Real property

Question 1

2. A recorded subdivision plat is used in the
   a. lot and block system.
   b. geodetic survey system.
   c. rectangular survey system.
   d. metes and bounds system.

Answer 1

2. a. The answer is lot and block system. A recorded subdivision plat, which becomes part of the legal description, is used in the lot and block system.

Question 2

15. A buyer took delivery of the deed to his new house but did not record the deed or take possession of the property. Under these circumstances, the
    a. buyer’s interest is not fully protected against third parties.
    b. transfer of the property from the seller is ineffective.
    c. deed is invalid after 90 days.
    d. deed is invalid after six months.

Answer 2

15. a. The answer is buyer’s interest is not fully protected against third parties. Constructive notice to the public of interest in a parcel of real estate is served when the deed is recorded and physical possession of the property is taken. Without this, an owner’s interests could be jeopardized

Question 3

19. What document protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exceptions?
    a. Abstract of title
    b. Title insurance policy
    c. Certificate of title
    d. Chain of title

Answer 3

19. b. The answer is title insurance policy. A title insurance policy is a contract under which the policyholder is protected from losses arising from defects in the title. An abstract of title is a historical summary report of what the title search found in the public record. A certificate of title is based upon a title search and certifies the condition of the title on the date the certificate is issued. A chain of title is the record of a property’s ownership. Although a certificate of title is used as evidence of ownership, it is not perfect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.

Question 4

21. A person owned a parcel of land. Subsequent to the owner’s death, the probate court determined the distribution of the land in accordance with the state’s statutes. This process is called
    a. escheat.
    b. condemnation.
    c. adverse possession.
    d. probate.

Answer 4

21. d. The answer is probate. Probate is a formal judicious process whose purpose is to see that the assets are distributed correctly. Probate courts distribute assets according to statute only when no other reasonable alternative, such as a valid will, exists.

Question 5

50. Under the Torrens system,
    a. title passes when the grantee’s application for registration has been approved and the real estate has been registered.
    b. the Torrens official performs exactly the same functions as the recorder of deeds.
    c. the original deed is mailed to the buyer after it has been registered.
    d. the registration of a title can be canceled by the owner at any time.

Answer 5

50. a. The answer is title passes when the grantee’s application for registration has been approved and the real estate has been registered. Under the Torrens system, the applicant needs to prove ownership. Then the court enters an order to register the real estate, and the registrar of titles issues a certificate of title. A person acquires title only when it is registered.

Question 6

52. How many acres are contained in a parcel with the following legal description: the NW¼ of the SE¼ and the S½ of the SW¼ of the NE¼ of Section 4?
    a. 50 acres
    b. 60 acres
    c. 40 acres
    d. 80 acres

Answer 6

52. b. The answer is 60 acres. To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply denominators for the first part: 4 × 4 = 16; 640 acres ÷ 16 = 40 acres; multiply denominators for the second part 2 × 4 × 4 = 32; 640 ÷ 32 = 20 acres; then add 40 acres + 20 acres = 60 acres.

Question 7

53. Title insurance would cover all of the following hidden defects discovered after closing and not listed on the title commitment EXCEPT
    a. an incorrect legal description.
    b. a wrong name on a recorded deed.
    c. a claim to ownership by the spouse of a former owner.
    d. a recorded mortgage satisfaction document.

Answer 7

53. d. The answer is a recorded mortgage satisfaction document. A recorded mortgage satisfaction document is a public notice, not a hidden defect. Title problems occur when there is a hidden mistake in a prior deed, will, mortgage, or other document that may give someone else a valid legal claim against a property. An incorrect legal description, wrong name on a recorded deed, or a claim to ownership by the spouse of a former owner could be hidden defects in title to a property.

Question 8

64. The MOST common method of describing real estate in Alabama is a combination of
    a. metes and bounds and government survey.
    b. metes and bounds, lot and block, recorded plat maps, and rectangular survey.
    c. lot and block and government survey.
    d. rectangular survey and government survey.

Answer 8

64. b. The answer is metes and bounds, lot and block, recorded plat maps, and rectangular survey. Rectangular survey, metes and bounds, and recorded plat maps are commonly used to describe property in Alabama. Once subdivisions have been approved, then lot and block descriptions are most often used.

Question 9

71. How many acres are in the property described as follows: the NW¼ of the SW¼ of the NE¼ of Section 16?
    a. 5+
    b. 20
    c. 10
    d. 40

Answer 9

71. c. The answer is 10. Multiply denominators: 4 × 4 × 4 = 64; 640 acres (one section) ÷ 64 = 10 acres.

Question 10

74. A custom home containing 4,320 square feet was recently constructed on a $145,000 lot. Construction costs were $80.25 per square foot, and other fees and costs totaled $12,785. What was the total cost of the property?
    a. $504,465
    b. $145,000
    c. $346,680
    d. $359,465

Answer 10

74. a. The answer is $504,465. 4,320 square feet × $80.25 per square foot = $346,680 cost per square foot; $346,680 + $145,000 cost of lot + $12,785 other fees and costs = $504,465 total cost of property.

Question 11

85. Grantee is to a deed as devisee is to a
    a. trust.
    b. estate.
    c. leasehold.
    d. will.

Answer 11

85. d. The answer is will. A grantee is the person to whom the property is conveyed. A person who receives property by will is a devisee.

Question 12

86. The clause in the deed that conveys the rights and privileges of ownership is called the
    a. habendum clause.
    b. granting clause.
    c. appurtenance clause.
    d. acknowledgment.

Answer 12

86. b. The answer is granting clause. The granting clause states the grantor’s intention to convey the property. The habendum clause defines the ownership.

Question 13

87. The type of title insurance that will protect the owner and heirs is called
    a. a lender’s policy.
    b. a leasehold policy.
    c. an owner’s policy.
    d. a certificate of sale policy.

Answer 13

87. c. The answer is an owner’s policy. An owner’s policy is issued for the benefit of owners and their heirs, unlike the lender’s policy, which is issued for the mortgage company.

Question 14

94. What is the depth of a lot that contains 9/10 of an acre and has a front that measures 150’?
    a. 216.36’
    b. 322.67’
    c. 261.36’
    d. 323.67’

Answer 14

94. c. The answer is 261.36. 9 ÷ 10 = 90% 43,560 × 90% = 39,204 39,204 ÷ 150 = 261.36

Question 15

98. The seller conveyed a quitclaim deed to the buyer. Upon receipt of the deed, the buyer may be certain that
    a. the seller owned the property.
    b. there are no encumbrances against the property.
    c. the buyer now owns the property subject to certain claims of the seller.
    d. all of the seller’s interest in the property, if any, belongs to the buyer.

Answer 15

98. d. The answer is all of the seller’s interest in the property, if any, belongs to the buyer. The quitclaim deed offers no covenants or warranties, only that the grantor “remises, releases, and quitclaims” interest in the property, if any.

Question 16

116. A woman conveys a life estate to her grandson and stipulates that upon her death the estate will pass to her son-in-law. The son-in-law has
     a. a reversionary interest.
     b. an estate for years.
     c. a remainder interest.
     d. a legal life estate.

Answer 16

116. c. The answer is a remainder interest. When a life estate ends, it is replaced by a fee simple estate. The future interest the woman’s son-in-law has in the fee simple estate that will convey to him when the life estate ends is called a remainder interest.

Question 17

118. “Beginning at the SE corner of the NE¼ of the section, then due west 5,280 feet more or less to the SW corner of the NW¼, then north along the west line of the section 2,640 feet, more or less, to the NW corner of said NW¼, then in a straight line to the point of beginning.” How many acres does this parcel contain?
     a. 80
     b. 240
     c. 320
     d. 160

Answer 17

118. d. The answer is 160. This parcel of land has only three sides, so the formula for finding the area of a triangle (A = ½BH) is used: ½(5,280 ft × 2,640 ft) = ½(13,939,200 sq ft) = 6,969,600 sq ft and 6,969,600 sq ft ÷ 43,560 sq ft in an acre = 160 acres.

Question 18

119. An owner divides a parcel into several lots, one of which is completely surrounded by other lots and has no street access. Which of the following is TRUE?
     a. The municipality must construct a street to create access.
     b. The owner must create an easement by condemnation to provide access.
     d. An easement by prescription should be granted.
     d. An easement by necessity should be created for the landlocked parcel.

Answer 18

119. d. The answer is an easement by necessity should be created for the landlocked parcel. An easement by necessity is created by court order based on the principle that owners have the right to enter and exit their land.

Question 19

137. Which approach to estimating value would be most useful to an appraiser asked to estimate the value of an existing strip shopping center?
     a. Income approach
     b. Sales comparison approach
     c. Cost approach
     d. Gross rent multiplier method

Answer 19

137. a. The answer is income approach. The income approach will have the most weight in the analysis of income-producing property. The sales comparison approach will have the most weight in the analysis of single-family residential property. The cost approach may be used as one approach to appraising income property, but the income approach will be given the most weight by the appraiser. The gross rent multiplier method is used in the income approach but to determine value of residential income property.

Question 20

3. The uniqueness of land and its inability to be substituted is called
   a. scarcity.
   b. nonhomogenity.
   c. permanence of investment.
   d. nonheterogenity.

Answer 20

3. b. The answer is nonhomogenity. Nonhomogenity is another term for uniqueness because two parcels of land are never exactly alike.

Question 21

4. Which of the following techniques would an appraiser use in the cost approach to value?
   a. Owner’s original cost of the building
   b. Sales prices of similar buildings in the area
   c. Assessed value of the building
   d. Estimated replacement cost of the building

Answer 21

4. d. The answer is estimated replacement cost of the building. The cost approach is used to estimate the replacement or reproduction cost of the building. Estimated replacement or reproduction cost less accrued depreciation plus estimated land value equals the estimated value by the cost approach. The owner’s original purchase cost is not used in any approach to value since the process is determining current value. The sales of similar buildings is used in the sales comparison approach. Assessed value is used only by taxing authorities, never in determining market value.

Question 22

10. In which of the following situations could a quitclaim deed NOT be used?
    a. To convey title
    b. To release a nominal real estate interest
    c. To warrant that a title is valid
    d. To remove a cloud on title

Answer 22

10. c. The answer is to warrant that a title is valid. The quitclaim deed carries no covenants or warranties. It is used to convey less than a fee simple estate or to cure a cloud on the title.

Question 23

19. What is the term for a deed that contains no express warranties?
    a. A bargain and sale deed
    b. A quitclaim deed
    c. A warranty deed
    d. A deed of trust

Answer 23

19. b. The answer is a quitclaim deed. A quitclaim deed provides the grantee with the least protection of any deed, as it carries no covenants or warranties. The bargain and sale deed contains no express warranties against encumbrances but does imply that the grantor holds title and possession. A warranty deed fully warrants good clear title to a property. A deed of trust is used to create a lien for a loan.

Question 24

22. According to a broker’s comparative market analysis (CMA), a property is worth $225,000. The homeowner bought the property for $190,000 and added $50,000 in improvements, for a total of $240,000. The property sold for $222,500. Which amount represents the property’s market value?
    a. $225,000
    b. $190,000
    c. $222,500
    d. $240,000

Answer 24

22. a. The answer is $225,000. A CMA provides an estimate of market value based on an analysis of comparable sales. Market price is the amount for which a property actually sells.

Question 25

26. An appraiser using the income approach to estimate the value of a property uses which of the following applications?
    a. Capitalization
    b. Depreciation
    c. Appreciation
    d. Equalization

Answer 25

26. a. The answer is capitalization. Capitalization is a method of estimating today the future value of an income stream. Depreciation is the loss of value for any reason. Appreciation is an increase of value. Equalization is used by tax assessors and is a process of adjusting the assessed rate in a taxing district to achieve more conformity with other tax districts.

Question 26

27. A farmer owns the W½ of the NW¼ of the NW¼ of a section. The adjoining property can be purchased for $2,300 per acre. Owning all of the NW¼ of the section would cost the farmer
    a. $600,000.
    b. $322,000.
    c. $120,000.
    d. $480,000.

Answer 26

27. b. The answer is $322,000. If a person wishes to own the entire quarter (160 acres) of a 640-acre section in which that person already owns 20 acres (½ × ¼ × ¼ = 1/32 and 640 × 1/32 = 20), then the portion of the section still to be acquired is 140 acres (160 acres – 20 = 140). At a cost per acre of $2,300, the adjoining property will cost $322,000 (140 × $2,300 = $322,000).

Question 27

28. In a situation where a homeowner conveys property to her uncle with a deed, and then the uncle records the dead, when did title to the property actually transfer or pass to the uncle?
    a. Upon delivery and acceptance of the contract
    b. Upon recording of the deed
    c. Upon delivery and acceptance of the deed
    d. Upon the delivery of consideration

Answer 27

28. c. The answer is upon delivery and acceptance of the deed. Title is transferred upon delivery and acceptance of the deed. At that moment, the deed is binding between the parties. When the uncle later records the deed, he is then protected against claims of third parties. Contracts do not transfer title. A valid deed must contain a clause acknowledging that the grantor has received consideration, but the consideration in itself does not transfer the title to the property.

Question 28

36. Which of the following is the BEST way to ensure that there are no encroachments and verify the boundaries of a parcel of land?
    a. Get a spot survey
    b. Write a legal description
    c. Find the monuments
    d. Verify the benchmarks

Answer 28

36. a. The answer is get a spot survey. A spot survey shows the location of all improvements on a property and whether they extend over the property lines.

Question 29

43. How many acres are in a property that is measured with the following legal description: the S½ of the SE¼ of the NW¼ of the NE¼ of Section 7?
    a. 2.5 acres
    b. 10 acres
    c. 20 acres
    d. 5 acres

Answer 29

43. d. The answer is 5 acres. To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply all denominators: 2 × 4 × 4 × 4 = 128, then divide 640 by 128: 640 (acres in a section) ÷ 128 = 5 acres.

Question 30

66. Which of the following parcels of land is the smallest?
    a. Two sections
    b. Two square miles
    c. 1,280 acres
    d. 5% of a township

Answer 30

66. d. The answer is 5% of a township. 5% of a township is 1,152 acres. A township is 36 sections of 640 acres each, so the total acreage in a township is 36 × 640 or 23,040 acres, and 23,040 acres × 0.05 = 1,152 acres. Two sections (two square miles) are 1,280 acres (640 × 2 = 1,280).

Question 31

68. The primary survey line running north and south in any area described by the rectangular survey system is its
    a. township line.
    b. base line.
    c. range line.
    d. principal meridian.

Answer 31

68. d. The answer is principal meridian. The principal meridians run north and south in a rectangular survey system, and the base lines run east and west.

Question 32

73. Which statement is TRUE regarding a special warranty deed?
    a. The grantor is making additional warranties beyond those given in a warranty deed.
    b. The grantor retains an interest in the ownership.
    c. The grantor is warranting that no encumbrances exist against the property.
    d. The grantor’s warranties are limited to the time the grantor owned the property.

Answer 32

73. d. The answer is the grantor’s warranties are limited to the time the grantor owned the property. A special warranty deed contains two basic warranties: that the grantor received title and that the property was not encumbered during the time the grantor held title, except as noted in the deed.

Question 33

74. The term improvements, when referring to real estate, includes
    a. shrubbery.
    b. trees.
    c. lawns.
    d. sidewalks.

Answer 33

74. d. The answer is sidewalks. An improvement is an artificial thing attached to the land. A sidewalk is a man-made addition.

Question 34

75. What is the size of a lot that is 1/4 of a mile wide by 1/4 of a mile long?
    a. 120 acres
    b. 10 acres
    c. 80 acres
    d. 40 acres

Answer 34

75. d. The answer is 40 acres. 1,320 ft (1/4 (0.25) of 5,280 ft {one mile}) x 1,320 ft = 1,742,400 sq. ft. ÷ 43,560 (sq. ft. in an acre) = 40 acres

Question 35

84. Which of the following terms identifies the physical characteristic of real estate that means every parcel of land is different?
    a. Immobility
    b. Indestructibility
    c. Uniqueness
    d. Scarcity

Answer 35

84. c. The answer is uniqueness. Uniqueness is the concept that no two parcels of property are exactly the same or in the same location. An individual parcel has no substitute because each is unique. Immobility means that the geographic location of a parcel of land can never be changed. Indestructibility means that land is durable and cannot be destroyed. Scarcity is an economic characteristic of land, meaning that when the supply of land is limited the price of the land increases.

Question 36

99. The type of deed in which the granting clause states “grant, bargain, and sell” is a
    a. special warranty deed.
    b. general warranty deed.
    c. reconveyance deed.
    d. bargain and sale deed.

Answer 36

99. d. The answer is bargain and sale deed. A bargain and sale deed contains no express warranties but implies that the grantor holds title and possession. The granting clause usually contains the phrase “grant, bargain, and sell.”

Question 37

100. When grantors do NOT wish to convey certain property rights, they
     a. must note the exceptions in a separate document.
     b. may not do so because the deed conveys the entire premises.
     c. may note the exceptions in the deed of conveyance.
     d. must convey the entire premises and have the grantee reconvey the rights to be retained by the grantor.

Answer 37

100. c. The answer is may note the exceptions in the deed of conveyance. If the grantors convey less than their complete interest, the wording in the granting clause must indicate this limitation. Mineral rights, water rights, and easements are frequently retained by grantors.

Question 38

102. Which of the following statements about the covenant of quiet enjoyment is TRUE?
     a. The grantor ensures that the title will be good against the title claims of third parties.
     b. The grantor guarantees that if the title fails in the future, he or she will compensate the grantee.
     c. The grantor warrants that he or she is the owner and has the right to convey title to the property.
     d. The grantor promises to obtain and deliver any instrument needed to make the title good.

Answer 38

102. a. The answer is the grantor ensures that the title will be good against the title claims of third parties. Quiet enjoyment means freedom from any claims to the title by third parties, persons other than grantor and grantee. The other guarantees and promises are warranted through the covenants of warranty forever, seisin, and further assurance. A general warranty deed provides all of these covenants.

Question 39

104. The type of deed in which the granting clause states “remise, release, alienate, and convey” is a
     a. bargain and sale deed.
     b. quitclaim deed.
     c. special warranty deed.
     d. sheriff’s deed.

Answer 39

104. c. The answer is special warranty deed. In a special warranty deed, the grantors defend the title against themselves. The words usually contained in the granting clause are “remise, release, alienate, and convey.”

Question 40

106. A man has defaulted in the payment of several of his debts, and the court has ordered his property sold to satisfy his obligations. A title search revealed several outstanding liens against the property to be sold. Which of the following liens has highest priority?
     a. Outstanding first mortgage lien dated and recorded one year ago
     b. Real estate tax lien for the current year
     c. Judgment lien rendered and recorded last month
     d. Mechanic’s lien for work started two months before the mortgage was recorded

Answer 40

106. b. The answer is real estate tax lien for the current year. Tax liens usually have priority over previously recorded liens.

Question 41

112. The date and time a document was recorded in the public records helps to establish which of the following?
     a. Abstract of title
     b. Alienation clause
     c. Marketable title
     d. Priority of mortgages and liens

Answer 41

112. d. The answer is priority of mortgages and liens. The priority of mortgages and other liens normally is determined by the order in which they were recorded. Time of recordation is an important consideration in establishing the priority of claims in the event of a sale. An abstract of title is a document prepared to report the results of a title search. An alienation clause is used in a mortgage or deed of trust to allow the full amount due to be called if the buyer is in default. Marketable title is established with an abstract or title commitment.

Question 42

117. A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exceptions, is called
     a. a chain of title.
     b. an abstract of title.
     c. a certificate of title.
     d. a title insurance policy.

Answer 42

117. d. The answer is a title insurance policy. Although a certificate of title is used as evidence of ownership, it is not perfect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.

Question 43

118. Which of the following is a lien on real estate?
     a. Easement
     b. Recorded mortgage
     c. Encroachment
     d. Restrictive covenant

Answer 43

118. b. The answer is recorded mortgage. A recorded mortgage is a lien on real estate. Easements, encroachments, and restrictive covenants are all encumbrances, not liens.

Question 44

125. Which of the following is defined as the historical records of all owners and encumbrances of a specific parcel of real estate?
     a. Title search
     b. Chain of title
     c. Title commitment
     d. Abstract of title

Answer 44

125. b. The answer is chain of title. A chain of title is the historical record of a property’s ownership and encumbrances. Each owner is linked to the next so that a chain is formed. A title search is the process of examining the chain of title for defects or errors. A title commitment lists current encumbrances and any defects found in the title upon completing the search. An abstract of title is a historical summary report of what the title search found in the public record; only when coupled with a title opinion can the buyer know if there are title issues.

Question 45

126. What is the length of a rectangular lot that is 275 feet deep and contains 1\3 of an acre?
     a. 105.6’
     b. 106.5’
     c. 290.04’
     d. 158.4’

Answer 45

126. a. The answer is 105.6’. 43,560 ÷ 3 = 14,520 × 2 = 29,040 sq. ft. 29,040 ÷ 275’ = 105.60 ft OR 2 ÷ 3 = 0.6667 43,560 × 0.6667 = 29,041.45 sq. ft. 29,041.45 ÷ 275’ = 105.6052 ft

Question 46

128. A man owned two acres of land. He sold one acre to a neighbor and reserved for himself an appurtenant easement over his neighbor’s land for ingress and egress. The man’s land
     a. is the servient tenement.
     b. is the dominant tenement.
     c. can be cleared of the easement when the man sells the withheld acre to a third party.
     d. is subject to an easement in gross.

Answer 46

128. b. The answer is is the dominant tenement. The man’s parcel benefits from the easement and is the dominant tenement. The neighbor’s tract, over which the easement runs, is the servient tenement.

Question 47

136. A property owner contracted to have a swimming pool installed on her property. When the pool was completed, she refused to pay for the improvement, and the contractor filed a lien for nonpayment. This lien was MOST likely a
     a. general lien.
     b. special lien.
     c. voluntary lien.
     d. specific lien.

Answer 47

136. d. The answer is specific lien. The lien filed by the contractor would be a mechanic’s lien and would be a specific, involuntary lien on the property.

Question 48

139. A section
     a. contains 460 acres.
     b. has a perimeter of 5,280 square feet.
     c. can be any number from 1 to 50.
     d. is one square mile.

Answer 48

139. d. The answer is is one square mile. Each township contains 36 sections, and each section is one square mile. Each side of a section is one mile long (5,280 feet), making the perimeter 5,280 ft × 4 sides, or 21,120 feet.

Question 49

140. A standard rectangular survey system section contains
     a. 36 townships.
     b. 640 acres.
     c. 160 government lots.
     d. 160 acres.

Answer 49

140. b. The answer is 640 acres. Each township contains 36 sections, and each section is one square mile, or 640 acres.

Question 50

19. What is the difference between a general lien and a specific lien?
    a. A general lien cannot be enforced in court, while a specific lien can be enforced.
    b. A general lien affects all of a debtor’s property, while a specific lien affects only a certain piece of property.
    c. A specific lien is held by one person, while a general lien is held by at least two persons.
    d. A specific lien covers real estate, while a general lien covers personal property.

Answer 50

19. b. The answer is a general lien affects all of a debtor’s property, while a specific lien affects only a certain piece of property. A general lien affects all of a debtor’s property, both real and personal. A specific lien affects only a particular property.

Question 51

28. Capitalization uses annual net operating income in order to
    a. estimate present value.
    b. determine replacement cost.
    c. establish depreciation.
    d. establish effective gross income.

Answer 51

28. a. The answer is estimate present value. Capitalization converts the net operating income (NOI) into an indication of value in the income approach to determine the current or present market value. An appraiser estimates the return on investment (ROI) an investor would demand for the property being appraised. An appraiser will determine replacement costs, reproduction costs, and depreciation for a property when using the cost approach to value. The effective gross income is estimated by deducting an appropriate amount for vacancy and rent loss in an income-producing property.

Question 52

30. Which of the following is NOT required for a deed to be valid?
    a. Legal description
    b. Signature of the grantee
    c. Execution of the grantor
    d. Consideration

Answer 52

30. b. The answer is signature of the grantee. A valid deed does not require signature of the grantee, but does require that the deed be executed or signed by the grantor. A legal description and consideration are among the essential elements required for a valid deed.

Question 53

31. What is the sale price of a 1.25 acre lot that is 150 feet deep if the selling price of the lot is $26,500 per front foot?
    a. $3,975,000
    b. $932,800
    c. $9,619,500
    d. $1,442,920

Answer 53

31. c. The answer is $9,619,500. 1.25 acres × 43,560 (sq. ft. per acre) = 54,450 (total sq. ft.) ÷ 150 ft (the depth of the lot) = 363 front feet × $26,500 per front foot = $9,619,500 (the selling price). The term front foot refers to a unit on frontage of a lot, usually the street frontage or water frontage. When two dimensions are given for a tract and not labeled, the first dimension is the frontage. Each front foot extends the depth of the lot.

Question 54

36. Which of the following principles would affect the value of smaller homes in a neighborhood that also contains large houses?
    a. Progression
    b. Increasing returns
    c. Competition
    d. Regression

Answer 54

36. a. The answer is progression. Under the principle of progression, the smaller homes in an area with larger homes will have their value increased. The principle of regression is the opposite of progression and states that the owners of larger homes in an area with smaller homes may find the values of their homes decrease. Competition is the interaction of supply and demand causing prices for property to rise or fall. Under the principle of contribution the law of increasing returns applies when money spent on improvements to a property produce an increase in income or value.

Question 55

46. The process by which government can acquire ownership of private land for public use is
    a. escheat.
    b. condemnation.
    c. eminent domain.
    d. doctrine of public acquisition.

Answer 55

46. b. The answer is condemnation. Condemnation is the process; eminent domain is the right of the government to acquire ownership of private land for public use.

Question 56

54. In what way does a deed of trust differ from a mortgage?
    a. Obligation of the borrower to repay the funds
    b. Redemption rights allowed after foreclosure
    c. Number of parties involved in the loan
    d. Time period permitted to cure a default

Answer 56

54. c. The answer is number of parties involved in the loan. A deed of trust is a three-party instrument that conveys naked title to a third party, the trustee, who holds the title on behalf of the lender, also known as the beneficiary. The borrower is the trustor. A mortgage is a two-part instrument between the mortgagor and the mortgagee.

Question 57

59. A parcel of vacant land, which is 80 feet wide on the street side of the property and 200 feet deep, is sold for $200 per front foot. How much money would a salesperson receive for her 60% share in the 10% commission?
    a. $640
    b. $1,600
    c. $2,400
    d. $960

Answer 57

59. d. The answer is $960. A front foot measures frontage on the front of the property. 80 feet × $200 = $16,000 sale price. $16,000 × 10% commission (0.10) = $1,600 (total commission). $1,600 × 60% (0.60) = $960 (the salesperson’s commission).

Question 58

60. In order for a deed to be valid, the
    a. signature of the grantee must be witnessed.
    b. deed must be recorded.
    c. grantee must sign the deed.
    d. grantor must be legally competent.

Answer 58

60. d. The answer is grantor must be legally competent. Competency of the grantor is one of the requirements for a valid deed. The grantor must be of lawful age and sound mind. Witnessing the grantee’s signature is never needed as the grantee does not sign the deed and recording a deed is not required for validity of the deed.

Question 59

61. By way of custom in Alabama, the buyer usually pays the deed recordation fee for a property being purchased. If you are working with a buyer, what would you advise him regarding the amount of the deed recordation tax for a $119,000 house?
    a. $119.00
    b. $129.00
    c. $178.50
    d. $238.00

Answer 59

61. a. The answer is $119.00. The deed tax due when recording a deed is 0.1% of the equity in the property, rounded upward to the nearest $0.50. $119,000 × 0.01 = $119.00.

Question 60

64. Which of the following best defines reconciliation?
    a. Analyzing and weighing the findings obtained by the different approaches to arrive at a final estimate of value
    b. Separating the value of the land from the total value of the property to compute depreciation
    c. Loss of value due to any cause
    d. The process by which an appraiser determines the highest and best use for a parcel of land

Answer 60

64. a. The answer is analyzing and weighing the findings obtained by the different approaches to value to arrive at a final estimate of value. The three approaches to value typically produce three different values. An in-depth analysis of these values is required to determine the most valid, logical, and reliable approach to be used to provide the final value estimate. Determining depreciation, a loss of value due to any cause, is part of the process of the cost approach. The highest and best use of a property is the single most profitable use for that property. Determining highest and best use is only one of the factors considered in an appraisal prior to choosing an approach to value and reconciliation.

Question 61

70. What would it cost to put new carpeting in a room measuring 15 feet by 20 feet if the carpet costs $16.95 per square yard, plus a $250 installation charge?
    a. $815
    b. $589
    c. $505
    d. $5,335

Answer 61

70. a. The answer is $815. One square yard contains nine square feet. Three steps: (1) Find the area of the floor to be covered in square feet by multiplying length by width (15 ft × 20 ft = 300 sq ft). (2) Change square feet to square yards by dividing by 9 (300 sq ft ÷ 9 = 33.33 sq yd). (3) Multiply the number of square yards needed by the price per square yard (33.33 × $16.95 = $565). (4) Add the installation charge to the carpet cost ($565 + $250 = $815). Total cost is $815.

Question 62

74. Anita is assigned to appraise a house in an area with very few sales over the past year. One of the comparable properties she chooses is a home similar to the subject property. The house recently sold as a foreclosure property. When writing her appraisal report, what action will Anita take as a result of the foreclosed sale?
    a. Make a positive adjustment to the value of the subject property
    b. Make a positive adjustment to the sales price of the foreclosed home
    c. Make a negative adjustment to the sales price of the foreclosed home
    d. Make a negative adjustment to the value of the subject property

Answer 62

74. b. The answer is make a positive adjustment to the sales price of the foreclosed home. A foreclosed home usually will sell for less than fair market value. The appraiser will make a positive, upward adjustment to the sales price of the foreclosed home to compensate for the sale at less than market value. In the sales comparison approach, adjustments are made to the sales prices of comparable properties, never to the subject property.

Question 63

79. If a home sold as a mortgage foreclosure does NOT bring an amount sufficient to satisfy the outstanding mortgage debt, the mortgagor may be responsible for
    a. a default judgment.
    b. liquidated damages.
    c. punitive damages.
    d. a deficiency judgment.

Answer 63

79. d. The answer is a deficiency judgment. A deficiency judgment entitles the mortgagee to a personal judgment against the borrower for the unpaid balance when a foreclosure sale does not produce enough cash to pay the loan balance in full after deducting expenses and accrued unpaid interest. It may also be obtained against any endorsers or guarantors of the note and against any owners of the mortgaged property who assumed the debt by written agreement. The mortgagee is not entitled to any damages. A default judgment is a judgment in favor of a plaintiff when a defendant does not appear in court.

Question 64

102. A parcel of vacant land has an assessed valuation of $274,550. If the assessment is 85% of market value, on what market value is the assessment based?
     a. $315,732.50
     b. $320,000.00
     c. $830,333.33
     d. $323,000.00

Answer 64

102. d. The answer is $323,000.00. If the assessment, $274,550, is 85% of market value, find the market value on which the assessment is based by dividing the assessment by 85% ($274,550 ÷ 0.85 = $323,000).

Question 65

108. A developer is planning a warehouse that will contain 103,000 square feet. Construction costs are estimated to be $62 per square foot. Ninety-five percent financing is available for the structure. How much money must the developer put up to complete the project?
     a. $638,600
     b. $5,747,400
     c. $6,066,700
     d. $319,300

Answer 65

108. d. The answer is $319,300. 103,000 sq ft × $62 per sq ft = $6,386,000 total construction cost; 6,386,000 × 5% down payment (100% sales price – 95% amount financed) = $319,300 developer needs to complete the project.

Question 66

115. The type of deed in which the grantor defends the title back to its beginning is a
     a. general warranty deed.
     b. trustee’s deed.
     c. quitclaim deed.
     d. special warranty deed.

Answer 66

115. a. The answer is general warranty deed. The general warranty deed provides the greatest protection to the buyer because grantors defend the title against both themselves and all those who previously had title.

Question 67

116. Which of the following would be considered acceptable evidence of marketable title?
     a. Title insurance policy
     b. Seller signing a general warranty deed
     c. Deed of trust
     d. Copy of the seller’s current deed

Answer 67

116. a. The answer is title insurance policy. Nothing can guarantee ownership or marketable title. An abstract with a title opinion or a title insurance policy show the title was researched and offer protection against future defects in the title. A deed by itself is not considered evidence of marketability.

Question 68

128. A four-bedroom home that only has one bathroom would probably have its appraised value reduced due to
     a. external obsolescence.
     b. curable physical deterioration.
     c. functional obsolescence.
     d. incurable physical deterioration.

Answer 68

128. c. The answer is functional obsolescence. Functional obsolescence exists when a property has outmoded or unacceptable physical or design features. A four-bedroom home with one bath is not desirable for buyers. External obsolescence exists due to economic, environmental, or social forces outside a property. Physical deterioration refers to a loss of value because a property has not been maintained property (deferred maintenance).

Question 69

131. Of the following liens, which would usually be given highest priority in disbursing funds from a foreclosure sale?
     a. A mortgage dated last year
     b. Unpaid real estate property taxes
     c. A mechanic’s lien for work started before the mortgage was made
     d. A judgment rendered the day before foreclosure

Answer 69

131. b. The answer is unpaid real estate property taxes. Unpaid real estate property taxes have first priority and “move to the head of the line” when property is liquidated at a foreclosure sale. They are a statutory lien with priority over liens created by contract, such as mortgages. Unpaid real estate property taxes take priority over mechanic’s liens and judgments, no matter when those liens were recorded.

Question 70

134. In a standard deed, which of the following clauses conveys the rights and privileges of ownership?
     a. Exception clause
     b. Seisin clause
     c. Granting clause
     d. Acknowledgment

Answer 70

134. c. The answer is granting clause. The granting clause states the grantor’s intention to convey the property at the present time. An exception and reservations clause notes any encumbrances, reservations, or limitations affecting the title. The convent of seisin is the grantor’s promise of ownership and ability to convey title in a general warranty deed. The acknowledgement is a formal declaration under oath that the person signing the deed does so voluntarily and that the signature is genuine and is not required to make a deed valid but is often required to record the deed.

Question 71

137. Escheat and eminent domain are both examples of
     a. adverse possession.
     b. transfers of title by descent.
     c. involuntary alienation.
     d. voluntary alienation.

Answer 71

137. c. The answer is involuntary alienation. Involuntary alienation occurs when property is transferred without the owner’s consent. The right of eminent domain allows a government to acquire property for a public purpose through condemnation. When a person dies without a will (intestate) and without heirs, the property passes (escheats) to the state. This process was neither planned nor initiated by the owner before death. Voluntary alienation occurs when property is transferred with the owner’s consent. Adverse possession is the acquiring of title through open, notorious, hostile, and continuous use of another’s property. Descent occurs when an heir inherits a property through probate from a deceased owner who died intestate, without a will.