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CONNECTICUT REAL ESTATE EXAM WITH COMPLETE
SOLUTIONS LATEST UPDATE 100% CORRECT
D. Anyone can buy, sell, rent, or build their own homes without a license, but those who construct and sell more than 4 dwellings within a year must be licensed or use a licensed broker in the sales. - ANSWER For which of the following activities would a person have to be licensed as a real estate salesperson or broker? A. To build homes B. To purchase a residence for one's own use C. Selling one's own property D. Selling 30 newly constructed homes in a popular subdivision
D. Commingling escrow funds with personal funds is a ground for revocation of the salesperson's license. - ANSWER The license of a salesperson can be revoked under which of the following circumstances? A. She obtains an exclusive-right-to-sell listing contract from sellers. B. She sells her principal residence without the use of a broker. C. She acts as a buyer's agent in a transaction after making a disclosure about agency relationships. D. She deposits a buyer's earnest money deposit into her personal savings account.
C. One must identify oneself as a licensees in advertisements is a requirement; therefore, such would not lead to the revocation of a salespersons license, while being adjudged mentally incompetent, aiding somebody in obtaining a license by cheating on an examination, and giving a For Sale sign in some location without an owners consent are all just causes for revocation of the salesperson's license. ANSWER Which of the following actions on the part of the licensee is NOT a violation of the li-cense law? A. Placing a For Sale sign prior to obtaining the owner's consent B. Relying on a co-worker to obtain the licensure examination by illegal means C. Placing a newspaper ad that indicates the person is a licensee D. Being adjudged mentally incompetent
D. A broker may not post a For Sale sign without permission so Myra is fol- lowing the license law. Brokers are not allowed to solicit information or offer employ- ment at a testing site, to use a promotion involving a game of chance, or to encourage client decision-making based on religious grounds. - ANSWER All of the following are violations of the license law EXCEPT which one? A. Shawn Birk, a broker, hires successful new licensees on location at a testing center. B. Amelia Lands, a licensed salesperson, advertises an open house attendance prize drawing to attract visitors. C. Wayne Janson counsels a seller not to accept an offer because the prospective purchaser is an active Catholic. D. Myra Wells places a For Sale sign on the Lohmans'
property once she has written permission to do so.
A. All advertising must be issued in the sponsoring broker's name, but the licensee need not specify street address or license information, including license number, year li- censed, or license expiration date. - ANSWER What information must appear in a real estate salesperson's directory listing along with his name? A. Roy Walters, Real Estate Salesperson, Residential Property Specialist. Sponsoring bro-ker: Willie James. B. Roy Walters, Real Estate Salesperson, Residential Property Specialist. 505 Waters St., Suite B. C. Roy Walters, Real Estate Salesperson, Residential Property Specialist. Licensed since January 1999. D. Roy Walters, Real Estate Salesperson, Residential Property Specialist. License valid through October 31 of current year.
B. All advertising must include the name of the employing broker. The licensee is not required to include her address or name the property owner, but having nothing more than a phone number would be a blind ad and is not allowed. - ANSWER Real estate licensees are required to include which of the following when advertising real estate? A. The licensees' phone number and street address B. The name of a licensed real estate broker C. The property owner's name and address D. No more than a telephone number to call for information
D. Brokerage web sites shall have the brokerage name, office address and states of licensure on each screen of the web site. - ANSWER What is the specific content that is required for a web site created by a broker's office? A. There is nothing that governs the content of web sites for brokerage offices. B. The names of active licensees employed by the broker must be included. C. Disclosures about agency relationships must appear on the home page in a prominent manner. D. The name and addresses of the office along with any states in which the brokerage holds licenses must be provided.
A. Client vs. customer-what's the diff'rence?. Unless otherwise provided in an agreement, licensees represent one party to a transaction. In this case, the customer is the buyer, and it is the obligation of the licensee to negotiate a purchase in the best interests of that party, not one that is most fair to both parties. - ANSWER A real estate licensee has a buyer agency agreement. Which of the following is correct with regard to the seller in this situation? A. A) a customer B) a client C) a fiduciary D) an agent
B. Options are typically concerned with only two factors: time and price. Whatever the parties agree to in those regards defines the terms of the option and the obligations of the parties. - ANSWER An optionor and an optionee enter a contract for an option on a commercial piece of property. If the optionee decides to exercise his option, when must he perform? A. He must 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 his option under the terms of the option contract. D. He can exercise his option whenever he wants.
have been met and it automatically expires. - ANSWER 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 take place on June 15. Assuming the clos- ing took place on June 15, when did the listing expire? A. 26-May-04 B. 15-Jun-04 C. 26-Aug-04 D. 15-Dec-
D. Commissions are paid based on actual selling price, not the price at which the property is listed. Also, the broker is representing the sellers in this transaction so the commission is debited on the seller's side of the account ledger. - SOLUTION The sellers listed their property on February 26 for six months for $104,500. 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 $102,000. The seller counter offered on April 1 for $103,500, which the buyer accepted with closing to be on June 15. How much commission was due the seller to the listing broker, and how would it be shown on the settlement statement? A. $3,622.50. Debit the seller. B. $7,140. Credit the seller. C. $7,315. Debit the seller. D. $7,245. Debit the seller.
D. 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 simply calculated by multiplying $39,440 by 10% and dividing by twelve. That results in monthly interest of $328.66, with half that amount, or $164. added to the principal payment at closing. - ANSWER The seller and the buyer agreed to a purchase price of $103,500 with the closing to occur on June 15. The seller's loan balance after the June 1 payment was $39,440. with an interest rate of 10%.The monthly payment was $440 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 $39,440; interest due $10,350 B. loan balance $39,000; interest due $3,944 C. loan balance $39,000; interest due $862.50 D. loan balance $39,440; interest due $164.
D. Mortgage monies are credited to the buyer's side of the ledger as a part of those monies that he or she will receive to close the transaction. Once all the funds have been ac- counted for, the monies (less appropriate deductions) transfer to the seller. - ANSWER The buyer and seller agreed to a purchase price of $103,500. The buyer received an 80% loan. How much was the buyer's loan and how did it appear on the settlement state- ment? A. $103,500. Credit the buyer and debit the seller. B. $100,000. Charge both the seller and the buyer. C. $ 95,000. Credit both the seller and the buyer. D. $ 82,800. Credit the buyer only.
C. Because there was agreement and SIGNED documents were provided on TUESDAY, Friday midnight ends the THREE-business-day period - ANSWER A home improvement
company was negotiating with a homeowner to add on two rooms to a home. They insisted on a second mortgage if the home-owner placed the rest of the property in the loan. After much negotiation, the price and terms were agreed to by both the company and the home-owner, whereafter the company issued the relevant disclosure form on a Monday, and the home-owner signed the agreement the next day at noon. Assuming there are five days a week the business is open, until what time would be allowed for rescission of the loan by the homeowner? A. Tuesday, midnight B. Thursday, midnight C. Friday, midnight D. There is no rescission on a house.
C. Land contracts are also known as installment contracts. Under such an arrangement the buyer will be in possession, but the title will remain in the seller's name until some time in the future, usually upon the date of the final payment. - ANSWER The seller under a land contract is known as: A. the grantor. B. the grantee. C. the vendor. D. the vendee.
C. Eight percent of $6,071 is $486 per year or $40.50 per month. $1,700 divided by $40.50 means the borrower held the loan for forty-two months. - ANSWER On an 8% straight term loan of $6,071, the borrower paid total interest of $1,700. How long did he have the loan? A. 30 months B. 36 months C. 42 months D. 48 months
D These are considered legal, not financing fees and therefore are not part of the Truth in Lending statement. - ANSWER The finance charges recorded on the Truth in Lending statements would include all of the following EXCEPT: A. loan fees charged by the lender. B. insurance premiums for mortgage insurance payment. C. discount points and service fees. D. recording fees and title insurance premiums.
A. Mortgage brokers operate much like independent insurance agents and repre- sent a number of lenders. They serve to match the individual buyer's circumstances to the mortgage program with which the buyer is best served. - ANSWER A mortgage broker:
A. arranges loans between borrowers and investors. B. is a lender. C. buys mortgages in the secondary mortgage market. D. buys mortgages and resells them at a profit.
D. Also known as a purchase money second, this is a streamlined and often cost-effective financing option. -ANSWER The Smiths' purchased a residence for $75,000. They made a down payment of $15,000 and agreed to assume the seller's existing mortgage, which had a current balance of $23,000. The Smiths', paid the remaining $37,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called: A. wraparound mortgage. B. package mortgage.
a second mortgage? A. It has priority over a first mortgage. B. It is not a security instrument. C. It is non-negotiable. D. It is issued with a higher rate of interest.
D. Each state sets its own ceiling for a maximum interest rate lenders may charge. Rates above that ceiling are considered usurious and illegal. No reputable lender exceeds those rates and those that make a practice of it are commonly known as loan sharks. - ANSWER Usury MOST nearly means:
A. lending without co-signors. B. lending at usury interest rates. C. multiple useable. D. usury.
B. VA loans are zero-down instruments, while FHA loans allow low down pay- ments in the 5% range. - ANSWER A borrower purchased a $74,000 house with no down payment. The loan was likely: A. a conventional insured loan. B. a VA loan. C. an FHA loan. D. a conventional loan.
C. The purchaser made a 20% down payment of $8,400, and had a mortgage of $33,600. Since the interest is expressed in annual terms, multiply the monthly payment of $ times twelve. That yields an annual interest cost of $3,024, divided by the principal balance of $33,600 yields an annual rate of 9%. - ANSWER A house sold for $42,000. The buyer made a 20% down payment. Monthly interest on the loan was $252. What was the interest rate on the loan? A. 5% B. 7% C. 9% D. 11%
A. This question is a formal description of amortized loans--the most common form of mortgage where monthly payments include both principal and interest (as op- posed to balloon or interest-only seconds). Typically, monthly payment amounts remain constant, while the interest portion is higher in the earlier years, giving homeowners a larg- er tax deduction with higher percentages of principal paid in the later years. - ANSWER Which of the following describes a mortgage that requires principal and interest pay- ments at regular intervals and is called the liquidation of debt by periodic installment until the debt is satisfied? A. amortized loan B. annuity loan C. acceleration loan D. assemblage loan
B. The purpose of RESPA--the federal Real Estate Settlement Procedures Act — is to make borrowers more aware of costs and charges. Accordingly, it should be given the time of application and no later than three days after that. - ANSWER Under RESPA, a copy of REAL ESTATE SETTLEMENT COSTS AND YOU must be given: A. within one day before closing. B. at the time of loan application, or within 3 days of application. C. within 5 days of application. D. at closing.
B. Acceleration clauses are the clauses that require upon the happening of certain events, for instance not making payments, the whole amount of the mortgage is due. Most commonly this is found in Due on sale clauses where the balance of the mortgage must be paid upon the sale of the house. ANSWER The clause in a trust deed or mortgage which permits the mortgagee to declare the en- tire unpaid sum due upon a default by a mortgagor is called: A. a judgment clause. B. an acceleration clause. C. an escalator clause. D. a forfeiture clause.
B Impound accounts, also referred to as escrow accounts, are established with the closing costs and monthly payments to keep payments for property taxes and homeowner's insurance current. -ANSWER An impound or reserve account MOST benefits whom? A. the borrower B.1 the lender C. the trustee D. the trustor
B. Government-sponsored loan programs such as FHA are not actually loans, but guarantees to lenders to encourage them to make favorable mortgages available to qualifying individuals. -ANSWER The lender is not insured or guaranteed against a loss, by reason of the borrower's de- fault in repayment, under which type of loan? A. FHA B. Conventional C. VA D. GI
D. Although the rules and terms may vary, the low down payment and below market interest aspects of VA loans have one caveat: the borrower must reside in the property. -ANSWER A VA loan may be approved to purchase a one-family to four-family property if: A. The veteran certifies the rent collected will equal the mortgage payments. B. a. The loan will be amortized for not over 20 years. C. The down payment will be at least 10%. D. The veteran agrees to live there.
B. A sale-leaseback is generally utilized to render or create cash flow from a commercial property. As the name suggests, the owner sells title to the purchaser in ex- change for cash, then leases the property back at a monthly rate while continuing to operate his business from that location or otherwise utilizing the property. - ANSWER Which of the following would you expect to find in a saleandleaseback transaction? A. The seller realizes a return on the purchase through rent payments. B. A sale-leaseback is the sale of a property with the agreement that the new owner is to lease it back to the seller when title passes. C. The buyer receives capital from inventories instead of in realty. D. The rent paid by the seller is not income-tax deductible.
C. APR stands for Annual Percentage Rate and reflects the actual cost of the loan by factoring fees such as points, recording fees, appraisal fees and such into the interest
B. Graduated payment mortgages are aimed directly at young families who expect their income to rise over the next five to ten years. Payments of interest and principal are accordingly below true costs in the first years and increase gradually to catch up the deficit. - ANSWER Where an FHA graduated payment mortgage is concerned, which of the following will change during the course of the loan? A. interest rate B. monthly payments C. finance charge D. annual rate
A. Although many banks, mortgage companies and programs operate with different LTVs, the lower, more conservative number is used. - ANSWER The maximum allowable loan to value ratios are: A. based on sale price or appraised value, whichever is lower. B. not established by federal statute in the case of FHA loans. C. based on the competitive market analysis done by the banker. D. set by law for conventional loans.
C. Not only are guidelines not uniform, qualification standards can vary enor- mously from lender to lender. There are no state-mandated qualifying requirements for conventional loans. - ANSWER All of the following are true of conventional loans except what? A. They are made to the buyer without governmental insurance or guarantee. B. The policy requirements of the lenders are not uniform. C. The qualifications needed to qualify are set uniformly by state law. D. They require a larger down payment than non-conventional loans.
A. All Lenders must be previously approved by the Federal Housing Authority before they are allowed to provide FHA Loans. Part of that approval process includes waving fees customarily charged on conventional mortgages. - ANSWER A buyer would like to obtain an FHA loan. The broker should directly refer the buyer to: A. A bank or savings and loan association - any approved lending institution. B. An FHA appraiser for the area concerned. C. The Federal Housing Administration Office. D. The Federal National Mortgage Association.
C. Regulation Z All financing terms and conditions must be disclosed if an ad features a low interest rate, downpayment, or other enticement. This does not apply in this case, however, because Regulation Z applies only to institutions, not individuals sell- ing their own property. - ANSWER An owner advertised Beautiful acreage; only $5,000 down; owner will personally fi- nance down payment. Would this be in violation of the Truth in Lending Act? A. Yes. Acreage is not exempt from Reg Z. B. Yes--since a down payment was stated. C. No. A. Owners are not covered under Reg. Z. D. No. The brokers may advertise the down payment.
C. Warehousing means that banks and other lenders originate mortgage loans to consumers for the purpose of promptly selling those loans on the sec- ondary market. This warehousing occurs when the bundling of individual loans, usually with the same characteristic, for example mortgage size or credit worthiness of borrowers and are sold as a single unit. - ANSWER A mortgage company originates a number of loans to be assembled into one package and sold to permanent investors. This is a form of interim financing to the mort- gage company and is called: A. blanket financing. B. package financing. C. warehousing. D. discounting.
D. Truth in Lending, also known as Regulation Z, was intended to put an end to fraudulent financing practices, in particular those that incorporate hidden costs-such as advertising an automobile lease for $250 down with no down payment required, then adding a $1,200 payment due at contract signing but labeling it an incidental acquisition fee. - ANSWER The major purpose of Truth in Lending is to
A. Control interest rates on behalf of the consumer. B. Control the true costs to close a transaction. C. Disclose the true costs of only an FHA loan. D. Disclose the true costs of obtaining credit.
C. This should not be done lightly. With the increased volume in home mortgages, the fact is a significant amount of closing statements do contain errors and it's easer and better to correct them before closing than after. - ANSWER Why is the RESPA closing statement allowed to be examined on or before closing? A. A. to allow the buyer to see costs at or before closing to see if he/she can get the loan at a cheaper price B. to make sure the title insurance came from the right company C. to check for mathematical errors D. to provide for special fees to specific parties for business related to the real estate trans- action
C. Any income--alimony, child support, freelance work, a second job--need not be disclosed unless the applicant is relying on such income to qualify for the loan. -ANSWER If a single parent is applying for a real estate loan, when would the fact have to be re- vealed that part of the parent's income is from child support? A. the VA or FHA loan application, if the parent's income is less than $25,000 B. When over 50 percent of the parent's income is from non-salary sources C. When the parent was relying on the income for repayment of the loan D. This type of income never has to be shown. It would be a violation of ECOA.
C. Trustor is the other name for the borrower and trustee is a supposedly neutral third
C. Although Fannie Mae is a mortgage oriented company, its stock sells like any other stock and can only be offered for sale by individuals who possess securities license. -ANSWER Which of the following activities requires a person to hold a securities license? A. Leasing industrial property B. Selling an income property C. Selling shares in Fannie Mae D. Arranging a sale-leaseback of commercial property
D. The FHA does not lend the money itself, but it encourages lenders to make these low-interest, low-down payment loans by insuring the loans against default. -ANSWER Which of the following is NOT a primary originator of loans? A. savings and loans B. credit unions C. commercial banks D. FHA
B. This is a form of owner financing and is perfectly acceptable, so long as both parties agree to the terms and conditions. ANSWER A buyer wanted to use a promissory note for consideration on the purchase of a prop- erty. Can he do this? A. Yes. The buyer can do as he wishes since he is making the contract. 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.
C. No down payment required would trigger 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. - ANSWER If advertised alone, which would be in violation of TRUTH IN LEND
D. Appraisals are independent valuations of the property based on a large number of variables. Lenders typically require this third-party assessment to ensure that the value of the property is at least adequate to retire the loan amount in the event of foreclosure. -ANSWER Why would a mortgagee (beneficiary) have an appraisal on the property? A. to ensure 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
A. Compound interest is associated with savings accounts and reflects the fact that money left on deposit earns interest on the interest it has already earned. Floating and Discount are terms associated with the bank-to-bank transactions and financial markets. - ANSWER In a repayment of a mortgage loan, which type of interest is used? A. simple B. discount C. compound D. floating
D. Generally speaking, an individual homeowner may sell his/her own home in whatever manner he/she wishes and is exempt from Truth in Lending or real estate practice prohibitions. - ANSWER 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.
A. 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. - ANSWER 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 placed by government agencies in the public record.
A. This entails much more than merely driving around. It is a formal process of identi- fying, measuring and analyzing the influences that help determine a neighborhood's vitality and desirability. - ANSWER 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 D. social analysis
While emotion and impulse certainly do, a home is also a considered purchase. Most people are seeking, within their affordability range, 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. -ANSWER 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. C. Buyers buy after they compare the house with others. D. Buyers buy based on current construction costs.
C. To scale - 4' to the inch, the room measures 12' x 18' or 216 square feet. There being nine square feet to one square yard, the room will require twenty-four square yards of carpet at $15 per yard. - ANSWER A scale drawing shows a room to be 3 inches by 4 ½ inches. Carpet is to be installed in the room at a cost of $15 per square yard. Scale: 1 inch = 4 feet: How much will it cost to install the carpet? A. $120 B. $202 C. $360 D. $3,
D. At a base minimum rent of $10.00 per square foot, the tenant's minimum rent is
ANSWER A real estate broker should disclose to the purchaser, his client of which of the following? A. how long a property has been on the market B. the seller's motivation for marketing his property C. a pending or recent zoning change D. The seller is getting a divorce.
A. One-eighth of a mile square is equal to 10 acres. Multiply 1/8 X 1/8 = 1/64 divided into 640 acres = 10 acres - ANSWER A square is 1/8 of a mile by 1/8 of a mile. How many acres is this? A. 10 acres. B. 20 acres. C. 40 acres. D. 160 acres.
B. Appraisers can, within the bounds of legitimacy, have different values on the same prop- erty depending on what the purpose of the appraisal is-for example, an appraisal for a second mort- gage generally would be more conservative than one for a competitive market analysis for the purpose of selling the home. IN addition to its purpose, an appraisal for insurance purposes focuses more on the costs of replacing the structure rather than what the house, land and intan- gibles, such as curb appeal, would be worth on the open market. - ANSWER 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.
C. Lot and block is the final survey of property being readied for development and identifies each individual parcel in a subdivision. - ANSWER A recorded subdivision plat is used in the: A. geodetic survey system. B. rectangular survey system. C. lot and block system. D. metes and bounds system.
B. There are two basic causes for the time and effort versus valuation method. First, there 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. - ANSWER 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. fee set by the National Appraisal Association.
D. Base line crossed, the PM becomes the main reference point in situating and describ-ing land lying within it. - ANSWER The major survey line that runs north and south in the rectangular survey system is the: A. township line. B. base line. C. range line. D. principal meridian.
D. Aesthetic zoning helps to ensure a degree of uniformity throughout a neighborhood or area, thereby increasing its aesthetic appeal and, in many cases, its attractiveness and worth as a residential location. - ANSWER The Jefferson County zoning commission has ordained that new development in a particular neighborhood must conform to a certain architectural style. Which of the following represents a type of zoning? A. bulk B. incentive C. directive D. aesthetic
B. The cost method is used most often for buildings where actual income or com- parative commercial value are unavailable--such as schools and libraries. - ANSWER The appraisal approach most likely to be used in valuing a public library building would be: A. market. B. cost. C. income. D. residual.
C. For example, assume an older office building has to cure electric and add bathrooms, repartition offices and fire safety features to meet code for resale. The cost to complete the work is estimated to be $2.2 million dollars. However the building is paid for and can readily resold for $4 million dollars. Here, curing the defects makes sense. However, when those numbers are flipped, which is many times the case, it would be wiser to take the building down and build anew, or change its use entirely, such as retail space, a parking garage, etc. - ANSWER Physical deterioration is curable whenever: A. It cannot be attributed to lack of maintenance. B. It does not result in loss of economic utility. C. It is less costly to correct than the appreciation in value that accrues. D. It can be repaired regardless of cost.
B. Like cars, buildings and their systems deteriorate over time and require re- pairs. Changes in code often can also prompt costly upgrades. There comes a time when those re- pairs start to be more than the income derived and the building has reached the end of its economic life. ANSWER 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.
D. An appraiser reconciles differences and does not average comparable sales in order to maintain accuracy and transparency of his calculations to arrive at a final value. - ANSWER 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 that desired by the employer. D. reconciles these differences by the type of property being appraised and the quantity and quality of data available.
C. An appraisal principle, substitution is the idea that the maximum value of a property is that price for which a comparable, equally desirable property can be purchased in a
expensive house in the neighborhood. It is an observation of the fact that lower priced homes and commercial buildings have a much greater downward pull on the value of higher end properties than the other way around. - ANSWER The Adams family purchased the largest and most expensive house in a new subdi- vision. Five years later, when they were ready to move, they discovered the monetary value of the home had gone up proportionately less than the other houses in the neighbourhood. This phenomenon is an example of the principle of: A. diminishing return. B. change. C. regression. D. substitution.
A. An appraisal aims at a fair estimate of the subject property's value based on what comparable properties have actually sold for. The most reliable way to do this is by additions and subtractions from the comparables rather than the other way around. For example, property A in the case of the 3-bedroom ranch may have sold for $225,000, but only has a two-car garage where the subject property has three. Assuming the incremental value of the additional garage space to be $5,500, the first comparable is adjusted upward by that amount to $230,500. If the next property was similar to the subject except it had a brand-new, high-end kitchen that added approximately $25, to the selling price and the home sold for $257,000, that comparable's price would be deducted to $232,000. - ANSWER In valuing a single family residence by the comparison approach, an appraiser would make adjustments to: A. the comparable properties. B. the subject property. C. both the comparable and the subject property. D. current properties being offered for sale.
C. Functional obsolescence can result from both outdated features as well as poor design. For example, while an older home with five bedrooms and only one bath is obso- lete by today's standards, so too is a new home with no bathtubs or with bedrooms that can be accessed only by going through another bedroom. - ANSWER An owner was building a house for himself. Due to personal preference, he decided not to put in a bathtub. This would result in: A. physical deterioration. B. external obsolescence. C. functional obsolescence. D. social obsolescence.
B. This is used as a quick, short-hand guesstimate for a property's approximate value. Sometimes this calculation produces a positive cash flow; other times a negative one--and one is not necessarily better than the other. Far more detailed calculations are necessary to determine a property's real market value and attractiveness as an investment. - ANSWER How does one determine the gross rent multiplier? A. Property value divided by the capitalization rate. B. Property value divided by the monthly rent. C. Property value divided by the net income. D. Property value divided by the gross income.
D. Oftentimes, a neighborhood is maintained in consistency and desirability by restrictive covenants, which have withstood court tests and prevent all future owners in certain ways from being able to modify or alter their property, such as adding outbuildings or creating additions above a certain height, putting up lights to illuminate a sports court, changing the architectural style of a home and so forth. ANSWER Restrictive covenants which run with the land: A. are no longer effective when the title is transferred. B. apply only until the developer has conveyed the title. C. can be removed by a court of competent jurisdiction. D. apply to and bind all successive owners of the property.
D. An arm's length means, of course, transactions involving independent and objective parties with no unrelated motivations to distort the true value. - ANSWER In performing a market analysis, an appraiser found that a recently sold property was of owners who had just gotten divorced. The subject property was listed for $60,000 for 3 months but was purchased by one of the spouses for $40,000. Should the appraiser use this as a comparable? A. Yes. You would use the actual sale price of $40,000. B. Yes--because it was a comparable type property. C. No--because it had only been listed for 3 months. D. No--because of the divorce it was not an At arms' length transaction
B. This is an example of grandfathering that's common when new zoning rules are put into place. Basically that means businesses and buildings that were compliant before the new code was enacted may continue to operate or exist under their current owners. However if the Ls wish to sell their business, it must be to an enterprise that complies with the new requirement. - ANSWER The Ls have operated a neighborhood grocery store for the last 30 years. Last week the city council passed a zoning ordinance that prohibits packaged food sales in the area where the Ls' grocery store is located. The store is now an example of a/an: A. illegal enterprise. B. nonconforming use. C. violation of eminent domain. D. variance of the zoning laws.
A. Each page of the web site must identify Marian's employing broker's name and address and the states in which Marian is licensed. -ANSWER Marian Kent, a real estate salesperson, is preparing a web site to advertise her ser- vices. To what does she have to put on the content of her web site specifically? A. Name and address of her employing broker's office and states in which she is li- censed B. Name of her employing broker's firm and states in which she is licensed C. Name and address of her employing broker's office and the particular period for which her real estate license is effective D. No specific disclosures are required.
D. Net listings are illegal at any time because they introduce potential conflict of interest for the broker. - ANSWER What is the official view of listings based on net price? A. They
