Unit 15 Quiz Questions Flashcards
Generally, in a court-ordered sale, which of these is paid first?
a. First mortgage
b. Mechanics’ liens
c. Child support liens
d. Real estate taxes
Real Estate Taxes
Real estate taxes do not have to be recorded to be effective, and they are usually given priority over all other liens.
Which of these is an example of a specific, voluntary lien?
a. Decedent’s debts
b. Internal Revenue Service liens
c. Mortgage lien
d. Corporate franchise liens
Mortgage lien
A mortgage lien is a specific, voluntary lien.
The millage breakout for ad valorem taxes is library: 0.5; school: 1; school debt service: 0.5; community college: 1; vocational school: 0.5; and all others: 5. If the property is assessed at
$165,000, how much is the tax bill?
a. $1,200.25
b. $1,402.50
c. $1,405.75
d. $1,800.50
$1402.50
The tax bill is $1,402.50:
0.5 + 1 + 0.5 + 1 + 0.5 + 5 = 8.5 mills or $0.0085 per dollar of valuation $165,000 × 0.0085 = $1,402.50
All of these are liens against real property EXCEPT
a. a mortgage.
b. real estate taxes.
c. lis pendens.
d. home improvement loan of a deceased property owner
Lis Pendens
A lis pendens is only the notice of a possible future lien. If it becomes a lien, itspriority is established by the date and time that it was originally filed
Which of these characteristics applies to a real estate tax lien?
a. Specific, involuntary lien
b. Specific, voluntary lien
c. General, involuntary lien
d. General, voluntary lien
Specific, involuntary lien
A real estate tax is levied on an individual property and is levied regardless of the taxpayer’s wishes.
Which of these would permit a law enforcement officer to seize and sell a debtor’s property?
a. Lis pendens
b. Satisfaction of judgment
c. Writ of execution
d. Writ of attachment
Writ of execution.
A writ of execution directs the sheriff to seize and sell as much of the debtor’s property as necessary to pay both the debt and the expenses of the sale.
Which of these is a general, statutory, and involuntary lien on both real and personal property?
a. Federal tax lien
b. Mechanic’s lien
c. Special assessment
d. Consumer loan lien
Federal Tax lien
An Internal Revenue Service lien is a general lien against the real and personal property owned by the delinquent taxpayer.
In February, a homeowner signed an agreement with a general contractor to have a bathroom converted to a sauna, but the homeowner never paid for the work. The homeowner stopped making mortgage payments in June. The owner is two years delinquent in property taxes to the county. The state gives mechanics’ liens priority. If all these creditors obtain judgments
against the owner in November, what will be the priority of their liens (first to last)?
a. Contractor → mortgage company → county
b. County → mortgage company → contractor
c. Contractor → county → mortgage company
d. County → contractor → mortgage company
County -> Contractor -> mortgage company
The priority is taxes, mechanic’s lien, and then first mortgage. Although the mortgage was filed first, property taxes always have first priority, and the state has given second priority to mechanic’s liens.
A town wants to construct new concrete curbs in a residential neighborhood. How will the town most likely raise the money necessary for the improvement?
a. Ad valorem tax
b. Special assessment
c. Equalized assessment
d. Utility lien
Special Assessment
The town will most likely levy a special assessment against the benefiting properties to pay for the new concrete curbs
All of these liens must be recorded to be effective EXCEPT
a. money judgment.
b. mechanic’s lien.
c. real estate tax lien.
d. voluntary lien.
Real Estate Tax lien
Real estate tax liens do not have to be recorded to be effective, and they always take precedence over all other liens. Because of this, the lender may require that a borrower pay
1/12 of the estimated annual taxes each month as part of the loan payment; the money is placed by the lender in an escrow account so that the lender can pay the taxes when due. Unpaid taxes take priority over mortgage liens.
The market value of an undeveloped parcel is $40,000. Its assessed value is 40% of market value, and properties in this county are subject to an equalization factor of 1.50. If the tax rate is $4 per $100, what is the amount of the tax owed on the property?
a. $480
b. $960
c. $1,080
d. $1,800
$960
The tax owned on the property is $960: $40,000 × 40% × 1.5 ÷ 100 × 4 = $960.
To give notice of a potential claim against a property and to establish priority, a creditor may file
a. a lis pendens.
b. an attachment.
c. a general lien.
d. a specific lien.
A lis pendens
A lis pendens is a notice of a possible future lien. If it becomes an actual lien, the effective date of the lien is the date and time that the lis pendens was filed.
A homeowner considered having a new garage built and talked about the project with a contractor. In April, while the homeowner was on vacation, the contractor began building the garage according to the discussed specifications. Work was complete by the end of May. In June, the homeowner returned from vacation and refused to pay for the garage. The
contractor decided to file a mechanic’s lien in July. Is the contractor entitled to a lien?
a. Yes, because the garage was constructed according to the homeowner’s specifications.
b. Yes, because the garage is not a part of an owner-occupied residence.
c. No, because notice of the lien should have been filed in May, when the work was completed.
d. No, because there was no express or implied contract between the homeowner and the contractor
No, because there was no express or implied contract between the homeowner and the contractor.
Which lien affects all real and personal property of a debtor?
A. Specific
B. Voluntary
C. Involuntary
D. General
General
The answer is general. A general lien attaches to all of a debtor’s property as opposed to a specific lien, which affects only a specific property.
Priority of liens refers to which of the following?
A. Order in which a debtor assumes responsibility for payment of obligations
B. Order in which liens will be paid if property is sold to satisfy a debt
C. Dates liens are filed for record
D. Fact that specific liens have greater priority than general liens
Order in which liens will be paid if property is sold to satisfy a debt.
The answer is order in which liens will be paid if property is sold to satisfy a debt. Priority of liens refers to the order in which claims against a property will be paid off. In general, the rule for priority of liens is “first come, first served,” but there are some exceptions, such as taxes and assessments
A lien on real estate made to secure payment for a specific municipal improvement project is which of the following?
A. Mechanic’s lien
B. Special assessment lien
C. Ad valorem
D. Utility lien
Special assessment lien
The answer is special assessment lien. Specific improvements are paid for by special assessments
Which of the following is classified as a general lien?
A. Mechanic’s lien
B. Bail bond lien
C. Judgment
D. Real estate taxes
Judgment
The answer is judgment. A judgment lien is not just on some specific assets but on the assets of the debtor in general
Which lien usually would be given highest priority in disbursing funds from a foreclosure sale?
A. Mortgage dated last year
B. Real estate taxes due
C. Mechanic’s lien for work started before the mortgage was made
D. Judgment rendered the day before foreclosure
Real Estate Taxes due.
The answer is real estate taxes due. Unpaid real estate taxes take priority when property is liquidated at a foreclosure sale. They are a statutory lien with priority over liens created by contract, such as mortgages.
A specific parcel of real estate has a market value of $160,000 and is assessed for tax purposes at 75% of market value. The tax rate for the county in which the property is located is 40 mills. The tax bill will be
A. $6,400.
B. $5,000.
C. $5,200.
D. $4,800.
$4800
The answer is $4,800. A mill is
1
1000
undefined of a dollar: $0.001. The mill rate is the tax on every dollar of the assessed value of property. A rate of 40 mills ($0.040) is applied to 75% of the $160,000 market value of the property: $160,000 × 75% = $120,000, and $120,000 × $0.040 = $4,800.
Which tax targets homeowners in particular?
A. Personal property tax
B. Franchise tax
C. Real property tax
D. Luxury tax
Real property tax
The answer is real property tax. The real property (ad valorem) tax falls on those who own real property, such as homeowners.
A mechanic’s lien claim arises when a contractor has performed work or provided material to improve a parcel of real estate on the owner’s order and the work has not been paid for. Such a contractor has a right to
A. tear out the work.
B.record a notice of the lien.
C. record a notice of the lien and file a court suit within the time required by state law.
D. have personal property of the owner sold to satisfy the lien
Record a notice of the lien and file a court suit within the time required by state law.
The answer is record a notice of the lien and file a court suit within the time required by state law. In this situation, the contractor has specific, statutory rights that are limited to the real property for which the contractor performed work or supplied materials
What is the annual real estate tax on a property valued at $135,000 and assessed for tax purposes at $47,250, with an equalization factor of 125%, when the tax rate is 25 mills?
A. $945
B. $1,181
C. $1,418
D. $1,477
$1477
The answer is $1,477. Tax = assessed value × equalization factor × tax rate. The millage rate is the tax on each dollar of assessed value: 1 mill = $0.001; 25 mills = $0.025. Therefore: $47,250 × 125% = $59,062.50, and $59,062.50 × $0.025 = $1,476.56. The best answer is $1,477.
Which of the following is a voluntary, specific lien?
A. IRS tax lien
B. Mechanic’s lien
C. Mortgage lien
D. Seller’s lien
Mortgage Lien
The answer is mortgage lien. A mortgage lien is created voluntarily by the borrower. The borrower names specific property in the mortgage agreement that serves as security for the lender.
A buyer purchased a parcel of real estate. Title has passed, but to date the buyer has not paid the purchase price in full, as originally agreed. If the seller wants to force payment, which remedy is the seller entitled to seek?
A. Attachment
B. Mechanic’s lien
C. Lis pendens
D. Judgment
Judgment
The answer is judgment. The seller could seek a monetary judgment based on a vendor’s (seller’s) lien for unpaid portions of the purchase price not secured by a mortgage.
A general contractor recently filed suit against a homeowner for nonpayment. The contractor now learns that the homeowner has listed the property for sale with a real estate professional. In this situation, which of the following will the contractor’s attorney use to protect the contractor’s interest?
A. Seller’s lien
B. Buyer’s lien
C. Assessment
D. Lis pendens
Lis Pendens
The answer is lis pendens. A recorded lis pendens— a notice of action pending—warns any potential purchaser that a property is subject to a pending legal action. Such a notice might prompt a buyer to consider very.
Which statement MOST accurately describes special assessment liens?
A. They are general liens.
B. They are paid on a monthly basis.
C. They take priority over mechanics’ liens.
D. They cannot be prepaid in full without penalty.
They take priority over mechanic’s liens.
The answer is they take priority over mechanic’s liens. Real estate taxes and special assessments take priority over all other liens.
Which of the following creates a lien on real estate?
A. Easement running with the land
B. Unpaid mortgage loan
C. License
D. Encroachment
Unpaid mortgage loan.
The answer is unpaid mortgage loan. Encumbrances such as easements and encroachments do not involve liens. A license is a personal, revocable privilege. A mortgage agreement creates a voluntary, specific lien.
Which statement is TRUE of both a mortgage lien and a judgment lien?
A. It must be entered by the court.
B. It involves a debtor-creditor relationship.
C. It is a general lien.
D. It is an involuntary lien.
It involves a debtor-creditor relationship.
The answer is it involves a debtor-creditor relationship. Both involve a debtor-creditor relationship. A mortgage lien is specific, not general, and is voluntary and entered by the lender. The lien is executed by legal action upon default of the borrower.
A mechanic’s lien is available to
A. accountants.
B. financial planners.
C.real estate professionals.
D. surveyors
Surveyors
The answer is surveyors. Contractors, subcontractors, and surveyors all have standing to seek a mechanic’s lien. Real estate professionals and others who assist property owners in handling their business dealings typically do not have the right to place liens on property.
The right of a defaulted taxpayer to recover property before its sale for unpaid taxes is
A. the statutory right of reinstatement.
B. the equitable right of appeal.
C. the statutory right of assessment.
D. the equitable right of redemption.
the equitable right of redemption
The answer is the equitable right of redemption. An equitable right of redemption exists because it is only fair (equitable) that a property owner be permitted to save the property before a tax sale—or even a foreclosure sale—by paying the amount owed in full.
Which of the following is a specific, involuntary, statutory lien?
A. Real estate tax lien
B. Income tax lien
C. Estate tax lien
D. Judgment lien
Real estate tax lien
The answer is real estate tax lien. A real estate tax lien is always on a specific piece of realty; it happens without permission of the property owner and so is involuntary; it is created by statute. Therefore, it is specific, involuntary, and statutory
General real estate taxes levied for the operation of the government are
A. assessment taxes.
B. ad valorem taxes.
C. special taxes.
D. improvement taxes.
Ad valorem taxes
The answer is ad valorem taxes. Confusingly, the general real estate tax—the ad valorem tax—creates a specific lien. The word general, in this context, distinguishes this tax from a special assessment for a specific project or neighborhood.
Properties on which real estate taxes must be paid include
A. public hospitals.
B. golf courses operated by the park district.
C. synagogues and churches.
D. apartment buildings.
Apartment buildings.
The answer is apartment buildings. Properties such as public hospitals and public parks, as well as religious institutions such as synagogues and churches, are usually exempt from real estate taxes. Apartment buildings, typically operated as investment properties, are taxed.)
