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Quiz Session - Attempts With Random Questions

National Real Estate Licensing Exam Questions

Page 9 of 35

161.

Which of the following scenarios does not depict an executory contract?

  • A real estate listing contract that is signed by the broker and the principal but before the property is sold

  • Sales contract after the property inspection is completed but before closing

  • Rental contract before the keys are delivered to the new tenant

  • A sales contract during the financing contingency period

Correct answer: A real estate listing contract that is signed by the broker and the principal but before the property is sold

A real estate listing contract that is signed by the broker and the principal but before the property is sold is an example of an executed contract, not an executory contract, which is defined as a contract that is not fully performed. 

The other scenarios are of contracts that are moving toward completion but things have to occur in each before closing can take place.

162.

Which valuation approach takes into consideration that buyers often judge the value of an existing structure by comparing it with the cost associated with constructing a new structure of the same type?

  • Cost approach

  • Sales comparison approach

  • Income capitalization approach

  • None of these

Correct answer: Cost approach

The cost approach is based on the principle of substitution. It takes into consideration that buyers often judge the value of an existing structure by comparing it with the cost associated with constructing a new structure of the same type. In developing the cost approach, the appraiser estimates the cost to replace or reproduce the improvements, deducts any depreciation, and adds the estimated value of the site or land as if it were vacant. The major limitation of this approach is the difficulty in estimating accrued depreciation, especially when depreciation is present in more than one form.

163.

Jordan decides to list her house for sale and contacts Justin, a real estate salesperson who works at Greg's real estate brokerage. Jordan lists her house with Justin and Greg. After a few weeks on the market, Bob decides to buy the house. Who establishes the listing price of the house for sale?

  • Jordan

  • Justin

  • Greg

  • Bob

Correct answer: Jordan

The seller of the real estate is the individual who decides what the listing price will be; therefore, Jordan will establish the listing price.

Justin and Greg are incorrect choices. Neither the broker nor the salesperson establishes listing prices; however, they can recommend what to list the house for based on what other houses are selling for in similar neighborhoods. Bob is incorrect because the buyer does not establish the listing price. However, the buyer is the one who negotiates and accepts the final selling price.

164.

The 1988 amendments to the Civil Rights Act of 1866 made changes to the enforcement provisions of the Federal Fair Housing Act of 1968. Among other things, these laws prohibit real estate agents from discriminating against renters, buyers, and sellers on the basis of race, color, religion, or national origin. Penalties imposed on real estate agents and brokers for violating the Act now includes all of the following choices except:

  • 30 days in jail plus up to $65,000 for five or more offenses within 10 years

  • A civil penalty up to $16,000 for the first offense

  • A civil penalty up to $37,500 for the second offense within 5 years

  • A civil penalty up to $65,000 for two or more offenses within 7 years

Correct answer: 30 days in jail plus up to $65,000 for five or more offenses within 10 years

Penalties imposed on real estate agents and brokers for violating the Act now include all of the other answer options.

165.

If a landowner refuses to negotiate with the government in the event that the government wants to take the property pursuant to eminent domain, the government has the right to do which of the following?

  • Condemn the affected land

  • Sue the landowner

  • Arrest the landowner

  • Sell the affected land

Correct answer: Condemn the affected land

If a landowner refuses to negotiate with the government during an eminent domain situation, the government has the right to condemn the affected land. Eminent domain gives the government the right to acquire privately owned property in order to build something for public use. In an eminent domain situation, the government cannot just seize the needed property, it must pay the landowner for the real estate.

The government does not have the right to sue the landowner. However, the landowner has the right to sue the government for high compensation. In an eminent domain situation, the government does not have the right to arrest the landowner or sell the affected land.

166.

Darcie has a loan on her house in which she pays monthly installment payments of principal and interest. Once the loan matures, Darcie’s debt will be paid in full. Which type of loan does this best describe?

  • Fully amortizing loan

  • Term loan

  • Balloon payment loan

  • Bridge loan

Correct answer: Fully amortizing loan

Darcie has a fully amortizing loan because this loan requires the borrower to pay monthly installments of principal and interest. Once the loan matures, it will be paid in full.

Term loan is incorrect because it is a loan which allows the borrower to pay fixed payments for a specific amount of time and then larger lump sums at either the start and/or the end of the term that pays off the loan's balance. Balloon payment loan is incorrect because it is a loan that requires the borrower to pay interest and some principal during the term, but once the loan matures, the borrower will still have a balance that needs to be repaid. Bridge loan is incorrect because it is a loan used to cover the time between a construction loan and a permanent loan.

167.

Jenny recently passed away and, in her will, she left her husband Steve the right to use, occupy, and enjoy her real estate until he passes away. Once Steve passes away, the real estate will become the property of their children, John and Diane, whom will co-own the real estate without survivorship.

John and Diane are known as which of the following?

  • Remainderman

  • Life tenant

  • Riparian

  • Joint tenant

Correct answer: Remainderman

John and Diane are known as the remainderman. Remainderman is the term used to refer to the individual(s) who will acquire ownership of real estate once the life tenant passes away.

Life tenant is incorrect because it refers to the individual who has the right to use, enjoy, and occupy the real estate while they are alive (Steve). Riparian is incorrect because it refers to a system for allocating water rights among those who possess land along the water's path, such as a river or lake. Joint tenant is incorrect because it refers to joint ownership that is automatically passed on to the survivor.

168.

Which one of the following methods is not a traditional method of paying a buyer's broker? 

  • Paying the listing broker the difference between the asking price and the sales price of the property purchased

  • Retainer fee

  • Flat fee

  • Hourly fee

Correct answer: Paying the listing broker the difference between the asking price and the sales price of the property purchased

Paying the listing broker the difference between the asking price and the sales price of the property purchased is not a traditional method of compensating a buyer's broker. While this method is similar to a net listing agreement (where the seller's broker gets to keep any portion of the sales price that exceeds the listing price), it is different, because here, the interests of the buyer's broker and buyer's agent are aligned. 

Retainer fee, flat fee, and hourly fee are all traditional methods of compensating buyer's brokers.

169.

Newton is a new real estate salesperson and really wants listings. Newton shows initiative and signs a listing agreement for his home with his old friend, Rip. After diligently marketing the property, Newton calls Rip with an offer from a ready, willing, and able buyer in the amount of the asking price and demands his commission. Rip refuses to pay, saying that they didn't have a valid listing agreement. Is Rip correct?

  • Rip is correct, because the listing agreement fails to name the broker

  • Rip is correct because it wasn't an arms-length agreement

  • Rip is correct because there was no consideration

  • Rip is incorrect because Newton has no right to collect the commission until the deed is recorded

Correct answer: Rip is correct, because the listing agreement fails to name the broker

Rip is correct, because the listing agreement fails to name the broker. Newton is a real estate salesperson. General requirements for a valid listing agreement (though they may vary state-to-state) are the agreement must (1) be in writing and have an enforceable commission clause, (2) state the rate or exact amount of commission to be earned by the broker, (3) specify a definite termination date for the agreement, (4) state the price of the real estate and terms of sale, (5) include a description specifically identifying the property, (6) name the broker, (7) bear the signature of the person who is to pay the commission.

170.

Which type of deed offers the grantee the strongest assurance of ownership?

  • General warranty deed

  • Limited warranty deed

  • Quitclaim deed

  • Special deed

Correct answer: General warranty deed

A general warranty deed offers the grantee the strongest assurance of ownership. A general warranty deed conveys the real estate and will defend the grantee’s rights indefinitely.

Limited warranty deed and special deed are one in the same where the grantor only warranties the deed for the time during which the grantor owned the property, not for any time prior. Quitclaim deed does not offer any assurance of ownership.

171.

Deeds should be recorded at the county courthouse. Who is responsible for recording the deed?

  • Grantee

  • Grantor

  • Broker

  • Title agency

Correct answer: Grantee

The grantee is the individual responsible for recording the deed at the county courthouse. The grantee will want to ensure the deed is recorded as soon as possible to prevent the real estate being sold to another individual. Recording is not necessary to make a deed valid. However, recording the deed with the county clerk gives the public constructive notice of the recording party's interest in the property and helps protect their rights. 

Other choices are incorrect because the grantee is ultimately responsible for recording the deed, not the grantor, the broker, or the title agency.

172.

Each year, wealthy and poor people pay income taxes, and tax rates increase with higher income. This tax would be classified as which of the following?

  • Progressive

  • Proportional

  • Regressive

  • Consequential

Correct answer: Progressive

Progressive tax charges taxpayers with a high income a higher proportion than those with a low income. Since the tax rates increase as income increases, income taxes are considered progressive.

Proportional tax is applied equally to taxpayers with high and low income. Regressive tax is in action when taxpayers who have a low income pay a higher proportion of their income than those with a higher income. Consequential is incorrect because it is not a classification of tax.

173.

Ed and his dog are looking for an apartment to rent. Ed found a basement apartment that would cost him $550 a month. The owner of the apartment requires a security deposit of $500 and a pet deposit of $750. The owner also requires the first month’s rent to be paid prior to moving in. How much money is Ed required to pay before he and his dog can move into the new apartment?

  • $1,800

  • $1,250

  • $1,050

  • $2,350

Correct answer: $1,800

Ed will be required to pay $1,800 before he and his dog can move into the new apartment. Ed will owe $500 for the security deposit, $750 for a pet deposit, and $550 for the first month’s rent.

$500 + $750 + $550 = $1,800

174.

What does the building process end with?

  • Certificate of occupancy

  • Building permit

  • Declaration of covenants

  • Acquisition due diligence

Correct answer: Certificate of occupancy

The building process ends with a certificate of occupancy. Once the construction is complete, the municipality’s inspector will issue a certificate of occupancy, which declares that the building is structurally sound and safe to live in.

Building permit is incorrect because it is issued before the building process begins. Declaration of covenants is incorrect because it is used to provide restrictions that go beyond the typical zoning regulations. Acquisition due diligence is incorrect because it is the process of ensuring that the real estate being purchased is suitable for said purchase.

175.

Which statement is true in regard to liens?

  • A tax lien has priority over all other liens

  • The lien recorded first has priority

  • A mortgage lien has priority over a tax lien

  • Liens all have the same priority

Correct answer: A tax lien has priority over all other liens

It is true that a tax lien has priority over all other liens. A tax lien is placed on a property when the owner does not pay their property taxes. A tax lien has priority over any other type of lien, regardless of when the lien was recorded.

It is false to state that the lien recorded first has priority, that a mortgage lien has priority over a tax lien, or that liens all have the same priority.

176.

A broker produces a buyer who is willing to pay the asking price for the listed real estate and the buyer meets all the required conditions; however, the principal chooses not to sell the real estate to this buyer. Which statement is true in regard to this particular situation?

  • The principal is responsible for paying the broker a commission for finding a legitimate buyer

  • The principal is responsible for selling the real estate to the buyer and paying the broker a commission for finding a legitimate buyer

  • The principal is not responsible for anything until he signs a contract to sell the real estate to the buyer

  • The broker is responsible for producing a buyer the principal will accept

Correct answer: The principal is responsible for paying the broker a commission for finding a legitimate buyer

The principal is responsible for paying the broker a commission for finding a legitimate buyer. Once the broker produces a buyer willing to pay the asking price for the listed real estate and the buyer meets all the required conditions, then the principal is responsible for paying the broker a commission. If the broker feels that he has earned the commission, then he may sue the principal. While this answer is common practice, it is not uncommon for listing agreements to stipulate that a broker's commission is only due if and when the deal closes and title passes. 

It is false to state the principal is responsible for selling the real estate to the buyer because the principal does not have a contract with the buyer; therefore, the principal is not liable to the buyer. It is false to state the principal is not responsible for anything because the principal has signed a listing agreement with the broker; therefore, the principal is liable to the broker. It is false to state the broker is responsible for producing a buyer the principal will accept because the broker is responsible for finding a qualified buyer willing to pay the listing price.

177.

Alex the agent is the exclusive broker for Ivan’s new condominium development, which consists of 20 studio apartments, each of which measures 25’ x 35’. Harry wants to buy ten of the twenty studios for $135 per square foot. How much is Harry offering for all 10 condos?

  • $1,181,250

  • $11,810,250

  • $118,125

  • $87,500

Correct answer: $1,181,250

Harry is offering $1,181,250 for all 10 condos. Each condo is 875 * 135 = $118,125, times 10 equals $1,181,250.

178.

Dov the developer is considering hiring Jackie the real estate agent to advise him on a new housing development that Dov wants to build. Dov is contemplating a parcel that is off of the town’s main commercial strip. “Jackie, what’s the most desirable type of home I could build here?” Dov asks her. Before Jackie gives him her opinion on pricing, what should she determine first?

  • If the town’s zoning regulations permit homes to be built in this location

  • If her favorite contractor is available to help her determine construction costs

  • The market price per square foot for homes within two miles of the location

  • If Dov will give her an exclusive listing agreement for the development

Correct answer: If the town’s zoning regulations permit homes to be built in this location

Before Jackie gives him her opinion on pricing, she should determine first if the town’s zoning regulations permit homes to be built in this location. If the zoning does not permit homes to be built here, then all the other questions are irrelevant, and Jackie would be wasting her time and look unprofessional if she spent time researching pricing on homes that couldn't be built at the location. Zoning laws are local laws the regulate and control the use of land in the community, generally pertaining to the height, bulk, and use of the buildings.

179.

Jackie is the exclusive sales agent for Dov’s luxury home development that’s governed by a Homeowner’s Association. With 90% of the homes sold and completed, Dov decides to sell the last 10% of the development as building lots, upon which buyers will build their homes. Asking price is $100,000 per lot. Betty offers full price for one lot, upon which she plans on building a pink micro-house consisting of one-bedroom and one bath. Jackie presents the offer to Dov, who rejects it. What is the most likely reason Dov rejected Betty’s offer?

  • Betty’s planned home violates the development’s CC&Rs

  • Betty’s planned home violates local zoning laws

  • Betty’s planned home violates local building codes

  • Betty’s planned home violates the HOA regulations

Correct answer: Betty’s planned home violates the development’s CC&Rs

Betty’s planned home violates the development’s Covenants, Conditions and Restrictions (CC&Rs), which are rules and limitations placed on a housing development that impose various types of deed restrictions on what can take place and be built in the development, such as house color requirements, minimum and maximum home square footage, out buildings and more. 

CC&Rs are contained in the development's parcel's deeds as created by the developer; they are are not promulgated by a governmental entity. Homeowners Association Regulations (HOAs) are rules established by the development's governing body regarding the operation of the association and are enforced by the association. 

180.

Samson purchased a home that cost $190,000. To purchase the home, Samson got a 93% loan, on which there was a charge of 2-1/2 points. What was the discount charged?

  • $4,417.50

  • $4,750.00

  • $13,300.00

  • $12,967.50

Correct answer: $4,417.50

The discount charged was $4,417.50.

To find the discount charged, you will first need to calculate the loan amount, which is 93% of $190,000: 0.93 x $190,000 = $176,700.

Next, you will calculate the discount, which is 2-1/2 points or 2.5% of the loan amount: 0.025 x $176,700 = $4,417.50.

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