Rockwell Exam Real Estate Classes WA
Final Exam 1 UPDATED ACTUAL
Questions and CORRECT Answers
A buyer purchases a rental home that is fully furnished. The document used to transfer title to
the furniture is:
a. quitclaim deed
b. bill of sale
c. special warranty deed
d. general warranty deed - CORRECT ANSWER- b. bill of sale
Deeds transfer title to real estate, a bill of sale is generally needed to transfer title to personal
property.
Ben receives a life estate in a property, with his nephew Will designated as the
remainderman. When Ben dies, what kind of interest does Will receive?
A. Fee Simple Estate
B. Life Estate
C. Remainder Interest
D. Reversionary Interest - CORRECT ANSWER- A. Fee Simple Estate
The interest that passes to a designated person upon the death of a life tenant (or other
measuring life) is a fee simple estate. Will has a remainder interest only up until the moment
Ben dies. Once Ben is dead, Will's interest immediately becomes a fee simple interest.
A buyer accepts a general warranty deed from a seller, believing that the seller is the sole
owner of the property. The buyer later finds out that the seller is only a co-owner. Has a
covenant in the general warranty deed been violated?
A. No, the only covenant in a general warranty deed promises that the previous owner didn't
encumber the property
B. No, the principle of caveat emptor controls matters concerning a deed
C. Yes, there is a covenant providing equitable title
,D. Yes, there is a covenant providing marketable title - CORRECT ANSWER- D. Yes, there
is a covenant providing marketable title
The general warranty deed contains a covenant of the right to convey, meaning that the
grantor either has title to the interest or is an agent of the owner with the authority to transfer
the interest.
A plaintiff files a lawsuit involving a property and also files a separate document intended to
provide notice of the lawsuit. This recorded notice of a pending legal action is called a/ an:
A. Abstract of judgement
B. Petition for alienation
C. Writ of execution
D. Lis Pendens - CORRECT ANSWER- D. Lis Pendens
A Lis Pendens is a recorded notice stating that there is a lawsuit pending that may affect title
to the defendant's real estate and that could bind the purchaser of the property.
A movie theater was built ten years ago. If the neighborhood is now zoned entirely
residential, the movie theater:
A. will have to be torn down
B. must be remodeled to better conform to the neighborhood's intended use
C. will be allowed to continue if the owner obtains a conditional use permit
D. will be allowed to continue since it was built before the new zoning law went into effect -
CORRECT ANSWER- D. Will be allowed to continue since it was built before the new
zoning law went into effect
The movie theater is an example of a nonconforming use, which predated a zoning change.
Nonconforming uses are generally allowed to continue, although they may not be enlarged,
or resumed if they are stopped.
In a bilateral contract:
A. a duty wil be performed by only one party
B. one party can restrict the performance of another party
C. two parties have exchanged promises, and both parties are obligated to perform
,D. all parties have fully performed their duties - CORRECT ANSWER- C. two parties have
exchanged promises, and both parties are obligated to perform
In a bilateral contract, two parties have exchanged promises and both parties are obligated to
perform. (Bi=two way)
Gerald engages a licensee to list his property and find a buyer for it. In this context, the
licensee is acting as a:
A. General agent
B. power of attorney
C. property manager
D. special agent - CORRECT ANSWER- D. Special Agent
When a licensee represents a seller in a single transaction, and is authorized to perform
typical duties associated with listing a property, she acts as a special agent.
A licensee located what seems like a ready, willing, and able buyer. However, the deal falls
through at closing because the buyer cant obtain necessary financing. At the same time,
though, a 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 the closing date
D. Yes, because the seller has an absolute duty to provide marketable title at closing -
CORRECT ANSWER- B. No, because there was no ready, willing, and able buyer
The most important rule of determining whether a seller is obligated to pay a commission is
whether a ready, willing, and able buyer was found during the listing period. This would take
precedence over the seller's failure to provide marketable title. A buyer who does not have
financial ability to complete the purchase does not qualify as "able."
Legally, how much earnest money must be submitted with a valid purchase and sale
agreement?
A. 1% of the purchase price
B. 3% of the purchase price
, C. 5% of the purchase price, but the amount over 3% cannot be retained as liquidated
damages
D. No earnest money is required - CORRECT ANSWER- D. No earnest money is required
While almost all buyers will include an earnest money deposit along with the purchase and
sale agreement, that is because of tradition. There is no contractual or legal requirement of a
particular amount, or any earnest money at all.
A mortgage often includes a clause requiring the lender's consent before another borrower
may assume the mortgage. This clause is called a/ an:
A. power of sale clause
B. subordination clause
C. defeasance clause
D. alienation clause (due-on-sale clause) - CORRECT ANSWER- D. Alienation clause (due-
on-sale clause)
an Alienation clause prevents assumption without the lender's consent by stipulating that the
loan balance is due and payable in full if the property is sold.
A buyer is unfamiliar with the concept of discount points and asks a licensee to explain. The
licensee responds " Discount points are used to replace funds that are being held by the
Federal Reserve, so that more funds are available to lend." Is that description correct?
A. No, discount points are used to increase yield for lenders who will sell the loans on the
secondary market
B. No, discount points are used to pay brokers' commissions
C. Yes, banks hold discount points in escrow until sufficient funds have been accumulated to
make more loans
D. Yes, discount points lower interest rates, which make loans more affordable for everyone -
CORRECT ANSWER- A. No, discount points are used to increase the yield for lenders who
will sell the loans on the secondary market.
Discount points are paid to a lender in order to increase the lender's upfront yield on a loan.
Typically, the lender will compensate for this by charging a below-market interest rate.
