Real Estate Practice Exam Questions

Questions and Answers

What is the definition of brokerage?

The business practice of bringing together the parties in a practice.

What are two examples of special use property?

Schools and cemetery.

What is an example of functional obsolescence?

Bathroom.

What is the definition of principal in real estate?

A consumer of real estate services who has entered into an agency relationship with a broker or another licensee employed by a broker. Signup and view all the answers

What is the definition of capitalization?

The process of determining the present value of a property from its future income. Signup and view all the answers

What is the salesperson's obligation to a buyer under single agency listing?

Inform the buyer. Signup and view all the answers

Which is not considered real estate?

Factories Signup and view all the answers

What is homeowners insurance?

Insurance to protect owners from fires and other damages. Signup and view all the answers

What is the definition of a special agent?

The type of agency in which the principal authorizes the agent to represent the agent in one specific transaction or business activity. Signup and view all the answers

Which of the following is not used to determine the cost approach to estimate value?

Gross Rent Multiplier Method Signup and view all the answers

What is steering?

The unlawful act of keeping a buyer away from certain communities or guiding them to certain communities. Signup and view all the answers

When is a salesperson entitled to commission if the transaction is not consummated?

Except when the listing broker does not disclose information. Signup and view all the answers

Can a salesperson give legal advice?

False Signup and view all the answers

Who determines the commission in a listing contract?

An agreement between the owner and broker. Signup and view all the answers

Which of the following is not a typical duty of a property manager?

Invest profits Signup and view all the answers

Who typically pays the transfer tax?

Buyer and seller. Signup and view all the answers

What is the definition of blockbusting?

An illegal real estate practice caused by inciting fear and panic selling by suggesting that persons of minority background are moving into an area. Signup and view all the answers

What is the definition of a special agency listing?

n/a Signup and view all the answers

What is the definition of a net listing?

A type of listing in which a seller desires to sell real property and receive a guaranteed amount. Signup and view all the answers

What is the main factor a property manager should use to evaluate a prospective tenant?

Can they make monthly rent payments on time? Signup and view all the answers

What are the examples of single agency disclosures?

Revealing the owner will accept less. Signup and view all the answers

What is the most reliable method of appraisal for residential real estate?

Sales comparison approach. Signup and view all the answers

What is the definition of assemblage?

Consolidating two separate lots into one. Signup and view all the answers

What would not be considered a depreciation of value?

Unimproved land. Signup and view all the answers

What has the greatest effect on real estate value?

Demand of people and location. Signup and view all the answers

What rules require fair housing laws to be in a listing contract?

PA Human Relations Act. Signup and view all the answers

Who typically pays for title insurance?

Buyer. Signup and view all the answers

What is the transfer tax charged by the state of PA?

1% of the sales price. Signup and view all the answers

What should you do about material defect disclosures?

Inform the buyer and seller. Signup and view all the answers

What is private mortgage insurance?

It protects the lender if there is default. Signup and view all the answers

What is the first step in the appraisal process?

Indicate objective of appraisal. Signup and view all the answers

What is an example of external depreciation?

Nearby property that suffers from lack of maintenance. Signup and view all the answers

Who does a selling salesperson represent under buyer agency?

Buyer. Signup and view all the answers

What is not an example of a real estate business violation of antitrust laws?

Opening offices in new locations. Signup and view all the answers

What is the definition of equity?

The value of real estate above any debt on that property. Signup and view all the answers

Who are the parties in a listing agreement?

Owner and listing broker. Signup and view all the answers

What are examples of fiduciary responsibilities under a single agency listing agreement?

Negotiate lowest price. Signup and view all the answers

What is reconciliation in appraisal?

The process of comparing property values from different approaches. Signup and view all the answers

What are typical property management operating expenses?

Ceiling replacement. Signup and view all the answers

Which of the following are examples of agricultural property?

Government owned rural land. Signup and view all the answers

What is the definition of physical deterioration?

Associated with normal wear and tear. Signup and view all the answers

What is the proper listing price of the property based on?

Seller. Signup and view all the answers

What is the Exclusive Right to Sell Listing definition?

A type of listing to list and sell real estate property in which the seller employs one broker. Signup and view all the answers

What type of property would be most appropriate to use the cost approach method?

25-year-old church. Signup and view all the answers

What is the definition of appraisal?

Supportable estimate of value. Signup and view all the answers

What is the PA law that prohibits discrimination in housing?

PA Human Relations Act. Signup and view all the answers

Is special price setting allowed for certain categories of people?

False Signup and view all the answers

When is the consumer notice given?

At the first discussion of needs and motivation. Signup and view all the answers

What are the conditions for an agreement of sale to become a binding contract?

When the buyer accepts the offer and the seller is notified. Signup and view all the answers

What does the 'C' stand for in fiduciary duties?

Care and confidentiality. Signup and view all the answers

What are the characteristics of sale and leaseback?

Buyer becomes lessor. Signup and view all the answers

What is a broker's obligation to a buyer without buyer agency?

Give the agreement of sale. Signup and view all the answers

What is the definition of redlining?

The unlawful practice of refusing real estate related business services based on location. Signup and view all the answers

What is a way to terminate a listing agreement?

Bankruptcy Court. Signup and view all the answers

What is a type of depreciation that is not curable?

External depreciation. Signup and view all the answers

What are the disclosure requirements to a seller under a listing agreement?

The buyer had AIDS. Signup and view all the answers

What is the definition of sale and leaseback?

A combination real estate transaction where there is both a sale of real property and then an immediate lease on the same property. Signup and view all the answers

Which of the following are characteristics of a contract for a deed?

Buyer receives title when the contract is signed Signup and view all the answers

Who is considered the lender in a purchase money mortgage?

Seller. Signup and view all the answers

What is the purpose of RESPA?

To provide disclosure of closing cost information. Signup and view all the answers

What is a purchase money order?

Debit to the seller. Signup and view all the answers

What is the definition of balloon mortgage?

A mortgage with a balloon payment. Signup and view all the answers

What are the obligations of an owner in a listing agreement if they refuse to sell when presented with a full offer?

They are liable for broker compensation. Signup and view all the answers

Is undisclosed dual agency allowable by law?

False Signup and view all the answers

Who does the earnest money deposit credit?

To the buyer. Signup and view all the answers

Convert 3 mills to a decimal.

.003. Signup and view all the answers

Who does the loan origination fee debit?

Buyer. Signup and view all the answers

What is prorated by day on a HUD-1?

Interest on an assumed mortgage. Signup and view all the answers

What is the source of money for an FHA loan?

A qualified lending institution. Signup and view all the answers

What is the role of a mortgage broker?

To find mortgage lenders for borrowers. Signup and view all the answers

What is true about the contract rules regarding printed form sales agreements?

Handwritten words take precedence over printed words. Signup and view all the answers

What is a shares appreciation mortgage?

The lender receives a share of capital gain at the time of sale. Signup and view all the answers

Determine the value by the Income Approach formula.

Net income divided by rate of capitalization. Signup and view all the answers

What is fiduciary responsibility in a property management contract?

To the lessor. Signup and view all the answers

What is the formula for the Gross Rent Multiplier?

Sale price divided by monthly rent. Signup and view all the answers

All are federal income tax deductions for a homeowner except...

Property management. Signup and view all the answers

What is an example of an item that is prorated at settlement?

Rental income. Signup and view all the answers

Paid tax is a credit to whom?

Credit to the seller. Signup and view all the answers

In a single agency listing agreement, who does the selling agent represent?

Dangerfield represents Crawford. Signup and view all the answers

What represents dual agency?

One broker with a listing agreement and a buying agreement. Signup and view all the answers

In a comparison between a land contract and a purchase money mortgage, which is true?

Both represent forms of financing. Signup and view all the answers

What is a characteristic of a VA mortgage?

Must sign an affidavit saying that they intend to occupy the property. Signup and view all the answers

What is a mortgage that includes both real and personal property?

Package mortgage. Signup and view all the answers

What is a mortgage that will not fully amortize the loan?

Balloon mortgage. Signup and view all the answers

What does Regulation Z require lenders to do?

Inform borrowers of home mortgage loans of closing costs. Signup and view all the answers

What is a mortgage that encumbers several parcels of land?

Blanket mortgage. Signup and view all the answers

What is the mortgage amount relative to the property price called?

Loan to value. Signup and view all the answers

What is a characteristic of negative amortization?

They are commonly found on Adjustable Rate Mortgages (ARM). Signup and view all the answers

What is the maximum profit a married couple can take on capital gain?

500k. Signup and view all the answers

What is a fair housing exemption?

Familial status. Signup and view all the answers

Study Notes

Real Estate Definitions and Concepts

Brokerage: Business practice connecting parties for transactions.
Special Use Property Examples: Schools and cemeteries are categorized as special use properties.
Functional Obsolescence: A term signifying reduced value due to outdated features, exemplified by bathrooms.
Principal: A client who engages a broker through an agency relationship.
Capitalization: A method to determine property value based on future income projections.

Real Estate Agency Practices

Salesperson's Obligation under Single Agency Listing: Duty to inform the buyer about relevant information.
Special Agent: Represents a principal in a specific transaction.
Commission Determination: Established through an agreement between the property owner and the broker.
Steering: Illegal act of directing buyers to or away from certain neighborhoods based on demographics.

Financial Aspects and Legal Concepts

Homeowners Insurance: Protects against risks like fire and damage.
Transfer Tax: Typically paid by both buyer and seller during property transactions.
Net Listing: A type of listing ensuring sellers receive a minimum amount while brokers earn commission on any excess sale price.
Private Mortgage Insurance: Protects lenders in case of borrower default.

Property Management and Appraisal

Property Manager Duties: Typical responsibilities excluding profit investment.
Sales Comparison Approach: Most reliable appraisal method for residential properties.
Reconciliation in Appraisal: Process of comparing values from different methods to derive a final property value.

Real Estate Violations and Regulations

Blockbusting: An illegal practice that foments fear within communities through discriminatory tactics.
Redlining: Illegal denial of services based on property location, often by lenders or insurers.
PA Human Relations Act: Law prohibiting discrimination in housing.

Contract and Lending Principles

Earnest Money Deposit: A credit allowed to the buyer during transactions.
Balloon Mortgage: A mortgage requiring a large balloon payment at maturity.
Loan Origination Fee: A cost incurred by the buyer for securing a mortgage.
Shares Appreciation Mortgage: A loan structure allowing lenders to benefit from capital gains.

Mortgage and Financing Terms

Loan to Value: Ratio expressing the loan amount relative to property price.
Negative Amortization: Occurs in adjustable rate mortgages where payments do not cover interest, increasing overall debt.
VA Mortgage Characteristics: Requires occupants to sign an affidavit of intent to occupy.

Disclosure and Settlement Obligations

Material Defect Disclosures: Obligations to inform buyers/sellers of any known issues.
HUD 1 Settlement: Lists prorated costs, including interest on assumed mortgages.
Disclosure Requirements: Brokers must disclose critical details, excluding irrelevant health information about buyers.

Appraisal and Taxation

Appraisal Process: Begins with defining the objective of the valuation.
Tax Deductions for Homeowners: Excludes property management costs from federal benefits.
Proration at Settlement: Commonly prorated items include rental income and taxes.

Property Transactions and Agency Relationships

Exclusive Right to Sell Listing: A contract allowing one broker to earn commission regardless of who sells the property.
Dual Agency: Represents a broker having both listing and buying agreements; requires informed consent.
Consumer Notice: Must be provided during initial discussions of a buyer's and seller's needs.

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Test your knowledge of real estate terminology and concepts with this set of flashcards. Each card features a term and its definition, along with practical examples related to the field. Perfect for students or professionals preparing for real estate exams.