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Free Real Estate Exam Study Guide - Courtesy of America's Real Estate Academy, Inc. © 2007



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question. Answers and explanations will be provided after you complete the exam and "check your work" - you may take the test as often as you like.
 

1. 
The essential elements of a valid contract include
a.
competent parties, offer and acceptance, in writing, and legal objective.
b.
offer and acceptance, consideration, legal objective, and in writing.
c.
competent parties, offer and acceptance, consideration, and legal objective.
d.
legal objective, in writing, signed by all parties, consideration.
 

2. 
An offer can be withdrawn by the offeror:
a.
at any time, for any reason.
b.
at any time prior to the deposit of the earnest money.
c.
at any time prior to receiving notification the offer has been accepted.
d.
at any time prior to receiving notification the offer has been accepted unless the offer states that it will be open for a certain time period in which case the offer cannot be withdrawn until after the period of time stated in the offer. .
 

3. 
What is the status of an offer when a counteroffer is made?
a.
It terminates.     
b.
It is still in effect if the counteroffer is rejected.     
c.
It terminates only if the counteroffer is accepted.     
d.
A counteroffer has no effect on the original offer.
 

4. 
Which of the following is true with regard to the interests of the buyer following the creation of a contract?
a.
The buyer has legal title to the property.     
b.
The buyer has naked title to the property.
c.
The buyer has equitable title to the property.
d.
The buyer receives no interest in the property at time of contract, only at closing.
 

5. 
The property description method utilizing distance, compass direction and markers is called:
a.
metes and bounds.
b.
rectangular survey.
c.
feets and sounds.
d.
lot and block.
 

6. 
How many investors are required for a Real Estate Investment Trust (REIT)?
a.
25 or more
b.
50 or more
c.
75 or more
d.
100 or more
 

7. 
The Civil Rights Act of 1866 banned ________ discrimination?
a.
racial
b.
religious
c.
national origin
d.
all forms of
 

8. 
Fair Housing Laws do NOT apply to which of the following?
a.
Single family house owned by a real estate investment trust.
b.
Single family house listed for sale by a broker.
c.
Quadraplex (4-unit) where owner occupies one unit.
d.
400 unit apartment building.
 

9. 
Familial status provisions would NOT apply to which of the following?
a.
Housing with 80% occupancy by persons 62 years of age or older.
b.
Housing with 80% of the units occupied by at least one person 55 years of age or older regardless of facilities.
c.
Housing totally occupied by persons 62 years of age or older.
d.
Housing with 80% of the units occupied by at least one person 55 years of age or older in which the advertising is NOT specifically aimed at older persons.
 

10. 
What term is used to describe when one or both parties do not perform under the contract terms?
a.
Negative performance     
b.
Subjection
c.
Breach     
d.
Subrogation
 

11. 
The illegal practice of mixing escrow money (or trust funds) with personal or business funds is:
a.
intermingling.
b.
interspersion.
c.
co-depositing.
d.
commingling.
 

12. 
When money spent on an improvement adds at least that much or more to the total value, that is an example of the principle of:
a.
substitution.     
b.
increasing returns.
c.
anticipation.
d.
competition
 

13. 
Two properties are combined with the result being that the value of the combined property is greater than the sum of the value of the individual parcels. The incremental increase in value is an example of
a.
plottage.
b.
union value.
c.
change.     
d.
assemblage.
 

14. 
Which of the following is TRUE about earnest money?
a.
Earnest money is not required to have an enforceable real estate contract.
b.
State law requires earnest money to create a legal and binding sales contract.     
c.
The consideration in a sales contract is the earnest money.     
d.
The amount of the earnest money is determined by the broker.
 

15. 
The agency relationship created between a broker and a salesperson is known as a
a.
limited agency.     
b.
special limited agency
c.
general agency
d.
universal agency.
 

16. 
Acts which do not require discretion or judgment that are performed for customers are classified as
a.
obligations.
b.
ministerial.
c.
agency.
d.
representation.
 

17. 
Which of the following describes a subagency relationship?
a.
A selling broker enters into an agency relationship with the buyer client.
b.
A listing agent offers a selling broker who is showing the listing the opportunity to represent the seller and the selling broker accepts.
c.
A seller accepts an offer presented by her listing agent that was made by a buyer who is represented by a different agent.
d.
None of the above are subagency relationships.
 

18. 
If Jorge gives Orlando the power to sign documents at closing, Orlando would be a (an)
a.
power of attorney.
b.
authorized attorney.
c.
attorney in fact.
d.
attorney at law.
 

19. 
An exclusive right-to-sell listing agreement is BEST described as:
a.
an expressed bilateral contract.     
b.
an implied bilateral contract.
c.
an expressed unilateral contract.     
d.
an implied bilateral contract.
 

20. 
The offer states that the earnest money check is not to be deposited until the offer is accepted. The salesperson receiving such an offer should
a.
deposit the check as soon as practicably possible.
b.
retain the check in safekeeping until the offer is accepted or rejected.
c.
deliver the check immediately to the broker.     
d.
All of the above are reasonable under the circumstances.
 

21. 
The mortgagee permits a new owner to replace the previous owner on a note secured by a mortgage by using which of the following?
a.
release and satisfaction
b.
subordination
c.
novation
d.
acceleration
 

22. 
Discount points
a.
may increase the cost to the borrower.
b.
increase the yield to the lender.
c.
Both a. and b. are correct.
d.
Neither a. nor b. is correct.
 

23. 
Which of the following is an investor in the secondary mortgage market?
a.
VA
b.
FHA
c.
HUD
d.
FNMA
 

24. 
Which of the following statements regarding VA loans is FALSE?
a.
A veteran may be able to obtain a loan for 100% of the purchase price or value which ever is less.
b.
A portion of the VA loan is guaranteed by the Veteran’s Administration.
c.
A veteran is responsible for losses incurred by the Veterans Administration resulting from the veteran’s default of a VA guaranteed mortgage loan.     
d.
A veteran may obtain a VA loan to purchase a house the veteran intends to rent to others.
 

25. 
Who enforces the Truth-In-Lending laws?
a.
VA
b.
FHA
c.
HUD
d.
FTC
 

26. 
Maximum interest rate are determined by the
a.
FDIC.
b.
FSLIC.
c.
Congress.
d.
state usury laws.
 

27. 
Which provision in a mortgage will allow the lender to demand the entire unpaid balance plus accrued interest when the mortgagor misses a payment?
a.
alienation clause
b.
acceleration clause
c.
estoppel clause
d.
balance clause
 

28. 
Which of the following types of depreciation is most likely to be incurable?
a.
physical depreciation
b.
functional obsolescence     
c.
external obsolescence     
d.
deferred maintenance
 

29. 
A prospective buyer will become personally liable for an existing mortgage. What type of financing is involved in the purchase.
a.
assumption
b.
purchase money mortgage
c.
land contract
d.
sale and lease back
 

30. 
A percolation test is used to
a.
measure a soils compactability.
b.
measure the rate at which soil will absorb water.
c.
to determine I.Q.
d.
to calculate soil load bearing capacity.
 

31. 
A property owner who owns a house and a separate commercial property on the same county is delinquent on the ad valorem taxes for the commercial property. The delinquency on the commercial property taxes will cause
a.
a lien against the commercial property.
b.
a lien against the commercial property and the home.
c.
a lien against the commercial property, home, and all personal property in the county.
d.
the forfeiture of all property to satisfy the taxes.
 

32. 
Which of the following BEST describes the business of a mortgage broker?
a.
Services loans.
b.
Brings borrowers and lenders together.
c.
Buys loans in the secondary market.
d.
Provides liquidity to the primary mortgage market.
 

33. 
When a property with no heirs dies and leave no will; or when a property is abandoned; the government will take ownership using its power of
a.
Taxation
b.
Eminent domain
c.
Condemnation
d.
Escheat
 

34. 
Which of the following statements about options is FALSE?
a.
Must be in writing to be enforceable.
b.
Optionor can unilaterally cancel.
c.
Optionee can unilaterally cancel.
d.
Only the optionee can compel performance.
 

35. 
An alienation clause
a.
allows the mortgagee to declare the entire balance on the loan to be immediately due and payable if the mortgagor sells or conveys title to the property.
b.
permits acceleration of the debt should the mortgagor violate any provision of the security instrument.
c.
allows the mortgagee to declare the entire balance on the loan plus accrued interest to be immediately due and payable if the mortgagor defaults on any installment payment.
d.
allows for prepayment of the mortgage without penalty.
 

36. 
A qualified veteran contracts to purchase a house for $200,000. The Veterans Administration certifies the value of the house to be $190,000. Which of the following is true?
     
a.
The veteran may not use VA-guaranteed financing to buy this house.
b.
The veteran may obtain full VA-financing up to the $190,000 but will have to make up the difference from savings or from another source.
c.
The veteran will be required to obtain a direct loan from the Veterans Administration for the difference.
d.
The veteran will be required to obtain a second mortgage in the amount of the difference.
 

37. 
To be valid, a real estate contract must 
a.
be in writing.
b.
have an earnest money deposit.
c.
recite consideration.
d.
All of the above are correct.
 

38. 
Eugene Ricci purchased real property and took title in the assumed name of Orlando Rotella. Subsequently, he sold the property to David Brown using the Orlando Rotella name. Did Brown receive legal title to the property?
a.
No, because title never vested in the fictitious name of Orlando Rotella due to fraud.
b.
Yes, because Ricci’s use of an assumed name did not invalidate either deed.
c.
No, because Ricci’s use of an assumed name invalidated both of the deeds.
d.
No, because Ricci should have signed the deed to Brown as Eugene Ricci.
 

39. 
A purchase-money mortgage
a.
is the same as seller financing.
b.
may be a junior mortgage.
c.
may be sold in the secondary mortgage market.
d.
All of the above are correct.
 

40. 
The county condemns a 20-foot strip of land across the rear of a property to use as an easement for running a storm drain. The owner’s house is unaffected and the owner will have some use of the land which was condemned subject to the county’s easement. Is the owner entitled to compensation?
a.
Yes, because any exercise of the county’s police power is compensable.
b.
Yes, because the county is limiting the owner’s use of the land through its power of eminent domain.
c.
No, because zoning permits reasonable imposition on property owners by government to protect the health, safety, welfare, and morals of the community.
d.
No, because there must be a “substantial” loss in value.
 

41. 
Truth-in-lending disclosures are required in which of the following loan situations?
a.
Single-family owner-occupied residence amortized over 180 monthly installment payments.
b.
Single-family owner-occupied residence to be paid in three installments with no finance charge.
c.
A non-owner occupied duplex used for investment amortized over 360 monthly installment payments.
d.
All of the above require Truth-in-Lending disclosure.
 

42. 
Which of the following best describes the Annual Percentage Rate (APR) as that term is used in the Truth-in-Lending Act?
           
a.
The stated interest rate in the note.
b.
The effective interest rate taking into consideration financing costs which usually results in an APR which is higher than the rate in the note.
c.
The effective interest rate taking into consideration financing costs which usually results in an APR which is lower than the rate in the note.
d.
The effective interest rate taking into consideration financing costs, closing costs, and down payment, which usually results in an APR which is higher than the rate in the note.
 

43. 
Encroachments are most likely to be discovered by which of the following?
a.
survey
b.
recorded subdivision plat
c.
title search
d.
construction permit
 

44. 
A buyer purchased a house for $180,000 and obtained an 80% loan. The loan called for the borrower to pay 6 discount points. What dollar amount will the lender charge for the discount points?
a.
$864
b.
$1,080
c.
$8,640
d.
$10,800
 

45. 
What action will the adverse possessor take to acquire title after fulfilling the statutory period of possession?
a.
File a legal action in court to “quiet title”.
b.
File a deed with the property records clerk in the county where the property is located.
c.
No action is required as the adverse possessor automatically becomes the owner of record after the statutory period of possession.
d.
File a “notice of rightful owner” with the property records clerk in the county where the property is located.
 

46. 
When should the purchase price be decided in a one-year option to purchase?
a.
When the option contract is agreed to.
b.
Anytime prior to closing.
c.
Within the first 3 days of the option or the option is voidable at the option of the optionee.
d.
Within the first 30 days of the option or the option is voidable at the option of the optionee.
 

47. 
A lease to occupy a house that begins on July 15th and ends on August 31st is
a.
a periodic estate.
b.
an estate by the entireties.
c.
an estate for years.
d.
an estate at severance.
 

48. 
Mortgage companies in the primary lending market close loans and assemble the loans into packages to be sold in bulk in the secondary market. This process of assembling and holding the loans until sold is called
a.
hedging the market.
b.
bulk financing.
c.
warehousing.
d.
playing the market.
 

49. 
A salesperson with AREA Realty takes a 90 day exclusive right-to-sell listing. Two weeks later, the salesperson moves to another state and places his Georgia license “inactive”. Which best describes the status of the listing?
a.
The listing contract expires.
b.
The listing contract expires but the seller is owed compensation for the breach.
c.
The Georgia Real Estate Commission requires that the listing be assigned to another agent.
d.
It remains a valid exclusive right-to-sell listing with AREA Realty.
 

50. 
The covenant in a deed that warrants that the grantor possesses a fee simple interest with the right and power to convey the property is known as the covenant of:
     
a.
seisin.
b.
non-encumbrances
c.
further assurance.
d.
quiet enjoyment.
 



 
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