SMART Guide

Question 1

1. A lease for a three-year term that
called for rent to be paid quarterly
expired. If at the end of the term, the
landlord were to accept another payment
of rent, the lease would be
A. extended another three years.
B. a periodic tenancy.
C. extended for a term not to exceed one
year.
D. cancelled in any event.

Answer 1

1. B. The original three-year contract is no longer in effect, and when the broker accepts
   additional rent, it creates a periodic tenancy.

Question 2

2. Marx gets to one of his barns by
driving across McDonald's land. He has
been making the drive daily for the past
six years. McDonald had often asked
Marx to stop this practice. Marx now
says he has a legal right to continue this
use of McDonald's land. Marx's right, if
valid, is an easement by
A. necessity.
B. implied grant.
C. prescription.
D. defeasance.

Answer 2

2. C. A Prescriptive easement is acquired through adverse use of another’s property for a
   five-year, continuous period. From the facts given in the statement it would appear that
   this is an easement by prescription.

Question 3

3. The general term value means
A. the function of an object.
B. the average use and function of an
object to all people.
C. the worth, usefulness, or utility of an
object to someone for some purpose.
D. a good buy.

Answer 3

3. C. Value is subjective depending on an individual’s needs. There are four elements to
   value: demand, utility, scarcity and transferability. Value increases when there is high
   demand for the same product, creating utility for that product. Value further increases
   when the product is scarce, creating more demand than supply. Finally value increases
   when the product is highly transferable from one party to another. The worth, usefulness
   and utility of a product is subjective, however driven by the four elements of value.

Question 4

4. A prospective purchaser obtained a
four-month option on a parcel of real
property by paying $200 to the owner.
All of the following are true EXCEPT
A. the optionee has created a legal
interest in the property.
B. the optionor is totally restricted by
having received a "valuable"
consideration.
C. the agreement imposes no obligation
on the optionee to purchase the property.
D. a unilateral contract has been created.

Answer 4

4. A. An option is not an interest in property; it is a unilateral contract in which the
   optionor is bound, but the optionee is not.

Question 5

5. Race restrictions limiting the sale or
   lease of property to persons of the
   Caucasian race were imposed on a
   subdivision in 1920, due to expire in
6. The restrictions are presently
   A. valid, as long as the original owner is
   still alive.
   B. unenforceable, even if the majority of
   homeowners want them.
   C. enforceable, if the buyer agrees.
   D. binding.

Answer 5

5. B. Racial deed restrictions are unenforceable and can now be removed per SB 1148.

Question 6

6. The Uniform Settlement Statement
required by the Real Estate Settlement
Procedures Act by law shall be delivered
or mailed to the borrower no later than
A. ten business days from the date of the
loan.
B. three business days prior to the
closing of the transaction.
C. one calendar day prior to the closing
of the transaction.
D. on, or before, the date of settlement.

Answer 6

6. D. The Uniform Settlement Statement must be delivered to the borrower at, or before,
   closing. Should the borrower waive this right, and not be present at closing, the
   statement should be delivered as soon as possible after the transaction closes.

Question 7

7. How long does a victim have to file a
complaint about discrimination with the
Department of Housing and Urban
Development?
A. Three months
B. Six months
C. Nine months
D. One year

Answer 7

7. D. The Department of Housing and Urban Development enforces fair housing laws
   on the federal level. Complaints must be filed within one year.

Question 8

8. The best synonym for "value" is
A. cost.
B. worth.
C. uselessness.
D. asking price.

Answer 8

8. B. “Value” can be defined as “present worth of future benefits.”

Question 9

9. In real estate "devise" refers to
A. a conveyance.
B. an inheritance.
C. destruction of man-made structures
by acts of god.
D. probate action when one dies
intestate.

Answer 9

9. A. In popular usage, devise means death. In real estate, it means a transfer property
   under a will.

Question 10

10. Under federal income tax law, the
basis of real property is the properties
A. purchase price minus any existing
assumed loans.
B. assessed value prior to sale.
C. fair market value.
D. cost.

Answer 10

10. D. Basis, cost, cost basis, and purchase price, plus adjustments for capital
    improvements and deductions for depreciation expense can all be defined as what was
    paid for the property.