practice exam

Question 1

____ is the right of the government to acquire property when the owner dies intestate and has no heirs eligible to inherit the property.
A. Severance
B. Eminent domain
C. Claimancy
D. Escheat

Answer 1

D
When a property owner dies without a will or survivors, the state assumes title through escheat

Question 2

When an appraiser is looking at the quality of interior finishes, the appraiser will
evaluate all of the following EXCEPT
A. Countertops
B. Walls
C. HVAC
D. Presence or absence of molding

Answer 2

C
HVAC, choice (HVAC.), is its own category for appraisals. Choices (countertops.), (walls.), and
(presence or absence of molding.) are considered part of interior finishes

Question 3

Builders are the best source of which kind of data that appraisers need?
A. Cost
B. Taxes
C. Market Value
D. Real estate closings

Answer 3

A
The tax assessor’s office for public tax records is the best source for choice (Taxes). Choice (Real
estate closings) is what the appraiser is attempting to determine. Choice (Real estate closings) is
also best sourced through public records, usually the county recorder’s office.

Question 4

The city buys a block of condemned houses, razes them, and establishes a park. In
order to create the park, the city required
A. Nonconforming use zoning
B. Density zoning
C. Spot zoning
D. Open space zoning

Answer 4

C
Spot zoning is property zoned for a different purpose than the surrounding area. It can be
beneficial, but can also be “arbitrary, capricious, and unreasonable.” A zoning variance is a better
way to deal with a zoning issue. Choice (nonconforming use zoning.) is incorrect because the park
did not exist previously to the current zoning. Choice (density zoning.) refers to the number of
houses that may be built on an acre of land. Choice (open space zoning.) is a distracter

Question 5

Which of the following phases of an environmental assessment estimates the cost
for cleaning up a site?
A. Phase I
B. Phase II
C. Phase III
D. Phase IV

Answer 5

C
Choice (Phase I) identifies potential contamination. Choice (Phase II) involves taking samples and
analyzing them to confirm contamination. Choice (Phase IV) develops a site management plan if
the contamination is too large or dangerous to remove.

Question 6

An appraisal will not help you with ____.
A. Fair market interest
B. Mortgage approval
C. Eminent domain
D. Estate valuation

Answer 6

A
An appraisal is usually performed on a piece of property to help with buying, selling, eminent domain, estate valuation, exchanges of ownership, mortgage approval, property and other taxes, and various court proceedings

Question 7

In looking at well-kept homes in Tower Beach, buyers typically refer to the kitchens
and bathrooms as dated. This comment is an example of
A. Functional obsolescence.
B. Economic obsolescence.
C. Physical deterioration.
D. Economic life

Answer 7

A
Choice (economic obsolescence.), also called external obsolescence, refers to a loss in value
because of factors outside a property. Choice (physical deterioration.) doesn’t apply because the
scenario states that the properties are well maintained. Choice (economic life.) refers to the
period of time during which a building is estimated to provide value

Question 8

The Petersons have failed to pay their property taxes for the last 4 years. When the
mortgage company discovered this, it moved to have the Petersons pay their entire
mortgage. The mortgage company could do this because the mortgage contained a
A. Default clause.
B. Prepayment penalty clause.
C. Escrow clause.
D. Acceleration clause

Answer 8

D
Choice (default clause.) is incorrect because it is not precise enough, but this answer choice is a
good distracter. Choice (prepayment penalty clause.) is incorrect because it refers to a penalty that
a mortgagor pays if the mortgagor pays off the loan ahead of schedule. Choice (escrow clause.) is
incorrect because this refers to the account into which the mortgagor pays a certain amount in
advance on a regular basis to pay property taxes

Question 9

The ____ requires that all real estate transfers of title be in writing
A. Transfer clause
B. Law of rights
C. Statute of frauds
D. Statute of adjudication

Answer 9

C
The statute of frauds was designed to address the importance of establishing and proving property
ownership.

Question 10

Mike has listed the Tubmans’ 2,500 square foot, 3-bedroom, 3-and-a-half bath
house. In order to determine a sales price, he will conduct a
A. Sales comparison analysis.
B. Comparative market analysis.
C. Highest and best use analysis.
D. Site valuation

Answer 10

B
Choice (comparative market analysis.) looks at the prices of recently sold properties in the neighborhood that are similar. Choice (sales comparison analysis.) is an approach to estimating
valuation used by appraisers. Choice (highest and best use analysis.) is a distracter; setting a sales price has nothing to do with estimating highest and best use. Choice (site valuation.) is a method used by appraisers to estimate the value of a site without including the value of existing or potential improvements

Question 11

Why are net listings generally frowned upon in the real estate industry?
A. They can lead to brokers taking advantage of property owners.
B. All of these.
C. The broker typically takes a smaller than average commission.
D. They drive down the prices of homes for sale

Answer 11

A
In a net listing, the seller names a price they want for their property, and any amount above that sale
price goes to the broker. Net listings are frowned upon in many states (and illegal in others) because
they can lead to brokers not acting in the best interest of the seller. For example, if a seller wanted
$150,000 for their home, and there was an offer for $152,000, in a net listing the broker may be
tempted to not accept the offer because his commission on the sale would be relatively small

Question 12

Lori signed listing agreements with both the Petersons Real Estate Agency and
Cramers Realtors to sell her co-op. Lori has what kind of listing with the brokers?
A. MLS
B. Net Listing
C. Dual agency
D. Open listing

Answer 12

D
Choice (MLS) is a service shared by a group of brokers in an area, but it is not an agreement between a seller and a broker. Choice (Net listing) is a listing in which the amount of the broker’s commission, if there is one, depends on how much the property sells for over the price that the
seller wants.

Question 13

Laches is
A. A type of deed restriction.
B. The loss of the right to evict a tenant.
C. The loss of the right because of a failure to enforce it within the proper amount of time.
D. The court order to enforce an eviction

Answer 13

C
Choices (a type of deed restriction.), (the loss of the right to evict a tenant.), and (the court order to
enforce an evictions.) are incorrect

Question 14

All of the following are recorded after a closing EXCEPT
A. The mortgage.
B. Liens
C. Inspection reports
D. Easements

Answer 14

C
Choices (the mortgage.), (liens.), and (easements.) as well as the deed are recorded after a
closing. Choice (inspection reports.) is not recorded, so it is the correct answer to the question.

Question 15

What is the purpose of underwriting?
A. To determine the risks of making a loan
B. To get a current appraisal on a home’s value
C. To determine how much a property is worth
D. To compare the interest rates of different lenders

Answer 15

A
Mortgage lenders use a process called underwriting to assess the risks of making a loan. To assess a potential borrower’s risk, they look at factors such as salary, credit history, and terms of
employment

Question 16

Which of the following must be given to mortgage applicants the day before the
closing?
A. Uniform Residential Appraisal Report
B. Good Faith Estimate
C. Uniform Residential Loan Application
D. Closing Disclosure

Answer 16

D
Choice (Uniform Residential Appraisal Report) is used by professional appraisers hired by lenders
to appraise the property in order to determine the value of the mortgage. The mortgagor is
entitled to a copy of the report within 90 days of being informed of the lender’s action on the
mortgage request. Choice (Good Faith Estimate) is required to be given persons seeking a
mortgage within 3 days of applying for a loan.

Question 17

For a loan to meet the requirements of Fannie Mae and Freddie Mac, it must have a loan-to-value ratio of
A. 80/20
B. Less than 80 percent.
C. Less than or equal to 80 percent.
D. More than 80 percent

Answer 17

C
The best LTV ratio is less than or equal to 80 percent and does not require private mortgage
insurance. Choice (80/20.) is a distracter because it seems familiar; it is the financing of a
mortgage by taking out two loans, one for 80 percent and one for 20 percent, which is used to
cover the down payment. Choices (less than 80 percent.) and (more than 80 percent.) are
incorrect

Question 18

Which type of deed grants the highest and most complete form of ownership?
A. General warranty deed
B. Quitclaim deed
C. Deed of trust
D. Judicial deed

Answer 18

A
Choice (Quitclaim deed) has no warranties. Choice (Judicial deed) has no warranty. Choice (Judicial deed) has limited warranties

Question 19

Some states require that real estate sales contracts be in writing because of the
state’s
A. Statute of Frauds.
B. Statute of Delivery.
C. Real Estate Commission regulations.
D. Statute of Liability

Answer 19

A
Choices (Statute of Delivery.) and (Statute of Liability.) are distracters. Choice (Real Estate
Commission regulations.) is incorrect because a Real Estate Commission does not have the power
to regulate the form of a contract

Question 20

Mike is considering buying the Peterson Company’s apartment building as an
investment. Which of the following will help him decide how long the building will
contribute to the value of the property?
A. Economic life
B. Physical life
C. Effective age
D. Actual age

Answer 20

A
Choice (Economic life) is also called useful life. Choice (Physical life) is the period of time during
which an improvement is estimated to last. Choice (Effective age) is the functional age of an
improvement based on the condition of the improvement and market conditions. Choice (Actual
age) is the chronological age of an improvement

Question 21

The Petersons bought their home 10 years ago for $175,000, paying 10 percent down and taking a mortgage for $157,500. Today, the outstanding principal is $98,900. What is the total equity that the Petersons have in their home?
A. 17500
B. 58600
C. 76100
D. 116400

Answer 21

C
Choice (17500) is incorrect because it is only the down payment. Choice (58600) is incorrect
because it represents only the amount that the mortgage has been reduced

Question 22

Someone who buys a timeshare owns it as
A. A share in a fee simple estate.
B. Community property.
C. A partnership.
D. A qualified fee conditional

Answer 22

A

Question 23

An assignment of a lease is a
A. Partial transfer of rights between landlord and lessee.
B. Partial transfer of rights from sublessor to sublessee.
C. Total transfer of rights from lessee to a third party.
D. Total transfer of rights from sublessee to sublessee

Answer 23

C
The first part of choices (partial transfer of rights between landlord and lessee.) and (partial
transfer of rights from sublessor to sublessee.) makes these answers incorrect regardless of the
second part of the answer. An assignment of a lease is the total transfer of rights between a tenant
and a third party, choice (total transfer of rights from lessee to a third party.). Sublessor and
sublessee, choice (total transfer of rights from sublessee to sublessee.), are terms used in a
subleasing arrangement, not an assignment of a lease.

Question 24

Ad valorem is a method used to
A. Appraise property.
B. Determine market value.
C. Determine a listing price.
D. Assess property

Answer 24

D
Ad valorem means “according to value.” Choice (appraise property.) is incorrect; the three ways
to appraise property are sales comparison, cost, and income. Choice (determine market value.) is
determined through appraisal. Choice (determine a listing price.) is determined using competitive
market analysis.

Question 25

Which phrase in the following ad would be considered a violation of the Fair Housing Act: “Two-bedroom apartment for rent in elevator building with handicap- accessible bathroom. Husband and wife preferred. Children welcome.” A. “Elevator building” B. “Handicap-accessible bathroom” C. “Husband and wife preferred” D. “Children welcome”

Answer 25

C Choice (“Husband and wife preferred”) states that married couples are preferred and implies that it’s heterosexual couples that are preferred. Choice (“Elevator building”) and (“Handicap- accessible bathroom”) are acceptable because they state facts and don’t state or imply that people with disabilities are not welcome to apply. Choice (“Children welcome”) is not a negative either. Saying that a group is welcome as long as it doesn’t shut out other groups is not considered discriminatory advertising

Question 26

Which of these would determine if there is encroachment on a property? A. Appraisal B. Survey C. Ejectment D. Easement

Answer 26

B A survey determines if one’s building or property encroaches (trespasses) on another’s. A survey is typically part of a real estate contract.

Question 27

Worn, dirty carpet would be considered in an appraisal as A. An incurable functional obsolescence. B. A curable physical deterioration. C. An incurable economic obsolescence. D. A curable functional obsolescence

Answer 27

B Choice (an incurable functional obsolescence.) is incorrect because a worn, dirty carpet is not an example of functional obsolescence. Choice (an incurable economic obsolescence.) is incorrect because it is not incurable or an example of economic obsolescence. Choice (a curable functional obsolescence.) is correct because it is curable, but it’s not functional obsolescence. Therefore, choice (a curable functional obsolescence.) is incorrect

Question 28

Which of the following situations would be exempt under the provisions of the Fair Housing Act? A. A landlord renting an apartment in a four-unit building B. A FSBO property C. A developer selling townhouses in a PUD D. Nuns who run an assisted living facility for the elderly and accept public funding

Answer 28

B A “for sale by owner” property is exempt from the requirements of the Fair Housing Act. Choice (A landlord renting an apartment in a four-unit building) is not exempt unless the landlord occupies one of the units in a four-unit building. Choice (A developer selling townhouses in a PUD) would only be exempt if the townhouses were in an over-55 community

Question 29

Deed restrictions and easements on a property are considered ____ when written into the deed. A. a consideration B. a bad investment C. exceptions and reservations D. a turnaround investment

Answer 29

C Exceptions and reservations are restrictions or limitations explicitly described in the deed.

Question 30

Which of the following established “innocent landowner immunity”? A. SARA B. CERCLA C. Brownfields Program D. LUST Trust Fund

Answer 30

A Choice (CERCLA), the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, was the predecessor to SARA, the Super-fund Amendments and Reauthorization Act of 1986, and held the current landowner responsible for any contamination, even if the landowner had nothing to do with the contamination. Choice (Brownfields Program) is the program that cleans up contaminated land and is administered under these two acts and the Small Business Liability Relief and Brown-fields Revitalization Act of 2002

Question 31

The local furniture store property sold and had an 8% rate of appreciation per year for 12 years. It was originally bought for $653,800. What was the latest sales price? A. 627,648 B. 1,281,448 C. 607,104 D. 1,265,439

Answer 31

B $653,800 × 0.08 = $52,304 **** $52,403 × 12 = $627,648 **** $627,648 + $653,800 = $1,281,448

Question 32

At closing, the borrower turns over to the lender for deposit into an escrow account a certain number of months of all of the following payments EXCEPT A. county property taxes. B. municipal property taxes. C. Interest. D. hazard insurance premiums

Answer 32

C Choice (interest.) is paid on an ongoing monthly basis with pay-ment of the principal, and so is the correct answer to the question, which is asking for what is not included in escrow. Some number of months of choices (county property taxes.), (municipal property taxes.), and (hazard insurance premiums.) are paid to the lender at closing and placed in an escrow account. (If the amount is larger than allowed under RESPA, an adjustment is made in the amount of the payments.

Question 33

Investor Mike is purchasing a building from the Acme Tool Company with a 20-year net-net-net leaseback offering outstanding cash throw off and good tax treatment. The building was built to the seller's needs under strict specifications to the seller's business. Mike should be most concerned with A. the physical condition of the building. B. the financial condition of the seller. C. the chance of property appreciation. D. the chance of increased maintenance costs

Answer 33

B the financial condition of the seller

Question 34

The Petersons Development Company is planning on rehabbing a block of tenements in the city. It is buying up the property from three owners and is paying them in installments. This type of installment contract is also known as a/an A. binder contract. B. Option. C. equity contract. D. land contract

Answer 34

D Choice (land contract.) may have another name in your state, so be sure that you know what terms are used in your state for all unfamiliar terminology used in this book. Choice (binder contract.) may seem familiar because of the word “binder,” but a binder contract doesn’t exist. Choice (option.)

Question 35

The Petersons are getting a general warranty on their home purchase. They expect that it will contain all of the following EXCEPT A. covenant of right to convey. B. covenant of right to grant. C. covenant of quiet enjoyment. D. covenant against encumbrances

Answer 35

B The ownership of the title and the grantor’s right to convey that title is found in the covenant of seisin; there is no covenant of right to grant. Choices (covenant of right to convey.), (covenant of quiet enjoyment.), and (covenant against encumbrances) are all found in a general warranty deed, and so are incorrect answers to the question

Question 36

The MPI is A. a form of private mortgage insurance. B. a one-time insurance premium on FHA-insured mortgages. C. equal to one point on a mortgage. D. an abbreviation for mortgage, principal, and interest

Answer 36

B Choice (a form of private mortgage insurance.) is incorrect; private mortgage insurance is abbreviated as PMI. Choice (equal to one point on a mortgage.) is incorrect because the mortgage insurance premium is not related to discount points, and the premium as of 2010 is 2.25 percent. Choice (an abbreviation for mortgage, principal, and interest.) is incorrect because MPI stands for mortgage insurance premium

Question 37

A colonial style house in Tampa just sold for $465,380. It has 5 bedrooms and 3.5 bathrooms and is 2,740 square feet. A similar colonial is for sale in Tampa with 5 bedrooms and 3.5 bathrooms and 2,846 square feet in size. What is its value? A. 465,380 B. 483,393 C. 465,549 D. 479,424

Answer 37

B $465,380 ÷ 2,740 = $169.85 **** $169.85 × 2846 = $483,393

Question 38

Which fiduciary duty requires the agent to act with care with respect to handling funds received on behalf of the principal? A. Full disclosure B. Loyalty C. Accountability D. Reasonable skill and care

Answer 38

B Accountability means financial accountability and is the fiduciary duty that requires the agent to act with care and properly handle funds received on behalf of the principal. Reasonable care, skill and diligence, along with full disclosure of pertinent information, obedience and loyalty are also all a part of a licensee’s fiduciary duty to the principal

Question 39

The Petersons have accepted an offer on their property and are waiting for the contract to be signed. Which of the following statements accurately describes the situation? A. The Petersons ’ agent may not continue to show the property. B. The Petersons may not entertain any offers that other agents bring to them. C. Other agents must stop showing the property. D. The Petersons may accept back-up offers

Answer 39

D While a property owner who has accepted an offer on his or her property may accept back-up offers, the offerors must be told that there is an accepted offer on the property and any other back-up offers as well. Choices (The Petersons ’ agent may not continue to show the property.), (The Petersons may not entertain any offers that other agents bring to them.), and (Other agents must stop showing the property.) are incorrect

Question 40

Which of the following does business in the secondary mortgage market? A. Commercial bank B. Portfolio lender C. Credit unions D. Private mortgage company

Answer 40

D Choices (Commercial bank), (Portfolio lender), and (Credit unions) do business in the primary mortgage market

Question 41

What information would be unethical for a listing agent to share with a potential buyer? A. “The community association fees are $800 this year, but they will be going up to $1200 next year.” B. “The seller is very eager for an offer because he lost his job and found a new one in a different state.” C. “The neighbors next door are really great and have two young children about the age of your kids.” D. “The roof might need to be replaced in the next year or two.”

Answer 41

B It is inappropriate for a listing agent to tell a prospective buyer personal information about the seller, even if it may encourage a sale. The only exception would be in the case of a seller instructing the agent to do so. Doing so would be a confidentiality breach on the part of the listing agent. The broker should answer all questions related to the property honestly

Question 42

With a graduated lease, the A. rent is a percentage of gross sales. B. rent adjusts payment amounts on a pre-determinded schedule. C. rent adjusts with interest rate changes. D. term of the lease adjusts automatically

Answer 42

B Choice (rent is a percentage of gross sales.) is a percentage lease. Choice (rent adjusts with interest rate changes.) may seem familiar, but it’s a mortgage rate that adjusts with interest rate changes, not a lease. Choice (term of the lease adjusts automatically.) may also seem familiar, but it’s an adjustable-rate mortgage that adjusts automatically.

Question 43

Mike has hired Petersons Realty to find apartment buildings for him to buy, provide information about the properties to him, and negotiate on his behalf. Petersons Realty is acting as a/an A. universal agent. B. agent by estoppel. C. special agent. D. general agent

Answer 43

C Choice (universal agent.) has broad powers to act for a principal, whereas the authority given to the agency in this case is limited. Choice (agent by estoppel.) occurs when an agent acts in such a way that a third party thinks the agent has more authority than the agent has; in this case, if the agent made an offer on a property without clearing it with Mike, the seller would reasonably think the agent had that authority

Question 44

Location is ____. A. the only factor in determining property value B. unimportant in determining property value C. important in determining property value D. irrelevant in determining property value

Answer 44

C Location is one of many factors in determining property value and may be the most important.

Question 45

Which of the following is NOT among the governmental factors that influence housing values? A. Property taxes B. Zoning C. Interest rates D. Building codes

Answer 45

C Choice (Interest rates) is an economic factor that influences housing values. Choices (Property taxes), (Zoning), and (Building codes) are political or governmental factors that influence housing values, so they are incorrect answers to the question.

Question 46

Possession of a current and valid license will be considered by a court A. to have no effect. B. as undeniable proof that the holder of that license may perform the services of real estate. C. as sufficient evidence to prove the license status unless stronger evidence to the contrary is introduced. D. as certification by the Commission that the license is in good standing

Answer 46

C as sufficient evidence to prove the license status unless stronger evidence to the contrary is introduced

Question 47

The Cramers are allowed to pay the taxes on their $576,000 home in one of four ways: annually, semi-annually, quarterly, or monthly. What is their monthly payment if the rate of assessment is 54.5% and the tax rate is $2.99 per hundred, rounded to the nearest dollar? A. 9.386 B. 1.435 C. 782 D. 821

Answer 47

C 576,000 × 0.545 = $313,920 **** $313,920 × 0.0299 = $9,386 **** $9,386 ÷ 12 = $782

Question 48

What is “community property”? A. Property that is owned by an entire condominium development B. Property that is owned by an entire subdivision of single-family homes C. Property acquired by a married couple during the marriage and considered to be jointly owned D. Both "Property that is owned by an entire condominium development" and "Property that is owned by an entire subdivision of single-family homes"

Answer 48

C Community property, an outgrowth of the Spanish and Mexican heritage of the area, determines that property acquired by a married couple during their marriage is considered to be jointly owned.

Question 49

The state government needs to expand its offices, so it moves to take over property by right of eminent domain. Some property owners refuse to accept the state’s offer. The state then goes to court to ask for A. an actual eviction. B. a retaliatory eviction. C. an injunction. D. condemnation of the property.

Answer 49

D Choice (an actual eviction.) is eviction of a tenant for cause such as non-payment of rent. Choice (a retaliatory eviction.) is eviction of a tenant as revenge for some action of the tenant such as complaining to the board of health because of poor building maintenance by the landlord. Choice (an injunction.) is incorrect be-cause the property owners would go to court to ask for an injunction against the state; an injunction is a court order to prohibit a person or an entity from doing some action

Question 50

Mr. Mike has died. By what rights does his wife lay claim to his property? A. Curtesy B. eminent domain C. tenancy in common D. dower

Answer 50

D Dower rights grant a wife (or child) interest in her husband’s estate. Curtsey laws recognize the rights of a husband in the event of his wife’s death

Question 51

Required brokerage relationship disclosures must be retained by the broker for: A. five years. B. three years. C. two years. D. one year

Answer 51

A five years.

Question 52

If the capitalization rate increases, the value A. increases proportionately. B. remains stable. C. increases non-proportionately. D. decreases

Answer 52

D Decreases

Question 53

In terms of antidiscrimination practices, a broker must do all of the following EXCEPT A. display the Fair Housing poster. B. enforce Fair Housing policies among the office’s sales agents and other employees. C. ensure that agents abide by RESPA. D. hire licensed realtors regardless of race, color, religion, age, sex, familial status, disability, or national origin

Answer 53

C Choice (ensure that agents abide by RESPA.) is incorrect because RESPA stands for the Real Estate Settlement Procedures Act and doesn’t deal with antidiscrimination policies, so it is the correct answer to the question.

Question 54

Lori is unable to pay his mortgage, so the First National Mortgage Company has gone to court for an order so First National can sell Lori ’ home. What kind of foreclosure is this? A. Judicial foreclosure B. Strict foreclosure C. Default foreclosure D. Nonjudicial foreclosure

Answer 54

B

Question 55

The passage of rules require A. the vote of all members of the Commission. B. the full vote of the Commission and the Governor's signature. C. the decision of the Chairman. D. a quorum vote of the Commission.

Answer 55

a quorum vote of the Commission

Question 56

A townhouse sold on August 10 for $123,000. A 3-year insurance policy premium of $751 was paid on June 1 of the previous year. What money, if any, is owed to the seller? A. 451.87 B. 0 C. 299.13 D. 345.91

Answer 56

A $751 ÷ 3 = $250.33 **** $250.33 ÷ 12 = $20.86 **** $20.86 ÷ 30 = $0.69 **** $250.33 × 1 = $250.33 **** $20.86 × 9 = $187.74 **** $0.69 × 20 = $13.80 **** $250.33 + $187.74 + $13.80 = $451.8

Question 57

If a party to a real estate contract fails to perform the agreed-upon actions by the specified time, the injured party has all of the following options EXCEPT A. breach the contract. B. sue for damages. C. rescind the contract. D. sue for specific performance

Answer 57

A Choice (breach the contract.) is what the other party has done, so it can’t be the correct answer. Choices (sue for damages.), (rescind the contract.), and (sue for specific performance.) are all actions that either the seller or the buyer may take if the other party does not perform. The seller may also forfeit a contract, which, depending on the wording of the contract, may entitle the seller to the earnest money

Question 58

A home is 10 years old. It has a 50-year life, and a $100,000 reproduction cost. The appraiser assigns physical deterioration of $26,000. Which is probably correct? A. The home has been better maintained than others in the area B. The home probably has a swimming pool, or is next to a convenience store. C. The home has been poorly maintained. D. The appraiser is wrong.

Answer 58

C The home has been poorly maintained

Question 59

Lori owned her home with her husband who has died. As the surviving spouse, she has written her will to leave her home to her three children. Lori is exercising her A. right to bequeath her property. B. life estate. C. community property rights. D. right to set up an trust

Answer 59

A Choice (right to bequeath her property.) is one of the bundle of rights that comes with property ownership. Choice (life estate.) is limited to the lifetime of the property owner, or the lifetime of someone designated by the owner. Choice (community property rights.) are rights to property held by a married couple in some states. Choice (right to set up an trust.) is incorrect because the question does not mention anything about a trust

Question 60

“Subject to a mortgage” A. is the same as assigning a mortgage. B. occurs when a purchaser takes over liability for the entire unpaid balance of the mortgage from the original mortgagor. C. occurs when a purchaser agrees to take over payments of a mortgage, but the original mortgagor remains responsible for the entire mortgage should the purchaser default. D. is a contingency clause in a sales contract that allows the purchaser to cancel the contract if his or her home is not sold before the closing on the new purchase

Answer 60

C

Question 61

An express contract is ____. A. either written or oral B. closed faster than a standard contract C. exclusively oral D. exclusively in writing

Answer 61

A An express contract is created in words, either written or oral. The other answer choices are not true

Question 62

An agency agreement in writing between a broker and a principal would not be valid if which of the following was missing? A. Method of termination B. Expiration date C. The purpose of the agreement D. The sale price

Answer 62

C The agency agreement is a contract, and the purpose of a contract must be stated and it must be a legal purposed for the contract to be valid. Choices (Method of termination), (Expiration date), and (The sale price) are not necessary in order for the agency agreement to be valid. If choice (The sale price) were “commission,” then it would be one of the five characteristics that make a contract valid

Question 63

The establishment of an adult day-care center in a home in a residential area might need which kind of variance? A. Nonconforming use B. Accessory use C. Special use permit D. Area

Answer 63

C Choice (Nonconforming use) is incorrect because a nonconforming use is one that predates present zoning; it’s not a variance. Choice (Accessory use) is not a variance either, but adding something—an accessory use—to further the primary function of a property is a reason to ask for a variance. Choice (Area) refers to the size of a lot, not to the use to which it is put

Question 64

The F.R.E.C. is composed of A. four brokers and three lay members. B. five brokers and two lay members. C. three brokers, two brokers or sales associates, and two lay members. D. seven members

Answer 64

D seven members

Question 65

A plat is a A. master plan for a city, town, or region. B. property report for an interstate land sale. C. different name for a building lot. D. map showing the location of lots and features in a proposed subdivision

Answer 65

D Only choice (map showing the location of lots and features in a proposed subdivision.) accurately defines a plat

Question 66

In terms of disclosure about material facts that affect the value or use of a property, a realtor A. doesn’t have to disclose anything more than is on the seller’s disclosure form. B. has to disclose anything that he or she knows is of a material nature regardless of what is on the form. C. has a fiduciary duty to the seller to protect the seller’s best interest and so must abide by what the seller discloses. D. has no responsibility; it is the seller’s responsibility only

Answer 66

B Choice (has to disclose anything that he or she knows is of a material nature regardless of what is on the form.) is the only instance where the fiduciary responsibility is trumped by the law. Realtors must disclose anything of a material nature that affects the value or use of the property

Question 67

Lori signed a contract of employment with Peterson Realtors. The contract includes a noncompete clause. Such a clause A. is unenforceable in some states. B. typically prohibits an agent from later working with clients they met through the agency, but does not proscribe an area in which they can work. C. is typically written for 90 days. D. has no force under the law because the agent signs under duress

Answer 67

A Because choice (is unenforceable in some states.) is true, you need to find out your state’s regulations on noncompete clauses in contracts of employment. Choice (typically prohibits an agent from later working with clients they met through the agency, but does not proscribe an area in which they can work.) is incorrect because a prohibition against the immediate area is typical in a noncompete clause. Choice (is typically written for 90 days.) is incorrect because the time period varies. Choice (has no force under the law because the agent signs under duress.) is a distracter

Question 68

The most common method used by the Federal Reserve Board to control the supply of money is by A. Urban Development Block Grants (UDAG). B. affirmative action. C. Tandem Plan. D. Open Market Operations

Answer 68

D

Question 69

The Petersons want to buy their first home. They have 20 percent to put down and need to borrow $200,000. They want a 30-year, fixed-rate mortgage and rates are 5.1 percent. Their monthly housing payments, including principal, interest, taxes, and homeowner’s insurance, will be $2,340. If their total income is $80,090, what percentage of their monthly combined incomes will their housing payments be? A. 2.85 percent B. 28.5 percent C. 3.5 percent D. 0.35 percent

Answer 69

D $80,090 ÷ 12 = $6,674.17 **** $2,340 ÷ $6,6674.17 = 0.35

Question 70

Which of the following people is NOT part of a protected class under the Fair Housing Act? A. A person with an IQ of 65 B. A person with cerebral palsy C. An active heroin addict D. An active alcoholic

Answer 70

C Choices (A person with an IQ of 65), (A person with cerebral palsy), and (An active alcoholic) are members of protected classes under the Fair Housing Act. Choice (An active heroin addict), an active heroin addict, or anyone who is a current substance abuser, is not protected

Question 71

The more land that is zoned for a particular use in an area A. results in a lower value for the land than if there were less land zoned for that use. B. has no effect on the value of the land. C. drives up the value of the land. D. affects the value negatively or positively depending on the zoned use

Answer 71

A This is an ex-ample of the laws of supply and demand. The more supply, the less demand, and the lower the value. Choice (has no effect on the value of the land.) is incorrect be-cause this is not an example of equilibrium. Choice (drives up the value of the land.) would be true if there were less supply and more demand. Choice (affects the value negatively or positively depending on the zoned use.) is incorrect because the economic principle is not dependent on use

Question 72

Prepaid items required by the lender at closing include all of the following EXCEPT A. mortgage insurance premiums. B. hazard insurance premiums. C. appraisal fee. D. property taxes

Answer 72

C Choices (mortgage insurance premiums.), (hazard insurance premiums.), and (property taxes.) and also accrued interest on the mortgage and association dues if the property is a townhome (PUD), co-op, or condo are required to be paid at closing, so they are incorrect answers to the question. Choice (appraisal fee.) is not a prepaid item, so it is the correct answer to the question

Question 73

The URAR is used to appraise a A. single-family residence. B. Condominium. C. co-op unit. D. commercial property other than residential rentals

Answer 73

A URAR stands for Uniform Residential Appraisal Report and is required for FHA loan guarantees. Choices (condominium.) and (co-op unit.) are incorrect because other forms are used for applying for FHA-insured loans for these types of residences

Question 74

Jerry sold a parcel of land to his church to build a retreat center with the stipulation that if the center wasn’t built, he would regain possession of the land. He dies and the church paves over the land for a parking lot. Jerry’s heirs find that the sale gave the church the property in qualified fee conditional, so they can A. do nothing about it. B. file a lawsuit for return of the land. C. offer to buy it back from the church. D. exercise their right of reentry and reversion

Answer 74

D Choice (exercise their right of reentry and reversion.) gives the heirs the right to inspect the property and reclaim it if they find the church has violated the contract of sale. Choice (file a lawsuit for return of the land.) is qualified fee determinable

Question 75

How much income must be generated from a $1,357,500 building if a 12% return on investment is desired? A. 120,000 B. 12,000 C. 170,000 D. 162,900

Answer 75

D $1,357,500 × 0.12 = $162,900

Question 76

____ were put in place to make sure that property buyers’ rights are protected. A. buyer agency agreements B. broker agency agreements C. primary agreements D. anti-trust agency agreements

Answer 76

A As real estate buyers became aware that most agents were protecting the seller’s interest, buyer agency agreements were created to protect buyers’ interests.

Question 77

An estate of indeterminate duration is a/an A. estate from period to period. B. freehold estate. C. leasehold estate. D. estate at will.

Answer 77

Correct Answer: B Choice (estate from period to period.) is a leasehold estate, known also as an estate for years. Choice (leasehold estate.) is the tenant’s interest in a rental property. Choice (estate at will.) is also a type of leasehold estate.

Question 78

The rate of depreciation on Peterson’s property over 18 years is 3% per year. If she bought the property for $132,000, what is its value now? A. 60,720 B. 71,280 C. 83,265 D. 95,737

Answer 78

A $132,000 × 0.03 × 18 = $71,280 **** $132,000 – $71,280 = $60,720

Question 79

The Petersons brothers are putting together parcels of land for a subdivision and have asked for a contract for deed on the Lori’ farm. This will allow the Petersons to A. take title immediately while paying off the purchase price in installments. B. borrow the purchase price from a financial institution over a longer period of time. C. take title after a certain number of monthly payments have been made. D. negotiate for a wraparound mortgage with a bank

Answer 79

C

Question 80

A residential mortgage transaction for purposes of the Homeowner’s Protection Act is one that A. is a single-family dwelling. B. has from 1 to 4 units. C. has a VA-guaranteed or FHA-insured mortgage. D. has a fixed rate mortgage

Answer 80

A HPA regulates private mortgage insurance. In addition to choice (is a single-family dwelling.), a residential mortgage transaction according to HPA is one that generates a mortgage or deed of trust and whose purpose is to finance the acquisition, construction, or refinancing of the borrower’s primary residence

Question 81

A fire insurance policy has an unused portion of 4 months and 16 days. If the policy cost $272 for 3 years, how much is the unused portion worth? A. 27.43 B. 34.24 C. 102.84 D. 94.67

Answer 81

B $272 ÷ 36 = $7.56 **** $7.56 ÷ 30 = $0.25 **** $7.56 × 4 = $30.24 **** $0.25 16 = $4.00 **** $30.24 + $4.00 = $34.24

Question 82

Lori has signed a two-year lease on an apartment managed by Realty Inc. The lease has a 2 percent rent increase at the end of the first year. Lori has what kind of interest in her apartment? A. Leased fee interest B. Leasehold estate C. Lessor interest D. None

Answer 82

B Choices (Leased fee interest) and (Lessor interest) refer to the landlord. Choice (None) is incorrect because once the lessee (Lori) has signed the lease she receives an interest in the apartment, which is the right to occupy it.

Question 83

Lis pendens is a public notice that a lawsuit is pending A. between tenants. B. between a divorcing couple. C. involving a lien on property. D. by the owner of a property against the property manager.

Answer 83

C he lawsuit involving property may involve title to real property or an interest in real property such as a lawsuit involving a disputed estate of which the property is part, or involving a prior contract for sale in which the seller refused to perform. Choices (between tenants.), (between a divorcing couple.), and (by the owner of a property against the property manager.) are distracters

Question 84

What is the final step after an appraiser has utilized all three approaches to value? A. average each approach B. use primarily the comparable sales approach C. Reconciliation D. correlating

Answer 84

C Reconciliation

Question 85

Condemnation of property in order to transfer it to a real estate developer is known as A. adverse possession. B. involuntary alienation. C. Escheat. D. assignment

Answer 85

D Choice (adverse possession.) refers to a type of easement. Choice (escheat.) is the taking of property by the state when the owner dies without a will and without relatives. Choice (assignment.) is the giving of rights, duties, or obligations to another; for example, a tenant may assign his or her lease to another.

Question 86

The neighborhood in which a property is located is an example of which of the following economic factors affecting property value? A. Conformity B. Contribution C. Balance D. Externality

Answer 86

D Choice (Conformity) is whether a property is similar to the other properties in the neighborhood. Choice (Contribution) is how much a characteristic of a property adds or subtracts from the value of the property. Choice (Balance) is the equilibrium between the value of land and the value of a building on that land

Question 87

Which of the following is NOT required in a listing agreement? A. Price B. Signature of the broker C. Commission D. Form of termination

Answer 87

D Choices (Price), (Signature of the broker), and (Commission) are required on a listing agreement, but choice (Form of termination) is not, so it is the correct answer to the question

Question 88

If the commission pays from the real estate recovery fund in any amount in a claim against a licensed real estate broker or real estate salesperson, the license of the real estate broker or real is automatically A. Discontinued B. Terminated C. Suspended D. Dismissed

Answer 88

B If the commission has to pay out of the recovery fund its bad news. If it happens... the broker or salesperson that committed the act in (which resulted in payment from the recovery fund) gets their license immediately terminated