The “Real” Real Estate Exam

PART 1 - BUYERS

A -  Showing a Property:

1. You are going to meet a new client at a listing that is not listed by our agency.  What documents must you have the buyer sign?

A. Buyer agency disclosure.

2. You are going to meet a new client at one of our listings.  What documents must you have them sign?

A. Buyer Agency, Notice of Designated Agency and Consent to Designated (only necessary if you don’t already have a buyers agreement).

3. The property you are going to show is a “short sale”.  What does “short sale” mean, and how will this affect the closing date?

A. The owner owes more to the bank than what it is being sold for.  Once the owner accepts an offer, they must send it to the bank to see if they are willing to release them of their mortgage obligations.  It will often take 60 days or more to hear from the bank so assume 100-130 days to close on a short sale.

4. What is Mass Save and which towns does it serve?

A. Mass Save is a program sponsored by Columbia Gas and Eversource Electric.  Customers who have these service providers actually pay a small monthly fee into a pool of funds.  Mass Save will come out to your property upon request and do an energy audit for FREE.  They will even improve your energy efficiency by doing things like replacing light bulbs, replacing shower heads with low flow heads, sealing doors, etc.  

5. What is the difference between a boiler and a furnace?

A. A boiler will “boil” water, and a furnace heats the air.

6. Which side of the foundation are the water meter and circuit breaker panel typically located on?   

A. Typically on the street side.

7. What is an accompanied showing?

A. Listing agent will be accompanying buyer’s agent and buyers during the showing.

8. What does it mean when the showing says 48 hr notice required?

A. Seller requests 48 hrs notice for showings to occur.  Typically done when the property has tenants and the listing agent must give the tenants proper notice.

9. What does it mean if the disclosures say “subject to seller finding suitable housing”?

A. Sellers need to find a house to live in before they can sell their current one.

10. How do you know which appliances are staying and which are not?

A. Look at the applicable field in MLS, or check the inclusion/exclusion document which might be attached to the listing in MLS

11. Besides Agency Disclosure on the first personal meeting, what should you bring with you to a showing and what should you review prior to showing each property?

A. Bring a good attitude! Also bring a tablet/smartphone so you can look up data if necessary, flashlight (one on your phone is fine) and listing sheet.  You should also see if there are any documents attached to the listing in mls (ie seller’s statement of property condition, disclosure documents, lead paint, feature sheet etc) so that you can alert the buyer to any additional information. 

12. What does it mean if the listing agent is offering a Variable Rate Commission?

A. I’m going to charge seller 6% and offer out 2.5% to cooperating agents.  However, if someone at my company sells it, we will only charge 5% to seller.  If I sell it, we will only charge seller 4%.  If another agent inquires about this, we have to disclose what the differentials in the rates are.  To be clear, we don't have to  disclose the whole compensation, just the differential.  Ie, we are charging 1% less if someone at our office sells it and 2% less if I sell it. 

13. What does it mean if the listing agent is offering a Dual Rate Commission?  

A. Same as variable but with only 2 options.

14. If you are working with an FHA buyer and they want to look at condominiums, what must you find out about the condominium complex before you show them units at the complex?

A. You need to make sure that the complex is FHA approved.  You can do an initial lookup by Clicking Here.  Please note that this site might not be 100% accurate.

B -  Writing an Offer:

1. What activity should you tie your inspection date to?

A. Fully executed P&S. Ie 10 days from fully executed purchase and sale

2. How long do you typically give for mortgage commitment and how long for closing date on the following financing types (FHA, VA, Conventional)?

A. 30-45 days for mortgage.  45-60 days for closing.

3. Which date would need to get extended out an extra 3 weeks if the buyer was going for a USDA loan?

A. Closing date.  Once the loan is approved by the lender it then has to be approved by USDA which can take a few extra weeks.

4, If the buyer were looking to buy a property which was subject to short sale approval, would you be able to use the standard mortgage and closing timelines? If no, what would you write for dates?

A. No, mortgage would be 30 days from short sale approval; closing date would be 45 days from short sale approval.

5. The buyer would like the seller to pay some of their closing costs.  Is that legal?  If so, what can the sellers pay for?

A. Yes! Closing costs, escrows, points & fees, and prepaids of the buyer can all be paid for by the seller. 

6. Is there a limit on how much sellers can pay toward closing costs?

A. Typically 3-6% of the purchase price.  It depends on the loan type.

7. Explain the difference between the down payment and the deposit.

A. Deposit is earnest money given to secure the property.  It is a portion of the total down payment.  You can think of it as the buyer’s “skin in the game”.  If the buyer defaults, they will lose their deposit;  Down payment is the total amount of money the buyer will pay towards the purchase price.  It is the difference between the purchase price and the loan amount. (ie 3.5%, 5%, 20% etc).

8. Your buyers ask that all the kitchen appliances remain along with the pool table, TV entertainment center, and couches in the basement.  Is there anyone you should check with, on the buy side of the transaction, before writing that offer to see if it’s okay if those things are written into the offer?

A. The Lender.  These items are referred to as chattel, and outside of appliances, most lenders will not want to see any of those items included in the purchase and sale.  Typically the buyer and seller would have to have a separate agreement for those additional items.

9. The buyer tells you they do not want to do any inspections.  Is that okay?  If so, are there any documents that you need to have them sign?

A. Yes it's ok. However, you will have to have them sign an Inspection Waiver.

10. You're representing a buyer, at a minimum, what two types of inspections should you recommend be done?

A. A structural/mechanical and Wood Destroying Insect (WDI).

11. You are representing the buyer on a $200,000 home purchase. The buyer asks you how much closing costs typically are and what is included in closing costs.  How do you respond?

A. You should tell them that closing costs will probably be around $5,000.00 -$6,000.00.  Closing costs include prepaid insurance, prepaid taxes, lender fees, attorney fees, and the appraisal.

12. What inspection must the seller pay for on a VA Loan?

A. Termite inspection.

13. Your buyer would like to make an offer on a property built before 1978.  Our offers say that the buyer has already received a copy of the lead paint disclosure prior to signing the offer.  What are the steps you should take to obtain the lead paint so that you can have your buyer sign it prior to writing an offer.

A. i. You go to the listing in mls to see if the listing agent has attached the lead paint to the listing. 

If the document is not attached the listing, you should call, email and text the listing agent and ask them to forward it to you. 

iii. If you can’t get ahold of the listing agent to get the document DO NOT wait to get your offer in.  Explain to your buyer that you are not sure what lead disclosure the seller is making and that you are going to get the document as soon as possible but you want to get the offer in for fear of losing out to other buyers.  Then work diligently to get the document and have the buyer wet sign the document. 

14. You are writing an offer for a property that has tenants in it.  Can you ask that the property transfer without tenants?

A. Yes, if reasonable time is given.  Otherwise the buyer must acquire the property with tenants.  You can reference this “Clauses” document in the ROVI Library for specific language. 

15. How much do the following things typically cost? (Depends on sq. ft.)

C -  After you have an accepted offer:

1. What two things must be done prior to the inspection date?

A. 1.Perform your inspection. 2. Request any repairs the buyer is looking for.

2. What options does the buyer have if they can’t test the sprinklers, pool or air conditioning because of cooler temperatures during the winter?

A. Option 1:  You gather as much information about the systems (ie age, last date of service) as you can and make an educated decision on if you think you are taking a big risk that they won’t work.  This is typically what happens and the buyer is taking a risk that something won't work when they go to use it.

Option 2:  The buyer could ask the seller to do a holdback.  A holdback is when the seller does not get all of their funds at closing.  Instead, a portion of the funds they were supposed to receive are held back in an escrow account by one of the attorneys (typically you hold back 1.5 times the cost of the potential repair). 

• • For instance, you might holdback $5,000 if you can't test the central air unit.  Then, once the weather gets warmer, if the AC unit works fine then the sellers would receive the money being held in escrow.  If there was a problem with the AC, then the money in escrow could be used to repair or replace the system and the balance would go to the seller. Please note: it is typically difficult to get the seller to agree to this, especially if the winter is just starting.  

3. What test has to be performed if the property is on private sewerage and who is typically responsible for paying for this test?

A. Title V = septic inspection.  The seller is typically responsible for this test.  Be careful though because some banks require that the buyer pay for this test.

4. After doing a home inspection, the buyer has three options with regards to how they move forward.  What are they?

A. 1. Proceed without asking for repairs.  

     2. Request and negotiate repairs. 

     3. Ask to be released from the transaction.

5. What will your buyer forfeit if you miss your inspection or mortgage date and the buyer wants to back out of the transaction?

A. Their deposit.

6. If FHA repairs are not made prior to the appraiser going out, the appraiser can make a remark that the work isn’t done.  If this happens, the appraiser will need to re-inspect the property.  How much is this re-inspection fee? 

A. $150.  However, we don’t want our buyers to have to eat this cost, so we need to get the sellers to get the work done prior to the appraisal, or delay the appraiser from going out.  We should also try and get in writing up front that if the seller don’t get it done before the appraisal, they must pay the $150 fee for reinspection.  Please note: the FHA Appraiser could ask for reinspection stuff not on our original repair list.  In that case, the buyer would have to pay the reinspection fee. 

7. You are representing a buyer and the mortgage commitment date is tomorrow.  The lender has provided you a conditional commitment for the buyer with two conditions left to get the loan clear to close.  Is that sufficient or must you file an extension for mortgage commitment?

A. File an extension.  You must have a clear to close before letting your mortgage contingency lapse, otherwise you are putting your buyer’s deposit at risk.  

8. You are representing a buyer and have satisfied the inspection and mortgage contingencies.  The property is scheduled to close in two days.  What final task must you complete prior to the clients meeting with the attorney to sign the paperwork?

A. Final walkthrough.

D -  Finance:

1. Your buyer is pre approved for a FHA mortgage.  What is the minimum down payment requirement, and are there any limitations to the areas in which they can buy, or limitations on the condition of the property which they can buy?

A. 3.5% down payment. The property must meet minimum FHA condition standards. There is no limit on areas they can purchase, but for condos, the condo complex must be FHA approved.

2. Your buyer is pre approved for a USDA loan.  What is the minimum down payment requirement, and are there any limitations to the areas in which they can buy, or limitations on the condition of the property which they can buy?

A. 0% down payment. There are limitations on areas they can buy.  USDA loans were created for the development of rural towns.  You can Click Here to see which towns quality.  The property must meet conditions similar to FHA.

3. Your buyer is pre approved for a conventional loan.  What’s the minimum down payment requirement, and are there any limitations to the areas in which they can buy, or limitations on the condition of the property which they can buy?

A. Typically, conventional loans require a minimum of 5% down, although some lenders have introduced 3% and even 1% down conventional loans.  There are no limits on area.  There are some restrictions on conditions for conventional loans, but they are significantly more relaxed than FHA, and they will be lender specific. 

4. Your buyer is pre approved for a VA loan.  What’s the minimum down payment requirement, and are there any limitations to the areas in which they can buy, or limitations on the condition of the property which they can buy?

A. 0% down payment. There are no restrictions on the areas in which they can buy. You CAN have another VA loan “active”, but basic entitlement will be subtracted.  The property condition requirements are similar to FHA.

***Please remember: On VA loans, the seller must pay for the termite inspection, not the buyer!***

PART 2 -  SELLERS

1. If you are buying/selling for yourself, or if you are related to any party involved in the transaction, must this be disclosed?

A. Yes!

2. You go out to do a listing presentation, and you do not get the listing.  Were there any documents you should’ve had signed?

A. Agency Disclosure (remember, it was the first personal meeting to talk about a specific property!)

3. You do a listing presentation, and you secure the listing.  What are the required documents that you need to have the seller sign?  

A. See THIS Document for the required documents

4. Can you count a room as a bedroom if it does not have a closet?

A. Yes. Here are some general guidelines for a bedroom

a. Minimum square footage: Although this can vary from state to state, 70 to 80 square feet is generally the acceptable minimum. 

b. Minimum horizontal footage: The minimum square footage doesn't tell the whole tale. A bedroom must also measure at least 7 feet in any horizontal direction. That is why you can't call a hallway a bedroom!

c. Two means of egress: There have to be two ways out of a bedroom. Traditionally, these would be a door and a window.  In most markets, a skylight would also qualify as that means of egress.

d. Minimum ceiling height: At least half of the bedroom ceiling has to be at least 7 feet tall.

e. Minimum window size: If a window is being counted as one of the means of egress, the window opening must be a minimum size, usually 5.7 square feet.

f. A heating and cooling element: We're talking a heater (a space heater won't qualify) as well as a way to cool it down, whether that's by opening a window or good old AC.

5. You’re representing a seller that has a septic and well water system.   What two inspections must the SELLER complete and provide certificates for prior to the closing?

A. Title V, Smoke and Carbon Monoxide Detectors.  The well would have to be inspected and paid for by the buyer. 

6. You’re representing a seller, and the buyer has a finance contingency.  The appraisal comes in below the purchase price.  What are the three options for the seller?

A. Option 1: Keep the sale price the same and ask the buyer to come out of pocket for the difference.  

Option 2: Release the buyer, try to find another buyer, and hope the appraisal comes in higher with that next buyer.  

Option 3: Negotiate a lower sale price where the buyer comes out of pocket with little or no extra money. 

7. You  are inputting a listing into the MLS for a property built in 1985.  The property has never been tested for lead paint.  Should you check off  “none” or “unknown” for the lead paint disclosure?

A. Unless the property has been tested, you MUST check unknown.  Even though they stopped making lead paint after 1978, it's still possible that lead paint was brought into that home (ie they brought in a fancy banister from another home).

8. You are listing a multifamily property that has three units in the building.  All three units have 2 means of egress, have their own separate heating units, have their own separate gas meters, and have their own separate electric panels.  Is there anything else you need to check before you can list this as a 3 family, or has it met all the criteria?

A. You will need to check with the town assessor's office and town building department to make sure they both recognize the property as a 3 family.   If they both don't agree that it is a 3 family, then you can’t list it as a 3 family.

9. According to the RAPV offer form that we use, who is responsible for the first $1,000 of termite treatment or repair?

A. The seller is responsible unless this provision was removed prior to signing the offer.  Please note most other offer forms do not have this language.

10. MA is a buyer beware state. Does this mean you must disclose items like crime or suicide that happened in a property up front?

A. No.  See THIS article for details.

11.  As the listing agent, are you or the co-broke agent allowed to chip in or reduce your compensation to help the seller with repairs or settle an issue?

A. Yes.  Technically the Broker would have to sign off on any changes to the commission structure, but this is possible to save a deal.

12. What options does the seller have when the buyer requests repairs after inspections? 

A. 1. Refuse to do the repairs (you obviously risk losing the buyer if you do this).

2. Have a licensed person do the repairs prior to closing. If time allows, you would want the seller to wait to have the work done until the buyers show they have obtained mortgage commitment. If you don't do this, you risk the seller spending the money on the repairs, and the buyer getting denied their loan and backing out.

3. Have a licensed person do some of the repairs prior to closing.

4. Give a closing cost credit in lieu of repairs.  Please keep in mind that the average closing costs on a $200,000 purchase would be between 5-6K, so if the repairs are going to be more than that, this option won't work fully.  Also, if the buyer has already asked for closing costs to be paid in their offer, then this option won't work. 

5. A combination of completing repairs and a closing cost credit.

6. Have a check cut to a contractor at closing to get the work done post closing.  (This one can be tricky, and you would have to check with the lender to make sure this option was ok).

13.  In MA, what document is only good for 60 days, and therefore should only be ordered after the buyer and seller have negotiated repair?  If time allows, you may even want to wait until the buyer has obtained their mortgage commitment.

A. Smoke Certificate.

14. What special document is required for condo owners to provide to the buyer at closing to show their dues/fees are up to date?

A. 6D Certificate.

15. If you are closing on July 31st, traditionally by the end of what day should the home be free of all contents, July 30th or July 31st?

A. July 30th.

16. What parts of an offer are negotiable by the seller before the offer is signed?

A. Everything is negotiable.

PART 3 -  CONNECTICUT AGENTS ONLY

1. Is a smoke detector and carbon monoxide detector required for the sale of a Connecticut property?

A. No.  The seller can either sign an affidavit advising that the smokes and carbons are in the correct places and working properly, or give the buyer a $250 credit.

2. Is a Title Five Inspection required for the sale of a Connecticut property that has a septic system?

A. No.

3. What must be signed at the first personal meeting with a buyer on a Connecticut property?

A. Buyer Contract (not agency disclosure).

4. What are the ROVI required documents to take a listing in Connecticut?

A. See THIS Document for the list

5. When taking a listing in Connecticut, can you use our deferral of showings strategy so that no one can view the property until the open house on Sunday?

A. No.  In CT, properties listed in the MLS must be immediately available for showings.  You could list the property late on Thursday with 48 hours notice, which almost brings you to the open house on Sunday.

6. When writing offers in Connecticut, do we use offer forms, or do we go straight to the purchase contract?

A. In CT there is no single page offer form.  Your offer is a completed purchase contract.

7. What is different about the purchase and sale in CT?

A. It is not constructed by attorneys.  The local boards and MLS have preconstructed a standard purchase and sale agreement as well as addendums that you can add to the purchase and sale agreement. 

8. What additional device may be required to show property in Connecticut?

A. A key fob, which connects to your phone, since many CT agents use electronic lockboxes.

9. With regards to a septic system, who typically pays for the pumping of the system so it can be inspected and who pays for the inspection?

A. The seller typically pays for the pumping, and the buyer pays for the inspection.