Chapter 1-Ownership Flashcards
An owner of a residential property had planted a rose bush several years ago on the property. The owner then decided to sell her property. Regarding the rose bush she had planted, this would be considered:
A. Personal property
B. Chattel
C. Real estate
D. Emblements
C. Real Estate
*Def: Title
*Bundle of rights
*Def: Deed
*Transfers real property rights
*Def: Land
*Geographical location on the earth that goes down to the core & up to infinity.
Def: Appurtenance
Right, privilege or improvement permanently attached to the land. Runs with the land.
Def: Right, privilege or improvement permanently attached to the land. Runs with the land.
Appurtenance
What are some examples of a Natural Appurtenance?
Spring, trees, pond, boulders
What are some examples of a man-made appurtenance?
Well, house, shop, garage
What are some examples of an Appurtenance in regards to Mineral Rights?
Oil, gold, (*unless stated otherwise)
What are some examples of an appurtenance (with regard to air rights?)
Billboards, advertising, radio tower
What are some examples of an Appurtenance in regards to Water Rights?
Stream, pond, river
What are the 3 ways to transfer real estate?
- Buy
- Will (inherit)
- Steal
*Who else may have rights in real property?
- The government
- The lender
- Easement rights (e.g. utility company)
- The government
*What are the physical characteristics of land?
- Immovable
- Indestructible
- Non-homogeneous
- Immovable
*What are the economic characteristics of land?
- Situs (location)
- Improvable
- Scarcity
- Permanence of investment
- Situs (location)
Real Estate =
Land + Appurtenances
What is personal property?
Not “real” property & Easily movable
Def: Chattel
Legal name for personal property
*Def: Bill of Sale
*Transfers the sale of personal property
In a commercial property sale, what document would be used in conveying personal property, such as a detached refrigerator and stove?
A. Deed
B. Contract for Deed
C. Mortgage
D. Bill of sale
D. Bill of sale
*Def: Severance
*Going from real property to personal property
*Def: Fixture
*Going from personal property to real property
*What 3 tests determine if something is personal property or real estate?
- Method of attachment
- Intention of the attaching party
- Adaptation of the item
- Method of attachment
Are trade fixtures personal property or real estate? (e.g. display cases or menu boards)
Personal property
What happens to trade fixtures after the tenant moves out?
The tenant can take them at the end of lease and must pay for any repairs of damage caused by removal.
Def: Emblement
Annual crops planted by tenant, who may return one time to harvest after moving out.
Which of the following items would not be a fixture?
A. Chandelier
B. Built-in bookshelves
C. Heirloom rosebush
D. Cast iron garden bench
D. Cast iron garden bench
Harvesting of crops that require annual planting means that the crops are considered to be:
A. Real property
B. Personal property
C. Fixtures
D. Trade fixtures
B. Personal property
*Converting real property into personal property would be considered a(n):
A. Chattel
B. Annexation
C. Severance
D. Fixture
*C. Severance
Which of the following items would automatically transfer with the sale of the property?
A. Trade fixtures
B. Plumbing fixtures
C. A free-standing appliance
D. Emblements
B. Plumbing fixtures
*Def: Zoning
*Land use control
Def: Eminent Domain
The right of the government to take private property for public good. The property owner is paid compensation for the property.
Def: Condemnation
The process used to take the property when the government exercises the right of Eminent Domain
Def: Escheat
The right of the government to take private property upon the owner dying intestate and having no heirs
Def: Intestate
No will/no heirs
Def: Abandonment
When somebody leaves the property without paying taxes
Def: Estate
The degree, quantity, nature and extent of ownership interest in real property (AKA Possessory Rights)
What is freehold estate?
What we usually think of as ownership. There is no definite ending date and it is for at least a lifetime.
What is a leasehold estate?
What we usually think of as renting or leasing. It is for a definite period of time or limited duration.
What rights do Freehold Estates include?
Maximum rights
What rights do Leasehold Estates include?
Some rights, AKA “Part of the Bundle”
The purpose of laws allowing for the state to take property through escheat is to:
A. Allow the property to be purchased cheaply by the state
B. Provide for more public land
C. Prevent land from becoming ownerless
D. Allow for the assessment of taxes
C. Prevent land from becoming ownerless
A person dies with no valid will and no heirs. The state government could claim ownership of this property through what government right?
A. Eminent domain
B. Taxation
C. Escheat
D. Police power
C. Escheat
A city wanted to take land as the space was needed to install a cloverleaf, allowing easier access to an interstate highway. The owner of the property refused to sell to the city. As a result of this, the city started the process of acquiring the property against the owner’s wishes. This process is referred to as:
A. Condemnation
B. Eminent domain
C. Escheat
D. Police power
A. Condemnation
The government telling people how to use their property in order to protect the public would be an example of:
A. Police power
B. Taxation
C. Escheat
D. Eminent domain
A. Police power
What do building codes require from real estate?
Structural integrity
What is F.E.M.A.?
Federal Emergency Management Agency
Who are flood insurance policies issued by?
F.E.M.A.
Federal Emergency Management Agency
What are the government rights in real property?
- Taxation
- Police power
- Eminent domain
- Escheat
What rights does the government have in real property regarding police power?
- Zoning
- Building Codes
- Flood Maps
What minimum two permits are required before a family may move into a new construction single family home?
- Building permit (Comes before work)
2. Occupancy permit/Certificate of Occupancy (Comes after work)
What are the 2 different types of fee estates?
- Fee simple
2. Conditional fee/defeasible fee
What is the difference between fee estates and life estates?
Fee estates are inheritable while life estates aren’t.
What are the 2 different types of life estates?
- Reversion/remainder
2. Dower - Curtsey - Homestead
Def: Life Estate
Real estate deeded to someone for life or life of another.
*Def: Estate in Reversion (Reverts back)
*When the grantor has deeded property to grantee for the rest of their life. When grantee dies, property goes back to grantor.
*Def: Estate in Remainder
*The grantor deeds property to grantee for life. When grantee dies, property deed goes to remainderman grantor (usually) names in the form of fee simple.
What is an example of estate in remainder?
When someone buys a house with old people living inside it and agrees to allow them to live there until they die, after which the property would be transferred to the buyer.
X
X
Def: Reservation
Grantor grants property to grantee for life. When grantee dies, grantor retains life estate.
Def: Pur Autre Vie (For another’s life)
When grantor grants property to grantee for the duration of a third party’s life. When the third party dies, the property goes to the remainderman in the form of fee simple.
Why were legal life estates created?
To protect people from being left homeless.
What are the 3 different types of life estates?
- Dower
- Curtesy
- Homestead
Def: Dower
The life interest that the wife receives if the husband dies.
Def: Curtesy
The life interest that the husband receives if the wife dies.
Def: Homestead
Family home is protected from debts. (e.g. Credit card, car)
Does the Homestead exemption apply to real estate taxes or mortgages?
No
In a life estate situation, what happens to ownership of the property when the life tenant dies?
A. The life tenant’s heirs would get the property
B. The current title holder or heirs would get the property
C. The state government would get the property
D. Whoever had the mortgage on the property would get the property
B. The current title holder or heirs would get the property
The highest quality of ownership for a person to obtain in real property is:
A. A life estate
B. Fee simple
C. A leasehold estate
D. A conditional fee estate
B. Fee simple
What is the difference between a Fee Simple and Conditional Fee/Defeasible Fee?
Fee Simple has maximum rights and Conditional Fee/Defeasible Fee have only conditional rights.
A person was served notice that a $20,000 judgment had been obtained against them. This person was concerned with losing their personal residence due to the judgment. Which of the following statements would be true?
A. The judgment must be over $25,000 to attach to a house
B. A judgment does not ever attach to a house
C. The Homestead Exemption might protect the person from losing the house
D. A person can always lose their house if a judgment is placed against the property.
C. The Homestead Exemption might protect the person from losing the house
What are the 2 different types of Estates in Land?
Fee Estates and Life Estates
Def: Severalty
To sever from all others (Individual or company)
What are the 4 types of Co-Ownership?
- Tenancy in Common
- Joint Tenancy
- Tenancy by the Entireties
- Community Property
XXX
XXX
How many deeds are there in a Tenancy in Common situation?
How ever many owners there are.
How many deeds are there in a Joint Tenancy situation?
One
In a Tenancy in Common situation, if one owner dies, who gets their portion of ownership?
Their heirs.
In a Joint Tenancy situation, is an owner required to notify the other owners if they intend to sell their portion?
Yes
In a Tenancy in Common situation, can an owner sell their portion without notifying the other owners?
Yes
Def: Suit to Partition
The court action to force the sale of the property in a Tenancy in Common situation if one owner wants out but there are no buyers and the other owners can’t afford their portion.
In what type of co-ownership must the title be taken to the property at the same time?
A. Joint Tenancy
B. Tenancy by the Entireties
C. Tenancy in Common
D. Community Property
A. Joint Tenancy
What are the Four Unities (T.T.I.P.) in Joint Tenancy?
T. Time (Must take title to the property at the same time
T. Title (One deed)
I. Interest (Interest has to be equal
P. Possession (Undivided interest)
Def: Right of Survivorship
In a Joint Tenancy situation, if one owner dies, their interest passes to the surviving owners.
In what type of co-ownership is a Suit to Partition used?
Tenancy in Common
In what type of co-ownership is Right of Survivorship used?
Joint Tenancy
How is a joint tenancy terminated?
When any of the 4 unities are destroyed.
In a Joint Tenancy, if one owner sold their interest, how would that co-ownernship then be structured?
It would remain a Joint Tenancy between the original existing owners, but would be a Tenancy in Common between the original existing owners and the new owner.
If a married couple buys a home together, what type of co-ownership would that fall under?
Tenancy by the Entireties (similar to joint tenancy)
If someone buys a home then later gets married, what type of co-ownership would that property fall into?
Community Property
X
X
Joint Tenancy:
A. Is inheritable to the heirs
B. Has a right of transfer
C. Carries the right of survivorship
D. Has more than one deed
C. Carries the right of survivorship
Two persons own a property under tenancy in common. Which statement would be correct assuming one of the owners dies?
A. The probate court wold have to make the final determination
B. The other owner would receive ownership under right of survivorship.
C. The heirs of the deceased would inherit the property
D. The administrator would determine the rightful owner
C. The heirs of the deceased would inherit the property
Two unmarried people wanted to purchase property with the right of survivorship. What ownership form should they choose?
A. Joint tenancy
B. Tenancy in common
C. Tenancy in the entirety
D. Community Property
A. Joint Tenancy
Three parties own a residence as tenants in common but only two live there. The third-party non-resident wants to sell the property, but the other two living there disagree and do not want to sell. In order to get the property sold, the third party would need to:
A. Initiate an actual eviction
B. Initiate a lease-purchase agreement
C. Initiate a lawsuit for partition
D. Refuse to pay the real estate taxes
C. Initiate a lawsuit for partition
What are the 4 types of leasehold estates?
- Estate for Years
- Periodic Tenancy
- Tenancy at Will
- Tenancy at Sufferance
Def: Lessor
Giver of the estate/Landlord
Def: Lessee
Tenant
Def: Demise
Transfer of rights in real property through a lease
Def: Reversion (in leasehold estates)
When the lease expires, it goes back to the lessor
Def: Estate for Years
Definite beginning & definite ending to the lease Doesn’t have to be years
Def: Periodic Tenancy
Period-period (e.g. Month-to-month lease)
Def: Tenancy at Will
No written lease
Has permission, but not protection
Def: Tenancy at Sufferance
Without permission (tenant remains after lease end date)
*A tenant was in possession of leased property. The landlord gave a written notice to the tenant to quit. The tenant, however, remained in the property and continued to send rent payments to the landlord. The landlord refused to accept the rent checks. This situation would be described as a:
A. Periodic tenancy
B. Tenancy at will
C. Tenancy at sufferance
D. Tenancy for years
*C. Tenancy at sufferance
*A buyer was moving to a city. The buyer wanted to wait a little while and look around the city before purchasing a home. In the meantime, the buyer wanted to just rent. The best thing for this buyer would be a:
A. Lease option
B. Lease purchase
C. Month-to-month lease
D. Tenancy at sufferance
*C. Month-to-Month Lease
What is the main difference between a freehold estate and a non-freehold estate?
A. A freehold estate always involves ownership
B. A freehold estate ends when a life estate terminates
C. A freehold estate is always inheritable
D. A freehold estate is for a fixed period of time
A. A freehold estate always involves ownership
A tenant was able to negotiate with a landlord a two-month lease for entertainment purposes. What type of leasehold estate would this be?
A. Periodic tenancy
B. Tenancy for years
C. Estate at will
D. Tenancy at sufferance
B. Tenancy for years
*Def: Encumbrance
*A restrictive covenant that burdens or limits your title or rights held by someone else.
What is the difference between a specific lien and a general lien?
A specific lien is to a property while a general lien is to a person and can include the property.
What are 3 types of specific liens?
- Property tax lien
- Mortgage lien
- Mechanic’s lien
What type of specific lien is ALWAYS prioritized above all others, general or specific?
Property tax lien
What is the effective date representative of in a mechanic’s lien?
The date the work started.
Who does a mechanic’s lien protect?
The contractor, subcontractors, and people supplying the material.
*How are liens prioritized?
*Property taxes always first, by date after that.
What are the 2 types of general liens?
- Income Tax Lien
2. Judgment Lien
*Def: Lis Pendens
*Pending Litigation
*Def: Writ of Execution
*When the sheriff seizes property to satisfy a judgment.
A contractor failed to pay subcontractors for work performed on a property. What could the subcontractors do?
A. Sue the contractor for fraud
B. Remove the materials from the improved property
C. File a mechanic’s lien on the improved property
D. Petition the attorney general for the money
C. File a mechanic’s lien on the improved property
A home has a judgment lien filed against it. What happens to the lien when the home is sold?
A. The lien is released when the debt is paid to create a marketable title
B. The lien remains a cloud on the title
C. The lien is only released by court action
D. The lien transfers to other properties owned by the seller
A. The lien is released when the debt is paid to create a marketable title
A judgment had been issued against a person for debts. The person owned a car, boat, farmhouse and some land. Which of the following pieces of property could the judgment lien be placed upon?
A. The car only
B. The car and boat only
C. The farmhouse and the land only
D. The car, boat, farmhouse and the land
D. The car, boat, farmhouse and the land
Who places an encumbrance?
The grantor
Who can enforce an encumbrance?
Only the court
Who can bring action against someone the court has determined is breaking an encumbrance?
Any entrusted party (e.g. HOA, neighbor)
How can one find out what encumbrances might be in place?
Public record-County recorders office
Any deed restrictions would apply to the:
A. Current owner only
B. Present and future owners
C. Original developer
D. Home owners association
B. Present and future owners
A developer would like to restrict the usage of the land in a particular development. He would do this through a:
A. Covenant in the deed
B. City restriction
C. Deed of trust
D. Mortgage
A. Covenant in the deed
A developer was in the process of developing a brand-new subdivision of homes. In order to preserve the value of the new homes being built, the developer decided to require all homes built to have a minimum of 1,800 square feet. This would best be accomplished through:
A. An easement by prescription
B. Zoning laws
C. Subdivision deed restrictions
D. A lien
C. Subdivision deed restrictions
If zoning & covenants are ever in conflict, which would the courts enforce?
Whichever is most restrictive
Def: Easement
Gives someone else the right to use a part of your property while you still retain the ownership rights. An easement does not give possessory rights, just the right of ingress and egress. For that reason, an easement is said to be an interest in the property but not an estate (non-possessory). Easement = Servitude.
What are the 3 types of easements?
- Appurtenant Easement
- Easement in Gross
- Easement by Prescription
Def: Appurtenant Easement
Easement by necessity. (Such as a road going through one property to get to a different property otherwise landlocked.) Appurtenant easements are given for the benefit of the particular land.
What happens to an appurtenant easement if the land sells?
It runs with the land. It cannot be sold separately from the land.
Def: Dominant Tenement
The land which the easement benefited.
Def: Servient Tenement
The land which the easement burdened.
Who can terminate an appurtenant easement?
The Dominant Tenement
XXXXX
XXXXX
What is an example of an easement in gross?
Utility company, billboards, railroads
What are the 3 characteristics of an Easement by Prescription?
- Continuous
- Open
- Notorious (Hostile)
XXXXX
XXXXX
Def: Easement of Prescription
The use of someone else’s property over a period of time that eventually leads to gaining rights to that property.
What 4 ways are easements created?
- Easement deeds
- Long term use
- Necessity
- Encroachment
*What are 3 ways easements are terminated?
- Abandonment
* 2. Dominant tenement - Properties get merged
Why would an owner give their neighbor a license to cross their property?
It’s permission versus a right and can be revoked at any time.
Def: Encroachment
Trespassing
Which of the following scenarios would require an easement by necessity?
A. A railroad has to reroute tracks around a piece of land if not allowed to go straight through
B. A gas company having to run gas lines around a property
C. An owner was landlocked and could not gain access to their property
D. A utility company had no access to a subdivision
C. An owner was landlocked and could not gain access to their property
An appurtenant easement can be terminated by:
A. The death of the dominant tenement
B. The death of the servient tenement
C. A merger of the properties
D. Destruction of property
C. A merger of the properties
XXXXX
XXXXX
Which of the following would not be an appurtenance?
A. Garage apartment
B. Easement on an adjacent property
C. Mortgage lien
D. Pipeline on a property
C. Mortgage lien
Ann Carr planted a rose garden on the corner of Mrs. Baird’s property. Mrs. Baird was home-bound and never left her house. Mrs. Baird never knew that Ann Carr had planted a rose garden on her property. The statutory period had elapsed and Ann Carr claimed the rose garden. Would Ann Carr have a good chance of getting rights to an easement by prescription?
A. Yes, because she had made open use of the property
B. No, because Mrs. Baird did not know of the rose garden
C. Yes, because she made improvements that would not have been made otherwise
D. No, because no improvements had been made to the property.
A. Yes, because she had made open use of the property
*The purpose of a survey is to determine:
A. Where improvements should be placed
B. If there are any encroachments on the property
C. If the property has any liens
D. The market value of comparable properties
*B. If there are any encroachments on the property
A property owner noticed that her neighbor was crossing over her property every day in order to take a short-cut to work. If the property owner did not want the neighbor to obtain permanent rights of use to her property, she could give her neighbor a(n):
A. License
B. Appurtenant easement
C. Easement by prescription
D. Easement by necessity
A. License
Def: Riparian
Flowing water
What rights does someone have if their property borders a riperian water way?
Reasonable water use
Def: Littoral
Bodies of water (i.g. lakes, ponds, ocean)
Where is the property line on a property that borders a riperian water way?
The middle of the water bed.
Where is the property line on a property that borders litoral water?
The high water mark.
Def: Avulsion (with regards to prior appropriations)
Permission to divert water for other purposes
Def: Water Table
Distance from the earth’s surface to underground percolating water.
*Def: Percolation Test
*A test to determine the water absorption rate of soil
*CERCLA is an acronym for what?
*Comprehensive Environmental Response, Compensation and Liability Act
Who is responsible for CERCLA violations on a property?
Anyone who has ever owned the land.
What are 6 types of environmental issues?
- Flood-prone areas
- Brownfield
- Radon Gas
- Asbestos
- Lead based paint
- Mold
*What’s the best way to deal with asbestos?
*Encapsulate it
Anything built before what year has to have a brochure given/signed disclosure about lead paint?
1978
Def: Radon gas
Radioactive gases naturally decaying
How is a build up of radon gas prevented?
A fan/vent to circulate air in and out of the basement.
What conditions create mold?
High humidity/low air flow
*Def: Brownfield
*Land where hazardous material has been dumped
What entity is solely responsible for for flood insurance in flood-prone areas?
F.E.M.A.
Riparian, littoral and prior appropriation all relate to:
A. Encumbrances
B. Easements
C. Water rights
D. Restrictions
C. Water rights
With regards to water rights and prior appropriation concepts, which of the following terms might be applicable?
A. Survey
B. Estoppel certificate
C. Covenant
D. Avulsion
D. Avulsion
In an effort to protect the public, the CERCLA law was passed dealing primarily with:
A. Asbestos
B. Stigmatized property
C. Radon gas
D. Hazardous waste
D. Hazardous waste
What are 3 types of multi-owner properties?
- Cooperative
- Condominium
- Time sharing
*What are 6 characteristics of a cooperative multi-owner property?
- All members could lose if coop is foreclosed on
- The coop owns in severalty
- Members own stock in coop
- Rental payments made to coop
- Coop pays mortgage and taxes
- Stockholders - Proprietary Lease - Leasehold Estate (Personal Property)
- All members could lose if coop is foreclosed on
What are 6 characteristics of a condominium?
- Fee simple title to each unit
- Bylaws list the rules and regulations governing the members - Board of Directors responsible for maintenance
- Pay own mortgage, taxes and insurance on unit (walls in)
- Common areas - Elements
- Pay home’s association dues (Pool, parking, halls, etc. Owned as tenants in common [COA])
- Master Deed or Declaration is recorded; basically creates condominium under state laws
*What are 3 characteristics of a Time Share
- Interval Ownership
- Fee Simple
- Tenancy in Common
- Interval Ownership
A person that has stock ownership in an apartment and a proprietary right to lease that space would be participating in a(n):
A. Condominium
B. Cooperative
C. Time Share
D. Alienation
B. Cooperative
Time share ownership would be most evidenced by:
A. Joint Tenancy
B. Cooperative ownership
C. Tenancy in the entireties
D. Tenancy in Common
D. Tenancy in Common
The common areas in a condominium are owned by the unit owners under
A. Severalty
B. Joint tenancy
C. Tenancy in Common
D. Tenancy in the Entireties
C. Tenancy in Common
The main difference a manager would need to realize between managing a condominium and an apartment complex is that in a condominium:
A. The manager would not have to maintain the common areas
B. The need for swimming pool regulations would not be as great
C. The people who reside there are unit owners
D. The residents are still considered to be tenants
C. The people who reside there are unit owners
*Def: Alienation
*Transfer
What are 2 different ways sellers can transfer property to buyers?
- Alienation
2. Transfer by deed
What are 4 types of deeds?
- General Warranty
- Special Warranty
- Bargain and Sale
- Quitclaim
What promises does a general warranty deed make?
The strongest deed. Seller owns it, has the right to sell & can provide marketable title. No one else owns, no hidden encumbrances. Seller can provide documents to prove ownership. Money back guarantee.
What promises does a special warranty deed make?
Same promises as a general warranty deed but only for the time since the current owner has owned it.
What promises does a bargain and sale deed make?
Only promising that they own it.
What promises does a Quitclaim Deed make?
No promises, “If I own it.” Missing signature, name spelled incorrectly, cloudy title. “Title is cloudy.”
Which of the following deeds would give the seller the least amount of liability?
A. Bargain and Sale Deed
B. Quitclaim Deed
C. Special Warranty Deed
D. General Warranty Deed
B. Quitclaim Deed
Which statement would be true regarding a deed?
A. A deed must be signed by the grantor and grantee
B. The purpose of a deed is to convey title
C. The grantee must be of legal age
D. Acknowledgment and recording of a deed are required
B. The purpose of a deed is to convey title
The type of deed that would provide the best protection for the buyer would be a(n):
A. Special Warranty Deed
B. General Warranty Deed
C. Quitclaim Deed
D. Bargain and Sale Deed
B. General Warranty Deed
Who signs the deed?
The grantor
What dates does the deed have on it?
The deed has no dates
*What starred item is required for a valid deed?
*6. Exceptions and Reservations - List encumbrances
CCR = Covenants, Conditions & Restrictions
*Def: Habendum
*“To have and to hold” - Words of conveyance
*Which of the following statements would be true regarding a warranty deed?
A. Only the grantee has to sign the deed
B. The grantee has to record the deed to make it valid
C. The grantor has to record the deed to make it valid
D. Only the grantor has to sign the deed
*D. Only the grantor has to sign the deed
Which of the following is not essential to the validity of a deed?
A. Signature of grantor and grantee
B. Legal description of the property
C. Words of conveyance
D. Consideration
A. Signature of grantor and grantee
What are the 2 purposes of recording documents?
- To establish priority (i.e. who was first)
2. To provide constructive notice
If a document is not recorded who is it only valid between?
The parties who created it.
What must happen before you can recored a document?
It must be “acknowledged” (AKA notarized)
With the exception of real estate taxes, liens generally are repaid at a foreclosure sale based on the
A. Dollar amount of the lien
B. Actual need of the creditors involved
C. Recording date of the lien
D. Original date of the agreement that led to the lien being filed
C. Recording date of the lien
*A judgment against a seller has been recorded on the public record. A buyer is interested in purchasing the seller’s property but does not know about the judgment. The buyer is said to have:
A. Actual notice
B. Preventative notice
C. Corrective notice
D. Constructive notice
*D. Constructive notice
*What are the requirements of voluntary alienation?
*Must be of legal age and sound mind
Def: Testate
Dying with valid will/heirs
XXXXX
XXXXX
Def: Testator
Person who dies who made the will
Def: Devise
Transfer of real property via will
Def: Devisee
Person who real property is transferred to via will
Def: Bequest
Transfer of personal property via will
Def: Executor
Person who carries out will (e.g. attorney, spouse)
Def: Executor’s Deed
Deed created by the executor
What are some different ways of having an involuntary transfer of real estate?
- Descent
- Adverse possession - Squatter’s rights
- Involuntary deeds (Tax Deed / Sheriff’s Deed)
- Transfer by water or wind
- Transfer by the courts
Def: Descent
Intestate-Government determines who gets what
Def: Probate
The person who determines who gets what in what amounts
Def: Administrator (with regards to descent)
Court appointed person who oversees distribution
In adverse possession, what 4 things are required for a squatter to prove their claim (i.e. perfect the title?)
- Continuous: 10 Years in Missouri
- Open: Conspicuous
- Notorious: W/O permission
- Exclusive: Primary residence
Def: Erosion
(With regard to transfer of deed by water or wind) Losing title because the property eroded away
Def: Erosion (with regards to Transfer of Deed by Water or Wind)
Losing title because the property eroded away
Def: Accretion
(With regard to transfer of deed by water or wind) Someone gains title by gradual build up of earth
Def: Avulsion (with regards to transfer of deed by water or wind)
A sudden change in a natural boundary whereby the property boundary lines do not change and the owner does not lose title
What is a cloud on a title?
Anything that impairs it and makes it unmarketable and lowers the value.
What are the two ways to remove a cloud on a title?
- Quitclaim Deed
2. Quiet Title Suit
*Def: Quiet Title Suit
*Court removing a cloud on a title
After closing, which of the following situations would require a quiet title suit?
A. The listing agent misrepresented a material fact about a property
B. The seller misrepresented to the buyer about a roof and basement leak in the property
C. The inspection company failed to discover the property contained mold
D. The seller’s cousin was claiming an ownership interest in the property and refused to sign a quitclaim deed
D. The seller’s cousin was claiming an ownership interest in the property and refused to sign a quitclaim deed
*A homeowner used a 20-foot strip of his neighbor’s property for 15 years. The use of the 20-foot strip was done openly, continuously and notoriously. The homeowner wants to sell his property including the 20-foot strip. Would he be able to do this legally?
A. Yes, but only if he first pays consideration to the neighbor for the 20-foot strip of land
B. No, as this would constitute illegal trespassing for the entire 15 years
C. No, as adverse possession requires 30 years or more
D. Yes, but he must perfect the title first and then he can sell the entire property, including the 20-foot strip.
*D. Yes, but he must perfect the title first and then he can sell the entire property, including the 20-foot strip.
*Def: Abstract
*Written history of the property
Def: Abstractor
Person who does title search
*Def: Chain of Title
*List of owners
Does an abstract guarantee a clear title?
No
What 2 ways prove ownership of real estate?
- Abstract
2. Title Insurance
In title insurance, what does a standard policy cover?
Recorded documents, forgeries, liens
In title insurance what does an extended policy cover?
Unrecorded liens
What 2 things are contained in a title insurance policy?
- Legal description of the property
2. Type of ownership
Who is covered in an owner’s title insurance policy?
The buyer
Who is covered in a mortgagee’s title insurance policy?
The lender
Def: Subrogation
A buyer signing over their rights to the title & claims insurance company to go after the seller in return for getting paid off.
When does the buyer get reimbursed in subrogation?
When they lose the property.
The best way to obtain a list of all previous owners on a piece of property would be through a(n):
A. Chain of Title
B. Abstract
C. Title Insurance Policy
D. Homeowner’s Insurance Policy
A. Chain of Title
What document would be a condensed history of all records that affect the title?
A. a Survey
B. an Abstract
C. an Affidavit of Title
D. a Chain of Title
B. an Abstract
What does a standard title insurance policy cover?
A. Questions of Survey
B. Rights of Parties in Possession
C. Unrecorded liens
D. Recorded title defects and liens
D. Recorded title defects and liens
What are the 2 different types of real estate taxes?
- General Assessment
2. Special Assessment
What do general assessment taxes tax?
Land and improvements
What are some examples of what general assessment taxes pay for?
Schools, police protection, fire protection, etc.
Def: Special Assessment Taxes
Real estate taxes for special improvement projects in a specific community
Six miles of curbs and gutters were installed to improve the properties in a certain area. The properties that were improved would most likely pay for the improvements through a:
A. Benevolent city fund
B. Special Assessment Tax
C. General Assessment Tax
D. Improvements Tax
B. Special Assessment Tax
What kind of value does the government use in raising money for operations?
A. Appreciated value
B. Depreciated value
C. Assessed value
D. Original purchase price
C. Assessed value
Which of the following would be true regarding special assessment taxes?
A. These are also called ad valorem taxes
B. If not paid, the property could be sold at a foreclosure sale
C. They are paid one time at closing
D. They are generally for the good of the entire community in raising money for police and fire protection
B. If not paid, the property could be sold at a foreclosure sale
XXX
XXX
Def: Master Land Plan
What a city adopts to plan for future growth
Def: Buffer Zone
Separates incompatible areas
What is an example of a buffer zone?
A park or apartment complex separating a house from a sky scraper.
What are some various types of zoning?
- Residential
- Commercial
- Agricultural
- Industrial
- Aesthetic
Def: Planned Unit Development (PUD)
Diverse use of land
*For what entity is FHRCS an acronym?
*Federal Historic Review Compliance Service
Def: Downzoning
Going from more active or larger to smaller or less active
Who is downzoning enforced by?
The courts
Who is downzoning established by?
The city
Who decides what to do with a building that has been deemed as a historical building?
The FHRCS
What are the 3 exceptions to zoning?
- Non-Conforming Use
- Variance
- Spot-Zoning
Def: Non-Conforming Use Zoning
When a type of building exists before the area is zoned contrary to that type of building
Def: Variance Zoning
When a type of building is permitted to be built in an existing are of zoning contrary to its building type
Def: Spot Zoning
When a spot in a particular zone is re-zoned
What 3 tiers of regulations does a subdivision have?
- Government
- Subdivider
- Developer
What are some examples regulations the government decides about subdivisions?
How wide the streets need to be, If the streets need a double yellow or dashed white line, etc.
What does a subdivider to?
Separates the subdivision by drawing it all out and getting approval from planning and zoning.
What does a developer do?
Improves the subdivision by building infrastructure
What are 2 tiers of restrictions placed on a subdivision?
- Developer
2. Home Owner’s Association
Def: Dedication
Voluntary process where someone donates land to the government (often done in exchange for favorable zoning).
Which of the following would be the best example of a buffer zone?
A. An agricultural property between multi-family dwellings and a commercial property
B. A single-family property between two commercial properties
C. A single-family property between a multi-family dwelling and a commercial property
D. A park between a high-rise apartment building and an industrial area
D. A park between a high-rise apartment building and an industrial area
What is the purpose of zoning regulations?
A. To allow for taxation on real estate
B. To allow the government to take private property for public good
C. To determine the type of construction materials that can be used in a certain area
D. To implement the master land plan
D. To implement the master land plan
A six-unit apartment complex in an area that has recently been rezoned R-1 for single family residential property only would be an example of a:
A. Variance
B. Non-Conforming Use
C. Building Code
D. Zoning Ordinances
B. Non-Conforming Use
Where would one look to find out what type of structure is allowed to be build on a certain piece of ground?
A. Title policy
B. Plat Map
C. Abstract
D. Zoning Ordinances
D. Zoning Ordinances
What is the purpose of a master plan?
A. To ensure safety in construction
B. To guide in the future development of cities
C. To give developers a way to make subdivisions uniform
D. To allow cities a way to acquire private property in the future if needed
B. To guide in the future development of cities
*What does a promissory note/bond do?
*Creates debt between the buyer & lender
What 3 things does a promissory note/bond include?
- Term length
- Interest rate
- Loan amount
What does a promissory note/bond not include?
Loan to value amount
Def: Mortgage
Security for a loan
XXX
XXX
Def: Lien Theory
When the homeowner gets title to house and the lender puts mortgage lien on the home so you can’t sell until the lender is paid back
Def: Title Theory
When the lender keeps the title so the homeowner can’t sell until the home is paid off.
If payments are not made on a property, how is it foreclosed?
Judicial foreclosure
Def: Judicial Foreclosure
Mortgagee has to go to court & judge will have to say they can foreclose. A Writ of Execution is ordered and the sheriff kicks people out of house if they do not leave.
What does the power of sale clause do?
Prevents lender from having to go to court to foreclose.
What 2 parties are involved in a mortgage?
- Lender
2. Borrower
What 3 parties are involved in a Trust Deed?
- Lender
- Borrower
- Neutral third party
What does the trustee do with regards to a trust deed?
Holds bare legal title in behalf of the lender
What happens in a non-judicial foreclosure?
Trustee sells property then gives money to the lender
Def: Redemption
When defaulting borrower has certain amount of time to buy property back after foreclosure
*What are the 2 types of redemption?
- Equitable
2. Statutory
*Def: Equitable Redemption
*Foreclosure - When person redeems property before sale
*Def: Statutory Redemption
*Foreclosure - When person redeems property after sale
*Def: Deficiency Judgment
*Personal judgment agains defaulting borrower for difference of any amount that wasn’t satisfied if the property does not sell for the amount that is still owed on it
*Def: Deed in Lieu of Foreclosure
*When the defaulting borrower willingly surrenders the property to the lender without going to court
*Is Deed in Lieu of Foreclosure considered a voluntary or involuntary alienation?
*Involuntary alienation
*Why might a borrower opt for a Deed in Lieu of Foreclosure situation?
*It may help borrower save credit
Def: Short Sale
Lender takes loss & forgives the debt, owner loses right to redeem property
A written document that is used to promise repayment of a loan is called a:
A. Promissory Note/Bond
B. Mortgage
C. Deed
D. Title
A. Promissory Note/Bond
A lender is going through the foreclosure process. The lender, however, would like to resell the property as soon as possible. The lender should seek a:
A. Judicial Foreclosure
B. Quick Foreclosure
C. Power Foreclosure
D. Deed in Lieu of Foreclosure
D. Deed in Lieu of Foreclosure
A property was sold by a foreclosure sale. The sale did not produce enough money to satisfy all the debts on the property. What could the creditors who weren’t paid now file?
A. A deed in Lieu of Foreclosure
B. An Estoppel Certificate
C. A Deficiency Judgment
D. A Blanket Mortgage
C. A Deficiency Judgment
XXXXX
XXXXX
*Def: Discounting (with regards to a note)
*When a lender sells a note for less than the value
*When are real estate note payments paid?
*In arrears; when you pay your monthly mortgage, you are paying the previous month’s interest.
*Def: Debt Service
*Principal & Interest
*Def: Estoppel Certificate
*Issued by lender stating current loan balance
A person purchased a property and obtained a 90% loan. The monthly payments on the debt service would apply to:
A. Principal & Interest
B. Principal, interest, taxes & insurance
C. Principal only
D. Interest only
A. Principal & Interest
Mortgage interest is always computed:
A. As being paid in advance
B. As being paid in arrears
C. Using compound interest
D. With a variable interest rate
B. As being paid in arrears
*The seller has an assumable loan on the property just listed by the listing broker. What is the best procedure to use in obtaining the outstanding balance on the loan for the official listing agreement?
A. Check the deed at the courthouse
B. Ask the seller directly for the balance
C. Have the seller fill out a lender’s loan information request form
D. Research the MLS data base
*C. Have the seller fill out a lender’s loan information request form
Def: Interest
Percent of loan balance
Def: Leverage
Borrowing money to make money
Def: Fully Amortized Note
A loan consisting of equal, regular payments satisfying the total payment of principal and interest by the due date
Def: Straight Note
A loan in which only interest is paid during the term of the loan, with the entire principal amount due with the final interest payment
Def: Partially Amortized Note
A loan in which partial interest and principal payments are paid during the term of the loan, with the the remainder of interest and principal amounts due with the final payment
Def: Graduated Payment Note
When the payment amount increases each year and then levels out for the remainder of the term
Def: Adjustable Rate Mortgage (ARM)
Interest rate based on index, with there being a cap on how high or low it can go. Interest is at 2% above the rates paid on Treasure Bills with a maximum change of 2% in any year and a maximum change of 6% over the term of the loan.
What are the 3 rules of adjustable rate mortgages?
- Lender must give example
- Lender can’t control index
- Borrower can verify index
Which of the following statements would be true of a partially amortized loan?
A. The amount going toward interest increases as time goes along
B. At the end of the loan, there is nothing left to be paid off
C. There are generally smaller monthly payments
D. The loan payments consist of interest only
C. There are generally smaller monthly payments
A final payment on a loan that was larger than the previous payments would be called a(n):
A. Fully Amortized Loan
B. Balloon Payment
C. Straight Note
D. Term Loan
B. Balloon Payment
Which of the following would provide for constant principal and interest payments with the loan completely paid off at the end of a loan?
A. Straight Note
B. Term Loan
C. Partially Amortized Note
D. Fully Amortized Note
D. Fully Amortized Note
A 3-year straight note was obtained at 10% per year. Interest paid the first two years was $4,200. The loan on the house was 75% of the value. What was the total value of the property?
A. $21,000
B. $28,000
C. $31,040
D. $38,750
B. $28,000
A buyer purchased a property for $200,000. The buyer obtained a 90% loan for 30 years at 4% interest. If the payment factor was $4.77, the monthly mortgage payment would be:
A. $858.60
B. $901.80
C. $978.20
D. $1,100.50
A. $858.60
XXXXX
XXXXX
Def: Pre-Payment Clause
Lender charges penalty for early pay-off
What types of property are most likely to have a Pre-Payment Clause in the mortgage?
Commercial, not typically consumer home loans.
Def: Acceleration Clause (Due on Default Clause)
Remaining loan balance becomes due immediately if person defaults on payments
Def: Alienation Clause (Due on Sale Clause)
If the property is transferred to somebody else, the remaining loan balance becomes due immediately
Def: Subordination Clause (Changes Priority)
Always makes 1st mortgage more important than 2nd mortgages
Def: Defeasance Clause (Null and Void Clause)
Mortgage or trust deed is cancelled/terminated after loan is paid off
What 2 things can be recorded to show that the note has been paid?
- Mortgage-Mortgage Release/Satisfaction
2. Trust Deed-Deed of Reconveyance
Def: Escalator Clause (with regards to purchase contracts)
Gives lender ability to lower/raise interest rate
Def: Alterations Clause
Borrower must obtain lender’s permission for changes
Def: Hypothecate
To pledge property as security for an obligation or loan without giving up possession of it
Def: Pledging
To pledge property as security for an obligation or loan by giving up possession of it
*Def: Impound (i.e. Escrow Account)
*Holding someone else’s money
What does the acronym PITI stand for?
P. Principal
I. Interest
T. Taxes
I. Insurance
What are 2 ways a buyer can take over a seller’s loan?
- Subject-To
2. Assumption
Def: Subject-To
Buyer takes over payments while the seller is solely liable to the lender
Def: Assumption
Buyer takes over payments and primary liability to the lender while the seller is secondarily liable to the lender
*In an assumption, what could the seller ask for to not be held liable?
*Release of Liability
XXXXX
XXXXX
*A lender is adding 1/12 of the annual taxes and insurance to a borrower’s monthly mortgage payment. These prepaid taxes and insurance are kept in a(n):
A. lender’s account of choice
B. borrower’s account
C. impounds or escrow account
D. state account
*C. impounds or escrow account
In a subject-to sale, which of the following is always true?
A. The buyer is not required to sign the purchase agreement
B. The seller remains liable for deficiencies on the original loan
C. The deed is conveyed upon signing the purchase agreement
D. The broker gets a deferred commission
B. The seller remains liable for deficiencies on the original loan
A prepayment penalty clause would apply to which of the following items?
A. A seller’s loan being assumed by a buyer
B. When personal property was being used as security for a loan
C. A borrower paying off an loan in advance
D. A mortgage where several properties were used as security
C. A borrower paying off an loan in advance
Which mortgage clause allows a lender to regain their investment if a borrower does not pay their payment?
A. Alienation
B. Due on sale
C. Acceleration
D. Defeasance
C. Acceleration
*A subordination clause in a mortgage does which of the following:
A. It changes the priority of the mortgages
B. It cancels the mortgage after the final payment
C. It prevents the loan from being assumed
D. It calls the loan due and payable upon nonpayment
*A. It changes the priority of the mortgages
Which clause in a mortgage would make the loan non-assumable?
A. Acceleration
B. Due on Sale
C. Prepayment
D. Defeasance
B. Due on Sale
What are the 11 different types of mortgages available?
- First Mortgage
- Second Mortgage (Junior Mortgage)
- Purchase Money Mortgage
- Blanket Mortgage
- Package Mortgage
- Open End Mortgage
- Growing Equity Mortgage
- Construction Loan Mortgage
- Wraparound Mortgage
- Reverse Annuity Mortgage
- Shared Appreciation Mortgage (S.A.M.)
Def: First Mortgage
Primary residence mortgage (whenever someone moves, the mortgage for their new home becomes their first mortgage)
Def: Second Mortgage (Junior Mortgage)
Any other mortgages (can have multiple at the same time)
*Def: Purchase Money Mortgage
*Owner financing. The seller carrying back 2nd mortgage. Seller deeds property to borrower and takes back note and mortgage
Def: Blanket Mortgage
A mortgage covering more than one parcel of real estate, providing for each parcel’s partial release from the mortgage lien upon repayment of a definite portion of the debt
Def: Package Mortgage
A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances
Def: Open End Mortgage
Line of Credit. If you have a lot of equity, the lender will create a home equity line of credit (H.E.L.O.C.)
Def: Growing Equity Mortgage
Paying a predetermined extra amount on principal loan balance based on index. Builds equity faster
*Def: Construction Loan Mortgage
Money released as needed, the riskiest type of loan
What’s the loan at the end of a construction loan?
First Mortgage (Take-Out Loan)
Def: Wraparound Mortgage
When the 2nd lender assumes the 1st lender’s loan
*Def: Reverse Annuity Mortgage (R.A.M)
*Mortgagee pays mortgagor money monthly. Must have house paid off to do it
Def: Shared Appreciation Mortgage (S.A.M.)
Lender agrees to lower interest rate and over time the property appreciates. Once the property is sold, they split the profit.
An elderly person has recently made the last payment on a mortgage. This person would like to supplement their retirement income. The loan most likely to help in this situation would be a:
A. Package Mortgage
B. Reverse Annuity Mortgage
C. Blanket Mortgage
D. Purchase Money Mortgage
B. Reverse Annuity Mortgage
A homeowner decided to sell their property. However, due to bad economic times, the mortgage interest rates had been rising for several years. In an effort to sell the property, the seller should consider:
A. offering a listing price that is below market value to encourage a quick sale
B. finding a broker to list the property at a reduced commission rate
C. offering owner financing as part of the total financing package
D. making improvements on the property that are not normal for the neighborhood
C. offering owner financing as part of the total financing package
A buyer entered into a written agreement to purchase a lot with the seller financing the purchase. The buyer obtained a construction loan to build the house which contained a subordination clause and take-out loan provision. The reason for this was that the buyer:
A. was still liable to both the seller and the lender on the entire financed project
B. would be considered to have a package mortgage to encompass the financing for both the land and the house
C. had to obtain a lender who would do the permanent financing
D. would need to be sheltered from liability in case the builder went bankrupt during the construction of the home
C. had to obtain a lender who would do the permanent financing
Because of health problems with lead-based paint, some federal institutions such as FHA are requiring which of the following?
A. Only that a brochure be given to any buyer explaining lead-based paint
B. Verification of any reports issued and all disclosures about lead-based paint have been given to the buyer before a loan is approved
C. Money to be put aside for lead based paint abatement in the future if necessary
D. Disclosure only to the buyer of any known lead-based paint
B. Verification of any reports issued and all disclosures about lead-based paint have been given to the buyer before a loan is approved
What is true about both FHA and VA loans?
A. Both require a certificate of eligibility
B. Both require owner occupancy
C. Both require MIP insurance
D. Both allow non-qualifying assumptions
B. Both require owner occupancy
An 80% loan to value ratio means that the loan amount will be based on 80% of:
A. the contract price or appraisal, whichever is higher
B. the contract price or appraisal, whichever is lower
C. the contract price
D. the appraisal price
B. the contract price or appraisal, whichever is lower
When an FHA 203-B loan is obtained, which generally happens?
A. an FHA appraiser appraises the property
B. There is a maximum of 20 years allowed for the loan term
C. FHA will guarantee a maximum of $27,500 in case of default
D. FHA loans will normally allow the buyer to obtain a 2nd mortgage to cover the down payment
A. an FHA appraiser appraises the property
What is an advantage for a borrower who chooses to pay private mortgage insurance (P.M.I.) in receiving a loan?
A. The insurance is tax deductible
B. The borrower can purchase with a lower down payment
C. The borrower receives a lower interest rate
D. The borrower only pays this one time at closing
B. The borrower can purchase with a lower down payment
What is the primary purpose of the Federal Housing Administration (F.H.A.)?
A. To buy notes from lenders
B. To make loans to borrowers
C. To set maximum interest rates
D. To insure loans for lenders
D. To insure loans for lenders
A buyer purchased a property for $100,000 obtaining an 80% loan to value ratio. The appraisal came in at $80,000. What would be the down payment?
A. $12,800
B. $16,000
C. $19,200
D. $36,000
D. $36,000
How much is 1 point worth?
1% of the loan amount
*Why does a lender use points?
*To increase the effective yield
Def: Buydown
A financing technique used to reduce the monthly payments for the first few years of a loan with discount points
Def: Loan Origination Fee
Fee for initiating a loan
Def: Lock-In Commitment
When the lender locks buyer in on interest rate and discount points
The reason a lender charges discount points is to:
A. cover the costs of initiating the loan
B. increase the effective yield to the lender
C. offset selling the loan at a premium
D. account for the time value of money
B. increase the effective yield to the lender
A buyer purchased a $200,000 house obtaining a 90% loan as well as putting up $5,000 in earnest money. The lender charged the buyer 2 discount points, a 1% loan origination fee and a lender’s title insurance fee of $500. How much must the buyer pay for the loan origination fee?
A. $500
B. $1,800
C. $2,000
D. $3,600
B. $1,800
A buyer purchased a property for $60,000 putting 15% down and paying two discount points. How much in dollars were the points?
A. $1,020
B. $1,200
C. $1,320
D. $1,500
A. $1,020
*What type of financing is Contract for Deed and Land Contracts/Installment Contracts?
*Owner financing
*In a contract for deed, what type of title does the buyer obtain?
*Equitable Title
What are some advantages of alternative financing?
- No qualifications
- Fewer closing costs
- Low downpayment
When does the buyer obtain legal title in a contract for deed?
After the final payment
What do Contracts for Deed and Land Contracts/Installment Contracts all have in common?
Seller financing
Def: Sale-and-Leaseback
A transaction in which the owner sells improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises
What are the advantages to a seller in a Sale-and-Leaseback type of financing?
- Seller gets a lot of money right away
2. Get to deduct lease payments
What is the advantage to a buyer in a Sale-and-Leaseback type of financing?
They have a property that increases in value
A land contract is also referred to as a(n):
A. installment contract
B. right of first refusal
C. option contract
D. listing contract
A. installment contract
In a land contract or contract for deed, the seller who retains the fee simple title is referred to as the:
A. optionor
B. optionee
C. vendee
D. vendor
D. vendor
Which of the following statements is true regarding a contract for deed?
A. Seller retains equitable title; buyer gets legal title in one month
B. Seller retains equitable title; buyer gets legal title in one year
C. Seller retains legal title; buyer gets equitable title in one month
D. Seller retains legal title; buyer gets equitable title immediately
D. Seller retains legal title; buyer gets equitable title immediately
A seller and a buyer entered into a contract for deed. Which of the following would be true regarding this type of contract?
A. Upon default, all the monies paid by the installment payer (buyer) would be returned to the buyer
B. The buyer receives an equitable title after the contract is paid off
C. The installment payer (buyer) would pay the taxes, insurance and assessments on the property
D. The deed is conveyed at the time of contract
C. The installment payer (buyer) would pay the taxes, insurance and assessments on the property
What are 3 ways to control the money supply?
- Reserve controls by the Federal Reserve
- Discount Rates
- Open Market Operations
How do lower interest rates effect the economy?
Stimulates the economy
How do higher interest rates effect the economy?
Slows the economy
If the Federal Reserve Requirement is 30%, how much can lenders loan?
70% (The difference)
Def: Discount Rate
The interest rate set by the Federal Reserve that member banks are charged when they borrow money through the Fed
Def: Open Market Operations
Buying and selling securities (selling=decreasing money supply while buying=increasing the money supply)
What 4 ways does a buyer go to receive a traditional home loan?
- Savings and Loans (Primarily home loans)
- Commercial Banks (Primarily business loans)
- Insurance Companies (Primarily high dollar loans)
- Mortgage Brokers
*What is the main difference between a Mortgage Banker and a Mortgage Broker?
*A Mortgage Banker is part of the primary mortgage market while a Mortgage Broker is not.
Mediators who work matching lenders with borrowers are called:
A. Mortgage Bankers
B. Mortgage Brokers
C. Banks
D. Savings and Loans
B. Mortgage Brokers
*Why do banks sell their loans?
*Liquidity
Def: Estoppel Certificate
States the current loan balance reduction certificate
*Def: Federal National Mortgage Association (A.K.A. FNMA/Fannie Mae)
*#1 Purchaser of mortgager pooled mortgages. Raises money by selling government backed bonds.
Def: Government National Mortgage Association (A.K.A. GNMA/Ginnie Mae)
Federally chartered, controlled by H.U.D. Buys FHA & VA loans in depressed areas
Def: Federal Home Loan Mortgage Corporation (A.K.A. FHLMC/Freddie Mac)
Primarily buys conventional notes from savings & loans
Which of the following entities would be part of the secondary mortgage market?
A. Federal National Mortgage Association
B. Savings and Loan
C. Commercial Bank
D. Mortgage Banker
A. Federal National Mortgage Association
Def: Usury Laws
Maximum interest rate lenders can charge
*What does Truth-In-Lending (Regulation Z) apply to?
- Residential-4 units or less and 5 payments or more
2. Consumer credit
*What doesn’t Truth-In-Lending (Regulation Z) apply to?
- Businesses
- Commercial
- Agricultural
- Residential-5 units or more
- Businesses
*Def: Truth-In-Lending (Regulation Z)
*Lender gives borrower all loan costs including annual percentage rate
Def: Right of Rescission
3 Day right to back out
*Does Right of Rescission apply to 1st mortgages?
*No
How does advertising pertain to Truth-In-Lending (Regulation Z)?
To tell any credit terms, must tell all credit terms
Who is exempt from advertising restrictions as it pertains to Truth-In-Lending (Regulation Z)?
For Sales by Owner (FSBO)
What is the purpose of the Real Estate Settlement Procedures Act (RESPA)?
To inform borrowers of total closing costs
What loans are covered under the Real Estate Settlement Procedures Act (RESPA)?
- New 1st mortgages (4 units or less)
- Any loan bought by FNMA
- Only applies to 25 acres or less
What are the 5 items required by Real Estate Settlement Procedures Act (RESPA)?
- Home Loan Toolkit
- The loan estimate
- The Closing Disclosure
- Limits on pre-paids (taxes and insurance)
- Prohibition of Kickbacks
When must the Home Loan Toolkit be given?
Within 3 business days of the loan application
When must the Closing Disclosure (CD) be given?
Within 3 business days before closing
What is the time limit on how much can be collected by a lender for escrow with regards to taxes and insurance?
3 Months
Def: Prohibition of Kickbacks
Broker cannot be affiliated with lender to avoid conflicts of interest
Def: Kickbacks
When the lender gives the broker a referral fee
The Equal Credit Opportunity Act bans credit discrimination based on what 8 things?
- Race
- National origin
- Color
- Sex
- Age
- Marital status
- Religion
- Public assistance/welfare
Which of the following would allow a lender to legally reject a loan for a residential house that was in good repair?
A. The buyer was of a different race than the other neighboring owners
B. The house was located in an area primarily used for light industrial
C. The house was located in a minority area of town
D. The buyer had been recently divorced
B. The house was located in an area primarily used for light industrial
*A person was applying for a new VA loan on a single-family home purchase. Which federal law was passed to ensure the buyer received disclosure of the total closing costs?
A. Truth-In-Lending Laws (Regulation Z)
B. The Equal Credit Opportunity Act
C. Usury Laws
D. The Real Estate Settlement Procedures Act (RESPA)
*D. The Real Estate Settlement Procedures Act (RESPA)
The Equal Credit Opportunity Act prohibits discrimination based on:
A. sexual orientation
B. a person being a minor
C. a person being a senior citizen
D. a person’s credit rating
C. a person being a senior citizen
A lender charging an interest rate that is higher than allowed by law would be violating:
A. Fair Housing laws
B. Equal Credit Opportunity laws
C. Usury laws
D. Securities laws
C. Usury laws
*Who oversees and administers the provisions of the Real Estate Settlement Procedures Act (RESPA)?
A. FBI
B. CIA
C. US Department of HUD
D. SEC
*C. US Department of HUD
Which of the following loans would fall under the 3-day right of rescission allowed under Regulation Z?
A. A residential loan for a first mortgage
B. A loan for a commercial property
C. A loan for an agricultural property
D. A home improvement loan for a principal residence
D. A home improvement loan for a principal residence
Def: Agent
Someone who represents someone else
What are the 2 classifications of agents?
- Special Agent
2. General Agent
What is the difference between a Special Agent and a General Agent?
A Special Agent is an agent at one time in one area while a General Agent is an ongoing agent in several areas.
What is an example of a General Agent?
Property Manager, Ongoing relationship with broker, etc.
*Def: Attorney-In-Fact/Power of Attorney
*Written authority to sign a document for someone else
What 3 ways can an agency relationship be created?
- Expressed
- Implied
- Ostensible
Def: Expressed Agency
Clearly stated intentions, written document
Def: Implied Agency
If the actions of the parties imply they have mutually agreed
Def: Ostensible Agency
Appears to be-similar to Implied Agency
Def: Fiduciary
Responsibility of loyalty and trust that you owe to your client
Def: Sub-Agency
When one broker employs the assistance of another broker to assist the seller
XXX
XXX
An agent wanting to represent both sides of a transaction and be a dual agent would need to:
A. have written informed consent from both parties
B. have payment from both parties
C. make sure both parties see an attorney
D. make sure both parties receive an agency brochure
A. have written informed consent from both parties
A listing agent is showing property to a prospective buyer. The listing agent should disclose to the buyer that the agent:
A. represents both the buyer and seller
B. represents the seller only
C. represents neither the seller nor the buyer
D. is merely a consultant for both parties
B. represents the seller only
*An agency agreement between a seller and broker is normally created with an:
A. implied agreement
B. offer and acceptance agreement
C. expressed agreement
D. option agreement
*C. expressed agreement
A buyer’s agent presents an offer to a seller. The buyer’s agent is not acting as a dual agent. In relation to the buyer’s agent, the seller would be a(n):
A. client
B. customer
C. principal
D. prospect
B. customer
*A husband went to Europe for an extended business trip. The wife then agreed to sell the house to a buyer while the husband was still away. The wife could sell the house herself if:
A. she obtained a letter from her husband authorizing the sale
B. the house was located in a state adhering to community property laws
C. she had been granted power-of-attorney by her husband to sign papers on his behalf
D. she was name executor of the estate
*C. she had been granted power-of-attorney by her husband to sign papers on his behalf
A broker is representing a seller as a special agent. Which of the following activities would the broker be able to do?
A. Perform any act as there is no fiduciary relationship
B. Represent the seller in any transactions for which the broker is authorized
C. Deal only with other properties not involving a principal
D. Deal with all of the seller’s properties on a continuous basis
B. Represent the seller in any transactions for which the broker is authorized
A fiduciary relationship is created when a broker does which of the following?
A. Brings an offer to purchase
B. Signs a listing contract
C. Takes a third party to apply for financing
D. Disburses earnest money
B. Signs a listing contract
The agency relationship normally established between a broker and a seller is a:
A. general agency
B. universal agency
C. special agency
D. ostensible agency
C. special agency
What are the 6 client level fiduciary duties (COLDAC)?
C. Care O. Obedience L. Loyalty D. Disclosure (Full) A. Accounting C. Confidentiality
What are the 3 customer level duties a broker has to a buyer?
- Fairness
- Honest
- Accuracy
Def: Latent Defect
Unseen defect
*How long of a grace period do you have after the end of a transaction to contact a client?
*18 Months
What does the acronym CAN-SPAM (Act) stand for?
Controlling the Assault of Non-Solicited Pornography & Marketing
An agent, in trying to obtain a listing from a seller, notices that there are water stains on the ceiling. The seller tells the agent not to disclose to anyone about the water stains. What should the agent do?
A. List the property and follow the seller’s instructions
B. Tell the seller to paint over the water stains and then list
C. Advise all buyers to get inspections done before purchasing
D. Refuse to take the listing
D. Refuse to take the listing
A licensee listed a property for sale. The seller informed the licensee that the property contained asbestos insulation in the basement. In this case, the licensee must:
A. tell the seller to remove or wrap the asbestos
B. tell the seller to contact the EPA and get an environmental report on the property
C. disclose of the asbestos to any prospective buyers
D. tell the seller that disclosure is not necessary as inspectors will determine if there are any issues with the asbestos
C. disclose of the asbestos to any prospective buyers
*An agent owes care, obedience, accounting, loyalty, disclosure and confidentiality to:
A. principals
B. lenders
C. brokers
D. customers
*A. principals
A seller and buyer are awaiting closing on a real estate transaction. The listing agent learns that a zoning change has just taken place on the property. What should the listing agent do?
A. Tell the seller only as the seller is the principal
B. Tell the seller and then see if the seller wants this information to be given to the buyer
C. Don’t tell anyone if the agent deems this information unnecessary
D. Disclose this to all parties in the transaction
D. Disclose this to all parties in the transaction
Which of the following would a seller’s agent have to disclose to a buyer?
A. The seller had lived there for one year making no improvements to the property
B. The seller had been convicted of a felony one year ago but has been clean ever since
C. A mental institution was located one mile away
D. The roof on the seller’s property is in bad condition
D. The roof on the seller’s property is in bad condition
A licensee was working with a seller principal and a buyer customer on the purchase of a residential home. The licensee was aware that an industrial plant was going to be build behind the residential property in the next few months. The licensee did not disclose this to the buyer. Two months after closing, the industrial plant construction began. In this scenario, the licensee is:
A. not liable as the buyer was a customer, not a client
B. not liable as it is the seller’s responsibility to disclose any adverse material facts
C. liable as the licensee was operating as an undisclosed dual agent
D. liable for failing to disclose of the industrial plant
D. liable for failing to disclose of the industrial plant
As a buyer’s agent, which of the following would the agent not have to disclose to a seller?
A. The buyer’s ability to complete the contract
B. The agency relationship between the agent and buyer
C. Any change in the buyer’s financial ability that would affect the contract
D. The buyer was willing to pay more for the property than the offer price
D. The buyer was willing to pay more for the property than the offer price
*Who signs a property disclosure statement?
A. Broker
B. Appraiser
C. Lender
D. Seller
*D. Seller
A seller’s agent would be guilty of a breach of fiduciary obligation by doing which of the following?
A. Telling the buyer that the seller is in bad financial shape and would take less for the property than the asking price
B. Telling the buyer about property defects
C. Taking a full priced offer of a friend to the seller
D. Taking a full priced offer from the seller’s agent himself with full disclosures of all material and fiduciary facts
A. Telling the buyer that the seller is in bad financial shape and would take less for the property than the asking price
How does commission money flow?
The seller pays the listing broker who pays the sales agent.
How much commission does a listing agent receive from a sale?
Always negotiable, but generally a percentage of the sale. Could be a flat fee.
Def: Sherman Anti-Trust Laws
Price Fixing; when brokers get together and decide to all charge the same commission rate. Illegal.
Can a broker share commission with other people?
Only if they are licensed
Def: Multiple Listing Service
When the seller pays the listing broker who pays the selling broker. Each broker shares with their own sales agents.
What must a selling agent do in order to receive commission for a sale?
Procure Cause
Def: Procuring Cause
The person who brings a ready, willing, able buyer to the table
Who would sue a seller if they refused to pay the commission?
The listing broker
Who would sue the listing broker if they refused to pay the sales agent from a sale?
The listing sales agent
*Three real estate managing brokers in a small town all get together and decide to charge the same commission rate. This would be a violation of which law?
A. RESPA
B. Sherman Anti-Trust
C. TILA
D. ECOA
*B. Sherman Anti-Trust
What is always true about a real estate commission?
A. An agent cannot be paid by both seller and buyer
B. It is always negotiable
C. The commission percentage is limited by state law
D. It is always paid by the seller
B. It is always negotiable
A local multiple listing service (MLS) passed a rule saying that any broker who charges less than 4% commission in a minority area cannot belong to the MLS. Which of the following statements would be true?
A. This is legal as brokers cannot be forced to operate at a financial loss
B. This is legal because without this rule, other brokers would be scared away from joining the MLS
C. This is illegal as this violated federal fair housing laws
D. This is illegal as this violated price fixing laws under the Sherman Anti-Trust laws
D. This is illegal as this violated price fixing laws under the Sherman Anti-Trust laws
Which of the following would be an example of a tying contract with a broker?
A. A group of brokers setting a common commission rate
B. A broker referring buyers to a particular lender
C. Requiring a builder to list a finished house with the broker after buying a lot in the subdivision
D. A broker listing a seller’s house for sale and then finding the seller a bigger house to buy in that same area
C. Requiring a builder to list a finished house with the broker after buying a lot in the subdivision
*An industrial building sold for $535,000. The listing broker charged a 4.5% commission agreeing to cooperate with other brokers and split the commission 50/50. If a cooperating broker sold the property, how much would each of the brokers receive?
A. $10,535.50
B. $12,037.50
C. $24,075.00
D. $28,975.00
*B. $12,037.50
*A broker sells a property receiving $8,400 by charging a 6% commission. What was the sale price?
A. $140,000
B. $157,000
C. $182,000
D. $302,000
*A. $140,000
Who is a Property Management Agreement between?
Owner & property manager
*What are the 2 purposes of a property manager?
- Maintain property value
2. Produce income
*What 5 functions is a property manager responsible for?
- Collecting rent
- Maintenance
- Leases
- Paying bills
- Renting unit
*What 3 functions is a property manager not responsible for?
- Cannot enter premises without notice and/or permission
- Renovation
- Appraisal
- Cannot enter premises without notice and/or permission
What is a property management budget for?
Operating expenses
Def: Reserve Account
A savings account to replace long-life assets such as a roof or parking lot
An agreement between a property owner and a property manager detailing the managers responsibilities in managing the property would be called a(n):
A. option contract
B. lease agreement
C. property management agreement
D. listing contract
C. property management agreement
A property manager is contemplating renting a space to a tenant with a mental disability. The manager is worried about this tenant posing a threat to the other tenants in the building. Under federal guidelines, what should the manager do?
A. Distribute leaflets to the other tenants about the new tenant
B. Inform the property owner if the manager suspects any problems
C. Confer with a manager of a condominium to get another opinion
D. There are no federal guidelines on this issue
B. Inform the property owner if the manager suspects any problems
A property manager’s two main objectives are to maintain the value of the property and:
A. generate and produce income from the property
B. minimize expenses
C. avoid lawsuits for the owner
D. get good tenants to occupy the space
A. generate and produce income from the property
Def: Conveyance
Transfers deed to the buyer
Whose responsibility is it to always produce a valid, marketable title?
The seller
An assumed loan in a real estate transaction would appear on the closing statement as a:
A. credit to the buyer only
B. debit to the buyer, credit to the seller
C. debit to the seller, credit to the buyer
D. neither a debit nor credit to the seller
C. debit to the seller, credit to the buyer
A listing real estate agent should be aware of all the ownership documents that will be used in a real estate transaction so the agent can:
A. know which documents the seller and buyer will have to sign to complete the transaction
B. give both parties advice on vesting
C. give the seller capital gains advice
D. give both parties inheritance advice
A. know which documents the seller and buyer will have to sign to complete the transaction
All of the closing documents should be prepared in accordance with the terms of the:
A. listing contract
B. sales contract
C. right of first refusal contract
D. title policy
B. sales contract
*How does earnest money appear on a closing statement?
A. Debit buyer only
B. Credit buyer only
C. Credit seller only
D. Credit buyer and seller
*B. Credit buyer only
How would a loan origination fee normally show up on a closing statement?
A. Debit buyer - Credit seller
B. Debit seller - Credit buyer
C. Debit seller - No entry to buyer
D. Debit buyer - No entry to seller
D. Debit buyer - No entry to seller
*A property sold for $350,000 with the buyer obtaining an 80% loan. If the transfer fee was $3 per $1,000, what was the amount of the fee?
A. $840
B. $1,050
C. $1,175
D. $1,300
*B. $1,050
A property was sold with a 300-gallon fuel tank being part of the sale. The tank was 2/3 full at closing with a cost of $1.45 per gallon. What would be the proration at closing?
A. $100
B. $145
C. $290
D. $435
C. $290
A property sold for $125,000 with a loan of $50,000. The seller paid $2,000 in closing costs and a 7% commission? How much would the seller net?
A. $54,250
B. $57,000
C. $61,250
D. $64,250
D. $64,250
*Taxes on a property were paid in arrears running from July 1st to June 30th. If closing was on April 15th and the annual taxes were $912, what was the tax proration?
A. $191
B. $437
C. $721
D. $912
*C. $721
*A seller received $75,000 at closing after paying a 6.5% commission. What would have been the sale price?
A. $79,875
B. $80,214
C. $82,570
D. $85,356
*B. $80,214
XXXXX
XXXXX
What are the 6 types of leases?
- Gross Lease
- Net Lease
- Percentage Lease
- Graduated Lease
- Index Lease
- Ground Lease
Def: Gross Lease
Normal lease, landlord pays taxes, insurance, etc.
Def: Escalation Clause (with regard to leasing)
If landlord’s expenses go up, they can pass part of those costs to the tenant
Def: Net Lease
Tenant pays taxes, insurance, basically everything and get tax deduction
*Def: Percentage Lease
*Commercial - Rent based on percentage of sales
Def: Graduated Lease
Pre-determined that payments could go up (or down)
Def: Index Lease
Lease is based on Consumer Pricing Index (published monthly)
Def: Ground Lease
Long term leases (cell towers, billboards, oil wells, etc.)
What are the 2 ways to transfer lease rights to others?
- Assignment
2. Subleasing
If a lease is assigned, who is liable to the landlord?
The original tenant and new tenant are equally liable. (Total transfer of rights)
If a lease is subleased, who is liable to whom?
The new tenant is liable to the original tenant while the original tenant is liable to the landlord. (Partial transfer of rights)
What effect does the sale of a home have on an existing lease?
No effect on lease, new owner must honor current leases.
Def: Actual Eviction
Landlord would go to court to file a suit for possession
Def: Constructive Eviction
When the lessor/landlord does not maintain the property in a livable condition and the lessee/tenant sues. Tenant must leave property.
A person builds a building on ground that is leased from a land owner. Which of the following statements would be correct concerning this situation?
A. This is not allowed under federal law
B. When the lease expires, the land owner would own the building
C. It would be easier to get financing this way rather than the land owner and building owner being the same person
D. The land owner would have to notify the building owner if the land was to be sold
B. When the lease expires, the land owner would own the building
A tenant signs a three-year lease with a landlord. The landlord dies with heirs inheriting the rental property. The heirs then sold the rental property to a new owner. The new owner would like to terminate the tenant’s lease. can the new owner do so?
A. Yes, because the death of the original landlord
B. Yes, because the rental property had been sold
C. No, unless the new owner gives property notice to the tenants
D. No, the lease is still valid for the remainder of the term
D. No, the lease is still valid for the remainder of the term
When a tenant pays taxes and insurance in addition to normal rent, this would be called a:
A. graduated lease
B. percentage lease
C. gross lease
D. net lease
D. net lease
*A commercial tenant leased a commercial space from a landlord. The tenant operated a grocery store on the premises. Which of the following statements would be true if the landlord died?
A. The heirs could terminate the lease
B. The heirs have to honor the lease as it runs with the land
C. The heirs could change the terms of the lease as the new owners
D. The heirs must give an automatic renewal to the tenant
*B. The heirs have to honor the lease as it runs with the land
What are the 4 different types of listing contracts?
- Open
- Exclusive Agency
- Exclusive Right to Sell
- Net Listing
Def: Open Listing
When anybody can be the procuring cause of the sale
Def: Exclusive Agency
Owner and real estate professional both have rights to sell
Def: Exclusive Right to Sell
Real estate professional has exclusive right to sell
In an Exclusive Right to Sell agency, does the broker have to be the procuring cause to earn a commission?
No
*Def: Net Listing
*Commission is the difference between what the seller wants to receive from the sale and the sales price
What are the 2 different types of buyer agreements?
- Open (Non-Exclusive)
2. Exclusive Buyer Agency
Def: Open (Non-Exclusive) Agency
Any agent who is the procuring cause gets paid
Def: Exclusive Buyer Agency
Only the authorized person can facilitate the buyer buying house
What does a listing need to have in order to be valid?
An expiration date
Def: Protective Period Clause
If list of people selling agent shows house to buys house within protective period after a listing has expired, selling agent receives commission
Def: Employment Contract
The listing contract between a broker & seller is considered to be an employment contract
A broker and buyer entered into an exclusive buyer agency agreement for 6 months which was signed on January 1st. In February, the buyer purchased a property on their own. The broker demanded that the buyer pay her a commission. Does the buyer owe the broker a commission?
A. No, because the buyer bought the property without the assistance of the broker
B. No, as sellers always pay commission in a real estate transaction
C. Yes, because of the exclusive buyer agency agreement
D. Yes, but the commission amount would be reduced to a referral fee
C. Yes, because of the exclusive buyer agency agreement
*A for-sale-by-owner lists a property with a broker. The broker puts the listing in the multiple listing service. The seller continues to advertise the property themselves. The seller then finds a buyer for their own property but still owes a commission to the broker. This must have been a(n):
A. Exclusive Agency listing
B. Exclusive Right to Sell listing
C. Open listing
D. Net listing
*B. Exclusive Right to Sell listing
An exclusive right to sell listing is given by an owner to a broker. Which of the following would be required of the owner?
A. To convey the property if a buyer offers full list price
B. To put the listing in the multiple listing service
C. Pay the broker a commission only if the broker can prove procuring cause
D. Pay the broker a commission upon completion of the sale of property
D. Pay the broker a commission upon completion of the sale of property
A broker for Realty A took an open listing on a property. The seller had already signed another open listing with Realty B. The broker for Realty A found a buyer who wrote an offer on the listed property. What should the broker for Realty A do now?
A. Take the offer to Realty B and have Realty B present the offer to the seller
B. Present the offer to the seller
C. Present the offer to the lender
D. Wait a few days to present the offer in case a different buyer might want to make a competing offer
B. Present the offer to the seller
A seller lists a property with Broker A. However, the listing provides that if any other broker sells the property, Broker A does not receive a commission. This type of listing would be called a(n):
A. exclusive agency
B. exclusive right to sell
C. open listing
D. net listin
C. open listing
An agreement between a seller and a broker where a broker is hired to sell the seller’s property is referred to as a(n):
A. option contract
B. listing agreement
C. buy sell agreement
D. offer to purchase contract
B. listing agreement
*A listing contract with a seller is about to expire. The broker has a buyer who is interested in the property but is not quite ready to make an offer. If the broker wants to be protected as far as earning commission if this buyer wants to purchase the property at a later date, the broker would need to do all of the following except:
A. make sure there is a protective period clause in the listing
B. make sure the protective period clause covers a certain number of days
C. give a notice in writing to the buyers that the buyers are on a protective period list
D. give in writing to the seller the names of all the buyers who have looked at the property through the broker
*C. give a notice in writing to the buyers that the buyers are on a protective period list
An agency agreement can always be terminated by:
A. the seller unilaterally
B. the broker unilaterally
C. the licensee and seller
D. mutual agreement by all parties to the contract
D. mutual agreement by all parties to the contract
A seller lists a property with one broker but reserves the right to sell it herself without paying a commission. This is an example of a(n):
A. exclusive right to sell listing
B. exclusive agency listing
C. open listing
D. net listing
B. exclusive agency listing
*Which of the following would not be a valid way for an agent to take a listing?
A. Receiving a percentage of the sale price as a commission
B. Receiving a flat fee
C. Receiving money for fixed expenses in addition to a normal commission
D. Receiving as commission anything obtained in sales price over a certain amount for the seller
*D. Receiving as commission anything obtained in sales price over a certain amount for the seller
XXXXX
XXXXX
What are the 3 types of brokers insurance?
- Errors and Omissions
- Hazard
- General Liability
Def: Hazard Insurance
Protects licensee in case of vandalism
Def: General Liability Insurance
Protects brokerage if someone gets hurt in the office
A buyer and a seller entered into a contract for the sale of a house. The buyer applied for and was approved for a loan. At the last minute the seller backed out of the sale. Is the broker due a commission?
A. No, because the buyer did not meet all the personal requirements of the seller
B. No, since the sale did not close, the broker did not perform
C. Yes, because the buyer was able to perform all of the requirements in the contract
D. Yes, anytime a contract is signed the broker has performed and is due a fee
C. Yes, because the buyer was able to perform all of the requirements in the contract
Def: Capitol Gain
Profit earned from the sale of an asset
How much money can you make from the sale of your primary residence without having to pay Capitol Gains tax?
$250K if single or $500K if married and have lived there for 2 of the past 5 years.
A buyer purchased a house by financing 90% of the sale price, thus putting 10% down. Which of the following statements would be true regarding this transaction?
A. If he sells the property for profit in the future, he can defer paying capital gains taxes by purchasing another home
B. If he sells the property at a loss, that would be tax deductible if he itemized deductions
C. He could deduct property taxes and mortgage interest if he itemized deductions
D. His taxes will always be lower because he pays mortgage interest on the loan
C. He could deduct property taxes and mortgage interest if he itemized deductions
Which of the following statements is true regarding security for a debt?
A. The note secures the mortgage
B. The mortgage secures the note
C. The warranty deed secures the note
D. The note secures the warranty deed
B. The mortgage secures the note
Existing easement, restrictions, liens and taxes are listed in which of the following clauses in a warranty deed?
A. Habendum
B. Reservations
C. Granting
D. Conservation
B. Reservations
A buyer working with an agent makes an offer on a property offered for sale by owner. The offer is contingent upon the buyer securing an FHA loan. Does this loan have to follow RESPA guidelines?
A. No, because FHA and VA loans do not need to meet HUD guidelines but not RESPA
B. Yes, because an FHA loan is guaranteed by the government
C. No, because the offer was made by a buyer working with a broker
D. Yes, because it is a single family residential property
D. Yes, because it is a single family residential property
What are the 2 essential elements of a contract?
- Competent parties
2. Offer and acceptance - mutual assent
At what point can a buyer not withdraw their offer?
When the offeree accepts
What is required in order to be considered a competent party with regards to contracts?
- Legal age + sound mind
- Must be alive at the time of acceptance
- Consideration
- Legal object
- Writing
How does a buyer withdraw if they don’t like the seller’s counter-offer?
Just say no/walk away
Once an offer is accepted, what does the buyer receive?
Equitable title
If a seller backs out after an offer was accepted, what can the buyer do?
Gives buyer right to sue because buyer has received equitable title meaning they have legal interest in the property.
Whose responsibility is earnest money?
The listing broker
Can a promise to pay be considered earnest money?
Yes
Def: Legal Object (with regards to a contract)
Has to be legal
What type of contract cannot be enforced in court?
An oral contract
Who must a contract be signed by?
All parties
Def: Statute of Frauds
The body of law that governs real estate contracts, leases over a year, and deeds
What must a real estate contract describe?
Must describe land legally or at lease adequately
An agent brought an offer to a seller with the seller counter offering back to the buyer. In the meantime, another offer was brought to the seller with terms more favorable to the seller. The seller’s best option would be to:
A. rescind the first counteroffer before acceptance and then accept the better offer
B. go ahead and accept the better offer and just ignore the outstanding counteroffer
C. wait for a third offer and hope the other two buyers won’t go elsewhere
D. counteroffer on the new offer and wait back to hear from both buyers
A. rescind the first counteroffer before acceptance and then accept the better offer
*A listing agent has received several offers on a listed property all at the same time. The listing agent should:
A. present the offers in the order received
B. present the best offer first
C. present all offers together at the same time
D. present only the offers with pre-approved buyers
*C. present all offers together at the same time
What is true when a counteroffer is made?
A. This represents a partial acceptance
B. It is binding on the offeree
C. It voids only part of the previous offer
D. It voids the previous offer
D. It voids the previous offer
When does a sales contract become legally binding for the buyer?
A. When the offer is made initially
B. When the offer is presented to the seller
C. When the offer is accepted by the seller
D. When the seller’s acceptance is communicated back to the buyer
D. When the seller’s acceptance is communicated back to the buyer
*A person with a mental impairment would like to enter into a contract for the purchase of a piece of real estate. Which of the following statements would be true?
A. The person can sign the contract if a psychiatrist says okay
B. The state would have to provide housing for this person
C. A person appointed by the court as a guardian can sign the contract on behalf of the mentally impaired person
D. This person would never be able to purchase a property
*C. A person appointed by the court as a guardian can sign the contract on behalf of the mentally impaired person
Which of the following would be an example of an impossibility of performance regarding a sales contract?
A. A buyer could not qualify for a loan
B. A seller died after signing the sales contract but before closing
C. A seller had signed the contract without the consent and knowledge of the other owners who were joint tenants
D. The property was destroyed by fire after the signing of the contract but before closing
C. A seller had signed the contract without the consent and knowledge of the other owners who were joint tenants
A broker has a property listed for $110,000. A buyer tells the listing broker she would like to make an offer of $90,000. What should the listing broker do?
A. Pressure the buyer to raise the amount of the offer
B. Tell the buyer to increase the earnest money with such a low offer
C. Tell the buyer that the broker will present the offer to the seller
D. Tell the buyer that the seller has told the broker not to present such low offers
C. Tell the buyer that the broker will present the offer to the seller
*An offer to purchase contract has been presented to the seller. Which of the following statements is true regarding the contract negotiation?
A. Any counteroffer must be close to the terms of the original offer
B. Any counteroffer must be in writing
C. The offer could be withdrawn any time prior to conveyance of an acceptance or rejection
D. The buyer would have a three day right of rescission even after acceptance by the seller
*C. The offer could be withdrawn any time prior to conveyance of an acceptance or rejection
Real estate sales contracts must be in writing to be enforceable under which body of law?
A. Real Estate Settlement Procedures Act (RESPA)
B. Statute of Frauds
C. Truth-In-Lending (Regulation Z)
D. Equal Credit Opportunity Act
B. Statute of Frauds
Which of the following would be correct concerning the validity of a contract?
A. A legal description of the property is required
B. Earnest money of at least $1 is required
C. Earnest money is not required
D. A verbal contract for real estate would be enforceable in a court of law
C. Earnest money is not required
What 2 ways are contract created?
- Expressed
2. Created by actions
How is an expressed contract created?
By clearly stating intentions in writing
How is an implied contract created?
By actions
What is the difference of a uni-lateral versus a bi-lateral contract?
A uni-lateral contract is a promise for an action while a bi-lateral contract is a promise for a promise.
Def: Executory Contract
A promise that’s been made but not completed
Def: Executed Contract
All promises complete
What can be put in a contract to ensure timely completion?
Time is of the Essence
*Which of the following would be an executory unilateral contract?
A. An unexercised option on a property in which a sum of money had been paid for the option
B. An exclusive right to sell listing where the broker had already performed
C. An offer to purchase contract between a buyer and a seller
D. A lease agreement where the tenant had fallen behind six months on rent
*A. An unexercised option on a property in which a sum of money had been paid for the option
Time is of the Essence in a contract means that the:
A. contract cannot be rescinded
B. contract terms should be performed punctually
C. transfer of the deed and title should be done as soon as possible
D. damages will be awarded if the contract is not closed on time
B. contract terms should be performed punctually
A contract would be considered executed when:
A. the deed has been delivered and accepted
B. all contract terms have been satisfied
C. the deed has been recorded
D. the deed has been acknowledged
B. all contract terms have been satisfied
What are 4 different ways to legally classify contracts?
- Valid and Enforceable
- Void
- Voidable
- Unenforceable
What are the essential elements in a Valid and Enforceable contract?
All parties, legal age - sound mind, legal description
Why might a contract be Void?
Party not of legal age or sound mind, illegal
*What are some examples of voidable contracts?
- Contract signed by a minor
- Contract signed under duress
- Contract signed due to misrepresentation
- Contract signed by a minor
Def: Misrepresentation
Property has been misrepresented; false statement about a material fact, a person intoxicated at the time of signing
Def: Puffing
Subjective opinion, embellishing (“This house is on the prettiest side of town.”)
Who could void a contract?
Injured party (minor, person under duress or misrepresented party)
A property has had termite problems in the past. A broker tells a buyer that the termite problems have been taken care of knowing that the problems actually still exist. The broker is guilty of:
A. deceptive and fraudulent conduct
B. puffing
C. fraud only in skill and care
D. negligent misrepresentation
A. deceptive and fraudulent conduct
A licensee, in showing a property to a buyer, told the buyer that property had the most beautiful view in the neighborhood. This would be an example of:
A. misrepresentation
B. puffing
C. rescission
D. just trying to make a sale
B. puffing
*A sixteen-year old purchased a property. Two weeks later the seller found out that the buyer was a minor. Which of the following statements is true?
A. The seller could void the deal
B. The sixteen-year old, as the injured party, may void the deal
C. The contract is automatically void
D. The contract is binding on both parties as the two weeks exceeds the 3 day right of rescission
*B. The sixteen-year old, as the injured party, may void the deal
What are 4 different ways to change a contract?
- Breach
- Assignment
- Novation
- Addendum/Amendment
Def: Breach
When one or both parties don’t perform
What 3 choices does a buyer have if a seller defaults?
- Specific Performance Suit
- Rescind
- Sue for damages
*Def: Rescind
*Go back to “status quo”
What 4 choices does a seller have if a buyer defaults?
- Declare contract forfeited
- Specific performance suit
- Rescind
- Sue for damages
When a seller declares a contract forfeited because the buyer did not perform, does the seller need to also return the buyer’s earnest money?
No
Def: Liquidated Damages Clause
Predetermined damages if a party sues for damages
What type of contract cannot be assigned?
Personal services (e.g. football player, lawyer)
Def: Assignment (with regards to changing a contract)
Transfers rights (unless contract says otherwise) to new buyer. New buyer must perform.
Def: Novation
An assumption with a release of liability (New replaces old)
Def: Addendum
An addendum adds something to the contract
Def: Amendment
An amendment changes the original contract
When a change is needed in a contract, the best way to accomplish this would be with a(n):
A. verbal agreement
B. addendum
C. amendment
D. new contract
C. amendment
A buyer and seller negotiated a sale whereby the seller was to include all the kitchen appliances. Upon moving in, the buyer discovered that the seller had taken all the kitchen appliances. What would be the buyer’s best remedy?
A. Declare the contract invalid
B. The buyer is out of luck as the buyer negotiated this himself
C. Sue the seller for partial performance
D. Sue the seller for specific performance
D. Sue the seller for specific performance
A seller and buyer have agreed to a sales contract. The buyer backs out of the agreement. Which of the following could the seller not do?
A. Sue for specific performance
B. Rescind the agreement
C. File for a writ of execution
D. Sue for compensatory damages
C. File for a writ of execution
What are the characteristics of a Right of First Refusal?
- Formal Document
- Person has first opportunity to buy if offered for sale or lease
- Person can buy by matching any other offer
- There is no definite sales price
- All contract laws apply
A seller and buyer agree on an option contract. Which of the following statements would be true?
A. It is non-binding on the seller
B. It is binding on the buyer
C. If the buyer does exercise the option, any option money paid would be automatically applied to the purchase price
D. It must be in writing to be enforceable
D. It must be in writing to be enforceable
A contract that begins as unilateral but could end up being bilateral is a(n):
A. sales contract
B. option contract
C. offer to purchase contract
D. listing contract
B. option contract
*A right to buy a property for a definite sale price with a definite time period is referred to as a(n):
A. sales contract
B. listing contract
C. right of first refusal
D. option contract
D. option contract
What type of contract is used to transfer real estate?
Offer to purchase contract - Sales contract
In an all cash deal, if either the buyer or seller died, would the contract be automatically terminated?
No. Seller’s estate would have to complete the contract by selling the property to the buyer. Likewise, buyer’s estate would have to complete the contract by buying the property.
In a mortgage (financing) contingency clause, what happens to the deal if the buyer dies?
The deal falls through
Is a sales contract uni-lateral or bi-lateral?
Bi-lateral
Def: Contingency Clause
“I’ll buy your home IF…”
What is the difference between a home warranty plan and a construction warranty?
A home warranty plan covers household appliances while a construction warranties are offered by the builder for construction issues.
*When after obtaining an offer with earnest money must a sales person deliver to their broker?
*Immediately
How much money can a broker keep of their own money in an escrow account?
$1,000
Why must every broker have a separate escrow account?
To hold other person’s money
*Who receives the interest that an escrow account for earnest money accrues?
*All parties must agree who gets interest
Def: Commingling
When you mix personal/business money with escrow money. Illegal!
A seller’s agent has a property listed. A buyer would like to make an offer on the property but wants to include an inspection contingency. In order to protect the seller, the listing agent should:
A. discourage these types of contingencies
B. refuse to take such an offer to the seller
C. make the inspection contingency for the shortest time frame possible
D. only allow contingencies based on financial issues
C. make the inspection contingency for the shortest time frame possible
A buyer writes a contract with a contingency that says if a certain thing does not happen, the buyer does not have to purchase the property. The contract does not close due to this contingency. Normally, any earnest money should be given to the:
A. buyer
B. seller
C. broker
D. state
A. buyer
What is the purpose of earnest money being part of a real estate contract?
A. Without it, there would be no consideration
B. It gives the broker commission money in case the buyer does not close
C. It establishes the intent of the buyer to carry out the contract
D. It provides for payment of some of the buyer’s closing costs
C. It establishes the intent of the buyer to carry out the contract
Which of the following would be considered commingling?
A. A broker depositing two different buyer’s earnest money checks into one escrow account
B. A broker refunding a buyer’s earnest money out of the escrow account
C. A broker depositing a client’s earnest money check into the broker’s personal account
D. A broker paying a secretary’s salary out of the broker’s account
C. A broker depositing a client’s earnest money check into the broker’s personal account
A buyer made an offer with earnest money to a seller on a listed property. The offer contained a clause saying the offer was only good for 24 hours. While the seller was considering the offer within the 24-hour time frame, the buyer changed his mind and called his buyer’s agent to rescind the offer. The buyer’s agent notified the listing agent of the rescission of the offer. In this case, the earnest money:
A. can only be returned to the buyer if the seller agrees
B. should be returned to the buyer immediately
C. should be held by the brokerage and applied to the next offer the buyer wishes to make
D. can only be returned to the buyer by court order
A. can only be returned to the buyer if the seller agrees
*Can brokers draft legal documents?
*No, they can only fill in blank spaces on attorney approved forms. They cannot charge extra for this work or give legal advise.
*Who are real estate contracts governed by?
*The state
An agent is working with a married couple in the purchase of a home. The couple asks the agent how they should take title to the property. The agent should say:
A. tenancy in the entireties
B. joint tenancy
C. see an attorney
D. tenancy in common
C. see an attorney
What are the 4 different types of legal property descriptions?
- Metes & Bounds
- Geodetic Survey System
- Rectangular (Government) Survey System
- Lot and Block System
*Def: Metes & Bounds
*Physical description of the property. Metes means length (e.g. feet, paces, bounds) and Bounds means markers (e.g. oak tree, gravestone). *Must always begin and end at point of beginning.
Def: Geodetic Survey System
“Bench marks”
Def: Rectangular (Government) Survey System
Describes land by using Land & Tier lines
How large is a township?
6 x 6 Miles
How large is a section?
1 x 1 Mile
How many acres are in a section?
640
How many square feet are in an acre?
43,560
*Somebody bought a 1/4 section + 15 acres, how many acres did they buy?
A. 175
B. 289
C. 560
D. 200
*A. 175
Who must approve a plat map (with regards to a lot and block system?)
The city
What does the description on a plat map list?
Lot #, Block #, Subdivision, County and State
Def: Setback Lines
How far off the lot lines you can build
Def: Front Footage
Linear footage lot line to lot line
Def: Square Footage
Length x width
*A legal description included Range 2 East and Tier 1 North of a principal meridian. This is an example of:
A. metes and bounds description
B. rectangular survey system description
C. lot and block description
D. geodetic survey system description
*B. rectangular survey system description
- A legal description that uses directions, distances and monuments is called:
A. the rectangular survey system
B. the geodetic survey system
C. a metes and bounds description
D. a lot and block description
*C. a metes and bounds description
Def: Sole Proprietorship
Where one person forms a company. One man show. No liability protection
Def: Syndication
Getting a bunch of people together & pool money. Spreads risk. Raises money.
XXXXX
XXXXX
Def: Real Estate Investment Trust (REIT)
Big mutual funds for real estate investments. Minimum of 100 people.
Def: Securities License
Sale of investment items to the public (e.g. Limited partnerships, REITs, Mortgage securities)
Who governs the sale of securities?
The Securities and Exchange Commission (SEC)
Def: Limited Liability Company (LLC)
Combines the benefits of the corporation with the benefits of a sole proprietorship. Profits and losses flow through to individual members.
A person invested $5,000 in a limited partnership. One of his concerns was the amount of his liability. Since he is one of the limited partners, can he be held liable for more than his initial investment?
A. No because he is guaranteed a 25% return on his investment
B. Yes, because limited partners are responsible for a limited amount of all debts
C. Yes, because he is liable for three times the initial investment
D. No, because he is only liable for his initial investment
D. No, because he is only liable for his initial investment
A person who wanted to invest in real estate but did not want to worry about management responsibilities would want to be a:
A. general partner
B. limited partner
C. corporation
D. sole proprietor
B. limited partner
In a general partnership (unlimited liability), with regards to partnership, the partners share how much liability?
All liability
What are the 3 main fair housing laws that pertain to real estate?
- Civil Rights Act of 1866
- Civil Rights Act of 1968 (Title VIII)
- Fair Housing Amendments Act of 1988
*Def: Civil Rights Act of 1866
*“All citizens of the United States shall have the same right in every state and territory as is enjoyed by white citizens thereof, to inherit, purchase, lease, sell, hold, and convey real and personal property.”
What does the Civil Rights Act of 1866 protect?
Race only
*What 7 things does the Civil Rights Act of 1968 (Title VIII) protect?
- Race
- Color
- Religion
- National Origin
- Sex
- Handicap (1988)
- Familial Status (1988)
- Race
XXXXX
XXXXX
Def: Blockbusting
Inducing owners to sell by telling them persons of a protected class are moving into the neighborhood
Def: Steering
Directing people towards an area based on a protected class
Def: Redlining
Geographically blocking off locations from loaning
What 4 parties are exempt from the Civil Rights Act of 1968 (Title VIII)?
- An owner selling or renting a single-family home if owner
A. Does not own more than three homes at once
B. Does not use a broker or agent (must be a FSBO)
C. Does not discriminate in advertising - Owner occupied 2-4-plex in renting
- Religious organization discriminating on religion (Not commercial!)
- Private club (Not commercial!)
What 1 thing can never be discriminated on by parties exempt from the Civil Rights Act of 1968 (VIII)?
Race
What 2 additional protected classes were added to Title VIII in 1988 (Fair Housing Amendments Act of 1988)?
- Handicap
2. Familial Status
What is a handicap?
Physical or Mental
What is not a handicap?
Being addicted to illegal drugs
XXXXX
XXXXX
Who may file a suit with Housing and Urban Development (HUD) with regards to fair housing?
Whoever has been discriminated against
What is the time limit to file a suit with Housing and Urban Development (HUD) with regards to fair housing?
1 Year from when discrimination took place
If the state and HUD have differing laws regarding fair housing, which will be enforced?
Whichever laws are stricter
*Def: Americans with Disabilities Act (ADA)
*Places of public accommodation must be accessible to persons with disabilities - hotels, shopping malls, etc.
XXXXX
XXXXX
The Americans with Disabilities Act (ADA) would not apply to a(n):
A. office building
B. real estate school
C. commercial building
D. church
D. church
A broker has been accused of steering. Which of the following would HUD least consider?
A. What other properties the agent had shown to the person in question
B. Looking at the results from testers who had tested this same agent in the area of fair housing laws
C. That the broker thought he was doing what was in the buyer’s best interest
D. Whether there was a fair housing poster posted at the office
C. That the broker thought he was doing what was in the buyer’s best interest
A violation of the federal fair housing laws:
A. may be a criminal act
B. must involve actual damages
C. is permissible under certain circumstances
D. must be filed with HUD within three years of the act
A. may be a criminal act
Which of the following would not be a protected class under the federal fair housing laws?
A. A person with children under 18
B. A person with a mental handicap
C. A person with a different national origin
D. A person currently using illegal substances
D. A person currently using illegal substances
An agent is working with buyers wishing to purchase an older home in a deteriorating neighborhood. Both of the buyers have good incomes and are well qualified. The buyers have been turned down by three lenders for a loan on the property. The lenders may be guilty of:
A. steering
B. blockbusting
C. price fixing
D. redlining
D. redlining
*A broker listed a home for sale. The broker noticed that a lot of Russians were moving into the neighborhood because of a local Russian grocery store in the area. The broker decided to cancel advertising for that listing in the general newspaper and instead advertised the listed property on Russian websites only. This would be:
A. a good marketing plan
B. illegal as this would be discriminatory
C. helpful for Russian people who wanted to move into the area
D. allowed as the broker was not required to advertise in a general newspaper
*B. illegal as this would be discriminatory
A broker has sold several homes in the same area to buyers having small children. The broker then advertises to other property owners in the area that they should sell now so they can move to a quieter neighborhood. This is an example of:
A. steering
B. blockbusting
C. redlining
D. puffing
B. blockbusting
*Under the federal fair housing laws, which of the following advertisements would be allowed?
A. Adult building
B. No children
C. Wheelchair accessible
D. Down the road from the Holy Rosary
*C. Wheelchair accessible
An owner of an 8-plex wants to advertise for seniors only. The building does not have any special facilities for older persons In order for the owner to do this, at least 80% of the units must be occupied by a person who is at least
A. 50 years old
B. 55 years old
C. 62 years old
D. 65 years old
B. 55 years old
*Which of the following would be a good example of a person being protected under the federal fair housing laws?
A. A minority person being steered to minority neighborhoods only
B. A blind person with a seeing eye dog being able to rent an apartment that has a no pets policy
C. A property manager refusing to rent to a person with small children
D. A lender refusing to make loans in questionable areas
B. A blind person with a seeing eye dog being able to rent an apartment that has a no pets policy
Under the federal fair housing laws, which of the following would not be discriminatory?
A. Refusing to rent to a person because of national origin
B. Refusing to rent to a person with children
C. Refusing to show a minority buyer homes in a white neighborhood
D. Requiring a tenant to remove a ramp from the deck of an apartment at the end of a lease
D. Requiring a tenant to remove a ramp from the deck of an apartment at the end of a lease
How long does a person have who has been discriminated against to file a complaint with the Department of Housing and Urban Development (HUD)?
A. 6 Months
B. 1 Year
C. 3 Years
D. 5 Years
B. 1 Year
What is the purpose of an appraisal?
To estimate the value of a property (primarily for lender)
Def: Broker Price Opinion (BPO)
Similar to CMA, less extensive than appraisal (usually for short sales)
How is an appraiser compensated?
All based on time and effort
What are the 4 economic characteristics of value?
D. Demand (Is there high demand?)
U. Utility (Has to be useful)
S. Scarcity (Is there a limited supply?)
T. Transferability (Has to be transferrable/marketable title)
When the supply is down and the demand is steady, does the home value increase or decrease?
Increase
When the supply is up and the demand is steady, does the home value increase or decrease?
Decrease
The best way to estimate value for a residential property is with:
A. the owner’s opinion
B. an appraisal
C. what the owner originally paid factoring in a multiplier
D. an estoppel certificate
B. an appraisal
What are 2 different types of depreciation?
- Tax Depreciation
2. Value Depreciation
Def: Tax Depreciation
Deliberately lowering the value of an investment property. The amount you lower will come off taxes.
Def: Value Depreciation
The item goes down in value because of wear & tear & age
Does land ever depreciate in value?
No
What are the 2 different types of life (with regards to depreciation)?
- Physical Life
2. Economic Life
Def: Physical Life (with regards to depreciation)
Number of years something can be structurally sound
Def: Economic Life (with regards to depreciation)
Number of years something can be profitable
Is physical life or economic life always shorter?
Economic life
XXXXX
XXXXX
Def: Effective Age (with regards to depreciation)
Based on condition. Maintained and improved over years (e.g. 30 year old property looks 20)
Def: Chronological Age (with regards to depreciation)
Actual age of a property
Which of the following would one normally depreciate?
A. A building only
B. Land only
C. Land and a building
D. The difference between land and a building
A. A building only
XXXXX
XXXXX
Def: Highest and Best Use (with regards to principles of value)
The purpose from which the lot can get the most value
Def: Substitution (with regards to principles of value)
A property is only worth what you can get an identical one for
Def: Conformity (with regards to principles of value)
Does the property conform to the market?
Def: Progression (with regards to conformity and the principles of value)
When the worth of a cheaper property increases because it’s around more expensive properties
Def: Regression (with regards to conformity and the principles of value)
When the worth of the more expensive property decreases because it is around cheaper properties
Def: Anticipation (with regards to principles of value)
What’s going to happen in the next few years that might effect the property value?
What drives competition (with regards to principles of value)?
Profit
What is the worth of a contribution (with regards to principles of value)?
A. How much it cost to build
B. The value of the house minus the land
C. The previous property value times 1 1/2
D. What it added to the value of the property
D. What it added to the value of the property
Def: Plottage Increment (Assemblage)
If the combination value is more than the sum
The principle of progression in the selling of a property would be best illustrated when the other homes in the neighborhood:
A. had adequate maintenance and repairs
B. are not as nice as the sold property
C. were nicer than the sold property
D. were mostly rented properties
C. were nicer than the sold property
A buyer purchases 3 properties. After the buyer combines all 3 properties, the entire parcel is now more valuable than before. This is called:
A. being in the right place at the right time
B. increasing returns
C. plottage
D. anticipation
C. plottage
An investor purchases some agricultural land believing the property might someday end up being valuable commercial land for a shopping center. The investor is purchasing this land based on the concept of:
A. anticipation
B. plottage
C. conformity
D. substitution
A. anticipation
What is the best way to appraise residential/vacant land?
Market Data Approach
What is the best way to determine a list price for a residential property?
A. Mortgage value
B. Competitive Market Analysis (CMA)
C. Assessed value
D. Appraised Value
B. Competitive Market Analysis (CMA) or Sales Comparison
A licensee does a competitive market analysis (CMA) in order to help a seller determine:
A. the assessed value
B. the value of the personal property located inside the house
C. a probable selling price
D. tax write-offs on their tax return
C. a probable selling price
Which approach to value is best to use in estimating the value of vacant land?
A. Income approach
B. Cost approach
C. Sales comparison approach
D. Rent approach
C. Sales comparison approach
Some out-of-towners had inherited some property. They contacted a local broker to sell the property. The out-of-towners wanted to list the property for $50,000. The broker knew that similar properties in that area were selling for $80,000. What should the broker do?
A. Buy the property personally because of the profit potential
B. List the property for $50,000 as a broker must be obedient to a client
C. Suggest a market analysis for the seller to estimate the current value of the property
D. Require a professional appraisal be done before listing the house
C. Suggest a market analysis for the seller to estimate the current value of the property
How does an appraiser estimate the value if there are no comparables?
Cost Approach
Why might a property not have any comparables?
New property, special purpose property (e.g. church)
What are the 3 steps in the cost approach?
- Estimate current replacement cost
- Subtract for depreciation
- Add the current land value
XXXXX
XXXXX
Def: Square Foot Method
Length x Width x cost per square foot
Def: Cubic Foot Method
Length x Width x Height
Def: Quantity Survey Method
Price items individually (brick-by-brick)
Def: Unit-In-Place Method
Price items by units (wall-by-wall)
Def: Reproduction Cost
An exact replica
Def: Replacement Cost
Similar
*Def: Physical Deterioration
*Property just got old, usually curable
*Def: Functional Obsolescence
*Problems inside the property lines Original bad floor plan - incurable (e.g. missing closets, bathroom is outside)
Def: Economic (External) Obsolescence
Outside property lines (e.g. house right next door to an airport)
*A house with outdated plumbing fixtures would be an example of:
A. physical deterioration
B. economic obsolescence
C. curable functional obsolescence
D. incurable functional obsolescence
*C. curable functional obsolescence
In the cost approach to value, which of the following would lease affect depreciation?
A. Land value going down
B. Physical deterioration to a building
C. Functional obsolescence on a property
D. Exterior obsolescence where a property is next to a toxic dump site
A. Land value going down
The cost approach to value can best be defined as using:
A. capitalization rates
B. depreciated cost of construction
C. comparable sold properties
D. income factoring in vacancy rates
B. depreciated cost of construction
A retail building suffers loss of usable space due to a number of narrowly spaced support columns. It also is cooled by window air conditioning units. This building suffers from:
A. deferred maintenance
B. functional obsolescence
C. economic obsolescence
D. external obsolescence
B. functional obsolescence
*How might a property owner of a house suffer a loss of value due to a new shopping center being build nearby?
A. Psychological impact
B. Economic obsolescence
C. Basis analysis loss
D. Locational depreciation
B. Economic obsolescence
The cost approach to value would be best used on a(n):
A. residential home
B. apartment complex
C. church
D. office building
C. church
Which approach to value would be best for an apartment complex?
A. Market Data Approach
B. Income Approach
C. Cost Approach
D. Sales Comparison Approach
B. Income Approach
What 2 different approaches to value both fall under the Income Approach?
- Capitalization Approach
2. Gross Rent Multiplier
What are the 3 approaches to value?
- Market Data Approach
- Cost Approach
- Income Approach
In the market data approach, which of the following items would be most important?
A. The gross rent multiplier
B. The capitalization rate
C. Sales comparisons
D. Original price paid for property
C. Sales comparisons
