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122 Cards in this Set
- Front
- Back
- 3rd side (hint)
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To assign a contract for the sale of real estate means to A - record the contract with the county recorders office B- permit another broker to act as a agent for the principal C - transfer ones right under the contract D - allow the seller and the buyer to exchange positiosn |
C - transfer one's rights under the contract Note - Assigninga contract means to transfer it to another |
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The property manager suspects that the tenants in a propertyare engaging in illegal drug trafficking. What should the property manager do? A) Cancel the property management agreement B) Observe the property for 30 days and then tell the owner C) Notify the owner immediately of the suspicious activity D) Do not worry. It is the owner's problem. |
C - Notify the owner immediately of the suspicious activity. |
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A zoning change has been announced that will result in theloss of value of the property to a property owner. What should a propertymanager do? A - Advisethe owner immediately. B - Terminatethe property management agreement C - Followthe owner's instructions that were previously given D -Startlobbying against the zoning change. |
A - Advisethe owner immediately. NOTE - Again, theproperty manager is the owner's "eyes and ears" for protecting theowner's best interests. Anything that can impact the property's value in eithera positive or negative way should be communicated immediately |
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A broker andseller terminate the listing contract. An offer is received in the mail by thebroker after the termination of the listing contract. The offer is for fullprice and includes all of the terms and conditions of the seller. Why is thisNOT a valid contract? A - There is no consideration involved B -No acceptance has been given C - No earnest money has been enclosed D - There is no current listing agreement |
B -No acceptance has been given NOTE - It has notbeen presented to or accepted by the owner. Remember, contracts aren't validuntil both parties agree. However, even though the listing agreement hasexpired, the offer should be presented. If it's accepted and the transactioncloses, the broker will generally be entitled to his or her full commission. |
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A real estate licensee has a buyeragency agreement. What is the seller in this situation? A - A customer B - A client C - A fiduciary D - An agent |
A - A customer Note - There'san important distinction between client and customer. Unless there is aspecific agreement to the contrary, licensees represent only one side in atransaction. In this case, it's the buyer who is the client and it's thelicensee's obligation to negotiate a deal that's in that person's bestinterests, not the one that's "fairest" to both parties. |
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Anoptionor and an optionee make a contract for an option on a commercial piece ofproperty. If the optionee decides to exercise his option, when must he perform A -- Hemust exercise his option within 6 months under state law. B -- He must exercise his option under the terms of the option contract. C -He must exercise this option when the optionor demands it. D -He can exercise his option whenever he wants |
B - He must exercise his option under the terms of the option contract. Options aregenerally concerned with only two things: time and price. Whatever the partiesagree to in those regards defines the terms of the option and the obligationsof the parties.
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When can a landlord evict a disabled blind or disabled tenant from the premises? A - If the tenant gets a guide dog and the apartment policy doesn't not allow pets B -If the tenant insists on a handicapped parking place C - If the tenant make modifications to his unit at his expense D - If the tenant has loud parties, makes too much noise, and is constantly disturbing other tenants |
D - If the tenant has loud parties, makes too much noise, and is constantly disturbing other tenants Note - The lawrequires "reasonable accommodation"--for example, allowing a guidedog for a blind person even if there's a "no pets" policy. However,that does not mean that all rules are suspended. Noise, safety, and "useof premises policies" may still be enforced. |
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Broker Carr, with ABC Real Estate Company, listed the property with a seller. Broker Smith, with XYZ Real Estate Company, called Broker Carr, and disclosed that he was a Buyer Agent. Broker Smith wrote a contract with a buyer for the sale of the property. What, if any, is the relationship between the buyer's broker, the seller and the listing broker? A-There is not a relationship between the parties. Broker Carr represents the Seller and Broker Smith represents the Buyer. B - Customer C -Agency D - Dual agency |
A-There is not a relationship between the parties. Broker Carr represents the Seller and Broker Smith represents the Buyer. Note - Since each broker represents separate sides in the transaction, no relationship exists. |
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A buyer bought a property without telling the seller of his intended purpose for the property. The contract contains no contingency clauses and it is a properly executed contract. After the closing, the buyer is unable to obtain the zoning he needs for his commercial project. What is the contract at this stage? A)VoidB)Voidable C)Breach D)Enforceable |
D - Enforceable Note -Since there were no contingency clauses, and no restrictive covenants of record. If the buyer cannot secure a change of zoning , the contract is perfectly valid as stands and is enforceable between the parties. |
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The seller and the buyer finally agreed to a purchase price of $203,500 with the closing to occur on June 15. The taxes for the year in the amount of $2,500 have not been paid by the seller. (Taxes are paid in arrears). How much would the tax proration amount to, and how would it appear on a full settlement statement? Base your answer on a 365 day year, and the buyer is responsible for the day of settlement. A)$1,130.14 debit the seller and credit the buyerB)$1,130.14 debit the buyer and credit the seller C)$2,500 credit the seller and debit the buyer D)Nothing. The seller does not owe since the buyer is buying. |
A)
$1,130.14 debit the seller and credit the Note The seller would owe money, and the buyer would receive money, because the seller has not paid the taxes. $2,500 divided by 365 is $6.849315 times the actual days of 165 is $1,130.14. |
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A seller listed his home for six months on February 26. On April 29, a buyer made an offer on the property. The listing broker presented the offer to the seller on April 30. The seller accepted the offer on May 1, with the closing to occur on June 15. Assuming the closing took place on June 15, when did the listing expire? B)6/15 C)8/26 D)12/15 |
B)
6/15 Note - Listing contracts set forth the terms and conditions under which a broker will sell a property for his or her client. When the closing takes place, the terms of the contract have been fulfilled and it expires automatically. |
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The sellers listed their property for six months on February 26 for $522,500. They agreed to pay the listing broker a 7% commission at closing on the agreed upon sale price. A buyer made an offer on the property on March 29 for $510,000. The seller countered the offer on April 1 at $517,500, and the buyer accepted the counter offer with the closing to occur on June 15. How much commission did the seller owe the listing broker, and how would it appear on the settlement statement? B)$35,700. Credit the seller. C)$36,575. Debit the seller. D)$36,225. Debit the seller |
D)
$36,225. Debit the seller note - Commissions are paid based on the actual selling price, not the listing price. Additionally, since the broker represented the sellers in this transaction, the commission is debited from their side of the ledger. |
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The seller and the buyer agreed to a purchase price of $270,000 with the closing to occur on June 15. The seller's loan balance after the June 1 payment was $170,000. with an interest rate of 6%.The monthly payment was $1,800 principal and interest. What was the loan balance the day of closing, and how much interest did the seller owe the bank? A)Loan balance $171,800; interest due $850B)Loan balance $170,000; interest due $2,550 C)Loan balance $270,000; interest due $862.50 D)Loan balance $170,000; interest due $425 |
D)
Loan balance $170,000; interest due $425 note - Although many types of loans can become more complex in their calculations of remaining principal and interest at a particular point in time, in this case the interest portion of the payment is calculated simply by multiplying $170,000 by 6% and dividing by twelve. That results in monthly interest of $850, with half that amount, or $425 added to the principal payment at closing. |
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The buyer and seller agreed to a purchase price of $310,500. The buyer received an 80% loan. How much was the buyer's loan and how did it appear on the settlement statement? A)$310,500. Credit the buyer and debit the seller.
B)$300,000. Debit both the seller and the buyer. C)$ 262,500. Credit both the seller and the buyer. D)$ 248,400. Credit the buyer only. |
D - $ 248,400. Credit the buyer only Note -Mortgage monies are credited to the buyer's side of the ledger as a portion of the funds he or she will use to complete the transaction. Once all the funds have been accounted for, the monies (less appropriate deductions) transfer to the seller |
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A home improvement company was negotiating with a homeowner to add on two rooms to a home. The company agreed to take a second mortgage as long as the homeowner also included the rest of the property in the loan. The company and the homeowner agreed to a price and the company provided the necessary disclosure form on Monday and the homeowner signed the agreement at noon the following day. Assuming that the week had five business days, until what time could the homeowner rescind the loan? A)Tuesday, midnight
B)Thursday, midnight C)Friday, midnight D)There is no rescission on a house. |
C)
Friday, midnight |
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The seller under a land contract is called A) the grantor.
B) the grantee. C)the vendor. D)the vendee. |
C)
the vendor. Land contracts are also known as installment contracts. In this type of arrangement, the buyer occupies the property, but the title is held in the name of the seller until some future point in time--often when the last payment is made. |
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When the lender under a deed of trust requires titleinsurance, who would be the most likely person to pay for it? A) the mortgagee B) the trustee C) the trustor D) the beneficiary |
C) The trustor "Trustor" is another name for the borrower and "trustee" is a "supposedly" neutral third party who holds naked legal title, the right to foreclose at the instructions of the beneficiary for non-payment of a promissory note. The beneficiary is the lender in a Deed of Trust. Even though it's the lender who requires the insurance to protect his/her position, its the borrower who pays for it |
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The Pickets are purchasing a homefor $780,000 and the lender is giving them a 90% loan at 5% interest, plus a 2%loan origination fee. How much is the loan origination fee? A) 14,040 B) 15,600 C)16,500 D) 70,200 |
A) 14,040 A loan for90% of the $780,000 purchase price results in a $702,000 mortgage. Since theorigination fee is based on the amount of the mortgage, not the price of thehome, the fee is 2% of $702,000 or $14,040. |
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Discrimination is prohibited inlending practices under A) ECOA B) RESPA C) Truth in Lending Act D) FNMA . . |
A) ECOA Passed in1992, the Equal Credit Opportunity Act prohibits a broad spectrum ofdiscriminatory lending practices, including the granting or denial of credit orthe costs associated with borrowing based on race, gender, marital status,source of income (e.g., public assistance) and other factors. |
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A buyer assumes the mortgage. How isthe owner relieved of the liability? A) Subject to mortgage B) Novation C) Substitution D)Graduation |
B) Novation Essentially,novation means to substitute a new contract for an old one; thus the holder ofthe original is relieved of his or her responsibilities. |
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Which type of loan will result inthe largest reduction of the principal balance most quickly? A) 5.5% over 30years B) 5.75% over 20 years C) 6% over 15years D) 7% over 20 years |
C) 6% over 15 years The shorterthe term of a loan, the more quickly principal is paid down and the fasterequity builds. A 15-year loan at 6% interest rate would provide the LARGEST andFASTEST reduction in the principal. Interestingly, the payments on a 15-yearloan are often not that much higher than the same loan with a 30-year payback.However, there are other considerations and options borrowers shouldunderstand. |
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Who is the largest purchaser in secondary market? A) Ginnie Mae B) Fannie Mae C) FHA D) Freddie Mac |
B) Fannie Mae Fannie Maestands for the Federal National Mortgage Association (FNMA). It was establishedby the National Housing Act specifically to start the secondary mortgagemarket, thus attracting more investors and funds to help support homeownership. |
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Which transaction requires a securities license? A) leasing a commercial building B) Selling a commercial warehouse C) Selling shares in Fannie Mae D) Arranging a sale-leaseback on a commercial property |
C) Selling shares in Fannie Mae Even thoughFannie Mae is a mortgage-based business, its shares sell just like any otherstock and only people with a securities license may offer them for sale. |
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Who is NOT an originator of primary loans? A) Savings and loans B) Credit Unions C) Commercial banks D) FHA |
D) FHA The FHAencourages lenders to make these low-interest, low-down payment loans byinsuring them against default. It does not actually lend money itself. |
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A buyer wanted to use a promissory note for consideration on the purchase of a property. Can he do this? A) Yes. The buyer can do as he wishes if the Commission approves the action B) Yes. This is acceptable as long as the seller agrees. C)No. Only money can be used for consideration D)No. Only the seller can write a promissory note. |
B - Yes. This is acceptable as long as the seller agrees. " This is a form of owner financing and is perfectly acceptable, so long as both parties agree to the terms and conditions. |
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If advertised alone, which would be in violation of Truth in Lending? A)"FHA financing available" B)"Assumable loan" C)"No down payment required." D)"Easy financing terms" |
C)"No down payment required." "No down payment required" triggers the Truth in Lending disclosures because it is a specific statement about only one aspect of the financing. "Easy terms" does not trigger the regulation because it's non-specific. |
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Why would a mortgagee have an appraisal on the property? A )To make sure the buyer did not pay too much B) To determine the value of the property C) To protect the buyer from fraud D To assure the property value is sufficient to cover the loan |
D To assure the property value is sufficient to cover the loan Appraisals are third-party valuations of a property based on a wide range of variables. Lenders generally insist on this independent assessment to make sure the value of the property is at least sufficient to pay off the loan amount in case of default. |
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Seller Jolita lists her house with Broker Fred. Fred then buys Jolita's house and collects the agreed-upon commission. This is an example of A) commingling monies. B) a Regulation Z violation. C) truth in marketing. D) self-dealing. |
D) self-dealing. Fred is taking advantage of his position to collect a commission. Self-dealing qualifies as intentional misrepresentation. |
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An owner was selling his own home. Can he advertise the down payment? A) No, because it violates RESPA B) No, because it violates Regulation Z. C) Yes--as long as it was listed with a broker. D) Yes, because it was his own home. |
D) Yes, because it was his own home. Broadly speaking, an individual homeowner is free to sell his/her own home as he/she chooses and is not subject to Truth in Lending or real estate practice restrictions. |
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Which is true about restrictive covenants? A) They are placed by private parties in a deed. B) They are placed by government agencies in a deed C) They are voidable by successive owners D) They are a form of tax shelter |
They are placed by private parties in a deed. Restrictive covenants are most commonly associated with subdivisions and community management associations and are intended to maintain consistency within the neighborhood. While viewed as a benefit by most, they do limit the owner's use of the property and are binding on future owners. |
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Looking at shopping centers in the appraisal process, the social fiber of the community and distances from schools is called A) neighborhood analysis B) market data approach. C) site analysis. |
A) neighborhood analysis This involves more than just driving around. It is a formal process of identifying, measuring and analyzing the influences that help determine a neighborhood's vitality and desirability |
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Which best describes why a buyer purchases a home using the market data approach? A) Buyers buy on impulse B) Buyers buy based on how much income can be derived from other property D) Buyers buy based on current construction costs |
C) Buyers buy after they compare the house with others. While emotion and impulse are certainly strong motivators, a home is also a considered purchase. What most people seek, within their affordability range, is value more than price. The only way to determine which home combines the elements of price, features, quality, condition, location and other factors that give a particular buyer the best value for his or her needs is to compare as many properties as possible |
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A scale drawing shows a room to be 3 inches by 4-1/2 inches. Carpet, which is $15 per square yard, is to be installed in the room. If the scale is 1 inch to 4 feet, how much would it cost to install the carpet? A) $120 B) $202 C) $360 D) $3,240 |
C) $360 At a scale of 4' to the inch, the room measures 12' x 18' or 216 square feet. Since there are nine square feet to one square yard, the room will require twenty-four square yards of carpet at $15 per yard. |
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A tenant leased 3,000 square feet at $10 per square foot and 8% of gross income. The total annual rent she paid was $60,000. What was the gross income on which she paid percentage rent? A) $120,000 B) $160,000 |
D) $375,000 At $10 per square foot, the tenant's base rent is $30,000. Since the total rent was $60,000, that means the remaining $30,000 was due to the gross sales percentage. Since that figure is 8%, simply divide $30,000 by .08 to arrive at $375,000. |
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The Rose family owns a home in a semi-rural area, which is about five years old. Recently announced plans for a new regional airport will place their home directly in line with a main runway ending 1 mile before their home. If the airport is constructed, will this diminish the value of the Rose Home?
B) Yes, because of economic obsolescence |
B) Yes, because of economic obsolescence Economic obsolescence occurs when factors unrelated to the property itself and outside of the owner's control diminish its value. A quick way to judge whether or not a property has become economically obsolete is to analyze whether, under the new circumstances, the location would still be chosen as a home site and, if yes, at what value compared with the current property. |
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Mrs. Jones, an appraiser, is appraising a single family residence for which she has located six closely comparable properties, all sold within the past six months. The subject property is rented for $1,500 per month. It is a custom-built home, approximately three years old. Mrs. Jones would probably give the most weight in her final estimate of value to which of the following appraisal methods? A) Cost approach |
B) Market data approach
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Which is the best example of functional obsolescence?
A) A residential home built next to a factory |
C) A house with no electricity or running water "Functional obsolescence" typically shows itself in one of two forms: first, in poor initial design, as in this case; second, when the features and design of the home have become outdated compared with competing properties. |
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A real estate agent should tell the buyer, his customer, which of the following? A) How the area's demographics have changed recently B) The seller's motivation for marketing his property |
C) A pending or recent zoning change A zoning change is a "material fact"--something that can have a direct impact on the property's value or desirability. For example, if the zoning in a middle class neighborhood on the edge of a growing city was changed from residential to mixed use, it means that a number of homes could be turned into businesses, which will make the property less desirable to people seeking a quiet place to raise a family. |
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A broker is opening her first escrow account, designating herself as trustee of the account. Where must the account be opened? A) In the same town as where the brokerage in located |
C) In either a federally-insured depository or bank, or a state-insured depository or bank The bank or depository chosen for an escrow account can be EITHER federally-insured or state-insured. |
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Which of the following would be considered an exclusive listing agreement? A)An exclusive short-term tenancy agreement.B)An exclusive right-to-lease agreement. C)An one-time verbal purchase offer. D)A non-exclusive option to purchase. |
B)
An exclusive right-to-lease agreement An exclusive listing agreement can be the exclusive agency of the broker, an exclusive right-to-sell agreement, or an exclusive right-to-lease agreement - a listing agreement does not only refer to purchases |
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What should a broker do when there is a dispute over the escrow? A) He should hold the money in escrow until the dispute is resolved.
B) He should give the money to the Commission for disbursement. C) He should release the money to the buyer. D) He should release the money to the seller |
A)
He should hold the money in escrow until the dispute is resolved. In the event of a dispute of earnest money, the broker should hold the money in escrow until the dispute is resolved. The broker may, following 30 days notice to the parties, petition the county court to make a decision as to who the money belongs. |
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A broker has been asked by his client to hold her money in escrow for 9 months. Is this legal? A) No, it is not legal under the Pennsylvania Code.
B) Yes, it is, as long as he deposits the money in an interest-bearing account. C) Yes, it is, as long as he deposits the money in a non-interest bearing account. D) Yes, as long as the broker provides the Commission with written notice of this arrangement. |
B)
Yes, it is, as long as he deposits the money in an interest-bearing account. Although normally escrow accounts are NON-interest bearing, a broker who expects to hold money in an escrow account for more than 6 months must deposit the money in an interest-bearing account. The broker may not claim the interest on such an account |
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A broker finds a file from 2 years earlier. It contains the acknowledgement portion of a consumer notice applicable to leases, relating to disclosure summary for the lease of a suburban home. The broker had worked for the homeowners in leasing their home. Under the law, does the broker need to retain these records? A)Yes, because all real estate records must be retained for a minimum of 4 years.
B)Yes, because all real estate records must be retained for a minimum of 5 years. C)No, the broker does not need to retain these records, because they aren't directly related to real estate transactions. D)No, the broker does not need to retain these records, because they only needed to be retained for 6 months. |
D)
No, the broker does not need to retain these records, because they only needed to be retained for 6 months. Pennsylvania law requires that most real estate records be retained for 3 years, but there are some exceptions to this rule. One exception is that certain records, including the type mentioned here, need only to be retained for a 6-month period. |
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Which of the following statements concerning listings is FALSE? A)A copy of the listing agreement must be provided to the seller.
B)Listing agreements must contain expiration dates. C)Both the buyer and the seller must sign the listing agreement. D)Listing agreements may not have automatic extensions. |
C)
Both the buyer and the seller must sign the listing agreement. The listing agreement is a contract between the owner of the property wishing to sell (seller) and the agent. It is signed before the property goes on the market and therefore before a specific buyer comes into the picture. The buyer does not need to sign the listing agreement. |
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A broker agreed to an oral non-exclusive buyer agency agreement. Which of the following statements is TRUE? A) The broker was complying with the law, as long as the buyer was provided with a written memorandum stating the terms of the agreement, along with the oral agreement |
A)
The broker was complying with the law, as long as the buyer was provided with a written memorandum stating the terms of the agreement, along with the oral agreement The only way an oral agreement is permitted in open listing agreements or nonexclusive buyer agency agreements is if the seller/buyer or landlord/tenant is provided with a written memorandum stating the terms of the agreement. |
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Which of the following must an exclusive listing agreement contain? A) The duration of the agreement
B) An automatic renewal clause C) A listing period of more than 1 year D) A listing period of more than 18 months |
A)
The duration of the agreement While an exclusive listing agreement must address the duration of the agreement, and set this forth in specific terms, it is ILLEGAL to either set forth this time period as exceeding 1 year in length, or to include an automatic renewal clause |
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The buyer, seller and broker all agree that the buyer's money will be placed in an interest-bearing account because the buyer is buying a commercial property that is scheduled to be rezoned in ten months. The purchase price of the commercial property is $2.5 million so the interest for ten months will be important at 4% interest. The parties agree that the broker is to receive the interest on the interest-bearing escrow account because he will be handling all the paperwork. Is this acceptable? A)The Commission forbids the broker from taking the interest on an interest-bearing account unless the broker is an owner. B) This amount of money requires that the buyer and seller should split the interest evenly C) The buyer is entitled to that money, he deposited it. D) The interest should go to the Pennsylvania Real Estate Commission |
A)The Commission forbids the broker from taking the interest on an interest-bearing account unless the broker is an owner The Commission forbids the broker from taking the interest on an interest-bearing account unless the broker is a lessor. |
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The first step in an appraisal is A) a market data comparison.
B) to define the problem. C) a neighborhood analysis. D)to gather information. |
B)
to define the problem. |
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A recorded subdivision plat is used in the A) metric survey system.
B)rectangular survey system. C)lot and block system. D)metes and bounds system. |
C)
lot and block system. Lot and block is the "final" survey of property being readied for development and identifies each individual parcel in a subdivision |
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An appraiser is usually paid A) a fee based on a percentage of the appraised value.
B)a fee based on the amount of time and effort. C)a fee agreed upon after the appraisal is completed. D)a standard fee agreed upon by the National Appraisal Association. |
B)
a fee based on the amount of time and effort. There are two fundamental reasons for the "time and effort" rather than valuation method. First is the fact that the differences between any two properties make it impossible to relate the complexity of the task to the value of the property. A high-end property could be a relative "no brainer" while a particular mid-market home could have dozens of variables to be analyzed. The second reason is that basing fees on value places an obvious incentive on appraisers to estimate high, thus distorting reality. |
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The primary survey line running north and south in the rectangular survey system is the A)township line.
B)base line. C)range line. D)principal meridian. |
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The zoning commission of Jefferson County requires that all new construction in a specific area adhere to a specific type of architecture. What type of zoning is this? A) Bulk |
D)
Aesthetic Aesthetic zoning helps ensure consistency within a neighborhood or area, thus raising its visual appeal and, very often, its desirability and value as a place to live. |
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The appraisal approach most likely to be used in valuing a public library building would be A)market. |
B) cost.
The cost method is most often used for buildings where actual income or comparative commercial value are unavailable--such as schools and libraries. |
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Physical deterioration is considered curable whenever A)it is caused by lack of maintenance.
B)it does not result in loss of economic utility. C)it costs less to correct than the resulting value increase. D)it can be repaired regardless of the cost |
C)
it costs less to correct than the resulting value increase. For example, let's say an older office building needs to update electric and add bathrooms, repartition offices and fire safety features to meet code for resale. The cost to complete the work is estimated at $2.2 million. However, the building is fully paid for and can easily be sold for $4 million. In this case, curing the defects makes sense. However, if those numbers were reversed, as is often the case, demolishing the building and starting over with a new structure or different use (e.g., retail space, a parking garage, etc.) would be the wiser choice. |
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The economic life of an investment can be described as A)the remaining chronological life of the improvements.
B)the time over which value generated exceeds cost of operation. C)the time when yield is attributable to the land itself. D)the actual age of the property. |
B)
the time over which value generated exceeds cost of operation. Just like cars, buildings and their systems deteriorate over time and require repairs. Additionally, code changes can trigger expensive upgrades. At some point, those repairs begin to exceed the income generated and the building has reached the end of its economic life. |
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When an appraiser correlates the three approaches into a final estimate, he A)averages the estimate. B)accords the greatest weight to the median value. C)selects the estimate nearest to that desired by the employer. D)reconciles the differences according to the type of property being appraised and the quantity and quality of data available. |
D)
reconciles the differences according to the type of property being appraised and the quantity and quality of data available. In order to maintain accuracy and "transparency" of his calculations, an appraiser reconciles differences and does not average comparable sales to arrive at a final value. |
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Apartment houses in an area were selling for $100,000 and a buyer offered $100,000 for an apartment building. The buyer is operating on the principle of A)highest and best use.
B)conformity. C)substitution. D)increasing returns. |
C)
substitution. An appraisal principle, "substitution" holds that the maximum value of a property is that price for which a comparable, equally desirable property can be purchased in a timely manner. For example,if two 4-bedroom homes with equal features, age, condition, lot size and desirability are on the market at the same time, buyers would not pay $250,000 for one when the other is available for $240,000. However, if the $240,000 is on the market now, but the owner wants to delay closing for six months while the other is available for immediate occupancy, there may well be buyers willing to pay the premium. |
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A promissory note is A)the lender's security for a loan made to finance the purchase of a property.
B)a guarantee that a loan is insured by a government agency. C)the lender's evidence of a debt (loan). D)automatically secured by a mortgage when signed by the property owner |
answer is "C - the lender's evidence of a debt (loan) By signing a promissory note, the borrower is acknowledging the debt and agreeing to pay it back as agreed. Thus it serves as the lender's proof of the loan and its terms. |
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Nelson (grantor/mortgagor) sells his home to Randall (grantee)"subject to" an existing first mortgage loan he obtained five years ago. After nine months, Randall can no longer continue to make the monthly payments. Under these circumstances A. The purchaser (grantee) has no liability to the lender B. The purchaser is solely liable to the lender C. The purchaser is primarily liable to the lender and theseller is secondarily liable D.The seller is primarily liable and the purchase is secondarilyliable |
"A - the purchaser (grantee)has no liability to the lender. " A grantee taking title to a real property "subject to" a mortgage is not personally liable to the mortgagee for payment of the mortgage note. In the event that the grantor/mortgagor defaults in paying the note, however, the grantee could lose the property, and thus his or her equity, in a foreclosure sale. |
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In order to determine exactly what portion of a mortgage loan the VA will guarantee on behalf of a qualified veteran, he must apply for a A. Certificate of reasonable value B. Release of liability C. Statement of entitlement D .Certificate of eligibility |
D - certificate of eligibility There are strict requirements for obtaining a VA loan and the first step is obtaining a certificate of eligibility. It can be obtained from VA centers, online or from many lenders. |
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An FHA 203 loan was applied for by a buyer. What was the purpose in seeking this type of loan? A. Low interest rates with accelerated payments B. Faster equity build-up C. Small down payment D. Shorter period of amortization |
C - Small down payment FHA loans, which are actually governmentguarantees of payment to lenders rather than actual loans, are intended to helplow and middle income families enter the housing market by providing lowdown-payment options |
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If the current conventional interest rate is 53/4%, how many points would have to be charged on a 5% VA loan to offset thedifference for the lender? A. 2 B. 4 C. 6 D. 8 |
correct answer is "C - 6" In banking math, eightdiscount points increase the percentage yield from one point spread to thenext. Thus six discount points would increase the percentage yield 3/4 of apoint.
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A tenant leases a lakeside cabin. When the tenant arrives atthe cabin and finds the roof leaks and the plumbing does not work, the tenantleaves. Under which of the following justifications could the tenant refuse topay rent on this cabin? A. Constructive eviction B. Unlawful detainer C. Tenancy in common D. The Tenant Act of 1999 |
answer is "A -Constructive eviction Constructive eviction occurswhen a rental property is not habitable, thus forcing the tenant to liveelsewhere and effectively "evicting" him or her. In order to claimconstructive eviction the tenant must notify the landlord in writing and givehim reasonable time to correct the defect(s) in order to lawfully withholdrent. |
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When a trust deed is used to pledge real property assecurity for a loan, the lender is the A. beneficiary. B. trustor. C. trustee D. mortgagee A. Beneficiary |
A. Beneficiary The beneficiary, because he will “benefit” byreceiving the property to satisfy the loan in the event to borrower defaults |
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How are the members of the Pennsylvania Real EstateCommission (PREC) selected? A. By public election B. By a committee ofthe Pennsylvania Association or Realtors C. Through election by real estate licensees D. By appointment by Governor |
D. By appointment by the Governor Under Pennsylvania license law, members of the Commissionare appointed by the Governor. |
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Two salespeople, Jean and Jeff, work for the same realtycompany. Jean asks Jeff to hold an open house for her and gives him $50 ascompensation. Which is TRUE? A. Jean is within real estate law since she hired a licensedassistant within the same firm. B. Jeff is acting with real estate law because he was properly compensated C. Jean and Jeff both acted within the real estate law aslong as their broker is aware of the situation D. Jean and Jeff have violated real estate law. |
D. Jean and Jeff have violated real estate law. Real estate law requires thatall compensation to an agent must come through their broker. Jean violated thelaw by directly compensating Jeff, and Jeff violated the law by receivingcompensation from someone other than a broker. |
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Of the PREC membership, how many are required to be licensedreal estate brokers at the time of their appointment? A. 5 B. 6 C. 9 D. 11 |
A. 5 Under law, the Commissionmust include 5 members that are licensed and qualified brokers at the time ofappointment. |
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Real estate license law in Pennsylvania is administered bywho? A. The legislature B. PennsylvaniaAssociation of Realtors C. Pennsylvania Real Estate Commission D. Department of Housing and Urban Development |
C. Pennsylvania Real Estate Commission Pennsylvania license law isadministered and enforced by the Real Estate Commission. The state legislatureenacts real estate law; the Pennsylvania Association of Realtors is a tradeorganization; the Department of Housing and Urban Development handles fairhousing issues, not license law. |
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What is the purpose of Pennsylvania license law? A. To promote real estatebusiness throughout the state B. To ensure public interestis protected C. To generate license andrenewal fees for the state treasury D. To prevent criminals in the real estateindustry |
B - To ensure public interest is protected The purpose of all laws,including license laws, is to provide for the good, safety and welfare of thepublic. |
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The Commission has the authority to do which of thefollowing? A. To enact laws that govern real estate licenses B. To compose the examination questions for the statelicensing exam C. To administer the state exam D. To administer and enforce license law |
D. To administer and enforce license law The Pennsylvania Real EstateCommission administers and enforces the laws that are enacted by thelegislature to govern licensee conduct. Professional testing services write andadminister tests |
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Fact The Pennsylvania Real EstateCommission administers and enforces the laws that are enacted by thelegislature to govern licensee conduct. Professional testing services write andadminister tests |
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Which of the following is NOT grounds for the Commission toinvestigate a licensee? A. A written complaint from a consumer B. On its own initiative C. By random selection of active licensees D. By a motion from Commission member |
C. By random selection of active licensees The commission is not allowed to randomly select licenseesfor investigation. It may, however , launch an investigation base on its owninitiative or on an complaint from a member or consumer. |
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Fact The commission is not allowed to randomly select licenseesfor investigation. It may, however , launch an investigation base on its owninitiative or on an complaint from a member or consumer. |
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Which of the following may the Commission, during either aroutine or special inspection, NOT do? A. Inspect all areas of theoffice. B. Examine all office recordsrelating to real estate transactions C. Interview clients that are currentlyconducting business with the licensee being inspected. D. Access records of thelicensee's escrow account. |
C. Interview clients that are currentlyconducting business with the licensee being inspected While the Commission mayaccess records, conduct office inspections and interview licensees, there is noprovision allowing the commission to interview consumers in relation to aninspection
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FACT While the Commission mayaccess records, conduct office inspections and interview licensees, there is noprovision allowing the commission to interview consumers in relation to aninspection |
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Which of the following does the Pennsylvania Real EstateCommission's statutory authority NOT include? A. Issue licenses and registration certificates to peoplethat meet the requirements established by license law. B. Waive all or part ofcontinuing education requirements for a licensee due to emergency or hardship. C. Approve schools that offerreal estate courses D. Prescribe the subjectsthat are to be tested during the license exam. |
A. Issue licenses and registration certificates to peoplethat meet the requirements established by license law. The Department of Stateissues licenses and registration certificates, not the PREC. The other dutiesall fall under the authority of the Commission
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Which of the following is subject to disciplinary action bythe PREC? A. A real estate appraisalcompany's employees B. Officers of a bank thathandles real estate transactions C. An attorney -in-fact providing services under a power of attormey D. Campground membership salesperson |
Campground membership salesperson
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An acceleration clause gives the lender the right to A. demand the entire amount owed due and payable upon default. B. adjust the amount of the payments if the interest rates increase. C. increase the interest rate upon assumption D. charge a pre-payment penalty if the loan is paid off before maturity |
A - demandthe entire amount owed due and payable upon default. |
This is a standard clause to protect the lender's interest in case of a sale (when the loan would no longer be secured by the property), default on payments (Declaring the total amount due is a first step in the foreclosure process.) and other defined circumstances
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A trust deed gives the lender a right to request that the trustee perform certain tasks in order to fulfill the terms of the trust. The trustee may take action in those circumstances because he holds A. naked title. B. equitable title. C. reversionary title. D. public title |
A. naked title.
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Since the trustee in this case is acting on behalf of the true owner of a property, he holds a "naked title," meaning a title without the usual rights of ownership.
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A. a mortgage or a deed of trust. B. a recorded deed C. a promissory note D. a property executed will |
A. a mortgage or a deed of trust.
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An old English term derived from two French words ("dead pledge"), the terms mortgage and deed of trust are often used interchangeably.
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Just before the sheriff begins the auction sale of foreclosed property, the delinquent borrower offers to pay the outstanding debt and all costs incurred because of his default. In such a case, A the same must proceed and the property sold to the highestbidder B. Theborrower may pay the judgment and reclaim his property under equitable rightsof redemption C. The borrower may pay the judgment and reclaim his propertyunder the statutory rights of redemption. D. thelender may choose to either accept payment or proceed with the auction |
B. The borrower may pay the judgment and reclaim his property under equitable rights of redemption
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Legally, actions that include "equitable" as part of their description, such as "equitable rights of redemption," refer to the inherent fairness of the action
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Broker Noah was asked by a purchaser to explain a budget mortgage. His best answer would have been A. mortgage that is less than $100,000. B . a mortgage with graduated payments. C. mortgage with interest only payments. D. mortgage with payments including principal, interest, taxes, and insurance. |
D. mortgage with payments including principal, interest, taxes, and insurance.
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Until creative financing came along, virtually all mortgages were "budget" in that each monthly payment covered all costs associated with the loan.
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A subdivision developer obtained a loan to purchase twenty lots. What type of clause might she/he be required to agree to in the security instrument (mortgage or deed of trust)? A. Subordination B. Partial release C. Exculpatory D. Safety |
B. Partial release
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A partial release clause provides that as payments are made on an accelerated or greater than pro rata rate, specific lots in the subdivision will be partially released from the mortgage.
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Which of the following would be in violation of the federal Truth-in-Lending laws? A. For sale, $500 down, payments $483.20 per month
B. For sale, VA financing available C)For sale, assume large FHA loan D)For sale, seller will carry |
A. For sale, $500 down, payments $483.20 per month
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Regulation Z stipulates that once one financing aspect is advertised, all other aspects must also be disclosed. In this case, that would include the total cost of the property, the interest associated with the monthly payment and any other costs, such as association fees or common charges
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An $284,000 loan at 5.5% annual interest had principal and interest payments of $1612.52 per month. How much of the second month's payment would be applied to the principal? A) $310.85
B) $312.28 C) $1,301.67 D) $1,300.24 |
B) $312.28
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You must reduce this loan twice in order to discover the answer to the problem. Step 1 - $284,000.00 X 5.5% = $15,620 a year divided by 12 months = $1301.67 a month interest. Step 2 - $1612.52 principal and interest payment minus $1301.67 =$310.85 principal paid the first month. Step 3 - $284,000.00 minus $310.85 = $283,689.15 principal balance at the end of the first month. Step 4 – Repeat the same process using the new loan amount. $283,689.15 X 5.5% = $15602.90 interest a year divided by 12 is $1300.24 interest a month. Step 5 - $1612.52 principal and interest minus $1300.24 = $312.28 principal paid the second month. Be very careful when completing a question like this that you don’t make the mistake of using the interest amount monthly for the answer. Look at answers C & D. – Answer B
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A house sold for $350,000. The buyer made a 20% down payment. Monthly interest on the loan was $1,400. What was the interest rate on the loan? A) 5%
B) 6% C) 7% D) 8% |
B) 6%
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20% down means the buyer would be carrying a $280,000 mortgage. With a monthly payment of $1,400, the annual amount of interest paid is $16,800… which is 6% of the principal and a 6% rate.
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buyer received an 80% loan. If the annual interest rate was 4.5% and the monthly interest paid was $790, what was the total sale price? A) $191,533
B) $210,667 C) $263,333 D) $279,667 |
C) $263,333
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At $790 per month, annual interest works out to $9,480. Since the rate is 4.5%, $9,480 is divided by .045 to yield the mortgage amount of $210,667. Since the loan represents 80% of the value, it's divided by .8 for a total home price of $263,333.
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Total interest paid on a 30-year straight note was $230,000 during the term of the loan. The annual interest rate was 6.6%. What was the loan amount? A) $100,000
B)$116,167 C)$127,750 D) $143,825 |
B)$116,167
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Total interest paid divided by the 30-year term yields an annual interest payment of $7,667. Dividing by the 6.6% rate shows the loan amount was $116,167.
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A buyer purchased an $800,000 house with an 80% loan to value ratio. The lender charged 3 discount points to the buyer. Including the down payment, how much must the buyer pay at closing? A) $659,200
B) $19,200 C )$179,200 D) $160,000 |
C )$179,200
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At 20%, the buyer's down payment was $160,000. Since each point is 1% of the $640,000 loan value ($800,000-$160,000), 3 points would be 3 x $6,400 or $19,200. Therefore the buyer's total downpayment costs are $179,200.
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A house sold for $950,000 with a sales commission rate of 7.5%. The listing broker received 50% of the total commission and the selling broker received 50%. How much would the selling salesperson receive if the selling broker kept 60% and gave 40% to the salesperson? A)$21,370
B)$71,250 C)$35,620 D)$14,250 |
D)$14,250
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With total commissions of $71,250, the selling and listing broker each receive $35,625. At 40% of the selling broker's share, the selling salesperson would receive $14,250.
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A broker was paid a commission of 6% of the first $120,000 of a sale price and 4% of all over $120,000. What would the sale price be if the total commission was $9,000? A)$120,000B)$165,000 C)$175,000 D)$197,50 |
ddd
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An owner of a six-family apartment complex pays the property manager an annual salary equal to 6% of the property's annual gross income. If the annual gross income is $700,000, the annual expenses are $325,000 and the capitalization rate is 10%, what is the property manager's annual salary?A)$19,500B)$32,500C)$42,000D)$70,000 |
correct answer is "C - $42,000 " |
This question is full of red herrings. The only figures that count are the gross annual income of $700,000 and the property manager's salary of 6% of GAI, which yields annual compensation of $42,000. |
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How much will the seller net after paying an 8% commission and paying expenses of $1,425 on a property that sold for $180,000?A)$165,600B)$164,175C)$180,000D)169,425 |
is "B - $164,175 |
At 8%, commissions come to $14,400, plus the $1,425 in additional expenses. Subtracting those two figures from the $180,000 sale price gives the seller a total net of $164,175. |
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A seller closed on his house on November 15. The annual tax bill for the current year is $1,475, which will be paid in arrears by the buyer. What is the seller's portion of the tax bill if the seller owns the day of closing, the taxes are based on a calendar year, and one uses the 360-day method?A)$1,291B)$1,414C)$185.00D)Nothing. The taxes were already paid. |
The correct answer is "A - $1,291 |
Daily proration: $1475 / 360 = $4.0972. Seller's days: January through October = 10 months x 30 days = 300 days; November 1-15 = 15 days; total seller days = 315. Seller's portion: ($4.0972 x 315 days) = $1,291 |
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A person invested $5,000 in a limited partnership. One of his concerns was the amount of his liability. Since he is one of the limited partners, can he be held liable for more than his initial investment?A)No, because he is guaranteed a 15% return on his investment.B)No, because he is only liable for his initial investment.C)Yes, because he is liable for three times the initial investment.D)Yes, because limited partners are responsible for a limited amount of all debts. |
correct answer is "B - No, because he is only liable for his initial investment. " |
One of the attractions of a limited partnership in a real estate investment is that it allows the person to participate in real estate development deals without risking more than his or her initial investment. (It's the general partners who have more than their initial stake at risk.) |
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A city took a property through eminent domain so they could build a sports complex and then lease it to four private sports franchises. Would this be allowed? A)Yes, as long as the homeowners were paid compensation for the properties. B)Yes, because sports franchises do not fall under federal laws. C)No, because land taken by eminent domain must be for public use. D)No, because this cannot be done within the boundaries of the city. |
A. Yes, as long as the homeowners were paid compensation for the properties. " |
So long as fair compensation is paid, how "the public good" is defined is left largely up to individual communities. |
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A subdivision has a deed restriction that does not allow tree houses. An architect moves into the subdivision and builds a tree house in the back yard. How many neighbors will it take to enforce the deed restriction and what action should be taken?A)75% of the neighbors must sign a petition that will be given to the local zoning board.B)Only 1 neighbor needs to take action through the local zoning board.C)Only 1 neighbor needs to take action through a court action.D)50% of the neighbors must take action through a private court action. |
That's right! The correct answer is "C - Only 1 neighbor needs to take action through a court action. " |
As practical matter, a complaint to the community association is often enough to convince the owner to remove the tree house. Failing that, however, the court will enforce the requires on a single complaint. |
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Which best describes ownership in severalty?A)Ownership of several properties by one person B)Ownership of one property by two or more persons C)Ownership of one property by one single person D)Ownership of several properties by two or more persons |
"C - Ownership of one property by one single person " |
The root of "severalty" in legal terms has to do with the state of being separate and distinct, thus representing sole ownership. |
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Happyville Ranch is a building development with a designed grouping of varied and compatible land uses, such as housing, recreation, commercial centers, and industrial parks, all within one contained development or subdivision. What would Happyville Ranch qualify as?A)An arcologyB)Zoning-free zonesC)Tax-free zonesD)AÂ planned unit developmen |
The correct answer is "D - AÂ planned unit development |
The first zoning evidence of PUD was created by Prince Georges County, Maryland in 1949. It permited the development of a large tract of land as a complete neighborhood unit, having a range of dwelling types, the necessary local shopping facilities and off-street parking areas, parks, playgrounds, school sites, and other community facilities. |
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An encumbrance that affects the title, usually related to money, is known asA)a lien.B)an easement in gross.C)an easement by necessity.D)an easement by prescription. |
"A - a lien. |
A lien is a charge against a property--a financial encumbrance. The other easements listed here do not deal with finances, but are considered usage encumbrances and affect the way in which the land may be USED. |
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A recorded legal document that gives constructive notice that an action affecting a certain property has been filed in court is calledA)a habendum clause.B)a general warranty deed.C)an estoppel certificate.D)a lis pendens. |
D - a lis pendens |
Lis pendens is Latin for "litigation pending," which will help you to remember that while a lis pendens isn't a lien, it is notice that litigation (a possible lien) is pending. The other terms listed deal with deeds (habendum clause and general warranty deed), or mortgages (estoppel certificate). |
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The formal Code of Ethics and Standards of Practice set forth by ________ calls for professionals to observe the "Golden Rule" and to conduct themselves and their real estate business in accordance with certain standards.A)the National Association of RealtorsB)the MLSC)United Real Estate ProfessionalsD)HUD |
A - the National Association of Realtors |
Members of the National Association of REALTORS® (NAR) follow a very strict code of ethics. Many state real estate commissions have included principal sections of this code in the rules and regulations that govern the conduct of the licensees in their particular states. |
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Broker John is advertising an desireable property that sold months ago to attract buyers. When the buyers ask to see that property, John shows them available properties instead. This is an example ofA)puffing.B)an anti-trust violation.C)bait-and-switch advertising D)traction |
"C - bait-and-switch advertising. |
With regard to property ads, bait-and-switch is doing advertising for a property that an agent doesn't intend to sell or that is no longer available for sale or lease in order to attract buyers or tenants for other properties the agent has for sale or lease. |
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The absolute ownership of an apartment or a unit, plus an undivided interest in the ownership of the common elements, which are owned jointly with the other unit owners, is called aA)cooperative.B)condominium.C)leasehold.D)timeshare. |
B - condominium. " |
Said another way, it means a condominium owner owns his own unit plus a share (usually based on the square footage of his or her unit) of all the common property in the complex. |
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A condominium homeowners' association would have the right to do all EXCEPTA)set the monthly charge for maintenance.B)make swimming pool regulations.C)make repairs to the common driveways.D)interview potential buyers. |
"D - interview potential buyers. |
Just as neighbors in a single-family neighborhood do not get to interview potential buyers, neither do homeowners' associations in a condominium development. |
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What can a person NOT do with his/her complete bundle of rights?A)MortgageB)DeviseC)SellD)Condemn |
D - Condemn |
Condemning property is the exclusive right of government. Usually that means local municipalities under eminent domain, though it can also include state as well as federal action, especially for national defense or hazardous waste conditions. |
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Which of the following liens is highest in priority?A)Special assessmentB)Mechanic'sC)JudgmentD)Mortgage |
A - Special assessment |
Special assessments are usually additional property taxes levied for things such as road and sewer repairs. A special assessment lien is filed when those taxes go unpaid and does take priority (is paid first) over all other liens, including mortgages in the event of foreclosure. |
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Which of the following does NOT accurately describe an encroachment?A)It can be classified as a nuisance.B)An undisclosed encroachment can render a title unmarketable.C)A prescriptive easement can result from an encroachment.D)Encroachments are normally revealed in the chain of title. |
The correct answer is "D |
Encroachments are accidental by nature and so are usually discovered only by inspection or survey. |
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A woman bought a house and wanted to bring along her pet cougar to keep in the backyard. Which would most likely keep her from doing this?A)Police power, because the police have authority over types of animals for pets.B)Urban development regulations, since they list allowable animals for the properties.C)Zoning ordinances, because often these contain which animals may be kept.D)Building codes, since they would contain the most restrictions for city dwellings. |
The correct answer is "C - Zoning ordinances, because often these contain which animals may be kept. " |
It's common for zoning ordinances to regulate the kinds of animals that may be kept. For example, in urban and heavily populated suburban areas, housepets only may be allowed. In more country-like settings, only housepets may be allowed in one zoning category, while housepets and horses in another. Other than zoos and wilderness areas, cougars are out of luck when it comes to being welcomed into the community. |
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A sale-leaseback converts a fee simple estate to a(n)A)easement by necessity.B)fee simple defeasible estate.C)less than freehold estate.D)life estate. |
"C - less than freehold estate. " |
A person who enters into a sale-leaseback transaction becomes a tenant on property he used to own. It's typically done to improve cash-flow in a business situation. |
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Which of the following would constitute a judgment?A)EasementB)Special assessmentC)A successful lawsuit versus the owner of a propertyD)Mechanic's lien |
The correct answer is "C - A successful lawsuit versus the owner of a property " |
Judgments" refer specifically to court actions, such as suing to enforce a lien and divide property after a bankruptcy. |
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A buyer and seller entered into a contract for the purchase of a house. The seller purposely did not disclose the fact that the roof leaked. The buyer has recourse under which of the following concepts?A)Statute of fraudB)Regulation ZC)Trust accountsD)Latent defects |
The correct answer is "D - Latent defects " |
Latent defects" refer to hidden structural flaws that are both known to the owner and not readily obvious to the buyer. Further, they are "material facts" which both the owner and, especially, the broker or salesperson are obligated to disclose. |
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A loan company was referring loan applicants to a particular insurance company, which in turn paid the loan company a referral fee. This isA)legal, as long as it is a set fee and not based on the amount of business referred.B)legal, as long as the loan company does not require a loan applicant to purchase insurance from a particular company.C)illegal, since the Real Estate Settlement Procedures Act prohibits kickbacks.D)illegal due to the Truth in Lending Law (Regulation Z) |
The correct answer is "C - illegal, since the Real Estate Settlement Procedures Act prohibits kickbacks. " |
Under RESPA guidelines, "referral fees" are considered illegal kickbacks |
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Which of the following must be disclosed to be in compliance with Regulation Z?A)The cost of creditB)Closing costsC)The tax billD)The ethnicity of a loan applicant. |
"A - The cost of credit " |
Regulation Z (Truth In Lending) creates a disclosure device only, and does not establish any set interest rates or required charges for credit such as closing costs or broker's commissions. |
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Which is NOT a purpose of the Truth in Lending Laws?A)To provide a competitive environment for mortgage lendersB)To allow the buyer to shop around for creditC)To help buyers be aware of the total cost of creditD)To set the interest rate |
"D - To set the interest rate " |
Regulation Z is concerned with interest rates only to the extent that its "sunshine" provisions force lenders to fully disclose all costs, thus providing a degree more competition. |
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Which of the following is NOT a purpose of the Federal Reserve System?A)To help banks determine how much money to keep on hand B)To make more money available so lenders can make loansC)To buy loans in a depressed area or in times of a tight money marketD)Set the "discount rates" of interest, which is the rate it charges for loans to its members |
C - To buy loans in a depressed area or in times of a tight money market " |
The Fed provides loan mechanisms and helps maintain an orderly marketplace, but it does not make, buy or sell actual loan instruments. |
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If a builder wanted to obtain a mortgage for several pieces of property with a release clause, which type would be best?A)Purchase money mortgage B)Package mortgage C)Blanket mortgage D)Clustered mortgage |
"C - Blanket mortgage " |
A blanket mortgage, as the name implies, is a single loan for a number of properties. The release clause allows the builder to make additional or accelerated payments and thus release or partially release some of those properties as security on the loan. |
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How would a construction loan differ from a VA or FHA loan on an existing home? A)A construction loan cannot be amortized. B)A construction loan is generally a higher risk than a residential loan. C)A construction loan cannot have discount points. D)A construction loan is guaranteed by the FDIC. |
The correct answer is "B - A construction loan is generally a higher risk than a residential loan. " |
From the lender's perspective, construction loans are higher risk on two counts. First, they carry no guarantees, as is the case with VA and FHA loans. Second, a house under construction is riskier than a completed one since any number of events, including material shortages, delivery issues, unexpected financial difficulties for the builder or owner and many others, can impact its completion. |
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What is the BEST definition of interest?A)An upfront fee charged by a lender to process a loanB)The fee a borrower pays to a lender for the use of the moneyC)A fee charged by the lender to increase their equity positionD)The total amount owed by a borrower. |
"B - The fee a borrower pays to a lender for the use of the money " |
Said another way, interest is the profit on money in the same way mark-up is the profit stores make on the goods they sel |
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In a repayment of a mortgage loan, which type of interest is used?A)SimpleB)DiscountC)CompoundD)Floating |
That's right! The correct answer is "A - Simple " |
Compound interest is the interest paid depositors for their savings while "discount" and "floating" are associated with the business-to-business financial markets. |
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Which would NOT fall under a blanket mortgage?A)Industrial developmentB)Single unit in a condominiumC)Residential developmentD)Private residence and two adjoining lots |
B - Single unit in a condominium " |
Blanket mortgages, by definition, are for multiple properties--usually within a business context, such as a land or housing developer. |
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Which of the following items protects a lender from having the loan assumed by another party?A)DefeasanceB)SubordinationC)Due on saleD)Acceleration clause |
The correct answer is "C - Due on sale " |
By declaring the entire balance due on the transfer of property, lenders control who owns the note because homeowners can't sell or transfer the mortgage without first selling the property. |
