Real Estate Final Exam 1
The Civil Rights Act of 1866 prohibits discrimination in housing based on which of the following reasons? • 1 Race • 2 Religion • 3 Sex • 4 Age
• 1 Race Although surprising to many, the original civil rights legislation was passed in 1866--by one vote over the veto of President Andrew Johnson
Which phrase is not acceptable to use when advertising? • 1 "Quiet streets" • 2 "Christian home" • 3 "Non-smoking" • 4 "Desirable neighborhood"
• 2 "Christian home" If a licensee creates an ad which is explicit in its preference for or limitation of any particular religion, the ad is discriminatory. It is probably safe to say that any advertising that describes the property would be considered acceptable, while advertising that describes buyers could be considered discriminatory, especially if the buyers are from a protected class.
When real estate under an estate for years is sold, what happens to the lease? • 1 It expires with the conveyance. • 2 It binds the new owner. • 3 It is subject to termination with proper notice. • 4 It is valid but unenforceable.
• 2 It binds the new owner. Tenancy for years is the common form of rental agreements and binds all future owners for the term of the lease.
Which of the following provides a buyer with the best assurance of clear, marketable title? • 1 Certificate of title • 2 Title insurance • 3 Abstract of title • 4 General warranty deed
• 2 Title insurance Title insurance provides the best assurance of marketable title.
After a seller's listing agreement with ABC Realty expires, what restrictions exist if the seller decides to list with a different agency and ABC Realty has an interested buyer? • 1 ABC Realty is barred from working with the seller due to previous client-agency confidentiality agreements and must refer the buyer to another agency. • 2 ABC Realty may represent the buyer but may not disclose any information about the physical condition of the property. • 3 ABC Realty may represent the buyer but may not disclose any information about offers made on the property when it was listed with ABC Realty. • 4 ABC Realty may only represent the buyer if at least 60 days have passed since the termination of the listing agreement with the seller.
• 3 ABC Realty may represent the buyer but may not disclose any information about offers made on the property when it was listed with ABC Realty. ABC Realty may certainly represent the buyer now that the listing agreement with the seller is terminated. Any information about physical condition of the property must be disclosed, but information such as knowledge of previous offers on the property, must remain confidential.
What is a Schedule of Exceptions on a title policy? • 1 Encumbrances • 2 Tax liens • 3 List of things not insured in the policy • 4 Defects
• 3 List of things not insured in the policy Almost no title insurance policy protects against all conceivable events. As the name suggests, the Schedule of Exceptions is a specific list of items not covered and can include things such as unrecorded mechanic's liens, assessments, water rights and mining claims.
If the owner of the dominant tenement becomes the owner of the servient tenement and merges the two properties, what happens? • 1 The easement becomes dormant. • 2 The easement is unaffected. • 3 The easement is terminated. • 4 The properties retain their former status.
• 3 The easement is terminated. "Dominant" and "servient" tenements involve two adjacent properties in which an easement is involved. For example, let's say Bridle Creek Farms and Barnstable Farms are separate parcels divided by a country lane that provides access to the county road system. The lane is owned by Bridle Creek, but the deeds of both properties stipulate that Barnstable Farms shall have unrestricted access for the purpose of accessing county roads. That access is an easement. Thus, if the owner of Barnstable Farms buys Bridle Creek Farms, the need for the easement disappears.
The covenant in a deed which states that the grantor is the owner and has the right to convey the title is called • 1 covenant of power. • 2 covenant of warranty forever. • 3 covenant of seisin. • 4 covenant against encumbrances.
• 3 covenant of seisin. Another outgrowth of the feudal system, "seisen" derives from the French meaning to "sit upon or own" and gives owners the right to sell or transfer property at will.
To assign a contract for the sale of real estate means to • 1 record the contract with the county recorder's office. • 2 permit another broker to act as agent for the principal. • 3 transfer one's rights under the contract. • 4 allow the seller and the buyer to exchange positions.
• 3 transfer one's rights under the contract. Assigning a contract means to transfer it to another.
A Savings & Loan institution would be violating the Federal Fair Housing Act by denying a loan to Mr. and Mrs. Happy Borrower for which of the following reasons? • 1 Low earnings • 2 No full-time job(s) • 3 Too many loans • 4 Minority background
• 4 Minority background Fair Housing and other anti-discrimination legislation doesn't force lenders or others to abandon sound business practices (such as denying loans to unqualified borrowers), merely to be fair and equally accessible to all people.
Which of the following type of agency relationship is NOT recognized in Michigan? • 1 Designated agency • 2 Disclosed dual agency • 3 Subagency 4 Transaction brokerage agency
• 4 Transaction brokerage agency Single agency (on behalf of either buyer or seller) and disclosed dual agency are the only types of agency relationships recognized in Michigan.
A breach of contract is a refusal or a failure to comply with the terms of the contract. If the seller breaches the purchase contract, the buyer may do all of the following EXCEPT • 1 sue the seller for specific performance. • 2 rescind the contract and recover the earnest money. • 3 sue the seller for damages. • 4 sue the broker for non-performance.
• 4 sue the broker for non-performance. While brokers and salespeople are responsible for bringing people together, they cannot be expected to know every detail of their circumstances or intent. Thus, if a buyer cannot get clear title or a seller is unexpectedly transferred, it is not the broker's fault the transaction failed and he or she bears no responsibility or liability.
The primary purpose of a deed is to • 1 prove ownership. • 2 transfer title rights. • 3 give constructive notice. • 4 prevent adverse possession.
2 transfer title rights. A deed is the instrument by which ownership of a property is transferred from one person to another, while a title is evidence of that ownership.
The rights of the owner of property located along the banks of a river are called • 1 littoral rights. • 2 prior appropriation rights. • 3 riparian rights. • 4 hereditament rights.
3 riparian rights. "Littoral" and "prior appropriation" are different kinds of water rights: in the first case, navigation rights to an ocean or other large body of water; in the second, the right to use a water source for irrigation. A hereditament is any inheritable property.
The federal anti-discriminatory laws apply to which of the following? • 1 A broker selling a single-family home • 2 A private club not open to the general public • 3 Office building sales • 4 The rental of industrial property
• 1 A broker selling a single-family home Civil rights laws apply to owners of residential property, rental units, hotels and virtually any other building offering housing or accommodations to the general public.
Broker Kiki is trying to sell a unique $15,000,000 mansion in South Beach. What advertising medium would probably be the best option for Kiki to sell this particular property? • 1 A magazine ad • 2 A billboard ad • 3 A telephone directory ad • 4 A radio ad
• 1 A magazine ad A magazine ad, although significantly more expensive than newspaper advertising, could be just what a firm needs to attract wealthy clients to their upscale offerings. Or a specialty magazine could be the appropriate venue for a particularly unique property.
Which of the following activities is a violation of the Federal Fair Housing Act? • 1 A nonprofit church that denies access to its retirement home to any person because of race • 2 A nonprofit private club that gives preference in renting units to its members at lower rates • 3 The owner of a single-family residence selling his/her own home who gives preference to a buyer based on his/her sex • 4 Discrimination in the sale of a warehouse based on the prospective purchaser's gender
• 1 A nonprofit church that denies access to its retirement home to any person because of race • 4 Discrimination in the sale of a warehouse based on the prospective purchaser's gender The private club is exempt because its preferential treatment is based on its membership; the home owner is exempt, so long as he is selling his home without a broker; the warehouse is exempt because it's not a housing unit.
A zoning change has been announced that will result in the loss of value of the property to a property owner. What should a property manager do? • 1 Advise the owner immediately. • 2 Terminate the property management agreement. • 3 Follow the owner's instructions that were previously given. • 4 Start lobbying against the zoning change.
• 1 Advise the owner immediately. Again, the property manager is the owner's "eyes and ears" for protecting the owner's best interests. Anything that can impact the property's value in either a positive or negative way should be communicated immediately.
What do liens and easements have in common? • 1 Both are encumbrances. • 2 Both must be on the public record to be valid. • 3 Neither can be done without the consent of the owner. • 4 Both are money claims against the property.
• 1 Both are encumbrances. Liens are, of course, serious in that they indicate the owner has failed to pay a debt secured directly or indirectly by the property. Easements, on the other hand, are generally a practical necessity for most residential properties.
In which of the following circumstances is a seller's disclosure statement NOT required? • 1 If the property is a commercial property. • 2 If the seller is listing the property as "for sale by owner". • 3 If the seller has not resided at the property for 1 year or more. • 4 If the buyer is the current tenant of the property.
• 1 If the property is a commercial property. Seller property disclosure forms are mandatory in the sale of 1- to 4-dwelling units, whether or not the buyer or seller has resided on the premises recently. However, seller property disclosure forms are NOT required in the sale of commercial properties.
Which of the following closing costs is typically paid by the buyer? • 1 Private mortgage insurance (PMI) • 2 Broker's commission • 3 Satisfy existing liens • 4 A flip tax
• 1 Private mortgage insurance (PMI) A buyer has to pay private mortage insurance if they did not have a 20%+ down payment (unless they have a VA or FHA loan). The others are paid by the seller
A person agrees to sell a property for $500,000. The buyer gives the seller $150 as valuable consideration for a six-month option. Which of the following statements is true? • 1 The $150 is valuable consideration if the seller accepted it. • 2 The buyer must have at least 5% down as valuable consideration. • 3 The buyer must have at least 20% down. • 4 The seller cannot accept money for the option.
• 1 The $150 is valuable consideration if the seller accepted it. "Valuable consideration" is a necessary component of all contracts. It is the benefit one party receives in exchange for granting benefit to the other. Generally it is money in any amount both parties agree to, though it can take other forms such as personal property, work or refraining from an act.
The Federal Fair Housing Act states that a prima facie case against a broker for discrimination be established after a complaint has been received because the broker has failed to do which of the following? • 1 The broker has failed to display a HUD Equal Opportunity poster. • 2 The broker has failed to hire any minority salespeople. • 3 The broker has failed to join the NAACP anti-discriminatory task force. • 4 The broker has failed to attend mandatory classes on fair housing.
• 1 The broker has failed to display a HUD Equal Opportunity poster. Included among Fair Housing regulations is the requirement that the HUD Equal Opportunity signage be prominently displayed.
A real estate salesperson refers buyers to a particular lender knowing that the lender pays a fee for referrals. Which is TRUE? • 1 The salesperson has acted injudiciously. • 2 The salesperson is well within the bounds of legal business practice if a written buyer agency agreement exists. • 3 The salesperson has acted in the best interests of the buyers if the lender offers a competitive interest rate and reasonable terms. • 4 The salesperson may do so only upon informing the buyers of the referral fee.
• 1 The salesperson has acted injudiciously. The salesperson acted unwisely in this instance because only the employing broker can provide compensation. Referral fees from lenders are illegal.
A realty company has entered agency agreements with both the sellers and the buyers in the transaction of a property. Is this allowable? • 1 Yes, as long as both parties agree in writing to the dual agency. • 2 Yes, as long as the sellers agree to be responsible for the commission. • 3 Yes, as long as the buyers agree to be responsible for the commission. • 4 No, dual agency is not allowable.
• 1 Yes, as long as both parties agree in writing to the dual agency. As long as both parties give written consent to the dual agency, the brokerage can represent both parties.
Carl Chauvinist, the owner of an apartment complex, lives in one unit of a triplex and routinely refuses to rent either of the other two units to a female. Can he do this? • 1 Yes. He may do this if he does not use a broker or discriminate in advertising. • 2 Yes. He may do this if he doesn't ask the tenant's age. • 3 No. Carl can never discriminate on sex. • 4 No. Carl must live in a single family home to discriminate.
• 1 Yes. He may do this if he does not use a broker or discriminate in advertising. Although laws vary by state as to number of units that fall under this type of provision, if a person owns and lives in a unit, he or she is entitled to practice a certain measure of discrimination. The view is that a person's dwelling (which includes units such as duplexes and triplexes) enjoys a degree of "sanctity" and the person may choose whom he or she brings into their "home."
A homeowner owned a house on a lot. The front ten feet of the lot were taken by eminent domain for a sidewalk. Would the homeowner be entitled to compensation? • 1 Yes. The land was taken for public use by eminent domain. • 2 Yes. He must be paid for the use of the sidewalk. • 3 No. He still had use of the house and lot. • 4 No. Compensation is not given on land taken for public use.
• 1 Yes. The land was taken for public use by eminent domain. Governments and municipalities can only seize property (other than in criminal cases) for the public good and through eminent domain, which is a process, not an arbitrary action. Part of that process involves determining fair compensation to the owner.
A competent and disinterested person who is authorized by another person to act in his or her place and sign a contract of sale is called • 1 an attorney in fact. • 2 a substitute grantor. • 3 a licensee. • 4 an agent.
• 1 an attorney in fact. "Disinterested" means being able to act in an objective manner without any hidden motivation or prospect of gain. For example, a person who made a secret deal to sign a contract contrary to his client's best interests in exchange for an under-the-table payment would not be "disinterested."
A special warranty deed differs from a general warranty deed in that the grantor's covenant in the special warranty deed • 1 applies only to a definite limited time. • 2 covers the time back to the original title. • 3 is implied and is not written in full. • 4 protects all subsequent owners of the property.
• 1 applies only to a definite limited time. The more common deed in most states is the general warranty, because it establishes the ownership trail and validity of title going back to the original recorded ownership (for example, the purchase of Manhattan Island and all subsequent divisions, subdivisions and resales). Under a special warranty deed, an owner transfers property guaranteeing the quality of title only during the period of his or her ownership, leaving subsequent buyers vulnerable to prior claims.
The list of previous owners of conveyance from whom the present real estate owner derives his or her title is known as the • 1 chain of title. • 2 certificate of title. • 3 title insurance policy. • 4 abstract of title.
• 1 chain of title. The "chain" links together the successive owners of a property from the most recent to the original recorded title holder. In addition, it notes other relevant information such as mortgages, judgments, liens, death of title holders, inheritors and so forth.
A three-story apartment complex built in 1965 does not meet with the handicapped access provisions for the 1988 Fair Housing Act. The owner must • 1 make the ground floor handicapped accessible. • 2 make the 1st and 2nd floors accessible. • 3 make the entire building accessible. • 4 the owner doesn't have to comply since it's less than 4 stories.
• 1 make the ground floor handicapped accessible. Because the building was constructed before the 1991 standards went into effect, only the first floor needs to be modified.
A(n) _______ is when an owner takes his property off the market for a definite period of time in exchange for some consideration, but he grants the right to purchase the property within that period for a stated price. • 1 option • 2 contract of sale • 3 right of first refusal • 4 installment agreement
• 1 option It's important to note that options generally give flexibility to only one side of the transaction. For example, let's say Barney is expecting a big promotion in six months and wants to buy Fred's house for $300,000 if it comes through. In exchange for keeping his home off the market for six months and agreeing to sell it to Barney for $300,000 at Barney's option, Barney gives Fred $3,000. The $3,000 is Fred's to keep no matter what. However, Barney is not obligated to buy Fred's house; it's his choice. Further, if he does get the promotion and wants to exercise his option, Fred must sell Barney his home for $300,000, even if market conditions have now made it worth more.
An option • 1 requires the optionor to complete the transaction. • 2 gives the optionee an easement on the property. • 3 does not keep the offer open for a specified time. • 4 makes the seller liable for a commission.
• 1 requires the optionor to complete the transaction. It is up to the optionor (seller)to finish the transaction. The optionee (buyer) does not have to complete (close) on the property, but would lose whatever option monies that have been deposited.
The illegal practice of directing minorities to areas populated by the same race or religion is called • 1 steering. • 2 blockbusting. • 3 redlining. • 4 panic peddling.
• 1 steering. "Steering" is driving people towards particular neighborhoods, and is the correct answer to this question. On the other hand, "blockbusting" is the opposite side of the same coin. Synonymous with "panic peddling," it refers to trying to generate panic selling in a neighborhood dominated by one race or ethnic group by representing that another group is about to start moving in.
The ________ is the culmination of the real estate transaction. • 1 title closing • 2 inspection • 3 signing of the sales contract • 4 default of the mortgage
• 1 title closing At the title closing: the buyer completes his or her financing arrangements (referred to as closing the loan), the seller transfers the title, and both the buyer and seller pay the necessary taxes, fees and other charges.
The local utility company dug up Charlotte's garden to install a natural gas line. The company claimed it had a valid easement and proved it through the county records. Charlotte claimed the easement was not valid because she did not know about it. The easement • 1 was valid even though the owner did not know about it. • 2 was an appurtenant easement owned by the utility company. • 3 was not valid because it had not been used during the entire time that Charlotte owned the property. • 4 was not valid because Charlotte was not informed of its existence when she purchased the property.
• 1 was valid even though the owner did not know about it. Easements grant only access, not ownership, use or occupancy rights. Further, that access is generally for the benefit of the property owner, such as maintaining utilities or sidewalks. As such, they "attach" to a deed or lease and remain in effect, until specifically lifted.
The purchase of a ticket for a professional sporting event gives the bearer what? • 1 An easement right to park his car • 2 A license to enter and claim a seat for the duration of the game • 3 Partial ownership in the professional sporting team • 4 A license to sell food and beverages at the sporting event
• 2 A license to enter and claim a seat for the duration of the game Easements grant access, not use. Commercial licenses, such as those required to sell beverages, souvenirs or services, cover extended periods. Although tickets to sporting events, concerts, shows and the like are technically licenses, they differ from most in their degree of restriction. For example, a concert ticket does not give the bearer the right to sit anywhere he or she chooses or wander backstage to meet the performers.
Jack owns a leasehold interest in a property whose owners or tenants agree to use the property on a periodic, non-overlapping basis. With what type of property does Jack have this leasehold interest? • 1 A cooperative • 2 A time-share • 3 A condominium • 4 A planned-urban development
• 2 A time-share Time-shares are most common with vacation and resort properties. Time-share arrangements provide for equal sharing of the property's expenses among the owners.
The system of ownership of real property in the United States is what? • 1 Incorporeal • 2 Allodial • 3 Command • 4 Feudal
• 2 Allodial "Allodial" is the modern form of ownership and is often contrasted with "feudal" in which land is held on the condition of rent or service due the government. For example, a medieval knight held property subject to coming to his baron's service when called. Similarly, the baron's land holdings were conditional on his raising an army and fighting for the king in times of conflict. Failure of any party to "perform as promised" was cause for holdings to be confiscated, often as a preliminary step to more extreme actions.
Anna owns 50 acres of land with 500 feet of frontage on a desirable recreational lake. She wishes to subdivide the parcel into salable lots, but she wants to retain control over the lake frontage while allowing lot owners to have access to the lake. Which of the following types of access rights would provide the greatest protection for a prospective purchaser? • 1 An easement in gross • 2 An appurtenant easement • 3 An easement by necessity • 4 A license
• 2 An appurtenant easement Appurtenant easements afford the most protection since they are generally a permanent feature of the property. Thus, in the case of sale, the lake access passes to any new owners. By contrast, an "easement in gross" is between two individuals, which would severely limit the attractiveness and value of the property if the original owner wished to sell.
A broker and seller terminate the listing contract. An offer is received in the mail by the broker after the termination of the listing contract. The offer is for full price and includes all of the terms and conditions of the seller. Why is this NOT a valid contract? • 1 There is no consideration involved. • 2 No acceptance has been given. • 3 No earnest money has been enclosed. • 4 There is no current listing agreement.
• 2 No acceptance has been given. It has not been presented to or accepted by the owner. Remember, contracts aren't valid until both parties agree. However, even though the listing agreement has expired, the offer should be presented. If it's accepted and the transaction closes, the broker will generally be entitled to his or her full commission.
John has started taking real estate re-licensing classes and agrees to help his neighbor sell her house for 3% commission. The house is sold and closing takes place 1 day after John receives his salesperson's license, but the neighbor refuses to pay the commission. Can John sue to recover the commission fee? • 1 Yes, Michigan law permits enforcement of an oral agreement in these circumstances. • 2 No, Michigan law prohibits lawsuits to collect commissions unless the injured party is a licensed broker whose license was in effect at the time the agreement was made. • 3 Yes, because John was formally enrolled in real estate education, the agreement is seen as professional and binding. • 4 No, because his commission rate was less than 5%.
• 2 No, Michigan law prohibits lawsuits to collect commissions unless the injured party is a licensed broker whose license was in effect at the time the agreement was made. John cannot sue because his license was not active when the agreement was made.
Which of the following liens does not need to be recorded to be valid? • 1 Materialman's lien • 2 Real estate tax lien • 3 Judgment lien • 4 Mechanic's lien
• 2 Real estate tax lien The requirement for individuals to record liens is due in part to the necessity of correctly identifying the complainant. For example, not just "Jones Contracting," but the specific Jones Contracting that performed the work and is owed the money. Because they bear the authority of government and are easily identified, liens by taxing authorities do not need to be recorded.
Owner Stan has been defaulting on mortgage payments and owes more than his property is worth. Stan's lender is allowing him to sell the property for less money than necessary to satisfy the loan. The bank has permitted Stan to do what? • 1 Commit tax fraud • 2 Short sale the property • 3 Deed the property to HUD • 4 "Flip" the property
• 2 Short sale the property Short sales avoid the delay and expense of a foreclosure sale. The lender usually forgives the mortgage balance owed after the sale.
After accepting an offer in writing, if a seller withdraws acceptance and cancels the transaction, which of the following is TRUE? • 1 The broker, having facilitated a written acceptance of an offer, is entitled to a commission and may deduct it from the deposit. • 2 The broker, having facilitated a written acceptance of an offer, is entitled to compensation and may sue the seller for the commission. • 3 The broker, in failing to successfully facilitate the transaction, is not entitled to any compensation. • 4 The seller, having accepted an offer in writing, is bound by the offer and must proceed with the transaction.
• 2 The broker, having facilitated a written acceptance of an offer, is entitled to compensation and may sue the seller for the commission. Since the seller accepted the offer, the broker earned the commission and is entitled to sue the seller for that commission.
Which of the following is TRUE of buyer-brokerage contracts in Michigan? • 1 The appropriate form must be used for the contract to be valid. • 2 The contract must be in writing to be enforceable. • 3 Such contracts are not regulated. • 4 Such contracts are illegal.
• 2 The contract must be in writing to be enforceable. The buyer-brokerage agreement is an employment contract and must be in writing to be enforceable in Michigan.
The buyer of an apartment complex is told that the refrigerator in one of the apartments goes with the sale. After taking title, he discovered that the refrigerator belonged to the tenant. Which is true about this situation? • 1 Since the refrigerator was in the apartment, it automatically belongs to the new owner. • 2 The refrigerator is the personal property of the tenant. The seller had no right to offer it to the buyer. • 3 The refrigerator was plugged into the wall and that makes it real property. • 4 The tenant will have to get permission from the new owner to remove the refrigerator.
• 2 The refrigerator is the personal property of the tenant. The seller had no right to offer it to the buyer. Plugging in an appliance does not constitute installation. Thus it is personal property that belongs to the tenant.
The amount of earnest money deposit is determined by • 1 the real estate licensing statutes. • 2 an agreement between the parties. • 3 the broker's office policy on such matters. • 4 the acceptable minimum of 5 percent of the purchase price.
• 2 an agreement between the parties. Earnest money is a demonstration of sincerity on the part of the purchaser and provides preliminary evidence that he or she is financially capable of completing the transaction. While it should be substantial enough to meet these two criteria, there is no set or customary amount or percentage.
The title to real estate passes when a valid deed is • 1 signed and recorded. • 2 delivered and accepted. • 3 filed and uploaded to the cloud. • 4 executed and mailed.
• 2 delivered and accepted. Fundamentally, real estate transactions only involve two parties--the buyer and the seller. All that's necessary to create a legal sale is for one party to make an offer the other accepts. Recording, escrow, real estate licensees, mortgage companies and the like facilitate and support the transaction process but are not requirements of a legal sale.
When the preliminary title report reveals the existence of an easement on the property, it indicates that the easement is a(n) • 1 lien. • 2 encumbrance. • 3 encroachment. • 4 tenement.
• 2 encumbrance. Anything that limits a person's use of a property is an encumbrance. Easements limit use in that they generally prohibit any kind of permanent structure on the area in question. For example, if a homeowner wanted to build a swimming pool in an area of his back yard and the local sewer company had an easement for pipes running under that area, he would have to find another location for his pool, even if it was not as desirable.
A person who has complete control over a parcel of real estate is said to own a • 1 leasehold estate. • 2 fee simple estate. • 3 life estate. • 4 defeasible fee estate.
• 2 fee simple estate. All the other options have conditions attached. A leasehold estate is, as the name implies, leased property. Similarly, a life estate gives a person ownership or control of a property only for the duration of his or her natural life. "Defeasible estates" give a person or entity control over a property only so long as certain conditions are met or avoided. For example, a community might be deeded a property on the condition that it be used only for building a school, or land willed to a child on the condition it never be used for commercial development. If the community tries to use the property for a recreation complex or the heir tries to sell to a retail developer, control would automatically revert to another party and the deed would become void.
The recording of a deed • 1 is all that is required to transfer the title to real estate. • 2 gives constructive notice of the ownership of real property. • 3 insures the interest in a parcel of real estate. • 4 warrants the title to real property.
• 2 gives constructive notice of the ownership of real property. Recording a deed does not convey, insure or warrant ownership. However, it does protect the owner's interest in a property by serving notice that the recorded owner is the only recognized holder of title. This places a larger burden of proof and process on someone trying to assert a prior ownership interest and/or claiming a deedholder's title is clouded.
Sam and Nancy bought a store building and took title as joint tenants. Nancy died testate. Sam now owns the store • 1 as a joint tenant with rights of survivorship. • 2 in severalty. • 3 as a tenant in common with Nancy's heirs. • 4 in trust.
• 2 in severalty. Joint tenancy means that two parties have an undivided interest in a particular property and, upon the death of one party, full ownership automatically goes to the survivor. Despite the way it sounds, "in severalty" means as sole owner.
A void contract is one that is • 1 not in writing. • 2 not legally enforceable. • 3 rescindable by agreement. 4 voidable by only one of the parties.
• 2 not legally enforceable. In order to be enforceable, real estate contracts must meet the legal requirements for contracts in general. For example, a contract signed by a minor or a "seller" who doesn't own the property in question was never legal to begin with and is thus "void."
The essential elements of a contract include all of the following EXCEPT • 1 offer and acceptance. • 2 notarized signatures. • 3 competent parties. • 4 consideration.
• 2 notarized signatures. A contract sets forth the terms and conditions of a real estate transaction, but does not itself transfer ownership. Thus it does not need to be notarized.
Broker K arrives to present a purchase offer to Mrs. D, an 80 year old invalid who is not always of sound mind, and finds her son and her daughter-in-law present. In the presence of Broker K, both individuals persistently urge D to accept the offer, even though it is much lower than the price she has been asking for her home. If D accepts the offer, she may later claim that • 1 broker K should not have brought her such a low offer for her property. • 2 she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. • 3 broker K defrauded her by allowing her son and daughter-in-law to see the purchase offer he brought to her. • 4 her consumer protection rights have been usurped by her son and daughter-in-law.
• 2 she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. "Duress" is the application of coercion or pressure to influence a person to act in a way contrary to his/her best interests. Further, since voluntary participation is a key condition of any contract, Mrs. D could well be successful in such an action. A voidable contract is one that is able to be voided because Mrs D was under duress or undue influence.
The right to control one's property includes all of the following EXCEPT • 1 the right to invite people on the property. • 2 the right to exclude the utilities meter reader. • 3 the right to erect "no trespassing" signs. • 4 the right to enjoy pride of ownership.
• 2 the right to exclude the utilities meter reader. This right to enter and work on a property is granted to utility companies (water, sewer, gas and electric) as well as telephone and cable companies. Essentially, if a company provides a service and owns the equipment (e.g., phone and cable lines), they are usually granted an easement.
An aggrieved party with a Fair Housing violation claim has how long to file a complaint with the Department of Housing and Urban Development? • 1 1 month • 2 6 months • 3 1 year • 4 3 years
• 3 1 year If the complaint is not filed within one year, a person may still file a civil suit in a Federal Court.
In general, the Foreign Investment in Real Property Tax Act (FIRPTA) requires a buyer to withhold estimated taxes equal to ____ of the sale price in any sale or exchange of property owned by a foreigner (not a US citizen). • 1 3% • 2 5% • 3 15% • 4 20%
• 3 15% In 1985, Congress passed the Foreign Investment in Real Property Tax Act (FIRPTA) to eliminate the problem of collecting delinquent taxes from foreigners who owned and sold property in the US and left the country without paying the taxes due on the sale. The IRS keeps this 10% to ensure that any capital gains on the sale are paid.
A salesperson is involved in a transaction where an individual wishes a six-month lease with an option to buy. What is true about this situation? • 1 The individual must go to an attorney since it is too complicated a transaction for a salesperson. • 2 This transaction is too complicated for a salesperson. Only a person with a broker's license should handle this transaction. • 3 A salesperson could use two standard forms, fill in the blanks and request that his or her broker review the forms before signing. • 4 The salesperson should write the purchase offer. A lease for 6 months does not need to be in writing.
• 3 A salesperson could use two standard forms, fill in the blanks and request that his or her broker review the forms before signing. Generally speaking, salespeople may complete standard forms so long as they are reviewed by and with the approval of their broker.
Which of the following would be used to clear a defect from the title records? • 1 A lis pendens • 2 An estoppel certificate • 3 A suit to quiet title • 4 A writ of attachment
• 3 A suit to quiet title A owner might bring a "quiet title" action to correct a minor mistake in the property description or to remove an easement that's been unused for years. Additionally, they are used when a third party tries to asset some right to the property through a dubious claim. The suit "quiets the mouth" of that person and establishes a clear title.
Under which of the following types of liens can both the real property and the personal property of the debtor be sold to pay the debt? • 1 Real estate tax lien • 2 Mechanic's lien • 3 Judgment lien • 4 Assessment lien
• 3 Judgment lien Most liens are against a specific property, such as a primary residence. Thus, a contractor seeking payment for a new deck cannot have a homeowner's car attached in settlement. A judgment lien, however, is a decision directed by the courts and can apply to whatever assets it deems appropriate.
The property manager suspects that the tenants in a property are engaging in illegal drug trafficking. What should the property manager do? • 1 Cancel the property management agreement • 2 Observe the property for 30 days and then tell the owner • 3 Notify the owner immediately of the suspicious activity • 4 Do not worry. It is the owner's problem.
• 3 Notify the owner immediately of the suspicious activity The property manager is the owner's agent, but not his "proxy." That is, he must inform the owner but not act on his behalf without authorization. For example, while calling the police to investigate might be appropriate, if the manager's suspicions were groundless and he called the authorities without authorization, the tenants might be able to sue the owner.
A bill of sale is used to transfer the ownership of what? • 1 Real property • 2 Fixtures • 3 Personal property • 4 Appurtenances
• 3 Personal property Personal property differs from "real property" in a number of respects, most importantly its portability. Cars, furniture, clothing, paintings, jewelry, appliances and just about any other non-food item one buys are examples of personal property.
According to the Michigan Board of Real Estate Brokers and Salespersons, which of the following is NOT a required element of a listing agreement? • 1 Exact expiration date • 2 Signatures of both broker and seller • 3 Qualified expert's report of property condition • 4 True copy forwarded to the seller after signing
• 3 Qualified expert's report of property condition The rules regarding listing agreements call for an exact expiration date, signatures of both the broker and the seller, and a true copy to be made for the seller after signing.
Which of the following would not terminate an agency relationship? • 1 Abandonment by the agent • 2 Revocation by the principal • 3 Submission by the agent of two offers at the same time • 4 Fulfillment of the agency purpose
• 3 Submission by the agent of two offers at the same time Submitting offers doesn't end the relationship--only the owner's acceptance of one and ultimately closing on the transaction.
A partition suit is used for which of the following? • 1 Determination of party fences • 2 To allow construction of additional bedrooms or bathrooms in a house. • 3 To force a division of property without all the owners' consents • 4 To change a tenancy by entireties to some other form of ownership
• 3 To force a division of property without all the owners' consents Partition suits are typically pursued when a co-owner of a property wants to sell his or her share and the other owners are opposed. Since it is a legal action involving the courts, it is an expense with often unsatisfactory results.
For which of the following actions must an agency agreement exist between a buyer and a real estate office? • 1 To provide a buyer with specifications of available properties • 2 To explain agency relationships • 3 To negotiate a reasonable price on a property • 4 To provide information about prospective lenders' mortgage interest rates
• 3 To negotiate a reasonable price on a property In order to negotiate a transaction, an agency agreement must exist between the real estate office and the buyer; explanations of agency relationships, and information about available properties and mortgage interest rates may be provided before an agency agreement is entered.
All real estate sales must be reported to the Internal Revenue Service after closing. The sale must be reported on • 1 a W-2. • 2 a Form-2555. • 3 a Form-1099. • 4 a Form-5305.
• 3 a Form-1099. The responsibility for filling out and submitting the 1099 generally falls to the person who conducted the closing.
A defaulting borrower who faces foreclosure may avoid court actions and costs by voluntarily deeding the property to the mortgagee. This is accomplished with a __________, which transfers legal title to the lienholder. • 1 short sale • 2 deficiency judgment • 3 deed in lieu of foreclosure • 4 caveat emptor
• 3 deed in lieu of foreclosure With the deed in lieu option, a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. The transfer, however, does not terminate any existing liens on the property.
A portion of Wendell's building was inadvertently built on Ginny's land. This is called an • 1 accretion. • 2 avulsion. • 3 encroachment. • 4 easement.
• 3 encroachment. The principal attributes of an encroachment are: 1) It is accidental and 2) it involves only part of a structure. Typically, the issue would be resolved by selling Wendell an easement or a lease or, if practical, actually moving the structure.
A broker is discussing a new listing with a prospective Mexican-American buyer. The buyer wants to inspect the property immediately, but the owner of said property has instructed the broker, in writing, not to show the house during the owner's three-week absence. The buyer insists on viewing the property. The broker should • 1 show the property to avoid a violation of the Federal Fair Housing Act. • 2 request the Real Estate Commission arbitrate the problem. • 3 inform the buyer of the seller's instructions. • 4 notify the nearest HUD office.
• 3 inform the buyer of the seller's instructions. Following an owner's lawful instructions is not only allowable, but a responsibility of the licensee. However, if the owner instructed the broker to tell minority buyers that he was out of town when he was not in order to avoid selling to a minority, the broker would be in violation of the law if he acted as the owner requested.
When the grantor does not wish to convey certain property rights, he or she • 1 must note the exceptions after the closing. • 2 may not do so, since the deed conveys the entire premises. • 3 may note the exceptions in the deed of conveyance. • 4 must convey the entire premises and have the grantee reconvey the rights to be retained by the grantor.
• 3 may note the exceptions in the deed of conveyance. Most commonly known as "restrictive covenants," such deed restrictions are often used to maintain the consistency of a neighborhood by, for example, stipulating that only traditional home styleso f a particular size and painted in traditional colors may be constructed and occupied within the subdivision. These are encumbrances on the property since they limit current and future owners in how they use the property.
A mobility impaired person was renting a unit in an apartment complex. Half the units had been assigned parking spaces near the door; the other half had not. The owner • 1 may charge extra money to the handicapped person for providing the parking space near the door. • 2 must take a vote of all tenants to see if they want to allow the handicapped person a parking space. • 3 must give a parking space near the door to the handicapped person, if one is available and a need is demonstrated. 4 does not have to offer the handicapped person the parking spot near the door.
• 3 must give a parking space near the door to the handicapped person, if one is available and a need is demonstrated. The "equal access" aspects of fair housing legislation do not necessarily mean equal treatment. "Reasonable accommodation" must also be made to meet the needs of handicapped people, including exceptions to standard policies such as convenient parking and guide dogs.
To create a joint tenancy relationship in the ownership of real estate, there must be unities of • 1 desires, ownership, claim of right, and possession. • 2 title, interest, liens, and survivorship. • 3 possession, time, interest, and title. • 4 ownership, possession, heirs, and title.
• 3 possession, time, interest, and title. This essentially means that all parties to the agreement share equally in all aspects of the property, including the length of time it's been held. That means if one party sells or transfers interest in a joint tenancy relationship, his or her place is taken by another in the same capacity.
The illegal process of a banker refusing to approve loans for a neighborhood based on the racial composition of the area is • 1 blockbusting. • 2 steering. • 3 redlining. • 4 panic peddling.
• 3 redlining. Loans may only be approved or denied on the basis of whether a specific individual and property meet established standards. Thus lenders are well within their rights to deny a loan to a particular person because he or she lacks sufficient income or has poor credit. Additionally, a loan for a partially completed home or one that doesn't meet code can also be denied. However, "macro" issues such as race or neighborhood cannot be considered.
H agrees to purchase V's real estate for $230,000 and deposits $6,900 earnest money with Broker L. However, V is unable to clear the title to the property, and H demands the return of his earnest money as provided in the purchase contract. Broker L should • 1 deduct his commission and return the balance to H. • 2 deduct his commission and give the balance to V. • 3 return the entire amount to H. • 4 give the entire amount to V to dispose of as he decides.
• 3 return the entire amount to H. Brokers and salespeople only earn their commission when a transaction closes. Since the transaction was never completed, no commission is owed. Additionally, H is entitled to have all his earnest money returned since it was the seller, not he, who defaulted on the contract.
A buyer makes an earnest money deposit of $10,000 on a $300,000 property and then withdraws her offer before the seller can accept it. The broker is responsible for disposing of the earnest money by • 1 turning it over to the seller. • 2 deducting the commission and giving the balance to the seller. • 3 returning it to the buyer. • 4 depositing it in his or her trust account.
• 3 returning it to the buyer. A contract only exists when it is both offered by the buyer and accepted by the seller. Since the second part of this requirement was never fulfilled, the buyer is entitled to have his earnest money returned.
The word "improvement" would refer to all of the following EXCEPT • 1 streets. • 2 a sanitary sewer system. • 3 trade fixtures. • 4 the foundation.
• 3 trade fixtures. The term "trade fixture" refers to an item installed by a tenant in a rented commercial property that he or she removes at the end of the occupancy.
An agent working as a subagent of the seller would suggest that the buyer hire an inspector from an outside service in all of the following cases EXCEPT • 1 when they smell gas in the basement. • 2 when there is a slow drain in the toilet. • 3 when a hinge is off the door. • 4 when there is sawdust in the kitchen cabinets.
• 3 when a hinge is off the door. Home inspectors are hired to find significant and often hidden property defects, such as signs of a leaking roof, termites, foundation cracking and so forth. Hinges and other "wear and tear" items are obvious and not among the reasons for hiring an inspector.
What type of a listing agreement allows the owner to appoint an exclusive agent to sell his property, but retains the right to sell the property himself? • 1 Open • 2 Exclusive right to sell • 3 Multiple listing • 4 Exclusive agency
• 4 Exclusive agency Open listings mean that if the owner or any other broker or salesperson produces the buyer, the broker will lose his or her commission. Exclusive Right to Sell gives the broker his or her commission regardless of who actually sells the property, even if it is the owner. Exclusive Agency allows the seller to appoint an exclusive agent, but retain the right to sell the property himself.
Which of the following is/are considered to be personal property? • 1 Wood-burning fireplace • 2 Furnace • 3 Bathtubs • 4 Lamps
• 4 Lamps The concept of personal property typically comes into play at the time of sale. Things that are part of the house--bathroom fixtures, fireplaces, carpeting and such--go with the sale. (Unless specifically excluded, as can happen in the case of a dining room chandelier or one or two other objects with which the owners have an emotional attachment.) Furniture, rugs, lamps and other portable items that are not "nailed down" constitute personal property and are not included in the sale.
Jim and Sandy are next-door neighbors. Sandy tells Jim that he can store his camper in her yard for a few weeks until she needs the space. Sandy did not charge Jim rent for the use of her yard. Sandy has given Jim a(n) what? • 1 Easement appurtenant • 2 Easement by necessity • 3 Estate in land • 4 License
• 4 License Granting the use of property for a defined period for a specific purpose is almost always a form of licensing. Easements grant only access, not ownership, use or occupancy rights. Further, that access is generally for the benefit of the property owner, such as maintaining utilities or sidewalks.
Jim Jones, the landlord, rents a property to Tom Smith, a handicapped person. Mr. Smith, with Mr. Jones' permission, modifies the house to suit his needs. When the lease expires, which of the following requirements would not have to be met by Mr. Smith? • 1 Mr. Smith must remove the "grab rails" in the bathroom that were installed for his use. • 2 Mr. Smith must raise the kitchen cabinets that were lowered for his use. • 3 Mr. Smith must repair the walls where the "grab rails" in the bathroom were removed. • 4 Mr. Smith must restore the wide doorways, that were installed for him, to the original size.
• 4 Mr. Smith must restore the wide doorways, that were installed for him, to the original size. Since the width of the door will not in any way be detremental to future tenants, there is not a requirement for the original width of the doors to be replaced by the handicapped tenant. All of the other issues must be restored to original status.
When a claim is settled by a title insurance company, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is known as what? • 1 Caveat emptor • 2 Surety bonding • 3 Subordination • 4 Subrogation
• 4 Subrogation For example, let's say Amanda buys a property and the seller provides a general warranty deed stipulating clear title. However, that turns out not to be the case and a third party provides a valid claim to a share of the property. Since Amada took out title insurance, the title insurance company negotiates and pays a settlement with the claimant on Amanda's behalf. Amanda's right to sue the seller then transfers to the title insurance company, which will take action to recover the amount they paid on Amanda's behalf.
Which of the following types of ownership CANNOT be created by operation of law, but must be created by the parties' expressed intent? • 1 Community property • 2 Tenancy in common • 3 Condominium ownership • 4 Tenancy by the entireties
• 4 Tenancy by the entireties Tenancy by the entireties is a form of ownership that husbands and wives can choose or create by deciding to do so and declaring it as such in contracts and deeds. Tenancy in common is put in motion by state law. Community Property is a law of ownership that exists in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and some other states. Tenancy by the Entireties is an estate that is recognized in some states between husband and wife, who have equal right of possession and enjoyment during their joint lives and with the right of survivorship--that is when one dies, the property goes to the surviving tenant. (In many states, if couples do not specify "Joint Tenancy," this form of ownership will be automatically assumed.) Tenancy in Common is a type of joint ownership by parties NOT married, that allows a person to sell his share or leave it in a will without the consent of the other owners. If a person dies without a will, his share goes to his heirs, not to the other owners.
In a gift of a parcel of real estate, one of the two owners was given an undivided 60 percent interest and the other received an undivided 40 percent interest. The two owners hold their interests as what? • 1 Cooperative owners • 2 Joint tenants • 3 Community property owners • 4 Tenants in common
• 4 Tenants in common In order to create joint tenancy, some form of relationship must exist between the parties involved, whether business, spousal or other. Because their interests were acquired as a gift, the parties in this instance become tenants in common, with all the ownership benefits of joint tenancy, but not the survivorship rights.
Which entity is prohibited from collecting taxes on real property? • 1 Counties • 2 Townships • 3 Cities • 4 The Federal Government
• 4 The Federal Government There are no federal taxes on real property. The Constitution of the United States specifically prohibits such taxes. The federal government does, however, tax income derived from real property and gains realized on the sale of real property. The federal government can impose a tax lien against property for failure to pay any tax due the Internal Revenue Service.
RESPA requires lenders to use the ___________ to detail the costs that the buyer and seller will pay at closing. • 1 ECOA Settlement Form • 2 NAR Settlement Statement • 3 IRS Schedule F • 4 Uniform Settlement Statement (HUD Form-1)
• 4 Uniform Settlement Statement (HUD Form-1) The HUD-1 form is a statement of actual charges and adjustments. The comparison chart on page 3 of the HUD-1 must be prepared using the exact information and amounts for the services that were purchased or provided as part of the transaction, exactly as that information and those amounts are shown on the GFE and in the HUD-1.
Tom leases store space to Kim for a restaurant, and Kim installs her ovens, booths, counters, and other equipment. When do these items become real property?• 1 When they are installed • 2 When Kim defaults on her rental payments • 3 When the lease takes effect • 4 When the lease expires, if the items are not taken by the tenant
• 4 When the lease expires, if the items are not taken by the tenant Kim is free to move these fixtures at the end of her lease. However, if she chooses to leave them behind, they are considered a permanent part of the structure (just like a dining room chandelier in a home) and revert to Tom.
Homeowner Tanya acquired the ownership of land that was deposited by a river running through her property by • 1 reliction. • 2 succession. • 3 avulsion. • 4 accretion.
• 4 accretion. Accretion means the addition to a parcel of land by sand or soil deposits due to the action of a river or other body of water over time. Avulsion refers to the loss of land as a result of its being washed away by sudden or unexpected action of nature, such as a flash flood that re-routes a river.
When a prospective buyer makes a written purchase offer that the seller accepts, then the • 1 buyer may take possession of the real estate. • 2 seller grants the buyer ownership rights. • 3 buyer receives legal title to the property. • 4 buyer receives equitable title to the property.
• 4 buyer receives equitable title to the property. "Equitable title" means that the prospective buyer has obtained the right to acquire ownership of a property currently owned and occupied by another.
Evan lives in an apartment building. The land and structures are owned by a corporation, with one mortgage loan covering the entire property. Like the other residents, Evan owns stock in the corporation and has a lease on his apartment. This type of ownership is called a(n) • 1 condominium. • 2 planned unit development. • 3 time-share. • 4 cooperative.
• 4 cooperative. This is the distinguishing characteristic that differentiates cooperative from condominium ownership. Although often confused, a condominium owner holds title to his individual unit. A co-op owner, on the other hand, is technically a renter. It's his stock in the corporation holding title to the property that gives him the right to lease the unit as well as sell that right to another.
Owner Grace's property has been foreclosed. After the property was sold for $340,000, she still owed $60,000 to the lender. The lender may be able to get a personal judgment against Grace for the $60,000. This is called a • 1 leverage lien. • 2 partition lawsuit. • 3 reverse foreclosure judgment. • 4 deficiency judgment.
• 4 deficiency judgment. A deficiency judgment enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.The lender's ability to pursue such a judgment may be limited, however.
Personal property includes all of the following EXCEPT • 1 chattels. • 2 fructus industriales. • 3 emblements. • 4 fixtures.
• 4 fixtures. "Chattel" is a legal term that means personal property. Emblements and fructus industriales refer to profit from crops that are grown as a result of a person's labor, such as corn, as opposed to those that occur naturally, such as grass or minerals. By the custom of English common law, they are considered personal property. By contrast, a fixture is considered attached to a property and thus part of the structure.
If, upon the receipt of an offer to purchase his property under certain conditions, the seller makes a counteroffer, the prospective buyer is • 1 bound by his original offer. • 2 bound to accept the counteroffer. • 3 bound by whichever offer is lower. • 4 relieved of his original offer.
• 4 relieved of his original offer. Offers are "one-time-only" events that must be accepted or rejected. Once the seller made a counter-proposal, he rejected the buyer's offer and no contract exists. The buyer is under no obligation to continue and is entitled to have any earnest money that accompanied the offer returned immediately.
Jim, Manny, and Harry are joint tenants owning a parcel of land. Harry conveys his interest to his long-time friend Wendell. After the conveyance, Jim and Manny • 1 become tenants in common. • 2 continue to be joint tenants with Harry. • 3 become joint tenants with Wendell. • 4 remain joint tenants owning a two-thirds interest.
• 4 remain joint tenants owning a two-thirds interest. Because joint tenancy must be declared, Jim and Manny remain joint tenants with a two-thirds interest while Wendell, because of his passive acquisition of his share of the property, becomes a tenant in common with Jim and Manny. The difference between the two forms is that Jim and Manny's share retains the right of survivorship provisions but Wendell's does not.
All of the following are physical characteristics of land EXCEPT • 1 indestructibility. • 2 uniqueness. • 3 immobility. • 4 scarcity.
• 4 scarcity. Scarcity is a fundamental economic concept that holds that the rarer and more desirable something is, the more valuable it will be. For example, professional athletes are highly paid because only the smallest percentage of people have the ability to perform at that level. Land is "scarce" because there is a finite amount available and, as Will Rogers once said, "They ain't making any more of it."
All of the following are duties of the property manager EXCEPT • 1 reporting to the owner all notices of building violations. • 2 providing upkeep and maintenance on the property. • 3 maintaining financial records and accounts. • 4 securing tenants of a particular ethnic origin in accordance with the owner's wishes.
• 4 securing tenants of a particular ethnic origin in accordance with the owner's wishes. Except in certain circumstances regarding the rental of space within one's personal residence or unit, owners, landlords and their agents are not permitted to discriminate against people based on race, gender, creed, handicap and other personal characteristics.
A mechanic's lien would be properly classified as a(n) • 1 equitable lien. • 2 voluntary lien. • 3 general lien. • 4 statutory lien.
• 4 statutory lien. A "statutory lien" is one that arises out of specific law (otherwise known as statutes). By contrast, an "equitable lien" has its roots in common law or custom. A "voluntary lien" is one entered with the property owner's knowledge and consent, such as a mortgage. A "general lien" grants a creditor the right to file a claim against all of a debtor's assets, not just a particular property.
