National Real Estate Exam

A buyer has a 30-year, $400,000 loan with a 7% interest rate. How much of the first month's mortgage payment is interest? $2,333.33 $28,000 $3,100 $933.33

$400,000 × 0.07 = $28,000; then $28,000 ÷ 12 = $2,333.33

Unilateral Contract

A contract in which consideration is only offered by one of the parties is a unilateral contract. In other words, the consideration only goes one way.

Executed Contract

A contract that has been completely performed by both parties.

special use permit

A special use permit, also called a conditional use permit, requires a public hearing and may be granted as long as the use is in harmony with zoning ordinances and doesn't adversely affect the community.

debt-to-income ratio

A standard tool that calculates whether a borrower will have difficulty meeting his or her loan repayment obligation. A household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt service, including housing and other debt such as car loans and credit cards.

Fee Simple Defeasible

A type of ownership of real property that grants the owner all the incidents of a fee simple absolute except that it may be taken away if a specified condition occurs or does not occur

Which of these is excluded on a title insurance policy on Martha's property because of the schedule of exceptions? A mechanic's lien recorded by A1 Siding and Windows A verbal lease agreement Martha has with her neighbor who leases Martha's garage Last year's unpaid property taxes The current year's unpaid property taxes

A verbal lease agreement Martha has with her neighbor who leases Martha's garage. The title policy doesn't exclude property taxes (assuming they're properly recorded), though the taxes must be paid before the policy is issued. The verbal lease agreement is excluded since it's not shown in public records.

promisary note

A written promise to pay a certain amount of money with a certain interest rate on a certain date. A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note's terms.

Brownfield site

Abandoned or otherwise unused commercial or industrial site with suspected contaminants.

Stages of home ownership

Acquisition, ownership, and reversion

attachment lien

An attachment lien is when the courts place on encumbrance on the property of a defendant in a lawsuit for monetary damages.

Freehold Estate

An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.

In the sales comparison approach, using comparables that are five and 15 years old when appraising a subject that is 10 years old is an example of what? Bracketing Bridging Substituting Surrounding

Bracketing is a process in which an appraiser determines a probable range of values for a property by comparing a group of comparable sales to the subject.

Which of the following is most likely to establish workmanship standards when someone is building an addition to their property? Building code Planning commission State regulations Zoning ordinance

Building codes are regulations, adopted under the government's police power, that specify the standards for constructed objects such as buildings.

Which duties survive agency termination?

Confidentiality and accounting

Where can you find a legal description of a property?

Deed

Related to real estate financing, how much is a point?

Points are a percentage of the amount being financed. One point is one percentage, so two-and-a-half points is 2.5% of the loan amount.

Tenancy by the entirety

The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. Upon the death of one spouse, the survivor becomes the owner of the property.

The Walton family got a great deal on their new home. They bought it for $101,295, and it appraised at $187,000. Using an assessment ratio of 25%, what is the assessed value of their new home?

$46,750

Easement Appurtenant v. Easement in Gross

*Appurtenant*: directly benefits the use and enjoyment of a specific piece of land, goes with the property *In Gross*: Doesn't benefit land. There's only a servant estate and no dominant estate. (Ex. utility easements like power lines or railroads)

Doctrine of Estoppel

-The principle which prevents a person from asserting something contrary to what is implied by a previous action or statement of that person. -i.e. Once the principal knows this person is acting on their behalf they can't claim no agency relationship arose. They are stopped from doing so because the principal effectively understood the individual to be acting on its behalf, didn't stop that individual, and is therefore stopped from discounting the existence of the agency relationship to the third party or customer.

The Smithwicks, your buyer clients, obtained a 90% loan on their new $400,000 home. At closing, they paid $6,150 for points at closing. How many points did they pay?

1.71 (Points cost 1% of the balance of the loan) The Smithwicks' loan is $360,000 ($400,000 x . 90), and they paid $6,150 for points at closing. Divide the cost in points by the loan amount to get the number of points they paid: ($6,150 ÷ 360,000 = 0.0170833, or 1.71).

As part of its penalty for violating antitrust law, Homes4Cheap, Inc. has been ordered to undergo court-ordered supervision. How long can this supervision last?

10 years

All lenders have different underwriting standards, but traditionally, the housing debt-to-income ratio has been ______%, with a total debt-to-income ratio of ______ %.

25 to 28; 33 to 36

Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity?

254200 (home amount - what you owe on the house)

feet in a mile

5280 feet

Your buyer client Heather just signed a purchase agreement for a $520,000 home. The LTVR is 60%. How much is Heather putting down on the purchase? $208,000 $220,000 $300,000 $312,000

A 60% LTVR means that Heather is financing 60% of her purchase and putting down 40%. Forty percent of $520,000 is $208,000 ($520,000 x 0.40).

Closing Disclosure

A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs)

Your client is purchasing a single-family home with a VA-guaranteed loan. The listing price is $150,000. Is an appraisal by a certified appraiser required? It's at the buyer's discretion. No, since the buyer is using a VA loan. No, since the sales price is less than $400,000. Yes, and since the purchase is financed with a VA-guaranteed loan, the appraiser must be VA certified.

A VA-guaranteed loan requires an appraisal by a VA-certified appraiser, who must also be licensed or certified by the state.

Indemnification Clause

A clause in which one party agrees to compensate another for a loss or damage that is sustained.

General Warranty Deed

A deed in which the grantor fully warrants good, clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed.

Reconveyance Deed

A deed used by a trustee under a deed of trust to return title to the trustor.

Misrepresentation

A false statement or lie that can render the contract void.

advance fee

A fee for rental information accepted in advance, or a promotional fee for a sale listing.

Abstract of Title

A history of the ownership of a parcel of land which lists transfers of title, rights, and liabilities.

FHA loan

A loan from Federal Housing Administration; insures loans to low- and moderate-income families who might not otherwise qualify for a mortgage. Borrowers with an FHA loan must pay a minimum down payment of 3.5% and have MIP.

Growing Equity Mortgage

A loan where payments increase each year, thereby allowing the loan to be paid off many years sooner and a substantial amount of interest dollars to be saved.

Dean's new business venture is a software services firm where IT professionals handle programming and customer service tasks for a number of business clients. His employees all work at tables in an open office space. Dean most likely has a ________ lease for the office space. Gross Loft Percentage Triple net

A loft lease is usually for a large open space that may have few amenities.

Economic Obsolescence

A loss in value due to factors outside the subject property, such as changes in competition or surrounding land use. Also referred to as external obsolescence.

Functional Obsolescence

A loss of value to an improvement to real estate arising from functional problems, often caused by age or poor design.

Purchase Money Mortgage

A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller financing.

Title Examination

A search of the public record to determine the quality of a title to real property.

Right-to-use timeshare

A type of timeshare ownership that is a leasehold, giving the owner the right to use the property for one week a year only for a specified number of years. May or may not be inheritable

Which of the following is an example of a universal agent? Buyer's agent Conservator Escrow officer Listing agent

A universal agent has broad authority to act on behalf of the principal, such as a person with a power of attorney or a conservator.

Exectory Contract

A valid contract that's in the process of being completed. Because one or more terms of the contract must still be completed

What is agency coupled with interest?

Agency coupled with interest means the agent holds an estate (or interest) in a property that is the subject of the agency relationship. Forgoing commission now in turn for listings down the road is an example. i.e An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots.

Express Agency

Agency created through words, written or oral, between the principal and the agent, such as a listing agreement.

Kenneth entered into a contract to sell his home to Valerie, who put down a $5,000 earnest money deposit. At the last minute, Valerie backed out of the deal and Kenneth kept the earnest deposit. This is an example of ______. Accepting liquidated damages Accepting partial performance Suing for damages Suing for specific performance

All of the answer options are actual remedies to breach of contract, but in this scenario, Kenneth kept the earnest money, which is known as accepting liquidated damages.

Almanzo is buying a horse farm for $695,000 and put down 15% in earnest money. His closing costs and down payment total $139,000. How much will he need to bring to closing? $20,850 $29,750 $34,750 $39,000

Almanzo set aside $104,250 as earnest money ($695,000 x 0.15). Subtract that from his total due at closing, and you get $34,750 ($139,000 - $104,250) as the amount he'll need to bring to closing.

When a government entity exercises its powers to create zoning ordinances, what must be followed? -Federal zoning codes -The area's comprehensive plan -The state's zoning codes -Universal design standards

An area's comprehensive plan outlines its future development plans and goals of the area. Zoning decisions should follow this plan.

Fee Simple Determinable

An estate which has been created to exist only until the occurrence or nonoccurrence of a particular event. Returns automatically.

Use Variance

An exception to the application of a zoning ordinance to permit an otherwise prohibited use within the zone.

How might the lengthy purchase process for a short sale or foreclosure impact a buyer's financing? An existing interest rate lock may expire before the transaction is ready to close. Lenders won't lock in an interest rate because of the distressed nature of the sale. The lender may not be willing to finance a short sale or foreclosure. The purchase price may increase over time.

An existing interest rate lock may expire before the transaction is ready to close. Interest rate locks are only set for a short period of time. The transaction time to close a distressed property sale may be longer than the interest rate lock period, forcing the buyer to lock the rate again and potentially increase loan fees.

Life Estate

An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons.

The Gatlins' lender tells them they can afford a monthly payment of $1,830 on their new home loan. What interest rate are the Gatlins getting if this is an interest-only loan with a principal balance of $349,000?

Annual payment ÷ loan balance = interest rate. $1,830 x 12 to get the annual payment of $21,960. Then divide the annual payment by the loan amount: $21, 960 ÷ $349,000 = .0629, or 6.29%.

unfair advertising

Any ad or business practice that causes or is likely to cause injury is considered an unfair ad, according to the FTC's Unfairness Policy Statement.

Appraiser Niles uses ______ to determine a range of values based on comparing a subject property to comparable sales. He makes sure to use some comparables that lack features of his subject property, and others that have even more desirable features, to balance out the comparison. Bracketing Competition Correlation Substituting

Bracketing determines a probable range of property values by comparing a group of comparable sales to the subject. The appraiser attempts to include both superior and inferior units of comparison such as age and transaction price.

Buyer Maria and seller Doug are closing on June 1. Maria's mortgage loan is $927.86, and $871.86 will go to interest in the first month. Maria will have to pre-pay interest for June using the 360-day proration method. What will her prepaid interest cost be at closing?

Calculate the daily interest rate for 30 days ($871.86 ÷ 30 = $29.06). Because Doug owns the closing day, Maria will pre-pay interest for 29 days, June 2 - 30, so $842.74 ($29.06 x 29).

Which act was the first to prohibit any exceptions for discrimination based on race or color?

Civil Rights Act of 1866

Deed Restrictions

Clauses in a deed limiting the future uses of the property. Deed restrictions may impose a vast variety of limitations and conditions—for example, they may limit the density of buildings, dictate the types of structures that can be erected, or prevent buildings from being used for specific purposes or even from being used at all.

Tenancy in Common

Co-ownership of property in which each party owns an undivided interest that passes to his or her heirs at death.

When prices go down because there are too many homes on the market and too few buyers, this is an example of ______. Competition Conformity Progression Regression

Competition

Which economic principle is related to supply and demand?

Competition impacts value because the more similar properties that are on the market, the lower the price will be driven. Competition is related to supply and demand.

Philip owns land in a state where growing marijuana is illegal. He wants to set up a small marijuana growing operation and export to states where marijuana has been legalized. He asks his attorney about the possibility. "No," his attorney explains. "It's not possible. Although you own the property outright, the right of ______ only allows you to manage the property in ways that are legal in this jurisdiction. Control Disposition Exclusion Possession

Control - The right of control allows owner Philip to manage the property in any way he sees fit—as long as the enterprise is legal in the given jurisdiction. Other regulations, such as HOA regulations, may also apply.

Nico is buying a home for $625,000. His earnest money deposit is 8%. He wants to avoid private mortgage insurance (PMI) on his conventional loan, and he owes 5% in closing costs. How much money should he bring to closing?

Conventional loans often require 20% down to avoid PMI ($125,000), and Nico has paid a $50,000 deposit ($625,000 x .08). Closing costs are $31,250 ($625,000 x .05). He needs $106,250 to close ([$125,000 - $50,000] + $31,250).

right-to-use timeshare

Conveys the right of possession, but it isn't ownership and therefore can't be sold or passed on to another individual.

Which approach to value measures the cost to produce a property, including land acquisition and construction costs?

Cost approach

Sue is selling her house for $265,000. Closing is set for June 19, and Sue owns the day of closing. She has a loan balance of $78,000 at a 4.2% rate, and she's current on her payments. She prepaid the property taxes ($1,350) and insurance ($925). Using a calendar-year proration method for calculations, how will these amounts appear on Sue's closing statement?

Credit of $706.70. Tax daily rate: ($1,350 ÷ 365 = $3.70) 195 days (days from closing until year end) = a $706.70 seller credit. Any prepaid seller's homeowners insurance will be refunded to the seller outside closing, so this doesn't appear on the closing statements.

Prudence just finished paying off the debt on her loan, so the lender released the property's title to her. What clause in her mortgage stipulates this?

Defeasance

Bethany has agreed to purchase Derrick's property using a land contract. Who holds legal title to the property during the term of the loan?

Derrick

The Town of Petersville has just decided to restrict density in one area of town that previously allowed a higher density. This is known as ______. Aesthetic zoning Density zoning Downzoning Reduction zoning

Downzoning. While it may result in more beautiful neighborhoods and does result in lowering density, downzoning also reduces possible uses and potential value.

Which real property ownership right protects the owner from harassment or interference?

Enjoyment provides the right to possess the land without harassment or interference.

In which of the following situations can the state use its power of escheat? Hannah passed away with no children and no debt, other than $83,000 left on her mortgage. Maury died, and his three children are upset because his estate isn't large enough to settle all of his debts. Nadine died with no heirs and no debt. Sam died with no will, and his son lives overseas.

Escheat occurs when a property owner dies without a will in place, and no heirs or creditors can be found.

Actual Notice

Express information or fact; that which is known; direct knowledge.

Mark works at Farm and Country Bank, and has arranged an agricultural loan for Josh, a local organic farmer. Josh didn't meet the bank's normal underwriting standards, but Mark made the loan because he was able to arrange for a guarantee from ______.

Farm Service Agency

Categories of Adjustments

Financing terms and cash equivalency, conditions of sale, market conditions at time of contract and closing, location, and physical characteristics.

Sherman Antitrust Act

First federal action against monopolies. Up to $100 million for corporations and $1 million for individuals

seller received $800,000 for a 5.5 acre rectangular parcel alongside a road frontage. The property is 400' deep. What was the price per front foot of the property? $1,335.67 $2000 $363.64 $598.95

First, find the square footage (5.5 x 43,560' = 239,580). You're given one dimension of the rectangle, so find the other: 239,580 ÷ 400' = 598.95 front feet. To find the price per front foot, $800,000 ÷ 598.95' = $1,335.67 per front foot.

A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What's the total amount of interest he'll pay over the course of the loan? $1,108,292.40 $500,000 $608,292.40 $750,000

First, multiply the monthly payment by the total number of payments. Then subtract the original loan value: $3,078.59 x 360 = $1,108,292.40 ‒ $500,000 = $608,292.40.

What does the income approach to value rely on when valuing properties that are five or more units? Gross income multiplier Gross rent multiplier Monthly gross rent Sales comparison

For five or more units, the gross income multiplier (GIM) would be used for the appraised value.

Freedom of Information Act

Gives all citizens the right to inspect all records of federal agencies except those containing military, intelligence, or trade secrets; increases accountability of bureaucracy

Marketable Title

Good or clear title, reasonably free from the risk of litigation over possible defects.

Reliction

Gradual recession of water which uncovers land that usually belongs to the riparian owner.

Sander and Ginny bought an old industrial site and plan to get grant money to put an environmental education center on the site. There are a few structures on the property, but they are in disrepair, and it will likely be less expensive to tear them down and build new than to rehabilitate them. However, the new owners are sure that they've made a great investment because the land is in great shape. This reflects which physical characteristic of real property? Immobility Improvements Indestructibility Uniqueness

Indestructibility is the physical characteristic that states that while improvements may deteriorate, land can't be destroyed.

A fire destroyed Meredith's house. Meredith contacted her insurance company, and she was shocked to learn her insurance policy didn't fully cover what she paid for the property. How does the insurance company determine the replacement value of her home? Its current market value The amount it appraised for The amount it would cost to completely replace her home The original sales price when it was first constructed

Insurance companies reimburse based on a property's replacement cost, or what it would cost to recreate that property if it had to be completely rebuilt.

In the eyes of a lender, when financing a residence, what advantage does an investor have over owner-occupied borrowers?

Investors can use rental income to qualify

Title Insurance

It protects the buyer against loss resulting from previously unreported title defects.

Marge's broker, Geoffrey, told her that the lease on the property she wants to buy runs with the land. What does that mean?

Items that run with the land continue to be in effect when the property changes hands. A lease agreement is one of these items. Water bills are another.

What's one benefit of a rural development loan?

Its optional longer term means a lower monthly payment.

The buyer was pre-approved a home and he made an offer that was accepted by a seller, what is the buyers next step?

Loan Application

Which legal description method uses compass headings and directions?

Metes and bounds uses compass headings and directions. The rectangular system divides land into townships and further divides those into sections.

Which clause in the listing agreement gives the listing broker the authority and obligates the broker to market the property to other brokers? Broadcast clause Marketing clause Multiple listing clause Provisionary clause

Multiple listing clause

Maxine is purchasing a small craft shop, including the underlying real estate. She applies for a commercial loan from her federally insured bank to complete the purchase. Is Maxine's transaction covered by the Real Estate Settlement Procedures Act?

No, commercial and business loans are exempt from RESPA.

warrenty deed

Offers the greatest protection that a deed can give.

Assignment of Contract

One party in a contract substitutes another party in his place. The original party retains secondary liability for the performance of the contract. It does not require the agreement of the other original party in the contract.

Sherman Antitrust Act (1890)

Outlawed monopolies and practices that restrained trade, such as price fixing

Severalty

Ownership of real property by one person only, also called sole ownership.

Tiers in the rectangular government survey system are formed by ______. Parallel baselines Parallel principal meridians Parallel range lines Parallel township lines

Parallel township lines East-west lines of a survey, which are parallel to the baseline, are called township lines. Township lines form strips of land known as tiers, and townships fall within these tiers.

Ken, Dale, and James are brothers who own more than 100 acres as tenants in common. The relationship between Ken and James disintegrated, and so James initiated a lawsuit. The end result is that the court gave each brother a designated set of acres to own. What was granted by the court? Bifurcation Parcel Partition Severalty

Partition is the term used to describe a specific, divided portion of property that's created as part of a co-ownership termination.

What is bounds?

Physical features that define the boundaries of the property. Combined with directions and distances (metes), these form the basis of a metes and bounds legal description.

Sunshine Surveyors Inc. created a lot and block survey for a new residential development, Happy Acres. The first thing they did when they surveyed the new neighborhood was to reference a metes and bounds land description. From there, they divided the land into numbered lots and blocks. This output is known as a ________.

Plat mapThe plat map is a detailed map of the given land, including streets, access roads, and measurements between features.

Which of these terms can be defined as what a buyer has paid for a property and what the seller has accepted? Appraisal Cost Price Value

Price is the actual amount that a buyer pays for a property. It may be the same as the market value, or it may not.

PITI

Principal, Interest, Taxes and Insurance are the monthly housing expenses that a lender calculates in order to determine a borrower's housing expense ratio.

Hal and Sara own a 212-acre farm. Their property is landlocked but they have permitted water rights to use the stream located six miles away for irrigation purposes. What kind of water rights do they hold?

Prior appropriation

The smallest property on the block is also priced lower than any others, but the higher-priced properties that surround it help to drive the property's market value up. What economic principle is at work here?

Progression is the bump in value that a lower-value property gets by being near a higher-value property.

What type of arrangement allows the buyer to retain title to the property but places a security interest in the property on behalf of the seller?

Purchase money mortgages allow the buyer to retain title to the property, but the seller has security interest in the property.

In many cases, property managers must get explicit permission in order to disburse funds from a trust account. What is one common way to do so without this explicit permission?

Put it in the property management agreement. The property manager may disburse funds from a trust account if the property management agreement states that the manager may do so without getting explicit permission each time a disbursement is made.

Estate at Sufferance

Retention of possession without the consent of the landlord after the lease has expired; also referred to as tenancy at sufferance.

Specific lien vs. general lien

Specific lien: attaches to a single property General lien: affects all of a debtor's property, both real and personal

Novation

Substituting a new obligation for an old one or substituting new parties to an existing obligation.

What is the term for sites identified by the EPA under the Comprehensive Environmental Response, Compensation, and Liability Act?

Superfund site

Zhe is appraising a property for Teamworks Lending. Which of these factors makes this a federally related transaction? It's a conventional loan that Teamworks will sell to Fannie Mae. Teamworks will hold the loan in its local loan portfolio. The borrower is a U.S. Marine Corps veteran. The loan amount is more than $250,000.

Teamworks will hold this federally-related transaction in its loan portfolio.

Which one of the following types of ownership termination allows each tenant to have a specific, divided portion (partition) of the property exclusively? Termination by division Termination of co-ownership by partition Termination of estate in severalty Termination of joint tenancies

Termination of tenancy in common by partition allows each tenant to have a specific, divided portion of the property exclusively. If the property can't be divided, the court may rule that the property be sold and the proceeds divided by the tenants.

Brownfields Law

The Brownfields Law provides direct funding, typically in the form of grants, to property owners to assist in the assessment and cleanup of contaminated sites.

The Gomez family just moved into their dream home. They purchased the home for $264,985, and it appraised at $272,402. The assessment ratio for their area is 25%, and the tax rate for their area is 2.8%. What is their annual tax bill?

The Gomez family will pay $1,907 in annual taxes ($272,402 x .25 = $68,100 x .028 = $1,907).

Tom and Martha live in a neighborhood where lawn ornaments are prohibited. They want to put up a nativity scene at Christmas and argue that the covenant doesn't apply to temporary decorations but only to permanent ones. Their homeowner's association disagrees. Which entity enforces subdivision covenants?

The civil court system

title search

The examination of public records relating to real estate to determine the current state of the ownership.

Fair Housing Act

The federal law that prohibits discrimination in housing based on race, color, religion, sex, handicap, familial status, and national origin

You're working with buyers who are pre-approved for a loan of up to $200,000. Assuming they lock in a 5.25% interest rate at closing, how much of their first payment will go toward interest?

The formula is loan balance x interest rate divided by months per year. Loan balance is: $200,000 x .0525 = $10,500 ÷ 12 = $875.

Joint Tenancy

The joint ownership of property by two or more co-owners in which each co-owner owns an undivided portion of the property. On the death of one of the joint tenants, his or her interest automatically passes to the surviving joint tenants. Time, Title, Interest and Possession

Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now? The lender releases the deed of trust that secured her mortgage loan. The lender releases the mortgage that secured her mortgage loan. The lender tells the trustee to release the title to Olivia. The trustee releases the mortgage that secured her mortgage loan.

The lender tells the trustee to release the title to Olivia.- Because the property deed was held by a third-party trustee instead of the lender, the trustee grants a reconveyance deed to Olivia, which grants her the title.

Lien Theory State

The mortgage merely creates a lien right on the mortgagee with the mortgagor retaining the title.

Which of the following is a common chimney or fireplace problem?

The presence of creosote outside a chimney can be a common problem.

Li Meng purchased a property that had been owned by the same man for more than 40 years. The title search was clean. In the spring, she started seeing traffic on the path to her dock and discovered that the previous owner had always allowed the locals to use his path to get to the lake. What covenant may have been breached? Against encumbrances Quiet enjoyment Right to convey Seisin

The previous property owner failed to disclose to Li Meng that there was an easement (which is an encumbrance) across the property.

Cost Approach

The process of estimating the value of a property by adding to the estimated land value the appraiser's estimate of the reproduction or replacement cost of the building, less depreciation.

Which one of these would NOT be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation? Financing terms and cash equivalency Income generated Market conditions at time of sale Physical characteristics of the property

The sales comparison approach doesn't factor in any income a property may have generated; that's an aspect of the income approach.

Through the divorce process, Gail was granted ownership of the couple's vacation timeshare. Gail is ready to sell the timeshare but discovers that her ex-husband Daniel's name is still on the deed, creating a cloud on the title. What should Gail do?

The simplest alternative is to execute a quitclaim deed from Daniel to release his share of ownership. Title insurance won't cover clouds on title, and a general warranty deed isn't appropriate in this situation.

Noviation

The substitution of a new contract for a prior contract.

Closing agent responsibilities

The title search, closing statement preparation, and title insurance purchase must all be completed prior to closing. After closing, the closing agent makes arrangements to pay off the seller's existing loan with the proceeds from the buyer. "We're recorded and funded" is music to a licensee's ears.

Servient Estate

The tract of land burdened by an easement.

timeshare estate

The type of timeshare ownership that is a fee simple ownership

What are the two categories of comparison when evaluating comparables to a subject property in the market comparison approach? Broad and specific Components and measures Elements and units General and detailed

There are two categories of comparison: elements, which look at physical and locational characteristics, and units, which look at the numbers.

Seller Jamison is closing on his property with buyer Conrad. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?

These taxes have already been paid, so they are a prepaid item. They'll appear as a buyer debit and seller credit at closing.

Insurable Title

Title to property that a company agrees to insure against defects and disputes.

An appraiser used the cost approach to estimate a property's value at $220,000. The site value was $50,000, and the total depreciation estimate was $4,000. What was the estimated cost of improvements?

To estimate value, an appraiser adds the site value to the estimated cost to replace improvements then subtracts the estimated depreciation. So $50,000 + cost of improvements ‒ $4,000 = $220,000. Cost of improvements = $220,000 ‒ $50,000 + $4,000.

Managing broker Todd is often extremely busy supervising his brokerage and training new licensees. He doesn't have time for his own clients, so he frequently sends his wife Cindy to meet with clients to sign transactional paperwork. Cindy doesn't hold a real estate license but she does have a power of attorney (POA) for Todd. All fees are paid to Todd. What is the issue with Todd doing this? Cindy should be paid any fees due. There is no issue as long as Cindy has a POA for Todd. There is no issue as long as the fees are paid directly to Todd. Todd is prohibited from allowing anyone to use his principal broker's license in order to perform real estate activities.

Todd is prohibited from allowing anyone to use his principal broker's license in order to perform real estate activities. In most states, principal brokers can't let anyone use their license in order to perform real estate activities, even if the principal broker receives the fee and/or a POA is in place.

What type of timeshare involves a buyer agreeing to pay a one-time purchase price and an annual maintenance fee, and in return selecting an accommodation time and having the right to use the unit for a specified number of years?

Vacation ownership is basically a way to prepay for a vacation rather than renting it.

What's the capitalization formula used in the income approach?

Value = income divided by rate of capitalization

3 approaches to value

What are the 2 types of easements?

Elaina and Allen just purchased a home using a deed of trust. What is a deed of trust?

When a deed of trust secures a loan, a trustee holds the title until the loan is paid. Because the right to sell in the event of a default is part of the deed of trust's language, a non-judicial foreclosure may be used.

Your 15-year-old son just signed a contract joining a health club, which costs $50 a month. Is this contract valid?

While legal capacity includes whether or not all parties are of legal age, contracts signed by minors are valid but voidable by the minor.

What's the biggest security issue with using social networking sites to market your listings? Criminals may use social networking sites to identify properties that are vacant or have high-end possessions. It may not be effective since you're casting a wide net rather than targeting potential buyers. People may misinterpret your listing information and hold you responsible for their misunderstanding. People you don't know will have your name and contact information.

While the other choices may be somewhat true, the biggest security problem is unknowingly exposing your clients to someone with bad intentions.

Which of documents will an escrow agent prepare for closing?

Working with the lender, she'll prepare the settlement statement, which details the costs the buyer and seller will have at closing.

Zach wants to purchase a property that's subject to an existing lease agreement, which includes the tenant's right to renew the lease. What is Zach's obligation, if any, to uphold the terms of the lease agreement?

Zach must honor the right to renew and allow the tenant to renew at the end of the term.

Bulk Zoning

Zoning for density with open-space requirements as well as setback, parking, and height restrictions

statement of purpose

a brief explanation of why you are asking for a loan and what you plan to do with the money

cooperative

a business organization owned and operated by a group of individuals for their mutual benefit

Earnest Money

a portion of the price of a home that the buyer deposits as evidence of good faith to indicate a serious purchase offer

Housing and Community Development Act of 1974

added gender (sex) to the protected classes

Spot zoning

allows a specific property to be rezoned within an existing zoning area. Spot zoning is illegal in some states

covenant term

an agreement or a promise, creating an obligation. In real estate it is not uncommon to find that a particular property has a covenant on the title whereby one party, (the purchaser) pledges or agrees to abide by a certain rule to the other (usually the vendor)

What do local authorities have police power over?

budgeting, zoning, and subdivision development, but they lack police power over federal government construction projects.

Quitclaim Deed

deed that conveys an individual's property rights to another but has none of the covenants of the warranty deed

Eloise is interested in buying a bungalow on the outskirts of the city. Her agent is reviewing the property details and informs her that there are several easements on the property. In particular, the gas company has a right of way because the natural gas line for the neighborhood runs through the back of the lot. What type of easement would this be?

easement in gross is granted to a specific individual or company—in this case, the gas utility company.

Esheat

forfeiture of a decedent's property to the state in the absence of heirs

Constructive Eviction

if landlord fails to perform duties and tenant refuses to pay rent and abandons premise due to the breach of contract

Habendum Clause

if used, describes the type of conveyance. It's typically used if title being conveyed is less than fee simple.

Plottage Value

increase in the value of land by assemblage of smaller lots into one ownership.

Fuctional obsolescence

loss of value due to worn or outmoded features

A tax abatement program

lower the property taxes on a given property for a set amount of time. This is typically in response to some sort of improvement or rehabilitation, or for some new construction properties

specific preformance

one party didn't meet the terms of the contract in the specified timeframe and is now being required to do exactly what was agreed to in the contract.

Anti-trust violations

price-fixing, group boycotting, allocation of customers and markets, tie-in agreements

Fee Simple Absolute

property owner has the highest possible interest, and the owner's rights are only limited by public or private restrictions such as zoning laws or homeowners association covenants.

The economic principle of ______ says that when there are two houses in the same neighborhood with the same size, appeal, and utility, the lower-priced one will tend to sell first.

substitution, which states that the lower-priced option of two properties of equal quality will likely sell first.

Usuary

the illegal action or practice of lending money at unreasonably high rates of interest. Credit cards, retail installment contracts, and consumer leases are typically exempt from usury laws.

state of limitations

the time limit in which a victim can bring a lawsuit for injuries before he/she is forever barred from bringing an action in court