2020 Edition

New Jersey Real Estate Practice Exam

 

General Principles of Agency

1. Which of the following represents a principal-agent relationship?
2. You have a listing and the activity has been slow. The seller tells you that he really needs to sell, so is open to negotiation. An agent from ABC Realty calls you and has some interested buyers but their price range is lower than the seller is asking. She wants to know the seller's motivation and if he is flexible on his price. What should you do?
3. The broker owes fiduciary duty to which of the following?
4. If a listing brokerage employs the real estate salesperson who represents the buyer of an in-house listing, what type of agency results?
5. If a buyer is to close on a house but cannot make the closing due to a family emergency, what type of Power of Attorney (POA) can be given to a friend or family member to attend the closing and sign the documents on behalf of the buyer and where the POA ends after closing?
6. In New Jersey, the real estate salespersons are required to provide this to a potential seller or buyer before entering into an agency relationship.
7. You work for Alpha Realty and show houses to a buyer. The buyer likes a listing with Beta Realty and you write an offer. You go to Beta Realty to meet with Mary, the listing agent. Mary then takes the offer to Alice her broker for her to review before Mary takes it to the seller. In what capacity are you working with Alice?
8. You had a listing where the seller was desperate to sell and he told you that he would take much less than the asking price. You worked diligently but no offers were made and the listing expired. The seller lists the property with another broker. Later on, one of your buyers is interested in the seller's property. Are you able to tell your buyer what the seller told you about being desperate to sell and being inclined to take a low offer?
9. All of the following will terminate an exclusive right to sell listing agreement between a broker and a seller except:
10. Who can act as a transaction broker in a real estate transaction in New Jersey?
11. What information is published by the New Jersey Department of Community Affairs pertaining to leasing property in New Jersey?

Statutes and Rules Governing Licensing Activities

12. In 1975, steps were taken to adjust the zoning requirements in every municipality in New Jersey. It was designed to make sure that the income groups represented in the population, which included low and moderate incomes, had a fair amount of housing or upcoming development. The catalyst was a community that had a very high percentage of buildable land zoned as industrial, leaving none for residential development. This ruling was not followed by most municipalities causing a second decision. The Fair Housing Act of 1985 built upon the prior legislation by adding time limits and guidelines for housing standards. It also provided a remedy for non-compliant municipalities by allowing the state to bring legal action. What was the original court case that started the measures described in the 1975 case?
13. Who pays the New Jersey realty transfer tax at closing?
14. Why was the Pinelands Protection Act of 1979 put in place?
15. The Real Estate Sales Full Disclosure Act, under the control of the Bureau of Subdivided Land Sales, was meant to protect New jersey residents from which of the following?
16. Mr. Sellers decides to give you the listing to his house. He fills out a Property Disclosure Form showing the house to be in good condition. Two months into the listing, he remembers he forgot to mention that there was a fire in the attic several years ago and the damaged area was covered with paneling. He mentions it to you just as you are expecting an offer from a co-op broker. What should you do?
17. Which of the following is a correct statement regarding buyer rebates?
18. A broker is setting up a home office. He has a visible sign on the corner of the property. Where must the entrance be?
19. As a listing agent, you will receive offers from agents in your own office, as well as from other brokers. What is your responsibility to agents from your own office and their customers?
20. The Farmland Assessment Act was enacted by the state Treasury Department to assist farmers from the rising property taxes in New Jersey. Farmers can apply for relief from assessed values as long as they meet certain requirements, like having been in production for the two years preceding the application. One goal of the legislation is to help protect the open space that many farms provide. Development has caused New jersey to be the most densely populated state in the country. To quality under the Act, how many acres, at a minimum, must a farmer have actively devoted to agriculture or horticulture use?
21. A broker must have a bank account to deposit client and customer funds. What type of bank account should be used?
22. In an open house announcement, a seller's agent has included a calculation of the monthly payments to be made based on a certain purchase price. What other language must be included in this ad?
23. Based on prior statutes, the Municipal Land Use Law of 1976 gave municipalities more control in how they were going to mold their communities, while remaining compliant with state responsibilities. Each municipality was required to create a master plan which the state could then approve and monitor, making sure that the land was used to its highest potential in a way that best suited the community. Who has the most input and control in forming a master plan?
24. Which of the following would be proper in an advertisement, following the guidelines set forth by the Real Estate Commission?
25. Unless working as employees in a brokerage, real estate agents are treated as self-employed for federal tax purpose, which means estimated taxes must be paid. How often do you pay estimated taxes?
26. John has a son who is not capable of taking care of himself, and John wants to make sure that after his death the son will be cared for. John decides to form a trust to leave his property and all other assets to his son, to be managed by John's brother Jim, who will be the trustee of the fund. John reserves the right to change or cancel the trust as well as to manage the trust until he dies or turns it over to Jim. What has John set up to insure the care of his son?
27. There are very strict regulations regarding what you can offer to a buyer or seller in order to gain their business. What, if anything, can be offered to a customer?
28. Joe, who is 17 years old, signs a contract for the purchase of a home being sold by John. The contract is fully signed and out for attorney review when John finds out Joe is a minor. What is the status of this contract?
29. Which of the following would be a legal and acceptable reason to refuse to rent or sell to someone?
30. In times of drought New Jersey has access to underwater aquifers and underground floodwater that has accumulated in floods and heavy rains. The land is saturated with water and contains vegetation that can sustain life in the high- water level. There is also wildlife, fish and birds that are native to the area. Which of the following legislation has helped protect these areas and helped to keep them healthy and free from detrimental intrusion by development?
31. Smith, who is a licensed real estate salesperson, has listed a property that he owns with his uncle. Another agent has presented an offer and Smith is preparing an agreement of sale. What must be in the agreement to avoid a conflict of interest for agent Smith?
32. The New Jersey Real Estate Guaranty Fund was established to compensate consumers harmed by a licensee during a real estate transaction. What particular offence by a licensee does it cover?
33. What government entity regulates timeshares in New Jersey?

Property Ownership

34. Which of the following business scenarios is a joint venture?
35. Your neighbor is replacing his fence that borders your property. Shortly after the project is finished you discover that his fence has been placed over your property line. Which of the following describes the boundary issue?
36. When a property owner dies without a will, they are said to have died:
37. Mary has rented a storefront and is opening a hair salon. After cleaning and painting the interior she installed several barber chairs, sinks and shelving. After a few years, Mary decided to move to a new location. She gives notice and moves out most of her things on the last day of the lease. She is trying to locate a handyman to move the affixed items and repair any damage caused by the move. At this point, who owns the trade fixtures?
38. Tom has a daughter Emma who is 18 years old and Tom wants her to inherit his estate when he dies. Tom has an elderly Aunt Betty who lives in a country house he owns and Tom wants to make sure she will be taken care of until she passes away. He forms a life estate for Aunt Betty. Tom predeceases Aunt Betty and Emma. Upon Tom's death, what ownership interest will Emma take in the country house?
39. Jack and Karen, who are brother and sister, own a property together. If one of them should die, the other will automatically own the whole property even if they both have heirs. What form of ownership do Jack and Karen have?
40. The right to own property is more than owning your house and yard. There are other rights that are included such as the rights to well water and mineral rights. What other ownership rights come along with the deed to your property?

Land Use Controls and Regulations

41. All of the following are covered by a building code, except:
42. A developer has filed applications to construct a new shopping center in town. The area has the proper zoning and the residents have expressed enthusiasm for the project. Only one hurdle remains, a new access road will need to be built where a small but well- established neighborhood exists. What can the municipality do to obtain rights to build the access road?
43. Mrs. Jones is the owner of a large parcel of land that has been in her family for generations. Recently there was a zoning change in her town and the land can now be subdivided into small parcels. Mrs. Jones had promised her family that the land would remain as it always was and pass down through the coming generations. What step can she take to ensure her property will remain a single undivided parcel with future owners?
44. Your client is a business owner looking to purchase a building in a Business Improvement District (BID) in a city in New Jersey. Which of the following would be a potential issue for a building owner in a BID?
45. There are many disclosures that are part of an agreement of sale. Some disclosures require a signature from the buyer acknowledging their receipt. Which of the following notices not only require a customer's signature but acknowledgement from everyone involved?

Valuation and Market Analysis

46. When appraising commercial properties there are several different methods an appraiser can choose from based on use and purpose. What method is most suited to appraise an apartment building?
47. Real estate agents often offer their clients a basic analysis to help a seller determine what a house should sell for. Called a Comparative Market Analysis or CMA, they usually use a sampling of sold properties, and sometimes include properties for sale to see what the current competition would be. A CMA is similar to which of the following appraisal methods?
48. The cost approach method would be used to appraise which of the following?
49. Tom and Barb bought a house for $250,000 ten years ago. They put 20 percent down and took out a $200,000 mortgage. In ten years, most of their payments have gone to interest, and the principal is at $160,000. The property is now appraised at $325,000. How much equity does the owner now have in the property?
50. What is external obsolescence?
51. How much does an appraisal cost?

Financing

52. When a borrower applies for a mortgage, the lender will check the borrower's credit to make sure he or she is a good risk. The lender will also "qualify" the borrower to make sure the borrower can afford the monthly payments. To determine what the monthly payment responsibility will be, a number of factors are considered, known as PITI. Principal, interest and taxes are the first three types of debt that are considered. What does the final "I" stand for in PITI?
53. What is the acronym for the type of loan that features interest rate changes?
54. One way a borrower can keep the cost of a monthly mortgage payment down in a high interest rate climate is to pay discount points, or points. Each point a borrower buys will bring down the interest rate. How much does a point cost the borrower?
55. In which of the following transactions is a HUD-1, now known as a TRID settlement statement, required?
56. When using a loan and mortgage to buy real estate, a loan estimate form must be given to the applicants no later than ____ days after applying for the loan.
57. If a house costs $160,000 and the bank requires a down payment of $32,000, what is the loan-to-value ratio?
58. Of the five factors considered in a FICO credit score, which factor typically carries the most weight?
59. Which of the following is the first step in the mortgage process for a borrower?
60. What is the basic entitlement under a VA loan if a borrower defaults?

Property Disclosures

61. You have decided to sell your house and there is a permanent storage building that looks like it is over the property line. If the property disclosure form does not mention encroachments, does the seller need to disclose this?
62. A property owner wants to build a three-family structure on a lot that is only zoned for one to two family housing. The lot is just 3 feet short of the zoning classification that allows three-family housing. What can be done to seek a change to the zoning so three-family housing would be a permitted use?
63. The owner of a property in a rural area has agreed to sell his property to his neighbor. The seller has oil heat and used to have an old tank that was rusted and leaked. The seller got rid of the tank and put another tank underground in the same spot, doing the work himself. He filled out a property disclosure form mentioning the new tank. A couple years later, the new owner hired a company to switch from an underground to above ground tank. The contractor discovered the old oil seepage. Who is liable for the clean-up?
64. Every agreement of sale and rental leases over 100 days must include a Lead Based Paint Disclosure addendum. The seller must disclose if they are aware, or not aware, of any lead paint in the property, as well as any findings from previous paint testing. The buyers or tenants acknowledge receiving the information and are given the right to inspect the home for lead based paint. What other information do buyers and tenants receive?
65. Which of the following is a latent defect?

Contracts

66. A contract for the sale of real estate in New Jersey has to meet certain requirements in order to be a valid contract. One requirement is that the contract must be for a legal purpose. Which of the following real estate transactions would involve an illegal purpose?
67. Which of the following real estate contracts is voidable?
68. A listing states that a property is 30 acres. A buyer makes an offer to the seller and a written land sale contract is entered into stating 30 acres. The buyer obtains a survey as part of his inspections and the property is actually 20 acres. The seller never had a survey when he bought it so he believed it to be 30 acres. What are buyer's options?
69. A 17-year old buyer signs a contract to purchase real estate. The seller did not know the age of the buyer at the time the contract was entered into. Can the seller enforce the contract?
70. When does delivery of the deed take place?
71. Which of the following clauses is required in New jersey real estate contracts?
72. Which remedy is characterized by a court ordering a seller to transfer real estate in accordance with an existing fully signed agreement of sale?
73. If a buyer is denied a loan and mortgage resulting in the cancellation of a land sale contract, what is said to have happened?
74. Under what statute does New Jersey recognize electronic signatures?
75. Which of the following are unilateral contracts?
76. Which of the following describes an addendum to a contract, as opposed to an amendment? Assume all of the following changes are made after a land sale contract has been signed by the parties.
77. Tom signed a lease to pay rent in order to occupy an apartment over the next year. What type of contract did he sign to complete the transaction?
78. Rachel has a contract to sell an undeveloped tract of land to Steve and the contract has a closing date of September 10th. Rachel prepared for closing and was ready to close on September 10th, but Steve was not ready for closing and requested an extension. What condition should Rachel have included when the contract was drawn, and can be made a condition of an extension, if granted?
79. Carl lists his home for $470,000. John offers $455,000. Carl counters with $460,000. John rejects the counter offer. A few months later, Carl has received no other offers. Can he accept John's offer of $455,000?
80. A seller lives in a location that recently became popular due to the opening of a train station near-by that made commuting into town much easier. To her pleasant surprise, the seller receives four offers within two days of her house being listed for sale. Sensing she listed her house too low and wanting to stimulate competition amongst the offerors, she instructs her real estate agent to tell the three lowest offerors what the amount is on the highest offer. Is it permissible for the real estate agent to disclose the amount of the highest offer to the other three offerors?

Leasing and Property Management

81. Real estate agent licensees who act as property managers have a fiduciary responsibility to the principal. Depending on the property management agreement, there may be many tasks in the agent's job description. Which of the following would be considered a breach of the fiduciary duty?
82. What kind of lease has the tenant pay all the expenses for the property, even those traditionally paid by the landlord?
83. What is the maximum amount of security deposit a landlord can charge in New Jersey?

Transfer of Title

84. As parties to a land sale contract are preparing to go to settlement, one of the things that a title company will do is to check the title of the property to make sure it is clear and transferable. Right before closing an additional title search is performed to make sure no new problems have shown up since the last search was done. What is this last- minute search called?
85. Where is a deed filed and recorded to establish public notice and confirm ownership?
86. At closing, which of the following will likely require proration and reimbursement to the seller?
87. A title search finds an undischarged mortgage from 1984. The title insurance company agrees to cover against this defect to facilitate a transfer of ownership in a sale of the property. What kind of title will be transferred?
88. If a home is old and has not been updated for many years, which of the following can a seller offer a buyer to give them confidence that the appliances, plumbing and HVAC systems will be repaired or replaced if they stop working after closing?
89. Which of the following types of deeds is a special warranty deed?
90. Which of the following laws requires that deeds be in writing?
91. What are the TILA disclosures at closing?
92. A mortgagee will require this when funding a mortgage.

Practice of Real Estate

93. Which of the following is an example of price fixing which is a violation of the Sherman Antitrust Act?
94. What is license lending?
95. Which of the following would constitute the discriminatory practice of steering?
96. Under the Americans With Disabilities Act (ADA), disability is a broad term that encompasses both physical and mental challenges. The ADA protects the rights of those parties covered by the Act from discrimination in the workplace and other areas. What physical or mental conditions are not covered by the ADA?
97. Which of the following postings must appear in all businesses that are involved with selling or financing real estate?
98. The rules on broker trust accounts are very clear as to how to handle business accounts. Once a broker comes into possession of client funds, the funds must be deposited promptly into a trust account. How long does a broker have to deposit the client funds after receiving them?
99. What is a Waiver of Broker Cooperation?
100. A real estate agent works in real estate office where the broker requires her to work certain hours and attend mandatory business meetings. The office takes taxes out of her commissions and provides an office and use of the equipment such as the copier and computer system. Based on the circumstances of this real estate agent's work arrangements, what status does the agent have with the office?
101. Which of the following practices are not consistent with New Jersey statutes (56:8-2) as to Truth in Advertising?
102. Which of these four listing types are illegal in New Jersey?
103. Which of the following would violate the Sherman Antitrust Act for reason that it is anti-competitive?
104. Which of the following cannot be solicited by phone under the New Jersey Do Not Call List?
105. The Federal Fair Housing Law applies to certain protected classes. They include race, color, religion, national origin, sex, disability (including mental, physical and substance abuse in recovery), and familial status. Which of the following represents someone protected by familial status?
106. Once buyers and sellers have agreed upon all of the negotiated items and the attorney review period is over, the buyers have to do their "due diligence" to move the sale forward. They have a responsibility to have their mortgage application submitted, conduct home and termite inspections if they choose to do so and have a title search ordered. What other task would fall under the buyer's due diligence?

Licensing Requirements

107. All but one of the following are the basic requirements for someone looking to obtain a New Jersey Real Estate License. Which is incorrect?
108. The state of New Jersey requires a criminal background check to assure that applicants are of good character. What part is the applicant responsible for obtaining?
109. Which of the following activities requires a real estate license?

Real Estate Calculations

110. John and Mary bought their home in 2016 for $200,000. They were required by the lender to put 20% of the price as a down payment. Within a year of the purchase, housing like theirs has appreciated 10% in value. How much equity do John and Mary have in their home?
111. If buyer takes a mortgage of $72,000 on home priced at $90,000, what is the loan to value ratio?
112. A borrower is purchasing a home for $320,000 and putting 20% down with a mortgage. He wants to reduce his interest rate on the mortgage by buying two points from the lender. How much will the points cost the borrower up front?
113. Jane Doe lists her property with you but she is not willing to pay a 6% commission, as is the policy of your broker. You explain how the commission rate will drive agents to work hard for the sale and after negotiating a bit longer, Jane agrees to pay 6% IF she can net $325,000, otherwise she will pay 5%. What would be the lowest price you could list for if you want the 6% commission, considering the other closing costs are paid outside of closing?
114. Seller is selling a house in an area where property taxes are paid quarterly. The settlement date is December 2nd and the tax amount for the last quarter is $328.00. How much will the seller have to pay in taxes for the last quarter?
115. John works for Fabulous Realty and sells a property listed by Humble Realty. John is a very successful sales agent and based on last-years sales totals he is earning a 70% commission split with his broker. The Humble Realty listing sold for $400,000 and the commission rate was 5.5%. How much will John earn in commission for this sale?
116. You are showing an apartment building to an investor. Based on some research, the investor believes the building might yield $40,000 net profit from rentals. Using a comparable, a similar building recently sold for $250,000 and had an annual net operating income of $50,000. What is the capitalization rate and the value of the apartment building the investor is considering?
117. A large shipping company is looking for raw land to build a warehouse. The company is looking for ten to fifteen acres. You have found a parcel you think might fit the company's needs. The survey and tax maps show the rectangular parcel to be 452 feet by 1061 feet in dimension. What is the total acreage?
118. A certain area in New Jersey has an average vacancy rate of 4.5%. An investor is looking at an apartment building as an investment. The building has 90 units with 14 units unoccupied. What is the vacancy rate of the subject building and is it higher or lower than the average?

Duties and Powers of the Real Estate Commission

119. If the New Jersey Real Estate Commission decides to pay a visit to a real estate office, how much notice must it give the broker?
120. An agent commits fraud and is guilty of one offense. The New Jersey Real Estate Commission can fine the agent instead of or in addition to license suspension or revocation. What would be the maximum amount the agent could be fined?