Real estate exam 2 missed questions

Question 1

Which of the following is regarded as a personal property interest:

A) All buildings erected on a parcel
B) A stand of virgin timber
C) Leasehold estates in real property
D) Rights to the unextracted minerals

Answer 1

C) Leasehold estates in real property

Leasehold estates in real property are regarded as personal property, and laws governing personal property apply. Each of the other three items listed are a real property interest.

Question 2

As used in real property law, which of the following is most nearly correct as a meaning for the word “tenancy”:

A) The landlord-tenant relationship;
B) The obstinacy of a holdover tenant;
C) The mode or method of holding title to real property by a lessee or owner;
D) None of the above

Answer 2

C) The mode or method of holding title to real property by a lessee or owner;

By definition, tenancy is the method or mode of holding title.

Question 3

The inability of a corporation to qualify as a joint tenant in the ownership of property is due to the fact that:

A) It is controlled by a board of direct-tors;
B) It can be domestic or foreign;
C) It has perpetual existence;
D) Only community property can be held in joint tenancy

Answer 3

C) It has perpetual existence;

A corporation usually does not die and, since the distinguishing characteristic of joint tenancy is the right of survivorship, it would be an unfair advantage for a corporation to hold title as a joint tenant, in almost all cases, because of its perpetual existence, the corporation would end up being the surviving person

Question 4

When a borrower has defaulted on a loan, and the lender chooses judicial foreclosure, the mortgagor is given a specified period of time to redeem the property. During this redemption period, the right of possession of the property is held by the:

A) Mortgagee;
B) Commissioner designated by the court
C) Court-appointed trustee;
D) Mortgagor

Answer 4

D) Mortgagor

During the one-year right of redemption, the defaulting borrower (the mortgagor) may remain in possession of the property.

Question 5

As used in most deeds of trust, the term default refers to:

A) Use of the property for an illegal purpose or activity
B) The refusal of the borrower to see that the property is adequately maintained;
C) Delinquent loan payments
D) Any of the above

Answer 5

D) Any of the above

The usual dead of trust allows the beneficiary to declare a default when any of the acts listed occurs.

Question 6

Under the Alquist-Priolo Special Studies Act a subdivider would be required to disclose to potentially purchasers

A) Toxic waste sits;
B) Earthquake fault lines;
C) Flood hazard zones
D) Water quality reports

Answer 6

B) Earthquake fault lines;

The Alquist-Priolo Special Studies Act requires subdivider to make certain disclosures if the property is near certain earth quake faults.

Question 7

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

A) Invalidated
B) rescinded
C) Discovered
D) Qualified

Answer 7

B) rescinded

A voidable contract is one which stands until such time as the injured party takes action to rescind it. It behooves the injured party to take action immediately upon a breach of the contract, or the court could find that the injured party has accepted the breach as a modification to the contractual terms.

Question 8

which of the following would be an illustration of the government’s police power:

A) The creation of restrictive conditions by the original subdivided;
B) eminent domain proceedings angina’s property in the path of the proposed freeway;
C Adjudication of conflicting claims between present and former owners of a parcel of real property;
D) The enactment of zoning laws limiting the use which may be made of a parcel of real property

Answer 8

D) The enactment of zoning laws limiting the use which may be made of a parcel of real property

Zoning regulations are one of the most common examples of governments police power

Question 9

Which of the following, if present in the formation of a contract, would not make a contract voidable;

A) Illegal purpose;
B) Fraud;
C) Duress;
D) Undue Influence

Answer 9

A) Illegal purpose;

An illegal purpose makes a contract void, no voidable. The other barriers to genuine assent render a contract voidable.

Question 10

Mr. Reynolds’s constructed a $500,000 income-producing building on a lot for which he paid $100,000. Mr. Reynolds’s financed the construction of the building by paying $100,000 cash and obtaining an 8% per annum interest rate loan for $400,000 secured by a first trust deed lien angina’s t the property. Under these conditions, Mr. Reynolds’s can depreciate on future income tax returns:

A) 600,000;
B) 500,000;
C) 400,000;
D) $100,000

Answer 10

B) 500,000;

An owner is only permitted to take depreciated on improvement not land

Question 11

Mr Jones, in order to comply with the regulations of the state Housing Law, should seek the issuance of a building permit from:

A) The local building department:
B) The nearest office of the Department of Housing and Community Development
C) The California Department of Real Estate
D) The California Department of Urban Renewal

Answer 11

A) The local building department:

The State Housing Law sets minimum standards; however all building permits are issue from the local building department, be it city or county.

Question 12

Broker Smith took a listing on commercial acreage and also received he right to purchase the property within 30 days. On the 28th day of the listing the broker decided to buy the property. Before buying the property, he must:

A) Dislcose any outstanding offers;
B) Give the owners any material information;
C) Obtain written consent from the owner which acknowledges any profit or anticipated profit
D) All of the above

Answer 12

D) All of the above

If an agent takes a listing and an option on the same property and wants to exercise the option, his responsibilities under the listing are greater than his responsibilities under the option since under the listing he is the agent and owes good faith and loyalty to his principal. Therefor, if he wanted to exercise the option, he would have to disclose any offers, revel any material information, and obtain the written consent of the owner before he exercises that option.

Question 13

Broker Sullivan delivered an offer to purchase real property to Owner Mercer at 11 a.m on Monday. Mercer asked for 24 hours to consider the offer. At 7pm that same day, Broker Sullivan received two additional offers from different buyers through one of the brokers salespersons. Sullivan firmly believes the owner will reject all three offers. In order to comply with the law, Sullivan must:

A) Hold the new additional offers until the owners has considered the offer handed him at 11am
B) Present the two additional offers to the owner in the same sequence in which the salesperson obtained them;
C) Simultaneously present the two additional offers to the owner as soon as the owner is available
D) Do non of the above

Answer 13

C) Simultaneously present the two additional offers to the owner as soon as the owner is available

In the situation given, the broker is an employ of the seller and has a fiduciary obligation to present all offers immediately. It is the sellers decision on which of several offers to accept. The brokers is permitted to make recommendations, but the final decision rests with the employing client .

Question 14

Broker Jones had a listing to sell seller Smith’s house. Broker Jones received an offer on the house and present it to seller Smith who hesitated in accepting the off. The broker promised Smith verbally to find Smith another suitable residence before escrow closed. On the basis of threat , the seller accepted the otter. If broker Jones failed to perform during the time period, which of the following is most nearly correct?

A) Seller Smith could initiate a civil suit and the broker would be responsible for damages;
B) Since the promise was verbal, the broker has no liability;
C) If Smith files a complaint, broker Jones may be liable for criminal negligence;
D) Seller Smith may withdraw his acceptance of the offer without liability.

Answer 14

A) Seller Smith could initiate a civil suit and the broker would be responsible for damages;

Since the seller relieve on the promise of the broker, the broker would be liable in civil court for breach of contract if he failed to perform. This is not one of the types of contracts which required to be in writing by the Statute of Fraids.

Question 15

If two parties want to create an enforceable broker-principal relationship concerning a right, title, or interest in real property, the most essential elements to do so would be:

A) A written authority for the broker to accept a deposit
B) A written offer to purchase;
C) A written employment contract;
D) An agreement concerning the commission

Answer 15

C) A written employment contract;

A written employment contract would be, of the items listed, most essential to create an enforceable contract

Question 16

Which of the following closing costs would be classified as a recurring cost:

A) Recording fees
B) Title insurance premiums;
C) Escrow fees;
D) Impound account items

Answer 16

D) Impound account items

Of the costs listed, impound account items are normally paid which the monthly payment of principal and interest, and thus “re-occur” throughout the loan. The other items normally are paid once, at the closing of the escrow.

Question 17

In order to secure an FHA loan, a new buyer would normally do all of the following, except:

A) Find a lender who will be willing to grant him the loan;
B) Apply to the nearest office of the FHA for an appraisal:
C) Agree to pay for mortgage insurance protection;
D) Buy a home which meets the FHA requirement s and restrictions

Answer 17

B) Apply to the nearest office of the FHA for an appraisal:

A buyer who wants to use FHA financing must find a lender who will grant him the loan, agree to pay for the mutual mortgage insurance, and buy a home which meets FHA requirements.

Question 18

In computing the unspecified maturity date on a construction loan, the time for repayment of the loan starts running:

A) From the date of first disbursement of funds
B) From the date of the note
C) When money is placed in escrow
D) According to the terms of the deposit receipt

Answer 18

B) From the date of the note

The date of the note determines the maturity date on the construction loan.

Question 19

Life insurance companies, not willing to deal directly with mortgagors/tussores, usually pay a loan servicing and preparation fee an make real estate mirage loans to purchase indirectly through:

A) FHA or VA;
B) Savings and loan associations;
C) Mortgage companies;
D) Any of the above

Answer 19

C) Mortgage companies;

Life insurance companies usually work through mortgage companies for the making and placing of individual home loans and pay the mortgage companies a loan preparation and servicing fee for their efforts.

Question 20

A) A grantee in a deed which is being acknowledged;
B) The mortgagee in a mortgage being acknowledged;
C) An employee of a corporation who has executed an instrument being acknowledged, if he is not personally interested;
D) The grantor in a deed being acknowledged.

Answer 20

C) An employee of a corporation who has executed an instrument being acknowledged, if he is not personally interested;

The notary public who takes the acknowledgement cannot be an interested person in the transaction. The grantee and the grantor in a deed would be interested parties, and the mortgagee in a mortgage would be an interested party.

Question 21

When a real estate licensee negotiates the sale of a mobile home in California, written notice of transfer must be provided to the Department of Housing and Community Development within:

A) 3 calendar days;
B) 5 business days
C) 10 business days;
D) 10 calendar days

Answer 21

D) 10 calendar days

The notice of transfer must be filed within 10 calendar days

Question 22

Discrimination in the sale or rental or residential housing accommodations based on sex, marital status, color, religion, race or national origination of the prospective tenant or buyer, is:

A) Unenforceable;
B) Illegal;
C) Contrary to public policy;
D) All of the above

Answer 22

D) All of the above

It should be noted that the act of discrimination is illegal; therefore, unenforceable. It should also be noted that this conduct is contrary to public policy and I subject to penalties as provided for under both state and federal laws.

Question 23

A lender who refers to a loan as “seasoned” is referring to the:

A) Quarter of the year in which the loan was made;
B) Maturity date of the loan;
C) Loan quality;
D) Record of consistent payments on the loan

Answer 23

D) Record of consistent payments on the loan

A “seasoned” loan exist when the payments on the loan have been made by the borrower when due, over a certain period of time, indicating the good faith of the borrower

Question 24

The Federal Truth-in-Lending Law (Regulation Z) gives the borrower a 3-day right of rescission when the loan is:

A) A purchase-money loan secured by a deed of trust on commercial property;
B) A loan secured by a second deed of trust on owner-occupied single-family residence when the money is borrowed subsequent to the purchase;
C) An FHA or VA loan to purchase a single-family, owner-occupied residence;
D) A conventional purchase-money loan secured by a deed of trust on residential property

Answer 24

B) A loan secured by a second deed of trust on owner-occupied single-family residence when the money is borrowed subsequent to the purchase;

A first trust deed loan used to purchase owner-occupied residential property generally does not include the 3-day right of rescission

Question 25

If a listing to sell mobile home expires and is not extended or renewed, how long does the broker have to remove all yard signs and stop all advertising of the mobile home:

A) A broker must do so immediately upon termination;
B) He has 48 hours from the termination;
C) He has one week from the termination;
D) He has 10 business days from the termination

Answer 25

B) He has 48 hours from the termination;

The broker would have 48 hours to remove the yard signs and stop all advertising

Question 26

A licensed real estate broker may legally negotiate the sale of:

A) A brand new mobile home;
B) Any registered mobile home;
C) Any mobile home that is greater than 32 feet in length;
D) Any mobile home

Answer 26

B) Any registered mobile home;

A mobile home that has been registered under the requirements of the Health and Safety Code is considered real property and may be sold by the real estate licensee.

Question 27

When Williams subdivided a 40-acres parcel of land into 65 lots in 1955, he included the following in every deed: “The ownership, use, and/or occupancy of this property is limited to persons of Caucasian race.” This deed instruction is:

A) Prohibited by local, state, and federal statutes and by rules and regulations of real estate commissioners in all states
B) Unenforceable because it violates the US Constitution
C) Valid, but only as long as Williams lives;
D) Enforceable as a privately imposed equitable servitude.

Answer 27

B) Unenforceable because it violates the US Constitution

Subdivision racial restrictions of this type have been found unenforceable as per a United States Supreme Court case, Shelly vs. Kramer, which is based on the Fourteenth Amendment to the United States Constitution. However, the Deed is still valid but the restrictions is not

Question 28

When making a loan, amortization tables are used in order to determine the:

A) Interest rate;
B) Monthly payment;
C) Term of the loan;
D) APR

Answer 28

B) Monthly payment;

When a person uses an amortization table, he refers to the correct table for the right interest rate, finds the amount of the loan and the term of the loan, and those factors will tell him what the monthly payment is.

Question 29

It is proper business practice for real property business managers to be compensated in all of the following ways except:

A) A percentage of gross receipts;
B) Commission on new leases;
C) Commission on major repair or alterations;
D) Receipt of discounts on purchases or supplies

Answer 29

D) Receipt of discounts on purchases or supplies

The Institute of Real Estate Management (IREM) recommends that property managers refrain from taking discounts or commissions arising out of purchases, contracts, or other expenditures of clients’ funds, unless such income is fully disclosed to the property owners and accepted with his permission.

Question 30

A real estate agent may legally represent all principles in the same transaction if:

A) He has informed all principles that he is the agent for each principal;
B) He has obtained consent of all to this agency relationship;
C) He is collecting commission from each principal with the knowledge of the others;
D) All of the above conditions exist

Answer 30

D) All of the above conditions exist

A real estate agent may only represent all principals in the same transaction if he has obtained their knowledge and consent. In this case, he could then collect a commission from all parties.

Question 31

Typically, when leasing real property, the commission of the leasing agent is based upon a percentage of:

A) Total annual rent collect during the first year of the lease;
B) Total cash paid by the lessee at the time of the negotiation of the lease;
C) Total rent collected over the term of the lease;
D) None of the above

Answer 31

C) Total rent collected over the term of the lease;

Usually, the commission of the leasing agent is figured on the total rent to be collected over the term of the lease. The commission can be any amount negotiated and specified in the employment contract.

Question 32

Jesse, an unlicensed employee of a real estate broker, hands out door-handler flyers and makes telephone solicitations, seeking buyers and sellers. Under the real estate law, his activities are:

A) Unlawful for the broker;
B) Commonly accepted behavior;
C) Unethical for Jesse;
D) Unlawful for both Jesse and the employing broker

Answer 32

D) Unlawful for both Jesse and the employing broker

While handing out door-hanger flyers would not require a license, telephone solicitations should require a license. Bother the broker and the salesperson have violated he real estate law.

Question 33

In making the decision of whether or not to issue a title policy, the title insurance company would be most concerned with those documents that appear within the:

A) Title guarantee;
B) Title report;
C) Chain of title
D) Title search

Answer 33

C) Chain of title

Documents would be discovered during a title search. The documents which are most significant would appear within the chain of title.

Question 34

If the trust account contains trust funds belonging to more than one beneficiary, the broker may not disburse any funds without the prior written consent of every principal who has funds in the account:

A) If such disbursal will reduce the balance of the total funds in the account to an amount less than the various owners have on deposit;
B) Except to pay a deposit to escrow;
C) Unless disbursement is for the purpose of refunding an earnest money deposit to an offer or;
D) Except when disbursement will be used to close a real estate transaction of the broker

Answer 34

A) If such disbursal will reduce the balance of the total funds in the account to an amount less than the various owners have on deposit;

The commissioner’s regulations require the broker to secure such permission

Question 35

Unpaid real property taxes constitute a lien:

A) Prior to a mortgage lien;
B) concurrent with a mortgage lien;
C) After a mortgage lien;
D) None of the above

Answer 35

A) Prior to a mortgage lien;

In California, real property taxes become a specific lien on the assess property as of March 1st, preceding the current tax (fiscal) year, tax liens take priority over all mortgage liens, regardless of date.

Question 36

The right to foreclosure a trust deed, under a trustees power of sale, outlaws:

A) In four years
B) In three years;
C) In two years:
D) Never

Answer 36

D) Never

A trust deed is not a contract but rather, a conveyance of the naked legal title with the power of sale from the truster to the trustee. Therefore, the trustee retains the right to sell the property under the trustee at any time for the benefit of the beneficiary. The conveyance has been performed and, thus is not under the statute of limitations; therefore, it never “outlaws”.

Question 37

A title company could make a title search bye searching records of the:

A) County clerk’s office;
B) County recorder’s office;
C) Federal land office;
D) All of the above

Answer 37

D) All of the above

All three offices could be searched by a title company when making a title search

Question 38

When imposing restriction on a new large subdivision, the procedure normally used is:

A) To publish them in a newspaper of general circulation at least 30 days prior to the first sale;
B) To include them in the final public report issues by the Real Estate Commissioner;
C) To include them as a covenant in the deed to each individual parcel;
D) To record them with the county recorder with adequate reference made thereto in the deed to each parcel.

Answer 38

D) To record them with the county recorder with adequate reference made thereto in the deed to each parcel.

The imposition of private restrictions on a new subdivision is normally achieved by recording them once, and then referring to the recorded restriction in each deed to an individual parcel.

Question 39

The gross rent multiplier is arrived at by dividing;

A) Gross monthly rental by market value
B) Gross monthly rental by selling price
C) Sales price by gross monthly rental
D) Value arrived by gross monthly rental

Answer 39

C) Sales price by gross monthly rental

To determine the gross rent multiplier, the sales price is divided by the gross monthly rental

Question 40

Smith executes a deed to Brown and records it. Later, Smith seeks to set the conveyance aside, claiming that there had been no delivery to Brown. Why will he probably be unsuccessful in his effort:

A) Brown has come into possession of the property;
B) Delivery is presumed with recording;
C) The recording validates the deed;
D) Recording establishes the priority of lien

Answer 40

B) Delivery is presumed with recording;

Recording a deed presumes that it has been delivers and accepted voluntarily. Smith would need to prove in court that the

Question 41

A broker’s unlicensed assistant prepares a newspaper ad. According to the Business and Professions Code, which of the following is most correct:

A) All content for the ad must originate from or be written by the broker;
B) The broker is required to read the entire advertisement prior to publication;
C) The broker must review the advertisement and approve it in writing prior to publication;
D) The broker’s responsibility is to ensure that the assistant is provided with accurate information

Answer 41

B) The broker is required to read the entire advertisement prior to publication;

The brokers is required to read the entire advertisement prior to publication. The broker must approve the ad, but that approval need not be in writing.

Question 42

Cassidy purchased one of 30 lots in a subdivision and signed a sales contract which stated, “No purchaser of a lot in this subdivision shall erect a ‘for sale’ sign on his lot until all the lots owned by a subdivided at sold.” If Cassidy wants to sell his lot before the subdivider has sold all of his lots, he may:

A) Not erect a ‘for sale’ sign because of the statement in the sales contract;
B) Erect a ‘for sale’ sign of reasonable dimensions because the statement in the sales contract is declared by law to be void;
C) Erect a ‘for sale’ sign of any dimension to get the best results because the statement in the sales contract is a restraint of trade;
D) Not erect a ‘for sale’ sign without being held liable by the seller

Answer 42

B) Erect a ‘for sale’ sign of reasonable dimensions because the statement in the sales contract is declared by law to be void;

The courts have held that prohibiting the use of a ‘for sale’ sign infringes upon the power of alienation which the owner of a property has; therefore, they have declared such an agreement void by law. However, the courts have further held that the ‘for sale’ sign must be of reasonable dimensions, which would vary with the courts and the size of the property.

Question 43

When acquiring an easement, which of the following methods would create an easement that could be most easily terminated for nonuse:

A) Express reservation in a deed;
B) A quitclaim deed from a valid owner;
C) Prescription;
D) Implication;

Answer 43

C) Prescription;

An easement acquired by prescription may be terminated if not used for a continuous period of five years. The other methods of creating an easement do not offer that opportunity.

Question 44

An acquired legal privilege for the right of use or enjoyment, shore of an estate, which one may be in the land of another is known as:

A) An easement:
B) A lease:
C) A devise;
D) A riparian right

Answer 44

A) An easement:

**An easement is not an estate, but is a non-possessory interest one has to use land belonging to another,

where as a lease (leasehold) is a personal interest in real property known as a less-than-freehold estate (chattel real).

A devise is the transfer of real property under a will.

Riparian rights are natural water rights which pass automatically with the land.

Question 45

Which of the following is the purpose of the Federal Truth-in-Lending Act:

A) To limit interest rates;
B) To regular fees charged by lenders
C) To provided consumers information concerning the cost of credit:
D) All of the above.

Answer 45

C) To provided consumers information concerning the cost of credit:

The purpose of the Federal Truthin-in-Lending Act is to assure consumers that they are prodded information on cost of credit.

Question 46

Which of the following statements, if any, is correct concerning the relationship between an effective interest rate and a nominal interest rate:

A) The effective rate is the rate the buyer will pay; the nominal rate is the rate named in the loan application;
B) The effective interest rate is always lower because the nominal interest rate includes charges other than interest;
C) The effective interest rate is the rate actually paid by the borrower for the use of the money; the nominal interest rate is the rate specified in the note;
D) None of the above is correct

Answer 46

C) The effective interest rate is the rate actually paid by the borrower for the use of the money; the nominal interest rate is the rate specified in the note;

The nominal interest rate is the rate stated in the note; the effective interest rate is the rate actually paid, and usually is higher , because it includes points, etc.

Question 47

Which of the following would be least necessary for a valid deed:

A) Acknowledgment;
B) Delivery;
C) Property description of the property;
D) A grantee who is sufficiently identified, though not named in the deed

Answer 47

A) Acknowledgment;

A deed does not need to be acknowledged in order to be valid. However, it does have to be acknowledged in order to be recorded. A deed must contain a proper description of the property and identify a grantee sufficiently (i.e., “to my oldest granddaughter”) but it is not necessary to specify the grantee’s name. In order to be effective, the deed must be delivered.

Question 48

Governmental land use, planning, and zoning are important examples of:

A) Eminent domain;
B) Police power;
C) Deed restrictions;
D) All of the above

Answer 48

B) Police power;

Governmental bodies may control the used of private property in an effort to provided for the health, safety, morals, and the common welfare of the community. Such authority is police power, which is the broadest power of the government to regulate and control private property.

Question 49

In appraising real property by the market data approach, the appraiser often takes into account certain non-property characteristics of the two properties. All of the following would be considered a non-property characteristic, except:

A) A “distress” sale;
B) The location and size of the parcel;
C) The economic viability of the neighborhood;
D) The presence of seller financing

Answer 49

B) The location and size of the parcel;

The size and location of the parcel are features of the property itself; the other items are features of the transaction, not of the property.

Question 50

A trust deed note take by a sate savings and loan association on a single family owner-occupied residence could be prepared without penalty:

A) If the loan is more than 7 years old:
B) If the lender excises the due on sale provision and signs a waiver of right to repay;
C) If the loan is assumed by a buyer of the house;
D) Any time whether there is a written prepayment charge or not

Answer 50

A) If the loan is more than 7 years old;

Concerning prepayment penalties on a single-family owner-occupied residence, one part of the civil code says they are not allowed after 5 year and another part of the civil code says they are not allowed after 7 years.

Question 51

Which of the following is the name of sheet metal which is used to protect a building from water seepage?

A) Sheeting
B) Gutter
C) Flashing
D) None of the above

Answer 51

C) Flashing

Flashing is sheet metal which is often placed on the roof of a house to prevent water seepage from getting into the building

Question 52

When an air conditioning unit has a higher energy efficiency ration (EER), it means that:

A) The unit is less efficient;
B) The unit is more efficient;
C) The unit needs more watts of electricity;
D) The BTUs are larger

Answer 52

B) The unit is more efficient;

The energy efficiency ratio (EER) applies to appliances and air conditioning units. The higher the ratio, the more efficient the unit is.

Question 53

If a roof slopes on all four sides it is called a: .

A) Gable roof;
B) Gabriel roof;
C) Hip roof;
D) none of the above

Answer 53

C) Hip roof;

A hip roof is a roof that slopes on all four sides.

Question 54

Functional obsolescence might be attributed to each of the following except:

A) No air conditioning in a commercial building in a warm climate;
B) The proximity or obnoxious nuisances;
C) Outmoded or outlandish design;
D) Improvements which have lost their usefulness

Answer 54

B) The proximity or obnoxious nuisances

Functional obsolescent is loss of value due to style, design, or floor plan; nearby nuisances would be social obsolescence, not functional obsolescence.

Question 55

In income-producing property valued by the capitalization approach, it the property taxes increase and all else remains equal, the property value will:

A) Increase more than the amount of the annual tax increase;
B) Decrease more than the amount of the annual tax increase;
C) Decrease an amount equal to the amount of the annual tax increase;
D) Increase an amount equal to the amount of the annual tax increase

Answer 55

B) Decrease more than the amount of the annual tax increase;

Inasmuch as the property taxes increased, that means the expenses increased, and therefore, if the same capitalization rate is the used, the value would decrease. The value will decrease more than the amount of the annual taxes because of the capitalization rate being a multiplying factor.

For instance, if the annual taxes increased $100 and thus the expenses increase $100 and the investor used a 10% capitalization rate the value of the property would decrease $1,000.

Question 56

According to a certain contract, the buyer will be taking the property subject to existing loan. “Subject to” most nearly means:

A) Both buyer and seller will be liable on the loan;
B) The seller has no liability for the loan;
C) Only the buyer will be liable for the loan;
D) The buyer will not be personally liable for the loan

Answer 56

D) The buyer will not be personally liable for the loan

If a buyer takes a property subject to an existing loan, the buyer is not personally liable for the payment of that loan. This means that if it went into default and the the property was sold for less than the balance, the lender could not get a deficiency judgment against the buyer of the property.

Question 57

An appraiser who does not use generally accepted appraisal methods in order to influence and FSLIC or FDIC insured lender may be guilty of

A) Acting unethically
B) Breaking the Rules and Regulations of Department of Real Estate
C) A misdemeanor
D) A felony

Answer 57

D) A felony

An appraiser doing so is committing fraud agains the United States and is guilty of fraud. This s a felony punishable by a fine of up to $5,000.

Question 58

When an appraiser relies on the principle of substitution, he assumes that one property may be substituted for another in terms of

A) income
B) use
C) structural design
D) any of the above

Answer 58

D) any of the above

Statement of fact

Question 59

The effectiveness of the market data approach of appraising would be limited most by which of the following?

A) The financing terms of comparable property
B) Types of property that are regularly sold
C) Economic conditions that rapidly change;
D) Differences in the comparable property

Answer 59

C) Economic conditions that rapidly change;

If economic conditions are rapidly changing, it is difficult to make the adjustments to the price of the comparable property.

Question 60

How many lots, each measuring 50 feet wide by 100 feet deep, could be created form an acre of land of the suitable dimensions:

A) 4
B) 5
C) 6
D) 8

Answer 60

D) 8

An acre of land contains 43,560 square feet; each of the lots would contain 5,000 square feet ( 50 x 100), 43,560 divided by 5,000 = 8.71 lots

Question 61

Parker has fee simple title to a rectangular lot on a commercial street. It contains 16,500 square feet and is 150 feet deep. Parker wasn’t to build a store building but needs more space. There are 2 lots available for purchase of identical size and shape to each other, one on each side of his lot. Each of these lots measures 150 feet in depth and contains 1,950 square feet. If Parker acquires both of these lots and combines them with this original lot, his total frontage will be:

A) Cannot be calculated from the information given
B) 176
C) 159
D) 143

Answer 61

D) 143

Because frontage can be calculated, “A” answer is eliminated.
Therefore answer “D” is closest to the precise answer (136’ total frontage).
(1) 16,500 sq. Ft. In Parker’s lot divided by 150 ft. Depth = 110 ft. Frontage
(2) 1,950 sq. Ft. In left lot divided by 150 ft depth = 13 ft. Frontage
(3) 1,950 sq. Ft. In right lot divided by 150 ft depth = 13 ft. Frontage
(4) 110 frontage on Parker’s lot + 13’ frontage on left lot + 13’
frontage of right lot = 136’ total frontage

Question 62

Of the following, which would have priority (would be a superior lien):

A) A first deed of trust;
B) A homestead;
C) A 1911 street Improvement assessment lien (bond);
D) Whichever of the above was recorded first

Answer 62

C) A 1911 street Improvement assessment lien (bond);

During the one-year right of redemption, the defaulting borrower (the mortgagor) may remain in possession of the property

Question 63

Title to real property can be acquired by an individual by all of the following methods, except:

A) Patent;
B) Prescription;
C) Succession;
D) Escheat

Answer 63

D) Escheat

When a person dies without a will and with no heirs, ultimately the property passes to the state. An individual cannot acquire property by escheat.

Escheat - a legal process that transfers ownership of abandoned property to the state.

Prescription - Acquiring an interest in property (usually by an easement) by using it openly and without owner’s permission
Patent (Land patent) : Patented lands may be lands that had been granted a sovereign authority in return for services rendered or accompanying a title or they my be lands privately purchased by a a government, individual or legal entity.