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ROCKWELL TEST QUESTIONS AND ANSWERS
A couple with children would like to buy a house that was built in 1950. The home was recently remodeled, with completely new paint and plumbing. In this situation, what does the agent always have to do? A.Ensure that the paint used during the remodel is lead-free B.Make sure the buyers receive a pamphlet on lead-based paint C.Provide them with a copy of a recent lead inspection report D.Nothing; the house was remodeled so lead-based paint rules don't apply - Answers - B.Make sure the buyers receive a pamphlet on lead-based paint A seller of a house built before 1978 must always give buyers a copy of a pamphlet on lead-based paint prepared by the Environmental Protection Agency. If (but only if) the property has been inspected for lead-based paint, the seller must also give a copy of the inspection report. The agent must make sure that the seller takes these steps. A buyers' purchase and sale agreement contained a financing contingency. The buyers applied for a loan with a local lender, who verbally informed them that their loan application was denied. The buyers' agent should: A.ask the sellers to provide a purchase money loan instead B.have the sellers extend the contingency deadline C.tell the buyers about their right to receive the denial in writing D.terminate the agency relationship - Answers - C.tell the buyers about their right to receive the denial in writing Under the Fair Credit Reporting Act, when a lender takes an adverse action on the basis of a credit report, the applicant or borrower must receive written notice of that action. The consumer should also be notified of which consumer reporting agency provided that information, so that the consumer can verify and, if necessary, contest that information. What information does an appraiser need in order to calculate a capitalization rate? A.Price and gross income B.Price and net income C.Value and gross income D.Value and net income - Answers - D.Value and net income According to the Uniform Relocation Act, tenants whose leases terminate because of the condemnation of their residence are entitled to at least 90 days' notice and assistance with relocation, including payment of moving expenses. (A residential tenant is not likely to have a compensable interest in the property. The tenant does not have an ownership interest, and from an appraisal perspective a residential leasehold interest is unlikely to have any financial value.)
A former mansion has been divided into three apartments. The best approach to finding the property's value is: A.cost B.income C.reconciliation D.sales comparison - Answers - B.income The income approach is appropriate for properties that are oriented toward generating income for the property's owner. That would be true even if the property originally was intended as a single-family residence. A licensee locates what seems like a ready, willing, and able buyer. However, the deal falls through at closing because the buyer can't obtain necessary financing. At the same time, though, the seller turns out to be unable to provide marketable title. Does the seller still owe a commission to the listing agent in this case? A.No, because the sale didn't close B.No, because there was no ready, willing, and able buyer C.Yes, because the licensee saw the transaction through to the closing date D.Yes, because the seller has an absolute duty to provide marketable title at closing - Answers - B.No, because there was no ready, willing, and able buyer A seller becomes obligated to pay a commission as soon as a ready, willing, and able buyer is found. A buyer who lacks the financial ability to complete the purchase isn't "able," however. While in some cases a failure to close excuses the seller's duty to pay a commission, that makes answer A only sometimes true. B is true without qualification and therefore the better answer. The deed that states that there is a conveyance of interest, if any, is the: A.grant deed B.bargain and sale deed C.quitclaim deed D.special warranty deed - Answers - C.quitclaim deed When signing a quitclaim deed, the grantor is saying, "I hereby quitclaim, remise, and release whatever interest I have in the property, if any." The police powers of the government include: A.defeasance B.foreclosure C.lis pendens
A.conveyed along with the surface rights to the property B.separable and divisible C.sold separately from the property D.an interest in personal property - Answers - B. separable and divisible Mineral rights may be sold separately from the land. However, they are appurtenant to the land and will be conveyed with the land unless there is an agreement otherwise. An investor rents a property to a tenant. For tax purposes, depreciation on this property is based on: A.market value, plus capital improvements, minus land value B.market value, plus rental income, minus land value C.price, plus capital improvements, minus land value D.price, plus rental income, minus land value - Answers - C.price, plus capital improvements, minus land value. Adjusted basis is calculated by starting with initial basis (the cost of obtaining the property), adding capital expenditures, and then subtracting depreciation deductions. The value of the land must also be subtracted from what is depreciable; land does not wear out, so depreciation doesn't apply. An apartment building is right where a new city park is going to be built. The city condemns it. Can the city terminate the leases of the building's tenants? A.No, because this is a violation of the federal Fair Housing Act B.No; if the government forces a landlord to breach a contract with a tenant, it is violating the Landlord-Tenant Act C.Yes, if notice is provided to the tenants and they receive relocation assistance D.Yes, if the tenants receive just compensation from the city - Answers - C.Yes, if notice is provided to the tenants and they receive relocation assistance Property owned by only one person ("in severalty") gives that owner more flexibility to use or dispose of the property than she would have if she shared ownership. By definition, ownership in severalty doesn't involve joint occupancy or shared risk. And properties held in fee simple are generally inheritable whether there's only one owner or more than one. Net listings are strongly discouraged because they are likely to be unfair to the: A.broker B.buyer C.seller D.All of the above - Answers - C.seller
In a net listing, the seller agrees to accept a certain amount of money from the sale and the listing broker receives any surplus beyond that. This arrangement is likely to be unfair to an uninformed seller. The broker could end up collecting a far larger commission than a broker who charges an ordinary percentage-based commission would have (while performing no extra work to justify the higher amount). The market price of a property would be best defined as: A.the amount paid to obtain the property B.the initial basis, plus capital improvements and minus depreciation C.the price that the property would likely bring in a sale under normal circumstances D.the value of the property to a particular owner - Answers - A.the amount paid to obtain the property Market price is simply the price that someone paid in an actual transaction—it's not an estimate of value. For income tax purposes, a homeowner can deduct: A.property taxes B.principal payments on a mortgage C.capital expenditures D.the adjusted basis - Answers - A.property taxes A real property owner can deduct the property taxes she pays, up to a certain limit. Cluster zoning, which allows smaller lot sizes and reduced frontages, is suitable if a development: A.includes both commercial and residential uses B.still has a density ratio consistent with the general plan C.abuts a wetland or other sensitive site D.abuts state- or city-owned land - Answers - B.still has a density ratio consistent with the general plan Cluster zoning is an approach to zoning that allows developments in suburban or rural areas to have smaller lot sizes and higher density, but also more shared green space. However, a development cannot exceed the limits on density established in the general plan (the community's comprehensive plan). By what right would a railroad company acquire private land necessary for a new railway line? A.Partition action B.Eminent domain C.Suit in federal court
related to matters of public record. The buyer should request extended coverage or (in a residential transaction) homeowner's title coverage, which provide greater protection than standard coverage. (Note that a survey doesn't address encumbrances; it only addresses encroachments.) An owner-occupied property qualifies for its state's homestead exemption from property taxes. Shortly after closing, the new assessed value of the property is issued, and the property tax amount increases significantly. The selling agent is obligated to: A.contact the closing agent and ask for details on the assessment B.contest the increased assessed value with local authorities C.do nothing D.tell the buyer that the tax amount has increased - Answers - C.do nothing New information that is material and comes to light after the disclosure statement has been given to the buyer should be disclosed in an amended statement. Higher property taxes are material if the increase is great enough that the buyer might reconsider the transaction. However, material facts that are discovered after closing do not need to be disclosed, and the buyer no longer has a right of rescission. (Note: Some states provide a partial property tax exemption for property that qualifies as the owner's homestead.) Most conventional loans contain an alienation clause which prohibits: A.the sale of the property B.prepayment of the loan C.the loan from being assumed without the lender's consent D.increases or decreases in the loan's interest rate - Answers - C.the loan from being assumed without the lender's consent. The alienation clause, also called the due-on-sale clause, prohibits the assumption of the loan. It means that if the property is sold, the loan must be paid off (unless the lender agrees to assumption of the loan by a particular buyer). Which is true regarding a standard 203(b) FHA loan? A.An FHA appraisal is required B.No downpayment is required C.Secondary financing from an institutional lender may be used for the downpayment D.The maximum loan term is 20 years - Answers - A.An FHA appraisal is required FHA loans require an appraisal by an appraiser who has met the educational and certification requirements for inclusion on the FHA's roster of approved appraisers. Secondary financing provided by a close family member is allowed, but secondary financing from an institutional lender is not allowed.
The property description in a deed reads: "Starting at the old stone well, then going south 120 feet, west 400 feet, north 80 feet, and east 210 feet." This description is: A.invalid, because it doesn't return to the point of beginning B.invalid, because it uses a point of beginning that is man-made C.valid, because it returns to the point of beginning D.valid, because all descriptions must start with a man-made point of beginning - Answers - A.invalid, because it doesn't return to the point of beginning This property description is invalid, because it does not return to the point of beginning. The courses and distances stated in a metes and bounds description must describe the entire perimeter of the parcel, starting and ending at the same point. A man-made object (a monument) may be used as the point of beginning, although that isn't a requirement. In a government survey description, one side of a section is how many feet long? A. B.2, C.5, D.43,560 - Answers - C.5, A section is one square mile, with each side measuring one mile long. One mile equals 5,280 feet. A square parcel measures 1/8 of a mile by 1/8 of a mile. How many acres is this property? A. B. C. D.80 - Answers - A. One-eighth of a mile is equivalent to 660 feet (5,280 feet ÷ 8 = 660 feet). Multiply to find its square footage (660 feet × 660 feet = 435,600 square feet), and then divide to find the number of acres (435,600 square feet ÷ 43,560 square feet per acre = 10 acres). An increasingly common land use pattern allows for subdivisions with smaller lot sizes and little or no setback and sideyard requirements while keeping the same density ratios. These are known as: A.horizontal property divisions B.downzoning C.planned unit developments
B.five years of experience as a commercial insurance agent C.two years of experience as a resident apartment manager D.five years of experience as a mortgage loan broker - Answers - D.five years of experience as a mortgage loan broker Examples of real estate-related experience that will qualify include five years of experience in escrow, mortgage finance, appraising, property management, land development, investment, etc. (Only one year of experience is required for a real estate attorney, though.) Unlicensed staff members in a real estate office can do which of the following without obtaining a real estate license? A.Discuss listings over the phone B.Show properties to interested parties C.Host open houses provided they don't discuss terms of sale D.Anything that is not covered by Washington real estate license law - Answers - D.Anything that is not covered by Washington real estate license law Unlicensed assistants may do anything that isn't covered by Washington real estate license law, such as bookkeeping or placing for sale signs. Unlicensed assistants can't host open houses, though. They can act as a greeter, but a licensee would need to be present to discuss financing and condition issues, for example. A home inspection revealed that black mold is present in a home. What should the buyer's agent tell the buyer? A.That black mold is toxic, and that the buyer should not buy the house B.That mold is commonplace, and can be cleaned up with bleach C.To require the seller to remedy the problem D.To seek expert advice - Answers - D.To seek expert advice A buyer's agent typically does not have expertise in environmental hazards. The proper step, for matters in a transaction outside the agent's expertise, is to advise the principal to seek expert advice. In this case, that would be a mold remediation specialist.
- A buyers' purchase and sale agreement contained a financing contingency. The buyers applied for a loan with a local lender, who verbally informed them that their loan application was denied. The buyers' agent should: A.ask the sellers to provide a purchase money loan instead B.have the sellers extend the contingency deadline C.tell the buyers about their right to receive the denial in writing D.terminate the agency relationship - Answers - C.tell the buyers about their right to receive the denial in writing.
Under the Fair Credit Reporting Act, when a lender takes an adverse action on the basis of a credit report, the applicant or borrower must receive written notice of that action. The consumer should also be notified of which consumer reporting agency provided that information, so that the consumer can verify and, if necessary, contest that information. The seller listed the property for $95,000. Assuming that their listing agreement is typical, the broker would NOT be entitled to a commission if the seller: A.rejected a $90,000 offer from a financially qualified buyer B.accepted a $90,000 offer from a financially qualified buyer C.accepted a $95,000 offer, but his title turned out to be unmarketable D.rejected a $95,000 offer from a financially qualified buyer - Answers - A.rejected a $90,000 offer from a financially qualified buyer A broker isn't entitled to a commission if the seller rejects an offer that doesn't meet the terms in the listing agreement, such as a below-listing-price offer as in answer A. Since the question is asking about when a commission is not due, answer A is the right choice.If an offer meets the seller's terms as stated in the listing agreement (in this case, a price of $95,000) and the buyer is financially able to buy, the broker is entitled to a commission whether the seller accepts the offer or not. Unless the purchase agreement or other contract states differently, an earnest money check given to a real estate licensee shall be made out to the: A.licensee's firm, as licensed B.closing or escrow agent C.seller D.appropriate multiple listing association - Answers - A.licensee's firm, as licensed. The question and answer correctly state the law; however, it is common practice for the buyer to name an escrow agent in the offer and make out the check to that company. Ned and Carla buy a house that is listed at $105,000; their offer for $5,000 less than that is accepted. They obtain a loan with an 80% loan-to-value ratio. The loan is for 30 years with a 5.5% interest rate. Taxes for the year are $4,000; insurance for the year is $800. Calculate their monthly PITI payment. Be sure to use the amortization table. A.$ B.$ C.$ D.$867 - Answers - C.$ The monthly PITI payment incorporates not just the principal and interest on the loan, but also a monthly share of taxes and insurance. The first step is to find the principal
C.The seller can agree to receive payments from the guardian and if the payments become unreliable, the seller can then cancel the contract D.The contract is automatically voided because of the buyer's incapacity, regardless of what the guardian wants - Answers - B.The buyer can finish out the contract as the buyer's guardian has proposed If a person is declared incompetent after signing a contract, the contract is voidable if the guardian establishes that the person was incompetent when the contract was signed, even though not yet officially declared incompetent. No facts state that this has happened, however. Therefore B is a somewhat better answer. The purchase and sale agreement has been signed and the seller has completed the seller disclosure form. A windstorm damages the property. The seller's agent is obligated to: A.contact the buyer's agent and inform him B.amend the seller disclosure form C.terminate the purchase and sale agreement D.subtract the cost of repairing the damage from the purchase price - Answers - A.contact the buyer's agent and inform him If the condition of the property changes or other new information comes to light that makes the original disclosure statement inaccurate, the seller must give an amended disclosure statement to the buyer or take corrective action so that the original statement is accurate again. The seller's agent isn't supposed to amend the disclosure statement himself, but the duty to disclose material facts would compel the agent to notify the other party. Jamie's house is mostly rectangular, measuring 30 feet by 40 feet. There is also an enclosed triangular foyer (a fully walled-in entry area) in front, measuring four feet across, four feet along the perpendicular side, and 5.7 feet along the diagonal side. In the back, there is a screened porch, which is 40 feet long and 5 feet deep. To the side, there is an attached garage, which measures 10 feet by 20 feet. What is the square footage of the living area? A.1, B.1, C.1, D.1,608 - Answers - B.1,2 08 Keep in mind that a house's square footage is based on its outside dimensions, but excludes garages and porches. So, you would only need to calculate the area of the main part of the house (30 feet × 40 feet = 1,200 square feet) and the odd triangular foyer (4 feet × 4 feet × 1/2 = 8 square feet.) (Remember, the formula for the area of a triangle is 1/2 or .5 × H × B—you don't use the diagonal or hypotenuse.) Add the two together to find the square footage is 1,208 square feet.
Jones and Smith live across the street from each other in a subdivision that has deed restrictions prohibiting the keeping of large animals as pets. Jones realizes that Smith is keeping a pet Shetland pony in the backyard. Jones can: A.enforce the deed restriction against Smith via lawsuit B.do nothing, because Smith's ownership rights take precedence over deed restrictions C.do nothing, because only a next-door neighbor can enforce such a deed restriction against Smith D.notify the local zoning authority, who will investigate - Answers - A.enforce the deed restriction against Smith via lawsuit Jones or any other homeowner in the subdivision can file a suit for an injunction against Smith; it isn't necessary to be a next-door neighbor. Which of the following is true concerning federal fair housing laws? A.Enforcement may be brought about by filing a complaint with the Dept. of Housing and Urban Development B.Parts of these laws were overturned by the Supreme Court in the case of Jones v. Alfred H. Mayer Co. C.They only apply to racial discrimination D.They preempt state-level antidiscrimination laws - Answers - A.Enforcement may be brought about by filing a complaint with the Dept. of Housing and Urban Development The Fair Housing Act is enforced through the Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity. Jones v. Mayer upheld the application of the Civil Rights Act of 1866 in sale or rental of real property. State laws are not preempted by federal antidiscrimination laws; in some cases, they may be more strict than federal law. An apartment building has eight units; each unit rents for $800 per month. The property can also be expected to earn $4,000 per year from laundry and vending machines. An appraiser estimates that the property typically operates with a 5% vacancy factor. What is the property's estimated annual effective gross income? A.$10, B.$13, C.$76, D.$76,960 - Answers - D.$76, Multiply the eight units in the building by the monthly rent to find the monthly income ( × $800 = $6,400). Multiply that by 12 months per year, to find the annual income (12 × $6,400 = $76,800). Calculate what is 5% of that amount ($76,800 × .05 = $3,840), and subtract that amount from the annual income ($76,800 − $3,840 = $72,960). Add the
Sam takes possession of an unused farm and begins growing crops. He sends the farm's owner a letter describing his actions. Can Sam ever become owner of the farm? A.Yes, because he is putting the land to productive use B.Yes, as long as he maintains possession C.No, because adverse possession requires that the true owner be unaware of the possession D.No, because his possession is not hostile to the owner's interest - Answers - B.Yes, as long as he maintains possession As long as Sam maintains exclusive and uninterrupted possession for the required period of time, he will become the owner of the property (although he may need to file a quiet title action to perfect title). The owner does not need to know about the possession, but the possession must be obvious enough to put an average owner on notice that her interest in the property is threatened. Sam's letter satisfies that requirement. An owner sells a property, and the buyer is going to make a 20% downpayment. The lender requires the buyer to pay two discount points, which turn out to total $1,000. What was the purchase price? A.$50, B.$62, C.$75, D.$200,000 - Answers - B.$62, The purchase price was $62,500. This question is simply two separate percentage problems. First, find the loan amount. Two discount points is 2% of the loan amount, so divide the value of the discount points by 2% to determine that this was a $50,000 loan ($1,000 ÷ .02 = $50,000). The 20% downpayment means this is an 80% loan. Now you can use the loan amount and the loan-to-value ratio to find the purchase price. To calculate the purchase price, divide the loan amount by 80% ($50,000 ÷ .80 = $62,500). The primary purpose of the Truth in Lending Act (Regulation Z) is to require the lender to: A.provide the borrower with a statement showing its aggregate interest charge for similar properties in today's marketplace B.include in any advertisement about available financing the annual percentage rate, plus the applicable finance charges C.disclose the complete cost of credit to consumer loan applicants D.reveal the true cost of all real estate loans, except purchase money loans - Answers
- C.disclose the complete cost of credit to consumer loan applicants
The Truth in Lending Act requires lenders to disclose financing costs to applicants for consumer loans, including consumer loans secured by real estate. (A consumer loan advertisement must state the APR and other information about finance charges only if it includes one or more triggering terms, such as a specific payment amount.) Mary, in an effort to shore up a rocky marriage, wrote a quitclaim deed that transferred her interest in her property to a joint tenancy with her husband, instead of a tenancy in common. She told her husband about this, but the document was never recorded. They later divorced, by which point the deed had been lost. Does Mary's now ex-husband have a valid claim on the property? A.No, although if the deed had been recorded it would have provided constructive notice B.No, because he didn't sign the deed C.Yes, because a court will consider oral evidence about a contract D.Yes, because quitclaim deeds do not require the signature of the grantee to transfer title - Answers - A.No, although if the deed had been recorded it would have provided constructive notice Mary's ex-husband couldn't enforce the transfer in court because the only evidence of the deed is oral evidence, which is generally unacceptable as proof of a transfer of real estate. If the deed had been recorded, the recorded document would provide the public at large with constructive notice of the transfer, and it would also satisfy a court. The entity that determines the maximum number of people who may legally live in a rental unit is the: A.Department of Housing and Urban Development B.state government C.local health department and zoning authority D.property owner - Answers - C.local health department and zoning authority Among the many things that local agencies such as a city's health department or zoning authority might determine is the maximum occupancy of each dwelling in a particular area. After the sale of a property in a 1031 exchange, the seller must close on the new property within: A.10 days B.30 days C.45 days D.180 days - Answers - D.180 days
A.it is automatically canceled, and B must requalify for the license B.B can renew the license within a year by paying a renewal fee and a late fee C.B is subject to disciplinary action D.B's license becomes inactive for six months - Answers - B.B can renew the license within a year by paying a renewal fee and a late fee A licensee can renew his license within one year after the expiration date by paying the renewal fee and a late penalty. After a disciplinary hearing, if the Director imposes sanctions, the licensee may appeal the Director's order within: A.six months, by filing an appeal with the court of appeals B.30 days, by filing an appeal with the superior court C.two months, by filing an appeal with the superior court D.30 days, by filing an appeal with an appellate administrative judge - Answers - B. days, by filing an appeal with the superior court A licensee may appeal the Director's order within 30 days after the date the order was issued, by filing an appeal with the superior court. A property manager would like to have his son perform maintenance duties on the managed property. The manager needs to provide all of the following to the owner, EXCEPT: A.disclosure of the family relationship B.opportunity for the owner to decline C.proof that the son is a licensed and bonded contractor D.rates that will be charged - Answers - C.proof that the son is a licensed and bonded contractor A property manager may arrange for contractor services (such as maintenance services) on the property with the owner's consent. The manager must disclose the manager's relationship to the service provider and the rates that will be charged. The service provider doesn't necessarily have to be a licensed contractor, though. A commercial building is valued at $1,600,000 if its annual net income is capitalized at a rate of 20%. If the operating expenses total 40% of the gross income, what is the approximate annual gross income? A.$128, B.$192, C.$533,333. D.$800,000 - Answers - C.$533,333.
First, calculate the annual net income, using the capitalization formula ($1,600,000 x. = $320,000). Now you need to use the percentage formula to calculate the gross income, but don't use the percentage of the gross income that is taken up by the operating expenses (which is 40% or .4); instead, you will want to use the percentage of the gross income that is not taken up by the operating expenses (percentages are most usefully expressed as decimals, so 1 - .4, or .6).Calculate the gross income ($320,000 ÷ .6 = $533,333.33). You can double-check your math by calculating what is 40% of the gross income ($533,333.33 x .4 = $213,333.33), and subtracting that amount (which represents the operating expenses) from the gross income to verify the net income ($533,333.33 - $213,333.33 = $320,000). Of the following, which is the best definition of a fee simple estate? A.Title and ownership without limitations B.An estate for years C.A leasehold interest in property that is supported by consideration D.The greatest interest one can own in land - Answers - D.The greatest interest one can own in land The fee simple estate is the highest and most complete form of land ownership. Answer A goes too far, since a fee simple estate is owned subject to limitations, such as liens or other encumbrances, and also government regulations (and sometimes private restrictions as well). A buyer received a warranty deed when she took title to a property. The seller's cousin showed up several months later and claimed an ownership interest in the property. The buyer would be protected against this claim by the warranty deed's: A.covenant against encumbrances B.covenant of hostile enjoyment C.covenant of seisin D.covenant of freehold warranty - Answers - C.covenant of seisin The covenant of seisin protects the buyer in this case. It promises that the grantor actually owns the property interest being transferred to the grantee. (The covenant of warranty might also apply here, but that's not one of the answer options; there is no such thing as a covenant of freehold warranty.) The full cost of which of the following is the most likely deductible as an expense in the year incurred from the income taxes of the owner of an investment property? A.Adding a swimming pool B.Installing a new HVAC system C.Prepaying additional principal on the mortgage D.Repainting the building - Answers - D.Repainting the building
