Determine your answer, then click the arrow to see the correct response.
If a Buyer Defaults on a Real Estate Contract, the Seller Can Keep the Earnest Money Deposit As:
A) Liquidated damages
B) Punitive damages
C) Specific performance
D) Compensatory damages
Correct Answer: A) Liquidated damages
Explanation: Liquidated damages are pre-determined damages agreed upon in the contract, often represented by the earnest money deposit, which the seller can keep if the buyer defaults.
A Buyer Is Interested In Purchasing a Property That Has a Lien on It. Which of the Following Is True About This Situation?
A) The buyer cannot purchase the property until the lien is paid off
B) The lien will be removed automatically once the property is sold
C) The buyer should ensure the lien is satisfied before or at closing
D) The seller is not obligated to inform the buyer about the lien
Correct Answer: C) The buyer should ensure the lien is satisfied before or at closing
Explanation: The buyer should ensure the lien is satisfied before or at closing to avoid taking on the financial obligation associated with the lien.
Which of the Following Best Describes "Amortization"?
A) The increase in property value over time
B) The gradual repayment of a loan over time
C) The process of determining property taxes
D) The depreciation of a property's value
Correct Answer: B) The gradual repayment of a loan over time
Explanation: Amortization is the process of gradually repaying a loan through regular payments that cover both principal and interest.
What Is a "Lien"?
A) A type of mortgage
B) A right to keep possession of property belonging to another person until a debt owed by that person is discharged
C) The legal process of transferring property ownership
D) A document showing proof of ownership
Correct Answer: B) A right to keep possession of property belonging to another person until a debt owed by that person is discharged
Explanation: A lien is a legal right or interest that a lender or creditor has in the debtor’s property, lasting until the debt obligation is satisfied.
A Property Sells for $350,000. If the Commission Rate Is 6%, What Is the Total Commission Earned by the Real Estate Agents?
A) $18,000
B) $21,000
C) $24,000
D) $28,000
Correct Answer: B) $21,000
Explanation: The total commission is calculated by multiplying the sale price by the commission rate: $350,000 × 0.06 = $21,000.
Maria, a Licensed Real Estate Broker in New Mexico, Receives Multiple Offers on a Property She Is Listing. She Decides To Disclose the Terms of One Buyer's Offer to Another Buyer To Encourage a Higher Bid. Is Maria's Action Permissible Under New Mexico Real Estate Laws?
A) Yes, as long as she gets the seller's permission
B) Yes, because it benefits the seller
C) No, because it violates the principle of confidentiality
D) No, because it violates the principle of loyalty
Correct Answer: C) No, because it violates the principle of confidentiality
Explanation: Disclosing the terms of one buyer’s offer to another buyer without consent is a violation of confidentiality, which is a key fiduciary duty in real estate.
Emily, a Real Estate Broker in New Mexico, Has Just Received an Earnest Money Deposit From a Buyer. According to New Mexico Real Estate Regulations, What Must Emily Do With the Earnest Money?
A) Deposit it in her personal bank account
B) Hold onto it until closing
C) Deposit it into a trust account immediately
D) Give it to the seller
Correct Answer: C) Deposit it into a trust account immediately
Explanation: In New Mexico, earnest money deposits must be placed in a trust account immediately to ensure the funds are handled properly and securely, according to real estate regulations.
An Investor Wants To Purchase a Property That Generates a Monthly Rental Income of $2,500. If the Investor Expects an Annual Return of 8%, What Is the Maximum Amount They Should Pay for the Property?
A) $300,000
B) $350,000
C) $375,000
D) $400,000
Correct Answer: C) $375,000
Explanation: Annual income is $2,500 × 12 = $30,000. To find the maximum purchase price based on an 8% return: $30,000 / 0.08 = $375,000.
A Property in New Mexico Was the Site of a Homicide 5 Years Ago. Is the Seller Required To Disclose This Information to Potential Buyers?
A) Yes, because it is a material fact
B) Yes, if the buyer specifically asks
C) No, because it does not affect the property's physical condition
D) No, because it is not required by law
Correct Answer: D) No, because it is not required by law
Explanation: According to New Mexico Statutes Section 47-13-2, sellers are not required to disclose that a property was the site of a homicide, suicide, or any other crime punishable as a felony. This statute ensures that sellers, lessors, landlords, and agents are not liable for failing to disclose such events.
A Real Estate Broker in New Mexico Orally Agrees With a Seller To List Their Property. The Seller Later Decides To Cancel the Listing. Is the Cancellation Valid Without a Written Agreement?
A) Yes, because the oral agreement is binding
B) Yes, if the broker consents through their actions
C) No, because the agreement must be in writing
D) No, because oral agreements are not valid in real estate transactions
Correct Answer: B) Yes, if the broker consents through their actions
Explanation: New Mexico law requires real estate brokerage agreements to be in writing. However, a real estate broker can effectively consent to the cancellation of an exclusive listing agreement through their actions, as outlined in New Mexico Statutes Section 47-1-45. The broker’s conduct can lead to the cancellation of the agreement according to the written contract’s provisions.