Clare Institute

The primary steps of the cost approach are to:

(1) estimate the land value, (2) estimate the replacement cost of the building new, (3) deduct all accrued depreciation from the replacement cost and (4) add the estimated land value to the depreciated replacement cost.

The Section East of Section 36 is: (a) Section 31 (b) Section 35 (c) Section 25 (d) Section 1

(a) Section 31 of the adjoining Township is East of Section 36.

A landlord must give the lessee (tenant) a copy of the lease within: (a) 5 days. (b) 15 days. (c) 25 days. (d) 30 days.

(b) 15 days.

Sellers of target housing must disclose to potential purchasers the presence of any known lead-based paint hazards that affect homes built prior to: (a) 1948 (b) 1978 (c) 1996 (d) 2000

(b) 1978

. Which of the following describes a "perfect escrow?" (a) All documents submitted to escrow have been proofed for errors. (b) All documents, funds, and instructions needed to close the transaction are in the hands of the escrow agent. (c) The title search has taken place and the policy of title insurance has been issued. (d) All financial settlements have taken place and the documents are recorded.

(b) All documents, funds, and instructions needed to close the transaction are in the hands of the escrow agent.

A non-riparian landowner obtains the right to take water from another property by: (a) percolation. (b) appropriation. (c) allocation. (d) avulsion.

(b) appropriation. Appropriative water rights allow a non-riparian owner to divert water flowing on another owner's land or water flowing on the public domain.

Corn crops are harvested once-a-year. Which theory applies? (a) doctrine of relation back (b) doctrine of constructive severance (c) doctrine of harvest and sale (d) doctrine of fruitful labor

(b) doctrine of constructive severance

In a tight money market, when interest rates are increasing, but rental rates are stable, how do these circumstances influence the market value of real property? (a) value increases (b) value decreases (c) not significant changes on existing rental properties. (d) value stays the same

(b) value decreases

3. A court order to ensure the sale of property to pay off judgment is called a(n): (a) foreclosure. (b) writ of execution. (c) lien. (d) attachment

(b) writ of execution.

Which of the following is the most commonly used credit rating system? (a) DACO (b) RESPA (c) FICO (d) FDIC

(c) FICO

The water department is a: (a) state governmental agency. (b) local government agency. (c) a quasi-governmental agency. (d) a privately owned agency.

(c) a quasi-governmental agency.

Valuable, adequate, good and sufficient in a contract would apply to (a) performance (b) just compensation (c) consideration (d) a bilateral contract

(c) consideration

Dual agency happens mostly with: (a) cooperating brokers. (b) mobile homes. (c) in-house sales. (d) subdivision sales.

(c) in-house sales.

Which of the following fees are allowed under RESPA? (a) One person marks up the cost of a third party service and keeps the difference without providing any goods or services to justify the additional charge. (b) Two or more persons split a fee and one person did not perform any services to receive a share of the fee. (c) A payment for the referral of business, rather than for services actually performed. (d) Payments to an attorney for services actually rendered.

(d) Payments to an attorney for services actually rendered.

. An easement differs from a license in that a license: (a) must be created by written instrument. (b) is of indefinite duration. (c) may be assigned. (d) may be revoked.

(d) may be revoked. A license is the personal, revocable, nonassignable permission to do some act on the land of another. An easement cannot be revoked.

Operating expenses

- accounting and legal services - advertising - insurance premiums - maintenance - management fees - property taxes - repairs - reserves and replacement - supplies- utilities

five requirements to acquire title by adverse possession:

1. The possession must be by actual occupation and be open and notoroius. 2. It must be hostile to the true owner's title. 3. It must be under claim of right or color of title. 4. Possession must be continuous and uninterrupted for a period of five years. 5. Claimant must have paid all real property taxes levied and assessed for a period of five years continuously.

lien

A charge or claim that one person (lienor) has on the property of another (lienee) as security for a debt or obligation.

"bulk transfer sale?"

A lumber company who transfers a substantial amount of lumber not in the ordinary course of business. A bulk sales would contain the words "not in the ordinary course of the transferor's business."

American Land Title Association (ALTA) policy

A title insurance policy that protects the interest in a collateral property of a mortgage lender who originates a new real estate loan.

covenant

A written agreement between two or more parties in which a party or parties pledge to perform or not perform specified acts with regard to property; usually found in such real estate documents as deeds, mortgages, leases and contracts for deed

Commission rate price fixing is a violation of the:

Anti-trust laws. Price fixing is a violation of the Sherman Anti-trust laws.

encumbrance

Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or burden, obstruct or impair the use of a property but not necessarily prevent transfer of title.

appurtenant

Appurtenant items belong to a property. For example, the garage is appurtenant to the house. Appurtenant items run with the land when the property is transferred. Trade fixtures do not transfer with the property.

Principle of Regression

Between dissimilar properties, the worth of the better property is adversely affected by the presence of the lesser-quality property. Regression is considered economic obsolescence.

The disadvantages of a Land Contract to the buyer are several, chiefly:

Covenants or restrictions of assignment or transfer of the land contract may hamper or prevent the transfer of buyer's interest therein. The buyer may not be aware of these problems until the time to transfer title. A prevailing opinion among financial institutions that a Land Contract is poor collateral because it is subject to a more rapid termination in the event of default. After full performance, the buyer may receive defective title or no title at all, although normally the contract will require delivery of a policy of title insurance. The buyer may have to pay the premium for this. Lack of assurance that the seller has good title at the time the contract is made, coupled with the fact that prior to full performance by the buyer, the buyer may not rescind the contract on these grounds. If during the contract term the seller should go bankrupt or die and title passes to heirs or be declared incompetent or have a conservator appointed, the buyer can at the very least anticipate time consuming, frustrating, and expensive litigation before obtaining a deed and policy of title insurance.

four characteristics of market value:

Demand, Utility, Scarcity, Transferability. On the state exam they are sometimes referred to as the "primary requisites of value." Memory aid: DUST

In the correct order, list the chain of events necessary to comply with the agency disclosure law:

Disclose, Elect, Confirm (Memory Aid: DEC).

Brownfields

Economically depressed urban areas suffering from real or perceived hazardous material contamination.

frost line

Frost line is how deep the frost permeates the ground. When building codes address frost line or frost depth they are referring to the building code mandate for the depth a foundation must penetrate into the ground.

Material Fact

Generally, a matter is considered material if the other party would not have entered into the contract had he/she known the true facts.

3 stages of building a single-family dwelling

Land acquisition development and construction

fiscal tax year

Memorization Aid: No, Darn, Foolin, Around: November 1st: First installment due; December 10th: Delinquent date for 1st installment; February 1st: Second installment due; April 10th: Delinquent date for 2nd installment.

The five tests of a fixture are:

Method of attachment, Agreement of the parties, Relationship of the parties, Intention of the person attaching it, Adaptability of the item. Study aid: "MARIA"

estoppel

Method of enforcing an agency relationship in which someone stated incorrectly that another person is his or her agent, and a third person relied on that representation.

personal property

Personal property are things that are tangible and movable; property that is not classified as real property, such as chattels. Title to personal property is transferred by way of a bill of sale, as contrasted with a deed for real property.

severalty

Sole ownership of real property.

unit-in-place method

The appraisal method of estimating building costs by calculating the costs of all of the physical components in the structure with the cost of each item including its proper installation, connection, etc. Also called the segregated cost method.

inflation

The gradual reduction of the purchasing power of the dollar, usually related directly to increases in the money supply by the federal government.

real property

The interests, benefits and rights inherent in real estate ownership.

attachment

The legal process of seizing the real or personal property of a defendant in a lawsuit by levy or judicial order, and holding it in court custody as security for satisfaction of a judgment.

Market Value

The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale.

return on investment

The net annual income divided by the original cash investment equals a percentage return on investment.

lessee

The person to whom property is rented or leased; called a tenant in most residential leases.

trustor

The person who creates a trust and places the property into the trust. The trustor is the borrower under a deed of trust and is the one who signs the note and deed of trust.

eminent domain

The right of the government to acquire title to property for public use by condemnation; the property owner receives compensation which is generally fair market value.

easement

The right to a specific use of or right to travel over land owned by another. The land being used or traveled over is the servient tenement; the land that is benefited by the use is the dominant tenement.

estate (tenancy) at sufferance

The tenancy of a lessee who lawfully comes into possession of a landlord's real estate but who continues to occupy the premises improperly after his or her lease rights have expired

The four unities of joint tenancy are:

Time, Title, Interest, and Possession

beneficiary statement

Upon the written request of an authorized person, the beneficiary must furnish a beneficiary statement within 21 days. There may be a $300 penalty for failing to comply. Although the beneficiary must provide an annual statement at no charge, additional statements may carry a maximum $60 charge.

deed in lieu of foreclosure

a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

"in-house" sale

a form of dual agency where a buyer is represented by the same brokerage firm that has the listing.

In real estate, the word "tenancy" means:

a method, mode or means of holding title by a lessee or owner.

Annexation

an addition to property by the act of joining or uniting one thing to another, as in attaching personal property to real property thereby creating a fixture. For Example, a sink becomes a fixture when it is annexed to the plumbing outlet.

ornate cornice

an outdated architectural design classified as functional obsolescence

Appurtenant

belonging to, adjunctive, appended or annexed to. For example, the garage is appurtenant to the house, and the common interest in the common elements of a condominium is appurtenant to each apartment. Appurtenant items "run with the land" when the property is transferred. Trade fixtures do not transfer with the property.

fee simple defeasible

created to exist only until the occurrence or non-occurrence of a particular event. This question describes a defeasible estate with a condition subsequent. If the condition is breached, the estate can revert to the grantor either automatically or by court action.

When the real estate commissioner stops a real estate licensee from performing any act in real estate which requires a license, he would issue a(n):

desist and refrain order.

The Office of Interstate Land Sales Registration (OILSR) applies to:

development of 100 or more unimproved lots for sale.

If interest rates on loans increase, capitalization rates would tend to:

increase. The "return on" part of the capitalization rate is the same as interest. If interest rates increase, the capitalization rate increases.

quantity-survey method

involves a detailed estimate of the quantities of raw materials used (lumber, plaster, brick, cement), as well as the current price of the material and installation costs. It also includes indirect costs, such as building permit, land survey, and overhead.

capitalization rate

measures the risk involved in an investment. Thus, the higher the risk the higher the CAP rate; the lower the the risk the lower the CAP rate. Leasing a building for a hardware store involves higher risk of vacancy than leasing for a post office and results in a higher CAP rate.

gross rent multiplier

obtained by dividing the sales price or value by the gross monthly rent.

ostensible agency

ostensible agencyA form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document

Disposition

refers to the act of selling or otherwise 'disposing' of an asset or security.

interim use

some use the property is put to while waiting for some future action that will make another use the most productive or as we say in the business..."it's highest and best use." Interim use is a form of nonconforming use of property.

Involuntary alienation

takes place when property is sold against the owner's will.

Principle of Substitution

the basis of all appraisal techniques in determining property value. Simply stated, value will tend to be set by the cost of acquiring an equally desirable substitute.

The rights of ownership include

the exclusive right to possess, encumber, will and sell. Also included is the right to give the property away (gift). Not the right of eminent domain.

fee simple estate

the maximum possible estate one can possess in real property. It is the least limited interest and the most complete and absolute ownership.

reconcilation

the process of interpreting the data gathered by bringing the various value estimates into mutual relationship with one another to determine a final estimate of value.

The word "percolation" refers to:

the returning of water to the land. It results in the recharging of the underground water system called the "water table."