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Kentucky Real Estate Mock Test 1 Actual
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Dino owns property rights located on Lake Michigan where he docks his yacht. His water rights are called: - ANSWER-Littoral rights Which of the following is NOT a duty of the real estate agent: - ANSWER-To accept offer on behalf a client. After receiving recommendations from the KY Assoc of REALTOR, the governor appoints: - ANSWER-5 commissioners, four of whom have had an active license for the past 10 years. A seller listed her property for $100,000 and told her agent not to present her with any offer les than $99,000. 3 days later a buyer wanted to make a written offer of $95,000. The agent... - ANSWER-Must present the buyer's offer to the seller. If a broker's branch office is 75 miles from his main office, the person managing this branch office must: - ANSWER-Have been licensed for 2 years averaging 20 hours per week in the business. Which of the following is NOT true regarding a sale-leaseback? - ANSWER-The ownership of the property never transfers. Which of the following would not be a disciplinary action of the KREC? - ANSWER-A jail term - KREC cannot send a licensee to jail. Ann conveys a life estate to Paul based on the life of Troy. Paul has 2 children who live with him and help him care for Troy. What is the status of the life estate if Paul predeceases Troy? - ANSWER-The property would revert to Paul's children, so long as Troy was alive. A life estate pur autre vie means tha the life estate is based on a 3rd party- in this instance, Paul or his heirs would have a life estate to the property o long as Troy was alive. Which of the following is NOT true regarding title insurance: - ANSWER-The mortgagee's policy is for the value of the property - it's for the loan balance and decreases as each payment is made on the loan.
When a lender charges more interest than is legally allowed, it is known as - ANSWER- Usury A buyer made an offer on a property which was accepted by the seller. Three days before the closing, the title was found to be defective and the buyer negated the contract. Under these circumstances the - ANSWER-brokerage has earned a commission because it found a ready, willing and able buyer A leasehold estate that automatically renews for the original term is a/an - ANSWER- Periodic Tenancy The seller accepted a signed offer. The earnest money must - ANSWER-be placed in the broker's escrow account within 3 business days A tenant leased a commercial space for a dance studio. The tenant purchased and installed mirrors on all the walls in the practice room. Which of the following statements is NOT true in this situation: - ANSWER-The mirror are legally classified as fixtures; the mirror are legally classified as TRADE FIXTURES, or the personal property of a tenant that is installed for the use of business. Which of the following would relieve the lessee of any obligation to make the rental payments? - ANSWER-Constructive eviction Dr. Wilder bought a home for $125,000. She obtained a 90% mortgage at an interest rate of 8% for 30 years. Other expenses included title insurance of $425, 2 discount points, 1% origination fee, and attorney fees of $250. Taxes of $955 for the year have been paid. If the closing takes place on June 23, how much money does Dr. Wilder need to bring to the closing? (Use 360 days in a year and the seller is responsible for the day of closing.) - ANSWER-$17,248. Buyer Credits: $125,000 x 90% = $112,500 Loan Buyer Debits: $125,000 - Sale Price $112,500 Loan x 8% = $9,000 Annual Interest $9,000 ÷ 360 = $25 Daily Interest Rate $25 x 8 days = $200 (Buyer would owe interest from June 23 - June 30.) $425 - Title Insurance $112,500 x 2% = $2,250 Discount Points $112,500 x 1% = $1,125 Origination Fee $250 Attorney Fee $955 ÷ 360 = $2.65 Daily Tax Rate June 23 - December 30 = 188 days $2.65 x 188 days = $498.20 Debit to buyer for taxes. Total debits: $125,000 + $200 + 425 + 2,250 + 1,125 + 250 + 498.20 = $129,748. Total credits: $112,
A package mortgage would include both real and personal property. This type of mortgage may be used in resort communities where the condo or house is furnished and the buyer can simply move in. An 80% loan was negotiated with an interest rate of 10%. The first month's interest payment was $833.33. What was the sale price of the property? - ANSWER-$125, $833.33 x 12 = $9,999. $9,996.96 ÷ 10% = $99,999. $99,996.96 ÷ 80% = $124,999.50 or $125, Broker Nelson appointed Julia, as only agent representing the seller and Barron as the only agent representing the buyer. Broker Nelson's agency policy is that of - ANSWER- designated agency When a real estate firm has an in-house dual agency, where an individual agent is designated to represent only the interests of the seller the same instance for the buyer. A person would be a special agent in which of the following transactions? - ANSWER- When a person has been given the authority to sign closing documents for the seller. A special agent is also known as a limited agent. A special agent is given limited authority, such as signing closing documents for the seller The minimum amount that Kentucky law requires that may be maintained in the Recovery Fund is - ANSWER-$400, In a percentage lease the tenant agreed to pay $650 fixed rent per month and 3% of the gross sales over $75,000. If the sales were $150,000 this year, what was the total rent paid for the year? - ANSWER-$10, Step 1 $650 x 12 = $7, Step 2 $150,000 - $75,000 = $75, Step 3 $75,000 x 3% = $2, Step 3 $7,800 + 2,250 = $10, An agent changed her surname. The agent - ANSWER-must give written notification to the KREC of the change. 324.330 requires written notification to the KREC of a change of surname. There is no time frame, but it should take place in a timely manner. Please note.Licensees shall annually file their telephone numbers and email addresses with the Commission. A suit to quiet title would be filed under which of the following circumstances? - ANSWER-When there is an adverse possession claim on the property.
Mr. Singleton's primary residence cost $250,000. During his period of ownership he added a tennis court at a cost of $10,000 and made other improvements at a cost of $20,000. Two years later he sold the property for $350,000 and paid a 7% commission. If he buys another home for $350,000, how much capital gains can he defer? - ANSWER-$0 because there is no deferment of capital gains on a principal place of residence. There is no deferment of capital gains when selling a principal place of residence. A capital gain is deferred on investment property if IRS guidelines are followed. What party is responsible for giving the Condominium Certificate to the Homeowner's Association for completion? - ANSWER-Seller Which of the following would be an example of external obsolescence? - ANSWER-A neighbor who doesn't maintain his property. External obsolescence or depreciation occurs because of issues outside the property's boundary lines. An agent has been found guilty of fraud in a real estate transaction. The court has determined the following damages: $5,000 actual and $2,000 punitive. What amount could be paid from the recovery fund? - ANSWER-$5, A builder secured a construction loan. He MOST LIKELY obtained a/an - ANSWER- open-end term mortgage. The builder most likely negotiated an open-end mortgage. This means there is a set loan amount, but the money is received in a series of "draws" as each stage of construction is completed. (A credit card is another example of an open-end mortgage.) An open mortgage contains a prepayment privilege clause which allows the borrower to pay off the loan at any time during the life of the loan. The brokerage fee on a $185,000 sale was computed as follows: 7% on the first 60,000, 6% on the next $50,000, plus a certain percentage of the remaining balance. If the total fee paid was $10,950, what was the third percentage? - ANSWER-5% Step 1 $60,000 x 7% = $4, Step 2 $50,000 x 6% = $3. Step 3 $4,200 + $3,000 = $7, Step 5 $10,950 - $7,200 = $3, Step 6 $185,000 - 60,000 - 50,000 = $75, Step 7 $3,750 ÷ $75,000 = 0.05 or 5% $4,200 + $3,000 = $7, $10,950 - $7,200 = $3, $185,000 - 60,000 - 50,000 = $75,
An ad valorem or property tax lien is a specific lien, not a general lien. A general lien is against both real and personal property. A specific lien is against one identified property. A statutory lien means it is placed by statute, or law. Carrie's lease agreement states that the landlord is responsible for furnishing heat. The landlord failed to provide heat and Carrie had to vacate the unit. This is an example of - ANSWER-constructive eviction. Constructive eviction occurs when the property becomes uninhabitable and the tenant must vacate the property. A licensee could be active in the real estate business if his/her license is - ANSWER-on probation A defeasible fee estate means that title - ANSWER-can be defeated upon the occurrence or nonoccurrence of a specified event. A defeasible fee estate means that title can be defeated upon the occurrence or nonoccurrence of a specified event. Fee Simple with a special limitation and fee simple conditional subsequent are the two types of defeasible fee estates. Mr. Brown, who does not have a Kentucky real estate license, is advertising that buyers have not seen all properties for sale until they have seen his "Real Estate Owned Listings" properties. The KREC may - ANSWER-file a civil action in the Jefferson Circuit Court. 324.020 (6). The Kentucky Real Estate Commission may seek and obtain injunctive relief against any unlicensed individual acting in violation of this chapter by filing a civil action in the Circuit Court where the commission is located or where the unlawful activity took place. Which of the following is NOT a duty of the KREC? - ANSWER-Fine a licensee $1, KRS 324.281(1) (c). The KREC can fine a licensee not to exceed $1,000. A sales contract has been signed by both the buyer and the seller. The closing is to take place in 30 days. The status of the contract is - ANSWER-executory. A borrower secured a loan in which he makes a fixed monthly payment and the balance will be zero at the end of the loan term. This BEST describes a/an - ANSWER-fully amortized mortgage. A fully amortized mortgage means that if the borrower makes timely payments on the loan, the balance will be zero at the end of the loan term.
A seller wants to net $25,000 after paying an 8% commission and after paying selling expenses of $531. If a buyer assumes the mortgage balance of $21,500, how much did he pay for the house? - ANSWER-$51, 100% - 8% = 92% $25,000 + 21,500 + 531 = $47, $47,031 ÷ 92% = $51,120. Which of the following listings could not be offered to a seller of real property located in Kentucky? - ANSWER-Net Five years ago an agent committed fraud in a real estate transaction. The buyers just discovered the fraudulent act. If the buyers want to receive compensation from the recovery fund, they - ANSWER-can recover actual damages from the fund if filed within two years of actual knowledge An assessed value of a property is $95,000. The assessment rate is 35% and the tax rate is $9.50 per $1,000. The taxes have not been paid and the seller is responsible for the day of closing which is July 11. How much is credited to the buyer? (Use 360 days in a year.) - ANSWER-$479. $9.50 ÷ $1,000 = .0095 tax rate $95,000 x .0095= $902.50 annual property taxes $902.50 ÷ 360= $2.51 daily tax rate (rounded up) January 1 thru July 11 = 191 days 191 x 2.51 = $479.41 Debit the seller, Credit the buyer (The assessed value of $95,000 is already given in the question so the 35% assessment rate is unnecessary information.) A grantee purchased a property and did not record the deed. Later the property was transferred to an heir, who sold the property. This would create a/an - ANSWER-gap in the title. When an owner does not record a deed, it creates a gap in the title. It is sometimes called a break in the chain of title. A tax assessor has determined that the appraised value of a property is $199,250. If the assessment rate is 28% and the tax rate is $5.25 per $100, what is the quarterly tax bill? - ANSWER-$732. Step 1 $199,250 x 28% = $55, Step 2 $5.25 ÷ $100 =. Step 3 $55,790 x .0525 = $2,928.98 ÷ 4 = $732.
How many acres are in a tract of land 400' by 800'? - ANSWER-7.34619 acres 400' x 800' = 320,000 square feet 320,000 ÷ 43,560 = 7.34619 acres The buyer executed a written offer to a seller. The seller's agent called the seller and presented the offer by phone. The seller accepted the offer by phone. At this point, what is the status of this offer? - ANSWER-Unenforceable In real estate, offers must be accepted in writing before a contract is created. At this point, the oral acceptance is unenforceable. The appraiser is to determine the most probable price that a buyer will pay for a property. This is known as - ANSWER-objective value. The appraiser's opinion of value is to be an objective value meaning it is based on evidence from surrounding sales Which of the following is NOT a future interest in an estate in land? - ANSWER-Pur autre vie The term pur autre vie is used to describe the life estate created by the life of a third party. Example: A gives a life estate to B based on the life of C. B only has a life estate so long as C is alive. (C is the third party.) So, B's life estate interest is current, it is not a future interest. Kentucky's Statute of Frauds requires that - ANSWER-to be compensated, there must be a written agreement between the party and the brokerage. Disciplinary actions that can be taken by the KREC include all of the following EXCEPT
- ANSWER-placing a licensee on probation for twenty four months. 324.160 (1) (d). Placing of any licensee on probation for a period of up to twelve (12) months. When property taxes and special assessments are due and they are NOT paid, they become - ANSWER-specific liens against the property. A specific lien is against an identified piece of property. Property taxes and special assessments are example of specific liens. Under the income approach to appraising which of the following would be deducted from effective gross income to derive the net operating income? - ANSWER-Property taxes and insurance
Potential Gross Income
- Vacancy Rates & Credit Losses
Effective Gross Income
- Fixed expenses (property taxes and insurance)
- Operating expenses (day to day operating expenses)
- Reserves funds (major improvements in the future)
Annual net operating income Annual net operating income ÷ Cap rate = Value Jayce listed a property for Sterling Realty which sold for $82,500. Jason, who works for Gold Realty, produced the purchasers. The brokers have agreed to divide the 7% commission equally, and Jason is to receive 55% of his brokers' share. How much was Jason paid? - ANSWER-$1,588. Step 1 7% ÷ 2= 3.5% Step 2 $82,500 x 3.5% = $2,887.50 x 55% = $1,588. In a circuit court an unlicensed may be penalized - ANSWER-the return of the commission, a fine of not less than $100 nor more than $1,000 and up to six months imprisonment, or both. 324.990. In the circuit court a fine an unlicensed individual not less than $100 nor more than $1,000, imprison them for up to six month, or both; and require them to return the commission. The semi-annual interest payments totaled $4,600. The borrower negotiated a 75% loan at an interest rate of 10.5%. How much did the borrower pay for the property? - ANSWER-$116, $4,600 x 2 = $9, $9,200 ÷ 10.5% = $87,619. $87,619.05 ÷ 75% = $116, If a buyer or seller refuses to perform on a contract, the aggrieved party may ask the court to compel performance. This is called a/an - ANSWER-suit for specific performance. A suit for specific performance can be filed when a party refuses to perform the terms of the contract. An Agency Disclosure Statement must be signed by the buyer - ANSWER-before making the offer on the property.
The owner of a condominium owns the air rights within the unit in severalty, meaning separate from the other property owners in the condominium. Severalty ownership in this situation does not mean that the ownership is only by one person. It means the owner/owners of the unit have the right to use the air space within the unit. The owner of a condominium will own the buildings and other areas of the community as a tenant in common with the other owners. When listing a property or showing a property, which of the following duties is an agent NOT required to do? - ANSWER-Discover latent defects in the property. A latent defect is a hidden defect. Agents are not required to discover latent defects. When leasing the following properties, which contract would LEAST LIKELY be a percentage lease? - ANSWER-Apartment A percentage lease means the tenant is paying a fixed monthly rental plus a percentage of the gross or net sales. An apartment lease would NOT be a percentage lease. Which of the following is not true regarding property management? - ANSWER-Property management agreements are personal service contracts that are binding upon the death of either party. Property management contracts are personal service contracts and they are NOT binding upon the death of either party. Which of the following is true regarding RESPA? - ANSWER-RESPA requires the disclosure of settlement charges on a HUD-1 Settlement sheet Agent "J" was showing one of his listing to a potential buyer when he disclosed, without the seller's consent, that the sellers were in the process of a divorce. The buyer then commented that he thought the list price was too high and questioned how much the sellers would really take. Agent "J" said he was sure he could get the sellers to take less than the list price for the property. It would appear that the agent - ANSWER-has breached the fiduciary duty of confidentially. Unless an agent has permission from the sellers, an agent is not allowed to disclose the personal information of the sellers. When a sales associate owns rental property, Kentucky law requires that the tenant's security deposits be placed in - ANSWER-an escrow account After a hearing an agent's license was suspended for ten days. This means the agent - ANSWER-can receive compensation if it was earned prior to the suspension period.
After the closing the seller gave the agent a $100 bonus check. The agent must - ANSWER-give it to his/her broker. While being interviewed as a potential listing agent for a property, the seller states that he does not want the property sold to a minority. The agent should - ANSWER-refuse the listing. When making adjustments in the comparable properties, the appraiser would NOT consider which of the following? - ANSWER-Racial demographics Under Kentucky law, a broker is required to keep copies of records for - ANSWER- 5 years Broker Bonnie moved into her new home on March 15. The KREC should receive notice of her move - ANSWER-no later than March 26 The commission shall be notified in writing of a change of residence address within ten (10) days Which of the following statements is true regarding the seller's disclosure form? - ANSWER-Upon the request of a seller, an agent may complete the form because the seller is incapable of filling out the form. 324.360 (9). Even though the law allows the agent to fill out the form for the seller, it is NOT recommended. "It shall be a violation of this chapter for a licensee to complete any portion of the form unless the licensee is the owner of the property or has been requested by the owner to complete the form. The request shall be acknowledged in writing on the form and the licensee shall be held harmless for any representation that appears on the form." Anne's Art Gallery leased space on the following terms: $1,200 per month fixed rent, plus 4.25% commission on all sales over $800,000. This year sales were $1,259,355. What was the total rent paid this year? - ANSWER-$33,922. Step 1 $1,200 x 12 = $14, Step 2 $1,259,355 - 800,000 = $459, Step 3 $459,355 x 4.25% = $19,522. Step 4 $19,522.59 + $14,400 = $33,922. Which of the following parties would have the legal right to transfer the title to property?
- ANSWER-The party with the legal authority to perform. The party/parties with the legal authority to perform would have the legal right to transfer the title to the property.
(You got it! The total debits and total credits were given in the question. All you had to do was subtract the difference.) A developer entered into a long term fixed rental lease that did not contain an escalation clause. How would this lease affect the appraised value of the property? - ANSWER- The value would decrease. If a developer entered into a long term fixed lease, the developer would not have the ability to raise the rent. This would cause the value of the property to decrease. Edgar allowed an oil company to drill for oil on his farm. Edgar has given the oil company a/an - ANSWER-profit. The word profit has more than one meaning. Profit can mean that the revenue generated by a business exceeds the expenses. In real estate the word profit also means the right to take from the land, or anything that the land produces, such as minerals, oil, crops, trees, etc The NW 1/4 of the NW 1/4 - ANSWER-is equivalent to ¼ mile by ¼ mile. A section of land is one mile by one mile. The NW 1/4 is one-half mile by one-half mile. (5,280 ÷ 2 = 2,640 feet) The NW ¼ of the NW ¼ is one-quarter mile by one-quarter mile. (2,640 ÷ 2 = 1, feet) 1,320 x 1,320 = 1,742,400 square feet 1,742,400 ÷ 43,560 = 40 acres A potential buyer is at an open house. At what point must the agent give the buyer a "Consumers Guide to Agency Relationships?" - ANSWER-The Guide must be given before the agent can ask questions where confidential information would be disclosed. The broker's license was suspended. What is the status of the licensees of the real estate agents working for the broker? - ANSWER-They are automatically inactive. A property manager's responsibilities include care and skill, obedience of legal instructions, and accountability of monies coming into his/her possession. This type of relationship can be BEST described as a - ANSWER-fiduciary relationship. An agent's license has just been suspended. The agent - ANSWER-may receive compensation that was earned prior to the suspension A lease has been assigned. The new landlord tenant relationship would be between the
- ANSWER-lessor and the assignee.
In the assignment of a lease, the new landlord tenant relationship would be between the lessor and the assignee. The landlord would expect the rent payment from the assignee. Please note. Unless novation was granted to the assignor, the landlord may look to the assignor for the rent payment, if the assignee does not pay the rent When a party purchases a cooperative, she/he will secure - ANSWER-stock in the company and a lease to the unit. The owner of a cooperative will purchase stock in the company that owns the building. The owner will be given a proprietary lease to the co-op unit. Which of the following is not required to secure a sales associate Kentucky Real Estate License? - ANSWER-Be at least twenty-one years of age The optionee's attorney met with the optionor and presented the signed document wherein his client exercised her option. An option contract that has been exercised is a/an - ANSWER-bilateral, executory contract. An option contract is a unilateral contract because only the seller is obligated to perform or sell if the buyer wants to buy. When the buyer says, "I'm going to exercise my option and purchase the property." the option contract becomes a bilateral, executory contract. Both buyer and sellers have duties to perform. A person dies testate. The person named to settle the estate would MOST LIKELY be called - ANSWER-an executor If it is determined that the complaint contains prima facie evidence, how many days does the licensee have to answer? - ANSWER-20 days
