LTP

Question 1

Tina, Mike and Joey purchased a piece of property on the same day. Their ownership shares are equal and they have undivided possession. Further, they acquired the property at the same time. This type of ownership is best described as:

A. Joint Tenancy
B. Tenants in Common

Answer 1

B. Tenants in Common

Tenancy in common is the default type of ownership for unmarried persons who acquire property together. Note that the question gives all of the unities of joint tenancy but does not specifically state the right of survivorship. To have joint tenancy, the parties must ask for joint tenancy.

Question 2

A buyer purchased a condo 5 years ago since the property had a parking garage and laundromat amenities. The condo complex also limited quantities of storage units which the buyer has not been granted the right to use. Who owns the storage units?

A. HOA owns the storage units and determines who gets to use them
B. The buyer through co-ownership of common area
C. Condo Owners have the deeded right

Answer 2

C. Condo Owners have the deeded right

A condo may have limited common elements that can be deeded or rented to certain condo owners. Property owners on the air space to a condo in fee simple (permanent, inheritable) interest and the common elements - whether in limited quantities or not - are owned as tenancy in common between all condo unit owners. The buyer does not own the amenities alone. The HOA manages but does not own in condos situations. All unit owners share ownership of the amenities.

Question 3

A limited warranty deed is:

A. a deed that warrants the grantor will defend against claims that arise from his/her time of ownership.
B. a deed with no warranties other than implying ownership of the property being sold.
C.

Answer 3

A. a deed that warrants the grantor will defend against claims that arise from his/her time of ownership.

A limited or special warranty deed limits the promises or covenants that a grantor makes to the period of time that they owned the property. The grantor would not be liable for title issues from any time prior to his/her ownership. A bargain & sale deed has no warranties other than implying ownership, which is similar to a quitclaim deed which has no warranties whatsoever. When property is sold at a foreclosure auction the winning party will receive a trustees deed. The marketable title act extinguishes old claims after 30-years.

Question 4

When calculating the capital gain or loss on the sale of a property, the amount realized is:

A. the difference between the sales price and allowable closing costs.
B.
the difference between the amount the property sold for and the amount paid.

Answer 4

B. The difference between the sale price and allowable closing costs.

The amount realized is the sales price of the property less allowable closing costs. Adjusted basis is calculated by taking the purchase price and adding capital improvements and allowable closing costs. The calculation of gain or loss is calculated by taking the amount realized and subtracting adjusted basis. NOTE: The purchase price may also be referred to as BASIS.

Question 5

Which of the following statements regarding environmental concerns is TRUE?

A. Asbestos has been linked to neurological issues when the particles become airborne and enter the lungs.
B. Polychlorinated biphenyls are associated with electrical equipment and are a known carcinogen.
C. Radon and it’s pungent odor

Answer 5

B. Polychlorinated biphenyls are associated with electrical equipment and are a known carcinogen.

Polychlorinated biphenyls were used as coolants in electrical equipment and are a probable carcinogen. Radon is an odorless, colorless gas that is the second leading cause of lung cancer and is considered a danger when it is above 4.0 pico cures per liter of air by the EPA. Lead based paint may be encapsulated to reduce the risks associated with lead exposure, which may cause neurological damage and organ failure. Asbestos was used in popcorn ceilings, ceiling tiles, floor tiles, siding and insulation. Exposure to friable asbestos increases the risk of lung cancer or mesothelioma.

Question 6

Under federal law, a property subject to the 1992 Lead Based Paint Hazard Reduction Act requires:

A. the buyer to perform lead based testing and to remediate prior to closing.

B. the seller to grant the buyer a 10-day inspection period.

Answer 6

B. the seller to grant the buyer a 10-day inspection period.

A buyer has the right to investigate the presence of lead in the home and under federal law has 10-days to test. The buyer can terminate the contract without penalty during this period. The seller does not have to certify that the home is lead free, but is required to disclose if they know lead is present or has reports about lead. The buyer has the right to test, but is not required to remediate lead. The buyer should be given the pamphlet Protecting Your Family From Lead In The Home.

Question 7

An agent lists a property as having 5,200 square feet. The property goes under contract and the appraisal identifies that the square footage is only 4,200 square feet. Which of the following could be correct given these facts?

A. The buyer agent could be disciplined for a negligent misrepresentation
B. The listing agent will not be liable if s/he hired an appraiser to measure the property

Answer 7

A. The buyer agent could be disciplined for a negligent misrepresentation

The buyer agent could be disciplined for this misrepresentation because the mistake was so large that the buyer agent should have been able to recognize the mistake. The listing agent can be disciplined for a misrepresentation (not omission) for putting the wrong number in the MLS. Hiring an appraiser is good advice, but the agent will still be responsible for his/her misrepresentations. Caveat emptor means, “buyer beware” but does not absolve agents of their responsibility to disclose accurate info

Question 8

Under the law of agency, when an agent is given a broad range of powers in an ongoing relationship, where actions are limited to certain defined tasks, is known as what type of agent?

A. Designated Agency
B. Universal Agency
C. General Agency
D. Special Agency

Answer 8

C. General Agency

A general agent is given broad authority but in a narrow field (think property manager or an agent’s relationship with the firm). Universal Agency is not common in brokerage practice but would be common for someone representing an incapacitated family member under a power of attorney (aka attorney-in-fact). Special agency arises when an agent represents the buyer, seller or tenant. Their actions are limited to gathering information and presenting it to the client and the agent has no capacity to sign or make decisions. For designated agency to form, you must first have dual agency. Dual agency forms when the same firm represents both buyer and seller in the transaction. With designated dual agency, you must have 2 agents that are appointed by the Broker-in-Charge. Neither agent can be aware of personal / confidential information about the other client at the time of designation (buyer’s agent cannot be aware of seller info and seller’s agent cannot be aware of buyer info). It is not possible for a BIC & PB to act as designated agents as the BIC has supervisory duties over the provisional broker. One way to recall this is: “No BIC & PB and no P&C”.

Question 9

A broker vented online stating “if agents would just stop sending listing information to 3rd party websites then the public would stop using those sites and finally sellers would listen to their agent’s expert knowledge when pricing a house for a sale”. This kind of talk is a violation of which of the following?

A. Group boycotting
B. CAN-SPAM violation for digital slander
C. Market allocations

Answer 9

A. Group boycotting

Encouraging many brokers to cease the use of a vendor’s services is group boycotting and violates antitrust laws (Sherman Antitrust Act). Market allocations refer to geographically dividing territory among providers. CAN-SPAM does not have a provision for digital slander but does have provisions for what unsolicited emails must contain. Tie in agreements refer to one service being provided on the condition another service is also used. For example, requiring buyers to use your services as a buyer’s agent to avoid paying an early termination fee.

Question 10

A broker that is writing up an offer to purchase for a buyer customer owes:

A. Confidentiality of personal information
B. Disclosure of material facts
C. Loyalty

Answer 10

B. Disclosure of material facts

A customer is a person that you do not have an agency relationship, so you treat them as a 3rd party. You owe the customer HFD - Honesty, Fairness and Disclosure of material facts. A salesperson / broker owes a client OLD CAR - Obedience, Loyalty, Disclosure, Confidentiality, Accounting and Reasonable skill, care and diligence.

Question 11

The purpose of a protection agreement is best described as which of the following?

A. Ensures a For Sale By Owner will pay the buyer agent’s compensation.
B. Prevents the seller from avoiding compensation payment to the listing agent regardless of how the buyer is procured

Answer 11

A. Ensure a For Sale By Owner will pay the buyer agent’s compensation.

A protection agreement is used by buyer agents with FSBOs to ensure the seller will pay the commission. A protection period - also called an extender clause or an override clause - prevents clients from waiting until agency expires before entering into a transaction. If the prior clients enters into agency with someone else, the active agency kills the protection period. The document used by out of area brokers to confirm compensation from a listing agent in another MLS is the confirmation of compensation form. An exclusive right to sell listing agreement is the document ensuring a seller pays the listing agent compensation regardless of how a buyer is procured.

Question 12

What is the name of the clause in an Exclusive Right to sell listing agreement that ensures the broker will receive their commission even after the listing period, “if one of the buyers procured during the term of the listing period purchases the home.”

A. Extender Clause
B. override clause
C. …
D. All the above

Answer 12

D. All the above

All of the terms can be used interchangeably to describe the protection afforded to the listing firm when the listing agreement expires. In North Carolina the NCAR Exclusive Right to Represent the Seller requires the list of buyers to be provided to the seller within 15 days of expiration.

Question 13

All the following statements regarding marketing regulations are correct, EXCEPT:

A. A broker cannot send unsolicited emails without a prominent opt-out under the Do Not Fax rules.
B. A broker cannot market payment or down payment without disclosing certain financing terms under Truth-in-Lending’s Regulation Z.

Answer 13

A. A broker cannot send unsolicited emails without a prominent opt-out under the Do Not Fax Rules.

Do Not Fax rules relate to faxes and not emails; it does require a prominent opt-out for faxing. Can-Spam applies to email restrictions where a prominent opt-out must be included in the email. Regulation Z requires the disclosure of payment, down payment, interest rate, APR, and other disclosures when it has been triggered by disclosure of specific lending numbers. The use of general terms like “great financing available” or “low down payment” are not considered triggers of Regulation Z. Federal Fair Housing lists protected classes where a broker and potentially a seller are not permitted to discriminate in a real estate transaction. Advertising can be deemed to be a violation of Federal Fair Housing when it lists a preference for or against a protected class. The Sherman Antitrust Act does not permit group boycotting of service providers or collusion to fix commission to be charged. A firm can set the rate of commission they will charge to a buyer or seller, however cannot collude with other brokerages to fix the fee.

Question 14

Betty offers to purchase a property deeded to Sally. Sally accepts the offer without her husband Sam signing. Which of the following statements is TRUE?

A. A valid contract does not exist, as Sam’s signature must be included in the contract for sale
B. Sally can sign on her husbands behalf when the agent witnesses Sam granting permission.

Answer 14

A. A valid contract does not exist, as Sam’s signature must be included in the contract for sale

While one spouse may purchase a property on her own, both spouses must agree to the sale of the property (“One to buy; two to sell”). All owners must sign the offer to form a legally binding valid contract for the sale of real property. Power of Attorney must be provided for a party to sign on behalf of another - and the agent witnessing a conversation over the phone would not be valid. A voidable contract means that one party can legally back out of the contract while the other party is obligated to perform. This occurs when a contract is formed and one party is a minor or when a party was drunk at the time of signature.

Question 15

A contract contains a financing contingency. Which of the following statements is TRUE?

A. The buyer is not entitled to a refund of earnest money paid unless the seller agrees in writing

B. The buyer is entitled to a refund of the earnest money deposit when the buyer terminates by the continency date when the denial is in writing.

Answer 15

B. The buyer is entitled to a refund of the earnest money deposit when the buyer terminates by the continency date when the denial is in writing.

The buyer will not be obligated to purchase the property if the loan is denied during the financing contingency date. Denial must be in writing. The buyer will receive a refund of the earnest money deposit when termination occurs by the contingency date. The seller is not obligated to grant an extension of time if the buyer has not heard back from the lender. The seller MAY amend the time period to grant the buyer additional time.

Question 16

A seller was so excited to finally receive an acceptable offer on his house that he celebrated to intoxication with champagne before e-signing the Offer to Purchase and Contract. As a result, the contract could be considered:

A. Void
B. Unenforceable
C. Valid
D. Voidable

Answer 16

D. Voidable

Categories of validity include: valid, voidable, void, and unenforceable. A valid contract requires both parties be legally competent yet this seller was temporarily not competent due to being drunk. A void contract means either the parties or the purpose for contracting was never legal. An unenforceable contract indicates both parties are in breach resulting in the inability of either to bind the other to previously agreed upon terms. The contract described here is voidable because only one party failed to reach the “reality of consent.” Examples for lacking the reality of consent include: mutual mistake, misrepresentation, fraud, being drunk or high, being under age 18, duress, and undue influence.

Question 17

A buyer and a seller each believe the other has breached the offer to purchase and contract. Which of the following could be a remedy available for breach?

A. Liquidate damages
B. Summary ejectment
C. Negotiations

Answer 17

A. Liquidated damages

Liquidated damages and suing for specific performance are remedies available to breach in sales transactions. Liquidated damages are defined in the contract. Compensatory/actual damages are paid to make a party whole to cover expenses. Assignment is changing the parties to a contract with intent to continue with the existing contract. Summary ejectment is not a remedy in sales but it is a remedy in lessor/lessee situations. Negotiations are part of the offer phase, not the contract phase of a transaction.

Question 18

A buyer with the assistance of a buyer’s agent emailed an offer to a listing agent who faxed the file to the seller. The seller printed out the paper and signed in pen then mailed the accepted purchase agreement in the nearest blue USPS box to the listing agent. Once received, the buyer coincidentally called the buyer’s agent to say she changed her mind and instructed the agent to withdraw the offer. Can the buyer rescind at this time?

A. No. A contract was formed once the accepted purchase agreement was received after being mailed.
B. Yes. No contract was formed since the seller and the listing agent failed to communicate acceptance to the buyer or the buyer’s agent.

Answer 18

B. Yes. No contract was formed since the seller and the listing agent failed to communicate acceptance to the buyer or the buyer’s agent.

Approved methods for communicating acceptance include personal delivery, phone calls, voicemail, traditional or special mail, fax, telegram, and similar. It is acceptable to inform the client or the client’s agent when communicating acceptance. In this scenario, the seller used traditional mail to get the purchase agreement back to his agent. Communication did not occur between offeree and offeror. The mailbox rule applies to contract formation if the offeree mails forms to the offeror.

Question 19

An option that is exercised is an example of:

A. Unilateral contract
B. Bilateral contract
C.

Answer 19

B. Bilateral contract

An option once exercised, becomes a bilateral contract where both the optionor and optionee must perform. Prior to exercise of the option the contract is unilateral, where on the seller is required to perform. An executed contract has closed - full performance has occurred. A voidable contract may be terminated by one party but not another - contract with a minor, someone that was drunk at the time of contract, damage to the property, etc. NOTE: In an option agreement ALL terms have been agreed to upfront - such as purchase price, time the optionee has to decide, actions required to exercise an option and the period of time to close.

Question 20

The principal and interest payments in an adjustable-rate mortgage with a payment cap may reflect which type of loan amortization?

A. negatively amortized loan
B. long term amortized
C. Fully amortized

Answer 20

A. Negatively amortized

A negatively amortized loan has insufficient debt service payment to reduce the remaining balance and instead the principal increases. A fully amortized loan has monthly debt service payments that reduce the principal balance to zero upon the final payment. Fixed rate loans are examples of full amortization. An example of a partially amortized loan is seller-financing where the seller wants to be “cashed out” after a few years of borrower payments and receive the remaining balance owed in one lump sum. Long-term amortization in financing situations refers to the relationship between term, rate, and payment. The longer the repayment period, the lower the payment and the higher the total interest paid over the life of the loan. Borrowers typically choose a longer-term loan as the monthly payments are lower, making the purchase more afforadable. Long-term loans typically have a higher interest rate when compared to a short-term loans.

Question 21

What legal right does a lender have in a short sale situation?

A. Deny the sale of the property
B. Sell or assign the remaining mortgage

Answer 21

A. Deny the sale of the property

A short sale and foreclosure situation are different. The lenders’ legal rights in a short sale include denial of the sale or accepting a different buyer’s offer while under contract. Remember, in a short sale, all lien holders must give permission for the sale to occurr. A lender’s legal rights in the promissory note include selling the mortgage, beginning the foreclosure process, and seeking a deficiency judgment.

Question 22

All the following statements are correct regarding RESPA (Real Estate Settlement Procedures Act), EXCEPT which of the following?

A. The lender is not permitted to charge a fee for preparation of the closing disclosure.
B. The borrower has a 3-day rescission period when obtaining a home equity loan, refinancing or FHA reverse mortgage.

Answer 22

B. The borrower has a 3-day rescission period when obtaining a home equity loan, refinancing or FHA reverse mortgage.

The 3-day right of rescission when obtaining a home equity loan, refinancing, or reverse mortgage is provided under Truth in Lending Regulation Z, not RESPA. The remaining answers are correct. One way to remember what RESPA covers is “Kids Eat Up Boogers Dirt and Lead.” No Kickbacks allowed among settlement service providers; Escrow account limitations (aggregate accounting adjustment); Uniform settlement statement (closing disclosure); Booklet (“Settlement Costs and You”); Disclosure of loan servicing; and Loan estimate within 3-business days of mortgage application.

Question 23

When lenders determine the amount of loan they are willing to provide, they must consider the property’s value compared to how much loan a borrower is seeking. Which of the following determines the property’s value?

A. contract price or appraised value, whichever is higher
B. contract price or appraised value, whichever is lower

Answer 23

B. contract price or appraised value, whichever is lower

Both the sales price and the appraised value are compared. The lower, not the higher, of the two values is used by the lender when calculating the loan-to-value ratio (LTV). Sometimes the lower number is the sales price, but other times the lower number is the appraised value. Lenders choose the lower value to reduce the risk of a borrower defaulting and to make the loan product a better or safer business endeavor for the bank.

Question 24

Which method of financing did a buyer likely secure if the seller is still responsible for finance payments made on a property?

A. A “subject to” loan
B. an “assumable” loan

Answer 24

A. a “subject to” loan

A purchase money mortgage and installment land contract are both examples of owner financing. An assumable loan is one in which the buyer takes over the payments and responsibilities. The seller is free of further obligations. However in a subject-to loan, the buyer makes payments while the seller is still obligated and responsible in the event the buyer fails to make payments.

Question 25

When calculating qualifying ratios, real property taxes are included:

A. on the housing expenses side.

B. on both the housing expenses and recurring obligations sides

Answer 25

B. on both the housing expenses and recurring obligations sides.

When calculating qualifying ratios, expenses are broken out between Housing Expenses and Total Debt (Housing Expenses + Recurring Obligations). Housing Expenses include principal, interest, taxes, and insurance. Therefore, the real property taxes are included in both calculations. A qualifying problem may include an HOA fee, which must be used in both qualifying ratios as the HOA can foreclose on the property if the fee is not paid.

Question 26

Which act requires that lending institutions use credit information only for the purpose for which it was obtained, provides a mechanism for dispute resolution of inaccurate information?

A. Equal Credit Opportunity Act.
B. Fair Credit Reporting Act

Answer 26

B. Fair Credit reporting act

Fair credit report protects consumers in the ways mentioned in the question as well as a list of other consumer protections aimed at protecting the consumers’ credit profile. Equal Opportunity Credit Act protects against discrimination of certain protected classes of persons in providing credit. Truth in Lending requires that lenders disclose the true cost of a consumer loan. RESPA requires disclosure of cost associated with the closing process and eliminates kickbacks between settlement service providers.

Question 27

In a title theory state which of the following statements is TRUE?

A. The lender is known as the beneficiary
B. The borrower is given full legal title to the property and the trustee retains only equitable title.

Answer 27

B. The borrower is given full legal title to the property and the trustee retains only equitable title.

The trustee receives bare legal title, and the borrower has equitable title when a deed of trust is signed in a title theory state. Foreclosure is considered non-judicial and may be referred to as a foreclosure by advertisement. The lender is known as the beneficiary or grantee. The borrower is considered the grantor when executing a deed of trust. The deed of trust contains a defeasance clause that requires the TRUSTEE to record a mortgage satisfaction or satisfaction of mortgage when final payment is made.

Question 28

The Real Estate Settlement Procedures Act requires which of the following?

A. That lenders provide form disclosing the cost of the financing
B. Borrowers may not receive a commission refund or “kickback” from an agent or lender.

Answer 28

A. That lenders provide form disclosing the cost of the financing

RESPA requires that borrowers be informed of their closing costs with 3 days of loan application (which is defined in the law). The purpose is so that consumers can compare the costs of different loans and lenders (Know before you owe). While Truth in Lending does allow a 3-day rescission period on equity lines, there is no rescission period when obtaining a mortgage loan to purchase a property. The cost of the financing, for example, the finance charge and APR are related to TIL, not RESPA. RESPA does eliminate kickbacks between service providers but does not prevent a service provider giving money to the borrower.

Question 29

Which of the following would be the best explanation of market value?

A. the most likely price arrived at between a well informed buyer and well informed seller in an open market

B. the most likely price as determined by an agent by completing a CMA

Answer 29

A. the most likely price arrived at between a well informed buyer and well informed seller in an open market

Market value is the price paid by a well -nformed buyer and accepted by a well-informed seller, free of any unusual market conditions. The depreciated value would be used to determine value using the cost approach, and the value of land would be added to calculate the total value. The present value of future benefits is part of the formula for calculating the value of a property using the income approach. An agent’s CMA would be used to arrive at a probable sale price, not market value (which is an appraiser’s term).

Question 30

A suggested sale price derived from a Comparative (or Competitive) Market Analysis is determined by observing the actions of buyers and sellers in an open market. The economic principal that describes this is known as the:

A. Economic Principal of Substitution.
B. Economic Principal of Anticipation.

Answer 30

A. Economic principal of substitution

The principal of substitution states that buyers will only pay the price that is dictated by similar transactions and no more given a fair and open market. Contribution means that an improvement is only worth the value that it adds to the property. Conformity in a subdivision occurs when “harmonious use of land and architecture” leads to the maximizing of property values. Anticipation - a buyer purchases today, based to some extent, on future use and value

Question 31

A tenant allows his/her cousin to move into the apartment he/she is staying at while the tenant is away for a lengthy business trip. The cousin pays the tenant $1,500 per month and the tenant pays the landlord the agreed to lease amount of $1,000. This situation can best be described as a(an):

A. example of leasing fraud.
B. sub-lease or sandwich lease.
C. Graduate lease

Answer 31

B. Sub-lease or sandwich lease

When another party leases the property from a tenant on a long-term basis or for the remainder of the lease is known as a sub-lease or sandwich lease. A graduated lease allows for rent to increase at set intervals. The Uniform Landlord and Tenant Act states that the owner must provide safe, fit, and habitable premises and that the tenant must pay rent and not damage the property.

Question 32

A tenant who pays a gross monthly rent in addition to property taxes, insurance, and common area maintenance probably has which type of lease?

A. Full service
B. Net

Answer 32

B. Net

A net lease transfers some of the owner expenses to the tenant such as taxes, insurance, or maintenance. A full-service lease is often the most expensive because it covers rent plus other services such as housekeeping. A ground lease is characterized by its extreme length of 99 years or more and is often “build to suit.” A percentage lease is common in retail rentals where tenants pay a small fixed rent plus a portion of gross sales above a negotiated volume.

Question 33

An owner of a property is forced to grant access to an adjoining lot since the neighbor’s continuous, long-term use resulted in a legal right to cross the owner’s property. This is an example of:

A. Adverse possession
B. A prescriptive easement

Answer 33

B. a prescriptive easement

With a prescriptive easement, an owner of property is forced to grant another the right to cross over their property. It is typically obtained through a lawsuit when the petitioner has continually used the property continuously and exclusively for 20+ years. Adverse possession is the hostile taking of real property owned by another (H.I. O.C.E.A.N. – Hostile, Intentional, Open, Continuous, Exclusive, Adverse, Notorious). Adverse possession claims can be made after 7 years with color of title or 20 years without color of title. A commercial easement in gross benefits an individual or entity, often for utilities, railways, etc. A party wall easement can be found in townhouses or a wall built between two properties, where an owner owns 50% of the wall and has an easement in the other 50%. The owners would equally share in the cost to maintain.

Question 34

For a seller to deliver marketable title, five criteria must be met. Which of the following is one of those criteria for a marketable title?

A. Protect a buyer from threat to quiet enjoyment of the property
B.
Be free of doubtful ownership for the immediately preceding 10 years

Answer 34

A.
Protect a buyer from threat to quiet enjoyment of the property

Typically, real estate sales contracts require sellers to deliver free and clear marketable title which has 5 criteria. 1) No significant liens or encumbrances are present. There will always be at least an ad valorem tax lien present. The word “all” in “All liens and encumbrances must be corrected or removed prior to settlement” is false because property taxes cannot be removed. A new ad valorem lien is created each year. 2) Disclose no serious defects. Even if a buyer is aware of a defect and willing to accept whatever fallout may ensue, that does not make the seller’s title marketable. 3) Be free of doubtful ownership. A broken chain of title is said to exist where there are gaps in records of ownership. The length of time an unbroken chain must exist varies from state to state which makes “for the immediately preceding 10 years” an incorrect detail. 4) Protect a purchaser from threat to quiet enjoyment of the property, and 5) convince a reasonable person the property can in fact be sold or mortgaged at fair market value.

Question 35

Which of the following is part of the government rectangular survey system?

A. lots and blocks
B. Range and base lines

Answer 35

B. Range and base lines

Tiers, ranges, meridians and base lines are used to describe property under the government rectangular survey system. Monuments are used in the metes and bounds property description, for which description starts at the point of beginning and ends back at the point of beginning. When referencing recorded documents, reference is made to lots, blocks, plat maps, as well as the deed book and page for the deed. Emblements are annual crops that remain personal property, where a tenant farmer would be able to harvest crops for the season, even after the land has transferred ownership.

Question 36

Which of the following measurements uses meridian and range lines?

A. Plot maps
B. Government rectangular survey method

Answer 36

B. Government rectangular survey method

The Government Rectangular Survey System uses meridians and range lines. It is important to know that the principal meridian runs north to south and the base line runs east to west. There are 36 sections in a township, 640 acres in a section and town center (school and municipal buildings) are commonly located in section 16. The metes and bounds property description is used in the 13 original colonies and Texas, and references monuments (metal rods, concrete, rock, barn, etc.). It starts at the point of beginning and ends back at the point of beginning, otherwise is considered imperfect. A property can also be reference by the recorded deed book and page or plat map book and page or other legal description that often lists out lot, block, and section.

Question 37

A legal nonconforming use is best described in which of the following?

A. A local inn predating the town is in an area which has always been zoned residential only since the town’s master map was created
B. A single building located in an industrial-commercial zone was recently changed to a retail zone while the surrounding are stayed industrial.

Answer 37

A. A local inn predating the town is in an area which has always been zoned residential only since the town’s master map was created

A legal nonconforming use is characterized by the use of a property that began before current zoning. In this case, the inn which existed before a town’s zoning policies is non-conforming. The owner operating a business out of the home is an illegal use. The building zoned retail in a commercial area is spot zoning. And the owner seeking permission to build within setbacks is an example of seeking a variance.

Question 38

In which case would a conflict of interest most likely arise?

A. A sub-agent to the seller assists his/her brother in the purchase of a home.
B. An agent working for the buyer notifies the listing agent that the buyer is his/her sister.

Answer 38

A.
A sub-agent to the seller assists his/her brother in the purchase of a home.

Since the agent is working for the seller (i.e. a subagent of seller), it would be a conflict to bring an offer from a family member or close friend. The selling agent would need to be a buyer’s agent to avoid the conflict. A subagent of the seller must disclose personal and confidential information learned about the buyer to the seller.

Question 39

A limited services listing agent failed to discover and disclose an obvious discrepancy in square footage that was placed into a multiple listing service. The buyer learned of the mistake after closing. Which of the following statements is TRUE?

A. The seller is guilty of a negligent omission for not recognizing the mistake
B. The agent is guilty of a negligent misrepresentation

Answer 39

B. The agent is guilty of a negligent misrepresentation

This is certainly a misrepresentation, likely a negligent one, because the agent did not do enough diligence to be minimally competent. Disclaimers are not a defense against misrepresentations. Sellers owe nothing to buyers. Agents are not required to measure homes (although it is highly suggested).

NOTE: It is important to know the difference between a misrepresentation (a lie), omission (withholding information) and false promises (making promises to induce the sale that are not kept).

Question 40

Which of the following listing agreements best defines an arrangement where the seller hires one broker and is only obligated to pay commission when the hired broker is procuring cause to the purchase contract?

A. Exclusive Right to Sell Listing
B. Exclusive Agency Listing

Answer 40

B. Exclusive Agency Listing

An exclusive agency agreement states that the owner will hire one broker; however, the owner may still offer the property For Sale By Owner. With a Non-Exclusive or Open listing, the seller may hire multiple brokers to list the property for sale. Whoever finds the buyer wins. If the seller is the procuring cause (finds the buyer), they will not be obligated to pay commission. The seller is obligated to pay one of the hired brokers if they are the procuring cause. A Net listing means that the broker will be compensated only when the sales proceeds are greater than a minimum required amount agreed to in the listing contract, with the broker entitled to the remainder. Under an Exclusive Right to Sell listing agreement, the seller hires one broker and is obligated to pay commission if the property is sold, optioned, conveyed or transferred.

Question 41

A salesperson affiliated with ABC Realty takes a listing on a 10-acre tract of land. While the property is active on the market and not under contract, the salesperson quits and affiliates with XYZ Realty. The salesperson:

A. is permitted to withdraw the listing with ABC and list the property with XYZ as the property is not under contract.
B. is not permitted to solicit the listing from ABC until the listing expires.

Answer 41

B. is not permitted to solicit the listing from ABC until the listing expires.

The listing agreement is between the brokerage and client, with the listing agent appointed to fulfill the brokerage duties. If a salesperson leaves one firm for another, it does not terminate the listing agreement with the original firm (ABC). The salesperson cannot interfere with the contract without risking civil court action for interference with a contract and if a REALTOR a violation of the REALTOR Code of Ethics. When the listing expires, the salesperson can compete with ABC for the listing.

Question 42

Forms are an integral part of the real estate transaction. Which of the following is true regarding real estate forms?

A. Buyers and sellers are prohibited by law from creating their own forms

B.
Local Realtor Associations often have forms that can be used by their members

Answer 42

B.
Local Realtor Associations often have forms that can be used by their members

Local Realtor Associations often provide a forms library. Agents should not cobble together their own forms. Buyers and Sellers can actually agree to create their own forms, but a prudent agent would advise them to speak with an attorney.