Negative amortization is:

Michigan Real Estate Exam

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Question 1 of 5.

A. The number of basis points a lender adds to an index.

B. The result of an interest-only mortgage loan.

C. Insurance coverage that compensates for damage to property.

D. An increase in mortgage debt when the payment is too small to cover the interest due.

Explanation: Negative amortization occurs when the monthly loan payment is less than the interest accrued that month, causing the unpaid interest to be added to the principal loan balance, which increases the total debt.

Question 2 of 5.

A real estate agent is contacted by a potential buyer whose financial interest is questionable, but who needs to write an offer. The agent should:

A. refuse to write this offer.

B. write it on a promissory note.

C. ask for a high earnest money payment.

D. refer any remuneration to the seller.

Explanation: An agent should not facilitate a transaction for a party they know or suspect cannot perform financially, as it wastes the seller's time and could lead to legal issues. The ethical action is to refuse to write the offer.

Question 3 of 5.

What should a real estate broker do with deposit money received on an offer?

A. Immediately upon receipt of funds.

B. At the time of application for insurance approval and the mortgage.

C. Within the day of the report on a purchase agreement if done on a local bank, or immediately if done on a national bank.

D. Within three days after the lender has received notice that the offer is accepted by all parties.

Explanation: Earnest money deposits must be handled promptly and according to state law, typically requiring deposit into a trust account by the next business day or as specified in the purchase agreement.

Question 4 of 5.

The site selection process for a functional retail shop should consider the area's social and transportation structure. Which factor should be considered?

A. A study of the area should reveal the target audience's income.

B. The area should be near mass transportation for customer shipping.

C. A study of the topography of the land would be vital to the project.

D. Some projects should indicate a high amount of disposable income.

Explanation: Understanding the demographic profile, including income, of the area is crucial for determining if it matches the target market for the retail shop.

Question 5 of 5.

A seller's video of a property is shown to be in a one-way building area. How should the broker proceed?

A. Show all the good points on the camera, and advertise the landing area for sale.

B. Drive up to the property, describe it, and begin the marketing campaign.

C. Reduce the asking price, as the one-way street is a detriment and will hinder selling at all.

D. Contact the municipality to determine if it's possible, and then have a computer project it.

Explanation: The broker must ensure all marketing is accurate. Verifying the property's actual location and access with the municipality is the correct first step to avoid misrepresentation.