Real Estate Practice Exam Questions
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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?

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

What is the definition of capitalization?

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

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

<p>Inform the buyer.</p> Signup and view all the answers

Which is not considered real estate?

<p>Factories</p> Signup and view all the answers

What is homeowners insurance?

<p>Insurance to protect owners from fires and other damages.</p> Signup and view all the answers

What is the definition of a special agent?

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

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

<p>Gross Rent Multiplier Method</p> Signup and view all the answers

What is steering?

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

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

<p>Except when the listing broker does not disclose information.</p> Signup and view all the answers

Can a salesperson give legal advice?

<p>False</p> Signup and view all the answers

Who determines the commission in a listing contract?

<p>An agreement between the owner and broker.</p> Signup and view all the answers

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

<p>Invest profits</p> Signup and view all the answers

Who typically pays the transfer tax?

<p>Buyer and seller.</p> Signup and view all the answers

What is the definition of blockbusting?

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

What is the definition of a special agency listing?

<p>n/a</p> Signup and view all the answers

What is the definition of a net listing?

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

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

<p>Can they make monthly rent payments on time?</p> Signup and view all the answers

What are the examples of single agency disclosures?

<p>Revealing the owner will accept less.</p> Signup and view all the answers

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

<p>Sales comparison approach.</p> Signup and view all the answers

What is the definition of assemblage?

<p>Consolidating two separate lots into one.</p> Signup and view all the answers

What would not be considered a depreciation of value?

<p>Unimproved land.</p> Signup and view all the answers

What has the greatest effect on real estate value?

<p>Demand of people and location.</p> Signup and view all the answers

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

<p>PA Human Relations Act.</p> Signup and view all the answers

Who typically pays for title insurance?

<p>Buyer.</p> Signup and view all the answers

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

<p>1% of the sales price.</p> Signup and view all the answers

What should you do about material defect disclosures?

<p>Inform the buyer and seller.</p> Signup and view all the answers

What is private mortgage insurance?

<p>It protects the lender if there is default.</p> Signup and view all the answers

What is the first step in the appraisal process?

<p>Indicate objective of appraisal.</p> Signup and view all the answers

What is an example of external depreciation?

<p>Nearby property that suffers from lack of maintenance.</p> Signup and view all the answers

Who does a selling salesperson represent under buyer agency?

<p>Buyer.</p> Signup and view all the answers

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

<p>Opening offices in new locations.</p> Signup and view all the answers

What is the definition of equity?

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

Who are the parties in a listing agreement?

<p>Owner and listing broker.</p> Signup and view all the answers

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

<p>Negotiate lowest price.</p> Signup and view all the answers

What is reconciliation in appraisal?

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

What are typical property management operating expenses?

<p>Ceiling replacement.</p> Signup and view all the answers

Which of the following are examples of agricultural property?

<p>Government owned rural land.</p> Signup and view all the answers

What is the definition of physical deterioration?

<p>Associated with normal wear and tear.</p> Signup and view all the answers

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

<p>Seller.</p> Signup and view all the answers

What is the Exclusive Right to Sell Listing definition?

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

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

<p>25-year-old church.</p> Signup and view all the answers

What is the definition of appraisal?

<p>Supportable estimate of value.</p> Signup and view all the answers

What is the PA law that prohibits discrimination in housing?

<p>PA Human Relations Act.</p> Signup and view all the answers

Is special price setting allowed for certain categories of people?

<p>False</p> Signup and view all the answers

When is the consumer notice given?

<p>At the first discussion of needs and motivation.</p> Signup and view all the answers

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

<p>When the buyer accepts the offer and the seller is notified.</p> Signup and view all the answers

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

<p>Care and confidentiality.</p> Signup and view all the answers

What are the characteristics of sale and leaseback?

<p>Buyer becomes lessor.</p> Signup and view all the answers

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

<p>Give the agreement of sale.</p> Signup and view all the answers

What is the definition of redlining?

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

What is a way to terminate a listing agreement?

<p>Bankruptcy Court.</p> Signup and view all the answers

What is a type of depreciation that is not curable?

<p>External depreciation.</p> Signup and view all the answers

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

<p>The buyer had AIDS.</p> Signup and view all the answers

What is the definition of sale and leaseback?

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

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

<p>Buyer receives title when the contract is signed</p> Signup and view all the answers

Who is considered the lender in a purchase money mortgage?

<p>Seller.</p> Signup and view all the answers

What is the purpose of RESPA?

<p>To provide disclosure of closing cost information.</p> Signup and view all the answers

What is a purchase money order?

<p>Debit to the seller.</p> Signup and view all the answers

What is the definition of balloon mortgage?

<p>A mortgage with a balloon payment.</p> 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?

<p>They are liable for broker compensation.</p> Signup and view all the answers

Is undisclosed dual agency allowable by law?

<p>False</p> Signup and view all the answers

Who does the earnest money deposit credit?

<p>To the buyer.</p> Signup and view all the answers

Convert 3 mills to a decimal.

<p>.003.</p> Signup and view all the answers

Who does the loan origination fee debit?

<p>Buyer.</p> Signup and view all the answers

What is prorated by day on a HUD-1?

<p>Interest on an assumed mortgage.</p> Signup and view all the answers

What is the source of money for an FHA loan?

<p>A qualified lending institution.</p> Signup and view all the answers

What is the role of a mortgage broker?

<p>To find mortgage lenders for borrowers.</p> Signup and view all the answers

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

<p>Handwritten words take precedence over printed words.</p> Signup and view all the answers

What is a shares appreciation mortgage?

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

Determine the value by the Income Approach formula.

<p>Net income divided by rate of capitalization.</p> Signup and view all the answers

What is fiduciary responsibility in a property management contract?

<p>To the lessor.</p> Signup and view all the answers

What is the formula for the Gross Rent Multiplier?

<p>Sale price divided by monthly rent.</p> Signup and view all the answers

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

<p>Property management.</p> Signup and view all the answers

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

<p>Rental income.</p> Signup and view all the answers

Paid tax is a credit to whom?

<p>Credit to the seller.</p> Signup and view all the answers

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

<p>Dangerfield represents Crawford.</p> Signup and view all the answers

What represents dual agency?

<p>One broker with a listing agreement and a buying agreement.</p> Signup and view all the answers

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

<p>Both represent forms of financing.</p> Signup and view all the answers

What is a characteristic of a VA mortgage?

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

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

<p>Package mortgage.</p> Signup and view all the answers

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

<p>Balloon mortgage.</p> Signup and view all the answers

What does Regulation Z require lenders to do?

<p>Inform borrowers of home mortgage loans of closing costs.</p> Signup and view all the answers

What is a mortgage that encumbers several parcels of land?

<p>Blanket mortgage.</p> Signup and view all the answers

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

<p>Loan to value.</p> Signup and view all the answers

What is a characteristic of negative amortization?

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

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

<p>500k.</p> Signup and view all the answers

What is a fair housing exemption?

<p>Familial status.</p> 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.
  • 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.

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