Practice Test 1 Flashcards
Land of riparian owner borders…
a river, stream, or watercourse (any moving water)
The fee charged by a lender for expenses incurred to make a new real estate loan is a…
loan origination fee
Who signs the promissory note and mortgage?
The mortgagor (borrower)
Vegetation is ___ property
real
A seller would get to harvest corn because corn is his __ property and wasn’t mentioned in the ___ ___
personal; sales agreement
Example of a freehold estate:
life estate (is limited to someone’s life)
The impairment of desirability and usefulness in real estate brought about by economic changes in the community is known as:
obsolescence
Which is true when a broker takes an oral listing to sell real property?
The broker has no legal right to enforce payment of commission on an oral listing to sell real property. The listing to sell real property must be in writing to be enforceable.
The market data approach to appraisal is based upon the principle of…
substitution
The holder of a life estate based on the holder’s own life may not…
…devise (leave by will) the property to anyone
A common example of police power is…
zoning laws which restrict and limit the use of land
A contractor obtained a construction loan, and the loan funds are to be released in a series of progress payments. Most lenders disburse the last payment when:
the period to file a mechanic’s lien has expired.
An easement by prescription does not require…
a confrontation with the true owner
Private restrictions on the use of land may be created by…
private use land controls, written agreement, or a developer’s general plan restrictions for a subdivision
Government land use, planning and zoning laws are important examples of:
use of police power
Generally when the government forces the sale of private land for public use, it is governed by due process of law and is accomplished through:
eminent domain
Depression, recession, expansion and prosperity represent the four phases of:
the business cycle
When a real estate broker is acting as a subagent for the seller, her fiduciary duty is owed by and primary responsibility is to:
the seller only
Which laws exert the greatest control over the California housing and construction industries?
State Housing Law, local building codes and the Contractor’s License Law
When there is a conflict between different building codes, which code has precedence?
whichever code sets the highest standards for construction and safety. Remember: “The most restrictive restriction restricts you!”
A tenant leased a building from an owner. The owner then sells the building to a new owner. What is true?
The change in lessee’s financial situation is none of the new owner’s business
A home was sold and the escrow closed Oct. 1, 2011. How would the property taxes for the 2011-12 tax year typically be prorated between the seller and buyer?
The seller would pay for the first 3 months of the property tax year (July, Aug., Sept.) by proration in escrow. The buyer would pay for the remainder of the tax year plus supplemental taxes based upon the reassessment that was triggered by the sale.
When you, as a real estate agent, know that a seller will not accept an offer from a buyer, you should not do what:
change the buyer’s offer to what you believe the seller will accept, initial the changes, & then present the offer to the seller
Home sold for $200K. Buyer assumed existing loan against property for $160K. The documentary transfer tax for this county is $.55 per $500 of consideration. The transfer tax is?
$44
$200K-$160K = $40K consideration
$40K / $500 = 80 taxable units
80 X $.55 = $44
Puffing is when an agent
exaggerates the features or condition of the property
Joe owns a grocery store and wanted to raise some money. He decided to sell his land and building to an investor and leased it back to himself in order to continue running his grocery store. What would be a tax benefit to Joe?
Joe’s rent payments to the investor will be fully deductible for income tax purposes as a business expense
The roof of a rectangular building with sides that rise at inclined planes on all four sides is called a:
hip roof
What describes an open-end loan?
one in which additional financing could be obtained without rewriting the contract
Which of the following is an appraiser’s primary concern in the appraisal of a residential subdivision?
Marketability and acceptability
When determining the value of a property, which of the following dates is most important to an appraiser?
The date the contract was signed
= the date on which a “willing buyer” and “willing seller” mutually agreed upon the sale price (value) of the property
Valuations of single-family dwellings are usually based on:
sales prices of comparable properties
To estimate the value of a parcel of vacant land, the appraiser concentrated only on the cost to the buyer of acquiring a comparable, substitute parcel of land. This approach is most similar to what appraisal method?
Market data
When land is valued by its highest and best use, and there is a building on the land that has little or no value, the appraiser should:
deduct the demolition cost of the building from his highest and best use opinion of value
The primary purpose of a site analysis by an appraiser is to determine the
highest and best use
In real estate appraisal, “market value” is based primarily upon what?
the willing buyer and willing seller concept
When attempting to determine current market value, real estate appraisers are least concerned with:
original cost
When real estate increases in value because of an increase in population and/or inflation, this would be classified as
an unearned increment
What is not an essential element of value?
appreciation
The primary purpose of RESPA (Real Estate Settlement Procedures Act) is to:
require lenders to make special disclosures without cost to the borrower, for loans involving the sale or transfer of four or less residential dwellings.
The placement of a building on a lot and its relationship to the surrounding environment is described as
orientation
A lender must notify a borrower when a balloon payment is due:
90 to 150 days prior to the due date
The most common method used by an appraiser in the appraisal of an amenity property would be
market comparison (a.k.a. market data approach)
When an appraiser analyzes rent using the income approach, she will base her appraisal on which characteristics?
quantity, quality, durability
When would the cost approach to appraisal be least appropriate?
old buildings
The unit of comparison when appraising land is:
frontage, front foot value, OR cost per SF / cost per acre
Valuable consideration in a contract consists of
services to be provided by one or both parties, whatever the parties consider to be of value, or one dollar or more
The selling agent, Jones, prepared an offer for the buyer of a home. At the very latest, when should agent Jones give the buyer the Agency Disclosure form?
before preparing the offer for the buyer
When an appraiser determines a “loss in value from any cause”, he is determining:
depreciation
A property owner who carries the proper amount of fire insurance coverage will be indemnified in the event of loss. In such case, the insured
should neither gain nor lose
A real estate appraiser reduced his opinion of the value of a home because the local sewer system was in poor condition and in need of repair. This loss in value would be classified as:
economic obsolescence (because the sewer system is an external cause)
Economic or social obsolescence would not result from
an outdated heating system (this would result in functional obsolescence)
Under California state law, the maximum fine which may be imposed by the Real Estate Commissioner on a person falsely claiming to be a real estate licensee is:
$20,000
The process of calculating the present worth of a property on the basis of its capacity to continue to produce an income stream is called
capitalization
The capitalization approach to appraisal is a process whereby an appraiser:
converts annual net income into capitalized value
Interest rates on real estate loans are primarily determined by:
demand and supply of money
When using the capitalization approach to appraisal, what would an appraiser subtract from the scheduled gross income to arrive at annual net income?
allowance for rent loss and vacancies
The Alquist-Priolo Special Studies Act discloses the location of earthquake fault lines on maps for properties located:
all counties in California
Lenders in the “prime” mortgage market generally prefer that not more than what percent of an applicant’s gross income be spent for housing?
25% to 28%
In home construction, the parallel wooden beams used to support ceiling loads and floors are called
joists
What is conveyed incident and appurtenant to the land?
natural rights, easements & restrictions, and servitudes
A loan which calls for regular periodic payment of both principal and interest to completely repay the loan is called a:
fully amortized loan
A real estate broker was helping his brother find a home. The broker, representing his brother, negotiated a lease with an option to buy from an owner/seller of a home. The real estate broker must disclose that he is the brother of the tenant/optionee to:
the owner/seller of the home
When a loan is fully amortized by equal monthly payments of principal and interest, the amount applied to principal reduction:
increases while the amount applied to interest payment decreases as the loan gets older
When the debt has been paid in full, the trustee will record what legal instrument to remove the lien of a trust deed from the public record
deed of reconveyance (also called a reconveyance deed)
The item that would appear as a debit on the buyer’s closing statement is
the purchase price
In a real property sales contract, the seller who is also acting as the lender is usually referred to as the
vendor
In a real estate transaction where the seller uses a land contract instead of a trust deed, the land contract may be described as:
a security device
According to California law, what would not be considered a blanket encumbrance?
real property taxes - because a tax lien would be tied to one specific parcel
A grant deed, when compared to a land contract of sale, may be different with respect to:
the interest conveyed to the buyer, the signatures of the parties, & the designation of purchase price
Promissory notes often include an “or more” clause. An “or more” clause would:
allow the borrower to make accelerated payments if he wishes
A charge imposed on property is called:
a lien
The effect of a tight money policy implemented by the Federal Reserve Board would have a net effect of increasing:
the use of second trust deeds in creating real estate transcations
Henry is a tenant with a 5-year lease on a ranch belonging to Jack. Fred is the owner of an adjacent piece of land. One day, Fred asked Henry to grant him an easement to cross the ranch land. Henry grants Fred an easement in writing, granting Fred permission to cross the land. Is the easement valid under these circumstances?
Yes, but the easement may not extend beyond the term of Henry’s lease
What does not affect the movement of mortgage rates?
the rate of unemployment
When four people own property as joint tenants:
there is still only one title to the whole property
When analyzing a real estate loan application, a lender would correlate characteristics of the borrower, the loan, and the property securing the debt to make:
a loan commitment
In what way is the FHA loan program different from conventional lending?
FHA is a mortgage insurer rather than a mortgage originator
When an eligible veteran purchases a home under the Cal-Vet program, the seller executes a grant deed in favor of:
the California Department of Veterans Affairs
Under the Federal Truth-in-Lending Law, two of the most critical facts which must be disclosed to buyers or borrowers are:
finance charge and annual percentage rate
The Real Estate Settlement Procedures Act (RESPA) does not prohibit:
buyer requiring a specific lender
The formula to calculate net operating income of an apartment building:
scheduled gross income minus vacancies and collection losses, minus operating expenses
An agreement by a lender to make a long term loan on real estate at some future date, upon the borrower’s request, is known as:
a standby loan commitment
A lender may require an impound account for some real estate loans. Who benefits from this impound account?
The beneficiary (lender) and the trustor (borrower)
An interest in real property may be taken by either prescription or by adverse possession. The interest taken by prescription is:
the right to use land which belongs to another person
A quitclaim deed conveys only the present right, title, and interest of:
the grantor
Title to real property is transferred with a deed. A valid deed does not need to contain what?
acknowledgment of the grantor’s signature
A valid deed can be:
signed by a witnessed mark
A person holding title to real property in severalty would have:
sole ownership
A joint tenancy in real property can legally be created with the execution of a deed by:
- husband and wife to themselves as joint tenants
- existing joint tenants to themselves & others as joint tenants
- existing tenants in common to themselves as joint tenants
Which factor will a lender usually consider to be the most important when making the decision whether or not to make a home loan?
the degree of risk
The “standard coverage” title insurance policy on real property insures the policy holder against loss occasioned by:
a forgery in the chain of recorded title
What is not covered by the standard coverage (CTLA) title insurance policy?
rights of parties in possession
Escrow instructions are commonly executed by:
buyers, sellers, and third parties
What would most likely result in the termination of a real estate sales escrow?
the mutual consent of the buyer and the seller
During escrow, if a dispute should arise between the buyer and seller preventing the close of escrow, the escrow holder may legally:
file an interpleader action in court
According to the Seller Transfer Disclosure law, the real estate licensee:
has a responsibility to visually inspect the property and reveal pertinent information which the seller has failed to disclose
Broker Bob has just taken an exclusive right to sell listing to sell a home. This brand new listing may be described as:
an express, bilateral, executory, employment contract
The term “express contract” describes a contract which is expressed
in words, either oral or written
A contract based on an unlawful consideration is
void
Which agreement is required to be in writing in order to be enforceable?
an agreement by a buyer to assume an existing real estate loan
Mr. Baker sold his country home to Mr. Jones, but reserved a life estate and remained in possession of the property. Later, Mr. Baker sold the life estate to Mrs. Connor and surrendered possession of the property. Mr. Jones then demanded the immediate possession of the property. Based on these facts, what is correct?
Mrs. Connor may remain in possession (as long as Mr. Baker is alive)
Broker John took a 60 day exclusive agency listing to sell a property that was owned by Jones. After 30 days, Broker John had not sold the property, so Jones sent him a letter by certified mail canceling the listing. One week later Jones listed the property with Broker Bob using an open listing. Two weeks later, Broker Bob sold the property under the open listing. In this situation how will the commission be handled?
Seller Jones will be liable for two full commissions (one to Broker Bob as the procuring cause of the successful offer under an open listing, and one to Broker John, because the property sold during the term of his 60 day exclusive agency listing)
An exclusive listing contract is
an employment contract, a bilateral contract, & a promise for a promise
When a broker takes an exclusive authorization and right to locate property listing with a buyer, the broker is authorized to:
represent other buyers at the same time
Any exclusive listing must contain:
a definite termination date
A “safety clause” is usually found in which contract?
a listing
When a real estate broker arranges a loan originated by a federally related lender, the broker must provide the borrower with the federal RESPA booklet and disclosures when the loan is secured by a first trust deed and the proceeds are used for financing:
- the purchase of a personal residence by a family who owns three or more similar units
- the purchase of one individual unit in a complex of six residential units on the same block
- the purchase of a single family dwelling by an individual buyer
If a contingency in a contract fails, what is true?
The buyer is not obligated to perform
If a real estate licensee advises buyers about how to take title when preparing a deposit receipt, she may be:
- giving tax advice
- giving legal advice
- providing a basis for a possible claim of discrimination
A buyer selected an expert to inspect the septic tank of the home he was about to purchase. The inspector damaged the home’s sprinkler system during the inspection. Who is liable for the cost of repairing the sprinkler system?
The buyer will be liable for damages, regardless of what was found during the inspection
The effective date of a residential purchase agreement is the date that:
the seller’s acceptance was properly communicated to the buyer
When a buyer buys a home “subject to” the seller’s existing loan on the property:
the buyer will not be personally liable for the loan and the seller remains the borrower of record
What is not true regarding options?
The option binds the optionee to perform - the true statement is that the option binds the OPTIONOR, not the optionee
A real estate licensee generally acts as:
a fiduciary
The position of trust assumed by the real estate broker as an agent for the seller or buyer is described legally as:
a fiduciary relationship
When representing a principal under a written listing agreement, what type of authority may an agent have?
actual, specific, or ostensible
A seller of real property is not bound by the acts and representations of:
the buyer’s broker
“Alienable” title means that the title:
can be conveyed
The most essential element to create an enforceable broker-principal relationship concerning a transfer of interest in real property is:
a written employment contract
On January 2nd, a buyer called a real estate agent to find out if the buyer’s offer had been accepted. The agent informed the buyer that the seller was out of town and would not be back until January 14th, after which she would make a decision as to whether the buyer’s offer would be accepted. Under these circumstances, what is true?
If the buyer decides not to wait for the seller to return, the buyer can rescind the offer & secure the return of the full amount of the deposit.
When an existing contract is replaced by a new contract, it is called:
novation
The maximum commission which can be charged by a real estate broker in the sale of residential income property is:
negotiable between the principal and broker
The normal relationship between an escrow officer and the principals in a real estate transaction is that of:
neutral agent
The buyer of a business, in order to avoid “successor’s liability” for unpaid sales tax, should require the seller to provide escrow with a “certificate of clearance” issued from what agency?
State Board of Equalization
What is an appropriate termination date for an exclusive right to sell listing of residential real property?
90 days after the listing is signed. (There must be a definite termination date)
A farmer deeded his farm to his sons, Able, Baker, and Charley as joint tenants. Shortly thereafter, Baker sold his interest to William. Able died and willed his interest to Sally. Ownership of the property would be:
Charley and William as tenants in common, Charley holding 2/3 interest, William 1/3 interest
Under no circumstances may a real estate broker:
misrepresent material facts
A lender required a borrower to pay two points to get a $52,000 loan. How much did the two points cost the borrower?
Each point costs 1% of the loan amount. Two points (2%) x $52,000 = $1,040
Private restrictions on land may be created
by deed or written agreement
Seller Jane was represented by Agent Able. Able convinced Jane to accept an offer by verbally promising her that he would find the “great replacement home” for her before the close of escrow. Assuming Agent Able was unable to find an acceptable replacement home for Jane, what is most correct?
Jane can recover damages in a civil lawsuit against Agent Able resulting from a false promise.
What describes the practice of single agency?
The single agency broker is client oreinted
A real estate broker showed a property to a prospective buyer which was not currently listed for sale and without the seller’s knowledge or consent. The broker then wrote up and presented an offer to the seller. In this situation, the broker acted
as a single agent (representing the buyer only)
A “blind ad” placed in a newspaper by a license real estate salesperson does not properly
identify the broker
Which of these is an encumbrance? freehold estate, fee simple absolute, recorded homestead, estate for years
estate for years - this is a lease, which effects and burdens the title to property
The document used to encumber a personal property mobilehome is a:
certificate of title
A real estate broker must retain copies of all listings, deposit receipts, canceled checks, loan documents, and trust records for
three years
Elizabeth, a licensed CA real estate broker, received a referral of a buyer from an out-of-state broker. Elizabeth sold this buyer a home and wants to split the commission with the out-of-state broker. Under the California Real Estate Law:
Elizabeth may split the commission with a broker of another state
The employment agreement between a broker and a salesperson must be retained:
by both broker and salesperson for 3 years from the date of the termination of the salesperson’s employment
What is the most important reason for a broker to maintain a client trust fund account in addition to his regular business account?
the consequence which could occur should legal action be taken against the broker
When a broker receives an advance fee for publishing a special pamphlet advertising properties which he has not listed for sale, he must:
give an accounting to the seller upon demand for any funds he has collected for the advertising
When a real estate licensee negotiates a loan secured by real property, he must deliver the mortgage loan disclosure statement to the borrower
within three days of receipt of a completed loan application or before the borrower is obligated to take the loan, whichever is earlier
A real estate broker negotiated a hard money loan secured by a second trust deed. As used in this context, “hard money” means:
a cash loan
The oldest, easiest to learn, most adaptable, and quickest method of appraising residences and land, is
the market data approach (also called comparison or substitution)
The purpose of the Federal Fair Housing Law is:
to prohibit discrimination in housing transactions
A real estate licensee who shows minority buyers homes located in segregated neighborhoods only is guilty of:
steering
Some real estate loans provide that the interest rate may be increased or decreased depending on money market conditions. This type of loan is called:
a variable interest rate loan
A real estate broker would be subject to discipline by the Real Estate Commissioner and in violation of fair housing laws if he did which of the following: steering, blockbusting, hired salespersons from only one ethnic group
all of the above
If an income property is valued at $300,000 using a 6% capitalization rate, how much would an investor pay for the property if he demanded an 8% capitalization rate?
$225,000
$300,000 x 6% = $18,000 net income
$18,000 / 8% = $225,000
Ted borrowed $2,500 and gave the lender a four year straight note. In 8 months he had paid $150 interest. What was the interest rate on the note?
9%
8 months = 2/3 of a year
$150 / 2 = $75 interest in 1/3 of a year
$75 x 3 = $225 interest per year
$225 / $2,500 = 9%
A buyer employs a broker to find a property with the condition that he will not purchase the property if represented by a dual agent. Under this condition, the buyer’s broker would consider a prospective seller to be a:
customer
The person who employs an agent may be called the client, fiduciary, or principal. Other people are typically called customers or potential customers.
