1. A principal MAY terminate an agency agreement when the:
A. broker presents an offer that the principal considers too low
B. parties mutually agree in writing Correct
C. principal dislikes one of the broker’s salespersons
D. agency is coupled with an interest in the property
Explanation
A principal can terminate an agency agreement at any time by mutual written consent with the broker, as agency is based on agreement. Option A is incorrect—presenting a low offer is the broker’s duty; it does not allow unilateral termination without breach. Option C is wrong—disliking a salesperson does not void the contract with the brokerage. Option D is false—an agency coupled with an interest (e.g., power of attorney for broker’s own benefit) is irrevocable, so termination is not allowed.
2. In appraising most residential properties, a real estate appraiser relies primarily on the:
A. reproduction cost approach
B. replacement cost approach
C. income approach
D. market data approach Correct
Explanation
The **market data (sales comparison) approach** is the primary method for valuing single-family homes, using recent sales of comparable properties adjusted for differences. Option A (reproduction) estimates exact replica cost—rarely used. Option B (replacement) is cost approach variant but secondary for homes. Option C (income) applies to income-producing properties.
3. Which of the following SHOULD be considered when establishing a listing price for a home?
A. Supply and demand for similar homes in the neighborhood Correct
B. The amount the seller paid for the home
C. How many dollars of proceeds the seller needs in order to purchase their next home
D. What homes would sell for in a nearby community
Explanation
Listing price should reflect **current market conditions**—supply, demand, and recent sales of comparable homes in the same neighborhood. Option B (original cost) is irrelevant to current value. Option C (needed proceeds) is a personal financial goal, not market-based. Option D (nearby community) may differ in desirability, schools, etc.
4. The gross income multiplier (GIM) is BEST used to value:
A. foreclosed residential real estate
B. real estate owned (REO) sites
C. investment properties Correct
D. federally-owned properties
Explanation
The **GIM** (Price ÷ Gross Income) is a quick valuation tool for **income-producing investment properties** like apartments or commercial buildings. Options A, B, and D are not typically valued using income multipliers—REO and foreclosures use market or cost approaches.
5. When mortgages are sold after they have been funded, they are considered part of the:
A. primary mortgage market
B. rural housing service
C. secondary mortgage market Correct
D. federal reserve system
Explanation
The **secondary mortgage market** involves the buying and selling of existing mortgages (e.g., by Fannie Mae, Freddie Mac). Option A (primary) is origination. Option B and D are unrelated to mortgage trading.