WA Real Estate Fundamentals Questions - Rockwell

Which of the following is most likely to be considered a fixture?

Plumbing

A life estate will last until:

The Death of the recipient

A deed that states there is a conveyance of interest, if any, is the:

Quitclaim deed

A judgement lien:

When paid off, requires a satisfaction of judgement to be recorded to clear the record

The police powers of the government include:

Building codes and zoning regulations

The term "meeting of the minds" is associated with:

Offer and acceptance

Exaggeration about a property's positive characteristics would be considered:

Puffing

The seller listed the property for $95k. Assuming that their listing agreement is typical, the broker would not be entitled to a commission if the seller:

Rejected a $90k offer from a financially qualified buyer

A contract specifies that "time is of the essence." That means that:

All contractual duties must be fulfilled on or before the date set forth in the contract.

Usury laws fix which of the following:

Maximum interest rates: state usury laws set max interest rates for certain types of loans

For which of the following people would an adjustable rate loan not be a good idea?

A person about to retire (fixed income)

An appraiser needs to be state certified to perform which of the following appraisals:

Appraisal related to an FHA loan

On a settlement statement, an earnest money deposit that will be held by the brokerage firm until closing is a:

Credit to the buyer

A licensee hears that a religious group will be opening a commune in a neighborhood. He begins contacting neighbors and telling them about this, encouraging them to list their properties with him before property values decline. This is:

Blockbusting

An investor is interested in purchasing a multi-family dwelling. He would most likely want to look for a:

Property where the rents are similar to comparable properties in the same area (key inquiry for investor market analysis is comps)

Zoning requirements state that a lot must be at least four times the size of the building located on the lot. An architect draws up a plan for a building that is 20k sq. ft. At least how many acres does the lot need to be?

2! 20k x 4 = 80k sq ft. - devide by 43,560 (sq ft per acre) to find size.

Tests to distinguish a fixture from personal property include all of the following except:

Cost of the item (method of attachment, intent of annexor and adaptability are tests)

A primary advantage of owning a property in severalty is:

Flexibility

All of the following are requirements for a valid deed except:

Acknowledgement

A homeowner has been sharing with a friendly neighbor the use of a driveway that crosses both of their properties. However, the owner is about to move out and the remaining neighbor would like to make sure that she can continue to use the driveway even if the new owner is not amenable to that. The homeowner should request an:

Easement

A local ordinance states that no sign can extend more than two feet above the roofline. The Morgans want to put a sign on their roof, but the sign is six feet high. To install their sign legally, the Morgans must apply for a:

Variance

A property is listed for $275,000. The buyers offer $265,000, and insist that the gourmet six-burner stove remain with the property. When the signed offer is presented to the sellers, the sellers accept the price, but want to take the stove with them. They cross out the item about the stove, sign the form, and return it to the buyers. Under these circumstances:

The original offer is terminated, and the sellers have made a counteroffer

A seller's agent, upon meeting with a prospective buyer, becomes concerned that the buyer is unlikely to be financially qualified. The agent should:

Relay those concerns to the seller, who will decide.

Net listings are strongly discouraged because they are likely to be unfair to the:

Seller

A purchase and sale agreement is for $150,000, with 80% financing, closing in 30 days with possession at closing, and a rent provision for possession after closing. This is an example of a/an:

Contract with contingencies

A promissory note that is secured by a mortgage is:

Primary evidence of the debt (The note is evidence of the debt; the mortgage makes the property security for the debt.)

Which of the following is an advantages of using private mortgage insurance from a borrower's perspective:

It allows for a smaller downpayment

The market price of a property would be best defined as:

The amount paid to obtain the property

Bronson agreed to sell his house to the Hatchers. Closing is scheduled for May 15. Bronson already paid the taxes for the entire year, but the Hatchers are assuming responsibility for the taxes as of the closing date. The settlement statement will prorate the taxes as a:

Debit to the buyer and credit to the seller

An agent shows his customer, who is an Asian-American, homes only in neighborhoods that are predominantly Asian-American. This is called:

Steering

A property manager will be paid 3% of a property's annual gross rental income. The rent paid is: $24,000 base rent; $12,000 percentage rent; $8,000 maintenance, taxes, and insurance (triple net). The commission amount that the manager will receive is:

$1080 - In a triple net lease, the tenant pays operating expenses (maintenance costs, taxes, and insurance) in addition to base rent and, in some cases, percentage rent. First, calculate the rent paid each year: $24,000 base rent + $12,000 percentage rent = $36,000. Then calculate the commission amount: .03 x $36,000 = $1,080. (Expenses probably wouldn't be considered part of the rent when calculating a commission.)

A borrower is purchasing a $300,000 home. She will be using a loan with an LTV of 80%. She will also be paying 3 discount points. What is the total amount of cash that she will need to bring to closing?

$67,200 -
There are two components that you'll need to calculate. First, calculate the size of the loan: $300,000 x .80 = $240,000. She'll need to bring $60,000 to cover the downpayment ($300,000 - $240,000 = $60,000). Second, calculate the amount of the discount points, using the loan amount and not the purchase price ($240,000 x .03 = $7,200). Add the two together for the total amount of cash needed ($60,000 + $7,200 = $67,200).

A rectangular parcel of land, starting from the point of beginning, measures 180 feet north, then 90 feet east, then 180 feet south. What is the length and direction of the last side?

90 ft. west

A seller finds that he cannot provide marketable title because of a cloud on title. To clear the title, he should file a:

Quiet Title action - (a quitclaim deed would also work but that means whoever would need to sign the deed would have to cooperate and that's not usually an option.)

Which of the following actions by a developer would require a zoning variance or a rezone, because it would result in a more intensive use of the land?

Increase in number of lots per acre

A contract for the purchase and sale of real property does not contain an adequate land description. The agreement is:

Unenforceable

In a dual agency, which of the following duties can the parties agree with the agent that they will waive?

The duty to submit additional offers after acceptance has been reached

Which of the following is the most commonly used type of disclosure?

Seller disclosure statement (not used in agricultural land or foreclosures)

A mortgage, and the associated mortgage note are both examples of:

Contracts

To obtain a 100% loan, with no downpayment, a borrower would most likely need to use a/an:

VA Loan

A real estate licensee is performing a competitive market analysis. He locates a comparable property that is slightly older than the subject property. The age of the comparable makes it worth $2,000 less. The comparable has a small porch worth $1,000 that the subject property lacks. If the comparable sold for $269,500 recently, what is the estimated value of the subject property?

$270,500 -
To estimate the value of the subject property, adjust the comparable's sales price to reflect what it would sell for if it were identical to the subject property. Add $2,000 to the comparable's sales price (to make it more like the subject property, which is newer), and then subtract $1,000 from the comparable's sales price (again, to make it more like the subject property, which lacks a porch). ($269,500 + $2,000 - $1,000 = $270,500.)

Which of the following is a rule or requirement under the Real Estate Settlement Procedures Act RESPA?

A seller is prohibited from choosing a title insurance company for the buyer

The manager of a six-story, 18-unit apartment building carefully screens tenant applications to make sure that tenants who use wheelchairs are assigned to the first floor. This:

Is allowed if there's no elevator to the upper floors

Mavis buys a home with a $500,000 sales price. She will be obtaining a loan for 90% of the property's value. She is paying two discount points, in order to bring the interest rate down from 5% to 4.75%. What is the total amount of cash that she will owe at closing?

$59,000 -
Mavis will need to make a $50,000 downpayment ($500,000 sales price x .90 = $450,000 loan amount; $500,000 sales price - $450,000 loan = $50,000 downpayment). She will also need to pay discount points ($450,000 loan x .02 = $9,000 discount points). The interest rate is not necessary for answering this problem. Add the downpayment and discount points for the total amount due at closing ($50,000 + $9,000 = $59,000).

Mary, in an effort to shore up a rocky marriage, wrote a quitclaim deed that transferred her property to a joint tenancy with her husband (as opposed to creating a tenancy in common). She told her husband about this, but the document was never recorded. They later divorced, by which point the deed had been lost. Does Mary's now ex-husband have a valid claim on the property?

No, although if the deed had been recorded it would have provided constructive notice

Special assessments levied against a property for local improvements, such as streetlights and sidewalks, are computed on the basis of:

The benefit the property receives from the improvements

When the parties to a contract put themselves back into the same positions they were in before they entered into the contract, the contract has been:

Rescinded

The buyers ask a listing agent about a rumor they've heard that a sex offender lives in the neighborhood. The agent should:

Inform the buyers where this kind of information can be verified

Which of the following statements is true concerning a lead-based paint disclosure?

It must include an option for the buyer to waive further inspection

A seller owes more on a loan than the property that secures it is likely to sell for. He approaches the lender about a short sale. He should keep in mind:

A short sale could result in a form 1099 from the lender, or a deficiency judgement

When using the replacement cost approach to estimate the value of a home that is three years old, the appraiser should do which of the following?

Determine replacement cost and then deduct for depreciation

Which of the following is the best example of non-discriminatory language, according to HUD's guidelines for the Fair Housing Act?

Female seeking female roommate

Through careful management, a property manager increases an apartment building's monthly income of $3,000 by an additional $500/month. Assuming a cap rate of 8%, what is the increase in the building's value?

$75,000 -
One way to solve the problem is to calculate the value before the increase ($3,000 x 12 = $36,000; $36,000 ÷ .08 = $450,000), calculate the value after the increase ($3,500 x 12 = $42,000; $42,000 ÷ .08 = $525,000), and then calculate the difference ($525,000 - $450,000 = $75,000). Another way would be simply to multiply $500 x 12 ($6,000) and then factor in the capitalization rate ($6,000 ÷ .08 = $75,000).

A condensed history of the ownership of a property is called a/an:

Abstract of title

Of the following types of contracts, which one is a unilateral contract?

Option; only one party is obligated to act.

Which of the following is the best definition of a material fact?

Knowledge that would affect a buyer's decision whether or not to buy

A transaction will include a home warranty. The seller's agent should find out:

Which party will be responsible for the one-time premium

A lender agrees that a seller who owes $400k on a mortgage that is in default may list the property at $350k, which is the current market value of the property. This type of transaction is known as a:

Short sale

A couple in their 70s with no liens on their home would like some extra income, but don't want to make monthly loan payments. What kind of loan might a lender offer them?

A reverse equity loan, since they are over 62 and have sufficient equity in their home

An investor looks at a property listed for $150k, with a monthly net operating income of $1k. He decides instead to offer $120k. What kind of income approach analysis would he have used to arrive at that conclusion?

Capitalization Rate

One of the provisions of the Housing for Older Persons Act:

Requires that in qualified projects, at least 80% of the units must be occupied by persons 55 years or older

Bob's property has a fair market value of $190,000. It is in a county where properties are assessed at 50% of value, and the tax rate is $55 per $1,000 of assessed value. What's Bob's annual property tax?

$5,225.00 -
The first step in calculating a tax problem is to find the property's assessed value ($190,000 × 0.5 = $95,000). Divide the assessed value by $1,000 to find the number of increments ($95,000 ÷ $1,000 = 95) and then multiply by the tax rate to find the annual tax bill (95 × $55 = $5,225).

Martha gave Hannah the right to purchase her vacant lot for $65,000. Hannah paid Martha $1,200 for this right. Hannah is the:

Optionee

A seller complains that the seller's agent is showing other properties to buyers that compete with the seller's property. Which of the following is true?

Seller's agent is not breaching the duty of loyalty

A buyer would be protected from risk of loss due to a failed heating system through:

A home protection plan

The Thompsons, a retired couple, need more income. Their lender offers a type of loan in which the lender will send the couple a monthly check for as long as the couple lives on the property, in exchange for a lien against the equity in their property. The lender is referring to a/an:

Reverse mortgage

Maya and Andrew are real estate agents who work for competing brokerages. They don't like a new discount broker and decide together not to show any of the new broker's listings. This is a violation of the Sherman Act because it is:

A group boycott

In an option:

The option agreement must clearly state all the terms and conditions of the sale

A licensee takes a listing from his sister. He should:

Disclose the relationship if acting as a dual agent

An agent sends faxes to clients highlighting prospective properties that they might like. The faxes should always include the:

Instructions on how to opt out of receiving more faxes

A letter of intent:

Sets out basics prior to negotiation

Which of the following instances is an example of an agency relationship terminated by operation of law?

The subject property, a single family residence, burns down - Termination of an agency by operation of law can include termination when the agency term expires, when one of the parties dies, or with the extinction of the subject matter, as in the case of a house burning down.

A broker will be working for a firm as an independent contractor. The firm must provide the broker with:

An independent contractor agreement

A survey has been completed, and stakes have been placed marking off the property. The survey can be used to:

Construct fences and driveways

A tenancy in which the tenant is in possession with the permission of the landlord, but there is no definite rental period or duration of possession is called a/an:

Estate at will

Periodic estate is:

A repeating period, such as month to month

Estate for years

Fixed end date such as a 1 year lease

Ned and Carla buy a house that is listed at $105,000; their offer for $5,000 less than that is accepted. They obtain a loan with an 80% loan-to-value ratio. The loan is for 30 years with a 5.5% interest rate. Taxes for the year are $4,000; insurance for the year is $800. Calculate their monthly PITI payment. Be sure to use the amortization table.

$854 - The monthly PITI payment incorporates not just the principal and interest on the loan, but also a monthly share of taxes and insurance. The first step is to find the principal and interest portion using the amortization table that is provided; for a 30-year loan at 5.5% interest, the P & I portion is $454. The taxes are given as an annual figure, so the next step is to divide that by 12 months ($4,000 ÷ 12 = $333). You'll need to do the same thing for the annual insurance amount ($800 ÷ 12 = $67). Add the three numbers to arrive at a total monthly payment of $854 ($454 + $333 + $67).

A plaintiff files a lawsuit involving a property and also files a separate document intended to provide notice of the lawsuit. This recorded notice of a pending legal action is called a/an:

Lis pendens - A lis pendens is a recorded notice stating that there is a lawsuit pending that may affect title to the defendant's real estate and that could bind the purchaser of the property.

An increasingly common land use pattern allows for subdivisions with smaller lot sizes and little or no setback and sideyard requirements while keeping the same density ratios. These are known as:

Planned unit developments

A & B sign a rental agreement in which A agrees to lease her property to B in exchange for rent. This contract is:

Bilateral

A real estate agent has assisted an investor with the purchase of a number of commercial properties. The investor will be out of the country for part of the year and asks the agent to manage all aspects of the properties including advertising and leasing. The real estate agent will be an:

General agent - a real estate agent acting as a property manager is a general agent

At closing, a sale doesn't go through because the seller's anticipated transfer to another city gets suddenly postponed, and the seller no longer wants to sell. Does the seller owe the listing agent a commission in this situation?

Yes, because the seller won't provide marketable title which is considered a default

How much earnest money must be submitted with a valid purchase and sale?

No EM is required

The mortgagee assigns its interest and the assignee records the assignment. The mortgagor now needs to make payments to the:

Assignee

A buyer is unfamiliar with the concept of discount points and asks a licensee to explain. The licensee responds, "Discount points are used to replace funds that are being held by the Federal Reserve, so that more funds are available to lend." Is this description correct?

No, discount points are used to increase the yield for lenders who will sell the loans on the secondary market
1 discount point = 1%

A percolation test will examine the:

soil's ability to absorb and retain water

A $4500 EM check bounces because of insufficient funds. The first thing the broker should do is:

Notify the principals

A property manager bases the operating budget on:

Anticipated expenses and revenue

A parcel measures 198 feet by 330 feet. It sold for $30,000. What was the price per acre?

$20,000 -
The first step would be to find the square footage of the lot (198 ft. x 330 ft. = 65,340 square feet). Convert that to acreage (65,340 square feet ÷ 43,560 square feet per acre = 1.5 acres). Divide the cost by the acreage to find the cost per acre ($30,000 ÷ 1.5 acres = $20,000 per acre).

Meridians and base lines relate to the:

Rectangular survey method aka Government Survey System

Which would characterize a tenancy in common?

Tenants can will a partial interest in the property

A buyer accepts a warranty deed from a seller, believing that the seller is the sole owner of the property. The buyer later finds out that the seller is only a co-owner. Has a covenant in the warranty deed been violated?

Yes, there is a covenant providing marketable title

K buys a piece of landlocked property from L on the condition that L provide an easement across the property for ingress and egress. The easement isn't recorded, K later sells the property. Is the easement still valid for the new owner?

Yes, because an easement of this types runs with the land, rather than belonging to an individual

A licensee is helping her buyer purchase some property that may have once been used as a storage site for a heating oil company. The licensee should advise her buyer to:

Consult an environmental expert

When can a minor enter into a binding contract?

if a guardian co-signs

Late on a Friday afternoon, an agent receives an offer on a property that she has listed, for $10,000 less than the listed price. The sellers will be away all weekend. The agent should:

Try to get the offer to them as soon as possible on Friday

Gail gives ABC Realty a listing that stipulates it is the only real estate firm authorized to list her home. At the same time she insists on including a provision that would allow her to sell the home herself without paying a commission to ABC. Which of the following describes the kind of listing she has created?

Exclusive agency listing

A buyer makes an offer to purchase on May 2. The offer includes a promise to deposit $5,000 in earnest money within two business days after mutual acceptance. The offer is contingent on results of a soil feasibility report. On May 5 the seller accepts the offer. On May 11 the soil report is ordered. On May 17 the soil feasibility report comes back and is approved by the buyer. By what date does the earnest money need to be deposited?

May 7th - Mutual acceptance occurs when the offeree communicates acceptance to the offeror. In this case, acceptance occurred on May 5, so the deposit would need to be deposited by May 7, two days later.

A contract for deed wouldn't be a good idea if the seller's mortgage has a/an:

Alienation clause