KY State Pratice Questions

Question 1

A contractor in Kentucky would consider the following to be an indirect expense in the construction of an improvement:

A. Building permit

B. Material cost

C. Any subcontract

D. Labor cost

Answer 1

A. Building Permit

The other choices are direct expenses.

Question 2

An attachment is:

Answer 2

A Lien

Question 3

A seller states that the minimum proceeds from the sale must be $108,000 after paying 18% in selling fees and other charges. For a transaction to occur, the sales price (rounded to the nearest dollar) must be at least:

Answer 3

$108,000 divided by 0.82 is $131,707.32

The seller’s minimum represents 82% of the contract (the other 18% is selling fees and charges):

Question 4

When preparing a feasibility report for a proposed residential development, and desiring to write the report in view of the national economic factors, all of the following should be included except:

Local zoning ordinances.

Answer 4

Local zoning ordinances.

Question 5

The most accurate determination of the age of a house can be made by inspecting the:

Answer 5

Tax assessor’s records

Question 6

Kentucky brokers aren’t allowed to split fees with or compensate any person who is not licensed to perform any of real estate acts. However, a broker may:

A. pay a commission or other compensation to a broker licensed outside of Kentucky, in compliance with KRS 324.235 to 324.238.

B. Both options are allowed

C. pay a referral fee to a broker licensed outside of Kentucky for referring a client to the Kentucky broker.

D.Neither option is allowed

Answer 6

B. Both options are allowed

Kentucky brokers are not allowed to split fees or compensate unlicensed individuals for performing real estate acts. A broker can, however, pay a referral fee to an out of state licensee or compensate a broker licensed outside of Kentucky for real estate acts, as long as the relationship is in compliance with KRS 324.235 to 324.238.

Question 7

When may the Kentucky Real Estate Commission reduce the two year experience requirement for applicants for a broker’s license to one year?

Answer 7

if the applicant has an associate degree in real estate or a bachelor’s degree with a major or minor in real estate

Question 8

The seller has not yet paid this year’s property taxes, which are $2,400 for the period from January 1 to December 31. On July 16, the house is sold. How are the taxes adjusted at closing?

Answer 8

Credit buyer $1,300; debit seller $1,100

Because the taxes haven’t yet been paid, the buyer receives credit for the period the seller lived in the house: 6 1⁄2 months at $200 per month = $1,300. The buyer receives credit at closing for that amount and the seller is debited for the same amount. The buyer will be responsible for the remaining $1,100 due for July 16th to December 31st.

Question 9

In Kentucky, dower and curtesy:

Answer 9

Are recognized for all marriages

Dower and curtesy are recognized in Kentucky. Dower is the wife’s interest in her husband’s property and curtesy is the husband’s interest in the wife’s property. The rights of dower and curtesy may not be waived by either spouse.

Question 10

A real estate broker negotiates a business opportunity transaction. His commission is paid partly in cash and partly as an ownership stake in the business. This is considered:

Answer 10

Legal

A broker may accept a commission in any manner that is legal in nature.

Question 11

The Real Estate Code of Ethics was created by:

Answer 11

National Association of Real Estate Boards.

Question 12

Which of the following is considered “telephone solicitation”?

A.A telephone call to a person with a prior or existing business relationship to the caller, in order to solicit a contract for the maintenance or repair of items purchased from the caller.

B. None of the other options represent “telephone solicitation”.

C. A telephone call made at the request of the person being called (unless the request was made during a prior telephone solicitation).

D. A telephone call made to a debtor to request payment or performance of an existing debt or contract that has not been completely paid, or performed, at the time of the call.

Answer 12

B. None of the other options represent “telephone solicitation”.

Question 13

The cleanest method of financing with the least exposure and liability to the seller is

Answer 13

New Financing

Question 14

what is the maximum that the real estate education, research and recovery fund will pay for combined payments to all claimants against any one licensee?

Answer 14

$50,000

Question 15

A veteran of the armed forces may obtain a mortgage for the full purchase price of a home with no requirement for down payment. To provide an additional benefit to the veteran, the Department of Veterans Affairs will also:

A. Guarantee a portion of the loan

B. Inspect the property

C. Pay the entire closing costs

D. Regulate the interest rate

Answer 15

A. Guarantee a portion of the loan

Question 16

In Kentucky, when should the agency disclosure statements be given to the consumer?

Answer 16

At the time a buyer is making an offer and at the time a seller is reviewing that offer.

Question 17

Ralph sold his house to Oscar, who did not record the deed, but took residency there. Ralph then sold the same property to Larry, who reviewed the county recorder’s records, but did not examine the property. Ralph gave Larry a deed, which Larry recorded. Which of the following would be true concerning title to the property?

A. Larry now owns the property, because he recorded his deed first.

B. Larry and Oscar are co-owners of the property.

C. Larry has recourse against Oscar for failure to record.

D. Oscar maintains title.

Answer 17

D. Oscar maintains title.

In situations like this, the first person to possess or record gets the property. Possession of the property provides constructive notice, so Oscar maintains possession even though he wasn’t the first to record.

Question 18

An expensive home that later became surrounded by cheaper homes would suffer a loss in property value attributable to:

Answer 18

Economic Obsolescence

An expensive home that later became surrounded by cheaper homes would suffer a loss in property value attributable to Economic Obsolescence. Economic obsolescence is a form of depreciation caused by factors that are not on the property, in the property, or even within the property lines. It can be caused by factors like the neighborhood experiencing a rise in crime. It can also be caused by economic factors such as problems in the job market. A recession or economic depression that reduces property value can also be categorized as economic obsolescence. In the question the expensive home is losing value because of cheaper homes surrounding it. Because that is a factor outside of the property line it would be Economic Obsolescence.

Question 19

Which of the Methods could be used by Appraisers for estimating the cost of Construction:

A. Quantity Survey Method

B. Square Footage Method

C. All of the other options are correct

D. Unit-in-Place Method

Answer 19

C. All of the other options are correct

Methods by appraisers for estimating the cost of Construction: Unit-in-Place Method: calculates the added cost of single units installed; Square Footage Method: utilizes exterior dimensions to calculate the cost per square foot; Quantity Survey Method: calculates the cost of labor and materials to construct each component of a building, very accurate but time consuming

Question 20

Which of the following is created when possession and title do not occur at the same time?

A. Interim Occupancy Agreement

B. Writ of execution

C. Subordination clause

D. Estate at Sufferance

Answer 20

A. Interim Occupancy Agreement

An Interim Occupancy Agreement allows for a buyer to take possession of a property prior to the close of escrow.

Question 21

An acceleration clause is inserted into a note that is otherwise negotiable. Adding this clause:

A. is required to be negotiable.

B. does not limit the negotiability of the note.

C. has no effect on negotiability, but also is of no benefit to the holder of the note.

D. makes the note non-negotiable.

Answer 21

B. does not limit the negotiability of the note.

An acceleration clause assists the lender in a foreclosure immediately but does not limit the negotiability of the note- so the note can still be assigned, sold, or transferred.

Question 22

Homeowner Ruth acquired land that was deposited by a river running through her property. This land was deposited by the process of:

Answer 22

Accretion

Accretion means the addition to a parcel of land by sand or soil deposits due to the action of a river or other body of water over time.

Avulsion refers to the loss of land as a result of its being washed away by sudden or unexpected action of nature, such as a flash flood that re-routes a river.

Question 23

Undue influence or duress applied to one party to a contract makes the contract:

Answer 23

voidable.

Question 24

A “GPAM” mortgage loan provides for:

Answer 24

Deferment of certain payments on the principal during the early period of the loan.

Graduated Payment Adjustable Mortgage (GPAM) allows for the deferment of certain principal payments.

A graduated payment mortgage loan, often referred to as GPM, is a mortgage with low initial monthly payments which gradually increase over a specified time frame. These plans are mostly geared towards young people who cannot afford large payments now, but can realistically expect to raise their incomes in the future. For instance a medical student who is just about to finish medical school might not have the financial capability to pay for a mortgage loan, but once he graduates, it is more than probable that he will be earning a high income. It is a form of negative amortization loan.

Question 25

The “Open End” clause in a mortgage would benefit the borrower the most if he:

Answer 25

Borrowed additional money

Open-End Clause is a provision in mortgage contract that declares the mortgaged real estate may be used as security to borrow additional money

Question 26

A take-out loan in real estate financing is:

Answer 26

A long term loan to replace a construction loan

Take-Out Loan is a long-term loan. It is a permanent mortgage loan which a lender agrees to make to a borrower upon completion of improvements on the borrower’s land. The proceeds of the loan are used principally to pay off the construction loan.

Question 27

The annual percentage rate (APR) is defined by the Federal Truth-in-Lending Law as:

Answer 27

the cost paid each year to borrow money, including fees, expressed as a percentage.

The APR is a broader measure of a borrower’s cost of borrowing money.

It reflects not only the interest rate, but also the fees a borrower must pay to get the loan expressed as a percentage.

When the APR is used in advertising by a lender, it reveals the particularities of costs in credit in percentage terms.

[If the ad only states the APR, then other disclosures are not necessary.]

Question 28

Usefulness of the cost approach would be limited when:

A. appraising for proposed construction.

B. an appraiser is appraising a new structure appropriate to its site and use.

C. appraising an old structure with many functional deficiencies.

D. there exists an unusually inactive real estate market.

Answer 28

C. appraising an old structure with many functional deficiencies.

The cost approach is most appropriate for new buildings, not old.

Question 29

The “marginal tax rate” is defined as:

Answer 29

The tax rate which is applied to the next dollar earned

Question 30

All of the following are sufficient to convey an interest in real property, except:

A. agreements of sale.

B. deeds.

C. bills of sale.

D. leases.

Answer 30

C. bills of sale.

Bills of sale are a written instrument that conveys title to personal property, such as furniture purchased as a part of a home sale.

They are not used for real property.

This is not the same as a lease, which is personal property that conveys an interest in real property.

Question 31

An appraiser’s primary concern when analyzing residential property is

Answer 31

Marketability and acceptability

An Appraiser is concerned with the marketability and acceptability of a property.

Depending on what type of property is being appraised, the others may be concerns as well, but not the primary concern of an appraiser which would be the marketability, and acceptability.

Question 32

The most comprehensive and complete appraisal report is the:

Answer 32

Narrative report

Narrative Report is the most Comprehensive of the three types (letter form, short form, Narrative) that includes all the information obtained by the Appraiser as well as the methodology behind the calculations and value conclusion.

But as comprehensive as it may be it does not contain the buyers financial condition because how you pay for the property is not relevant to the value of the property itself.

Question 33

When property values increase due to the increase in population it would be considered to be:

Answer 33

An unearned increment

Unearned Increment: An increase in the value of a property as the result of inflation or a population increase.

Question 34

An appraiser is using the market data approach comparing the prices of comparable properties to the subject property. If the comparable properties have a feature that is not present in the subject property, the value of that feature will be:

Answer 34

Subtracted from the sales price of the comparables;

When comparing two properties you need to deduct for features of the comparable.

For example, if one property has pool and the other does not, you must subtract the value of the pool.

Question 35

When an appraiser contrasts “reproduction costs” with “replacement cost”, the term “replacement costs” is more closely associated with which of the following concepts?

A. The present cost to replace the building with an exact replica

B. The original cost to replace a building

C. The present cost to replace the building with another building having the same utility

D. The cost to replace a building with another building which would use the land to its highest and best use

Answer 35

D. The present cost to replace the building with another building having the same utility

The replacement cost of improvements is the cost to replace one improvement with another improvement having the same utility.

Question 36

A joint tenant can dispose of an interest held in real property by all of the following ways, except by:

A. gift.

B. sale.

C. lease.

D. will.

Answer 36

D. will.

A joint tenancy has the right of survivorship. This means that If one joint tenant dies, the surviving joint tenants take the decedent’s interest automatically- the property interest cannot be willed.

Question 37

An increase in the availability of money leads to which of the following effects on interest rates?

A. No effect on interest rates, due to TILA guidelines

B. Interest rates would go up

C. Interest rates would go down

D. No effect on interest rates, due to RESPA guidelines

Answer 37

C. Interest rates would go down

Just like most things in a free market economy, mortgage loans are subject to the laws of supply and demand.

Thus, when there is more mortgage money in the market place “looking for a home,” borrowers have more choices, which leads to increased competition among lenders, which leads to lower interest rates.

Question 38

“Intestate succession” occurs when:

Answer 38

There is no will.

Intestate succession occurs when someone dies without leaving a will, or leaving an invalid will so that the property of the estate passes by the laws of succession rather than by the direction of the deceased.

Question 39

Tim sold his home for $30,000 and took back a note for $15,000 with interest at 9% per annum. The note was secured by a first mortgage. The home had a fair market value of $29,000. Later he decided to sell the mortgage and note which he discounted to $13,000. He then sold it to Eric. On the back of the note, he wrote “I hereby assign the within note to Eric without recourse.” If the maker of the note defaults before any principal payments are made, Eric’s best legal remedy is to:

Answer 39

foreclose to enforce payment of $15,000.

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan.

If, for example, someone defaulted on a $15,000 note before any payments were made, then the lender would foreclose for $15,000.

In this case, the maker of the note still owes $15,000 on the property, even though Tim sold the debt to Eric, so Eric would foreclose for $15,000.

Question 40

A lis pendens:

A. may affect title to real property based on the results of the lawsuit.

B. can only be removed from the public records by a court order.

C. can be recorded no matter what the type of lawsuit is.

D. only affects title to real property if the owner is not a party to the lawsuit.

Answer 40

A. may affect title to real property based on the results of the lawsuit.

A “lis pendens” is a legal document which gives notice that an action or legal proceeding (mechanic’s lien filing, foreclosure) is pending in the courts that could affect the title to the designated property.

Question 41

There are several differences between an extended coverage policy of title insurance and a standard coverage policy of title insurance. Which of the following is insured under the extended policy, but not under the standard policy?

A. The possibility that some improvements on the insured property are located on adjoining land

B. The results of a forged deed in the chain title

C. Detrimental zoning ordinances

D. The lack of capacity of one of the parties to any transaction involving title to the land

Answer 41

A. The possibility that some improvements on the insured property are located on adjoining land

Question 42

Insurance for a mortgage loan may be provided by:

Answer 42

FHA or private mortgage insurer

Federal Housing Administration (FHA) insures Lenders against loss in the event of a default. FHA loan might approve a loan to buy 1-4 units of residential property to be used for rental purposes. To get an FHA loan you go to institutions that are authorized to deal with the FHA, there is no FHA office. Private insurers can insure loans when the borrower does not qualify for the FHA loan.

Question 43

A voidable contract remains binding upon the parties until the contract is:

Answer 43

rescinded.

A voidable contract is a contract that may be rejected by one of the parties to a contract.

It is valid until it is rescinded. Examples of voidable contracts include contracts signed under duress, or contracts entered into with threat or menace. In those situations, the person forced or coerced into signing can void the contract (because they weren’t a willing party) or choose to honor the contract.

The person who did the forcing or coercing cannot void the contract (because they were a willing party).

Question 44

In order to enjoy some of the benefits of incorporation, yet retain the partnership, it is possible to form a “limited partnership.” This can be achieved only by filing a formal certificate. Limited partners:

A. Must have at least two partners who are general partners.

B. May participate in management.

C. Are not responsible for firm debts beyond their individual investment.

D. May allow their names to be used in the business

Answer 44

C. Are not responsible for firm debts beyond their individual investment.

Limited partners are exactly that - limited.

They cannot do anything except invest their money in the partnership.

Because of their restricted position, they are not held liable for debts of the partnership beyond the amount of their investment.

Question 45

A real estate investor who wishes to operate by using the principle of leverage would:

Answer 45

use borrowed money so that the return can be maximized.

Leverage is the use of borrowed funds to complete an investment transaction.

The higher the proportion of borrowed funds used to make the investment, the higher the leverage and the lower the proportion of equity funds.

Question 46

Re-zoning a section of town and changing its lawful use for new development from commercial to residential use is known as:

Answer 46

down zoning

This is known as down zoning because it usually reduces the economic value of the property involved.

Down zoning is the process by which an area of land is rezoned to a usage that is less dense and less developed than its previous usage.

This is typically done to limit sprawl and overgrowth of cities, and to help concentrate areas of development into smaller sections to prevent over zoning a community.

Question 47

A buyer enters into a verbal contract to purchase a house and immediately gives the broker an earnest money check for $500. Prior to performance under this contract, the verbal contract is considered legally:

Answer 47

unenforceable.

A verbal contract is an agreement that is not in writing and is not signed by the parties.

It is a real contract but lacks the formal requirement of a memorandum (written document) to render it enforceable in litigation, making it unenforceable.

The statute of frauds requires all purchases of real property to be written in order to be enforceable, so until this real property transaction is performed or entered into a written agreement, the verbal contract is considered unenforceable.

Question 48

A salesperson who prepares a written listing agreement with a seller is helping to create a contractual relationship between the:

Answer 48

salesperson’s broker and the seller.

Question 49

Keith and Ralph bought a house as tenants in common. If Keith dies, which of the following statements about ownership of the house is CORRECT?

A. Ralph holds life estate ownership in Keith’s share of the property.

B. It automatically becomes tenancy in severalty.

C. It is divided, with Ralph retaining Ralph’s original interest and the balance going to Keith’s estate.

D. Ralph holds fee simple ownership in Keith’s share of the property.

Answer 49

C. It is divided, with Ralph retaining Ralph’s original interest and the balance going to Keith’s estate.

Tenancy in Common is formed as the result of two or more persons owning an undivided interest in the property.

Unity of Possession is the only unity required for a tenancy in Common.

There is no automatic right of survivorship as there is with a Joint tenancy: Thus Keith’s interest does not have to go to Ralph.

Question 50

When private property is abandoned, the state may acquire title to that property under the right of:

Answer 50

escheat

Escheat is a reversion of property to the state in the absence of an individual owner.

Usually occurs when a property owner dies intestate (without a will), and without heirs.

An individual CANNOT acquire property through Escheat.

Question 51

Which of the following documents is usually prepared when a real estate buyer also purchases a seller’s riding lawn mower?

A. A conditional sales contract

B. An option

C. A wraparound loan

D. A bill of sale

Answer 51

D. A bill of sale

A bill of sale is a written document that serves as evidence of the transfer of title to personal property.

Personal property is generally movable property, an example of a bill of sale would be a lawn mower.

Question 52

Homeowners may deduct all of the following expenses on their tax return except:

A. Points on a purchase money mortgage.

B. Mortgage interest paid.

C. Property taxes paid.

D. Depreciation and maintenance expenses.

Answer 52

D. Depreciation and maintenance expenses.

Question 53

Which of the following describes a representative with full authority to bind the principal to all agreements in which the representative has been authorized to act?

A. Special agent

B. Accidental agent

C. General agent

D. Double agent

Answer 53

C. General agent

A general agent has the power to act on behalf of the principal in an authorized area of business. Property managers are an example of a general agent, as they are authorized to perform all tasks related to the managing of the property.

Question 54

The type of real estate loan that allows the lender to increase the outstanding balance of a loan up to the original sum in the note while advancing additional funds is the:

Answer 54

open-end mortgage.

An “Open End Mortgage” is an expandable loan in which the borrower is given a limit up to which he or she may borrow, with each incremental advance to be secured by the same mortgage.

The lender is allowed to advance additional funds to increase the outstanding balance of the loan at the borrower’s request, up to the original loan limit of the promissory note.

Question 55

The lender is required, under TRID, to provide a detailed Loan Estimate at the time of loan application or within three business days to:

Answer 55

the buyer.

When a homebuyer applies for a home loan, the TILA/RESPA Integrated Disclosure rule requires the lender to provide a Loan Estimate to the buyer within 3 days of receipt of the loan application, and all revisions have to be delivered at least 7 days before closing.

The loan estimate details the loan terms, mortgage payments, costs at closing and other costs and fees related to the loan, many of which cannot change.

Question 56

An owner advertised “beautiful acreage; only $5,000 down; owner will personally finance down payment.” Would this be in violation of the Truth in Lending Act?

Answer 56

No, because owners are not covered by Regulation Z

Regulation Z requires disclosure of all financing terms and conditions if a low interest rate, down payment or other enticement is featured in an ad.

This does not apply in this case, however, because Regulation Z applies only to institutions, not individuals selling their own property.

Question 57

A broker shows a prospective buyer a home. The buyer makes an offer and the seller accepts. The broker, buyer, and seller then go to the Reliable Escrow Company where the buyer makes out a personal check for a $1,000 deposit payable to Reliable Escrow Company and hands it to the escrow officer. Which of the following is correct?

A. No record is required to be kept since the check was made out directly the escrow company and was not delivered by the broker

B. The broker has to keep a record of the check in his record of all trust funds received and not placed in his trust account

C. The broker can keep a digital record of the check on his phone only, as long as the governing real estate body knows where his phone is kept

D. The broker has to keep a record of all checks deposited into his personal bank account

Answer 57

B. The broker has to keep a record of the check in his record of all trust funds received and not placed in his trust account

Brokers are generally required to keep records of all financial dealings related to real estate transactions they are brokering.

Question 58

Under a lease, the leasehold interest lies in the:

Answer 58

lessee.

A “leasehold interest” is the right to exclusive possession and use of real property for a fixed period of time held by the lessee. Remember: lessor(landlord), lessee (tenant).

Question 59

Which of the following does not “go with the land”?

A. An easement appurtenant

B. An easement in gross

C. An easement by necessity

D. An easement by prescription

Answer 59

B. An easement in gross

An easement in gross is held by a person or entity, not a property, so it does not “go with the land”.

Typically an easement is used to go to another property.

With an easement in gross, there is no other property to go to.

Therefore it would not go with the land because there is no land.

Question 60

When analyzing the income produced by a property, an appraiser is concerned with:

A. quality of tenants.

B. prospect of continued income.

C. All of the other options are correct

D. amount of income.

Answer 60

C. All of the other options are correct

Question 61

If you are a subagent of the listing broker, you are representing the:

Answer 61

Seller

“Subagent” means a person to whom an agent delegates agency powers.

In a case like this, the subagent may be “working for” the listing agent, but they are still representing the seller.

This is common in real estate, as the marketing of real property by real estate agents is often a cooperative effort.

The listing broker usually makes an offer of compensation to a cooperating broker (subagent) by placing the property on the Multiple Listing Service.

Some MLS’s make the offer of subagency automatic, while for others, the offer of subagency is optional and requires an affirmative act by the listing broker.

If the principal (seller) specifically authorizes his/her broker to appoint a subagent and thus establishes a new contractual and fiduciary relationship, the subagent represents the principal in the same manner as the listing broker.

Question 62

The Statute of Frauds outlines which contracts must be in writing to be enforceable through court action. Which of the following contracts would be enforceable?

A. A verbal lease for one year or less

B. An exclusive listing taken orally by a broker to sell a single-family residence

C. An oral agreement to pay a broker a commission for the negotiation of an exchange of two businesses

D. A verbal agreement to secure a loan of $1,500

Answer 62

A. A verbal lease for one year or less

The Statute of Frauds is state law that requires certain contracts to be in writing and signed by the party to be charged (or held) to the agreement in order to be legally enforceable.

The Statute of Frauds generally requires that all contracts for the sale of land or any real property interest be in writing.

It also states that leases for more than one year need to be in writing as well.

Question 63

A licensed real estate broker is successful in securing a buyer for a property who is ready, willing and able to buy. The offer is accepted and signed by both parties and escrow is opened. During the escrow period, the title company discovers that the seller is married but under 18 years of age and notifies the broker and the escrow holder. Under these circumstances, the contract is:

Answer 63

Valid

A minor is generally defined as any person under the age of 18.

However, a person under the age of 18 years is said to be an emancipated minor if the person has entered into a valid marriage, is on active duty in any armed forces, or willingly lives apart from their parents with the parents’ consent and manages their own financial affairs regardless of the source of income.

Emancipated minors are treated as adults by the law, so are capable of consenting to a contract.

Question 64

Which of the following is TRUE concerning promissory notes?

A. They are used as security for trust deeds

B. They are always used when real estate is sold

C. They are recorded at the county recorder’s office

D. They are the evidence of the debt

Answer 64

D. They are the evidence of the debt

The promissory note is the evidence of the debt. The trust deed is the security of the debt.

Question 65

In receiving a gift of a parcel of real estate, one of the two new owners was given an undivided 60% share, and the other received an undivided 40% share. They now hold title as

Answer 65

tenants in common

Tenants in common hold property with undivided fractional interests, and the shares do not have to be equal.

In a joint tenancy, each owner holds equal shares and interests to the property.

Community property consists of personal or real property acquired by either party in a marriage and belonging to both parties to the marriage.

In a cooperative, owners own shares in a corporation, partnership or trust which owns a property, with each owner holding a proprietary lease and the right to occupy the unit.

Question 66

Which lien affects all real and personal property of a debtor?

Answer 66

General

A general lien attaches to all of a debtor’s real and personal property as opposed to a specific lien, which affects only a particular piece of real or personal property.

A voluntary lien, such as a mortgage, is placed on a property with the consent of the owner.

An involuntary lien is imposed upon a property without the consent of the owner.

Question 67

One major difference between joint tenancy and tenancy in common is:

A. tenants in common have a separate legal title, which allows them to have divided interests.

B. joint tenancy requires all ownership rights to be acquired at the same time.

C. joint tenants have equal rights of possession, while tenants in common do not.

D. tenants in common have survivor rights for each owner.

Answer 67

B. joint tenancy requires all ownership rights to be acquired at the same time.

Joint tenancy (which offers the right of survivorship) requires PITT- possession, interest and title must all occur at the same time.

Tenants in common owners have equal rights of possession but may have unequal rights of ownership.

All owners, regardless of how ownership is taken, share one deed which conveys legal title.

Question 68

All of the following will terminate an easement EXCEPT:

A. when the need for the easement no longer exists.

B. the abandonment of an easement.

C. the nonuse of a prescriptive easement.

D. termination by the servient tenement.

Answer 68

D. termination by the servient tenement.

An easement cannot be terminated by the servient tenement, although it can be terminated by the dominant tenement (usually via quitclaim deed).

All of the other events shown will terminate an easement.

Question 69

A property owner conveys a life estate to her uncle and names her son as remainderman. On the death of the uncle, the son will have what type of estate?

Answer 69

Fee simple absolute estate

The son holds a remainder interest in the property, and will have a fee simple absolute estate upon the death of the uncle, the life tenant.

Question 70

A township contains only:

Answer 70

36 sections

Each section is 1 square mile.

Each township is 6 miles square and contains 36 square miles, so a township contains 36 sections.

Each section is 1 square mile, or 640 acres.

The 36 square miles of a township are 23,040 acres.

Question 71

Which of the following would be classified as a general lien?

A. Real estate property tax lien

B. Mechanic’s lien

C. Judgment

D. Property tax lien

Answer 71

C. Judgment

A judgment lien is not a lien just on specific assets but on the assets of the debtor in general.

A judgment applies to both the personal and real property of the debtor.

Property tax liens are specific liens that have priority over other liens.

A mechanic’s lien may be filed against real property by a contractor or supplier for nonpayment of work or supplies.

A property tax lien may be filed by a government for the nonpayment of real estate property taxes.

Question 72

How many acres are in a parcel described as the NW¼ of the SE¼ and the S½ of the SW¼ of the NE¼ of Section 4?

Answer 72

60 acres

To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres.

In this problem, multiply denominators for the first part: 4 × 4 = 16;

640 acres ÷ 16 = 40 acres.

Multiply denominators for the second part:
2 × 4 × 4 = 32;

640 ÷ 32 = 20 acres.

Then add 40 acres + 20 acres = 60 acres.

Question 73

Eminent domain and escheat are two examples of

Answer 73

involuntary alienation.

Involuntary alienation occurs when property is transferred without the owner’s consent.

The right of eminent domain allows a government to acquire property for a public purpose through condemnation.

When a person dies without a will (intestate) and without heirs, the property passes (escheats) to the state.

This process was neither planned nor initiated by the owner before death.

Voluntary alienation occurs when property is transferred with the owner’s consent.

Adverse possession is the acquiring of title through open, notorious, hostile, and continuous use of another’s property.

Descent occurs when an heir inherits a property through probate from a deceased owner who died intestate, without a will.

Question 74

Change, contribution, and substitution are some of the basic principles that affect what aspect of real estate?

Answer 74

Value

Change, contribution, and substitution all affect value—the most probable price a property will bring.

Change relates to the reality that nothing is constant and variations in various aspects of a property will affect its value.

Contribution means that the value of any part of property is measured by how it affects the value of the whole property.

Substitution says that the maximum value of a property tends to be determined by how much it would cost to purchase an equally desirable substitute property.

Depreciation is a loss of value for any reason.

Under the principle of supply and demand, when supply increases the value decreases and when demand increases, the value increases.

Question 75

The characteristics of value include which of the following?

Answer 75

Scarcity

The characteristics of value (STUD) are: scarcity, transferability, utility and demand .

Scarcity means that there is a limited supply of similar properties.

Competition is the interaction of supply and demand causing prices for property to rise or fall.

The economic principle of anticipation states that value is created by the expectation that certain events will occur affecting the value of a property.

Balance refers to the amount remaining after certain mathematical calculations have been completed.

Question 76

A state certified appraiser is conducting an appraisal of a library building surrounded by several acres of land belonging to the property. In determining the value of the land itself, the appraiser will most likely use the

Answer 76

sales comparison approach

An appraiser will most likely use the sales comparison approach to determine the value of the land.

They may use the cost approach to arrive at an opinion of value for the library building itself.

The reproduction cost and the replacement cost are incorporated within the cost approach to value.

An appraiser uses the income approach to value for income-producing properties, such as a multi-unit apartment building.

NOTE - The question is asking solely about how the appraiser would value the land. Land is always valued by using the sales comparison approach.

Question 77

The Consumer Financial Protection Bureau (CFPB) states all of the following for residential loans EXCEPT:

A. lenders must provide borrowers with a new loan estimate of closing costs.

B. the borrower may cancel the first home purchase loan transaction within three days after settlement.

C. a new loan closing disclosure must be used at new loan closings.

D. borrowers must receive information on settlement charges.

Answer 77

B. the borrower may cancel the first home purchase loan transaction within three days after settlement.

A borrower has no rights to cancel a first or second home purchase loan under the CFPB but does have cancellation rights for other loans, such as those for refinancing or home equity.

The CFPB does require that lenders provide borrowers with a new loan closing disclosure that states all charges to be paid by the borrower and the seller at settlement of the loan.

Lenders must provide a new loan estimate of closing costs no more than three business days after receiving a loan application along with information on settlement costs.

Question 78

Conventional loans are viewed as the MOST secure loans because

Answer 78

their loan-to-value ratios are often lower than other types of loans.

The answer is their loan-to-value ratios are often lower than other types of loans.

The borrower with a conventional loan usually makes a down payment of at least 20%, so that the loan-to-value ratio is 80%.

The security for the loan is provided by the mortgage, and the payment of the debt rests on the borrower’s ability to pay.

Conventional loans are not insured or guaranteed by the government, unlike FHA or VA loans.

Private mortgage insurance (PMI) protects the lender only for the excess of the loan amount over 80% of the property’s appraised value.

Conventional loans are often purchased from the original lenders through the secondary mortgage market.

Question 79

A broker and seller terminate the listing contract. An offer is received in the mail by the broker after the termination of the listing contract. The offer is for full price and includes all of the terms and conditions of the seller. Why is this NOT a valid contract?

Answer 79

No acceptance has been given.

It has not been presented to or accepted by the owner.

Remember, contracts aren’t valid until both parties agree.

However, even though the listing agreement has expired, the offer should be presented. If it’s accepted and the transaction closes, the broker will generally be entitled to his or her full commission.

NOTE- while there’s no listing agreement here, that’s not what makes the offer “NOT a valid contract”- it’s the lack of 1 of the 4 essentials of a valid contract that makes it so (consideration has been offered, but no acceptance of the offer has been made).

Question 80

Title VIII of the Civil Rights Act of 1968, also known as the Federal Fair Housing Act, prohibits discrimination in which of the following categories?

A. The sale of homes and home loan lending

B. Title insurance, home loan lending, and selling single family homes

C. Escrow closing and title insurance, and selling single family residences

D. The sale of homes, home loan lending, and title insurance

Answer 80

A. The sale of homes and home loan lending

The Civil Rights Act of 1968 defines housing discrimination as the “refusal to sell or rent a dwelling to any person because of his race, color, religion, or national origin”.

Title VIII of this Act is commonly referred to as the Fair Housing Act of 1968, and it specifically prohibited discrimination concerning the sale, rental and financing of housing based on race, religion, national origin.

Gender, familial status, and disability were added to the list of identities protected by the Fair Housing Act through amendments in 1974 and 1988.

Whatever you do, remember the year 1968 when taking the real estate exam!

Question 81

Which of the following best describes an earnest money agreement?

A. A legally enforceable contract binding the buyer and their heirs to the conditions of the contract

B. A legally enforceable contract binding both the buyer and seller to all known and unknown facts attached to the property

C. a legally enforceable contract requiring the seller’s signature to be valid

D. a legally enforceable contract requiring the signatures of all parties to be valid

Answer 81

D. a legally enforceable contract requiring the signatures of all parties to be valid

While an earnest money deposit is not a contract, an earnest money AGREEMENT is a legally enforceable contract that requires the signature of all parties to be valid.

Earnest money agreements are contracts written up during the exchange of the earnest money which often outline the conditions for refunding the deposit.

Question 82

In doing a market analysis, an appraiser found a recently sold property where the owners had just gone through a divorce. The property had been listed for $160,000 for 3 months but was purchased for $140,000 by one of the spouses. Should the appraiser use this as a comparable?

Answer 82

No, because the divorce makes it not an “at arms’ length” transaction

“At arm’s length” means transactions involving independent and objective parties with no unrelated motivations that might distort the true value.

In this case, the relationship between the owners might have skewed the final sales price, making it an unreliable comparable.

Question 83

Economic obsolescence in a property is generally:

Answer 83

a type of depreciation that is incurable.

Economic obsolescence is caused by factors outside the property lines, like a property being located too close to an airport.

When economic obsolescence results in depreciation to the value of a property, that depreciation is considered “incurable” because there’s nothing the property owner can do to fix it.

If you want to be over analytical you can think of things such as when developers invest in improving the property.

But that is how you will get into trouble on your exam.

Try to find the best answer for the given question rather over rationalizing every point.

Question 84

The economic life of an investment property can be described as:

Answer 84

the time over which value generated by the investment exceeds its cost of operation.

The economic life of an investment property is simple- how long can it make money?

Once a property costs more to operate than it earns, it reaches the end of its economic life.

Question 85

Looking at shopping centers in the appraisal process, the social fiber of the community and distances from schools is called:

Answer 85

neighborhood analysis.

Neighborhood analysis is a formal process of identifying, measuring and analyzing the influences that help determine a neighborhood’s vitality and desirability.

It is useful when determining the value of homes in a particular area.

Question 86

A construction lien is best described as:

Answer 86

a specific lien.

A construction lien, also known as a mechanics lien, is a claim made against a property by a contractor or other professional who has supplied labor or materials for work on that property.

Construction liens are designed to protect professionals from the risk of not being paid for services rendered. They are considered a specific lien.

Question 87

A grandfather grants a life estate to his grandson and stipulates that on the grandson’s death, the title to the property will pass to his son-in-law. This second estate is called

Answer 87

a remainder.

A life estate is a type of property ownership, typically established by a deed, which is often used to avoid probate and immediately transfer property to an heir, or remainderman, at the time of death.

The remainder is the future interest conveyed to the remainderman in the deed.

Question 88

In 2003, an owner constructed a building that was eight stories high. In 2014, the municipality changed the zoning ordinance and prohibited buildings taller than six stories. Which of these statements is not false regarding the existing eight-story building?

Answer 88

The building is a nonconforming use.

A nonconforming use is a use of property that was allowed under the zoning regulations at the time the use was established but which, because of subsequent changes in those regulations, is no longer a permitted use. … State law does not regulate nonconforming uses, structures, or lots

Question 89

How many acres are contained in a rectangular parcel of land which measures 1⁄4 mile x 1⁄2 mile?

Answer 89

80 Acres

4*2= 8

640 acres / 8 = 80 acres

Question 90

An easement appurtenant:

A. will be terminated if abandoned by the servient tenement.

B. may be terminated by the servient tenement.

C. may be terminated by the dominant tenement.

D. cannot be terminated.

Answer 90

C. may be terminated by the dominant tenement.

An appurtenant easement is a type of easement that still applies to a property even if the owners change.

It is sometimes referred to as “running with the land”.

Appurtenant easements can be terminated if the dominant tenement files a quitclaim deed for the easement.

Question 91

Permission to use property by the giving of an easement creates:

Answer 91

an encumbrance.

An encumbrance is a right to, interest in, or legal liability on real property that does not prohibit passing title to the property, but that may diminish its value.

Encumbrances can be classified in several ways, including financial (for example, liens) or non-financial (for example, easements, private restrictions).

Question 92

If a tenant rents a building from April 1st to July 1st of this year, the tenancy is:

Answer 92

an estate for years.

Terms of an agreement are contained in a lease.

Leases with fixed periods are generally referred to as an “estate for years”.

This refers to a leasehold estate for any specific period of time (the word “years” is misleading.)

An estate for years is not automatically renewed.

Question 93

Susan, a property owner, has neighbors that use her driveway to reach their garage. Susan’s attorney explains that the neighbors have an easement appurtenant that gives them the right to use her driveway. Susan’s property is the:

Answer 93

servient tenement

The party gaining the benefit of the easement is the dominant estate (or dominant tenement), while the party granting the benefit or suffering the burden is the servient estate (or servient tenement).

Like, for example, if Joe holds an easement to drive through Arthur’s apple orchard to get to his shed, Joe has the dominant tenement and Arthur’s apple orchard is the servient tenement.

Question 94

A Purchase Money Mortgage is:

Answer 94

a mortgage given from buyer to seller to secure the purchase price.

A purchase money mortgage is a mortgage issued as part of the purchase transaction and is given to the seller rather than to a third-party lender.

Also known as seller or owner financing, this is usually done in situations where the buyer cannot qualify for a mortgage through traditional lending channels.

The “lender” is the seller in a purchase money mortgage.

Question 95

A buyer taking title “subject to” a mortgage should request a:

Answer 95

reduction certificate.

A reduction certificate is a document signed by a lender stating the outstanding amount on a mortgage loan.

Question 96

David sold his home and agreed to take back a note and trust deed as part of the purchase price. He wanted to have the note become due and payable if the property was resold. To accomplish this, which of the following clauses should be in the note or trust deed?

Answer 96

Alienation clause

Question 97

If a borrower must pay $6,000 for points on a $150,000 loan, how many points is the lender charging for this loan?

Answer 97

4

One discount point costs 1 percent of your mortgage amount. 1% of $150,000 = $1,500, and $6,000 ÷ $1,500 = 4.

Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments.

Question 98

Assume a broker took an open listing. He then made an oral agreement with another broker to share the commission on the sale of a property. The second broker procured an offer resulting in the sale of the property. If the first broker refused to share his commission on the sale, which of the following is most likely?

Answer 98

In this situation, the first broker has defaulted on an oral contract to share the commission and could lose a court suit if the second broker sues for his share of the commission. This has nothing to do with real estate regulations, only the oral agreement between the two brokers.

NOTE - The second broker would not sue the SELLER for his share of the commission because the oral agreement is between the two brokers only, which is not the same as the correct answer.

Question 99

Which of the following is not required to be noted on the agreement to create a lease for more than one year?

A. A termination date must be listed

B. The amount of rent and the method of payments must be defined

C. Both the lessor’s and the lessee’s signatures

D. It must be in writing

Answer 99

C. Both the lessor’s and the lessee’s signatures

It is not always necessary for a lessor and a lessee to sign a lease for more than one year.

Though the lease agreement itself must be in writing, the actions of the lessor and lessee can make the contract enforceable, even if not signed.

Question 100

As long as it is specified as part of his or her duties, is it legal for an unlicensed salaried assistant to solicit listings for the broker?

Answer 100

No, active participation in real estate transactions requires a license.

Tasks such as answering phones or making copies are considered support and don’t require any licensing or course work.

However, activities such as soliciting listings or providing information about a property are part of the transaction process and may be handled only by licensed real estate professionals.

Question 101

A buyer defaulted several months ago on a written contract to purchase a seller’s real estate. The seller can still sue for damages, unless he is prohibited from doing so by the:

Answer 101

statute of limitations.

Virtually all avenues of legal recourse, including suits for breaking a contract, have “statutes of limitation”.

A statute of limitation is a time limits for taking legal action against another person or entity.

Question 102

RESPA would prohibit which of the following acts?

A. Redlining

B. Steering

C. Blockbusting

D. Kickbacks

Answer 102

D. Kickbacks

RESPA is concerned with educating consumers about the true costs of borrowing and standardizing lending practices and closing practices.

As such, referral fees (or “kickbacks”) are prohibited between the different entities involved in the home loan process.

Question 103

The maximum permissible “loan to value ratios” are:

Answer 103

based on sale price or appraised value, whichever is lower.

Although various banks, mortgage companies and programs have different LTVs, the lower, more conservative number is used.

Question 104

“Reversion” best describes the property interest of a:

Answer 104

lessor under a leasehold.

In property law, “reversion” is a future interest retained by the grantor after the conveyance of a lesser estate to another person or entity, such as the owner of a fee simple granting a life estate or a leasehold estate.

Question 105

Mr. and Mrs. Thomas Martin want to sell their house. They want a broker to show the property, but they would like to be able to sell the house themselves without the obligation of paying a broker a commission. What form of listing would allow them to use the services of several brokers and not pay a commission, should they sell the house themselves?

Answer 105

Open listing

An open listing lets an owner sell her home by herself as a “For Sale By Owner”.

It is a non-exclusive agreement, meaning the owner may execute open listings with more than one real estate broker and pay only the broker who brings an able buyer whose offer the owner accepts.

Question 106

When planning a subdivision, a developer should determine the kinds of land uses to be involved and the amounts of land to be allocated to each use by considering:

Answer 106

the comprehensive plan of the local government.

A subdivision is the act of dividing land into pieces that are easier to sell or otherwise develop, usually via a plat.

The most effective way to determine land use and the amount of land to allocate is to consult the local government or municpality’s comprehensive plan.

Question 107

The National Do Not Call Registry provides that:

A. consumers who have made an inquiry to a licensee may be contacted up to three months later.

B. licensees may never contact consumers without written authorization.

C. consumers with whom a licensee has had a business relationship can be contacted for up to 12 months after termination of that relationship.

D. licensees may not contact previous customers who are on the registry.

Answer 107

A. consumers who have made an inquiry to a licensee may be contacted up to three months later.

The National Do Not Call Registry is a database maintained by the United States federal government, listing the telephone numbers of individuals and families who have requested that telemarketers not contact them.

Certain callers are required by federal law to respect this request, but it allows for licensees to contact potential customers for up to 3 months after the customer has made an inquiry with them.

NOTE - This question is asking about consumers who have only made an inquiry- they may be contacted up to 3 months later. Customers who have had an established business relationship with a company can be contacted up to 18 months later.

Question 108

A broker wrote an offer for a buyer that contained a 10-day acceptance clause along with a $2000 deposit. On the fifth day, the buyer notified the broker he wanted to withdraw the offer and receive back his deposit check for $2000. Which of the following statements is true about this situation?

A. The buyer must wait until the 10 day acceptance clause has ended before revoking the offer

B. The buyer can revoke the offer immediately, provided the seller has not responded to the buyers offer

C. The buyer must wait until the preliminary title report has been delivered, then terminate the offer and ask for the $2000 deposit to be returned

D. The buyer must wait until the seller acknowledges the offer, then the buyer can terminate the offer with a counteroffer

Answer 108

B. The buyer can revoke the offer immediately, provided the seller has not responded to the buyers offer

Regardless of the acceptance clause, a buyer can revoke an offer at any time before the seller has accepted and that acceptance has been communicated back to the buyer.

Until that point, there is no contract.

Question 109

What are the types of free hold estates, and define?

Answer 109

1. Fee Simple Absolute - Fee Simple Absolute, also known as fee simple is an absolute ownership of land without any conditions and limitations.
2. Fee Simple Defeasible - A fee simple defeasible is a conveyance of property that has conditions placed on it. The holder of a fee simple defeasible possesses the property as a fee simple subject to that condition. If the condition is violated or not met, then the property will either go back to the original grantor or a specified third party.
3. Life Estate - s the ownership of immovable property for the duration of a person’s life. In legal terms, it is an estate in real property that ends at death when ownership of the property may revert to the original owner, or it may pass to another person. The owner of a life estate is called a “life tenant”.

Question 110

D: Tenancy In Common

Answer 110

Tenants in common share the ownership of a specific property. Each owner may own a different portion of the property, but all of them have equal rights to the entire property. Any of the owners can sell their share at any time

Should one of the tenants die, their interest would pass to their heirs. If Joe died, Steve would still hold 50% and Kim would still own 25%, but Joe’s 25% would pass to whomever he designated in his estate plan or to his relatives, according to state law.

Question 111

D: Joint Tenancy

Answer 111

Unlike tenants in common, joint tenancy typically involves a right of survivorship, which means that the interest held by each tenant would pass to the others upon death.

Joint tenancy requires four unities known as TTIP, which stands for time, title, interest, and possession. Each owner must take title to the property at the same time and receive the title on the same deed. Each also receives the same proportionate and equal share of ownership, along with identical rights of possession.

The title usually reverts to a tenancy in common if these four unities aren’t met. If a joint tenant sells or conveys the interest created in a joint tenancy to another party, the joint tenancy is broken and a tenancy in common is created.

Question 112

A seller states that the minimum proceeds from the sale must be $108,000 after paying 18% in selling fees and other charges. For a transaction to occur, the sales price (rounded to the nearest dollar) must be at least:

A. $131,707

B. $129,710

C. $124,707

D. $137,710

Answer 112

A. $131,707

The seller’s minimum represents 82% of the contract (the other 18% is selling fees and charges):
$108,000 divided by 0.82 is $131,707.32

Rounded to the nearest dollar, the answer is $131,707.

Question 113

What is the formula for Cap Rate?

Answer 113

NOI / Price of Property

Question 114

The gross income of an investment property is $102,000. If the monthly expenses are $1000 and the cap rate is 7%. What is the value?

A. $1,118,751.20

B. $1,285,714.20

C. $1,457,142.80

D. $1,923,649.70

Answer 114

B.$1,285,714.20

$102,000 - ($1000*12) = $90,000

$90,000 / 7% = $1,285,714.20

Question 115

The 1968 Supreme Court case which upheld the Civil Rights Act of 1866, was?

Answer 115

Scott Vs. Sandford

Question 116

A borrower made their final payment to the lender. Which of the following documents could NOT be sued by the lender to release their interest in the property?

A. Satisfaction

B. Mortgage Release

C. Mortgage Discharge

D. Deed in Trust

Answer 116

D. Deed in Trust

Question 117

A borrower negotiates a 30 year fixed mortgage with 6% interest. She paid 10% down. If the interest payment on the 1st payment is $526.50 how much did she pay for the property?

Answer 117

I (Interest) = 6%

Price of property = Price

10% down payment meaning Loan amount is 90% of the property value.

1st month interest = $526.50

Interest per year = %526.50 * 12 = $6,318

0. 9Price*.06 = $6,318
1. 9Price = $6318 / .06 = $105,300

Price = $105,300 / .9 = $117,000

Question 118

When estimating the value with Mkt data approach to appraising, the appraiser will?

A. Average the different sale prices of the adjacent properties

B. Consider what the current owner paid for the property.

C. Make adjustments for the accused depreciation.

D. Make adjustments for amenities in the comparable properties.

Answer 118

D. Make adjustments for amenities in the comparable properties.

Question 119

A new contract has been substituted in place of the original contract. the intent of this action was to discharge the obligation and to release the liability of the of the parties in the original contract. The word that defines this scenario is?

Answer 119

Substitution

Question 120

A section is a measurement in the government survey that is equal to what?

Answer 120

One square mile

2.6 square kilometers

640 acres

260 hectares

Question 121

How big is an acre?

Answer 121

43,560 square feet

4046.86 Square Meters

4840 square yards

1/640th of a square mile

Question 122

One mile is equal to

Answer 122

5280 feet

Question 123

The principal of appraising that is considered the foundation for the mkt data approach is the principal of?

A. Highest & Best use

B. Supply & Demand

C. Substitution

D. Competition

Answer 123

A. Highest & Best Use

Question 124

The Hud-1 indicates that Shawn paid for title policy. The policy will decrease as each principal & interest payment is made on the loan. Shawn paid for?

A. Owner’s Title Policy

B. Mortgagee’s Title Policy

C. Agent’s title policy

D. Broker’s title policy

Answer 124

B. Mortgagee’s Title Policy

Question 125

Under the superfund guidelines retroactive liability means?

Answer 125

Retroactive liability means that individuals can be held responsible for past actions, even if those actions were legal at the time.

Question 126

The KREC is to be notified of a change of residence address within?

Answer 126

10 days

Question 127

With a property having an annual net income of $60,000. What is the difference between a cap rate of 5% and 6%?

Answer 127

1. Figure out what the property value is at 5%.
   60,000/5%= 1,200,000
2. Figure out what the property value is at 6%.
   60,000/6% = 1,000,000
3. 1,200,000 - 1,000,000 = 200,000

Question 128

Amy buys a property and closes on Aug,1st. The seller pre-paid the annual real estate taxes of $5000 in advance. How much will Amy owe the seller in real estate taxes at closing?

Answer 128

1. What is the monthly amount?
   5000 / 12 = $416.67 a month
2. 416.67 * 5 months = $2083.33

Question 129

How many acres are in a tract identified as N1/2 of the SE 1/4 of the SW 1/4 of N1/2?

Answer 129

This type of question is always talking about a section. 1 section is equal to 640 acres.

640 / 2 / 4 / 4 / 2 = 10 acres

Question 130

A property measures 420 feet along the highway and contains 12 acres. What is the depth of the tract?

Answer 130

1. B * 420 = (12 * 43,560)
2. B * 420 = 522,720 sqft

• How many sqft is in a acre?
  43,560 Sqft

3. B = 522,720 / 420 = 1,244.57 ft

Question 131

A property was valued at $400,000 using a 6% cap rate. The owner wanted to use a 8% cap rate how much should he pay for the property?

Answer 131

*What is a cap rate: It is the rate of return on a real estate investment based on the income the property produces.

Cap Rate = Annual Net Operating Income / Cost & Sales price of the property

1. Figure out how much the property makes.
   $400,000 * 6% = $24,000
2. $24,000 / 8% = $300,000

Question 132

Suppose a $30,000 commission is earned on the sale of a house. The listing broker and the buyer’s broker agree to split the commission evenly. The listing salesperson receives 40% of the listing side. How much will the listing salesperson receive?

Answer 132

1. $30,000 *50% = $15,000

2. $15,000 * 40% = $6,000

Question 133

What is the selling price of a property if Arthur paid $350 for taxes due, has a $12,500 mortgage, paid a 6% broker commission, and netted $7,000 on the sale?

Answer 133

1. add the outstanding mortgage, taxes due, and net profit:

$12,500 + $350 + $7,000 = $19,850

2. $19,850 is 94% of the selling price, with the broker’s 6% commission equalling the rest. To find the selling price, simply divide the known quantity by it’s percentage relative to the selling price:

$19,850 ÷ .94 = $21,117.02

Question 134

A property is listed for $212,000, but due to a bidding war, it sells for $219,000. The commission is set at 6% and split evenly between the buyer’s and seller’s broker. The selling agent has an agreement with his broker to receive 75% of the split paid to the broker. What is the amount the seller’s agent receives after closing?

Answer 134

1. We start solving this problem by finding out what 6% of $219,000 is:

$219,000 x .06 = $13,140

2. The problem mentions that the commission is split evenly between the two brokers. Each side gets 50%:

$13,140 x .50 = $6,570

3. And finally, we need to figure out the agent’s split, which is 75% of $6,570:

$6,570 x .75 = $4,927.50

Question 135

A lot-and-block description of a parcel of land must always include

Answer 135

the name or number of the subdivision plat.

Question 136

A point, line, or surface from which elevations are measured or indicated is

Answer 136

a datum.

Question 137

As a legal description, “the northwest ¼ of the southwest ¼ of Section 6, Township 4 North, Range 7 West” is defective because it contains no reference to

Answer 137

a principal meridian

Question 138

Monuments are the turning points in which method of property description?

Answer 138

Metes and bounds

Question 139

In a legal description, the terms lot and block relate to

Answer 139

a recorded subdivision map.

Question 140

How many acres are contained in a parcel described as follows: The NE ¼ of the NW ¼, and the S ½ of the NW ¼, and the NE ¼, of Section 10?

Answer 140

280 acres

The answer is 280 acres. There are three parcels in this description.

The first: ¼ × 640 = 160, and ¼ x 160 = 40 acres

The second: ¼ × 640 = 160, and ½ x 160= 80 acres

The third: 640 × ¼ = 160

40 + 80 + 160 = 280 acres

Question 141

What is the shortest distance between Section 1 and Section 36 in the same township?

Answer 141

Four miles

The answer is four miles. The shortest distance from Section 1 to Section 36 is from the bottom of Section 1 to the top of Section 36, or four miles.

Question 142

A farm that is a quarter-section is

Answer 142

160 acres.

A quarter (¼) of 640 acres is 160 acres

Question 143

For the purpose of the United States Geological Survey (USGS), the term datum is defined as

Answer 143

the mean sea level at New York Harbor

Question 144

The air above a property owner’s land may be subdivided into

Answer 144

air lots

Question 145

What is the square footage for this property described by the metes-and-bounds method?

Beginning at a point on the southerly side of Smith Street, 200 feet easterly from the corner formed by the intersection of the southerly side of Smith Street and the easterly side of Johnson Street; then east 200 feet; then south 100 feet; then west 200 feet; then north 100 feet to the POB.

Answer 145

20,000 square feet

The property is 200 × 100 = 20,000 square feet.

Question 146

A buyer acquired a property with three acres. How many square feet does the property have?

Answer 146

130,680 SQFT

Because one acre contains 43,560 square feet, three acres will contain 3 × 43,560 sq. ft. = 130,680 sq. ft.

Question 147

Cities with local datums also have designated official local

Answer 147

benchmarks.

Cities with local datums also have designated official local benchmarks.

Question 148

In the rectangular survey system, a township is a square formed by

Answer 148

horizontal township lines and vertical range lines.

Townships are the basic units of the rectangular survey system.

Question 149

Which of the following identifiers is NOT used to describe a lot from a recorded subdivision plat?

Answer 149

City and ZIP code

The city and ZIP code are not used in a lot and block description.

Question 150

The basic units of the rectangular survey system are

Answer 150

The townships.

Townships are the basic units of the rectangular survey system.

Principal meridians and base lines are the two sets of intersecting lines in the system.

Ranges are the 6-mile strips of land on either side of a principal meridian.

Question 151

Six acres of prime undeveloped property are sold for $2.25 per square foot. How much did the buyer pay?

Answer 151

$588,060. The buyer paid $588,060:

square feet × 6 = 261,360 square feet

261,360 square feet × $2.25 = $588,060

Question 152

A legal description is a detailed way of describing a parcel of land and is based on information collected through

Answer 152

a survey.

A legal description is a detailed way of describing a parcel of land and is based on information collected through a survey.

Question 153

The LEAST specific method for identifying real property is

Answer 153

street address.

A legal description is a precise method of identifying a parcel of land and includes metes-and-bounds, rectangular survey, and lot-and-block as methods that can be used for identification.

A street address is not a legal description and, therefore, not as precise.

Question 154

A metes-and-bounds property description must always conclude at the point of

Answer 154

beginning.

metes-and-bounds property method of property description always ends back at the point of beginning so that the tract being described is completely enclosed.

Question 155

How big is an acre?

Answer 155

43,560 sq. ft.

Question 156

What is the length of a mile and number of square feet in an acre?

Answer 156

5,280 feet and 43,560 square feet

Question 157

A survey that provides only the location of the structures and improvements as related to property boundaries is

Answer 157

an Improvement Location Certificate (ILC).

A survey that provides only the location of the structures and improvements as related to property boundaries is an Improvement Location Certificate (ILC).

Question 158

A parcel of land is 400 feet by 640 feet. The parcel is cut in half diagonally by a stream. How many acres are in each half of the parcel?

Answer 158

2.94

The answer is 2.94. The parcel is 256,000 square feet:

400’ ×640’ = 256,000 sq. ft.

Half of it is 128,000 square feet. Each acre requires 43,560 square feet. Therefore:

128,000 sq. ft. ÷ 43,560 sq. ft. per acre = 2.938 acres (rounded to three decimal places).

The nearest answer is 2.94.

Question 159

A parcel of land is two acres. It sells for $1.18 per square foot. What is the total selling price for the parcel?

Answer 159

$102,801.60

$102,801.60. An acre consists of 43,560 square feet.

43,560 × 2 = 87,120 total square feet.

87,120 × $1.18 = $102,801.60

Question 160

A chain is 66 feet long or four rods; a rod is

Answer 160

16.5 feet.

A chain is 66 feet long and the same length as four rods, each being 16.5 feet long.

Question 161

Subsurface rights can be legally described just as air rights, but with what difference?

Answer 161

They are measured below the datum rather than above it.

Question 162

The definition of a dwelling under the Fair Housing Act includes all of the following except

A)office with lavatory.
B)a condominium or cooperative.
C)factory-built housing.
D)vacant land intended for housing.

Answer 162

A) office with lavatory.

The Fair Housing Act defines a dwelling as any building or part of a building designed for occupancy as a residence by one or more families, including vacant land on which an applicable structure will be built.

A commercial building composed of office or retail space does not fall under the Fair Housing Act.

Question 163

All of the following would be permitted under the federal Fair Housing Act EXCEPT

A)an owner refusing to rent the other side of the duplex in which she lives to a family with children.

B)an expensive club in New York renting rooms only to members who are graduates of a particular university.

C)a Catholic convent refusing to furnish housing for a Jewish man.

D)the owner of a 20-unit residential apartment building renting to men only.

Answer 163

D)the owner of a 20-unit residential apartment building renting to men only.

Sex is a protected category under the federal Fair Housing Act but the owner of the building doesn’t qualify for any exception to the law.

Even if the owner lives in one of the units, doesn’t use a broker, and does not advertise discriminatorily, the property is not an exception to the law because it has more than four units.

Question 164

A person who believes illegal discrimination has occurred in violation of the Fair Housing Act may file a complaint with HUD

Answer 164

within 1 year of the alleged act.

HUD also may initiate its own complaint

Question 165

In a dispute before HUD, the term conciliation is BEST defined as

Answer 165

The informal resolution of a dispute by obtaining assurances that the person responding to the complaint will remedy the violation.

HUD can attempt to resolve the dispute informally through conciliation.

Conciliation is the resolution of a complaint by obtaining assurance that the person against whom the complaint was filed will remedy any violation that may have occurred.

Question 166

Why is the Civil Rights Act of 1866 unique?

Answer 166

It provides no exceptions that would permit racial discrimination.

Unlike other exemptions permitted under the federal Fair Housing Act of 1968, the Civil Rights Act of 1866 allows no exceptions that would permit discrimination on the basis of race.

Question 167

Under the Fair Housing Act, what is HUD’s first action on receiving a complaint of illegal discrimination?

Answer 167

Investigates for reasonable cause to bring a charge

Within 100 days of the filing of the complaint, HUD either determines that reasonable cause exists to bring a charge of illegal discrimination or dismisses the complaint.

Question 168

An occupancy requirement is exempt from familial status protection under the Fair Housing Act if the housing is intended to be occupied by

Answer 168

persons 62 years of age or older.

Housing is exempt from the familial status protections if it is intended for occupancy only by persons 62 years of age, or for occupancy in 80% of its units by at least one person 55 years of age or older. Strict rules for ongoing verification and reporting are imposed on this second alternative.

Question 169

A single man with two small children has been told by a real estate professional that homes for sale in a condominium complex are available only to married couples with no children. Which statement is TRUE?

A) Restrictive covenants in a condominium take precedence over the fair housing laws.

B) The man may file a complaint alleging discrimination on the basis of familial status.

C )Because a single-parent family can be disruptive if the parent provides little supervision of the children, the condominium is permitted to discriminate against the family under the principle of rational basis.

D) Condominium complexes are exempt from the fair housing laws and can therefore restrict children.

Answer 169

B) The man may file a complaint alleging discrimination on the basis of familial status.

The salesperson and, by implication, the broker and the property owners/principals have violated the prohibition against familial-status discrimination. Anyone in charge of one or more children under age 18 who is denied access because of the children is the victim of discrimination based on familial status.

Question 170

The first federal law to prohibit racial discrimination in the provision of housing was

Answer 170

the Civil Rights Act of 1866.

The law prohibits discrimination based on race in every property transaction and is still in effect.

Question 171

The fine for a first violation of the federal Fair Housing Act could be as much as

Answer 171

$19,987.

Question 172

What is one negative result of redlining?

A)Real estate professionals are not able to advertise in local newspapers.

B)It is often a contributor to the deterioration of older neighborhoods.

C)Appraisers have a difficult time evaluating properties in the area.

D)The effects test must be applied to determine whether to file a lawsuit.

Answer 172

B)It is often a contributor to the deterioration of older neighborhoods.

Redlining is a prohibited practice by lenders and insurance companies.

It frequently leads to the deterioration of older neighborhoods because loans are not made based on racial grounds as opposed to any real objection to an applicant’s creditworthiness.

Question 173

he federal law we call the Fair Housing Act is

Answer 173

Title VIII of the Civil Rights Act of 1968.

The law has been amended since then by the Housing and Community Development act of 1974 and the Fair Housing Amendments Act of 1988, so that it now prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, or disability.

Question 174

For fair housing purposes, what is the definition of the term disability?

Answer 174

An impairment that substantially limits one or more of an individual’s major life activities.

The definition of the term disability is very broad and focuses on impairments that prevent or restrict a person from performing tasks that are of central importance to most people’s lives.

Question 175

A homeowner decides to rent a spare bedroom in her single-family house to a tenant for $500 per month. When a 24-year-old man asks to see the room, the homeowner refuses, telling him that she will only rent to women over the age of 50. The prospective tenant threatens to sue for a violation of the Fair Housing Act on the basis of age. Should the homeowner be concerned?

Answer 175

No, because the rental of rooms in an owner-occupied single-family home is exempt from the Fair Housing Act

Question 176

The provisions of the ADA apply to any employer with at least

Answer 176

15 or more employees.

Question 177

Complaints of discriminatory housing practices filed with HUD will be referred to a local enforcement agency if

Answer 177

the state or municipal law is substantially equivalent to the federal law.

Question 178

The legal framework that preserves the federal constitutional rights of citizens, including those that would be thwarted by discriminatory practices, has been created and protected by

Answer 178

the U.S. Congress and U.S. Supreme Court.

Question 179

A real estate professional said to a homeowner, “I hear they’re moving in. There goes the neighborhood! Better put your house on the market before values drop!” This is an example of what illegal practice?

Answer 179

Blockbusting

Such statements, made by a person in real estate brokerage, constitute blockbusting—usually an attempt to get listings by frightening owners into selling by encouraging the belief that a member of a protected class is moving into the neighborhood.

To do this for financial gain is a violation of the federal Fair Housing Act.

Question 180

Which statement describes the Supreme Court’s decision in the case of Jones v. Alfred H. Mayer Company?

Answer 180

Racial discrimination is prohibited by any party in the sale or rental of real estate.

The Jones v. Mayer decision held that the Civil Rights Act of 1866, banning all limitation on property rights on the basis of race, is the law of the land.

Racial discrimination by anyone in the sale or rental of any kind of property violates this law.

Question 181

The Fair Housing Act prohibits discrimination created by redlining

Answer 181

An area that will not be the subject of marketing and/or lending efforts.

A lending institution can refuse to make a loan for sound economic reasons, but it may not refuse to make a loan based solely on the location of the property.

In the same way, real estate professionals may not effectively set some areas apart as unsuitable for marketing property because of the protected classification of the residents of the area.

Question 182

The Lead-Based Paint Hazard Reduction Act requires that borrowers of property built before 1978.

A. 5 days to conduct an inspection they may waive.

B. 5 days to conduct an inspection they may NOT waive.

C. 10 days to conduct an inspection they waive.

D. 10 days to conduct an inspection they may NOT waive.

Answer 182

C. 10 days to conduct an inspection they can waive.

Question 183

How big is an acre?

Answer 183

43,560 square feet

4046.86 Square Meters

4840 square yards

1/640th of a square mile

Question 184

One mile is equal to

Answer 184

5280 feet

Question 185

The KREC is to be notified of a change of residence address within?

Answer 185

10 days

Question 186

With a property having an annual net income of $60,000. What is the difference between a cap rate of 5% and 6%?

Answer 186

1. Figure out what the property value is at 5%.
   60,000/5%= 1,200,000
2. Figure out what the property value is at 6%.
   60,000/6% = 1,000,000
3. 1,200,000 - 1,000,000 = 200,000

Question 187

Amy buys a property and closes on Aug,1st. The seller pre-paid the annual real estate taxes of $5000 in advance. How much will Amy owe the seller in real estate taxes at closing?

Answer 187

1. What is the monthly amount?
   5000 / 12 = $416.67 a month
2. 416.67 * 5 months = $2083.33

Question 188

A property measures 420 feet along the highway and contains 12 acres. What is the depth of the tract?

Answer 188

1. B * 420 = (12 * 43,560)
2. B * 420 = 522,720 sqft

• How many sqft is in a acre?
  43,560 Sqft

3. B = 522,720 / 420 = 1,244.57 ft

Question 189

A property was valued at $400,000 using a 6% cap rate. The owner wanted to use a 8% cap rate how much should he pay for the property?

Answer 189

*What is a cap rate: It is the rate of return on a real estate investment based on the income the property produces.

Cap Rate = Annual Net Operating Income / Cost & Sales price of the property

1. Figure out how much the property makes.
   $400,000 * 6% = $24,000
2. $24,000 / 8% = $300,000

Question 190

A house sold for $950,000 with a sales commission rate of 7.5%. The listing broker received 50% of the total commission and the broker representing the buyer received 50%. How much would the salesperson representing the buyer receive if their broker kept 60% and gave 40% to the salesperson?

Answer 190

1. $950,000 * 7.5% = $71,250
2. $71,250 * 50% = $35,625
3. $35,625 * 40% = $14,250

Question 191

What is the selling price of a property if Arthur paid $350 for taxes due, has a $12,500 mortgage, paid a 6% broker commission, and netted $7,000 on the sale?

Answer 191

1. add the outstanding mortgage, taxes due, and net profit:

$12,500 + $350 + $7,000 = $19,850

2. $19,850 is 94% of the selling price, with the broker’s 6% commission equalling the rest. To find the selling price, simply divide the known quantity by it’s percentage relative to the selling price:

$19,850 ÷ .94 = $21,117.02