Florida Real Estate Broker Exam — All Questions

Rule 61J2-14.012, F.A.C., requires a Florida broker to compare total trust liability with the reconciled bank balances of all trust accounts:

• a.Once weekly, in a written statement the broker reviews, signs, and dates
• b.Once monthly, in a written statement the broker reviews, signs, and dates✓
• c.Once quarterly, in a written statement the broker reviews, signs, and dates
• d.Once annually, in a written statement a certified public accountant signs

Rule 61J2-14.012(2), F.A.C., requires that once monthly a broker cause to be made a written statement comparing the broker's total liability with the reconciled bank balances of all trust accounts, and that the broker review, sign, and date it. Trust liability is defined as the sum of all deposits received, pending, and being held by the broker at any point in time. The rule lists the minimum contents, including account numbers and balances, deposits in transit, outstanding checks by date and number, and an itemized list of trust liability. No outside accountant is required, and subsection (3) requires an explanation and corrective action whenever liability and bank balances disagree.

Before a Florida broker may place escrow funds in an interest-bearing account, rule 61J2-14.014, F.A.C., requires:

• a.Written permission of all parties as to the account, recipient, and timing✓
• b.An escrow disbursement order from the commission approving the account
• c.A written opinion of the brokerage's attorney approving the arrangement
• d.Written permission of the buyer alone, because the buyer supplied the funds

Rule 61J2-14.014(1), F.A.C., allows a broker to place escrow funds in an interest-bearing account, but the placement, the designation of the party who is to receive the interest, and the time the earned interest must be disbursed all require the written permission of all the parties to the transaction. The account must be insured and located in a depository doing business in Florida. Interest is a benefit somebody will receive, so the buyer cannot authorize it alone. An escrow disbursement order is a dispute remedy under s. 475.25(1)(d)1., F.S., not a prerequisite to opening an account, and no attorney opinion is called for.

Real estate brokers in Florida are regulated under chapter 475, part I, Florida Statutes, by:

• a.The Florida Bar, through its real property law section
• b.The county property appraiser for the county of the office
• c.The Florida Real Estate Commission, within the department✓
• d.The Florida Department of Revenue, through its tax division

Florida real estate licensing is governed by chapter 475, part I, F.S., and rule chapter 61J2, F.A.C., and s. 475.01(1)(c), F.S., defines commission to mean the Florida Real Estate Commission, which sits within the Department of Business and Professional Regulation. Section 475.021, F.S., assigns the recordkeeping, examination, legal, and investigative services to the Division of Real Estate. The Florida Bar regulates attorneys, a separate profession with its own admission and discipline. The county property appraiser values real property for tax purposes, and the Department of Revenue administers state taxes, including the documentary stamp tax that touches real estate transactions.

Under s. 475.25(1), F.S., the maximum administrative fine FREC may impose for each count or separate offense is:

• a.$5,000, and a license may be suspended for up to 10 years✓
• b.$1,000, and a license may be suspended for up to 10 years
• c.$5,000, and a license may be suspended for up to 5 years
• d.$10,000, and a license may be suspended for up to 3 years

Section 475.25(1), F.S., authorizes the commission to deny an application, place a licensee on probation, suspend a license for a period not exceeding 10 years, revoke a license, impose an administrative fine not to exceed $5,000 for each count or separate offense, and issue a reprimand, and it permits any or all of these in combination. Because the cap is per count, a multi-count complaint can produce a total far above $5,000. Rule 61J2-24.001(1), F.A.C., sets out the guideline range and orders the penalties from lowest to highest as letter of concern, reprimand, fine, probation, suspension, and revocation or denial.

In Florida, operating as a real estate broker or sales associate without a valid and current active license is:

• a.A misdemeanor of the first degree under s. 475.42(1)(a), F.S.
• b.A misdemeanor of the second degree under s. 475.42(1)(a), F.S.
• c.A noncriminal violation punishable by administrative fine alone
• d.A felony of the third degree under s. 475.42(1)(a), F.S.✓

Section 475.42(1)(a), F.S., provides that a person may not operate as a broker or sales associate without holding a valid and current active license, and that any person who violates the paragraph commits a felony of the third degree, punishable as provided in s. 775.082 or s. 775.083. That is the most serious criminal classification in the section, and it reflects the public protection rationale for licensure. Section 475.42(2), F.S., supplies the default for the rest of the section: any person who violates the other provisions of subsection (1) is guilty of a misdemeanor of the second degree, except where a different punishment is prescribed.

A Florida licensee who pleads nolo contendere to a felony must inform the commission in writing within:

• a.10 days after entering the plea to the felony charge
• b.60 days after entering the plea to the felony charge
• c.30 days after entering the plea to the felony charge✓
• d.30 days after the court imposes a sentence for the felony

Section 475.25(1)(p), F.S., makes it a ground for discipline to fail to inform the commission in writing within 30 days after pleading guilty or nolo contendere to, or being convicted or found guilty of, any felony. The trigger is the plea or the finding of guilt, not sentencing, so a licensee who waits for the sentencing hearing has already missed the deadline. The reporting duty is independent of whatever discipline the underlying conduct may draw, which means a licensee can be disciplined for the failure to report even where the felony itself is unrelated to real estate practice.

Payments from the Florida Real Estate Recovery Fund are limited to:

• a.$50,000 per claim and $250,000 in the aggregate against one licensee
• b.$50,000 per claim and $150,000 in the aggregate against one licensee✓
• c.$25,000 per claim and $150,000 in the aggregate against one licensee
• d.$100,000 per claim and $300,000 in the aggregate against one licensee

Section 475.484(1)(a), F.S., caps recovery at the unsatisfied portion of the claimant's judgment or $50,000, whichever is less, and only to the extent the judgment reflects actual or compensatory damages, with treble damages, court costs, attorney's fees, and interest generally excluded. Section 475.484(4), F.S., caps payments based on judgments against any one broker or sales associate at $150,000 in the aggregate. A third cap sits between them in s. 475.484(3), F.S.: claims arising out of the same transaction are limited to $50,000 in the aggregate regardless of the number of claimants or parcels involved.

When the Florida Real Estate Recovery Fund pays a claim on a judgment against a licensee, that licensee's license is:

• a.Automatically revoked on the date of payment, with no further action needed
• b.Suspended only after a separate disciplinary hearing before the commission
• c.Placed on probation until the licensee has repaid the fund with interest
• d.Automatically suspended on the date of payment, with no further action needed✓

Section 475.484(7), F.S., provides that upon payment of any amount from the fund in satisfaction of a claim described in s. 475.482(1), F.S., the license of the broker or sales associate is automatically suspended on the date of payment, and it states expressly that no further administrative action is necessary. The license may not be reinstated until the licensee has repaid the fund in full plus interest. The subsection also closes an obvious escape route: a discharge in bankruptcy does not relieve a licensee of these penalties and disabilities, except to the extent the provision would conflict with 11 U.S.C. s. 525.

A claim against the Florida Real Estate Recovery Fund must be made within 2 years of the act or its discovery, and in no event more than:

• a.4 years after the date of the act giving rise to the claim✓
• b.3 years after the date of the act giving rise to the claim
• c.5 years after the date of the act giving rise to the claim
• d.6 years after the date of the act giving rise to the claim

Section 475.483(1)(c), F.S., requires that a claim for recovery be made within 2 years from the time of the act giving rise to the claim, or within 2 years from the time the act is discovered or should have been discovered with the exercise of due diligence, and it adds an outer limit: in no event may a claim be made more than 4 years after the date of the act. The 5-year figure belongs to a different clock, the deadline in s. 475.25(5), F.S., for filing an administrative complaint against a licensee. Eligibility also requires a final civil judgment, notice to the commission, and an unsatisfied writ of execution.

A Florida broker who prepares a comparative market analysis for a prospective seller is:

• a.Performing an appraisal that must fully comply with USPAP
• b.Providing a brokerage service rather than an appraisal✓
• c.Performing an appraisal that requires a certified appraiser
• d.Providing a service that only a broker associate may perform

Section 475.01(1)(a), F.S., includes appraising within the definition of broker but specifically excludes those appraisal services that must be performed only by a state-licensed or state-certified appraiser. A comparative market analysis prepared to help an owner set a listing price is brokerage work incidental to seeking the listing, and it is an opinion of likely selling price rather than a formal opinion of value developed under the Uniform Standards of Professional Appraisal Practice. A licensee should not present a CMA as an appraisal or use appraisal terminology that implies one. Broker associates hold no special CMA privilege.

USPAP, the body of standards a Florida appraiser must follow, stands for:

• a.Uniform Statutes for Professional Appraisal Procedure
• b.United States Professional Appraisal Practice Standards
• c.Uniform Standards for Property Appraisal Purposes
• d.Uniform Standards of Professional Appraisal Practice✓

The Uniform Standards of Professional Appraisal Practice are promulgated by the Appraisal Standards Board of the Appraisal Foundation and set the ethical and performance requirements for appraisers, covering development of the appraisal and its reporting. They are standards adopted by reference into state law rather than statutes enacted by a legislature, which is why the second choice misdescribes them, and they are national in scope but not a federal agency product. Florida regulates appraisers under part II of chapter 475, F.S., a separate credential from the broker and sales associate licenses issued under part I.

In the sales comparison approach, when a comparable property has a desirable feature the subject property lacks, the appraiser:

• a.Adds value to the comparable's sale price
• b.Subtracts value from the comparable's sale price✓
• c.Subtracts value from the subject's indicated value
• d.Adds value to the subject's indicated value

The governing discipline of the sales comparison approach is that the appraiser always adjusts the comparable and never the subject, because the subject's value is the unknown being solved for. The comparable sold for a price that reflects its extra feature, so to estimate what it would have sold for had it been like the subject, the appraiser subtracts the contributory value of that feature. The mirror image applies when the subject has a feature the comparable lacks: value is added to the comparable's price. Adjusting the subject in either direction reverses the logic of the approach and produces a circular estimate.

The cost-depreciation approach estimates the value of a property as:

• a.Land value plus improvement cost new, plus accrued appreciation
• b.Land value plus improvement cost new, less accrued depreciation✓
• c.Improvement cost new, less accrued depreciation, less land value
• d.Land value plus the capitalized net income of the improvements

The cost approach reasons that an informed buyer will pay no more for a property than the cost of acquiring a comparable site and building an equally desirable substitute improvement. The appraiser estimates the site value as if vacant, adds the reproduction or replacement cost new of the improvements, then subtracts accrued depreciation from all causes, physical, functional, and external. Depreciation is subtracted rather than appreciation added, land value is added rather than subtracted, and capitalizing net income is the separate income approach. The cost approach is most reliable for new or special-purpose buildings with few comparable sales.

An office building produces net operating income of $96,000, and comparable buildings sell at an 8 percent capitalization rate. The indicated value is:

• a.$1,080,000
• b.$768,000
• c.$1,200,000✓
• d.$7,680

The income capitalization formula is value equals income divided by rate, so $96,000 divided by 0.08 gives $1,200,000. The $768,000 figure comes from multiplying by 8 percent instead of dividing, an easy slip that produces a value below the income it is supposed to capitalize many times over. The $7,680 figure is that same multiplication carried out and then misplaced by a decimal. Remember the relationship among the three variables: income equals value times rate, and rate equals income divided by value, so a higher capitalization rate always yields a lower value for the same income stream.

An appraiser attributes a Florida home's loss in value to a landfill newly opened across the road. This is:

• a.Physical deterioration, which is generally curable
• b.Functional obsolescence, which is generally incurable
• c.External obsolescence, which is generally incurable✓
• d.Functional obsolescence, which is generally curable

External obsolescence, sometimes called economic obsolescence, is a loss in value caused by forces outside the property's own boundaries, such as a nearby nuisance, a change in the neighborhood, or a downturn in the local economy. Because the owner cannot remove the landfill, external obsolescence is generally treated as incurable. Functional obsolescence arises from the design or utility of the improvement itself, such as an outdated floor plan or too few bathrooms, and may be curable or incurable depending on cost. Physical deterioration is ordinary wear and tear and deferred maintenance, most of which is curable.

A broker price opinion prepared by a Florida licensee differs from an appraisal chiefly because it is:

• a.An opinion of value given as a brokerage service, not an appraisal✓
• b.An appraisal that simply omits the cost approach to value
• c.An appraisal performed under a narrower scope of work
• d.An opinion that binds the broker to purchase at the stated price

A broker price opinion is a licensee's opinion of the probable selling price of a property, usually prepared for a lender, servicer, or asset manager considering a sale, short sale, or foreclosure. Like a comparative market analysis, it is a brokerage service falling within the definition of broker in s. 475.01(1)(a), F.S., rather than an appraisal developed under USPAP by a state-licensed or state-certified appraiser. It is not an appraisal with a reduced scope, and it is not an offer: nothing about giving a price opinion obligates the broker to buy the property or guarantees the owner that price.

An investor uses a gross rent multiplier to value a rental house. The multiplier is derived by dividing:

• a.Sale price by gross rent✓
• b.Gross rent by sale price
• c.Net operating income by sale price
• d.Sale price by net operating income

The gross rent multiplier is derived from comparable sales by dividing each comparable's sale price by its gross rent, and the resulting factor is then multiplied by the subject's gross rent to indicate value. It is a quick screening tool for small residential income properties precisely because it uses gross rent and therefore requires no expense data. Dividing rent by price inverts the factor. Net operating income divided by sale price produces the capitalization rate, and sale price divided by net operating income produces its reciprocal, both of which are income-approach measures rather than gross multipliers.

When a Florida broker values a going business along with its real estate, the intangible value of its reputation and customer base is:

• a.Goodwill✓
• b.Leasehold value
• c.Salvage value
• d.Chattel value

Goodwill is the intangible value of a going concern that exceeds the value of its identifiable tangible and separately identifiable intangible assets, arising from reputation, customer relationships, location advantage, and trained staff. It matters in Florida brokerage because s. 475.01(1)(i), F.S., defines real property to include any interest in business enterprises or business opportunities, so a licensee may broker a business sale. Chattel value refers to tangible personal property such as equipment and fixtures, leasehold value is the tenant's interest in a favorable lease, and salvage value is what an asset brings at the end of its useful life.

Under s. 475.278, F.S., a Florida licensee who has not established another relationship in writing with a customer is presumed to be operating as:

• a.A single agent for the seller
• b.A licensee with no brokerage relationship
• c.A single agent for the buyer
• d.A transaction broker✓

Section 475.278(1)(b), F.S., states that it shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer. The presumption is the default that operates in the absence of a writing, which is why the two single agent choices and the no brokerage relationship choice are wrong: each of those must be affirmatively established in writing. Section 475.278(1)(a), F.S., separately prohibits a licensee from operating as a disclosed or nondisclosed dual agent, defining dual agent as a broker who represents both buyer and seller as a fiduciary.

Which of the following is a duty a Florida transaction broker owes under s. 475.278(2), F.S.?

• a.Limited confidentiality, unless waived in writing by a party✓
• b.Full confidentiality of all customer information, without exception
• c.Undivided loyalty to whichever party first requested assistance
• d.Obedience to the lawful instructions of the party being assisted

Section 475.278(2), F.S., lists the transaction broker's duties as dealing honestly and fairly; accounting for all funds; using skill, care, and diligence; disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer; presenting all offers and counteroffers in a timely manner; limited confidentiality unless waived in writing; and any additional duties mutually agreed to. Limited confidentiality specifically prevents disclosing that a seller will take less or a buyer will pay more, among other things. Loyalty and obedience are single agent duties under s. 475.278(3)(a), F.S., and full confidentiality is not what limited confidentiality means.

A Florida single agent who wishes to become a transaction broker in the same transaction must:

• a.Obtain a written order from the commission approving the change
• b.Obtain the principal's written consent before the change takes effect✓
• c.Wait until closing, when the change takes effect automatically
• d.Cancel the existing listing agreement and negotiate a new one

Section 475.278(3)(b)2., F.S., allows a single agent relationship to be changed to a transaction broker relationship at any time during the relationship, provided the agent first obtains the principal's written consent to the change. Section 475.278(3)(c)2., F.S., prescribes the Consent to Transition to Transaction Broker disclosure used to obtain it, whose first sentence must be printed in uppercase and bold type. The change is a matter of the principal's informed consent, not a commission order, and it does not require unwinding the listing. Nothing about it happens automatically, least of all at closing after the parties have relied on the relationship.

Which duty is owed by a Florida single agent but not by a transaction broker?

• a.Dealing honestly and fairly with the customer
• b.Accounting for all funds in the transaction
• c.Loyalty and obedience to the principal✓
• d.Using skill, care, and diligence in the transaction

Section 475.278(3)(a), F.S., lists nine single agent duties: dealing honestly and fairly, loyalty, confidentiality, obedience, full disclosure, accounting for all funds, skill, care, and diligence, presenting all offers and counteroffers in a timely manner, and disclosing known facts materially affecting residential value that are not readily observable. Comparing that list with the transaction broker duties in s. 475.278(2), F.S., shows the overlap: honest and fair dealing, accounting for funds, and skill, care, and diligence appear in both. The fiduciary duties that appear only on the single agent list are loyalty, obedience, confidentiality, and full disclosure.

A Florida licensee who has no brokerage relationship with a buyer or seller must give the required disclosure notice:

• a.Before the closing of the transaction
• b.At the time an offer is first presented
• c.Before the showing of property✓
• d.Within 24 hours after the first contact

Section 475.278(4)(b), F.S., requires that the duties of a licensee who has no brokerage relationship be fully described and disclosed in writing to the buyer or seller before the showing of property. Those duties, listed in s. 475.278(4)(a), F.S., are only three: dealing honestly and fairly, disclosing all known facts that materially affect the value of residential real property which are not readily observable to the buyer, and accounting for all funds entrusted to the licensee. The first sentence of the notice must be printed in uppercase bold type. Waiting until an offer or closing would defeat the purpose of telling a customer where the licensee stands.

A Florida broker may appoint designated sales associates to act as single agents for buyer and seller in the same transaction only when:

• a.The transaction is nonresidential and both parties have $1 million in assets✓
• b.The transaction is nonresidential and both parties waive confidentiality
• c.The transaction is nonresidential and the property exceeds 10 acres
• d.The transaction is residential and both parties have $1 million in assets

Section 475.2755(1), F.S., permits designated sales associates only in a real estate transaction other than a residential sale as defined in s. 475.278(5)(a), F.S., and only where the buyer and seller have assets of $1 million or more, at the customers' request. Both customers must sign disclosures stating that their assets meet the threshold and requesting that form of representation. The designated associates owe single agent duties, and a special uppercase notice replaces the ordinary transition disclosure. The device exists for sophisticated commercial parties, which is why the residential option is wrong; no waiver of confidentiality and no acreage test appears in the statute.

Under an exclusive agency listing, the seller owes the listing broker a commission if the property is sold by:

• a.Anyone at all, including the seller acting without a broker
• b.The listing broker or the seller, but not by any other broker
• c.The listing broker only, and by no other person at all
• d.The listing broker or any other broker, but not by the seller alone✓

An exclusive agency listing appoints one broker as the seller's exclusive agent, so a commission is earned if any broker procures the buyer, but the seller retains the right to sell the property personally without paying a commission. That reserved right is the single feature distinguishing it from the exclusive right of sale listing, under which the broker is paid no matter who sells, including the seller. An open listing pays only the broker who actually procures the buyer and leaves the seller free to give the same terms to any number of brokers. Section 475.25(1)(r), F.S., governs the contents of all written listing agreements.

Section 475.25(1)(r), F.S., requires a written Florida listing agreement to contain a definite expiration date and requires the broker to give the principal a signed copy within:

• a.48 hours of obtaining the written listing agreement
• b.24 hours of obtaining the written listing agreement✓
• c.72 hours of obtaining the written listing agreement
• d.10 days of obtaining the written listing agreement

Section 475.25(1)(r), F.S., makes it a ground for discipline if a broker fails to include in any written listing agreement a definite expiration date, a description of the property, the price and terms, the fee or commission, and a proper signature of the principal, or fails to give the principal a legible, signed, true and correct copy within 24 hours of obtaining the agreement. The same paragraph forbids a provision requiring the person signing the listing to notify the broker of an intention to cancel after the definite expiration date, which is how the statute bars automatic renewal clauses that would extend a listing indefinitely.

A Florida broker's entitlement to a commission under an open listing generally depends on the broker being:

• a.The first broker to show the property to any prospective buyer
• b.The broker who entered the property into the local MLS
• c.The broker holding the buyer's escrow deposit at closing
• d.The procuring cause of a ready, willing, and able buyer✓

Under an open listing the seller pays only the broker whose efforts actually produced the sale, so entitlement turns on procuring cause: an uninterrupted chain of events, begun by the broker, that leads the buyer to purchase on the seller's terms. The buyer must be ready, willing, and able, meaning both prepared to buy and financially capable. Merely being first to show the property does not establish procuring cause if another broker's efforts closed the sale, entering a listing in the MLS is a marketing step rather than proof of causation, and holding the escrow deposit is a custodial function unrelated to who earned the fee.

Under s. 475.25(1)(h), F.S., and rule 61J2-10.028, F.A.C., a Florida broker may lawfully share brokerage compensation with:

• a.A party to the transaction, with full disclosure to all parties✓
• b.An unlicensed person who referred the buyer to the brokerage
• c.An unlicensed assistant who arranged the property showings
• d.An unlicensed inspector who examined the property for the buyer

Rule 61J2-10.028(2), F.A.C., provides that the sharing of brokerage compensation by a licensee with a party to the real estate transaction, with full disclosure to all interested parties, is not a violation of chapter 475, part I. That is the familiar commission rebate to a buyer or seller. Section 475.25(1)(h), F.S., otherwise prohibits sharing a commission with, or paying a fee to, a person not properly licensed as a broker, broker associate, or sales associate under the laws of this state for the referral of real estate business or for any of the services in s. 475.01(1)(a), F.S. It does allow a Florida broker to pay a referral fee to a broker licensed under the laws of a foreign state or nation.

Under the Commercial Real Estate Sales Commission Lien Act, a Florida broker's lien for an earned commission attaches to:

• a.The commercial real property itself, ahead of a recorded mortgage
• b.The owner's net proceeds from the disposition, not the real property✓
• c.The commercial real property itself, behind a recorded mortgage
• d.The buyer's loan proceeds held by the closing agent at closing

Section 475.703(1), F.S., grants a broker a lien upon the owner's net proceeds from the disposition of commercial real estate for any commission earned under a brokerage agreement, and it states expressly that the lien is a lien upon personal property, attaches to the owner's net proceeds only, and does not attach to any interest in real property. That design keeps the broker's claim out of the chain of title and away from priority fights with mortgagees, which is why all three property-based choices are wrong. Section 475.709, F.S., directs the closing agent to reserve the claimed amount from the owner's net proceeds when a commission notice has been properly delivered or recorded.

A Florida sales associate helping a buyer prepare an offer on a preprinted, approved contract form may:

• a.Draft an added clause creating a new financing condition
• b.Fill in the blanks with the terms the parties have agreed on✓
• c.Advise the buyer on the legal effect of the title exceptions
• d.Prepare a deed conveying the property at the buyer's request

A Florida licensee may complete a preprinted, approved contract form by filling in the blanks with the business terms the parties have negotiated, because that is incidental to the brokerage service the licensee is licensed to perform. Composing original contract language, counseling a party on the legal consequences of title exceptions, and drafting instruments of conveyance such as deeds are all the practice of law. A licensee who crosses that line risks discipline under s. 475.25(1)(b), F.S., for violating a duty imposed by law, in addition to the separate consequences of unauthorized practice. The right response to a legal question is to refer the customer to an attorney.

Under s. 725.01, F.S., which agreement must be in writing and signed to be enforceable in Florida?

• a.A buyer's oral instruction to submit a written offer today
• b.A lease of real property for a term of exactly 6 months
• c.An oral agreement to pay a cooperating broker a referral fee
• d.A lease of real property for a term longer than 1 year✓

Section 725.01, F.S., Florida's statute of frauds, provides that no action shall be brought upon any contract for the sale of lands, tenements or hereditaments, or of any uncertain interest in or concerning them, or for any lease thereof for a period longer than 1 year, unless the agreement is in writing and signed by the party to be charged. A six-month lease falls below that threshold and may be oral. The statute reaches contracts for the sale of land and longer leases rather than every real estate related promise, so an oral fee arrangement between brokers and an oral instruction to a licensee are outside its terms even though both are unwise.

Section 689.261, F.S., requires a buyer of Florida residential property to be given a disclosure summary warning that the buyer should not rely on:

• a.The seller's current insurance premium as the buyer's future cost
• b.The seller's current mortgage balance as the property's market value
• c.The seller's current utility bills as the buyer's monthly expense
• d.The seller's current property taxes as the amount the buyer will owe✓

Section 689.261(1), F.S., requires that a prospective purchaser of residential property be presented a property tax disclosure summary at or before execution of the contract for sale, either included in the contract or attached as a separate summary. The prescribed language warns that the buyer should not rely on the seller's current property taxes as the amount of property taxes the buyer may be obligated to pay in the year subsequent to purchase. The warning exists because a change of ownership triggers reassessment, so the homestead assessment cap the seller enjoyed does not carry over. Insurance, mortgage balance, and utilities are not the subject of this statutory summary.

Under Florida's Johnson v. Davis rule, a seller of a home must disclose facts that:

• a.Materially affect value, are known to the seller, and are readily observable
• b.Are known to the seller, whatever their effect on the property's value
• c.Materially affect value, are known to the seller, and are not readily observable✓
• d.Would affect a buyer's decision, whether or not the seller knew of them

Johnson v. Davis, 480 So. 2d 625 (Fla. 1985), holds that where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them. All three elements matter: the fact must be known to the seller, it must materially affect value, and it must not be readily observable. A defect the buyer can plainly see needs no disclosure, a known fact that does not affect value falls outside the duty, and a seller cannot be charged with disclosing something the seller never knew. Section 475.278, F.S., imposes a parallel duty on licensees.

Under s. 689.25, F.S., which fact is not a material fact that must be disclosed in a Florida real estate transaction?

• a.That the roof leaks badly whenever it rains heavily
• b.That a homicide occurred in the house some years ago✓
• c.That the foundation has visible structural cracking
• d.That an open building permit covers unfinished work

Section 689.25(1)(b), F.S., provides that the fact that a property was, or was at any time suspected to have been, the site of a homicide, suicide, or death is not a material fact that must be disclosed in a real estate transaction, and paragraph (1)(a) says the same of an occupant infected with HIV or diagnosed with AIDS. The statute also bars a cause of action against an owner or agent for failing to disclose those facts. The protection is narrow and covers stigma rather than condition: a leaking roof, an open permit, and cracked foundations are physical and legal conditions that materially affect value and fall under the Johnson v. Davis duty.

Section 404.056(5), F.S., requires that radon gas notification be provided on at least one document executed at or before:

• a.The closing of the sale, or the tenant's occupancy of the premises
• b.The first showing of the building to a buyer or prospective tenant
• c.The contract for sale and purchase, or execution of a rental agreement✓
• d.The listing of the building with a Florida real estate brokerage

Section 404.056(5), F.S., titled Notification on Real Estate Documents, requires notification on at least one document, form, or application executed at the time of, or prior to, contract for sale and purchase of any building or execution of a rental agreement for any building, and it prescribes the exact language beginning RADON GAS. Because the notice must come at or before the contract, giving it at closing or on taking occupancy is too late, while requiring it at first showing or at listing is earlier than the statute demands. The requirement does not apply to residential transient occupancy of 45 days or less.

A mortgage loan that is neither insured by the FHA nor guaranteed by the VA is classified as:

• a.A blanket mortgage loan
• b.A purchase money mortgage loan
• c.A conventional loan✓
• d.A package mortgage loan

Conventional is defined by exclusion: any mortgage loan not insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, and therefore carrying no government backing of the lender's risk. Conventional loans above an 80 percent loan-to-value ratio typically require private mortgage insurance instead. The other three terms describe features of a loan rather than its government status. A purchase money mortgage is one the seller takes back as part of the price, a blanket mortgage covers more than one parcel and usually includes a release clause, and a package mortgage covers real property together with personal property such as appliances.

A buyer purchases a Florida home for $400,000 with a new 80 percent loan-to-value mortgage. The cash down payment is:

• a.$80,000✓
• b.$320,000
• c.$100,000
• d.$32,000

An 80 percent loan-to-value ratio means the lender advances 80 percent of value, here $320,000, leaving the buyer to supply the remaining 20 percent, which is $80,000. The $320,000 figure is the loan itself rather than the down payment, a substitution worth guarding against because the question asks what the buyer brings rather than what the lender lends. The $32,000 figure results from taking 20 percent of the loan instead of 20 percent of the price. The $100,000 figure would be a 25 percent down payment, which corresponds to a 75 percent loan-to-value ratio rather than the 80 percent stated.

Under Regulation Z, an advertisement stating only that a home may be bought for $2,000 down triggers a requirement to disclose:

• a.The lender's name, address, and identification number
• b.The seller's asking price and the property's assessed value
• c.The full credit terms, including the annual percentage rate✓
• d.The estimated closing costs the buyer is expected to pay

Regulation Z, implementing the federal Truth in Lending Act, treats certain specifics as trigger terms whose use in an advertisement requires the full credit terms to follow. The amount or percentage of any down payment is a trigger term, as are the number of payments, the period of repayment, the amount of any payment, and the amount of any finance charge. Once triggered, the advertisement must state the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate. General statements such as easy financing available or low down payment are not trigger terms because they state no specific figure.

Under s. 817.545, F.S., mortgage fraud is a third-degree felony, but it becomes a second-degree felony when the stated loan value exceeds:

• a.$50,000
• b.$250,000
• c.$100,000✓
• d.$500,000

Section 817.545(5)(a), F.S., makes a violation of the mortgage fraud statute a felony of the third degree, and s. 817.545(5)(b), F.S., elevates it to a felony of the second degree where the loan value stated on documents used in the mortgage lending process exceeds $100,000. The offense itself is defined in s. 817.545(2), F.S., as knowingly, and with intent to defraud, making or using a material misstatement, misrepresentation, or omission during the mortgage lending process with the intention that it be relied on. Section 817.545(3), F.S., adds that an offense may not be predicated solely on information lawfully disclosed under federal disclosure laws.

A Florida broker's principal role at a residential closing is to:

• a.Prepare the deed and the closing disclosure for both of the parties
• b.Certify to the buyer that the seller's title is marketable and clear
• c.Decide which party is legally entitled to the escrow deposit money
• d.See that the parties meet their contract obligations and funds are accounted for✓

The broker coordinates: assembling the documents the contract calls for, tracking contingency deadlines, communicating with the closing agent and lender, attending the closing, and accounting for the escrowed funds the brokerage holds. Preparing deeds and rendering opinions on the marketability of title are the practice of law and belong to the attorney or closing agent. Deciding entitlement to a disputed deposit is precisely what a broker may not do: s. 475.25(1)(d)1., F.S., requires the broker to notify the commission and institute one of four settlement procedures instead of choosing between the parties.

Which deed conveys Florida real property with covenants warranting title only against defects arising during the grantor's own ownership?

• a.A bargain and sale deed
• b.A general warranty deed
• c.A quitclaim deed
• d.A special warranty deed✓

A special warranty deed warrants only that the grantor has done nothing to impair the title during the grantor's period of ownership, leaving earlier defects uncovered, which is why it is common in transfers by fiduciaries and institutional sellers. A general warranty deed warrants the title against all defects arising at any time in the chain, and s. 689.02, F.S., prescribes the statutory form of warranty deed used in Florida. A quitclaim deed conveys whatever interest the grantor may have, with no warranties at all, and is typically used to clear clouds on title. A bargain and sale deed implies ownership but carries no warranty against encumbrances.

Under chapter 712, F.S., Florida's Marketable Record Title Act, a person has marketable record title when the public records show a root of title of record for at least:

• a.20 years
• b.50 years
• c.40 years
• d.30 years✓

Section 712.02, F.S., provides that any person having the legal capacity to own land in this state who, alone or with predecessors in title, has been vested with an estate in land of record for 30 years or more shall have a marketable record title, free and clear of all claims except the matters set forth as exceptions in s. 712.03, F.S. The act shortens title searches by extinguishing most older interests that are not properly preserved. Those statutory exceptions matter in practice, because interests such as certain easements, rights of persons in possession, and properly filed notices survive the 30-year cutoff.

Under s. 695.01, F.S., an unrecorded Florida deed is:

• a.Void between the parties and against any later purchaser as well
• b.Good against everyone as soon as the grantee takes possession
• c.Good between the parties but not against a purchaser without notice✓
• d.Void unless it is recorded within 30 days after it is delivered

Section 695.01(1), F.S., provides that no conveyance, transfer, or mortgage of real property, nor any lease for a term of 1 year or longer, shall be good and effectual in law or equity against creditors or subsequent purchasers for a valuable consideration and without notice unless it is recorded according to law. The deed still binds the grantor and grantee between themselves; recording protects against third parties. That is why the statute makes notice decisive rather than possession or a filing deadline, and Florida imposes no 30-day recording requirement for validity, although prompt recording is the only way to obtain the protection.

Under the federal TRID rules, a residential borrower must receive the Closing Disclosure no later than:

• a.3 business days after consummation of the loan
• b.3 business days before consummation of the loan✓
• c.1 business day before consummation of the loan
• d.7 business days after the loan application is submitted

The TILA-RESPA Integrated Disclosure rules require the creditor to ensure the consumer receives the Closing Disclosure no later than three business days before consummation, giving the borrower time to compare final terms against the earlier estimate. Certain changes after delivery, such as an increase in the annual percentage rate beyond tolerance, a change in loan product, or the addition of a prepayment penalty, restart the three-day waiting period. Do not confuse this with the Loan Estimate, which must be delivered or placed in the mail within three business days after the creditor receives the consumer's application.

Florida documentary stamp tax on a deed is imposed at the rate of:

• a.35 cents on each $100 of the consideration
• b.55 cents on each $100 of the consideration
• c.70 cents on each $100 of the consideration✓
• d.2 mills on each dollar of the consideration

Section 201.02(1)(a), F.S., imposes the tax on deeds and other instruments conveying an interest in real property at 70 cents on each $100 of the consideration, and where the full consideration is not shown on the face of the instrument the tax applies to each $100 or fractional part. The other figures are real Florida rates attached to different instruments, which is what makes them tempting: 35 cents on each $100 is the tax on promissory notes and written obligations under s. 201.08, F.S., and 2 mills on each dollar is the nonrecurring intangible tax on mortgages under s. 199.133, F.S.

Florida documentary stamp tax on a promissory note is imposed at the rate of:

• a.2 mills on each dollar of the indebtedness
• b.70 cents on each $100 of the indebtedness
• c.45 cents on each $100 of the indebtedness
• d.35 cents on each $100 of the indebtedness✓

Section 201.08(1)(a), F.S., imposes the tax on promissory notes, nonnegotiable notes, and written obligations to pay money at 35 cents on each $100 or fraction of the indebtedness, and it caps the tax on such a document at $2,450. Paragraph (1)(b) applies the same rate to mortgages and other evidences of indebtedness filed or recorded in this state. Because a financed purchase generates both a deed and a note, both taxes are typically due at a Florida closing: 70 cents per $100 on the deed under s. 201.02, F.S., and 35 cents per $100 on the note, plus the separate intangible tax on the mortgage.

Florida's nonrecurring intangible tax on a new mortgage securing Florida real property is imposed at:

• a.2 mills on each dollar of the obligation✓
• b.2 mills on each $100 of the obligation
• c.70 cents on each $100 of the obligation
• d.35 cents on each $100 of the obligation

Section 199.133(1), F.S., imposes a one-time nonrecurring tax of 2 mills on each dollar of the just valuation of all notes, bonds, and other obligations for payment of money secured by mortgage, deed of trust, or other lien upon real property situated in this state. Two mills is $0.002 per dollar, which works out to $2 per $1,000 of the obligation, so a $200,000 mortgage carries $400 of this tax. Section 199.133(2), F.S., limits the tax to the extent the obligation is secured by Florida real property. The 70-cent and 35-cent rates belong to the documentary stamp taxes on deeds and notes respectively.

A Florida home sells for $285,000 and the buyer assumes no existing debt. The documentary stamp tax on the deed is:

• a.$1,995.00✓
• b.$1,425.00
• c.$997.50
• d.$2,850.00

Divide the consideration by 100 to get the number of taxable units, then multiply by the deed rate of 70 cents: $285,000 divided by 100 is 2,850 units, and 2,850 multiplied by $0.70 is $1,995.00. The $997.50 figure applies the 35-cent note rate instead of the 70-cent deed rate, which is the single most common error on this calculation. The $2,850.00 figure stops after counting the units and forgets to apply any rate at all. The $1,425.00 figure uses a 50-cent rate that does not exist in s. 201.02, F.S. Remember that a fractional part of $100 is taxed as a full unit.

When unpaid annual property taxes are prorated at a Florida closing, the seller is charged with:

• a.The entire tax year, regardless of the actual closing date
• b.Nothing, because Florida property taxes are always the buyer's
• c.Only the buyer's taxes for the coming year, as a courtesy credit
• d.The portion of the tax year during which the seller owned the property✓

Proration divides a recurring cost as of the closing date so that each party bears the expense for the period of actual ownership. The seller is charged for the portion of the tax year up to closing and the buyer takes over from there, with local custom deciding whether the day of closing itself goes to the seller or the buyer. Because Florida real estate taxes are paid in arrears, meaning the bill for the current year is not payable until November, the seller's share is normally handled as a debit to the seller and a corresponding credit to the buyer, who will later pay the full bill.

A Florida sale closes on April 30. Unpaid annual taxes are $3,650, prorated on a 365-day year with the day of closing charged to the seller. The seller's share is:

• a.$1,190
• b.$1,210
• c.$1,200✓
• d.$2,450

First find the daily rate: $3,650 divided by 365 days is exactly $10 per day. Then count the days from January 1 through April 30 inclusive, since the day of closing is charged to the seller: 31 days in January, 28 in February, 31 in March, and 30 in April, which totals 120 days. Multiplying 120 days by $10 gives $1,200. The $1,190 figure results from excluding the closing day and counting only 119 days, and $1,210 from counting one day too many. The $2,450 figure has no basis in the arithmetic and would exceed two-thirds of the annual bill for a sale that closed a third of the way through the year.