National Real Estate Exam

If a promissory note (given for payment on a parcel of land) has a lower lien priority than a succeeding claim, what is this called? Select one: A. Estoppel B. Enumeration C. Subordination D. None of the above

C. Subordination

Real estate salespersons often prepare a CMA when making listing price recommendations. Which principle is a CMA primarily based upon? Select one: A. The principle of conformity B. The principle of contribution C. The principle of substitution D. The principle of highest and best use

C. The principle of substitution

A budget mortgage payment (PITI) would normally NOT include: Select one: A. A payment toward the principal of the loan B. A payment toward the interest of the loan C. 1/12 of the annual real property taxes D. 1/12 of the annual life insurance premium

D. 1/12 of the annual life insurance premium ***The insurance portion of the PITI is hazard insurance, NOT life insurance.

The difference between an employee and an independent contractor depends on: Select one: A. Scope of work B. Degree of supervision C. Who pays insurance D. All of the above

D. All of the above

Building codes: Select one: A. Could be based on national standards B. Are enforced locally C. Involve a certificate of occupancy D. All of the above

D. All of the above Building codes often include national, state, or local standards. They are issued and enforced by local authorities, and a certificate of occupancy must be issued to document conformity.

Which of the following items is not personal property? Select one: A. A lease B. A mortgage that secures personal property C. Partnership interests D. An easement

D. An easement

The principle of substitution is used with the: A. Income approach B. Cost approach C. Market data approach D. Both B and C

D. Both B and C

If a broker has an exclusive right-to-sell listing, which of the following statements is INCORRECT? Select one: A. There must be a definite termination date in the listing B. All money given to the broker must be accounted for C. The broker may cancel the listing if he chooses D. The broker is legally obligated to sell the property

D. The broker is legally obligated to sell the property -) The broker is NOT obligated to sell the property. He is only obligated to make a reasonable effort to sell the property.

Redlining

Denying loans in certain areas due to race, religion, sex, familial status, or a disability.

Blockbusting

Encouraging owners to sell their properties because minorities are moving into a neighborhood

(FHA)

Federal Housing Administration

Estate for Years is a type of leasehold that:

Has a specific expiration date or specific term.

Warranty Deed

Offers the greatest protection that a deed can give

Trade Fixtures

Personal property used in a business and can be removed by the lessee when the lease terminates.

Easement

Right to use a property for a specific use

Easement Appurtenant

Runs with the land.

A seller sells her home to a buyer who assumes her existing loan. If the buyer defaults, who is responsible for the balance of the debt?

Seller and buyer, jointly and severally **When the buyer "assumes" the existing loan of the seller, the seller remains a co-maker on the note with the buyer. Thus, both the seller and the buyer are jointly (both) and severally (individually) liable to the lender for the debt. This means that the lender may go after either or both parties in case of default.

Federal Fair Housing Laws do NOT provide protection on the basis of:

Sexual preference

A real estate broker is a

Special Agent

Fannie Mae

The Federal National Mortgage Association

Ginnie Mae

The Government National Mortgage Association

Condemnation

The PROCESS of the government taking a property by eminent domain.

Eminent Domain

The RIGHT of the government to condemn & take the property.

Life Estate

The estate CANNOT be passed on to the life estate holder's heirs

Quiet enjoyment

The promise that the grantee's possession of the land will be defended against hostile claims and and that he shall enjoy possession of the property

Escheat

The state takes property upon an owners death if there is no will & no heirs exist.

RESPA (Real Estate Settlement Procedures Act)

a law requiring full disclosure of closing costs to buyer and seller.

Net Listing

- seller hires broker to locate a buyer and agrees to compensate the broker with a set amount of money - broker can sell the house for as much as he wants - ILLEGAL IN MOST STATES

Economic Life

- the period of time over which an income-producing property is expected to remain economically profitable to its owner - Economic life is SHORTER than physical life.

A mortgage broker

-true intermediaries--they neither close nor service loans in their own name. - may be a person, firm, or corporation THEY ARE NOt: Banks because they do not take deposits

The types of deeds are:

1) Warranty Deed 2) Special (or limited) Warranty Deed 3) Quitclaim Deed 4) Special Purpose Deed 5) Transfer on Death Deed.

Elements necessary to a valid deed:

1) signed & acknowledged by grantor 2) Lists marital status of the grantor 3) Use words of conveyance - also called a granting clause 4) Names & addresses of grantees 5) Acknowledged by Grantor in front of Notary Public 6) Signed in front of two witnesses (in most states) 7) Legal description 8) Delivery & acceptance of deed

Encumbrance

A claim or liability that attaches to the land & is held by one who is NOT the fee owner.

Breach

A failure to perform without any recognized excuse is:

Pur Autre Vie

A life estate that is dependent up the life of another.

Adverse Possession

A person takes possession & use of a property belonging to another. Possession must be open, notorious, hostile & uninterrupted for a certain period of time

The buyer-broker agreement that is most similar to the exclusive right-to-sell contract is: Select one: A. Exclusive buyer agency agreement B. Exclusive agency buyer agency agreement C. Open buyer agreement D. Exclusive right-to-market agreement

A. Exclusive buyer agency agreement

Which of the following deed clauses is most likely to state the names of the parties? A. Premises B. Habendum C. Testimonium D. None of the above

A. Premises **only the premises clause names the parties to the transaction.

When property is sold with an existing lease: Select one: A. The lease interests are transferred B. The original lessor retains liability C. The lessee must renegotiate possession D. The assignee would pay the rent to the assignor

A. The lease interests are transferred

An owner has been using a parcel of land for heavy industry since 1973. Subsequently, the property is zoned commercial, excluding industrial uses. The owner's continued industrial use of the property is a(n): Select one: A. Violation of the existing zoning B. Deviation from the master plan C. Zoning variance D. Illegal non-conforming use

A. Violation of the existing zoning

Easement in Gross

An entity's personal right to use property. The receiver DOES NOT own the adjoining property. Example: utility easement

Which of the following is the BEST example of a unilateral contract? A. Lease B. Option C. Real estate contract for sale D. Listing agreement

B. Option

Which of the following persons would likely NOT be an agent? Select one: A. A real estate salesperson handling referrals only B. A property manager employed by the owner C. A person working for a multiple listing service D. A person holding a power of attorney

C. A person working for a multiple listing service

Mortgage brokers: Select one: A. Discount loan B. Service a loan C. Act as intermediaries D. Close a loan

C. Act as intermediaries

The type of value that a local government assigns to a property is the: Select one: A. Market value B. Appraised value C. Assessed value D. CMA value

C. Assessed value

Freddie Mac

he Federal Home Loan Mortgage Corporation

A negative (restrictive) covenant

is a private restriction on land that may appear in a deed. This type of restriction would be imposed by a developer, not local government through use of zoning powers. or building codes

Severance

the act of removing a fixture.

Fixtures

items of personal property attached to real property that are not removed by the seller

The Truth-in-lending Act

law that requires disclosure of loan costs

Heterogeneity

or uniqueness, is the legal basis for specific performance lawsuits (lawsuits that seek to force a sale of land as agreed).

Examples of Specific Liens

real estate taxes, mortgages, mechanics liens

Open Listing

1) Any # of brokers may be retained 2) The broker who sells the property receives the commission. - Agency agreement between a seller and brokers - owner is only obligated to pay a commission to a broker if they sell the property or if they are the PROCURING CAUSE - if the owner sells the property than they owe NO commission to the broker - unilateral - may be oral or written - can have an indefinite exp date

RESPA prohibits:

1) Kickbacks & fees for services not performed in connection w/ the closing 2) It limits the amount of escrow reserves a lender can hold 3) The sale may not be on the condition on the use of a certain title co or escrow co. chosen by the seller.

RESPA requirements include:

1) Lenders must give borrowers a good faith estimate of closing costs. 2) Lenders must give borrowers a HUD booklet describing closing costs, settlement procedures & borrowers rights. 3) Closing agent must prepare a HUD stmt detailing how much was paid to what companies for what services 4) Borrower must be given right to inspect HUD stmt 1 day before close. 5) Lenders & other parties must give full disclosure of all business relationships. 6) Lender must disclose to borrower if the loan is likely to be sold to another investor.

The 3 approaches to value are:

1) Market Data Approach (single family homes) 2) Cost Approach (commercial property) 3) Income Approach (income producing property)

Exclusive Listing

1) Only one broker is authorized to sell 2) If the owner finds a buyer, no commission is owed - seller pays exclusive agent a commission if they sell the property, or if any other broker sells the property - similar to open if the owner sells the property they owe NO commission to the broker -bilateral -must be written -must have exp date

Exclusive Right to Sell

1) Only one broker is authorized to sell 2) the broker receives a commission no matter who finds the buyer (broadest opportunity for a commission) - seller lists the property with a single broker - will pay the broker regardless of who sells the property - must be written -bilateral - personal service -definite exp date

Violations of the Sherman Antitrust Act include

1) Price Fixing 2) Allocation of the market

The Civil Rights Act of 1866 Covers:

1) Race 2) Color 3) Ancestry (it's the only act that covers this) It applies to all property (Real & Personal) There are no exceptions

The Federal Equal Credit Opportunity Act applies to:

1) Race 2) Color 3) Religion 4) Sex 5) National Origin 6) Age 7) Marital Status 8) Receipt of Public Assistance

The Federal Fair Housing Act Covers:

1) Race 2) Color 3) Religion 4) Sex 5) National Origin 6) Disability 7) Familial Status It applies ONLY to housing & land for housing Exceptions: 1) FSBO 2) FSBO - 4 plex 3) Religious Groups 4) Private Clubs

Joint Tenancy

2 or more ownership holders own a fraction of UNDIVIDED interest. Rights of survivorship apply.

warranty forever

the promise the title will always be good.

Option Contract

the right to buy a property at a fixed price within a stated period of time

The market price of real estate is generally the same as: 1 Sales Price 2 Appraised Value 3 Highest and best use 4 Mortgage loan value

Answer: 1, Sales price

A mortgage note must be: 1 a negotiable instrument 2 Signed by the mortgagor 3 Signed by the mortgagee 4 Recorded to be valid

Answer: 2, Signed by the mortgagor (the borrower)

Which of the following choices is NOT a freehold estate? Select one: A. A present interest in land B. A lease that does not require rent payments C. A life estate D. All of the above

B. A lease that does not require rent payments (types of ownership) Life estates and present estates are freeholds. Regardless of the term, all leases are leaseholds (non-freehold estates).

Which of the following formulas is used to determine annual real estate taxes? Select one: A. Sales price x Tax rate B. Assessed value x Tax rate C. Appraised value x Tax rate D. Market value x Tax rate

B. Assessed value x Tax rate

What is an invitation to enter into a contract? Select one: A. Acceptance B. Counteroffer C. Contract D. All of the above

B. Counteroffer

Deed restrictions usually affect: A. The current owner only B. Current and subsequent owners C. Subsequent owners only D. All property owners within local government boundaries

B. Current and subsequent owners

Which of the following circumstances will not terminate an agency by operation of law? Select one: A. Destruction of the property B. Discharge of the broker by the principal C. Death of the principal D. Death of the broker

B. Discharge of the broker by the principal Discharge of the broker (revocation by the principal) is termination by act of the parties, not by operation of law.

In relation to lien priority, which of the following statements is incorrect? Select one: A. A recorded deed has priority over a recorded mortgage B. Federal income tax liens have priority over all other liens C. Mechanics liens apply on the date that work began or materials were supplied D. The date of recording determines the priority for private liens

B. Federal income tax liens have priority over all other liens ***Real estate tax liens have priority over all others. Federal and State income tax liens must get in line, just like the others. A deed MUST be recorded before property can be pledged. On a related note, remember that property tax liens are specific and not general liens.

The land characteristic that is most likely the basis for a specific performance lawsuit is: Select one: A. Immobility B. Heterogeneity C. Situs D. Improvements

B. Heterogeneity

What is an advantage of FHA financing? Select one: A. No insurance premiums are required B. Lenders cannot charge prepayment penalties C. Loans are fully guaranteed D. The FHA establishes maximum interest rates

B. Lenders cannot charge prepayment penalties

If a salesperson lists a property, she CANNOT be: Select one: A. A dual agent B. Only a buyer's agent C. Only a seller's agent D. An agent for the buyer and seller

B. Only a buyer's agent

If the property title is set to pass to someone other than the grantor upon termination of an estate, the interest held by the person who will receive the property is: Select one: A. Reversionary B. Remainder C. Equitable D. Ostensible

B. Remainder - If the interest given goes back to the grantor, then the grantor's interest is reversionary. Meanwhile, if the interest goes to someone else, the interest is a remainder estate.

The Real Estate Settlement Procedures Act (RESPA) requires lending institutions to provide a Loan Estimate of closing costs: Select one: A. When the loan application is submitted B. Within 3 days of the loan application C. Within 3 days of closing D. Within 10 days of the loan application

B. Within 3 days of the loan application

What is a clause in a mortgage that prevents a buyer from assuming an existing loan? Select one: A. Condemnation B. Defeasance clause C. Alienation clause D. Acceleration clause

C. Alienation clause The alienation clause is also referred to as the "due on sale" clause. This means that if you sell the property, the entire loan balance is DUE. If interest rates are going up, lenders do not want anyone to assume a loan at lower than market rates.

Mrs. Franklin is buying property from Mr. Akin. In order to get to her property, it is necessary to cross property owned by Mr. Travis. In the past, Mr. Travis had granted permission to Mr. Akin for this purpose. Mrs. Franklin wants to protect this privilege. What would best serve Mrs. Franklin's interests? Select one: A. An easement in gross B. A license C. An appurtenant easement D. Either A or C

C. An appurtenant easement Mrs. Franklin should ask for an easement from Mr. Travis. The easement could be an appurtenant easement or an easement in gross. Both would give Mrs. Franklin the RIGHT to cross the property. However, an appurtenant easement would transfer to other property owners and survive the death of either owner. An easement in gross would not serve Mrs. Franklin as well as an easement appurtenant because the easement in gross would not survive the death of Mr. Travis. A license would not serve Mrs. Franklin well because it is revocable at the will of Mr. Travis. Therefore, an easement appurtenant would BEST serve Mrs. Franklin.

Dixie is selling her own home as a FSBO. On Sunday, a full price offer is made by an Asian couple. Dixie refuses the offer. On Monday, Dixie accepts an offer that is $4,000 below asking price from a Caucasian family. Dixie could be in violation of which of the following laws? Select one: A. Fair Housing Law of 1986 B. State license laws if Dixie is not licensed C. Civil Rights Act of 1866 D. None of the above

C. Civil Rights Act of 1866 -(fair housing laws) Dixie could only be in violation of the 1866 Civil Rights Act, and not current Fair Housing Laws. Strange as it may seem, the Fair Housing Law exempts owner sales so long as the owner does not use discriminatory advertising. However, NO ONE is exempt from the 1866 Civil Rights Act. Finally, most states permit an owner to sell her property without a license.

The donation of real estate for public use is: Select one: A. Reverse condemnation B. Eminent domain C. Dedication D. Escheat

C. Dedication

What is not a private limitation on title? Select one: A. Lien B. Deed restriction C. Eminent domain D. Encroachment

C. Eminent domain

Which of the following items would be disclosed by a metes and bounds survey? Select one: A. Easement B. Marketability C. Encroachments D. Both B and C

C. Encroachments The survey should definitely reveal any physical encroachments. Meanwhile, easements may not be obvious and would have to be checked in the county records. Once this is checked, they are indicated on the plat that the surveyor prepares. Depreciation is not something the surveyor considers, nor does he consider the marketability of the property. A surveyor is only concerned with the physical characteristics of the property itself.

Which of the following is most likely to render a contract void? Select one: A. Fraud in the inducement B. Mutual mistake C. Illegal purpose D. All of the above

C. Illegal purpose -Contracts for an illegal purpose are always void (because courts won't enforce an agreement to break the law). If parties enter into a contract and there was fraud in the inducement or a mutual mistake, the contract would be VOIDABLE, not VOID. Fraud in the inducement exists where a party is induced to sign the contract because of fraudulent statements or facts from the other party.

An area where zoning regulates the specific balance of shopping, business, and recreational facilities is an example of: Select one: A. Urban renewal B. Spatial zoning C. PUD D. Commercial condition zoning

C. PUD *** Planned Unit Developments (PUDs) are mixed-use developments that use zoning ordinances to achieve a desired balance.

The Government's right to control private land is limited by: Select one: A. Just compensation clause B. Right to privacy C. Rational relationships D. None of the above

C. Rational relationships

Which of the following items is not covered as a trigger term under Regulation Z? A. loan amount B. down payment amount C. frequency of payments D. number and amount of payments

C. frequency of payments

The purpose of a recording act is to:

Create a local public record

What is the economic characteristic which states that a person will purchase based on the expectation of a future benefit? Select one: A. Increasing returns B. Highest and best use C. Substitution D. Anticipation

D. Anticipation -Anticipation is when an investor purchases a property based on its future potential income.

A quitclaim deed may be used to: Select one: A. Transfer ownership of a fee simple estate B. Transfer interest in a life estate C. Terminate an easement D. Any of the above

D. Any of the above

All of the following situations are examples of downzoning, except: Select one: A. From single family dwellings to multi-unit apartments B. From agricultural use to single-family dwellings C. From single-family dwellings to a conversation area D. Both A and B

D. Both A and B

Prior to 1986, what was an advantage of FHA financing? Select one: A. No insurance premiums were required B. Lenders could not charge discount points C. Loans were fully guaranteed D. Loans were automatically assumable

D. Loans were automatically assumable

A conventional loan could be: Select one: A. FHA insured B. VA guaranteed C. HUD originated D. None of the above

D. None of the above -Conventional loans are those which are not FHA insured or VA guaranteed. HUD does not originate loans.

An owner lists a home with a broker for $72,000. Two days later, the broker brings in an offer for $70,000. At this time, which of the following statements is true? Select one: A. The broker had found a buyer and has earned his commission B. A ready and willing buyer has been found and a commission is due C. A ready and willing buyer has been found, but no commission is due D. None of the above

D. None of the above In order to earn a commission, the broker must find a ready, willing, and able buyer ON THE TERMS OF THE SELLER. The offer was lower than the listed price; therefore, the offer was NOT on the terms of the seller.

All of the following are examples of dual agency except: A. Broker representing buyer and seller, with consent of both B. Escrow agents C. Broker representing both buyer and seller, without consent of either D. Two salespersons in a firm represent a different buyer and seller

D. Two salespersons in a firm represent a different buyer and seller

A broker would be in violation of the Federal Fair Housing Act for all of the following actions, EXCEPT: Select one: A. Refusing to list a 4-unit apartment because it is owned and occupied by a minority couple B. Accepting a listing with the intention of changing the racial make-up of the neighborhood C. Hiring salespersons on the basis of sex, regardless of experience or qualifications D. Refusing to show a German couple property that is located in a mostly Italian neighborhood

Hiring people on the basis of sex is a gross violation of the law, but NOT the Fair Housing Law. Such a practice is a violation of the Equal Employment Opportunity Act. C. Hiring salespersons on the basis of sex, regardless of experience or qualifications

Steering

Trying to influence a buyer's housing choice using race, religion, ethinicity, national origin, or ancestory factors as the reasoning.

fixture

an item of real property that was previously considered as personal property.

A quitclaim deed CAN

be used to transfer any interest in real property from one party to another. It is normally used for the transfer of an interest that is less than fee simple.