100 Multiple-Choice Question Exam 1

Instructions. Before taking the state license examination prepare by taking the Practice Exams. Doing so will allow you to test your knowledge, to practice your exam-taking strategies, and to reduce your anxiety. Take the practice exam under timed conditions and then review both your right and wrong answers. This exam is designed as a representative test: Questions are from all major subject areas; they are of the type and in the form used on state exams for sales associates and brokers; and the degree of difficulty is on a par with, or is slightly more difficult than, the typical licensing exam. Thus, successful completion (75 or higher) under simulated exam conditions (three uninterrupted hours using no reference material) should indicate your readiness for the state exam.

Write down your answers on a separate sheet of paper. The link for the answers are at the bottom of the page.
Good Luck!

1. In Florida, the maximum commission a broker may charge for services rendered is
a. 7%
b. 10%
c. any rate agreed on by the broker and the buyer or seller.
d. set by FREC rules and state usury laws, whichever is less in the transaction involved.

2. Terry is a real estate licensee who is representing a tenant in a commercial rental. Terry wants to share part of her commission with the tenant. Which statement is true regarding this situation?
a. A licensee may share a commission with a party to a real estate sale and purchase agreement, but not with parties to lease agreements.
b. Real estate licensees may share commissions with parties to residential lease agreements, but not with parties to commercial lease agreements.
c. Real estate licensees may share their commission with a party to a lease agreement, provided it is disclosed to all interested parties.
d. It is illegal for a real estate licensee to share commissions with a party to any real estate transaction unless the party is a real estate licensee.

3. When the value of a business's tangible assets is subtracted from its purchase price, the amount remaining represents the
a. price paid for goodwill.
b. accounts payable to the business.
c. long-term liabilities of the business.
d. sales tax collected but not yet remitted to the state.

4. Which type of estate in real property is held for a definite number of years?
a. Fee simple estate
b. Life estate
c. Estate for years
d. Estate by the entireties

5. In the government survey system of legal descriptions, a "check" is subdivided into "townships" that measure
a. 6 square miles.
b. 6 miles square.
c. 640 acres.
d. 640 square miles.

6. A real estate developer purchased three residential lots for $30,000 each. The lots are located on a busy street and just one block from the business district. The developer is successful in getting the lots combined into a single lot zoned professional offices. An appraiser values the professional office lot at $140,000. This increase in value can most likely be attributed to which appraisal principle?
a. Substitution
b. Supply and demand
c. Plottage
d. Progression

7. In Dade County, the building, housing, and health codes require landlords to maintain rented premises in good repair, capable of resisting normal forces and loads, and to provide heat during cold weather, running water, and hot water. Ms. Trufare leased a two-bedroom, single-family home from Mr. Si Lagree in June for a one-year period. In November, Ms. Trufare told Mr. Lagree that she had no source of heat and requested he install a heater. Mr. Lagree said he would install the heater, but it would result in a rental increase of $10 per month. Which is most correct?
a. Mr. Lagree is wrong because the house should be provided with heat to comply with county ordinances, and the rent was established by lease.
b. Mr. Lagree is entitled to increase the rent because the single-family home is exempt from the Florida Landlord and Tenant Act.
c. Ms. Trufare is not entitle to any free additions or improvements because she should have inspected the premises prior to signing the lease.
d. Both B and C are correct.

8. Listing agreements do NOT have which requirement?
a. Written form
b. Definite expiration date
c. Description of the property
d. Fee or commission charged

9. The "highest and best use as though vacant" is considered to be the use that will result in the greatest amount and longest duration of net income that accrues to the
a. improvements on a property.
b. land itself.
c. lessee of commercial property.
d. lessor of commercial property.

10. Mark Meany has listed his property with Happy Customers Realty. Mark has informed the sales associate that he will not sell his condominium to college students. Which statement is TRUE regarding this situation?
a. Mark can refuse to sell to college students, but the real estate licensee cannot refuse college students.
b. Mark and his sales associate can be fined for violating the Fair Housing Act.
c. Although this may be a poor business decision, it is not a violation of the Fair Housing Act.
d. The licensee should withdraw from the listing and report Mr. Meany to the FREC.

11. Teresa is a receptionist at Best Price Realty. A buyer comes into the office and hands Teresa an earnest money deposit on Wednesday (no legal holidays involved). Which statement applies to this situation?
a. The broker must deposit the check into the escrow account no later than the end of business on Monday of the following week.
b. Teresa could be charged with providing real estate services without a license.
c. The broker must deposit the check into the escrow account by the end of business on Friday.
d. Only a licensed real estate sales associate is allowed to accept an earnest money deposit on behalf of the broker.

12. A broker's principal is away on vacation. The broker receives an offer of $67,000 for the principal's property. Before the principal returns, the broker receives a second offer of $64,000. The broker should
a. refuse the lower offer.
b. submit only the best offer when the principal returns.
c. hold the lower offer until the first offer is accepted or rejected.
d. submit both offers to the principal.

13. Developer Bob wishes to sell several parcels of vacant land that are encumbered by a blanket mortgage. Broker Sal lists the parcels for $25,000 per lot. A buyer enters into a contract to purchase one of the lots for $24,000. After contacting the lender, Sal learns that in order to release the lot from the blanket morgage, the lender requires a payment of $30,000. Which statement applies?
a. Developer Bob must pay the $6,000 difference to the lender prior to closing.
b. The buyer is liable to the lender for the $6,000 difference because it was an existing lien.
c. The broker can be charged with fraudulent and dishonest dealing by trick, scheme, or device.
d. Developer Bob can be charged with conversion.

14. Bob White was a successful licensed real estate broker. He and his wife jointly owned Quail Haven Realty, Inc., a two-person corporation for profit registered with the DBPR as an active real estate brokerage firm. Mrs. White was registered as an officer of the corporation but had never qualified to be licensed. Mr. and Mrs. White mutually agreed to a divorce, and the court awarded Mrs. White the profitable real estate brokerage corporation as part of the property settlement. Mrs. White retained her married name, and Bob White organized a new brokerage firm. Which is correct?
a. As a result of the court's action, Mrs. White may continue operating the brokerage firm if shes chooses.
b. Mrs. White is entitle to the same rights and privileges as full owner of the firm as existed before the divorce.
c. Mrs. White need only request that her status be changed to active real estate broker.
d. It is illegal for Mrs. White to continue operating the firm.

15. A buyer gives the broker a $53,500 good-faith deposit. The broker defrauds the buyer of the $53,500. The buyer sues the broker and is awarded a judgment in the amount of $78,500 for the original $53,500 deposit plus $25,000 in punitive damages. The buyer was unable to collect the judgment from the broker, so he requests relief from the Florida Real Estate Recovery Fund. How much can the buyer receive from the Recovery Fund?
a. $78,500
b. $53,500
c. $50,000
d. $25,000

16. A sales associate has earned a commission of $2,400. The broker for whom she works pays her $2,000 and uses the remainder of her commission to pay office expenses with a promise to pay the remaining $400 when he can afford to do so. The broker is guilty of
a. nothing illegal.
b. grand larceny.
c. culpable negligence.
d. conversion.

17. The owner of an apartment complex plans to be away for a full year. He arranges for a tenant to take care of his apartment house and to act as his representative during the year's absence. The tenant is to be given a free apartment plus $150 per week for this service. Which is most correct?
a. The owner has violated Chapter 475, F.S.
b. The tenant has violated Chapter 475, F.S.
c. The tenant can perform all the functions the owner would if present.
d. The tenant can use only legally approved lease forms during the owner's absence.

18. The law that requires at the time of loan application (or within three business days) that the lender provide the borrower with a good-faith estimate of settlement costs is the
a. Truth-in-Lending Act.
b. Florida Uniform Land Sales Practices Act.
c. Florida "Little FTC Act."
d. Real Estate Settlement Procedures Act.

19. Mr. Tenant's lease expired November 30. He continued to occupy the premises and to mail his monthly rent payment to the landlord on the same schedule he had observed prior to the expiration of the formal lease. Mr. Tenant is a
a. lessor.
b. life tenant.
c. tenant at will.
d. tenant at sufferance.

20. A broker receives conflicting demands from the buyer and seller. The broker properly notifies the FREC and requests an escrow disbursement order (EDO). However, before the order is issued, the buyer and seller sue one another. What must the broker do in this situation?
a. The broker must notify the FREC of the situation within ten business days.
b. The broker need not do anything because the lawsuits are a separate action.
c. The broker must follow the instructions of the EDO when received because it was timely filed.
d. The broker must notify the FREC of the lawsuit within 15 business days.

21. The purpose of the Save Our Home amendment is to
a. provide a procedure for retaining ownership of one's home after foreclosure proceedings are initiated.
b. limit the increase in the amount of property taxes on homestead property.
c. provide low cost mortgage financing for first time homebuyers.
d. reduce the amount of income taxes owed by homeowners.

22. Mr. Freno lived next door to a real estate broker. Mr. Freno referred his sister to the broker next door, and she purchased a home costing $120,000. To show his appreciation, the broker may
a. take Mr. Freno and his wife out to dinner.
b. give Mr. Freno a bottle of his favorite wine.
c. send Mrs. Freno a small gift.
d. express his thanks to Mr. Freno.

23. Which entity is a HUD agency?
a. DIF
b. OTS
c. Ginnie Mae
d. Fannie Mae

24. Broker Nocount listed a commercial lot belonging to Mr. Favor for $48,000. Later, Nocount learned that a firm that owned the building adjoining Favor's lot was going to need the lot for expansion and would be willing to pay up to $62,000 for the lot. Broker Nocount told Mr. Favor that he wanted to terminate his brokerage relationship and buy the lot himself for $46,000 cash. Mr. Favor agreed to the offer and sold the lot to Broker Nocount, who then sold the lot to the neighboring firm. This is an example of
a. a legitimate business transaction.
b. conversion.
c. culpable negligence.
d. concealment.

25. Mrs. Allday, a widow and a veteran with 25 percent disability due to service-connected injuries, has resided in Florida since 1971. Mrs. Allday is entitled to a maximum property tax exemption on her homesteaded property of
a. $5,500.
b. $25,500.
c. $26,000.
d. $30,500.

26. A contract for the sale and purchase of a property fails to close. Both the buyer and the seller make demands that they are entitled to receive the earnest money deposit. The matter is to be resolved in a court of law. The broker is not making a claim to receive any of the funds. Which court procedure is appropriate in this situation?
a. Interpleader
b. Declaratory judgment
c. Compensatory damages
d. Lis pendens

27. DBPR auditors conducted a routine check of Broker Smith's escrow accounts. Office records revealed that Broker Smith had made 22 sales during the time period checked and that only two of the sales had closed with appropriate disbursements totaling $9,000. Binder deposit receipts showed Broker Smith had collected an overall total of $88,000 in binder deposits. Total commissions earned by all 22 sales amounted to $58,500. Smith's escrow balance at the time of the audit was $20,400. Which statement is most correct?
a. Broker Smith's license can be suspended or revoked due to the condition of his escrow account.
b. Broker Smith has not violated Chapter 475, F.S., because he can account for every penny of binder deposits.
c. The DBPR has violated Broker Smith's rights without valid justification or authority.
d. Broker Smith has shown that his escrow account records are maintained adequately.

28. The clause in a mortgage that ensures that the mortgage cannot be foreclosed so long as all payments are current and other conditions are fulfilled is the
a. redemption clause.
b. defeasance clause.
c. escalation clause.
d. release clause.

29. When the Commission decides that a real estate licensee's activities may have been grounds for suspension or revocation, the licensee is informed by the use of a
a. notice and a copy of the complaint.
b. writ of certiorari.
c. notice of noncompliance.
d. writ of injunction.

30. Jim is unlicensed and lives in Chicago. Jim referred a prospective buyer to Broker Donna in Tallahassee, Florida. Broker Donna reimbursed Jim for his out-of-pocket expenses associate with making the referral. Which statement applies to this situation?
a. This is legal because the expenses were actually incurred.
b. Jim can accept the expense money as long as he does not come to Florida.
c. The expense money can be considered a referral fee and therefore must be disclosed to the prospective buyer before Jim can accept the money.
d. Both Jim and Broker Donna have violated Chapter 475 because it is illegal to pay an unlicensed person for performing real estate services.

31. Sales associate Dirk is employed by Broker Jones. Dirk sold a house owned by Broker Jones' customer, and the transaction was closed on May 20. On October 10 of the same year, Dirk sued the customer for his commission, which amounted to $4,100. Which statement is FALSE?
a. Dirk may be penalized by suspension.
b. Dirk may be penalized by fine.
c. Dirk may be penalized by probation.
d. Dirk did nothing wrong because he earned the commission.

32. Aveda Realty is the exclusive representative of the developer of Blues Creek subdivision. Aveda sales staff will temporarily work out of a mobile home that the developer has placed in the subdivision until the model home is completed. Transactions will be closed at the main office. Does Aveda Realty need to register the mobile home as a branch office?
a. License law prohibits the use of mobile homes as temporary shelters.
b. The broker must make the mobile home stationary before registering it as a branch office.
c. The broker must register the branch office and pay a fee before assigning any sales staff there.
d. The mobile home is a temporary shelter and therefore is not considered to be a branch office.

33. Broker Tate lists a tract that has three mortgages amounting to approximately 90 percent of total market value. In order to convey title properly to a buyer, which statement is most correct?
a. All subordinate mortgages must be either paid off or merged with the first mortgage.
b. The property must be refinanced.
c. A deed must be voluntarily delivered.
d. All mortgages must be paid off.

34. Sales associate Dean is employed by Developer Bob to sell new homes in Capri subdivision. The developer is also building in Winder and Mile Trail subdivisions, which are organized as affiliated companies. Bob wants to have Dean sell homes in the other subdivisions because Capri recently was sold out. Which statement applies?
a. Dean must work out of Winder or Mile Trail but not both because sales associates must be registered with a single office.
b. Dean may request and be issued a group license so that he can work in any of the developer's subdivisions.
c. Developer Bob must contact the DBPR and request a multiple license.
d. The sales offices of the subdivisions are considered temporary shelters. Therefore, Dean doesn't need to do anything in order to work for the various affiliated entities.

35. Broker Dudley Doright received an offer and an earnest money deposit on Thursday, July 10, at 9:30am. The owner of the property will not be in town until Wednesday, July 16, to consider the offer. Dorights's next normal banking day will be Monday, July 14; however, he has a large safe built into the wall of his office. FREC rules require Broker Doright to
a. hold the earnest money deposit in his safe until his principal can accept or reject the offer.
b. hold the earnest money deposit in his safe until his banking day on Monday, July 14.
c. deposit the earnest money in his escrow account by the close of business on Tuesday, July 15.
d. deposit the earnest money in his escrow account by the close of business on Friday, July 11.

36. Buyer Brown entered into a purchase and sale agreement with Seller Sam to buy Sam's condominium. Two days later, Brown canceled the contract and requested that the broker return his earnest money deposit. Which statement applies to this situation?
a. The broker may return the earnest money deposit because it is within the buyer's three-day rescission period.
b. The broker must get a release of the earnest money deposit from both the buyer and the seller before releasing the funds. Otherwise, the broker must notify the FREC of conflicting demands.
c. This is a breach of contract, and the seller may be entitled to the earnest money deposit as liquidated damages.
d. The broker must request the FREC to issue an escrow disbursement order.

37. A Georgia broker has a prospective buyer who wants to buy some land in Florida for the purpose of building between 100 and 150 luxury condominiums. The Georgia broker contacts a Florida broker to help locate some suitable tracts for the prospect to consider. Together, they work with the buyer and show him five separate tracts. Their cooperation pays off when the buyer purchases a 60-acre tract for $558,000 and they evenly divide a 10 percent commission. Which is more correct? a. If the Georgia broker's license is current, this is a legal arrangement.
b. Only the Florida broker is legally entitled to a commission.
c. Both brokers are legally entitled to a commission.
d. Both brokers have violated Chapter 475, F.S.

38. For a limited partnership to register as a real estate broker with the DBPR, the limited partnership must
a. file a copy of the partnership agreement with the DBPR.
b. have all general partners who will deal with the public licensed as active brokers.
c. register all unlicensed limited partners.
d. register all sales associates who are general partners.

39. A broker deposited a $5,000 earnest money deposit in his escrow account in a timely manner. A sale contract was signed by the buyer and seller. Later, the two parties disagree about which equipment and furnishing are to be conveyed with the property. Each accuses the other of breaching the contract, and each demands that the broker turn over the deposit to him. The broker worked almost two months to sell the property, and he feels that he has earned his commission of $4,000 and therefore wants to be paid. The broker should notify the FREC and
a. request the FREC to issue an escrow disbursement order.
b. seek arbitration of the dispute or instruct his attorney to file a request for a writ of certiorari.
c. seek arbitration of the dispute, or file a bill of interpleader, or recommend that the two disagreeing parties litigate the matter.
d. request the FREC to issue an escrow disbursement order, seek arbitration of the dispute, seek adjudication by a court of law, or seek mediation of the dispute.

40. Which type of deed will provide the grantor the BEST assurance of no future liability?
a. Warranty deed
b. Special warranty deed
c. Quitclaim deed
d. Fiduciary's deed

41. In an effort to obtain more listings and subsequent commissions, a licensee urges people in an older neighborhood to sell because "a group belonging to a religious cult has recently moved in and property values will fall." This is an example of the illegal and unethical practice called
a. redlining.
b. blockbusting.
c. reverse discrimination.
d. steering.

42. The mandatory distance between lot lines and building improvements is known as
a. zoning.
b. variance.
c. frontage.
d. setback.

43. If the interest paid for borrowed funds is greater than the overall rate of return to an investor, this is an example of
a. positive leverage.
b. negative leverage.
c. increased yield.
d. increase cash reversion.

44. Mr. Sims and Mr. Frey are primarily owner-developers, although both are active real estate broker licensees. Together they hire Mr. Mica, an accountant and CPA who is not a licensee, to supervise the overall development of a large tract of land they are jointly developing into a high-quality, recreation-oriented subdivision. Mr. Mica is not experienced in selling real estate; however, he is an astute businessman and manages to exceed the first 18 months' sales projections in just nine months. As a reward for his achievement, Sims and Frey agree to pay Mr. Mica a bonus of 15 percent of the amount in excess of the first 12 months' sales projections. Which is most correct?
a. This is a perfectly legal arrangement.
b. All three men have violated Chapter 475, F.S.
c. Mr. Sims and Mr. Frey have violated Chapter 475, F.S.
d. Mr. Mica has violated Chapter 475, F.S.

45. The Florida Real Estate Time-Share Act applies to time-share plans consisting of
a. more than seven time-share periods over at least a three-year period.
b. more than three time-share periods over at least a seven-year period.
c. more than seven time-share periods with no minimum span of time.
d. two or more time-share periods with no minimum span of time.

46. Management Services Inc. represents a residential landlord who has obtained a writ of possession to evict a tenant. The writ has been executed by the sheriff. The tenant's belongings are inside the apartment. Which statement is TRUE regarding this situation?
a. The landlord, or Management Services Inc. as agent, may remove the personal belongings and place them on the property line.
b. Only the sheriff may remove the tenant's personal belongings.
c. The property manager must notify the tenant by certified mail of the intent to remove the personal property.
d. The landlord or property manager must get an executed judgment lien on the personal property before taking possession of it.

47. Widow Jane is always looking for good, safe investments for her money. Jane decides to bid on a cute bungalow home at a foreclosure sale. Jane feels that the fair market value of the home is approximately $84,000. There is a first mortgage lien of $68,000 held by the lender who has initiated the foreclosure action. The property is homesteaded by the current owner. Property taxes are two years in arrears. Which statement applies?
a. Widow Jane's opening bid should be high enough to cover the existing first mortgage so that the mortgage lien can be satisfied from the sale proceeds.
b. Widow Jane will be responsible for the prior property tax liens.
c. The mortgage lien and back taxes will not survive a foreclosure sale.
d. Because this is homesteaded property, the home is protected from foreclosure.

48. Which statement(s) describes a purchase-money mortgage?
a. It is alternative financing between buyer and seller that usually excludes a third party.
b. It enables a buyer to purchase with less equity funds than required by a financial institution.
c. It is given by the buyer to the seller for all or part of the purchase price of the property.
d. All of the statements describe purchase-money mortgages.

49. If licensees are not state-certified appraisers, they may still evaluate real property for the purpose of obtaining a listing. They must, however, refer to the value determined as a(n)
a. estimate of value.
b. listing analysis.
c. appraised value.
d. comparative market analysis (CMA).

50. A buyer and seller executed a sale and purchase agreement. Buyer and seller have a dispute over the earnest money deposit. The buyer has agreed to arbitrate the matter. However, the seller will not agree. Can the broker proceed to have the dispute resolved by arbitration?
a. Yes, the broker can choose any one of several methods to resolve an escrow dispute, provided the Commission is notified in a timely manner.
b. No, the broker is required to first request an escrow disbursement order.
c. Yes, the earnest money deposit was pledged by the buyer; therefore, the buyer may choose arbitration to resolve the dispute.
d. No, the seller would also have to agree to arbitration.

51. To be enforceable in court, a contract for the sale of real property must
a. be signed by two subscribing witnesses.
b. be in writing and signed by both parties.
c. be acknowledged by an official of the court or a notary public.
d. specify the type of deed that will convey the title.

52. When a buyer stipulates that he will agree to make each monthly mortgage payment on the house he is buying but takes no responsibility for the note, he is
a. buying with an assumption of the mortgage.
b. releasing the seller from his obligation regarding the mortgage.
c. purchasing the house subject to the mortgage.
d. assigning the mortgage.

53. A real estate instructor was citing examples of freehold estates and nonfreehold estates. Which did she correctly use as an example of an estate that is nonfreehold?
a. Estate for years
b. Life estate
c. Fee estate
d. Estate by the entireties

54. In a community property state, the real property owned by a wife prior to her marriage is known after her marriage as
a. common property.
b. joint property.
c. community property.
d. separate property.

55. Young Dan was not licensed with the DBPR but helped his father (Harry) by finding buyers for his father's lots. Dan did not receive any money, but his father agreed to give Dan a choice lot, free and clear, after Dan found buyers for five lots. Dan was offered a well-paying job some distance from home after he had found buyers for only three lots. Dan took the job and did not earn his lot. Which statement is correct?
a. Dan need not have been licensed because his father owned the lots.
b. Dan violated Chapter 475, F.S., and is subject to fine or imprisonment.
c. Dan did not violate Chapter 475, F.S., because he received no compensation.
d. Dan and his father both violated Chapter 475, F.S., due to intent.

56. Sam Elder, a widower, was 83 years old and the owner of a popular restaurant business. His business assets consisted of goodwill, regular customers, all the restaurant equipment, and the building housing the restaurant. The land was leased and has 54 years remaining on a 99-year lease. Sam told his headwaiter that he would like his help in selling the business for $200,000. Sam agreed to give the headwaiter $7,000 if he, the headwaiter, found a buyer for the business. The headwaiter approached one of the regular customers who agreed to buy the business if the headwaiter would contract to manage the business. An agreement was reached, and Sam sold the business. When Sam learned that the headwaiter was going to take over as manager, Sam refused to pay the promised $7,000. Which is most correct? a. The headwaiter can force Sam to pay on the strength of a verbal contract.
b. Sam's age would cause doubt to be cast on the compensation agreement.
c. The headwaiter violated Chapter 475, F.S., and can be fined or jailed.
d. Because the headwaiter received no compensation, he did not violate Chapter 475, F.S.

57. Curable functional obsolescence results in a change in value that is
a. less than the cost to cure the defect.
b. equal to the cost to cure the defect.
c. greater than the cost to cure the defect.
d. unrelated to the actual cost to cure the defect.

58. When a broker is unable to convince a property owner that the current market value is the price at which the property should be listed, the broker should
a. take the listing at the owner's price and hope to sell the property.
b. take the listing at the owner's price and later return to negotiate a reduction.
c. diplomatically decline to accept the listing.
d. take the listing and forget about it.

59. The individual whom a single agent represents in his or her dealings with the public is the
a. buyer.
b. mortgagor.
c. customer.
d. principal.

60. Which offense is a misdemeanor of the first degree?
a. False advertising
b. Unlicensed practice of real estate
c. Culpable negligence
d. Collecting a fee for inaccurate and out-of-date rental information

61. Streets, parks, and school sites are transferred from developers to counties or communities by an act or process called
a. subdivision.
b. subrogation.
c. descent.
d. dedication.

62. A mortgage note or bond provides legal evidence of a personal debt and also
a. permits legal action to collect the debt wherever the mortgagee may be located.
b. pledges all the assets of the mortgagor.
c. neutralizes the defeasance clause in the mortgage.
d. creates a lien on the property.

63. A broker has a farm listed for $164,000 with a negotiated sale commission of 8 percent. An immigrating retiree sees the For Sale sign and voluntarily offers $185,000 for the farm. The broker buys the farm from his seller for $160,000, and then he sells it to the retiree for $185,000. Later, the seller learns of the sequence of transactions. Which statement is most correct?
a. The broker must reimburse the seller $25,000 plus any commission received.
b. No legal or ethical violation has occurred.
c. The broker's purchase price may be regarded as a legal option.
d. The law does not apply to this transaction.

64. In determining market value, the principle of substitution is the basis for which approach to value?
a. Comparable sales approach
b. Cost-depreciation approach
c. Income capitalization approach
d. The principle of substitution is the basis for all three approaches

65. Which statement is FALSE regarding a new condominium complex?
a. A declaration must be filed before any units may be sold.
b. Each unit owner has a fractional, undivided interest in the common areas and facilities.
c. Each unit owner is responsible for his or her own mortgage payments.
d. Unit ownership requires the purchase of shares of stock in the association.

66. When a new lending agreement releases the seller and substitutes the buyer as the party liable for the mortgage debt, this act is called
a. subrogation.
b. subject to the mortgage.
c. novation.
d. negative amortization.

67. Which statement is TRUE with respect to a composite closing statement?
a. The balance due from the buyer is paid directly to the seller.
b. The balance due from the seller is paid directly to the buyer.
c. The balance due the seller is paid directly by the buyer.
d. The balance due the seller is paid by the closing agent.

68. The risk associated with an investment's ability to provide sufficient funds to pay operating costs is referred to as
a. purchasing power risk.
b. interest rate risk.
c. business risk.
d. financial risk.

69. A consideration that is legally sufficient to result in an enforceable real estate sale contract could be
a. a specified sacrifice by one contracting party.
b. receipt of some benefit in lieu of cash.
c. a promise to accomplish some particular act.
d. any of the considerations described above.

70. Bill offered $150,000 for Terri's home. Terri countered at $160,000. Bill did not accept Terri's counteroffer. Terri told her broker that she was revoking the counteroffer and accepting Bill's original offer. Which statement is TRUE regarding this situation?
a. Bill and Terri have entered into a sale and purchase agreement for $150,000.
b. Terri can revoke her counteroffer and accept Bill's original offer up until the time Bill rejects the counteroffer.
c. Terri cannot accept the original offer because it was extinguished by the counteroffer.
d. None of the statements are true.

71. The intent of the Legislature with respect to Florida's laws regulating professions and occupations is to
a. control licensed professions and occupations in every way possible for the protection of the public.
b. exercise strict control over a selected group of professions to screen and limit persons desiring to enter those professions.
c. permit any qualified person to engage in any profession regulated by the State of Florida.
d. permit anyone who wants to enter a profession to do so.

72. The purpose of recording documents relating to real property is to
a. make the documents legal.
b. give notice to future purchasers and creditors.
c. prevent loss by adverse possession.
d. eliminate squatters' rights.

73. A quitclaim deed differs from a bargain-and-sale deed because
a. the bargain-and-sale deed has a covenant of seisin.
b. the quitclaim deed gives a full warranty of title.
c. only the bargain-and-sale deed has a granting clause.
d. the quitclaim deed is enforceable longer.

74. The real taxable value of a Florida resident's home will NOT be known until the
a. age of the homeowner is known.
b. total tax millage is applied to the assessed value.
c. total existing exemptions are subtracted from the current market value.
d. total existing exemptions are subtracted from the current assessed value.

75. Broker Don purchased some raw acreage and developed it into several hundred building lots. He wrote Mr. Milling, a licensed real estate broker in Alabama, and offered Mr. Milling $150 for every prospect he sent to Florida who bought a lot from him (Broker Don). Which statement is correct?
a. Broker Don has violated Chapter 475, F.S.
b. Mr. Milling cannot legally accept compensation from Broker Don unless he is licensed as a broker in Florida.
c. Broker Don can be fined and imprisoned.
d. This is a perfectly legal arrangement.

76. Mr. Brown is a sales associate with Honest Realty, Inc. After two months of negotiation and effort, he succeeded in obtaining a tentative offer from Mr. Marshall to buy an undeveloped apartment site. Mr. Marshall refused to sign any sale agreement until he returned from a vacation in Alaska. While Mr. Marshall was on vacation, Mr. Brown took a two-week vacation but still returned several days ahead of Mr. Marshall. Within a few days after returning, Mr. Marshall contacted Mr. Brown and purchased the apartment site. Neither Mr. Brown nor Mr. Marshall was aware that, during their vacations, the zoning for the property had been changed from multifamily to single-family zoning, thereby prohibiting the use of the property Mr. Marshall had intended. Mr. Marshall brought suit against Mr. Brown and his employer, which resulted in collection of damages. What legal basis did Mr. Marshall have for his suit?
a. Conversion
b. Concealment
c. Culpable negligence
d. Commingling of interests

77. To determine the correct amount of property tax for property, multiply the tax rate by the
a. assessed value of the property.
b. last recorded sale price.
c. taxable value of the property.
d. appraised value of the property.

78. Mr. Cohen is a broker who overlooked the expiration date of September 30 on his license for the first time in 15 years as a real estate broker. Five days later, on October 5, an old friend brings a relative to Mr. Cohen's real estate office to discuss purchase of an office building listed by Ms. Dennis, another broker. Mr. Cohen contacts Ms. Dennis, who agrees to cobroker the transaction on a 50/50 basis. Mr. Cohen obtains a binding offer and a substantial earnest money deposit from the prospective buyer and presents them both to Ms. Dennis for her to obtain approval from the owner. Two months of offer and counteroffer follow. Finally, a mutually acceptable arrangement is negotiated by Mr. Cohen and Ms. Dennis. The closing is held and the sale commission is paid to Ms. Dennis, who then refuses to share the commission with Mr. Cohen because she learned the month before that Mr. Cohen's license has expired. Which is correct?
a. Both brokers have violated Chapter 475, F.S.
b. Ms. Dennis has violated Chapter 475, F.S., due to conversion.
c. Mr. Cohen has violated Chapter 475, F.S.
d. Neither broker actually has violated Chapter 475, F.S.

79. Mr. Park decided he would pay the requested purchase price of a house to the owner, Mr. Dino, if the owner agreed to accept $6,000 cash as the total down payment. Mr. Dino agreed to accept the offer on the condition that Mr. Park arrange his own financing and pay the balance of the purchase price at closing. Mr. Park accepted this condition with the stipulation that his $6,000 be returned to him in the event he was unsuccessful in obtaining adequate financing. Mr. Dino agreed to the financing contingency and instructed his broker, Mr. Chase, to prepare a contract for sale incorporating the agreed conditions and contingencies.
Four weeks after Mr. Park and Mr. Dino signed the sale contract, Mr. Park met with Mr. Dino to announce that he was unable to obtain financing and therefore had to revoke the sale contract under the provisions of the financing contingency. He then requested the return of his $6,000. Mr. Dino agreed with Mr. Park's request and notified Mr. Chase to return Mr. Park's deposit. To the surprise of both Park and Dino, the broker (Mr. Chase) pointed out a clause in the small print of the sale contract giving the broker the deposit in the event the transaction did not go through. Mr. Park and Mr. Dino consulted their respective attorneys. What will their lawyers tell them is the proper action or result under the laws regulating contract?

a. The $6,000 must be turned over to Broker Chase.
b. The $6,000 must be returned to Mr. Park (the buyer).
c. The $6,000 must be split between Mr. Dino (the seller) and Mr. Chase (the broker).
d. The $6,000 must be split between Mr. Park (the buyer) and Mr. Dino (the seller).

80. A broker, representing a newly formed syndicate of investors, arranged the purchase of 1,800 acres of ranch land for $1,650,000 from a citizen of Venezuela. The seller demanded all cash, with the buyers to arrange their own financing. The broker helped her investors arrange the financing. Further, the broker recommended that the buyers only pay the seller what percent of the selling price in order to comply with an IRS regulation?
a. 10%
b. 40%
c. 60%
d. 90%

81. A real estate broker followed the instructions of an escrow disbursement order. The seller sued the broker and obtained a judgment against the broker for $15,000 in damages plus $10,000 in attorney's fees and court costs. The broker incurred $3,000 in attorney's fees. The Commission is authorized to pay
a. $15,000.
b. $18,000.
c. $25,000.
d. $28,000.

82. John manages a residential rental property. The owner has decided she wants another real estate office to manage the property and asks John to transfer the security deposits to the new rental agent. Which statement applies to this situation?
a. John must first secure the tenants' permission to transfer the deposits.
b. John must close the bank accounts and return the funds directly to the owner.
c. John must transfer the funds to the new agent along with an accounting.
d. The deposits must be reimbursed to the tenants.

83. In the cost-depreciation approach to estimating value, land value is commonly estimated by
a. comparable sales analysis.
b. development cost analysis.
c. residual value subtraction analysis.
d. subtracting building value from total property value.

84. The VA total monthly obligations ratio is determined by dividing the total monthly
a. housing expenses (PITI) by the net monthly income.
b. obligations by the gross monthly income.
c. housing expenses (PITI) by the gross monthly income.
d. obligations by the net monthly income.

85. Where the government survey system is used to describe real property, the primary north-south line and the primary east-west line that form the basic reference point for the system are correctly called the
a. principal meridian and base line.
b. primary meridian and primary base line.
c. principal meridian and primary base line.
d. primary meridian and principal base line.

86. An up-front fee paid to the lender in exchange for a reduced interest rate, generally for the first one to three years, is referred to as
a. commitment fees.
b. points.
c. the discount rate.
d. a buydown.

87. For income tax purposes, the term adjusted sale price means the sale price of a home
a. less the original cost.
b. less allowable fix-up and selling expenses.
c. less the down payment when seller financing is involved.
d. adjusted to reflect the negotiation and acceptance of a counteroffer.

88. The real estate term situs refers to
a. commercial properties designated on a site plan.
b. properties listed in the historic properties register.
c. scenic rural or farm areas.
d. value derived from preferred property locations.

89. The master plan developed by planning commissions to manage local growth and preserve living conditions is called the
a. growth management plan.
b. comprehensive plan.
c. development plan.
d. environmental impact plan.

90. Broker Betty purchased two adjoining lots, each of which measured 150' across the front and 180' in depth. She paid $7,500 for each lot. She then divided the property into three equal lots and sold each one for $125 per front foot. What percent of profit did she make on her original investment? a. 25%
b. 60%
c. 67%
d. 150%

91. A homebuyer has arranged a conventional mortgage of $30,000 at 13 percent interest for 30 years. By agreement, the first three monthly payments are to consist of interest only with payment on principal to begin with payment number four. How much total interest will the homebuyer pay during the first three months?
a. $975
b. $325
c. $3,900
d. $11,700

92. The closing date is September 10. Day of closing belongs to the seller. Property taxes for the year are $1,700. Calculate the proration using the 365-day method.
a. $1,178.36 debit seller, credit buyer
b. $1,173.70 debit seller, credit buyer
c. $521.64 credit seller, debit buyer
d. $516.99 debit seller, credit buyer

93. The sale price of a home is $66,000. A savings association has agreed to lend 80 percent of the sale price. The prospective buyer has made a binder deposit of $2,200. How much more cash must the buyer produce at closing?
a. $10,760
b. $11,000
c. $13,200
d. $14,960

94. A developer purchased a tract measuring 1,452 feet by 1,200 feet for $3,000 per acre. The sale contract provided for the developer to pay the seller 29 percent of the purchase price in cash, the developer to assume a $50,000 existing first mortgage, and the seller to take back a new second mortgage for the remainder of the purchase price. How much must the seller pay for the tax stamps he must place on the deed before it can be recorded?
a. $596.40
b. $660.00
c. $720.00
d. $840.00

95. Buyer Bettie bought a new home for $230,000. The lender agreed to loan Bettie $200,000 at 9 percent interest with six points discount. What approximate yield will this provide the lender?
a. 9.5%
b. 9.67%
c. 9.75%
d. 10.25%

96. Which parcel contains 2 1/2 acres of land?
a. W 1/2 of the NE 1/4 of the NW 1/4
b. S 1/2 of the NW 1/4 of the N 1/2 of the NE 1/4
c. SE 1/4 of the SW 1/4 of the SW 1/4
d. SW 1/4 of the NE 1/4 of the NW 1/4 of the NE 1/4

97. Your county government has estimated its budget for the coming year to be $24,000,000. Income from nonproperty tax revenues is estimated to be $8,000,000. The county property assessor reports a total of $1,050,000,000 in taxable property. Homestead exemptions are found to total $100,000,000. Compute the tax rate for your county.
a. 25.3 mills
b. 22.9 mills
c. 16.8 mills
d. 15.2 mills

98. Mr. Gillian engages you to estimate the value of his office building prior to his putting it up for sale. The building is even years old, and it would now cost $90,000 to reproduce the structure new. Originally, the economic life of the structure was estimated at 40 years. The land is valued at $20,000. Mr. Gillian paid $70,000 for the building and the land five years ago. What is the estimated value of Mr. Gillian's property?
a. $98,750
b. $94,250
c. $90,750
d. $81,250

99. Sales associate Sam listed a parcel of undeveloped commercial property for $215,000. The agreed sale commission is 10 percent on the first $50,000, 5 percent on the next $100,000, and 3 percent on any balance. Sales associate Sarah sold the property for $210,000, and the owner paid the sale commission per the listing agreement. The broker paid the listing sales associate 10 percent of the total commission and split the remaining commission 65 percent to Sarah and 35 percent to himself. What was Sarah's commission?
a. $7,670
b. $6,903
c. $4,130
d. $3,717

100. On March 1, an investor bought a ten-unit apartment building for $360,000. He paid $72,000 in cash and obtained a 30-year mortgage in the amount of $288,000. A review of the accounts over the preceding two years revealed that vacancy and collection losses were stable at 4 percent. Potential gross income for the property is $70,400 and the operating expenses are $12,770, including reserve for replacements of $2,812. Mortgage payments are $2,742.71. Calculate the net operating income.
a. $49,259
b. $52,002
c. $54,814
d. $67,584

Exam 1 Answers
Exam 2