Schlicher-Kratz License Review Course Exam#1

Front 1

1. Which of the following statements concerning a sale of real estate in Pennsylvania is (are) correct?
I The sale must be transacted with a real estate broker.
II The sale must have an attorney present at the title closing.
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 1

1. Answer = D. A sale of real estate can be a private transaction that does not involve either a real estate broker or an attorney. However, for persons who are inexperienced with the sale of real estate, a sale transaction without the use of either a real estate broker or an attorney can be a serious financial risk. Nevertheless, it is not illegal.

Front 2

2. When a lessor is allowed to increase the rent in relationship to the U.S. Government Treasury Bill rate of interest, the lease would most likely be a (n)
(A) Index lease
(B) Percentage lease
(C) Graduated lease
(D) Net lease

Back 2

2. Answer = A. When the rent in a lease is tied into an economic indicator like the consumer price index or Treasury Bill rate the lease is an index lease.

Front 3

3. The individual designated as the broker of record in the application for a Pennsylvania corporation real estate broker's license could be
I A real estate broker candidate who passed the broker's exam.
II An officer of the corporation who already has a broker's license.
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 3

3. Answer = C. The Rules: 35.222. (c) A partnership, association or corporation that wants to obtain a Pennsylvania broker's license shall: (2) Designate the individual who is licensed by the Commission as a broker to serve as broker of record.

Front 4

4. If a prospective buyer makes an offer to purchase that is lower than the listed price for a property and accompanies the offer with an earnest money deposit, the broker must do which of the following?
(A) Refuse the offer and the deposit.
(B) Present the offer and the deposit to the seller.
(C) Present only the deposit to the seller.
(D) Hold the offer and deposit and wait until other offers on the property are made before presenting the first offer to the seller.

Back 4

4. Answer = B. Under any form of agency the broker has a fiduciary responsibility to disclose and present all offers to the seller from a potential buyer.

Front 5

5. An attorney who is not a Pennsylvania licensed real estate broker may do which of the following for a client for a fee?
I Advertise and sell the real property of the client
II Lease the real property for the client
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 5

5. Answer = C. The Rules: 35.202 Exclusions from the act. The following categories of individuals and entities are excluded from the act and this chapter: (5) An attorney-at-law who receives a fee from his client for rendering services within the scope of the attorney-client relationship and does not hold himself out as a real estate broker.

Front 6

6. A standard coverage title insurance policy covers defects resulting from
(A) Unrecorded easements
(B) Unpaid special assessments
(C) Rights of parties in possession
(D) Forged signatures on a prior deed

Back 6

6. Answer =D. A standard coverage title insurance policy typically includes: improper marital status, incompetent grantors, deeds not correctly delivered, title clouds located in the records of the county and forged documents. In addition to the previous coverage and owner's title insurance policy with extended coverage includes: unrecorded encumbrances unknown by the insured, an evaluation of a property survey and unrecorded rights of persons in possession.

Front 7

7. Before an agreement of sale is executed the Pennsylvania real estate brokers involved in the transaction are required to
I Provide each party with a written estimate of reasonably foreseeable expenses associated with the sale
II Provide a statement that the expenses associated with the sale are as accurate as could be reasonably expected of a real estate licensee
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 7

7. Answer = A. The Rules:35:334. Statements of estimated cost and return. (a) Before an agreement of sale is executed, the brokers involved in the transaction shall provide each party with a written estimate of reasonably foreseeable expenses associated with the sale that the party may be expected to pay, including , but not limited to: (1) The broker's commission. (2) The mortgage payments and financing costs. (3) Taxes and assessments. (4) Settlement expenses. (b) The estimates of costs required under subsection (a) shall be as accurate as may be reasonably expected of a person having knowledge of and experience in, real estate sales.

Front 8

8. Which of the following lease arrangements is designed to generate a capital gain for the lessee?
(A) Percentage lease
(B) Index lease
(C) Ground lease
(D) Sale-leaseback

Back 8

8. Answer = D. In a sale and leaseback, the seller typically sells the property to an investor and then through a second lease transaction becomes the tenant (lessee) of the same property. This frees up equity of the seller/lessee into an immediate capital gain.

Front 9

9. The Pennsylvania Real Estate Commission has the power to do all of the following EXCEPT
(A) Refuse to issue real estate licenses due to just cause
(B) Levy fines of up to $10,000
(C) Make annual reports to the Pennsylvania Senate
(D) Hold hearings upon its own motion

Back 9

9. Answer = B. The Act: Chapter 6. Section 604. Prohibited acts. (a) The commission may......levy fines of up to $1,000.......

Front 10

10. To estimate the value of a 50 year old residence, an appraiser would place the most weight on which of the following appraisal methods?
(A) Cost approach involving the replacement cost
(B) Income approach
(C) Direct sales comparison approach
(D) Gross rent multiplier approach

Back 10

10. Answer = C. The sales comparison approach is the most reliable appraisal approach for appraising most residential properties.

Front 11

11. A person who has just passed the Pennsylvania real estate salesperson license examination is entitled to do which of the following?
I Solicit real estate listings by telephone
II Attend real estate title closings
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 11

11. Answer = B. Passing the licensing examination does NOT mean a candidate is actually licensed. It simply entitles the candidate to apply for a license on the proper form to the Pennsylvania Real Estate Commission. The Rules: 35.223. Licensure as a salesperson. (a)....an individual who wants to obtain a Pennsylvania salesperson's license shall: (1) Have scored a passing grade on each part of the salesperson's examination within three years prior to submission of a properly completed license application.

Front 12

12. Albert Downs pays Shirley Martin $3,000 for an option to purchase land for $400,000 within five months. After two months Downs offer Martin a lower price for the property. Which of the following is true?
(A) Downs' new offer voids the option.
(B) Downs has violated the law.
(C) Martin may accept the lower offer.
(D) Martin may sue Downs for breach of contract.

Back 12

12. Answer = C. An option is a unilateral contract in which the person who is given the option (optionee or potential buyer) has a choice and is not under any obligation to purchase the property. Therefore there is no ability to void the option, no violation of law and no breach of contract allowing the non-defaulting party to file a lawsuit.

Front 13

13. A married couple can hold title to the ownership of real property in all of the following forms EXCEPT
(A) Tenancy in common
(B) Tenancy for years
(C) Joint tenancy
(D) Tenancy by the entireties

Back 13

13. Answer = B. A tenancy for years is NOT an ownership interest in real estate but rather the interest of a tenant (leasehold estate) for a definite period of time.

Front 14

14. A type of mortgage that would permit the mortgagor to refinance an additional sum of money in the future as a part of the existing mortgage is call a(n)
(A) Blanket mortgage
(B) Open end mortgage
(C) Swing loan
(D) Package mortgage

Back 14

14. Answer = B. In an open end mortgage a borrower has the privilege to obtain future advances and typically borrow amounts up to the original mortgage.

Front 15

15. In which of the following situations is a Pennsylvania real estate broker subject to license suspension or revocation for the unlawful conduct of a salesperson working for that broker and for which the salesperson is unaware of his unlawful conduct?
I If the broker did not provide adequate supervision over the activities of the salesperson
II If the broker was aware of the actions of the salesperson
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 15

15. Answer = C. The Act. Chapter 6. Section 604. Prohibited acts. (a) (16) In the case of a broker licensee, failing to exercise adequate supervision over the activities of his licensed salespersons or associate brokers within the scope of this act. Chapter 7. Section 702. Imputed knowledge, limitations. (a) No violation of any of the provisions of this act on the part of any salesperson, associate broker or other employee of any licensed broker, shall be grounds for the revocation or suspension of the license of the emplyer of such licensee unless it shall upon the hearings held, that such employer had actual knowledge of such violation.

Front 16

16. A licensed Pennsylvania real estate broker with three branch offices is required to do which of the following
I Keep the names and locations of all licensed employees in the main office and in all branch offices.
II Maintain the display all of licenses in a conspicuous place in the main office for all employed real estate licensees.
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 16

16. Answer = D. The Rules: 35.245. Display of licenses in office. (a) The current license of a broker, cemetery broker or rental listing referral agent shall be displayed in a conspicuous place at the main office. (b) The current of an associate broker, salesperson, associate cemetery broker or cemetery salesperson shall be displayed in a conspicuous place at the office out of which the licensee works.

Front 17

17. Owner Sam Jones calls Pennsylvania real estate broker Carmela Martinez on the telephone and requests that Martinez and Jones immediately enter into an oral, open listing that includes placing a "For Sale" sign on the property. Without having anything in writing Martines can
I Enter into the oral, open listing
II Place a "For Sale" sign on the property
(A) I only
(B) II only
(C) Both I & II
(D) Neither I nor II

Back 17

17. Answer = D.