Master Exam for REAL ESTATE

Lenders who deal directly with borrowers make up the:

Primary mortgage market. The primary mortgage market involves lenders who originate mortgages, dealing directly with borrowers.

The earnest money accompanying a purchase offer:

is not necessary to establish a valid contract. A sales contract can be valid even without any earnest money. Earnest money's main use is to reassure the seller and prove the buyer's good faith.

A prospect for the lease of a commercial property feels the need for adversarial representation and hires a broker to negotiate the lease on his behalf. What is the name of the contract entered into between the prospect and the broker?

A buyer broker agreement. A contract wherein the broker represents a buyer or tenant is called a buyer broker agreement or an exclusive right to represent agreement.

The construction of a family room, additional bedroom, and extra bath has been completed on the owner's home. Before the addition can be used, which of the following is TRUE?

A certificate of occupancy must be issued. A certificate of occupancy grants permission to occupy a completed building structure after it has been inspected. A building inspector may inspect the plumbing during the actual building process before completion. A building permit is issued before construction begins. A conditional use permit does not relate to actual building construction but permits use of a property for a use related to, but not permitted by, zoning ordinances.

Which of the following is true regarding condominiums?

A condominium unit may be mortgaged like any other parcel of real estate. A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Condominiums units are treated like any other real property and can be mortgaged like a house.

An executed contract is a contract:

A contract is considered "Executed" once both parties have completely performed each of their obligations under the contract.

The words "procuring cause" would have an important meaning to which of the following:

A dispute over commission on an exclusive agency listing. Procuring cause is the act of the broker which is instrumental in effecting the meeting of minds between the seller and the buyer as to price and terms. It is one of the requisites for entitlement to commission. Procuring cause basically means that you are the reason the buyer is there to purchase the property.

If a broker is an agent of a seller, he owes to the buyer:

A duty of fair and honest dealing. A broker acting as an agent of the seller should be fair and honest with the buyer, but the fiduciary duty still lies soley with the seller.

A freehold estate consists of:

A fee estate; Freehold estate is an estate in which ownership is for an indeterminate length of time, that would be "fee estate" the other options are all examples of less than freehold estates.

Which of the following defines a mortgage loan?

A mortgage loan is collateralized with real estate. The word "mortgage" refers to the pledge that the buyer makes to the lender, promising the property as collateral for the loan. Mortgage loans are applicable without an exchange of real property, such as with a refinance of a home.

In 2003, an owner constructed a building that was eight stories high. In 2014, the municipality changed the zoning ordinance and prohibited buildings taller than six stories. Which of these statements is not false regarding the existing eight-story building?

A nonconforming use is a use of property that was allowed under the zoning regulations at the time the use was established but which, because of subsequent changes in those regulations, is no longer a permitted use. ... State law does not regulate nonconforming uses, structures, or lots.

A standard title insurance policy insures against:

A recorded deed in the chain of title that was not properly delivered. Standard policy of title insurance protects against forgery and improper delivery, however it does not include a survey or on-site inspection.

A balloon loan could also be described as a:

Partially-amortized loan. A Balloon Loan is a partially amortized loan. It has a fixed rate of interest over a period of time. At the end of the balloon period, the borrower must refinance or pay off the remaining balance. In other words, the entire balance will be due.

David sold his home and agreed to take back a note and trust deed as part of the purchase price. He wanted to have the note become due and payable if the property was resold. To accomplish this, which of the following clauses should be in the note or trust deed?

Alienation clause. An alienation clause in a financial contract comes into effect when ownership of a specified asset is transferred or a collateral property is sold. Alienation clauses are common in mortgage contracts providing full repayment if real estate property ownership changes.

Which is true concerning an option contract?

All of the other answers are correct. An option is a contract to keep an offer to sell or lease real property open for a set period of time. The optionor cannot revoke the offer to sell during the designated period of time and the optionee is under no obligation to buy the property in question, but the optionee has no interest or estate in the land until they exercise the option agreement.

The purpose of a "release clause" in a mortgage is to:

Allow the release of some properties upon partial payment, when more than one property is used as security for the debt. A Release Clause is often found in a Blanket Mortgage which allows portions of property to be released from a lien as payments are made.

The Civil Rights Act of 1866 prohibits discrimination in housing based on which of the following reasons?

Although surprising to many, the original civil rights legislation was passed in 1866 by one vote, over the veto of President Andrew Johnson. It prohibited discrimination based on race, although later amendments added protections for religion, sex, and marital status.

The purpose of a building code is to

Building codes are used to make sure buildings are structurally sound and safe. A restrictive covenant is a restriction established by a private entity, not a public government. Building codes do not affect a deed's restrictive covenant. Zoning ordinances regulate the types of new construction but are not enforced through building codes.

Which best describes why a buyer purchases a home using the market data approach?

Buyers buy after they compare the house with others. The market data approach compares a subject home to similar properties that have recently sold in an area to arrive at a home's value. While emotion and impulse are certainly strong motivators, a home is also a well-considered purchase. What most people seek, within their affordability range, is value more than price. The only way to determine which home combines the elements of price, features, quality, condition, location and other factors that give a particular buyer the best value for his or her needs is to compare as many properties as possible.

Which of the following is described as the process of expressing anticipated future benefits of ownership in dollars, and discounting them to a present worth at a rate which is attracting purchase capital to similar investments?

Capitalization. Capitalization is a method of estimating the present value of future income.

What is steering?

Channeling of prospective homebuyers to or away from particular neighborhoods, thereby limiting their choices. Steering is the assumption and channeling of prospective home seekers to or away from certain neighborhoods or properties thereby limiting their choices.

The rescission provisions of the Truth in Lending Act apply to which transactions?

Consumer credit. Consumer credit is a debt that a person incurs when purchasing a good or service.Consumer credit includes purchases obtained with credit cards, lines of credit and some loans.Consumer credit is also known as consumer debt.

Which of the following would alienate title to property:

Conveying title. Conveying the title will alienate (transfer from one owner to another) the title to property.

A buyer is most likely to borrow the money to buy his/her home from:

Credit unions are becoming a large player in the primary mortgage market.

The deed restrictions on a subdivision said that the lots must contain a minimum of 15,000 square feet. The zoning restrictions said that the lots must contain a minimum of 10,000 square feet. Which would prevail?

Deed restrictions. The higher standard of restrictions will usually prevail. For example, if deed restrictions in a subdivision required that each lot contain a minimum 15,000 square feet structure, and the applicable zoning laws required that each lot contain a minimum 10,000 square foot structure, the deed restrictions would prevail. With things like this, you usually go with the option that is more restrictive.NOTE - This question asks about the MINIMUM square footage of a structure, so the more restrictive number is 15,000 sq. ft. If the question asked about the MAXIMUM square footage of a structure, the more restrictive number would be 10,000 sq. ft.

Which of these is legally required in a real estate brokerage?

Displaying the Equal Housing Opportunity poster in a brokerage. Any business, real estate broker, agent or person in the real estate business must post the HUD Equal Housing Opportunity Poster in accordance with the Federal Fair Housing Act. It contains legal definitions of discrimination in real estate. Not posting it may be seen as evidence of a discriminatory housing practice. Next Question

Which of the following clauses in a conventional mortgage instrument entitles the lender to accelerate the loan if the loan is assumed?

Due-on-sale. A due-on-sale clause states that the entire balance would be due upon sale of the property. Thus if there is a due on sale clause there will be no loan to assume.

The effectiveness of the market data approach of appraising would be limited most by which of the following?

Economic conditions that rapidly change. Market Data is least reliable when there is rapid economic change to the market and/or the market is inactive. This approach functions around the idea of finding the price of similar properties to compare the target property to. Therefore if there is nothing to compare to, this approach is useless.

Which of the following rights of ownership in real property do individuals normally not have?

Eminent domain rights. Eminent domain is a legal strategy that allows a federal or local government to seize private property for public use. The seizing authority must pay fair market value for the property seized. This is not a right an individual would have. The other government rights are police power, taxation and escheat. A easy way to remember the government powers is to remember the name Pete. Pete stands for Police power, Escheat, Taxation and Eminent domain.

Which of the following is not characteristic of a Federal Housing Administration (FHA) loan?

FHA provides the money for the loan. An FHA loan is a mortgage that's insured by the Federal Housing Administration (FHA). ... However, borrowers must pay mortgage insurance premiums, which protects the lender if a borrower defaults. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% for a credit score of 580 or higher.

When can a landlord evict a blind or otherwise disabled tenant from the premises?

If the tenant has loud parties and makes too much noise. The law requires "reasonable accommodation" for disabled tenants. For example, a landlord must allow a guide dog for a blind person even if there's a "no pets" policy. This doesn't mean that all rules are suspended for that person, however, and noise, safety, and "use of premises policies" may still be enforced.

In a limited partnership

In a limited partnership, each limited partner can be held liable for losses only to the extent of their investment. There is no limitation on the number of investors in the partnership. The limited partners are not legally permitted to participate in the running of the business.

An appraiser asked to estimate the value of an existing strip shopping center would probably give the MOST weight to which approach to value?

Income approach. The income approach will have the most weight in the analysis of income-producing property. The sales comparison approach will have the most weight in the analysis of single-family residential property. The cost approach may be used as one approach to appraising income property, but the income approach will be given the most weight by the appraiser. The gross rent multiplier method is used in the income approach but to determine value of residential income property.

Robert often refers to tax shelters when discussing properties. Robert is primarily referring to:

Income taxes. Tax Shelters pertain to Income Taxes. It is a general term used to include any property or other investment which gives the owner certain income tax advantages, such as deductions for property taxes, mortgage interest or depreciation.

Which of the following would not be subject to property tax?

Intangible personal property. Intangible personal property is not subject to taxation. Real property and tangible personal property are subject to taxation.

An increase in the availability of money leads to which of the following effects on interest rates?

Interest rates would go down. Just like most things in a free market economy, mortgage loans are subject to the laws of supply and demand. Thus, when there is more mortgage money in the market place "looking for a home," borrowers have more choices, which leads to increased competition among lenders, which leads to lower interest rates. Next Question

Which of the following is not subject to taxation?

Patents and trademarks. Intangible personal property is not subject to taxation (although profits made from selling intellectual property are taxable). Real property and tangible personal property are subject to taxation.

If the owner of the dominant tenement becomes the owner of the servient tenement and merges the two properties, any existing easements between the two properties:

One way of terminating an easement occurs when the owner of either tenement becomes the owner of both, and the properties are merged under one legal description. At that point there is no more need for the original easement.

In order for a property manager to determine net operating income on a property, which of the following fees is subtracted from the effective gross income?

Operating expenses. Operating expenses are the costs associated with operating income producing property usually before interest and income tax expense, but including property taxes, insurance, repairs and maintenance, replacement reserves. This would be subtracted from the effective gross income. Next Question

A broker has been in the business for many years. He currently has 40 exclusive listings in his office. The broker dies and his daughter who is also a broker, takes over for him. What should she do about the current listings?

She should attempt to renegotiate all of the listings, if possible. Listings are personal service contracts and terminate with the death of either party. The listing agreement is between the seller and the broker. When the broker dies, the listing terminates (in non-corporate instances). In this case, the new broker should attempt to renegotiate the listings with the sellers.

In most states, by paying the debt after a foreclosure sale, the mortgagor has the right to regain the property. What is this right called?

Statutory right of redemption. This right of redemption is called "statutory" because it is legally mandated by law, as opposed to the right of redemption being a custom lenders could choose to follow or not, at their option. The statutory right of redemption (where applicable) is exercised after a foreclosure sale, while the equitable right of redemption (where applicable) is exercised before a foreclosure sale.

Mary owns one parcel of land and is trying to show that exceptional circumstances exist which justify using the land in a way which is prohibited by current zoning laws. Her intended use would not be detrimental to the public. She would probably petition the planning commission for a:

Variance. A petition for variance is a method by which a landowner can try to show that unique circumstances exist and that his land should be allowed an exception to present zoning laws. Variance is done lot by lot.

The covenant in a deed which states that the grantor is the owner and has the right to convey the title is called the:

covenant of seisin. Another outgrowth of the feudal system, "seisen" derives from the French meaning to "sit upon or own". The covenant of seisin gives owners the right to sell or transfer a property at will.

On a settlement statement, prorations for real estate taxes paid in arrears are shown as a:

debit to the seller and a credit to the buyer. On a closing statement for a real estate sale, a debit is an item that is charged to a party. Taxes "paid in arrears" are charged after the taxes have been assessed (as opposed to prepaid taxes), so the seller will owe the buyer for a proration of the taxes that haven't been paid yet. This shows up on the settlement statement as a debit to the seller and a credit to the buyer, as the seller must pay the buyer for the seller's portion of the taxes (which will be paid by the buyer when taxes come due).

When using the cost approach to estimate the value of a residential dwelling, a listing broker SHOULD:

determine replacement value less depreciation. The cost approach is an appraisal method where a property's value is estimated using the cost of the property plus cost of all improvements, minus depreciation.

To find the value of a property, if the net operating income and the capitalization rate are known, an appraiser using the income approach to value would

divide the net operating income by the capitalization rate. To find the value, the net operating income (NOI) is divided by the capitalization rate. Remember the IRV formula: Income divided by Rate or Value. In the income approach, I ( NOI) ÷ R (capitalization rate) = Value. If an appraiser knows the NOI and the value of the property, the capitalization rate may be found: NOI ÷ value = capitalization rate. If the appraiser knows the capitalization rate and the value of the property, the NOI can be calculated: value x rate = NOI.

A deed:

does not have to be recorded to transfer title. It is not necessary to record a deed for it to effectively transfer title. Deeds are considered officially executed when signed by the grantor.

Economic Obsolescence

is the most difficult to cure because it is due to causes outside of the property lines thus they are usually outside of your control. Example of these would be murder, crime or increasing airport noise.

Which of the following types of ownership CANNOT be created by operation of law, but must be created by the parties' expressed intent?

joint tenancy. Joint tenancy is an option whereby two individuals declare that each party owns an undivided interest and upon the death of one full title automatically passes to the other. While joint tenancy avoids probate, it can have other tax consequences.

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?

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.

One of the required elements of a valid real estate sales contract is that it MUST:

be signed by the seller. A valid real estate sales contract must be signed by the seller. The sales contract can still be valid if it's not signed by the buyer, but it might be unenforceable in that case.

Failure to perform any of the terms or conditions of a contract is called a(n):

breach. "Breach of contract" is the violation of any of the terms or conditions of a contract without legal excuse. The non-breaching party can usually seek one of three alternative remedies upon a material breach of the contract: rescission of the contract, an action for money damages, or an action for specific performance.

Which of the following is true regarding a real estate conservation area?

certain real estate activities are prohibited in order to maintain the stability of an area. A real estate conservation area is one where specific real estate activities are prohibited, such as no "For Sale" signs, in order to stabilize the neighborhood.

The list of previous owners of conveyance from whom the present real estate owner derives his or her title is known as the:

chain of title. The "chain" links together the successive owners of a property from the most recent to the original recorded title holder. The chain of title is generally verified by deeds, judgments in lawsuits over title, affidavits, and any other documents which show ownership changes.

In making the decision of whether or not to issue a title policy, the title insurance company would be most concerned with those documents that appear within the:

chain of title. The chain of title is the history of all of the documents that transfer title to a parcel of real property, starting with the earliest existing document and ending with the most recent. Note that the chain of title only tracks documents that transfer title to a property. This is different than an abstract of title, which also includes information from deeds, mortgages, easements and other encumbrances.

The main obligation the principal owes a broker is:

compensation. The principal's primary obligation in an agency agreement is usually payment of the agreed-upon commission.

The process under eminent domain by which property is taken for public use is

condemnation. Condemnation is the power of local, state or federal government agencies to take private property for public use provided the owner is paid just compensation.

Arthur, a property manager, was $1000 short when needing to pay his office rent. He wrote a check to himself from his client's trust account to cover the cost. Arthurs' action is an example of:

conversion. Conversion is unauthorized use or control of someone else's property. At a minimum this is personal property (like money), but in some jurisdictions it can also apply to types of real property, such as land.

When a real estate agent acts exclusively as a buyer's agent, he can:

present offers to the seller or to a seller's agent. An agent who represents the buyer exclusively may present an offer to the seller (if there is no agent) or to the seller's agent.

Dirk Smith built an incredible mansion in the valley, soon after many of his peers built trashy tasteless properties right next to his that were clearly substandard. These properties clearly hurt the value of Dirk's property. This would be considered to be:

principle of regression. The Principle of Regression: The concept that a more expensive property can become devalued when lesser expensive or substandard properties are built nearby.

Oscar, Andrew and Douglas are joint tenants owning a parcel of land. Douglas conveys his interest to his long-time friend Joe. After the conveyance, Oscar and Andrew:

remain joint tenants owning a two-thirds interest. Because joint tenancy must be declared, Oscar and Andrew remain joint tenants with a two-thirds interest while Joe, because of his passive acquisition of his share of the property, becomes a tenant in common with Oscar and Andrew. The difference between the two forms is that Oscar and Andrew's share retains the right of survivorship provisions but Joe's does not.

Rents have gone up in the area. The principle that BEST describes this increase is

supply and demand. Under the concept of supply and demand, if demand decreases and supply remains the same, the supply becomes more valuable. Fewer rental properties will produce higher rents. The principle of substitution says that the maximum value of a property tends to be how much it would cost to purchase an equally desirable substitute property. The principle of contribution is used to determine if improvements will increase or decrease the value of the real property. Conformity is the appraisal principle that holds that the greater the similarity among properties in an area, the better the properties will hold their value.

A promise in exchange for a promise, supported by consideration, is the basis for a:

valid, binding, bilateral, contract.

Police powers include:

zoning. Zoning is a proper function of a municipality's police power. Police power is defined as the power to regulate a municipality for the advancement and protection of the health, morals, safety or general welfare of the community as a whole.

Which of these phrases, when placed in a print advertisement, would comply with the requirements of the Truth in Lending Act?

"12% annual percentage rate" The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed. It requires finance charges to be stated as an "annual percentage rate," using that term.

A borrower pays $200,000 for a home, makes a down payment of $40,000 and obtains a loan for the balance of the purchase price. The lender charges four (4) discount points for the loan. How much will the borrower pay in discount points?

$6,400. A discount point is 1% of the loan amount. Four discount points is 4% of the loan amount. The loan amount is $160,000 (subtract the down payment of $40,000 from the purchase price of $200,000). To find the amount of the discount points, multiply the loan amount by 4%: 4% (.04) x $160,000 = $6,400.

In a deed in which the grantor, Douglas, states "to Stephen for life", the grantor has what type of interest?

A reversionary interest. A reversionary interest in property law means that the grantor of the trust (or deed) has an interest in getting back a transferred property after some time or upon a certain condition. With life estates like the one in this question, after Stephen dies, estate ownership "reverts" back to Douglas (or his estate, if he has passed too). If there is no language in the deed indicating a remainderman, like "to Stephen for life, then to Mary", the property typically passes back to the grantor in reversion.

If a principal no longer desires the broker to act for him during the period of an exclusive right to sell listing, he may:

A seller can terminate their relationship with a broker before the expiration of the listing, but they may be liable for damages to the broker.

What is RESPA?

A standard for closing procedures. The intent of RESPA - the federal Real Estate Settlement Procedures Act - is to make borrowers more aware of costs and charges.

Most buyers of real property select which of the following types of policies of title insurance?

A standard policy. Most buyers will select what is standard.

A note on which only the interest is paid during its term is called:

A straight note. In a Straight Note there are no principal payments made. The entire principal amount of the loan is paid off at maturity or the end of its term. [The interest is paid off either at the end or during note's term.]

An instrument which usually transfers possession of real property, but does not transfer ownership is:

A sublease. Subleases transfer possession of real property. They do NOT transfer ownership. A tenant can sublease the property or assign his lease as long as it is not mentioned in the lease agreement.

Caroline Martin assures real estate salesperson, Abby Benton, that the home she's selling has hardwood floors throughout. This appears to be true, since it is exposed in all rooms but two of the bedrooms which have wall-to-wall carpeting. Abby passes these assurances on to buyers who later discover that neither of the bedrooms has hardwood. What, if anything, is Abby guilty of?

Abby is guilty of misrepresentation because she made a false assertion based on facts she should have verified. She could have avoided the violation by lifting a corner of the carpet to inspect the flooring or making a written disclosure to the buyers such as: although the seller believes hardwood is under the carpet, she does not know and cannot guarantee that to be true.

Homeowner Ruth acquired land that was deposited by a river running through her property. This land was deposited by the process of:

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.

If an advertisement is placed in a newspaper advertising a house for sale and only the APR is stated:

Additional disclosures are not required. The APR is the cost of credit that consumers pay, expressed as a simple annual percentage. If the ad only states the APR, then other disclosures are not necessary.

Which act requires that "reasonable accommodation" be made in public?

Americans with Disabilities Act. The American with Disabilities act, passed by Congress in 1990, this act requires that "reasonable accommodation" be made in public accommodations, including the workplace, for those with physical or mental disability. As a result it would require the removal of architectural barriers on some commercial properties.

What is a "client" during a real estate transaction?

Any person who signs an agreement for the sale or purchase of a property with a licensee. Much as it makes us feel better to think of all people who express interest or phone us as "clients," the fact is no one is a client until he or she affixes a signature to a formal agreement.

A real estate broker, acting as agent for a landlord, has the following instructions: 1. Collect a larger deposit from single men than from single women; and 2. Advertise only by encouraging existing, predominantly white tenants to solicit prospective tenants from among their friends. Which of these instructions is prohibited by the Federal Fair Housing Act?

Both. Using gender or race as qualifying factors in housing is discriminatory, and both are prohibited by the Federal Fair Housing Act.

Which of the following is/are considered to be personal property?

Furniture. 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.

Carol made an offer to purchase Greg's property. As part of the offer, Carol agreed to take title "subject to" an existing VA loan which Greg obtained when they purchased the property in the approximate amount of $39,000. If Greg sells to Carol under these conditions, which of the following is true concerning liability for a loss suffered by the government after a foreclosure on the VA loan?

Greg will be primarily liable. When property is sold "subject to" an existing loan, the seller is still primarily liable for the loan. A "subject to" clause in a deed states that the grantee takes title "subject to" an existing mortgage. The original mortgagor (the seller) is solely responsible for any deficiency, should there be foreclosure of the mortgage. This differs from an "assumption" clause, whereby the grantee "assumes" and agrees to pay the existing mortgage.

When an owner sues the government to get them to pay for taking his property, this is known as:

Inverse condemnation. Inverse condemnation is a term used in the law to describe a situation in which the government takes private property but fails to pay the just compensation required by the Constitution. In order to be compensated, the owner must then sue the government. In such cases the owner is the plaintiff and that is why the action is called inverse. The order of parties is reversed, as compared to direct condemnation where the government is the plaintiff who sues a defendant-owner to take his property.

One of the main differences between real and personal property is that real property:

Is immovable. Real property is usually immovable and would include a bearing wall, minerals, and stock in a mutual water company.

A voidable contract is a contract that:

Is valid and enforceable on its face, but it may be rejected by one of the parties. A voidable contract is that which is capable of being adjudged void, but is not void unless action is taken to make it so.

Broker Jack listed Jill's home under an exclusive right-to-sell listing and later received an offer from another licensee, Amanda, that met all of the listing terms and conditions. After considering the offer, Jill informed Jack that she no longer wished to sell, and asked to be released from the listing agreement immediately. Which of the following is a TRUE statement about Jack's position in this situation?

Jack may succeed in collecting an earned commission from Jill. An owner may terminate the listing contract prior to its expiration, but he/she may still be liable to the broker for a commission. In this case, if Jill were to sell the house during the term of the original listing, Jack may still be owed commission (though he would most likely have to go to court to get it). Amanda cannot sue for specific performance because the offer was not accepted, and any earnest money deposit would have to be returned to Amanda.

Which of the following would be classified as a general lien?

Judgment lien. A judgment lien is not just on specific assets, but on all the assets of the debtor in general. A judgment applies to both the personal and real property of the debtor. Property tax liens are specific liens against the delinquent property, that may be filed by a government for the nonpayment of real estate property taxes. Mechanic's liens are also specific liens against the property on which work was performed, that may be filed against real property by a contractor or supplier for nonpayment of work or supplies.

Oscar and Susan are next-door neighbors. Susan tells Oscar that he can store his camper in her yard for a few weeks until she needs the space. Susan did not charge Oscar rent for the use of her yard. Susan has given Oscar a(n) what?

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.

In negotiating a sale, a buyer wanted an attached basketball hoop to be included in the sale but did not want to pay extra for it. Which would BEST accomplish this?

List the basketball hoop as a fixture in the sale contract. Since fixtures are automatically included in the sale price, and since the basketball hoop is immovable and thus qualifies as a fixture, this is the best solution.

An agent becomes the agent of the seller when both the seller and the agent sign a(n):

Listing Agreement. The Listing Agreement is the employment contract that creates the agency relationship between the seller and the listing agent.

Which of the following determines the loan-to-value ratio on a mortgage?

Loan amount as the percentage of the sales price or appraised value, whichever is the lowest. The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. The term is commonly used by lenders to represent the ratio of the first mortgage as a percentage of the total appraised value of real property. Commonly, this looks like:Mortgage amount ÷ Appraised value = Loan-to-Value ratio.

The owner has a large parcel of land surveyed into lots and streets and files a subdivision plat. Each lot can be legally described by use of which of the following?

Lot and block system. The lot and block system is often used to describe property in subdivisions. The rectangular government survey system divides land into rectangles and describes those rectangles with principal meridians and base lines. The metes-and-bounds system outlines the perimeter of a parcel by starting at one point and ending at the same point. A street address is not a legal property description.

When an agency relationship ends, which of the following duties does not continue?

Loyalty. In real estate terms, loyalty means doing nothing that might weaken the seller's bargaining position and that responsibility ends when the sale is complete.

On an FHA loan, which of the following would the buyer not be required to do?

Make a 20 percent down payment on the loan. An FHA loan is a mortgage that's insured by the Federal Housing Administration (FHA). ... However, borrowers must pay mortgage insurance premiums, which protects the lender if a borrower defaults. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% for a credit score of 580 or higher.

An appraiser is assigned to appraise a house in an area with very few sales over the past year. One of the comparable properties she chooses is a home similar to the subject property. The house recently sold as a foreclosure property. When writing her appraisal report, what action will the appraiser take as a result of the foreclosed sale?

Make a positive adjustment to the sales price of the foreclosed home. A foreclosed home usually will sell for less than fair market value. The appraiser will make a positive, upward adjustment to the sales price of the foreclosed home to compensate for the sale at less than market value. In the sales comparison approach, adjustments are made to the sales prices of comparable properties, never to the subject property.

Which of the following types of legal descriptions identifies a property by outlining its boundaries in terms of a series of directions and distances from a specific point of beginning?

Metes and bounds. Metes and bounds is a method used in describing property which starts at an identifiable starting point and then describes the succeeding sides by their bearing (direction) and length (distance).

Which of the Methods could be used by Appraisers for estimating the cost of Construction:

Methods by appraisers for estimating the cost of Construction: Unit-in-Place Method: calculates the added cost of single units installed; Square Footage Method: utilizes exterior dimensions to calculate the cost per square foot; Quantity Survey Method: calculates the cost of labor and materials to construct each component of a building, very accurate but time consuming.

Tax credits are a direct offset against taxes due rather than deductions against income. Credits are usually available for all of the following types of real estate except:

New ventures that are running at a loss. Tax credits are an incentive offered by jurisdictions to encourage special efforts to improve the quality of life in a community through restoring abandoned buildings and providing shelter for the needy.

Which of the following is NOT essential to a contract?

Performance. Performance is not one of the four essentials of a valid contract, which are: Capable Parties, Lawful Object, Offer and Acceptance, and Consideration. "Consideration" is the promise of payment, while "performance" is delivery of the payment- you will still have a valid contract without performance, although a successful contract will end with performance.

Which of the following items is often short-rated?

Premiums on an insurance policy. When a casualty insurance policy is canceled prior to expiration, the insurance company normally assigns a short-rate factor to the refund.

To determine ownership, what is the court action taken?

Quiet title action. A court action intended to establish or settle the title to a particular property, especially where there is a cloud on the title. All parties with a possible claim or interest in the property must be joined in the action. A quiet title action is frequently used by an adverse possessor to substantiate the title, because having official record title makes it easier to market the property. Once the judgment or decree of the court has been recorded, proper record notice of the claimant's right and interest in the property is established.

A homeowner has owned her house for over 65 years. It has fallen into disrepair, but because she lives on a fixed income, she does not have the money to make the needed repairs. She has a considerable amount of equity in the house. What type of loan would BEST provide her the funds to make the necessary repairs?

Reverse-mortgage. A reverse mortgage allows people 62 years of age or older who have considerable equity in their homes to borrow money against that equity. No payments are due until the property is sold or the borrower defaults, moves, or dies. A home equity loan uses the equity in the home as a source of loans but requires monthly payments of principal and interest that may be burdensome to older persons on a fixed income. A blanket loan covers more than one parcel or lot and permits the borrower to obtain a release of a parcel or lot from the mortgage lien when the lot is sold. An open-end mortgage is an expandable loan in which borrowers are given a limit up to which they may borrow, with each advance secured by the same mortgage.

A husband and wife want to buy a lot for $25,000. They will pay $10,000 cash and the seller will "carry back" a note and trust deed for the balance. They intend to build a home on the lot in five years. When they are ready to look for a lender that will finance their construction plans, the absence of which of the following clauses may cause them difficulties?

Subordination clause. A subordination clause in a mortgage usually says that all original claims on a debt must be paid before any new ones. A subordination clause in a second or third mortgage gives the first mortgage priority. This means that if the house is sold or foreclosed upon, the debt owed under the primary mortgage gets paid off first.When this husband and wife try to build a house, their lender will likely require the seller to include a subordination clause in the agreement for the lot sale. If the lender for that transaction doesn't agree to a subordination clause, the couple may have a hard time getting a loan to build.

Joe and Susan own property as joint tenants. Susan then sells her interest to Carol. What is the relationship between Joe and Carol regarding the property?

Tenants in common. Tenancy in Common is a specific type of concurrent, or simultaneous, ownership of real property by two or more parties. It is generally the default concurrent type of tenancy. All tenants in common hold an individual, undivided ownership interest in the property. This means that each party has the right to alienate (transfer the ownership of) their ownership interest.

Which of the following may appear on a closing statement as a credit to the buyer?

The balance of an assumed loan. A loan assumption is a transaction in which a person (the "assumptor") obtains an ownership interest in real property from another person and accepts responsibility for the terms, payments and obligations of that other person's mortgage loan. It is money the buyer doesn't need to bring to the table at closing, so it's a credit to the buyer on the closing statement (even though it's a debit to the buyer's personal accounts).

Which of the following is the best definition of a "commercial acre":

The building portion of an acre after deductions for streets, curbs and sidewalks. Commercial Acre: Also referred to as a Buildable Acre, this is the portion of land left that can be built minus the streets, sidewalks, curbs, etc.

A broker wrote an offer for a buyer that contained a 10-day acceptance clause along with a $2000 deposit. On the fifth day, the buyer notified the broker he wanted to withdraw the offer and receive back his deposit check for $2000. Which of the following statements is true about this situation?

The buyer can revoke the offer immediately, provided the seller has not responded to the buyers offer. Regardless of the acceptance clause, a buyer can revoke an offer at any time before the seller has accepted and that acceptance has been communicated back to the buyer. Until that point, there is no contract.

Processing a loan includes an analysis of which of the following selections?

The buyer's credit. Processing a loan includes an analysis of the buyer's credit.

A seller lists her property with a local broker, and the listing agreement excludes the seller's prized Iris flowers planted in the garden. The broker lists the exclusion in the MLS and notes it on the property brochure. But when a buyer makes an offer on the property, the plants are not mentioned anywhere in the contract. The seller accepts the offer. At closing, who has possession of the Iris plants?

The buyer, since they are improvements to the land. Landscaping is considered to be an improvement and, once attached, is an appurtenance which transfers with the land via the deed. In this question, the seller excludes the Iris plants on the listing which implies they are planted, or otherwise appurtenant to the property. Since the seller forgot to exclude the plants in the purchase contract, which is what determines the legal status of appurtenant items, the plants would likely be considered appurtenant and would transfer with the property to the buyer.NOTE - There are other potential outcomes to this situation, but the correct answer is the only realistic answer provided (this is a common question format on many exams).

The buyer has been informed in the title work that there is an easement on the property he has under contract. At closing what will happen with the easement?

The easement will transfer with the title with the buyer's only choice being to terminate the purchase contract if the easement is an issue. Easements are non-revocable rights so the seller or buyer cannot terminate or revoke the easement. The buyer's only choice is to take the property with the easement or terminate the purchase contract.

The economic life of an investment property can be described as:

The economic life of an investment property is simple- how long can it make money? Once a property costs more to operate than it earns, it reaches the end of its economic life. The time over which value generated by the investment exceeds its cost of operation.

Which of the following statements about housing loans with federal government supports is false?

The federal government supplies funds to the lending agency. The federal government supports many aspects of home loans to make it easier for citizens to purchase homes. For example, the FHA insures lenders of federally-backed loans against losses for mortgages on single-family residences and multi-family properties (apartments and health care facilities), and VA-backed loans may be used to purchase condominiums. The federal government does not, however, supply funds directly to lending agencies.

What law prescribes the rights and duties between a property manager and his clients?

The laws of agency. The laws of agency are an area of contractual or commercial law dealing with fiduciary relationships that involve a person, called the agent, who is authorized to act on behalf of another (called the principal).

Of the following, which best defines a fee simple estate?

The most interest that one can hold in land. Also referred to as an "Estate of Inheritance", a Fee Simple Estate is one type of Freehold Estate and is indefinite in duration. A Fee Simple Estate can be sold or inherited, and is not free of encumbrances.

Title VIII of th e Civil Rights Act of 1968, also known as the Federal Fair Housing Act, prohibits discrimination in which of the following categories?

The sale of homes and home loan lending. The Civil Rights Act of 1968 defines housing discrimination as the "refusal to sell or rent a dwelling to any person because of his race, color, religion, or national origin". Title VIII of this Act is commonly referred to as the Fair Housing Act of 1968, and it specifically prohibited discrimination concerning the sale, rental and financing of housing based on race, religion, national origin. Gender, familial status, and disability were added to the list of identities protected by the Fair Housing Act through amendments in 1974 and 1988.

The "marginal tax rate" is defined as:

The tax rate which is applied to the next dollar earned. Marginal Tax Rate is the tax rate that is applied to the next dollar of taxable earned income.

The lessee of an apartment and the owner of a condominium have many things in common. Which of the following is true for both?

They each hold an estate in real property. Although the type of estates are different, the only thing they have in common is that they each have an estate. Remember that an "estate" is simply an "interest in real property". A condo owner has a fee interest and an estate of inheritance. The lessee has a less-than-freehold estate. They each have an estate. A lease is personal property, it is also less-than-freehold estate is a form of a lease, therefore it is still a type of a estate.

In arriving at an effective gross income figure, an appraiser of income property makes a deduction for:

Vacancy. Also referred to as Adjusted Gross Income, the Effective Gross Income is calculated by subtracting Vacancy Losses from Gross Income.

A loan fee charged by a lender to increase the lender's yield on a loan is:

a discount point. Discount points are used to increase the lender's yield on its investment. The yield is the profit the lender makes on a loan, the spread between the cost of acquiring the funds lent to the borrower, and the interest rate charged to the borrower. Interest is the sum paid or accrued in return for the use of a lender's money. The principal is the balance owed on the original loan amount.

A valid deed must contain:

a granting clause. Deeds provide evidence of the transfer of title of real property from a grantor to a grantee. For a deed to be valid, it must meet the following requirements:1. The grantor must be legally competent2. The deed must be delivered and accepted3. The deed must contain a granting or action clause.In most states, a deed does NOT need to be acknowledged to be valid.

The owner of real property who leases it to another is called

a lessor. a lessor is a person who leases or lets a property to another; a landlord.

An encumbrance that affects the title, usually related to money, is known as:

a lien. A lien is a charge against a property--a financial encumbrance. The other easements listed here do not deal with finances, but are considered usage encumbrances and affect the way in which the land may be USED.

Roberto owns an apartment building and wants to exchange his property in a 1031 tax deferred exchange in order to defer paying taxes in the year of the exchange. He could exchange his apartment building for:

a more valuable apartment building, exchanging loans and paying money to the other party to equalize the values. A 1031 exchange allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. Exchanges need to be of "like-kind" and the values must be equal. If they are not, the lesser-valued property owner must equalize the value with cash or some other kind of property, usually personal property.

Each party is bound to a specific date for performance if a real estate sales contract contains:

a provision that time is of the essence. When a contract has a "time is of the essence" clause, the dates and times provided for contract performance are considered vital and mandatory to the contract. Failure to act in the timeframe provided can constitute a breach of contract.

The real estate broker representing a seller is usually:

a special agent. In real estate, a special agent (or "specific agent") is an agent hired to perform a specific duty for a client. The real estate agent's authority is limited to the specific job for which they are hired. This is in contrast to "universal" or "general" agents which are responsible for several duties (show and rent apartments, supervise maintenance, do the bookkeeping, etc).

Which of the following would be used to clear a defect from the title records?

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 assert some right to the property through a dubious claim. The suit "quiets the mouth" of that person and establishes a clear title.

The owner of a single lot is trying to show that exceptional circumstances concerning an intended use of the property are applicable to his property. The owner is also trying to show that the exception is not detrimental to the public. The owner would probably petition the planning commission for:

a variance. A Petition for Variance is a method by which a landowner can try to show that unique circumstances exist and that his land should be allowed an exception to present zoning laws. Variance is done lot by lot.

If you went to the city/county and wanted to change the height requirement specific to your structure from the standard normal requirements, this would be:

a variance. A variance is a request to deviate from current zoning requirements. If granted, it permits the owner to use his land in a way that is ordinarily not permitted by the zoning ordinance. It is not a change in the zoning law, but a waiver from the requirements of the zoning ordinance.

When a tenant voluntarily vacates a rented property with no intention of honoring future obligations on the lease, this is known as:

abandonment. Abandonment is when a tenant voluntarily vacates a property before their leased tenancy has ended. This is usually done without letting the landlord know (if the landlord knew and agreed, they would probably terminate the lease so there would be no abandonment).

The recorded history of matters that affect the title to a specific parcel of real property is called a(n):

abstract of title. Abstracts give an at-a-glance history of all the recorded documents associated with a property, including changes in title, liens, mortgages taken out and paid off, transfers through death and so forth. Chain of title is a history of ownership only.

A homeowner acquired the ownership of land that was deposited by a river running through her property by:

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.

The liquidation of a financial obligation on an installment basis is commonly termed:

amortization. Amortization is the liquidation of a financial obligation in installments.

The federal Equal Credit Opportunity Act (ECOA) allows lenders to discriminate against potential borrowers on the basis of:

amount of income. Lenders may reject applicants who have insufficient income for the loans they are requesting or for their lack of ability to repay the loans. Lenders may not discriminate against potential borrowers on the basis of race, color, religion, national origin, sex, marital status, age, or dependence on public assistance.

An option is a contract to keep an offer to sell or lease real property open for a set period of time. The optionor cannot revoke the offer to sell during the designated period of time and the optionee is under no obligation to buy the property in question, but the optionee has no interest or estate in the land until they exercise the option agreement.

an assignment. An assignment is a legal term used in the context of the law of contract and of property. In both instances, assignment is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee. In this case, business A can assign their lease to business B (with the consent of the landlord).

If two parties want to create an enforceable broker-principal relationship concerning a right, title or interest in real property, the most essential element to do so would be:

an employment contract. The most essential element of an enforceable broker-principal relationship is the employment contract. A listing is the most common employment contract, but licensees can broker leases and broker for buyers as well.

An adjustable rate mortgage would be a good choice for all of the following EXCEPT:

anyone on a fixed income. Adjustable rate loans adjust their rates and payments can increase, which a borrower on a fixed income might not be able to afford.

When purchasing with FHA financing, a new buyer would normally do each of the following except:

apply to a local FHA office for the FHA appraisal. The Federal Housing Administration (FHA) insures lenders against loss in the event of a default. To get an FHA loan, borrowers go to qualified lenders- there is no FHA office. Contrary to what many think, FHA loans do require (and include) mortgage insurance premiums (MIP). This is different than Private Mortgage Insurance (PMI).NOTE - This question asks "each of the following EXCEPT" which means it's looking for a false answer, and it's false that a buyer would apply to a local FHA office as there isn't one.

The sudden tearing away or removal of land by action of water is:

avulsion. In real property law, avulsion refers to a sudden loss or addition to land, which results from the action of water. It differs from accretion, which describes a gradual loss or addition to land resulting from the action of water.NOTE - Avulsion is SUDDEN, while accretion and erosion are GRADUAL.

Within the agency agreement is a statement that binds the buyer to payment of the broker's fee if, within a stated number of days, the buyer purchases a property that was shown to the buyer during the agency period. This clause is called the:

broker protection clause. Unless the buyer subsequently hires another buyer agent and purchases this property, the broker protection clause obligates the buyer to pay the broker's fee.

A divorce attorney hires a broker to determine the value of the property the couple owns. The broker will most likely prepare a(n)

broker's price opinion. A broker price opinion (BPO) is a broker's opinion of the value of a particular property, often in the form of a competitive market analysis. The BPO may not be labeled an appraisal, which may only be conducted by a state licensed or certified appraiser. The sales comparison approach is used in both the BPO and an appraisal. The cost approach is used when conducting an appraisal.

A joint tenancy with right of survivorship is created

by a deed. Joint tenancy, like all ownership, is not implied by law or through any action. All tenancy is created when the deed is conveyed to the grantee. To create joint tenancy the deed must specifically identify the parties as joint tenants. When a deed does not indicate the form of tenancy and two or more people acquire title to property, the new owners are presumed to be tenants in common. Joint tenancy is the right to survivorship, so that when an owner dies, the interest transfers directly to the surviving co-tenants, not heirs. Signature by spouses does not create joint tenancy.

Re-zoning a section of town and changing its lawful use for new development from commercial to residential use is known as:

down zoning. This is known as down zoning because it usually reduces the economic value of the property involved. Down zoning is the process by which an area of land is rezoned to a usage that is less dense and less developed than its previous usage. This is typically done to limit sprawl and overgrowth of cities, and to help concentrate areas of development into smaller sections to prevent over zoning a community.

A mortgage clause which states that the entire balance of a mortgage is due immediately if the borrower sells the property is known as a(n):

due-on-sale clause. The due-on-sale clause, also known as an alienation clause or resale clause, says that the balance of a loan must be paid in full if the mortgaged property is sold.

Many states permit mortgagors to redeem their property after default but before a foreclosure sale. This right is called a(n):

equitable right of redemption. If a borrower in default pays the lender the amount in default (plus costs) BEFORE the foreclosure sale, it is known as an equitable right of redemption (not applicable in all states). Certain states also have a period of time AFTER a foreclosure sale in which the borrower in default may redeem the property if the borrower pays the court- this is called a statutory right of redemption.

The difference between the value of a property and the total amount of liens against it is known as:

equity. Equity is the difference between how much a property is worth and how much is owed on the property. A lien is a hold or claim on the property of another to satisfy an unpaid debt.

A clause in a loan document which makes the payments periodically increase is known as a

escalation clause. An escalation clause is a clause in a lease or contract that guarantees a change in the agreement price once a particular factor beyond control of either party affecting the value has been determined. An important example of this is a contract that adjusts for inflation.

A person who has complete control of a parcel of real estate is said to own a

fee simple estate. The highest interest in real estate recognized by law is the fee simple or fee simple absolute estate in which the holder is entitled to all rights of the property. In a fee simple estate, the property may pass to the owner's heirs upon the death of its owner. A tenant's right to possess a property for the term of a lease is called a leasehold estate. A life estate is an interest in real property that ends when the owner dies. A defeasible fee estate is a fee simple estate that can exist as long as a certain use continues or provided that the property is used for a specific purpose.

The position of trust assumed by the broker as an agent for the client is described most accurately as a

fiduciary relationship. A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person.

Personal property includes all of the following EXCEPT:

fixtures. Chattel, or chattels, is a legal term that means personal property. Emblements and fructus industriales refer to profit from crops 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.

The prospective purchaser may withdraw the offer at any time before the seller's acceptance of an offer:

for any reason. A buyer may cancel for any reason prior to the acceptance by the seller.

A house built in 1920 had a garage that was 12' x 18'. Today, if an acceptable garage is 16' x 20', this property suffers from:

functional obsolescence. Functional obsolescence, in this case, results from a feature once considered "standard" but that falls below today's expectations.

A four-bedroom house with a one-car garage would be an example of:

functional obsolescence. The correct answer is functional obsolescence, which is a loss in the value of a property resulting from a deficiency in the floor plan of a house. A one-car garage would be inadequate for the four bedroom house.

The BEST way to ensure that there are no encroachments to a property and to properly verify the boundaries of a parcel of land is to

get a survey. Encroachments are found through actual notice or visual inspection by the buyer or someone working for the buyer. A survey shows the location of all improvements on a property and whether any improvements extend over the property lines. A legal description is a description of a specific real estate parcel complete enough for an independent surveyor to locate and identify the parcel. Monuments are fixed objects or markers to identify corners or places where boundary lines change directions, but they will not identify encroachments. Benchmarks are permanent reference points established for use in surveys to measure differences in elevation, but they will not identify encroachments.

A broker has a combination of a listing and an option on a property. She exercises the option without disclosing to the seller that she has found a buyer at a higher price. The broker:

has made a secret profit. In this situation, the broker exercised an option to buy already knowing that she had a buyer on the hook that would pay her more, resulting in "secret profit". Secret profit refers to a broker making an undisclosed profit at the seller's expense. Brokers cannot conceal offers from buyers until after they have exercised the option- full and fair disclosure must be given to the seller. The common law duty of an agent to make no secret profit has been a fixture of modern jurisprudence, which means that engaging in conduct that creates secret profit can result in litigation.

Two brokers decide to list a property together and agree to split the commission 50⁄50. One broker finds the buyer and then refuses to share the commission. To recover the agreed-upon portion of the commission, the deceived broker could file an action:

in a civil court. If a broker agreed to share a commission with another broker and then refused to pay the other broker, the other broker should file an action in a civil court. This matter is about the civil agreement for the commission rather than license law, so it must be filed in a civil court- once payment has been made from the seller to the broker, a Department of Real Estate or Real Estate Commission no longer has jurisdiction.

A corporation takes title to real property:

in severalty. A corporation is legally treated as a single person and may own property in severalty. A corporation, though not human, is an artificial person in the eyes of the law. A corporation is not a partnership or a trust. It does not own property with the right of survivorship established through a joint tenancy.

Two friends bought a store building and took title as joint tenants. One woman died testate. The surviving woman now owns the store:

in severalty. Joint tenancy includes the right to survivorship, which means the property passes to the surviving owner(s) upon the death of one tenant. In this case, the women took title as joint tenants. When one woman died, her share passed to the other owner who now owns the property in severalty.

Sam and Nancy bought a store building and took title as joint tenants. Nancy died testate. Sam now owns the store:

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 salesman asks a broker, other than his own, for a $100.00 advance on his next commission. If the broker pays it, he is:

in violation of the law. A real estate broker may never pay money to another broker's salesman.

A balloon payment is usually associated with a

large payment during the term or at the end of the payment schedule. A balloon payment is a large payment due at the end of a balloon loan, such as a mortgage, commercial loan or other amortized loan. A balloon loan typically features a relatively short term, and only a portion of the loan's principal balance is amortized over the term.

The CFPB (Consumer Financial Protection Bureau) requires that:

lenders provide the borrower with a new loan estimate at the time of application or no more than three days after application. The CFPB enforces truth-in-lending laws including TILA, RESPA, and TRID which requires lenders to provide borrowers with a loan estimate of settlement costs no more than three business days after receiving the loan application. The CFPB enforces truth-in-lending laws including TILA, RESPA, and TRID which requires lenders to provide borrowers with a loan estimate of settlement costs no more than three business days after receiving the loan application.

The owner of an apartment building borrowed $75,000 to install a pool on the property. One year later, the property's value increased by $30,000 due to the improvement. This is an example of:

leverage. Leverage is maximizing the use of borrowed money, such as using the proceeds from a loan to increase the value of a property.

An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would NOT include reference to the

listed price of the parcel. The listed price of the parcel is the price that the owner wants for the property. It may or may not be a realistic price or reflect the fair market value of the property. Highest and best use, the most probable price the parcel will bring, and the physical dimensions of the parcel are all applicable to the analysis by the appraiser in determining the market value of the parcel.

In making new real estate loans, institutional lenders often charge a fee for expenses incurred for such items as document preparation and related work. The fee charged is often a percentage of the face amount of the loan, and is referred to on the borrower's closing statement as a:

loan origination fee. Document preparation charges are usually charged for as part of the loan origination fee.

A recorded subdivision plat is used in the

lot and block system. The answer is lot and block system. A recorded subdivision plat, which becomes part of the legal description, uses the lot and block system. The rectangular survey system divides land into rectangles and describes those rectangles with principal meridians and base lines. The geodetic survey system refers to the government system that identifies property through a network of benchmarks, each one identified by its longitude and latitude. The metes-and-bounds system outlines the perimeter of a parcel by starting at one point and ending at the same point.

Mrs. Jones, an appraiser, is appraising a single family residence for which she has located six closely comparable properties, all sold within the past six months. The subject property is rented for $500 per month. It is a custom-built home, approximately three years old. Mrs. Jones would probably give the most weight in her final estimate of value to which of the following appraisal methods?

market data approach, Market data would be used because it is the most reliable indicator of a home's true value. Since it is a single family residence rather than a multi-unit investment property, the fact that it is rented, as well as the amount of rent, is irrelevant to the calculations.

In the appraisal of residential property, the cost approach is most appropriate in the case of a(n):

new property. The cost approach is most appropriate for new buildings, not old, because the cost of materials will still be similar to what it cost to build the new building. The older the building is, the more variables there are for estimating its value. But if something was built yesterday, then the estimation of how much it cost to build is much more accurate.

With a tenancy for years:

no notice is required to terminate the lease. An estate (tenancy) for years is a leasehold estate that continues for a definite period of time. Because it always has specific beginning and ending dates, no notice is required. A tenancy for years may be for any specified period of time. In a tenancy for years, the lessee has a leasehold estate.

For the past 30 years, the Seddons continue to operate a neighborhood grocery store. Last week, the city council passed a zoning ordinance that prohibits packaged food sales in the area where the Seddon's grocery store is located. The store is now an example of a/an:

non-conforming use. This is an example of "grandfathering" that's common when new zoning rules are put into place. Basically it means that businesses and buildings that were in compliance before the new code was established may continue to operate or exist under their present owners. However, if the Seddons want to sell their business, it must be to an enterprise that meets the new requirement.

A listing that does not require a broker to use diligence in obtaining a purchaser is:

not an exclusive listing. An exclusive listing is an agreement in which the seller agrees to appoint only one broker to sell the property. For this reason, it must include a promise by the broker to use diligence in finding a buyer. Therefore if a listing is not exclusive such as the case in an open listing, the broker is then not required to use diligence in finding a buyer..

The major cause of loss of value in real property is due to:

obsolescence. Obsolescence is the major cause of loss of value in real property and can refer to functional or economic obsolescence. The word obsolescence literally means the condition of no longer being used or useful, or the condition of being obsolete.

The type of real estate loan that allows the lender to increase the outstanding balance of a loan up to the original sum in the note while advancing additional funds is the:

open-end mortgage. An "Open End Mortgage" is an expandable loan in which the borrower is given a limit up to which he or she may borrow, with each incremental advance to be secured by the same mortgage. The lender is allowed to advance additional funds to increase the outstanding balance of the loan at the borrower's request, up to the original loan limit of the promissory note.

The difference between a freehold and leasehold estate is

ownership versus possession. Freehold estates are estates of ownership while in a leasehold estate the property owner gives the tenant possession of the property. Tenants may agree to pay all the property expenses or share them with the owner or the owner can pay them all. The right to purchase is not a requirement for leasehold and there is no right of survivorship.

The Yuter's purchased a residence for $75,000. They made a down payment of $15,000 and agreed to assume the seller's existing mortgage, which had a current balance of $23,000. The Yuters' financed the remaining $37,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a:

part purchase mortgage. Also known as a "purchase money second," this is a streamlined and often cost-effective financing option.

Defined as a loss in value from any cause, depreciation is generally divided into three categories. The loss of value due to the normal wear and tear on a property is called:

physical deterioration. Physical deterioration is the loss of value based on the physical wear and tear on the property. It can be either curable or incurable deterioration. External and economic obsolescence are a reduction in a property's value caused by factors outside of the property lines. Functional obsolescence is a loss in value due to such factors as outmoded or unacceptable features of the property itself.

A veteran wishes to refinance his home with a VA-guaranteed loan. The lender is willing, but insists on 3½ discount points. In this situation, the veteran can:

proceed with the refinance loan and pay the discount points. Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called "buying down the rate," which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000).

A CORRECT statement about the Federal National Mortgage Association (FNMA) is that it:

purchases certain mortgages originated by lending institutions. FNMA is a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

Teddy, Andy and Peter are joint tenants owning a parcel of land. Peter conveys his interest to his long-time friend Dan. After the conveyance, Teddy and Andy:

remain joint tenants owning a two-thirds interest. Remember that joint tenancy requires the four unities of TTIP- Time, Title, Interest, and Possession. Teddy and Andy remain joint tenants with a two-thirds interest while Dan, who received his share of the property later and does not share the "unity of Time" with Teddy and Andy, becomes a tenant in common with 1⁄3 share.

The term impounds refers to:

reserves. Impounds are monies set aside (reserves) to cover future payments of recurring costs such as taxes and insurance.

A property owner conveys the ownership of his house to his mother and stipulates that on her death ownership will revert to him. The interest the owner has in the property is a

reversionary interest. Until the mother dies the son holds a reversionary interest. Upon death of the life tenant, the mother, the holder of the reversionary interest will return to having a fee simple absolute estate. A qualified fee estate is held as long as the owner maintains the deed condition. A homestead is protection for a primary property against certain creditors. A remainder interest belongs to a person named as a remainderman, the person-other than the creator of the estate-to whom the life estate will pass when the estate ends.

All of the following are included in the bundle of legal rights EXCEPT the:

right of survivorship. Property is accompanied with the bundle of rights, which are rights inherent in ownership of property. The bundle of rights includes the right to use, to sell, to mortgage, to lease, to enter, and to give away, or the right to refuse to exercise any of these rights. It is useful to imagine a bundle of rights that can be separated and reassembled.A "Bundle of Straws" - in which each straw represents an individual right - is a common analogy made for the bundle of rights. Any property owner possesses a set of straws related directly to the land. For example, completion of a mechanic's lien takes some, but not all, rights out of the bundle held by the owner. Extinguishing that lien returns those rights or "sticks" to the bundle held by the owner.The right of "survivorship" is included in certain types of joint property ownership, and it means that any surviving co-owners absorb a dying owner's interest in a property. For example, if Pete and John are Joint Tenants with the right of survivorship and Pete dies, John gets his interest in the property- not Pete's heirs.

The following are required to be in writing EXCEPT the:

sale of an RV. The Statute of Frauds generally requires that all contracts for the sale of land or any interest therein be in writing. An RV isn't considered land or real property, so selling it would not require a bill of sale to be in writing for the sale to be valid.

Neighbor A uses Neighbor B's driveway to reach A's garage, which is on their property. B's attorney explains that ownership rights of A's real estate includes an easement appurtenant giving them the right to use B's driveway. In this case, B's property is the

servient tenement. In an appurtenant easement the parcel over which the easement runs is known as the servient tenement, and the neighboring parcel that benefits from the easement is known as the dominant tenement. B's property is the servient tenement, and A's is the dominant tenement. The easement does not create a leasehold estate. A license is a personal privilege with permission from a landowner to enter the land for a specific purpose.

Title held by a husband and wife may include all of the following forms of ownership EXCEPT:

severalty. Severalty means sole ownership and, other than forming a corporation, spouses can only hold property in common through some form of joint ownership.

The income approach to value would be MOST important in the appraisal of a:

shopping center. The income approach would be used to estimate the value of income-producing properties, such as shopping centers and office buildings. The sales comparison approach or the cost approach may be used to determine the value of other types of properties.

Real estate investments have which of the following advantages when compared with an investment in securities:

slower depreciation. Real estate is a much safer investment than securities because it has less of a risk to suddenly drop in value.

A mechanic's lien would be properly classified as a(n)

specific lien. A mechanic's lien is a specific lien as it affects a specific property and only that particular property. It is an involuntary lien placed on a property without the owner's consent. A general lien is the right of a creditor to have all of an owner's property, real and personal, sold to satisfy a debt. An equitable lien arises out of a written contract that shows the intention of the parties to charge a particular property as a security for a debt or obligation.

The law that requires real estate contracts to be in writing to be enforceable is the:

statute of frauds. Contrary to popular belief, the statute of frauds is not about specific actions defined as fraud, but the requirement in every state that certain documents be in writing, especially those pertaining to real estate. It's called the statute of frauds because it was first enacted in England in 1677 to prevent fraudulent claims of title.

A mechanic's lien is properly classified as a(n):

statutory lien. A mechanic's lien is a "statutory lien", as their authority comes from specific laws 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, and a "general lien" grants a creditor the right to file a claim against all of a debtor's assets, not just a particular property. Next Question

Which is the best example of functional obsolescence?

steep, narrow stairway in a 1 3⁄4 story home. "Functional obsolescence" typically shows itself in one of two forms: first, in poor initial design, as in this case; second, when the features and design of the home have become outdated compared with competing properties.

An appraisal differs from a competitive market analysis conducted by a broker in that an appraisal is based solely on an analysis of properties:

that have actually sold. An appraisal is based on the analysis of properties that have actually sold. A comparative market analysis (CMA) features properties similar to the subject property in location, size, and amenities. A CMA includes analysis of properties currently on the market; those properties currently listed that compete for buyers with the subject property; properties that have actually sold (recently closed properties); and properties whose listings have expired.

The lender is required, under RESPA and TRID, to provide a detailed Loan Estimate disclosure at the time of loan application or within three business days (but no later than 7 days before closing) to:

the buyer. When a homebuyer applies for a home loan, the TILA/RESPA Integrated Disclosure rule requires the lender to provide a Loan Estimate to the buyer within 3 days of receipt of the loan application, and all revisions have to be delivered at least 7 days before closing. The loan estimate details the loan terms, mortgage payments, costs at closing and other costs and fees related to the loan, many of which cannot change.

The appraisal approach most likely to be used in valuing a public library building would be:

the cost approach. The cost method is most often used for buildings where actual income or comparative commercial value are unavailable, like schools and libraries. They are considered special purpose properties.

To determine the kinds of land uses and the amounts of land for each use in a subdivision, a developer must consider

the master plan of the local government. A master plan (or comprehensive plan) created by a local government usually covers land use, housing needs, community facilities, utilities, and energy conservation. Before the actual subdividing can begin, a developer must go through the process of land planning. The resulting land development plan must comply with the municipality's master plan. While other considerations may be important to the developer, they must comply with the master plan.

All of the following are essential elements of every valid contract, except:

the payment of money. The four essentials of a valid contract are Meeting of the minds, Capable parties, Lawful object and Consideration. Payment of money (or delivery of whatever consideration was agreed upon) occurs when the valid contract has been performed.NOTE - Consideration is the promise of a payment, while the payment of money would be "performance" of the contract.

To rehabilitate real property usually means:

the property will be restored to a good condition. Rehabilitation of property means to restore real property to an improved state. The restoration is usually needed because the property's condition has worsened.

The right of alienation is defined as:

the right to transfer an interest in real property. In property law, alienation is the voluntary act of a property owner "alienating" themselves of the property- for example, selling it, willing it, or giving it to a family member.

The seller under a land contract is called:

the vendor. The seller under a land contract can also be referred to as the "vendor". Land contracts are also known as installment contracts. In this type of arrangement, the buyer occupies the property, but the title is held in the name of the seller until some future point in time, often when the last payment is made.

The states in which the lender holds title to mortgaged real estate are called:

title-theory states. Title theory is a property-law doctrine which states that a mortgage transfers a property's title to the mortgagee, who holds it until the mortgage has been paid off, at which time they pass title to the mortgagor (borrower).