Quick Quiz 8 COPY

Question 1

The trustee will deliver to the trustor a

Answer 1

reconveyance deed.

Question 2

A trustee’s deed would be used in case of .

Answer 2

foreclosure and would not be delivered to the trustor

Question 3

Which does NOT constitute an estate in real property?
A) Reversion
B) Leasehold
C) Deed of trust
D) Remainder

Answer 3

C) Deed of trust
A deed of trust conveys only a security interest, not a possessory interest. Estates in remainder and in reversion are both future possessory interests. A leasehold estate is a present possessory interest.

Question 4

The principle of value that affirms that a purchaser will buy goods and services at the lowest cost available is
A) regression.
B) substitution.
C) inflation.
D) retribution.

Answer 4

B) substitution.
The principle of substitution states that when several similar commodities, goods, or services are available, the one with the lowest price attracts the greatest demand and widest distribution.

Question 5

In real estate financing, lenders will sometimes refer to “nominal rate” when granting a loan. This means
A) the rate of interest specified in the promissory note.
B) the maximum rate of interest allowed by law is obtainable on financing a property.
C) that the rate of interest in the final granting of the loan will be greater than the commitment.
D) points will be required, as the rate required by the lender would exceed the legal rate of interest.

Answer 5

A) the rate of interest specified in the promissory note.

Question 6

Buyer purchased a property from Seller on August 15, 2006. Buyer was to take possession as of September 30, 2006, with all prorations to be as of the same date. On November 1, 2005, Seller had paid the taxes for the fiscal year of 2005-2006. The escrow closing statement would show
A) Seller pays Buyer for three months’ taxes.
B) Seller pays Buyer for nine months’ taxes.
C) Buyer pays Seller for three months’ taxes.
D) Buyer pays Seller for nine months’ taxes.

Answer 6

A) Seller pays Buyer for three months’ taxes.The taxes have been paid to July 1, 2006, which is three months short of the close of escrow, September 30, 2006. The seller is obligated to pay the buyer for the taxes for the months of July, August, and September.

(1) C.O.E.: September 30, 2006
(2) D.I.: July 1, 2006* *Date of item: Taxes paid to July 2006
(3) Short of C.O.E. 3 mos. Therefore, seller owes 3 mos.

Question 7

Which would cause an owner of a fee simple estate to convert her interest to a less-than-freehold estate?
A) Granting oil and mineral rights to a third party
B) Both granting oil and mineral rights to a third part and leasing for the purpose of agricultural use for a period of five years
C) Leasing for the purpose of agricultural use for a period of five years
D) A sale-leaseback

Answer 7

D) A sale-leaseback
The owner who sells her interest is conveying the fee title (a freehold estate) to the buyer. When the seller becomes a lessee of the former property through a leaseback arrangement, the seller has converted the former freehold (fee) estate to a less-than-freehold estate (a lease).

Question 8

The power of eminent domain can be exercised by
A) public education institutions.
B) cities.
C) public utilities.
D) all of these.

Answer 8

D) all of these.

Question 9

In the absence of expressed provisions in the deed restrictions and plans, which of these is part of a condominium unit?
A) Bearing walls
B) None of these
C) Elevator
D) Central heating system

Answer 9

B) None of these

Question 10

Which is NOT a specific lien?
A) Mechanic's lien
B) Judgment lien
C) Blanket mortgage
D) Unrecorded property tax lien delinquent from prior years

Answer 10

B) Judgment lien
A judgment lien is a general lien on all property of the debtor not otherwise exempt by law. A property tax lien, a mechanic’s lien, and a blanket mortgage are all specific liens.

Question 11

Real property taxes for the 2005-2006 fiscal year become a lien on
A) February 10, 2006.
B) January 1, 2005.
C) December 10, 2005.
D) November 1, 2005.

Answer 11

B) January 1, 2005.

Taxes become a lien on January 1, 2005 preceding the fiscal tax year.

Question 12

Mr. and Mrs. Crest purchased a home two years ago, financing it with a long-term first trust deed and note. They encountered some financial difficulty and were unable to make their payment for two consecutive months. As a result, the beneficiary initiated foreclosure proceedings and the Crests received a copy of the notice of default that had been recorded. Their best course of action at this time is to exercise their right of
A) loan moratorium.
B) redemption.
C) reinstatement.
D) refinancing.

Answer 12

C) reinstatement.
Their right of reinstatement permits them to make up the delinquent payments plus any penalties during the three months following notification of default. Redemption refers to the right to pay the entire loan off, plus penalties, costs, and charges in order to keep the property.

Question 13

On FHA loans, mutual mortgage insurance
A) insures the mortgagee against loss through foreclosure.
B) pays off the mortgage if the mortgagor dies.
C) is paid for by the mortgagee.
D) insures mortgagees against fire.

Answer 13

A) insures the mortgagee against loss through foreclosure.
FHA mutual mortgage insurance insures the lender (mortgagee) against loss in the event a foreclosure sale fails to satisfy the debt obligation. The mortgage insurance premium (MIP) is paid by the borrower (mortgagor).

Question 14

A licensee who is guilty of “conversion” is one who is
A) misrepresenting.
B) failing to make full disclosure.
C) misappropriating the funds of clients.
D) commingling.

Answer 14

C) misappropriating the funds of clients.
Conversion is to change from one use to another as in the case of misappropriating funds entrusted to a licensee. Commingling is mixing funds of the agent with those of the client, and failure to make full disclosure can be referred to as negative fraud.

Question 15

Able died leaving no heirs but had willed Blackacre Ranch to Baker. Talbot was in possession of Blackacre under an existing lease that had two years to run. During the probate of Able’s estate, the court found the will to be invalid. Under these circumstances, title to Blackacre would
A) pass to Talbot since he is in possession.
B) pass to Baker since it was Able’s intent.
C) pass by statutory provisions by a court of proper jurisdiction.
D) pass through an action by one or more of the heirs for declaratory relief.

Answer 15

C) pass by statutory provisions by a court of proper jurisdiction.
The court would follow the law of the state because the will failed. Therefore, with no heirs claiming the property, it would escheat to the state after a five-year period.

Question 16

In appraising a property using the market data approach, how would an appraiser treat a feature value found in the comparable property but not found in the subject property?
A) Add the value of the amenity to the subject property
B) Subtract the value of the amenity from the sales price of the comparable property
C) Treat the amenity as not included in the valuation
D) Disregard the feature value as no two properties are exactly alike

Answer 16

B) Subtract the value of the amenity from the sales price of the comparable property
The appraiser would subtract the value of the amenity from the sales price of the comparable property in order to get an indication of the value of the subject property.

Question 17

A real estate salesperson who advertises a property must provide in the advertisement
A) the broker’s name.
B) the broker’s name and address.
C) both the broker’s name and address and the salesperson’s name.
D) at least the salesperson’s name.

Answer 17

D) at least the salesperson’s name.

Question 18

In the sales comparison approach, the adjusted sales price of the comparable property is
A) a direct relationship to market value.
B) indicated by agreement between the buyer and the seller.
C) an estimate of value of the comparable property with similar prominent characteristics to the subject property.
D) the only indication of the market value.

Answer 18

C) an estimate of value of the comparable property with similar prominent characteristics to the subject property.
Sales prices of “comps” are adjusted to reflect what the comparable property might have sold for had it been more nearly identical to the subject property-or had similar prominent characteristics to the subject property.

Question 19

The Subdivision Map Act provides primary responsibility for the physical aspects of the subdivision to the
A) governing bodies of cities and counties.
B) real estate commissioner.
C) State Department of Public Health.
D) state land commissioner.

Answer 19

A) governing bodies of cities and counties.
The Subdivision Map Act is primarily a statewide enabling act giving local governments authority to control the physical characteristics of subdivisions within their jurisdictions, and outlining map filing procedures on a statewide basis.

Question 20

In making a decision with regard to a proposed real estate loan for a borrower, lenders normally seeks to minimize
A) overall net yield.
B) the number of substandard loans in their portfolio.
C) loan-to-value ratio.
D) a borrower’s difficulties with regard to the results of divorce, death, or unforeseen events.

Answer 20

B) the number of substandard loans in their portfolio.
Lenders generally seek to minimize the number of substandard loans in their portfolios, thus reducing their risk of loss. A lender sometimes reduces the allowable loan-to-value ratio for a specific borrower to reduce the risk in making that loan, but the lender does not want to minimize the loan-to-value ratio.

Question 21

A salesperson unlawfully takes kickbacks in connection with licensed real estate activities. The employing broker finds out about the kickbacks, fires the salesperson, and warns others in the office not to do this. Under these circumstances
A) both the salesperson and the broker could be disciplined by the real estate commissioner.
B) only the broker could be disciplined by the real estate commissioner.
C) a court could revoke the salesperson’s real estate license.
D) only the salesperson could be disciplined by the real estate commissioner.

Answer 21

A) both the salesperson and the broker could be disciplined by the real estate commissioner.
A broker is responsible for supervision of employed salespersons. A failure to supervise salespersons which might contribute to the salesperson’s violation of laws could lead to disciplinary action against the broker as well as against the salesperson. Only the real estate commissioner can revoke a real estate license, never the court.

Question 22

All of these costs qualify for itemized deductions by the owner-occupant of a single-family residence in the appropriate tax year EXCEPT
A) the unreimbursed portion of a casualty or theft loss in excess of 10% of the adjusted gross income.
B) real property taxes.
C) interest on a deed of trust.
D) the cost of painting a bedroom.

Answer 22

D) the cost of painting a bedroom.
Real estate taxes, interest on loans, and the unreimbursed portion of casualty or theft losses are acceptable deductions on an owner-occupied residence, while the cost of painting a bedroom is not tax deductible.

Question 23

In the narrative form of appraisal report, where would the property value be stated?
A) Description of use
B) Description of the neighborhood
C) Purpose of the appraisal
D) Legal description of the property

Answer 23

C) Purpose of the appraisal
The beginning or cover letter in a narrative form of appraisal sets forth the purpose of the appraisal and the final opinion of value. Everything that follows in this most comprehensive form of appraisal is the appraiser’s data to support the appraiser’s conclusion.

Question 24

A primary source of funds for residential financing is the
A) Federal Home Loan Bank.
B) Federal Savings and Loan Association.
C) Federal Savings and Loan Insurance Corporation.
D) Federal Housing Administration.

Answer 24

B) Federal Savings and Loan Association.

Question 25

Which is a correct statement?
A) The nominal interest rate is the same as the annual percentage rate (APR).
B) The nominal interest rate is the percentage of interest that is actually paid by the borrower and the effective interest rate is the percentage of interest that is stated in the loan.
C) The effective interest rate is the percentage of interest that is actually paid by the borrower and the nominal interest rate is the percentage of interest that is stated in the loan.
D) The effective interest rate is the interest rate paid and the nominal interest rate is the minimal rate that is charged.

Answer 25

C) The effective interest rate is the percentage of interest that is actually paid by the borrower and the nominal interest rate is the percentage of interest that is stated in the loan.
The effective interest rate is the percentage of interest that is actually paid by the borrower and the nominal interest rate is the percentage of interest that is state in the loan. This statement defines correctly the effective interest rate as the percentage of interest actually paid (or received by the investor) and may reflect periodic compounding. The effective rate may also include some nonrecurring costs such as discount points and is similar to an annual percentage rate (APR) as defined by Regulation Z. The nominal rate is the percentage of interest stated in the note.

Question 26

In the valuation process, an appraiser would be LEAST concerned with the
A) identification of the property rights being appraised.
B) definition of value.
C) identification of real estate.
D) assessed value.

Answer 26

D) assessed value.

Question 27

Brown hired a broker to find a warehouse for lease. Green hired the same broker to find a lessee for a warehouse. Each agreed to pay a commission. The broker negotiated a lease between Brown and Green. Brown knew the broker was representing Green, but Green did not know the broker was representing Brown. Which statement is correct?
A) Both Brown and Green are liable for commissions.
B) Neither is liable for a commission.
C) Brown is liable for the commission.
D) Green is liable for the commission.

Answer 27

B) Neither is liable for a commission.
Since the broker has a fiduciary relationship with both Brown and Green, this failure to get consent from both parties creates an undisclosed dual agency, or divided agency, and denies the broker’s right to collect from either party.

Question 28

A joint tenancy can be created by deeds conveying undivided interests by
A) transfer from a wife deeding her separate property to herself and husband as joint tenants.
B) transfer from tenants in common deeding to themselves as joint tenants.
C) all of these.
D) transfer from joint tenants deeding their interests to themselves and others as joint tenants.

Answer 28

C) all of these.
Civil Code §683 enables joint tenancies to be created by (1) simple will or transfer, (2) transfer from sole owner to himself or herself and others, (3) transfer from tenants in common or joint tenants to themselves or to themselves and others, (4) transfer from husband and wife (holding title as community property or otherwise) to themselves or to themselves and others, and (5) transfer to executors of an estate or trust.

Question 29

Davidson has an easement on Parkins's property. If Davidson is not a property owner, her easement is a(n)
A) easement in gross.
B) restrictive easement.
C) nonpossessory encroachment.
D) appurtenant easement.

Answer 29

A) easement in gross.
Davidson has a personal right to use Parkins’s property (servient tenement). Since Davidson does not own property, and therefore there is no dominant tenement, it is an easement in gross.

Question 30

An easement may be terminated by all of these EXCEPT
A) nonuse of a prescriptive easement for five years.
B) destruction of the servient tenement.
C) written release by the owner of the dominant tenement.
D) revocation by the owner of the servient tenement.

Answer 30

D) revocation by the owner of the servient tenement.
The owner of the servient tenement cannot revoke the easement. The owner of the dominant tenement, the parcel receiving the benefit, may terminate by giving a written release of the easement. Destruction of the servient tenement, by its very nature, would terminate the easement on such a parcel. An easement gained through prescription can be lost through nonuse for five years.

Question 31

In real estate transactions, the term reversion most nearly relates to
A) title to land acquired by action of flow of water.
B) the right of a lessor under a lease.
C) the action of the state under law of escheat.
D) the right of a mortgagee in event of default.

Answer 31

B) the right of a lessor under a lease.
A reversionary interest is one in which the possession of the property returns by operation of law to the grantor or lessor. It exists when the estate conveyed is less than fee simple; for example, a life estate or leasehold estate.

Question 32

A licensee can legally do all of these things EXCEPT
A) claim an income tax deduction for a commission paid for the sale of his own property.
B) fail to use a termination date on an exclusive listing.
C) use an open listing without a final and definite termination date.
D) collect a commission or service a mortgage loan that he did not negotiate.

Answer 32

B) fail to use a termination date on an exclusive listing.

Using an exclusive listing without a definite termination date is a violation of the real estate law.

Question 33

Unless otherwise specifically stated, a grant deed presumes to convey
A) a fee simple defeasible estate.
B) a life estate.
C) an estate for years.
D) in fee simple.

Answer 33

D) in fee simple.
While a fee simple defeasible and a life estate can be transferred by a grant deed, they must be specified. An estate for years is transferred by a lease. A fee simple (absolute) is one that is not qualified, and is presumed if nothing else is specified.

Question 34

In real estate, the word tenancy means
A) a device.
B) a tenacious person.
C) a method or mode of holding title.
D) two or more people joined in an enterprise.

Answer 34

C) a method or mode of holding title.

Question 35

A developer wants to purchase land and later secure financing for improvements. What clause is most beneficial to the developer in the original trust deed used to purchase the land?
A) Exculpatory clause
B) Acceleration clause
C) Alienation clause
D) Subordination clause

Answer 35

D) Subordination clause
Since construction lenders require first priority, the previously recorded trust deed must have a clause that requires it to relinquish priority to a subsequent trust deed.