Review Test Flashcards
A buyer’s agent notices that the seller’s property disclosure form provided to him by the listing broker is not complete because some of the boxes indicating structural damage have NOT been checked. What should the buyer’s agent do?
A)
Contact the listing broker and request a properly completed disclosure form.
B)
Advise the buyers that a property inspection will uncover any structural problems.
C)
Contact the sellers directly and question them about the form.
D)
File a complaint against the sellers with the state real estate commission.
The answer is contact the listing broker and request a properly completed disclosure form. Because the sellers are represented by a broker, the buyer’s agent should contact the listing broker and request that the sellers provide a properly completed form. A property inspection may not uncover latent defects, hidden structural problems that are not easily discovered. A real estate commission investigates only complaints against real estate licensees.
Normally, the priority of general liens is determined by
A) the order in which the cause of action arose. B) the size of the claim. C) the order in which they are filed or recorded. D) the court.
The answer is the order in which they are filed or recorded. The general rule for priority of liens is “first come, first served.” Property taxes and special assessments are exceptions to the general rule because they usually take priority over other liens. The priority of liens does not arise out of the size of a claim. Courts do not determine the priority of liens.
During the period of time after a real estate sales contract is signed, but before title actually passes, the status of the contract is
A) executed. B) unilateral. C) executory. D) voidable.
The answer is executory. An offer becomes an executory contract upon acceptance and executed upon completion of the duties. Duress, fraud, misrepresentation, and minors always make contracts voidable. Only one party is bound in a unilateral contract.
A purchase contract contains several personal property items and fixtures that will be transferred upon sale of the property. Which of these is TRUE?
A)
All personal property must be listed in the bill of sale to convey to the buyer.
B)
There is no need to list the personal property in the contract because it will automatically convey unless it is excluded by the seller.
C)
The fixtures and personal property will need to be itemized in the bill of sale.
D)
All fixtures must be listed in the deed to convey to the buyer.
The answer is all personal property must be listed in the bill of sale to convey to the buyer. Fixtures are appurtenant, attached to the property, and automatically conveyed with the deed without being listed. Personal property must be listed in the bill of sale in order to be included in the sale.
A buyer purchased a property that is one mile square and another that measures 511.23 ft. × 511.23 ft. At a cost of $2,000 an acre, how much did she pay for the property?
A) $1,733,435 B) $1,373,435 C) $1,921,999 D) $1,291,999
The answer is $1,291,999.
Property 1: 5,280 × 5,280 = 27,878,400; 27,878,400 ÷ 43,560 = 640 acres.
Property 2: 511.23 × 511.23 = 261,356.1129; 261,356.1129 ÷ 43,560 = 5.9999 acres.
640 + 5.9999 = 645.9999 total acreage 645.9999 × $2,000 = $1,291,999
A title insurance policy protects against title defects
A) which have been cleared by a quiet title suit. B) found after closing. C) that occurred before closing. D) no matter when they are discovered.
The answer is found after closing. The title commitment would list any defects found before closing and would exclude them from coverage, so only defects arising after closing are covered. A defect cleared by a quiet title suit is no longer a defect.
Residential leases are usually expressed as
A) a percentage of total space available. B) an annual rate per room. C) a monthly rate per unit. D) an annual or monthly rate per square foot.
The answer is a monthly rate per unit. Residential leases are for an apartment or home and are expressed in a per unit rate. Commercial space can be expressed in price per square foot or percentage of space available. Hotel rooms are expressed in the rate per room.
When showing a property, an agent exaggerates the property’s benefits. This practice is
A) puffing, which is legal as long as there is no misrepresentation. B) an illegal misrepresentation of the property. C) fraud on the part of the agent. D) an illegal ministerial act.
The answer is puffing, which is legal as long as there is no misrepresentation. The broker is exaggerating the benefits of the property. In this situation, the broker is not guilty of fraud or misrepresentation. Fraud is a deceitful practice or a misstatement of a material fact, known to be false. A ministerial act is a routine act performed for a customer that does not involve judgment, discretion, or advice.
Under the federal Fair Housing Act, it is illegal to discriminate because of a person’s
A) having been convicted of distributing a controlled substance. B) having a history of dangerous behavior. C) marital status. D) having AIDS.
The answer is having AIDS. People with AIDS are protected under the disability provision of the Fair Housing Act. Fair housing laws do not prohibit discrimination in housing because of a person’s marital status. Owners may refuse to sell or rent to persons who have a history of dangerous behavior or drug convictions because fair housing laws do not protect such behavior.
All of these documents would create an agency relationship EXCEPT
A) a listing contract. B) a sales contract. C) a buyer agency contract. D) a property management contract.
The answer is a sales contract. A sales contract is a contract between an owner and a buyer to purchase a property. It does not create a relationship in which a person acts on behalf of another. The other contracts create agency relationships establishing the duties of a brokerage firm on behalf of a principal.
A father and his daughter have equal shares in a home they bought one year ago. They list the home and sell it within six weeks. According to federal tax laws, what is their exclusion on any capital gains acquired from selling the house?
A)
The father and his daughter qualify for a $500,000 exclusion from capital gains taxes.
B)
The father and his daughter qualify for a $250,000 exclusion from capital gains taxes.
C)
Each qualifies for a $125,000 exclusion from capital gains taxes.
D)
The father and his daughter do not qualify for any exclusion from capital gains taxes.
The answer is the father and his daughter do not qualify for any exclusion from capital gains taxes. The father and his daughter did not live in the house for the two years required to qualify for any exclusion from capital gains taxes. If they had lived in the house for two of the most recent five years and each filed a separate income tax return, then each of them as a co-owner of the property would qualify for an exclusion of $250,000.
A landowner divided much of her land into smaller parcels and has recently sold a tract adjacent to a nature preserve. The preserve and the tract that was sold are landlocked and cannot be entered except through one of the other tracts still belonging to the landowner. The buyer of the tract will probably be granted what type of easement by a court action?
A) Easement by prescription B) Easement in gross C) Easement by necessity D) Conditional use permit
The answer is easement by necessity. An easement by necessity arises when there is no ingress or egress (entry or exit) from one piece of property without crossing over a parcel of land owned by another. An easement in gross permits a right-of-way for an individual or company to use another’s property. An easement by prescription is acquired when a person makes continuous and visible use of another’s land for a certain period of time without the owner’s permission. A conditional use permit is granted by a municipality to a property owner to allow a special nonconforming use of property in a residential district.
A buyer who owns the property in equity has
A) a lease. B) an executory contract. C) a liquidated damages contract. D) an option contract.
The answer is an executory contract. During any point in the executory contract (time period between signed offer to title transfer), the buyer has equitable title (also called the owner in equity). An executory purchase contract can be liquidated damages or specific performance. In an option contract, only one party is bound and there is no equity of title.
What is the rate of interest if the mortgagor makes quarterly interest payments of $1,340.63 on a $65,000 loan?
A) 7.8% B) 9.3% C) 8.3% D) 2.06%
The answer is 8.3%. Step 1, find the total interest paid annually: $1,340.63 × 4 = $5,362.52. Step 2, divide the interest by the principal to determine the rate: $5,362.52 ÷ $65,000 = 8.3% (0.083).
The phase from offer to a closed and executed/closed contract is called the _________ period. ________ contracts are binding on one party and not the other. An _____________ contract is also void due to lack of an essential element.
The phase from offer to a closed and executed/closed contract is called the EXECUTORY period. VOIDABLE contracts are binding on one party and not the other. An UNENFORCEABLE contract is also void due to lack of an essential element.
In an exclusive _____-__-____ listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An ____ listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive ______ listing provides that the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on his own. An ______ listing permits the broker to retain an option to purchase the property for the broker’s own account.
In an exclusive RIGHT TO SELL listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An OPEN listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive AGENCY listing provides that the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on his own. An OPTION listing permits the broker to retain an option to purchase the property for the broker’s own account.
In which of these arrangements would there be two landlord-tenant relationships?
A) Lease purchase B) Assignment C) Novation D) Lease option
The answer is assignment. There would be two landlord-tenant relationships in an assignment, which is when the landlord allows the original tenant to lease to another. The original tenant is still liable for the rent if the new tenant does not pay. A lease option and lease purchase would be only one landlord-tenant relationship.
The primary survey line running east and west in the rectangular survey system is
A) the principal meridian. B) the base line. C) the township line. D) the range line.
The answer is the base line. The base lines run east and west in a rectangular survey system, while the principal meridians run north and south. Township lines run east and west; range lines run north and south. Sections are created through the intersection of these lines.
In receiving a gift of a parcel of real estate, one of the two new owners was given an undivided 60% share, and the other received an undivided 40% share. They now hold title as
A) community property owners. B) joint tenants. C) cooperative owners. D) tenants in common.
The answer is tenants in common. Tenants in common hold property with undivided fractional interests, and the shares do not have to be equal. In a joint tenancy, each owner holds equal shares and interests to the property. Community property consists of personal or real property acquired by either party in a marriage and belonging to both parties to the marriage. In a cooperative, owners own shares in a corporation, partnership, or trust, which owns a property, with each owner holding a proprietary lease and the right to occupy the unit.
The ability of a community to attract income and business is known as the community’s
A) market value. B) zoning plan. C) economic base. D) life cycle.
The answer is economic base. The economic base measures the ability of a community to attract business and income. Life cycle refers to the expected useful lifetime of equipment or property. Market value is the most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market. A zoning plan determines the types of improvements permitted on specific properties in a community.
___________ _________ are private limitations on the use of property established by a developer or an owner and binding on future owners.
Restrictive covenants
What capitalization rate is indicated by a property producing $10,000 annual net operating income (NOI) for which an investor paid $105,263 (rounded)?
A) 10.50% B) 9.50% C) 10% D) 9%
The answer is 9.50%. $10,000 (annual NOI) ÷ $105,263 (purchase price) = 9.5% (0.095) the capitalization rate.
A couple’s apartment lease has expired, but their landlord has accepted rent and indicated to them that they may remain on the premises until a sale of the building is closed. They will be charged their normal monthly rental during this period, but there will be no automatic renewal of the lease. The right held by the couple is called
A) a periodic tenancy. B) an estate at sufferance. C) a tenancy at will. D) a holdover tenancy.
The answer is a tenancy at will.
A tenancy-__-____ gives the tenant the right to possess property with the landlord’s consent for an unspecified or indefinite term and does not automatically renew.
at-will
A ________ tenancy runs for an indefinite period, has no expiration date, and automatically renews.
periodic
An estate-__-__________ arises after a tenant’s rights to possession expire, and the tenant continues to possess the property without the landlord’s consent.
at sufferance
A ________ tenancy is created when a tenant with an estate for years holds on to a property after the lease has expired and no new lease agreement has been made.
holdover
The statute of ______ requires real estate contracts to be in writing to be enforceable.
frauds
An oral contract, although _____________, is still valid between parties.
unenforceable
The law of _______ regulates the processes by which an heir acquires an intestate estate.
descent
A __________ _______ contract allows the seller to keep the earnest money if the buyer defaults and gives the buyer specific performance remedies if the seller defaults.
liquidated damages
An __________ 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.
alienation
Marketable title is established with an ________ or title commitment.
abstract
The buyer in a contract for deed holds _________ title to the property.
equitable
Equitable title gives the borrower the rights of __________ and ___ of the property, while the seller retains the _____ title during the contract term. If the buyer defaults, the seller can _____ the buyer and keep any money the buyer has already paid, which is considered rent.
possession, use, legal, evict
An ________ is a change to an original contract. An _________ is created to make changes or to add provisions after the original contract is created.
addendum, amendment
Private mortgage insurance (PMI) protects the lender only for the excess of the loan amount over __% of the property’s appraised value.
80
The _______ ____________ _________ Act (UECA) requires an environmental covenant that indicates the cleanup of hazardous material and restrict land use.
Uniform Environmental Covenants Act
A buyer purchased a property but did not record the deed. Under these circumstances,
A)
the buyer’s interest is not fully protected against third parties.
B)
the deed is void because recording is required to make it valid.
C)
the transfer of property between buyer and seller is invalid.
D)
the deed is invalid after 90 days.
The answer is the buyer’s interest is not fully protected against third parties. Properly recording a deed in the public record serves as constructive notice to the world of the buyer’s rights or interests in the property. If a buyer does not record the deed, a third party may make a claim on the property. Not recording the deed does not affect the validity of the transfer or of the deed to the property because recording is not an essential element to create a valid deed.
Novation is a new ________ replacing an old one.
contract
________ rates increase the lender’s yield on loans.
Discount
____ ___________ fees cover the lender’s costs in generating a loan.
Loan origination
