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exam prep Flashcards

1
Q

Which of the following professionals involved in the real estate business are most concerned about managing real estate for clients?

A

Property managers

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2
Q

Real estate can be defined as

A

land and everything permanently attached to it.

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3
Q

Which of the following is included in the bundle of rights inherent in ownership?

A

To possess

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4
Q

The overriding test of whether an item is a fixture or personal property is

A

how it is described in a sale or lease contract

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5
Q

An owner of a lakefront property tells a fisherman that he cannot fish in a boat within fifty feet of the owner’s shoreline. The fisherman protests that the owner cannot prevent him. Which of the following is true?

A

The fisherman is correct because the water and the land underlying it are public property.

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6
Q

The distinguishing feature of a defeasible fee simple estate is that

A

it may revert to a grantor if the prescribed use changes.

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7
Q

Dower can best be defined as

A

a wife’s life estate interest in her husband’s property.

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8
Q

A distinct feature of a joint tenancy is that joint tenants

A

cannot will their interest to a party outside the tenancy.

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9
Q

Interests in a condominium differ from those in a cooperative, in that

A

the coop owner owns stock in the cooperative association, whereas the condominium owner simply owns real estate.

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10
Q

There are two adjoining properties. An easement allows property A to use the access road that belongs to property B. In this situation, property B is said to be which of the following in relation to property A?

A

Servient estate

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11
Q

Title records of a property reveal several recorded liens: a one-year old judgment lien; a mechanic’s lien dating from two years ago; a special assessment tax lien recorded last month; and a first mortgage lien recorded five years ago. In case of a foreclosure, which of these liens will be paid first?

A

Special assessment tax lien

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12
Q

A lender may terminate foreclosure proceedings if the defaulting borrower executes

A

a deed in lieu of foreclosure.

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13
Q

A person has occupied a property for seven years, and no one has ever attempted to evict her or co-occupy the parcel. In this case, the person might base a claim of legal ownership on

A

constructive notice of possession.

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14
Q

A person wishes to convey any and all interests in a property to another with full assurances against encumbrances, liens, or any other title defects on the property. This party would most likely use which of the following types of deed?v

A

A general warranty deed

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15
Q

The chain of title to a property refers to which of the following?

A

A chronology of successive owners of record

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16
Q

A leased property is conveyed to a new owner. What happens to the lease?

A

It remains in effect.

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17
Q

The Uniform Residential Landlord and Tenant Act fundamentally attempts to

A

encourage fairness and simplicity in lease forms and provisions.

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18
Q

A primary objective of residential zoning is

A

promote the value and planned land use of a neighborhood.

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19
Q

A shop was originally built in a commercial zone. The zone has since been changed to a residential zone. Zoning authorities permit the use, most likely as

A

a legal nonconforming use.

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20
Q

Authorities conduct comprehensive land use planning in order to

A

balance public interests with individual property rights.

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21
Q

The purpose of a formal legal description of a property is to

A

locate and identify the property reliably.

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22
Q

A parcel is described as the SW 1/4 of the N 1/2 of the E 1/2 of Section 14. What is its acreage?

A

80 acres

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23
Q

A suburb has a growing need for single-family housing, but the land available for new construction is running low. In this case, it is likely that the price of existing homes

A

will increase.

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24
Q

The demand for homes in a market is best expressed in terms of

A

number of households seeking housing.

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25
Q

What is the significance of base employment in a real estate market?

A

It drives total employment and population growth, which lead to demand for real estate.

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26
Q

The concept known as substitution states that

A

buyers will not pay more for a certain house than they would for another, similar house.

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27
Q

The “price that a willing, informed, and unpressured seller and buyer agree upon for a property, assuming a cash price and reasonable exposure of the property to the market” describes which of the following concepts of value?

A

Market value

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28
Q

A warehouse building lacks sufficient ceiling height for the operation of modern forklifts. This is an example of

A

functional obsolescence.

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29
Q

To derive value using the income capitalization approach, one must

A

divide the capitalization rate into net income.

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30
Q

An office building rents for $600,000, has expenses of $400,000, and a cash flow of $100,000. The prevailing gross rent multiplier is 8. Using the GRM, what is the value of the building?

A

$4,800,000

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31
Q

An owner obtains a loan and gives the mortgagee a mortgage on the property as collateral. The mortgagor/owner retains title to the property, and the mortgagee records a lien. This is an example of

A

hypothecation.

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32
Q

An important characteristic of a promissory note is that

A

it is assignable.

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33
Q

Disclosure of estimated closing costs is required of a lender in order to comply with

A

the Real Estate Settlement and Procedures Act.

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34
Q

The secondary mortgage market organizations do all of the following EXCEPT

A

directly originate loans.

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35
Q

Negative amortization of a loan occurs whenever

A

a payment does not pay the interest owed.

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36
Q

A borrower earns $3,000/month and makes credit card and car note payments of $500. A conventional lender requires a 27% income ratio. What monthly amount for housing expenses (principal, interest, taxes, insurance) will the lender allow this person to have in order to qualify for a conventional mortgage loan?

A

$810

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37
Q

A $250,000 interest-only loan carries a 7% rate. Monthly payments are

A

$1,458.

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38
Q

A lender is charging 2.75 points on a $240,000 loan. How much must the borrower pay for points?

A

$6,600.

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39
Q

Which of the following is generally true of a real estate investment?

A

The greater the return, the greater the risk

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40
Q

The capital gain on sale of an investment is computed as

A

net sales proceeds minus adjusted basis.

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41
Q

The formula for return on equity is

A

cash flow divided by equity.

42
Q

Mary Bright bought a home for $80,000, paying $10,000 down and taking a mortgage loan of $70,000. The following year she had a new roof put on, at a cost of $2,000. What is Mary’s adjusted basis in the house if she now sells the house for $100,000?

A

$82,000

43
Q

An office building has a potential income of $500,000 and vacancy of 10%. Its cash-paid bills total $300,000, and annual depreciation is $5,000. Payments on the loan total $100,000. What is the property’s pre-tax cash flow?

A

$50,000

44
Q

A property is purchased for $200,000. Improvements account for 75% of the value. Given a 39-year depreciation term, what is the annual depreciation expense?

A

$3,846

45
Q

An income property is bought for $500,000. Gross income is $100,000, and net operating income is $60,000. Cash flow is $10,000. What is the return on investment (ROI)?

A

12%

46
Q

Which of the following is the formula for deriving the tax base of a jurisdiction?

A

The total of all assessed values minus exemptions

47
Q

The purpose of a homestead tax exemption is

A

to offer tax abatement on a principal residence.

48
Q

A homeowner’s tax bill for a taxing district is derived by

A

multiplying the tax rate times the taxable value of the property.

49
Q

The village of Parrish has an annual budget requirement of $20,000,000 to be funded by property taxes. Assessed valuations are $400,000,000, and exemptions total $25,000,000. What must the tax rate be to finance the budget?

A

5.33%

50
Q

A canal dredging project is to cost $100,000. There are 40 properties along the canal, and 40 others across the street from the canal. The total canal footage to be dredged is 2,500 feet. How much will the assessment be for a 150-foot property on the canal?

A

$6,000

51
Q

A prospective homebuyer offers to buy a house if the seller agrees to pay financing points at closing. The seller gets the offer, signs it, and gives it to his agent to deliver. At this point the status of the offer is

A

still an offer.

52
Q

One aim of the statute of frauds is to

A

require certain conveyances to be in writing.

53
Q

A buyer agrees to all terms of a seller’s offer and sends notice of acceptance back to the seller. The seller now tells the buyer the deal is off because he has learned that the home was underpriced. Which of the following is true?

A

The buyer has a binding contract.

54
Q

A principal discloses to the listing agent that she must sell a property within two months to avoid a financial problem. Nearly seven weeks later, a buyer’s agent hears of the seller’s difficulty from the listing agent and advises his buyer to submit an offer for 80% of the listed price. The buyer complies, and the seller accepts the offer. Which of the following is true?

A

The listing agent has violated fiduciary duties owed the client.

55
Q

An owner’s agent is showing a buyer an apartment building. The buyer questions the agent as to whether some cracking paint contains lead. The agent’s best course of action is to

A

inform the seller of the inquiry and test the paint.

56
Q

Agent Jerry, who works for Broker Lucy, obtains an owner listing to lease a building. Lucy’s other agent, Linda, a tenant representative, locates a tenant for Lucy’s listing. If there is no arrangement to the contrary, Broker Lucy in this instance is

A

a dual agent.

57
Q

A transaction broker should disclose his or her agency relationship to the transaction principals

A

upon first substantive contact.

58
Q

An agent obtains a listing which ensures compensation for procuring a customer, provided the agent is the procuring cause. This agent has entered into a(n)

A

exclusive right-to sell agreement.

59
Q

A landlord promises to compensate a broker for procuring a tenant, provided the landlord’s brother decides not to rent the property within a month. This would be an example of a(n)

A

exclusive right-to-lease agreement.

60
Q

The amount of a real estate brokerage commission is determined by

A

agreement among competing brokers.

61
Q

Real estate sales agents are legally authorized to

A

represent buyers on their broker’s behalf.

62
Q

In eliciting an offer from a buyer, an owner’s agent must be careful to

A

complete any offer the buyer might decide to make.

63
Q

An example of conversion is

A

spending a customer deposit on a surety bond for the agency.

64
Q

Three leading agencies charge identical commission rates for brokering office properties in Phoenix. Which of the following is true?

A

This is a perfectly legitimate business practice.

65
Q

A business owner insists on a price for his enterprise that exceeds the value of the tangible assets, claiming that it is a well-known family business with a loyal clientele. The excess value is known as

A

the buyer’s premium.

66
Q

An agent informs owners in an area that a decline in property values over the past five years is due to an influx of minority families. He suggests that the trend will continue, and advises them to sell before it is too late. This agent is probably guilty of

A

blockbusting

67
Q

An agent spends two hours with a minority buyer, then shows the buyer five available properties all over town. Later, a similarly qualified minority couple enter the office. The agent spends twenty minutes with the couple, gives them the MLS book to review, and encourages them to drive by the listings on their way home. If they like anything, they should come back the next day to discuss terms. This agent could be liable for

A

providing unequal services.

68
Q

An owner suddenly pulls a property off the market after hearing from the agent that a minority party has made a full-price offer. The agent then goes back to the minority party and reports that the seller has decided to wait until next year to sell the home. Who, if anyone, has violated fair housing laws?

A

Both owner and agent.

69
Q

An owner completes a contract to sell her property. Before closing, she runs into financial trouble and assigns the contract to her mortgagor. Which of the following is true?

A

The sale contract remains valid.

70
Q

Buyers and sellers rely on escrow accounts in order to

A

allow a third party fiduciary to handle the funds.

71
Q

An option-to-purchase expires. The landlord agrees to extend it in exchange for a higher price. The optionee claims he can exercise the option within the redemption period. Which is true?

A

The landlord is under no obligation, since options do not have a redemption period.

72
Q

RESPA requires specific closing procedures whenever

A

the loan is to be sold to the FNMA.

73
Q

When an item is prorated between buyer and seller on a settlement statement, the closing officer must

A

debit one party and credit the other.

74
Q

Which of the following items are paid in arrears?

A

Taxes and interest

75
Q

A sale transaction on rental property closes on December 16. The landlord received the December rent of $713 on December 1. Assuming the closing day is the seller’s, and that the 365-day method is used for prorating, which of the following entries would appear on the settlement statement?

A

Credit buyer $368.00

76
Q

The most common form of risk transference in brokerage firms is

A

errors & omissions insurance.

77
Q

Which of the following is a major risk in the fulfilling of listing agreements?

A

Exceeding the limits of the authority granted by the agreement

78
Q

In the contracting process, a licensee must be careful to avoid

A

drafting a contract illegally.

79
Q

If a licensee is found guilty of obtaining a real estate license under false pretenses, the most likely penalty will be

A

license revocation.

80
Q

A broker responsible for handling a trust account is violating the law by

A

depositing an earnest money check in a personal account.

81
Q

In order to set rents and to estimate the expected return on a managed property, a property manager needs to prepare a(n)

A

operating budget.

82
Q

Why is it important for a property manager to maintain good relations with tenants?

A

None of the above.

83
Q

While physical maintenance of the property is a primary function of the property manager, the level of maintenance performed must be balanced with

A

owner objectives and tenant demands.

84
Q

What kind of insurance would provide coverage for loss of income when a rental property is damaged so badly that it cannot be used?

A

Consequential loss

85
Q

Property managers are usually considered to be

A

dual agents serving both the landlord and the tenants.

86
Q

Licensees may not engage in the unauthorized practice of law, including preparation of certain documents. Which of the following documents may be prepared by a licensee?

A

Listing and sales contracts, and buyer representation forms

87
Q

Which of the following statements is true regarding the Tennessee Real Estate Commission?

A
88
Q

An affiliate broker may be paid by

A
89
Q

Which of the following statements is FALSE regarding licensing requirements?

A
90
Q

Escrow account records must be maintained

A
91
Q

Which of the following statements is accurate regarding records that must be retained by the broker?

A
92
Q

Which of the following statements is FALSE regarding offers and counteroffers?

A
93
Q

Which of the following statements is TRUE of implied agency in Tennessee?

A
94
Q

What is true regarding the written disclosure of agency?

A
95
Q

Which of the following statements is TRUE regarding environmental issues?

A
96
Q

Tennessee law mandates that, if possible, at least one member of the Tennessee Real Estate commission should be

A

a resident of the southern grand division.

97
Q

When applying for a license for a branch office, a licensee must provide written proof that

A
98
Q

Who is ultimately responsible for seeing that a licensee meets all requirements for license maintenance?

A
99
Q

Of the following, which one CANNOT be used to establish an agency relationship in Tennessee?

A
100
Q

Which of the following statements about commercial brokerage is TRUE?

A

real estate (27 decks)

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