Question 1

When an offer from a potential buyer is presented to the seller, the seller asks if the buyer is a member of a minority race. The broker presenting the offer should correctly respond as follows:

Accepted Answer

Asking about the buyer's race is a violation of fair housing laws, and the broker presenting the offer must not disclose such information. The best response is to explain that such information is not relevant and cannot be disclosed by law or business practice.

Question 2

From the agent's perspective, the strongest listing agreement is the

Accepted Answer

From the agent's perspective, the Exclusive Right to Sell Listing is the strongest listing agreement, as it guarantees the agent a commission regardless of who buys the property during the listing period. This type of listing agreement gives the agent exclusive rights to sell the property and earn a commission, so the agent has a greater incentive to invest time and resources into marketing and selling the property. Additionally, the agent is protected if the seller finds a buyer on their own or through another agent, as they are entitled to a commission regardless of how the property is sold.

Question 3

A person borrowed $18,000 for a period of 180 days using a straight note at 10% interest payable monthly. How much total interest will have been paid in 90 days?

Accepted Answer

The total interest for 180 days at 10% on $18,000 is calculated as follows: Interest = Principal × Rate × Time = $18,000 × 10% × (180/360) = $900 for 180 days. Therefore, for 90 days, it would be half of that, which is $450.

Question 4

Buyer makes a written bonafide offer to purchase, and seller signs the acceptance. A contract is first created:

Accepted Answer

A contract is created when there is a meeting of the minds, which occurs when the buyer receives proper communication of the seller's acceptance. Until then, there is only an offer and not a contract.

Question 5

Four separate co-buyers of a parcel of land signed a deposit receipt contract at different times and places. A copy must be:

Accepted Answer

Each co-buyer should receive a copy at the time they sign to ensure that they have a clear understanding of the terms of the contract and their obligations as co-buyers.

Question 6

A person purchased a small condo for $320,000, putting $100,000 down and obtaining a new loan for the balance at 8.4% payable $1,800 per month amortized for 30 years. What will be the loan balance after one payment?

Accepted Answer

To solve this problem, we need to first calculate the amount of the loan. Since the buyer put $100,000 down, the loan amount is $320,000 - $100,000 = $220,000.

Next, we need to calculate the interest portion of the first payment. The monthly interest rate is 8.4% / 12 = 0.7%. So, the interest portion of the first payment is 0.7% x $220,000 = $1,540.

Finally, we can calculate how much of the first payment goes towards paying down the loan balance. This is simply the total payment ($1,800) minus the interest portion ($1,540), which equals $260.

So, after the first payment, the loan balance will be $220,000 - $260 = $219,740.

Therefore, the best choice is B.

Question 7

Two acres are being subdivided into 5 equal lots. Each lot has a front set back of 10 feet and is 198 feet wide. What is the buildable area of each lot?

Accepted Answer

The answer of Two acres are being subdivided into 5...

Question 8

How much would a person need to deposit into a savings account to generate $1,000 per month for one year if annual simple interest rates are 5%?

Accepted Answer

To generate $1,000 per month for one year, the total amount needed would be $12,000. Using the formula:

Interest = (Principal x Rate x Time) / 100

we can rearrange to solve for the principal (P):

P = (Interest x 100) / (Rate x Time)

Plugging in the values, we get:

P = ($12,000 x 100) / (5 x 1) = $240,000

Therefore, the person would need to deposit $240,000 into their savings account to generate $1,000 per month for one year.

Question 9

Investor purchased 3 lots for a total of $360,000, then resold them for $600,000. Based on cost, what was the percentage of gross profit?

Accepted Answer

The cost of each lot would be $360,000/3 = $120,000. 
The gross profit would be $600,000 - $360,000 = $240,000. 
The gross profit percentage based on cost would be (gross profit/cost) x 100% = ($240,000/$360,000) x 100% = 66.67%.

Question 10

A duplex rents for $700 per unit per month. Expenses and vacancies run 30% of gross rents. With a capitalization rate of 6%, what is the value?

Accepted Answer

The correct answer is A because the value of the duplex is $196,000. This is calculated by taking the gross rents ($700 x 2 = $1,400) and subtracting the expenses and vacancies (30% of $1,400 = $420), which gives us a net operating income of $980. We then divide the net operating income by the capitalization rate (6%) to get the value of the duplex ($980 / 0.06 = $196,000).

Question 11

When the owner of a piece of leased property gives the lessee an option to buy, the option:

Accepted Answer

The option to buy is not a purchase contract until exercised. It simply gives the lessee the right, but not the obligation, to purchase the property at a certain price within a certain timeframe. No actual purchase occurs until the lessee exercises the option.

Question 12

An owner gives Ace Realty an exclusive right to sell listing for 90 days. Thirty days later the owner finds a buyer and sells the property without the services of Ace Realty. The:

Accepted Answer

An exclusive right to sell listing means that the brokerage (Ace Realty in this case) is owed a commission regardless of who finds the buyer, including if the owner finds the buyer themselves.

Question 13

A person purchased an undeveloped piece of land on a country road. The land contains a quarter of a quarter of a quarter of a section and the front bordering the road is 435 ft. Approximately how deep is the parcel?

Accepted Answer

A section is typically 1 mile by 1 mile, or 5280 feet by 5280 feet, which equals 640 acres. A quarter of a section is 160 acres, a quarter of that is 40 acres, and a quarter of that is 10 acres. Given the frontage is 435 feet, to find the depth (assuming a rectangular shape for simplicity), we use the area formula for a rectangle (Area = length × width). Here, the area is 10 acres (43560 square feet per acre), so 43560 * 10 = 435600 square feet. Dividing by the frontage (435 feet) gives the depth: 435600 / 435 = 1000 feet.

Question 14

A 5-unit apartment property rents for $820 per unit per month. Expenses and vacancies average $800 per month. The asking price is $660,000. What is the capitalization rate?

Accepted Answer

The capitalization rate is calculated by dividing the net operating income (NOI) by the property's value. The NOI is the total rental income minus expenses and vacancies. Here, the monthly rental income is 5 units * $820 = $4,100. Subtracting the $800 expenses gives an NOI of $3,300 per month, or $39,600 annually. The capitalization rate is $39,600 / $660,000 = 0.06, or 6%.

Question 15

An owner neglected to pay property taxes of $900 for the year 20XX. The owner sold the property and escrow closed December 15, 20XX. Using a 30-day month, what would be the normal proration in escrow?

Accepted Answer

The seller is responsible for the property taxes up to the closing date. Since the escrow closed on December 15, the seller owes taxes for 11.5 months (January 1 to December 15). The proration would be $900 * (11.5/12) = $862.50. Since the seller has not paid any taxes, they are debited $862.50, but the question asks for the normal proration, which is the amount owed for the remaining half-month, $900 * (15/30) = $450. The seller is debited for the taxes they owe, which is $412.50 for the period from January 1 to December 15.

Question 16

Sales price $298,500, buyer to put $86,500 down and to assume seller's loan of $230,000. The documentary transfer tax is:

Accepted Answer

The documentary transfer tax is calculated on the amount of the sale price minus any assumed loan. Here, the taxable amount is $298,500 - $230,000 = $68,500. The tax rate is typically $0.55 per $500 of taxable amount. Therefore, ($68,500 / $500) * $0.55 = $75.35. However, the closest option is $95.15, which might include additional local taxes or fees.

Question 17

Sellers should disclose defects in the property

Accepted Answer

According to California law, sellers are required to disclose known defects in the property on the Transfer Disclosure Statement. This document must be provided to the buyer before the close of escrow. Verbal disclosures are not sufficient, and it is not enough to disclose defects at any time prior to close of escrow. Sellers should not rely solely on their agent to make these disclosures.

Question 18

A real estate agent may legally refuse to show property available for sale to a person of a minority race if the:

Accepted Answer

The only legal reason among the options provided for a real estate agent to refuse showing a property is if the owners were out of town and had specifically instructed that the home not be shown to anyone during their absence. This reason is not discriminatory based on race or any other protected characteristic.

Question 19

The law that states real estate contracts must in writing to be enforceable is called the statute of:

Accepted Answer

The statute of frauds is a law that mandates certain types of contracts to be in writing to be enforceable. In real estate, this law requires that purchase and sale agreements, leases, and mortgages be written and signed by all parties involved.

Question 20

If the seller refuses to sell after signing a valid purchase contract and the buyer wants the property instead of money damages, the buyer will sue for:

Accepted Answer

If the buyer wants the property instead of money damages, the appropriate legal remedy is specific performance. This means that the court can order the seller to complete the sale and transfer the property to the buyer as agreed in the purchase contract. Rescission is the legal remedy of canceling the contract and restoring the parties to their original position before the contract was made. Reversion of title is a concept related to estates in land and the transfer of ownership after a certain condition or time has passed. Damages refer to monetary compensation for a loss or injury caused by a breach of contract, but they may not be the preferred remedy by a buyer who wants the property.

Quiz 6: Practical Real Estate Mathematics