TEST 4 -- WRONG

Question 1

How many eight acre parcels would fit in a section of land?

(A) 40 parcels; (B) 80 parcels; (C) 160 parcels; (D) 640 parcels.

Answer 1

(B) 80 parcels

A section contains 640 acres of land. 640 acres divided by 8 acres = 80 parcels of land.

Question 2

An estate of inheritance or perpetual estate could also be described as a:

(A) fee simple defeasible; (B) life estate; (C) less-than-freehold estate; (D) estate in fee.

Answer 2

(D) estate in fee.

An estate in fee is another name for the fee simple estate, estate of inheritance, or perpetual estate

Question 3

Which of the following would be defined as a fixture in the law:

(A) a built-in stove in a mobilehome; (B) area rugs in a home; (C) crops after harvest; (D) something incorporated into the land.

Answer 3

(D) something incorporated into the land

A fixture is something which has become attached or incorporated into the land and is now real property.

Question 4

An attachment lien is good for:

(A) 6 months; (B) 2 years; (C) 3 years; (D) 6 years.

Answer 4

(C) 3 years

Question 5

Under federal income tax law, the “basis” of real property is the property’s:

(A) purchase price minus any existing assumed loans; (B) assessed value prior to sale; (C) fair market value; (D) cost.

Answer 5

(D) cost

Under federal income tax law, the basis of real property would be what the current owner paid for it, the cost.

Question 6

Prepaid rent received by a landlord is treated as taxable income:

(A) in the year collected; (B) only if it is actually applied toward rent in a later year; (C) only if it is for trade or business property; (D) none of the above.

Answer 6

(A) in the year collected

Prepaid rent is reported as ordinary income in the year collected.

Question 7

Which of the following statements is most correct?

(A) property is deeded to the state on July 1, if the property taxes for the prior year were not paid; (B) the delinquent property tax payer must make monthly payments to the state during the statutory redemption period; (C) the real effect of a “sale to the state” by the tax collector is to start the redemption period running, but the delinquent owner remains in possession for five years; (D) the property is automatically deeded to the state if the property is not redeemed within the first three years.

Answer 7

(C) the real effect of a “sale to the state” by the tax collector is to start the redemption period running, but the delinquent owner remains in possession for five years

The real effect of a “sale to the state” by the tax collector is to start the redemption period running; however, the owner can remain in possession for five years.

Question 8

Mike owns a 20-unit apartment building. He reports his income on a cash basis; therefore, he can deduct all of the following for tax purposes, except:

(A) loss of income due to vacancies; (B) depreciation of improvements; (C) interest payments on the third trust deed; (D) the cost of painting three units

Answer 8

(A) loss of income due to vacancies

A vacant unit generates no income to report, but it is, not a deduction. The other expenses are deductible from income.

Question 9

Real property includes:

(A) chattel mortgages; (B) trust deeds; (C) vegetation; (D) chose.

Answer 9

(C) vegetation

Vegetation is real property.

And you are an idiot

Question 10

If a broker wants to operate his business under the fictitious name of ABC Realty, he must do which of the following before conducting business under that name?

(A) file the fictitious business name with city where he has the main branch of his brokerage; (B) publish the fictitious business name in any newspaper of general circulation; (C) register the fictitious business name with the DRE; (D) obtain a license from the DRE under the fictitious business name.

Answer 10

(D) obtain a license from the DRE under the fictitious business name.

Before a broker may conduct business under a fictitious business name he must:

(1) register the fictitious business name with the county recorder’s office (not the secretary of state);
(2) publish the fictitious business name statement in a paper of general circulation within the county where his office is located (not just any paper);
(3) apply to the DRE for a new broker’s license under the fictitious business name (not register the fictitious business name with the DRE). The broker may operate under the fictitious business name after he obtains a license from the DRE under the fictitious business name.

Question 11

An appraiser would use the building residual technique to establish the:

(A) replacement cost of a new building; (B) present value of the building; (C) annual net income; (D) value of the land.

Answer 11

(B) present value of the building

The building residual technique is used to establish the value of the building.

Question 12

A grant deed, when compared to a land contract of sale, may be different with respect to:

(A) the interest conveyed to the buyer; (B) the signatures of the parties; (C) the designation of purchase price; (D) all of the above.

Answer 12

(D) all of the above.

A grant deed, when compared to a land contract of sale, may be different with respect to the interest conveyed to the buyer; the signatures of the parties and the designation of purchase price.

Question 13

The appraisal of real property is made as of a “given date” to indicate:

(A) the true age of the improvement; (B) the market conditions influencing the value of the property at that point in time; (C) the date when the appraiser looked at the property; (D) the loan balance as of a given date.

Answer 13

(B) the market conditions influencing the value of the property at that point in time

The appraisal of real property is as of a given date to indicate the market conditions influencing the property at that particular point in time.

Question 14

The gross rent multiplier is arrived at by dividing:

(A) net monthly rental by market value; (B) gross monthly rental by market value; (C) sales price by gross monthly rental; (D) sales price by annual net income.

Answer 14

(C) sales price by gross monthly rental

Gross rent multiplier = sale price divided by the gross monthly rental.

Question 15

The square foot, cubic foot, and unit-in-place methods of real estate appraisal are most commonly used in what approach:

(A) the market data approach; (B) the income approach; (C) the cost approach; (D) none of the above.

Answer 15

(C) the cost approach

The first step of the cost approach is to determine replacement cost of improvements. This is done by the square foot, cubic foot, unit-in-place, or quantity survey methods.

Question 16

Which of the following best describes an estate of indefinite duration?

(A) a life estate; (B) an estate for years; (C) an estate of periodic tenancy; (D) an estate of inheritance.

Answer 16

(D) an estate of inheritance.

An estate of inheritance is another term for a fee simple estate. A fee simple estate is of an indefinite duration. The other choices have some fixed duration.

Question 17

“Economic rent” is defined as the:

(A) rent necessary to allow the owner to break-even; (B) rent the property would produce in a perfectly informed marketplace; (C) rent the property would produce in a rent received under a contract; (D) rent the property would produce in a rent received for comparable space in the current economic marketplace.

Answer 17

(D) rent the property would produce in a rent received for comparable space in the current economic marketplace

This is a definition of economic rent. No marketplace is perfectly informed.

Question 18

Michael is selling his business, “Mike’s Pies.” Michael must collect sales tax from the buyer on which of the following items?

(A) the inventory which is included in the sale; (B) “good will” value; (C) the fixtures and furniture included with the business; (D) none of the above.

Answer 18

(C) the fixtures and furniture included with the business

The seller of a business must collect sales tax on the fixtures and furniture included with the business. The buyer should request a receipt from the State Board of Equalization, called a “clearance receipt” to avoid successor’s liability for the sales tax.

Question 19

In typical economic times, investors who make long-term investments:

(A) have less risk than those who make short-term investments; (B) have the same amount of risk as those who make short-term investments; (C) have more risk than those who make short-term investments; (D) have the best answer to worries about inflation.

Answer 19

(C) have more risk than those who make short-term investments

Long term investments generally have a greater degree of risk. If interest rates and inflation increase, the investor would be locked into a low rate of return.

Question 20

When a lender takes a deed in lieu of foreclosure from the borrower, the lender:

(A) must get court approval; (B) must first obtain the written consent of all other lien holders; (C) will assume any junior liens; (D) none of the above.

Answer 20

(C) will assume any junior liens

If a lender accepts a deed from the borrower in lieu of foreclosure, existing liens would stay against the property.

Question 21

The relationship between the parties to a real estate transaction and the escrow officer is usually described as which of the following:

(A) independent contractor; (B) employee; (C) mediator; (D) agent.

Answer 21

(D) agent

The escrow officer is an agent for the buyer and seller.

Question 22

When authorized by a broker, withdrawals from the real estate broker’s client trust account can be made by the broker or by which of the following people?

(A) only salespeople in the broker’s employ; (B) anyone employed by the broker; (C) only corporate officers; (D) anyone authorized by the broker.

Answer 22

(B) anyone employed by the broker

Anyone employed by broker who has authorization from broker can make withdrawals from the trust account. If the employee does not have a license, the employee must also be bonded.

Question 23

The United States Attorney General would likely act to enforce the Federal Fair Housing Law when:

(A) state officials fail to act; (B) a conspiracy exists to practice resistance to the Federal Fair Housing Law; (C) a complaint is filed with the Supreme Court; (D) the discrimination involves more than ten units.

Answer 23

(B) a conspiracy exists to practice resistance to the Federal Fair Housing Law

The United States Attorney General has authority to enforce the Federal Fair Housing Law when there is evidence of a conspiracy to resist it.

Question 24

The term used by lenders, “mortgage yield,” refers to:

(A) the total amount the lender receives when a mortgage is paid off; (B) the effective interest return obtained from a first trust deed; (C) all of the money received by a lender after deducting closing costs and loan fees; (D) an increase in the value of a property which has a mortgage.

Answer 24

(B) the effective interest return obtained from a first trust deed

Mortgage yield can be described as the lender’s effective interest return from a real estate loan.

Question 25

The law requires the county recorder to index deeds by:

(A) a street address, and by a legal description; (B) a street address and by the parcel number; (C) the names of the grantor and the grantee; (D) the date and time of recording.

Answer 25

(C) the names of the grantor and the grantee

The law requires the county recorder to index deeds by the names of the grantor and the grantee.

Question 26

Larry sold his house to Mel, who did not record the deed, but moved in. Larry then sold the same property to Jane, who reviewed the county recorder’s records, but did not look at the property. Larry gave Jane a deed, which she recorded. Which of the following would be true concerning title to the property?

(A) Mel and Jane are co-owners of the property; (B)
Jane now owns the property, because she recorded her deed and Mel did not; (C) Jane has recourse against Mel for failure to record; (D) Mel maintains title.

Answer 26

(D) Mel maintains title.

Although Mel did not record his deed, he took possession by moving in. Possession of the property by Mel gives constructive notice. Since Jane recorded after Mel took possession, she had constructive notice of Mel’s rights.

Question 27

A prospective buyer obtained a three-month option on a parcel of real property by paying $300 to the owner. All of the following are true, except:

(A) the option is a unilateral contract; (B) the optionor is totally restricted by having received “valuable” consideration with the option; (C) the option imposes no obligation on the optionee to buy the property; (D) the optionee has created a legal interest in the property.

Answer 27

(D) the optionee has created a legal interest in the property

An option does not create a legal interest in the property for the optionee.

Question 28

None of the following persons may lawfully enter into a valid contract to purchase real property except:

(A) unemancipated minors; (B) minors who are wards of the court; (C) convicts in prison; (D) aliens.

Answer 28

(D) Aliens

Aliens may lawfully enter into a valid contract.
may lawfully enter into a valid contract.

(He meant illegal aliens)

Question 29

Which of the following would be an example of functional obsolescence?

(A) new zoning laws; (B) incompatible land use in the neighborhood; (C) a deteriorated driveway; (D) a one-car garage.

Answer 29

(D) a one-car garage.

Question 30

Market value is the price a willing buyer will pay and a willing seller will accept with both being fully informed, and the property being exposed to the market for a reasonable period of time. Market value is best expressed as:

(A) present value of future income; (B) cost to reproduce improvements new; (C) value of a property is in the eye of the beholder; (D) objective value.

Answer 30

(D) objective value

Market value is best expressed as “objective value.”

Question 31

The purpose of the Equal Credit Opportunity Act is to:

(A) standardize the methods for obtaining credit; (B)
regulate the total amount of credit given to the borrower; (C) discourage discrimination in lending based on age, sex, race, marital status, color, religion or national origin; (D) all of the above.

Answer 31

(D) all of the above.

The purpose of the Equal Credit Opportunity Act is to: standardize the methods for obtaining credit, regulate the total amount of credit given to the borrower and discourage discrimination in lending based on age, sex, race, marital status, color, religion or national origin.

Question 32

A buyer must bring a lawsuit for breach of written contract against a seller within:

(A) 6 months; (B) 1 year; (C) 3 years; (D) 4 years.

Answer 32

(D) 4 years

The Statute of Limitations requires lawsuits for breach of a written contract to be filed within four years of the breach.

Question 33

A buyer and seller initial the liquidated damages clause in a deposit receipt and then the buyer defaults. The deposit is:

(A) given to the seller when escrow opens; (B) limited to 3% of the selling price; (C) divided equally between the seller and the listing agent; (D) used to pay any costs incurred and then returned to the buyer.

Answer 33

(C) divided equally between the seller and the listing agent

The standard deposit receipt provides that if buyer defaults, the seller and the agent split whatever the seller actually recovers from the buyer, but never to exceed the agreed upon commission. Since the buyer initialed liquidated damages, seller should recover the deposit and split it with the agent.