Real Estate Practice: Midterm
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An option on real estate is which of the following?
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A deposit
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A consideration
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A contract
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An endorsement
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About This Quiz
This midterm quiz in Real Estate Practice assesses knowledge on various aspects such as contractual agreements, broker fees, and mortgage lending. It's designed to test the competence and understanding of real estate concepts, aiding learners in applying these in practical scenarios.
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- 2.
In the absence of specific contractual provisions to the contrary, if a seller defaults on a sales contract, the buyer may do which of the following? I. Sue the seller II. Cancel the contract and retrieve any earnest money deposited.
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. Both I and IIExplanation
The buyer has the right to sue or cancel for non-performance and have refunded any monies paid in.Rate this question:
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- 3.
The term contractual ability refers to which of the following?
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The competence of the parties to a contract.
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An agreement about terms between the parties to a contract.
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The legality of the purpose of a contractual agreement.
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The inclusion in a contract of all necessary clauses and convenants.
Correct Answer
A. The competence of the parties to a contract.Explanation
Contractual ability refers to the competence or legal capacity of the parties involved in a contract. It refers to their ability to understand the terms of the contract and to be legally bound by it. This includes factors such as age, mental capacity, and legal status.Rate this question:
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- 4.
If a broker is to receive a fee of 7% of the actual sales price of a house, how much less will he earn if the seller reduces the $63,000 price by $5,000.
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$175
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$260
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$350
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$700
Correct Answer
A. $350Explanation
If the broker is to receive a fee of 7% of the actual sales price, then the fee would be 7% of $63,000, which is $4,410. If the seller reduces the price by $5,000, the new price would be $58,000. The broker's fee would then be 7% of $58,000, which is $4,060. The difference between the two fees is $4,410 - $4,060 = $350. Therefore, the broker would earn $350 less if the seller reduces the price by $5,000.Rate this question:
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- 5.
A seller wishes to net $8,590 from the sale of her property. If her broker is to receive a fee of 4% of the selling price and an allowance of $50 for expenses, what must the minimum selling price be.
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$8,884
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$8,896
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$8,984
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$9,000
Correct Answer
A. $9,000Explanation
The seller wishes to net $8,590 from the sale of her property. The broker's fee is 4% of the selling price and there is an allowance of $50 for expenses. To calculate the minimum selling price, we need to add the broker's fee and the allowance to the desired net amount.
Broker's fee = 4% of selling price = 0.04 * selling price
Allowance for expenses = $50
Therefore, the equation becomes:
Selling price + 0.04 * selling price + $50 = $8,590
Simplifying the equation:
1.04 * selling price + $50 = $8,590
1.04 * selling price = $8,540
selling price = $8,540 / 1.04
selling price ≈ $8,211.54
Since the selling price must be at least the minimum amount, the minimum selling price must be $9,000.Rate this question:
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- 6.
The lender of a mortgage money is known as which of the following?
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Mortgageee
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Mortgagor
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Trustee
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Lessee
Correct Answer
A. MortgageeeExplanation
The lender of a mortgage money is known as the mortgagee. The mortgagee is the party that provides the loan to the borrower, also known as the mortgagor. The mortgagor is the one who borrows the money and uses their property as collateral. The mortgagee has the right to take ownership of the property if the mortgagor fails to repay the loan. The trustee is a separate party that holds the property in trust, and the lessee is the one who rents a property.Rate this question:
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- 7.
When a mortgage loan requires periodic payments that will not fully amortize the amount of the loan by the final due date, the final payment is called
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Release payment
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Balloon payment
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Level payment
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Acceleration payment
Correct Answer
A. Balloon paymentExplanation
In a partially amortized loan, any payment larger than the normal periodic payment is considered a balloon payment.
A release payment is the amount needed to remove a lien from the property.
A level payment is an equal payment throughout the life of the loan.
An accelerated payment is one that is required in advance of its normally scheduled due date by the lender.
A mortgage provision called the acceleration provision indicates that if the borrower defaults on the mortgage, the lender may declare the entire debt be immediately due and payable; non-compliance of this provision by a borrower who is in default allows the lender to proceed towards foreclosure.Rate this question:
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- 8.
A mortgage that covers a number of parcels of real property and that may provide for the release of each parcel as certain payments are made to reduce the loan is called:
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Blanket mortgage
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Open-end mortgage
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Wrap-around mortgage
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Partially amortized mortgage
Correct Answer
A. Blanket mortgageExplanation
Under a blanket mortgage, an individual parcel may be conveyed free and clear as the release clause is satisfied. Can be used to by a builder/developer to finance many properties in a development. Usually there is a partial release clause that is activiated when each home in the development is sold. Clause provides that when an agreed upon amount of debt on each particular home is paid off at the settlement table from proceeds of the sale price, the mortgage lien is removed on that particular property. The release allows the title for each property to be conveyed by the developer to the new purchaser.
Blanket can also be used if purchasing a vacation or rental home, allowing a substantial amount of equity in first home as the down payment on the second property. That way the lender would encumber both the first and second home as collateral security for repayment of debt.
An open-end mortgage provides for advancement of additional funds against the original note after a portion of the note has been repaid. This type of loan is commonly available today in the form of an equity line of credit. Loan can be opened back up to the end in the sense that a borrower who paid down their mortgage can borrow an amount of money back up to the original amount of the loan.
A wraparound mortgage is a special form of second mortgage financing. It is also referered to as an all-inclusive mortgage. This mortgage encompasses or wraps around all other existing financing on real property. It is also referred to as junior financing in that it is subordinate or junior to a more senior loan. It can be used to finance the purchase of property when a seller is willing to provide financing for the buyer but the seller has a mortgage on the property for sale that cannot or should not be paid off. The seller becomes who becomes the lender receives loan payments from the buyer and is resonsible for making payments to the first lender.
Partially amortized mortgage refers to a method of repayment of a mortgage. It involves blending an amortized mortgage and a term loan because it contains characteristics of both loans. It is a short term loan. In the intial segment, portions of the payment are applied to both interest and principal. At the end of the initial 3, 5, or 7 year segement, the mortgage contains a feature of the term loan that requires a large lump sum balloon payment of principal to be due and payable. Therefore a partially amortized mortgage is a type of balloon financing.Rate this question:
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- 9.
Written evidence of a promise to repay borrowed money is called:
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Abstract
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Acknowledgement
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Convenant
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Note
Correct Answer
A. NoteExplanation
A "note" is a written evidence of a promise to repay borrowed money. It is a legal document that outlines the terms and conditions of the loan, including the amount borrowed, interest rate, repayment schedule, and any other relevant details. It serves as proof of the borrower's obligation to repay the borrowed funds and can be used as evidence in case of a dispute or legal action.Rate this question:
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- 10.
Funds for the Federal Housing Administration (FHA) loans are provided by:
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Qualified lending institutions
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Any government agency
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Federal Housing Administration (FHA) only
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Federal Deposit Insurance Company only
Correct Answer
A. Qualified lending institutionsExplanation
FDIC insures the deposits of institutions that are membes of the Federal Reserve System.Rate this question:
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- 11.
A conventional mortgage is best defined as:
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FHA-insured mortgage
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VA-insured mortgage
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Non-insured bank mortgage
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Installment land contract
Correct Answer
A. Non-insured bank mortgageExplanation
A conventional mortgage refers to a mortgage loan that is not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, it is provided by a private lender, typically a bank. This means that the borrower assumes the full risk and responsibility for repaying the loan. Unlike FHA-insured or VA-insured mortgages, a conventional mortgage does not come with any specific government-backed protections or benefits.Rate this question:
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- 12.
A veteran who receives a Veterans Administration (VA) loan on a property is permitted to do which of the following? I. Sell the property and transfer the loan to a new property II. Sell the property to a non-veteran who may then assume the balance of the loan
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. II onlyExplanation
A veteran who receives a Veterans Administration (VA) loan on a property is only permitted to sell the property to a non-veteran who may then assume the balance of the loan. They are not allowed to transfer the loan to a new property. Therefore, the correct answer is II only.Rate this question:
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- 13.
During one year, a man paid an average of $126 a month on interest on his loan. If he was in the 28 percent income tax bracket and all the interest for that year was deductible from his taxable income, approximately how much less was his income tax bill as a result of this deduction?
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$35
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$42
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$353
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$423
Correct Answer
A. $423Explanation
The man paid an average of $126 a month on interest on his loan for a year. This means he paid a total of $126 x 12 = $1512 in interest for the year. Since the interest is deductible from his taxable income, he can reduce his taxable income by $1512. In the 28 percent income tax bracket, this deduction would result in a tax savings of $1512 x 0.28 = $423. Therefore, his income tax bill would be approximately $423 less as a result of this deduction.Rate this question:
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- 14.
Sherwood Estates is a suburban development of large, new houses. After one of the houses was bought by a religious group and turned into a commune, two realty firms sensing the possibility of quick profits, telephoned owners of the houses in the block where the group located, told them of the recent establishment of the commune and solicited listings. Under the Federal Fair Housing Act, the realty firms' solicitation of owners is:
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Not prohibited
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Unlawful panic-peddling
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Unlawful discrimination
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Unlawful intimidation
Correct Answer
A. Unlawful panic-peddlingExplanation
Also known as BlockbustingRate this question:
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- 15.
In allegations of discriminatory practices under the Federal Fair Housing Act, the burden of proof is on the:
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Court
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Defendant
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Complainant
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Department of Housing and Urban Development
Correct Answer
A. ComplainantExplanation
In allegations of discriminatory practices under the Federal Fair Housing Act, the burden of proof is on the complainant. This means that it is the responsibility of the person making the allegation to provide evidence and prove that discrimination has occurred. The complainant must show that they have been treated unfairly or differently based on a protected characteristic, such as race, color, religion, sex, familial status, national origin, or disability. The burden of proof is not on the court, defendant, or Department of Housing and Urban Development, as they are not the ones making the allegation.Rate this question:
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- 16.
Under the guidelines set up by the Federal Fair Housing Act, a veteran who is trying to rent a house through a broker has been discriminated against. When he files a complaint with the Department of Housing and Urban Development, that agency can do which of the following under this Act? I. Fine the broker II. Bar the broker from participating in both FHA and VA programs
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. Neither I or IIExplanation
The agency does not have the authority to fine a broker or bar a broker from participating in various programs.
In PA, complaints filed with HUD would be handled by the PA Human Relations Commission. An aggrieved party may seek a remedy of monetary damages or penalties through an Administrative Law Judge. Another alternative for an aggrieved party is to seek judicial action in a federal court within 2 years of the alleged act.Rate this question:
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- 17.
An individual who engages another to act for him under a contractual agreement is referred to as:
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Principal
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Grantor
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Agent
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Testator
Correct Answer
A. PrincipalExplanation
Principal is an individual who has an agent act in his behalf.
Grantor is one who transfers title to real property by deed.
Testator is a person who makes a will.Rate this question:
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- 18.
An agency relationship typically exists between which of the following?
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Seller and buyer
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Seller and broker
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Borrower and lender
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Lender and seller
Correct Answer
A. Seller and brokerExplanation
Broker and seller is a tradtional agency relationship.
The relationship between the other pairs listed above, are contractual but none is an agency relationship.Rate this question:
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- 19.
Broker Owens enters into a listing agreement to sell Ms. Allen's house. All of the following statements are true, EXCEPT:
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When Broker Owens' salesperson, Mark King, shows Ms. Allen's property, he is a representative of Ms. Allen.
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Ms. Allen may terminate for cause the listing agreement with Broker Owens prior to the agreement's ending date.
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When Broker Owen's shows the house to prospective buyer Steve Smith, he is now an agent of Mr. Smith.
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If the listing agreement provides Broker Owens to invest money to improve Ms. Allen's residence, this is called agency coupled with an interest.
Correct Answer
A. When Broker Owen's shows the house to prospective buyer Steve Smith, he is now an agent of Mr. Smith.Explanation
No agency relationship exists between buyer and broker unless an arragement is entered into making the broker the buyer's agent.Rate this question:
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- 20.
If a salesperson is told by a seller that the listed property has a leaky roof and termites, the salesperson must do which of the following: I. Inform a prospective buyer of these conditions. II. Require that the roof be repaired and the termites be exterminated before selling the property.
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. I onlyExplanation
A salesperson has an obligation to disclose both positive and negative facts about a property to a prospective buyer. A salesperson cannot require the seller to repair or cure any defects.Rate this question:
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- 21.
A fiduciary relationship between a listing broker and seller terminates if the seller does which of the following? I. Withdraws the property from the market and formerly terminates the listing agreement. II. Requests that the listing be placed in the multiple listing book.
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. I onlyExplanation
If the seller withdraws the property from the market and formally terminates the listing agreement, it means that they no longer want to sell the property and have ended their agreement with the listing broker. This termination of the agreement also terminates the fiduciary relationship between the listing broker and seller. Therefore, the correct answer is I only.Rate this question:
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- 22.
When handling an exclusive right to sell listing, a broker is responsible for doing which of the following: I. Guaranteeing to buy the property himself if it is not sold within the listing period. II. Screening offers and refusing those that are below listed price.
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. Neither I or IIExplanation
In an exclusive right to sell listing, the broker is not responsible for guaranteeing to buy the property if it is not sold within the listing period (option I). The broker's responsibility is to market the property and find a buyer, not to purchase the property themselves. Additionally, the broker is not required to screen offers and refuse those below the listed price (option II). The broker's role is to present all offers to the seller and advise them on the best course of action, but it is ultimately the seller's decision whether to accept or reject an offer. Therefore, neither option I nor option II is the responsibility of the broker in an exclusive right to sell listing.Rate this question:
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- 23.
Which of the following types of listing agreements gives the broker the greatest assurance of receiving a commission.
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Net listing
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Exclusive agency listing
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Exclusive right to sell listing
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Open listing
Correct Answer
A. Exclusive right to sell listingExplanation
Exclusive right to sell - one exclusive broker office, receives commission no matter who finds the buyer - even if seller finds on his own
Net - if seller doesn't receive certain amount, broker gets no commission
Exclusive agency - one exclusive broker office, but if seller finds the buyer on his own, no commission is due
Open listing - typically oral agreement, open to several brokers, only one who finds buyer gets a commissionRate this question:
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- 24.
Which of the following statements about listings are true? I. A listing may be terminated by mutual consent of both parties. II. An owner may not enter into a listing contract with more than two brokers at any one time.
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I only
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II only
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Both I and II
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Neither I or II
Correct Answer
A. I onlyExplanation
Mutual consent is a reason for termination of any contract.
In an open listing agreement, a seller may list with as many brokers as he desires. Only the one broker who finds the buyer, gets the commission.Rate this question:
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- 25.
The term quieting a title refers to:
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A title insurance company's search of a title.
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A mortgagor's relinquishing title after foreclosure.
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The deposit of title with an escrow agent.
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The removal of a cloud on a title by court action.
Correct Answer
A. The removal of a cloud on a title by court action.Explanation
Quiet title refers to a legal action taken to remove any clouds or disputes on a property's title. This action is typically initiated in court to establish clear ownership and resolve any conflicting claims or uncertainties regarding the property's title. It is a process that aims to "quiet" or eliminate any doubts or challenges to the property's ownership, ensuring a clear and marketable title.Rate this question:
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- 26.
Title insurance on a property was $174.90, the fee for the title search was $75, the cost of preparing papers was $15, and miscellaneous other fees amounted to $6.10. If the seller paid 60% of the total expenses and the buyer paid the rest, how much more did the seller pay than the buyer.
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$49
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$53
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$54
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$56
Correct Answer
A. $54Explanation
The total expenses for the title insurance, title search, preparing papers, and miscellaneous fees amount to $174.90 + $75 + $15 + $6.10 = $271. The seller paid 60% of this amount, which is 0.6 * $271 = $162.60. The buyer paid the rest, which is $271 - $162.60 = $108.40. Therefore, the seller paid $162.60 - $108.40 = $54 more than the buyer.Rate this question:
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- 27.
Physical deterioration of a property is associated with which of the following?
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Eccentric design
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Changing function
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Obsolescence
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Ordinary wear and tear
Correct Answer
A. Ordinary wear and tearExplanation
Eccentric design, changing function, and obsolescence are all contributing factors to functional depreciation. Ordinary wear and tear contributes to physical deterioration.Rate this question:
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- 28.
The period of time during which the income of a building provides sufficient to warrant maintaining the building is called the building's:
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Economic life
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Recapture limit
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Reversion limit
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Investment duration
Correct Answer
A. Economic lifeExplanation
The correct answer is Economic life. Economic life refers to the period of time in which the income generated by a building is enough to justify the cost of maintaining and operating the building. It is the duration during which the building remains economically viable and profitable.Rate this question:
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- 29.
To estimate the value of property using the direct sales comparison approach (market data), an appraiser relies on the market behavior of:
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Insurers
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Buyers
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Brokers
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Lenders
Correct Answer
A. BuyersExplanation
When estimating the value of a property using the direct sales comparison approach, an appraiser relies on the market behavior of buyers. This approach involves comparing the property being appraised to similar properties that have recently been sold in the market. By analyzing the behavior of buyers in the market, such as their preferences, trends, and willingness to pay for certain features or locations, the appraiser can determine the value of the property based on the prices at which similar properties have been sold.Rate this question:
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- 30.
The loan on a property is 60 percent of its appraised value. If the interest rate is 6 percent per year and the first semiannual interest payment is $360, what is the appraised value of the property.
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$10,000
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$20,000
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$21,600
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$60,000
Correct Answer
A. $20,000Explanation
Since the first semiannual interest payment is $360 and the interest rate is 6 percent per year, we can calculate the loan amount by dividing the interest payment by the interest rate. So, $360 divided by 0.06 equals $6000. Since the loan is 60 percent of the appraised value, we can calculate the appraised value by dividing the loan amount by 0.6. So, $6000 divided by 0.6 equals $10000. Therefore, the appraised value of the property is $20000.Rate this question:
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- 31.
The assessed value of a property for tax assessment purposes is $16,000. If the annual property tax is $600, what is the rate of taxation?
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2.67%
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3.33%
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3.75%
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4.25%
Correct Answer
A. 3.75%Explanation
The rate of taxation can be calculated by dividing the annual property tax ($600) by the assessed value of the property ($16,000) and then multiplying by 100 to convert it to a percentage. Therefore, the rate of taxation is (600/16000) * 100 = 3.75%.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Aug 30, 2011Quiz Created by
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