Exam Prep Pass Flashcards
An example of an appurtenance to land is: A. An easement in gross B. A bill of sale C. An assignment D. A sublet
Rationale: A is the correct answer. Appurtenances are those rights, privileges, and improvements that belong to and pass with the transfer of real property but are not necessarily a part of the property, such as rights-of-way, easements, water rights, and property improvements. An easement that is not created for the benefit of the land owned by the owner of the easement. For example, a utility easement would be an easement in gross.
Which one of the following instruments does NOT transfer an interest in real estate? A. An option B. A lease C. A bill of sale D. An agreement of sale
Rationale: C is the correct answer. A bill of sale is used to convey personal property while a deed is an instrument used to convey real property.
When the government takes privately owned property for public use it is called: A. Easement B. Eminent domain C. Public domain D. Adverse possession
Rationale: B is the correct answer. It is the government’s right (under police power) to take privately held land for public use. The process of taking the land is called “condemnation.”
A landowner may ask for a variance when he wishes to be allowed to deviate from: A. Permitting B. Deed restrictions C. Zoning D. Fire codes
Rationale: C is the correct answer. Variance enables s landowner to change the use of a property without changing the zoning. Variances may be given for setback requirements, required number of parking spaces on the property, or minimum square footage for the lot size. Spot zoning allows a zoning change on only a small part of the land.
To create an easement by prescription the following must happen:
A. Constant use of the land for the state number of years
B. Open and notorious use of land
C. Hostile and adverse use of the land
D. All of the above
Rationale: D is the correct answer. A person may acquire an easement by using the servient land a particular way for a long period of time. Such an easement is called a prescriptive easement. The user gets an easement by openly, adversely, continuously, and exclusively using the land for a number of years specified by state statute. Acquiring an easement by prescription today is similar to acquiring title to land by adverse possession. The difference is simply that if the adverse use doesn’t amount to possession but is merely the use of the servient land, the adverse user acquires an easement to continue that use rather than complete ownership of the land.
Mike gave land to the university. Mike will not allow the university to use the land for any sports activities. If the land is used for sports activities, the land will revert to Mike. This is a: A. Fee simple estate B. Life estate C. Defeasible fee estate D. Estate for years
Rationale: C is the correct answer.
In defeasible fee estates, the grantor gives land to the grantee, subject to certain conditions. The effect of the defeasible fee is that it restricts the use of the property by the possessor. Failure to observe the conditions causes the property to revert to the grantor. A fee simple estate subject to a condition subsequent is very similar to a defeasible fee estate. The only difference is that in a condition subsequent, the owner must go to court to take the property back.
Recording a deed:
A. Guarantees fee simple title
B. Is the final step in the transfer of title
C. Is required before resale of the property
D. Protects ownership and safeguards against fraudulent sale
Rationale: D is the correct answer.
Recording a deed is done in the county where the property is located. This act protects ownership and safeguards against fraudulent sale.
A lien that is placed on the property by someone who furnished labor or materials for the property and has not been paid is called a: A. Mechanics lien B. Tax lien C. Deed of trust lien D. Mortgage lien
Rationale: The correct answer is A. A mechanics lien must be filed in the county in which the property is located.
John and Joe own a property together. John owns 60% of the property and Joe owns 40% of the property. What kind of ownership do we assume they have? A. Severalty B. Tenancy in common C. Joint tenancy D. Leasehold
Rationale: B is the correct answer. A way to remember the difference between tenants in common and joint tenancy is that tenants in common ends in an “n” for “no” right of survivorship, meaning that if one of the partners dies, the property of the deceased will go to his heirs . Joint tenancy ends in a “y” meaning “yes” there are rights of survivorship (survivorship of the partnership), meaning that if one of the party dies, the remainder of the property will go to the other partner.
John and Joe own a property together. John owns 60% of the property and Joe owns 40% of the property. What kind of ownership do we assume they have? A. Severalty B. Tenancy in common C. Joint tenancy D. Leasehold
Rationale: B is the correct answer. A way to remember the difference between tenants in common and joint tenancy is that tenants in common ends in an “n” for “no” right of survivorship, meaning that if one of the partners dies, the property of the deceased will go to his heirs . Joint tenancy ends in a “y” meaning “yes” there are rights of survivorship (survivorship of the partnership), meaning that if one of the party dies, the remainder of the property will go to the other partner.
A new 4000 sq. ft. home is built in a neighborhood of 1500 sq. ft. homes. The new home suffers from:
A. Functional obsolescence
B. Economic obsolescence
C. Regression
D. Both B and C
Rationale: C is the correct answer. Regression is the principle that states properties with superior improvements or land values are reduced when most properties in the same neighborhood are inferior.
Which of the following results from factors outside the property? A. Functional obsolescence B. Physical deterioration C. Economic obsolescence D. Curable depreciation
Rationale: C is the correct answer. Economic obsolescence is the loss of value because of what is happening outside the property. It is usually incurable. A neighborhood that is losing its value, an airport being built close to the property, or a major employer moving out of the area are all examples of economic obsolescence.
With regard to the capitalization rate:
A. The value of property increases as the rate increases.
B. The value of the property decreases as the rate decreases.
C. The value of the property decreases as the rate increases.
D. A changing capitalization rate has no effect on the value of the property.
Rationale: C is the correct answer. As the cap rate increases, the value of the property decreases.
The cost approach uses which of the following formulas to estimate value?
A. Replacement cost plus reproduction cost plus land
B. Reproduction or replacement cost plus depreciation plus land
C. Reproduction or replacement cost less depreciation plus land
D. Cost of replacement minus land plus depreciation
Rationale: C is the correct answer. To estimate value using the cost approach, determine reproduction or replacement cost less depreciation plus land.
Tom owns 2 lots that are side by side. Each lot is worth $25,000. If Tom combines the two lots, the value will be $80,000. This new value would be called: A. Salvage value B. Assessed value C. Plottage value D. Rental value
Rationale: C is the correct answer. Plottage is combining two or more parcels of land making the combined property more valuable than if the properties were sold individually. The process of putting the properties together is called assemblage.
Broker Sam met the owners of the property at 123 Lake Avenue to list their home for sale. Sam explained to the owners that he had done extensive market research on the property and his appraisal of the property shows the home to be worth $475,000. Sam used three very similar comparables in the immediate neighborhood that had the same number of bedrooms, baths and living areas. He used comparables that had sold in the past six months. Did Sam do anything wrong during his presentation?
A. No
B. Yes, he only used three comparables.
C. Yes, he called his CMA an appraisal.
D. Yes, he used six-month-old comparables.
Rationale: A is the correct answer. Sam is a broker, not an appraiser. He prepares a CMA (Comparative Market Analysis) or a BPO (Broker’s Price Opinion) but he is breaking TREC rules to call his analysis an appraisal. Only licensed appraisers can call their analysis of a property an appraisal. It is fine for Sam to use three very similar sold comparables in the immediate neighborhood and by FNMA guidelines, 6-month-old comparables are ok.
What is the relationship created called when a written agreement spells out the responsibilities of the principal and the agent? A. A limited partnership B. An expressed agency C. An ostensible agency D. An implied agency
Rationale: B is the correct answer. Expressed agency occurs when the buyer and agent state the exact terms of their relationship and the buyer expresses his or her intention to be represented by an agent. It can be oral or in writing.
A contract that is binding on one party but not on the other party is: A. Void B. Voidable C. Unenforceable D. Valid
Rationale: B is the correct answer. When a contract is void, it is not valid. It can never be enforced under state or federal laws. A void contract is null from the moment it was created and neither party is bound by the terms. A voidable contract is binding on one party but not the other. (Unilateral contracts are voidable by the unbound party). A voidable contract is valid and may be enforceable in certain situations only if both parties agree to move forward. One party is bound to the terms of the contract, whereas the other party can oppose the contract for legal reasons if they so choose. Therefore, if the unbound party rejects the contract, it becomes voidable.
A purchaser's right to acquire legal title to real property under the terms of a valid agreement is known as: A. Naked title B. Equitable title C. Specific performance D. Contract title
Rationale: B is the correct answer.
Equitable title refers to the actual use and enjoyment of a given property without real, absolute ownership. In a purchase contract, this is the interest in the property held by the buyer. The buyer then has the right to demand the transfer of legal title upon payment of the agreed upon purchase price after the final installment payment has been made. The interest can be transferred by deed, subcontract, assignment, or mortgage. In other words, equitable title is conveyed to the buyer as soon as a purchase agreement is accepted, while legal title waits until the actual transfer takes place.
When property is sold by means of an installment contract:
A. The seller delivers deed at closing.
B. The buyer is NOT given the right to occupy the property until the contract terms have been fulfilled.
C. The seller retains title.
D. Time is of the essence.
Rationale: C is the correct answer.
An installment contract is also called a contract for deed. This means that the seller retains title to the property until the buyer pays off the loan.
A contract that has been fully performed is: A. Executory B. Cancelled C. Executed D. Breached
Rationale: C is the correct answer. An executed contract is one in which all parties to the contract have signed and initialed all changes.
When a contract appears to be good and binding but, in fact, one of the parties may legally reject it, the contract is said to be: A. Valid B. Voidable C. Void D. Unenforceable
Rationale: B is the correct answer. A voidable contract is a valid contract that may be terminated or rescinded by one of the parties.
What is added to a contract to further describe the rights and duties of the parties? A. An addendum B. An amendment C. An attachment D. An exhibit
Rationale: A is the correct answer. A contract may be subject to the buyer selling their home before buying another. A “Sale of Other Property by Buyer” addendum may be added that specifies the time frame and other details about the buyer selling their property and the obligations of the buyer and the seller. Other addenda may further explain the financing (Third Party Financing Addendum) the purchaser is going to obtain.
What type of agent is a property manager? A. Universal agent B. Special agent C. General agent D. Authorized agent
Rationale: C is the correct answer. General agents are given the authority to act on behalf of the owner of the property. This includes signing lease agreements, accepting deposit money and qualifying the tenant.
All changes from the original contract once it is receipted by the title company are completed on the:
A. Termination notice
B. Amendment
C. Third Party Financing addendum
D. Original contract that agent requests back from the title company
Rationale: B is the correct answer. Once a contract has been receipted by the escrow company, it remains in place. Any changes must take place on an amendment, signed by all parties, and dated.
A buyer’s interest in real property, acquired at the moment the seller and the buyer enter into a sales contract, is known as: A. Legal title B. Equitable interest C. Fee simple determinable D. An option to purchase
Rationale: B is the correct answer. Equitable interest is the buyer’s interest in real property the moment the seller and the buyer enter into a sales contract.
Documents that must be in writing according to the Statute of Frauds include:
A. A lease for a term of one year or more
B. Deeds
C. Deeds of trust and promissory notes
D. All of the above
Rationale: D is the correct answer.
All deeds must be in writing to be enforceable in a court of law.
Agency by ratification is an agency relationship created when a principal confirms and accepts a purported agent’s unauthorized act. Given that definition, which of the following statements is true about agency by ratification?
A. Agency by ratification is illegal in Texas.
B. Agency by ratification is permitted in Texas.
C. Agency by ratification falls under Deceptive Trade Practices Act is punishable by triple damages.
D. There is no such thing as agency by ratification.
Rationale: B is the correct answer.
Agency by ratification is permitted in Texas.
The death of the __________will not terminate the listing, but the death of the _____________ or the____________ will terminate the listing.
A. Listing salesperson ——— broker ———seller
B. Broker————-salesperson————seller
C. Seller————broker————salesperson
D. None of the above
Rationale: A is the correct answer. If the broker or the seller dies, the listing agreement automatically terminates.
If an agent from ABC Company lists a property and another agent from ABC Company who represents the buyer sells the property, what is the role of the broker? A. Sub-agent B. Listing broker C. Intermediary D. Dual agent
Rationale: C is the correct answer. Intermediary involves a broker who has one agent who has listed the property and another agent who has a buyer for that listing both agents being in the same brokerage company. The broker will appoint one agent to work with the seller and appoint another agent to work with the buyer.
A licensed real estate agent is offered a listing by an owner who stipulates that she will not sell to any person of a certain national origin. The agent should:
A. Accept the listing and leave it up to the owner to reject offers from these persons
B. Refuse the listing
C. Report the owner to the real estate department
D. File a complaint against the owner with HUD
Rationale: B is the correct answer. If the seller of a property intends to discriminate, you are advised to refuse the listing.
The handicapped amendment to fair housing defines handicapped as:
A. Having a physical or mental impairment that limits major life activities
B. Having a record of having such an impairment
C. Both A and B
D. Neither A or B
Rationale: C is the correct answer. Handicap became a protected class in 1988 by the Fair Housing Amendment of 1988 and its definition includes having a physical or mental impairment that limits major life activities as well as having a record of such impairment. It also includes a single mother or father with children under the age of 18 and also pregnant women.
All of the following should be included in the broker’s policy and procedures manual EXCEPT:
A. Goals for the company
B. Agency and representation
C. Compensation and fees.
D. Required attendance at sales meetings and scheduled time for answering the telephones at the office that the broker schedules three months in advance.
Rationale: D is the correct answer. As independent contractors, brokers may not require agents to engage in specific, timed activities.
Broker Bob is meeting with Kim for the first time and hopes to list her home. Which choice best describes the conversation between Broker Bob and Kim?
A. The conversation is a substantive dialogue and Bob must give Information About Brokerage Services.
B. The conversation is a substantive dialogue, but Information About Brokerage Services is not required.
C. Information About Brokerage Services will only be given if Bob gets the listing.
D. Information About Brokerage Services is only used for buyers.
Rationale:
A is the correct answer. Information About Brokerage Services is used for buyers, tenants, sellers, and owners.
The TAR Residential Leasing and Property Management Agreement is the form often used between: A. Seller and buyer B. Property manager and tenant C. Property manager and owner D. Tenant and owner
Rationale: C is the correct answer. TREC does not make a management agreement to be used by the real estate broker and the owner.
How does a constructive eviction occur?
A. A landlord obtains a court order to force the tenant to vacate the lease property.
B. A landlord declares a tenant in default and takes possession of the leased property.
C. A tenant declares the landlord to be in default and vacates the property.
D. A court officer forcibly removes the tenant from the property.
Rationale: C is the correct answer. Constructive eviction is when the tenant claims the landlord’s actions have made the property unfit for habitation.
