1. The total amount of money required to buy, build, or develop something is referred to as:
A. price impact
B. cost Correct
C. direct cost
D. value
Explanation
Cost represents the actual monetary expenditure required to acquire, construct, or develop a property, encompassing all expenses involved in the process. Direct cost specifically includes labor and materials, but the broader term 'cost' applies to the overall financial outlay needed to create or obtain the property. Price impact relates to market effects, while value represents perceived worth, not the money actually spent. This distinction is important in real estate valuation, where cost does not always equal value. For instance, the cost to build a property may be higher or lower than its market value due to market conditions. Understanding cost is essential for accurate budgeting and investment analysis in real estate transactions.
2. Sylvia is building a home on an empty lot. Every other home in her neighborhood is a craftsman-style bungalow, but Sylvia really wants to build a three-story gothic Tudor. Her architect explains that building such a different house will affect its value and the value of the houses around it. What principle of value is the architect taking into consideration?
A. principle of contribution
B. principle of anticipation
C. principle of change
D. principle of conformity Correct
Explanation
The principle of conformity states that a property achieves maximum value when it is similar in style, size, and design to surrounding properties in the neighborhood. Building a gothic Tudor in a craftsman bungalow neighborhood would likely reduce the property's value due to lack of conformity and may negatively impact neighboring property values as well. This principle emphasizes the importance of neighborhood harmony in maintaining property values. Non-conforming properties can face challenges in resale and appraisal. Architects and agents often advise clients on conformity to optimize investment returns. Violating conformity can lead to over-improvement or under-improvement relative to the area.
3. The completed Buyer Representation and Broker Compensation Agreement must include:
A. the exact sales price of the property
B. the exact address of the property
C. the names of all salespersons who may work with the buyer on the broker's behalf
D. the start date of the agreement Correct
Explanation
The Buyer Representation Agreement requires a definite start date to establish the term of the agreement and when compensation obligations begin. It does not require the specific property address or sales price, as the agreement is general and applies to any property the buyer may purchase during the term. This ensures clarity on the duration of the agent's exclusive representation. The start date helps prevent disputes over when the agreement became effective. Brokers must ensure all essential terms are included for enforceability. Omitting the start date could render the agreement invalid or ambiguous.
4. How does an agent's requirement to disclose material facts differ from a seller's requirement?
A. Sellers are held to a higher standard because they own the property. They are expected to disclose both what they know and what they should have known.
B. Agents are held to a higher standard. They are expected to disclose both what they know and what they should have known based on their expertise. Correct
C. Agents and sellers are held to the same standard. They both must disclose what they know AND what they should've known.
D. Agents and sellers are held to the same standard. They both must only disclose what they know.
Explanation
Real estate agents have a fiduciary duty and professional expertise that requires them to disclose known material facts and those they should have discovered through reasonable diligence and visual inspection. Sellers are only required to disclose what they actually know, not what they should have known, as they are not held to the same professional standard. This difference protects buyers from hidden defects. Agents' higher standard stems from their role as fiduciaries. Failure to disclose can lead to liability for agents. Sellers' obligation is based on actual knowledge.
5. If CAR members use the RPA, what is the default way to treat a dispute between parties?
A. civil action
B. mediation Correct
C. arbitration
D. criminal action
Explanation
The Residential Purchase Agreement (RPA) requires parties to attempt mediation before proceeding to arbitration or litigation, providing a cost-effective and efficient dispute resolution method. This promotes amicable resolution and reduces legal costs for both parties. Mediation is non-binding and allows for negotiation. If mediation fails, parties can escalate to arbitration or court. CAR members must follow this provision in the RPA. This clause helps avoid costly lawsuits.