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
A buyer who signs a mortgage—the document to be given to the lender—is a mortgag__. The buyer is also the maker (_______) on the note. The lender is the mortgag__.
mortgagOR, obligor, mortgagEE
A lender who provides a deed of trust is known as the ___________ and is the holder of the note.
beneficiary
A vendor is the ______ in a contract.
seller
In the income approach, all of these are considered when calculating net operating income (NOI) EXCEPT
A) utilities. B) debt service. C) real estate taxes. D) management fees.
The answer is debt service. Debt service (mortgage payments of principal and interest) is not included in calculating NOI. Management fees, real estate taxes, cost of utilities, insurance, and other costs to maintain the property are all considered in determining a property’s operating expenses.
Time is of the essence means that if the requirement is not met, the contract has been ________.
breached
Involuntary __________ occurs when property is transferred without the owner’s consent.
alienation
The right of _______ ______ allows a government to acquire property for a public purpose through condemnation.
eminent domain
_______ possession is the acquiring of title through open, notorious, hostile, and continuous use of another’s property.
Adverse
Real estate licensees may call consumers with whom they have an established business relationship for up to __ months after the consumer’s last purchase, delivery, or payment.
18
A real estate licensee may call a consumer for up to _ months after the consumer makes an inquiry or submits an application.
3
If a consumer asks a company not to call, the company must abide by the consumer’s request, which stays in effect for _ years.
5
The characteristics of value are ______, _______, _________, and _______________ (DUST).
demand, utility, scarcity, and transferability
Easements in _____ are individual rights to use someone’s land, as in the case of the utility company.
gross
An easement by ________ is created by a court when an owner sells a parcel of land that has no access to a public way except over the seller’s remaining land.
necessity
An easement by ____________ 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.
prescription
An ___________ easement has two parties; an example would be a right to drive across a neighbors land.
appurtenant
P_____ for loans, some o__________ fees, mortgage i_______, and real estate property t____ can be deducted on income tax returns (remember POIT).
Points, origination, interest, taxes
Factors outside the property boundary lines that affect a property’s value are examples of external _________.
obsolescence
A ________ _____ mortgage is a second mortgage given back to the seller by a buyer to bridge the gap between the borrower’s down payment and the first mortgage.
purchase money
A _________ lease is used to attract tenants to properties that are difficult to lease because it allows them in for a lower then market rate that increases as the business grows.
graduated
__________ maintenance is repairing problems.
Corrective
__________ maintenance is inspecting and repairing if needed before a problem arises.
Preventive
_______ maintenance, such as changing furnace filters, is needed for continued operations.
Routine
The broker receives an earnest money deposit with a written offer to purchase that includes a 10-day acceptance clause. On the fifth day, before the offer is accepted, the buyer notifies the broker that she is withdrawing the offer and requests the return of her earnest money deposit. In this situation,
A)
the buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money.
B)
the seller and the broker have the right to each retain one-half of the deposit.
C)
the buyer cannot withdraw the offer because it must be held open for the full 10 days.
D)
the buyer may revoke the offer but will not have the earnest money returned because the buyer failed to give the seller the full acceptance time.
The answer is the buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money. The offeror (the buyer) may revoke the offer at any time before the offer is accepted, even if the person making the offer agreed to keep the offer open for a set period of time. At that point, the earnest money deposit should be refunded to the buyer.
In a land contract, the seller retains _____ title to the property during the contract term, and the buyer is granted _________ title and possession. At the end of the loan term, the seller delivers a clear title to the buyer.
legal, equitable
Title XI of the Financial Instructions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) regulates
A) appraisers. B) attorneys. C) lenders. D) real estate licensees.
The answer is appraisers. Title XI of the FIRREA regulates appraisers. The FIRREA does not regulate real estate licensees, lenders, or appraisers.
The Lead-Based Paint Hazard Reduction Act (LBPHRA) of 1992 requires sellers and landlords of residential dwellings built before 1978 to disclose known information. The Act does not require the sellers and landlords to conduct _____ or a ____ assessment.
tests, risk
One “section” = ___ acres
640
Government rights do not include the private right to control issues within only certain neighborhoods; these are known as ____ restrictions and are usually set by the original developer.
deed
A ___ listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. ___ listings are not only discouraged but illegal in many states.
net, Net
A _________ fee estate exists as long as a determined use of the property continues.
qualified
A _______ is a personal right to enter the land of another for a specific purpose and can be terminated or revoked at any time. Typically, these are not in writing and are not considered to be encumbrances because the owner may take the license.
license
Easements are nonrevocable and _______, usually in a deed, rights of use in another property.
written
______ ordinances regulate the types of new construction but are not enforced through building codes.
Zoning
A _______ use permit usually is granted to a property owner to allow a special use of a property for the common good. A nonconforming use permit allows an existing property to be used for a purpose that existed before current zoning ordinances and is not permitted under those ordinances.
special, nonconforming
Easements, encroachments, and restrictive covenants are all ____________, not liens.
encumbrances
________ ownership is the sole possession of a property by one owner without a need for any unity of interests with other parties.
Severalty
Tenancy in common and community property forms of ownership do not include the right of ___________.
survivorship
A ____ of _____ or a mortgage are the two security instruments used in loans.
deed of trust
A ___________ loan allows the borrower to obtain additional financing, retaining the first loan on the property.
wraparound
In a _____________ mortgage, a lender participates in the income of the mortgaged property beyond a fixed return.
participation
A deed condition would create a fee simple __________ or qualified estate.
defeasible
____________ 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.
Equalization
A __________ clause requires the lender to execute a satisfaction (a release or discharge) of the debt when the note has been fully paid.
defeasance
An __________ clause states that the lender may collect full payment on a loan when the property is conveyed to another party without the lender’s consent.
alienation
A property manager is usually a _______ agent.
general
An ____________ is anything that attaches to and runs with the land, such as improvements, rights, and fixtures.
appurtenance
In a ___ lease, the tenant agrees to pay rent along with some of the property expenses.
net
In a __________ or _____ lease, the tenant pays a base rent plus a percentage of sales.
percentage or retail
A _____ lease is when the tenant only pays rent.
gross
_____________ use permits allow uses that existed before zoning restrictions were enacted that prohibited those uses. A municipality may allow the uses to continue for a specified time and with a limited right of transfer to later buyers. A ________ is permission for a property use that is expressly prohibited by zoning ordinances. A _______ use or conditional use is permission to use a property for a related but nonconforming use for the public good.
Nonconforming, variance, special
When a deed does not indicate the form of tenancy and two or more people acquire title to property, the new owners are presumed to be tenants in ______.
common
_____ tenancy is the right to survivorship, so that when an owner dies, the interest transfers directly to the surviving cotenants, not heirs.
Joint
___________ damages as a remedy allows the seller to keep the earnest money and nothing more.
Liquidated
The purpose of an ________ is to legally change any of the provisions of the offer or to insert new terms. __________ modify executory contracts.
addendum, Amendments
When two dimensions are given for a tract of land and they are not labeled, the first dimension is the ________.
frontage
The word _____ also means frontage, as the length of a parcel is called the _____.
width, depth
In a cooperative, each tenant-owner receives shares in the cooperative and a ___________ lease to the owner’s unit for the life of the cooperative. Cooperative owners do not own real estate and do not have ___ ______ interest in their units. Cooperative owners pay their portion of _____ assessed on the cooperative.
proprietary, fee simple, taxes
Competent grantor is a requirement of a valid ____.
deed
Familial status and handicap (disability) were added as protected classes under the federal ____ _______ __________ Act of 1988.
Fair Housing Amendments
The federal Civil Rights Act of ____ prohibits discrimination on the basis of race, ethnicity, national origin, religion, or sex in voting laws and practice, in education, in the workplace, and in facilities that serve the general public.
1964
The federal ____ _______ Act of 1968 forbids discrimination in housing and mortgage lending on the basis of race, color, religion, and national origin. Additional laws passed in 1974 and 1988 added sex, familial status, and disability as protected classes. The federal Civil Rights Act of 1866 prohibited discrimination based on race.
Fair Housing
The federal Civil Rights Act of ____ prohibited discrimination based on race.
1866
