Chapter 1

Question 1

Appraisal

Answer 1

An estimation of a property’s value. Usually done by a licensed professional.

Question 2

Brokerage

Answer 2

The Business of Bringing people together in a real estate transaction.

Question 3

Commercial

Answer 3

The types of properties that include offices, stores parking lots and more

Question 4

Development

Answer 4

The term for the construction of improvements upon the land

Question 5

Elevation Certificate

Answer 5

Insurance agents are required to obtain one of these on any property before issuing quotes for flood insurance.

Question 6

Financing

Answer 6

Pledging of real property and collateral for the repayment of a loan though a mortgage or deed of trust.

Question 7

Federal Deposit Insurance Corporation

Answer 7

This agency can fine and withdraw its insurance from lenders that do not carry flood insurance on required mortgages

Question 8

What does CO mean?

Answer 8

Certificate of Occupancy

Question 9

Lanie owns a home in the mountains. If the home’s appraised market value is $540,000 and the loan balance is $135,000, what is the loan to value ratio?

Answer 9

25%

Question 10

Lori has agreed to transact real estate business on behalf of Alex with Alex’s authority. Lori is:

Answer 10

An Agent

Question 11

What fiduciary duty requires the agent to act with care with respect to handling funds received on behalf of the principal?

Answer 11

Accountability

Question 12

Another name for an easement is:

Answer 12

Right of way

Question 13

Halley owns 25 acres of land in a residential area and wants to develop a real estate complex containing 50 single family homes. What type of mortgage can she obtain that will permit her to pay it off as she sells each home?

Answer 13

Blanket

Question 14

Which of the following is not true about the 1988 Amendment to the Fair Housing Act adding protected classes to the law?

Answer 14

Elderly persons were not added to law. However, senior citizen housing is exempt from the Fair Housing Act if it complies with the exemption requirements. By restricting tenants to people 55 and over, an exemption to the Fair Housing Act could apply.

Question 15

What is another name for swamps, marshes and bogs?

Answer 15

Wetland

Question 16

Paula enters into a contract for the purchase of Jordan’s home. Paula applies for a mortgage. The contract requires her to get a document from her mortgage lender stating that the lender will be loaning her the necessary funds. What is that document called?

Answer 16

A commitment

Question 17

Ownership of real property for an undetermined length of time is called:

Answer 17

A freehold estate

Question 18

What is not a mixed-use property?

Answer 18

An outlet center with clothing and furniture stores are similar commercial uses, so no mixed use exists. A building with a steakhouse on the first floor and offices on the second floor combine two separate uses, restaurant and office space. A shipping warehouse adjoining an office suite center combine a warehouse and office space. A religious prayer facility with residential housing above it combines a religious use with a residential use.

Question 19

Barbali manages a commercial office building. One of the tenants contacts her to complain about a broken door lock. What type of maintenance is necessary to repair the lock?

Answer 19

Corrective Maintenance

Question 20

Biff is hired by owner Gilligan to oversee a residential property complex, including supervising complex employees and maintenance, but he has limited authority. Biff is the:

Answer 20

Property Manager

Question 21

Julie is looking to buy her first home. She locates one and her offer is accepted. Julie applies for a mortgage. She is told that she can deduct her mortgage interest from her income because she has bought a(n) _____________ home.

Answer 21

A qualified home. Which is a primary or main home for mortgage interest deduction purposes.

Question 22

Helga purchases an investment property in the city for $750,000. In the first year, the property generated an annual cash flow of $75,000, but she sustains a $25,000 tax loss that she can apply against the income of a very successful car wash that she owns. If Helga is in the 35% tax bracket, what is her after-tax cash flow related to the city property?

Answer 22

$35,000. $75,000 (annual cash flow) + $25,000 (tax loss) = $100,000 x .35 = $35,000. After-tax cash flow is calculated by adding back the tax loss to the income and then multiplying by the tax rate. A tax savings is possible when a tax loss can reduce the taxable income of a separate investment.

Question 23

The profit realized from the sale of real estate held for 3 years is:

Answer 23

Long term capital gains. This represents the profits on a capital investment, such as real estate. The profit realized from the sale of real estate held for 3 years is long term capital gains. Long term capital gains are profits on assets that are owned for more than 12 months. Short term capital gains are profits on assets that are owned for 12 months or less. Profit on long term capital gains is subject to a reduced tax rate and is not taxed as ordinary gross income, but profit on short term capital gains is taxed as ordinary gross income.

Question 24

Lev owns a home. Francois is a real estate agent who has visited Lev to try to list Lev’s home for sale, but Lev refuses. Lev nonetheless permits Francois to show 3 prospective purchasers his home. Has an agency been created?

Answer 24

Yes. An agency by estoppel.

An agency by estoppel, which is an implied agency, was created since Lev, the principal, did not stop Francois, the agent, from representing Lev’s interests. An implied agency is formed based on the words or actions of the agent and principal that evidences an intent to form the agency. An express agency is formed through an oral or written agreement. An agency does not necessarily need to be created through a written agreement. A listing agreement is an example of an express agency.

Question 25

The City of Glass wants to expand a public park. It needs to obtain the necessary land from private landowners. What government power can be used to obtain the land needed to expand the park?

Answer 25

Eminent domain. This is the government power permitting it to obtain private property for public use. Condemnation is the actual taking of the property pursuant to the eminent domain power. Municipal forfeiture and public seizure are not formal terms.

Question 26

In order to purchase a home, Darla needs to take out a mortgage. A mortgage is an example of a(n):

Answer 26

Executory contract. This is a contract that has terms to be completed at a later date. It is not fully performed until all acts required are completed, such as a mortgage. An executed contract is a fully performed contract. A unilateral contract involves a promise to induce the other party to do some act, such as an open listing contract, where the property owner can cancel the listing at any time prior to an agreed upon deal. An implied contract is formed based upon the actions of the parties that evidence an intent to enter into a contract, such as where a seller permits a broker to show a property before any formal agreement is entered into.

Question 27

Trevor owns an apartment building that is 75 years old. He has not performed much maintenance on the building, so the foundation and structural integrity are starting to crumble. As a result, the building’s value has been decreasing. What does that reduction in value refer to?

Answer 27

Depreciation. This is the loss of value due to a building or property due to any cause, such as deterioration, damage and normal wear and tear. Functional obsolescence means that the property has become inferior to surrounding properties due to technological changes, such as obsolete equipment (e.g., heating system), outdated electrical system or outdated design. External obsolescence refers to changes occurring to land-use in the surrounding area, such as increased traffic, pollution, and zoning changes that affect the permitted use of the property.

Question 28

What Chapter is the Massachusetts Fair Housing Law?

Answer 28

Chapter 151 B

Question 29

Under agency law in Massachusetts being a Facilitator is

Answer 29

is legal but only with the consent of all parties to the transaction. When a real estate agent works as a facilitator that agent assists the seller and buyer in reaching an agreement but does not represent either the seller or buyer in the transaction.

Question 30

Which Chapter regulates environmental hazards, dealing with hazardous waste?

Answer 30

Chapter 21 E

Question 31

Which Chapter is the Massachusetts Consumer Protections Law?

Answer 31

Chapter 93 A

Question 32

If found guilty of illegal discrimination the Massachusetts Real Estate Board shall suspend the agent or broker for at least how long?

Answer 32

60 Days

Question 33

Under agency law in Massachusetts what is illegal?

Answer 33

Undisclosed Dual Agency

Question 34

Nick is an agent and has been working as one for 20 years. He just got happily married. After many years in his apartment he decides to finally purchase a house for him and his new wife. According to Massachusetts license law what must he do?

Answer 34

disclose that they have a license in a purchase agreement where they are buying their own listing.

Question 35

What is a violation of Massachusetts license law?

Answer 35

Net Listing

Question 36

Under agency law in Massachusetts Disclosed Dual Agency is

Answer 36

legal but only with the consent of all parties to the transaction. A Disclosed Dual Agency is when the broker owes both the seller and buyer a duty to deal with them fairly and honestly. In this type of agency relationship, the broker represents each party.