Florida Real Estate Sales Associate — All Questions

A borrower takes a $20,000 loan at 7.5 percent simple interest for 6 months. How much interest is owed?

• a.$1,050
• b.$1,500
• c.$375
• d.$750✓

Simple interest equals principal x rate x time: $20,000 x 0.075 x 0.5 = $750.

An income property has a net operating income of $60,000 and a market value of $750,000. What is the capitalization rate?

• a.8 percent✓
• b.10 percent
• c.12.5 percent
• d.6 percent

The cap rate equals NOI divided by value: $60,000 / $750,000 = 0.08, or 8 percent.

A property produces $63,000 of net operating income and is valued using a 9 percent cap rate. What is its indicated value?

• a.$567,000
• b.$770,000
• c.$630,000
• d.$700,000✓

Value equals NOI divided by the cap rate: $63,000 / 0.09 = $700,000.

A rental has gross potential income of $100,000, a 5 percent vacancy loss, and operating expenses of $35,000. What is the net operating income?

• a.$65,000
• b.$60,000✓
• c.$95,000
• d.$55,000

Effective gross income is $100,000 minus 5 percent vacancy ($5,000), or $95,000. Subtracting $35,000 in expenses gives NOI of $60,000.

A property has a net operating income of $60,000. Using a 7.5 percent capitalization rate, what is its estimated value?

• a.$750,000
• b.$450,000
• c.$800,000✓
• d.$4,500,000

Value equals NOI divided by the cap rate: $60,000 / 0.075 = $800,000.

A property sells for $450,000 and produces annual gross rent of $37,500. What is the gross rent multiplier (annual)?

• a.10
• b.0.083
• c.12✓
• d.15

The annual GRM equals price divided by annual gross rent: $450,000 / $37,500 = 12.

An appraiser uses a monthly gross rent multiplier of 110. If a property rents for $2,500 per month, what is its indicated value?

• a.$275,000✓
• b.$2,750,000
• c.$225,000
• d.$250,000

Value equals the monthly GRM times monthly rent: 110 x $2,500 = $275,000.

An investor buys a property for $220,000 and later sells it for $253,000. What is the percentage of profit based on cost?

• a.85 percent
• b.12 percent
• c.15 percent✓
• d.13 percent

Profit is $253,000 - $220,000 = $33,000. Dividing by the $220,000 cost gives 0.15, or 15 percent.

A home sold for $189,000, which was a 10 percent loss from what the owner originally paid. What was the original purchase price?

• a.$189,000
• b.$170,100
• c.$207,900
• d.$210,000✓

A 10 percent loss means the sale equals 90 percent of cost: $189,000 / 0.90 = $210,000.

An investor buys a home for $160,000, spends $40,000 on renovations, and sells for $240,000. What is the percentage of profit on total cost?

• a.20 percent✓
• b.50 percent
• c.33 percent
• d.25 percent

Total cost (basis) is $160,000 + $40,000 = $200,000, and profit is $240,000 - $200,000 = $40,000. Dividing $40,000 by $200,000 gives 20 percent.

A property worth $300,000 appreciates 5 percent per year, compounded, for 2 years. What is its value after 2 years?

• a.$315,000
• b.$330,750✓
• c.$330,000
• d.$347,288

Compounding: $300,000 x 1.05 x 1.05 = $300,000 x 1.1025 = $330,750.

A Florida home is assessed at $280,000 with combined exemptions of $50,000. The millage rate is 22 mills. What is the annual property tax?

• a.$5,060✓
• b.$5,600
• c.$6,160
• d.$4,600

Taxable value is $280,000 - $50,000 = $230,000. At 22 mills ($22 per $1,000), tax = 230 x $22 = $5,060.

A property with a taxable value of $210,000 owes $4,200 in annual property tax. What is the millage rate?

• a.0.02 mills
• b.200 mills
• c.20 mills✓
• d.2 mills

The rate equals tax divided by value: $4,200 / $210,000 = 0.02, which is $20 per $1,000, or 20 mills.

Annual property taxes are $5,475, paid in arrears. Using Florida's 365-day proration, the seller owned the property for the first 90 days of a non-leap year. What is the seller's share owed to the buyer at closing?

• a.$1,335
• b.$1,350✓
• c.$1,365
• d.$4,125

The daily rate is $5,475 / 365 = $15. For 90 days the seller owes 90 x $15 = $1,350, credited to the buyer.

Monthly rent of $1,800 was collected by the seller for June. The sale closes June 16 and the buyer owns the day of closing. Using a 30-day month, how much rent is credited to the buyer?

• a.$900✓
• b.$1,080
• c.$960
• d.$840

The buyer owns June 16 through 30, which is 15 days. The daily rent is $1,800 / 30 = $60, so 15 x $60 = $900 is credited to the buyer.

Florida is which type of state for enforcing a defaulted mortgage?

• a.A strict-foreclosure state where title passes to the lender automatically on default in all cases
• b.A state that prohibits foreclosure entirely on homestead property
• c.A nonjudicial state where the lender may sell without any court action
• d.A judicial foreclosure state, where the lender must file suit and obtain a court judgment✓

Florida requires judicial foreclosure: the lender files a lawsuit and the court orders a sale. This process protects the borrower and produces a clerk's sale of the property.

Florida follows the 'lien theory' of mortgages, which means that:

• a.The borrower keeps legal title and the mortgage is only a lien securing the debt✓
• b.The borrower has no ownership interest during the loan in all cases under Florida law
• c.The lender holds legal title until the loan is repaid
• d.Title is held by a neutral trustee for the lender

In a lien-theory state such as Florida, the borrower retains title and the lender's mortgage is merely a lien. This is one reason Florida uses judicial rather than power-of-sale foreclosure.

When a Florida lender begins a foreclosure, it records a document that gives public notice a suit affecting title is pending. This is a:

• a.Deed of reconveyance
• b.Lis pendens✓
• c.Estoppel certificate
• d.Satisfaction of mortgage

A lis pendens is a recorded notice that litigation affecting the property is pending. It provides constructive notice so later buyers or lienholders take subject to the outcome.

In a Florida judicial foreclosure, the borrower's equitable right of redemption generally lasts until:

• a.Ten years after the foreclosure sale
• b.The clerk of court files the certificate of sale✓
• c.The property is resold by the new owner
• d.The moment the borrower misses a single payment in all cases

Florida's equity of redemption allows the borrower to pay the full debt and stop the sale up to the time the clerk files the certificate of sale. After that point, the right to redeem is cut off.

If a foreclosure sale brings less than the total mortgage debt, the lender may pursue the borrower for the shortfall through a:

• a.Lis pendens
• b.Satisfaction piece
• c.Subordination agreement
• d.Deficiency judgment✓

A deficiency judgment lets the lender recover the difference between the debt and the foreclosure sale proceeds. Florida courts may grant deficiency judgments subject to statutory limits.

In residential financing, the document that is the borrower's actual promise to repay, separate from the security instrument, is the:

• a.Estoppel letter
• b.Promissory note✓
• c.Mortgage
• d.Deed of trust

The promissory note evidences the debt and the borrower's promise to repay with stated terms. The mortgage is the separate instrument that pledges the property as security for that note.

A borrower who pledges real property as security for a loan while keeping possession and use of it is engaging in:

• a.Hypothecation✓
• b.Escheat
• c.Subrogation
• d.Novation

Hypothecation is pledging property as collateral without giving up possession. It is exactly what a borrower does when granting a mortgage on a home they continue to occupy.

Unlike some states, Florida generally does not permit a lender to foreclose a residential mortgage through a private 'power of sale' because Florida:

• a.Requires the courts to oversee the foreclosure✓
• b.Bans all residential mortgages
• c.Automatically forgives defaulted loans in all cases
• d.Allows only cash purchases of homes

Because Florida is a judicial-foreclosure state, a lender must obtain a court judgment rather than sell privately under a power-of-sale clause. Court oversight is a defining feature of Florida foreclosures.

When a Florida mortgage loan is paid in full, the lender records a document releasing the lien known as a:

• a.Lis pendens
• b.Satisfaction of mortgage✓
• c.Purchase money mortgage
• d.Acceleration notice

A satisfaction of mortgage is recorded to clear the paid-off lien from the public record. Failing to record it can leave a cloud on the owner's title.

The mortgage clause that requires the lender to release its lien once the debt is fully paid is the:

• a.Defeasance clause✓
• b.Acceleration clause
• c.Escalation clause
• d.Alienation clause

A defeasance clause obligates the lender to defeat, or cancel, its lien and issue a satisfaction when the loan is repaid. It is the counterpart to the acceleration clause that speeds up repayment on default.

A clause by which an existing lender agrees to let its lien become inferior to a new loan is a:

• a.Habendum clause
• b.Subordination clause✓
• c.Acceleration clause
• d.Defeasance clause

A subordination clause lets an existing lienholder voluntarily give a later loan higher priority. It is common in construction and development financing where a new lender demands first position.

A written statement from a lender showing the exact remaining balance and terms of a loan is commonly called a(n):

• a.Warranty deed
• b.Promissory note
• c.Estoppel (payoff) letter✓
• d.Lis pendens

An estoppel or payoff letter states the current unpaid balance and prevents the lender from later claiming a different amount. It is often requested before a sale or loan assumption.

When a seller finances part of the purchase price by taking back a mortgage from the buyer, that instrument is a:

• a.Blanket mortgage
• b.Wraparound deed
• c.Purchase money mortgage✓
• d.Reverse mortgage

A purchase money mortgage is created when the seller extends credit to the buyer and takes back a mortgage as security. It allows financing directly between the parties without an institutional lender.

A financing arrangement in which a new, larger mortgage is placed over an existing loan that the seller keeps paying is a:

• a.Package mortgage
• b.Blanket mortgage
• c.Open-end mortgage
• d.Wraparound mortgage✓

In a wraparound, the seller keeps the underlying first mortgage and the buyer makes payments on the larger wrap, from which the seller pays the original loan. It is a form of seller financing that requires care with due-on-sale clauses.

Under a contract for deed (installment land contract), during the payment period the:

• a.Buyer takes possession while the seller keeps legal title until the balance is paid✓
• b.Lender holds title in trust for both parties
• c.Buyer receives full legal title immediately at signing in all cases under Florida law
• d.Seller must move out and give up all interest

In a contract for deed, the seller retains legal title as security and the buyer holds equitable title with possession. Legal title transfers only after the buyer completes the agreed payments.

A single mortgage that covers several parcels of land and includes a clause allowing individual lots to be freed as they are sold is a:

• a.Reverse mortgage
• b.Open-end mortgage
• c.Blanket mortgage with a partial release clause✓
• d.Package mortgage

A blanket mortgage secures more than one parcel, which is common for subdivisions. A partial release clause lets the developer release individual lots from the lien as each one is sold and paid down.

A mortgage that secures both real property and specified personal property, such as appliances, is a:

• a.Blanket mortgage
• b.Bridge loan
• c.Wraparound mortgage
• d.Package mortgage✓

A package mortgage finances real estate together with certain personal property like a refrigerator or range. It is common in new-home and furnished-condominium sales.

A mortgage that lets the borrower re-borrow funds already repaid, up to the original amount, is an:

• a.Blanket mortgage
• b.Amortized mortgage
• c.Open-end mortgage✓
• d.Package mortgage

An open-end mortgage works like a line of credit against the property, allowing additional advances up to a set limit. It saves the cost of writing a brand-new loan for later borrowing.

A short-term loan that funds a builder in stages as work is completed is best described as a:

• a.Purchase money mortgage
• b.Construction loan disbursed in draws✓
• c.Fully amortized 30-year loan in all cases
• d.Reverse mortgage

A construction loan advances money in draws tied to completed phases of the project. It is short term and is usually replaced by permanent financing once the building is finished.

A reverse mortgage (HECM) is generally available to homeowners who are:

• a.First-time buyers under 30 seeking low down payments in all cases
• b.At least 62 years old and converting home equity into payments✓
• c.Any borrower who wants to skip a down payment
• d.Investors buying commercial buildings

A HECM reverse mortgage lets owners aged 62 or older draw on their equity, with repayment deferred until they sell, move, or die. It is designed to help older homeowners access equity without monthly loan payments.

Section 8 of the Real Estate Settlement Procedures Act (RESPA) specifically prohibits:

• a.Charging any closing costs to the buyer in all cases under Florida law in every transaction
• b.Selling a loan on the secondary market
• c.Kickbacks and unearned referral fees among settlement service providers✓
• d.Requiring title insurance on a purchase

RESPA Section 8 bans kickbacks, fee-splitting, and unearned referral fees that raise the cost of settlement services. Its goal is to keep closing costs fair and transparent for consumers.

Under the Truth in Lending Act and Regulation Z, the three-day right of rescission generally applies to:

• a.Every residential purchase-money loan
• b.Only loans that have no finance charge in all cases under Florida law in every transaction
• c.A refinance or home-equity loan on a borrower's principal residence, not a purchase loan✓
• d.Commercial loans on office buildings

Regulation Z gives borrowers three business days to rescind certain loans secured by their principal residence, such as refinances and home-equity loans. It does not apply to the loan used to purchase the home.

Under the TRID rule, the lender must deliver the Loan Estimate to the applicant no later than:

• a.Thirty days after closing
• b.The day the loan is paid off in all cases under Florida law
• c.One year after application
• d.Three business days after receiving the loan application✓

TRID requires the Loan Estimate within three business days of a completed application so the borrower can compare terms early. It combines earlier good-faith-estimate and TILA disclosures.

Under TRID, the borrower must receive the Closing Disclosure at least:

• a.Thirty days before application in all cases under Florida law
• b.Three business days before consummation of the loan✓
• c.Only after the loan funds
• d.On the morning of closing

The Closing Disclosure must reach the borrower at least three business days before consummation so they can review final terms. Certain significant changes restart the three-day period.

The Equal Credit Opportunity Act (ECOA) prohibits a lender from:

• a.Verifying an applicant's income in all cases under Florida law in every transaction without exception as a general rule regardless of the circumstances
• b.Charging interest on a loan
• c.Requiring a down payment
• d.Discriminating in credit decisions based on race, sex, religion, national origin, marital status, age, or public-assistance income✓

ECOA bars discrimination in any part of a credit transaction based on protected characteristics. Lenders may still evaluate legitimate creditworthiness factors such as income and credit history.

The Home Mortgage Disclosure Act (HMDA) primarily requires lenders to:

• a.Guarantee approval to every applicant
• b.Report data about mortgage applications and originations to help detect discriminatory patterns✓
• c.Insure loans against borrower default
• d.Set interest rates for the whole market in all cases under Florida law in every transaction without exception

HMDA requires covered lenders to collect and report mortgage application and loan data. Regulators use the data to identify possible discriminatory or redlining patterns.

Under the federal Homeowners Protection Act, a lender must automatically terminate borrower-paid private mortgage insurance when the loan balance reaches:

• a.20 percent of the current sale price
• b.50 percent of the original value in every case in all cases under Florida law
• c.78 percent of the original property value, if payments are current✓
• d.The full 100 percent of the loan

The Homeowners Protection Act requires automatic PMI termination at 78 percent LTV of the original value when the borrower is current. Borrowers may also request cancellation at 80 percent.

A key feature of an FHA-insured loan is that the borrower must pay:

• a.A guarantee fee only for veterans
• b.Nothing extra because FHA loans carry no insurance in all cases
• c.A mortgage insurance premium (both upfront and annual)✓
• d.Double the normal down payment

FHA loans require a mortgage insurance premium, typically an upfront premium plus an annual premium. The insurance protects the lender and lets borrowers qualify with smaller down payments.

A distinctive benefit of a VA-guaranteed loan for an eligible veteran is that it often allows:

• a.A guaranteed 2 percent interest rate for life
• b.Financing with no down payment✓
• c.Purchase of unlimited investment properties
• d.Waiver of all closing costs by law

VA loans are guaranteed for eligible veterans and frequently permit 100 percent financing with no down payment. Borrowers usually pay a VA funding fee unless exempt.

A conventional 'conforming' loan is one that:

• a.Meets Fannie Mae and Freddie Mac standards and loan limits and is not government-insured✓
• b.Exceeds the maximum limit set for the secondary market in all cases under Florida law in every transaction
• c.Is insured by the FHA
• d.Is guaranteed by the VA

Conforming loans satisfy the underwriting and size limits set by Fannie Mae and Freddie Mac so they can be sold to those agencies. They are conventional loans, meaning not FHA or VA backed.

A loan whose amount exceeds the conforming limits set for Fannie Mae and Freddie Mac is called a:

• a.Package loan
• b.Jumbo loan✓
• c.Bridge loan
• d.Conforming loan

A jumbo loan is larger than the conforming loan limit and therefore cannot be purchased by Fannie Mae or Freddie Mac. Jumbo loans often carry stricter qualifying standards.

Ginnie Mae (the Government National Mortgage Association) primarily:

• a.Guarantees mortgage-backed securities that pool government-backed FHA and VA loans✓
• b.Licenses real estate brokers
• c.Directly lends money to individual homebuyers in all cases under Florida law in every transaction
• d.Sets local property tax rates

Ginnie Mae guarantees timely payment on securities backed by government-insured or guaranteed loans. It supports liquidity for FHA and VA lending in the secondary market.

The primary mortgage market is where:

• a.The government sets national interest rates
• b.Appraisers are licensed and regulated
• c.Existing loans are pooled and sold to investors
• d.Lenders originate loans directly to borrowers✓

The primary market is where borrowers obtain loans directly from originating lenders. The secondary market is where those existing loans are bought and sold to provide lenders more capital.

A charge a lender collects for processing and originating a loan, typically about one percent of the loan and not used to lower the rate, is a(n):

• a.Prepayment penalty
• b.Loan origination fee✓
• c.Discount point
• d.Intangible tax

An origination fee compensates the lender for making the loan and is usually about one percent of the amount. Unlike discount points, it does not buy down the interest rate.

In a temporary '2-1 buydown,' the borrower or seller pays upfront so that the interest rate is:

• a.Eliminated entirely for the life of the loan
• b.Reduced in the first two years, then rises to the note rate✓
• c.Fixed below market for the entire 30-year term in all cases under Florida law
• d.Increased for the first two years only

A 2-1 buydown lowers the effective rate by two points the first year and one point the second, then it reaches the full note rate. The upfront cost funds the early payment reduction.