Georgia Real Estate Practice Exam

Georgia Listing and Agency 

1 Sales Associate Susan is working with a customer buyer. Susan and her buyer discussed agency representation at the first meaningful contact, however, the buyer decided not to commit to Susan yet, and opted to work with Susan as a customer. According to Georgia's Brokerage Relationships in Real Estate Transactions Act (BRRETA), Susan and her customer will need to sign a buyer agency agreement when:

a. Susan locates home inspectors for the buyer.

b. Susan provides pre-printed real estate form contracts.

c. Susan advises the buyer on an offer price and terms.

d. Susan identifies properties for sale, lease or exchange.

Incorrect. Please choose another answer.

Answer options a, b and d are all ministerial acts by a broker and do not require an agency agreement. Providing advice and professional expertise to a client, such as advising a buyer on an offer price or the terms of an offer, are acts that require an agency agreement. Under BRRETA, a broker may perform ministerial acts for a customer, but must have a broker engagement or written agreement with a client setting forth the agency relationship, compensation terms and other information about the performance of brokerage services.

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2 Seller Roy has sold plenty of homes in the past. His last experience with an agent was unsatisfactory so he decides to market his home on his own. He places advertisements with all the brokers in town and offers a commission to any broker that brings him a buyer. This is an example of:

a. An open listing

b. An exclusive open listing

c. An exclusive agency

d. An exclusive right-to-sell

Incorrect. Please choose another answer.

An open listing offers compensation to any broker who brings a buyer. This is an example of a unilateral agreement. The brokers are not obligated to bring a buyer, but the seller is obligated to compensate the broker who brings a buyer. If the seller finds a buyer, no broker is compensated.

Georgia Sales Contracts 

3 Liam and Joseph enter into a contract for the purchase of Liam's home. As the Seller, Liam agrees to repair the roof before closing. As the Buyer, Joseph agrees to get full approval from the lender within a two-week period. The closing date is set for the following month. This agreement is:

a. An executory contract

b. An executed contract

c. A unilateral contract

d. A voidable contract

Incorrect. Please choose another answer.

An executory contract is a contract where the parties involved have items that have yet to be performed. Both parties agree to complete certain items during the specified contract period which has yet come to pass. Failure to complete the obligations outlined in the contract are considered a breach of contract. A unilateral contract involves the promise of one party which can be accepted by the performance of the other party. A voidable contract is a contract that can be rendered unenforceable for a number of legal reasons, such as fraud, which gives a party a right to repudiate the contract.

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4 Marie wants to gift her family home to her grandson. The deed states that the property is given "for love and affection". What is this referred to as?

a. Earnest money

b. Valuable consideration

c. Specific performance

d. Good consideration

Incorrect. Please choose another answer.

Good consideration refers to "love and affection" that can be observed when real property is transferred between two parties as a gift. It is not actually consideration that would support a contract. When transferring real property, valuable consideration should be present for a contract to be viewed as a valid contract. In contracts, there must be an exchange of something valuable such as money or a promise to complete something. This is not necessary for gifts.

5 A seller receives an offer for their home for $300,000. The seller counteroffers with a price of $310,000. If the counteroffer is accepted, the parties have ______ to the terms of the sale.

a. partial consent

b. mutual consent

c. lack of consent

d. interim consent

Incorrect. Please choose another answer.

Mutual consent takes place when both parties have reached "the meeting of the minds." This means that all terms are voluntarily accepted by both parties. Mutual consent is a required element for a contract to be considered a valid contract. When a counteroffer is made, it rejects and cancels the initial offer. A counteroffer forms a new offer, which when accepted, forms a contract on the terms set forth in the counteroffer.

6 In Georgia, real estate contracts must have all of the following elements to be deemed a valid contract, except:

a. Mutual consentb

b. Lawful Purpose

c. Consideration

d. Liquidated damages

Incorrect. Please choose another answer.

While most real estate contracts have liquidated damages clauses to protect the buyer and seller in the event of a breach by the buyer, liquidated damages is not an essential element of a contract. To have a legal binding real estate contract, the following basics are needed: (1) mutual assent; (2) legal purpose; (3) consideration; (4) competency of the parties; (5) identification of the essential terms such as parties, property and price; and (6) be in a signed writing (Statute of Frauds).

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7 For a real estate contract to be enforceable in a court of law in Georgia, it must:

a. Be in writing and signed by the parties

b. Have a recorded verbal agreement

c. Be filed with the Clerk of the Superior Court

d. Both a and c

Incorrect. Please choose another answer.

The statute of frauds states that for a contract to be enforceable it must be in writing and signed by the parties. The contract must also identify the buyer and seller, sufficiently describe the property to be sold and state the contract price. Georgia does not honor oral agreements in transactions involving real property. The only exception is with a lease. An oral lease with a term of less than 12 months could be enforceable. A lease longer than 12 months must be in writing. Contracts do not have to be filed with the Clerk of the Superior Court to be enforceable.

8 John received a big promotion, which came with a substantial raise. John is looking ahead and would like to add an extra $350 to his monthly mortgage payment, to pay off his home loan sooner. What clause should John review, in his loan agreement, before going forward?

a. Satisfaction clause

b. Subordination clause

c. Prepayment Clause

d. Acceleration Clause

Incorrect. Please choose another answer.

The pre-payment clause allows the lender to charge a penalty fee if the borrower pays off the loan early or reduces the principal loan amount drastically. It encourages borrowers to pay over a longer time period and protects lenders from losing interest income. The partial release clause (also known as the partial release clause) directs the creditor to release part of the property from the lien and convey title to the debtor once certain provision(s) has been satisfied. The subordination clause allows a mortgage recorded later to receive priority over an earlier recorded mortgage.

Georgia Finance 

9 Which of the following of the secondary markets is a wholly owned government corporation, and not a Government Sponsored Enterprise?

a. Ginnie Mae

b. Fannie Mae

c. Freddie Mac

d. Both b and c

Incorrect. Please choose another answer.

Only Ginnie Mae carries the full faith of the US Government, because Ginnie Mae is a government owned corporation and not a government sponsored enterprise. Ginnie Mae is part of the Department of Housing and Urban Development. Fannie Mae and Freddie Mac are government sponsored enterprises that are privately held corporations with shareholders. Ginnie Mae guarantees securities backed by mortgages which are insured by the federal government (VA & FHA). Unlike Freddie Mac and Fannie Mae, Ginnie Mae does not directly purchase or sell mortgages or issue Mortgage-Backed Securities, rather it guarantees securities provided by approved private mortgage issuers, giving them a lower cost of funding in the capital markets.

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10 What does it mean when a borrower hypothecates his or her property as a condition of a loan?

a. A borrower pledges real and/or personal property as security or collateral for the loan, while still maintaining possession of it.

b. A bank promises to discharge the lien on the property once a loan is repaid.

c. A borrower transfers legal title to a disinterested third party until the loan has been repaid.

d. A borrower transfers the property to the bank in settlment of the loan upon default.

Incorrect. Please choose another answer.

Hypothecation is when a borrow pledges his real and/or personal property as security or collateral for the loan, while still maintaining possession of the property.

11 What is the current loan balance of a fixed rate mortgage with a 5.5% interest rate, when $935 of the next payment is applied to interest?

a. $17,000

b. $51,400

c. $203,067

d. $204,000

Incorrect. Please choose another answer.

First, we determine the annual interest ($935 x 12 - $11,220). Next, divide the annual interest by the interest rate to find the balance of the loan before the next payment is submitted.

$11,220 ÷ 0.055 = $204,000
 

Required Licensure in Georgia 

12 Under the Brokerage Relationships in Real Estate Transactions Act (BRRETA), the only licensee that is authorized to legally bind themselves in real estate contracts where a promise to pay a fee is involved is the:

a. broker

b. listing agent

c. buyer's agent

d. selling agent

Incorrect. Please choose another answer.

All clients involved in a brokerage engagement agreement belong to the broker (brokerage firm). BRRETA specifically spells out the clear agency roles allowed. It is the Georgia law that oversees the "agency" relationship that brokers have with buyers, sellers, tenants, and landlords. Only brokers can receive commission. They can then distribute what is owed to their affiliated licensees at the close of a transaction.

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Georgia Property Management 

13 In a high-end lease of a penthouse apartment, a prospective tenant requests the property manager to revise a standard Georgia lease by adding an addendum with provisions to accommodate her specific needs. How should the property manager proceed?

a. The property manager should draft and attach a custom addendum to the lease.

b. The property manager should ask the listing broker to draft the addendum.

c. The property manager should ask the tenant's broker to draft the addendum.

d. The property manager should contact an attorney to draft the addendum.

Incorrect. Please choose another answer.

While a property manager may be hired as a general agent to run the business for a landlord, and have a broad scope of responsibility in the management of the property, property managers and brokers may not draft contracts, addendums, leases, etc. if they do not have a law license. Drafting of legal documents is only permitted by a licensed attorney. If a property manager or broker drafts legal documents, it would constitute the unauthorized practice of law and be subject to criminal penalties in Georgia.

Community Association Management in Georgia 

14 Susan owns a unit where she lives in a 15-unit building. She has been very active cleaning-up of the common areas, hiring a quality landscape company for the exterior grounds and putting together an annual budget to maintain these areas throughout the year. Although Susan is not a licensed Community Association Manager (CAM), are her actions permitted by Georgia law?

a. Yes. A community of 15 units is exempted from CAM licensing requirements.

b. Yes. Since she effectively is an employee of the community association.

c. Yes. As a property owner, Susan is exempt under the CAM license laws.

d. No. Susan may not conduct services for the community involving finances or budgets without a CAM license.

Incorrect. Please choose another answer.

The following are exemptions for needing a CAM license in Georgia:

• Owner providing CAM services within the community where they live.
• Full-time owner employee providing CAM services.
• Full-time association employee providing CAM services.
• Association member providing CAM services only to that association.
• Person performing only maintenance to the grounds/building.
• Public accountant acting solely as an incident to practice.

Georgia Closing Procedures 

15 Is it a legal requirement to have witnesses present at the signing of a deed, other than a notary in some cases, during a real estate closing when transferring ownership in real property in Georgia?

a. Yes, at least one person must witness the signing of the deed.

b. Yes, at least two persons must witness the signing of the deed.

c. Yes, and the buyer can act as a witness.

d. No.

Incorrect. Please choose another answer.

Witnesses are not legally required for a real estate deed transfer in Georgia. Warranty deeds and quitclaim deeds must be notarized in order to be considered valid. It is important to note that witnesses do not provide the same level of legal authentication as a notary public.

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Unfair Real Estate Practices 

16 You are Georgia licenses real estate salesperson and you find a new listing that fits your need for a property to add to your rental portfolio. Your plans are to buy and hold the property and possibly place a tenant to occupy it. You draft the offer and submit to the listing agent, but the offer price is way below list price. You offer a quick close and state in the offer that you hold a real estate license and provide your license number. Can the listing agent present your offer to the Seller even though you hold a real estate license?

a. No, a licensee cannot make offers to sellers.

b. No, because the offer is below the asking price.

c. Yes, as long as the fact that the offeror is a licensee is kept confidential.

d. Yes, the buying agent must disclose they hold a license and the listing agent must present all offers received.

Incorrect. Please choose another answer.

Salesperson licensees can make offers on properties. As a licensee, proper material disclosure must be given on any real estate contract for lease, purchase, or sale. The agent must disclose they hold a real estate license in the state that they are purchasing the property. As long as there is written disclosure on the contract about a licensee on either side of the transaction holding a license, it is permissible to make offers. (Unfair Practice #9) Additionally, because a broker oversees the actions of all licensees, licensees must inform the broker in writing about any real estate transactions that their affiliated licensees are a part of, even if they are personal transactions. Failure to do so would lead to reprimand from the broker and GREC.

17 When a licensee is involved in a real estate transaction, they must:

a. Disclose all information to the other party.

b. Provide equal services to consumers.

c. Use the equal opportunity logo in all advertising.

d. Only show homes to prequalified buyers.

Incorrect. Please choose another answer.

When it comes to working with consumers, licensees must treat all people the same. No discrimination of any kind is tolerated in real estate transactions. Discrimination by a licensee is a federal and state law violation. In the practice of real estate, what you do for one you must do for all. The buyer or seller can request to have confidentiality with regards to their information and the licensee must honor that request unless disclosure is required by law. The Fair Housing Act does not require the use of the equal opportunity logo or slogan in real estate advertising.

Georgia Fair Housing 

18 The city of Buckhead has seen a huge increase in crime. The city has compiled crime statistics and the demographics committing these crimes are apparent. Your neighborhood association asks you, as the "real estate professional," to speak to the subdivision about the crime statistics and demographics. You should:

a. Share the statistics in an informative manner but leave out the demographics portion.

b. Send another sales associate from your office who does not live in the area.

c. Send out CMAs to all your neighbors showing the current value of their home.

d. Decline to speak.

Incorrect. Please choose another answer.

As a licensee, you do not want your actions to be misconstrued as blockbusting. Blockbusting is soliciting property owners to sell by stating demographic changes in the neighborhood could result in a lowering of property value or school decline. Mentioning the "demographics" could violate one of the categories of protected classes.

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Unfair Real Estate Practices 

19 In Georgia, if a licensee violates any real estate license law, the broker must:

a. Give a verbal reprimand if it is the first offense.

b. Notify the Commission of the violating actions.

c. Penalize the licensee with a set fine.

d. Transfer the licensee to another brokerage firm immediately.

Incorrect. Please choose another answer.

Georgia requires that all real estate business be done through a brokerage firm with a qualifying broker. The qualifying broker oversees the activities of all licensees that are affiliated with the brokerage firm. Any violations of real estate license law that the broker becomes aware of must be reported to the Georgia Real Estate Commission.

Georgia Licensee Qualifications 

20 Sarah just turned 18 and she wants to follow in her mother's footsteps and become a real estate agent in Georgia. To fulfill her dream, she must do all of the following except:

a. Pass a 75-hour prelicense course

b. Earn a college degree

c. Pass the state exam

d. Get a criminal background check

Incorrect. Please choose another answer.

A salesperson candidate does not need a college degree to become licensed. Completion of college courses in real estate can substitute for the prelicense course. All the other items are requirements to meet before a license can be issued.

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Georgia Real Estate Commission 

21 The Commissioner holds an important role within the organization of GREC. Their duties include all the following except:

a. Overseeing the day-to-day operations of GREC

b. Hiring all staff of the office

c. Voting on whether a licensee violated license law

d. Enforce the rules and regulations set forth by the Commission

Incorrect. Please choose another answer.

The Commissioner does not participate in voting decisions. The Commissioner is hired by the Commission to oversee the staff and is NOT a member of the Georgia Real Estate Commission. The Commissioner is the enforcer of rules, regulations, and penalties determined by the members of the Commission. The Commissioner handles daily operations only.