MACINTOSH REAL ESTATE SCHOOL
PREP EXAM QUESTIONS - COLORADO PORTION
Frequently Answered Questions
For quick access to the answers to a particular question, please
click on the hyperlinks in the table
below corresponding to the Final Exam Question Number - they will take you directly
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PREP EXAM QUESTIONS - COLORADO PORTION
Please note: occasional reference may be
made to a page, in our text, section number, or C.R.S. statute in these
answers. Because we are very flexible about allowing students time to
complete the program andwe are
constantly updating the materials, your page or section numbers
may not be exactly the same as referenced in the explanation.
A note about Category Analysis for each question: Each question is designated into
one of five different categories (which are, in turn, sub-divided into smaller categories. For
example, "FORMS" (Ch. 21) is divided into which forms the question asks about). These categories basically
correspond to the chapters in the MacIntosh Colorado (Contracts and Regulations) manual/workbook.
In turn, those chapters are roughly divided into similar categories as the questions on the Colorado
portion of the license exam.
There are some exceptions to these rules, however, that students should know when reviewing
the prep exam. This way you will know where to find the information on which
to focus in your review of the prep exams and preparations for the license exam.
The main thing to watch out for is that certain aspects of Colorado topics are also examined
in depth elsewhere in the MacIntosh course materials. Therefore, the student should be studying
in several different locations in the materails for those topics. For example,
1) License Law questions are separately categorized for the specific license law statutes (Ch. 14 -
Colorado book) and unique Colorado agency relationships such as "Transaction Broker" (detailed
in Ch. 2 of the Uniform book.);
2) The majority of "Rules and Regulations" (Ch. 15 and 16) involve the provisions of Rule E, which
is also the subject of the entire "Trust Accounts and Record Keeping" course;
3) There will be many "Closings" questions on the license exam, which are discussed in the Closings
course;
4) Colorado Liens and Foreclosures are heavily tested on the Colorado portion of the license exam and
are thoroughly discussed in Chapter 10 of the Uniform book;
5) Similarly, interests rates, property taxes, security deposits, lease terminations, etc., are
analyzed in their appropriate locations throughout the Uniform course. (The Glossary/Index at
the end of Book Three identifies which chapters such terms appear.)
Question #1
CATEGORY: Uni-LISTINGS Correct answer: d
A listing where the owner of the property may sell it on his own without paying a commission, or having a single broker sell the property for a pre-agreed upon percentage of the purchase price is called:
a) Exclusive Right to Sell Listing
b) Open Listing
c) Net Listing
*d) Exclusive Agency Listing
Look at the definition of Exclusive Agency Agreement in the Dictionary we provide (first "Instructions" book) and in Chapter 2.
This is also similar to Question #73 on this Colorado Prep Exam.
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Question #2
CATEGORY: RULES & REGS - Correct answer: b
A brokerage-firm or broker must maintain at least two trust accounts if the following is true:
a. the branch is 35 miles or more away from the main office
*b. the broker manages seven rental properties
c. someone other than the broker manages/maintains the account
d. the broker manages/maintains the account
Answer "a" is complete nonsense. So is answer "d". A broker must maintain a trust account if they handle anymoney for others. This has nothing to do with whether they need two or more accounts.
Answer "c" is possible – if the wording was a little different.
The correct answer ("b") comes from the Property Management brokerage requirements:
Chapter 15: Rule E-1. Trust accounts; requirements and purposes
(i) Separate escrow accounts required for managing 7 or more residences
A broker who manages less than seven (7) single family residential units may deposit rental receipts and security deposits and disburse money collected for such purposes in the "sales escrow" account.
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Question #3
CATEGORY: RULES & REGS - Correct answer: b
What must an associate broker include on her advertising (signage)?
a. employing broker full licensed name
*b. name and telephone of employing broker
c. agency name
d. name as exactly registered with real estate commission
In order to determine the best answer for any question – especially this one - you need to look at Rule E-8 (and possibly C-19, depending on the wording of the question and the answers) plus use the process of eliminating the “worst” answers:
“E-8. Advertising
A real estate licensee who performs any act requiring a license, including advertising services or advertising property belonging to another, shall do so in the name of the employing broker.”
So the reason the answer to this question (very common on the license exam) is “name and telephone of employing broker” is because it is the best choice of the four, considering the rules C-19 and E-8. Answer “a” is good – but not as complete as “b” (and “a” says, “full licensed name” which is not really true because the Rule just says “employing broker’s name”. So, the point is that you’re trying to identify the broker that is in charge (including the brokerage’s phone number, ideally.) The answer with the most “identifying” information is the best, in this case “b”.
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Question #4
CATEGORY: FORMS - Counterproposal - Correct answer: a
Who signs the counterproposal?
*a) seller
b) buyer
c) broker
d) appraiser
Another way to say "counterproposal", is "counteroffer". The first person (buyer) makes the offer, and the second person (seller) changes the terms a bit and makes the counteroffer. So who makes the "counteroffer"? It’s the second person in the facts/scenario/question wording, the buyer.
Since this question is very basic (does not describe a complicated scenario where offers are going back and forth) the answer to "Who signs the counterproposal?" then the answer will be seller. In that case, they are fishing for the basic situation where buyer makes the offer (proposal) to buy and then seller comes back with the second(counter) proposal at a higher amount or at additional terms.
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Question #5
CATEGORY: LICENSE LAW - Correct answer: b
With whom must a developer or a broker register a timeshare?
a) Land Use Commission
*b) Real Estate Commission
c) Secretary of State
d) HUD
Read the first 5 pages of the first Chapter in the Colorado course. You will find a half-dozen questions come from just these few pages. The answer is "a" Real Estate Commission. This is only part of what you need to know from that section of the materials:
The Division of Real Estate is part of the Department of Regulatory Agencies and is responsible for budgeting, purchasing, and related management functions. The director of the Division is an administrative officer who executes the directives of the Commission and is given statutory authority in all matters delegated by the Commission.
The Division of Real Estate is the licensing, regulation and enforcement agency for real estate brokers, appraisers, mortgage brokers, subdivision developers, and the holders of conservation easements. Licensees must comply with education and/or experience requirements, reciprocity and/or pass a general and/or state portion of the licensing exam prior to licensure.
The Division’s objectives are to:
• Provide protection to consumers and other stakeholders.
• To educate consumer on their rights and promote consumer awareness throughout the State of Colorado
• To enforce state and federal laws, rules, regulations and standards and impose disciplinary action when recommended
• To license real estate brokers
• To license real estate appraisers
• To license mortgage brokers
• To register timeshares and raw land subdivisions developers
• To certify the holders of conservation easements
• Investigates complaints
• To enforce compliance with state and federal laws.
• To impose the recommended disciplinary actions against licensee
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Question #6
CATEGORY: Uni-AGENCY - Correct answer: b
What can an Agent do?
a) discuss with the buyer their client’s reasons for selling the property
*b) Inform either party of the other's inability to complete the transaction
c) inform the seller as to the buyer’s reasons for purchasing the property
d) tell the buyer that their client, the seller, would accept less than the asking price.
This comes from that all-important Chapter 2and Chapter 14, that you really need to review carefully:
12-61-804. Single agent engaged by seller or landlord.
(1) A broker engaged by a seller or landlord to act as a seller's agent or a landlord's agent is a limited agent with the following duties and obligations:
(a) To perform the terms of the written agreement made with the seller or landlord;
(b) To exercise reasonable skill and care for the seller or landlord;
(c) To promote the interests of the seller or landlord with the utmost good faith, loyalty, and fidelity, including, but not limited to:
(I) Seeking a price and terms which are acceptable to the seller or landlord; except that the broker shall not be obligated to seek additional offers to purchase the property while the property is subject to a contract for sale or to seek additional offers to lease the property while the property is subject to a lease or letter of intent to lease;
(II) Presenting all offers to and from the seller or landlord in a timely manner regardless of whether the property is subject to a contract for sale or a lease or letter of intent to lease;
(III) Disclosing to the seller or landlord adverse material facts actually known by the broker;
(IV) Counseling the seller or landlord as to any material benefits or risks of a transaction which are actually known by the broker;
(V) Advising the seller or landlord to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of such broker;
(VI) Accounting in a timely manner for all money and property received; and
(VII) Informing the seller or landlord that such seller or landlord shall not be vicariously liable for the acts of such seller's or landlord's agent that are not approved, directed, or ratified by such seller or landlord.
(d) To comply with all requirements of this article and any rules promulgated pursuant to this article; and
(e) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations.
(2) The following information shall not be disclosed by a broker acting as a seller's or landlord's agent without the informed consent of the seller or landlord:
(a) That a seller or landlord is willing to accept less than the asking price or lease rate for the property;
(b) What the motivating factors are for the party selling or leasing the property;
(c) That the seller or landlord will agree to financing terms other than those offered;
(d) Any material information about the seller or landlord unless disclosure is required by law or failure to disclose such information would constitute fraud or dishonest dealing; or
(e) Any facts or suspicions regarding circumstances which may psychologically impact or stigmatize any real property pursuant to section 38-35.5-101, C.R.S.
The above section applies to the seller, but the statute applying to the buyer is virtually identical – so applies equally well to this question.
So you have to use the process of elimination. In this question, three of the choices are things (above) that an agent can not do. The other – remaining – choice is something that the agent can do – and is therefore the correct answer. (b) Here, it is clearly a material fact that their client is unable to sell or buy the property, and to continue with the transaction would certainly constitute dishonest dealing. So, even though it might be a "secret" about their client, the broker would not be liable for disclosing that their client can’t go through with the deal. (Put another way, they would be liable if the contract went all the way through and failed at closing – and the broker knew all along that it would fail.)
Know the passage above, because it will answer several questions on the Colorado License Exam.
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Question #7 - CATEGORY: Uni-AGENCY - Correct answer: b
Who is allowed to add terms to a contract?
a) Listing Broker
*b) The parties
c) Selling Broker
d) The lender
The point here is that brokers can’t change the contract without the consent of the parties. So answers such as, "only the buyer" or "only the seller" or "only the parties" or "the buyer and seller" - will be correct.
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Question #8
CATEGORY: Uni-AGENCY - Correct answer: b
Agent is listing her own house for sale, when must she disclose she is also an agent?
a) Not until closing
*b) Immediately
c) When signing contract to buy
c) When giving agency relationship disclosure
Licensees must be completely and immediately up-front with potential sellers or buyers. This is true, even when the licensee is dealing with their own properties and not acting in their capacity as an agent.
This is because a licensee is in a position of superior knowledge, based on their superior real estate education and training. If something goes wrong in the transaction and the other party sues, failure to disclose their superior knowledge would certainly be used as a major strike against them.
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Question #9 -
CATEGORY: CLOSINGS - Correct answer: d
How does the appraisal fee appear on the settlement statement?
a) debit appraiser
b) debit seller
c) debit lender
*d) debit buyer
This is an easy "Closings"-type question, that simply expects that you know 1) what is a “debit” (and what is a credit), and 2) what are the three columns on the worksheet/settlement statement.
To answer this question, all you have to do is ask yourself one question: "Who gets the appraisal, who is it for?"
What is the appraisal for, and who wants it? The lender! The lender wants to know what the house is worth so that they can determine whether (and how much) to lend to the buyer.
The buyer gets the loan… so the answer is "buyer".
This applies to any "Closings"-type question or calculation. Ask yourself who "gets" that item, then that person "pays" for that item, and then it is a debit for that party.
If it is any kind of loan fee – such as an appraisal, Discount Points, Origination Fee, loan closing fee (not just the sales closing fee – which is always split between buyer and seller) then it is a BUYER DEBIT and buyer pays for it.
...
Other questions on Mac exams give the answer to a "Who Pays for..." Question as "negotiable" or "either buyer or seller", etc. So how do we know that the answer to this particular question is automatically "Buyer" if it doesn't specify?
You would be correct if this were one of those questions that was asking about the sales contract.
So, if it were asking “According to the Contract to Buy and Sell Real Estate, who pays for the appraisal?”
then that answer would be “negotiable” or “either buyer or seller”, etc., because the contracts require the broker to have the parties specify who is responsible
for paying items - by checking the appropriate box, etc.
But this actual license-exam question does not reference the Sales Contract, so the “negotiable” answer is not what it is getting at.
Instead, as stated above, this is a “Closings” question – that is expecting you to understand that “Appraisal” is normally a lender figure (because the lender
requires the appraisal to determine the buyer’s loan amount) and -absent any information to the contrary- the buyer always pays their own lender fees.
Note that you will get a question similar to this on the license exam. However, it will reproduce a copy of a blank HUD-1 Settlement Statement and it will ask you “What goes on line 212 of the HUD-1 statement.” (Or similar line.) It may be an appraisal, it may be Origination Fees or Discount Points. You will need to look on the HUD-1 form provided, and determine the answer… But if you understand that the Buyer pays lender fees, and that a “debit” is a payment – then you will know that the answer to the question about “Where does a certain loan fee appear on the HUD-1/Settlement Statement” is Buyer Debit.
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Question #10 -
CATEGORY: FORMS-Deed of Trust Correct answer: b
What is on a Colorado commission approved Trust Deed/Deed of Trust?
a) 1% interest increase for default
*b) Strict Due on Sale
c) 15% disbursement rate
d) one year property insurance paid in advance
The only one that is officially to do with the DOT is "Strict Due on Sale", because that is one of the kinds of CO D.O.T.s. The other answers have blanks that must be completed and therefore things like time-periods ("one year") or percentages ("1%" or "15%") are variable and not always on the DOT. In other words, “a”, “c” and “d” are all provisions of the Deed of Trust (interest increase, disbursement rate and property insurance) but they do not state those specifics. (“1%”, “15%”, “one year” – are not on that form.)
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Question #11 - Correct answer: c
CATEGORY: Uni-PROP MGMT
By law a property manager is not required
to keep records by which of the following methods?
a) Journal
b) Ledger
c) "Good Funds" reconciliation
d) Escrow bank account
Detailed in the Record Keeping course - under "Property
Management Records".
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Question #12 - Correct answer: c
CATEGORY: CONTRACTS-Sales
According to the Colorado Contract to Buy
and Sell Real Estate, by law who pays for the cost of the appraisal?
a) Buyer
b) Seller
c) Subject to negotiation
d) The buyer's broker must bear the cost of all expenses
The answer to the first one is that BY LAW, no
one must pay for the appraisal. So the answer would be "none of the
above" or "subject to negotiation", etc.
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Question #13 - Correct answer: a
CATEGORY: Uni-Land Interests
In Colorado, which of the following uses
has priority in determining the right to use water from a natural stream
or river when the capacity is insufficient for all those desiring to use
it?
a) Domestic use always has priority;
b) Agricultural use always has priority;
c) Any parcel having an area 35 square acres or greater;
d) Priority of use is not provided for in the Colorado
Constitution, so it will be determined for the party demonstrating the
greatest need.
The mention of "35 acres" was a
nonsense answer; "35 acres" has nothing to do with water rights.
Where it does come in is in Subdivision development. Building multiple
parcels (such as a single-family housing development) on plots of land
less than 35 acres requires the very annoying (for developers) process of
registering as a subdivision developer, and filing infrastructure plans
with the county for approval, building sidewalks and lighting, etc.
Water rights are specifically mentioned in that Chapter 3, again. Page 3-12 and
3-13: "Priority of appropriation shall give the better right as
between those using the water for the same purpose; but when the waters of
any natural stream are not sufficient for the service of all those
desiring the use of the same, those using the water for domestic purposes
shall have the preference over those claiming for any other purpose, and
those using the water for agricultural purposes shall have the preference
over those using the same for manufacturing purposes." "
It should be noted the State Constitution provides a preference in use,
placing domestic use first, followed by agricultural use." What that
means is that the Doctrine of Priority of Use goes: Domestic use first,
Agricultural use second, Industrial use last. Colorado follows this
Doctrine, as well as the Doctrine of Prior Appropriation - discussed in
the same section.
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Question #14 - Correct answer: c
CATEGORY: CONTRACTS-Sales
According to the Colorado Residential
Contract to Buy and Sell, which of the following is not true of the
buyer's right to inspect the property?
a) Seller will furnish a property disclosure form by the date
specified;
b) Buyer must furnish notice of any unsatisfactory condition
before the Inspection Objection Deadline or the condition of the property
will be deemed satisfactory to the buyer;
c) If written notice is given by the buyer by the Resolution
Deadline specified, the contract will be considered terminated
immediately;
d) Buyer is responsible for any damage caused by the inspection.
What is the explanation for answer "c" being correct?
Remember that this question is asking you which one of the choices
is not in the Contract to Buy and Sell. These kinds of questions are three
times as difficult as questions which as "Which one of these things
is true?" So, the wording of three answers is correct, according to
the contract, and one of them is not exactly correct.
See Section 10 of the Sales Contract in Chapter 21, and also the explanatory breakdown of
Section 10: "10. PROPERTY DISCLOSURE, INSPECTION... Section 10 pertains to buyer's right to inspect
the property. It provides: (1) Seller will furnish a property disclosure
form by the specified date; (2) Buyer has the right to inspect the
premises and must furnish notice of unsatisfactory condition before the
Inspection Objection Deadline or the condition of the property will be
deemed satisfactory to the buyer; (3) If notice is sent and a resolution
is not reached by the Resolution Deadline, the contract terminates immediately,
(unless the buyer withdraws in writing the objection); (4) Buyer is
responsible for any damage caused by the inspection.'
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Question #15 - Correct answer: b
CATEGORY: Uni-LIENS & ENCUMB
An Estoppel Certificate is:
a) A required Rule F Disclosure form that must be provided by
Colorado property management brokers to their landlord principals;
b) A document signed by tenant and provided to the property
owner's lender stating the current status of the lease and preventing the
tenant from future claims against the lender for unreturned security
deposits;
c) A document required by the Department of HUD in order to
release a veteran borrower from liability on an assumed VA loan;
d) Evidence from a licensee submitted to the Colorado Real
Estate Commission stating that the licensee has fulfilled the 2-year
experience requirement and is now eligible to become an Employing Broker.
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Question #16 - Correct answer: d
CATEGORY: RULES & REGS
The Colorado Real Estate Commission may
not investigate and penalize a licensee for which of the following?
a) Acting for more than one party without the required
disclosure;
b) Failing to keep records regarding money belonging to others
for at least four years;
c) Conviction of a felony for forgery
d) Accepting a fee from a mortgage lender without full disclosure
and written consent from both buyer and seller.
The three choices that are considered a violation are specifically listed
in CRS 12-61-113 in Chapter 14: ("12-61-113. Investigation -
revocation - actions against licensee.") Answer "a" ("Acting
for more than one party without the required disclosure") is CRS
12-61-113(1)(d); Answer "b" ("Failing to keep records for
four years") is CRS 12-61-113(1)(i); Answer "c" ("conviction
without disclosure") is CRS 12-61-113(1)(m).
Answer "d"
("Accepting a fee from a mortgage lender without full disclosure and
written consent from both buyer and seller.") is the only possible correct answer
because of a "technicality". Rule E-18 (Chapter 15) states: "A licensee shall not
accept... a ... fee... for placing a loan with a mortgage lender ...
in any real estate transaction in which the licensee... is entitled to receive a commission
... unless the licensee fully informs any party with whom they have
established a brokerage relationship... and obtains prior
written consent of such party.
In other words, the Rule says that the broker must obtain written permission from one party -
the one with whom they have the brokerage relationship. (This would most likely be the
buyer - the one who is actually getting the loan.) Since Answer "d" says "both parties",
it is technically false - and therefore the correct answer to this question.
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Question #17 - Correct answer: a
CATEGORY: RULES & REGS
Every applicant for an Associate Broker's
license in Colorado must submit which of the following?
a) Fingerprint card;
b) Proof of completion of the 168 hours of required education;
c) Proof of completion of the 48-hour course in Real Estate Law
and Practice;
d) Proof of successful passage of both parts of the state
license exam.
Note that it says every applicant... Not
every applicant needs to complete 168 hours (if you have had a previous
salesperson license, or if you are a previously-licensed broker, or are a
licensed attorney - you do not necessarily have to take all six courses or
the full 168 hours). For the same reasons, not every applicant must take
the 48 hour Uniform course, or both parts of the state license exam.
However - everybody must submit a fingerprint card with their application.
Examples of licensee applicants who are not required to pass both parts of the license exam:
A licensed attorney need only pass a 12-hour course in Closings and
Trust Accounts and pass only the Colorado portion of the license exam.”
Examinees who have an active license in another state need only pass the
Colorado portion of the license exam, not both parts.
This is the significance of the statement in Chapter 14, under 12-61-103(6)(a)
“The applicant for a broker's license shall submit to and pass an examination
designated to determine the competency of the applicant …The examination shall
include, but not be limited to, ethics, reading, spelling, basic mathematics,
principles of land economics, appraisal, financing, a knowledge of the statutes
and law of this state [Chapter 14] relating to deeds, trust deeds, mortgages, listing
contracts, contracts of sale [Chapter 21], bills of sale, leases, agency, brokerage [Chapters 2 & 15, 16],
trust accounts [Record Keeping course], closings [Closings course], securities, the provisions of this part 1, and the
rules of the commission [Chapter 15] ….”
You can also see this illustrated in the matrix starting on page 3 of the actual
license application
that you will be using when you apply for your license.
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Question #18 - Correct answer: b
CATEGORY: LICENSE LAW
The Colorado Real Estate Commission's
objectives and the License Law do not cover which of the following?
a) The basic definition of a real estate broker;
b) The ethical standards that should be observed in the real
estate industry;
c) Maintaining records of historical information concerning the
licensing status of corporations, partnerships and limited liability
companies;
d) Publication of specialized licensing and educational
pamphlets.
Does this really mean the commission does not get involved in
the ethics part of real estate? And where is that in the book?
No - This is not saying that the commission does not get involved in
the ethics part of real estate. The question is saying that there are
specifically-listed "Objectives" and specifically-listed License
Laws. Three of the choices are given in either those Objectives or the
License Law, and one of them is NOT.
The "Objectives" are listed
right at the beginning of Chapter 14 (page 3): "The overall objective
of the Commission is to protect the public. The methods of obtaining this
objective are included in the following activities or programs..."
Answers "a", "c", and "d", are specifically
listed in that section, and answer "b" ("The ethical
standards that should be observed in the real estate industry") is
NOT. In fact, it specifically says on page 14-2: "The law does not
dictate the ethical standards that should be observed in the real estate
industry..."
Students tend to treat these first few pages of Chapter
14 as merely introductory. However, it is *guaranteed* that you will get
*at least* two questions on the state license exam (Colorado part) from
these first pages. It even says that in the green Candidate Handbook that
every student receives: "The state portion of the licensure
examination... I - Duties and Powers of the Real Estate Commission (2% - 2
questions); A. General Powers; B. Investigations, hearings and appeals;
criminal violations.
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Question #19 - Correct answer: b
CATEGORY: CLOSINGS
On the closing worksheet, what would be
the Colorado State Documentary fee on a property that sold for $89,950?
a) $8.95 Debit Buyer
b) $9.00 Debit Buyer
c) $89.95 Debit Buyer
d) $89.95 Debit Seller
When figuring the Doc Fee, do you round to the nearest dollar?
No, when calculating you should round up to the nearest cent. It just so happens that the
nearest "cent" here is also the nearest dollar ($9.00). Since
the doc fee is "1 cent per $100 of sales price", the best way to
accurately determine the doc fee is the divide the sales price by $100 and
then multiply by 1 cent ($.01): $89,950 / $100 = 899.50. $899.50 x .01 =
$8.995. Since you can't do anything with a half-a-cent you must round up
to the nearest cent, which is $9.00.
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Question #20 - Correct answer: c
CATEGORY: LICENSE LAW
What happens to a licensee's license if
the Employing Broker's E & O insurance lapses?
a) Nothing happens, because every licensee must carry their own
E & O insurance
b) The licensee has a 30-day grace period to allow the employing
broker to obtain alternate insurance
c) The employed licensee's license is inactivated
d) The licensee must pay for the employing broker's insurance
This is because when E&O insurance lapses,
the licensee's license is rendered "inactive" (even an employing
broker). When an employing broker's license is inactivated, revoked or
suspended, the licenses of those Associate Brokers licensed under the
Employing Broker's license are inactivated (until they find an alternate
Employing Broker.)
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Question #21 - Correct answer: b
CATEGORY: CONTRACTS-Lead-Based Paint Discl
The Lead Paint Disclosure does NOT cover:
a) paint
b) asbestos
c) pipes
d) soil
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Question #22 - Correct answer: d
CATEGORY: RULES & REGS
Rule E-35, which requires brokerage
relationships be disclosed in writing is required in which of the
following circumstances?
a) small talk concerning price range
b) bona fide open house showing
c) responding to general factual questions from a potential
buyer concerning properties which have been advertised for sale
d) when the licensee elicits confidential information
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Question #23 - Correct answer: b
CATEGORY: Uni-TAX
Colorado law requires that non-resident
individuals who sell real estate within Colorado are subject to a state
withholding tax, which applies to all sales over $100,000. The tax is the
lesser of 2% of the sales price, or net proceeds of the sale due to the
sellers. In this particular problem, sellers are residents of Florida who
are selling their investment property in Colorado for $428,000. At
closing, they must pay off the balance of the loan on the property of
$385,200, a broker's commission of 6%, and additional closing costs of
$11,620. What amount will the closing company pay to the State of Colorado
for the withholding tax on this sale?
a) $8,560
b) $5,500
c) $856
d) Nothing. The proceeds are insufficient to pay the 2% tax.
$428,000 - $385,200 - $25,680 - $11,620 = $5,500.
$5,500 is all they
have left. Note that the facts tell you that "the tax is the lesser
of 2% of the sales price, or net proceeds of the sale due to the
sellers," so since the $5,500 net proceeds is less than the $8,560
(2% of sales price) so $5,500 is the maximum amount that the govt. can
take from the sellers.
The other trick of this question is that examinees
will often incorrectly use (or read) their calculators and drop a digit
(therefore, they will see $856, instead of $8,560.) And, of course, the
facts say nothing about the option of paying "nothing", and in
any case, the proceeds are sufficient to pay at least $5,500.
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Question #24 - Correct answer: b
CATEGORY: LICENSE LAW-agency rels
An employing broker who designates a
licensee to act as a seller's agent for one party and designates that same
licensee to act as a buyer's agent for the other party to the contract:
a) has no agency relationship with either seller or buyer
b) has formed a Dual Agency
c) must execute a licensee buy-out addendum
d) must have the buyer execute a buyer-agency agreement
This would be dual agency by definition and law.
See, Chapter 2, under "The Newer Colorado Law of Agency: Designated
Brokerage", Paragraph 2 of the description of the legislation: "An
individual may be designated to work for the seller or landlord treating
the buyer or tenant as a customer, or as a single agent for a buyer or
tenant treating the seller or landlord as a customer, but not as a single
agent for both."
So, it is important to understand that if a single broker wants to
work with both seller and buyer, they can't do so as a single agent for
both: They must have either the buyer or seller "switch" to "customer",
or have both switch to Transaction Broker relationship… and do so by
means of the Change of Status form. Otherwise, representing both brokers
under single agency is most definitely "Dual Agency" (and
prohibited by Colorado law).
In a company with more than one broker, the alternative would be to
have another broker work with one of the parties and have the brokerage "Designate"
one broker to work with seller and another broker to work with the buyer
(under single agency). This would not be Dual Agency.
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Question #25 - Correct answer: b
CATEGORY: CONTRACTS-Sales
If a seller has a signed Contract to Buy
and Sell Real Estate and wants to change the closing date, how should the
seller go about doing it?
a) Tell the buyer verbally about the closing date change
b) Fill out the Agreement to Amend/Extend Contract with the new
date
c) Fill out the Counterproposal with the new date
d) Fill out the Agreement to Amend/Extend Contract with Broker
with the new date
The answer is "b", because the proper way to change the closing date is to complete and execute an Amend/Extend Agreement. (See Chapter 21, the final Contract Problem.) Ideally, both parties - seller AND buyer - should be executing the Amend/Extend, so if you get a question like this on the license exam that includes the buyer - that would be a better answer. However, that option (+ buyer) was not a choce when this question has appeared on the license exam, so the best answer is "b".
The answer is not "d", even though it is advisable to have the broker present whenever modifying the terms of the deal. However, when the answer says "fill out", that is really a tricky way of the license exam saying "execute" - which means "sign"! If you look at the Amend/Extend examples in Chapter 21, you'll notice that the broker does not execute (sign) the Amend/Extend. That is why the broker - even though she may be "present" - does not execute (or "fill out") the Amend/Extend.
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Question #26 - Correct answer: a
CATEGORY: LICENSE LAW-agency rels
The following may make changes to real
estate paperwork / contract, EXCEPT?
a) Buyer's Broker
b) Buyers and Sellers
c) An attorney for Buyer or Seller
d) Broker's Attorney
The answer should be "a" - the broker.
The parties can make changes to their own legal documents and an attorney
can do this - but all the broker can do is fill out the paperwork
according to the instructions of the parties.
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Question #27 - Correct answer: d
CATEGORY: Uni-TITLE
The best way to get a condensed history
of title on a property is with:
a) Torrens Title
b) Chain of Title
c) Affidavit of Title
d) Abstract of Title
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Question #28 - Correct answer: c
CATEGORY: LICENSE LAW-agency rels
If two brokers from different firms are "talking"
about lowering their commission rates in a particular market, is it:
a) Illegal
b) Legal
c) Legal as long as they don't act on it
d) Unethical as it prevents trade
The answer is "legal as long as they don't
act on it", because it wouldn't be collusion or illegal until they
acted to actually lower their commissions.
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Question #29 - Correct answer: b
CATEGORY: CLOSINGS
For a Colorado closing which occurs on
January 15: Prior year's taxes owing $850; Current year's taxes based on
previous year's taxes. What figures will appear in the "Current
year's taxes" row on the worksheet?
a) Debit Seller $32.61 / Debit Buyer $817.39 / Credit Broker
$850.00
b) Debit Seller $32.61 / Credit Buyer $32.61
c) Credit Seller $817.39 / Debit Buyer $817.39
d) Debit Seller $850.00 / Credit Buyer $850.00
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Question #30 - Correct answer: c
CATEGORY: CLOSINGS
If the sales price is $207,359.60, what
is the Documentary fee?
a) $2.07
b) $5.00
c) $20.74
d) $207.36
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Question #31 - Correct answer: a
CATEGORY: CLOSINGS
In Colorado, in a sale with a "New
Loan" closing, who normally pays for the loan closing fee on the
settlement statement?
a) Buyer
b) Seller
c) Listing Broker
d) Split Between Buyer and Seller
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Question #32 - Correct answer: d
CATEGORY: CLOSINGS
Closing on a sale and New Loan occurs on
February 1. The new 30-year fixed-rate loan is $90,000 at 7% interest.
Monthly payment will be $598.77. On the closing worksheet, what will be
the entry on the line for "Interest on New Loan"?
a) Debit Buyer $598.77, which will pay for February's loan
payment. The next payment will be due on March 1.
b) Debit Buyer $598.77, which will pay for January's payment.
c) Debit Buyer $535.06, which will pay for January's interest -
and the first regular loan payment is not due until March 1.
d) Debit Buyer $483.28, which will pay for February's interest -
and the first regular loan payment is not due until April 1.
If your closing occurs on Feb. 1, and there is a new loan, then
buyer (borrower) will be paying interest for the full month of February
(28 days, presumably). Since it is a new loan - they will not be paying
any interest for January - because they didn't have the loan in January.
So, in that case it would be 28 x 17.26.
Technically, the calculation
would be: 90,000 x .07 = $6,300. 6,300 / 365 = $17.260 x 28 = $483.28.
What this does, however, is pay borrower's interest all the way through
February, which would cover the March 1 payment due! So, the next
payment would not be due until April 1 - exactly 2 months after closing!
(The April 1 payment would then be paying the March interest.)
A lot of people get confused that even though we are paying for the full
month coming up following closing (in this case, it would be February), we
are paying off the [the interest for the] March payment, because
interest is paid in arrears. Basically, with an assumed or New
Loan, you have to pay the interest for the rest of the month -
INCLUDING the day of closing, because borrower owns the property (and
loan) as of the day of closing.
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Question #33 - Correct answer: b
CATEGORY: CLOSINGS
After the June 8 closing on the sale of a
duplex, seller will continue to live on and rent one half of the duplex
after closing. Seller will pay rent in the amount of $975 per month. On
the closing worksheet, seller will need to pay a prorated part of June's
rent. How will the rent appear on the closing worksheet?
a) Debit Seller $975 / Credit Buyer $975;
b) Debit Seller $747.50 / Credit Buyer $747.50;
c) Debit Seller $747.50 / Debit Buyer $227.50 / Credit Broker
$975;
d) Debit Seller $723.40 / Credit Buyer $723.40.
975 / 30 = $32.50 x 23 days (June 8 through June 30). Yes, buyer
owns the property on June 8, and seller only owns it to June 7, but that
also means that seller is now the renter starting on June 8.
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Question #34 - Correct answer: a
CATEGORY: CLOSINGS
Closing takes place on November 18, and
the seller pre-paid the yearly hazard insurance premium on May 28 in the
amount of $780. How will this entry appear on the settlement sheet of an
assumed loan?
a) Debit Buyer / Credit Seller $408.17
b) Debit Seller / Credit Buyer $371.83
c) Debit Buyer / Credit Seller $780
d) Debit Buyer / Credit Seller $94.03
780 / 365 = 2.137 x 191 (buyer's responsibility = Nov. 18 - May 27:
13+31+31+28+31+30+27) = $408.17.
In this question, you use 365 days to divide by for the hazard insurance,
but in Closing Problem #3, you divide hazard insurance by 12 months.
Which is the correct way for dividing hazard insurance?
Practically no figures are “always” calculated a certain way. That’s one of the main points of the Closings course and all the closings questions. Since you can’t say, “X is always calculated this way” you have to know all the possibilities… But that’s not so hard, because the question (in this case, the “fact situation”) tells you what to do, based on the wording. In this case, it says, “Current Hazard Insurance (to be prorated): $650.00 (9 months ago exactly, the policy was paid for 1 year by Seller.)” By saying, “months ago exactly”, we are telling you that this time only you should calculate based on months.
No matter what the proration, if you get a proration problem and aren’t sure which technique to use (months/days), try the most likely option and see if that’s one of your choices (a,b,c,d). If not, try the other way.
In real life, it could be calculated by months, days, months and days. Really, the closing company simply follows the directions of the lender – takes their figure or directions.
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Question #35 - Correct answer: b
CATEGORY: CLOSINGS
At an assumption closing, the balance of
the Tax reserves held by the lender is 4 months @ $344. How will this
figure appear on the assumption closing worksheet?
a) $344 Debit Seller / Credit Buyer, because one month of
reserves is always held back at closing.
b) $1,376 Debit Buyer / Credit Seller, because the lender must
pay the taxes when they come due next year.
c) $1,376 Debit Seller / Credit Broker, because seller always
pays the taxes out of the reserve at closing.
d) $1,376 Debit Buyer / Credit Broker, because buyer must pay
the taxes out of the reserve at closing.
This simply asks you "For an assumption,
what column does a reserve appear?" Like all reserves, these are
monies that the seller previously paid for, but the buyer is going to be
assuming (getting the benefit of) at closing. Since buyer is getting the
benefit of monies that s/he didn't pay, s/he will have to "pay back"
the seller. Buyer pays = Debit Buyer, Seller "gets paid" =
Credit Seller. In addition, you have to correctly multiply 4 x $344
($1,376).
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Question #36 - Correct answer: d
CATEGORY: CLOSINGS
There is a Special Assessment tax in the
amount of $2,400 on the property tax records for the property being closed
on September 15. How will this appear on the settlement statement?
a) Debit Buyer $2,400
b) Debit Seller $1,697.64 / Debit Buyer $702.36
c) Debit Seller $1,200 / Credit Buyer $1,200
d) Either $2,400 Debit Seller, or no entry at all because buyer
is assuming the special assessment.
The reason answer A is not correct, is because it says "Debit Buyer $2,400".
(Not debit seller.)
So we know that it has to be B, C or D, because the "debt" (Special Assessment) was incurred before closing (therefore during seller's ownership.)
As to the other three answers, therefore: See on the Explanation for the sample problem in the Closings course (approximately page 23)
"FINAL SETTLEMENT WHEN A LOAN IS ASSUMED", line 20: "Special assessments, such as street paving, storm sewer, etc., if
the were installed at the time of sale, even though not yet assessed, are generally paid by the seller under the terms of the approved
contract forms, and are never prorated."
This eliminates answers B and C, leaving only answer D, which says that very thing.
This problem is not a dirty trick, because two of the Closing worksheet problems (#3 and #6) and that sample problem mentioned above had Special Taxes.
The phrase "Buyer will assume" does not mean that we are dealing only with Assumptions. It means that the buyer will assume responsibility for
paying the special taxes after closing, and this can happen regardless of whether it is a Sale with a New Loan or an Assumption.
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Question #37 - Correct answer: c
CATEGORY: CLOSINGS
In the Colorado Exclusive Right-to-Sell
Listing contract between seller and Listing Broker Commission, the "Compensation
to Brokerage Firm" section states that the seller agrees to pay a
3.5% commission on the gross sales price to the Listing broker, and 2.5%
to the buyer broker. The Listing Broker has a 50/50 arrangement with her
Associate Broker, and the Buyer Broker has a 3:2 split agreement with his
Associate Broker. The sales price is $290,000, the loan amount is
$234,900, and the net proceeds to seller will be $15,400 after closing
costs. How much will be the commission to the Associate Broker who was
working with the buyer?
a) $15,400
b) $5,075
c) $2,900
d) $993
$290,000 x .025 = $7,250 (to Buyer brokerage). $7,250 x 40% (3:2
means that the Associate will get 2 "parts" out of 5, or 40%) =
$2,900. The loan amount and seller's proceeds are merely distractors,
since the commission is taken out of the gross sales price, anyway.
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Question #38 - Correct answer: d
CATEGORY: CONTRACTS-Sales
Why does the Selling Company Broker sign
the Contract to Buy and Sell Real Estate?
a) To make the contract enforceable
b) To ensure their commission
c) To help the closing company prepare the settlement statement
d) To show receipt of the earnest money
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Question #39 - Correct answer: d
CATEGORY: Uni-LIENS & ENCUMB
Who must pay the difference in taxes if
there is an error in the statement of taxes due in the tax certificate?
a) Buyer
b) Seller
c) Title Company
d) County
I've participated in several closings where the seller promises
to make a shortage correct by signing a statement, that influenced my
selection here. Why does the County make up the difference if there is an
error on the tax certificate?
Well, the "easy" answer is because the County maintains
the records and actually produces the Tax Cert, so it would purely be
their error. This is now in the Closings section in the first Closing
example for "A Simple Real Estate Transaction", and in the
Glossary and Index definitions in the back of the final book: "Any
loss resulting from an error in a tax certificate shall be paid by the
county that such treasurer represents."
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Question #40 - Correct answer: c
CATEGORY: CONTRACTS-Sales
The inspection clause in the Contract to
Buy and Sell Real Estate does not allow the Buyer to:
a) Terminate the Contract
b) Require repairs
c) Change the resolution deadline
d) Withdraw Notice to Correct
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Question #41 - Correct answer: b
CATEGORY: RULES & REGS
An advertisement under a trade name must
contain:
a) Listing Broker name and phone number
b) The exact name of the Broker as licensed with the Real Estate
Commission
c) Broker's name in smaller print than the trade name
d) Address and Phone number of Franchisor
Chapter 15, Rules C-14, C-18, C-19 (especially subsection "f").
Know this, because you will get an "advertising under" question
or two on the Colorado exam.
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Question #42 - Correct answer: b
CATEGORY: RULES & REGS
How often must a Broker reconcile an
active escrow account?
a) Daily
b) Monthly
c) Quarterly
d) Annually
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Question #43 - Correct answer: b
CATEGORY: RULES & REGS
If a listing broker asks another broker
to attend a closing for him who is responsible for the accuracy of the
closing statements?
a) The listing broker
b) Both the listing broker and the broker that attended the
closing
c) The broker that attended the closing
d) The employing broker, the listing broker and the broker that
attended the closing
Why isn't answer "d" the answer? I thought that due
to the employing broker's duties of supervision that they would also be
responsible for the closing statement's accuracy.
This comes directly from Rule E-5(e): "If a licensee with whom
a brokerage relationship has been established is unable to attend a
closing or review closing documents, another licensee may agree or be
designated by an employing broker to review and sign a closing statement
and will assume joint responsibility with the absent licensee for its
accuracy, completeness and delivery."
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Question #44 - Correct answer: a
CATEGORY: CONTRACTS-Listing
What is the duration of the holdover
period in the Exclusive Right to Sell Listing agreement?
a) Subject to negotiation
b) 60 days
c) 90 days
d) 120 days
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Question #45 - Correct answer: c
CATEGORY: RULES & REGS
An unlicensed personal assistant may:
a) Show listed properties
b) Give customers an opinion of value
c) Write checks from the escrow account
d) Attend closings for the broker
Although a "personal assistant may distribute literature at an
open house so long as no negotiating, offering, selling or contracting is
involved", an unlicensed person may not actually "show" a
house, because that applies to taking part in the actual negotiations.
The answer to this question (which has recently appeared on the
state license exam with almost the exact same wording) and similar
questions about "unlicensed assistants" can be found in "Commission
Position on the Use of Unlicensed Assistants" on page 16-16 and in
Rule E-1 (Chapter 15 and the Record Keeping course). The correct ("best")
answer to this question appears on page 15-14: "The licensed broker
must be able to withdraw money from such separate account, but may
authorize other licensed or unlicensed co-signers."
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Question #46 - Correct answer: d
CATEGORY: RULES & REGS
What is the maximum amount of the
broker's own funds that may be kept in the escrow account?
a) $1
b) $100
c) $200
d) Enough to keep it open
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Question #47 - Correct answer: d
CATEGORY: CONTRACTS-Listing
According to the Colorado Exclusive
Right-to-Sell Listing contract, if a dispute arises between the Broker and
Seller, which is not true of mediation?
a) The parties jointly agree on a mediator
b) The mediation process terminates within 30 days
c) Mediation is not the same as arbitration
d) The losing party will pay the cost of the mediation
I understand "d" because both
parties share expense. However, the question asks which "is not true"
of mediation. Since Mediation is in fact arbitration by dictionary
description, wouldn't "c" be and "in-true" or not true
statement as well?
Your dictionary definition is incorrect. Mediation is definitely not
the same thing as arbitration, as mediation is non-binding and designed to
help the parties come to their own mutual agreements. Whereas, although
the procedure is less formal, arbitration is as binding as a court trial
decision and is involuntarily imposed on the parties.
Note the definitions in our own Glossary in the back of the third
book: mediation A nonjudicial process to resolve disputes where a
third party acts as a facilitator to aid the parties in reaching an
agreement. arbitration A nonjudicial process for resolution of
disputes whereby the parties agree to abide by a decision made by a third
person.
So… answer "c" cannot be correct, because it is True
that Mediation is not the same as arbitration (and since the question asks
which is NOT True, then that cannot be the correct answer.)
Answer "d" is correct because the Exclusive Right-to-Sell
Listing explicitly states that in the event of a dispute, the parties will
share in the cost of mediation.
Besides, by the definition of a mediation, there is no "losing"
party, because the resolution is a voluntary agreement. Either way, the
parties split the cost of mediation.
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Question #48 - Correct answer: d
CATEGORY: RULES & REGS
According to Rule E, which of the
following is not required to be kept in a separate escrow account?
a) Earnest money deposits
b) Funds of others received by a broker relating to real estate
partnerships
c) Funds of others received by a broker relating to joint
ventures
d) IRS withholding taxes
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Question #49 - Correct answer: a
CATEGORY: FORMS - Lead Paint Disclosure
What is true about lead-based paint disclosure?
a) Agent must use the lead disclosure form.
b) Seller must fix all lead issue before closing.
c) The parties don't have to worry about lead paint, if the buyer doesn’t have small children.
d) It was already disclosed on the seller disclosure form so agent doesn’t have to disclose it at closing.
Check out the Lead Based Paint Disclosure in Chapter 21: Agent must disclose (answer “a”). In the form itself, it says, “Each real estate licensee signing below acknowledges receipt of the above Seller's Disclosure, has informed Seller of Seller's obligations and is aware of licensee's responsibility to ensure compliance.”
And in the Lead Based Paint Disclosures Statement, it says specifically, “At the time the listing contract is signed by the Seller, the Listing Agent (including Transaction-Brokers) should review the Lead-Based Paint Disclosure (Sales) form with the Seller and have the Seller execute the form.”
Answer “c” is complete nonsense, and answer “b” is not correct, according to the wording of the form. (Seller must disclose – they are not responsible for stripping off all lead-paint from prior to 1978 and vowing that the problem has been completely remedied.)
While the form and Statement go on to state that all of this should be done prior to closing, that does NOT make answer “d” the most correct. What if the parties and agent did not disclose all that prior to closing.
Answer “a” is the most completely-correct and therefore the best answer to this question.
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Gary Frank-liked him since Supergirl, he's only improved since
Question #50 - Correct answer: b
CATEGORY: CLOSINGS
Prior Year’s taxes were $1010, and this year’s taxes at closing will be based on that amount. Closing is on September 16, prorate the taxes to closing. What figure will go on line 211 of the HUD-1 settlement statement?
a) $708.33
b) $713.89
c) $286.11
d) $0
An example of the HUD-1 Settlement Statement is included in the Closings Course, under Problem #2. Note that Line 211 of that form is “Current Year’s Taxes” – so that is asking you to prorate to the day of closing, and this will be the amount that seller will pay buyer at closing (because the taxes will not become due until next year – when the buyer will be responsible for paying the entire amount. Therefore, Seller must pay buyer now for the number of days s/he lived in the property (based on the prior tax year bill.)
On the license exam, you will get a HUD-1 Settlement sheet and a very long set of facts. For any question about property taxes for this year – due at closing. You simply need to pick out the relevant figures (and ignore the rest!). In this case, you need only the amount of taxes that you will base it on (here, prior year’s bill of $1000) and day of closing.
$1010 / 365 = $2.767 per day
Then you need to count the number of days that seller held the property (before day of closing):
January - 31
February - 28
March - 31
April - 30
May - 31
June - 30
July - 31
August - 31
September – 15
TOTAL = 258
Multiply number of days (258) x 2.757 (“per diem”)
Answer = $713.89 (from rounded figure $713.886)
Incorrect choices are based on
a) a miscalculation of number of days in a year (360 only applies to Uniform math questions. For the Colorado part of the license exam, you will use 365 days);
c) a miscalculation of who pays for the proration (It is not buyer, because buyer will pay the full amount next year. Seller, therefore, must pay buyer now at closing for the number of days seller lived in the house prior to closing);
d) A complete guess – or at least a misunderstanding that current year’s taxes must be prorated, and that seller pays buyer (debit seller/credit buyer.)
Finally, make sure that you catch that the "last year's" figure was actually $1,010 (and not $1000), and that you round to 3 digits on the first calculation, and of course, 2 decimal places for the final figure (since dollars have only xx cents, and not xxx cents. Right?)
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Question #51 - Correct answer: b
CATEGORY: Uni-LIENS & ENCUMB
For Residential properties, what is the maximum number days after the lender files a Notice of intent to foreclose that the defaulting owner has to cure?
a) 110 days
b) 125 days
c) 230 days
d) 265 days
Note that for Residential properties, the defaulting owner has no less than 110 days, and no more than 125 days, in which to cure the default. This means that
they will need to make up the past due payments (plus fees and interest).
Note also that as of 2008, there is no longer any right to cure the default after foreclosure. (See Question #16 on the Colorado final exam.)
Note also that for Agricultural properties, the defaulting owner has no less than 215 days, and no more than 230 days, in which to cure the default.
This question is guaranteed to be on the license exam. (The choices - number of days - may be different, so memorize the above explanations.)
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Question #52 - Correct answer: c
CATEGORY: RULES & REGS
According to Landmark Colorado case law,
a title company may serve in assisting with closing as a:
a) subcontractor
b) subagent
c) listing broker's scrivener
d) co-broker
The case is the Title Guaranty case
(Chapter 17), which says that title companies cannot draft legal
documents, they can only "fill them in" on behalf of the broker
and the parties. To do otherwise would be the unauthorized practice of
law. (The companion case was the Conway-Bogue case which says that
brokers cannot create legal documents.) The rest of the answers are
nonsense answers (we don't even have "subagency" betwee real
estate brokers any more.)
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Question #53 - Correct answer: d
CATEGORY: Uni-TITLE
At closing, who pays if the lender wants
to delete standard (survey) exceptions from the mortgagee's title policy?
a) Lender
b) Broker
c) Seller
d) Buyer
Doesn't Section 7a of the Contract to Buy and
Sell real estate specifically say that "any additional premium
expense to obtain this additional coverage shall be paid by the seller"?
Note that this question says that the lender is requiring
coverage and the question specifically asks about the mortgagee's
title insurance policy - therefore it is buyer's charge (since it is
buyer/borrower's loan). The only gimmick of this question is that it
indicates (twice) in the question that it is a lender charge, and you are
supposed to know that all lender charges (including with seller
carry-backs) are buyer's responsibility.
In addition, note that Section 7a of the Buy/Sell Contract does not
say that the seller will unconditionally pay for insuring over all
exceptions. This section of the contract starts by saying that seller will
pay for the owner's policy (as always), and then requires
one of two checkboxes to be selected: [ ] Shall [ ] Shall Not commit to
delete or insure over the standard exceptions (which, in practice, the
buyer - through his/her broker - would have to ask for). Since it
is a subsection of this particular checkbox choice, the statement "Any
additional premium expense to obtain this additional coverage shall be
paid by Seller" means that it is a contingency: If
they choose in this section for standard exceptions to be deleted or
insured over on the owner's policy, then seller will pay for them.
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Question #54 - Correct answer: d
CATEGORY: Uni-FINANCE
According to Colorado law, what is the
maximum interest rate that a seller may charge the buyer/borrower for
supplementary (purchase-money) financing?
a) 6.5%
b) 10%
c) 21%
d) 45%
It is not 21% - that is for consumer financing agreements - See about pg.
5-16.
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Question #55 - Correct answer: b
CATEGORY: CONTRACTS-Sq Ft Discl
The purpose of the Colorado Real Estate
Commission-approved Square Footage Disclosure is for:
a) Appraisal valuation
b) Marketing purposes
c) Loan approval
d) Complying with VA regulations concerning the Certificate of
Reasonable Value (CRV)
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Question #56 - Correct answer: c
CATEGORY: CONTRACTS-Sales
According to the Colorado Contract to Buy
and Sell Real Estate (Residential), if buyer is to pay all or part of the
purchase price by obtaining a new loan, and buyer fails to give seller
written notice of buyer's inability to obtain a new loan commitment, then:
a) seller must give written notice of buyer's default
b) seller waives this condition
c) buyer is in default if the sale does not close
d) buyer is automatically in default
Why is buyer in default because of failing to give notice to
seller that buyer couldn't get a loan (commitment)?
The main reason that "c" is the answer is because it
quotes the exact language of the Colorado Contract to Buy and Sell Real
Estate (Residential), Section 5(b): "Loan Commitment. If Buyer is to
pay all or part of the Purchase Price by obtaining a new loan... this
contract is conditional upon Buyer obtaining a written loan commitment....
This condition shall be deemed waived unless Seller receives from Buyer...
written notice of Buyer's inability to obtain such loan commitment.... IF
BUYER WAIVES THIS CONDITION BUT DOES NOT CLOSE, BUYER SHALL BE IN DEFAULT."
(See, for example, page 21-73)
So, if buyer fails to give Seller written notice of failure to get a
loan commitment, then seller would be "in the dark" and
presumably still expecting to close. It would be buyer's fault the
contract didn't close, and therefore buyer is in Default, and Seller could
seek whatever damages are due (probably the Earnest Money Deposit -
assuming seller chose Liquidated Damages in Section 20).
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Question #57 - Correct answer: c
CATEGORY: CONTRACTS-Lead-Based Paint Discl
Which of the following situations is not
one which would normally require the use of the Colorado Licensee Buy-Out
Addendum to Contract to Buy and Sell Real Estate?
a) A licensee enters into a contract to purchase a property at
the same time the licensee lists the property
b) A licensee contracts to buy the property from seller, while
at the same time is marketing the property under an existing listing
contract
c) Buyer and Seller are both represented by the same real estate
broker or brokerage
d) A brokerage promises to buy the property if it does not sell
during the period of the listing contract
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Question #58 - Correct answer: a
CATEGORY: CONTRACTS-Sales
According to the Colorado Contract to Buy
and Sell Real Estate (Residential), the "Additional Provisions"
section:
a) must contain only terms which are transaction specific
b) is the appropriate place to place listing information
regarding the transaction.
c) must be included, if at all, as a separate attachment to the
contract.
d) must recite: "The Language of these additional
provisions has been approved by the Colorado Real Estate Commission."
I found discussion about "transaction specific" in the
Additional Provisions section of the Contract in the Practical
Applications course, specifically page P-82 and P-93. In this Prep exam,
are you asking about things that can only be found in the Practical
Applications course (which is supposed to be taken *after* the Prep exam
and state license exam)? Or can this information be found elsewhere?
Yes, this is discussed at least twice in the Practical Applications
course, specifically in the articles, "Use of Addenda and Additional
Provisions" and "What's Up With Section 2.d of the Contract to
Buy and Sell?" But that is not where this information and question is
coming from. This question comes from the "Statement of Policy
Concerning Rule F", which is reproduced and discussed in Chapter 15,
16 and 21. Specifically, the article, "Guidelines for the Use of
Addenda and Additional Provisions (March 1997)" (page 16-14) says: "Remember,
only those provisions which are transaction specific can be included in
additional provisions." And the "Statement of Policy Concerning
Rule F" says: "The "Additional Provisions" section
must contain only those terms or acknowledgments which are transaction
specific, resulting from negotiations by the parties." (Page 15-35,
among others.)
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Question #59 - Correct answer: c
CATEGORY: LICENSE LAW
For which of the following is Errors and
Omissions Insurance not required?
a) A corporation which owns a real estate brokerage
b) An employing broker
c) An associate broker with an inactive license
d) A licensee with a active salesperson license issued prior to
1997
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Question #60 - Correct answer: a
CATEGORY: CONTRACTS-Sales
In the Colorado Residential Contract to Buy
and Sell Real Estate, all inclusions are to be conveyed to Buyer by
Seller, by the:
a) Bill of Sale
b) Financing Statement
c) Warranty Deed
d) Hold-Over Clause
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Question #61 - Correct answer: d
CATEGORY: Uni-PROP MGMT
If a broker acting as a property
management receives a tenant security deposit, and there is no provision
in the management agreement between the broker and the owner of the
property, how should the broker treat the security deposit?
a) The broker should immediately turn the funds over to the
owner.
b) The broker should deposit the funds in the broker's general
sales account not later than the third business day following receipt.
c) The broker should deposit the funds in the tenant security
deposit account not later than the third business day following receipt.
d) The broker should deposit the funds in the tenant security
deposit account not later than five business days following receipt.
Is the point of this question the difference between property
management escrow vs. sales contract escrow?
Actually, this question is simpler than the facts suggest, but it is
very specifically referring to the provisions of Rule E-1(n): "Time
limits for deposit of money belonging to others Except as provided in Rule
E-1(o), all money belonging to others which is received by a broker as a
property manager shall be deposited in such broker's escrow or trust
account not later than five business days following receipt. All other
money belonging to others which is received by a broker shall be deposited
in such broker's escrow or trust account not later than the first business
day following receipt." (Page 15-17) So, yes - the trick of this
question is keying on the difference between "Property Management"
money (5 days) and "Sales" money (3 days).
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Question #62 - Correct answer: c
CATEGORY: CONTRACTS-Listing
Seller insists on keeping his firewood on
the property. What does the broker have to do in the listing agreement?
a) Since the Listing involves only the land and its structures,
the broker should do nothing and let the buyer and seller work it out
later;
b) Do nothing, as fire wood is already listed in the "Inclusions"
section of the approved Listing agreements;
c) List it as personal property
d) List it as real property
The answer is "personal property", so
you would have to list it in the Listing (and Sales) contract as personal
property in the "Inclusions" section. Otherwise, the sale would
not include it (since it is not specifically "Included") and the
seller could come and take it away.
The question is stating that the seller wants to keep his
firewood, but the answer and associated explanation state to list the
firewood as personal property in the inclusion section of the listing
contract. Wouldn't it be true, therefore, that the firewood would pass to
the buyer as an "Inclusion" much like, for example, a water
softener?
You are actually correct in your statement that firewood - since it
is personal property - is something that would be written in the "Inclusions"
section (the blank part of Sec. 8(a)(3)). However, you missed the "tricky"
wording of this question - why answer "b" is NOT correct and
answer "c" IS correct.
Note that answer "b" says: "fire wood is ALREADY
listed in the Inclusions section of the approved Listing agreements".
Put another way, firewood is already ON the list, so you don't need to
write anything in the Inclusions section. NOT TRUE. It lists (under
Personal Property) storm windows, storm doors, window and porch shades,
etc., etc., but firewood is not on that list.
Part of the lesson of this question is that one word usually makes
the difference between an ALMOST CORRECT answer and the answer that is
MOST CORRECT. Here, that word is "already".
The other part of the lesson of this question is - as the
Instructions and Explanations for Chapter 21 AND the Listing/Sales
contracts themselves stress - you need to know the EXACT WORDING of the
contracts in certain places. This is ESPECIALLY true when it gives a LIST
of items, because you KNOW you are going to get questions that essentially
say: "Which of the following is not on that list?"
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Question #63 - Correct answer: b
CATEGORY: CONTRACTS-Sales
In the event of a dispute over earnest
money, which of the following is true?
a) The broker must interplead the funds if a lawsuit is filed
b) Broker may retain the funds until broker receives written
instructions from the parties
c) Broker must return the funds to the buyer, to allow the
seller to commence a lawsuit to recover them
d) Broker must retain the funds until receiving instructions
from the seller as to the disposition of the funds
Isn't answer "a" also true,
because the broker must interplead funds if a lawsuit is filed?
Answer “a” is definitely not correct. A broker is not
required (not-“must”) to interplead the money if there is an
earnest money dispute. They may interplead the money or they may
hold on to the money pending a dispute resolution.
Note in the discussion of the Sales contract, Section 22 (on about
page 21-94 in your materials), it states explicitly (for the benefit of
this very question): "22. EARNEST MONEY DISPUTE. If a dispute arises
over who should get the earnest money deposit, the listing broker: 1. must
first wait to receive written instructions agreed upon by both the buyer
and the seller, and then 2. the broker may start a court action and
interplead the parties and hopefully be awarded costs and attorney fees.
(You will be asked this on the State License exam.)"
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Question #64 - Correct answer: d
CATEGORY: LICENSE LAW
According to Colorado license law, which
of the following is least likely to be permitted for unlicensed assistants
of real estate brokers?
a) Ed, an assistant, helps prepare a competitive market analysis
(CMA) for Sheila an associate broker.
b) Rhonda, an assistant, drives some potential buyers to meet
with broker Marvin to look at a listed house.
c) Chuck, an assistant, hands out brochures to potential buyers
at an open house.
d) Bill, a potential buyer tells Jane, an assistant, that he
will offer $190,000. Jane tells Bill that she has to present the offer to
her Employing Broker first.
See "Commission Position on the Use of Personal Assistants",
Page 16-16. According to the Rule, the assistant may "8. prepare
market analyses for sellers or buyers on behalf of a broker but disclosure
of the name of the preparer must be given, and it must be submitted by the
broker. ", so answer "a" is allowed (and therefore not the
correct answer). However, in answer "d" when Jane, the
assistant, says "she has to present the offer", then she
stepping into the realm of "negotiating". Only licensed brokers
may "present offers" to the Employing Broker or the seller. ("The
license law prohibits unlicensed persons from negotiating, listing or
selling real property. Therefore, foremost to the use of personal
assistants is careful restriction of their activities so as to avoid
accusations of illegal brokerage practice.")
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Question #65 - Correct answer: c
CATEGORY: RULES & REGS
Which of the following is true concerning
Continuing Education for licensees in Colorado?
a) Licensees may satisfy the entire continuing education
requirement by passing 24 hours of elective coursework
b) Licensees may satisfy the entire continuing education
requirement by passing the Broker Transition course every three years
c) Licensees may satisfy the entire continuing education
requirement by passing the Colorado portion of the licensing exam
d) All Continuing Education coursework must by taken in-person
in a classroom setting
Rule B-2(e): "Licensed brokers
must satisfy the continuing education requirement...By passing the
Colorado portion (state part) of the licensing exam."
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Question #66 - Correct answer: a
CATEGORY: Uni-FINANCE
Dual Contracting is:
a) a criminal offense in Colorado.
b) an agency relationship whereby the broker represents both the
seller and buyer.
c) perfectly acceptable as long as the broker presents both
contract offers to the seller in a timely manner.
d) a mutual exchange of promises whereby each promise is
consideration for the other promise.
Dual Contracting is a fraudulent arrangement
whereby the buyer and seller of a property a false contract for a higher
sales price, in order to induce the buyer's lender to increase the loan
proceeds. This is the definition in the Glossary, and the concept is
discussed in both Chapter 1 (Contracts) and Chapter 5 (Finance). This is
definitely a question on the state license exam.
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Question #67 - Correct answer: d
CATEGORY: CONTRACTS-Listing
According to the Colorado Exclusive
Right-to-Sell Listing Contract (Residential) (Seller Agency), regarding
the Seller's Property Disclosure Form:
a) Seller is required by law to provide a Seller's Property
Disclosure
Form
b) Seller may choose not to provide the Form, but must indicate
that choice in the "Additional Provisions" section of the
Listing Contract
c) Seller states in the Form that either the Seller or a
qualified property inspector has personally verified the condition of each
item
d) By providing the Form, Seller is merely stating that the
condition of each item as stated is to the best of Seller's knowledge
Why isn't answer "b"
also correct (since the form is not mandatory)?
It does say that providing the disclosure is voluntary, but
nowhere in the Listing agreement does it say that if the seller chooses
not to provide the disclosure, s/he must mention that in the "Additional
Provisions" section. So, since that last part is just nonsense, the
entire answer can't be correct.
What Section 15 of the Listing contract does tell us is that
the seller is not required by law to provide the buyer with a Property
Disclosure, but may voluntarily do so. Seller must check the appropriate
box: [ ] Agrees [ ] Does Not Agree.
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Question #68 - Correct answer: d
CATEGORY: RULES & REGS
Although all "money belonging to
others" accepted by a Colorado broker shall be deposited in an
account separate from money belonging to the broker,
a) the broker may normally use the escrow account as a
depository for the funds of broker's employed licensees
b) the broker may use the account for investment plans for the
benefit of the broker's employed licensees
c) funds of others received by a broker relating to a real
estate partnership in which the broker has an ownership and receives a
commission for the sale of property may be kept in the same trust account
as the broker's trust account for earnest money deposits
d) the broker may deposit enough of the broker's money to keep
the account open
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Question #69 - Correct answer: a
CATEGORY: CONTRACTS-Licensee Buy-Out
By executing the Licensee Buy-Out
Addendum to Contract to Buy and Sell Real Estate, the Seller of the
property acknowledges which of the following?
a) The licensee may eventually re-sell the property at a profit
b) Seller will be responsible for any loss incurred by buyer's
re-sale of the property
c) Cancellation of the buy-out contract will automatically
terminate the Listing Agreement
d) The licensee buyer is no longer under any obligation to
present to seller future offers from potential purchasers
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Question #70 - Correct answer: c
CATEGORY: CONTRACTS-Sales
A promissory note taken as earnest money:
a) Must be paid in full by closing
b) Must be delivered to the seller within one business day
c) Must be made payable to the listing broker
d) Must be made payable to the seller
Why must an earnest money note be paid to
the listing broker? Is this amount then due at closing (debit seller,
credit broker?)
This comes straight out of Rule E-1(o), page 15-16. It should be
made out to the listing broker so that the seller won't call it "due"
even if the sale doesn't go through. Imagine the scenario where the buyer
doesn't have the earnest money up front, so gives the seller a promissory
note instead. In essence, it says, "I promise to pay this earnest
money amount at closing." If any transaction fails due to no fault of
the buyer's, then the seller should give the earnest money back to the
buyer. In the case of a promissory note, the buyer would have given it to
the listing broker - who would then tear it up if the deal fell through.
However, if it is payable to the seller and that seller was less than
scrupulous - then they could file suit to force the buyer to pay!
In reality, the buyer would not really be required to *pay* the
earnest money at closing. This is because this would be taken care of by
the purchase price entry on the settlement sheet.
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Question #71 - Correct answer: a
CATEGORY: Uni-FAIR HOUSING
Which class of citizens is NOT a
protected class under the Colorado Fair Housing Act?
a) Age
b) Married Couples
c) Families with Children
d) Homosexuals
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Question #72 - Correct answer: a
CATEGORY: LICENSE LAW-agency rels
Is it acceptable for a broker to refuse a
listing?
a) Yes, brokers are not obligated to take every listing
b) Yes, but only if it contains an illegal aspect
c) No, brokers must accept all listings
d) No, brokers must accept all listings because to not do so
would be a violation of Fair Housing Laws.
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Question #73 - Correct answer: d
CATEGORY: Uni-LISTINGS
A listing where the owner of the property
may sell it on his own without paying a commission, or having a single
broker sell the property for a pre-agreed upon percentage of the purchase
price is called:
a) Exclusive Right to Sell Listing
b) Open Listing
c) Net Listing
d) Exclusive Agency Listing
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Question #74 - Correct answer: b
CATEGORY: CONTRACTS-Sales
When the buyers enter into an agreed upon
Contract with the seller, and sign a Contract to Buy and Sell Real Estate,
those buyers have:
a) Legal title to the property from the moment they sign
b) Equitable title to the property from the moment they sign.
c) A right to all of the profits from that moment of signing on.
d) Merchantable title to the property.
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Question #75 - Correct answer: a
CATEGORY: CONTRACTS-Sq Ft Discl
Which of the following is not true
regarding the Square Footage Disclosure?
a. The disclosure is made to buyer and seller pursuant to ANSI
standards
b. The listing broker must disclose whether s/he has measured
according to a specific standard
c. The listing licensee must disclose whether s/he is providing
information from an independent source
d. Measurement is for the purpose of marketing and not for loan
or valuation purposes
Answers "b", "c" and "d" are
specifically listed in the Disclosure.
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Question #76 - Correct answer: b
CATEGORY: RULES & REGS
The broker must reconcile an active
escrow account:
a. Daily
b. Monthly
c. Quarterly
d. Annually
Defined and discussed everywhere in the Record Keeping and
Trust Accounts course.
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Question #77 - Correct answer: d
CATEGORY: CLOSINGS
The monthly water bill is payable in
advance, in the amount is $39.06. It is unpaid as of closing, May 10. How
should this appear on the settlement statement?
a. Debit seller $27.72
b. Credit buyer $27.72
c. Debit seller $13.86, debit buyer $13.86
d. Debit buyer $27.72, debit seller $11.34
There are 31 days in may, so the daily charge for the water bill is
$1.26. Seller is responsible for 9 days (9 x 1.26 = $11.34) and Buyer is
responsible for 22 days (22 x 1.26 = $27.72. Since a debit is
something that that party pays for, that means DEBIT BUYER $27.72,
DEBIT SELLER $11.34. (It also means that the corresponding credit would be
the total of those two amounts, being paid out: Broker
Credit/Disbursement OUT $39.06, of course.)
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Question #78 - Correct answer: b
CATEGORY: Uni-LIENS & ENCUMB
In Colorado, if a homeowner chooses to
pay the property taxes all at once, rather then splitting it in two equal
payments, when must this be done?
a. March 1
b. April 30
c. May 1
d. June 16
Chapter 10, Liens & Encumbrances.
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Question #79 - Correct answer: c
CATEGORY: Uni-PROP MGMT
A property manager must deposits checks
for tenant security deposits in the escrow account:
a. Within one business day of receipt
b. Within three business days of receipt
c. Within five business days of receipt
d. Within seven business days of receipt
Rule E(1) (n), Chapter 15 (and the Record Keeping Course): "…all
money belonging to others which is received by a broker as a property
manager shall be deposited in such broker's escrow or trust account
not later than five business days following receipt." Note,
however, that with earnest money deposits (i.e., for a real estate
sale): "All other money belonging to others which is received
by a broker shall be deposited in such broker's escrow or trust account
not later than the third business day following receipt."
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Question #80 - Correct answer: c
CATEGORY: CONTRACTS-Listing
According to the Colorado exclusive right
to sell listing contract, the seller enters into brokerage relationship
with:
a. Brokerage firm only
b. Designated broker and the brokerage firm
c. Designated broker only
d. Supervising broker and employing broker
Doesn't the very first sentence in the exclusive right-to-sell listing contract, say "Seller and Brokerage Firm enter into this exclusive,
irrevocable contract…"? This would seem to directly contradict the correct answer ("c", "Designated broker only") and make the correct answer
"a", ("Brokerage firm only") wouldn't it?
While it is correct that the Listing Agreement says in section 1, "Seller and Brokerage Firm enter into this… contract…" that is not
what the question is asking. The question asks "the seller enters into brokerage relationship with…" In other words, it is asking,
"Who is the agent responsible for this closing, and who owes the agency relationship duties to the seller?"
So, Section 1 is taking the "contract" angle (Ch. 1), but Section 2 is defining the "agency" angle. Therefore, the question asks
not what kind of contract or "who are the parties to the contract", but what kind of agency is created. Therefore, it is asking about the
specifics of Designated Brokerage – which is what is detailed in Section 2. For example, "…the individual designated by the Brokerage Firm
to serve as the broker of seller." This question is like many others on the license exam, which makes you think it is asking about one thing (contract relationship) but
really is asking about something else (agency relationship/Designated Brokerage), which makes the answer altogether different.
But the key fact is that the section you bring up (Sec. 1) is not what they are after.
Instead, they want you to understand Designated Brokerage, which says in the Listing contract, Chapter 21, Section 2(a):
BROKER AND BROKERAGE FIRM. Multiple-Person Firm: "The brokerage relationship exists only
with Broker and does not extend to the employing broker, Brokerage Firm or
to any other brokers employed or engaged by Brokerage Firm who are not so
designated."
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Question #81 - Correct answer: a
CATEGORY: Uni-LIENS & ENCUMB
A certificate of taxes is:
a. The county's assurance of total taxes due
b. The document that allows lender to escrow the tax reserve
c. Issued only if taxes are delinquent
d. Required by the IRS for the sale of income producing
properties
Glossary: "Certificate of taxes due (tax cert): A written
statement or guaranty of the condition of the taxes on a certain property,
made by the County Treasurer of the county wherein the property is
located. Any loss resulting from an error in a tax certificate shall be
paid by the county that such treasurer represents." Tax Certificates
in Colorado are also discussed in Chapters 10 and 17.
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Question #82 - Correct answer: b
CATEGORY: RULES & REGS
The employing broker's duty of "reasonable
supervision", includes:
a. The ability to delegate responsibility for ensuring
compliance with real estate commission statutes and rules
b. Having each licensee receive, read, and sign a copy of the
office policy manual
c. Countersigning all buy/sell contracts to make them binding
d. Reviewing at least 50% of contracts to ensure competent
preparation
Rule E-31 in Chapter 15: ""reasonable supervision" of
licensees with two or more years of experience shall include, but not be
limited to, compliance with the following: (a) Maintaining a written
office policy describing the duties and responsibilities of licensees
employed by the broker. A copy of the written policy shall: (1) be given
to, read and signed by each licensee; (2) be available for inspection,
upon request, by any authorized representative of the Commission."
Answer "a", "delegating responsibility" is mentioned
in E-31(d), but not in regards to compliance of commission statutes and
rules. (You can't delegate responsibility to follow the law.) Answer "d",
"reviewing contracts" is mentioned in E-31(b), but it talks
about reviewingall contracts, not just 50%.
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Question #83 - Correct answer: b
CATEGORY: RULES & REGS
A broker holds earnest money deposits,
manages 10 single-family rental homes, and is holding 10 tenant security
deposits. The broker must have how many escrow accounts?
a. One
b. Two
c. Three
d. 21
Rule E-1(h) states that a broker who manages less than seven (7)
single family residential units may deposit rental receipts and security
deposits and disburse money collected for such purposes in the "sales
escrow" account. (In that case, therefore, if the broker manages less
than seven units and holds earnest money, they need only have one escrow
account.)
Rule E-1 does not say that if you manage more than 7 properties that you
must have a separate account for each activity. (Although there would be
nothing wrong with that.) It just says that you “must have” more than one.
Since in this question the broker manages more than seven units
and holds more than seven security deposits, s/he must have one
sales escrow account and one tenant security deposit account. Total = 2.
In other words, this question is asking what the minimum number the broker
must have, according to the Rule – not the “ideal” number.
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Question #84 - Correct answer: a
CATEGORY: CLOSINGS
The notary fee for a warranty deed
appears on:
a. Seller's settlement statement
b. Buyer's settlement statement
c. Brokers settlement statement
d. Seller's and buyer's settlement statements
Just like in Closing Problem #6, the notary fee is a charge for whoever
is signing the document
(the person whose signature is being witnessed and noarized).
Here, the seller was signing the deed,
the seller's signature was being notarized, and therefore the seller
pays the notary fee.
Why wouldn't the notary fee also show up on the broker's
settlement statement?
There is no such thing as a broker's settlement statement. Only the
buyer and the seller get settlement statements, because they are the
parties. You are thinking of the two "broker" columns on the
worksheet (for settlement), but as I try to stress - those last two
columns are only for the closing entity's (usually the title company)
reconciliation. In other words, so that the seller's and buyer's entries
balance. Put another way, if there is a debit in the seller's or buyer's
columns (things they PAY for), then there must be a corresponding CREDIT.
If that party is not PAYING the other party, then that is an item that
GETS PAID OUT. That is why anything that is paid OUT (such as an appraisal
fee to the appraiser, an origination fee to the lender, or the closing fee
to the title company) goes in that last, DISBURSEMENT OUT column
(confusingly also called the broker CREDIT column).
Note in the Closings course (for example problem #2) we give
examples of actual settlement sheets - which the parties sign - as opposed
to the worksheet (which is used by the closing entity to determine who
pays for what, and what items must be paid out, and ultimately - to ensure
that the money coming IN balances with the money going OUT.) The HUD-1
settlement sheet shows both the seller and buyer items, and the individual
settlement sheets show only that party's debits and credits. (Therefore,
only that party signs their own settlement sheet.) Nowhere is there a
broker settlement sheet.
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Question #85 - Correct answer: c
CATEGORY: CLOSINGS
The Documentary fee is:
a. Five dollars
b. One cent per dollar of value
c. One cent per hundred dollars of value
d. One dollar per thousand dollars of value
Chapter 7, Deeds: "documentary fee on real property conveyances…
obligates the clerk and recorder of each county to collect this fee of one
cent for each one hundred dollars of consideration (or $10 per $100,000 of
purchase price) whenever a deed is recorded."
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Question #86 - Correct answer: a
CATEGORY: RULES & REGS
When must a broker maintain a ledger?
a. When the broker deposits personal funds in the account to
keep it open
b. When the broker manages less than seven rental properties
c. When the sales contract will close in less than 30 days
d. When recording commissions paid to associate brokers
Chapter 15, Rules, and the Record Keeping course, Rule E-1(o)(2) and (5) : (2) "A
record collectively called a "ledger" or an equivalent component
of an accounting system which records in chronological sequence all money
which is received or disbursed by the broker on behalf of each particular
beneficiary of a trust account." And " (5) If a broker has on deposit personal funds sufficient to maintain the trust account pursuant to Rule E-1(f), an entry showing such money shall be made in the journal and on a "broker's ledger record" " .
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Question #87 - Correct answer: b
CATEGORY: RULES & REGS
A licensee has part interest in the title
company. What must the licensee do if the buyer asks about title
insurance?
a. Advise the client to get legal advice
b. Refer the buyer to licensee's title company after written
disclosure
c. Provide the buyer with list of title companies
d. Refer buyer to lender's title company to protect client's
interest
Chapter 14, License Laws: "12-61-113.2.(1)(b) "… the
Real Estate Commission shall commence the promulgation of rules that: (b)
Require a written disclosure to be provided to the buyer or seller at
either the time the real estate listing agreement is signed or agency
disclosure is given if the buyer or seller has been or will be referred to
a title company in which the real estate broker or real estate broker
associate has a financial interest."
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Question #88 - Correct answer: d
CATEGORY: RULES & REGS
Which of the following is not included
under Rule F?
a. Deed of trust
b. Commercial contract to buy and sell
c. Vacant land contract to buy and sell
d. Contracts for the sale of newly constructed houses containing
warranties
The former Commission "Statement of Policy Concerning Rule F"
explicitly stated in the first line: "Construction contracts or
contracts for the sale of newly constructed houses containing warranties
do not fall within the purview of Commission Rule F." Although,
in 2005, the "Statement of Policy Concerning Rule F"
was incorporated into Rule F itself (and this specific passage was removed)
the answer is still correct based on the process of
elimination. The other three answers are specifically detailed as forms
that do full under Rule F, Chapters 15, 16 and 21.
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Question #89 - Correct answer: b
CATEGORY: CONTRACTS-Sales
According to the contract to buy and
sell, closing services are paid by:
a. Buyer
b. Negotiable between the parties
c. Seller
d. Split equally between buyer and seller
Chapter 21, Contract to Buy and Sell Real Estate, Section 14. There
are choices (check boxes) for who is to pay for the cost of
closing, Buyer, Seller, or split between the two. There is no "standard"
or "required" choice and therefore the question of who pays the
closing fees is negotiable.
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Question #90 - Correct answer: b
CATEGORY: CLOSINGS
In the sale of a six unit apartment
complex, seller holds a $750 security deposit for each unit. Upon closing,
how does this appear on the settlement statement?
a. $4500 credit tenants, debit seller
b. $4500 debit seller, credit buyer
c. $4500 debit buyer, credit seller
d. $4500 debit seller, credit broker
As the new "landlord", buyer acquires all the assets of
the property, including the security deposits. So the seller must transfer
those funds to buyer at closing: debit seller/credit buyer.
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Question #91 - Correct answer: c
CATEGORY: LICENSE LAW-agency rels
The licensee does not have a written
agency agreement with the seller, therefore licensee is automatically:
a. Agent for seller
b. Agent for buyer
c. Transaction broker
d. Dual agent
Chapter 2, Agency, outline of the Newer Law of Agency: "Transaction
Broker - Automatic presumption (if no written contract for single agency);
Chapter 14, License Law, CRS 12-61-803 (2): "A broker shall be
considered a transaction-broker unless a single agency relationship is
established through a written agreement between the broker and the party
or parties to be represented by such broker."
If the "licensee does not have a written agency agreement
with the seller" why can't the licensee be an agent for the buyer?
The emphasis is on the seller in the question - so we then
know that it is asking about the relationship with the seller. If the
broker doesn't have an agreement with the seller, that doesn't mean that
they automatically have a relationship with the buyer. Then the key are
the words "automatically" and "written". In other
words, it is saying: "What is the default agency
'relationship' if you don't have a written agreement?"
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Question #92 - Correct answer: d
CATEGORY: LICENSE LAW-agency rels
An individual transaction broker may do
all the following, except:
a. Advise the interests of buyer or seller
b. Assist one or more parties
c. Close the transaction for both buyer and seller
d. Assist both buyer and seller in negotiating a real estate
transaction
Chapter 14, License Law, CRS 12-61-802 (6): "'Transaction-broker'
means a broker who assists one or more parties throughout a contemplated
real estate transaction with communication, interposition, advisement,
negotiation, contract terms, and the closing of such real estate
transaction without being an agent or advocate for the interests of any
party to such transaction."
The reason answer "d" is correct (in other words, the TB
cannot do this) is because it says "Assist both buyer and
seller". This is not allowed because to assist both buyer and seller
in negotiations in the same transaction would be dual agency.
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Question #93 - Correct answer: c
CATEGORY: RULES & REGS
Title companies can offer closing
services including preparation of legal documents, as:
a. Agents of seller or buyer
b. Co-broker with the listing broker
c. Scrivener of the listing broker
d. Independent contractor
The term "scrivener" is discussed in Chapter 7, Deeds and
Evidence of Title, under the section entitled, "Title Companies".
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Question #94 - Correct answer: a
CATEGORY: LICENSE LAW-agency rels
An agent working with the seller may not
work:
a. With buyer as transaction broker in the purchase of seller's
property
b. As a buyer agent in purchase of another property
c. With other sellers as agent to sell another property
d. With buyer as customer in purchasing seller's property
This situation is first addressed in the "Colorado" part of Chapter 2-Agency, and then very specficially in Chapter 21, under the Section-by-Section explanation for the Listing Agreement. (Specifically, section 4.2.)
The issue is, essentially, what happens when the Broker represents Seller under a listing agreement, and then that same broker brings in the buyer.
(In other words – one broker represents the seller and then brings in the buyer, whom they also represent.)
The broker can’t represent both parties, because that would be the outlawed Dual Agency. So one of them must “switch” to a non-agency relationship.
Now, to get "in-depth" to the Listing agreement, what does a broker specifically do when the Broker represents Seller under a listing agreement,
and then that same broker brings in the buyer?
They will probably have to ask one of the parties to switch to a non-agency relationship. It all depends on what the Broker and Seller did when they were
putting together the Listing Agreement (long before the eventual buyer ever came along.)
In these rare situations, if the box in 4.3.1.2 is not checked – then the broker will represent seller, and give up any agency relationship with buyer: Broker will treat buyer as a customer and will owe no agency duties to buyer.
If the box in 4.3.1.2 is checked – then broker originally agreed to work with buyer under a Transaction Broker relationship.
Then buyer will have to switch to "Customer" (NO agency duties from broker) or make the seller switch to Transaction Broker relationship.
Finally, neither of these situations will apply, if at the top of this form Seller checked [ ] TRANSACTION BROKERAGE. This means that both seller and buyer are
agreeing from the start to forego an agency relationship and instead have a Transaction Broker association with the broker.”
This question deals with what happens when a buyer comes along and wants that same broker to represent him/her. There are 3 possibilities:
1) Check the box then seller represents Seller as a Listing Broker and Buyer as a customer…
unless broker already has a Transaction Broker agreement with the ultimate Buyer. Then broker stays a Transaction Broker for the Buyer, uses the Change of Status form to switch to Transaction Broker for the Seller, also.’
2) Do nothing (don’t check the box) and then seller represents Seller as a Listing Broker and Buyer as a customer.
3) If Broker was representing Seller as a Transaction Broker, then this passage (4.3.1.2) is not an issue (because there is no “agency” conflict of interest if the buyer comes along and wants that same broker to represent him/her.)
In other words, if the Broker has a Listing with the Seller and then they show the property to a buyer whom they have a representation agreement… then they can only keep the Listing with the Seller (and treat the buyer as a customer) or they can work for both Seller and Buyer if they are both Transaction Broker representations.
It sounds as though I would have to designate another broker in
my firm as the buyer's representative, and would therefore presumably have
to pay that broker the buyer portion of the commissions.
Yes, presumably. If the broker represented the seller and then the same broker found
the buyer - that broker would still have to have the brokerage appoint
another broker to be designated broker for one of them (probably the
buyer) or convince one of them (probably the buyer) consent to become
merely a "customer" (no representation, and presumably - no
commission!)
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Question #95 - Correct answer: d
CATEGORY: Uni-FINANCE
A seller not normally in the business of
making real estate loans, giving a seller carry-back in the amount of
$30,000, may charge what maximum amount of interest?
a. 1%
b. 3%
c. 21%
d. 45%
Chapter 5, Finance, under the section entitled, Uniform Consumer
Credit Code: "The following finance charge rate limitations are
currently in effect and should serve as an aid to licensees. 1. Seller
Financing (carryback or owner-will-carry loan). If the seller is not a "creditor",
the seller may charge 21% if the amount financed is $3,000 or less. If the
amount financed is more than $3,000, the seller may charge up to 45%.
(This is true whether the installment contract or purchase money mortgage
is a first lien or junior lien.)"
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Question #96 - Correct answer: d
CATEGORY: CONTRACTS-Listing
According to the exclusive right to sell
listing agreement, all the following are negotiable, except:
a. Length of the holdover
b. Broker's compensation
c. Duration of listing
d. Use of the lead-based paint form
Chapter 21, Exclusive Right to Sell Listing Agreement. Answers "a"
through "c" all allow the seller and broker to negotiate the
provisions (and/or require a choice or check-box, or blank to fill in). By
federal law, the use of the lead-based paint form is mandatory for all
homes where the building permit was issued (construction started) prior to
January 1, 1978.
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Question #97 - Correct answer: d
CATEGORY: RULES & REGS
An out-of-state client has 15 units in
Colorado and wants an associate broker to manage them, the broker
associate should:
a. Set up a trust account in the client's home town
b. Inform the employing broker and deposit tenant security
deposits in the sales escrow account
c. Obtain employing broker's approval, set up the escrow account
in broker associate's own name
d. Ask the employing broker to obtain a property management
agreement and set up the proper escrow account
You can't get the answer to this question simply by "picking"
an answer, because the correct answer may only be determined by the
ever-essential technique of "eliminating the incorrect answers":
Answer "a" is not correct because C.R.S. 12-61-113(g.5), Chapter
14, states that escrow accounts must be deposited in a "recognized
depository in this state". (In addition, under "How to Open
Escrow Bank Accounts" in the Record Keeping course, Step (1) is "Select
a Colorado depository"; Answer "b" ("deposit in the
sales escrow account") cannot be correct because Rule E-1(i) states
that a broker who manages more than seven (7) single family residential
units must not deposit security deposits in the "sales escrow"
account, but must deposit in a tenant security deposit account. Answer "c"
is not correct, because any escrow account must be in the brokerage's
(employing broker's) name.
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Question #98 - Correct answer: c
CATEGORY: CLOSINGS
Seller's title insurance appears in what
the columns on the settlement statement?
a. Debit seller, credit buyer
b. Debit buyer, credit broker
c. Debit seller, credit broker
d. Seller no entry, debit entry to buyer
Note that it is "seller's title insurance", therefore it
must be a debit to seller (answers "a" and "c").
Since the fee for title insurance is paid OUT to the title insurance
company, and not to the buyer, it must be a credit to the broker (really,
DISBURSEMENT OUT).
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Question #99 - Correct answer: b
CATEGORY: Uni-LAND DESCRIP
An improvement location certificate:
a. Is a precise legal survey
b. May reveal encroachments
c. Is required for every real estate sale
d. May be legally relied upon for determining the location of
property lines
According to Chapter 8: "The improvement location
certificate (ILC) is another method of describing and approximately
locating property, that is often required by lenders and insurance
companies. It offers certain reasonable assurances regarding potential
boundary or encroachment problems that may affect their interest."
That same section goes on to say, "What the improvement location
certificate is not: a. It is not a survey. b. It does not locate exact
boundaries. c. It does not establish property corners. d. It is not to be
legally relied upon for locations of property lines or future
improvements."
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Question #100 - Correct answer: d
CATEGORY: CONTRACTS-Prom Note
Under the commission approved earnest
money promissory note, the maker:
a. Transfers responsibility of late payments to broker
b. Agrees to pay a collection fees without limit in the case of
default
c. Agrees to redeem note in cash at least one week prior to
closing
d. Waives certain legal process rights
Yikes! This is a
bad license exam question…! But we didn't make it up. Answers "a"
and "c" are nonsense answers, both in that they make no sense
but also because they don't even come close to anything stated in the
Promissory note.
Answer "b", "Agrees to pay a collection fees in the
case of default" is very, very close to correct. However, this answer
also says, "without limit" - which is not the case. Section 4 of
the Promissory Note (NTD 81-5-04) states: "The Note Holder [lender]
shall be entitled to collect all reasonable costs and expense of
collection…" There is a limit, which is "all
reasonable costs".
Frankly, answer "d" would be difficult for even a seasoned
attorney to answer - even one who is both well versed in the Uniform
Commercial Code - but it is the closest to correct. When this answer says,
"waives certain legal process rights", it would presumably mean
that the borrower waives rights normally associated with a note, such as
the ability to cure the note in case of default and be notified of the
date of the foreclosure sale, etc. The promissory note does say in Section
6, "Borrower… hereby waive[s] presentment, notice of dishonor
and protest…" "Presentment" means a demand made by or
on behalf of a person entitled to enforce an instrument; a note is "dishonored"
if presentment (demand for payment) is made by the lender but the borrower
defaults; the "protest" is an official notice by the course that
the note was presented and dishonored (and the lender can start legal
proceedings. Therefore, according to Section 6 of the promissory note, the
borrower waives these rights and by simply failing to pay as agreed is
considered on notice of the possibility of legal proceedings by the
lender.
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Question #101 - Correct answer: d
CATEGORY: LICENSE LAW
The license required to sell real
estate options in Colorado is:
a. Subdivision developers license
b. Option dealers license
c. Securities license
d. Broker's license
Chapter 14: CRS 12-61-101(2) "Real estate broker" or "broker"
means any person… (g) Buying, selling, offering to buy or sell, or
otherwise dealing in options on real estate, or interest therein, or
improvements affixed thereon or acting as an "option dealer";
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Question #102 - Correct answer: a
CATEGORY: CONTRACTS-Listing
In Colorado, for a written listing
agreement to be valid, it must:
a. Have a termination date
b. Be exclusive
c. Describe services performed for buyer
d. Describe material facts relative to the property
Rule E-11 (Chapter 15): "Listing must have termination date
When a licensee secures a written agreement to perform activities
requiring a license, a definite date for termination shall be included
therein."
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Question #103 - Correct answer: a
CATEGORY: LICENSE LAW-agency rels
A designated broker includes all the
following except:
a. A broker in a single person firm who designates himself to be
the broker in a particular transaction
b. Employing broker designating himself to represent a specific
landlord
c. A broker designated for another broker and performing certain
tasks
d. The broker who works for seller without establishing a
written agency relationship
Chapter 2, Agency: "If a real estate brokerage firm has more
than one licensed natural person, the employing broker or an individual
broker employed or engaged by that employing broker shall be designated…"
A single-person firm, therefore, has no need for designating a brokerage.
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Question #104 - Correct answer: c
CATEGORY: LICENSE LAW-agency rels
A designated broker may reveal
confidential information to his supervising broker when:
a. It protects the interests of the client
b. Disclosure is requested by the supervising broker
c. Designated broker has informed consent of the party he is
working with
d. It is deemed necessary by the attorney retained by the
brokerage firm
Rule E-45, Chapter 15: Designated broker shall be permitted to
reveal to a supervising broker, and a supervising broker shall be
permitted to receive, confidential information as authorized by the
informed consent of the party the designated broker is assisting or
working with, without changing or extending the designated brokerage
beyond the designated broker.
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Question #105 - Correct answer: b
CATEGORY: CONTRACTS-Sales
A security system installed in a home
is leased by seller:
a. Buyer must assume the lease and agree to the service plan
b. Buyer may agree to accept the system
c. Seller must remove the system, repair the damage, and cancel
the lease
d. The security system cannot be part of the sales contract
Chapter 21, Explanation to Sales Contract: Section 10, Inclusions
and Exclusions (a)(2), "Personal Property. Items which are not
technically fixtures, but are attached in some way to the structure. These
items will also automatically go with the property by virtue of this
contract. These inclusions are: storm windows, storm doors, window and
porch shades, awnings, blinds, screens, window coverings, curtain and
drapery rods (but not necessarily curtains), fireplace inserts, screens
and grates, heating stoves, storage sheds, and all keys. Several items
require boxes to be checked, if the items are to be sold with the
property: water softeners, smoke and fire detectors, security systems, and
satellite systems. These items are not necessarily fixtures, and the
seller would be able to remove them if the boxes are not checked."
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Question #106 - Correct answer: d
CATEGORY: CLOSINGS
Closing is March 15, the first loan
payment is due April 1. What is the total amount of tax escrow that the
lender can hold in escrow reserve?
a. None
b. One month
c. Two months
d. Three months
If a closing takes place in March and the first payment is due on
April 1, then the borrower will pay and the lender will collect 9 payments
by the end of the year and by the time the next property tax payment is
due (Jan. 1 of the following year): April through December = 9 payments.
In order to have the full (12 months) amount of taxes, the lender must
collect the first three months worth of taxes in advance
at closing.
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Question #107 - Correct answer: b
CATEGORY: RULES & REGS
To assess and receive markups and other
compensation for services by third parties or an affiliated business
entity, broker must:
a. Adjust down the commission amount by a like amount
b. Have prior written consent
c. Have a written policy to reflect pass-through of compensation
d. Disclose amounts of compensation after closing
Rule E-1(p)(8): "Pursuant to C.R.S. 12-61-113(1)(c.5), (q) and
6-1-105, the broker must obtain prior written consent to assess and
receive mark-ups and/or other compensation for services performed by any
third party or affiliated business entity."
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Question #108 - Correct answer: b
CATEGORY: LICENSE LAW
What is the license renewal fee when a
broker renews their license 32 days late?
a. Payment of the regular renewal fee
b. Payment of 1 ½ times the regular renewal fee
c. Twice the renewal fee
d. The license may not be renewed, and broker must fulfill all
educational and testing requirements again
Rule D-13, Chapter 15: "An expired license may be reinstated as
follows: (a) If proper application is made within thirty-one days after
the date of expiration, by payment of the regular renewal fee; (b) If
proper application is made more than thirty-one days but within one year
after the date of expiration, by payment of the regular renewal fee and
payment of a reinstatement fee equal to one-half the regular renewal fee;
(c) If proper application is made more than one year but within three
years after the date of expiration, by payment of the regular renewal fee
and payment of a reinstatement fee equal to the regular renewal fee."
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Question #109 - Correct answer: a
CATEGORY: CONTRACTS-Prop Discl
Seller does not want to provide the
property disclosure. Any statements made by the broker regarding the
condition of the property:
a. Should include mention that it is only "to the best of
the broker's knowledge"
b. Must be verified by the broker with an independent
investigation
c. Will be considered binding in the event of a lawsuit brought
by buyer
d. Must be disclaimed in writing by the broker
See Chapter 21: "Article: "Hey! What's up with Measuring
Property?".
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Question #110 - Correct answer: c
CATEGORY: Uni-VALUATION
When preparing a CMA, the broker must disclose:
a. That it is not to be used as a lender appraisal
b. The methods used in preparing the document
c. That the broker is not a licensed appraiser
d. A certification of the exact measurements of the property
Chapter 15, Rule E-42: "Notice required on CMA's for other than
marketing. When a real estate licensee prepares a competitive market
analysis (CMA) for any reason other than the anticipated sale or purchase
of the property, the licensee must include a notice stating: "The
preparer of this evaluation is not registered, licensed or certified as a
real estate appraiser by the State of Colorado"."
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Question #111 - Correct answer: b
CATEGORY: RULES & REGS
Regarding fees or commissions from a title company, licensees
a) may accept them without restriction
b) may not accept under any circumstance
c) may accept with written consent of both parties
d) may accept with written consent of only the party to which they have established a brokerage relationship
Rule E-19 (Ch. 15).
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Question #112 - Correct answer: d
CATEGORY: CONTRACTS-Sq Ft Discl
Which of the following is untrue regarding the Square Footage Disclosure in Colorado, if a licensee conducts the actual measurement?
a) The methodology or manner in which the measurement was taken must be disclosed
b) The parties must be advised that the measurement is for purposes of marketing
c) The parties must be advised that if they want an exact figure, the property should be independently measured
d) The licensee’s measurement must be exact
Rule E-43 (Ch. 15); Square Ft. Disclosure and "Guidelines for Measuring Residential Properties" (Ch. 21).
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Question #113 - Correct answer: a
CATEGORY:CLOSINGS
On a settlement statement, who normally pays for the documentary fee in Colorado?
a) buyer
b) seller
c) lender
d) county clerk and recorder
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Question #114 - Correct answer: b
CATEGORY: CLOSINGS
On a settlement statement, where does the recording fee for the first deed of trust normally appear?
a) debit seller
b) debit buyer
c) credit buyer
d) debit lender
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Question #115 - Correct answer: c
CATEGORY: CONTRACTS-Listing
Which Colorado form contains a holdover agreement?
a) Contract to Buy and Sell
b) Deed of Trust
c) Exclusive Right to Sell Listing Agreement
d) Agency Disclosure
Ch. 21, Contract Forms.
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Question #116 - Correct answer: d
CATEGORY: LICENSE LAW-agency rels
The definition of Designated Brokerage includes:
a) A broker engaged as a limited agent for both the seller and buyer
b) A real estate brokerage firm that consisting one licensed person who has been designated by the Real Estate Commission to represent the seller.
c) A subagent designated by the listing brokerage to represent the buyer
d) An employed broker who is designated in writing by an employing broker to serve as a transaction-broker for a seller
CRS 12-61-802(1.5) (Ch. 14)
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Question #117 - Correct answer: c
CATEGORY: RULES & REGS
If a broker is leaving town and asks another broker to attend a closing in his behalf, who is responsible for an accurate closing?
a) only the closing broker
b) only the employing broker
c) only the original broker and the closing broker
d) the employing broker, the original broker and the closing broker
Rule E-5(e) (Ch. 15).
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Question #118 - Correct answer: b
CATEGORY: RULES & REGS
If an agent has not renewed her E and O insurance and after 30 days fills out the paperwork and sends in her application, what is the status of her license during those 30 days?
a) active but she cannot sell real estate
b) inactive
c) suspended
d) expired
Rule D-14(d) (Ch. 15).
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Question #119 - Correct answer: b
CATEGORY: CONTRACTS-Prop Discl
When a client wishes not to fill out a Seller's Property Disclosure, what should the client's agent recommend?
a) Seller's Property Disclosure is required and one should be provided
b) Recommend that they complete the Seller's Property Disclosure because buyers requested it
c) Licensee should fill out the Seller's Property Disclosure themselves
d) Licensee should initial the disclosure that is made
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Question #120 - Correct answer: d
CATEGORY: LICENSE LAW
For which do you need a Securities license?
a) Sale of Timeshares
b) Sale of Condominium
c) Sale of Community Property
d) Sale of Cooperative interest involving a pooled account
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Question #121 - Correct answer: a
CATEGORY: LICENSE LAW-agency rels
Which agency relationship does not require that the agent be an “advocate” for their client?
a) transaction broker
b) buyer's agent
c) listing agent
d) single agent
CRS 12-61-802(6) (Ch. 14).
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Question #122 - Correct answer: d
CATEGORY: LICENSE LAW-agency rels
What is the agency relationship of an employing broker to the clients of the designated associate broker in a particular transaction?
a) selling broker
b) buyer broker
c) subagent
d) no agency relationship
CRS 12-61-803(b) - Ch. 14: "The brokerage relationship established between the seller, landlord, buyer, or tenant and a designated broker… shall not extend to the employing broker nor to any other broker employed or engaged by that employing broker who has not been so designated and shall not extend to the firm, partnership, limited liability company, association, corporation, or other entity that employs such broker."
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Question #123 - Correct answer: c
CATEGORY: CLOSINGS
Where do new loan "Net Proceeds" appear on closing statement?
a) credit seller
b) debit buyer
c) debit broker
d) credit broker
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Question #124 - Correct answer: a
CATEGORY: CLOSINGS
Where do assumed loan proceeds appear on a settlement statement?
a) debit seller
b) credit seller
c) credit broker
d) debit broker
I can never figure out where items go (debit/credit). Especially on Assumptions. Is there a
way to remember this?
Yes - and you should use this technique for every item - regardless of whether it's an Assumption:
If you get a question that asks what line/column something goes in (debit/credit, seller/buyer), ask yourself “Who pays, and who gets paid?” Or put another way, picture one person writing the check and handing it to the other. (Remember that “other” may be buyer, seller OR a third party like the broker, an appraiser, the title company for the closing fee, etc.)
Here the seller has the loan and is “giving” it to the buyer. (That’s essentially what an Assumption is.) So picture Seller handing (“seller debit”) buyer a check for seller’s old loan amount that buyer is assuming (“buyer credit”).
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Question #125 - Correct answer: b
CATEGORY: LICENSE LAW
What is the minimum age for licensee applicants in Colorado?
a) 21 years old
b) 18 years old
c) 16 years old
d) According to the License Law, there is no age limit
CRS 12-61-103(4)(a): "An applicant for a broker's license shall be at least eighteen years of age."
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Question #126 - Correct answer: a
CATEGORY: LICENSE LAW-agency rels
In Colorado, single agency
a) requires a written agreement
b) is the automatic agency status, absent a written agreement otherwise
c) is synonymous with seller agency
d) has been replaced with dual agency by law
12-61-803(2) (Ch. 14): "A broker shall be considered a transaction-broker unless a single agency relationship is established through a written agreement between the broker and the party or parties to be represented by such broker."
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Question #127 - Correct answer: d
CATEGORY: Uni-FAIR HSG
Erica is a single mother who wishes to rent an apartment. The property manager refuses to rent to Erica because it is an "adults-only" community. If Erica wishes to file a complaint with the Real Estate Commission against the Property Manager for violation of Colorado Fair Housing laws, how long after the refusal to rent does she have?
a) 60 days
b) 90 days
c) 6 months
d) one year
Ch. 6, Fair Housing, CRS 24-34-504: "Time limits on filing of charges - repeal. (1) Any charge alleging a violation of this part 5 shall be filed with the commission. . .
within one year after the alleged unfair housing practice occurred, or it shall be barred."
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Question #128 - Correct answer: d
CATEGORY: LICENSE LAW-agency rels
Who represents buyer or seller in Real Estate Transaction:
a) buyer agent
b) seller agent
c) transaction broker
d) single agent
The key word is "represents", which indicates an agency relationship, as opposed to a non-agency relationship of Transaction Broker. Ch. 2.
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Question #129 - Correct answer: b
CATEGORY: CLOSINGS
Which of the following is always a credit to seller on a loan assumption worksheet?
a) broker commission
b) selling price
c) trust deed assumption
d) unpaid loan payment due
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Question #130 - Correct answer: b
CATEGORY: Uni-LIENS & ENCUMB
Property owner has decided to pay his property taxes in two installments, but fails to pay the first installment. When does the interest on the unpaid property tax begin to accrue?
a) January 1
b) March 1
c) May 31
d) June 30
Chapter 10 (approximately pg 10): "Property taxes become due on January first following the year for which issued. They are therefore paid in arrears. Property taxes in Colorado may be paid, without penalty, as follows: One-half on or before the last day of February, and the remaining one-half on or before the fifteenth day of June, or the entire tax may be paid on or before April 30 of the year following the one in which it was assessed. (39-10-104.5 C.R.S.)
"As soon as the first one-half installment becomes delinquent (March 1), interest penalty accrues until the date of payment; except that, if the first installment is made after the last day of February, but not later than thirty days after the mailing by the treasurer of the tax statement pursuant to section 39-10-103(l)(a), no such delinquent interest shall accrue. For the single-payment option, interest accrues as of May 1st. On June sixteenth, all unpaid taxes of the preceding year become delinquent and an interest penalty will be assessed in addition to any previous penalty that has accrued. (39-10-104.5 (3)(a), C.R.S.)"
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Question #131 - Correct answer: c
CATEGORY: Uni-LIENS & ENCUMB
For Agricultural properties, what is the maximum number days after the lender files a Notice of intent to foreclose that the defaulting owner has to cure?
a) 110 days
b) 125 days
c) 230 days
d) 265 days
Note that for Agricultural properties, the defaulting owner has no less than 215 days, and no more than 230 days, in which to cure the default. This means that
they will need to make up the past due payments (plus fees and interest).
Note also that as of 2008, there is no longer any right to cure the default after foreclosure. (See Question #16 on the Colorado final exam.)
Note also that for Residential properties, the defaulting owner has no less than 110 days, and no more than 125 days, in which to cure the default.
This question is guaranteed to be on the license exam. (The choices - number of days - may be different, so memorize the above explanations.)
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Question #132 - Correct answer: d
CATEGORY: RULES & REGS
Regarding a placement fee or commission from a mortgage lender, licensees
a) may accept them without restriction, if the lender is FDIC insured
b) may not accept under any circumstance
c) may accept with written consent of both parties
d) may accept with written consent of only the party to which they have established a brokerage relationship
Rule E-18 (Ch. 15).
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Question #133 - Correct answer: b
CATEGORY: RULES & REGS
If the buyer's broker's company conducts the closing, but the buyer's broker is unable to attend that closing or review closing documents, and another licensee is designated by an employing broker to review and sign the closing statement, who is then responsible for the accuracy, completeness and delivery of those settlement statements?
a) The broker that attended the closing
b) The Buyer's broker, the employing broker and the broker that attended the closing
c) The employing broker and the broker that attended the closing
d) The Buyer's broker and the employing broker
Note: This question (and answers) changed on 11/8/10. If you took the Colorado prep exam prior to that date, you should review the question and all answer-choices carefully. The previous question was similar to Question #43, and both reflected the wording of a prior wording of the license exam question. The current version of the license exam question includes additional facts in the question and changes the wording of the possible answers. Therefore, you should pay special attention to the wording of this new version of the question and answers, and the reasoning behind the correct answer (below).
This new version of the question is an amalgamation of three different parts of Rule E-5. Part of the point of Rule E-5 was to assign the primary responsibility for the (accuracy of the) closing squarely on the Designated Broker’s shoulders. This meant that the Employing Broker – although s/he has responsibility for proper “supervision” – is not liable if the Associate (Designated) Broker screws up the closing. This is also what question #43 on the Colorado Prep Exam focuses on.
However, this question centers on a different set of facts: What if the Employing Broker – by virtue of the fact that the Brokerage prepares the closing documents and/or conducts the closing - actually takes part in the specific transaction… Does that mean s/he is still shielded from liability if the transaction goes south (and either buyer or seller suffer monetary loss and sues the broker/age)? The answer – in that case , when the brokerage conducts the closing – is “no”: The Employing Broker is equally liable, as well as the original broker (the one whose clients are at the closing) and the designated broker who attended the closing (and presumably caused the problem or didn’t verify the accuracy of the closing documents, etc.)
E-5. Closing responsibility; closing statement distribution
"Pursuant to 12-61-113 (1)(h), at time of closing, the individual licensee who has established a brokerage relationship with the buyer or seller or who works with the buyer or seller as a customer, either personally or on behalf of an employing broker, shall be responsible for the proper closing of the transaction … (Nothing in this rule shall relieve an employing broker of the responsibility for fulfilling supervisory responsibilities…)
(d) If closing documents and statements are prepared by, and the closing is conducted by, an employing broker’s company such broker is primarily responsible for the accuracy and completeness of the settlement statements and documents.
(e) If a licensee with whom a brokerage relationship has been established is unable to attend a closing or review closing documents, another licensee may agree or be designated by an employing broker to review and sign a closing statement and will assume joint responsibility with the absent licensee for its accuracy, completeness and delivery."
So, if
1) the closing documents are prepared by the brokerage, AND
2) the primary (associate) broker can’t attend the closing and assigns someone else to attend in her/his place,
then the following people are responsible for the accuracy:
- Individual (first) broker (Rule E-5)
- Employing Broker (Rule E-5d)
- Substitute broker (Rule E-5e)
Note that this situation is only true if the brokerage actually conducts the closing ("prepares closing documents and statements") – so such wording is necessary for answer “B” ("The Buyer's broker, the employing broker and the broker that attended the closing") to be correct.
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Question #134 - Correct answer: a
CATEGORY: Uni-FINANCE
Mortgage brokers in Colorado
a) Are regulated by the Colorado Real Estate Division
b) Are not regulated in the State of Colorado
c) Must be licensed real estate agents
d) Are overseen by the banking industry
Prior to 2007, Colorado Mortgage Brokers were not required to have a background check or education, nor were they
required to be registered with the Real Estate Commission. Now the Real Estate Commission requires Mortgage Brokers to
pass (40 hours) education and testing (just like real estate brokers).
See the Commission's website regarding
Mortgage Broker Licensing.
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Question #135 - Correct answer: b
CATEGORY: RULES & REGS
After full performance of agreed services, broker withdraws from the escrow account reimbursement for advertising. How long does the broker have to provide their client with a itemized accounting?
a) 72 hours
b) 30 days
c) 10 days
d) promptly
Rule E-2: "When money is collected by a broker for. . . advertising expenses. . . A full and itemized accounting must be furnished the person within 30 days of any withdrawal of funds from the escrow or trust account."
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Question #136 - Correct answer: d
CATEGORY: RULES & REGS
Money held in an escrow or trust account which is due and payable to the broker shall be withdrawn
a) within 72 hours
b) within 30 days
c) within 10 days
d) promptly
The answer is "d": "promptly"... Rule E-1(f)(1): "Money held in an escrow or trust account which is due and payable to the broker shall be withdrawn promptly."
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Question #137 - Correct answer: c
CATEGORY: CONTRACTS-Deed of Trust
According to the Colorado Real Estate Commission approved Deed of Trust form, which of the following events is not considered a transfer?
a) conveyance of title
b) execution of a contract creating a right to tile in the property
c) transfer in a will upon the death of a joint tenant
d) execution of a contract creating a right to receive more than 50% of the beneficial interest in the Borrower
Deed of Trust (Due on Transfer - Strict TD72-5-04, Sec. 24), Closings course.
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Question #138 - Correct answer: d
CATEGORY: SUBDIVISIONS
Which of the following would not be required to register with the State of Colorado as a Subdivision?
a) a property divided into 30 interests intended solely for residential use and offered for sale
b) fifty residential time shares
c) conversion of an apartment building into a common interest community of 40 units
d) A campground with 35 lots for tents
Chapter 18, CRS 12-61-401 (3) (a):
"Subdivision" means any real property divided into twenty or more interests intended solely for residential use and offered for sale, lease, or transfer.
(b) (I) The term "subdivision" also includes:
(A) The conversion of an existing structure into a common interest community of twenty or more residential units, as defined in Article33.3 of Title 38, C.R.S.;
(B) A group of twenty or more time shares intended for residential use; and
(C) A group of twenty or more proprietary leases in a cooperative housing corporation, as defined in article 33.5 of title 38, C.R.S.
(II) The term "subdivision" does not include:
(A) The selling of memberships in campgrounds..."
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Question #139 - Correct answer: a
CATEGORY: RULES & REGS
You are a listing broker representing the seller, and you receive an earnest money check from the buyer. You MUST:
a) Deposit the check no later than three days after acceptance of the offer
b) Deposit the check no later than three days after receipt of the check
c) Deposit the check upon seller's instructions.
d) Deposit the check into your business account.
Rule E-1(n) & (o).
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Question #140 - Correct answer: d
CATEGORY: Uni-FINANCE
When should you (as an agent) take more precautions in advising your clients about a "seller carry back financing" risks? If they were to purchase:
a) Commercial property
b) Residential property
c) Raw land
d) Installment Land Contract
The answer is (Installment) Land Contract, not because there is something unique about carry-back financing,
but because you are advised several times to be very cautious when dealing with (and advising clients about) Installment Land Contracts.
(Chapters 1, 5 and 10) So, the issue is not about the carry-back financing, but about "advising about land contracts".
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Question #141 - Correct answer: c
CATEGORY: Uniform-TITLE
Who can a broker legally pay to prepare closing documents?
a) Starker Exchange;
b) Subrogator;
c) Scrivener;
d) Subordinator.
You WILL see a similar question on the license exam!
“Scrivener Fee” is an outdated term – and it hasn’t been used in “real life” for decades. It is however, discussed in Chapter 7:
Question: Who pays for these new closing fees that are required by Reg. 88-5?
Answer: The Division of Insurance does not take a position on who should pay the closing fees or, for that matter, the title insurance policy fees.
These fees are a matter of negotiation and contract between the parties. However, based upon local practice and custom, the Division believes that
these may be paid in the following manner:
a) The [owner’s] title insurance policy fee by the seller. [The mortgagee’s/lender’s title insurance policy by the buyer, unless prohibited by
the terms of an FHA-insured loan.]
b) The closing and settlement services fee, exclusive of document preparation, [split] by seller and buyer.
c) Document preparation/scrivener fee by the broker/licensee. [This is a nominal charge, such as $5, which is paid by the
listing broker in order to comply with Commission Rules and Division of Insurance regulations prohibiting a title company from
charging for services which could be construed as “preparation of legal documents”.]
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Question #142 - Correct answer: d
CATEGORY: Uniform-TITLE
Which entity is legally entitled to disburse earnest money funds at closing?
a) Straw Man;
b) Survivor;
c) Realtor;
d) Scrivener.
You WILL see a similar question on the license exam! See the explanation of "scrivener" above, FAQ #141.
Technically, the definition of a scrivener is "a person who writes a document for another, usually for a fee."
However, the Colorado Real Estate Commission applies this as well to describe the "title company" or "closing company", which
actually collects and disburses the funds associated with closing and prepares documents (such as the settlement statements).
Note that this is not "preparation of legal documents", which is prohibited by regulation - since only licensed
attorneys may do so. Instead, they are simply "filling in blanks" on standardized documents, according to the instructions of the parties.
This is why they can be labeled as "scriveners".
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Question #143 - Correct answer: a
CATEGORY: CONTRACTS-Sales
Which of the following is not considered a deceptive trade practice under the Colorado Consumer Protection Act?
a) Exaggerating the potential future increase in value of a property
b) Advertising a property, but refusing to show that property
c) Failure to represent oneself as the seller of a property within 30 seconds after beginning a conversation while soliciting door-to-door
d) Misrepresenting the results of a Radon Test
See COLORADO CONSUMER PROTECTION ACT, Chapter 17.
Many students see a question similar to this on the license exam and panic because
they think the question is asking about "radon" and they don't remember anything about that topic from their studies.
This is just about the only place that mentions "Radon" - so there you have it.
Bottom line is that this question is not about "radon", so don't panic. It is about the Colorado Consumer Protection Act - which is more about the new responsibilities
of Mortgage Brokers in Colorado - which is certainly important to both the "real life" Real Estate industry and the License Exam, so read
this and study it in Chapter 17.
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Question #144 - Correct answer: c
CATEGORY: Uniform-TITLE
The Colorado Common Interest Ownership Act" was created for the purpose of:
a) ensuring that people with disabilities who share common real estate needs find a place to live
b) ensuring that the public has equal access to common areas
c) providing associations legal protection against owners who do not pay their homeowners association fees
d) keeping ownership of common areas separate from individual ownership rights
This was covered in Short-Answer Question #14 for Chapter 18, and two Quiz questions in Chapter 17 and 18. More good reasons to diligently complete these exercises for
every chapter.
Note that this question is on the Colorado License Exam. If it were a "general" (Uniform License Exam) question, then it would simply be asking about the definition
of one or more of the different kinds of interests that fall under the category of "Common Interest Communities" (e.g., Condominiums, Time-Shares, etc.) In that case,
answer "d" would be appropriate - since it talks about the overall purpose and rights of individual owners vs. the common ownership of the "common areas".
However, this is a very specific question that warns you right there in the wording (and the fact that it is on the COLORADO license exam) that it is asking about the
Purpose of a specific Act. Like all Statutes in the Colorado materials (including those reproduced in the appropriate chapters of the Uniform materials) - the "purpose"
of any particular Act is always at the beginning, under "Definitions" or "Declarations" (and therefore the Statute number for this particular section will always end in
either .101 or .102). Always study these first sections carefully, because they are "easy pickins" for the License Exam.
Chapter 17 contains the Common Interest Ownership Disclosure Statute (38-35.7-102, approximately Chapter 17, page 36) requires the Common Interest Community Disclosure
(Approximately Chapter 17, page 50):
DISCLOSURE – COMMON INTEREST COMMUNITY – REQUIREMENT FOR ARCHITECTURAL APPROVAL
.Disclosure - common interest community - requirement for architectural approval.
THE BUYER ALSO UNDERSTANDS THAT BY COMPLETING THIS PURCHASE, THE BUYER IS RESPONSIBLE FOR PAYING ASSESSMENTS TO THE ASSOCIATION.
IF THE BUYER DOES NOT PAY THESE ASSESSMENTS, THE ASSOCIATION COULD PLACE A LIEN ON THE PROPERTY AND POSSIBLY SELL IT TO COLLECT THE DEBT.
And Chapter 18, sets out the "Definitions" in the beginning - which means that (like all "Acts") it is defining its Purpose:
"COLORADO COMMON INTEREST OWNERSHIP ACT
38-33.3-102. Legislative declaration.
(1) The general assembly hereby finds, determines, and declares, as follows:
(a) That it is in the best interests of the state and its citizens to establish a clear, comprehensive, and uniform framework for the creation and operation of
common interest communities;
(b) That the continuation of the economic prosperity of Colorado is dependent upon the strengthening of homeowner associations in common interest communities
financially through the setting of budget guidelines, the creation of statutory assessment liens, the granting of six months' lien priority, the facilitation of borrowing,
and more certain powers in the association to sue on behalf of the owners and through enhancing the financial stability of associations by increasing the association's
powers to collect delinquent assessments, late charges, fines, and enforcement costs..."
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Question #145 - Correct answer: b
CATEGORY: SUBDIVISIONS
In Colorado, a subdivider files a subdivision plan with
a) Colorado Real Estate Commission
b) Colorado Land Use Commission
c) Colorado Secretary Of State
d) HUD
The filing of Subdivision plans ("plats") is discussed in the last page and a half of text in the Subdivision Chapter,
(Ch. 18): "A final plat of the subdivision must be approved by the county commissioners before it will be filed and recorded"
and two paragraphs later, under "COLORADO LAND USE COMMISSION
...
The land use commission stands in an advisory position to the county commissioners and establishes guidelines for subdivision regulations."
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Question #146 - Correct answer: d
CATEGORY: VALUATIONS
A "BPO", or "Broker Price Option" is:
a) The provision in the Licensee Buy-Out, where the Broker commits to a price to buy the seller's property.
b) The provision in the Licensee Buy-Out, where the Seller gives the Broker an option to buy the property.
c) The provision in the Exclusive Right-to-Sell Listing Agreement that sets the amount of the Broker's commission.
d) A Competitive Market Analysis, whereby a broker compares recent sales in the neighborhood and provides an opinion of the possible sales price.
“Broker Price Option” is an obscure synonym for “Broker Price Opinion”, which is a synonym for something that is covered pretty thoroughly (in the Uniform Valuation text) under “Competitive Market Analysis” – an opinion of the property’s value (suggested sales price), generated by the licensee using statistics of recent comparable sales.
But simply because it is an obscure term, makes it even more likely on the license exam to be asked. There is a question on the Colorado license exam that asks about the "BPO" / "Broker Price Option".
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Question #147 - Correct answer: d
CATEGORY: CONTRACTS - PROPERTY DISCLOSURE
Radon:
a) is not harmful to non-smokers
b) has a strong odor
c) is only found in old wooden houses
d) is inexpensive to test for and mitigate.
Radon is only mentioned in 3 "official" places in the Contract Forms: 1) The Listing Contract, Section 10; (COST OF SERVICES OR PRODUCTS OBTAINED FROM OUTSIDE SOURCES. Broker will not obtain or order
products or services from outside sources unless Buyer has agreed to pay for them promptly when due [examples: surveys, radon
tests, soil tests, title reports, engineering studies, property inspections). Neither Broker nor Brokerage Firm shall be obligated to
advance funds for Buyer. Buyer shall reimburse Brokerage Firm for payments made by Brokerage Firm for other products or
services authorized by Buyer.]
2) The Sales Contract, Section 20; (same text as Listing)
3) the Seller's Property Disclosure, Section K1 [Environmental Conditions: Do any of the following conditions now exist or have they ever existed? Hazardous materials on the Property, such as radioactive, toxic, or biohazardous materials, asbestos, pesticides, herbicides, wastewater sludge, radon, methane, mill tailings, solvents or petroleum products.]
But Radon is an important topic to homeowners in Colorado, because it is odorless, colorless and tasteless, there are high concentrations in the Rocky Mountain region and a high risk and mortality rate due to cancer.
Inexpensive home kits can detect radon levels. However, this correct answer is fairly inaccurate in the "real world", because if a homeowner or purchaser is required to hire a company to detect and mitigate (improve) radon levels, the cost can be approximately $1500.
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Question #148 - Correct answer: a
CATEGORY: CONTRACTS - PROPERTY DISCLOSURE
Employing Broker is speaking at a meeting with all the licensees in the office concerning Asbestos. Which of the following would NOT be true reqarding what an Employing Broker should say?
a) Sellers must disclose this on the specific Asbestos Disclosure Form.
b) If clients are concerned about the presence of asbestos to contact a certified expert to inspect and clean the property.
c) If the Seller's agent knows that there is Asbestos present, they must disclose the fact to the Buyer. (Because, after all, the seller's agent doesn't represent the buyer!)
d) Agent should advise Sellers that if they are aware of Asbestos, the Property Disclosure form requires full disclosure.
Asbestos is a natural mineral was used in building materials that is effective in resisting heat and corrosion. Inhalation of asbestos fibers by workers can cause serious diseases of the lungs and other organs that may not appear until years after the exposure has occurred. Homes are no longer being built with asbestos, but older homes may still have this deadly product and are required by law to be disclosed and professionally cleaned.
This is actually a combination of two different questions on the licnese exam (which no one could quite remember the specifics.) So this question (and answers) is NOT exactly what you will see... but just contains the various asbestos-related issues that are asked about in the two questions. The reason the answer to this question is "a" is because there is no such thing as a specific "Asbestos Disclosure Form" in Colorado... so the agent cannot advise their clients to use such a thing. The other answers are true (and therefore NOT a correct answer) for the following reasons:
Chapter 14: 12-61-804 (3)(a) A broker acting as a seller's or landlord's agent owes no duty or obligation to the buyer or tenant; except that a broker shall, subject to the limitations of section 38-35.5-101, C.R.S., concerning psychologically impacted property, disclose to any prospective buyer or tenant all adverse material facts actually known by such broker. Such adverse material facts may include but shall not be limited to adverse material facts pertaining to the title and the physical condition of the property, any material defects in the property, and any environmental hazards affecting the property which are required by law to be disclosed.
Chapter 15: 12-61-807. Transaction-broker.
(2) A transaction-broker shall have the following obligations and responsibilities:
(b) To exercise reasonable skill and care as a transaction-broker, including, but not limited to:
(VI) Disclosing to all prospective buyers or tenants any adverse material facts actually known by the broker including but not limited to adverse material facts pertaining to the title, the physical condition of the property, any defects in the property, and any environmental hazards affecting the property required by law to be disclosed;
Chapter 21: Exclusive Right-to-Sell Listing Agreement is an agreement between the seller and broker(age). This means that broker's duties to the buyer are limited. One of the things that the Broker MUST disclose to the buyer, however, is the existence of any MATERIAL defects... including environmental hazards.
Specifically, section 5.1.3: Broker must disclose any adverse material (crucial to the contract or subject of the contract) defects to the seller actually known to the broker; Section 5.1.4 Broker must advise Seller to obtain a lawyer for legal matters, or any other “expert” (appraiser, inspector, etc.) for matters for which Broker is unqualified.
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Question #149 - Correct answer: d
CATEGORY: RULES & REGS
According to the Colorado Real Estate Commission's Rules and Regulations, what are Supervising Broker's Duties regarding a new Associate Broker?
a) Develop a weekly work plan for the Associate;
b) Attend all staff meetings with the Associate;
c) Fill out all the Associate's closing documents;
d) Attend closings with the Associate.
Rules E-30 and E-31 detail the Employing Broker's Responsibilities (E-30) and "reasonable supervision" of licensees with two or more years of experience. (E-31)
But Rule E-32 is in question here, as it details the Employing or Supervising Broker's requirement for a “high level of supervision” for licensed persons with less than two years experience:
(a) Provide specific training in office policies and procedures;
(b) Be reasonably available for consultation;
(b) To exercise reasonable skill and care as a transaction-broker, including, but not limited to:
(c) Provide assistance in preparing contracts;
(d) Monitor transactions from contracting to closing;
(e) Review documents in preparation for closing;
(f) Ensure that the employing broker or an experienced licensee attends closings or is available for assistance...
The first three answers of the qustion are all decent advice, and perfectly reasonable job duties for a Supervising Broker. (Although answer "c" is pretty extreme. "fill out all the Associate's closing documents".) However, only answer "d", "attend closings with the Associate" is specifically stated in Rule E-32.
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Question #150 - Correct answer: a
CATEGORY: RULES & REGS
A Buyer Broker accepts an earnest money deposit from buyer, it should be
a) Given to the Seller's Broker
b) Deposited directly in the Seller's Broker's escrow account
c) Given directly to the seller
d) Deposited directly in the Closing Company's trust account
This would have been an simpler question had the answers read "Listing Broker" instead of "Seller's Broker". But the point of that is that you must know and understand that SELLING BROKER = BUYER'S BROKER and LISTING BROKER = "SELLER'S BROKER".
Chapter 15, Rule E-1(o): "Listing broker holds escrow funds; delivery to third party - ...where the selling broker
receipts for earnest money under a contract, the selling broker shall deliver the contract and the earnest money to the
listing broker who shall deposit the earnest money in the broker’s escrow or trustee account in a recognized depository
not later than the third business day following the day on which the broker receives notice of acceptance of such contract."
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Question #151 - Correct answer: a
CATEGORY: CLOSINGS
Who pays for the appraisal?
*a) buyer
b) seller
c) lender
d) appraiser
This is an easy "Closings"-type question, but it panics some examinees – because they are (deep down inside) assuming that it is asking you for a fact that they were supposed to memorize. It is not!
To answer this question, all you have to do is ask yourself one question: "Who gets the appraisal, who is it for?"
What is the appraisal for, and who wants it? The lender! The lender wants to know what the house is worth so that they can determine whether (and how much) to lend to the buyer.
The buyer gets the loan… so the answer is "buyer".
This applies to any "Closings"-type question or calculation. Ask yourself who "gets" that item, then that person "pays" for that item, and then it is a debit for that party.
If it is any kind of loan fee – such as an appraisal, Discount Points, Origination Fee, loan closing fee (not just the sales closing fee – which is always split between buyer and seller) then it is a BUYER DEBIT and buyer pays for it.
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Question #152 - Correct answer: b
CATEGORY: FORMS-counterproposal
What must be included on the counterproposal?
a) original contract terms
*b) signature of seller
c) deadline date
d) Revised sales price
Same knowledge set as the question, "Who signs the counterproposal?".
Of the 3 choices, and the process of elimination – a) "original contract terms" is only a maybe… and c) "deadline date" is a maybe , and "d" "revised sales price" is only a maybe – because they are not mentioned in the facts of the question. The counteroffer is made by the seller (remember "Who signs the counterproposal?") then it must be signed by the seller.
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Question #153 - Correct answer: b
CATEGORY: FORMS - Sales
How should it appear in the Colorado Contract to Buy and Sell if a ceiling fan is to be excluded from the sale of a home?
a) Italicized
*b) Written in the blank for the Exclusions Section
c) Deleted from the list in the Inclusions Section
d) Check the appropriate box in the list in the Exclusions Section
The Exclusions Section of the Contract to Buy and Sell is a blank space to write in any items the Seller wishes to retain after the sale, such as a refrigerator or chandelier. (Note: Section Numbers are frequently subject to change by the Real Estate Commission.)
Exclusions: If there are fixtures that the seller is going to remove and take away, these items must be listed here. Of course, fixtures will stay with the real estate if not excepted from the contract. If, by some strange chance the items are too extensive to fit in this space, it is acceptable to list them on another addendum.
If you know that the seller does not intend to transfer any one or more of these items, the easiest time to delete them from the contract is at the time the offer is drawn up. Remember that if they are not deleted and the seller signs this offer, the seller must transfer them to the buyer at the time of closing.
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Question #154 - Correct answer: a
CATEGORY: Uni-INTERESTS
Subsurface mineral rights are usually
*a) owned by a 3rd party
b) owned by the government
c) transferred by bill of sale
d) transferred by deed of trust
This is similar to Question #53 on the Colorado final exam:
Which of the following is true regarding subsurface rights?
a) Title to the mineral rights are automatically transferred when the property is sold.
b) When seller transfers title to the property, the rights automatically revert from a third party to the buyer.
c) The mineral rights easement owner does not have the right to enter to the property in some way to extract the minerals.
*d) A third party can own the subsurface rights.
You WILL see a similar question on the license exam!
"Surface vs. Subsurface rights" is the official heading for this topic in the PSI testing handbook, and "subsurface rights" is the heading for the official R/E Commission Real Estate Law and Practice (Uniform) outline. Unfortunately, this confusing heading means that you need to know how title is transferred to land vs. how title is transferred to Water Rights or Mineral Rights (subsurface rights).
So, for "surface rights", you need to know Chapter 7, and for Mineral Rights, look at chapter 3 (about page 13) . Also, Chapter 17, Short-answer Question #17, and most of Ch. 19. For Water Rights, there is a whole section at the end of Ch. 17, the discussion of the Listing Contract in Ch. 21 (re: Section 3 of that contract, and the Sales Contract (Sec. 8 of that contract).
Mainly, mineral and water rights DO NOT "run with the land" - which means they are NOT automatically transferred with the deed from seller to buyer. In fact, in Colorado they may have been transferred many (150?) years ago to a railroad or mining company - and their "successors" still hold the rights to extract coal, etc. from your land. Will you one day see bulldozers or oil rigs in your back yard? No - there are legal and governmental processes they must go through - and they are never allowed to damage your (surface) property. So there is usually little to worry about. (Although this continues to periodically pop up as residential developments expand into former farming or oil drilling land. For example - some properties in Erie and Louisville in the 1990s.)
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Question #155 - Correct answer: b
CATEGORY: CLOSINGS
HOA fees for the quarter have been prepaid by the seller in the amount of $101.20, how should this appear on the settlement sheet:
a) $51.70 seller debit/buyer credit
*b) $51.70 buyer debit/seller credit
c) $49.90 seller debit/buyer credit
d) $49.90 buyer debit/ broker credit
It doesn’t even matter what the calculation for this question is… On this particular question the numbers are only in there to distract you.
Like most questions, this question is asking "who pays for this item at closing" (Debit vs. Credit). And to answer that, you need to simply ask yourself, "who already paid for this item?" If one party previously paid for it (in advance) then the other party has to pay back (DEBIT) that first party.
The seller paid for this item in advance… so the answer to "who has to pay the seller back" of course - is "buyer".
Then, it is NOT being PAID OUT (that would be, instead, a broker credit), but instead being paid back to seller – then it must be a CREDIT to SELLER.
DEBIT BUYER / CREDIT SELLER – answer "c".
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Question #156 - Correct answer: b
CATEGORY: Uni-AGENCY
In Colorado, what is another term for "single agent"?
a) Transaction Broker
*b) Listing Broker
c) Dual Broker
d) Designated Broker
"Dual Broker" is really just a nonsense term, but in any case would be like a "dual agent" – which is certainly not a single agent. (It has also been eliminated from Colorado, as a matter of law.) "Transaction Broker" and "Designated Broker" are Colorado types of Agency, and while those folks could also be a "single agent" in any particular case, those terms are not the same thing (synonymous) as "single agent" – so neither of those choices are the best answers.
"Single Agent" just means "Agent"… as in agent for seller, agent for buyer, listing agent, selling agent, etc., etc. It is just a general term. Therefore, " Listing Broker" in this case is an example of a " single agent", and is therefore the best answer.
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Question #157 - Correct answer: b
CATEGORY: Uni-VALUATIONS
When can a broker give a BPO?
a) when an owner is trying to obtain financing
*b) when the owner wants to determine how much to ask for her house
c) when a bank is trying to estimate value on a foreclosed home
d) when the assessor needs to assign a value for taxation
This is similar to Question #146 on this Prep Exam: A "BPO", or "Broker Price Option" is:
a) The provision in the Licensee Buy-Out, where the Broker commits to a price to buy the seller's property.
b) The provision in the Licensee Buy-Out, where the Seller gives the Broker an option to buy the property.
c) The provision in the Exclusive Right-to-Sell Listing Agreement that sets the amount of the Broker's commission.
d) A Competitive Market Analysis, whereby a broker compares recent sales in the neighborhood and provides an opinion of the possible sales price.
"Broker Price Option" is a fairly obscure synonym for "Broker Price Opinion", which is a synonym for something that is covered pretty thoroughly (in the Uniform Valuation text) under "Competitive Market Analysis" – an opinion of the property’s value (suggested sales price), generated by the licensee using statistics of recent comparable sales.
But simply because it is an obscure term, makes it even more likely on the license exam to be asked. There is a question on the Colorado license exam that asks about the "BPO" / "Broker Price Option".
Therefore, correct answer, "d" ("When the owner wants to determine how much to ask for her house. "). A BPO would be created by the Broker Associate to tell the seller their opinion of what the asking price of the house should be.
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Question #158 - Correct answer: c
CATEGORY: Uni-AGENCY
Who can amend a contract?
a) Listing broker
b) Buyer's broker
*c) buyer and seller
d) Attorney
As always, brokers can’t change the contract without the consent of the parties.
So the answer to a simple question (no additional facts) is going to be something like,
"only the buyer" or "only the seller" or "only the parties" or "the buyer and seller".
This is a general question – so it is not something you can "memorize".
You have to analyze the question, asking yourself "what do I know about this topic".
Do not , ever, never – simply guess. You know something about every question –
so always ask yourself "what do I know?", then eliminate the wrong answers and then narrow it down to the correct answer.
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Question #159 - Correct answer: c
CATEGORY: FORMS-Sales
Which of the following are negotiable on the Colorado contract to buy and sell?
a) discount points
b) mediation
*c) closing costs
d) legal description
You can get the answer by the same process of elimination, as always. What terms can the parties (buyer and seller) always have a say in? ("negotiate"). Process of Elimination:
a) Discount Points are a "maybe" – the buyer can theoretically negotiate their loan terms… but the seller has no say. More importantly, "Discount Points" are not a provision in the Contract to Buy and Sell (or any of the CO contract forms – so it doesn’t matter which form they are talking about.)
b) Mediation is a FALSE – there are no fill-in-the-blanks or checkboxes on any forms that allow the parties to get out of mediation.
c) is a TRUE statement – the parties can always negotiate costs between each other, such as the closing costs. Process of Elimination, makes "c" the best answer.
d) is FALSE because it is specifically noted in the Contract (just like Mediation) by virtue of the omission of an "option" such as a checkbox - that it is mandatory
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Question #160 - Correct answer: b
CATEGORY: Uni-LISTINGS
If a seller has listed a property and an agent finds that he is in an exclusive agency agreement with another agent, what can that agent legally do?
a) take the listing as soon as the existing listing has expired
*b) entitled to a commission if s/he produces a ready willing and able buyer
c) receive a commission if the seller sells the property himself
d) refuse the listing
See also, Question #73 in this Colorado Prep Exam. According to that question and the definitions in the Dictionary and Chapter 2, the Agent will get a commission if the house sells – unless the seller him/herself actually found the buyer. (As opposed to an Exclusive Right to Sell Agency Contract, where the Agent will get a commission if the house sells – even if the seller him/herself actually found the buyer.)
Answer “a” (“take the listing when the other one is expired”) is an okay
answer – but not the best – because the question really isn’t asking
(or even hinting at) an issue with the 2nd agent wanting to become the
Listing agent.
Answer “b” is the correct (best) answer because it says “produce a ready,
willing and able buyer”. That means that the 2nd agent is the agent dealing
with the buyer – and therefore gets the “buyer” half of the commission.
In case there is confusion about whether the question is asking about the
first (Listing) broker (because it isn’t very clear by the wording) then
that broker also gets a commission under the Exclusive listing agreement –
because they are the Listing Broker and the seller did not find the buyer.
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