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Colorado state Real Estate Exam Questions With All Correct Answers!!
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Colorado state Real Estate Exam Questions With All Correct Answers!!
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Name: Score:84 Multiple choice questions
,Term 1 of 84
An apartment building produces $4,000 per quarter in gross rents. The maintenance expenses run
$350 per month. Property taxes are $1,750 per year. The mortgage payments are $650 per month.
If the building is worth $83,750 what is the cap rate (AKA capitalization rate)?
The formula for calculating cap rates are: Total Gross Income - Annual Operating Expenses
= Net Operating Income / Value of Building = Cap Rate. Note that mortgage payments are
not a part of expenses. Cap Rates are often used to value a building such as in the income
approach to appraisals. The value of a building is not effected by the financing used to
purchase the building. If an investor is buying a building for cash and another using a loan
the value of the building is the same. The operating costs are the same for both. A close
cousin to cap rate that does take financing into account is Return On Investment or ROI.
ROI takes all the costs of a specific investor to determine how much profit they will receive
each year. Profit is clearly impacted by the financing costs.
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Notify Real Estate Commission of true selling price of home.
The real estate commission does not track sale prices of homes.
A real estate broker can facilitate these safeguards by adherence to the following:
• Note the amount of any seller paid costs (including a seller assisted down payment or fee
paid to a charitable organization on behalf of the buyer) or other seller concession in the
proper transaction documents, including the Buy/Sell Contract, Closing Statements, and
Real Property Transfer Declaration.
• Utilize all available fields in the multiple listing service to report sold information
,including all transaction terms and seller concessions. Sold information should be entered
promptly following closing and be specific and detailed particularly when the sold price
includes a seller assisted down payment or concessions.
• Advise buyers and sellers to consult legal and tax counsel for advice on tax
consequences of seller contributions and inducements to purchase.
• Cooperate with appraisers as they perform their due diligence in asking questions about
sales.
AAA gets the Buyers commission (for representing the buyer) and Rogers Realty gets the
listing commission (for representing the seller).
The new listing terminated the holdover period. Therefore AAA cannot claim a listing side
commission, Rogers Realty is going to receive the listing commission. However, since AAA is
now representing the buyer, they will be entitled to the buy side commission. There is a
check box in the Holdover Clause which would have allowed the Holdover clause to survive
re-listing the property. Since this box was not checked, the default is that the Clause would
not survive re-listing the home.
The Holdover Period says that a listing broker may be entitled to a commission after the
expiration of a listing contract for the period of time specified in the clause if: 1) the broker
negotiated with the buyer during the listing period and 2) the broker submitted the name of
this buyer in writing to the seller. Although the protection is for a negotiated time after the
listing expires; it can terminate early if the property is re-listed by another agent and the
"Shall Not" box is checked, meaning the old listing agent "shall not" be owed a commission
if another brokerage firm has earned one. If neither the "Shall" or "Shall Not" be owned a
commission" box is checked - the default is "Shall Not". See "Holdover Period" in the "When
Earned" clause of an Exclusive Right to Sell listing agreement.
The buyer can place a 2nd mortgage on the property.
-Since the seller has title to the property the buyer is not allowed to place a 2nd mortgage
on the property.
, Definition 2 of 84
$30,000 check the Seller will receive from this closing.
This is a common spot of confusion, so do not let it break your head. The situation occurs at the
bottom of the 6 column worksheet when you are reconciling the columns. Let's assume for a
moment you are looking at a Buyer's columns. You have applied all the debits and credits and all
you have to do is reconcile the columns which have $100,000 in the Credit column (money the
buyer has proven they have) and $125,000 in the Debit column (what the Buyer owes). Looks like
this Buyer is a little short, but by how much? To determine this amount, you have to make both
columns equal. This enables the Closing Agent to determine how much the Buyer is short; which is
also how much of a check the Buyer needs to bring and be deposited into the escrow account.
So you add $25,000 to the Buyer's Credit column to make both columns equal. Therefore this
$25,000 CREDIT represents how much the Buyer is short, meaning this CREDIT does not represent
how much they have, it represents how much they still OWE. This is how a CREDIT becomes
something you OWE. We are not done reconciling yet. We have a $25,000 Credit, to balance it
out we need a $25,000 Debit. That debit goes to the Broker account which represents the Escrow
Account. Back to practical language - the Buyers needs to bring a $25,000 check to the closing
so that they can make their Credit column (what they got) equal to the Debit column (what they
owe) and the Broker (Closing Agent) needs to deposit it into the Escrow Account ($25,000 Debit).
For extra points - the reverse is most common with the Seller. When a Sellers Debit column (what
they owe) is lower than their Credit column (what they sold their property for), the amount added
to the DEBIT column to make both columns equal represents money the Seller is receiving. The
balancing CREDIT in the Broker column, reminds the Closing Agent to cut a check to the Seller
out of the escrow account.
If a friend asks you to help manage a property for a fee, would you put the deposits into
your escrow account or your employing brokers escrow account?
When reconciling a 6 column worksheet for a closing - after totaling up the debits and
credits, the closing agent needed to add a $30,000 Debit to the Seller Debit column to
make it equal to the Seller Credit column. What does this Seller Debit represent?
Which would need to be registered with the CREC (Colorado Real Estate Commission) for a
subdivision?
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