Colorado State RE Exam

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Tenancy at will

A tenancy at will is a property tenure that can be terminated at any time by either the tenant or the owner (landlord). It exists without a contract or lease, and is unspecific in duration or the exchange of payment. A tenancy at will arrangement is desirable to tenants and owners wishing to have the flexibility to change rental situations easily and without breaking a contract. Tenancy at will: minimum three-day notice to terminate

The amount due from the buyer appears on a closing statement as a:

The amount due from the buyer appears on a closing statement as a credit to the buyer. This is a receipt for the money that the buyer has already paid. Remember that the closing is over!

In the Colorado Contract to Buy & Sell establishes a Loan Objection Deadline; if the buyer is getting a new loan. What is the effect of the deadline?

A buyer has until the Loan Objection Deadline to provide written notice s/he cannot get a commitment for a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money is refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer’s earnest money becomes nonrefundable should s/he not receive a loan.

The amount due to the seller appears on a closing statement as a

This answer pertains to the bottom of the settlement sheet when the columns are reconciled. Once you have applied all credit and debits, you total up all columns to the bottom. . If the Seller’s debit column is less than the Seller’s Credit column, it means the Seller is getting money back. If for example, the debit column totals $60,000 and the Credit column totals $100,000; you would add $40,000 to the Debit column making both columns equal to $100.000. Unfortunately, you are not done yet. You have added $40,000 to the Seller’s Debit column. For every Debit there must be a Credit. Where does this corresponding Credit go? To the Broker Credit column.

The rescission provisions of truth-in-lending apply to what type of loan?

A home equity loan has a three day right of recission or a re-finance.

In order for a broker to write an offer for a buyer on a HUD-acquired property, the broker must use a:

Offers must be submitted on HUD Standard Retail Sales Contract.

All HUD homes are:

Sold as is, but you can still have an inspection

At or before the signing of a contract for sale, every condominium unit buyer must be provided by the seller with:

A copy of the amendments to the condominium association by-laws

Which does NOT fall under Rule F?

Rule F is the rule under which all approved contracts and the rules governing their use fall. The non-approved contract in this list is the "contract to purchase newly constructed homes with warranties". New home builders are exempt from the rules established under the Conway-Bogues court decision. As such they are not required to use approved contracts and generally choose to use purchase contracts they create.

How many times can the exclusion on capital gains taxes be claimed?

1 transaction every 24 months

When a complaint against a licensee results in a possible suspension or revocation, a hearing is required. Which of the following presides over the hearing?

An administrative law judge presides over all hearings by the real estate commission. Colorado Real Estate Manual statute 12-61-114.

According to the Contract to Buy and Sell, who pays for the appraisal?

It is negotiable.. but traditionally the buyer pays for the appraisal as it is usually the buyer’s lender that requires it.

According to the Real Estate License Law, a transaction and trust account record must be kept for a minimum of how many years?

The real estate commission requires all records to be kept for four years.

The fee to notarize a Warranty Deed is charged on the settlement statement to:

The seller(s) signs the warranty deed, not the buyer. The charge is debit seller. On the settlement sheet do not confuse "recording" the deed with "notarizing" the deed. Recording the deed is "debit buyer" as it is considered in the buyers best interest to have the deed recorded into the public record.

The Real Estate Commission has the authority to:

audit or investigate a licensee and files at any time without advance notice

The seller agrees to pay $1500 of the buyer’s closing costs, this is shown on the settlement sheet as:

Debit Seller/Credit Buyer. This gets the dollars into the Buyer’s side. The Buyers is then debited for his/her share of the Closing Costs. The Buyer’s individual closing cost charges will each be a debit to the Buyer and a credit to the Broker (this deposits the money into the Trust Account for the Broker/Closing Agent to actually pay the vendor who is owed the Closing Costs).

As a licensee you desire to sell your home yourself:

It is recommended that the office policy manual address the purchase and sale of a licensee’s property.

A Colorado broker with residence out of state accepts an earnest money deposit on a property located in Colorado. He needs to:

open an escrow account in a Colorado bank

The property is leased through September, and the new buyer closes on June 30.

All existing lease remain in effect even though the property has been sold.

On contracts to purchase land, crops that are growing in the field:

Crops that are fruits of industry, they require cultivation, can always be a negotiable item, fruits of nature usually go with the land.

At closing, the earnest money is credited as follows:

Earnest money is credited to the buyer at closing and debited to the broker.

Licensee Buyout Addendum:

Seller acknowledges that following Closing, the Property may be held by Buyer for a period of time or may be resold immediately, and any profit or loss shall be solely that of Buyer. Seller further acknowledges that there is a chance for profit to Buyer and that certain expenses may accrue to Buyer. Such expenses include costs and expenses of Closing, holding, and reselling the Property. In any event, after Closing, Buyer will absorb the loss or receive the profit from any sale and ownership of the Property.

Contract closing date is March 29. Buyer and seller want to close on the 27th. In order to do this, they must:

As long as both parties to the contract agree and the date is being moved up, there is no need to do and amend and extend contract.

Single Licensing

As of January 1, 1997 only real estate broker’s license will be issued. Salesperson licensed under the old law will eventually need to upgrade to a broker. You are allowed to hold real estate licenses from several states, you are allowed to hold different state licenses i.e. appraiser, insurance, real estate broker.

In Colorado the minimum time following recording the Notice of Election and Demand before a residential foreclosure sale can be held is:

A residential foreclosure sale must be within 110 to 125 days of the recording of the Notice of Election and Demand. For agricultural properties the window is 215-230 days.

An ad in the newspaper must appear under the name of:

All advertising must contain the name of the employing broker. Not the branch office.

A couple signed a lease on an apartment for a period of 1 year. The lease does NOT contain an automatic renewal clause. The couple plans to move out at the end of the lease rather than renew it. How much notice MUST they give to comply with the lease term?

A lease for a defined period of time, with no automatic renewal is a Tenancy of Years. Do not let the term "years" fool you. This tenancy simply means that the lease is for a set period of time, be it a day, a month, 6 months or a year. If it had an automatic renewal it would have been a Periodic Tenancy. The most common version of a Periodic Tenancy is a month-to-month lease which automatically renews when rent is paid. A Periodic Tenancy can go on forever as long as the set period of time is renewed. In a Tenancy of Years there is a set period of time, but no automatic renewal – when the lease is done, you are done, unless you and the landlord agree to renew, but that is not automatic.

The maximum amount of days that can be specified in the Holdover Period in the Listing Contract is:

Negotiable. the Listing Period expires (Holdover Period) (1) to anyone with whom Broker negotiated and (2) whose name was submitted, in writing, to Seller by Broker during the Listing Period (Submitted Prospect). Provided, however, Seller ___ Will __Will Not owe the commission to Brokerage Firm under this if a commission is earned by another licensed real estate brokerage firm acting pursuant to an exclusive agreement entered into during the Holdover Period and a Sale or Lease to a Submitted Prospect is consummated. If no box is checked in this then Seller does not owe the commission to Brokerage Firm.

When a licensee purchases a property utilizing a licensee’s buy-out agreement:

Under the licensee buyout agreement a licensee will not collect a commission.

In the Contract to Buy/Sell Real Estate (AKA the purchase contract), who is responsible for the cost of the appraisal?

Who pays what in the purchase contract is always a matter of negotiation. Although there are traditions that we follow, such as the Seller paying for Title Insurance, this is custom and not law. Neither the Real Estate Commission or State Statutes will tell a Buyer or Seller what they must pay. That is between the buyer and the seller.

Which of the following is required for a person to be a broker of record for a corporation?

The only requirement in order to be the broker of record for a corporation is that one have a valid, active Colorado broker’s license, and have fulfilled the necessary requirements to be an Independent Broker.

When reconciling a 6 column worksheet for a closing – after totaling up the debits and credits, the closing agent needed to add a $30,000 Debit to the Seller Debit column to make it equal to the Seller Credit column. What does this Seller Debit represent?

A $30,000 check the Seller will receive from this closing. This DEBIT represents the Seller’s proceeds from the sale (what they are getting).

A rental agreement for less than how many months does not need to be in writing to be enforceable?

The Statute of Frauds is the law that governs whether or not a real estate contract of any kind must be in writing. Although it is never advisable to enter into a real estate lease agreement with an oral contract, the law does specify that it is is enforceable if the agreement is for less than 12 months. Having said this, be aware that real estate brokers are also bound by real estate commission rules and as such are required to use commission approved forms, therefore we do not have the authority to comsumate an oral lease. The buyer and seller can, their attorneys can, the licensee cannot.

A broker must offer:

A broker must offer only the relationships he or she chooses to offer.

A broker who does not have any employed licensees must:

maintain an office policy on brokerage relationships Every office must maintain an office policy and available for review.

Right of rescission is part of:

The right of rescission is a consumer protection law found within the Truth in Lending Act. The Truth in Lending Act (TILA), Title I of the Consumer Credit Protection Act, is aimed at promoting the informed use of consumer credit by requiring disclosures about its terms and costs. In general, this regulation applies to each individual or business that offers or extends credit when the credit is offered or extended to consumers; the credit is subject to a finance charge or is payable by a written agreement in more than four installments; the credit is primarily for personal, family or household purposes; and the loan balance equals or exceeds $25,000.00

Starting out you might prefer a lower split versus keeping 100% of your commission for:

Higher splits typically include higher monthly office fees and when first starting out you need support and supervision to get your career moving.

Real estate closing fees customarily appear on a settlement statement as a:

By custom in Colorado buyers and sellers share the cost of closing a transaction where the buyer is getting a conventional loan. VA requires the seller to pay the cost of closing. FHA allows the buyer to pay 1/2 of the closing fee. This is shown as a debit to whomever is paying it and a credit to the broker so that a check is written to the title company for providing the service.

In a net loan proceeds settlement sheet, the net loan amount is shown as a:

Net Loan Proceeds: Debit broker single entry. most often seen with new loans (and always on the State Exam). Net Loan Proceeds is a situation when a lender is making a loan for x and part of that loan is covering expenses that the lender is owed. In short – the lender is lending money to the buyer to cover expenses that are going to be paid to the lender. The lender does not want to send the entire loan amount to the closing and wait for a check back to cover the money they are owed, they instead take their money out of the loan up front and send the remaining balance called Net Loan Proceeds to the closer.

When establishing a relationship with a buyer or seller, the Commission-approved form entitled "Definition of Real Estate Working Relationships:"

The definition of Real Estate Brokerage relationships may help explain but is not proper disclosure.

A growing crop, also known as emblements, is regarded as:

property of the tenant farmer. Emblements are regarded as personal property even before harvest; thus a tenant has the right to take the annual crop resulting from his or her labor.

When showing buyers new homes:

When showing buyers new homes the broker should register the buyers with the builder. Failure to do so may result in the agent not receiving a commission.

The grace period to renew an expired license without penalty is:

Licensees have a 31 day grace period from the expiration date of their license to complete the renewal process. For example, a license which expires on 12/31/2011 will have a grace period extending until 01/31/2012 to complete the renewal process and pay the required fee. The division does recommend completing the renewal process as soon as possible to avoid last minute issues which may prevent your renewal.

A transaction broker relationship may be created by:

Brokerage Disclosure to Buyer. Seller and Buyer Agency relationships must be in writing. In the absence of a written agreement the default non-agency relationship is a transaction broker. However, prior to performing a licensed activity such as eliciting or receiving confidential information, the Broker must at a minimum disclose this status using an approved disclosure form

When a broker terminates his affiliation with an employing broker what must be done?

The licensee and the employing broker have joint responsibility in notifying the real estate commission.

Interest on the loan assumed is shown as:

Credit to the buyer a debit to the seller.

After the Sellers columns on a Settlement sheet have been subtotaled, to balance the two debit and credit columns, a credit to the Seller and a debit to the broker would represent:

Money owed by the seller. When the Sellers credit column is less than the debit column you need to add a credit to make them both equal. This means the credit column (containing the sale price) is less than the debits (containing amoung items – money owed on the property). This Seller is "upside-down." This credit ends up representing money the Seller must bring to the Closing and give to the Broker to pay off debts. (A Broker Debit is a deposit into the escrow account and a check that has to be written).

A broker supplies the financing for a project to build condominiums with the stipulation that he has the exclusive right to sell the completed condos. Which of the following BEST describes this relationship?

Agency coupled with an interest. Not only does the agent have an agency relationship with the client, the agent also has a financial interest.

Seller is giving the buyer a contingency but doesn’t want to be stopped from selling forever. The seller should consider

Before we define "escape clause" lets define "contingency". When a seller agrees to accept a contingency from a buyer, they are agreeing to sell the property to the buyer contingent on the buyer selling their property. Sellers are more likely to accept a contingency offer in a tough real estate market when they are uncertain when and if their property will sell. In a strong market, seller are not as motivated to pull their property off the market.It is very common when a seller does accept a contingency, for the seller to want to include an escape clause into the terms of the purchase agreement. There is no set format for an escape clause, it is simply a term used to describe any clause in a contract that would let the seller not perform the contract i.e. blow off the contingent buyer and accept another offer. It is not unusual for an escape clause to place a deadline on the contingent buyer, usually a day or two, to waive the contingency or lose the property.

When purchasing a "new home" through a builder, the earnest money should be held in the:

Builder’s escrow account. The builder will state in the contract who is holding the earnest money and where.

What if anything is required by the broker to be included on his/her Web site.

Commission rules regarding advertising of brokerage identity all apply to any Web site or Internet advertising. Brokerage name must appear on web site.

A three-day right of rescission applies to:

Second Mortgages. Residential mortgages are exempt from rescission if the mortgage is created to finance the acquisition or initial construction of the consumer’s principal dwelling. (REM 5-13)

When should the listing agent order the title commitment?

the listing agent should order the title commitment as soon as all the parties accept the contract. Dates are very important. Title commitments must be ordered in a timely fashion, in order to meet the required contract dates.

Title insurance fees or premiums are paid:

only once, and the policy continues in force without further payment. Unlike other insurance, title insurance is paid only once and the policy continues in force without further payment.

As per the Mediation clause in the Contact to Buy/Sale Real Estate: "The mediation, unless otherwise agreed, will terminate in the event the entire dispute is not resolved within _________ days of the date written notice requesting mediation is delivered by one party to the other at the party’s
last known address.

30 days

If the appraiser contacts the listing broker and indicates a problem reaching the contract value, the:

listing agent should provide comparables to substantiate the value. The listing broker has a responsibility to the seller to substantiate the value.

A buyer is concerned that new construction a mile away could have a negative environmental impact on the home they are considering purchasing. Can they make the Contract to Buy/Sell contingent on the result of an environmental impact report?

Yes, you can make a contract contigent on anything This is a matter of negotiation between the buyer and seller. The law has no jurisdiction on matters of negotiation between a buyer and seller.

If an offer was made on a house in which the buyer intended to be have a a hair salon in the basement, but found out a few days prior to closing that the zoning wouldn’t allow it, can they cancel the agreement without penalty?

Zoning is a matter of Title. Buyers have the right to terminate the contact without penalty if any aspect of Title is unsatisfactory to them. However, they must due so in writing prior to either the Off-Record Title Objection Deadline or the Record Title Objection Deadline.

Title insurance companies guarantee against a loss because of defects existing:

at or before the date of the policy. Defects, which come into existence subsequent to the date of insurance of the title policy, are not covered.

Mr. and Mrs. Snively have a contract to purchase a home for $257,000. A hailstorm damaged the roof to the tune of $27,500 before closing. What remedy does the buyer have?

Snively’s have an option of whether they will or will not proceed with this contract. C-lender wouldn’t close and loan of damaged property).

Form 1099-S shall be given to any seller of a transaction to:

This is to report any capital gains income to the federal government, But remember the exclusion.

How is the purchase price handled on the settlement statement?

Charge the buyer, credit the seller.

According to Commission Position 39 on Lease Options, Lease Purchase Agreements and Installment Land Contracts a licensee may create the before mentioned agreements by:

Installment Land Contracts s a purchase agreement in which the owner retains legal title to a property while the buyer, usually a tenant, makes payments. ONCE THE BUYERS COMPLETES THESE PAYMENTS, THE SELLER DEEDS THE PROPERTY TO THE BUYER. Two big points here: 1) Since the buyer does not take legal ownership until they complete payments, this means the buyer, who usually has possession of the property, has no legal rights to the property beyond that of a renter. THEY DO NOT OWN IT – THE SELLER DOES. 2) Because of the number of creeps who have used installment land contracts to defraud unknowing buyers, the real estate commission does not have an approved form for us as agents to use. These contracts are not illegal, if you have clients who want to enter into such an agreement, they need to bring in an attorney to draw up the necessary paperwork.

Who is responsible for getting a copy of the contract to the Title Company?

Listing Agent. Listing agent helps seller determine which title company will issue commitment.

A lawsuit for inverse condemnation may be brought by

Inverse condemnation is a lawsuit brought by a property owner seeking compensation for land taken for a public use by a government entity with eminent domain powers. Eminent domain is the taking of private land for public use with payment of compensation by a government entity. Inverse condemnation actions are usually brought when the government has limited use of private land to an extent that the value of that land is greatly reduced, or where the government has allowed the public to make use of private land.

Who shall request the earnest money to be released, in good funds to the closing clerk, prior to closing?

Listing agent generally requests it from the broker at least 24 hours before closing.

An offer has been presented to the sellers of a property. The sellers do not want to accept it as it is. They ask their agent to change the terms through a counter proposal. The seller’s agent prepares the counter proposal and delivers it to the buyer’s agent. The buyers don’t want to accept the new terms the seller Is offering. What can be done?

As buyer’s agent you would tell them to rewrite the original contract. A purchase contract can only have one counter attached, the buyer can’t withdraw a counter, and only sellers can withdraw the counter. They must sign another contract knowing what terms are acceptable.

An Environmental Impact Statement (EIS)

An Environmental Impact Statement (EIS) is a document prepared to describe the effects for proposed activities on the environment. "Environment," in this case, is defined as the natural and physical environment and the relationship of people with that environment. This means that the "environment" considered in an EIS includes land, water, air, structures, living organisms, environmental values at the site, and the social, cultural, and economic aspects. An "impact" is a change in consequence that results from an activity. Impacts can be positive or negative or both. An EIS describes impacts, as well as ways to "mitigate" impacts. To "mitigate" means to lessen or remove negative impacts.

Commission approved Deed of Trust:

The differences are principally what happens to the loan when the property is sold. "Due on Transfer – Strict" means the entire loan balance becomes due on sale. "Due on Transfer – Creditworthy" means the loan is assumable with lender approval. "Assumable – Not due on transfer" means the loan is assumable with no additional approvals required to another owner.

An owner has refinanced his primary residence and decided to take cash out of the loan to buy a fixer-upper. If the closing is scheduled for today (Monday) on the primary residence, How early can the owner close on the fixer upper?

Since the right of rescission is 3 days, he will not get the check until 3 business days after the closing which would be Friday. "Right of rescission" gives borrowers the ability to cancel their a loan for a certain period of time, no questions asked. The right of rescission does not apply to business loans or first loans on real estate. A 3 day right of rescission does apply to home refinancing and home equity loans.

Which of the following is true if a broker negotiates a Success Fee under the Exclusive-Right-to-Buy Contract?

The buyer will indicate who is to pay the fee. The Exclusive Right to Buy agreement is often referred to as the Buyer Agency Agreement. This is the contract used when a buyer wants to engage the services of a buyer’s agent. In this agreement, Success Fee is a term used for commission. Since the buyer is engaging the agent, the buyer needs to indicate who is going to pay the agent (buyer or listing broker or seller or anybody but me). The form of this payment needs to be indicated i.e. a percentage of the sale or lease, or an hourly rate, or some other form of compensation. If there is a minimum or maximum amount. If they are paying a retainer. In short, a number of different negotiated items all relating to the commission to be paid.

When an existing contract is replaced with a new contract, this is referred to as:

novation

In an estate for year’s leasehold estate, what happens when the original lessor dies?

In an estate for years leasehold estate, the lessee’s right is unaffected.

What must appear in the title of a trust account?

Company name and employing broker’s name

Trust account records must be kept for:

Trust account and transaction recods must be maintained by four years.

A tenancy whereby neither the lessor or the lessee specify a definite starting date or ending date is known as a:

Tenancy at will

Tenancy for Years

This is, also called an estate for years or tenancy for a definite term, is an estate that is created by a lease. A lease is a contractual agreement where a tenant takes a leasehold interest in a real property for a specified duration. The defining characteristic of a tenancy for years is that the term must have a definite beginning and end; that is, a beginning date and either a specific time period (such as one year or one month) and an end date must be declared. As long as a lease is for a definite term, it is identified as a tenancy for years. These leases terminate automatically at the specified end date without the need for notice by either party.

Tenancy from Period to Period

A tenancy from period to period is an estate that exists when the tenancy is for a definite initial time, but is automatically renewable unless terminated by the lessor or lessee with prior notice that the tenancy is to be ended. These estates, which are also called periodic tenancies, are of indefinite duration since they can be renewed indefinitely. A tenancy from period to period may be from year to year, month to month, week to week or even day to day, and renews for a like period of time. For example, a month to month periodic tenancy is renewable in one-month periods until it is terminated at the end of a month through proper notice by either party

Tenancy at Will

A tenancy at will, or an estate at will, exists at the pleasure of both the lessor and the lessee. This type of tenancy can be terminated at any time "at the will" of either the owner or the tenant. A tenancy at will lease agreement might contain language that expresses that the lease may be terminated instantly when notice is given. In practice, a tenant is generally entitled to a reasonable amount of time in which to vacate the property. Landlords may prefer a tenancy at will when a property is for sale and any tenants would have to vacate quickly. Tenants may favor a tenancy at will if they plan on renting only for a short period of time; for example, prior to moving or while waiting to move into a new home.

Tenancy at Sufference

A tenancy at sufferance is the lowest form of estate known to law. Also called an estate at sufferance, it exists indirectly as the result of circumstance, and is never deliberately created. This type of tenancy arises when a person goes into possession of land in a lawful manner, but remains on the property without any right to do so, and without the owner’s consent. The only difference between a tenant at sufferance and a trespasser is that the tenant at sufferance had at one time a right to be on the property, but has stayed beyond the terms of the previous agreement. For example, a tenant who remains after a one-year lease has terminated, without consent or recognition from the owner, becomes a tenant at sufferance. The tenant can be evicted at any time without notice.

A purchaser is required to fill out a W-9 form at closing so that:

A transaction broker relationship may be created by:

Brokerage Disclosure to Buyer. Buyer and Seller Agency relationships must be in writing.In the absence of a written agreement the default non-agency relationship is a transaction broker. However, prior to performing a licensed activity such as eliciting or receiving confidential information, the Broker must at a minimum disclose this status using an approved disclosure form .

An applicant for a Colorado real estate license who has been licensed in any other state must file which of the following proofs of that licensure?

A certificate of licensing history from the other state’s real estate licensing authority. A certificate of licensing history that indicates the licensee’s current status. Any complaints and disciplinary actions taken against the individual must accompany an application for a real estate license in a new state.

A buyer submits an offer contingent upon the successful closing of their present home.

The listing agent has the responsibility to verify as much information as possible on behalf of their principal.

In Colorado, which of the following must be investigated by the real estate commission?

The commission is required by law to investigate all written complaints that have been verified. They MAY investigate a licensee at any time, for any reason, or for no reason.

In a new loan closing, sometimes a lender may make some of the payouts, such as recording fees, survey and reserve taxes before the closing. When these amounts are taken out of the loan, the remaining balance is the amount sent to the closing table and is called the Net Loan Proceeds. The Net Loan Proceeds are entered on the settlement worksheet:

most often seen with new loans (and always on the State Exam). Net Loan Proceeds is a situation when a lender is making a loan for x and part of that loan is covering expenses that the lender is owed. In short – the lender is lending money to the buyer to cover expenses that are going to be paid to the lender. The lender does not want to send the entire loan amount to the closing and wait for a check back to cover the money they are owed, they instead take their money out of the loan up front and send the remaining balance called Net Loan Proceeds to the closer.

If a broker lends money to a client and places it in his trust account:

he may withdraw it only with the consent of his client. Once a broker makes a loan to a client, it becomes the property of the client and must be handled the same as any other trust money.

In addition to taking the required 168 hours of course instruction to become an associate broker, one must also:

An associate broker needs to pass the state and uniform state exam and hang their license under an employing broker.

When the license of the sole proprietor is suspended for two years, what is the effect on the affiliated associate brokers?

If the broker’s license is suspended, the licenses of all associate brokers will be placed on inactive status until these persons are "hired" by a new broker.

An ad in the newspaper must appear under the name of:

the broker of record. All advertising must contain the name of the employing broker.

A legal easement can be created by any of the following EXCEPT
the parties’ behaving as though there was an agreement,
a written agreement between the parties,
definition within a deed, merger of the titles

merger of the titles Explanation When two titles are emerged it means that two properties have been merged into one. Any easements between the two are extinguished as no longer necessary.

Richard and Jan Minard purchase a house for $85,000 from Mearl and Eunice Miley. They sign an installment land contract (aka land contract), and a $3,000 down payment is made. After only four months Richard and Jan are unable to make their payments, and are in default. All the following are true except:

Untrue – this loan can be foreclosed as though it were a mortgage True – the Minards may have to forfeit all of the money they have paid, as well as the house, he Mileys may take the Minards to court and sue for payment as many times as the Minards are in default over the life of the loan, the Minards have no opportunity to redeem their equity in this property As this is an installment land contract (AKA land contract or contract for deed), there is no mortgage as the buyers have no title to this property. In this kind of contract the buyers have right of possession ,while the sellers retain legal title. It is not until the buyers have made all payments that they recieve legal title. Legally, they have no greater standing than renters. They may be in breach of this contract, but the sellers (Miley’s) do not have to foreclose to take ownership of something to which they already have title. There is no foreclosure on an installment land contract. In this case, the buyers lose everything.

Brian purchased a second home three years ago for $ 169,000. He sold it this year for $154,000. He decided to go ahead and sell it for a loss because his work schedule prevented him from enjoying the second property. His tax return will:

not show any loss, as you cannot write off a loss on your personal residence. The IRS only plays with the owner of a personal residence if the house is sold at a profit; if there is a loss the IRS does not want to be your partner on your residence.

Closing is February 10 and taxes for the prior year were not paid for $1,854, this is shown on the settlement sheet as:

$1,854 debit to the seller, credit to the broker Taxes for the prior year would be a debit to the seller and a credit to the broker. The previous years taxes are the seller’s problem. Debit the seller for $1854. The broker receives the funds as a Credit. (remember – the "broker" is a proxy for the title company closing agent who controls the escrow account). The broker (closing agent) will then write a check from the escrow account and send it to the governement to pay the past due tax bill.

Ms. Nation, an eligible veteran, made an offer of $95,000 to purchase a condo she will finance with a VA-guaranteed loan. Four weeks after the offer was accepted, a certificate of reasonable value (CRV) for $92,000 was issued for the property. In this case:

the veteran may withdraw from the transaction without penalty or negotiate with the seller to reduce the price to $92,000 VA will not allow another loan for the $3,000. The seller would need to come down on the purchase price, the buyer can put the $3,000 down, or the veteran may withdraw from the transaction.

Mr. Jones has a property valued at $150,000. The 2003 taxes were 27.65 mills. In 2004 the mill levy was reduced to 25 mills but the assessed value increased 10%. Did the taxes increase or decrease?

The taxes decreased since the mill levy reduction was a greater percent than the assessment increase.

A 6 foot wide sidewalk is to be poured on the inside of a corner lot that measures 50 feet by 100 feet. If the cost of the sidewalk is $0.68 per sq. ft., how much will the sidewalk cost?

50 X 6 = 300 + (94 X 6 =564) = 864 sq ft X $.68 = $587.52

John Johnson owned a parcel of land around his copper mine. He sold the mine and property for $230,000 with the verbal understanding that copper already mined before the date of sale would not be included in the sale. The mined copper is considered by law as:

Any mineral that has been removed from below the surface is personality.

A building sold for $180,000. The buyer put up 10% cash and obtained a loan for the balance. The lending institution charged a 1% loan origination fee. What was the total amount the buyer used for this purchase?

$180,000 X .9 = $162,000 X .01 = $1,620 + $18,000 = $19,620 The loan origination fee is a lender charge for the purpose of securing a new loan

An offer is made on a property listed with broker Green for $93,000. The offer is for $91,000 and the buyer will be obtaining FHA financing. The appraisal comes in at $88,000. What recourse does the buyer have?

The buyer may get an FHA loan provided the difference between the appraised price is paid in cash. The buyer cannot borrow the money but can pay the difference in cash or s/he can terminate the contract at no penalty.

A broker has listed 1.65 acres of land at $ .205 per square foot. What is the selling price?

43560 (Feet in one acre) X 1.65 (acres of land) = 71874 (square feet), X .205 (cost per square foot) = $14,734.17 (selling price)

A man earns $20,000 per year and can qualify for a monthly PITI (Principal, Interest, Taxes, Insurance) payment equal to 25% of his monthly salary. If the annual tax and insurance is $678.24, what loan amount will he qualify for given a monthly PI (Principal Interest) payment factor is $10.29 per $1000 of loan amount? To be clear, a payment factor Is the amount of money a borrower will pay for each $1,000 of loan amount.

The man can qualify for a loan, but only one that the monthly payment including PITI (Principal, Taxes, Interest, Insurance) is not more than 25% of his monthly salary. Generally a payment factor comes from a Morgage Factor Table also called an Amoritization Table. It give you the amount of monthly payment for each $1,000 of the loan amount for a given interest and term. 1)First, we better figure out how big a monthly payment he can afford. He makes $20,000 a year. $20,000/12 months = $1,666.67 a month. $1,666.67 x 25% = $416.67 monthly payment he can afford 2) Next, lets subtract the taxes and insurance to see how much will be left for the loan. $678.24 (annual Taxes and Insurance / 12 months = $56.52. $416.67 – $56.52 = $360.15 left over to pay Principal and Interest each month. 3) Last up – how many thousands worth of loan can he get for $360.15 amonth? The PI (Principal Interest) payment factor is $10.29 per $10000 of loan (comes from a chart). In English this means each $1000 of loan amount will cost him $10.29 per month. So……$360.15 (money he has available to pay principal and interest each month) / $10.29 = 35 thousands or $35,000.

At a trustee’s sale, a property was sold for $160,800. The fees and court costs amounted to $1,600. The property was encumbered with a first deed of trust in the amount of $156,500 and a second deed of trust in the amount of $2,000. Which of the following is correct?

There would be a surplus, which would go to the trustor. The total of the liens and foreclosure costs was $160,100. The property sold for $160,800, with a surplus of $700. It belongs to the trustor (the borrower).

You have listed a house for $197,800. If the house sells for the listed price, the seller will make a profit of 15%. What price did the seller pay for the house?

First of all here is the formula… $197,800 / 115% = $172,000.

A new loan for $165,000 is taken out at 6 1/2 % by the buyer the closing is May 16. How will the interest be shown on the settlement sheet?

$165,000 (loan amount) x .065 (Interest Rate) = $10,725 (annual interest) / 365 (days in year) =$29.38356 (interest per day) x 16 (days owned by buyer in May -May 16-31) = $470.14 Debit to the buyer (because they owe the interest) credit to the broker (because the money is being paid into the escrow account controlled by the broker/closing agent so that they can cut a check for the interest to the lender).

Bill & Sarah applied for a VA loan to purchase a property for $158,000. The property appraised at $157,000. They agreed to pay a 1/2 % loan origination fee. How much will they pay in origination fees?

VA loans are only made on the appraised value so the loan amount would be $157,000 and 1/2% would be 157,000 X .005 = $785 The loan origination fee is a lender charge for the purpose of securing their new loan

If the lead based paint disclosure is not signed by BOTh parties PRIOR to the contract to buy and sell real estate, the contract is:

Void.

When is the earnest money release form used?

It is optional, but typically used when money is released from an escrow account

1) A Residential Contract to Buy and Sell does NOT require inclusion of which of the following?

fireplace screens and grates
leased security systems
parking and storage facilities as described in a condominium community
window coverings on the property on the date of the sales contract

Included by contract: storm doors, windows shades, blinds, screens, fireplace grates and inserts, heating stoves, storage sheds, awnings, curtain rods, window coverings, drapes, and all keys (unless written as an exclusion) If checked will be included: water softener, security systems, satellite dish, smoke/fire detectors

If the seller or private financing section of the contract to buy and sell real estate is NOT needed, the broker can do all of the following except:

CAN do: Mark a line through the section, put an NA in all the blanks in the section, not print the section but indicate the section has been omitted CAN NOT do: delete the section completely

According to the Exclusive Right to Sell, the Listing Broker has the right to change her relationship from agent to Transaction Broker. The Change of Status form must be signed:

As soon as the change is made and there is a conflict of interest. Before you can even show the house you need to have the transaction broker change form signed by both parties.

An associate broker may create an agency agreement with a buyer or seller:

Only on a real estate commission approved form. Cannot use forms prepared by buyer/seller’s attorneys. Only these contracts create agency: Exclu right to sell Exclu right to buy Exclu right to lease Exclu tenant contract

On which contracts can you create an offer to purchase:

Contract to Buy and Sell Real Estate (Land)
Contract to Buy and Sell Real Estate (Colorado Foreclosure Protection Act)
A only
A and B

A and B Both are valid contracts to purchase. The following are: Contract to buy/sell real estate residential, income residential, commercial, land, CO Foreclosure protection act

What is the maximum amount of interest can a Seller charge on a carry back loan under Colorado law?

45% Carry back loan is when seller is lending money to buyer

Provisions inserted into the blanks of real estate approved contracts must:

Use a different font than the printed part of the section Commission wants it to look different from the approved parts of the form

Which is NOT TRUE regarding the Counterproposal form?

The original contract is not to be signed by the party creating the counterproposal
The Dates and Deadlines Table may be deleted as not applicable
If Date is left blank it means "no change"
It is to be used only to counter price and Dates

True: The original contract is not to be signed by the party creating the counterproposal (Seller does not sign original offer if they are going to counter) True: The Dates and Deadlines Table may be deleted as not applicable (can be removed if only countering price) True: If Date is left blank it means "no change" False: It is to be used only to counter price and Dates (can also be used to counter any part of the original contract)

When using a Counterproposal form, the client submitting the counterproposal would:

sign only the counterproposal. On the original contract check the "is countered" box or "is rejected"box and then initial

Mineral rights not specifically mentioned in a Deed or in the Contract to Buy and Sell are:

Not part of the agreement
Transferred to buyer
Retained by seller
Do not exist

Transfered to they buyer. All mineral rights are transferred with sale. Water is the only exception and must be transferred by a separate deed

According to the Contract to Buy and Sell Real Estate earnest money is held on behalf of:

Seller
Buyer
Buyer and Seller
Seller and Broker

The earnest money in the form of _______ is part payment of the purchase price and shall be payable and held by _______ in its trust account on behalf of both seller and buyer. Once in escrow it technically doesn’t belong to either parties.

Regarding the Colorado Homestead Exemption, as indicated in the approved Deed of Trust forms, the buyer agrees that:

The homestead exemption is not addressed in the deed of trust forms
That the homestead exemption is not waived
The trustor waives the right to the homestead exemption
The trustee waives the right to the homestead exemption

Trustor = Borrower Trustee = Receives and records Deed Beneficiary = Lender The trustor waives the right to the homestead exemption (Borrower doesn’t get to keep 45K if he defaults on his loan)

What is typically not negotiable in the Contract to Buy and Sell Real Estate:

Closing service fee
Mediation fee
Appraisal fee
Title fee

Almost anything can be negotiated, but typically the mediation fee will be split equally by both parties in the case of mediation.

A Single Party listing:

Does not require a contract
Has no holdover clause
Does not fall under the Statute of Frauds
Requires two agents

A single party listing

The buyer notifies the seller in writing of a termination of the contract under the Loan Objection Deadline. What happens to the earnest money?

The broker must immediately return the money to the buyer A buyer has until the Loan Objection Deadline to provide written notice s/he cannot receive a satisfactory loan and wants to terminate the contract. If s/he does provide such notice, the earnest money must be refunded to the buyer. If the buyer does not provide such notice, the contract continues, but the buyer’s earnest money becomes nonrefundable should s/he not receive a loan.

You have a listing with a couple who hold title in joint tenancy. A broker brings you an offer and the couple indicates that they will probably accept the offer, but they want to think it over for a few hours. During those few hours they are involved in a traffic accident and one of them is killed. What would be the status of the listing?

The listing agreement is enforceable against the surviving spouse. If the listing agreement has been signed by both spouses and one spouse dies, the listing agreement is still enforceable against the surviving spouse. In joint tenancy the surviving member(s) immediately inherits the property upon the death of a member. Therefore the surviving member has full rights to sell the property and the listing contract is valid. If you chose either of the purchase contract answers please be careful to read the questions more closely. This question asked about the status of the listing contract. As the verbiage of this questions contained much info about the purchase contact it is easy to skim through and miss the real question.

When creating the listing agreement, the sellers informs you that they will not be filling out a Seller’s Property Disclosure form. What is your best response:

Inform the sellers that most buyers want the form The listing agreement does not require the sellers to fill out the form, however the purchase contract requires one be filled out and the buyers expect to receive one. Once a purchase contract is received, the sellers will have to counter the offer. If the sellers are reluctant to fill out because they have no knowledge of the property (for example in an estate situation whereby they inherited the property) sometimes the best strategy is to fill out the form indicating they have no knowledge of the property.

A deed of trust held by someone other than the public trustee is NOT:
Exempt from loan recission rules
Foreclosed through the courts
A conditional transfer of ownership from the Trustor to the Beneficiary
Notice that a legal action is pending that may effect ownership

Notice that a legal action is pending that may effect ownership Regardless of who holds the Deed of Trust, the transfer of ownership is real and not a notice of pending legal action.

If items listed in the Inclusions and Exclusions Section of of the Contract to Buy and Sell Real Estate are not a part of the property, the broker should:

do nothing, if the listing item is not on the property as of the date of the contract, it is not included nor necessary to cross it out 3.1. Inclusions. The Purchase Price includes the following items (Inclusions): 3.1.1. Fixtures. If attached to the Property on the date of this Contract, lighting, heating, plumbing, ventilating, and air conditioning fixtures, TV antennas, inside telephone, network and coaxial (cable) wiring and connecting blocks/jacks, plants, mirrors, floor coverings, intercom systems, built-in kitchen appliances, sprinkler systems and controls, built-in vacuum systems (including accessories), garage door openers including remote controls; and 3.1.2. Personal Property. The following are included if on the Property whether attached or not on the date of this Contract: storm windows, storm doors, window and porch shades, awnings, blinds, screens, window coverings, curtain rods, drapery rods, fireplace inserts, fireplace screens, fireplace grates, heating stoves, storage sheds, and all keys. If checked, the following are included: Water Softeners Smoke/Fire Detectors Security Systems Satellite Systems (including satellite dishes).

If a licensee is also a licensed appraiser, can the licensee offer to appraise a home if they intend to be the listing agent for that same property in the future?

Yes, as long as it is disclosed to all parties There are no laws that prohibit an appraiser or a mortgage broker from working as such on a transaction upon which they are involved as a real estate broker, or acting as a real estate broker in the future on a property on which they have operated as a mortgage broker or an appraiser. However, this can be construed as a conflict of interest and all present or potential conflicts of interest must be disclosed to the parties involved.

Who can not prepare an addendum to the Contract to Buy and Sell Real Estate?
buyer or seller
employing broker’s attorney
attorney for buyer
buyer”s broker

Associate Brokers may only use forms prepared by the Real Estate Commission.

An Employing Broker designates one seller agent and one buyer’s agent. The Employing Broker has:

no agency If the employment contract is with a brokerage firm that consists of more than one licensed natural person, the employing broker or an individual broker employed or engaged by that employing broker shall be designated by the employing or supervising broker to work with the party as a "designated broker." The employing or supervising broker may designate more than one of its individual brokers to work with a party as "designated brokers." A brokerage relationship exists only with the individual broker(s) so designated. The duties, obligations, and responsibilities of that relationship do not extend to the employing broker, brokerage firm or to any other brokers employed or engaged by the brokerage firm.

If a landlord fails to refund the security deposit within one month (up to 60 days if specified in the lease) of the tenant surrendering the property, the landlord:

is liable for treble the amount wrongfully withheld CRS 38-12-103 (3) (a)

A buyer is assuming a loan and the loan balance has turned out to be less than the assumption balance provided by the seller. How would this be handled according to the Residential Contract to Buy and Sell ?

The buyer may terminate the contract by written notice if the difference causes the buyer’s cash at closing to increase by a stated amount. The buyer has the option of terminating the contract if the terms are unacceptable.

An employing broker may properly designate a broker:

It must be done in writing.

A buyer and seller have written two contracts for one property: a higher contract to submit for a larger loan request and another with a lower actual purchase price because they know the seller is anxious to sell quickly. Which correctly describes this arrangement?

fraudulent dual contracting The buyer and seller are committing fraud and if a broker knew of the arrangement, he or she is also committing fraud and risks disciplinary action as well.

Licensee gets asked by out-of-state party to manage 15 rental units. Broker should:

inform employing broker to create Property Management Contract and set up proper escrow account Section 12-61-103 (10) requires all business to be conducted only in the licensed name of the employing broker. Within a brokerage, only the employing broker or an attorney for the brokerage can create contracts from scratch.

The Colorado Real Estate Commission may take all of the following actions against a licensee EXCEPT:

The commission may fine, censure or mandate education for licensee and suspend or revoke a license. Only a court can assess damages.

As to the fees for preparation of legal documents at closing:

the licensee bears the cost for the preparation of legal documents except those prepared by the Seller”s or Buyer”s attorney There is no obligation for a licensee to prepare any legal documents as part of a real estate transaction. However, if a licensee or the licensee’s agent (editors note: the Closing Agent is engaged by a licensee and is thus a licensee’s agent) prepares any legal document, the licensee or the licensee’s agent may not charge a separate fee for preparation of such documents. A licensee shall not be responsible for fees charged for the preparation of legal documents where they are prepared by an attorney representing the purchaser or seller. Costs of closing not related to preparation of legal documents may be paid by the licensee or by any other person. A broker who closes transactions and charges separately for costs of closing not related to the preparation of legal documents must specify the costs and obtain the written consent of the parties to be charged

John Bargas of Buywell Realty wants to place a listing in the phone book. At a minimum he must list:

Buywell Realty The minimum is the employing broker’s name (the firm, not the person) Chapter 2 – CREC Manual Rule 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;…."

A Ttransaction-broker may NOT do which of the following without ending his/her Transaction broker obligations:

Sell a buyer his own personal residence A Transaction Broker by definition is a neutral party. You cannot be neutral when selling your own home or the home of a relative.

The fee to notarize a Warranty Deed is charged on the settlement statement to:

The seller(s) signs the warranty deed, not the buyer. The charge is debit seller. On the settlement sheet do not confuse "recording" the deed with "notarizing" the deed. Recording the deed is "debit buyer" as it is considered in the buyers best interest to have the deed recorded into public record.

Unless the lease states otherwise, how long does a property manager have to return a security deposit after a lease has expired?

Colorado law mandates that a security deposit must be returned within 30 days with an accounting for all deductions unless the lease indicates a different time period. Under no circumstances can the period of time be greater than 60 days.

Unless modified, the powers granted in a Colorado statutory power of attorney for property are:

Power of Attorney, unless modified, are general in scope. Usually they are modified by stating exactly what is allowed for a licensee to sign in the name of the client.

The Sellers Agent at his option rebated part of his commission back to the Seller. Was this legal?

Yes, as it was part of the negotiated commission in the listing contract The Real Estate Commission has no problem with a licensee giving money to his/her client. The client does not need to be licensed as the rebate is considered a product of the commission negotiated by the licensee and his/her client in the Listing Agreement.

Who pays the Colorado Use Tax on the transfer of furniture, personal property, equipment:

Buyer The Colorado Use Tax, (39-26-Part 2, C.R.S.) is a form of sales tax, payable on the transfer of furniture, equipment, etc. The buyer is obligated to pay this tax by statute. The broker has the duty to inform the buyer of this obligation.

Broker attends client closing. What must he/she do with signed closing documents?

Clients AND employing brokers are to recieve closing doucments immediately.

Under what conditions is it permissible for a broker to pay a referral fee to a person who does not possess a Colorado real estate license?

The Colorado Real Estate Commission states that a referral fee payment is permissible provided that an unlicensed person not perform duties requiring a license. Do not confuse "referral fee" with "commission". You can only pay a commission to a licensed agent. Referrals are ok to pay to anybody. The difference is what you do for the money. If the person receiving the money is doing something that requires a license such as negotiating than it is a commission. If the person is just passing a name along, which does not requires a license – then it is a referral fee. Referral Fee’s also have to be reasonable and cannot be a commission in disguise.

Which of the following is required before an owner of a 35-parcel of undeveloped land may drill a well for water only?

Small wells on domestic property must have a permit from the state engineer even though they are exempt from a requirement to purchase water rights.

Which does NOT fall under Rule F?

Contract to Buy/Sell (Commercial)
Contract to Buy/Sell (Land)
Deed of Trust
Contract to purchase newly constructed home with warranties.

Rule F is the rule under which all approved contracts and the rules governing their use fall. To answer this question requires a knowledge of the contracts that are approved and those which are not. They are listed in the Printout section of our website. The non-approved contract in this list is the "contract to purchase newly constructed homes with warranties". New home builders are exempt from the rules established under the Conway-Bogues court decision. As such they are not required to use approved contracts and generally choose to use purchase contracts they create. Some students may wish to point out that some small new builders may choose to use the the approved purchase contract and add warranty info. This is true. However, please read the first sentence of this explanation again. We want you to be prepared to answer this question should you see it on the State exam.

When making a counter offer by using the approved Counterproposal form – how do you change dates?

The only dates which are changed in the original Contract to Buy/Sell Real Estate are those specified as changed in the Counterproposal form. All other dates are assumed to not have been affected.

If the homestead exemption is not waived, the owner is protected:

The Colorado Homestead Protection Exception provides a $60,000 (This number changes with time) exemption from any debt, contract or civil obigation entered into after July 1, 1975. This exemption is for the head of family householder. Elderly or disabled individuals receive a $90,000 exemption. Generally, the exemption is waived as a requirement for getting a loan.

A real estate broker shall NOT engage in any of the following acts:
dealing in options on real estate
preparing legal documents as a courtesy for the seller of a for a sale by owner transaction
selling or offering to sell or exchange a time-share
auctioning real estate

According to the Conway-Bogue court decision – a Broker is only allowed to perform a licensed activity, such as prepare contracts, on a transaction in which they have been engaged as a Broker by at least one of the parties.

Can a broker in Colorado give a referral fee to an out-of-state broker?

Commission Rule E-23 states that a Colorado broker who cooperates with a broker who is licensed in another state or country may pay such out-of-state broker a finder’s fee or share of the commission if: (1) such broker resides and maintains an office in the other state or county, (2) all advertising, negotiations, contracting, and conveyancing done in Colorado is performed in the name of the Colorado broker, and (3) all money collected prior to the closing is deposited in the name of the Colorado broker.

In the absence of language to the contrary in the Property Managment Agreement a property manager must:

Deposit security deposit into escrow account Short version: put it into the escrow account first even if you are going to immediately transfer it to the owner. However, before the owner transfer you need to provide appropriate written notification to the tenant as to who is holding the deposit and the holder’s contact info.

Trust Account journal and ledger documentation of disbursements from trust accounts need NOT include:

Name of the person who wrote the check out of the account (1) A record called an "escrow or trust account journal" or an equivalent accounting system which records in chronological sequence all money belonging to others which is received or disbursed by the broker. For funds received, the records maintained in the system must include the date of receipt and deposit, the name of the person who is giving the money, the name of the person and property for which the money was received, the purpose of the receipt, the amount, and. a resulting cash balance for the account. For funds disbursed, the records maintained in the system must include the date of payment, the check number, the name of the payee, a reference to vendor documentation or other physical records verifying purpose for payment, the amount paid, and a resulting cash balance for the account.

Which class is protected under under Colorado Fair Housing and not the Federal Fair Housing?

Marital Status is not a protected class under Federal Fair Housing

A brokerage firm holding 4 earnest money deposits, and 15 security deposits for managed single-family residences must have a minimum of how many trust accounts?

Rule E-1 (h) A broker who manages less than 7 single-family residences may deposit rental receipts and security deposits and disburse money collected for such purposes in the "sales escrow" account" Elsewise, you need one escrow account for earnest money, one for rental receipts and one for rental deposits.

How many days after notice of discrimination does someone have to file a complaint under Colorado Fair Housing Laws with the Colorado Civil Rights Commission?

One year There is a legal requirement that a charge must be filed within a specific period of time (statute of limitations) from the date of notice of the last discriminatory act. After the statute of limitations has passed the Colorado Civil Rights Commission does not have jurisdiction. In Employment cases the statute of limitations is six months; in Housing cases the statute of limitations is one year.

Duplex owned by wife and husband. Joint tenancy. Husband dies. Husband had a will and left all assets or to son from previous marriage. What does the son receive?

Son does not get the property All parties under joint tenancy have a right of survivorship. This means that the wife became the sole owner of the proeprty automatically upon the death of her husband. This right supercedes the will.

When a license law complaint is made to the Commission against a licensee, the licensee must:

When a licensee has received written notification from the Commission that a complaint has been filed against the licensee, the licensee has been selected for an audit, or that an audit has identified record keeping or trust account deficiencies, such licensee shall submit a written answer to the Commission. Failure to submit a written answer within the time set by the Commission in its notification shall be grounds for disciplinary action unless the Commission has granted an extension of time for the answer in writing and regardless of the question of whether the underlying complaint warrants further investigation or subsequent action by the Commission.

A landlord can evict a delinquent tenant by:

A landlord must institute court action in order to evict a tenant which is called an unlawful detainer action.

A broker acting as a transaction broker for a buyer, with no written agreement needs:

to provide the buyer with a copy of the "Brokerage Disclosure to Buyer" with the broker’s signature showing the date it was given to the Buyer. Even though the broker has no written agreement – the broker is still required to make a written disclosure as to their relationship. Absent a written agreement – the default relationship is transaction broker.

The information a broker must keep about a deposit into an escrow account does not include:

address of affected parties
address of affected property
confirmation of electronic transfer
amount of deposit

The broker’s deposit slip or wire transfer must individually identify the respective parties, properties, and amounts deposited, and the appropriate escrow records must be established. You do not need the confirmation

Property taxes become a lein on January 1 for the previous year. When may taxes be paid without receiving a penalty:

The first half payment by the last day of February, the second half payment no later than June 15 If you are going to pay property taxes in one payment, that payment is due no later than April 30. If you choose to make two half payments; the first payment is due no later than the last day of February and the second payment not later than June 15.

A broker representing a seller advertises that she will "rebate" a part of her commission to the buyer at closing. To be legal the broker must:

Disclose and get approval from the seller In Colorado Commission Position Statement CP-12, the commission says that "rebating" a part of a commission to a buyer or seller is legal. However, since the broker represents the seller, the broker must disclose this to the seller and get the seller’s approval.

Which of the following is true with regard to the approved Earnest Money Promissory Note?

must be due early enough to assure good funds for closing An Earnest Money Promissory Note allows a prospective buyer to present earnest money in form of a promise to pay. The note must be presented and paid before closing to assure that it represents good funds at closing.

Which of the following is required in the event of a dispute between the parties relating to the Contract to Buy and Sell?

The parties must mediate in good faith to seek a settlement for up to 30 days. For dispute resolution, the contract only requires nonbinding mediation. If mediation does not reach a voluntary settlement after 30 days, either party may proceed to arbitration or litigation.

What does not need to be placed into an escrow account?

withholding taxes
security deposits
short-term rental deposits
earnest money

withholding taxes Withholding taxes are not under the jurisdiction of the Real Estate Commission. Applicable Commission Rules for escrowed deposits are are E-1 and Position Statement CP-5

Out of state seller sold a property for $489,000. The property was highly leveraged resulting in cash proceeds to the seller of $5,500. How much should be withheld subject to the Colorado Department of Revenue Income Tax?

This question relates to the rules on Colorado withholding taxes. The rule is if the seller has an out-of-state address, the State directs at close a withholding of 2% of the purchase price or the proceeds whichever is less. This is to cover any potential State income tax liability for sellers. Since they live out-of-state, they likely do not file Colorado tax returns. Taking the money gives them a good incentive to file. Keep in mind this is not an actual tax, just a withholding. If the seller files and does not owe taxes, they get the withheld money back. Two percent of the selling price of $489,000 is $9780. Since $9780 is higher than the proceeds of $5,500, the lessor amount of $5,500 will be withheld as the potential tax liability. Also note that this withholding does NOT apply to Colorado residents.

Closing March 15, next payment due April 1. How many months of escrow can lender take for taxes?

3 The private lender will collect its loan in monthly installments, along with one month’s taxes to be held in reserve so that sufficient funds are on hand to pay the yearly taxes when due. This reserve is based lender’s own loan requirement and state law, C.R.S. 39-1-119. This law provides that any amount held on May 20 in excess of 3/12 of the taxes paid that year must be refunded to the borrower on or before May 30. Payments to a reserve escrow account must be adjusted annually upon reasonable belief of substantial improvements to the property or upon official notification of an increase in the actual amount of taxes levied. Failure to make a refund is subject to interest and penalty.

For a VA loan – how will the Buyer’s Loan Processing Fee be shown on a settlement sheet

The VA assigns this expense to the Seller. The Buyer can not pay it.

On a new loan closing, the settlement worksheet entry for a tax reserve indicates that the new lender is

Withholding this amount from loan proceeds to start the escrow account for the next tax payment Lenders have the right to take sums of money from the buyer and place it into a Tax Reserve escrow account to ensure there is enough money availabe to make the next tax payment. Lenders are sensitive to this as unpaid taxes automatically become the most senior obligation should the buyer default on the loan.

A property manager may refuse to lease to:

A Muslim tenant renting near a Catholic church
A gay individual
A disabled veteran
A person addicted to or using illegal drugs

The Fair Housing Act considers alcoholism and drug addiction to be a disability. This means that a landlord can’t reject a rental application or otherwise discriminate simply because someone is an alcoholic or a drug addict. HOWEVER, a landlord may reject if (s)he learns that someone is currently using illegal drugs. Use of illegal drugs is an illegal activity. Many landlords ask about this on their rental application, and it’s perfectly legal to do so.

The payoff of an existing loan appears on a closing statement as a:

Sellers are charged for paying off their existing loan. Debit Seller. The corresponding entry is Credit Broker so that a check will be sent to the sellers lender.

The covenant of quiet enjoyment is best described by which answer.

The grantor guarantees the title against claims of a third party.

Under the 1988 amendment to the Civil Rights Act of 1968, an apartment owner would be acting within the law by

refusing to pay for modifications to an apartment that would allow a handicapped person the full enjoyment of the unit Disabled individuals are allowed to make modifications but it must be at their expense and they must bring the property back to its original condition.

The date of closing for an installment land contract is the date:

When the installment contract is signed this is the date of closing on an installment land contract

Who has the responsibility for prosecuting the practice of real estate without a license?

Since the Real Estate Commission only has jurisdiction over people with licenses, someone performing a licensed activity without a license would be a criminal matter prosecuted by the district attorneys. The Real Esatte Commission can work with District Attorneys in the preparation of cases. What the Real Estate Commission can do is: The Real Estate Commission has the power upon its own motion to investigate any licensee’s real estate activities. If a written complaint is filed, the office is compelled to investigate. If the complaint against the licensee is of such a serious nature that it may result in disciplinary action against a licensee, a hearing will be held before an administrative law judge. The judge is appointed by the Department of Personnel and Administration. The administrative law judge will make an initial decision of revocation, suspension, censure, or dismissal. Education courses, probation, and fines can also be mandated. If written objections are not filed with the Commission within 30 days, the initial decision becomes final. If written objections are filed, the Commission may adopt the findings and initial decision of the administrative law judge, modify the disciplinary action, or refer the matter back for rehearing. The Commission can also issue letters of admonishment in instances where conduct does not warrant formal disciplinary proceedings.

In order to be the named broker for a corporation doing business in several states, a broker should:

the broker for the corporation must be an officer or director of the corporation.

Which would need to be registered with the CREC (Colorado Real Estate Commission) for a subdivision?

A membership-based campground with 75 campsites
Bulk sale of 500 lots between two developers
A development with15 residential units
A 60 unit co-op building

A 60 unit co-op building The Subdivision Developer’s Act affects the types of subdivisions that must be registered with the Commission. The following types of subdivisions within the State of Colorado, must be registered before: * 1. Any division of real property into 20 or more interests for residential use; * 2. Subdivisions consisting of 20 or more time-share interests * 3. Subdivisions consisting of 20 or more residential units created by converting an existing structure (e.g., condominium conversions); and * 4. Subdivisions created by cooperative housing corporations with 20 or more shareholders with proprietary leases, whether the project is completed or not. B. Exempt from Registration under the Subdivision Developer’s Act: * 1. The selling of memberships in campgrounds; * 2. Bulk sales and transfers between developers; * 3. Property upon which there will be erected residential buildings that have not been previously occupied and where the consideration paid by the purchaser for such property includes the cost of such buildings * 4. Lots that, at the time of closing of a sale or occupancy under a lease, are situated on a street or road and the street or road system is improved to standards at least equal to streets and roads maintained by the county, * 5. Sales by public officials in the official conduct of their duties.

In interpreting a contract, a court would consider that:

A court considers, that a later document takes precedence over an earlier document

Your best friend sold her house herself. She asks you to help prepare the documents as a favor, and your response is:

yes, but you will have to execute a listing agreement first The preparation of contracts for a transaction in which you are not a party constitutes practicing law, which is illegal. To become a party to a transaction you must ether be the buyer or seller, or establish a relationship with a party by executing a listing contract (remember: the buyer agency agreement is considered a listing contract)

Acceptance of an offer must be which of the following?

To be valid and binding an offer must be unconditionally accepted, and communication conveyed to the offeror, within the time limits.

A broker has an Exclusive Right-to-Buy contract with a principal. Who is to be their customer?

The Exclusive Right to Buyer is also know as the Buyer Agency agreement. It is the contract a buyer signs to engage a broker as a buyer’s agent. Since the buyer is the principal, the only possible customer is a seller.

A promissory note calling for payment of interest only during its term is called a(n):

Straight Note This is a promissory note evidencing a loan in which payments, of interest only, are made periodically during the term of the note. The principal is due in a lump sum upon maturity.

Real property is closing on May 14. The buyer is assuming the seller’s mortgage. As of closing the balance is $65,325. The annual interest rate is 8%. How should the interest on the loan be prorated based on a banker’s year(360 days in a year, 30 days in a month) .

Debit the seller $203.23 $65,325 x 8% / 360 days = $14.5167 x 14 days = $203.23. On the national test the Seller is responsible for the day of closing, on the State test the Buyer is responsible for the day of closing The seller is debited because this is an assumption, which means the buyer is taking over payments. Since the closing is mid-month the buyer and seller need to split the payment for that month. Remember that mortgage interest is paid in arrears. This means the June 1 payment is for the month of May. That is the month they have to split. Since the payment has not been made – the seller is debited for their part of the bill.

An unlicensed secretary for a property manger can only do which of the following?
Collect rents
Publish a listing
Take a listing
Negotiate a lease

Collect Rents – All of the rest require that the individual be a licensed broker. An unlicensed assistant can show a home. Their restrictions are simply to provide access to the property and confine real estate conversation to info on materials already published by the licensed agent. Which means they can answer a question on the price of the home (that is published on the MLS or in ads) but not answer a question related to "What do you think they will take?" (that answer is a licensed activity). In real life this is a very controversial topic as listing agents generally do not like the idea of unlicensed people taking strangers through their homes.

A Seller asks an agent/friend to accept compensation to advise on Tax and Title matters for a property the seller is considering buying. Can the agent do this?

No, this is outside the scope of permitted activities for a holder of a real estate license This violates the Conway-Bogue court decision which in Colorado binds the conduct of agents. Agents are recognized authorities at conducting real estate transactions. We are not experts at tax and title matters. Those are within the recognized legal expertise of accountants, title examiners and lawyers. A real estate broker is expected to recommend to clients they seek expert advice when the matter is outside their area of expertise.

An advantage of FHA financing to a buyer is:
the loan is guaranteed by the federal government
that there are no loan origination fees
that the property must meet minimum property requirements
that the buyer does not pay points

A FHA insured loan must meet minimum property requirements.

A mortgage broker usually offers which of the following services?

A mortgage broker usually brings buyers and lenders together, typically on a commercial transaction.

Just as an agent owes duties to the principal, a principal owes duties to the agent. They may include which of the following?

Perform the agency contract
Compensate the agent
Reimburse the agent for expenses
All of the above

All of the above 25. The law of agency governs the duties and obligations of both the agent and the principal.

If a purchase agreement says to release earnest money after the inspection date, then the seller demands the money be release prior to the inspection date. What should the broker do?

Refuse to release the earnest money The broker must act according to the terms and conditions of the purchase contract. Absent the buyer’s and Seller’s written approval to release the earnest money early, the broker has two options: to release nothing or to "Interplead". To interplead is to turn the earnest money over to the courts.

All of the following are evidence of merchantability of title EXCEPT:
Torrens title certificate
Title Insurance policy
A general warranty deed
A title insurance commitment

A deed is not evidence of merchantability of title, it is only evidence of title. It is not title. Title is a bundle of rights, (a concept) not a document.

Mary is a broker in Colorado for ABC Real Estate. Mary’s client John wants to purchase a home that Mary has listed. Mary must:
terminate the buyer agency agreement and let John become a customer
terminate the buyer agency and let John find another agent
become a Transaction Broker to both parties
any one of the above is correct

Any of the above is correct In this question, Mary has to resolve a conflict of interest. Since Mary has a property listed, she is either a Sellers Agent or a Transaction broker for the Seller. Since the buyer is a "Client" he has a Buyers Agency agreement with Mary because a buyer can only become a "Client" with a Buyers Agency relationship. Transaction Broker does not create an agency relationship. So, to avoid a conflict of interest, because you cannot have a Agency relationship (Buyers and Seller) with two parties in the same transaction, nor can you be a Transaction Broker (ie Neutral) for one party in a transaction and an agent (ie not Neutral) for the other, Mary’s choices are: a) terminate the Buyer Agency Relationship making the Buyer a "Customer" and not a "client", b) Tell the buyer to get another agent c) Become a Transaction Broker (neutral) for both parties.

A developer who leases real property from the owner with the intent of constructing a shopping center has which of the following interest in the property?

Renting a property gives the lessee a leasehold interest in the property.

A private owner of a single 20-acre parcel of land wishes to sell off ten acres and retain ten acres for her own use. Which statement is true for this owner?

The owner is not required to register with the real estate commission but must meet local and state requirements for this subdivision.

An owner lost their home due to foreclosure. The house sold for $700,000 with $40,000 left over from the foreclosure sale of the property. They thought they were free and clear from financial obligations until they received a letter in the mail saying they owed more money. Why would they owe more money?

The IRS views a foreclosure sale as a normal sale of the property. The $40,000 left over from the sale of the foreclosed property, after all obligations were settled, would have been returned to the foreclosed owners. The owners would need to consider the tax consequences of the sale as the $40,000 may be viewed by the IRS as a capital gain and thus subject to capital gain taxes.

If there is no Legal Description of a property in a Purchase and Sell contract, is the contract:

Unenforceable – The property to be sold must be adequately described in the purchase and sale agreement. The mailing address is not an adequate description of the property. The purpose of a legal description is to describe a particular parcel of land in a unique and unambiguous manner that will survive forever. In the United States, this is done by reference to lots and blocks in a subdivision map, by metes and bounds, by aliquot (using the nomenclature of the U.S. Public Land Survey System, or by a combination of the above. Thus, it is necessary to include or attach the entire lengthy and convoluted legal description on the purchase and sale agreement for it to be enforceable.

The 42nd U.S. Code, Section 1982 bans all racial discrimination as a result of the outcome of the "Jones vs. Mayer Case". Constitutionality for this rests on which amendment?

13th. Jones vs. Mayer is a United States Supreme Court case which held that Congress could regulate the sale of private property in order to prevent racial discrimination: "42 U.S.C. § 1982 bars all racial discrimination, private as well as public, in the sale or rental of property, and that the statute, thus construed, is a valid exercise of the power of Congress to enforce the Thirteenth Amendment."

A commercial lease for a definite period of time is terminated by:
death of the lessor
death of the lessee
a sale by the lessor
surrender

A commercial lease can only be terminated prior to expiration due to breach or surrender. The lessor must accept the surrender in order for the tenant to be relieved of rent payments due for the balance of the original term.

A deceased person who dies testate devises real property to:

A person devises property to his/her devisees (not heirs)

The period of time during which a property may be profitably utilized is known as its:

The economic life of a property is the time period during which the property may be profitable. There is no amortized life of a property.

A building was sold for $115,000. Earnest money in the amount of $15,000 was deposited, and the buyer obtained a loan for the balance. The lender charged a fee of 2% of the loan. What was the total cash used by the buyer for this purchase?

$15,000 + 2% of $100,000 = $17,000

A loan which requires the borrower to pay interest only and then to pay the entire principal on the maturity date, is called a:

A term loan A loan with a maturity date but no amortization.A borrower pays the interest monthly, quarterly,or annually,as required by the lender,but the principal is not due until maturity.Term loans of short duration,usually less than one year,may be set up as single pay loans.In that case,principal and all accrued interest are paid at maturity.

If the buyer is assuming an 8.5% loan with a balance of $127,538.00 at a closing on July 11, what is the interest proration?

$291.42 debit to the seller, credit to the buyer $127,538 X .085 = $10,840.73 / 12 = $903.394 / 31 = $29.14 X 10 = $291.42 debit seller, credit buyer. Please note that on assumed loans interest is calculated in a unique way – Loan balance x annual interest rate = total annual interest / 12 x the number of days the seller owned the property in the month of closing.

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