Section Tests Answer Key
Section Tests Answer Key
SECTION ONE: COURSE OVERVIEW: THE REAL ESTATE BUSINESS
1. c. property managers handle day-to-day operations while asset managers manage portfolios of properties. (8)
2. b. developers. (7)
3. b. retail, office and industrial properties. (9)
4. a. Brokers and agents (10)
5. b. By geography (10)
6. d. A broker who renders real estate services for a fee (11)
7. b. state government. (14)
SECTION TWO: REAL ESTATE LICENSE LAW AND QUALIFICATIONS FOR LICENSURE
1. c. The Florida Legislature passed F. S. Chapter 475 as the first real estate license law. (17)
2. c. if the defect materially affects the value of the property. (18)
3. a. Chapter 120 (19)
4. b. Must disclose any criminal history (21)
5. d. Initial licensing fee (22)
6. c. An applicant’s fingerprints are sent to the FBI for a criminal background check. (23)
7. a. 90 (24)
8. d. If a student misses more than 8 hours due to illness (25)
9. c. are exempt from prelicense education but must take the state exam. (26)
10. c. pass the state license exam with a score of 75% or higher. (27)
11. a. Applicants who fail the state license exam may retake it only once within a year of failing it. (27)
12. d. 2-year experience requirement (28)
13. a. the fundamentals of real estate appraising. (29)
14. c. has resided in Florida continuously for 4 or more months within the previous year. (30)
15. b. active duty military personnel who are licensed in another state. (32)
16. d. Every licensed person or entity (32)
17. a. 60 (33)
18. b. During the first license period prior to license expiration (33)
19. c. 8 hours (34)
20. c. Having a hardship(35)
SECTION THREE: REAL ESTATE LICENSE LAW AND COMMISSION RULES
1. c. F.S. Chapter 120. (40)
2. d. protect the public from unregulated business practices. (41)
3. c. Division of Professions (40)
4. a. for 2 years. (42)
5. b. support the Florida Real Estate Commission. (42)
6. c. must include one current member of the FREC. (43)
7. a. five members who hold real estate licenses. (43)
8. c. Members of the FREC must not serve more than two consecutive terms. (44)
9. d. decrease the amount of appropriate fees to be collected. (45)
10. a. report the violation to the State Attorney. (40)
11. b. on March 31 or September 30. (46)
12. c. September 30, 2020 (46)
13. d. Sally’s license will become null and void. (48)
14. d. Sally is exempt from renewal requirements. (47)
15. c. The license becomes involuntarily inactive. (48)
16. c. must report the violation to the State Attorney. (45)
SECTION FOUR: AUTHORIZED RELATIONSHIPS, DUTIES, AND DISCLOSURE
1. d. trust, confidence, and good faith. (53)
2. c. provide sufficient information for the agent to complete the agent’s tasks. (59)
3. b. general agency. (54)
4. b. special agency. (54)
5. c. a party creates an agency relationship outside of an express agreement. (54)
6. a. Death or incapacity of the agent (55)
7. a. The agent has violated the duty of confidentiality. (56)
8. b. the agent has not violated fiduciary duty. (56)
9. d. inform the seller. (57)
10. a. fairness, care, and honesty. (58)
11. b. has an exposure to a charge of negligent misrepresentation. (58)
12. d. practicing law without a license. (58)
13. c. a subagent. (61)
14. b. Bob and Sue are acting as transaction brokers. (62)
15. a. may not represent any party’s interests to the detriment of the other party in the transaction. (62)
16. c. Whenever the licensee and principal agree to do so. (63)
17. a. A sales associate designated by a broker to represent one party in a transaction while another associate of the broker is designated to represent the other party (65)
18. c. Five years (66)
19. b. at the time of signing a listing or representation agreement or before showing a property . (61)
20. a. None (60)
21. c. Dual agency (61)
22. a. Disclosing facts that materially affect the property’s value (60)
23. b. the nonresidential buyer and seller have assets of $1 million or more. (64)
24. c. Transaction brokers have no duty of undivided loyalty. (62)
25. c. for 5 years. (66)
SECTION FIVE: REAL ESTATE BROKERAGE ACTIVITIES AND PROCEDURES
1. d. a joint venture. (89)
2. c. the advertising must not be misleading. (71)
3. b. price fixing. (83)
4. b. Separate enclosed offices for each broker and associate (69)
5. d. The registration for a closed branch office may not be transferred to a new branch office. (70)
6. c. considered blind advertising. (71)
7. c. Turn the check over to the employing broker by end of the next business day. (75)
8. b. No later than the end of the third business day following receipt of the funds (75)
Section Tests Answer Key 485
9. a. obtain written agreement from all involved parties. (77)
10. a. within 15 business days of the last demand. (77)
11. c. interpleader action. (79)
12. c. Release the escrow funds to the buyer without notifying the FREC (80)
13. c. The purchaser of the list may demand a refund of 75% of the fee the purchaser paid for the list. (80)
14. b. When the licensee obtains the opinion of title from an attorney and passes the information on to the client (81)
15. d. third-degree felony. (82)
16. b. Sue Stan for not paying Sarah her share of the commission. (83)
17. c. within 10 days after the change. (85)
18. d. Limited partnership (87)
19. a. Sales associates are not permitted to use a trade name. (90)
20. b. is a legally binding relationship among its members. (89)
21. c. participating members must have joint control. (89)
22. b. limited liability company. (88)
23. d. Not for profit corporation (87)
24. c. Ostensible partnership (87)
25. a. Cooperative association (89)
26. a. still owes the duty of confidentiality to the former broker and principals. (85)
27. d. removing records from the previous broker’s office. (85)
SECTION SIX: VIOLATIONS OF LICENSE LAW, PENALTIES, AND PROCEDURES
1. d. within 5 years (98)
2. c. If the offense is a criminal act (98)
3. a. When the complaint is for a first-time minor violation (98)
4. c. When the DBPR believes the licensee poses an immediate danger to the public (98)
5. c. 20 days. (98)
6. b. 1 (99)
7. d. 30 (99)
8. b. When no probable cause is determined (99)
9. c. A formal complaint will be filed against the offender. (99)
10. d. Do not dispute the allegations and waive the right to a hearing (100)
11. a. FREC. (100)
12. d. None (100)
13. a. the license may be revoked without prejudice. (108)
14. b. 2 years (108)
15. c. punitive (108)
16. b. appropriating client or customer deposits for use in the agency’s business. (96)
17. d. mixing escrow funds with the broker’s operating funds. (96)
SECTION SEVEN: FEDERAL AND STATE LAWS PERTAINING TO REAL ESTATE
1. b. prohibit discrimination in housing transactions. (112)
2. c. the Civil Rights Act of 1968. (113)
3. c. the Fair Housing Amendments Act of 1988 (115)
4. a. blockbusting. (114)
5. c. steering. (114)
6. a. providing unequal services. (114)
7. a. discriminatory misrepresentation. (113)
8. d. The prohibition may be legal. (115)
9. c. The agent and the owner (115)
10. b. public accommodations and employment. (118)
11. c. any time before midnight on the seventh day after signing the contract. (119)
12. b. Joe owns an apartment building and has just interviewed a prospective tenant on the phone. When the tenant arrived to sign the lease, Joe realized the individual is Hispanic. Consequently, Joe refused to rent to this individual. (120)
13. a. Allowing a service dog to live in a no-pet apartment building (121)
14. c. within 30 days of receiving the deposit. (121)
15. c. 30 days (123)
SECTION EIGHT: PROPERTY RIGHTS, ESTATES & TENANCIES
1. a. real property includes ownership of a bundle of rights. (131)
2. c. To transfer (130)
3. d. Stock (131)
4. a. the right of others to use and enjoy their property. (134)
5. c. separable. (135)
6. d. Riparian (137)
7. b. To the middle of the waterway (137)
8. c. A doctrine that gives the state control of water use and the water supply (136)
9. a. A tree growing on a parcel of land (131)
10. b. its definition as one or the other in a sale or lease contract. (132)
11. d. A plant or crop that is considered personal property (133)
12. c. Affixing and severance (133)
13. b. Trade fixtures that are personal property (132)
14. a. The owner’s claim is invalid, because the state owns the underlying land (136)
15. c. one or more of the bundle of rights to real property. (138)
16. a. interests that do not include possession. (139)
17. b. A leasehold endures only for a specific period of time. (140)
18. d. absolute fee simple estate. (141)
19. c. the estate may revert to a grantor or heirs if the prescribed use changes. (141)
20. a. the original owner or other named person. (142)
21. b. A fee simple owner grants the life estate to a life tenant. (143)
22. c. The pur autre vie estate endures only for the lifetime of a person other than the grantee. (144)
23. c. Legal life estate (144)
24. a. A homestead interest cannot be conveyed by one spouse. (144)
25. b. a wife’s life estate interest in her husband’s property. (144)
26. b. A widow who was excluded from a will makes a claim to a portion of the couple’s principal residence. (145)
27. b. Estate from period to period (151)
28. a. tenancy in severalty. (145)
29. c. tenancy in common. (145)
30. a. Parties must acquire respective interests at the same time. (149)
31. b. cannot will their interest to a party outside the tenancy. (148)
486 Principles of Real Estate Practice in Florida
32. c. fee simple ownership of the airspace in a unit and an undivided share of the entire property’s common areas. (154)
33. b. The property is owned by tenants in common or by a freehold owner who leases on a time-share basis. (158)
34. a. A cooperative may hold an owner liable for the unpaid operating expenses of other owners. (153)
35. a. a default by a coop owner may cause a foreclosure on the entire property instead of just a single unit, as with a condominium. (153)
36. b. Right to cancel (162)
37. d. Timeshare (161)
38. a. Condominium resales (157)
39. b. HOA (162)
SECTION NINE: TITLE, DEEDS AND OWNERSHIP RESTRICTIONS
1. a. Ownership of the bundle of rights to real estate (167)
2. d. actual notice. (175)
3. c. title records. (176)
4. a. voluntary alienation. (168)
5. c. accepted by the grantee. (169)
6. d. states the grantor’s intention, names the parties, describes the property, and indicates a consideration. (182182)
7. a. state the grantor’s assurance or warrant to the grantee that a certain condition or fact concerning the property is true. (183)
8. c. general warranty deed. (181)
9. d. A quitclaim deed (181)
10. a. It is taken by the state according to the process called escheat. (172)
11. d. an unenforceable nuncupative will. (170)
12. a. pass to heirs by the laws of descent and distribution. (172)
13. b. inspecting the property and evicting any trespassers found. (174)
14. d. declined because possession was secretive. (174)
15. c. give constructive notice of one’s rights and interests in the property. (177)
16. c. A chronology of successive owners of record of a parcel of real estate. (178)
17. b. free of undisclosed defects and encumbrances. (177)
18. c. Title insurance (178)
19. c. encumbrance. (185)
20. c. the right to a defined use of a portion of another’s real property. (186)
21. d. Dominant tenement (186)
22. a. The property has been continuously used as an easement with the knowledge but without the permission of the owner for a period of time. (189)
23. c. Over time, the encroachment may become an easement by prescription that damages the property’s market value. (190)
24. b. a deed restriction. (185)
25. a. It involves a monetary claim against the value of a property. (194)
26. c. Real estate tax lien (196)
27. d. subordinate. (199)
28. a. the date of recordation. (197)
29. b. A state in which a mortgagor retains title to the property when a mortgage lien is created (198)
30. c. The lumber yard may place a mechanic’s lien for the amount of the lumber against the homeowner’s real property. (198)
31. b. an encroachment. (190)
32. b. transfers with the property. (186)
33. a. a party wall. (187)
34. d. A license, which terminates at the owner’s death (190)
35. b. general judgment lien. (195)
36. a. including a “ sale subject to lease” clause in the contract. (193)
37. b. In a sublease, the original tenant retains primary responsibility for performance of the original lease contract. (193)
38. a. A rights lease (193)
39. d. net lease. (191)
40. b. retail landlords.(191)
41. d. The tenant leases the ground from the landlord and owns the improvements. (192)
42. d. A deed can be valid with an incorrect parcel identification number on it. (180)
SECTION TEN: LEGAL DESCRIPTIONS
1. a. To create a consistent, unchanging standard for locating the property. (204)
2. b. They identify an enclosed area, beginning and ending at the same point. (205)
3. c. Metes and bounds (205)
4. b. point of beginning. (205)
5. d. Six miles by six miles. (208)
6. a. range. (208)
7. b. tier. (208)
8. d. Thirty-six (209)
9. a. 640 (209)
10. c. 80 acres (211)
11. b. will include a metes and bounds description. (207)
12. a. the lot and block number, with section, township and meridian references. (212)
13. c. properties located above or below the earth’s surface. (212)
14. c. To maintain a rectangle survey pattern on the earth’s curvature (208)
15. b. the property’s value. (213)
16. d. Surveyors rely strictly on records and plats filed with the county recorder’s office. (214)
SECTION ELEVEN: REAL ESTATE CONTRACTS
1. a. it represents a “meeting of the minds.” (217)
2. c. enforceable or unenforceable. (218)
3. b. is possibly valid and enforceable. (219)
4. c. a counteroffer. (224)
5. d. valuable consideration. (220)
6. c. is void. (221)
7. b. voidable. (218)
8. a. must act within a statutory period. (221)
9. b. require certain conveyance-related contracts to be in writing. (221)
10. b. The buyer has no obligations to the seller whatsoever. (225)
11. a. is void. (223)
12. d. The original offer is legally extinguished. (224)
13. a. may be assigned. (225)
14. c. A two-year lease. (222)
15. a. an option to purchase. (223)
16. c. it is performed. (225)
17. b. it is impossible to perform. (226)
18. b. specific performance. (227)
19. a. exclusive right-to sell agreement. (229)
20. b. exclusive agency agreement. (228)
21. c. open listing. (229)
22. d. net listing. (230
23. a. the client. (228)
24. a. To list the owner’s property in a multiple listing service. (231)
Section Tests Answer Key 487
25. b. the agent has a claim to a commission if the owner sells or leases to a party within a certain time following the listing’s expiration. (233)
26. b. the parties have completed a verbal, executory contract. (236)
27. c. The assignor has completed a legal action. (237)
28. a. the buyer can potentially force the seller to transfer ownership. (237)
29. a. entrust deposit monies to an impartial fiduciary. (237)
30. a. The seller may cancel the contract, since it can be ruled invalid. (238)
31. d. claim the deposit as relief for the buyer’s failure to perform. (238)
32. d. third-party loans surviving closing may be accelerated by the lender. (241)
33. a. The buyer must withhold 15% of the purchase price at closing for the seller’s capital gain tax payment. (241)
34. b. the optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so. (248)
35. d. The option is expired, and the tenant has no rightful claim to money paid for the option. (248)
36. a. The tenant can force the sale at the original terms. (248)
37. c. They give the optionee an equitable interest in the property. (249)
38. c. open listing. (229)
39. b. Molly’s Law disclosure (242)
40. c. Caveat emptor (245)
SECTION TWELVE: RESIDENTIAL MORTGAGES
1. c. hypothecation. (255)
2. a. The borrower gives the lender a note and a mortgage in exchange for loan funds. (255)
3. a. title-theory state. (255)
4. b. usury. (260)
5. c. $15,000. (261)
6. c. it is a negotiable instrument. (256)
7. d. may be required to execute a release of mortgage document. (258)
8. c. foreclosure. (264)
9. a. there is no right to redeem the property in a non-judicial foreclosure. (267)
10. b. a deed in lieu of foreclosure. (267)
11. c. mortgagor. (256)
12. a. It establishes the level of lender risk. (257)
SECTION THIRTEEN: TYPES OF MORTGAGES AND SOURCES OF FINANCING
1. b. Truth-in-Lending laws (289)
2. a. The Equal Credit Opportunity Act (291)
3. c. the Real Estate Settlement Procedures Act. (291)
4. b. Buying securities, changing the discount rate, and controlling banking reserves (284)
5. a. cycle funds back to primary lenders so they can make more loans. (287)
6. a. Fannie Mae, Freddie Mac, and Ginnie Mae. (287)
7. c. purchase FHA-backed and VA-backed loans. (274)
8. b. insure loans made by approved lenders. (274)
9. a. guarantee loans made by approved lenders. (276)
10. c. the loan payments gradually increase. (273)
11. b. the borrower pays additional interest at the onset in order to obtain a lower interest rate. (274)
12. a. the interest rate may vary. (272)
13. b. the seller offering the buyer a wraparound can profit from a difference in interest rates. (286)
14. b. a blanket mortgage loan. (274)
15. b. Payments are not sufficient to retire the loan. (272)
16. a. an appraisal report. (280)
17. c. the ability to re-pay, the value of the collateral, and the profitability of the loan. (280)
18. b. the lender wants to ensure the loan is fully collateralized. (280)
19. b. consider the income of a spouse in evaluating a family’s creditworthiness. (278)
20. a. safeguard against over-indebtedness. (281)
21. d. dividing one’s debts by one’s gross income. (282)
22. c. take-out loan commitment. (283)
23. a. an amortized loan is paid off over the loan period. (272)
SECTION FOURTEEN: REAL ESTATE-RELATED COMPUTATIONS AND CLOSING OF TRANSACTIONS
1. d. exchange legal title for the sale price. (301)
2. b. the lender wants to ensure proper handling of the collateral for the loan. (303)
3. b. the loan is to be sold to the FNMA. (304)
4. d. the buyer must pay the expense. (306
5. d. a debit to one party and a credit to the other. (307)
6. a. the excess of the buyer’s debits over the buyer’s credits. (307)
7. b. Inspection fees (307)
8. c. Taxes and interest (308)
9. d. Rents and insurance (307)
10. a. the seller must pay prorated expenses inclusive of the day of closing. (308)
11. d. $692 (311)
12. c. $195,200 (311)
13. a. by the end of the next business day. (298)
14. d. The property buyer (300)
15. b. 70 cents on each $100 of the sale price. (311)
16. c. $400. (312)
SECTION FIFTEEN: REAL ESTATE MARKETS AND ANALYSIS
1. c. Land and everything permanently attached to it (331)
2. a. The surface of the earth and all natural things permanently attached to the earth (331)
3. b. Immobile, indestructible, heterogeneous (331)
4. d. land does not include man-made structures. (331)
5. c. the amount of money a buyer and seller agree to exchange to complete a transaction. (347)
6. b. desire, utility, scarcity, and purchasing power. (348)
7. b. will increase. (349)
8. d. the market tending toward equilibrium. (338)
9. c. the market is over-supplied. (338)
10. a. The demand must literally come to the supply. (333)
11. b. base employment. (336)
12. a. have been increasing. (338)
13. d. expanding the sewer system. (337)
14. a. trade area population and spending patterns. (335)
15. c. costs of occupancy and building efficiency. (336)
SECTION SIXTEEN: REAL ESTATE APPRAISAL
1. a. if two similar properties are for sale, a buyer will purchase the cheaper of the two. (350)
2. a. is physically and financially feasible, legal, and the most productive. (350)
3. d. the price that a willing, informed, and unpressured seller and buyer agree upon for a property assuming a cash price and the property’s reasonable exposure to the market. (351)
4. b. the broker may not be a disinterested party. (352)
488 Principles of Real Estate Practice in Florida
5. a. there may be no recent sale price data in the market. (354)
6. c. select comparable properties, adjust the comparables, estimate the value. (354
7. b. the seller offers below-market seller financing. (356)
8. b. weights the comparables. (356)
9. b. market value is not always the same as what the property cost. (360)
10. b. replacement cost. (361)
11. d. functional obsolescence. (361)
12. b. incurable economic obsolescence. (361)
13. c. depreciation (361)
14. a. estimate depreciation, subtract depreciation from cost, and add back the land value. (362)
15. b. $8,500 (363)
16. b. Apartment buildings (364)
17. c. estimate net income, and apply a capitalization rate to it. (365)
18. c. potential gross income minus vacancy and credit loss minus expenses. (366)
19. b. $400,000 (366)
20. a. numerous expenses are not taken into account. (368)
21. b. $240,000 (368)
22. c. For federally related transaction appraisals (345)
23. c. Federally related transactions (345)
24. b. Appraisals can be used in preparing CMAs. (369)
SECTION SEVENTEEN: REAL ESTATE INVESTMENTS & BUSINESS OPPORTUNITY BROKERAGE
1. b. the more the investor stands to gain, the greater the risk that the investor may lose. (373)
2. a. income and tax benefits. (374)
3. c. debt. (375)
4. d. relatively illiquid. (376)
5. b. a more management-intensive investment. (376)
6. d. gross income minus expenses minus building depreciation. (377)
7. c. deduct interest payments from income. (379)
8. d. The owner may be able to exclude capital gain from taxable income when the property is sold. (381)
9. c. may be deducted from the sale price for gains tax purposes. (379)
10. b. the difference between net sale proceeds and adjusted basis. (380)
11. a. cost recovery expense. (382)
12. c. dividing cash flow by the investor’s equity. (384)
13. a. propose an asset sale. (385)
14. b. intangible assets. (386)
15. c. the value or price of the business over and above the value of its other assets. (387)
16. a. Real property (385)
17. c. perform due diligence. (388)
SECTION EIGHTEEN: TAXES AFFECTING REAL ESTATE
1. c. There are no federal ad valorem taxes. (392)
2. c. may delegate taxing authority to county governments. (392)
3. c. impose property taxes for specific municipal services. (392)
4. b. create a two-mile extension of county sewer facilities. (393)
5. b. the assessed value of property. (393)
6. b. the total of all assessed values of properties minus exemptions. (393)
7. d. smooth out wide discrepancies of assessed values within the district. (394)
8. c. appeal to adjust the assessed valuation. (394)
9. b. to offer an amount of tax relief on an owner’s principal residence. (396)
10. a. dividing the tax requirement by the tax base. (395)
11. c. multiplying each district’s tax rate times the taxable value of the property. (395)
12. a. it only applies to properties which will benefit from the public improvement. (398)
13. b. entitles its holder to apply for a tax deed after a certain period. (399)
14. b. gives a delinquent taxpayer a grace period prior to the tax sale to pay property taxes. (399)
15. d. 10 mills. (392)
16. b. market value. (394)
17. d. Appeal to a higher court (394)
18. a. Head of the family (396)
19. c. subtracting exemptions from the assessed value. (394)
SECTION NINETEEN: PLANNING, ZONING, AND ENVIRONMENTAL HAZARDS
1. a. balance individual property rights with the community’s welfare. (405)
2. d. a fusion of land use laws and local land use objectives and strategies. (406)
3. a. zoning. (407)
4. c. police power. (411)
5. d. sell the property to the municipality. (411)
6. c. the planning commission. (408)
7. b. delegation of authority by state-level enabling acts. (411)
8. a. reasonably promote community health, safety and welfare. (412)
9. d. To ensure that improvements comply with codes (412)
10. b. regulate density. (412)
11. a. a special exception. (414)
12. c. a legal nonconforming use. (413)
13. a. it would cause the property owner unreasonable hardship to bring the property into compliance with zoning ordinances. (414)
14. b. a plat of subdivision. (415)
15. c. the construction complies with building codes. (416)
16. a. Florida’s Growth Policy Act (408)
17. d. Future land use (409)
18. b. includes risk categories based on wind speed. (415)
19. b. refers to insulation’s resistance to heat flow. (416)
20. c. a licensed pest control company inspector. (419
