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Final Exam Prep > Chapter 2 Quiz Principles II > Flashcards

Chapter 2 Quiz Principles II Flashcards

1
Q
  1. Written documents affecting title to real estate are recorded:
    A. Where the titleholder resides
    B. Where the titleholder has legal residence
    C. At the county clerk’s office where the property is located
    D. At any county clerk’s office in Texas
A

The correct answer is C. Each county in Texas has a county clerk’s office and all documents pertaining to
property in that county are recorded in that office.

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2
Q 
2. A person appointed by a court to settle the estate of a deceased person when the executor cannot
perform or refuses to perform is:
A. Another executor
B. A legatee
C. An administrator
D. A devisee
A

The correct answer is C. Administrators are not named in the will and are court appointed and executors
are named in the will and are court approved.

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3
Q 
3. What is an abstract of title?
A. Title insurance
B. A history of all recorded activity affecting a parcel of real estate
C. A judgment on real property
D. A patent
A

The correct answer is B. An abstractor searches the public records for all documents pertaining to the
property and an attorney often writes an opinion of the abstract.

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4
Q 
4. Property managers have a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ relationship with the property owner.
A. Partnership
B. Subagency
C. Binding
D. Fiduciary
A

The correct answer is D. The owner is the property manager’s client and the tenant is the property
manager’s customer

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5
Q
  1. A chain of title shows the linkage of property ownership that connects the present owner to the
    original source of title. In most cases it starts with:
    A. Ownership from 1955
    B. Chattel
    C. A suit in a federal court
    D. The original grant of the land from the government to a private citizen
A

The correct answer is D. A chain of title is a list of who owned the property, who they sold it to, the date
the sale occurred, and the number of the book and page it was recorded in at the county clerk’s office.

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6
Q 
6. A handwritten will signed by the testator but not witnessed is known as a(n):
A. Nuncupative will
B. Holographic will
C. Oral will
D. Formal will
A

The correct answer is B. A holographic will is handwritten, dated, and signed by the person making the will. It is not witnessed and is not recorded. A holographic will is legal in 19 states.

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7
Q 
7. A voluntary gift of private land to the public is known as:
A. Alienation
B. A dedication
C. Reliction
D. Annexation
A

The correct answer is B. A dedication is a gift of private land to the public. An example would be a private owner who gives land to the city for a park and playground.

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8
Q 
8. The general warranty deed contains:
A. The covenant of seisin
B. The covenant against encumbrances
C. Both A and B
D. Neither A or B
A

The correct answer is C. The covenant of seisin means the person conveying the land has the right to
convey the land. A covenant against encumbrances means the property is not encumbered by anything
other than the encumbrances that have been disclosed

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9
Q 
9. In order to convey title to real property, a deed must be signed by the:
A. Grantee
B. Grantor
C. Agent
D. Buyer
A

The correct answer is B. The deed must be signed by the seller. The grantor is the seller.

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10
Q
  1. Sam has moved onto a property owned by Fred. Sam is not leasing the property. If Sam holds
    possession of the property for a long period of time, he will own the property through:
    A. Adverse possession
    B. Eminent domain
    C. Foreclosure
    D. Erosion
A

The correct answer is A. There are four statutes of adverse possession. They are the 3-year, 5-year, 10-
year, and the 25-year statutes. The 10 year is the most common and the 25 year is absolute.

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11
Q
  1. The Act passed in 1968 to protect the consumer from land scams is the:
    A. Buyers Land Protection Act
    B. Interstate Land Sales Full Disclosure Act (ILSFDA or ILSA)
    C. Federal Land and Housing Act
    D. Texas Public Ownership
A

The correct answer is B. The Interstate Land Sales Full Disclosure Act was passed in 1968. It is
administered by the Consumer Financial Protection Bureau (CFPB).

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12
Q 
12. The trustee in a deed of trust:
A. Writes the contract for the buyer
B. Shows the property to the buyer
C. Forecloses on the property in the event of default
D. Collects the monthly payments
A

The correct answer is C. The trustee in a deed of trust forecloses on the property if the borrower gets
behind on the payments. The trustee also releases the lien when the borrower has completely paid for the
property

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13
Q 
13. Removing the original borrower’s name from the contract and substituting the new buyers name is called:
A. Novation
B. Substitute
C. Covenants
D. Subdividing
A

The correct answer is A. Novation of parties substitutes a new name for the name that was on the
contract. A novation of contracts substitutes a new contract for original contract

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14
Q 
14. The right to redeem the property before a mortgage foreclosure sale is called:
A. Equitable redemption
B. Buyer redemption
C. Statutory redemption
D. This is never used in Texas.
A

The correct answer is A. Equitable redemption is used with a foreclosure for mortgage. Statutory
redemption is used with a property tax sale. The owner of the property sold at a tax sale can redeem the
property from the buyer after the sale.

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15
Q 
15. The right to redeem the property after a tax foreclosure sale is called:
A. Equitable redemption
B. Buyer redemption
C. Statutory redemption
D. Never used in Texas
A

The correct answer is C. Statutory redemption is used after a tax sale. Equitable redemption is used with
a foreclosure for mortgage. The owner of the property must pay all of the late payments and penalties on
the property before the foreclosure to stop the foreclosure for mortgage.

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16
Q
  1. The Texas Bootstrap Loan Program:
    A. Is a self-help housing construction program for very low-income families
    B. Is only for persons over 65
    C. Must be built completely by the family
    D. Is only for homes costing more than $300,000
A

The correct answer is A. The owner-builder must provide at least 65% of the labor necessary to build the
home.

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17
Q
  1. The Federal Reserve Bank:
    A. Is the most common bank seen in most cities
    B. Was created to provide the nation with a more stable monetary and financial system
    C. Provides loans to most residential home buyers
    D. Was created in 2013
A

The correct answer is B. The Federal Reserve Bank does not provide banking services to individuals. It
provides banking services for banks and credit unions.

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18
Q
  1. FHA loans are_______________________ and VA loans are _________________________.
    A. Insured by the Federal Housing Administration —– guaranteed by the Department of
    Veteran Affairs
    B. Backed by conventional banks —– backed by commercial banks
    C. Only for people with children —– only for people without children
    D. Farm loans —– lake loans
A

The correct answer is A. The Federal National Mortgage Association (FNMA) is commonly known as
Fannie Mae. FNMA buys FHA and VA loans.
grantee is the buyer.

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19
Q 
19. A mortgage that includes real estate and personal property is a:
A. Reverse mortgage
B. Package mortgage
C. Blanket mortgage
D. Equity mortgage
A

The correct answer is B. An example of this is a buyer finances the house, refrigerator, washer, and dryer
on the same loan. It is a package mortgage.

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20
Q
  1. One of the property manager’s fundamental responsibilities is:
    A. Obtaining a construction loan for the owner
    B. Financial reporting to the principal
    C. Finding a buyer for the property
    D. Maintaining good standing with the local property management association
A

The correct answer is B. It is up to the owner to determine if they want reports on a daily, weekly,
monthly, quarterly, semi-annual, or annual basis.

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21
Q
  1. In a deed the person giving up ownership is the ____________________, and the person receiving
    ownership is the _______________________.
    A. Grantee —– grantor
    B. Sublessor —– sublessee
    C. Sublessee —– sublessor
    D. Grantor —– grantee
A

The correct answer is D. The grantor is the seller and the

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22
Q 
22. What type of agency is commonly created by a management agency?
A. General
B. Specific
C. Universal
D. Vicarious
A

The correct answer is A. Listing agreement and buyer’s representation agreement create special agency.

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23
Q
  1. In a ________________________, the owner warrants that the owner has done nothing to encumber
    the title while the owner owned the property.
    A. General warranty deed
    B. Special warranty deed
    C. Bargain and sale deed
    D. Quitclaim deed
A

The correct answer is B. A special warranty deed is sometimes from one spouse to the other in a divorce.

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24
Q 
24. A \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ is created by using the words “love and affection” as the
consideration for the deed.
A. Consideration deed
B. Correction deed
C. Guardian deed
D. Gift deed
A

The correct answer is D. The consideration in a gift deed is often “$10 and love and affection.” The
consideration in a general warranty deed is often “$10 and other good and valuable consideration.”

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25
Q 
25. What a person has seen heard or read concerning the property is:
A. Actual notice
B. Constructive notice
C. Due within one year
D. Due within 30 days
A

The correct answer is A. An owner gives constructive notice by occupying or using the land and by
recording documents pertaining to the property in the county clerk’s office.

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26
Q 
26. The \_\_\_\_\_\_\_\_\_\_\_\_\_\_ index lists in alphabetical order all sellers named in the documents recorded in
a year.
A. Grantor
B. Grantee
C. Lis pendens
D. Tract
A

The correct answer is A. The grantor index is the sellers index and the grantees index is the buyers index.

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27
Q 
27. The expenses, which a lender incurs while processing a mortgage loan application, are recovered
from the borrower as:
A. Discount points
B. An origination fee
C. A mortgage insurance premium
D. Private mortgage insurance
A

The correct answer is B. The origination fee is charged by the lender for processing the loan. It is the
money the lender uses to pay the expenses of the company.
rwise

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28
Q 
28. In a sublet the original tenant, called the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, sublets the property to the new tenant,
called the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A. Mortgagee-----mortgagor
B. Sublessor---- sublessee
C. Sublessee ------sublessor
D. Buyer--------seller
A

The correct answer is B. The original (sublessor) is still responsible to the landlord for the lease.

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29
Q
  1. The Federal National Mortgage Association was organized by the federal government in 1938 to buy
    FHA mortgage loans from lenders. What else is true about FNMA?
    A. FNMA is no longer in business.
    B. FNMA began purchasing VA loans in 1948.
    C. FNMA became FHLMC in 1952.
    D. FNMA is part of the primary market.
A

The correct answer is B. FNMA was created during the depression of the 1930’s to buy the mortgages
that were insured by FHA. FHA was also created in the 1930’s. FNMA began buying VA loans after World
War II.

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30
Q 
32. The term that BEST describes a tenant’s interest in the property under a lease is a:
A. Life estate
B. Reversionary interest
C. Remainder interest
D. Leasehold estate
A

The correct answer is D. A leasehold estate is a temporary right to property granted by the owner to a
tenant thru a lease.

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31
Q
  1. The borrower is:
    A. Not required to be notified when the note is sold, and the servicing rights are not sold
    B. Not required to be notified when the note is sold, and the servicing rights are sold
    C. Required to arrange for the sale of the servicing rights
    D. Not required to allow servicing rights
A

The correct answer is A. The lender is not required to notify the borrower when the note is sold, and the
servicing rights are not sold. The borrower is only required to be notified if the servicing rights are sold
because the borrower will now be making the payment to a different agency.

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32
Q 
34. The premiums for the title insurance policy are set by the:
A. Title Company
B. Texas Department of Insurance
C. State Department of Premiums
D. Texas Real Estate Commission
A

The correct answer is B. The premiums are set by the Texas Department of Insurance and are the same
at all title companies in the state of Texas. The amount paid for the insurance policy is based on the sales
price of the house.

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33
Q 
35. A statutory year has \_\_\_\_\_\_\_\_\_\_\_\_ days and each month has \_\_\_\_\_\_\_\_\_\_\_ days.
A. 365-------31
B. 365-------28
C. 360-------28
D. 360 ------30
A

The correct answer is D. A calendar year has 365 days. A statutory or banker’s year has 360 days.

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34
Q
  1. When a property has become uninhabitable and the landlord has refused to repair the property the
    tenant may file a:
    A. Constructive eviction
    B. Foreclosure against the owner
    C. Judicial eviction
    D. Must stay in the property until the lease is up
A

The correct answer is A. The tenant will appear before a Justice of the Peace and ask to be let out of the
lease because the property has become uninhabitable and the landlord has refused to repair the
property.

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35
Q 
37. Which of the following is NOT a legal description?
A. Government survey system
B. Lot and block
C. Street address
D. Metes and bounds
A

The correct answer is C. Metes and bounds is used in Texas and all of the states along the east coast. It
is the oldest form of survey system.

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36
Q 
38. To become a broker the salesperson must have experience points. The number of experience points
required is:
A. 270
B. 3,600
C. 4
D. 300
A

The correct answer is B. A salesperson must have and active license for four of the previous five years.
The salesperson receives the points for doing real estate transactions. The salesperson must acquire
points in each of the four years.
cess

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37
Q 
39. Title VIII of the Civil Rights Act of 1968 makes it illegal to discriminate on the basis of:
A. Familial status, handicap, race
B. Color. religion
C. National origin, sex
D. All of the above
A

The correct answer is D. The protected classes are race, color, national origin, religion, sex, handicap,
and familial status. Discrimination against race is a federal law and no one is allowed to discriminate
against race.

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38
Q
  1. Jack has a lien on his home. The lien will be repaid in full by the maturity date without the need for a
    balloon payment. This type of loan is known as a(n):
    A. Term loan
    B. Straight loan
    C. Amortized loan
    D. Loan point
A

The correct answer is C. With an amortized loan, the borrower pays part of the principal and part of the
interest every month. By the end of the loan all of the principal and interest has been paid.

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39
Q 
41. Zoning is enforced by:
A. Lenders and appraisers
B. Streets and roads
C. Building permits and building codes
D. Neighbors
A

The correct answer is C. Zoning is one of the government’s rights to privately owned land. Example: The city sets the use of the property by zoning the property as either residential or commercial. Anyone
wishing to build in the zoned area must buy a permit and build the building to the city code. The city
sends an inspector to inspect the building and make sure the building is built to code and is the building
the builder received the permit to build. Zoning is enforced with this process

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40
Q 
42. Graduate, REALTOR® Institute (GRI) is a designation presented by:
A. NAR
B. TAR
C. TRELA
D. IREM
A

The correct answer is A. The GRI designation is received by many REALTORS®. It includes in-depth
training in legal issues, professional standards, and the sales process.

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41
Q 
43. The CPM designation is presented by:
A. IREM
B. NAR
C. TREC
D. TAR
A

The correct answer is A. Institute of Real Estate Management (IREM) presents the Certified Property
Manager (CPM) designation. This designation demonstrates expertise to owners and investors.

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42
Q
  1. A mortgage broker:
    A. Arranges loans between borrowers and lenders
    B. Is a lender
    C. Buys mortgages in the secondary mortgage market
    D. Buys mortgages and resells them at a profit
    .
A

The correct answer is A. A mortgage broker represents many different lenders and brokers the loan between the lender and the borrower

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43
Q
  1. The loan that requires regular equal payments of sufficient size and number to pay all interest and
    principal by the end of the loan is a(n):
    A. Term loan
    B. Balloon loan
    C. Onetime payment loan
    D. Amortized loan
A

The correct answer is D. With an amortized loan, the borrower pays part of the principal and part of the
interest every month. By the end of the loan all of the principal and interest has been paid. A term loan
would have a balloon payment due at the end of the loan.

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44
Q
  1. The Deed of Trust has several advantages for the lender including:
    A. The time between default and foreclosure is short.
    B. The non-judicial foreclosure is inexpensive.
    C. There is always a statutory redemption period.
    D. Both A and B
A

The correct answer is D. A statutory redemption period applies only to a property that has been sold in a
tax sale.

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45
Q 
48. A construction loan is also called a(n):
A. Mark-up loan
B. Interim loan
C. Equity loan
D. Kit loan
A

The correct answer is B. A construction loan, also called an interim loan, is used to build a building. When
the building is finished the loan will be converted to a regular mortgage.

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46
Q 
49. The investor may try to keep the \_\_\_\_\_\_\_\_\_\_\_\_\_ high by keeping the expenses on the property low.
A. Cash flow
B. Rent
C. Debit
D. HOA
A

The correct answer is A. Cash flow is the movement of money into or out of a business. It also refers to
the amount of money left each month after all money has been collected and all expenses have been
paid.

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47
Q 
50. A mortgage that is only for persons 62 years old or older is a:
A. Reverse mortgage
B. Package mortgage
C. Blanket mortgage
D. Equity mortgage
A

The correct answer is A. A package mortgage includes personal property and real estate. A blanket
mortgage covers more than one property.

48
Q
  1. Variances may be given for all of the following reasons EXCEPT:
    A. Set back requirements
    B. Required number of parking spaces
    C. Minimum square footage
    D. Change from residential to commercial zoning
A

The correct answer is D. A variance enables a landowner to chance the use of a property without
changing the zoning.

49
Q 
52. All Fair Housing laws apply to:
A. Residential properties for lease
B. Residential properties for sale
C. Residential properties for rent
D. All of the above
s.
A

The correct answer is D. All of the above. Residences for sale and lease apply to Federal Fair
Housing. Keep in mind that private clubs, religious organizations, and an owner of a 1-4 unit
property where the owner is a resident are exempt from fair housing law

50
Q 
53. At the closing:
A. All documents will be signed.
B. All doors and windows must be locked.
C. The seller will receive the sales price for the property.
D. Both A and C
A

The correct answer is D. All documents will be signed at closing including the seller signing the deed and
the buyer signing the loan documents.

51
Q 
54. Possession of the property will be given to the buyer when:
A. The seller signs the contract
B. The buyer offers earnest money
C. The loan funds
D. Real estate is paid
A

The correct answer is C. When the loan funds the seller will receive payment for the property and the
buyer will receive possession of the property.

52
Q 
55. In analyzing a mortgage loan application, it is illegal for a lender to consider:
A. Job stability
B. Marital status
C. Income adequacy
D. Credit rating
A

The correct answer is B. The Equal Credit Opportunity Act prohibits discrimination based on marital
status. The law was passed in 1974.

53
Q 
56. A legal claim on a property resulting from a debt against the property is called a:
A. Deed
B. Lease
C. Lien
D. Ownership
A

The correct answer is C. Examples of liens on properties are mortgage liens and tax liens.

54
Q 
57. Land plus new construction cost minus depreciation is the formula for the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A. Cost approach
B. Market data approach
C. Income approach
D. Capitalization approach
A

The correct answer is A. The cost approach in appraisal is always used for special purpose properties. A special purpose property does not produce income and there are no comps available.

55
Q 
58. Private Mortgage Insurance was formed as a privately-owned business venture to insure home
mortgage loans. It insures:
A. Only the top 20% of the sales price
B. 100% of the sales price
C. 100% of the loan amount
D. Only the top 20% to 25% of a loan
A

The correct answer is D. Private mortgage insurance covers a lender’s risk if the lender extends a loan for
more than 80 percent of the fair market value (or purchase price, whichever is less) of property. Usually,
the borrower pays the premiums for the PMI insurance.

56
Q
  1. Foreclosure sales are held in each county in Texas on the first Tuesday of each month between
    10 a.m. and 4 p.m. How many of these sales would be held in Travis County in one year?
    A. 12
    B. 30
    C. 52
    D. 365
A

The correct answer is A. There will be 12 sales in each county in Texas every year.

57
Q 
60. A person who leaves no will dies:
A. Probate
B. Testate
C. Codicil
D. Intestate
A

The correct answer is D. Intestate means the person dies without a will. Testate means the person dies
with a will.

58
Q 
61. Master plans for an area, subdivision regulations, building codes, environmental protection legislation
and zoning are all examples of:
A. Public controls
B. Private controls
C. Office controls
D. City controls
A

The correct answer is A. Condominium bylaws, restrictive covenants, and deed restrictions are all private control

59
Q 
62. Deed restrictions are also known as:
A. Covenants, Conditions, and Restrictions
B. CC&Rs
C. Both A and B
D. None of the above
A

The correct answer is C. Deed restrictions are clauses in a deed limiting the future use of a property.

60
Q 
63. Deed restrictions are examples of:
A. Public controls
B. Private controls
C. Zoning
D. Police power
A

The correct answer is B. Public controls are subdivision regulations, building codes and zoning.

61
Q 
64. The right the city has to zone comes from the states’ \_\_\_\_\_\_\_\_\_\_.
A. Taxation
B. Eminent domain
C. Escheat
D. Police power
A

The correct answer is D. Taxation, eminent domain, escheat, and police power are all government right to
privately owned property.

62
Q
  1. A small corner grocery store existed before the land was zoned residential by a new zoning
    ordinance. The grocery store is an example of:
    A. A nonconforming use
    B. A variance
    C. Spot zoning
    D. A planned unit development
A

The correct answer is A. A nonconforming use. Any property grandfathered into a city’s zoning or still in the same zoning status as it was in the beginning and currently is not conforming to the zoning around it is considered to be
nonconforming.

63
Q
  1. A certificate of occupancy cannot be issued until:
    A. The building has been dried in.
    B. The foundation has been poured.
    C. The building is complete and meets all requirements.
    D. The first person moves into the building.
A

The correct answer is C. A certificate of occupancy will be issued by the city or county. No one can live in
the property until a certificate of occupancy has been received by the builder.

64
Q
  1. A building was in existence before the new zoning law was enacted. The owner may apply for
    a ___________ and continue to use the building.
    A. Nonconforming use permit
    B. Building Permit
    C. Zoning permit
    D. Variance
A

The correct answer is A. The nonconforming use permit will be issued only for the current owner of the
property.

65
Q 
68. A landowner who wants to change the use of a property without changing the zoning can ask for:
A. Downzoning
B. A variance
C. A nonconforming use permit
D. A building permit
A

The correct answer is B. A variance may be given for setback requirements, required number of parking
spaces on the property or minimum square footage for the lot size.

66
Q 
69. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ means the higher-density zoning is reduced.
A. Downzoning
B. Public ownership
C. Police control
D. Building code
A

The correct answer is A. An area rezoned from multi-family to single-family has been downzoned.

67
Q
  1. What is a restrictive covenant?
    A. A buffer zone
    B. A change in zoning
    C. A provision in the deed limiting and prohibiting certain uses for a property
    D. The process of taking private land for public use
A

The correct answer is C. The process of taking private land for public use is eminent domain.

68
Q 
71. Police power has the authority to enforce laws and regulations for all the following reasons EXCEPT:
A. Safety
B. General welfare
C. Intimidation
D. Health
A

The correct answer is C. Police power as it applies to real estate is zoning.

69
Q 
72. Historically, the investor has been allowed deductions on their income tax. Something that could be
deducted is:
A. Property tax
B. Management fees
C. Interest on the loan
D. All of the above
A

The correct answer is D. The homeowner is allowed to deduct interest on the loan and property tax from
their income tax.

70
Q 
73. The practice whereby a borrower pledges property as collateral to secure a debt and retains
possession of the property is:
A. Lien theory
B. Promissory note
C. Deed of trust
D. Hypothecation
A

The correct answer is D. Hypothecation

A deed of trust is a type of mortgage. It is a three-party document. A promissory note is a written promise of one parson to pay a mortgage.

71
Q
  1. The original lender has sold the note to another lender but has retained the servicing rights. Is the
    original lender required to notify the borrower of the sale?
    A. No, the lender is not required to notify the borrower if the servicing rights are not sold.
    B. Yes, the borrower must always be told when the loan is sold.
    C. No, the original lender never has to notify the borrower about anything.
    D. Yes, if the borrower asks.
A

The correct answer is A. The borrower must only be notified if the servicing rights are sold.

72
Q 
75. The trustee in a deed of trust uses the \_\_\_\_\_\_\_\_\_\_\_\_\_ to speed up the loan and foreclose if the
borrower is in default.
A. Acceleration clause
B. Due-on-sale clause
C. Mortgage clause
D. Default clause
.
A

The correct answer is A. The acceleration clause is used to make the entire amount of principal and
interest due immediately if the borrower defaults on payments

73
Q
  1. Lenders in Texas prefer to use the:
    A. Deed of Trust because it has non-judicial foreclosure
    B. Deed of Trust because it has judicial foreclosure
    C. Regular mortgage
    D. Bill of Sale
A

The correct answer is B. An acceleration clause is used in a foreclosure on the property. An alienation
clause is also called a due on sale clause

74
Q
  1. Sue is going to buy a house from Bob and is going to assume Bob’s loan. The act of removing Bob’s
    name from the loan and placing Sue’s name on the loan is called:
    A. Subject to
    B. Alienation
    C. Novation
    D. Due-on-sale
A

The correct answer is C. A novation is the substitution of a new obligation for an old obligation (or the
substitution of a party for a party).

75
Q
  1. When the amount received from a foreclosure sale is insufficient to pay off the mortgage loan and the
    other expenses of the sale, the lender may sometimes secure:
    A. A statutory lien
    B. A mechanic’s lien
    C. An estoppel lien
    D. A deficiency judgment
A

The correct answer is D. The deficiency judgement is a personal judgement levied against the mortgagor
by the lender.

76
Q
  1. _____________ applies to redeeming a property before a mortgage foreclosure and _____________
    applies to redeeming a property after a property tax foreclosure.
    A. Equitable redemption —– statutory redemption
    B. Statutory redemption —– equitable redemption
    C. Properties cannot be redeemed.
    D. Statutory redemption applies to both foreclosure
A

for mortgage and foreclosure for property tax.
The correct answer is A. A mortgage foreclosure does not allow statutory redemption. Statutory
redemption is redeeming the property after the foreclosure sale.

77
Q
  1. After a foreclosure sale, a deficiency judgement could be filed against the borrower if the lender:
    A. Has filed for bankruptcy
    B. Did not receive all money owed to the lender
    C. A lender cannot file a deficiency judgment.
    D. Get permission from the courts
A

The correct answer is B. In order for the lender to file a deficiency judgement the loan must include a
deficiency clause.

78
Q 
82. The Home Owner’s Loan Corporation (HOLC) created:
A. PITI
B. Short sales
C. Escrow
D. Amortized loans
A

The correct answer is D. The Home Owner’s Loan Corporation was created in 1933. An amortized loan is
completely paid by the maturity date.

79
Q
  1. ABC Lending has charged the borrower an origination fee. This fee:
    A. Is not interest
    B. Represents charges for processing the loan application
    C. Both A and B
    D. None of the above
A

The correct answer is C. Traditionally the origination fee has been 1% of the loan amount but may be any
amount. The lender sets the amount of the origination fee.

80
Q 
84. FHA is the acronym for \_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A. Fair Housing Administration
B. Federal Housing Administration
C. Federal Housing Act
D. Free Homes Act
A

The correct answer is B. The Federal Housing Administration was created in 1934. FHA insures mortgages on homes. The down payment is 3.5% of the price of the home.

81
Q
  1. A VA loan requires:
    A. No down payment
    B. A down payment of 35% of the sales price
    C. A down payment of 3.5% of the sales price
    D. A down payment equal to 20% of the sales price
A

The correct answer is A. VA is the Veterans Administration and they guarantee loans for lenders.

82
Q
  1. The Truth-in-Lending Act provides all the following EXCEPT:
    A. A uniform system for disclosures
    B. Prevention of inaccurate and unfair credit billing
    C. Telling financial institutions what interest rate they can charge
    D. Prevention of inaccurate credit card practices
A

The correct answer is C. TILA requires lender to use the same credit terminology and expressions of
rates, so borrowers can compare one lender to another.

83
Q 
87. The right of rescission gives the consumer \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ in which to rescind a credit transaction
by notifying the lender.
A. 3 weeks
B. 1 month
C. 3 days
D. 1 day
A

The correct answer is C. The three-day y right of rescission does not apply to all loans. It does not apply to the first mortgage on the property.

84
Q
  1. The Equal Credit Opportunity Act prohibits discrimination based on:
    A. Race, color, religion
    B. National origin, age, sex
    C. Marital status, income from a public assistance program
    D. All of the above
A

The correct answer is D. The ECOA makes it unlawful for any creditor to discriminate against any
applicant on the basis of race, color, religion, national origin, sex, marital status, or age; income derived
from a public assistance program; or to the fact that the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. The ECOA does not allow discrimination based on age. This
does not apply to someone under 18, rather it means a lender cannot discriminate because they believe
someone is too old to borrow money.

85
Q 
90. Redlining is the lender refusing to make loans on properties in certain:
A. Areas
B. Neighborhoods
C. Locations
D. All of the above
A

The correct answer is D. The lender must loan money based on the qualifications of the browser and not
on where the property is located.

86
Q 
91. The Federal Home Loan Mortgage Corporation was created in 1970 to buy:
A. Conventional loans
B. VA loans
C. FHA loans
D. Personal loans
A

The correct answer is A. The Federal Home Loan Mortgage Corporation is called Freddie Mac. The
FHLMC is a part of the secondary mortgage market.

87
Q
  1. Mary obtained a loan on the property she was buying. The house contained a refrigerator, washer,
    and dryer. These items were included as collateral for the loan. Mary has a:
    A. Blanket mortgage
    B. Construction loan
    C. Package mortgage
    D. Reverse loan
A

The correct answer is C.

A blanket mortgage covers more than one property and a reverse loan is for
people 62 years of age.

88
Q 
88. Which of the following is NOT a clause in a mortgage?
A. Alienation clause
B. Due-to-sale clause
C. Zoning clause
D. Defeasance clause
A

The correct answer is C. Zoning clause. Zoning, while it affects property, is not a part of the mortgage.

89
Q 
93. The buyer purchased a home and the vacant lot next door. He financed the properties together.
He has a:
A. Blanket mortgage
B. Construction loan
C. Package mortgage
D. Reverse loan
A

The correct answer is A. A package mortgages includes personal property and real estate. A construction loan is also called an interim loan.

90
Q 
94. A deed that transfers title to real estate from one person to another:
A. Must be a written document
B. Must be oral
C. Is not used in Texas
D. Can be in writing or oral
A

The correct answer is A. In order to satisfy the Statutes of Frauds a deed must be in writing. The deed
must also be signed by the seller.

91
Q 
95. The \_\_\_\_\_\_\_\_\_\_\_\_\_\_ is the seller and the \_\_\_\_\_\_\_\_\_\_\_\_\_ is the buyer.
A. Grantor ----- tenant
B. Trustee ----- grantee
C. Grantor ----- grantee
D. Grantee ----- grantor
A

The correct answer is C. A tenant is someone who rents a property from the owner. A trustee is one to
whom something is entrusted.

92
Q 
96. Who signs the deed?
A. Seller
B. Buyer
C. Trustee
D. Landlord
A

The correct answer is A. The seller signs the deed. Ownership of the property cannot pass from one to
another until the seller signs the deed.

93
Q 
97. Any additional capital included in a 1031 Tax-Deferred Exchange is called:
A. An add-on
B. A boot
C. Not Allowed
D. An extra-extra
A

The correct answer is B. Boot is any money received by the taxpayer in an exchange.

94
Q 
98. Which deed has the covenant of seisin and the covenant against encumbrances?
A. Quitclaim deed
B. General warranty deed
C. Sale deed
D. Bargain deed
A

The correct answer is B.

The seller has title to the property and the right to sell the property.

95
Q
  1. The Americans with Disabilities Act requires property managers:
    A. To hire the disabled whenever possible
    B. To ensure the disabled employees have the same level of access to facilities that all employees have
    C. To remove all existing barriers to the free movement of disabled persons regardless of cost
    D. To remodel the ground floor of the property in accordance with ADA standards if it was built
    before 1978
A

The correct answer is B.

1978 applies to lead-based paint not to Americans with Disabilities Act. The Americans with Disabilities Act (ADA) was signed into law on July 26, 1990, by President George H.W.
Bush.

96
Q
  1. A list of names that includes all of the names of the owners of the property from the time the property
    was given by the state to a private owner up to the present owner is called a(n):
    A. Chain of Title
    B. Abstract of Title
    C. Title insurance
    D. List
A

The correct answer is A. An abstract of title is a condensed historical summary of all the documents that have been recorded affecting the title of a property.

97
Q 
101. The loan policy of title insurance is also called the:
A. Lender’s policy
B. Mortgagee’s title policy
C. Both A and B
D. None of the above
A

The correct answer is C. There are two types of title insurance. One is for the lender and one is for the
owner.

98
Q
  1. When a person takes possession of another person’s land and holds that possession for a long
    enough period of time, the possessor may take ownership of the property. What is this called?
    A. Voluntary alienation
    B. Descent
    C. Eminent Domain
    D. Adverse Possession
A

The correct answer is D. Adverse possession is also sometimes call squatter rights.

99
Q 
103. The result of combining two parcels of land to make a larger more valuable property is called:
A. Rental value
B. Plottage value
C. Deed
D. Lease
A

The correct answer is B. The process of combining the two parcels of land is called assemblage.

100
Q 
104. The process of joining two or more properties is called:
A. Deed
B. Plottage
C. Assemblage
D. Lease
A

The correct answer is C. The result of combining the two parcels of land to make the land more valuable
is called plottage.

101
Q 
105. The principle of Highest and Best Use refers to the use of the property to result in the:
A. Highest sales price
B. Lowest property tax
C. Highest value for the property
D. Lowest insurance rate on the property
A

The correct answer is C. The principle of Highest and Best Use is one of the Principles of Value used in
appraisal.

102
Q
  1. When using the market approach to appraise residential property the price on the _____________
    will be adjusted up or down
    A. Comps
    B. Subject property
    C. Both the comps and the subject property
    D. The market approach is not used to appraise residential property.
A

The correct answer is A. The comp prices are used to find the value of the subject property. The value of
the comps is adjusted to make them more like the subject property.

103
Q 
107. Real estate agents are not allowed to do appraisals unless they have an appraiser’s license, but
they often do a(n):
A. IOU
B. CMA
C. ADD
D. FFA
A

The correct answer is B. A CMA is a Competitive Market Analysis and is used by a real estate agent to
find the value of a property. It is not an appraisal.

104
Q
  1. The sales contract forms promulgated by the Texas Real Estate Commission states “Taxes for the
    current year, interest, maintenance fees, assessments, dues, and rents will be _____________.”
    A. Prorated through the Closing Date
    B. Prorated through the 15th of the month
    C. Prorated through the date of the offer
    D. Prorated through the date of move in
A

The correct answer is A. In Texas the seller is responsible for the day of closing on the property. The
seller pays the taxes, maintenance fees, and HOA dues for the day of closing.

105
Q 
109. The \_\_\_\_\_\_\_\_\_\_\_\_\_ pays expenses and receives income for the day of closing.
A. Seller
B. Buyer
C. Seller and Buyer
D. Title company
A

The correct answer is A. In Texas the seller is responsible for the day of closing on the property. The
seller pays the taxes, maintenance fees, and HOA dues for the day of closing.

106
Q 
110. Joe has borrowed to buy an investment property. The money Joe borrowed cost more than the
return on the money. This is called:
A. Positive leverage
B. Negative leverage
C. Equity
D. Bill of sale
A

The correct answer is B. Negative leverage is also called negative cash flow.

107
Q
  1. The broker does not become an employee of the owner but:
    A. Is an employee of the buyer
    B. Is employed by the owner and remains an independent contractor
    C. The salesperson is an employee of the owner.
    D. The salesperson is an employee of the buyer.
A

The correct answer is B. The broker is an independent contractor and is employed by the owner. The
salesperson is an independent contractor and is employed by the broker.

108
Q 
112. The ownership of a temporary right to hold and use land under a rental contract is a:
A. Freehold estate
B. Gross lease contract
C. Leasehold estate
D. Periodic estate
A

The correct answer is C. A freehold estate shows ownership of the land. A leasehold estate is a lease of
the land.

109
Q 
113. A lease that is for a definite period of time with a specific starting date and a specific ending date
is a(n):
A. Periodic estate
B. Estate at will
C. Estate for years
D. Net lease
A

The correct answer is C. An estate for years can be for any length of time, but it must have a specific
starting date and a specific ending date.

110
Q 
114. A lease that automatically renews itself when it expires is a periodic estate. It is also called a:
A. Month to month lease
B. Square foot lease
C. Percentage lease
D. Ground lease
A

The correct answer is A. An estate for years is sometimes followed by a periodic estate. An example
would be when an apartment lease comes to an end and the tenant goes month to month.

111
Q
  1. Jeff has leased a commercial building from Tom, the owner. Jeff has agreed to pay Tom a small
    amount of rent and also to pay the property taxes, the insurance on the building and for repairs to
    the building. Jeff has a:
    A. Periodic estate
    B. Net lease
    C. Percentage lease
    D. Gross lease
A

The correct answer is B. A net lease is also called a net net lease, a net net net lease, or a triple net
lease.

112
Q 
116. Land includes subsurface rights, surface rights, and air rights. A person who leases land has a(n):
A. House lease
B. Estate for years
C. Percentage lease
D. Ground lease
A

The correct answer is D. A percentage lease is used on a retail property that produces income. The
tenant pays a flat fee and a percentage of their income to the landlord.

113
Q
  1. When a tenant who leased an apartment sublets the apartment to a new tenant, who is the one
    responsible for the rent charged by the apartment complex if the new tenant defaults?
    A. The original tenant is responsible for the rent.
    B. The new tenant is responsible to the apartment complex.
    C. Neither are responsible for the rent.
    D. Both must pay the apartment complex.
A

The correct answer is A. The new tenant is responsible for and pays rent to the original tenant and the
original tenant is responsible for and pays rent to the landlord.

114
Q 
118. In a real estate investment syndicate, the person who forms the syndicate and finds the property for
investments is called the:
A. Owner
B. Syndicator
C. Buyer
D. Trustee
A

The correct answer is B. A real estate syndicate is a combination of people formed to buy property by
pooling resources. The syndicator runs the syndicate.

115
Q
  1. A salesperson who wants to become a broker must:
    A. Have additional education (60 semester hours)
    B. Have experience points (3600)
    C. Pass the brokers examination
    D. All of the above
A

The correct answer is D. The salesperson must also have an active license for 4 of the previous 5 years.

116
Q 
120. The designation presented by the National Association of Realtors that requires in-depth training in legal and regulatory issues, technology, professional standards, and the sales process is the:
A. SRES
B. CPM
C. GRI
D. GREEN
A

The correct answer is C. A GRI is a designation presented by the NAR.

Final Exam Prep (9 decks)

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