NATIONAL REAL ESTATE PRACTICE QUESTIONS
1. When a borrower defaults on a mortgage, an acceleration clause allows thelender the option
of: demanding immediate payment of the entire loan balance.Anacceleration clause is a
provision in a mortgage or trust deed that, upon the occurrence of a specified event, gives the
lender the right to call the entire debt dueand payable in advance of the fixed payment date.
The event might be default on the installment payments, destruction of the premises, or sale of
the property. Thisis stated in the original mortgage document, and agreed to by the parties.
2. A property has a fair market value of $95,000 and is assessed at 50% of value. The tax
rate is $55.00 per $1,000 of assessed value. What is the real estate tax for this property?:
$2,612.50. $95,000 × 0.50 = $47,500 assessed value
$47,500 ÷ 1,000 = 47.5 units (how many thousands in $47,500)
$55.0 × 47.5 = $2,612.50
3. An owner has been asked to grant a 60-day option to purchase a property. When should the
purchase price be decided?: upon creation and signing of the option to purchase. One of the
essential elements of an option agreement is that the
purchase price at which the property would be sold must be established at the time the option is
created. The stated purchase price is separate from the consideration paid for the option right
itself.
4. Which of the following is true about prepayment penalties on VA or FHA loans for single-
family dwellings?: Neither the VA nor the FHA allows prepaymentpenalties.A prepayment
penalty is a charge for paying a loan off before it matures.By paying it off ahead of schedule
the lender may not make the amount of interestplanned on at the time the loan was initiated.
By law, neither the FHA nor VA loanscan contain prepayment penalties.
5. When managing property, which of the following actions is legal?: obtaininginformation
from prospective tenants to determine if they are financially able to afford the rent.Qualifying
prospective tenants financially is legal and an extremely important requirement in leasing real
estate.
6. The owner of a lot is interested in selling. The lot is 99' x 110'. If similar property sells for
$36,000 per acre, what is the most likely selling price for this property?: $9,000. There are
43,560 sq. ft. in an acre. 99 × 110 = 10,890 sq. ft.10,890 ÷ 43,560 = 0.25 or ¼ of an acre. The
cost of an acre is $36,000; therefore,
¼ of an acre would be $9,000: $36,000 × 0.25 = $9,000.
7. A licensee is representing prospective buyers. The licensee orally in- formed the buyers
that the developer would be paving the streets in frontof a house in a rural subdivision. The
licensee had not verified this but
assumed that it was true because the developer had done the paving in similar subdivisions. The
buyers relied on the licensee's statement in deciding to buy the house. If no contract exists
,spelling out paving responsibilities, who can be held accountable for damages?: the licensee
because his unverified statement was misrepresentation.The licensee presented information as
being factual but did not verify it. If it is incorrect and the buyers are damaged due to their
reliance on that information, whether it is oral or in writing, the licensee can be held
responsible formisrepresentation.
8. Which of the following is a characteristic of a limited partner's role in
a limited partnership?: reduced personal liability and no management decision making. Unlike
a general partnership, limited partners are passive investors, sharein profits, and have no say
in the organization and direction of the operation. Eachlimited partner may lose only as much
as he or she invests.
9. For a real estate sales contract to be valid, it must include: considera- tion.Consideration
is an essential element for any contract. For a real estate contractto be valid, it must contain
some form of consideration.
10. A home equity line of credit is: a secured loan.A home equity line of credit is a mortgage
loan that allows the borrower to obtain advances up to an amount that represents a specific
percentage of the borrower's equity in a property.
11. Which of the following factors tends to increase the price of residential real estate in a
given area?: a large manufacturing plant opening in the city.The price of residential property
generally increases when there are more buyers, and,therefore, more demand for houses. If a
large plant opens in a city, the employmentopportunities increase and more employees would
be buying houses, increasing demand.
12. A buyer made an offer on a property and the seller accepted the offer. A week later, the
seller asked the licensee to amend the contract's provision forclosing from 60 days to 90 days.
The licensee completed the amendment andall parties initialed the change. The buyer now
asks if the seller would agree to split the cost of any needed repairs found during the home
inspection. Which of the following should be prepared to include this provision?: an
addendum.An addendum is an additional provision added to an existing contract without
altering the content of the original. It is a new contract that references the original contract
and should be dated, signed or initialed by all parties. The originalsales contract should refer
to the addendum as part of the agreement between theparties.
13. Four people bought an investment property together, each having an equal
ownership interest. They took title in such a manner that if one died he could leave his one-
fourth interest to his heirs. How did they take title to thereal estate?: tenants in common.In
tenants in common ownership, the ownership
interests do not have to be equal, but they can be. Each owner can sell or bequeathhis or her
property without the consent of the other co-tenants.
14. A licensee was showing property in an eight-unit complex to a prospectivetenant using a
motorized wheelchair. The tenant wanted to rent a unit, installgrab bars in the bathroom, and
lower all the door handles. The landlord: mustallow the tenant to make the modifications at the
, tenant's expense, but can require,by the terms of the lease, restoration of the property.The
1988 Amendments to theFederal Fair Housing Act require that a landlord allow a tenant to
make changes tothe property to accommodate a disability. These modifications are at the
tenant's expense, and the landlord can require the tenant make reasonable restoration to the
property at the end of the lease.
15. Which of the following is the best description of a fee simple estate?: the most complete
ownership in property that one can obtain. A fee simple estate is thehighest form of ownership
one can hold. It is complete ownership in its least limitedform. There can be limitations on the
use of the land as imposed by the governmentor by deed restrictions, and there can be
encumbrances against the land, such as easements or real estate taxes. However, the owner
still has complete ownership and all the legal rights that go with ownership of land in a fee
simple estate.
16. A licensee plans to send out an e-mail offering his services. According to the CAN-
SPAM Act, the licensee must: tell recipients how to opt out of receivingfuture e-mail.The
CAN-SPAM Act establishes rules for commercial e-mail and the requirements for commercial
messages, gives recipients the right to have the e-mailstopped, and spells out penalties for
violations. One of the main requirements is thatrecipients must be told how to opt out of the
receipt of future e-mail.
17. An owner's mortgage includes a clause requiring a prepayment penalty. Three percent of
any outstanding loan principal would be charged by the lender if the owner paid off the
principal before the scheduled time. Paymentswere $296.88, due on the first of each month,
and included both principal andinterest in arrears at 8% per annum. After the owner's July 1
payment, her loanbalance was $8,946.23. On August 1, after handing her lender the check for her
August 1 payment, the owner paid off the entire remaining loan balance. Whatis the
approximate prepayment penalty?: $261.27. The monthly house payment,
$296.88, includes both interest and principal. The prepayment penalty is charged only on the
principal, not on interest. Therefore, one must determine how much thenew principal loan
balance will be after the August 1st house payment is made. Thecalculations are as follows:
The loan balance after the July 1 payment is $8,946.23 x 0.08 interest rate = $715.70a year ÷ 12
months = $59.64 interest for July.
$296.88 monthly house payment - $59.64 interest = 237.24 principal payment onAugust 1
payment.
$8946.23 loan balance - $237.24 principal paid in August leaves new principal
balance of $8708.99 after August 1st payment.
This is the amount on which the prepayment penalty will be based:
$8708.99 x 0.03 penalty = $261.27
18. The owner of an apartment building has just signed an agreement with a real estate firm.
Has an agency been formed?: Yes, because an agency is formedwhenever one party delegates to
another the right to act on his behalf in certain business transactions. An agency is formed
1. When a borrower defaults on a mortgage, an acceleration clause allows thelender the option
of: demanding immediate payment of the entire loan balance.Anacceleration clause is a
provision in a mortgage or trust deed that, upon the occurrence of a specified event, gives the
lender the right to call the entire debt dueand payable in advance of the fixed payment date.
The event might be default on the installment payments, destruction of the premises, or sale of
the property. Thisis stated in the original mortgage document, and agreed to by the parties.
2. A property has a fair market value of $95,000 and is assessed at 50% of value. The tax
rate is $55.00 per $1,000 of assessed value. What is the real estate tax for this property?:
$2,612.50. $95,000 × 0.50 = $47,500 assessed value
$47,500 ÷ 1,000 = 47.5 units (how many thousands in $47,500)
$55.0 × 47.5 = $2,612.50
3. An owner has been asked to grant a 60-day option to purchase a property. When should the
purchase price be decided?: upon creation and signing of the option to purchase. One of the
essential elements of an option agreement is that the
purchase price at which the property would be sold must be established at the time the option is
created. The stated purchase price is separate from the consideration paid for the option right
itself.
4. Which of the following is true about prepayment penalties on VA or FHA loans for single-
family dwellings?: Neither the VA nor the FHA allows prepaymentpenalties.A prepayment
penalty is a charge for paying a loan off before it matures.By paying it off ahead of schedule
the lender may not make the amount of interestplanned on at the time the loan was initiated.
By law, neither the FHA nor VA loanscan contain prepayment penalties.
5. When managing property, which of the following actions is legal?: obtaininginformation
from prospective tenants to determine if they are financially able to afford the rent.Qualifying
prospective tenants financially is legal and an extremely important requirement in leasing real
estate.
6. The owner of a lot is interested in selling. The lot is 99' x 110'. If similar property sells for
$36,000 per acre, what is the most likely selling price for this property?: $9,000. There are
43,560 sq. ft. in an acre. 99 × 110 = 10,890 sq. ft.10,890 ÷ 43,560 = 0.25 or ¼ of an acre. The
cost of an acre is $36,000; therefore,
¼ of an acre would be $9,000: $36,000 × 0.25 = $9,000.
7. A licensee is representing prospective buyers. The licensee orally in- formed the buyers
that the developer would be paving the streets in frontof a house in a rural subdivision. The
licensee had not verified this but
assumed that it was true because the developer had done the paving in similar subdivisions. The
buyers relied on the licensee's statement in deciding to buy the house. If no contract exists
,spelling out paving responsibilities, who can be held accountable for damages?: the licensee
because his unverified statement was misrepresentation.The licensee presented information as
being factual but did not verify it. If it is incorrect and the buyers are damaged due to their
reliance on that information, whether it is oral or in writing, the licensee can be held
responsible formisrepresentation.
8. Which of the following is a characteristic of a limited partner's role in
a limited partnership?: reduced personal liability and no management decision making. Unlike
a general partnership, limited partners are passive investors, sharein profits, and have no say
in the organization and direction of the operation. Eachlimited partner may lose only as much
as he or she invests.
9. For a real estate sales contract to be valid, it must include: considera- tion.Consideration
is an essential element for any contract. For a real estate contractto be valid, it must contain
some form of consideration.
10. A home equity line of credit is: a secured loan.A home equity line of credit is a mortgage
loan that allows the borrower to obtain advances up to an amount that represents a specific
percentage of the borrower's equity in a property.
11. Which of the following factors tends to increase the price of residential real estate in a
given area?: a large manufacturing plant opening in the city.The price of residential property
generally increases when there are more buyers, and,therefore, more demand for houses. If a
large plant opens in a city, the employmentopportunities increase and more employees would
be buying houses, increasing demand.
12. A buyer made an offer on a property and the seller accepted the offer. A week later, the
seller asked the licensee to amend the contract's provision forclosing from 60 days to 90 days.
The licensee completed the amendment andall parties initialed the change. The buyer now
asks if the seller would agree to split the cost of any needed repairs found during the home
inspection. Which of the following should be prepared to include this provision?: an
addendum.An addendum is an additional provision added to an existing contract without
altering the content of the original. It is a new contract that references the original contract
and should be dated, signed or initialed by all parties. The originalsales contract should refer
to the addendum as part of the agreement between theparties.
13. Four people bought an investment property together, each having an equal
ownership interest. They took title in such a manner that if one died he could leave his one-
fourth interest to his heirs. How did they take title to thereal estate?: tenants in common.In
tenants in common ownership, the ownership
interests do not have to be equal, but they can be. Each owner can sell or bequeathhis or her
property without the consent of the other co-tenants.
14. A licensee was showing property in an eight-unit complex to a prospectivetenant using a
motorized wheelchair. The tenant wanted to rent a unit, installgrab bars in the bathroom, and
lower all the door handles. The landlord: mustallow the tenant to make the modifications at the
, tenant's expense, but can require,by the terms of the lease, restoration of the property.The
1988 Amendments to theFederal Fair Housing Act require that a landlord allow a tenant to
make changes tothe property to accommodate a disability. These modifications are at the
tenant's expense, and the landlord can require the tenant make reasonable restoration to the
property at the end of the lease.
15. Which of the following is the best description of a fee simple estate?: the most complete
ownership in property that one can obtain. A fee simple estate is thehighest form of ownership
one can hold. It is complete ownership in its least limitedform. There can be limitations on the
use of the land as imposed by the governmentor by deed restrictions, and there can be
encumbrances against the land, such as easements or real estate taxes. However, the owner
still has complete ownership and all the legal rights that go with ownership of land in a fee
simple estate.
16. A licensee plans to send out an e-mail offering his services. According to the CAN-
SPAM Act, the licensee must: tell recipients how to opt out of receivingfuture e-mail.The
CAN-SPAM Act establishes rules for commercial e-mail and the requirements for commercial
messages, gives recipients the right to have the e-mailstopped, and spells out penalties for
violations. One of the main requirements is thatrecipients must be told how to opt out of the
receipt of future e-mail.
17. An owner's mortgage includes a clause requiring a prepayment penalty. Three percent of
any outstanding loan principal would be charged by the lender if the owner paid off the
principal before the scheduled time. Paymentswere $296.88, due on the first of each month,
and included both principal andinterest in arrears at 8% per annum. After the owner's July 1
payment, her loanbalance was $8,946.23. On August 1, after handing her lender the check for her
August 1 payment, the owner paid off the entire remaining loan balance. Whatis the
approximate prepayment penalty?: $261.27. The monthly house payment,
$296.88, includes both interest and principal. The prepayment penalty is charged only on the
principal, not on interest. Therefore, one must determine how much thenew principal loan
balance will be after the August 1st house payment is made. Thecalculations are as follows:
The loan balance after the July 1 payment is $8,946.23 x 0.08 interest rate = $715.70a year ÷ 12
months = $59.64 interest for July.
$296.88 monthly house payment - $59.64 interest = 237.24 principal payment onAugust 1
payment.
$8946.23 loan balance - $237.24 principal paid in August leaves new principal
balance of $8708.99 after August 1st payment.
This is the amount on which the prepayment penalty will be based:
$8708.99 x 0.03 penalty = $261.27
18. The owner of an apartment building has just signed an agreement with a real estate firm.
Has an agency been formed?: Yes, because an agency is formedwhenever one party delegates to
another the right to act on his behalf in certain business transactions. An agency is formed
