Exam 1: Definitions Exam 3

Question 1

A broker lists and negotiates the sale of a home for Mr. B, a young married man. At the time of the sale the broker was not concerned with the age of his client. After the deed had been signed and escrow closed, the title company informs the broker that the seller is under 18 years of age. The deed is
A)
outlawed.
B)
illegal.
C)
valid.
D)
voidable.

Answer 1

valid.

Question 2

In tenancy in common, there is always a unity of
A)
time.
B)
title.
C)
possession.
D)
interest.

Answer 2

possession.

Question 3

In filing its corporation income taxes, what is the characteristic of a corporation that files as a Subchapter S corporation?
A)
The earnings and losses of the corporation are passed through to the stockholders who will include them on their personal income tax returns.
B)
It would not have to file an income tax return since it is a nonprofit corporation.
C)
It can hold title to real property.
D)
The corporate income is exempt from taxation.

Answer 3

The earnings and losses of the corporation are passed through to the stockholders who will include them on their personal income tax returns.

Question 4

It is improper for a salesperson to
A)
tell his principal that he has the nicest farm in the county.
B)
show the property only on sunny days.
C)
keep the client's secret that the property has a leaky roof.
D)
submit verbal offers to the principal.

Answer 4

keep the client’s secret that the property has a leaky roof.

Question 5

A salesperson, canvassing a Caucasian neighborhood that was located near a minority neighborhood, contacted prospective sellers and informed them they should sell now before their property lost value due to minorities entering into the area. Using these tactics he was successful in obtaining several listings. This action is considered to be
A)
panic peddling.
B)
steering.
C)
both panic peddling and blockbusting.
D)
blockbusting.

Answer 5

both panic peddling and blockbusting.

Question 6

The distinguishing characteristic of real property as opposed to personal property is that real property
A)
can be depreciated over useful life.
B)
is immovable.
C)
is a long-term asset.
D)
has a high cost of acquisition.

Answer 6

is immovable.

Question 7

The Principle of Integration and Disintegration affirms that
A)
maximum value is found when there is a reasonable degree of homogeneity along all lines, sociological as well as economic.
B)
all existence is characterized by three stages: development, equilibrium or static condition, and decline or decay.
C)
excess profits breed ruinous competition.
D)
property value is created and maintained, other factors being favorable, in proportion to the equilibrium attained in the amount and location of essential types of real estate.

Answer 7

all existence is characterized by three stages: development, equilibrium or static condition, and decline or decay.

Question 8

Percolation test refers to
A)
flood control.
B)
sewage.
C)
water wells.
D)
soil analysis

Answer 8

soil analysis.

Question 9

Two houses were built on two adjacent lots of equal value. Construction costs and maintenance were the same. One house is appraised to be of higher value. What is most likely the reason?
A)
Both houses were across the street from a nonconforming house that resulted in economic obsolescence.
B)
One house had more wear and tear.
C)
One house was considered to have functional obsolescence.
D)
One house had more economic obsolescence.

Answer 9

One house was considered to have functional obsolescence.

Question 10

In regards to the Natural Hazards Disclosure Statement (effective 6/1/98), which statement is incorrect?
A)
The statutory form must be signed if the property is subject to the TDS.
B)
Agents, not sellers, must comply with this new law.
C)
There may be additional local requirements.
D)
There are six minimum natural hazard disclosure requirements.

Answer 10

Agents, not sellers, must comply with this new law.

Question 11

A lease based on gross income of the lessee is a
A)
percentage lease.
B)
gross lease.
C)
ground lease.
D)
net lease.

Answer 11

percentage lease.

Question 12

In an advertisement, only the annual percentage rate is mentioned. What else must also be disclosed in the ad?
A)
No further disclosures necessary
B)
Monthly payments required
C)
Amount of loan
D)
Amount of down payment required

Answer 12

No further disclosures necessary

Question 13

Alienation expresses a meaning most nearly opposite to
A)
ad valorem.
B)
acceleration.
C)
amortization.
D)
acquisition.

Answer 13

acquisition.

Question 14

Recording a deed would give
A)
effective notice.
B)
right of possession.
C)
constructive notice.
D)
actual notice.

Answer 14

constructive notice.

Question 15

The right to the use and enjoyment of another's property short of an estate is an example of a(n)
A)
leasehold.
B)
subordination clause.
C)
easement.
D)
deed.

Answer 15

easement

Question 16

In appraising older apartment properties, values determined by gross multipliers are
A)
considered the most appropriate approach to value.
B)
based on the relationship between rental value and the sales price of comparable properties.
C)
comparable to capitalization rates.
D)
based on sales price.

Answer 16

based on the relationship between rental value and the sales price of comparable properties.

Question 17

In the purchase of a residence, the buyer conditioned the sale upon the seller’s providing the buyer with a certified inspection report from a licensed pest control operator showing the property to be free of wood-destroying organisms. The seller contracted the Apex Termite Control Company who, upon inspection, reported termite damage and estimated the repairs would cost $500. The seller then had Apex repair the damage and the seller made payment directly to the contractor for the work that had been done. With respect to the report of work accomplished, which statement is TRUE?
A)
The Apex Termite Company would be required to deliver a copy to the buyer.
B)
No report need be made to the buyer since the seller had the work done and paid for it, and the residence is now free of termites.
C)
The escrow officer would ensure the buyer has received a copy of the report since escrow cannot close until this has been accomplished.
D)
Either the broker or the seller would be responsible for delivering a copy to the buyer.

Answer 17

Either the broker or the seller would be responsible for delivering a copy to the buyer.

Question 18

A subdivider desiring to know the maximum FHA financing for a property would most likely go to a(n)
A)
FHA appraiser for a conditional commitment.
B)
FHA appraiser for a firm FHA commitment.
C)
conventional lender for a firm FHA commitment.
D)
lender for a conditional commitment.

Answer 18

lender for a conditional commitment.

Question 19

The state fiscal year falls between the dates
A)
July 1 to June 30, midnight.
B)
June 30 to July 1.
C)
December 31 to January 1, midnight.
D)
January 1 to December 31

Answer 19

July 1 to June 30, midnight.

Question 20

Mr. Able obtained a loan to build an apartment building. (1) He planned to charge a higher deposit to single males, and (2) his only source of advertising was to ask his tenants, predominantly white, to refer their friends as prospective tenants. With reference to fair housing laws, Mr. Able's actions would be correct in which choice(s)?
A)
2 only
B)
1 only
C)
Both 1 and 2
D)
Neither 1 nor 2

Answer 20

2 only

Question 21

A broker avoids showing property located in a non-minority neighborhood to her minority customers. This is an example of
A)
redlining.
B)
blockbusting.
C)
steering.
D)
none of these.

Answer 21

steering.

Question 22

What is the BEST definition of economic rent?
A)
The amount the property would rent for if it was available in today’s market
B)
Payment for use of property designated in a lease
C)
The amount left after the lessor pays expenses
D)
The amounts the owner actually receives in rents

Answer 22

The amount the property would rent for if it was available in today’s market

Question 23

Which definition BEST describes an “open-end mortgage”?
A)
One under which several parcels of land are included under one mortgage
B)
One in which additional financing could be obtained without rewriting the contract
C)
One in which personal property is held for added collateral
D)
One in which the mortgage represents a partial payment for the parcel of the land

Answer 23

One in which additional financing could be obtained without rewriting the contract

Question 24

A simple contract must be
A)
recorded.
B)
an offer, acceptance, and communication.
C)
acknowledged.
D)
an agreement in writing.

Answer 24

an offer, acceptance, and communication.

Question 25

Which statement is TRUE with regard to escrow procedure?
A)
A broker can hold an escrow account for compensation for other parties when he has no interest in the transaction.
B)
When the escrow holder is in possession of a binding contract between the buyer and seller, it is considered a complete escrow.
C)
The escrow officer acts as an arbitrator of arguments between the buyer and seller.
D)
When the escrow requirements have been met, the escrow agency changes from a dual agency to a separate agency.

Answer 25

When the escrow requirements have been met, the escrow agency changes from a dual agency to a separate agency.