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Quiz Session - Attempts With Random Questions

National Real Estate Licensing Exam Questions

Page 10 of 35

181.

Andrew represents Sally in the sale of her house. Sally wants to sell her house as quickly as possible and for the highest price. To accomplish this goal, Andrew lists the house at $300,000 - 10% below market value. By doing so, he plans to attract many buyers and then he anticipates a bidding war will ensue, after which, Sally will end up with a buyer at above market value. Here’s what happened: Andrew offered $275,000 and then, as a final offer, offered $295,000. Jewel’s first offer was 15% below market value and then her final offer came in at 5% above market value. What was Jewel’s final offer?

  • $346,500

  • $330,000

  • $315,000

  • $350,000

Correct answer: $346,500

Jewel’s final offer was $346,500. Market value was $330,000 ($300,000 x 1.1), and Jewel's offer is 5% above market ($330,00 X 1.05).

182.

Which option correctly describes the escheat process?

  • Land is turned over to the government because it no longer has a legal owner

  • Land is turned over to the government because it is needed for public use

  • Land is turned over to another individual due to use that is actual, open, notorious, exclusive, and long enough

  • Land is turned over to another by will or last testament

Correct answer: Land is turned over to the government because it no longer has a legal owner

The escheat process occurs when land is turned over to the government because it no longer has a legal owner. Escheat generally occurs when a landowner passes away without a will or living heirs.

Eminent domain occurs when land is turned over to the government because it is needed for public use. Adverse possession occurs when land is turned over to another individual due to use that is actual, open, notorious, exclusive, and long enough. Devise occurs when land is turned over to another by will or last testament.

183.

Under what type of real estate sales listing does the real estate broker get paid a commission regardless of who sells the property during the term of the agreement?

  • An exclusive right-to-sell listing agreement

  • Exclusive agency agreement

  • Open listing agreement

  • Term listing agreement

Correct answer: An exclusive right-to-sell listing agreement 

An exclusive right-to-sell agreement is a real estate listing agreement where the owner gives one brokerage the sole right to market and sell the property. While the owner may still sell the property privately or through another broker, the listing broker will be due his full commission when the property sells, whether or not he brought the buyer and/or was instrumental in the sale. 

Exclusive agency agreement and open listing agreement are incorrect because, in both cases, if the seller sells the property privately, the listing broker is not entitled to a commission. There is no such thing as a term listing agreement.

184.

Edgar the eager investor uses private money from Slip to fund his fix and flip purchases. He approaches Betty the broker with an all-cash offer to buy Owen's home for $249,000. Betty says that even if Edgar's preapproval letter is real, they'll still need an appraisal by a certified appraiser under the FIRREA. Why is Betty wrong?

  • Because the purchase price is under $250,000

  • Because FIRREA doesn't regulate mortgages

  • Because Edgar is a sophisticated investor

  • Because the FIRREA regulations don't apply in their state

Correct answer: Because the purchase price is under $250,000

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) requires that appraisals are required for all federally related transactions and that the appraisals is performed by a state-licensed appraiser. Transactions under $250,000 do not qualify as federally related. The other choices are incorrect.

185.

What are the principal tax deductions allowed of a homeowner?

  • Property taxes and interest expense

  • Property taxes, interest expense, and insurance

  • Interest expense and insurance

  • Interest expense, utilities, and upgrades

Correct answer: Property taxes and interest expense

The principal tax deductions allowed of a homeowner are property taxes and interest expense. A homeowner may deduct interest for two residences, and this includes condominiums and cooperative apartments.

Insurance, utilities, and upgrades are not principal tax deductions allowed of a homeowner.

186.

In what type of lease does the tenant typically build a building on the premises?

  • Ground lease

  • Net lease

  • Percentage lease

  • Gross lease

Correct answer: Ground lease

In a ground lease, the tenant rents the raw land and builds a structure on the land. 

A net lease is one under which the tenant pays rent, plus real estate taxes, maintenance costs and utilities. A percentage lease is one in which the rent for a retail tenant is based in part on percentage of gross sales. A gross or fixed lease is a traditional residential lease under which the tenant pays rent and the landlord pays the operating expenses, such as maintenance, real estate taxes and other public charges, such as water and sewer. 

187.

In regard to estimating the site value, which method is being used by insurers when determining the replacement value of a property to be insured? 

  • Reproduction value

  • Allocation

  • Land residual

  • Assemblage

Correct answer: Reproduction value

In regard to estimating the replacement value of an insured property, reproduction value is the value based on the cost of building a functional equivalent of the subject property's improvements, assuming current construction costs. 

Allocation is incorrect because it is used when the value is estimated based on what comparables indicate land value is equivalent to as a percentage of total value. Land residual is incorrect because it is used when the residual income from an improved property is added to the land and converted to land value by dividing it by the rate of return. Assemblage is incorrect because it is used when multiple parcels are combined to increase the value of land.

188.

Jackie is a real estate agent hired by Dov the developer to sell his fix and flip houses. Dov’s model is to buy existing homes, renovate them quickly, adding new bathrooms and kitchens, and sell them at a profit. Most of Dov’s homes are older, and Jackie is aware that they may contain things like asbestos, buried oil tanks, and lead paint. Which of the below choices is Jackie obligated to do?

  • Prepare truthful answers to questions from potential buyers about environmental conditions of the properties that fully disclose what she knows about their condition

  • Uncover all environmental hazards in Dov’s houses

  • Refuse to represent Dov unless he fixes existing environmental hazards on the properties

  • Call the Department of Environmental Protection to tell them that Dov is flipping potentially hazardous homes

Correct answer: Prepare truthful answers to questions from potential buyers about environmental conditions of the properties that fully disclose what she knows about their condition

Licensees are expected to be aware of environmental issues and know where to look for professional help. They must treat potential environmental hazards in the same way that they treat other material facts about a property and practice full disclosure. 

The other answers are incorrect.

189.

Barbara the broker is hired by Herbie the homeowner to sell his house. Herbie wants to get market value for his house and has to move in July, six months from now. Ever the procrastinator, Herbie asks Barbara when he should start marketing his house. What should Barbara tell him?

  • List it in March, because it will give you a reasonable time to find a buyer and it will be exposed to as many buyers as possible

  • Wait as long as you want, timing doesn't matter

  • It doesn't matter, just take the first offer to come along. That's usually the best offer anyway.

  • Start right away so you can sell it as quickly as possible

Correct answer: List it in March, because it will give you a reasonable time to find a buyer and it will be exposed to as many buyers as possible

Listing his house in March will give Herbie the best chance of obtaining market value for his home because doing so will give him a reasonable amount of time to market the property and find a knowledgeable purchaser. 

The other choices are incorrect because market value is usually not obtained if a sale is rushed and/or the property is inadequately marketed.

190.

What is a difference between assessments imposed on a property owner by the municipality and one imposed on a property owner by a HOA (Homeowners Association)?

  • The municipality is governmental body and a HOA is a private body

  • HOA fees are based on fair market value, while municipal taxes assessments are based on a taxable value

  • There is no difference

  • Assessments by HOAs only apply to condominiums, while municipal assessments apply to all property

Correct answer: The municipality is governmental body and a HOA is a private body

A difference between assessments imposed on a property owner by the municipality and one imposed on a property owner by a HOA (Homeowners Association) is that HOAs are private bodies that regulate aspects of a group of residents, which can be condominiums, co-ops, or even privately owned homes, all of which are members of a homeowners association. 

The other choices are incorrect.

191.

Frank’s lease on an apartment expired a month ago, but he has yet to move out and currently has no plans to do so. What type of leasehold estate does this best describe?

  • Tenancy at sufferance

  • Estate for years

  • Estate from year to year

  • Tenancy at will

Correct answer: Tenancy at sufferance

The circumstance provided best describes tenancy at sufferance because this is a lease in which a tenant remains on the premises after the lease has expired.

Estate for years is incorrect because it is a lease that has an expiration date, regardless of when the expiration date is. Estate from year to year is incorrect because it is a lease that automatically renews unless one party notifies the other party of termination. Tenancy at will is incorrect because it is a lease that either party can terminate at any time for any reason.

192.

If a land description names a stream and a large rock outcropping, which method is being used to describe the land?

  • Monuments or occupancy

  • Metes and bounds

  • Lot and block numbers

  • Rectangular survey

Correct answer: Monuments or occupancy

If a land description names a stream and a large rock outcropping, it is using the monuments or occupancy method of describing land. The monuments or occupancy method of describing land uses waterways, rock formations, trees, and ownership of land to describe land.

The metes and bounds method of describing land uses distances and angles to describe land. The rectangular survey method of describing land uses principal meridians and baselines to describe land. The lot and block numbers method of describing land is used once a developer has filed a subdivision plat at the county courthouse, and it describes land in numbered lots.

193.

Alex the agent is the exclusive broker from Ivan’s new condominium development, which consists of 20 studio apartments, each of which measures 25’ x 35’. Harry buys ten of the twenty studios for $135 per square foot. Assuming he gets a 6% commission, how much is Alex's commission?

  • $70,875

  • $7,087.50

  • $141,750

  • $118,125

Correct answer: $70,875

Alex’s commission is $70,875. The other choices are incorrect because the commission is 6% of the sales price of $1,181,250 equals that amount: ((875 x 135) x (10)) x .06.

194.

Jared and Shaun decide to swap houses. What type of contract would be required for this circumstance?

  • Contract for exchange

  • Contract for deed

  • Option

  • Assignment

Correct answer: Contract for exchange

A contract for exchange is used when two individuals decide to swap houses. If one of the houses is worth more than the other, additional consideration called “boot” is often required.

Contract for deed is incorrect because it is used when the seller of real estate finances the sale for the buyer and keeps the deed until the final payment is made. Option is incorrect because it is a contract used when a potential buyer gives the seller consideration for holding the property for a specific dollar amount for a specific time period. Assignment is incorrect because an assignment occurs when one party to a contract conveys his/her rights in the contract to another party. In order for one of the parties to assign a contract, assignments must be not be forbidden in the contract.

195.

Alex is working with Ivan the investor and is trying to give him the best sense of a property's value in today's fast-paced real estate sales market. Ivan asks Alex what he thinks 1 Grove Street is worth. "Give me 24 hours and I'll give you a CMA," says Alex. As promised, Alex emails Ivan a CMA complete with a list of the 20 properties similar to 1 Grove Street that closed in the last 12 months. What's wrong with Alex's approach?

  • Here, Alex should only provide properties sold in the past 3-4 months

  • CMAs should include a maximum of 5 comparables

  • Because Alex is not a certified appraiser, Alex may not do CMAs

  • Because it's a fast paced market, Alex should include properties on the market but not closed, because the price of properties that closed are already outdated

Correct answer: Here, Alex should only provide properties sold in the past 3-4 months

Here, Alex should only provide properties sold in the past 3-4 months because properties that closed more than 4 months ago, especially in a fast-paced market, may not be indicative of current market prices. 

The other choices are incorrect.

196.

Adam has been granted broad powers to represent Kim. What would Adam be referred to as?

  • A general agent or a universal agent

  • A special agent or a universal agent

  • A special agent or a general agent

  • A general agent or an exclusive agent

Correct answer: A general agent or a universal agent

Since Adam has been granted broad powers to represent Kim, he would be known as either a general agent or a universal agent. A power of attorney is generally required to create a universal agent. General agency does not necessarily require a power of attorney and is typically created when the principal delegates ongoing business tasks to the agent within a particular business or enterprise.

A special agent is incorrect because a real estate broker is a special agent who has limited powers, in that he/she generally just has the power to find the principal a buyer. An exclusive agent is incorrect because it is not a term used to describe individuals who have been granted powers to represent another individual.

197.

William made a profit of 40% when he sold his home for $315,000 last month. How much did William pay for his home?

  • $225,000

  • $126,000

  • $189,000

  • $196,875

Correct answer: $225,000

William paid $225,000 for his home. The original price of William’s home, plus 40%, equals $315,000. Therefore, $315,000 is 140% of what William originally paid: $315,000/1.40 = $225,000.

198.

Which option best describes going-concern value?

  • Value of a business

  • Value of real property

  • Value to an investor

  • Value to a user

Correct answer: Value of a business

Going-concern value is what a business is valued at based on operations, not the real property itself.

The value of real property describes market value. The value to an investor describes investment value. The value to a user describes value in use.

199.

Susan is in contract with a real estate agency to sell her real estate. Susan’s contract with the agency states that she will only work with the listing broker, and she will only pay a commission to the listing broker unless she finds the buyer herself. What type of agency contract does this best describe?

  • Exclusive agency listing

  • Open listing

  • Exclusive-right-to-sell listing

  • Net listing

Correct answer: Exclusive agency listing

Susan has an exclusive agency listing. An exclusive agency listing contract is an agency contract in which the principal agrees to only employ one broker and only pay commission to that broker unless the principal produces a buyer for the real estate.

Open listing is incorrect because it is an agency contract in which a principal may list with any number of brokers and that states the principal will only pay a commission to the broker who finds a customer who purchases or rents the real estate. Exclusive-right-to-sell listing is incorrect because it is an agency contract that states the principal will pay commission to the broker regardless of who produces the buyer. Net listing is incorrect because it is an agency contract that states the principal agrees to pay a commission to the broker in the amount that exceeds a specific designated sales price.

200.

The location of investment real estate is a key aspect of its success. Which type of property would be the most successful when located in downtown areas close to business activities?

  • Office buildings

  • Residential properties

  • Stores and shopping centers

  • Industrial properties

Correct answer: Office buildings

Office buildings are investment properties that would be the most successful when located in downtown areas close to business activities.

Residential investment properties would be the most successful when located in low traffic areas close to jobs, shopping, and good schools. Stores and shopping centers are investment properties that would be the most successful when located in high traffic areas near areas in which people live and work. Industrial investment properties would be the most successful when located near highways, waterways, and rail lines because they require good transportation.

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