The CE Shop Principles of Real Estate
Exam Questions with 100% Correct
Answers
Ricardo has left a gift of real property in his will to his son, Juan. Ricardo is the
________________________ and Juan is the ______________. - Answer-Devisor ,
devisee
Which factor influences property value and addresses questions such as, "What's the
market like?" and "Are there more buyers than sellers, or vice versa?" - Answer-
Demand
What percentage of loss would the seller have if he paid $18,000 for a vacant lot, built a
home on the lot that cost $145,000, and then sold the property for $153,000? Round
your answer to the nearest percent. - Answer-6%
Add the cost of the lot and the cost of the house together to get the total cost
($163,000). Next, subtract the sales price from the total cost to get the amount of loss
($10,000) he took. Finally, divide the total cost by the loss amount ($10,000 ÷
$163,000).
Which of these properties are exempt from the FIRREA federal appraisal guidelines? -
Answer-Properties valued at $400,000 or less
What's a quiet title action? - Answer-An action to locate and notify all who may have
some claim on the title, and determine the validity of all claims
The closing funds may be in the form of ______ at closing. - Answer-A cashier's check
Who is the lessee in a lease agreement? - Answer-Tenant
Which term is defined as land that is built up by water depositing sand, silt, or gravel? -
Answer-Accretion
When presenting a CMA, if you take the time to explain the CMA process, help the
prospective sellers understand what's behind the numbers, and ultimately leave the
decision of the list price up to them, what characteristic have you demonstrated? -
Answer-Effective communication
Effective communication - Answer-Low-rise
,What percentage of profit would the seller make if he paid $18,000 for a vacant lot, built
a home on the lot that cost $145,000, and then sold the property for $200,599? Round
your answer to the nearest percent. - Answer-23%
Add the costs of the lot and the house together to get the total cost ($163,000). Next,
subtract the sales price from the total cost to get the amount of profit ($37,599). Finally,
divide the total cost by the profit amount ($37,599 ÷ $163,000).
What takes precedence over a deceased person's wishes to grant his property at death,
even if those wishes are specified in the decedent's will? - Answer-Operation of law
Which veteran loan program offers qualified veterans help with repairs on their current
home? - Answer-Veterans Home Improvement Program
Loans for ______ purposes don't require TILA disclosure. - Answer-Business
The tenant is the ______ in a lease agreement. - Answer-Lessee
Anita's property appraised at $370,000. It is assessed at 40% of appraised value, and
the tax rate is 80 mills. What are Anita's semi-annual property taxes? - Answer-Divide
mills by 1,000 (80 ÷ 1,000 = .08). Assessed value is 40% of appraised value, so multiply
.4 by $370,000 = $148,000. Multiply this by the mill rate (.08) to get annual taxes of
$11,840. Divide this by two to get semi-annual property taxes of $5,920.
What might Trina's mother have bequeathed to Trina? - Answer-Her jewelry and fine
china
At closing, who pays for and receives clear title for the property being purchased? -
Answer-Buyer
Which type of RD loan program provides eligible applicants with the option to build,
rehab, improve, or even relocate a dwelling in an eligible rural area? - Answer-Single
Family Housing Guaranteed Loan Program
You are in the middle of a house sale with someone claiming power of attorney for the
property owner. What must be done before the deed can be executed? - Answer-Power
of attorney must be filed on record in the county where the property is located.
Noah owns an LLC that buys and sells stocks on the NASDAQ 100. He needs some
additional financing. To which type of lending institution might he prefer to go? -
Answer-An investment group
The doctrine of "use it or lose it" is known as the doctrine of ______. - Answer-Laches
Which document is used to establish proof of ownership and to transfer the title? -
Answer-Deed
,A property is generating $100,000 in income and has expenses of $25,000. The
investor pays $3,000 toward mortgage principal each year and $32,000 toward interest,
plus another $4,000 in income taxes. What is the before-tax cash flow? - Answer-
$40,000
To arrive at before-tax cash flow, you subtract from income ($100,000) expenses
($25,000) and debt service ($3,000 + $32,000 = $35,000). So $25,000 + $35,000 =
$60,000. Then $100,000 - $60,000 = $40,000. You don't subtract income taxes of
$4,000.
What is dynamic risk? - Answer-An uninsurable business risk resulting from economic,
tax, and market changes
With the cost approach to value, what is the replacement cost? - Answer-Cost to build a
functionally equivalent improvement
What is the 200% rule as it relates to tax-deferred exchanges? - Answer-The combined
fair market value of the property (or properties) being exchanged into cannot be more
than 200% of the relinquished property.
Jared has a 70/30 split with his brokerage firm, and his firm has a 50/50 split with
cooperating brokerages. Last month, he was paid $12,239.50 in commissions from his
home sales, which totaled $538,000. What is the brokerage's commission rate? -
Answer-6.5%
Jared was paid $12,239.50, which is 70% of the amount paid to his broker as
commission. That makes his firm's commission $12,239.50 ÷ .70 = $17,485. Multiply
that by two for the total commission the firm grossed, since it's shared 50/50 with a
cooperating brokerage (the brokerage that brings the buyer to the sale), giving you
$34,970. Then divide by the total sales amount for the brokerage's commission rate:
$34,970 ÷ $538,000 = 0.065, or 6.5%.
Which of the following is a benefit of unimproved land? - Answer-If land is scarce, it can
be valuable.
You're on a planning board that's discussing how to keep the city more livable by
reducing building density. The subject of bulk zoning comes up. What is your response?
- Answer-"That's a great way to meet our objectives."
What is the name of the FTC regulation that requires a landlord or property manager to
obtain a tenant's written consent before sharing any information about the tenant with
an unaffiliated third party? - Answer-Privacy rule
What is the best description of a deed? - Answer-A document to transfer
ownership/interest in real estate
, Above all, why should a property manager have some knowledge of systems such as
heating, ventilation, air conditioning, structural engineering, waterproofing, plumbing,
electrical, gas, oil, water, security, maintenance, and elevators? - Answer-To minimize
the potential of receiving bad advice on repairs, replacements, and parts
Which of the following is an instrument of conveyance? - Answer-Deed
The economic principle known as ______ means that the value of property today is
impacted by the current value of the total expected future benefits. - Answer-
Anticipation
Which of these types of tenants most often uses a percentage lease? - Answer-Retail
What is capital risk? - Answer-The risk that an investor cannot secure financing at an
affordable rate
What does a balloon payment represent at the end of a loan term? - Answer-It means
that some principal remains at the end of the loan term.
If the insurance rate per $500 of coverage is $6 per year and your home would be
replaced for $250,000 if destroyed, then what would the annual premium be? - Answer-
$3,000
Which of the following properties is exempt from the FIRREA federal appraisal
guidelines? - Answer-A refinance of a property valued at $375,000
When co-owners of a property decide to partition the property, what does it mean? -
Answer-They're dividing the property proportionally so that each co-owner becomes
sole owner of a portion.
Finn wants to know how much he'll net on the sale of his property. His property sold for
$385,000. He paid a real estate commission of 6%, his other closing costs totaled
$3,837, and he must pay off a loan balance of $127,715. What's his net? - Answer-
$230,348
Property manager Dawson was reviewing a property management agreement and was
happy to learn that he would be indemnified for any losses due to tenant negligence.
Where is this likely found in the property management agreement? - Answer-Insurance
Provision
_______ is the principle that the more similar properties there are on the market, the
lower the price will be driven. - Answer-Competition
Using the income approach, determine the value of a property that has a net operating
income of $15,000 and a cap rate of 15%. - Answer-100,000
