Real estate exam 1 Questions and Answers (Graded A)
The closing date is August 16. The property's fair market value is $180,000. In this community, property is assessed at 50% of its market value, and taxes are applied at 55
mills per dollar of assessed value. Using a 365-day calendar year and assuming the buyer is responsible for the closing day, what would the buyer's prorated share of the annual property taxes be?
A.
$1,856.25
B.
$1,871.28
C.
$3,078.72
D.
$3,743.01 - ANSWER B
Explanation:
This problem requires two steps: finding the annual property taxes, and then prorating them. Begin with the tax assessment problem. The assessed value is 50% of the market value ($180,000 × .5 = $90,000). The tax is calculated using mills, which are equivalent to one-tenth of a cent, so 55 mills equals 5.5 cents on the dollar ($90,000 × .055 = $4,950). Next, prorate the annual tax amount. First, find the per diem amount using a 365-day year ($4,950 ÷ 365 = $13.56). Calculate the number of days for which the buyer is responsible (16 in August, including the closing date, 30 in September, 31 in October, 30 in November, and 31 in December = 138 days). Multiply the number of days by the per diem rate to find the amount the buyer must pay at closing, to cover the remainder of the year's taxes ($13.56 × 138 = $1,871.28).
2. A buyer is looking at a house in a neighborhood with newly installed sidewalks. When
the buyer asks about taxes, the seller assures her that the home isn't subject to any special assessments. The buyer's agent should:
A.
advise the buyer that the property may be subject to special assessments and recommend that the buyer look into it
B.
check the county records to see if the property has any special assessments pending against it
C.
contact an attorney to begin an investigation of the matter
D. say nothing and take the seller's word for it - ANSWER A.
Explanation:
As part of the fiduciary duty of loyalty, a buyer's agent is required to promote the buyer's
interests; so it's appropriate for the buyer's agent to recommend that the buyer investigate the question of a special assessment instead of relying on the seller's assurances. (State law may specify that the agent is under no duty to investigate the matter himself, unless he specifically agreed to do so.)
3. Which of the following pieces of information must a listing agent convey to a seller?
A.
A potential buyer confides that he plans to violate zoning restrictions
B.
A potential buyer is a member of a racial minority
C.
A potential buyer, who has asked for the seller to take back a purchase money mortgage, has abused his credit in the past
D.
The neighborhood where the seller plans to move is seeing more minorities moving in - ANSWER C.
Explanation:
A listing agent owes the duty of loyalty to his principal, the seller. If the listing agent discovers information that suggests that selling to a particular buyer could be detrimental to the seller (perhaps, for example, the buyer lets slip some problems obtaining financing in the past), that should be disclosed to the seller.
4. Maria has a lease that begins on June 1 and ends on December 1 of that same year. Maria has a:
A.
periodic estate
B.
tenancy at will
C.
term tenancy
D.
joint tenancy - ANSWER C.
Explanation:
A term tenancy, also known as an estate for years, is a tenancy for any fixed period of time (even for less than one year).
5. Bob builds a fence extending 20 feet onto the neighboring property. He uses the land for 15 years without the knowledge of the neighboring owner, who lives in another city. When Bob wants to list his property for sale, including the extra 20-foot strip, which of the following is true?
A.
Adverse possession does not apply because the neighboring owner did not know about Bob's possession of the land
B.
Adverse possession does not apply since Bob did not pay taxes on the land during those 15 years
C.
Bob has not proven hostile intent, because there has not been a confrontation with the neighboring owner
D.
The land is his to sell, having passed through adverse possession - ANSWER D.
Explanation:
Bob's possession of the land meets all of the criteria for adverse possession: he occupied the land, his use was open and notorious, it was exclusive, and for the required period of time. Hostile intent does not require confrontation. (Bob may need to file a quiet title action, though, to perfect the title before proceeding with the sale.)
6. A deed restriction is a covenant that:
A.
controls housing costs in a subdivision
B.
lasts forever
C.
prevents the property from becoming encumbered
D.
restricts future owners of the property - ANSWER D.
Explanation:
A deed restriction is a private agreement that limits uses of a property. It runs with the land, so it affects future owners of the property. While it potentially could last forever, there are a number of ways in which a deed restriction may be terminated.
7. A developer wants to subdivide a parcel and market it to potential buyers in other states. The property is divided into 135 vacant lots. He must register with the Office of Interstate Land Sales, which is administered by:
A.
FNMA
B.
HUD
C. state real estate office in developer's home state
D.
state real estate office in state in which property is located - ANSWER B
Explanation:
The Interstate Land Sales Full Disclosure Act requires the developers of subdivisions with more than 100 vacant lots who will market the lots through interstate commerce to register with the Office of Interstate Land Sales, a division of the Department of Housing
and Urban Development. (Note: As of July 2011, responsibility for administration of ILSA has been transferred from HUD to the federal Consumer Financial Protection Bureau, but you may still encounter a question similar to this on the state exam.)
8. The parties negotiate the sale of a property by writing letters to each other (in the old-
fashioned way, by hand). Their agreement is:
A.
invalid; the parties must meet with each other in person
B.
invalid; the parties must use a preprinted form
C.
invalid; each letter is only a counteroffer to the previous letter
D.
valid; under the statute of frauds, contracts to sell real estate are enforceable if they are in writing - ANSWER D
Explanation:
The statute of frauds requires contracts for the sale of real estate to be in writing. Simple notes, memoranda, or a series of letters can be sufficient to meet the requirement, as long as they identify the property adequately, indicate agreement between the parties, and are signed by the parties.
9. A home is built on a hillside with underground springs that cause the ground to soften
from time to time. The owner, who has had the property for three years with no problems, sells the house without mentioning the underground springs. The listing agent
is also aware of the springs but says nothing. A year later, the buyer realizes that a corner of the house is sinking. She is entitled to sue:
A.
the listing agent
B.
the seller
C.
both the listing agent and the seller
D.
neither the listing agent nor the seller - ANSWER C
