Exam 1: Definitions Exam 5

Question 1

An appraiser is called upon to appraise a property on which there was a building of no value. The appraiser should
A)
appraise for highest and best use and disregard the cost of demolition.
B)
appraise for highest and best use and deduct the cost of demolition.
C)
add the salvage value of the building.
D)
ignore the building.

Answer 1

appraise for highest and best use and deduct the cost of demolition.

Question 2

Which would have the LEAST effect on property taxes in a community?
A)
Homestead exemptions
B)
Compactness of the community
C)
Zoning and private restrictions
D)
Number of commercial buildings and high-priced homes

Answer 2

Homestead exemptions

Question 3

A deed was given by "A" to "B" with oral instructions not to record the deed until "A's" death. The deed was
A)
valid.
B)
voidable.
C)
void.
D)
illegal.

Answer 3

void

Question 4

John, a rancher, gave Broker Otis an exclusive listing to sell his ranch. John advanced Otis $100 to advertise the sale of his ranch in a brochure that Otis publishes. By law, the broker must account for the funds by doing which of the following?
A)
Place the advance fee in his personal checking account and spend it only for advertising
B)
Place the $100 in a trust account, expend from the trust account for advertising, and account for the money used by itemizing all expenditures in a report given to the seller
C)
Place the $100 in a trust account in case John defaults on the listing
D)
Place the $100 in a trust account so that the money will be returned to the seller in the event the property is not sold

Answer 4

Place the $100 in a trust account, expend from the trust account for advertising, and account for the money used by itemizing all expenditures in a report given to the seller

Question 5

A real estate agent’s license will be suspended when the real estate fund pays a judgment creditor of the agent and will NOT be reinstated until the agent
A)
pays back the recovery account with interest.
B)
pays the judgment creditor all funds that were not paid from the recovery account, plus interest.
C)
reimburses the recovery account for one-half of all funds paid to the judgment creditor, plus interest.
D)
pays the judgment creditor and the recovery account plus interest.

Answer 5

pays back the recovery account with interest.

Question 6

What will have an impact on the real estate market in years to come?
A)
Land-use regulation
B)
All of these
C)
The real estate industry
D)
Consumerism

Answer 6

All of these

Question 7

Lenders have recently become confident and have been lending up to 95% on residential mortgages due to the availability of
A)
guaranteed mortgage insurance.
B)
Fannie Mae insurance.
C)
mortgage cancellation insurance.
D)
private mortgage guaranty insurance.

Answer 7

private mortgage guaranty insurance.

Question 8

Which statement regarding appraisal is accurate?
A)
None of these
B)
Appraising is an exact science.
C)
The worth of an appraisal report is determined by the experience, knowledge, and qualifications of the person.
D)
There is no difference between valuation and appraising.

Answer 8

The worth of an appraisal report is determined by the experience, knowledge, and qualifications of the person.

Question 9

Utility value is often referred to as subjective as opposed to market or objective value. Utility value would most nearly apply to a(n)
A)
industrial property.
B)
single-family home.
C)
apartment building.
D)
commercial retail store property.

Answer 9

single-family home.

Question 10

According to current federal law, an appraiser must hold a state appraiser's license or certification when performing an appraisal for
A)
a federally related lender.
B)
a property owner.
C)
any large corporation.
D)
a real estate licensee.

Answer 10

a federally related lender.

Question 11

A balloon payment would be a characteristic of a(n)
A)
amortized loan.
B)
self-liquidating loan.
C)
standing loan.
D)
partially amortized loan.

Answer 11

partially amortized loan.

Question 12

A real estate agent is
A)
liable for the torts of the principal.
B)
liable to a third party for his or her own torts.
C)
not liable for acts of subagents.
D)
not liable to principal for abandonment of employment agreement prior to the end of its term.

Answer 12

liable to a third party for his or her own torts.

Question 13

A $2,000 deposit was placed in a broker's trust account. After all the conditions were met and the offer had been accepted by the seller, the buyer said there was a condition in the contract that gave him an "out" and demanded his money back. The seller agreed to the rescission provided he can retain one-half of the deposit money but the buyer wanted all of the deposit returned to him. This was refused by the seller, who then instructed the broker to give him the entire deposit. The broker should
A)
return the money to the buyer.
B)
leave it in the trust account.
C)
give it to the seller.
D)
do nothing.

Answer 13

give it to the seller.

Question 14

Which element is NOT necessary in the formation of a contract?
A)
Acceptance
B)
Performance
C)
Consideration
D)
Offer

Answer 14

Performance

Question 15

The maximum amount of commission and loan costs that may be charged for a second trust deed of $4,000 for a four-year term is
A)
$990.
B)
$850.
C)
$725.
D)
$550.

Answer 15

$990

Question 16

An agency contract can be created by all of these EXCEPT
A)
appointment by the principal.
B)
a voluntary offer by the agent.
C)
an oral contract.
D)
an implied contract in law.

Answer 16

a voluntary offer by the agent.

Question 17

A sublease
A)
transfers all leasehold rights.
B)
transfers less than the leasehold and reverts back to the grantor.
C)
is the same thing as an assignment.
D)
is a freehold estate.

Answer 17

transfers less than the leasehold and reverts back to the grantor.

Question 18

In the matter of a broker’s commission to be paid by a seller, which statement is TRUE?
A)
A listing agreement signed only by the seller is unenforceable.
B)
Action for the broker’s commission must be brought within four years of earning the commission.
C)
The broker’s commission earned but not paid creates a lien on the seller’s property.
D)
The seller and buyer may rescind the sale, thus relieving the seller of the obligation to pay the broker’s commission.

Answer 18

Action for the broker’s commission must be brought within four years of earning the commission.

Question 19

Smith built a $250,000 house in a neighborhood in which houses are valued between $75,000 and $85,000. Any resulting loss of value would be an example of
A)
physical obsolescence.
B)
physical depreciation.
C)
functional obsolescence.
D)
economic and functional obsolescence.

Answer 19

economic and functional obsolescence.

Question 20

To alienate title to real property, an individual
A)
clouds a title.
B)
records a homestead.
C)
conveys title.
D)
secures an ALTA policy of title insurance.

Answer 20

conveys title.

Question 21

A lease contract signed by a lessee included a condition that the lessee’s $500 security deposit was nonrefundable and would be retained by the lessor upon expiration of the lease. With respect to the foregoing which statement is correct?
A)
The clause would be legal only if it stated the lessor could retain a maximum of $100 of the security deposit.
B)
A nonrefundable security deposit is a violation of specific state statutes.
C)
The security deposit is valid if stated elsewhere and can only be used for damages.
D)
The clause is legal since the lessee agreed to it when signing the lease.

Answer 21

A nonrefundable security deposit is a violation of specific state statutes.

Question 22

Legal consideration, no matter how small, is essential for a valid contract. However, the amount of consideration must be reasonable and sufficient in a contract for the sale of real property to sustain an action for
A)
unlawful detainer.
B)
specific performance.
C)
rescission.
D)
damages.

Answer 22

specific performance.

Question 23

In the purchase of a franchise, which are typically required as start-up fees?
A)
Capital to purchase equipment, store site, franchise fee, labor, and supplies
B)
Long-term and short-term debt fees, retirement, and Social Security contributions
C)
Venture capital, prorate taxes and assessments, incorporation fees
D)
Assets, liabilities, and owner’s equity

Answer 23

Capital to purchase equipment, store site, franchise fee, labor, and supplies

Question 24

The power of eminent domain can be exercised by
A)
public utilities.
B)
cities.
C)
public education institutions.
D)
all of these.

Answer 24

all of these.

Question 25

The most important factor to a lender who is contemplating a loan to a developer of a shopping center would be the
A)
long-term leases.
B)
anchor tenant.
C)
credit of the purchaser.
D)
number of tenants.

Answer 25

anchor tenant.