1. In completing a comparative market analysis on a property, the licensee is primarily attempting to
A. explain to the owner why the price she wants to ask is too high
B. show the owner what should be done to the property to make it more saleable
C. appraise the property's actual value
D. show the owner the anticipated selling price Correct
Explanation
A comparative market analysis (CMA) helps a real estate licensee estimate the likely selling price of a property by comparing it to similar properties that have recently sold in the same area. This gives the seller a realistic idea of what buyers are willing to pay in the current market. While a CMA might show that the owner's desired price is too high, that is not its main goal—it is meant to guide pricing decisions based on data. Suggesting repairs or improvements is separate from a CMA and usually comes from inspections or staging advice. A CMA is also not a formal appraisal, which is a detailed valuation done by a licensed appraiser for lending or legal purposes.
2. Which of these property issues would be considered a latent defect
A. Tree roots are penetrating the main sewer line Correct
B. The main bath shower has two broken tiles
C. All of the walls were recently painted
D. There is a large crack in the driveway
Explanation
A latent defect is a hidden problem that is not easily visible during a normal inspection and that the seller knows about. Tree roots growing into the sewer line underground fit this description because buyers and inspectors usually cannot see it without special equipment like a sewer camera. Sellers must disclose known latent defects. Broken shower tiles are obvious during a walkthrough, so they are patent (visible) defects. Fresh paint on walls is a visible cosmetic improvement, not a defect at all. A large driveway crack is clearly seen on the surface, making it a patent defect rather than latent.
3. As required by the New Jersey Real Estate Sales Full Disclosure Act, before signing any contract for the purchase or lease of a property registered with the New Jersey Real Estate Commission, the purchaser or lessee MUST be provided with a copy of the
A. Statement of Record filed by the developer with the Commission
B. New Jersey Public Offering Statement approved by the Commission Correct
C. deed or other instrument establishing title in the name of the developer
D. filed plat map identifying the location of the property being bought or leased
Explanation
The New Jersey Real Estate Sales Full Disclosure Act protects buyers in developments like subdivisions or condominiums by requiring developers to give a Public Offering Statement that has been approved by the Commission. This document explains important details about the property, fees, restrictions, and risks before any contract is signed. The federal Statement of Record is for HUD-regulated interstate sales, not specifically New Jersey's requirement. Deeds and title documents come later in the process. Plat maps are helpful for location but are not the key disclosure document mandated by this state law.
4. The buyer wrote an offer to purchase a property and gave the principal broker $10,000 earnest money. The offer required the seller to respond within six days. Three days later the buyer decided to rescind the offer and has asked for the earnest money to be returned. What will normally happen to the earnest money in such a situation
A. The principal broker will retain the earnest money deposit in lieu of a commission in the event of rescission of the offer
B. The buyer can withdraw the offer, but the seller and the principal broker will each receive $5,000 as liquidated damages
C. Until the seller has accepted the offer, the buyer has the right to rescind and have the earnest money returned Correct
D. The buyer cannot rescind the offer until the six days are up and will therefore forfeit the earnest money deposit
Explanation
An offer to buy real estate does not become a binding contract until the seller accepts it and communicates that acceptance. Before acceptance, the buyer can withdraw the offer at any time, and the earnest money must be returned because no contract exists. Brokers cannot keep earnest money as commission just because an offer is withdrawn. There is no automatic split or liquidated damages without a contract. The six-day period is for the seller to decide, not a restriction preventing the buyer from revoking the offer earlier.
5. If a broker accepts money on behalf of a client, it
A. cannot be used to pay client expenses
B. cannot include large amounts of earnest money
C. must be placed in a separate escrow or trust account Correct
D. may be commingled with the principal broker's operating account if the client agrees
Explanation
Money belonging to clients, such as earnest money deposits, must always be kept in a separate escrow or trust account to protect it and avoid any confusion with the broker's own funds. This is a key rule to maintain trust and comply with licensing laws. Client funds can be used for authorized expenses like advertising if agreed. There is no limit on the size of earnest money deposits. Commingling with the broker's business funds is never allowed, even if the client agrees, because it risks misuse and violates fiduciary responsibility.