Real Estate Exam

What s given when a party outwardly manifests the intent to enter into a contract? a. acceptance b. an offer c. consideration d. assent

An offer When a prospective buyer writes an offer to purchase real property, the document is the outward manifestation of the prospective buyer's intent to enter into a contract. Once the seller accepts the offer the buyer is bound by his/her promise to purchase, and cannot cancel the promise without good reason. A bona fide offer gives the power of acceptance to the seller of the property. Although an acceptance is also an outward manifestation of the intent to enter into a contract, it is not the best answer. Acceptance of an offer is unequivocal assent to all of the terms of the offer.

In a ____, the real estate agent represents only the buyer or the seller of a piece of property. combined agency relationship limited agency relationship split agency relationship single agency relationship

single agency relationship In a single agency relationship, a real estate agent is hired by either the buyer or the seller and must keep that party's best interests in mind.

Title XI of FIRREA requires real estate appraisals made in connection with federally related transactions to be performed by which of the following real estate appraisers? a. federally-licensed or federally-certified b. state -licensed or state -certified c. county-licensed or county-certified d. city-licensed or city-certified

state -licensed or state -certified FIRREA requires real estate appraisals made in connection with federally related transactions (that is, transactions requiring financing from any federally-insured lending institution), to be performed by state -licensed or state -certified real estate appraisers.

Which of these would determine if there is encroachment on a property? easement appraisal survey ejectment

survey

A homeowner is buying a new home but hasn't sold their old one. Which type of loan would they obtain in the short term and pay back as soon as their old house is sold? home equity wraparound swing sale-leaseback

swing Explanation: A swing loan (also sometimes referred to as a "bridge" or "gap" loan) is a short term loan that allows borrowers to borrow against their current property in order to buy a new one. They are typically taken out when the borrower wants to buy a bigger home but hasn't sold their current property.

Appraiser Andy is attempting to appraise a 28-unit apartment house, employing only the income approach. During his research on the property, he discovers that each unit rents for $775 a month, an amount that seems consistent with like rental units in the vicinity. For the past five years the annual expenses of operation have averaged $82,460. The complex has maintained a consistent occupancy rate of 95%. Using a capitalization rate of 9.5%, what is the market value Andy will estimate? a. $2,741,100 b. $1,736,000 c. $868,000 d. $1,873,100

$1,736,000 Step One: Calculate the potential gross monthly income by multiplying the monthly rent by the number of units: $775 x 28 = $21,700. Step Two: Calculate the potential gross annual income by multiplying the potential gross monthly income by 12: $21,700 x 12 = $260,400. Step Three: Calculate the actual gross annual income by applying the occupancy rate factor to the potential gross annual income: $260,400 x .95 = $247,380. Step Four: Subtract the annual operating expenses from the gross annual income to find the annual net income: $247,380 - $82,460 = $164,920. Step Five: Annual income divided by the capitalization rate equals the value, so: $164,920 ÷ .095 = $1,736,000.

You are trying to price a property. Five years ago, it was sold for $125,000, but property values in this particular neighborhood have decreased by an average of 5 percent since then. What is the rough value of this property? a. $117,500 b. $118,000 c. $118,750 d. $119,000

$118,750 $125,000 x .05 = $6,250 $125,000 - $6,250 = $118,750

Jane is depositing $400 dollars in a savings account in hopes of earning interest. If the annual rate of interest is 6%, and she keeps the money in her account for 5 years, what would her balance be at the end of the 5 year period? $2000.00 $4194.30 $424.06 $535.29

$535.29 A= 400 (1+0.06) 5= 535.29

When the agent and the principal agree that the agent will represent the principal, it is called ____. representative agency express agency implied agency principal agency

Express agency Either verbal or written agreement

A covenant that becomes part of the property rights and binds successive property owners is a covenant that _____________. a. runs with the land b. does not run with the land c. is personal property d. can never be changed

Runs with the land

Negligent A person is negligent when he/she had a clear duty, and breached the duty.

An agent who does not make a reasonable effort to properly represent the interests of the client could be found by a court to have been _____________. a. unethical b. negligent c. puffing d. really stupid

The market (sales comparison) approach would be MOST appropriate for establishing the value of which of the following? a. 5-year old single-family house b. 10-unit apartment building c. 25-year old church d. retail commercial property

5 year old single family house The market approach is used most often with existing (real estate that has been used or lived in) residential real estate. In a typical appraisal of an existing single family residence, the appraiser will estimate the market value using the market approach; and validate his findings using the cost approach. In the case of retail property or income -generating property, the income approach is used as the main approach. Churches, museums and special purpose buildings are generally appraised using the cost approach.

If a borrower puts down 10% on their home loan, what is the loan-to-value ratio? 80% 90% 10% 20%

90%

A contract can become voidable if one of the parties was being victimized because ____. they did not agree voluntarily all of these they were misled they were a minor

All of the above

What is a severability clause? a. A clause describing the nature of potential liability (such as in the term "joint and several"). b. A clause in a statute or contract providing that if any particular part of the statute or contract is found to be void or unenforceable, that part will be carved out and the balance enforced to the extent possible. c. A clause which enables one party to a contract to declare the contract void when another party to contract breaks one of the conditions of the contract. d. A clause which allows the lender to "sever" the mortgage and declare all funds due and payable.

A clause in a statute or contract providing that if any particular part of the statute or contract is found to be void or unenforceable, that part will be carved out and the balance enforced to the extent possible. Sometimes, a severability clause states that some provisions to the contract are so essential to the central purpose of the contract that if those provisions are illegal or unenforceable, the contract as a whole will be voided. A severability clause will not be applied if it changes the fundamental nature of the contract. An example of a severability clause is as follows: "If a provision of this Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect the validity or enforceability in that jurisdiction of any other provision of this Agreement; or the validity or enforceability in other jurisdictions of that or any other provision of this Agreement."

Who can legally appraise a residential property when the purchase is being financed with an FHA-insured loan? a. A certified home inspector b. A licensed appraiser c. A broker hired to provide a Broker Opinion of Value d. Both b and c only

A licensed appraiser Only a licensed appraiser can perform an appraisal. An appraisal is required for all federally related loans like, for example, an FHA-insured loan, a VA-guaranteed loan, a conventional loan, and loans from lenders with FDIC.

The listing period for a single family home vs. a commercial property differs in that: A commercial property listing does not have an expiration date whereas a single family home listing always does. By law, single family homes may only be listed for up to 1 year, while commercial properties may be listed up to 18 months. A single family home is typically listed for 60-120 days whereas a commercial property is typically listed 6 months-1 year. Single family homes may be listed for as long as the seller would like, whereas commercial property listing periods are regulated by law.

A single family home is typically listed for 60-120 days whereas a commercial property is typically listed 6 months-1 year. All listings should have a fixed expiration date, and this period is negotiable as no laws regulate this aspect of sale. However, most contracts are 60-120 days for a single family home and 6 months- 1 year for a commercial property.

Who is the typical reverse mortgage customer? someone without a lot of liquid capital someone elderly all of these someone with a lot of equity in their home

All of the above

Which of the following is false? a. Agents should educate clients to protect the client's best interests and ensure a knowledgeable negotiating position. b. If a client makes a harmful decision because the agent did not provide the client with the appropriate information, the client might have grounds for a negligence charge. c. Depending on the market, the client's negotiating position may be more powerful if the client "treads lightly" with regard to contractual demands. d. Agents should not educate clients to protect the client's best interests and ensure a knowledgeable negotiating position. e. None of the above

Agents should not educate clients to protect the client's best interests and ensure a knowledgeable negotiating position.

Mortgage lenders make their money by ____. charging annual loan servicing fees charging loan application fees all of these charging loan origination fees

All above

Most real estate contracts include a clause that requires the parties to resort to _____________ before permitting a contractual dispute to be tried in the court system. a. alternative dispute resolution b. mediation c. binding arbitration d. any of the above

All of the above Alternative dispute resolution is any process that is a means for disagreeing parties to resolve their dispute outside the court system. Mediation and binding arbitration are the most common methods of alternative dispute resolution. Due to the increasing caseload of traditional courts, and the costs of litigation, ADR is gaining popularity. Also, with ADR, the parties have greater control over the selection of the individual or individuals who will decide the outcome of their dispute.

the real estate salesperson-buyer relationship All relationships are with the BROKER!

All of the following are agency relationships EXCEPT _____________. a. the attorney-client relationship b. the real estate salesperson-buyer relationship c. the real estate broker-buyer relationship d. the listing broker-seller relationship e. None of the above - they all have agency relationships

Fair market value cannot be established unless a transaction is considered ____. unilateral arm's length free of probate recorded

Arm's Length An arm's length transaction is one where both parties are free of duress and potential conflicts of interest. Only in an arm's length transaction can the agreed upon value be considered fair market.

____ were put in place to make sure that property buyers' rights are protected. broker agency agreements anti-trust agency agreements primary agreements buyer agency agreements

As real estate buyers became aware that most agents were protecting the seller's interest, buyer agency agreements were created to protect buyers' interests.

Lessee Barbara transfers her lease rights to Billy, but retains secondary liability for the lease. Billy becomes primarily liable to the original lessor to comply with the lease terms and the payment of rent. If Billy defaults on the rental payments, Barbara can be held liable for the rent. This type of arrangement is a _____________. a. sublease b. assignment of contract c. contract novation d. lease option contract

Assignment of contract Before the assignment is valid, the original lessor must approve the assignment and agree to it. The primary difference between a lease assignment and a sublease is that with an assignment, the assignor (in this case, Barbara) retains secondary liability; and the assignor (in this case, Billy) assumes primary responsibility for the lease obligations. If this were a sublease arrangement, Barbara would remain primarily liable on the lease; and Billy would have no contractual obligation to the original lessor.

Who determines the amount of earnest money to be deposited in conjunction with an offer to purchase real estate? a. The parties to the contract. b. State law. c. The listing broker's office policy. d. The custom for the area.

Both parties

A mortgage broker's primary role is to ____. bring borrowers and lenders together sell mortgage loans originate mortgage loans underwrite mortgage loans

Bring borrowers and lenders together The mortgage broker is an intermediary and does not create, sell, or underwrite loans (which is the job of the lender).

For an appraiser who is using the income approach to appraise a commercial office building, annual loan payments are _____________. a. considered an annual operating expense b. subtracted from gross income to get net operating income c. called annual debt service d. added to expenses to arrive at gross operating income

Called annual debt service Annual loan payments are called annual debt service. They are not considered to be an operating expense; and are not considered when calculating the annual net income for the property. Even though the debt service is an expense to the owner, it is not an operating expense.

The income approach as used by an appraiser makes use of which of the following? a. equalization b. depreciation c. appreciation d. capitalization

Capitalization With the income approach, the value of a property is determined by how much income the property can generate. Once the annual income is determined, that dollar amount is divided by a capitalization rate (rate of return) to find the value. Investors who purchase income properties will buy properties based on the potential for return; and the rate of return in relation to the price paid.

Gabe was the owner of parcel A. By a deed dated February 12, Gabe conveyed parcel A "to Nephew for the term of his life; and upon Nephew's death, to Charitable Organization #2. In this scenario, Charitable Organization #2 has what kind of future interest in parcel A? a. Charitable Organization #2 has a shifting executory interest in parcel A. b. Charitable Organization #2 has a valid remainder interest in parcel A. c. Charitable Organization #2 has no future interest in parcel A because the term of Nephew's life estate is uncertain. d. Charitable Organization #2 has a reversionary interest in parcel A.

Charitable Organization #2 has a valid remainder interest in parcel A. A future interest that will automatically vest upon the death of another person is either a reversionary interest or a remainder interest. A reversionary interest "reverts back" to the original grantor. Since Charitable Organization #2 is not the original grantor, it cannot have a reversionary interest. A shifting executory interest is an interest that vests when the holder of the future interest must divest someone else of ownership.

In the market for single -family homes, price is driven by _____________. a. comparable sales data b. cash flow and investment potential of the home c. tax incentives d. none of the above

Comparable Sales Data Market prices of comparable properties is what drives values to increase or decrease. A substantial number of homes are purchased with borrowed funds. The lenders require that before the funds are issued, the home must be appraised. The appraiser for a single family home will use the market data approach to value; and the value of the appraised property is based on the sales prices of comparable properties.

Which is not one of the "three c's" of underwriting? conformity capacity collateral credit

Conformity Capacity is the cash reserve and debt ratio of the borrower. Collateral includes their down payment and property types. Credit includes their credit score and accounts. Conformity is not one of the three c's of underwriting.

The recording of an instrument gives: legal notice. actual notice. constructive notice. documented notice

Constructive Notice Constructive Notice attaches once a document is recorded. Once recorded, subsequent buyers will be deemed to have received "Constructive Notice" regarding the document and its effect on the property in question. This could also be given by taking possession of a property. Actual Notice is when an individual has first-hand knowledge of something- for example, if a buyer has knowledge that someone has taken possession of the property that is for sale.

Benjamin Hanssen and Lumiko Yakamura own a five-bedroom, four-bathroom single-family residence. In terms of the construction, design, and style of the property, the home is similar to the other residences in the neighborhood. Hanssen and Yakamura ordered an appraisal in contemplation of their upcoming divorce. They are both displeased by the result of the appraisal. The backyard swimming pool that cost $75,000 to build was only valued by the appraiser at $50,000. Hanssen likes to work on classic cars from the 1960s. In order to work on them at home, he installed three expensive hydraulic lifts in the 3-car garage. The appraiser appraised these lifts as adding no value to the subject property. Yakamura has turned the master bedroom and master bathroom into a self-contained granny flat for her elderly father. The granny flat was also appraised as adding no value to the subject property. When they called the appraiser to complain, the appraiser explained that, per the principle of _____, the swimming pool, the hydraulic lifts, and the granny flat were all examples of _____. a. Contribution; increasing returns. b. Contribution; decreasing returns. c. Conformity; increasing returns. d. Conformity; decreasing returns.

Contribution Decreasing Returns An appraiser values an improvement (e.g., a swimming pool, hydraulic lifts in the garage, a granny flat), not at what it cost to build and install, but based upon what it "contributes" to the market value of the property. Market value is the most probable price a property should bring on the open market in a competitive sale with an informed seller and buyer. Here, these three improvements are examples of decreasing returns, meaning they cost more than they contributed to the market value of the property. A swimming pool is the classic example of decreasing returns. A large number of buyers do not want a swimming pool because of safety concerns and/or maintenance costs. The hydraulic lifts in the garage may be an example of decreasing returns because many buyers want to use a garage to park their cars, not to lift and service them at home. Finally, in many residential neighborhoods, buyers want a master bedroom and master bathroom. Giving up these amenities for a granny flat may not be a positive for buyers, especially those with children. Note: The principle of conformity theorizes that residential neighborhoods and commercial districts tend to benefit when buildings are roughly similar to each other.

Depreciation is used by real estate appraisers when using which approach to value? a. Market approach b. Income approach c. Cost approach d. Capitalization approach

Cost Approach With the cost approach, the appraiser uses a published guide (usually Marshall and Swift™ residential cost index) to figure the replacement cost of the property if the property were brand new. Then the appraiser calculates depreciation based on a life cycle for improvements in the area, and determines an estimated market value.

A ___ serves as your permanent record of property ownership. certificate white paper list paper deed

Deed A deed both serves as proof of current ownership, as well as serving to transfer property to someone else.

In order to be valid, all exclusive listings must include: an automatic renewal clause. a forfeiture clause. permission for the listing broker to appoint subagents. a definite date of expiration.

Definite date of expiration

Patricia held fee simple title to a vacant lot adjacent to Mt. Olive Church. She wanted to donate the lot to Mt. Olive, and her attorney prepared a deed conveying all rights of the vacant lot to the church "...so long as the lot is used for church-related purposes." After the completion of the gift, the church will own a _____________. a. life estate b. tenancy for years c. determinable fee estate d. periodic tenancy

Determinable Fee Estate Patricia is donating a determinable fee. She is giving the property rights to the church, but placing conditions on it the use of those rights. If the conditions are not met, ownership automatically reverts back to Patricia. With a determinable fee, Patricia or her heirs do not need to file a legal action to repossess the property. The words "so long as" in the deed effectively create the determinable estate. In other words, the automatic reversion does not take rights away, it simply enforces the idea that some rights were never granted to the grantee.

The primary purpose of Truth in Lending is to: Disclose the true costs of only an FHA loan. Disclose the true costs of obtaining credit. Control interest rates on behalf of the consumer. Control the true costs to close a transaction.

Disclose the true costs of obtaining credit. Truth in Lending (otherwise known as Regulation Z) is intended to do away with deceptive financing tactics, especially those involving hidden costs- for example, advertising a $250 car lease as zero-down and then tacking a $1,200 upfront payment at the time of contract disguised as an "incidental" acquisition fee.

An implied agency with the buyer can result if the words and conduct of the real estate agent do not clearly _____________. a. notify the seller b. dispel the assumption c. notify the broker d. compensate for the misunderstanding

Dispel the assumption An agency relationship between a buyer and a real estate broker can be created by accident. In other words, even though the parties may not have consciously planned to create an agency relationship, an implied agency can be created unintentionally, inadvertently or accidentally by their actions. If the conduct or representations of the broker induce the buyer to believe that he/she is the broker's principal then an implied agency exists, along with all of the common law duties of agency.

A flight pattern to a nearby airport was changed so that planes pass over a single -family residential neighborhood. Any loss in value to these properties would be attributed to ________. a. functional obsolescence b. physical deterioration c. physical obsolescence d. economic obsolescence

Economic Obsolescene Depreciation generally results from one of three factors: functional obsolescence, physical deterioration, or economic obsolescence. Economic obsolescence occurs if the value of property decreases as a result of negative factors outside the property that are beyond the control of the property owner. Another example of economic obsolescence might be a factory that is built near residential neighborhood; and the smoke and smell diminish the desirability of the area.

____ is the right to acquire ownership of private Real Estate for public use. Severance Escheat Attachment Eminent domain

Eminent domain Explanation: When a government agency or a private entity needs land for public use, they access private land through eminent domain.

What is the term for restrictions, easements, or liens that give others rights to a property? encumbrances escheat emblements joint tenancy

Encumbrance This gives some rights to others on the property besides the owner...kinda like a right-of-way

____ is the right of the government to acquire property when the owner dies intestate and has no heirs eligible to inherit the property. Severance Claimancy Eminent domain Escheat

Escheat

You may need to know the value of the house you inherited ____. for appraisal tax purposes for income tax purposes for estate tax purposes for real valuation purposes

Estate tax purposes

When a homeowner reserves the right to sell his or her own property, but offers the exclusive right for only one agent, this is a(n) ____. exclusive agency listing homebound agency listing homeward agency listing executive agency listing

Exclusive agency listing An exclusive agency listing is almost identical to an exclusive right to sell listing, except the homeowner can sell the property themselves and not have to pay a fee to the agent.

When a broker is given the right to collect the commission, no matter who sells a property, this is a(n) ____. executive right to sell listing primary right to sell listing exclusive right to sell listing secondary right to sell listing

Exclusive right to sell listing An exclusive right to sell listing is very straightforward—the broker is given the exclusive right to sell a property and will collect the commission if someone else sells it.

Sasha Petrov, a seller, and Bob Smith, a broker, entered into a written listing agreement to sell Petrov's condominium. The type of listing agreement was an exclusive-right-to sell. Petrov told Smith not to show the condo to anyone prior to the carpet being replaced with hardwood floors. While the installers were taking out the wall-to-wall carpeting and installing the hardwood floors, Broker Bob showed the home to Emily Chen. Chen submitted an all-cash offer far higher than the listing price, and Petrov accepted it. One month later, the transaction closed, and title was transferred to the new owner. What type of agency did the listing agreement create between Petrov and Smith? a. Agency by ratification. b. Agency by estoppel. c. Ostensible agency. d. Express agency.

Express Agency Express agency is an agency relationship intentionally created by the principal and agent. It is expressly stated, either in a formal written form or through a verbal agreement. Here, the exclusive right-to-sell listing agreement between the seller and the broker is the formal, written expression of the agency relationship between these two parties.

Ninety year old Zachary signed a written power of attorney giving his daughter, Gayle authority to handle any and every kind of business for Zachary, including decisions about his finances, like or death decisions, disposition of real estate, and any other transaction that might arise. Gayle has what kind of agency? a. Implied agency. b. Express agency. c. Universal agency. d. General agency e. Both b and c only

Express Agency and Universal Agency Gayle is authorized to perform any and all business for her father, with or without regard to a particular job; and without regard to whether the business is certain or uncertain. Thus, she has a universal agency. The agency is stated, and is therefore also an express agency. Universal agency, should be in writing in order to carry weight with the other parties to the transaction, although writing is not required for enforcement of the agency in a court.

Which of the following is TRUE with regard to express and implied agency? a. Express agency must be in writing; and implied agency is verbal. b. Express agency is stated, either verbally or in writing; and implied agency is not stated, but based on actions and conduct of the parties. c. Implied agency is not enforceable; only express agency is enforceable in the real estate business. d. Implied agency is enforceable in the real estate business and is the preferred method of agency.

Express agency is stated, either verbally or in writing; and implied agency is not stated, but based on actions and conduct of the parties. Agency that is stated is express agency. The statement can be verbal or written. Implied agency is not written, but is based on the actions and conduct of the agent and principal. Implied agency happens all the time in the real estate business, and is enforceable, usually against the agent only. In other words, an agent under an implied agency cannot force payment of a commission from a seller because there is no written agency agreement or listing. However, if a real estate licensee under an implied agency misinforms a buyer or seller about certain aspects of real estate, that licensee can be held liable for breach of fiduciary duty - even though there is no written agency agreement. Implied agency is not preferable method in the real estate business, although sometimes temporary implied agency is unavoidable.

If a person has complete control over their property, and the ownership in the property is not defeasible, what interest does the person have in the property? a. fee conditional estate b. fee simple estate c. life estate d. defeasible fee estate

Fee Simple Estate A fee simple estate is ownership that gives a person or entity complete control (subject to standard governmental restrictions). A life estate gives a person ownership or control of a property only for the duration of his/her natural life. Defeasible estates (estates which can be defeated) give a person or entity control over a property only so long as certain conditions are met or avoided.

An estate that is of indefinite duration is called a ____ estate. reversion leasehold non-freehold freehold

Freehold The only type of estate without constraints on duration is a freehold estate.

When estimating the value for a particular piece of property, an appraiser will not investigate ____. future factors social factors physical factors environmental factors

Future factors

Which government entity was created to encourage low-income housing? FNMA (Fannie Mae) FmHA FNMA (Freddie Mac) GNMA (Ginnie Mae)

GNMA (Ginnie Mae) Explanation: While all of these are second mortgage markets and Freddie Mac does have multiple low-income housing programs, only Ginnie Mae was created to encourage low-income housing.

One authorized by a principal to perform any and all acts associated with the continued operation of a particular job or certain business of the principal is _____________. a. a general agent b. a universal agent c. a special agent d. a respondent superior

General Agent The words "particular job or certain business" are words that pertain to general agency. A universal agent is authorized by a principal to perform any and all business for the principal, with or without regard to a particular job; and without regard to whether the business is certain or uncertain. A special agent is authorized to perform only acts associated with one transaction. The special agency is concluded when the transaction is concluded.

In a real estate transaction, the ____ is the recipient of a piece of property and is receiving property from someone else. endowed grantee bequeathed endorsed

Grantee

In a real estate transaction, the ____ is the current owner of the property and is conveying his or her property to someone else. guarantor agent grantor landlord

Grantor The grantor grants a piece of property to the grantee to complete a transfer of real estate.

Demolishing a single family residence located in a commercial zone in order to build an office building would be a good example of _____________. a. change b. progress c. highest and best use d. regression

Highest and Best Use Highest and best use is the most lucrative use that could be made of a parcel of land as currently zoned. A single family residence built on a lot in a commercial zone is not the highest and best use of the land, because the presence of the house in the commercial zone diminishes the value of the commercial property that surrounds the home; and the commercial property surrounding the home diminishes the value of the home.

Lessee Sharon leases from lessor Howard for a lease term of five years. 24 months after the execution of the lease, Sharon gets a new job and must move to another state. Sharon tells Howard about her predicament, but Howard will not release her from her lease obligations unless she finds a suitable person to move into the unit and take over the remainder of the lease. Sharon contacts her friend Sam, who is looking for an apartment, and Sam agrees to move in to the unit. How will the paperwork most likely be handled? a. Sharon will delegate her obligations to the lease to Sam through a delegation document. b. Howard and Sam will use a novation, and substitute Sam's name for Sharon's name on the original lease. c. Sharon will sublease to Sam; and retain primary liability on the original five -year lease. d. Sharon will assign rights to Sam with the approval of Howard and Sam will have primary liability on the original lease.

Howard and Sam will use a novation, and substitute Sam's name for Sharon's name on the original lease. Novation is the substitution of a new name on a contract. The new agreement extinguishes the rights and obligations that were in effect under the old agreement. A novation ordinarily arises when a new individual assumes an obligation that was incurred by the original party to the contract. With a novation, the original obligor (Sharon) is totally released from the obligation.

Which document outlines the environmental effects that are caused by new development? Environmental Development Report Environmental Impact Report Environmental Project Report Environmental Risk Report

Impact Report The Environmental Impact Report (Statement) describes the likely environmental effects a new development will have. The document is sometimes required by local governmental agencies before new construction is started.

When the agent and the principal have not officially agreed that the agent will represent the buyer, but their actions imply this, it is called ____. implied agency alter agency insinuated agency express agency

Implied

In the valuation of a large apartment complex, the most weight would be given to ____________ to value. a. the cost approach b. the income approach c. the sales comparison approach d. single fund approach

Income approach Since a large apartment complex is an income producing property, its value is based its ability to generate income. The values of other apartment complexes in the area are secondary. The appraiser will used the income approach as a primary indicator of value, then support his findings by using one of the other approaches to estimate value.

State Q has a statute that requires that prior to the establishment of dual agency; the agent must obtain the prior informed written consent of all principals who are to be represented. John Jones is a broker and has a listing for a small office building in excellent condition that produces a reliable income stream. For these reasons, Amber, one of his sales associates, decides to purchase the building as an investment for herself. What action must John Jones ensure that Amber takes? a. Inform the SEC of Amber's intent because it is considered an insider trade. b. Inform the owner in writing that she is a licensee and acting as a dual agent. c. Have a third party purchase the property on her behalf to maintain a professional, arms-length relationship. d. There's no special action Amber must take, because Amber is not a dual agent.

Inform the owner in writing that she is a licensee and acting as a dual agent. Because Amber is representing both the buyer (herself) and the seller (her firm holds the listing) she must disclose her dual agency status. Of course, licensees must also always disclose the fact that they are real estate professionals whenever they buy or sell property on their own behalf. In most states, if a brokerage firm holds the listing, all of the agents in that firm are considered agents of the seller. If an agent in the firm becomes a buyer, there is an inherent dual agency. Furthermore, most states have strict statutes that require a real estate licensees acting as a buyer or seller to disclose their status as a licensee.

How is land different than other property assets? It retains its value better than other property assets. Its value is not tied to nearby housing values. It cannot decline in value. It is fixed and immobile.

It is fixed and immobile. Explanation: Land is the only property asset that is fixed and immobile. Like other properties, land can decrease or increase in value as surroundings become more or less desirable, even though it cannot "depreciate" in an accounting sense. The other options are all not true or not unique to land.

You are the listing agent on a $250,000 home. The property is in escrow. You discover that there has been a roof leak in the home some years back. After the leak, the homeowner's insurance covered the necessary repairs, and the roof was made good-as-new both structurally and aesthetically. The history of the roof leak is not readily apparent. When a physical defect is not readily apparent, that defect is a _____________. a. patent material defect b. latent material defect c. defect that the agent is responsible to disclose d. defect that should always remain a secret

Latent material defect The word latent means not readily apparent. Most states do not make the real estate licensee responsible to see and disclose latent defects. The word patent means readily apparent. A patent material defect is one that is visible without special tools or without opening up the structural elements of the home. The word material pertains to issues associated with the physical condition of the home or land. Since the roof is clearly part of the physical property, any defect (whether current or past) is material. The licensee is responsible to disclose all material defects that are known, or that the licensee should know.

Borrower Bill signs a promissory note to lender Leonard. The note specifies that Bill will repay to Leonard a principal of $1000.00, at 6.5% simple interest over a term of one year. The total amount to be repaid is $1065.00, and on the first of each month for twelve months, Bill will make a payment of $88.75 to Leonard. Three months after signing the note, Bill falls on hard times, and he tells Leonard if Leonard does not agree to cut Bill's remaining debt in half, Bill will have no choice but to default on the note. Leonard agrees to reduce Bill's debt. How will this be accomplished? a. Leonard and Bill will execute a contract novation whereby Bill's outstanding debt is reduced to $399.38. b. Leonard's verbal agreement to reduce the debt is sufficient. Bill's debt is effectively reduced without further action. c. Bill and Leonard will execute an assignment document whereby Leonard relinquishes his rights to all future payments in excess $339.38. d. Bill must sign a formal default admission, and then Leonard can sign a written reduction in debt.

Leonard and Bill will execute a contract novation whereby Bill's outstanding debt is reduced to $399.38. A novation has two purposes - to substitute a new name on a contract, or to substitute a new contract for an old contract. In this case, the contractual parties remain obligated to each other, but the terms of their obligation are modified with the new contract. A novation is a tool that can be used when the parties find that payments or performance cannot be made under the terms of the original agreement, or the debtor will be forced to default or go into bankruptcy unless the debt is restructured. (A loan modification is a novation.)

Which of the following appraiser designations is limited to the appraisal of noncomplex one -to-four unit residential properties with a transaction value of less than $1 million? a. certified residential real property appraiser b. licensed real property appraiser c. certified general real property appraiser d. certified non-complex appraiser

Licensed real property appraiser A professional appraiser who is legally authorized to appraise non-complex one -to-four unit residential properties with a transaction value of less than $1 million is a licensed real property appraiser. The licensed real property appraiser designation is considered the minimum designation required for an appraiser to receive a fee for conducting a real estate appraisal.

Freehold Estates include: periodic tenancy. leasehold estates. life estates. estates for years.

Life Estates life estates

What are life estates pur autre vie?

Life estates pur autre vie are life estates that are measured by the life of someone other than the estate holder.

Which of the following is the price at which a willing and informed buyer would buy and a willing and informed seller would sell? a. appraised value b. offer price c. market value d. book value

Market Value Market value is determined by the purchase prices paid by informed buyers. Appraisers do not determine market value. They estimate the market value of a subject property based on two of three approaches. With the market approach (or sales comparison approach), they estimate the market value of a property based on buyers paid for comparable properties. With the cost approach, an appraiser calculates the market value based on replacement cost new less depreciation. With the income approach, market value is estimated based on the property's ability to generate income.

McKenzie is a listing broker for seller John, who wants to sell his home in State M. In addition, she represents buyer Jack as a buyer's agent. Jack wants to buy John's home. McKenzie has obtained written consent from both Jack and John to represent both parties in the transaction for the sale of John's home. McKenzie is what kind of agent? a. McKenzie is a disclosed dual agent because she represents both parties in the same transaction. b. McKenzie is a special agent for John and a general agent for Jack. c. McKenzie was a general agent for John first; so she cannot represent Jack in the same transaction. d. McKenzie is a universal agent, because she represents both parties in the same transaction.

McKenzie is a disclosed dual agent because she represents both parties in the same transaction. McKenzie is a dual agent because she is representing buyer and seller in the same transaction. Her dual agency is disclosed, because she has obtained written consent from both parties to represent them. Most states do not allow dual agency unless the agent first obtains written consent from both parties in the transaction. In this scenario, McKenzie must protect the best interests of both parties, which is sometimes difficult to do, given that the parties very often have opposing interests.

A stream and large rock are referenced in a property description. Which type of land description would this be considered? lot and block governmental survey metes and bounds rectangular survey

Metes and Bounds Monuments and occupancy markers are sometimes used in metes and bounds property descriptions. Monuments include both natural and manmade items like large trees, rocks, or fences. Occupancy descriptions include more vague owned properties, such as "Carlson's Farm." Governmental survey is just another term for rectangular survey.

An express agency that is unwritten is dangerous, both for the client and the agent because the relationship has not been clarified in writing, and a greater possibility of _____________ exists. Furthermore, an express agency that is not in writing is unenforceable. a. animosity b. clarity c. misunderstanding d. escrow closure

Misunderstanding If there is no express agency, then an implied agency probably exists if the agent and client have been corresponding for any significant length of time. As a result, the agent is bound by a fiduciary duty to the client with no boundaries and no clear-cut responsibilities to the agency. This seldom happens with sellers, because the listing contract obligates the agent to perform diligently, and sellers will almost immediately sign it. Mostly, implied agency arises between prospective buyers and agents because buyers refuse to sign an express agency contract.

Insurance companies not willing to deal directly with borrowers usually pay a loan servicing and preparation fee, and make real estate mortgage loans to purchase indirectly through: mortgage companies. FHA or the VA. Freddie Mac. savings and loan associations.

Mortgage Companies Insurance Companies usually make loans through mortgage companies. These "loan correspondents" negotiate and service their loans.

An appraiser was hired by a developer to appraise a large parcel of vacant land. The appraiser was ordered to include the highest and best use of the property, local economic conditions, and provide a thorough analysis of the subject property and the surrounding geographic area. The job called not only for in-depth explanations, but also for showing the data included in the appraiser's work file. The type of report used for this specific appraisal is called a(n) _________: a.Narrative report b.Universal report c.Restricted use report d.Summary report

Narrative Report The narrative report is typically used for appraisals of large parcels of vacant land, complex properties, or large commercial developments. Test-Taking Tip: Make sure you know the three report forms used for appraisals: the narrative report, the summary report, and the restricted report. C is incorrect. The restricted use report is a limited review of the property, and it must state that only the client may use the evaluation and/or valuation contained in it. D is incorrect. The summary report is the standardized form used for most residential appraisals. The name of the report comes from the fact that the appraiser "summarizes" rather than shows the data in the appraiser's work file.

Net listings are......

Net listings are illegal in many states, while some other states require that the amount of commission a broker can earn is percentage based and negotiated before the sale.

Quincy lives on 80 acres of land in a remote urban area. About a year ago, he split his land into two forty-acre parcels; parcels A and B. His home is was on parcel A. He subsequently negotiated for the sale of adjacent parcel B, to Brimley. During the negotiation discussions, Brimley told Quincy that he wanted to erect a meat packing house on parcel B, and Quincy gave him a verbal approval. The two men subsequently entered into a written contract for the sale of parcel B, which contained no mention of restrictions on the use of the land. Thereafter, Quincy got to thinking that a meat packing house would stink to high heaven, and diminish the value of his property; so Quincy delivered a deed which stated "Grantee does hereby covenant for himself, his successors and assigns that the realty conveyed herein shall not be used for any purpose other than the construction of a single story residential home." Brimley accepted the deed, and had it recorded. Can Brimley erect his meat packing house? a. Yes, because at the time the contract was made, Quincy gave his approval of Brimley's plans. b. Yes, because the written purchase contract contained no restrictions on the use of the land. c. No, because the statute of frauds requires that a conveyance be in writing and signed by the party to be charged; and Brimley did not sign the deed, so he cannot be charged (bound to) the restriction. d. No, because the restrictive covenant contained in the deed effectively prohibits Brimley from doing anything except constructing a single story residential home.

No, because the restrictive covenant contained in the deed effectively prohibits Brimley from doing anything except constructing a single story residential home. In determining the extent of an estate conveyed and the restrictions to which the estate is subject, the courts place most weight on the deed that conveyed the estate. If the words in the deed differ from the words of the contract, the deed prevails. Although the statute of frauds requires that the transfer of real estate be in writing and signed by the parties to be charged, most courts hold that accepting and recording a deed that contains restrictions binds the grantee to those restrictions, even though the grantee does not sign the deed.

A broker has a brokerage policy that the agents in the brokerage are not to conduct a visual inspection of the property if they represent the seller. The broker asserts that this policy is to protect the sales agents (i.e., the less the agents know about the property, the less their obligation for disclosure). In other words, if the agent conducts a visual inspection, and finds a material defect in the property, the agent is legally required to disclose the defect; but if the agent never discovers the defect, then the agent has no obligation to disclose what he does not know. Is this a valid policy? a. Yes, because the sellers and the seller's agent must disclose only known defects. b. No, because the seller and the seller's agent must disclose all material defects that are known; or those that are reasonably discoverable. c. Yes, because a broker is free to run his brokerage as he/she sees fit. d. Yes, because such due diligence is always beyond the scope of the real estate salesperson.

No, because the seller and the seller's agent must disclose all material defects that are known; or those that are reasonably discoverable.

Typically, owners of property in a residential subdivision take title subject to certain covenants, conditions, and restrictions (CC&Rs). Since ownership of the property is conditional upon the owner obeying these conditions, the estate held is a defeasible fee with a condition subsequent. Is this type of estate automatically terminated if the property does not comply with the CC&Rs? a. Yes, because the estate is subject to a condition subsequent. b. No, the right of reentry is not automatic, it must be granted by a court. c. Yes, because a defeasible fee is not subject to the constitutional requirement of due process. d. No, because to subject property owners to CC&Rs is unconstitutional.

No, the right of reentry is not automatic, it must be granted by a court. CC&Rs are conditions subsequent that are placed upon the fee simple defeasible estate. However, since the owners have actual title to the estate, there is no automatic right of reentry, or termination of the estate. Instead, the person or entity who wishes to terminate the estate must file a court action; and termination of the estate must be done through judicial foreclosure.

A prospective buyer makes an offer on a property. The offer expires on Tuesday at 5:00 p.m. On Tuesday at 3:30 p.m., the seller decides to accept the offer. On Tuesday at 4:45 p.m., the buyer is misinformed by the seller's daughter that the seller rejected it. On Tuesday at 6:30 p.m., the buyer makes an offer on another property which is immediately accepted, and he becomes bound to the second purchase contract. Is he bound to the first purchase contract? a. Yes. Meeting of the minds refers to both parties knowing what the promises are. Since both parties knew the promises at the time the promises were made, there is meeting of the minds, and the first contract is valid and enforceable. b. Yes. When the seller decided to accept the offer, there was unequivocal assent to the terms of the offer. This constitutes meeting of the minds; and the first contract is enforceable. c. No. There must be a moment prior to the expiration of the first offer that the minds of the parties are brought together. d. No. Two minds will never see the same things in the same way. He is not bound to the first contract unless the first seller sues for specific performance.

No. There must be a moment prior to the expiration of the first offer that the minds of the parties are brought together. A phrase used to describe the idea that the parties to a contract have a common understanding of what is to take place is "meeting of the minds". Meeting of the minds is an essential element to a valid contract. If the prospective buyer never learns of the seller's acceptance, then the minds are not brought together. Meeting of the minds requires not only that all parties know and understand that they are bound; but that all parties know this at the same time. Since the buyer was misinformed about the seller's acceptance, he understandably believed that was not bound to the first contract. Although he might learn of the seller's acceptance later on, there is no moment prior to the offer expiring where both parties know they are bound. Therefore, the buyer is properly released from the first contract.

An amount of consideration having no bearing on the real value of a contract would be called a _____________. a. immaterial consideration b. hypothetical consideration c. normative consideration d. nominal consideration

Nominal consideration Consideration is an essential element for the formation of a contract. It is something of value given in exchange for something of value from the other party. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. Sometimes consideration is nominal, meaning it is stated for form only, such as "$10.00, plus good and valuable consideration", or similar verbiage written in a warranty deed. Such wording is used to hide the true amount being paid. The real purchase price of the property is not written on the deed because the amount of money the owner paid for the property is not relevant to the ownership of the property.

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

Non-conforming use

In 1980, Oliver Nguyen purchased a large parcel of waterfront real estate improved with a bungalow. Recently, he executed a deed granting this real estate to Annie Nguyen, for her life, remainder to Brittany Nguyen. What ownership interest does Oliver Nguyen now have in the waterfront property? a. None. b. Fee simple absolute. c. A reversionary interest. d. A remainder interest.

None Oliver Nguyen has conveyed both the present interest (to Annie Nguyen) and the future interest (to Brittany Nguyen), and no longer holds any ownership interest in the property. This conveyance created a life estate with a remainder interest. A life estate is a freehold estate of ownership. Annie Nguyen has a life estate, and, because it is for her life, she is called "the measuring life." Brittany Nguyen has a remainder interest, and is called a "remainderman."

When a property owner wishes to use multiple agents to sell a property, this is a(n) ____. agent listing open listing exclusive listing owner operator listing

Open listing An open listing is also called a non-exclusive or general listing, and is not exclusive.

75-year-old Norman conveyed ownership of his home and land to his son Craig, but retained all property rights for the duration of his own life. Which of the following statements is FALSE? a. Norman retained a traditional life estate measured by his own life. b. Norman owns a life estate, and Craig owns a life estate pur autre vie measured by the life of Norman. c. Craig has a remainder interest in the estate. d. Norman owns a life estate pur autre vie measured by his own life.

Norman owns a life estate, and Craig owns a life estate pur autre vie measured by the life of Norman. Because Norman's estate is measured by his own life, Norman owns a traditional life estate. When Norman dies, Craig will have the remainder of the estate, so Craig has a remainder interest. Life estates pur autre vie are life estates that are measured by the life of someone other than the estate holder.

Substituting a new obligation for an existing one with the intent to cancel the latter is called ____. assignment execution latches novation

Novation Novation is when a new contract is used to replace the initial contract

Listing agent Abraham Ali was instructed in writing by his seller not to bring any further offers, because the seller had already accepted an offer. Abraham Ali complied with the seller's wishes, and posted a notice on the MLS listing publication that said "Seller no longer accepting offers." Abraham complied with the seller's lawful instructions because he has a common law duty of _____________. a. care b. research c. obedience d. advertising

Obedience The common law duty of obedience requires that the broker obey all instructions from the client principal as long as the instructed action is legal and ethical.

In an old home, _____________ would most likely be a source of incurable functional obsolescence. a. peeling paint b. outdoor plumbing c. an unattractive store front d. a factory in the vicinity

Outdoor Plumbing Incurable functional obsolescence is a feature on the property that causes the property to diminish in value, but to cure the obsolescence would cost more than the building is worth. Outdoor plumbing in an older home is likely incurable because to retrofit indoor plumbing would require a demolition of the entire home, and reconstruction of the home after the plumbing is installed.

The term ____ refers to the legal act of giving and receiving a deed. transfer of goods passing title transfer title transfer of sale

Passing title

The change in value of a piece of property based in its location is not affected by ____. hazards and nuisances amenities and services past performance proximity to transportation

Past Performance Location affects the value of property through the following factors: access to employment, amenities and services, hazards and nuisances, nearness to transportation, neighborhood compatibility, safety, schools, and traffic.

A buyer and seller agree to wait until the seller's listing is expired to make the sale in order to avoid paying the broker his share. How can the broker get his commission? If the listing is expired, the commission is forfeited. Sue the party/parties the broker was representing. File an injunction with the title company. Prove in court he was the procuring cause of sale.

Prove in court he was the procuring cause of sale.

Which deed is used to release rights to property in an effort to obtain clear title? warranty deed reconveyance deed bargain and sale deed quitclaim deed

Quitclaim Deed

What deed claims no warranties at all?

Quitclaim deed

Most Real Estate loans deal with simple interest, the formula for which is ____. Rate x Monthly Payment = Annual Interest Annual Interest x Monthly Payment = Rate none of these Rate x Loan Balance = Annual Interest

Rate x Loan Balance = Annual Interest

When an agreement is formed between an agent and a principal after a sale is confirmed, this is called ____. agency by prior agreement agency by restitution agency by foreclosure agency by ratification

Ratification If an agent sells a piece of property without any contract or permission from the principal, the principal may create an agency by ratification by approving the sale anyway.

You are the listing agent on a $500,000 home. You discover that there has been a roof leak in the home some years back. After the leak, the homeowner's insurance covered the necessary repairs, and the roof was made good -as-new both structurally and aesthetically. However, on the ceiling of the home, there is a water stain that is visible with a casual visual inspection. The legal term that we use to describe the water stain on the ceiling is "_____________". a. red flag b. latent material defect c. concealed material defect d. covert physical defect

Red Flag The term "red flag" is used to describe indications in or on a property that would alert a reasonable person with the same or similar knowledge to that of a real estate agent to a possible defect in the property. Latent defects, generally do not come with red flags such as a water stain. If, for instance, the seller of the home in the scenario would have painted the ceiling to conceal the water stain, the physical defect of the leaking roof would be considered latent. Most states do not make the real estate licensee responsible to see and disclose latent defects; but most states do make the real estate licensee responsible for disclosure of material defects that show red flags.

A person that fraudulently makes a misrepresentation of fact, opinion, intention, or law for the purpose of inducing another to act or to refrain from action, is subject to liability to the other in deceit for pecuniary loss caused to him by his justifiable _____________ upon the misrepresentation. a. outrage b. reliance c. lawsuit d. profit loss

Reliance

A rule of agency law holding that the principal is liable to third parties for all wrongful acts of the agent committed while transacting the principal's affairs is the rule of _____________. a. respondent superior b. dual agency c. fiduciary d. ostensible agency

Respondent superior If a listing agent misrepresents a certain aspect of the property, and the buyer relies on this misrepresentation, the seller is liable to the buyer, because the listing agent committed a wrongful act while transacting the seller's affairs. Likewise if a buyer's agent misrepresents the buyer's ability to perform on a contract, and the seller relies on that misrepresentation, the buyer is liable to the seller for the buyer's agent's wrongful conduct. In other words, the agent's words and actions are directly attributable to the client and can cause liability for the client.

When a property is released from a mortgage because it has been paid off by the borrower, what document does the lender provide to prove this to be true? satisfaction piece postponement of lein land release estoppel certificate

Satisfaction piece

Yankee Doodle Realty has dual agency agreements with both the buyer and seller in the same transaction. Alissa, a Yankee Doodle salesperson has been working with the buyer. If a purchase is contingent on financing, what information may she share with both the buyer and the seller? a. She may disclose the fact that the buyer filed bankruptcy six months ago. b. She may disclose to the seller that the buyer is willing to pay above the offering price. c. She may disclose to the buyer that the seller is willing to accept less than the listing price. d. She may disclose to the buyer that the seller is getting a divorce.

She may disclose the fact that the buyer filed bankruptcy six months ago. She may not share financial information with either party unless it directly impacts the ability of either party to perform the requirements of the contract. The buyer's bankruptcy certainly impacts the buyer's ability to get financing. While she needs to represent both parties equally, she may not disclose the confidential bargaining positions of either party. This is a part of the common law duty of confidentiality.

For a deed to be valid, it must be: a. Signed by the grantor b. Signed by the grantee c. Recorded at the state level d. All of the above.

Signed by the grantor A deed must be signed by the grantor (i.e., the owner conveying an interest in real estate to someone else).B is incorrect. The grantee does not have to sign the deed. The grantee must accept delivery of the deed, but that can be achieved through possession of the deed, taking possession of the property, taking out a loan on the property, etc. C is incorrect. For most states, official records are recorded at the county level.

Legally, what is the nature of agency relationships between listing brokers and sellers? a. General agency b. Specific agency c. Universal agency d. Limited power of attorney

Specific Agency Specific agency (or special agency) means that a licensee may act on a principal's behalf only in limited ways for a limited time; generally for only one transaction. General agency is an agency whereby the agent is given authorization to act as agent for a range of activities. Universal agency is unlimited rights to act on the principal's behalf. A limited power of attorney grants authority to act on the principal's behalf, but limits the authorization to only those acts that are named.

A seller and a broker enter into a written listing agreement for the seller's 2-unit dwelling. The broker is authorized to advertise, stage, and solicit offers on the property. The broker's duties also include advising the seller as to the advantages and disadvantages of offers received. However, the broker cannot accept an offer and bind the seller. This is an example of what type of agency? a. Special agency. b. General agency. c. Implied agency. d. Dual agency.

Special Agency B is incorrect. In contrast to a special agency, a general agent typically has a number of duties to perform. This type of agency is usually used for ongoing businesses. The general agent does have a limited authority to bind the principal. One frequently-tested example of a general agency is a property manager with the authority to, for example, find and sign well-qualified tenants. C is incorrect. An implied agency can be created unintentionally or by accident. It may be created accidentally through the speech or actions of the agent (e.g., the broker for the seller advising a stranger who drops in at an open house). This answer choice is incorrect because, here, both parties intended to enter into an agency relationship and formalized that intention in a written listing contract. D is incorrect. A dual agency occurs when the agent represents more than one party to the transaction (e.g., representing both the buyer and the seller in a purchase transaction). There is no dual agency scenario presented in this fact pattern. Note: Some states legally prohibit dual agencies.

All of the following statements are false, except:Statement #1: Both an exclusive listing agreement and a Power of Attorney establish an agency relationship.Statement #2: Both the listing agent and the attorney-in-fact are usually acting in expectation of some type of compensation.Statement #3: Under a Power of Attorney, only an attorney can serve as an attorney-in-fact.Statement #4: The listing agent owes fiduciary duties to the principal, but the attorney-in-fact does not. a. Statement #1. b. Statement #2. c. Statement #3. d. Statement #4.

Statement #1 Both an exclusive listing agreement and a Power of Attorney create an agency relationship. Under the exclusive listing agreement, the principal is the seller and the agent is the real estate broker. Under a Power of Attorney, the principal is the person signing the Power of Attorney, and the agent is called an "attorney-in-fact." Test-Taking Tip: An agent (aka a "fiduciary") is typically entrusted with the affairs of the principal, and is legally obligated to put the interests of the principal above any self-interest. Fiduciary duties owed by the agent to the principal include: loyalty, obedience (to lawful commands), maintaining confidentiality, prudence (aka "due care"), and accountability.

The law in all states provides that contracts for the sale of real estate or an interest in real estate are unenforceable unless they are in writing and signed by the parties. What law is this? a. Statute of Limitations b. Statute of Estoppel c. Statute of Real Estate d. Statute of Frauds

Statute of Frauds Contracts for the sale or purchase of real estate are unenforceable in a court of law unless they are in writing and signed by the parties to be charged. The purpose of the statute of frauds is to prevent fraud by a person seeking to enforce a contract that was never made. The statute was not designed to prevent oral contracts. One exception to this rule is oral leases for a period not exceeding one year. Such leases are enforceable if the intent of the parties can be established in court.

The ____ requires that all real estate transfers of title be in writing. statute of adjudication statute of frauds transfer clause law of rights

Statute of frauds The statute of frauds was designed to address the importance of establishing and proving property ownership.

The principal of appraisal that dictates that home values tend to increase when demand increases is the principle of _____________. a. progression b. substitution c. regression d. supply and demand

Supply and Demand

A bilateral contract is one where ____. only one party makes a promise both parties are covered by the same agent both parties are covered by the same brokerage house both parties make a promise

both parties make a promise

A listing agreement expired two weeks ago and the seller has re -listed with another agency. However, that agent who was the first listing agent now has an interested buyer. In showing the property to this prospective buyer, which of the following is true? a. The agent now becomes a dual agent and must represent both parties equally. b. The agent cannot represent this buyer until at least sixty days after the original listing agreement expires. c. The agent cannot discuss any offers he received on the property while he was the listing agent. d. The agent cannot disclose to his buyer any information about the property's physical condition he received or became aware of while he was the listing agent.

The agent cannot discuss any offers he received on the property while he was the listing agent. This is part of the common law duty of confidentiality. However, any information a licensee has about a property's physical characteristics that could affect its price or desirability is "material". In most states, the agent is required to disclose all material facts in writing to all parties to the transaction.

In an open listing, who gets the commission?

The agent who sold it gets all the commission

Who takes the biggest risk in an open listing

The agent. No sale. No money

With regard to the two main methods of alternative dispute resolution, which of the following is a FALSE statement? a. The purpose of mediation is to help the disputing parties work out a compromise. b. Arbitration results in a decision based on the facts of the case. c. The arbitration board will engage in a settlement negotiation process prior to a hearing. d. An arbitration board must have an odd number of members, generally three to five members.

The arbitration board will engage in a settlement negotiation process prior to a hearing. Mediation is concerned only with helping the parties come to a compromise, regardless of fairness; and regardless of who is right or wrong. If mediation fails, or one party refuses to mediate, the dispute moves back to the litigation track, unless the parties specifically request that the matter go to arbitration. Arbitration permits parties to submit their dispute to an arbitration board, which listens to the facts and then renders a judgment. The arbitration board will consist of an odd number of members who do not engage in any settlement negotiation processes. The parties in arbitration typically agree to (1) allow the decision of the board to be binding; and (2) forego the right to an appeal.

Brokers and the agents in the brokerage are almost always liable for their own acts of negligence. However, when an agent is required to hire an outside party (such as a home inspector) to do work on behalf of the client, it would be unreasonable to hold the broker liable and responsible for the actions of the parties hired. What is the clause that releases the broker from liability for the actions of the parties the broker hires? a. The broker protection clause. b. The broker indemnification clause. c. The reasonable care clause. d. The broker severability clause.

The broker indemnification clause. Indemnification is an agreement between two parties not to hold one of them liable for future legal action or fines. Indemnification clauses will not trump the law of agency, and will not release the broker from the duty to use reasonable care in their hiring of the third party providers. A broker can and likely will be held liable if the third party provider has a history of bad work and the broker either knew about it or should have known about it.

The seller changes his mind and decides not to sell to the buyer. What recourse does the buyer have? a. The buyer has no recourse. No one can make the seller sell his property if he does not want to sell it. b. The seller is in breach, but the buyer's only recourse is to take back his earnest money deposit. c. The buyer can sue the seller for specific performance and force the seller to sell. d. The buyer can call the police; and the police will escort the seller from the premises.

The buyer can sue the seller for specific performance and force the seller to sell. In this case, the buyer should sue the seller for specific performance; and force the seller to sell. Since the earnest money deposit came out of the buyer's pocket to begin with, taking back the earnest money deposit is no compensation for the buyer. Specific performance is remedy is available to the buyer if the property in question is unique and monetary damages are not sufficient. Since all real property is unique, specific performance is a viable remedy. The purchase contract is enforceable against the seller.

On June 1, a buyer and a seller enter into an enforceable purchase contract whereby the buyer agrees to purchase the property for $250,000 and the seller agrees to sell the property for that amount. Escrow is opened and a close of escrow date is set for December 1. On November 1, the property is appraised and the market value of the property according to the appraisal has increased 20% since June 1, and the property now has a market value of $300,000. 21. Who realizes the gain? a. The buyer realizes the gain because the buyer has equitable title by virtue of the valid purchase contract. b. The buyer realizes the gain because of the equal dignities rule. c. The seller realizes the gain, because title to the property has not transferred yet, and the seller still owns the property. d. The seller realizes the gain because of the seller retains equitable title until close of escrow.

The buyer realizes the gain because the buyer has equitable title by virtue of the valid purchase contract. The buyer receives equitable title (title to the equity) upon acceptance of the purchase offer by the seller. Equitable title is transferred when a price is named in a purchase contract. The increase in market value of the property is immaterial to the seller's promise to sell the property to the buyer for $250,000. In this case, the seller bears the loss, and the buyer realizes the gain.

____ are rights and privileges belonging to the land. Assemblages Attachments Assignments Appurtenances

The correct answer is: Appurtenances Explanation: All rights and privileges belonging to the land (air, soil, water, etc.) are appurtenances.

A contract can be unenforceable if ____. a person failed to take enforcement action within the statute of limitations it was written and all copies are missing or destroyed all of these it was oral or implied and there is no proof or witness to agreement

The correct answer is: all of these Explanation: All these are cause for a contract to be deemed unenforceable in court.

What part of a deed limits the amount of the estate granted? premises habendum testimonium acknowledgement

The correct answer is: habendum Explanation: Sometimes called the "to have and to hold clause," the habendum describes the limits of the estate being granted.

A ____ is a promise of real property, kept by the lender to secure the loan. deed agreement contract note

The correct answer is: note Explanation: The legal definition of a note, as it applies to Real Estate, is a promise of real property to secure a loan. While the complete term is promissory note, today's professionals simply use the term note and you should know that it refers to promissory note. The word promise in the question was a clue to the correct answer. (A mortgage is also a representation of debt obligation that the borrower keeps. The lender gets the note.)

When dividing a single plot of land into two or three units, the process is called ____, and the units are called ____. subdividing; lots partitioning; parcels subdividing; parcels partitioning; lots

The correct answer is: partitioning; parcels Explanation: When dividing a land into less than four units, partitioning divides the land into parcels. With four or more units, the land is subdivided into lots.

A reverse mortgage ____. requires participant to be 65 or older and removes all remaining interest payments from mortgage requires participant to be 62 or older and converts equity into cash requires participant to be 55 or older and converts equity into cash requires participant to be 62 or older and removes all remaining interest payments from mortgage

The correct answer is: requires participant to be 62 or older and converts equity into cash Explanation: A reverse mortgage is an option for individuals 62 or older who want to transform equity in their property into cash through a mortgage.

Which part of a traditional deed contains warranties? acknowledgement habendum premises testimonium

The correct answer is: testimonium Explanation: The testimonium part of a deed contains warranties, if applicable.

When using the income approach to value, a real estate appraiser would NOT care about which of the following? a. The capitalization rate, because the capitalization rate has nothing to do with the property's ability to generate income. b. The annual net income, because the income approach considers only the gross potential income. c. The market rent, because this has nothing to do with the property's cost of reproduction. d. The cost to cure a leaky roof, because the indication of value is based solely on the property's ability to generate income.

The cost to cure a leaky roof, because the indication of value is based solely on the property's ability to generate income. The indication of value using the income approach is based solely on the property's ability to generate income in whatever state of repair the property is at the time of the appraisal. While it is true that the property value from a cost approach standpoint would realize depreciation as a result of physical deterioration, there is no such consideration when using the income approach. Capitalization rate and net income are the two key factors considered when estimating the value using the income approach.

A daughter has a life estate that is measured by the life of her mother. Upon the death of the mother, ownership of the estate will go to the grandson who will turn 18 next month. Which of the following is a true statement? a. The daughter owns a life estate pur autre vie, and grandson owns a reversionary interest. b. The daughter owns a traditional life estate and the grandson owns a life estate pur autre vie. c. The daughter owns a life estate pur autre vie, and grandson owns a remainder interest. d. The daughter owns a reversionary interest and the grandson owns a remainder interest.

The daughter owns a life estate pur autre vie, and grandson owns a remainder interest. Since the daughter's estate is measured by the life of someone else, her estate is a life estate pur autre vie. The grandson will gain ownership of the estate only upon the death of his grandmother. He has an interest in the remainder of the estate after his grandmother dies. Currently, he has no ownership in the estate; he merely has a future interest. His future interest is not reversionary, because he has not yet owned any interest in the estate. Reversion refers to the act of reverting ownership back to the original grantor.

In reference to deeds, what is the closest definition of "delivery in escrow"? A deed is considered invalid until it is signed by the grantor. A deed is completed but not delivered, such as when a death occurs and the deed is found in the grantor's home. The grantee obtains physical possession of the completed deed from the grantor. The grantor delivers the deed to a trustee, who holds onto the deed until the grantee has completed any required actions.

The grantor delivers the deed to a trustee, who holds onto the deed until the grantee has completed any required actions.

In a bargain and sale deed

The grantor states he still has some interest in the 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 _____________. a. the highest and best use of the parcel b. the list price of the parcel c. the most probable price the parcel will bring in an arms-length transaction d. the physical dimensions of the parcel

The list price of the parcel The listing price is an indicator of value only insomuch as the listing agent is presumed to be knowledgeable about property values, and would probably have listed the property at a competitive price. However, the appraiser cannot rely on this presumption, and should not consider the list price when conducting the appraisal. Very often, the presumption that a listing agent priced the property realistically proves to be erroneous

A purchase and sale agreement between a seller and a buyer for a residential property is a binding contractual agreement. All of the following, however, if listed as clauses in the purchase contract would commonly allow a buyer to back out without suffering legal or financial liability. The one exception is: a.Buyer is unable to sell buyer's current home. b. Buyer is unable to obtain financing to purchase the new property. c. The preliminary title insurance report shows the residential property is a dominant tenement. d.An inspection report shows major problems with the home's systems and construction.

The preliminary title insurance report shows the residential property is a dominant tenement. An appurtenant easement has two parcels of land associated with it, the "dominant tenement" and the "servient tenement." The dominant tenement is the parcel of land that benefits from the easement. The servient tenement is the parcel of land this is burdened with the easement. The dominant parcel's owner would have a nonpossessory right to use someone else's land for a specified purpose (e.g., ingress and egress for road access). A buyer typically would not be able to walk away from a purchase contract merely because the property that is the subject of the purchase contract benefits from an easement appurtenant.A (a current home sale contingency), B (a financing contingency), and D (a home inspection contingency) are all common contingencies that would allow a buyer to exit a purchase contract without being in breach. Test-Taking Tip: In the context of contracts, a contingency is a condition which, if it occurs, allows one or both parties to exit the contract without suffering legal or financial liability.

What is meant by riparian rights? The former property owner still lives at the property, but it has officially been sold. There is no legal owner to the land so the property becomes possession of the government. The property owner has property that borders a moving body of water. The property was given to the current owner by a deceased family member.

The property owner has property that borders a moving body of water. If a property owner has riparian rights, their property boarders a moving body of water such as a river or stream. Typically, a property owner with riparian rights CANNOT meddle with the natural flow of the water touching their property.

A seller receives an offer to purchase his property subject to certain terms. The seller counteroffers. Which of the following is TRUE? a. The prospective buyer is bound by his original offer. b. The prospective buyer is bound to accept the counteroffer. c. The prospective offer is not bound to any offer. d. The prospective buyer cannot make a counteroffer

The prospective offer is not bound to any offer.

The listing price for an apartment building was $4 million. A prospective buyer came in with an offer of $5 million. The seller rejected the offer, and decided to take the property off of the market. The buyer was angry that an offer so much higher than the list price was rejected, and saw an attorney to see if a lawsuit for breach of contract was possible. Per the rules of contract law, the attorney most likely told the prospective buyer all of the following, except: a.The seller doesn't have to accept any offer: Listing a property is merely an invitation to entertain offers. b. There is no contract at the offer stage. c.The seller's rejection of the offer terminated the offer. d. The seller could still accept the offer.

The seller could still accept the offer. A, B, and C are all correct statements

Why are net listings generally frowned upon in the real estate industry? The broker typically takes a smaller than average commission. They can lead to brokers taking advantage of property owners. All of these. They drive down the prices of homes for sale.

They can lead to the brokers taking advantage of property owners. In a net listing, the seller names a price they want for their property, and any amount above that sale price goes to the broker. Net listings are frowned upon in many states (and illegal in others) because they can lead to brokers not acting in the best interest of the seller. For example, if a seller wanted $150,000 for their home, and there was an offer for $152,000, in a net listing the broker may be tempted to not accept the offer because his commission on the sale would be relatively small.

After the buyer's offer was accepted by the seller, the broker cashed the buyer's deposit check and put the money in his office safe pending the close of escrow. The seller demanded the deposit money, but the broker refused to give it to him. Assuming only the above facts: This conduct would probably subject the broker to disciplinary action by the real estate commissioner. The broker had legal justification for refusing to give the deposit money to the seller. The broker had legal justification to hold only one-half of the deposit; he must give the other half to the seller. The broker needs to look out for the best interest of the seller at all times, even if that means performing acts against the sellers will.

This conduct would probably subject the broker to disciplinary action by the real estate commissioner.

Rectangular survey is used in many states as a way to evenly divide property into 6 even square mile areas. What are these areas called? villages cities townships counties

Townships

____ indicates ownership of property, in real estate terms. Title Variance Actuance Certified

Title While title indicates ownership, it is not a physical thing. The deed is the physical proof of a title.

Which of the following is a non-agency relationship allowed in some states that have a designated category of service where the licensee represents neither party as an agent?. a. partially disclosed principal b. transactional brokerage c. ostensible agency d. scope of authority

Transactional brokerage Also called a facilitation relationship, a transactional brokerage relationship is non-agency relationship. As such, there is a fiduciary relationship between brokers and sellers or buyers; but there is no agency. The broker acts as a facilitator who assists the buyer or seller with the paperwork, and assists with the details associated with the close of escrow.

Consideration is always given by all parties to a contract, regardless of whether the contract is unilateral or bilateral. a. True. b. False.

True Consideration is something of value given by all parties. It can be said that both sides must give consideration and experience detriment, and all parties must benefit from the consideration received from the other party. A contract is not valid without consideration given by all parties. In a unilateral contract, only one of the parties gives a promise as consideration; the other side gives something other than a promise as consideration (usually money).

Joan sells her house to her brother Mike on a handshake. This contract is: unenforceable illegal valid because they are related valid only in certain states

Unenforceable Must have signatures from both parties

Which of the following type contracts is generally formed by a promise and a payment of money in return? a. unilateral b. bi-lateral c. multi-lateral d. collateral

Unilateral A one -sided contract is a unilateral contract - uni meaning "one", and lateral meaning "side". Unilateral contracts are contracts in which only one party makes a promise. Generally, the consideration is money in exchange for a promise. A real estate option is a unilateral contract. The optionor promises to keep the property available for a certain price for a certain period of time; and the optionee gives money in exchange for that promise.

____ are annual crops planted on real property but are considered personal property. Bargain and sale deed Emblements Reversions Recordation

Usually for agricultural easements, emblements are crops that are considered personal property while still being attached to the land.

A contract that is missing one of the required elements, such as consideration is a _____________. a. void contract b. enforceable contract c. rescindable contract d. voidable contract

Void Contract A contract is void if there is no consideration given from both sides. A void contract was never legally enforceable. When two parties rescind a contract, they are put back to their original positions, all consideration is returned. However, rescindability requires that a valid contract existed in the first place. A voidable contract is a contract that is voidable by only one of the parties, but not the other, such as in the case where a minor signs a contract. The minor cannot be held to a contractual obligation, but the other party (because the other party is a competent party) can be held to contractual obligations.

A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company, and is called: discounting. blanket financing. warehousing. package financing.

Warehousing Warehousing refers to the process whereby banks and other lenders make mortgage loans to consumers for the purpose of quickly selling those loans on the secondary market.

What is the most desirable deed that provides the greatest amount of protection for the grantee? warranty deed trustee deed bargain and sale deed quitclaim deed

Warranty Deed When a warranty deed is given, the grantee is protected from any person who claims it and any liens against the property by the grantor.

What is reversionary interest?

When someone does not yet own any interest in an estate. Reversion refers to the act of reverting ownership back to the original grantor.

Fiduciary The word fiduciary comes from the word faith or faithful. In a fiduciary relationship, the agent has several duties to the client, including the duties of care, obedience, accounting, loyalty and disclosure.

Which of the following relationships implies a position of good faith or trust? a. joint venture b. proxy surrogate c. fiduciary d. tenancy by the entirety

How does a home equity line of credit differ from a second mortgage? A home appraisal is not necessary for a home equity line of credit. The terms can be used interchangeably. The interest accrued on a home equity line of credit is not tax deductible. With a home equity line of credit the borrower can draw money as they need it.

With a home equity line of credit the borrower can draw money as they need it. Explanation: In a traditional second mortgage, a borrower would take all of the money loaned to them at one time. In a home equity line of credit the borrower may take up to a specified amount, but they do not need to take that amount in full or all at one time.

What is the difference between the terms "option to purchase" and "right of first refusal"? a. There is no difference. The terms mean exactly the same thing. b. With an option, a buyer has "locked -in" the opportunity to purchase under given terms, but in a right of first refusal, there is no particular agreed upon sales price. c. In an option, there is no particular agreed upon sales price, and in a right of first refusal, there is an agreed upon sales price. d. In an option, the optionee must be given an opportunity to match any legitimate purchase offer that would otherwise be accepted during a given period of time; but the holder of a right of first refusal has reserved the opportunity to purchase property under given terms.

With an option, a buyer has "locked -in" the opportunity to purchase under given terms, but in a right of first refusal, there is no particular agreed upon sales price. With an option, a buyer has "locked -in" the opportunity to purchase under given terms. In the right of first refusal, there is no particular agreed upon sales price, merely an agreement that the right holder can match any legitimate purchase offer that would otherwise be accepted during a given period of time. Although many use these two terms interchangeably, there is a significant difference in the way these contractual arrangements are executed.

Mr. and Mrs. Cox make Mr. and Mrs. Green an offer on their home, but they have not heard back from them on whether or not the offer has been accepted. In the meantime, they have found another home they would like to purchase instead. What is their best option? Wait for Mr. and Mrs. Green's response. If they accept the offer, pay the withdraw fee outlined in the contract. Withdraw their offer with penalty. Modify their offer to one they are confident Mr. and Mrs. Green will not accept. Withdraw their offer with no penalty.

Withdraw their offer with penalty. Before an offer has been accepted, the buyers have the right to withdraw their offer with no penalty. However, if the seller has already accepted the offer, the offer now becomes a contract that carries with it legal obligations.

When a broker lists a property and then shows the property to the buyer, is a dual agency created? a. Yes. b. No.

YES The dual agency relationship may be established simply by conduct of the parties indicating their intention that it exist. A seller, a buyer or any other person who can establish that he relied on a broker's words may be found to be the broker's principal. The relationship can exist even when real estate is neither bought nor sold.

Listing agent Dick Richards advertised his listing on the MLS and represented that the master bathroom in the home had been "totally remodeled". Richards relied on what his client told him and did not further investigate. In fact, the remodel of the bathroom did not include the plumbing, pipes and lighting fixtures. Could agent Richards be liable for misrepresentation? a. Yes, because he intentionally placed a misleading advertisement b. No, because he was merely relaying the information conveyed to him by the seller. c. No, because reasonable people would understand that totally remodeled doesn't really mean completely remodeled. The word "totally" is a figure of speech. d. Yes, because he breached a duty of care when he misrepresented facts in his advertisement.

Yes, because he breached a duty of care when he misrepresented facts in his advertisement. It's safer to replace totally with a neutral characterization like "beautifully" or "impeccably". Generally, negligent misrepresentation occurs when the agent has not fulfilled the duty of discovery and due care.

Janice learned from a co-worker that a certain property had water rights; and relayed this information to clients. The clients, relying on Janice's statement, purchased the property only to find that the property did not have water rights, and never will. Did Janice pursue a course of misrepresentation? a. Yes. Even though Janice thought she was telling the truth, she was not, and this is negligent misrepresentation. b. Yes. Janice's conduct is intentional misrepresentation. c. No. There is no misrepresentation because there is no intent to defraud. Janice thought she was telling the truth. d. No. It is the responsibility of the buyer to investigate all aspects of the property being purchased. The buyer cannot hold the salesperson accountable for this type of statement.

Yes. Even though Janice thought she was telling the truth, she was not, and this is negligent misrepresentation. By neglecting to do the research, Janice violated the common law duty of care. Because Janice had no intent to defraud, her statements cannot technically be considered intentional misrepresentation or fraud. However, in most states the penalty for negligent misrepresentation does not differ significantly from the penalty for intentional misrepresentation. The amount of damages due to the party who relied on the misrepresentation is the same regardless of the licensee's intent.

Johnny Wink, a real estate licensee in state Q knows or strongly suspects that an unimproved lot in state Q would bring $50,000 if exposed on the open market for a reasonable period of time. The property owner offers to list the unimproved lot with Johnny for $40,000. Johnny sees an opportunity to satisfy the client and make some extra money at the same time by offering to buy the property for $40,000. The owner accepts Johnny's offer for $40,000 and pays him $4,000 commission. Ten days later, Johnny, acting as a principal sells the lot for $50,000. Has Johnny violated a fiduciary duty? a. No. The original owner got exactly the price he was asking and therefore Johnny fulfilled his fiduciary duty. b. Yes. Johnny violated his fiduciary duty to the client since the lot was worth considerably more than the $40,000 the client wanted. c. No. Since the client was happy with the amount Johnny paid, that's all that matters. d. No. Everything is okay since the client lives in state R and rarely visits state Q.

Yes. Johnny violated his fiduciary duty to the client since the lot was worth considerably more than the $40,000 the client wanted. In this case, the client's satisfaction and happiness are irrelevant. The client's best interests were not protected. The client's state of residence or frequency of visitation to state Q is also irrelevant.

Thomas promises in writing to sell his home and land to his neighbor Harold in exchange for monetary consideration. Harold cannot read or write and authorizes his agent to sign the contract for him without having the agent read it to him. Is this a valid contract? a. No. Both parties to a contract must be literate. Harold cannot read or write. Thus, the contract is invalid. b. Yes. There is no requirement that both parties are literate for the contract to be enforceable, so the contract is valid. c. Yes. Promissory estoppel will apply since no written contact is valid. d. No. The terms of the contract must have been read by or to Harold to have a meeting of the minds.

Yes. There is no requirement that both parties are literate for the contract to be enforceable, so the contract is valid Legality of contract is an essential element in the formation of a contract. Literacy of the parties is not required for a contract to be valid. The parties need not be literate or able to read the contract. The general rule is, absent misrepresentation, an illiterate person who fails to have a contract he/she signed read to him/her by a person available to read the contract cannot thereafter claim that he did not assent to its provisions.

A condominium is legally defined as: a community where the owner owns a portion of the shares of stock of the cooperative corporation a community in which the architectural style makes the homes look uniform and neat in appearance an association with dues used to maintain community property, including swimming pools, park areas, and parking lots a community where homeowners have the title to one piece of indvidual property and the right to use community property shared with others

a community where homeowners have the title to one piece of indvidual property and the right to use community property shared with others

An example of substantial performance is when ____. a contractor does a job that is far better than their normal performance a contractor does a job that is far worse than their normal performance a contractor substitutes similar materials during a job a contractor independently alters the terms of the contract

a contractor substitutes similar materials during a job

What financial instrument is given by a borrower to the lender as promise to repay a debt? a note a lien a mortgage a trust deed

a note Explanation: A note, or promissory note, is evidence of a debt that can be resold.

A(n) ____ is a way of proving that the grantor signs the deed voluntarily. acknowledgment proof of purchase guarantee proof of signature

acknowledgement Generally, an acknowledgment is witnessed and attested to by a notary public, who requires evidence of your identity, and to indicate that you are signing the deed of your own free will.

Value in use is ____. added property value based on a government sanction allowing it to be used for general purposes added property value based on a specific person using it for a specific purpose the value of using a property that anyone can benefit from financially added property value based on a typical person using it for a typical purpose

added property value based on a specific person using it for a specific purpose Explanation: Value in use is an added property value unavailable to the typical buyer because it's for a specific person using it for a specific purpose.

A person has been using another person's land for 30 years without permission. They may have a legal claim to the land by which means of ownership? involuntary alientation They do not have a legal claim to the land. adverse posession voluntary alienation

adverse posession Explanation: Adverse possession laws are very old laws found in every state. The idea behind this type of possession is that if the true owner is so disinterested in the land they own that they allow someone else to use it for a long period of time (depending on the state, 7-40 years), the person using it has rights based on the fact they were treating the property as their own.

A good example of an implied contract is ____. a tenant staying despite not paying rent a tenant communicating that they expect the full deposit back because the landlord did not ever note damage to the property after a written lease expires, rent is paid and the check cashed an agent is told by a potential seller that he'd like the agent to do a market analysis

after a written lease expires, rent is paid and the check cashed Explanation: The owner shows through his actions that the contract is still valid, even though it is now simply implied.

When a principal doesn't stop an agent from going beyond his or her normal line of duties, this is called ____. agency by fair use agency by alteration agency by estoppel agency by association

agency by estoppel Agency by estoppel is created when agents perform duties outside of what they would normally do, though related to what their initial task was.

When an agent is invested in a project outside his or her agent status, this is called ____. agency coupled with an interest agency turnaround agency coupled with a principal agency impetus

agency coupled with an interest Explanation: Agency coupled with an interest is when an agent invests time or money in a property and also agrees that before doing so, he or she will be the agent (but one is not conditional on the other).

Some states have ____ that require agents to disclose who they are representing to the buyers. agent identification laws agency branding laws agent identification clauses agency disclosure laws

agency disclosure laws

Gradual liquidation through periodic payments of principal and interest is called ____. a HELOC a take-out loan a reverse annuity mortgage an amortized loan

amortized loan

A foreclosure sale is ____. an auction sale to the highest bidder preceded by a statutory right of redemption period no different from strict foreclosure a notice of default

an auction to the highest bidder

The Americans with Disabilities Act of 1990 would affect which of the following? an existing business with 20 employees a third floor apartment in a newly constructed apartment complex a single-family home multi-family home with three units

an existing business with 20 employees Explanation: The Americans with Disabilities Act (ADA) of 1990 seeks to accommodate those with disabilities by broadening their access to public facilities. Any existing business with 15 or more employees must update their facility to conform with ADA rules and regulations. Almost all new construction, with the exception of single-family homes, must be handicapped accessible. While newly-constructed ground-floor apartments are subject to ADA regulations, those on higher levels are not. As of 1988, multi-family buildings with four or more units must comply with ADA standards.

A gross rent multiplier (GRM) at the asking price is _____________. a. gross scheduled income divided by the property's value b. gross scheduled income divided by the selling price c. asking price divided by the gross scheduled income d. net income divided by the gross monthly rent

asking price divided by the gross scheduled income A gross rent multiplier (GRM) is the ratio of the price of a real estate investment to its annual gross scheduled income. Gross scheduled income is the maximum amount of rental income that a property can generate with 100% occupancy for the entire year. For instance, for a 5-unit complex where each unit rents for $100 per month, the gross scheduled income is 5 x $100 x 12 or $6,000. If the asking price of the 5-unit complex is $180,000, then the gross rent multiplier is $180,000 ÷ $6,000 or 30.

Upon sale, the instrument that conveys ownership rights to personal property is a ____ and that dealing with real property is a ____. deed, bill of sale deed, land sales contract bill of sale, deed land sales contract, deed

bill of sale, deed Explanation: A bill of sale transfers title to personal property and a deed transfers title to real property.

When real estate agents represent the buyer and not the seller of a piece of property, they are engaging in ____. good faith buyer protection seller protection buyer agency

buyer agency Agency is the term for representation in a real estate transaction. The principal, in this case, the buyer, gives legal authority to an agent to act on the principal's behalf when dealing with a third party.

According to federal law, sellers are not allowed to disclose that the property is or has been owned or occupied by a person exposed to HIV, or diagnosed as having AIDS. Therefore, if a buyer asks whether the owner of a subject property is HIV positive, the agent should always state, "NO," regardless of what the circumstances are. a. Wrong. The agent should always disclose all known material facts truthfully, no matter what the material fact is. b. Right. Federal law prohibits this disclosure, so the agent should always answer "NO" to this question. c. Wrong. The agent should either answer the question truthfully, or respond that he/she is not required to answer that question. d. The agent should terminate the relationship with the buyer.

c. Wrong. The agent should either answer the question truthfully, or respond that he/she is not required to answer that question. As a matter of federal law (Fair Housing Act) a person having HIV or AIDS is considered being a part of a protected class and as such, a licensee or seller is legally prohibited from disclosing this material fact.

What are the four elements required of every valid and enforceable contract? competent parties; legal purpose; negotiated price; and signatures competent parties; legal address; dollar amount; and clear title competent parties; legal address; broker signatures; and cash competent parties; legal purpose; offer and acceptance; and consideration

competent parties; legal purpose; offer and acceptance; and consideration Every legal contact must have parties of sound mind, a clear legal purpose, and agreement between parties, and consideration, which is something of value given in exchange for something of value. In real estate, consideration is usually some sort of monetary payment.

A party who possesses the legal capacity to enter into a contract is referred to in legal terms as a _____________. a. party with consideration b. competent party c. legitimate party d. proxy

competent party One of the elements of a valid contract is contractual capacity. A person who has contractual capacity is a person who has met the state criteria to be bound by a contract. In most states, this means that the person has reached the age of majority (18), and does not have any mentally impairments that would impede his/her ability to comprehend the nature and consequences of the contract. Mental impairments can include mental handicap, intoxication, medical impairments, drug-related impairments and the like.

Interest paid on the accrued interest as well as the principal is called ____. compensating interest compound interest simple interest exponential interest

compound interest While simple interest is paid only to the principal owed, when accrued interest is added in or included, the interest is compounding.

The ____ shows that the grantor is receiving something in exchange for the property. transfer clause reception clause consideration clause proper exchange clause

consideration clause The thing of value in exchange for the property does not have to be the exact sum of money that is paid, nor does it even have to be a sum of money (it can often be "for love and affection" for gifts).

When a contract is a "take -it-or-leave -it" proposition that is oppressive and unfair, a court will determine that the contract is unconscionable, and it will not be enforced. Such a contract is a _____________. a. frustrated purpose contract b. contract of adhesion c. contract of cohesion d. contract of coercion

contract of adhesion A contract of adhesion is a contract that is biased and prejudicial where one party has superior bargaining ability and will not allow any modification. A contract of adhesion, such as a lease, that a court determines to be unconscionable, will not be enforced. This is not to say that all "take -it-or-leave -it" propositions will not be enforced. For a court to deny enforceability, a "take -it-or-leave -it" proposition must be oppressive and unfair, and be presented by a person with superior bargaining power.

The three classic approaches to value in real estate appraisal are _____________. a. the market approach, the cost approach and the interest approach b. the market approach, the income approach and the interest approach c. the cost approach, the income approach and the market approach d. the income approach, the cost approach and the interest approach

cost approach income approach market approach The cost approach is a method of estimating value whereby the appraiser uses an index to figure the replacement cost new of the property, then subtracts depreciation. With the income approach, the value of the property is based upon its potential to generate income. With the market approach (sometimes called the sales comparison approach), the value of the property is based upon the values of comparable properties and the principal that if the comparable properties that have sold recently in the market.

What is the objective of most appraisals? determining insurance value of a property determining loan value of a property determining investment value of a property determining market value of a property

determining market value of a property Explanation: Although an appraiser may be used to evaluate any of these, they typically are sought to determine the market value of a property.

Mr. Smith has died. By what rights does his wife lay claim to his property? dower tenancy in common curtesy eminent domain

dower Explanation: Dower rights grant a wife (or child) interest in her husband's estate. Curtsey laws recognize the rights of a husband in the event of his wife's death.

When a person or entity uses the land of another for a specific purpose, it is known as a(n): restrictive covenant easement littoral right lien

easement Usually for access, utility, and drainage

An express contract is ____. exclusively oral closed faster than a standard contract exclusively in writing either written or oral

either written or oral Explanation: An express contract is created in words, either written or oral. The other answer choices are not true.

The rule of agency law that stipulates that when a contract is required by law to be in writing, the authority of an agent to enter into such a contract on behalf of the principal must also be in writing is the _____________. a. statute of frauds b. equal dignities rule c. scope of authority d. respondent superior

equal dignities rule The equal dignities rule is the rule of agency law that stipulates that when a contract is required by law to be in writing, the authority of the agent to represent a party to the contract must also be in writing. All states have a statute of frauds that requires real estate contracts to be in writing to be enforceable, so the equal dignities rule applies to real estate agency contracts in all states. The terms "scope of authority" and "respondent superior" are associated with the rule of agency law that holds that a principal might be liable for the wrongful acts committed by his agent while transacting the principal's business.

Deed restrictions and easements on a property are considered ____ when written into the deed. a consideration a turnaround investment exceptions and reservations a bad investment

exceptions and reservations

An appraisal will not help you with ____. fair market interest eminent domain estate valuation mortgage approval

fair market interest Explanation: An appraisal is usually performed on a piece of property to help with buying, selling, eminent domain, estate valuation, exchanges of ownership, mortgage approval, property and other taxes, and various court proceedings.

Defeasible Fee Estate is: a. gives a person or entity control over a property only so long as certain conditions are met or avoided. b. is ownership that gives a person or entity complete control c. gives a person ownership or control of a property only for the duration of his/her natural life.

gives a person or entity control over a property only so long as certain conditions are met or avoided.

A life estate is: a. gives a person or entity control over a property only so long as certain conditions are met or avoided. b. is ownership that gives a person or entity complete control c. gives a person ownership or control of a property only for the duration of his/her natural life.

gives a person ownership or control of a property only for the duration of his/her natural life.

The ____, also known as the words of conveyance, includes the words that describe exactly what rights the grantee is receiving. granting clause transfer clause guarantor's rights grantee's rights

granting clause The granting clause specifies what you really own when you own a piece of real estate.

The ____, which contains the words "to have and to hold," further defines any rights being granted to the grantee. marriage clause habendum clause partnership clause joint clause

habendum clause The words in the habendum clause must agree with the words in the granting clause, though they may further define specific rights.

As is the case with most homes, what is the term for pledging something as security for a loan without the necessity of giving it up? freehold estate hypothecation security agreement leaseback agreement

hypothecation Explanation: Hypothecation allows a property owner to use the property as security for the loan while still being able to occupy it.

For a listing agreement to be valid, it must be ____. in writing and contain a cap on broker commission recorded, if an oral agreement in writing, with an expiration date of no more than 90 days in writing, have an expiration date, and be signed

in writing, have an expiration date, and be signed Listing agreements must be for a certain amount of time, be in writing, and be signed.

Market value is different from market price in that market price ___. is not an actual value, but just an idea is a fact that has actually occurred is always 10% below market value is taxable and market value is not

is a fact that has actually occurred Explanation: Market value is just an estimate of what a property should sell for in the current market. Market price is what it did sell for. The other answer choices are not true.

A fee simple estate is: a. give a person or entity control over a property only so long as certain conditions are met or avoided. b. is ownership that gives a person or entity complete control c. gives a person ownership or control of a property only for the duration of his/her natural life.

is ownership that gives a person or entity complete control

When an appraiser uses the income approach to value, the appraiser must calculate the annual net income of a property. The formula for net operating income is gross operating income _____________. a. plus vacancies b. less annual operating expenses c. less annual debt service d. plus other income, such as vending machine income

less annual operating expenses An appraiser must start with the gross potential income, and subtract the vacancy rate to establish the gross operating income. Next, the appraiser subtracts the annual operating expenses to establish the net operating income.

Dual agency is sometimes referred to as a ____________

limited agency

Which of the following is pre-determined compensation that may be due to the seller if the buyer defaults on a real estate purchase contract? a. compensatory damages b. judicial damages c. liquidated damages d. repairable damages

liquidated damages Liquidated damages are monetary damages for breach of contract, where the parties agreed at the time of contracting on a reasonable figure for compensation to be paid in the event of a breach. The dollar amount of the liquidated damages must be reasonable in light of the anticipated or actual harm caused by the breach. If the parties agree on a figure, but that figure is found to be unreasonable, then in the interest of public policy, the clause will not be enforced.

Which of the following is NOT considered realty? a growing tree lumber land bricks mortared together in a wall

lumber property and everything ATTACHED to it.

Which of the following is a factor which does NOT contribute to the value of real estate? a. utility b. demand c. supply d. money invested in the improvements

money invested in the improvements The cost of the real estate to the owner is irrelevant when determining the market value of the real estate. The features and utility of the property, as well as the supply of and demand for comparable properties in the given market determine the value. Owners may be under a misguided notion that the more money they invest in refurbishing a property, the more value they add to the property. This is not necessarily true. Generally, if the refurbishments increase utility, such as upgrading a kitchen or adding a bathroom, they will increase value. If the refurbishments do not increase utility, they will not increase value, but may increase desirability.

All of the following are essential elements of an agency agreement EXCEPT _____________. a. payment of consideration b. fiduciary relationship of the agent to the principal c. agreement by the principal d. agreement by the agent e. None of the above - all are required for an agency agreement

payment of consideration Payment of consideration is not necessary for an agency to exist. Agency is simply a promise to protect the best interests of the principal. A broker-client agency promise differs from a contractual promise because there is no consideration given in exchange for the promise of agency. There is instead a conditional promise of payment to the broker upon the occurrence of the sale of the real estate.

Subprime loans are usually an option for ____. people with subpar credit and come with a higher interest rate people with great credit who get a lower interest rate people with great credit who want to remove any interest payment entirely people with subpar credit and come with a lower interest rate

people with subpar credit and come with a higher interest rate

Which of these is not a type of leasehold estate? estate for years estate at sufferance estate in perpetuity estate at will

perpetuity There is no such estate as "estate in perpetuity." All other answer choices are types of leasehold estates.

Another name for a governmental survey

rectangular survey

Which lien is required by law to be paid first? home equity loan delinquent property taxes construction lien personal loan

property taxes

When a client wants to resolve his/her dissatisfaction with the buying/selling process, oftentimes, a simple apology from the agent will be all that is needed. If the brokerage did not cause the client's dissatisfaction, the agent's response should convey _____________. a. regret and not accept blame b. an attempt to dispel blame c. acceptance of blame anyway d. blame on something else

regret and not accept blame

A reconveyance deed ____. removes a lien and is evidence a trust deed has been paid in full when it is signed by the trustee requires court approval to remove a lien can remove a lien without needing the signature of the trustee is only used for personal property and not real property transfer

removes a lien and is evidence a trust deed has been paid in full when it is signed by the trustee Explanation: The trustee is a third party who has the power of sale without court approval. When the lien is paid in full, a title previously in the form of a trust deed becomes reconveyed through new deed.

Which of the following would not be considered a finance charge? seller's points interest appraisal fees finder's fees

seller's points Explanation: A finance charge is any charge made by the lender of credit that the borrower is directly or indirectly required to pay. The borrower is not responsible to pay the seller's points, but is responsible for items such as finder's fees, appraisal fees, and interest.

The sales comparison approach to valuation is directly related to ____. the principle of anticipation the quality and amount of sales data available market investment return rates all pending, canceled and short-sale listings

the quality and amount of sales data available

Investment value is ____. the potential value increase for any person the value to a specific investor with a specific plan for the property the potential value increase for any property the value to a typical investor with no plan for the property

the value to a specific investor with a specific plan for the property Investment value is the value to a specific investor with a specific plan for the property. Unlike "value in use," investment value does not presuppose a use already in place.

What is the purpose of underwriting? to compare the interest rates of different lenders to get a current appraisal on a home's value to determine the risks of making a loan to determine how much a property is worth

to determine the risks of making a loan Explanation: Mortgage lenders use a process called underwriting to assess the risks of making a loan. To assess a potential borrower's risk, they look at factors such as salary, credit history, and terms of employment.

What is the main purpose of Regulation Z? to limit the amount consumers can be charged to set a minimum interest rate to lock the borrower into a mortgage once the paperwork is signed to let borrowers know the true cost of credit

to let borrowers know the true cost of credit

____ is when an individual can be paid for brokering a real estate transaction, yet represent neither the buyer nor the seller. individual brokerage transactional brokerage situational brokerage divisional brokerage

transactional brokerage Transactional brokerage is only legal in some states, and care must be taken to see what the duties and responsibilities are for the agents brokering a deal if they are not representing either side of the deal.

Broker Hilary arrives to present a purchase offer to Becky. When Hilary arrives, Becky is very upset and does not want to sell her home. Becky's husband is present, and he urges Becky to accept the offer, even though it is much lower than the presumed market value of the home. If Becky accepts the offer at her husband's urging, she might later claim that the contract is invalid because she was _____________. a. sad to sell her property, thus her agreement is tainted with sorrow b. under duress when she signed the contract, thus her agreement was not voluntary c. not competent at the time because of her sadness d. not prepared to give proper consideration, because she was mad at her husband

under duress when she signed the contract, thus her agreement was not voluntary If a party to a contract is under duress, the contract can be considered voidable. Sadness is not a reason to void a contract; nor is it a reason to declare a person incompetent at the time of signing. Of the choices presented, duress is the best option. However, it should be noted that Although Becky could possibly claim duress here, the "urging" from Becky's husband is not really considered duress unless there were threats involved.

A reconveyance deed is

used when a borrower (homeowner) is released from a mortgage; records will show that the mortgage has been paid off.

A mortgage is a ____. type of loan written contract that allows a buyer to own the home outright immediately written contract pledging real property owned to secure a debt a promise to repay a debt

written contract pledging real property owned to secure a debt