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GEORGIA REAL ESTATE FINAL PREP
QUESTIONS WITH VERIFIED ANSWERS
"To realize the maximum value of property, a reasonable degree of sociological and economic homogeneity is necessary, but it should not become monotonously uniform. In real estate, this
concept is called the principle of - CORRECT ANSWER "conformity""
"If the borrower's LTV (loan to value ratio) is more than 80%, - CORRECT ANSWER the
borrower's LTV (loan to value ratio) is more than 80%, the lender requires the borrower to set up a budget mortgage which will add 1 month of property taxes, 1 month of hazard insurance and 1 month of mortgage insurance to the principal and interest payment creating what is often called a PITI payment." "The mortgage insurance portion of the PITI payment may involve private mortgage insurance (PMI) or mortgage insurance for an FHA loan, MIP. Monthly PMI is calculated as follows: Loan Principal × PMI% (established by company) = Annual sum of PMI divided by 12 to determine the
monthly portion for PMI in the PITI payment. - CORRECT ANSWER MIP on a FHA loan requires
an up-front premium (UFMIP) as well as a monthly premium. The UFMIP is calculated by multiplying the FHA loan amount by 1.75%, and then adding that sum to the loan principal, establishing the total loan amount. That total is then multiplied by 1.75% to establish the monthly MIP as part of the PITI payment." "In addition to making a PITI payment, borrowers who have more than an 80% LTV will also be
required by the lender to deposit funds at closing into the lender's escrow account - CORRECT
ANSWER These escrow funds include 2 to 4 months of hazard insurance; 2 months of mortgage
insurance; and whatever number of months of property tax that, when added to the number of months the lender has collected from the PITI payment before the property tax due date, will equal 14 months (one full year to pay the tax bill and 2 additional months in reserve)." "Though the CMA borrows from methods used by professional appraisers, license law in Georgia
prohibits licensees from referring to this analysis as an appraisal. - CORRECT ANSWER In
preparing the CMA for clients, licensees must emphasize to clients that the evaluations are offered strictly as a guide for establishing a listing price or a sales price offer." "The basis of the CMA is to evaluate a fair market price for a subject property by using nearby, recently sold similar properties. In this process, the CMA will adjust the values of these
comparable properties to account for differences in specific features with the subject property. -
CORRECT ANSWER The goal in the adjustments is to make these comps, as much as possible,
just like the subject property. Once the adjusted prices of each comp are calculated, each value is correlated or reconciled by assigning it a percentage for reliability. The resulting dollar totals for each comp are then added together to establish a fair market price for the subject property." "The initial disclosures in the agency agreements conclude with notices of dual and designated agency. Clients are informed that dual agency is permitted in Georgia only if the clients give informed consent in writing after receiving all required disclosures in this brokerage engagement
relationship. - CORRECT ANSWER Clients are also informed that in a potential dual agency
situation, brokers may provide each client with separate, exclusive representation through the appointment of designated agents for each client. Brokers must also provide clients with a written office policy regarding the types of agency offered by their firms. Clients are finally advised that in signing the brokerage engagement, they are consenting to the broker acting as a dual or a designated agent in the transaction." "In both the exclusive right to sell listing agreement and the exclusive buyer brokerage engagement, brokers earn commissions not on the actual sale of the property but when they
perform the particular service indicated in the terms of the agreement. - CORRECT ANSWER
For the seller's broker, performance means presenting a written contract offer to the seller within the terms of the engagement, fulfilling all requirements for such an offer indicated in the listing agreement; or when the seller enters into an enforceable contract for sale of the listed property during the term of the engagement with any buyer through the efforts of any party. For a broker representing a buyer, commission is earned when the client enters into an enforceable contract to purchase through the efforts of any party during the term of the brokerage agreement." "The exclusive right to sell listing agreement also points out specific reimbursement liabilities for
a seller-client if the client defaults on the terms of the brokerage engagement. - CORRECT
ANSWER These liabilities may include, but are not limited to, the broker's and affiliated
licensees' costs for marketing the property, MLS advertising, and mileage fees. These reimbursements are separate from any other legal actions the broker might make against the seller, such as a claim for commission." "Brokers may also negotiate commission protection clauses (safety clauses) within brokerage engagements. Here, after an engagement terminates or expires without the performance called for in the contract, a listing broker would present the seller with a written list of individuals who were shown the property during the term of the agreement. If any of these identified persons returns to create a contract for sale directly with the seller during the period negotiated in the
available from the Georgia Association of REALTORS® (GAR). The GAR forms are prepared by attorneys and revised or updated each year to reflect changes in real estate law or practice." "Real estate contract forms must include a legal description of the property, which may be
attached to the contract form, - CORRECT ANSWER copied into the spaces provided for a
short-form legal description, or simply referenced by page number in the deed book of the county in which the property is located." "Upon ensuring that earnest money had been credited to the trust account where deposited, an
escrow agent may disburse such funds as follows: - CORRECT ANSWER To the buyer if the
contract is not accepted and is not in dispute To the buyer for credit at closing Pursuant to a separate written agreement executed by the seller and the buyer as to its disbursal Upon court order or an arbitrator's decision with jurisdiction over the disputed issue By the escrow agent's reasonable interpretation of the contract within 30 days after receiving notice of the contract's termination or notice of a failed closing" "Generally, the buyer will identify an attorney to close the transaction within the contract offer,
though the selection is negotiable with the seller. - CORRECT ANSWER Regardless of who
makes the selection, the closing attorney needs to be acceptable to the buyer's lender, whom the attorney represents in the transaction, as well as acceptable to the title insurance company who provides a policy for the lender at closing." "If a new property under construction is being sold, or the seller has agreed to construct a home
on the property before closing, - CORRECT ANSWER the seller will comply with appropriate
guidance and provisions dictated by the Interstate Land Sales Act (ILSA)." "The seller bears responsibility for the financial expenses of clearing the title of any defects or
"clouds" presenting obstacles for the issuance of any title insurance policy for the buyer. -
CORRECT ANSWER Absent any guidelines to the contrary from the buyer's lender—property
taxes, homeowners association dues, and property utility costs are prorated between the parties as of the date of closing." "Seller contributions toward the buyer's closing costs are subject to the lender's underwriting
criteria for such allowances. - CORRECT ANSWER The allowed contributions may be applied
by the purchaser to offset any costs incurred in the closing of the transaction."
"The contract form for the purchase and sale of residential real property includes three
fundamental contingencies: - CORRECT ANSWER 1. Buyer's general right to terminate—
subject to buyer's right to terminate the contract for any reason before the contingency expiration date
- Appraisal contingency—in which the buyer has right to terminate the agreement if the property does not appraise for a least the contract before the expiration date of the contingency
- Financial contingency—in which the buyer has the right to terminate the agreement if the buyer cannot show the ability to obtain a loan within the specific terms identified in the contingency before the expiration date of the contingency. Written termination under this circumstance requires the buyer to provide the seller with a notice in writing from the buyer's lender indicating reasons for loan denial." "If the loan identified in the financing contingency involves a loan assumption or seller financing— - CORRECT ANSWER or if buyer chooses FHA or VA financing as the contingency loan— appropriate exhibits for these respective loans must be attached to the contract."
"The buyers will lose this contingency right if - CORRECT ANSWER they fail to provide proof of
either the lender's approval or denial, or the lender's denial is based on the buyer's lack of sufficient funds to close, lack of timely loan application, failure to sell or lease current home, or conduct after contract acceptance date but before closing." "Regarding the purchase and sale of new construction, contracts commonly establish substantial protections for the seller's existing investment in such construction. Brokers representing buyers should urge buyers of new construction to exercise due diligence in carefully reviewing new construction contracts. Contracts for residential new construction typically allow a buyer to select interior options and make changes to selections solely at the seller-
builder's discretion. - CORRECT ANSWER Plans and specifications for new construction are
generally acknowledged as approximations in the contract, as well as the seller's rights to make changes in building components, such as insulation R-values. Brokers representing buyers should advise buyers of new construction that, absent proof of seller negligence or fraud, a buyer's failure or refusal to close constitutes a breach of contract performance." "With regard to a seller's contractual obligation for property repairs, contract language such as
"good and workmanlike" lends itself to broad interpretations. - CORRECT ANSWER To
minimize conflicts in this area, brokers might remind clients that language used to request property repairs should be particular and specific, carefully describing what is required to repair the property."
"Before the closing, if the seller receives eminent domain notice against the property, the seller must notify the buyer within 30 days, giving the buyer the option of canceling the contract with a full refund of the earnest money or assigning the buyer any condemnation monetary rights under
that law. - CORRECT ANSWER True"
"While most residential leases are written to protect landlords, state and local statutes such as
the Georgia residential landlord-tenant law commonly include protections for tenants as well. -
CORRECT ANSWER This law prohibits residential leases from negatively impacting a landlord's
responsibility to: keep the property in good repair; comply with local ordinances; comply with Georgia regulations regarding security deposits; follow statutory process for eviction of tenant; pay a tenant's legal costs for disputing the landlord's breach of lease if the lease requires the tenant to pay the landlord these costs as a result of a breach by the tenant." "Enforcement of legal rights in tenant-landlord disputes that cannot be resolved by the parties
find resolutions through the Georgia court system. - CORRECT ANSWER The basis for judicial
decisions in these matters comes from two sources: legislative codes and case law, in which resolutions issued by the state courts of appeal and the Georgia Supreme Court clarify application of the law." "An estate for years in Georgia, unlike in common law, generally applies to leases greater than a five-year term (typically for commercial use) and do not establish a tenant-landlord relationship between the parties. What is conveyed here is an estate that includes the rights and powers of
ownership for a time period of five or more years. - CORRECT ANSWER Georgia Code
identifies residential leases, for the most part, as conveying only the rights of possession for a particular use within a time period specified in the rental agreement." "Residential lease forms in Georgia commonly include provisions, absent notices of termination from either party, that generate automatic lease renewal with options for a month-to-month or otherwise agreed-upon term of renewal. Additionally, any rent increases for the renewal term
are identified. - CORRECT ANSWER Residential leases in Georgia usually provide tenants with
a right of possession at the beginning of the lease rather than a guarantee of actual possession. The contract form will commonly identify a number of days from the start of the lease term by which, if possession is not granted to the tenant, that party has the right to cancel the contract with a full refund of any security deposit. Within that designated period, the tenant will receive prorated reductions according to when actual possession is granted." "Under Georgia Code, if brokers or other third parties engaged by landlord hold tenant security deposits as escrow agents or if a landlord, spouse, or minor children own more than 10 rental
units and hold security deposits, such funds must be placed in trust accounts. A landlord, spouse, or minor children owning fewer than 10 such properties may hold such funds in a general
operating account with sole discretion for use of such monies. - CORRECT ANSWER Georgia
law also allows landlords to post a bond in superior court in the county where the property is located, as a substitute for establishing escrow/trust accounts for security deposits." "A tenant's security deposit may not be applied to offset rental payments. Security deposits will be returned to the tenant at that party's last known mailing address within 30 days of lease
expiration. - CORRECT ANSWER Such funds become property of the landlord after 90 days if
reasonable efforts to deliver the money have been unsuccessful." "A security deposit will be returned to a tenant in full, provided that all monies due the landlord have been paid, the tenant has vacated the property, and the tenant is not in default under the
lease. - CORRECT ANSWER "
"The landlord is entitled, under Georgia law, to withhold from the security deposit any sums under the lease, including, but not limited to, the following: Final rental payment Amount owed for repairs (normal wear and tear excepted) Amount paid by the landlord to remove the tenant's personal property Delinquent utility bill paid on behalf of the tenant Cleaning fees due to the tenant's failure to return property to same degree
of cleanliness present upon the tenant's occupancy of property - CORRECT ANSWER If the
landlord breaches these requirements for return of the tenant's security deposit, Georgia law holds the landlord liable for three times the amount of improperly handled funds and legal fees. If the mishandling is not intentional, and occurred through bona fide error, then the landlord's liability is limited to the exact sum of funds." "Other miscellaneous charges commonly found in residential leases not regulated by Georgia statute include late payment fees, rekeying fees, utility reconnect fees, costs associated with
enforcement of the landlord's rights, and pet fees. - CORRECT ANSWER Georgia law limits the
fee for dishonored checks to $30, or 5% of the payment, whichever is greater." "Residential lease forms will commonly allow early termination of a lease by either party, subject to a contractually established notice and payment of an earlier termination fee typically equal to
one month's rental payment. - CORRECT ANSWER As prescribed under federal and state laws,
early termination of leases is afforded to military service members who are assigned elsewhere for periods of more than 90 days."
- The landlord files dispossessory action in the county where the rental property is located; such action in Georgia is typically filed in magistrate court.
- A dispossessory affidavit is delivered to the tenant by the sheriff, with a seven-day notice to answer summons.
- If the tenant does not respond, the landlord is awarded dispossessory judgment; if the tenant responds, a court date is scheduled. The tenant is allowed to occupy the property until the court's final disposition, and the landlord is prohibited from suspending utilities during that period." "The terms and provisions of the following items from the lease form, with the exception of the parties identified in this form as tenant and landlord, are the same as those reviewed in the corresponding section descriptions of the purchase and sale of residential real property contract
form: - CORRECT ANSWER item 24 Notices and item 25 Miscellaneous Provisions and
Definitions." "Lease contract forms in Georgia may also be used in residential lease/purchase agreements and
as part of option sales contracts to purchase leased property. - CORRECT ANSWER True"
"Concluding that traditional common law agency no longer adequately served real estate relationships between licensees and the public in the state, the Georgia General Assembly in 1994 passed the Brokerage Relationships in Real Estate Transactions Act (BRRETA). Intending to
provide guidance for brokers and their sales affiliates, BRRETA - CORRECT ANSWER classified
and clarified broker duties and obligations to all parties in real estate transactions, and required licensees to disclose to clients and customers whose interests they were protecting." "Responding to the recommendations of a Georgia Real Estate Commission task force, the Legislature amended BRRETA in 2000 in five areas:
- Establishing that real estate client relationships could only be created by written contract
2. Creating designated agency as separate from dual agency - CORRECT ANSWER 3. Creating
transaction brokerage and identifying the duties in this type of relationship
- Clarifying duties of real estate agents to disclose offsite adverse neighborhood conditions
- Clarifying duties of real estate agents to keep information confidential BRRETA was intended to regulate relationships between real estate brokers and sellers, buyers, landlords, and tenants, only to the extent these parties did not establish these relationships through a written agreement. BRRETA does not regulate the agency agreement between brokers and their sales affiliates, nor was the statute intended to change or limit the Georgia Real Estate Commission's authority to regulate licensee activities through the statutory license law or the Commission's rules and regulations. Also under BRRETA, a broker's
membership in a common source information organization such as an MLS does not create an agency relationship between the broker and the organization."
"Brokerage engagement: - CORRECT ANSWER written agency contract in which a seller,
buyer, landlord, or tenant becomes a client of the broker. The client of the broker promises either to compensate or allow the broker to be compensated by another party for services the broker provides in the transaction"
"BRRETA requires the following disclosures from brokers to clients: - CORRECT ANSWER
Advise prospective clients of the types of agency relationships offered by the brokerage company Advise prospective clients if the broker holds any other brokerage relationships known to the broker which may conflict with the interests of prospective clients Advise prospective clients how the broker will be compensated and if the broker will share such compensation with other brokers who cooperate in the transaction Advise prospective clients of the broker's obligation to keep information confidential"
"Brokerage engagements may be terminated in the following ways: - CORRECT ANSWER By
the performance of duties stipulated in brokerage engagement By the expiration date of the brokerage engagement By termination of the agreement as authorized in the language of the brokerage engagement" "Absent any provision for termination in the brokerage agreement and no termination having
occurred, - CORRECT ANSWER BRRETA mandates that the agreement terminate within one
year from its origination." "Upon termination of a brokerage engagement, a broker owes no further duties to a client except
as follows: - CORRECT ANSWER To account for all monies relating to the engagement
To keep confidential, where requested by the client, all information received during the brokerage engagement unless the client subsequently permits disclosure and such disclosures are required by law The information becomes public from an outside source" "BRRETA considers any buyer, seller, landlord, or tenant working with a broker without a written
brokerage engagement to be a. - CORRECT ANSWER customer"
"A broker engaged by sellers or landlords must timely disclose to prospective buyers and tenants all known material facts relating to existing adverse physical conditions in the neighborhood
"A broker acting as a transaction broker may provide assistance to any customers by performing
ministerial acts. - CORRECT ANSWER Ministerial services are those that do not require the
broker's judgment, discretion, or advice."
"A broker acting as a transaction broker does the following: - CORRECT ANSWER 1. Timely
present all offers
- Timely account for all trust monies held for parties in the transaction
- Timely disclose to all buyers and tenants with whom the broker is working all adverse material facts that are known to them pertaining the physical condition of the property and the neighborhood within a mile from the property; these adverse material facts are facts that buyers and tenants could not discover by a diligent inspection of the neighborhood or examination of public records."
“Valid contract elements needed: - CORRECT ANSWER 1. competent parties
- mutual consent (offer/acceptance)
- legal consideration (promises, an act)
- legal object"
"An existing 1st mortgage loan can generally be changed to a 2nd or junior lien by: - CORRECT
ANSWER a subordination agreement signed by the 1st mortgagee."
"When a property is sold ""as-is,"" the seller must disclose: - CORRECT ANSWER any known
material facts."
"Timeshare - CORRECT ANSWER Form of real property ownership with the right of occupancy
and use of specific property for a specific portion of each year for either a fixed number of years or forever" "The sellers acknowledge in the contract form a promise to deliver to the buyer good and
marketable title for the property by a warranty deed. - CORRECT ANSWER Such title
delivered to the buyer is one for which a title insurance company licensed in Georgia will provide for a title insurance policy for the buyer." "Earnest money deposits in real estate transactions are commonly held by brokers, who serve as escrow agents for the funds and are required to deposit funds in a Commission-registered trust
account within a time frame identified in the contract. - CORRECT ANSWER Circumstances
may also provide for the sellers to hold earnest money, in which case, absent any requirement under Georgia law, the seller may hold funds in a general operating account with discretion in the use of these funds; brokers involved in a real estate transaction have no responsibility or liability for earnest money funds held by the seller."
"An inspection of real property for purchase is a right as well an obligation for a buyer, and if so
indicated in the space provided on the contract form, - CORRECT ANSWER the purchaser, with
reasonable notice to the seller, may conduct inspections on the property up until the time of closing." "Caveat emptor ("buyer beware") is the guiding principle in Georgia regarding the buyer's responsibility to address potential issues on the property and in the surrounding neighborhood.
CORRECT ANSWER Licensees may certainly be expected to advise clients on real estate
matters subject to the agent's professional skill and training, but on issues that fall outside this scope, clients are expected to independently seek out appropriate expertise." "A tenant "at will" under Georgia Code is a party who occupies a property with the landlord's
consent and makes rental payments without a written lease. - CORRECT ANSWER This type
of lease is subject to eviction and security deposit regulations under the landlord- tenant law and requires notice by either party (30 days from the tenant, 60 days from the landlord) to terminate such lease."
"Verbal leases in Georgia for a year or less are enforceable; - CORRECT ANSWER enforceable
rental agreements for more than one year must be in writing and include an adequate legal description." "As prescribed in Georgia Code and incorporated into residential lease forms, within five days after a tenant no longer occupies the property, the landlord is obligated to provide the tenant with a copy of an updated rental property condition report, indicating damages not noted on the
initial property inspection and for which the tenant will be responsible. - CORRECT ANSWER
The tenant has the right to inspect the property within three banking days of the report to confirm or dispute the landlord's assessment. The tenant will have five banking days from receipt of the report to notify the landlord in writing of any disputed items." "Upon a landlord's default through no cause of tenant, this lease form entitles the tenant to terminate the lease, to have security deposit reimbursed, and to receive a fee from the landlord equal to any early termination fee stipulated in the
contract. - CORRECT ANSWER These actions constitute the tenant's sole and exclusive remedy
and serve as full liquidated damages for the tenant." "With the exception of the parties to the contract for the lease of residential property identified as tenant and landlord, the terms and conditions in item 22 Brokerage, are the same as those previously reviewed in item 8 Brokerage in the contract for purchase and sale of residential real
property and the corresponding standard term (SDTM-8). - CORRECT ANSWER True"
"BRRETA imposes the following duties owed to clients by brokers: Perform the terms of the brokerage engagement
Promote the client's interests in the following ways: - CORRECT ANSWER o Seek a buyer or a
tenant to purchase or lease property
