Real Estate Exam Flash Cards

The section marked A is which of the following?

The answer is Section 36. Starting with the upper left corner as number 1, sections of a township are numbered right to left, left to right, right to left, and so on until reaching number 36.

A prospective homebuyer who is African-American asks about the availability of a home in a predominantly white residential neighborhood for which the prospective buyer has been financially qualified. What should the broker say to this prospect? A) "I'll be pleased to show you houses in that area." B) "You wouldn't want to live in that area because the neighbors aren't very friendly." C) "The residents there don't want the community to become too diverse." D) "I'd be happy to show you homes in other areas where newcomers are welcome."

The answer is "I'll be pleased to show you houses in that area." The broker must not channel homeseekers toward or away from particular neighborhoods based on race, which would be the illegal practice of steering.

Which of the following is NOT permitted under HUD's advertising guidelines? A) "Family room" B) "Married couples only" C) "Wheelwhair ramp" D) "Good neighborhood"

The answer is "married couples only". That statement discriminates on the bases of familial status.

A 10-acre parcel was sold for $3.50 per square foot. What was the total selling price for the parcel?

The answer is $1,524,600. An acre consists of 43,560 square feet. 43,560 × 10 = 435,600 total square feet. 435,600 × 3.50 = $1,524,600

A parcel of land is two acres. It sells for $1.18 per square foot. What is the total selling price for the parcel?

The answer is $102,801.60. An acre consists of 43,560 square feet. 43,560 × 2 = 87,120 total square feet. 87,120 × $1.18 = $102,801.60.

If premises of 2,500 square feet are to be leased at a cost of $3.50 per square foot per month, what will be the annual rental cost of the space? A) $10,500 B) $105,000 C) $95,750 D) $30,000

The answer is $105,000. 2,500 × $3.50 = $8,750 per month and $8,750 × 12 = $105,000 per year

A buyer is willing to pay $1,200 per acre for the SE ¼ of the SE ¼ of the SE ¼ of Section 11. How much will the buyer pay for the land?

The answer is $12,000. The buyer will pay $12,000: ¼ × 640 = 160 160 × ¼ = 40 40 × ¼ = 10 acres 10 acres × $1,200 = $12,000

The homestead exemption in a town is $15,000. Four years ago, a resident purchased a home for $58,000 and then experienced hard times. At a court-ordered sale, the property is purchased for $60,000. If the resident has an outstanding mortgage balance of $35,000 and credit card debts amounting to $24,360, how much is protected by the homestead exemption?

The answer is $15,000. The homestead exemption is $15,000. So, when the property is sold for $60,000, the mortgage of $35,000 is paid and $15,000 is reserved, leaving $10,000 for the credit card debt.

If a farm described as "the NW¼ of the SE¼ of Section 10, Township 2 North, Range 3 West of the 6th. P.M." sold for $4,500 an acre, what was the total sales price?

The answer is $180,000. Disregard all elements of the description except those showing area. It is a quarter of a quarter of a section, or 1/16 of 640, or 40 acres. When sold, each acre brought $4,500, so the gross selling price is calculated as follows: 40 acres × $4,500 = $180,000.

How much insurance must a home inspector in Alabama carry for injury or damage to property? A) $20,000 B) Double the value of the average home inspected in the prior 12 calendar months C) $250,000 D) None

The answer is $20,000. The home inspector must carry at least $20,000 for injury or damage to property and at least $50,000 for injury or damage, including death, to any one person, and up to $100,000 for injury or damage, including death, to more than one person.

A two-unit apartment building is being appraised. In this neighborhood, the accepted gross rent multiplier is 144. The annual income generated by the building is $16,800 (both units rented). The monthly expenses are $300. Based on the income approach, what is the estimated market value of the apartment building?

The answer is $201,600. The monthly rental income is $1,400 ($16,800 ÷ 12 = $1,400). Rental income × GRM = estimated market value: $1,400 × 144 = $201,600. The monthly expenses are not included in the calculation.

The sale price of a property is $230,000. Transfer tax to be paid by the seller at closing, based on $0.50 per $500, will be

The answer is $230.00. Transfer tax to be paid by the seller at closing, based on $0.50 per $500 or fraction thereof, will be: $230,000 ÷ $500 = 460; 460 × $0.50 = $230 transfer tax owed by seller.

What are the limits of compensation, if any, from Alabama's real estate recovery fund? A) $100,000 for the same transaction B) $50,000 for the same transaction C) $25,000 for the same transaction D) None of these

The answer is $25,000 for the same transaction. Payments for claims arising out of the same transaction may not exceed a total of $25,000, regardless of the number of claimants.

Appraisers generally are limited in the approximate value of properties they are allowed to appraise. Those value "break point" limitations are A) $250,000 and $5 million. B) $100,000 and $500,000. C) $250,000 and $1 million. D) $1 million and $5 million.

The answer is $250,000 and $1 million. Some appraisers can value certain types of properties up to $250,000 in value. Others can value certain types of properties up to $1 million in value. Certified general real property appraisers have no limits on types of properties or values.

Two real estate professionals were found guilty of conspiring with each other to allocate real estate brokerage markets. A seller suffered an estimated $90,000 loss because of their activities. If the seller brings a civil suit against the two real estate professionals, what can the seller expect to recover?

The answer is $270,000 plus attorney's fees and costs. Under federal law, victims of such activities in restraint of trade (antitrust activities) are entitled to treble (triple) damages plus attorney's fees and costs if the alleged perpetrators are found guilty.

A specific parcel of real estate has a market value of $160,000 and is assessed for tax purposes at 75% of market value. The tax rate for the county in which the property is located is 40 mills. The tax bill will be

The answer is $4,800. A mill is 1/1000 of a dollar: $0.001. The mill rate is the tax on every dollar of the assessed value of property. A rate of 40 mills ($0.040) is applied to 75% of the $160,000 market value of the property: $160,000 × 75% = $120,000, and $120,000 × $0.040 = $4,800.

Three friends agree to purchase and operate a property as a permanent investment. Two friends each contribute $50,000. The third contributes $30,000 and agrees to manage the day-to-day operations of the business, which the friends call "Property Group Partners." Only the third friend has any right to participate in the operation of the venture. If a structure on the property collapses, resulting in injury and property damage worth $275,000, what will be the liability of the friend who contributed $50,000?

The answer is $50,000. A limited partner is limited in liability to the amount of the original investment.

What are the limits of compensation, if any, from the Alabama Real Estate Recovery Fund as a result of judgments or settlements against any one person? A) $75,000 B) $50,000 C) $25,000 D) $100,000

The answer is $50,000. Each licensee has a $50,000 lifetime cap for the total amount of recovery fund money that can be paid out to consumers for judgments against that licensee.

In one state, the transfer tax is $0.80 per $500 or fraction thereof. There is no tax charged on the first $500 of the price. What tax must the seller pay if the property sells for $329,650?

The answer is $527.20. The seller must pay $527.20: $329,650 - the $500 = $329,150 $329,150 ÷ $500 = 658.3, rounded up to 659 659 × $0.80 = $527.20

If a lender agrees to make a loan based on an 80% LTV, what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900?

The answer is $91,600. The loan-to-value ratio will be based on the relationship of the loan to either the appraisal or the purchase price, whichever is less. In this case, the appraisal is less. Therefore, the loan will be 80 percent of $114,500, which equals $91,600.

The market value of an undeveloped parcel is $40,000. Its assessed value is 40% of market value, and properties in its county are subject to an equalization factor of 1.50. If the tax rate is $4 per $100, what is the amount of the tax owed on the property?

The answer is $960. The tax owned on the property is $960: $40,000 × 40% × 1.5 ÷ 100 × 4 = $960.

A bargain and sale deed contains how many express warranties?

The answer is 0. A bargain and sale deed contains no express warranties against encumbrances; however, it does imply that the grantor holds title and possession of the property.

Under the Civil Rights Act of 1968, what is the time limit to file a housing discrimination complaint with HUD? A) The same as the statute of limitations for torts committed in the state in which the alleged discriminatory act occurred B) 2 years C) 1 year D) 100 days

The answer is 1 year. Persons who wish to file a complaint with HUD under Title VIII of the Civil Rights Act of 1968 must do so within one year of the alleged violation.

What is the tax assessment rate for a family's vacation cabin? A) 10% B) 25% C) 20% D) 30%

The answer is 10%. Current assessment rates in Alabama are 10% of the tax appraisal value for agricultural, forest, residential, and historic properties. To qualify as residential, the property must be used by the owner as a single-family dwelling. It is not limited to the principal residence.

In any township, what is the number of the section designated as the school section?

The answer is 16. Section 16 is one of the centrally located sections in the standard township and is designated as the school section.

Residential property managers of buildings constructed before what year must provide lead-based paint disclosure forms to all new tenants? A) 1981 B) 1977 C) 1976 D) 1978

The answer is 1978. The requirement applies to residential buildings constructed before 1978.

The EPA requires that water suppliers report any health risk situation within A) 24 hours. B) 72 hours. C) 48 hours. D) 96 hours.

The answer is 24 hours. The EPA requires that water suppliers report any health risk situation within 24 hours.

What is the grace period after a license revocation or suspension? A) 42 days B) 30 days C) 10 days D) 60 days

The answer is 30 days. When a license is suspended or revoked, the licensee has 30 days to file a motion for rehearing, and 30 days after adverse ruling on the motion to appeal the decision. Despite these post-order remedies, the suspension or revocation is in effect until overturned after rehearing or appeal. There is no grace period.

Within how many days of the final hearing must the Real Estate Commission issue a written report? A) 7 B) 30 C) 3 D) 14

The answer is 30. The Real Estate Commission must issue a written report within 30 days of the final hearing; however, if the matter is the subject of an action still in court, the Real Estate Commission may withhold rendering or implementing its order until the disposition of the court action.

A credit score can range from

The answer is 300 to 850. Lenders will require a minimum credit score for a loan, often depending on whether or not the borrower is making use of a government-sponsored program, or the lender will sell the loan after initiating it.

The N½ of the SW¼ of a section contains how many acres?

The answer is 80. A section contains 640 acres. A ½ of ¼ of 640 equals 80 acres. Using decimals, the equation is 0.5 × 0.25 × 640 = 80.

A property contains 10 acres. How many lots of not less than 50 feet by 100 feet can be subdivided from the property if 26,000 square feet were dedicated for roads?

The answer is 81. The area of ten acres in square feet is figured as follows: 10 acres × 43,560 sq. ft. = 435,600 sq. ft.. Reserving 26,000 square feet for roads leaves 409,600 square feet. The area of each lot is to be not less than 5,000 square feet: 50' ×100' = 5,000 sq. ft. Divide the available square footage by the square footage needed for each lot: 409,600 sq. ft. ÷ 5,000 square feet = 81.92. Because each lot must be "not less than 50 feet × 100 feet," the property can be subdivided into 81 such lots

Who has the authority to investigate claims of home repair fraud and prosecute individuals? A) FBI B) DOJ C) Alabama attorney general D) SEC

The answer is Alabama attorney general. The Alabama Attorney General Consumer Affairs Division will investigate claims of home repair fraud and, if evidence exists, will prosecute individuals. Further, the Home Builders Licensure Board (HBLB) has a complaint procedure for consumers aggrieved by licensed homebuilders.

The Supreme Court decision that ended the separate but equal doctrine of legalized racial segregation was A) the Civil Rights Act of 1968. B) Plessy v. Ferguson. C) Brown v. Board of Education. D) the Civil Rights Act of 1866.

The answer is Brown v. Board of Education. The separate but equal doctrine of racial segregation was ended by the U.S. Supreme Court's 1954 decision in Brown v. Board of Education.

The database of consumer claims history available to insurance companies is the

The answer is Comprehensive Loss Underwriting Exchange. This database, referred to as CLUE, gives insurance companies information that assists in the underwriting and rating process.

Appraisals are required for

The answer is FHA and all federally related loans. Appraisals are required for all federal loan programs.

Which of these makes direct loans to qualified borrowers?

The answer is FSA. The Farm Service Agency will guarantee loans made and serviced by private lenders and guaranteed for a specific percentage; the FSA will also make loans directly to the borrower.

Many trade organizations serve the real estate business. The largest is the

The answer is National Association of REALTORS® (NAR). The National Association of REALTORS® (NAR) is the largest real estate trade organization serving the real estate industry

All of these are essential to a valid real estate sales contract EXCEPT A) consideration. B) offer and acceptance. C) an earnest money deposit, held in an escrow account. D) legally competent parties.

The answer is an earnest money deposit, held in an escrow account. Earnest money is an optional term in a contract, not a requirement. The essential elements of a contract are offer and acceptance, consideration, legally competent parties, consent, and legal capacity.

The type of easement that is a right-of-way for a utility company's power lines is

The answer is an easement in gross. Easements in gross are individual rights to use someone's land, as in the case of the utility company. A commercial (but not a personal) easement in gross can be assigned, conveyed, and inherited.

The new owner of a property installs a fence on the property. By mistake, the fence extends one foot over the lot line onto a neighbor's property. The fence is an example of

The answer is an encroachment. To build over a property line is to encroach on the property of another.

A tenant's right to possess real estate for a definite period with a specific starting and ending date is

The answer is an estate for years. When this leasehold interest expires, the lessee is required to vacate the premises and surrender possession to the lessor. No notice is necessary as the lease agreement states a specific expiration date; state law may require notice of intent to terminate a residential lease.

The principal difference between an estate for years and an estate from year to year is that

The answer is an estate from year to year has no expiration date. An estate from period to period, or periodic tenancy, does not have a specific expiration date. An estate (tenancy) for years has specific beginning and ending dates.

An agreement that is specific in its terms and conditions is considered

The answer is an express agreement. In an express agency agreement, the parties formally express their intention to establish an agency and state its terms and conditions.

A mortgage broker is

The answer is an intermediary. Mortgage brokers are intermediaries who bring borrowers and lenders together.

When properly recorded in the county where the real estate of the defendant is located, a judgment becomes

The answer is an involuntary lien. A judgment is a general, involuntary, equitable lien on both real and personal property owned by the debtor.

There are five different brokerage signs in the front yard. Evidently, the seller has signed

The answer is an open listing. In an open listing, the seller retains the right to sell the property and may employ more than one broker to perform agency duties.

Value is created by the expectation that certain events will occur according to the principle of

The answer is anticipation. The income approach to value is based on the principle of anticipation.

Two real estate firms agree they will not bid against each other when attending foreclosure auctions on behalf of their respective clients. What laws have been violated? A) Price-fixing laws B) None of these C) FDIC foreclosure laws D) Antitrust laws

The answer is antitrust laws. Bid-rigging is a collusive and anticompetitive behavior that violates both state and federal antitrust laws.

A newly licensed broker is preparing to open an office and must open a trust account. Under Alabama rules, how much of her personal money may she use to open the account? A) Up to $500 in an interest-bearing account B) Any amount required by the bank C) None, because personal funds may not be used in a trust account D) Up to $100 in a non-interest-bearing account

The answer is any amount required by the bank. AREC recognizes that the bank may require money to open and maintain the trust account.

No real estate license is required for managing rental properties consisting of A) apartment complexes with more than four units each. B) fourplexes. C) single-family homes. D) duplexes.

The answer is apartment complexes with more than four units each. Persons must hold an active real estate license to manage residential or commercial rental properties, except that managers of apartments (defined as more than four units per property) are not required to have an active license. This exception was written into the law because of lobbying efforts by apartment owners and managers.

Who usually provides funds for FHA-insured loans?

The answer is approved lenders. An FHA-insured loan is insured by the agency, and funds are made available by FHA-approved lenders.

Real estate brokers and sales associates may NOT act as attorneys unless they

The answer is are also licensed attorneys representing clients in that capacity. Real estate brokers and sales associates may not act as attorneys unless they are also licensed attorneys representing clients in that capacity.

Leases that run for 100 years or more A) are unenforceable. B) cannot be prohibited by law. C) are valid and enforceable in all states. D) are prohibited in some states.

The answer is are prohibited in some states. Leases that run for 100 years or more are prohibited in some states.

The Real Estate Settlement Procedures Act (RESPA) permits an affiliated business arrangement (ABA)

The answer is as long as a consumer is clearly informed of the relationship among the service providers. RESPA permits an ABA as long as fees are reasonably related to the value of the services provided and are not simply for referring business from one company to another, and the consumer is fully informed of the relationship among the service providers.

Loan servicing includes

The answer is bookkeeping. Loan servicing involves collecting payments, accounting, bookkeeping, preparing insurance, and maintaining tax records.

A buyer purchased a new residence from a builder for $350,000. The buyer made a down payment of $30,000 and obtained a $320,000 mortgage loan. The builder of the house paid the lender 3% of the loan balance for the first year and 2% for the second year. This represented a total savings for the buyer of $16,000. What type of mortgage arrangement is this?

The answer is buydown. The builder brought down the purchaser's interest rate for two years by paying the lender advance interest. This is a buydown arrangement.

Rights to the property above the earth's surface are

The answer is called air rights. Rights to the property above the earth's surface are called air rights.

A buyer purchases a home in an area where closings are traditionally conducted in escrow. Which item would a buyer deposit with the escrow agent before the closing date? A) Estoppel certificate B) Deed to the property C) Cash needed to complete the purchase D) Title evidence

The answer is cash needed to complete the purchase. The buyer is normally responsible for depositing the cash needed to complete the transaction.

Standard coverage in an owner's title insurance policy would cover all of the following EXCEPT A) changes in land use brought about by zoning ordinances. B) forged documents. C) incompetent grantors. D) defects found in public records.

The answer is changes in land use brought about by zoning ordinances. Standard coverage in an owner's title insurance policy would cover defects found in public records, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds. It would not include changes in land use brought about by zoning ordinances.

What causes mold problems in buildings? A) Chronic moisture problems B) Insects C) Air pollution D) Fiberglass building materials

The answer is chronic moisture problems. Moisture, oxygen, and a cellulosic food source feed mold growth. Mold can gradually destroy virtually anything on which it is growing.

In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called

The answer is closing escrow. In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called closing escrow.

All of these are violations of federal antitrust law EXCEPT A) commission splitting. B) tie-in agreements. C) group boycotting. D) allocation of customers.

The answer is commission splitting. Brokers may legally share and split commissions. Price fixing, allocation of customers, and group boycotting are illegal under federal antitrust law.

The rules of a society established by tradition and court decisions are found in

The answer is common law. Common law is defined as the rules of a society established by tradition and court decisions.

Which principle of value indicates that a developer's very profitable real estate project will attract others to engage in similar activity in the same area and thus drive down profits? A) Value B) Anticipation C) Progression D) Competition

The answer is competition. A successful project invites imitators (competitors) to do the same thing nearby. This drives profits down for a developer and costs down for a consumer-buyer.

The resolution of a fair housing complaint by obtaining assurance that the respondent will remedy the violation is called A) civil action. B) conciliation. C) administrative proceedings. D) a judgment.

The answer is conciliation. Conciliation attempts to resolve the complaint without further legal action, such as an administrative proceeding. However, a conciliation agreement can be enforced through civil action.

A real estate professional filed a complaint with the Real Estate Commission alleging that a seller failed to pay a commission she owed him. The AREC will A) refer the complaint to the magistrate's court. B) hold a hearing to determine the procuring cause of the sale. C) order that payment be made to the rightful party within 10 days of a finding. D) decline involvement in a dispute over commissions or fees between licensees.

The answer is decline involvement in a dispute over commissions or fees between licensees. The Commission's primary mission is to protect the public. Commission rules do not authorize involvement in money disputes between brokers. The local association of REALTORS® can arbitrate monetary disputes between cooperating brokers who are members of the organization.

What is it called when a developer pays the cost for paving a new street and then conveys ownership in it to a local municipality? A) Gifting B) Dedication C) Granting D) Commitment

The answer is dedication. Dedication describes when a developer pays the cost for paving a new street and then conveys ownership in it to a local municipality.

Which of the following is NOT a governmental power? A) Taxation B) Dedication C) Police power D) Eminent domain

The answer is dedication. Governmental powers are police power, escheat, eminent domain, and taxation.

Which of the following is NOT proof of ownership? A) Certificate of title B) Deed C) Title insurance D) Torrens title

The answer is deed. A warranty deed contains no proof of the condition of the grantor's title at the time of the conveyance.

The characteristics of value include

The answer is demand, utility, scarcity, and transferability. Remember the acronym DUST.

In some states, a husband could not sell his property unless his wife also signed the deed. The wife's interest was called

The answer is dower. Historically, a wife's interest in her deceased husband's property was dower, a husband's interest was curtesy. Protection of some part of the family home is called homestead.

A consumer files a lawsuit against an associate broker and sends a copy to the broker but not the Commission. What are the consequences? A) The associate broker's license will be downgraded to salesperson status pending the outcome of the lawsuit. B) The associate broker's license will be suspended pending the outcome of the civil suit. C) If successful in the lawsuit and the other conditions are met, the consumer can recover from the recovery fund. D) Even if successful in the lawsuit and the other conditions are met, the consumer cannot recover from the recovery fund.

The answer is even if successful in the lawsuit and the other conditions are met, the consumer cannot recover from the recovery fund. This is because it must provide a copy of the lawsuit to the Commission when it files the lawsuit against a licensee.

An example of specific performance for breaching a real property purchase contract would be

The answer is a court action to force compliance with the contract. Specific performance means that if one breaks the promise, the other party has the legal right to sue in court to make the defaulting party perform. Specific performance is a more likely remedy if the seller defaults, because every piece of real property is considered unique. If the buyer defaults, the seller may need to sell the property to a different buyer and sue the first buyer for any loss suffered if the purchase price is reduced.

At closing, the new loan proceeds would be

The answer is a credit to the buyer. Loan proceeds are always a credit to the buyer.

At closing, the earnest money left on deposit with a real estate broker is

The answer is a credit to the buyer. The purchaser's earnest (deposit) money is usually shown in a contract of sale as credited toward closing expenses and, if there is enough, toward any down payment.

A point, line, or surface from which elevations are measured or indicated is

The answer is a datum. A point, line, or surface from which elevations are measured or indicated is a datum.

All of the following may be used to prove ownership EXCEPT A) a deed. B) title insurance. C) a Torrens certificate. D) a certificate of title.

The answer is a deed. Proof of ownership is evidence that title is marketable. A deed by itself is not considered sufficient evidence of ownership. Even though a warranty deed conveys the grantor's interest, it contains no proof of the condition of the grantor's title at the time of the conveyance. The grantee needs some assurance that ownership is actually being acquired and that the title is marketable. A certificate of title, title insurance, or a Torrens certificate is commonly used to prove ownership.

A borrower defaulted on a mortgage loan, leaving an unpaid balance of $95,000. After receiving only $85,000 from the sale of the property, the lender filed for

The answer is a deficiency judgement. A deficiency results when the foreclosed property does not bring enough money to fully repay the loan; the mortgagor may be entitled to a personal judgment against the borrower for the unpaid balance. Lis pendens gives notice that the property is the subject of legal action. A satisfaction indicates that the loan was fully repaid.

Most states require that a real estate listing agreement contain

The answer is a definite contract termination date. Failing to specify a definite termination date in a real estate listing can be grounds for suspension or revocation of a license in most states. Automatic extensions have been discouraged by courts. Broker protection clauses and MLS clauses are not required.

Real estate that is inherited from a person who died testate is called

The answer is a devise. The gift of real property by will is known as a devise, and the person who receives property by will is known as a devisee.

Which transaction is BEST described as involving a ground lease? A) A landowner agrees to let a tenant drill for oil on a property for 75 years. B) A landlord charges a commercial tenant separate amounts for the land and the leased building. C) The tenant pays a base amount for the property plus a percentage of business-generated income. D) The tenant agrees to pay a proportionate, increased rental based on annual appraisals of the rented property.

The answer is a landlord charges a commercial tenant separate amounts for the rented land and for the leased building. When a tenant has separate leases and pays separate rents on the building and the ground under it, the second agreement is a ground lease. The consideration paid for it is ground rent.

Real estate is bought and sold on the basis of

The answer is a legal description. Real estate is described by accepted legal descriptions. The plat size and plat and parcel are examples of informal reference.

The holder of a life estate is called

The answer is a life tenant. A life tenant is not a renter like a tenant associated with a lease. A life tenant is entitled to the rights of ownership and can benefit from both possession and ordinary use, just as if the individual were a fee simple owner, but only while the life tenant is still living.

Under the Sherman Antitrust Act, the penalty for a person found guilty of fixing prices or allocating markets is

The answer is a maximum $1 million fine and 10 years in prison. For corporations, the penalty may be as high as $100 million.

A facilitator functions as

The answer is a nonagent. Someone who works with a buyer and a seller (or landlord and tenant), assisting one or both with the transaction without representing either party's interests acts as a nonagent and may be called a facilitator, intermediary, transactional broker, transaction coordinator, or contract broker.

A developer built a structure that has six stories. Several years later, an ordinance was passed in that area banning the construction of any building six stories or higher. This building MOST likely has A) a conditional use. B) a nonconforming use. C) a zoning violation. D) a variance.

The answer is a nonconforming use. A nonconforming use is one that is currently not permitted by zoning, but began before the restriction. The building is allowed because the use was already there. It is "grandfathered."

When an area was rezoned as residential, a store was grandfathered in and allowed to continue business. This is an example of A) a conditional-use permit. B) an amendment. C) a variance. D) a nonconforming use.

The answer is a nonconforming use. Because the store had been there legally before the zoning ordinance, it is permitted to continue operating, usually until its use changes or the building is destroyed.

A buyer is purchasing a fully furnished condominium unit. In this situation, the buyer would be MOST likely to use A) a buydown. B) a blanket loan. C) a package loan. D) a wraparound loan.

The answer is a package loan. A loan secured by a fully furnished condominium unit is secured by both real and personal property. A blanket loan is secured by several properties.

A borrower wants to obtain a loan that will allow regular payments of principal and interest for five years and then a final balloon payment to pay off the remaining principal balance. This type of loan is known as

The answer is a partially amortized loan. A partially amortized loan allows the borrower to make principal and interest payments, with a final balloon payment at the end. A term loan has interest-only payments, a fully amortized loan has no balloon payment, and with a reverse mortgage, the lender pays the borrower.

Shareholders in a cooperative receive shares of stock that entitle them to

The answer is a proprietary lease. The proprietary lease is part of the ownership of the cooperative stock and gives the owner the right to occupy a specific dwelling unit. Common elements are owned by condominium owners as tenants in common.

The document used to convey ownership to real property is

The answer is a quitclaim deed. Deeds transfer real property. Both a title policy and abstract with title opinion are used to verify and protect against defects of title.

If a contract does NOT contain a time or date for performance, the obligations required by the contract should be performed within

The answer is a reasonable time. Interpretation of what is a reasonable time depends on the situation; however, courts have sometimes declared contracts invalid if they did not contain a time or date for performance.

A grantee who wants to obtain merchantable title via a valid deed should make sure the deed has all of the following EXCEPT

The answer is a recording stamp after closing. Deeds do not need to be recorded to be valid.

An arrangement whereby the owner of property sells the property and then leases it back again for an agreed period and rental is called

The answer is a sale and leaseback. Such an arrangement can provide funds for business expansion while ensuring that the business can remain on the premises.

The term severalty comes from the fact that

The answer is a sole owner is severed or cut off from other owners. The term severalty comes from the fact that a sole owner is severed or cut off from other owners.

An existing mortgage loan can have its lien priority lowered through the use of

The answer is a subordination agreement. A subordination agreement can change the priority of an existing mortgage by the first lender agreeing to release its position as a first lien to that of a second lender.

A written agreement between lienholders to change the priority of a mortgage is

The answer is a subordination agreement. Under a subordination agreement, the holder of a superior or prior lien agrees to permit a later lienholder's interest to take precedence.

Time-shares sold in Alabama for a fee or commission must be sold by A) an AREC employee. B) a real estate licensee. C) a time-share licensee. D) a real estate broker.

The answer is a time-share licensee. In Alabama, anyone engaged in the sale or leasing of time-shares must have a time-share licensee. A real estate licensee is not licensed to sell time-shares; however, a person may hold both a real estate license and a time-share license.

A legal arrangement under which the title to real property is held to protect the interests of a beneficiary is

The answer is a trust. Trusts protect beneficiaries. Partnerships can protect limited partners; corporations can protect stockholder-owners.

A rural property owner acquired ownership of land that was deposited by a river running through her property by

The answer is accretion. Increases in land adjacent to a body of water resulting from the deposit of soil by the water's action is known as accretion, and the owner is entitled to that land.

The air above a property owner's land may be subdivided into

The answer is air lots. The air above a property owner's land may be subdivided into air lots.

An agreement for a brokerage to list real estate for sale must be signed by

The answer is all individuals who have a legal interest in the property. The current occupants of the property will not necessarily have an ownership interest in it.

What is a seller's agent required to disclose to prospective buyers about material defects in the property?

The answer is all information about material defects that the agent knows or should know. Agents are responsible for disclosing information they are told or that they discover on their own, plus information they should have known.

A real estate broker hired by an owner to sell a parcel of real estate must comply with

The answer is all lawful instructions of the owner. Lawful instructions from one's broker require obedience. An agency statute may modify aspects of the common law of agency. Caveat emptor is a warning to purchasers, not brokers.

The possession of property by an adverse possession claimant must be

The answer is all of these. The possession by the claimant must be open (obvious to anyone who looks), notorious (known by others), continuous (uninterrupted), hostile (without the true owner's consent), and adverse (to the true owner's possession).

The document that is a historical summary of all the documents of title is

The answer is an abstract of title. The abstract summarizes all the documents that create the chain of title; an attorney then reviews the abstract and renders a title opinion.

It is a good idea to include a clause in a listing agreement releasing the agent from liability if the agent performs a negligent act but specifically recognizing liability for intentional or reckless acts. A) False, because it is not enforceable B) False, because it might give the wrong impression to a property owner C) True D) True, but the release should also include reckless acts

The answer is false, because it is not enforceable. Parties cannot contractually agree to waive negligence that might happen in the future.

What is another name for an IRS tax lien?

The answer is federal tax lien. This type of lien results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes.

The commitment to issue a title policy includes all of the following EXCEPT A) estate or interest covered. B) legal description. C) name of the insured party. D) full sale price of the property.

The answer is full sale price of the property. The commitment to issue a title policy includes the name of the insured party, legal description of the real estate, estate or interest covered, conditions and stipulations under which the policy is issued, and a schedule of all exceptions, including encumbrances and defects found in the public records and any known unrecorded defects. It does not include the full sale price of the property.

Which lien affects all real and personal property of a debtor? A) Voluntary B) Specific C) General D) Involuntary

The answer is general. A general lien attaches to all of a debtor's property as opposed to a specific lien, which affects only a specific property.

An important purpose of the E-Sign Act is to

The answer is give contracts created using email the same legal standing as those on paper. The E-Sign Act diminishes legal barriers in electronic contracting, but it does not specify required security measures. Notarization is allowed. Parties are not required to use electronic contracting.

A mortgagor is the one who

The answer is gives a promissory note and mortgage to the lender in exchange for a loan. The mortgagor is the borrower and the mortgagee is the lender.

What is the compensation plan called if a sales associate's commission split increases depending on whether the sales associate achieves higher production goals?

The answer is graduated commission split. A graduated commission split is based on a sales associate's achieving specified production goals. A 100% commission plan provides for a sales associate to pay a monthly service charge to the broker so that the sales associate can keep 100% of the commissions earned.

Which party or parties must sign a deed to make it valid?

The answer is grantor. The grantor signs (executes) the deed.

When parties own property as tenants in common, each owner

The answer is has equal rights of possession with the other owners. Tenants in common have undivided rights of possession in the entire property but may have different shares of ownership and don't need to take title via the same instrument.

Someone who is the victim of discrimination under the Fair Housing Act may seek damages that can include noneconomic injuries, such as A) property loss. B) deferred compensation. C) lost wages. D) humiliation.

The answer is humiliation. The Fair Housing Act allows a victim of discrimination to seek both economic and noneconomic damages, which can include humiliation, embarrassment, inconvenience, and mental anguish.

The general types of foreclosure proceedings are

The answer is judicial, nonjudicial, and strict foreclosure. Judicial foreclosure allows the property to be sold by court order after the mortgagee has given sufficient public notice.

A buyer and a seller enter into a real estate sales contract. Under the contract's terms, the buyer will pay the seller $500 a month for 10 years. The seller will continue to hold legal title, while the buyer will live in the home and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do the buyer and seller have?

The answer is land sales contract. This arrangement has a variety of names: contract for a deed, land contract, installment contract, land sales contract, and more. Its most important characteristic is that no deed is given to the buyer (vendee) until all the payments in the contract have been made, although some states give the buyer an equitable interest in the property after a specified period of successful payments.

A sales associate wants to be classified by the IRS as a qualified real estate agent—the equivalent of holding independent contractor status for tax purposes. The sales associate must meet all of the following requirements EXCEPT A) hold a current real estate license. B) receive substantially all income from the brokerage based on production, not time worked. C) have a written agreement with the broker stating that the sales associate will not be treated as an employee for federal tax purposes. D) perform all work unsupervised by the managing broker.

The answer is perform all work unsupervised by the managing broker. The IRS's three requirements to be treated as a qualified real estate agent, and thus self-employed, are that the real estate professional (1) is a real estate licensee, (2) has a written agreement with the broker indicating the licensee will not be treated as an employee by broker contributions to Social Security or the withholding of income taxes, and (3) earns a substantial portion of income from the firm in commissions, not wages. An independent contractor is not free from supervision by the managing broker.

A person who dies testate has

The answer is prepared a will indicating how the property the person owns at the time of death will be disposed of. A person who dies testate has prepared a will indicating the disposition of the deceased's property.

Which of the following items would usually NOT be shown on the plat map for a new subdivision? A) Land to be used for streets B) Numbered lots and blocks C) Easements for sewer and water mains D) Prices of residential and commercial lots

The answer is prices of residential and commercial lots. Prices are not a matter of public record and are subject to constant change. They do not belong on the recorded plat of subdivision.

A broker wants to place a For Sale sign on an abandoned lot in order to receive calls from prospects. The broker must first A) do nothing because it is acceptable to put up For Sale signs. B) receive permission from the Alabama Real Estate Commission. C) receive permission from the owner. D) file an application at the county courthouse.

The answer is receive permission from the owner. A broker may place a For Sale sign on a property only with the permission of the owner. While not required by law, a prudent broker will obtain written permission.

Seller disclosure statements are _____ for transmittal to potential buyers. A) highly discouraged B) required C) recommended D) not recommended

The answer is recommended. As a caveat emptor (let the buyer beware) state, Alabama does not require a written property disclosure report by the seller. Nevertheless, as a good business practice, the broker should encourage a property disclosure report from sellers as a condition for listing a property and make it available to interested buyers.

All of the following items are usually prorated between the buyer and the seller at closing EXCEPT A) real estate taxes. B) utility bills. C) rents. D) recording charges.

The answer is recording charges. The seller usually pays for recording charges necessary to clear all defects and furnish the purchaser with a marketable title. The purchaser pays for recording charges that arise from the actual transfer of title.

The primary purpose of the Uniform Electronic Transactions Act (UETA) is to

The answer is remove barriers in electronic commerce that would otherwise prevent enforceability of contracts. The primary purpose of the Uniform Electronic Transactions Act (UETA) is to remove barriers in electronic commerce that would otherwise prevent enforceability of contracts. UETA sets forth basic rules for entering an enforceable contract using electronic means.

A salesperson is low on funds for promoting her business and has found that if she leaves yard signs up for an extra couple of weeks after a listing expires, she can generate a few extra calls and occasionally interest the caller in other properties. The salesperson should A) contact a lender to establish a credit line for her real estate business. B) remove her sign immediately because the cost of lost signs would outweigh benefits. C) notify the owner to remove and return the sign when the owner wants it gone. D) remove the sign upon expiration of a listing unless she has the property owner's permission to leave the sign up.

The answer is remove the sign upon expiration of a listing unless she has the property owner's permission to leave the sign up. A listing agreement typically provides permission to place a sign on a property for sale. When a listing expires, the permission authorized in the written document terminates.

Which of the following is NOT one of the ways a lien is created? A) Statutory B) Equitable C) Rescission D) Voluntary

The answer is rescission. There are four ways to create a lien: voluntary, involuntary, statutory, and equitable.

A property manager is offered a choice of three insurance policies with different deductibles. If the property manager selects the policy with the highest deductible, which risk management technique is being used? A) Controlling risk B) Retaining risk C) Avoiding risk D) Transferring risk

The answer is retaining risk. The deductible is the part of risk that the insured retains.

Alabama counties that do not use the older tax assessor and tax collector system for local taxing authorities have a _____ who is in charge of those same functions. A) revenue commissioner B) probate judge C) county manager D) tax appraiser

The answer is revenue commissioner. Of the most populous counties in Alabama, the following use the revenue commissioner system: Baldwin, Mobile, and Montgomery. The following counties have a tax collector and a separate tax assessor: Jefferson, Madison, and Tuscaloosa. Shelby County has a property tax commissioner. Remember to learn the titles of the appropriate officials in the county where you will be operating.

Antitrust laws do NOT prohibit real estate

The answer is sales associates within the same office agreeing on a standard commission rate. Commission-setting agreements and allocation of markets on any basis between and among different companies violate antitrust laws. However, commission-setting within a company is not a violation.

The characteristics of value include which of the following? A) Anticipation B) Balance C) Scarcity D) Competition

The answer is scarcity. The characteristics of value are remembered by the acronym DUST: demand, utility, scarcity, and transferability.

What must a landlord do before commencing a lawsuit for actual eviction? A) Obtain a judgment from the court B) Notify the sheriff C) Contract with a company to forcibly remove the tenant and possessions D) Serve notice on the tenant

The answer is serve notice on the tenant. To regain possession through a legal process called actual eviction, the landlord must serve notice on the tenant before commencing the lawsuit.

In some parts of the country, closing is called

The answer is settlement and transfer. Closing procedures vary somewhat in different parts of the country; in some areas, itis called settlement and transfer.

Which of the following describes the act by which real property can be converted into personal property? A) Attachment B) Accession C) Conversion D) Severance

The answer is severance. When we sever something, we cut it loose. Severing (felling) a tree from its roots converts it from realty—real(proper)ty—to personalty—personal(proper)ty. The process is called severance.

Which of the following is considered an improvement? A) Subdivision plat B) Lease C) Sewer D) Tenant

The answer is sewer. It is infrastructure added to the land. An improvement is anything that is added as a fixture to the land.

A garden apartment that is at the bottom of a 10-step stairway is for lease. A person with a disability that makes it impossible to use stairs asks to see the unit; the landlord A) should let the prospective tenant know that the unit is unsuitable. B) should install a motorized seat for the stairway before showing the unit to the prospective tenant. C) should advise the prospective tenant of the need for an expensive accommodation that the landlord is unwilling to make. D) should show the prospective tenant the access to the unit and let the tenant decide whether to proceed with the rental.

The answer is should show the prospective tenant the access to the unit and let the tenant decide whether to proceed with the rental. If the tenant is willing to install a motorized chair lift to access the apartment, the landlord should not object.

A township is a rectangle that is

The answer is six miles square containing 36 square miles. A township is 23,040 acres.

A town wants to construct new concrete curbs in a residential neighborhood. How will the town most likely raise the money necessary for the improvement?

The answer is special assessment. The town will most likely levy a special assessment against the benefiting properties to pay for the new concrete curbs.

Which of these characteristics apply to a real estate tax lien? A) General, voluntary lien B) Specific, voluntary lien C) General, involuntary lien D) Specific, involuntary lien

The answer is specific, involuntary lien. A real estate tax is levied on an individual property; few would argue that individuals choose to have the tax levied, hence, an involuntary lien.

When senior housing includes subsidized units, the property manager needs to be familiar with A) elder abuse laws. B) health care providers. C) state and federal rules pertaining to eligibility requirements and income verification. D) nutrition.

The answer is state and federal rules pertaining to eligibility requirements and income verification.

In addition to state licensing laws, other laws that have a significant effect on the practice of real estate include

The answer is state and local land-use and zoning laws. In addition to state licensing laws, other laws that have a significant effect on the practice of real estate include state and local land-use and zoning laws.

In Alabama, holding which office prohibits a person from simultaneously becoming a member of the Alabama Real Estate Commission? A) School board superintendent B) City mayor C) County sheriff D) State senator

The answer is state senator. AREC members are not allowed to hold any elective or appointive state or federal office simultaneously, to avoid any hint of impropriety.

The National Association of REALTORS® is composed of

The answer is state, regional, and local associations. Many trade organizations serve the real estate business. The largest is the National Association of REALTORS® (NAR), whose website is www.realtor.org. NAR is composed of state, regional, and local associations.

Deed restrictions are created by all of the following EXCEPT A) deed. B) general plan of a subdivision. C) statute. D) written agreement.

The answer is statute. Deed restrictions are private restrictions and are separate from and in addition to land-use controls exercised by the government.

The channeling of protected class members to certain buildings or neighborhoods is called A) steering. B) blockbusting. C) redlining. D) boycotting.

The answer is steering. Steering is prohibited by fair housing laws, even if the action is requested by a client or customer.

Some states' laws regulate sales of land located both inside and outside the states. These state land sales laws tend to be A) stricter and more detailed than the federal law. B) exactly the same as the federal law. C) less detailed than the federal law. D) less strict than the federal law.

The answer is stricter and more detailed than the federal law. Some state laws regulate sales of land located both inside and outside the state, and tend to be stricter and more detailed than federal law.

Tanks that are exempt from federal regulation do NOT include A) tanks on or above the floor of underground areas, such as basements or tunnels. B) tanks that store heating oil burned on the premises. C) tanks that hold 200 gallons. D) farm and residential tanks that hold 1,100 gallons or less of motor fuel used for noncommercial purposes.

The answer is tanks that hold 200 gallons. Federal regulation applies to tanks that hold 200 gallons.

Who should real estate professionals rely on for sound environmental information? A) Technical experts in the field B) Their sponsoring brokers C) Home inspectors D) Appraisers

The answer is technical experts in the field. The most appropriate people on whom a real estate professional can rely for sound environmental information are scientific or technical experts.

If a licensed home inspector's insurance is canceled or lapses, it must notify A) all banks for whom the inspector does work. B) the Alabama Real Estate Commission. C) all real estate licensees for whom the inspector has pending jobs. D) the Alabama Building Commission.

The answer is the Alabama Building Commission. The building commission asks insurance companies to notify it directly if insurance is canceled or lapses, but this is a courtesy, not a requirement.

To integrate information found in publicly available land records, the Federal Geographic Data Committee has created

The answer is the Cadastral Data Content Standard. The Cadastral Data Content Standard was created by the Federal Geographic Data Committee to integrate information found in publicly available land records. The National Integrated Land System was developed by the federal Bureau of Land Management and the U.S. Department of Agriculture's Forest Service.

The closing statement used for MOST residential closings is A) the Certification of Settlement. B) the Closing Disclosure. C) the Loan Affidavit. D) the Loan Estimate

The answer is the Closing Disclosure. The closing statement used for most residential closings is the Closing Disclosure prepared by the CFPB.

As directed by the Dodd-Frank Act, new mortgage disclosure rules were issued in 2014 by

The answer is the Consumer Financial Protection Bureau. CFPB issued the mortgage disclosure rules that took effect January 10, 2014.

Environmental hazards are primarily the concern of A) FCC. B) the FTC. C) the CFPB. D) the EPA and HUD.

The answer is the EPA and HUD. The Environmental Protection Agency (EPA) and Department of Housing and Urban Development (HUD) are the primary agencies of the federal government concerned with environmental issues.

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is administered and enforced by A) the Environmental Protection Agency. B) the Federal Housing Administration C) the Department of Housing and Urban Development. D) the Consumer Product Safety Commission

The answer is the Environmental Protection Agency. CERCLA is administered and enforced by the EPA.

The federal underground storage tanks (UST) program is regulated by A) the Department of Housing and Urban Development. B) the Consumer Product Safety Commission. C) the Federal Housing Administration. D) the Environmental Protection Agency.

The answer is the Environmental Protection Agency. The federal UST program is regulated by the EPA.

Programs to help families purchase or operate family farms are provided by

The answer is the Farm Service Agency. The Farm Service Agency (FSA) is a federal agency of the Department of Agriculture. The FSA offers programs to help families purchase or operate family farms and has taken over the functions of the former Farmers Home Administration (FmHA).

The federal legislation which was passed to protect public health by regulating the nation's public drinking water supply was A) the Safe Drinking Water Act (SDWA). B) the Water Preservation Act. C) the Public Water Supply Act. D) the Safe Public Water Act.

The answer is the Safe Drinking Water Act (SDWA). The federal legislation which was passed to protect public health by regulating the nation's public drinking water supply was the Safe Drinking Water Act (SDWA).

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was created in 1980 and established A) the Superfund. B) the Clean Lands Fund. C) the Clean Water Act. D) the Brownfields Act.

The answer is the Superfund. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was created in 1980 and established a $9 billion fund called the Superfund.

The legal framework that preserves the federal constitutional rights of citizens, including those that would be thwarted by discriminatory practices, has been created and protected by A) the actions of local jurisdictions, acting under the authority provided to the states. B) measures passed by the public in general elections. C) the U.S. Congress and U.S. Supreme Court. D) state legislatures.

The answer is the U.S. Congress and U.S. Supreme Court. The legal framework that preserves the federal constitutional rights of citizens, including those that would be thwarted by discriminatory practices, has been created and protected by the U.S. Congress and U.S. Supreme Court. Various presidential orders have also bolstered these rights.

The use of electronic signatures makes routine paperwork more efficient and has been encouraged by adoption by most states of

The answer is the Uniform Electronic Transactions Act. The Electronic Signatures in Global and National Commerce Act (E-Sign) applies to those states that have not adopted UETA, and some sections of the law also apply to those states that have adopted UETA.

A licensee employed by a real estate firm decides to terminate his employment and transfer his license to a different real estate firm. What happens to the licensee's six active listings after the transfer? A) Upon the transfer, the active listings become inactive. B) The active listings follow the licensee to the new real estate firm. C) Upon the transfer, the active listings expire. D) The active listings remain the property of the old real estate firm.

The answer is the active listings remain the property of the old real estate firm. Upon the termination of employment, licensees are not allowed to take or use any brokerage agreements because they are the property of the broker.

The following ad appeared in the newspaper: "For sale: 4 BR brick home; Redwood School District; excellent Elm Street location; short walk to St. John's Church; and right on the bus line. Move-in condition; priced to sell." Which statement is TRUE? A) The ad should not mention St. John's Church. B) The ad describes the property for sale and is very appropriate. C) The ad should state that the property is available to families with children. D) The fair housing laws do not apply to newspaper advertising.

The answer is the ad should not mention St. John's Church. Reference to a nearby church implies religious preference. This violates HUD advertising regulations designed to enforce the Federal Fair Housing Act.

A trust is a device by which one person transfers ownership of property to someone else to hold or manage for

The answer is the benefit of a third party. A trust is a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party.

The overall document that serves as a guide to anticipating changing needs in a local government, municipality, or county is A) the strategic plan. B) the comprehensive plan. C) the annual plan. D) the specific area plan.

The answer is the comprehensive plan. The comprehensive plan, also called the master plan, will consider a long term, perhaps 20 years or longer, and will often include a general plan that can be revised and updated more frequently, plans for specific areas, and strategic plans.

When a homeowner defaulted on a home loan, the trustee immediately sold the property to recover the debt. The trustee acted under the terms of the security instrument. Based on these facts, which of these statements is TRUE? A) The exercise of this power of sale clause is an example of strict foreclosure. B) The trustee's sale of the property was illegal unless the state permits a so-called friendly foreclosure. C) The homeowner could have exercised the statutory right of redemption at any time prior to the trustee's sale of the property. D) The exercise of this power of sale clause is an example of nonjudicial foreclosure.

The answer is the exercise of this power of sale clause is an example of nonjudicial foreclosure. This foreclosure and sale were nonjudicial; that is, they did not require a court order. Strict foreclosure and friendly foreclosure do not involve a sale. The statutory right of redemption applies only after the sale.

Which of the following is FALSE about probate? A) Estate taxes must be paid before distribution. B) Tenancy in entirety passes without probate. C) None of these. D) The laws of probate are set at the national level.

The answer is the laws of probate are set at the national level. Estate taxes must be paid before any distribution. The laws of each state govern the probate proceedings. Property held in tenancy by the entirety passes immediately.

A mortgage becomes a lien on real property when

The answer is the lender records the financing documents. It is not until the financing documents are recorded that the lien actually takes effect.

What is a major disadvantage to lenders of accepting a deed in lieu of foreclosure?

The answer is the lender takes the real estate subject to all junior liens. The lender loses rights to FHA or private mortgage insurance or VA guarantees. The process is called friendly foreclosure, because a lawsuit is not involved. It is an adverse element for the borrower, but that does not affect the lender.

The informal document that may be used to begin negotiations between the parties in a complex transaction is

The answer is the letter of intent. A letter of intent can be used to indicate the interest of a prospective buyer or lessee and, if the intent is reciprocated by the property owner, to begin negotiations. A contingency is any additional condition that must be satisfied before a sales contract is fully enforceable. A binder is a short version of a sales contract that is used until a more complete version is drafted.

If a real estate professional is the subject of threats or acts of violence brought about by compliance with the Fair Housing Act, A) the perpetrator of the acts is punishable by criminal action. B) a civil action may be brought but no criminal action is permitted. C) a complaint should be made to the state real estate licensing agency. D) there is no provision in the Fair Housing Act for recourse by the real estate professional.

The answer is the perpetrator of the acts is punishable by criminal action. The Fair Housing Act protects owners and real estate professionals who aid or encourage the enjoyment of fair housing rights. Threats, coercion, and intimidation are punishable by criminal action.

To determine whether an item is a fixture, the MOST important test is whether A) the person who installed it intended for it to be permanent. B) the value of the item is high. C) the item must be dismantled for removal. D) the effort needed to remove the item is significant.

The answer is the person who installed it intended for it to be permanent. The intent of the person who installed the item is the most important test of whether the item is a fixture.

For residential property, some jurisdictions may mandate A) comprehensive inspections for hazardous substances to include asbestos, radon, carbon monoxide, mold, lead-based paint, and contaminated groundwater. B) acceptable carbon monoxide levels in children's rooms. C) proper ventilation on all new buildings so that radon is not an issue. D) the placement of carbon monoxide detectors.

The answer is the placement of carbon monoxide detectors. Half of the states now mandate the placement of carbon monoxide detectors, along with required smoke detectors, in residential property.

The real estate financing market comprises

The answer is the primary and secondary mortgage markets, plus government influences such as the Federal Reserve system. These are the three basic components of the real estate financing market.

A sales associate or appraiser trying to estimate the market value of a property would be seeking

The answer is the probable price the property will bring. Market value is the value that would be paid in an arm's-length transaction between knowledgeable parties.

Chain of title is MOST accurately defined as

The answer is the record of a property's ownership. Chain of title is the entire history, or record, of transactions affecting a property, while an abstract is a summary of relevant facts found when examining the history. Title insurance is used to protect against defects in the record of a property's ownership and is issued only after a title examination, which evaluates the public records of the property.

What term describes a person's interest in a homeowner's yard in which a fee was paid to park in the yard all day to attend an event at a state fair? A) License B) Real estate interest C) Freehold interest D) Right of way

The answer is license. License is considered a privilege, not a right.

After license laws are enacted by the legislature, who is responsible for adopting administrative regulations?

The answer is licensing authority (division, Commission, etc.) Administrative regulations are written and adopted by the licensing authorities in each state. They have the force and effect of law, but they are easier to change because they do not require legislative action.

All written documents that affect title to real estate should be

The answer is made a part of the public record. The public record for the jurisdiction in which the real estate is located serves notice to the world of the existence of the documents of transfer, liens, and other instruments that affect title to real estate.

One way that property managers meet the goals of ECOA is by A) disqualifying tenant applicants on the basis of receiving welfare payments. B) making sure to use the same lease application for every applicant. C) not evaluating certain tenant applicants through the use of credit reports. D) establishing that certain buildings do not allow children as residents.

The answer is making sure to use the same lease application for every applicant. Equality is the key. It is acceptable to use credit reports; however, managers need to require them for all applicants. ECOA prohibits discrimination on the basis of receipt of public assistance, such as welfare.

MOST contracts state that the seller is responsible for providing what type of title to the property? A) Clear B) Absolute C) Marketable D) Indefeasible

The answer is marketable. Most contracts clearly state that the seller is responsible for providing marketable title to the property. The term marketable means a title that has no defects that could carry over as a problem for the new owner at the time that owner decides to sell the property.

A salesperson is charged with placing real estate signs on property without the owner's permission. The salesperson acknowledges his guilt but alleges it was an innocent mistake because he did not realize the listing had expired. He offers to plead guilty in return for a $50 fine and attendance at a Risk Management for Salespersons class. Is the Commission likely to accept this offer? A) Yes, because the offense was minor and not worth the time and trouble of a full hearing B) No, because this is not an allowed punishment C) Yes, because it was an innocent mistake D) No, because the salesperson is supposed to keep track of expired listings and remove signs

The answer is no, because this is not an allowed punishment. The minimum allowed fine is $100.

In August, a tenant signs a one-year lease in an apartment complex. Rent payments are due on the 15th of each month. On December 12, the apartment complex is sold to a new owner. On March 14, the building is destroyed in a fire. Which of these statements accurately describes the tenant's obligations? A) The tenant is required to continue paying rent for the full lease term because a tenancy for years cannot be terminated by the destruction of the premises. B) The tenant is not required to continue paying rent after December 12 because the sale voids the preexisting lease. C) The tenant is not required to continue paying rent after March 14 because the premises have been destroyed. D) The tenant is required to continue paying rent, but the residential lease is converted by law into a ground lease.

The answer is the tenant is not required to continue paying rent after March 14 because the premises have been destroyed. Typically, if a residential rental unit is destroyed, the lease is terminated. This is not the case with agricultural land or ground leases.

Under a land contract, the buyer is called

The answer is the vendee. Under a land contract, the buyer is called the vendee.

Under an installment contract, the legal title to the property is held by

The answer is the vendor. A vendor is the seller who retains legal title to the property during an installment contract term.

Subsurface rights can be legally described just as air rights, but with what difference?

The answer is they are measured below the datum rather than above it. Subsurface rights are used for mining, utility line locations, and condominiums with floors below ground level.

All of these are reasons for probate EXCEPT A) to confirm that the will is valid. B) to ensure that the heirs do not fight among themselves. C) to identify which persons get any of the estate. D) to determine the exact assets of the deceased person.

The answer is to ensure that the heirs do not fight among themselves. Preventing fights among heirs is not the reason for probate.

A buydown loan enables a borrower

The answer is to lower the interest rate on a mortgage or deed of trust loan. By paying part of the interest upfront to offset monthly mortgage payments at the beginning of the loan term, the borrower can qualify for a loan with the expectation that the borrower's income will increase, making future, higher payments possible.

Which of the following would automatically terminate a residential lease? A) Death of the tenant B) Failure of the tenant to pay rent C) Sale of the property D) Destruction of the property

The answer is total destruction of the property. Death of the tenant, failure to pay rent, or sale of the rented premises would not end a residential lease. Destruction of the property would terminate a lease.

While a real estate broker working for a buyer should help the buyer prepare the strongest offer that represents the least risk to the buyer, the broker working with the seller should

The answer is transmit all offers to the seller. It is not up to the broker to decide which offers are worthy of transmitting to the seller. The broker (or sales associate) should be available to consult with the seller about the seller's response to an offer (acceptance, counteroffer, rejection).

At a minimum, how many licenses must a branch office have? A) Two B) Three C) One D) Four

The answer is two. At a minimum, a branch office must have two licenses: a qualifying broker's license and a branch office license. Any number of licensees may be affiliated with the office, or there might be only one qualifying broker and nobody else.

At MOST closings, what is the number of title policies issued?

The answer is two. The owner's policy is for the benefit of the owner (buyer), and the lender's policy is for the benefit of the lender.

How many title policies are typically issued at a closing?

The answer is two. The owner's policy is for the benefit of the owner (buyer), and the lender's policy is for the benefit of the mortgage company.

On March 7, a buyer and a seller execute a contract for the purchase of the seller's property. Closing is set for June 10. On April 15, the property is struck by lightning and destroyed by the resulting fire. If the Uniform Vendor and Purchaser Risk Act has been adopted by the state in which the property is located, which party bears liability for the loss?

The answer is under the act, the seller bears the loss alone. In states that have adopted the Uniform Vendor and Purchaser Act, the seller remains responsible for the property until the day of closing.

If a contract seems to be valid, but neither party can sue the other to force performance, the contract is said to be

The answer is unenforceable. An unenforceable contract may appear to be valid; however, neither party can sue the other to enforce performance.

All of the following are economic characteristics of land EXCEPT A) area preference. B) scarcity. C) permanence of investment. D) uniqueness.

The answer is uniqueness. Uniqueness is a physical characteristic of real estate, along with immobility and indestructibility.

Which of these formulas is incorrect for the income approach? A) Value ÷ rate = income B) Income ÷ value = rate C) Income ÷ rate = value D) Value × rate = income

The answer is value ÷ rate = income. As the capitalization rate goes down, the value increases.

A contract for the sale of real estate that does not state the consideration and provides no basis on which the consideration could be determined is considered

The answer is void. A contract is void when a consideration is not stated because consideration is an essential element of a contract.

A minor signed a sales contract to purchase a home. Which of the following describes this contract?

The answer is voidable by the minor. Minors who are parties to a contract always make the contract voidable. It is incumbent upon the seller to not allow a minor to enter into a contract. The seller will have to wait for the minor to cancel or move forward.

A lien can be created in which four ways?

The answer is voluntary, involuntary, statutory, equitable. These are the four ways to create a lien.

Loan approval by Fannie Mae, taking into account the borrower's credit report, a paycheck stub, and a drive-by appraisal of the property, can be accomplished

The answer is within minutes. Even for a complex or difficult mortgage, Fannie Mae can process the loan in less than 72 hours. The use of automated underwriting has made short approval times possible.

Any aggrieved person who believes illegal discrimination has occurred may file a complaint with HUD A) within one year of the alleged act. B) within two years of the alleged act. C) within 18 months of the alleged act. D) no later than six months after the alleged act.

The answer is within one year of the alleged act. Any aggrieved person who believes illegal discrimination has occurred may file a complaint with HUD within one year of the alleged act.

When following disclosure rules, real estate agents should ensure that A) written disclosure forms are kept on file in the broker's office for one year. B) even initial disclosures are in writing. C) written disclosure is made within one business day after the consumer enters into any written agreement. D) written disclosure is made before the consumer enters into any written agreement.

The answer is written disclosure is made before the consumer enters into any written agreement. Initially, disclosures may be oral, but written disclosure must be made before the consumer enters into any written agreement. All paperwork, including disclosure forms, must be maintained for three years under AREC rules.

Temporary salesperson (and temporary broker) licenses expire A) on September 30 of even-numbered years. B) one year after issuance, unless previously converted to original active or inactive status. C) on September 30 of odd-numbered years. D) on September 30 of the second calendar year after obtaining the license.

The answer is one year after issuance, unless previously converted to original active or inactive status. Temporary salesperson licenses and temporary broker licenses do not expire on September 30. Instead, their holders have their own deadline of one year to convert them to permanent active or inactive licenses. Once converted, those licenses are subject to the normal September 30 biennial (every other year) deadlines.

A person who has no related certifications and is not a licensed contractor, architect, engineer or residential home builder but who wishes to be licensed as a home inspector will generally need to pass an exam and have at LEAST A) nothing; there are no other requirements. B) one year of work experience and 100 home inspections under someone else's supervision. C) six months' work experience and 50 home inspections under someone else's supervision. D) three months' work experience and 35 home inspections under someone else's supervision.

The answer is one year of work experience and 100 home inspections under someone else's supervision. A high school diploma or equivalent is also required.

A buyer signs a contract under which he is given the right to purchase a property for $130,000 anytime in the next six months. The buyer pays the current owner $500 at the time that contract is signed. Which of the following BEST describes this agreement? A) Sales B) Option C) Contingency D) Installment

The answer is option. The buyer has purchased an option. The $500 is the option price. If the option isn't exercised within the three-month option period, the option will lapse.

After a salesperson completes the postlicense education requirements, she receives her A) original license. B) biannual license. C) official license. D) final license.

The answer is original license. If the temporary license is issued on an active status, the licensee must complete a 30-hour postlicense training course within a six-month period and have the "original" license issued.

Half of the complaints filed with the Commission are by A) anonymous tips. B) consumers. C) law enforcement. D) other licensees.

The answer is other licensees. Although the Commission does not investigate disputes between or among licensees, they constitute many of the complaints received by the Commission. Approximately 50% of the complaints are for disputes among licensees. The balance comes from consumers and Commission auditors. A responsible licensee would not waste the Commission's time with such complaints.

Escheat is intended to prevent property being

The answer is ownerless or abandoned. Escheat is intended to prevent property from being ownerless or abandoned after a property owner dies, leaving no heirs specified by will or state law.

A standard title search would reveal all of the following EXCEPT A) property tax liens. B) parties in possession. C) recorded easements. D) a deed restriction of record.

The answer is parties in possession. Title searches use public records to find all items that have been recorded. Items that are typically recorded are tax liens, deed restrictions, easements, and mortgages. The parties in possession of the property would be found through a physical inspection of the property.

When a person dies, ownership of real estate

The answer is passes immediately. When a person dies, ownership of real estate immediately passes either to the heirs by descent or to the persons named in the will. Before full title and possession of the property may be taken, the estate must go through a judicial procedure called probate.

In some parts of the country, the closing process involves the parties in the transaction sitting around a table and exchanging copies of documents, a process called

The answer is passing papers. In some parts of the country, the closing process involves the parties in the transaction, which can include agents, attorneys, lender's representative, and escrow official, as well as the seller and buyer, sitting around a table and exchanging copies of documents, a process called passing papers.

The Commission may delay announcing a decision on a complaint for which of the following reasons? A) None of these B) Pending appeal C) Pending civil or criminal charges D) Provide time for the licensee to hire a lawyer

The answer is pending civil or criminal charges. The Commission will usually delay its decision until pending civil or criminal charges are resolved in order to avoid having its decision used in evidence in those proceedings and influencing the outcome.

Buyer agents may be compensated in any of these ways EXCEPT A) flat fee for service. B) hourly rate. C) percentage of selling price. D) percentage of list price.

The answer is percentage of list price. Buyer agents are most likely compensated by sharing the commission paid by the seller, or by receiving a flat fee, percentage of the selling price, or hourly rate from the buyer.

In many states, the real estate sales associate is

a licensed real estate salesperson. Some states require all real estate licensees to have a broker's license, while others issue separate licenses to brokers and salespersons, but all recognize that sales associates work for an employing broker, who is responsible for the sales associates' conduct.

A property owner who does not want to deal with the everyday tasks of managing a rental property can hire

a property manager. A property manager handles the day-to-day tasks of managing property for an owner. An appraiser forms an opinion or property value, a home inspector examines the property and reports problems, and the developer improves the property.

All of these are examples of government policies that can affect the real estate market EXCEPT A) the Federal Reserve Board's discount rate. B) a shortage of skilled labor or building materials. C) land-use controls, such as zoning. D) federal environmental regulations.

a shortage of skilled labor or building materials. A shortage of skilled labor will affect the supply of real estate, and this labor shortage is not generally associated with governmental policies.

A building is valued at $100,000 using a capitalization rate of 8%. If an investor demands a capitalization rate of 10%, the value of the building will a. decrease more than $10,000. b. increase by 20%. c. increase by less than 20%. d. decrease less than $10,000.

a. The answer is decrease more than $10,000. NOI of property is $8,000, which is 8% (0.08) of $100,000 value, or 10% (0.10) cap rate of $80,000 value; $100,000 - $80,000 = $20,000, which is a decrease of more than $10,000 to get a higher cap rate. The less the investor puts into the property, the greater the rate of return.

A seller wants to net $165,000 from the sale of a house after paying the broker's fee of 6%. The seller's gross sales price, to the nearest dollar, will be a. $182,242. b. $175,532. c. $174,900. d. $155,000.

b. The answer is $175,532. Two steps: (1) Find what percentage of the selling price the seller will get after the broker takes 6% (100% - 6% = 94%). (2) Because the amount the seller wants to net is $165,000, which is also 94% of the gross selling price, find the actual gross selling price (to the nearest dollar) by dividing $165,000 by 94% ($165,000 ÷ 94% = $175,531.91, or $175,532).

Daniel has a property valued at $125,000 that is assessed at 35% of its value. If the local tax rate is 6,400 mills per $100 of the assessed value, what are Daniel's monthly taxes? a. $140.33 b. $233.33 c. $480 d. $280

b. The answer is $233.33. Tax rate = 6,400 mills ÷ 1,000 = 6.40 ÷ 100 = 0.064 Assessed value = $125,000 × 35% = $43,750 $43,750 × 0.064 = $2,800 annual tax $2,800 ÷ 12 = $233.33 monthly tax

Assuming that the listing broker and the selling broker in a transaction split their commission equally, what was the sales price of the property if the commission rate was 6.5% and the listing broker received $12,593.50? a. $139,900 b. $387,492 c. $256,200 d. $193,746

b. The answer is $387,492. Two steps: (1) Find the entire commission by doubling listing broker's half (2 × $12,953.50 = $25,907). (2) Find the sales price by dividing the entire commission by the brokerage rate ($25,907 ÷ 6.5% = $387,492).

All the following clauses in a loan agreement enable the lender to demand the entire remaining debt be paid immediately EXCEPT a. a due-on-sale clause. b. a defeasance clause. c. an acceleration clause. d.an alienationclause

b. The answer is a defeasance clause. A defeasance clause requires a lender to execute a satisfaction when the note has been fully paid.

What is the difference between a general lien and a specific lien? a. A general lien cannot be enforced in court, while a specific lien can be enforced. b. A general lien affects all of a debtor's property, while a specific lien affects only a certain piece of property. c. A specific lien is held by one person, while a general lien is held by at least two persons. d. A specific lien covers real estate, while a general lien covers personal property.

b. The answer is a general lien affects all of a debtor's property, while a specific lien affects only a certain piece of property. A general lien affects all of a debtor's property, both real and personal. A specific lien affects only a particular property.

A salesperson verbally agrees to represent a homeowner couple as clients in the sale of their principal residence. An agent in the same real estate office shows the home to a buyer, who presents a written offer. The listing agent is called a. a single agent. b. a transaction agent. c. the principal. d. a limited consensual dual agent.

b. The answer is a transaction agent. Before a listing agreement is signed, the licensee cannot act as the agent for the owner. The listing agent can only act as a transaction agent.

Which of the following types of loans require interest-only payments with a lump sum balloon payment at the end? a. Amortized b. Straight c. ARM d. FHA

b. The answer is straight. In a straight/term or interest-only loan the borrower makes payments of interest only. At the end of the loan term, the entire original principal debt must be paid in one lump sum balloon payment. An amortized loan requires equal periodic payments on both the principal and the interest. An ARM (adjustable rate mortgage) has an interest rate that fluctuates up or down during the loan term based on some economic indicator. FHA loans tend to be fully amortized loans which are fully paid at the end of the term.

The Commission has which of the following responsibilities? a. Disciplinary and advisory b. Supervisory and rulemaking c. Licensing and creation of standard forms for real estate brokerage d. Arbitration and education

b. The answer is supervisory and rulemaking. The Commission does not provide advisory services, does not create standard forms for real estate brokerage services, and does not provide arbitration services. It does provide some limited education services, but those are related to its internal requirements for licensing of real estate educators.

Under what circumstances might the AREC lawfully decline to meet its 30-day deadline for issuing its written report after a disciplinary hearing? a. The licensee files a waiver of speedy trial in exchange for a sentencing reduction if found guilty. b. The same charges are the subject of pending state civil or criminal action. c. The same charges have been lodged against the licensee and their qualifying broker. d. The Disciplinary Board fails to have a quorum during the 30-day period.

b. The answer is the same charges are the subject of a pending state civil or criminal action. In such instances, the Commission usually defers its decision until after a decision in the pending state case. This is because a possibly erroneous Commission decision, made in a context that does not involve important Constitutional safeguards or discovery powers, would prejudice the licensee in the state action.

A buyer particularly liked the ornate brass lighting fixtures in a seller's house and immediately made an offer, which the seller accepted. On moving day, the buyer discovered that the seller had replaced all the ornate brass lighting fixtures with plain chrome ones. Which of these is MOST likely a correct assumption?

buyer: "Lighting fixtures are normally considered to be real property." The buyer is correct in assuming that lighting fixtures are normally part of the real property. If the seller had wanted to remove the fixtures, the seller should have done so before putting the house on the market, or specifically excluded them in the listing agreement.

What is the capitalization rate for a property that produces $10,000 annual net operating income (NOI) and for which an investor paid $105,263 (Rounded)? a. 9% b. 10% c. 9.50% d. 10.50%

c. The answer is 9.50%. $10,000 (annual NOI) ÷ $105,263(purchase price) = 9.5% (0.095) the capitalization rate

Two commissioners are appointed specifically because of their status. Which of the following describes those statuses? a. Experienced less than 5 years and experienced more than 30 years b. Property manager and real estate sales office broker c. African American and consumer d. Female and African American

c. The answer is African-American and consumer. These appointments are to make sure that certain important stakeholders are not omitted from deliberations and rulemaking.

Which of the following laws requires any advertisement that references mortgage financing terms to contain certain disclosures? a. Fair Housing Act b. Real Estate Settlement Procedures Act c. Truth in Lending Act d. Equal Credit Opportunity Act

c. The answer is Truth in Lending Act. Truth in Lending Act requires that trigger terms about mortgage financing in any kind of advertising must also include additional disclosures in the advertisement. The Fair Housing Act prohibits discrimination against protected classes in residential real estate advertising and practice. RESPA (Real Estate Settlement Procedures Act) deals with closings and settlement and does not apply to advertisement. The Equal Credit Opportunity Act prohibits lenders and others who grant or arrange credit to consumers from discriminating against protected credit applicants.

Zoning authority by a municipality is limited by a. a requirement that it not favor one part of the municipality at the sacrifice of another. b. a majority vote of the planning board. c. a requirement that any actions promote the health, safety, morals, or general welfare of the community. d. regulations issued by the Alabama Department of State.

c. The answer is a requirement that their actions promote the health, safety, morals, or general welfare of the community. Zoning by its nature tends to favor some parts of the community over others. Planning boards do not vote—they make recommendations. The Alabama Department of State issues rules related to business entities and elections. It has nothing to do with zoning.

A cooperative obtains the funds necessary to cover ongoing operating expenses and mortgage payments by a. charging rent to each of the shareholders. b. selling the common elements. c. collecting regular assessments from shareholders. d. charging special assessments.

c. The answer is collecting regular assessments from shareholders. Funds for the budget are assessed to individual shareholders, generally in the form of monthly fees.

Which of the following is an involuntary alienation of property? a. Quitclaim b. Inheritance c. Condemnation d. Gift

c. The answer is condemnation. Condemnation is an operation of the law that carries out an involuntary transfer (alienation).

What is the principal difference between an estate for years and an estate from period to period? a. An estate for years cannot be terminated. b. An estate from period to period must be in writing. c. An estate from period to period has no expiration date. d.Anestateforyears is a lifeestate

c. The answer is estate from period to period has no expiration date. An estate from period to period, or periodic tenancy, does not have a specific expiration date as it automatically renews until notice is given by the tenant or landlord. An estate (tenancy) for years has specific beginning and ending dates. Neither estate is a life estate. Each can be terminated. Both an estate for years and an estate from period to period must be in writing to be enforceable.

An owner conveys a life estate to her grandson George and stipulates that on her death the estate will pass to her son-in-law Tomas. Tomas has a(n) a. reversionary interest. b. estate for years. c. remainder interest. d. legal life estate.

c. The answer is remainder interest. The owner's death will end the life estate conveyed to her grandson, which will then mean the holder of the remainder interest, the son-in-law, will have fee simple absolute ownership of the property. An estate for years is a leasehold estate that continues for any definite period of time. A legal life estate is a freehold estate created out of a provision.

With whom does the consumer files its claim for compensation from the Recovery Fund? a. The Alabama Real Estate Commission b. The Attorney General's office c. The court that entered civil judgment against the licensee d. The local association of REALTORS®

c. The answer is the court that entered civil judgment against the licensee. If it desires, the Commission may then dispute its liability with the same court that heard all the initial evidence.

How long is the post-tax sale administrative redemption period in Alabama? a. One year b. Two years c. Three years d. Four years

c. The answer is three years. Redemption periods might be much longer if the owner never relinquished possession of the property to the investor, but the administrative period is only three years. This is the time period during which redemption may be accomplished through county personnel. If any redemption rights still exist after the first three years, redemption must be negotiated directly with the investor via a process called judicial redemption.

If the qualifying broker's license is revoked or suspended, is there a grace period? a. Yes, there is a 60-day period to appeal the revocation or suspension. b. No, there is no grace period, but the qualifying broker is allowed a reasonable time to wind up the affairs of the company and make preparations for clients, customers, and licensees. c. Yes, there is a 30-day period to appeal the revocation or suspension. d. No, there is no grace period at all.

c. The answer is yes, there is a 30-day period to appeal the revocation or suspension. During this time, the qualifying broker may engage in winding-up activities and perhaps hire a new qualifying broker for the company. New contracts will need to be executed with the new broker

The difference between the cost basis of property and its net selling price is

capital gain. This is essentially the profit earned from the sale of an asset.

Special-purpose real estate includes

churches, schools, cemeteries, and government-held lands. The answer is churches, schools, cemeteries, and government-held lands. Special-purpose real estate includes churches, schools, cemeteries, and government-held lands.

Another name for depreciation is A) inflation. B) leverage. C) capital gain. D) cost recovery.

cost recovery. Depreciation, or cost recovery, allows an investor to recover the cost of an income-producing asset through tax deductions over the asset's useful life.

A developer wishes to purchase the land on which an eight-unit condo complex once stood in Gulf Shores, but which was completely destroyed by a major hurricane. You need to obtain purchase contract(s) from a. the last known president of the condo association. b. the state of Alabama, because the land escheated. c. no one—this land cannot be purchased. d. all of the condo owners.

d. The answer is all of the condo owners. The condo owners own the land as tenants in common. Each condo owner held title to the interior space between their exterior walls, ceiling, and floor. Everything else is common area and is owned by them as tenants in common.

Lawrence does not want to be obligated to purchase a property but would like to have the right to purchase a property within 60 days for $300,000. Lawrence should try to negotiate a. a contract for deed. b. a purchase money mortgage. c. a purchase agreement. d. an option.

d. The answer is an option. An option contract would allow the investor the time to determine if she wants to buy and has the advantage of locking the seller into selling at a price agreed to at the beginning of the process. Contract for deed and purchase money mortgages are forms of seller financing and would not give this type of flexibility. Both require a purchase agreement to create the terms of the financing.

When should written agency disclosure be provided to a consumer? a. Immediately b. At the time of contract execution c. Within 24 hours of first contact with the consumer d. As soon as reasonably possible and before asking for any potential confidential information

d. The answer is as soon as reasonably possible and before asking for any potential confidential information. This makes the consumer aware of different agency choices available before disclosing too much.

An unlicensed support person may do which of the following? a. Show property when the licensee is out of town b. Make cold calls trying to locate listing prospects c. Staff a booth at a home show d. Attend an open house with a licensee, but only for purposes of safety or disability-related assistance to the licensee

d. The answer is attend an open house with a licensee, but only for purposes of safety or disability-related assistance to the licensee. An unlicensed person may not independently show property, make cold calls to the public, or staff a home show booth.

Even if the seller refuses to agree, earnest money can be disbursed a. if the seller files for bankruptcy. b. when the buyer provides timely notice that the property has failed an inspection contingency. c. if the buyer signs a notarized indemnity agreement. d. by payment into court with an interpleader lawsuit.

d. The answer is by payment into court with an interpleader lawsuit. The only way earnest money can be disbursed is by interpleader, by agreement of all parties, or if the property has been foreclosed and the contract is impossible to perform. Whether or not a contingency has been broken is a question for the courts, not the agent. If the seller files for bankruptcy, the property can still be sold—it simply requires bankruptcy court approval.

Taxes levied on a property owner to pay for installation of sidewalks or sewers are called a. ad valorem taxes. b. general property taxes. c. special excise taxes. d.specialassessments

d. The answer is special assessments. Special assessments are taxes levied on real estate to fund public improvements.

The law that requires real estate contracts to be in writing to be enforceable is the a. law of descent and distribution. b. parol evidence rule. c. statute of limitations. d. statute of frauds.

d. The answer is statute of frauds. The statute of frauds requires real estate contracts to be in writing to be enforceable. An oral contract, although unenforceable, can still be valid between the parties if they fulfill its terms.

Mortgage loan originators work in which specialization of the real estate market?

financing. Federal law requires mortgage loan originators to qualify for the Nationwide Multistate Licensing System and registry (NMLS).

Which factor primarily affects supply in the real estate market?

governmental monetary policy. Population, demographics, and employment impact demand for a commodity, but governmental monetary policy strongly influences the supply and value of property in a local market.

A major manufacturer of automobiles announces that it will relocate one of its factories, along with 2,000 employees, to a small town. What effect will this announcement MOST likely have on the small town's housing market?

houses will likely become more expensive. The expected arrival of 2,000 employees and their families in a small town will cause sellers to raise their prices in expectation of the greatly increased demand and the long time it takes to build new housing. It becomes a sellers' market, and the many buyers will have to compete for the few houses available.

The use of borrowed money to finance an investment is called

leverage. As a rule, an investor can receive a maximum return from the initial investment by making a small down payment, paying a low interest rate, and spreading mortgage payments over as long a period as possible.

A highrise development that includes office space, stores, theaters, and apartment units is an example of

mixed-use development. A mixed-use development (MUD) is a small community built vertically in one building.

Property management, appraisal, financing, and development are all

separate professions within the real estate industry. Property management, appraisal, financing, and development are not linked to the government; they are all linked to real estate business.

Immobility, indestructibility, and uniqueness are considered

the physical characteristics of land. Even when it is denuded of vegetation by strip mining, eroded by a flood or dust storm, or one of many near-identical parcels, land is still considered to have the characteristics of immobility, indestructibility, and uniqueness.

Schools would be considered part of which real estate classification?

special purpose. Special-purpose properties include schools, churches, cemeteries, and municipal service buildings.

To be valid, a lease must meet the same essential elements as any other contract, which are

The answer is capacity to contract, legal objective, offer and acceptance, and consideration. To be valid, a lease must meet the same essential elements as any other contract.

The National Association of REALTORS®(NAR)

The answer is is the largest real estate trade association in the country. The National Association of REALTORS® (NAR) is the largest real estate trade association in the country.

A listing agent knows that a neighborhood has no particular or predominant racial or national origin profile. A potential buyer asks about the racial makeup of the neighborhood. Which of the following should the listing agent say? A) "Under fair housing laws, I am not able to provide that information." B) "I don't know." C) "I think you will fit in well, but I can't say anything else." D) None of these

The answer is "under fair housing laws, I am not able to provide that information." Although this might seem to give the impression that the racial makeup is different from the potential buyer's heritage and that might seem dishonest, any discussion of race, at all, is illegal.

What is the transfer tax that will be paid by the seller of a $510,000 home, if the seller's state requires payment of a transfer tax of $1.25 for each $500 (or fraction of $500) of the sales price of real estate?

The answer is $1,275. $510,000 divided by the dollar amount per taxable unit ($500), equals 1,020 taxable units. The number of taxable units multiplied by the tax rate per unit equals the tax to be paid. So, 1,020 times $1.25 equals the $1,275 transfer tax the seller must pay to the state.

A buyer borrowed $85,000 to be repaid over 30 years in monthly installments of $456.30 at 5% annual interest. How much of the buyer's first month's payment was applied to reducing the principal amount of the loan?

The answer is $102.13. There are three steps: (1) First, find the amount of interest in the first monthly payment by multiplying the annual interest rate by the original amount of the loan: Principal × rate = interest ($85,000 × 5% = $4,250). (2) Then, divide the annual interest by 12 to find the first month's interest: $4,250 ÷ 12 = $354.17. (3) Finally, subtract that interest from the amount of the regular monthly payment to find the amount available to apply to principal: $456.30 - $354.17 = $102.13.

A specific parcel of real estate has a tax appraisal value of $80,000 and is an owner-occupied residence. The tax rate for the county in which the property is located is 30 mills. The tax bill will be A) $480. B) $60. C) $240. D) $50.

The answer is $240. $80,000 tax appraisal × 10% assessment rate = $8,000. $8,000 × 3% millage rate (30 mills is 3%) = $240. The assessment rate for owner-occupied residences is 10%.

A piece of land is for sale for $2.25 per square foot. The land is three acres. What was the total selling price for the land?

The answer is $294,030. An acre consists of 43,560 square feet. 43,560 × 3 = 130,680 total square feet. $130,680 × 2.25 = $294,030.

A charge of three discount points on a $120,000 loan equals

The answer is $3,600. A point is 1 percent of the amount borrowed (the loan amount). Three points would be three times as much: 3% × $120,000 = $3,600.

If a buyer is willing to pay $3 per square foot for lot 10, Block A, how much would the buyer pay for the land?

The answer is $32,400. The buyer would pay $32,400: 90 × 120 = 10,800 square feet 10,800 square feet × $3 = $32,400.

It would cost approximately $350,000 to build a house and its various improvements on a parcel of property. If the property was vacant, undeveloped land, it would be worth about $100,000. At present, the property's physical deterioration equals about $60,000. If an appraiser were to apply the cost approach, what would be an estimate of the value of this property?

The answer is $390,000. In the cost approach, the appraiser subtracts depreciation from the current cost of the improvements and then adds on the value of the land as if it were vacant: $350,000 - $60,000 + $100,000 = $390,000.

Under state law, one-half of an intestate decedent's property goes to the decedent's spouse, one- fourth is divided equally among the decedent's children, and one-fourth goes to the state. If there is no spouse, the children divide three-fourths equally. A citizen of this state dies intestate, survived by an ex-spouse and seven adult children. If the estate is $865,550, how much will each child receive under state law?

The answer is $92,737.50. The ex-spouse gets nothing. The state gets one-fourth and the remaining three-fourths will be divided equally among the seven children: $865,550 ÷ 4 = $216,387.50 to the state. The remaining amount, $649,162.50, is divided seven ways, leaving $92,737.50 per child.

Group homes for mentally disabled persons must be at LEAST _____ feet from each other. A) 5,280 B) 1,000 C) 500 D) 2,500

The answer is 1,000. The rule is to prevent high concentrations of group homes in particular areas, because that would dilute the beneficial effects of living in a natural residential environment. This is another example of zoning regulations that affect population densities.

Federal and state laws regarding storage of hazardous substances or liquid petroleum products apply to underground storage tanks that have at LEAST what percentage of their volume underground? A) 25% B) 50% C) 10% D) 60%

The answer is 10%. Federal and state laws that impose strict requirements on underground storage tanks containing hazardous substances or liquid petroleum products apply when a tank stores at least 10% of its volume underground.

How many years of active licensed real estate experience are required to become a member of the Alabama Real Estate Commission? A) 2 B) 10 C) 6 D) 4

The answer is 10. Ten years of licensed and active real estate experience are required to become a member of the Alabama Real Estate Commission. Ten years with a license on inactive status do not qualify one for membership on the AREC. The consumer commissioner cannot have a real estate license at all, and must not have held one during the prior 10 years.

Within how many days after receipt of a fair housing complaint must the complaint investigation be completed? A) 100 B) 60 C) 180 D) 90

The answer is 100. The complaint investigation must be completed in no more than 100 days after receipt of the complaint. Complaints may be filed in writing within 180 days after the alleged discriminatory housing practice occurred at a local fair housing office and/or with the U.S. Department of Housing and Urban Development (HUD).

A buyer acquired a property with three acres. How many square feet does the property have?

The answer is 130,680. Because one acre contains 43,560 square feet, three acres will contain 3 × 43,560 sq. ft. = 130,680 sq. ft.

In Alabama, all active status license brokers and salespeople applying for renewal of their license must successfully complete how much continuing education? A) 9 hours annually B) 8 hours every two years C) 6 hours annually D) 15 hours every two years

The answer is 15 hours every two years. The Commission must approve continuing education courses.

A farm that is a quarter-section is

The answer is 160 acres. A quarter (¼) of 640 acres is 160 acres.

The Do Not Call Improvement Act of 2007 states that real estate professionals may call consumers with whom they have an established business relationship for up to how many months after the consumer's last purchase, delivery, or payment?

The answer is 18 months. This is true even if the consumer is listed on the National Do Not Call Registry.

Alabama's fair housing law is similar to the federal fair housing law. Within how many days after an alleged discriminatory incident can a complaint be filed? A) 300 B) 180 C) 60 D) 90

The answer is 180. Complaints may be filed in writing within 180 days after the alleged discriminatory housing practice occurred at a local fair housing office and/or with the U.S. Department of Housing and Urban Development (HUD). The complaint investigation must be completed in no more than 100 days after receipt of the complaint.

What is the age of legal competence to enter into a contract in Alabama? A) 21 B) 19 C) 20 D) 17

The answer is 19. In Alabama, a person must be 19 years old, or married and 18 years old, and of sound mind to enter into a contract.

Manufactured housing is the term used for a factory-built home as of

The answer is 1976. With the passage of The National Manufactured Housing Construction and Safety Standards Act of 1976,manufactured homes became federally regulated.

Lead-based paint is found in about 75% of all private housing built before A) 1992. B) 1996. C) 1978. D) 1985.

The answer is 1978. The federal government estimates that lead is present in about 75% of all private housing built before 1978, the year the Federal government banned the use of lead in interior paints.

Alabama leases for a term greater than _____ years must be acknowledged the same as deeds and must be recorded to be enforceable, otherwise they will be limited to a shorter time than agreed in the lease. A) 20 B) 2 C) 99 D) 5

The answer is 20. If a lease has a term longer than 20 years but is not acknowledged in the same manner as a deed and/or is not recorded in the real estate records within 1 year of execution, it will be limited to a 20-year term. A memorandum of lease can be recorded instead of the full lease, and it will meet the legal requirements for recordation.

In Alabama, one period for adverse possession is an uninterrupted use for how many years? A) 5 B) 40 C) 7 D) 20

The answer is 20. There are three adverse possession time periods in Alabama, depending on the origin of the title problem. They are 20 years, 10 years, or 3 years. There are no adverse possession time periods of 5, 7, or 40 years.

The real estate industry, including all licensed real estate brokers and sales associates, is subject to

The answer is antitrust laws. Even though individual real estate sales associates are subject to supervision by the employing real estate broker, both are subject to both federal and state antitrust laws.

The accused licensee or any other person has the right to file for an application for a rehearing within _____ after an adverse decision by the AREC. A) one year B) 14 days C) 5 business days D) 30 days

The answer is 30 days. The accused licensee or any other person has the right to file for an application for a rehearing within 30 days of the date of the decision. The aggrieved person must specify the grounds for relief. The accused also has the right to appeal the Commission's decision in the circuit court by posting an appeal bond of $200 within 30 days of the Commission's final order.

How big is an acre?

The answer is 43,560 sq. ft. One acre equals 43,560 square feet.

A broker sold a residence for $485,000 and received $26,675 as commission in accordance with the terms of the listing agreement. What was the broker's commission rate?

The answer is 5.5%. Commission rate × selling price = commission, so commission ÷ selling price = commission rate; therefore, $26,675 commission ÷ $485,000 selling price = 0.055, or 5.5% commission rate.

What department in Alabama is responsible for overseeing most of the implementation of federal environmental laws? A) Alabama Coastal Wetlands Protection Board B) Alabama Water Pollution Control Board C) U.S. Army Corps of Engineers D) Alabama Department of Environmental Management

The answer is Alabama Department of Environmental Management. The Alabama Department of Environmental Management (ADEM) implements all state and federal environmental laws.

Which regulatory body administers RESPA? A) FTC B) HUD C) FCC D) FDIC

The answer is HUD. The Real Estate Settlement Procedures Act (RESPA) is a federal consumer law administered by HUD. It requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the costs of settlement services, such as kickbacks and referral fees that can increase settlement costs for homebuyers.

Which agency, upon receiving a complaint regarding a Fair Housing Act violation, investigates? A) ADA B) HUD C) DOJ D) HOPA

The answer is HUD. The federal Fair Housing Act is administered by the Office of Fair Housing and Equal Opportunity under the direction of the secretary of HUD. Upon receiving a complaint, HUD initiates an investigation.

Which of these lots has the LEAST street exposure? A) Lot 9, Block A B) Lot 10, Block B C) Lot 3, Block A D) Lot 15, Block B

The answer is Lot 3, Block A. Lot 3, Block A with 30 feet on a roadway has the least street exposure.

A qualified buyer makes a written offer on a property on March 6 by filling out and signing a purchase offer. Later that day, the seller accepts and signs the offer, keeping one copy. The broker gives a copy of the signed agreement to the buyer on March 8. The seller's deed is delivered on May 1. The deed is recorded on May 7, and the buyer takes possession on May 15. When is the broker's commission payable if this is a usual transaction?

The answer is May 1. Although the commission was earned when the buyer was notified of the seller's acceptance (March 8), the commission is typically paid at the time the transaction is closed; that is, the purchase price is paid by the buyer and the buyer receives the deed.

The Counselors of Real Estate (CRE), Commercial Investment Real Estate Institute (CIREI), and Institute of Real Estate Management (IREM) are affiliated institutes of

The answer is National Association of REALTORS® (NAR). NAR has the following affiliated institutes, societies, and councils: Counselors of Real Estate (CRE), Commercial Investment Real Estate Institute (CIREI), and Institute of Real Estate Management (IREM), among others.

Alabama's fiscal tax year for property taxes runs A) May 1 through April 30. B) December 1 through November 30. C) October 1 through September 30. D) January 1 through December 31.

The answer is October 1 through September 30. For property taxes, Alabama's fiscal tax year runs October 1 through September 30, and property taxes are paid in arrears. Taxes become a lien on October 1. Property owners have until December 31 to pay without being delinquent.

The expiration date of a one-year lease is September 30. On July 1, the house is sold to a family that wants to live in the rental property. Assuming the lease does not include a sale clause, how soon can they move in?

The answer is October 1, present year. The tenants have the right to possess the property until the end of their lease. The new owners will have to wait to move in.

Alabama ad valorem taxes become a lien on A) January 1. B) November 1. C) December 31. D) October 1.

The answer is October 1. The ad valorem tax year runs from October 1 of one year to September 30 of the next year. By September 30, the taxes for the prior year are now fully "earned" by the government and become a lien on October 1.

The 1896 U.S. Supreme Court case that upheld racial segregation in public facilities and the 1954 case that overturned it are

The answer is Plessy v. Ferguson and Brown v. Board of Education. Plessy established the "separate but equal" doctrine, but the Brown decision overturned it by holding that separate schools for black and white students are inherently unconstitutional.

What does RESPA stand for?

The answer is Real Estate Settlement Procedures Act. RESPA is designed to ensure that the buyer and seller are both fully informed of all settlement costs.

Which township section number is directly north of Section 7?

The answer is Section 6. Township sections are numbered in an S fashion: 1 through 6, right to left, then 7 to 12, left to right. Section 7 is directly south of Section 6.

All active and inactive licenses expire on A) September 30 of the second calendar year after obtaining the license. B) August 31 of even-numbered years. C) September 30 of odd-numbered years. D) September 30 of even-numbered years.

The answer is September 30 of even-numbered years. Licenses issued any time during the two-year period also expire on September 30 of the even-numbered years. An inactive license must be renewed in the same manner as an active license and with the same fees. The only difference is that a licensee who renews on inactive status is not required to meet the continuing education requirements imposed on active licensees. The August 31 deadline is to pay the renewal fee without a $150 late payment penalty for last-minute renewers.

Which of these concepts applies to every appraisal? A) Highest and best use B) Assemblage C) Diminishing returns D) Plottage

The answer is highest and best use. The principal of highest and best use is the most profitable single use to which a property can be put, and is considered in every appraisal.

Terry is the personal assistant of a real estate sales associate. Terry must be paid by the broker who employs the sales associate. This means that

The answer is Terry has a real estate license. Most states have very specific rules about what a licensed assistant and an unlicensed assistant may do and how they can be compensated. Usually, an unlicensed personal assistant working for a sales associate can be paid by the sales associate, but a licensed personal assistant working for a sales associate must be paid by the employing broker.

Which of the following requires that all advertising that references mortgage financing terms contain certain disclosures? A) Truth in Lending Act (Regulation Z) B) Equal Credit Opportunity Act C) Community Reinvestment Act D) Fair Housing Act

The answer is Truth in Lending Act (Regulation Z). Regulation Z of the Truth in Lending Act requires that trigger terms about mortgage financing in any kind of advertising must also include additional disclosures in the advertisement.

A developer wishes to drain a 20-acre swamp in order to create a subdivision of garden homes, with a fishing and boating lake in the center. What agency might cause delays if NOT consulted early in the process? A) EPA B) County health department C) Alabama Real Estate Commission D) U.S. Army Corps of Engineers

The answer is U.S. Army Corps of Engineers. Rigid wetlands definitions require developers to obtain permits for dredging and other activities that remove materials from wetlands such as swamps. As an example, developers who want to maintain storm water detention ponds that provide water purifying features and recreational amenities should begin very early in the process to work with the U.S. Army Corps of Engineers and the ADEM or face delays as a result of regulatory barriers. Typically, recreational lakes in subdivisions are actually ADEM-required detention ponds.

Anyone who feels that their rights under fair housing laws have been violated may file a complaint with the A) Alabama Fair Housing Council. B) U.S. Department of Housing and Urban Development. C) Alabama Real Estate Commission. D) Department of Justice.

The answer is U.S. Department of Housing and Urban Development. Fair housing complaints may be filed with a local office of or directly with the U.S. Department of Housing and Urban Development.

A legally enforceable agreement in which two parties promise to do something for each other is classified as

The answer is a bilateral contract. A contract is bilateral if each party to the agreement promises to do something in exchange for the other's promise to do something.

A promise for a promise is one way to describe

The answer is a bilateral contract. In a bilateral contract, both parties promise to do something, but in a unilateral contract, one party makes a promise in order to entice a second party to do something.

The first title search shows the status of the seller's title on that date. The second search is made after closing and is called

The answer is a bring down. The first title search shows the status of the seller's title on that date. The second search is made after closing and is called a bring down.

All of the following are prohibited under the antitrust laws EXCEPT A) a broker setting a company commission schedule. B) competing brokers allocating markets based on the value of homes. C) real estate companies agreeing not to cooperate with a broker because of the fees that the broker charges. D) competing property management companies agreeing to standardized management fees.

The answer is a broker setting a company commission schedule. A broker may independently determine commission rates or fees for the firm only.

Under antitrust laws, which of the following activities is acceptable? A) A broker setting a company commission schedule B) Real estate companies agreeing not to cooperate with a broker because of the fees that the broker charges C) Competing brokers allocating markets based on the value of homes D) Competing property management companies agreeing to standardized management fees

The answer is a broker setting a company commission schedule. A broker may independently determine commission rates or fees for the firm only.

The permit from the local government indicating that a property is suitable for habitation is called A) a license for occupancy. B) a certificate of possession. C) a certification for possession. D) a certificate of occupancy.

The answer is a certificate of occupancy. The permit from the local government that is required before a building can be occupied is called a certificate of occupancy.

A prospective buyer of commercial or industrial property should include in an offer to purchase A) a contingency to allow for an environmental site assessment. B) a request for an affidavit by the seller that there are no contaminants on the property. C) the establishment of a trust account to cover the cost of any property decontamination. D) a waiver from future liability for any contamination found on the property.

The answer is a contingency to allow for an environmental site assessment. A prospective purchaser should perform all of the examinations and tests required to show due diligence in discovering any possible contamination—and be prepared to possibly walk away from the transaction if there exists the possibility of future liability for cleanup of hazardous wastes.

A company is a legal entity, created by charter under the laws of the state. The company is managed and operated by a board and is permitted to buy and sell real estate. When one of its directors dies, the company continues to operate. Because of its structure, the company's income is subject to double taxation (first by the company, and then by its shareholders). The company is BEST described as

The answer is a corporation. The corporation would not be affected if one of the directors dies. The company's income is subject to double taxation, which defines the company as a corporation.

The only fee that the lender may collect before the applicant receives the Loan Estimate is for

The answer is a credit report. The only fee that the lender may collect before the applicant receives the Loan Estimate is for a credit report.

At closing, the principal amount of a purchaser's new mortgage loan is

The answer is a credit to the buyer. The purchasers see to it that money is available in the form of a mortgage loan for the purchase of the property. They are given credit for getting this money to the table.

At closing, the listing agent's commission is usually shown as

The answer is a debit to the seller. When the sellers have engaged the agent, they will be debited (charged) for the agent's commission at closing.

Regarding the federal Lead-Based Paint Hazard Reduction Act, which statement is TRUE? A) Purchasers of housing built before 1978 must be given five days to test the property for the presence of lead-based paint. B) A disclosure statement must be attached to all sales contracts and leases involving residential properties built before 1978. C) All residential housing built before 1978 must be tested for the presence of lead-based paint before being listed for sale or rent. D) A lead-hazard pamphlet must be distributed to all prospective buyers but not to tenants.

The answer is a disclosure statement must be attached to all sales contracts and leases involving residential properties built before 1978. Although no remediation of the property is required, a lead- based paint warning disclosure statement must be completed and signed by the parties and a copy attached to any sales contract or lease for a residential property built before 1978. In the disclosure statement, buyers and renters acknowledge receiving a HUD booklet about protecting one's family from lead-based paint hazards.

A real estate transaction may be completed by using an escrow agent or escrow holder who acts as

The answer is a disinterested third party to make sure required documents and funding are in place before the transaction is completed. The escrow agent may be an attorney, title company, trust company, escrow company, or the escrow department of a lending institution.

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

The answer is a fee simple estate. The highest interest in real estate recognized by law is the fee simple or fee simple absolute estate, providing the holder all rights to the property.

Condominiums are A) a type of building. B) a form of property ownership. C) not recognized in Alabama D) a vacation property

The answer is a form of property ownership. While we are most familiar with multistory vacation condos on the Alabama Gulf Coast, there are other types of condominium developments. These include garden home communities, office buildings, warehouses, and even boat docks—called dockominiums. They all involve sole ownership and possession of some elements, shared ownership and sole possession of other elements, such as building balconies or garden home yards, and shared ownership and shared possession of the common areas.

The process of probate is

The answer is a formal judicial process. Probate is a legal procedure for verifying the validity of a will and accounting for the decedent's assets. The process can take several months to complete.

A person who is designated by the principal in a broad range of matters related to a particular transaction or activity is

The answer is a general agent. A special agent is given limited authority for a limited time. A general agent is given broad authority in a specific circumstance; a property manager is typically a general agent for the owner as are most real estate sales associates representing their broker.

A grantor conveys property by delivering a deed. The deed contains five covenants. This is MOST likely

The answer is a general warranty deed. A general warranty deed contains covenants of seisin, further assurance, quiet enjoyment, freedom from encumbrances, and warranty forever.

Radon is A) easy to detect because of its odor. B) only found in the eastern United States. C) not found in older homes. D) a known human carcinogen

The answer is a known human carcinogen. Radon can cause health problems and has been classified as a Class A known human carcinogen. It can be found anywhere in the United States.

A hole lined with clay or a synthetic liner to prevent leakage of waste material into the water supply describes A) a UST. B) a landfill. C) a brownfield. D) a hazardous waste site.

The answer is a landfill. A hole lined with clay or a synthetic liner to prevent leakage of waste material into the water supply describes a landfill.

A title insurance policy that protects the interests of a mortgagee is called

The answer is a lender's policy. The mortgagee is the lender. The mortgagee's policy is transferable.

In the absence of clear limitations in the lease as to the use of the premises,

The answer is a lessee may use the premises for any lawful purpose. The lessee still must comply with local zoning and/or subdivision restrictions.

A person has permission from a property owner to hike on the owner's property during the autumn months. The hiker has

The answer is a license. Such permission given to an individual is personal, nontransferable, and can be withdrawn.

A claim against real property to secure repayment of a debt is

The answer is a lien. A lien secures payment of an indebtedness.

If buyers seek a mortgage on a single-family house, they would be LEAST likely to obtain the mortgage from

The answer is a life insurance company. Life insurance companies make mortgage loans on large projects but rarely, if ever, on individual home purchases.

In Alabama, what is used to make the home serve as collateral for the loan granted to purchase the home? A) An abstract B) A note C) A mortgage D) A deed

The answer is a mortgage. The instrument by which the borrower promises to repay the loan on certain terms and conditions is the note. The instrument that gives the house as collateral for the loan is a mortgage.

A lender making a loan secured by a mortgage will probably require the borrower to purchase

The answer is a mortgagee's title insurance policy. To protect their interests, lenders generally require a borrower to purchase a mortgagee's title insurance policy (also called a lender's policy or a loan policy).

Developing is generally A) considered to be the same as subdividing. B) found to be equal to the activity required for subdividing. C) a much more extensive activity than subdividing. D) a less extensive activity than subdividing.

The answer is a much more extensive activity than subdividing. Developing (which requires grading of lots, installation of utilities and roadways, and construction of buildings) is generally a much more extensive activity than subdividing.

Real estate professionals should always recommend testing the water supply when it is not part of A) a shared well system. B) a spring-fed stream. C) a municipal water supply. D) a privately owned well system.

The answer is a municipal water supply. Real estate professionals should always recommend testing the water supply when it is not part of a municipal water supply.

A real estate sales associate, classified by the IRS as an independent contractor, receives

The answer is a negotiated share of commissions on transactions. An independent contractor may not receive any employee benefits and must not be treated as an employee for federal tax purposes. An independent contractor may negotiate with the broker for commissions on transactions.

A lessee who pays some or all of the property expenses, such as hazard insurance and property tax, has

The answer is a net lease. With a net lease, the tenant pays a base rent plus operating costs of the property, such as utilities, insurance, property taxes, and assessments.

Under a brokerage agreement with a property owner, the broker is entitled to sell the property for any price, as long as the seller receives $85,000. The broker may keep any amount over $85,000 as a commission. This type of listing might be illegal and is called

The answer is a net listing. Whether an open, an exclusive agency, or an exclusive right-to-sell, any listing that allows the broker to keep all of the selling price over the net amount that the seller requires is a net listing. Net listings are illegal in many states.

An intermediary functions as

The answer is a nonagent. Someone who works with a buyer and a seller (or landlord and tenant), assisting one or both with the transaction without representing either party's interests acts as a nonagent and may be called a facilitator, intermediary, transactional broker, transaction coordinator, or contract broker.

The functions of a facilitator or intermediary are those of

The answer is a nonagent. Someone who works with a buyer and a seller (or landlord and tenant), assisting one or both with the transaction without representing either party's interests acts as a nonagent and may be called a facilitator, intermediary, transactional broker, transaction coordinator, or contract broker.

An estate left the decedent's farm to eight grandchildren. Because no form of ownership was specified in the decedent's will, each of the grandchildren receives

The answer is a one-eighth interest in the property as a tenant in common. If no other form of ownership is specified, each co-owner is a tenant in common with the other co-owners. While each owner in this case has a one-eighth ownership interest, each shares unity of possession, which means the right to use the entire property.

A buyer makes an offer on a seller's house. Pursuant to this offer, the buyer is obligated to perform only if the buyer is first able to sell a condominium. This is an example of

The answer is a property sale contingency. A property sale contingency protects a buyer who has to sell a property in order to buy the seller's property.

The parties are returned to their original positions before the contract was created if there is

The answer is a rescission. Any monies or property exchanged must be returned.

Which of these BEST defines density zoning? A) The mandatory use of clustering B) The average number of units in a development C) A restriction on the average number of acres per parcel D) A restriction on the average number of houses per acre

The answer is a restriction on the average number of houses per acre. Density zoning ordinances restrict the average maximum number of houses per acre that may be built within a particular subdivision.

A buyer purchased a home for cash 30 years ago. Today the buyer receives monthly checks from a mortgage lender that supplement the buyer's retirement income. The buyer MOST likely has obtained

The answer is a reverse mortgage. In a reverse mortgage, the lender pays the borrower regular monthly payments as long as the borrower lives in the home or until the property is sold, at which time the debt is paid off by the sale proceeds. Interest accrues and compounds until the loan is repaid. The terms vary with the age of the borrower and value of the property.

Upon the death of the life tenant, the property returned to the grantor. The type of interest held by the grantor in the life estate must have been

The answer is a reversionary interest. If the estate returns to the grantor, it is known as a reversionary interest. If the estate goes to another party, that party has a remainder interest.

The final payment on a home mortgage has just been made to the lender. There will still be a lien on the property until the lender records

The answer is a satisfaction of mortgage. A satisfaction of mortgage, also known as a release or discharge, is executed by the lender when the note has been fully paid. This document returns to the borrower all interest in the real estate originally conveyed to the lender. This release must be recorded in the public record to show that the debt has been removed from the property.

Ownership in severalty means

The answer is a sole owner's interest is separate from any other property interest. Ownership in severalty occurs when property is owned by one individual, corporation, or other entity. The owner in severalty has sole rights to the property and sole discretion to sell, will, lease, or otherwise transfer part or all of the ownership rights to another person.

A broker was hired to represent the seller, to market the seller's property, and to solicit offers to purchase. The broker is called

The answer is a special agent. A special agent is one who is hired for a limited time and given limited authority. A broker taking a listing is generally a special agent.

A bail bond lien against the real estate of a property owner who is charged with a crime that will result in a trial is

The answer is a specific, statutory, voluntary lien. The execution and recording of the bail bond creates a specific, statutory, voluntary lien against the owner's real estate. If the accused fails to appear in court, the lien may be enforced by the sheriff or another court officer.

The lot-and-block system starts with the preparation of

The answer is a subdivision plat. The lot-and-block system starts with the preparation of a subdivision plat by a licensed surveyor or an engineer.

A buyer asks a court to enforce the provisions of a contract by bringing

The answer is a suit for specific performance. The buyer asks the court to force the seller to go through with the sale and transfer the property as previously agreed.

A homeowner's child will start college soon. What financing option is available for the homeowner to obtain funds to pay for the child's education?

The answer is home equity loan. A homeowner can use the equity buildup in a home to finance such things as education; it is an alternative to refinancing.

A property manager hires a full-time maintenance person. While repairing a faucet in one of the apartments, the maintenance person steals some jewelry and the tenant sues the owner. The property manager could protect the owner against this type of loss by purchasing A) liability insurance. B) workers' compensation insurance. C) a surety bond. D) casualty insurance.

The answer is a surety bond. The manager can protect the owner by urging the purchase of a surety bond on the building employee at the time the employee is hired. Property managers usually formulate and recommend insurance plans for an owner's consideration and decision.

Information about the exact location and size of the property is obtained through

The answer is a survey. Information about the exact location and size of the property is obtained through a survey.

A tenancy in which the tenant continues in possession after the lease has expired, without the landlord's permission, is

The answer is a tenancy at sufferance. A tenant who stays after the end of the lease without the landlord's permission holds a tenancy at sufferance.

Three people were concurrent owners of a parcel of real estate. When one of the owners died, that interest became part of the deceased's estate. The deceased was

The answer is a tenant in common. If the deceased had been a joint tenant, the property would not have passed to an heir as prescribed in her will because joint tenancy supersedes a will. The deceased also was not a tenant by the entirety, a category reserved for spouses. Nor was the deceased an owner in severalty because that requires property to be held by only one person.

A will provided that the local banker take care of the deceased's estate until the deceased's children reach age 25. What kind of trust is this?

The answer is a testamentary trust. A testamentary trust is established by will after the trustor's death. A living trust is established during the trustor's lifetime. Real estate is the only asset in a land trust. A deed of trust (also called a trust deed) is a financing instrument.

A seller accepted money from a buyer in exchange for the buyer's unrestricted right to cancel the purchase transaction (option to terminate) within 10 days of the executed date of the sales contract. This agreement is

The answer is a unilateral contract. This is a one-sided agreement with the seller's promise to sell enticing the buyer to buy his property. The buyer is not legally obligated to act, but the seller is obligated to keep his promise.

Which of the following is NOT used by an appraiser applying the income approach to value? A) Annual net operating income B) Accrued depreciation C) Annual gross income D) Capitalization rate

The answer is accrued depreciation. Depreciation is one of the calculations used in the replacement (cost) approach and not in the income approach.

Expenses to be prorated (such as water bills and unpaid property taxes) that are owed by the seller but will be paid late by the buyer are called

The answer is accrued items. Expenses to be prorated (such as water bills and unpaid property taxes) that are owed by the seller but will be paid later by the buyer are called accrued items.

A tenant moves a pet into an apartment community that has a no-pets policy. The landlord wishes to remove the tenant due to the breach. The legal process to remove a tenant is known as

The answer is actual eviction. A tenant's breach of a lease can result in actual eviction, whereas landlord negligence can result in a tenant's being forced to move, and this is known as constructive eviction.

The legal process through which a landlord may regain possession of a leased property is called

The answer is actual eviction. When a tenant breaches a lease or improperly retains leased premises, the landlord may regain possession through a legal process known as actual eviction.

Contamination from underground storage tanks is A) addressed by EPA regulations. B) easily detected and eliminated. C) only caused by tanks currently in use. D) found only in petroleum stations.

The answer is addressed by EPA regulations. The federal underground storage tank program is regulated by the EPA. The regulations apply to tanks that contain hazardous substances or liquid petroleum products and that store at least 10% of their volume underground.

A resident of Denver bought acreage in a distant county, never went to see the acreage, and did not use the ground. An artist moved a mobile home onto the land, had a water well drilled, and lived there for 22 years. The artist may become the owner of the land if the artist is in compliance with the state law regarding

The answer is adverse possession. Adverse possession is (hostile) possession of real estate without the permission of the owner and contrary to the owner's best interests. If it continues in an open, conspicuous (notorious) way for the time set by statute (the statutory period), the adverse possessor may take legal action to be declared the owner on the basis of all these facts.

Public records can help establish all of the following EXCEPT A) liens. B) encumbrances. C) ownership. D) adverse possession.

The answer is adverse possession. Public records contain detailed information about each parcel of real estate, so they are crucial in establishing the priority of liens, establishing ownership, and giving notice of encumbrances.

Title acquired through adverse possession must be open, notorious, continuous, hostile, and

The answer is adverse to the true owner's possession. Title acquired through adverse possession must be open, notorious, continuous, hostile, and adverse to the true owner's possession.

Which of the following is TRUE when real estate licensees follow agency disclosure rules? A) Agency disclosures create an obligation on the part of the buyer or the seller. B) Specific assistance can be performed anytime before agency disclosure has taken place. C) Agency disclosures must be signed by the consumer. D) Agency disclosures do not include agreements for broker compensation.

The answer is agency disclosures do not include agreements for broker compensation. The broker's compensation is determined by a brokerage agreement, not by an agency disclosure.

Parties to lending agreements are referred to by different terms. Which of these refers to the same party?

The answer is borrow = mortgagor. The person who makes the payments to repay the loan is called the borrower. The person who gave the property as security is called the mortgagor. Both are the same person.

Interfering with a contractual relationship is called A) lis pendens. B) res ipsa loquitur. C) conveyance. D) alienation.

The answer is alienation. Legally binding listing agreements must be respected by outside parties. Alienating those involved in contractual relationships is illegal. This word can be remembered by referencing the old cause of action in divorce cases involving infidelity—"alienation of affection." "Alienation" is also a legal expression for transfer of real estate. Both cases involve a transfer—a transfer of real estate or an attempted transfer of allegiance.

Which of the following describes an executed contract? A) A sales contract is signed, but ownership has not yet changed hands. B) Two parties have yet to perform an obligation under the agreement C) All obligations under the agreement have been performed D) One party has yet to perform an obligation under the agreement

The answer is all obligations under the agreement have been performed. A contract is either executed or executory, depending on whether the agreement has been completed or some obligation under the agreement has yet to be performed. An executed contract is one in which all parties have fulfilled their promises; the contract has been performed. An executory contract exists when one or both parties still have an act to perform. A sales contract is an executory contract from the time it is signed until closing; ownership has not yet changed hands, and the seller has not received the sales price. At closing, when the contract terms have been met, the sales contract is executed.

Which of these has been proven to pose a health hazard? A) Lead-based paint B) All of these C) Radon D) Asbestos

The answer is all of these. Asbestos, lead-based paint, and radon have all been proven to cause adverse health effects in humans.

Which of the following would cause a cloud on title? A) A recorded lien that was paid off but not released B) Missing the name of the grantor C) Gap in the chain of title D) All of these

The answer is all of these. In more serious cases, such as a missing name of the grantor or a gap in the chain of title, it may be necessary to file a suit to quiet title.

On which type of loan can the borrower prepay without penalty? A) Loans sold to Fannie Mae and Freddie Mac B) VA loans C) FHA loans D) All of these

The answer is all of these. Prepayment penalties are fairly unusual in today's market.

In a face-to-face closing, who may be present? A) All of these B) Representative for the lending institution C) Buyer and seller D) Representative for the title insurance company

The answer is all of these. Real estate professionals representing the buyer and seller and attorneys for the buyer and seller may also be present. In a face-to-face closing, the parties may be meeting for the first time.

The Equal Credit Opportunity Act prohibits discrimination in the lending process based on

The answer is all of these. The ECOA prohibits discrimination in granting credit based on race, color, religion, national origin, sex, marital status, age, and receipt of public assistance.

An alienation clause is also known as

The answer is all of these. The lender may want to prevent a future purchaser of the property from being able to assume the loan, particularly if the original interest rate is low. For this reason, most lenders include an alienation clause (also known as a resale clause, due-on-sale clause, or call clause) in the note.

A lien is created in which of the following ways? A) Involuntary B) Voluntary C) All of these D) Equitable

The answer is all of these. There are four ways to create a lien: voluntary, involuntary, statutory, and equitable.

A lender uses which of the following to make a lending decision for a mortgage loan?

The answer is all of these. To determine what a prospective buyer can afford, most home mortgage lenders use a computerized underwriting system that considers various factors, including the loan applicant's credit report and credit score. Lenders also generally look at a loan applicant's percentage of debt to income (DTI).

A purchase contract contains several personal property items and fixtures that will be transferred upon sale of the property. Which of the following is TRUE? A) All fixtures must be listed in the deed to convey to the buyer. B) All personal property must be listed in a bill of sale to convey to the buyer. C) There is no need to list the personal property in the contract because it will automatically convey unless it is excluded by the seller. D) The fixtures and personal property will need to be itemized in a bill of sale.

The answer is all personal property must be listed in a bill of sale to convey to the buyer. Fixtures are appurtenant, attached to the property, and automatically conveyed with the deed without being listed. Personal property must be listed in the bill of sale in order to be included in the sale.

The Consumer Financial Protection Bureau requires mortgage lenders to

The answer is allow a borrower to seek review of a decision about a loan workout request. The rules of the Consumer Financial Protection Bureau allow a borrower to seek review of a decision about a loan workout request and require that the lender quickly resolve complaints, generally within 30 to 45 business days; give the borrower two months' warning if an adjustable-rate mortgage will have a rate change; and work with the borrower, if the borrower is having trouble paying the mortgage, including contacting the borrower to help.

A mortgage document contains the clause: "In the event of Borrower's default under the terms of this Agreement, Lender may declare the entire unpaid balance of the debt due and payable immediately." This clause is called

The answer is an acceleration clause. An acceleration clause can be used to make the remaining balance of a loan due if the borrower defaults. Hypothecation is the act of offering the property as security without giving up possession. The defeasance clause in a mortgage defeats the granting clause. A release indicates that the loan has been repaid in full.

P signed a deed transferring ownership of P's house to Q. To provide evidence that P's signature was genuine, P executed a declaration before a notary. This declaration is known as

The answer is an acknowledgment. P gave this acknowledgment as to the validity and voluntary nature of P's signature to a notary. The notary took P's acknowledgment and attached a seal.

The services performed by a licensed real estate professional

The answer is can be customized to the needs of the client or customer. Some states require that licensees offer a minimum level of service, but most allow the client and customer to decide on the specific level of services that will be provided.

Which of the following describes a gross lease? A) A lease in which the tenant pays the landlord a percentage of the monthly income derived from the property B) An agreement allowing the tenant to terminate the lease if certain conditions near the premises become unbearable C) An agreement in which the tenant pays a fixed rent and some or all of the utilities and the landlord pays all taxes, insurance, and expenses related to the property D) A lease in which the tenant pays rent plus some of the operating expenses related to the property

The answer is an agreement in which the tenant pays a fixed rent and some or all of the utilities and the landlord pays all taxes, insurance, and other expenses related to the property. In a gross lease, the tenant pays no part of the property's operating expenses other than utilities.

A loan that provides for the full payment of the principal over the life of the loan is

The answer is an amortized loan. An amortized loan is paid off in regular periodic payments that include both principal and interest over a term of years.

When it insures a home loan, FHA tries to minimize its risk by requiring

The answer is an appraisal of the real estate by an FHA-approved appraiser. An important feature of an FHA-insured loan is its low down payment, although the borrower must still meet standard FHA credit qualifications.

A right or privilege tied to real property, although not necessarily part of the property, is called

The answer is an appurtenance. An appurtenance is a right or privilege association with the property, although not necessarily a part of it. An emblement or trade fixture is a tangible item on the property. The deed is a document that transfers title.

The transfer of rights or duties under a contract to a third party is called

The answer is an assignment. The transfer of rights or duties under a contract to a third party is called an assignment.

A person who plans to be the qualifying broker for a corporation applies for a company license. That person must also be A) an independent person not affiliated with the corporation B) an employee or officer of the corporation C) an officer of the corporation D) a shareholder of the corporation

The answer is an employee or officer of the corporation. The company license may be issued to a qualifying broker, corporation, sole proprietorship, or partnership; however, a qualifying broker who is an officer, partner, or employee of the company must make the application for a corporation or partnership license.

A sales associate's contract with her broker states that she is not an employee. In the past year, less than half her income was commission, with the rest an hourly wage paid by the broker. The IRS would classify her as

The answer is an employee. Because her earnings were more than half in hourly wages, the IRS would not consider her to be an independent contractor within the definition of a qualified real estate agent, but would treat her as an employee of the broker.

Often, a subdivision application will include A) a request for monetary assistance from the city. B) a petition from the nearby property owners. C) a copy of bank preapproval for a development loan. D) an environmental impact report.

The answer is an environmental impact report. The land must be surveyed and laid out so that the subdivision utilizes natural drainage and land contours. Often an environmental impact report is required with the application for subdivision approval.

Federally funded projects require A) an environmental assessment statement (EAS). B) an environmental hazard statement (EHS). C) an environmental status statement (ESS). D) an environmental impact statement (EIS).

The answer is an environmental impact statement (EIS). A federally funded project requires an environmental impact statement (EIS) to be performed.

A buyer signed an agreement with a broker to compensate the broker even if the buyer purchases the property from a relative. This is called

The answer is an exclusive buyer representation agreement. An exclusive buyer representation agreement binds the buyer to compensate the agent whenever the buyer purchases a property of the type described in the contract, even if the buyer finds the property independently.

Once a sales contract is completed with all parties fulfilling their promises, the ownership changing hands, and the seller receiving the purchase price, the sales contract is

The answer is an executed contract. At closing, after the seller has conveyed the property to the buyer and the seller has received the sales price amount, the contract is considered an executed contract.

A buyer who owns the property in equity has

The answer is an executory contract. During any point in the executory contract (time period between signed offer to title transfer), the buyer has equitable title (also called the owner in equity).

When the parties agree to terms and show their intentions in words, whether orally or written, the agreement is said to be

The answer is an express contract. In an express contract, the parties state the terms and show their intentions in words—oral or written. Most real estate contracts are express contracts; they have been committed to writing. Under the statute of frauds, certain types of contracts must be in writing to be enforceable in a court of law.

The Superfund Amendments and Reauthorization Act (SARA) created A) a responsible party status. B) an innocent government immunity status. C) an innocent landowner immunity status. D) a liable party status.

The answer is an innocent landowner immunity status. The Superfund Amendments and Reauthorization Act (SARA) recognizes that a landowner in the chain of ownership could be completely innocent of all wrongdoing and therefore should not be held liable for environmental problems associated with the presence of undisclosed landfills and hazardous waste sites.

A broker just explained the value of signing an exclusive agency listing with a broker who is a member of the multiple listing service. The broker is trying to overcome the misconceptions of the seller who asked about

The answer is an open listing. Sellers are often confused, thinking that the only way to find buyers from a number of brokers is to enter into an open listing. Explaining the advantages of a multiple listing service can overcome the misconception.

All of these are common tests of a valid zoning ordinance EXCEPT A) all property owners being affected in a similar manner. B) clear and specific provisions. C) anticipation of future housing needs. D) a nondiscriminatory effect.

The answer is anticipation pf the future housing needs. The comprehensive plan would seek to anticipate future housing needs.

Which of the following must the seller's agent disclose to the buyer? A) The fact that the seller has AIDS B) The fact that the seller is near bankruptcy or foreclosure C) Any known material defects that affect health or safety D) The lowest offer the seller will accept for the property

The answer is any known material defects that affect health or safety. Alabama does not require a written property disclosure report by the seller though the law requires the seller and the seller's agent to disclose any material defects of the property.

Managers who monitor a portfolio of properties similar to a securities portfolio by analyzing the performance of the properties and making recommendations to the owners of the properties are called A) portfolio specialists. B) asset specialists. C) property analysts. D) asset managers.

The answer is asset managers. Managers who monitor a portfolio of properties similar to a securities portfolio by analyzing the performance of the properties and making recommendations to the owners of the properties are called asset managers.

A buyer has given rights under a sales contract to a third party but has not been released of the liability under the contract. This is called

The answer is assignment. Assignment refers to a transfer of rights or duties under a contract. The obligations may be delegated to a third party but the original party remains primarily liable unless specifically released.

Alabama environmental laws and regulations are A) implemented by the Alabama Real Estate Commission. B) nonexistent; state agencies enforce federal laws only. C) at least equivalent to federal standards. D) less restrictive than federal laws.

The answer is at least equivalent to federal standards. According to the website maintained by ADEM—the Alabama Department of Environmental Management—Alabama was allowed to assume responsibility for implementing federal laws only after demonstrating that state laws and regulations are at least equivalent to federal standards and that the state has matching funds and personnel available to administer the programs.

A property description using the metes-and-bounds method must always end where?

The answer is at the point of beginning. This method of property description always ends back at the point of beginning so that the tract being described is completely enclosed.

A key element of an agent's fiduciary responsibility of loyalty is to

The answer is avoid conflicts of interest. As a fiduciary, an agent should hold the client's interests above those of all others and avoid even the appearance of a conflict of interest. Reporting the status of funds is an accounting responsibility. Obeying the principal's instructions relates to obedience. Revealing relevant information relates to the responsibility of disclosure.

An important purpose of a living trust is to

The answer is avoid having property in the trust go through probate. On the trustor's death, the trust need not go through a probate proceeding because title automatically passes to the beneficiary named in the trust. The living trust has no effect on the value of the estate for estate tax purposes, however.

The sudden removal of soil by an act of nature is called

The answer is avulsion. The sudden removal of soil by an act of nature is called avulsion.

At what point should a real estate licensee discuss potential conflicts of interest when listing a property for sale? A) Before the seller executing a purchase offer B) Before showing the property to a client of the same company C) Before presenting a purchase offer to the seller D) Before signing the listing agreement

The answer is before signing the listing agreement. Real estate licensees should discuss the possible conflicts of interest and limited consensual dual agency before the seller signs the listing agreement. The seller might not want to enter into a listing agreement with the expectation of aggressive representation from the agent, only to see the agent's responsibilities later diluted through limited consensual dual agency. The seller might prefer to list with a company with a lower likelihood of potential conflicts of interest.

A real estate professional's duties to a customer do NOT include A) care and skill in performance. B) disclosure of all facts that the real estate professional knows or should reasonably be expected to know that materially affect the value or desirability of the property. C) being primarily responsible to the customer. D) honest and fair dealing.

The answer is being primarily responsible to the customer. Even though an agent's primary responsibility is to the principal, the agent also has duties to third parties. Any time a real estate professional works with a third party, or customer, the real estate professional is responsible for adhering to state and federal consumer protection laws, as well as the ethical requirements imposed by professional associations and state regulators. In addition, the real estate professional's duties to the customer include reasonable care and skill in performance, honest and fair dealing, and disclosure of all facts that the real estate professional knows or should reasonably be expected to know that materially affect the value or desirability of the property.

Cities with local datums also have designated official local

The answer is benchmarks. Cities with local datums also have designated official local benchmarks.

A contract that exchanges a promise for a promise is said to be

The answer is bilateral. When all parties to the contract make promises to give something, the contract is said to be bilateral.

A developer obtained a loan for 12 parcels of real estate. The loan provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. What type of loan is this?

The answer is blanket loan. This is a blanket loan with a provision for partial release as properties are sold. In a blanket loan, a borrower puts up several parcels of real estate to be used as security for the debt.

Zoning disputes and requests for variances are heard by which body? A) Zoning board B) Board of appeals C) Board of adjustments D) Board of equalization

The answer is board of adjustments. In Alabama, a board of adjustments hears zoning disputes and requests for variance. A board of equalization hears disputes about property tax appraisals. The zoning board makes recommendations to local government about zoning ordinances to pass. Although many state agencies have their own boards of appeals, there is no single entity called a board of appeals.

A property with encumbrances that will outlast the closing

The answer is can be sold if a buyer agrees to take it subject to the encumbrances. A buyer can agree to purchase property with existing encumbrances, such as a lien that the purchaser will assume.

A builder goes all over the country buying large tracts of vacant land, splitting them into smaller parcels, and building identical communities of single-family ranch-style homes surrounding a central shopping center. The builder sells the homes to residents and leases space in the shopping center to merchants. The builder is A) a subdivider only. B) both a developer and a subdivider. C) an assembler. D) a developer only.

The answer is both a developer and a subdivider. Subdividers buy undeveloped acreage and divide it into smaller lots. A developer improves the land, constructs homes or other buildings, and sells them. Developing is usually more complex than subdividing.

In a mortgage or lien theory state, the mortgagor retains

The answer is both legal and equitable title. In a mortgage or lien theory state, the mortgagor retains legal and equitable title to the property that is used as security for a loan.

A general lien affects the debtor's property,

The answer is both real and personal. A general lien affects the debtor's property, both real and personal.

In Alabama, who is allowed to prepare contracts for the purchase of real estate for others? A) Both real estate brokers and attorneys B) Attorneys C) Real estate brokers D) Unlicensed administrative personnel in a real estate office

The answer is both real estate brokers and attorneys. Alabama courts have not yet decided whether a contract for sale/lease of real estate requires a licensed attorney to prepare the form. At the present time, Alabama brokers are permitted to draft real estate sales/lease contracts, provided they do not charge a fee for preparing such documents.

Which of the following is a similarity between an exclusive agency listing and an exclusive right-to-sell listing? A) Both types of listings give the responsibility of representing the seller to one broker only. B) Both types of listings are open listings. C) Under each, the seller retains the right to sell the real estate without the broker's help and without paying the broker a commission. D) Under each, the seller authorizes only one particular sales associate to show the property.

The answer is both types of listings give the responsibility of representing the seller to one broker only. Each listing is exclusive, meaning it is granted to one broker exclusively. While the exclusive agency listing would allow the seller to find a buyer without paying a commission, the exclusive right-to-sell listing would require a commission to be paid even if the seller alone procured the buyer. Open listings impose no limit on the number of additional brokers that might be hired by the seller.

If a potentially responsible party (PRP) refuses to pay the expenses of cleaning up a toxic site, the EPA may A) bring an administrative action and be awarded the actual cost of the cleanup, plus court costs. B) have no legal recourse. C) bring a civil action and be awarded three times the actual cost of the cleanup. D) bring a criminal action and have the PRP jailed for up to 10 years.

The answer is bring a civil action and be awarded three times the actual cost of the cleanup. A PRP is a potentially responsible party. If the PRP does not clean up the site, the EPA bills the PRP for the cost. Then, if the PRP still refuses to pay, the EPA can seek damages in court for up to three times the actual cost of cleanup.

The acronym BPO stands for

The answer is broker's price opinion. This might be requested by a lender when an existing borrower has requested a refinancing or home equity line of credit.

Regulation Z requires disclosure of all of the following EXCEPT A) a loan origination fee. B) discount points. C) the loan interest rate. D) brokerage commissions.

The answer is brokerage commissions. Regulation Z has to do with disclosing details of the proposed loan. It does not deal with brokerage commissions.

Which term BEST describes the service of bringing together buyers and sellers and landlords and tenants to complete a real estate transaction? A) Consideration B) Minimum services C) Procuring cause D) Brokerage

The answer is brokerage. In Alabama, a real estate broker is licensed to act as an intermediary between parties involved in buying, selling, exchanging, renting, or leasing real estate.

Defunct, derelict, or abandoned commercial or industrial sites, many of which are suspected to contain toxic waste, are called A) redfields. B) brownfields. C) greenfields. D) blackfields.

The answer is brownfields. The Small Business Liability Relief and Brownfields Revitalization Act, the Brownfields Law, provides funds to assess and clean up brownfields, clarifies liability protections, and provides tax incentives toward enhancing state and tribal response programs.

Which of the following would be considered a variable expense when a manager develops an operating budget? A) Building repairs B) Employee wages C) Basic operating costs D) Utilities

The answer is building repairs. Cash reserves are needed to deal with unscheduled or variable expenses such as unexpected building repairs.

Real estate professionals can't be experts in all areas of real estate law,

The answer is but they should know and understand some basic principles. A real estate professional can't be an expert in all areas of real estate law; however, real estate professionals should know and understand some basic principles.

The primary activity of Freddie Mac is to

The answer is buy and pool blocks of conventional mortgages. Freddie Mac—the Federal Home Loan Mortgage Corporation (FHLMC)—buys and gathers into bundles (pools) existing conventional mortgages. Freddie Mac raises money to do this by selling bonds backed by these pools of mortgages.

The holder of a right of reentry of real estate (or the holder's heir or successor) can assert the right

The answer is by bringing a legal action in court. With a fee simple subject to a condition subsequent, the estate does not automatically terminate upon violation of the condition of ownership. The owner (or the owner's heir or successor) has the right of reentry but must bring a legal action in court to assert the right.

Zoning powers are conferred on municipal governments in which of the following ways? A) By state enabling acts B) By popular local vote C) Through city charters D) Through the master plan

The answer is by state enabling acts. Zoning powers lie with state governments. Local zoning power is conferred on local jurisdictions by the state through enabling acts.

Depending on the type of trust and its purpose, the trustor, trustee, and beneficiary

The answer is can all be either people or legal entities. Depending on the type of trust and its purpose, the trustor, trustee, and beneficiary can all be natural persons or legal entities.

Waste disposal sites are A) lined for aesthetic reasons. B) never owned by private enterprise. C) capped with soil for aesthetic reasons. D) capped with soil for legal reasons.

The answer is capped with soil for aesthetic reasons. Lining prevents seepage, and both private industry and governments own and operate sites.

Which term means "let the buyer beware?" A) Caveat emptor B) Caveat viator C) Caveat vendee D) Caveat venditor

The answer is caveat emptor. As a caveat emptor (let the buyer beware) state in the sale of commercial properties and used residential properties, Alabama does not require a written property disclosure report by the seller. Caveat venditor means let the seller beware and applies to the sale of new residential properties. The rule in Alabama for new residential properties is caveat venditor.

A subordination agreement is a written agreement between lienholders to

The answer is change the priority of a mortgage. Under a subordination agreement, the holder of a superior or prior lien agrees to permit a later lienholder's interest to take precedence.

The supposition that no physical or economic condition remains constant is exemplified by the principle of

The answer is change. Real estate is subject to natural phenomena, routine wear and tear, and the demands of the market, just as any business is.

According to the Fair Housing Act, what is steering? A) An appropriate method to manage risks associated with rental property ownership B) Encouraging people to rent or sell by claiming that certain protected classes of people will have a negative impact on property values C) Channeling of protected class members to certain buildings or neighborhoods D) A method of providing reasonable accommodation for people with disabilities

The answer is channeling of protected class members to certain buildings or neighborhoods. Steering is prohibited under the Fair Housing Act. Blockbusting is encouraging people to rent or sell by claiming that the entry of certain protected classes of people in an area will have a negative impact on property values.

Real estate professionals must scrutinize their business practices and be particularly careful NOT to fall victim to A) local city or county employees who lead them into discriminatory practices. B) scams by "advisors" that would lead them into discriminatory practices. C) clients or customers who expect professionals to discriminate. D) other real estate brokers who lead them into discriminatory practices.

The answer is clients or customers who expect to discriminate. Real estate professionals must also reject illegal practices of other real estate professionals based on "the way we've always done things," officials who expect a pattern of discrimination, and schemes that are too good to be true.

Many organizations seek to ensure a high standard of conduct in their members by developing and requiring adherence to a

The answer is code of ethics. One way that an organization can work to ensure a high standard of conduct is by adopting and enforcing a code of ethics.

A broker performing as a property manager who deposits the rent into his operating account is an example of

The answer is commingling. Mixing a broker's money with a client's money is commingling (and illegal).

According to some states, any real property that either spouse owns at the time of marriage remains separate property. Further, any real property acquired by either spouse during the marriage (except by gift or inheritance or with the proceeds of separate property) belongs to both of them equally. What is this form of ownership called?

The answer is community property. This arrangement falls under community property law, which is found—with some variations in details—in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and as an option in Alaska.

A licensed EIFS inspector must complete which requirements? A) Complete a written application B) Pass a written exam with a score of 70 or more C) Complete an apprenticeship of six months D) Provide three letters of recommendation regarding character

The answer is complete a written application. There are very few requirements for licensure as an EIFS inspector, and no written exam.

A person holds a real estate license in a state that has similar licensing requirements to Alabama. To also obtain a license in Alabama, the person must A) complete an Alabama application and submit an official license history from the home state. B) complete 30 hours of prelicensing education in Alabama. C) complete an Alabama application and attach a copy of the home-state license. D) pay a $750 fee and provide proof of current license status in the other state.

The answer is complete an Alabama application and submit an official license history from the home state. To obtain a reciprocal license in Alabama, the licensee must complete an application form, pay the appropriate fees, and submit an official certificate of licensure (license history) that indicates current licensure in another state. This certificate must be current within the previous 120 days.

All of the following are required of a broker who is seeking to collect a commission for brokering the sale of a property EXCEPT A) having had a contract of employment—an agency representation agreement. B) complying with a commission rate set by a trade organization. C) having been the procuring cause in the transaction or having an exclusive-right-to-sell agreement. D) having a valid real estate broker's license.

The answer is complying with a commission rate set by a trade organization. Professional organizations may not set fees or commissions splits.

Ownership of property by two people is considered

The answer is concurrent ownership. Ownership in severalty is ownership by one individual. Two or more individuals can own property together in a form of concurrent ownership.

Which of the following is NOT a governmental power? A) Police power B) Escheat C) Condemnation D) Eminent domain

The answer is condemnation. Governmental powers are police, escheat, eminent domain, and taxation. Condemnation is the process by which the government exercises the right of eminent domain, by either judicial or administrative proceedings.

A man has a deed to a lakefront cottage, along with 5% of the parking lot, laundry room, and boat house. He owns a A) condominium unit. B) membership camping interest. C) time-share. D) cooperative unit.

The answer is condominium unit. The condominium buyer receives a deed to real property. This form of ownership is designed to provide exclusive use and fee ownership of a portion of a larger property, plus shared use and ownership of common areas.

A man owns one of 20 units in fee simple, along with a 5% ownership share in the parking facilities, recreation center, and grounds. What kind of property does he own?

The answer is condominium. When a person owns part of a development in fee and a percentage of the rest in common with the other unit owners, this is condominium ownership.

What kind of ownership do the horizontal property acts regulate?

The answer is condominiums. Condominiums are regulated by the horizontal property acts enacted in most states.

At the risk of seeming boring or monotonous, properties will still be at their highest value if the neighborhood exhibits

The answer is conformity. Maximum value is created when a property is in harmony with its surroundings.

The principle that maximum value is realized when land use is in harmony with surrounding uses is

The answer is conformity. The principle of conformity indicates that maximum value is created when a property is in harmony with its surroundings. Contribution is the principle that evaluates the cost of adding an improvement against the value of the property as a whole. Competition is the interaction of supply and demand, while highest and best use is the most profitable single use to which the property may be put.

An apartment complex is severely damaged by a tornado, making it uninhabitable. What type of insurance covers the landlord against the resulting loss of rent? A) Liability B) Fire and hazard C) Consequential loss, use, and occupancy D) Casualty

The answer is consequential loss, use, and occupancy. Consequential loss policies—also called business interruption insurance—offset loss of rental income due to disasters that keep a property from being used.

In the common law of agency, an agent owes the principal all of the following EXCEPT A) consideration. B) disclosure. C) obedience. D) loyalty.

The answer is consideration. The agent owes the duties of COLD-AC: care, obedience, loyalty, disclosure, accounting, and confidentiality..

Two contracts from the same buyer are used on the same property. One of the contracts is used to purchase and the other to finance, with the true price only known between the contracting parties and their agent. This is A) valid as long as the buyer and seller agree to the terms. B) valid as long as the amount financed does not exceed $125,000. C) legally called a bait and switch. D) considered a fraudulent practice.

The answer is considered a fraudulent practice. Using two contracts from the same buyer on the same property, one to purchase and the other to finance, with the true price only known between the contracting parties and their agent, is called a dual contract and is a fraudulent practice.

The legal presumption that information may be obtained by an individual through due diligence is

The answer is constructive notice. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.

Properly recording documents in the public record provides what type of notice to the world of an individual's rights or interest?

The answer is constructive. Constructive notice is the legal presumption that information may be obtained by an individual through due diligence. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.

The recovery fund provides payment to A) licensees who cannot collect commissions from their brokers. B) brokers who cannot collect commissions from a cooperating broker. C) brokers who cannot collect commissions from their seller clients. D) consumers who have suffered monetary damage as a result of a licensee's violation(s) of the Alabama Real Estate License Law.

The answer is consumers who have suffered monetary damage as a result of a licensee's violation(s) of the Alabama Real Estate License Law. These funds are awarded to the complainant either through a judicial process or as the result of an investigation by the Commission that finds fault on the licensee's part. A licensee may not use the fund to recover unpaid commissions.

Real estate license laws exist primarily to protect

The answer is consumers. The main objective of real estate license laws is to make sure that the rights of purchasers, sellers, tenants, and owners are protected from unscrupulous or negligent practices.

Which type of loan typically has he lowest loan-to-value ratio?

The answer is conventional. Conventional loans are viewed as the most secure loans because their loan-to-value ratios are often lowest.

The real property interest that takes the form of personal property is

The answer is cooperative unit ownership. Because it involves receiving shares of stock and a leasehold—both of which are considered by common law to be personal property—cooperative ownership is personal, not real, property.

A person lives in an apartment building. The land and structures are owned by a corporation, with one mortgage loan securing the entire property. Like the other residents, this person owns stock in the corporation and has a lease to the apartment. This type of ownership is called

The answer is cooperative. In a cooperative, a corporation holds title to the property and offers stock shares to the residents, who then receive a proprietary lease to the apartment.

A property manager repairs a leaking sink. This is classified as which type of maintenance? A) Corrective B) Preventive C) Construction D) Routine

The answer is corrective. Fixing something that is not working properly (malfunctioning) is making a corrective repair.

An appraiser determining the accrued depreciation of a property is using which approach to value? A) Capitalization B) Income C) Sales comparison D) Cost

The answer is cost. In the cost approach, the appraiser determines the total accrued depreciation of the improvements, which is subtracted from the current construction cost of the improvements to find their contribution to property value.

A restriction in a seller's deed may be enforced by which of the following? A) Zoning board of appeal B) State legislature C) Court injunction D) City building commission

The answer is court injunction. Deed restrictions are private land-use controls and can only be enforced by a suit for injunctive relief. The courts can prevent someone from violating a recorded restriction by issuing an injunction—forcing the violator to remove the violation or stop the activity.

Which of these is a guarantee that the grantor has the right to convey the property?

The answer is covenant of seisin. The covenant against encumbrances is a warranty that the property is free from encumbrances, except as so noted. The grantor further assures that everything will be done to make the title good. Quiet enjoyment guarantees that the title will be good against third parties who might try to bring legal action to gain the property.

What is NOT included in public land-use controls? A) Environmental protection laws B) Subdivision regulations C) Comprehensive plan specifications D) Covenants, conditions, and restrictions

The answer is covenants, conditions, and restrictions. Restrictive covenants are private—not public— land-use controls.

Lenders charge a loan origination fee to

The answer is cover the expenses involved in generating the loan. The processing of a mortgage application is called loan origination. When a home loan is originated, a loan origination fee is charged by most lenders to cover the expenses involved in generating the loan.

All of the following are valid reasons for terminating a buyer representation agreement EXCEPT A) agreement of the parties. B) death of the sales associate who worked with the buyer. C) death of the broker. D) purchase of a property.

The answer is death of the sales associate who worked with the buyer. A listing agreement is a personal service agreement between a broker and a seller, not between a sales associate and a seller.

Lenders usually look at a loan applicant's percentage of

The answer is debt to income. A homebuyer may be expected to incur a monthly housing payment of no more than 28% of the borrower's gross monthly income, with monthly payments on all debts no exceeding 36% of gross monthly income.

The rules of the AREC can be changed by a A) decision by the Alabama real estate commissioners, notification to the public, and a public hearing before adoption. B) vote of the legislature and signed by the governor. C) petition from members of the public. D) vote by the members of the Alabama Association of REALTORS®.

The answer is decision by the Alabama real estate commissioners, notification to the public, and a public hearing before adoption. The Commission is a policy-making body with the authority to promulgate rules for the regulation of the real estate industry consistent with all applicable statutes. The state legislature passes statutes, but the AREC is responsible for the rules and regulations necessary to implement those statutes.

To institute a nonjudicial foreclosure, the trustee or mortgagee may be required to record a notice of

The answer is default at the county recorder's office. To institute a nonjudicial foreclosure, the trustee or mortgagee will send a notice of default to the borrower indicating the amount that must be paid to make the debt current, as well as the action that will be taken if the required payment is not made.

Which of the following is NOT covered by an extended title insurance policy? A) Defects and liens listed in the policy B) Rights of parties in possession C) Certain unrecorded liens D) Defects that may be discovered by an inspection

The answer is defects and liens listed in the policy. A title company will not cover against defects that appear in a title search. These are included in the policy as exclusions.

Title is conveyed by deed only when the deed has been

The answer is delivered to and accepted by the grantee. Title to property is not considered transferred until the deed to the property is actually delivered to and accepted by the grantee. Sometimes, the grantee may refuse to take title to property.

All of the following would cause a high vacancy rate EXCEPT A) indifferent management. B) poor location. C) desirable amenities. D) excessive rent.

The answer is desirable amenities. Desirable amenities would be found in properties with a low vacancy rate. When the vacancy rate is high, the manager needs to determine why. The manager should first identify and correct problems before lowering rents because the problem might be poor management or a defective or undesirable property.

The condominium form of property ownership can be used for

The answer is detached structures. While many types of structure have been designed for or converted to the condominium form of ownership, there is no requirement that individual units share walls or floors.

All of the following factors would be important in comparing properties under the sales comparison approach to value EXCEPT A) differences in financing terms. B) differences in dates of sale. C) differences in original cost. D) differences in appearance and condition.

The answer is differences in original cost. None of the approaches to appraisal considers the original (historical) cost of a property. The other three factors would be relevant to the sales comparison—sometimes called the market data—approach. Original cost, however, is used in computations of book- value depreciation for tax purposes.

A seller tells his agent in confidence that he must sell fast and may accept less than the list price. The agent tells a buyer the seller will accept up to $5,000 less than the list price. Which is TRUE? A) The agent has not violated any agency responsibilities to the seller. B) The relationship between the agent and the seller ends automatically if the purchaser submits an offer. C) Disclosure was improper and possibly illegal, regardless of the agent's motive. D) The agent should have disclosed this information, regardless of its accuracy.

The answer is disclosure was improper and possibly illegal, regardless of the agent's motive. Such action is an example of the agent's failure to maintain confidentiality—a breach of the agent's fiduciary duty.

The federal Fair Housing Act does NOT prohibit A) discriminating on the basis of marital status. B) blockbusting. C) discriminatory advertising. D) redlining.

The answer is discriminating on the basis of marital status. Marital status is not one of the seven protected classes under the federal Fair Housing Act.

When using email to communicate with clients, real estate professionals should

The answer is do all of these. In communicating with clients or consumers via email, best practices include using the subject line in a useful and helpful manner, avoiding spelling errors, responding promptly to all email messages, being specific and brief, and paying attention to the size of any file attachments. Real estate professionals should never send unsolicited email messages.

A tenant's tenancy for years will expire in two weeks. The tenant plans to move to a larger apartment across town when the current tenancy expires. In order to terminate this agreement, the tenant must

The answer is do nothing because the agreement will terminate automatically at the end of the current term. In common law, a tenant for a specified period (one who holds a lease for years) does not have to give notice because the lease ends by contractual agreement. Nor does the landlord have to give the tenant notice in such a case, unless required to do so by state law.

A property owner wants to use water from a river that runs through the property to irrigate a potato field. To do so, the owner is required by state law to submit an application to the Department of Water Resources describing in detail the plan for beneficial use of the water. If the department approves the owner's application, it will issue a permit allowing a limited amount of river water to be diverted onto the property. Based on these facts, it can be assumed that this property owner's state relies on which rule of law?

The answer is doctrine of prior appropriation. Many states whose water is in relatively short supply have passed statutes authorizing a system of prior appropriation in which owners downstream do not necessarily have to wait for "what's left" after those upstream have drawn their fill. Priority—who is allowed to appropriate water first—is established, instead, by the date of approved filing and continued conformity with any rules and limitations on use imposed by the jurisdiction.

The death of one of the directors of a corporation

The answer is does not affect title to property owned by the corporation. The corporation is a separate entity. Corporations may have the potential to live forever and the corporation would simply replace the director without any discontinuation of operations.

Nonconforming use is a term used in reference to property that A) is in need of deferred maintenance. B) extends over lot lines. C) has not been recorded. D) doesn't comply with current zoning requirements.

The answer is doesn't comply with current zoning requirements. When zoning in an area changes, a pre-existing improvement is allowed to continue as a nonconforming use.

The seller told the listing broker that the seller's loan was assumable. Upon reviewing the seller's loan documents the listing broker found the mortgage was not assumable and the seller would have to pay off the mortgage upon sale. What clause did the listing broker discover upon reading the mortgage document?

The answer is due-on-sale clause. Upon sale of the property, the due-on-sale or alienation clause requires payment of the lien before the transfer of title and does not allow for assumption of the loan.

A broker is retiring and wants to submit the firm's listings to another broker. How can the broker do this?

The answer is each seller must agree to a new listing with the new broker. Because the listing agreement is a contract for the personal services of the original broker, every seller has the right to cancel the listing agreement and not work with the new broker.

For as long as anyone can remember, neighbor families have used a footpath to get to the river. Recently, the current owner of the footpath erected a fence across the path. Which of these easements might the neighbors claim would require the owner of the footpath to remove the fence? A) Easement in gross B) Appurtenant easement C) Easement by necessity D) Easement by prescription

The answer is easement by prescription. Long-time unauthorized usage may create legal rights leading to an easement by prescription. An easement in gross is a personal right, often used by utility companies. An easement by necessity could be imposed by court order to provide access to a landlocked property.

Which of the following is personal property? A) A vineyard B) An orchard C) Emblements D) Perennial shrubbery

The answer is emblements. Annually cultivated crops such as fruit, vegetables, and grain are known as emblements and are generally considered personal property. Vineyards and orchards generally yield perennial crops and are considered real property.

A suit for condemnation would be used to exercise which governmental right?

The answer is eminent domain. The process is condemnation; the power is eminent domain.

In the period after an offer to purchase real estate is accepted and the sale is closed, the buyer acquires an interest in the property that is called

The answer is equitable title. A person who holds equitable title has rights that vary from state to state, but equitable title may give the buyer an insurable interest in the property.

Government powers include police power, eminent domain, taxation, and

The answer is escheat. A governing body is able to enact laws to protect the public's welfare through its police power, take property for a public use by its right of eminent domain, enact taxes to provide for maintenance of public services, and take over ownership of property when an owner dies and no heir can be found.

A property owner dies without a will or lawful heirs. By what process does the property revert back to the government?

The answer is escheat. State laws provide for ownership to transfer, or escheat, to the state when an owner dies and leaves no heirs (as defined by state law) and there is no will or living trust instrument that directs how the real estate is to be distributed.

Capitalization is the process by which annual net operating income is used to

The answer is estimate value. Capitalization (the income approach) requires the use of the net operating income, and capitalization rate to find value.

All of the following should be a consideration in selecting tenants for the property EXCEPT A) ethnic background of the tenants and their employees. B) compatibility of the tenants' business with those of other tenants. C) size of the available space relative to the tenants' requirements. D) tenants' ability to make the rental payments.

The answer is ethnic background of the tenants and their employees. The criteria for tenant selection should include space requirements of the tenants, ability to pay the rent, and compatibility of the business with that of the other tenants. Ethnic background should not be considered in order to avoid violation of any local, state, or federal fair housing laws.

Under its police powers, a municipality may regulate all of the following about housing in a development EXCEPT A) lot sizes. B) type of structure. C) building uses. D) ethnicity of owners.

The answer is ethnicity of owners. Police powers may control the use, size, details of construction, and density of occupancy—but not who may own buildings.

Buyers can be liable for cleanup of contaminated property A) only if the contamination was created during the five years preceding the purchase. B) unless they obtain the proper endorsement on their title insurance. C) only if the buyer does not obtain a Phase I. D) even if they had no knowledge of the contamination.

The answer is even if they had no knowledge of the contamination. Responsibility for cleaning up hazardous waste on a property varies. The only way buyers can protect themselves from unexpected costs is to thoroughly research before buying. Because cleanups can be quite costly, prospective buyers should obtain as many reports as available from the EPA, ADEM, and private environmental specialists. Do not be confused by the law that says a lender can protect itself from postforeclosure liability for unknown contaminants, but only if it requires a Phase I before making the loan. The rule protects lenders, not buyers.

Misrepresentation or omission might result in broker liability

The answer is even if unintentional. Misrepresentation or omission does not have to be intentional to result in broker liability.

The civil rights laws that affect the real estate industry help ensure that A) home sellers report on the reasons for rejecting any offers. B) everyone has the opportunity to live wherever they can afford to live. C) communities are able to attract developers to build and offer homes for sale. D) community revenues are enhanced through greater home sales.

The answer is everyone has the opportunity to live wherever they can afford to live. The civil rights laws that affect the real estate industry help ensure that everyone has the opportunity to live wherever they can afford to live.

A property owner's bundle of legal rights entitles the owner to do all of the following EXCEPT

The answer is exclude utility meter readers. The right of exclusion generally allows an owner to exclude someone else from entering the property, but this does not include the right to exclude the utility meter reader.

A contract that has been signed by all parties is

The answer is executed. An executed contract also is one in which all parties have fulfilled their promises; that is, the contract has been performed. An executed (signed) contract may or may not be enforceable depending on its terms.

A lease would be terminated by which of the following? A) Sale of the leased premises B) Expiration of the term in a lease for years C) Death of the tenant D) Abandonment of the leased premises by the tenant

The answer is expiration of the term in a lease for years. A tenancy (estate) for years is a leasehold estate that continues for a definite period with specific beginning and ending dates.

After a real estate professional takes a sale listing of a residence, the owners specify that they will not sell the home to any Chinese family. The real estate professional should do which of the following? A) Advertise the property exclusively in newspapers marketed to persons of Chinese heritage. B) Abide by the owners' directions despite the fact that they conflict with the fair housing laws. C) Explain to the owners that the instruction violates federal law and that the real estate professional cannot comply with it. D) Require that the owners sign a separate legal document stating the additional instruction as an add-on to the listing agreement.

The answer is explain to the owners that the instruction violates federal law and that the real estate professional cannot comply with it. The fiduciary duty of obedience requires that the broker obey all LAWFUL instructions. This is not a lawful instruction as it requires a violation of the Fair Housing Act. If the owners are adamant, to avoid breaking the law, the real estate professional must terminate the representation.

An encroachment describes improvements that A) extend over adjoining lot lines. B) does not comply with zoning. C) is in need of deferred maintenance. D) has not been recorded.

The answer is extend over adjoining lot lines. An example of an encroachment is a shed that extends two feet onto the neighbor's property.

Regulation Z defines a creditor as any person who

The answer is extends consumer credit more than 25 times each year (or more than 5 times when dwellings are used as security.) A creditor, for purposes of Regulation Z, is any person who extends consumer credit more than 25 times each year or more than 5 times each year if the transactions involve dwellings as security. The credit must be subject to a finance charge or payable in more than four installments by written agreement.

Agents who represent buyers as clients must be compensated by the buyer and are not entitled to a split of the listing commission. A) False, but only if the listing agent is from the same real estate firm B) False in all situations C) True in all situations D) True, but only if the listing agent is from the same real estate firm

The answer is false in all situations. Commission splits and compensation are freely negotiable between agents and clients, and between listing and selling agents. Rarely will a listing agreement specify that the listing agent may not share the commission with any other agent. This would be a foolish thing for a seller, because it would limit the number of people willing to show the property to potential buyers. In the commercial context, it is more common for the listing commission to be a relatively small percentage of the sale, with the listing agent unwilling to split the commission. This practice is relatively common in commercial sales because many buyers separately compensate their agents instead of relying on commission splits.

Because Alabama is a buyer-beware state for used residential structures and because a sales contract specifies that the property is being sold as is, this means the agent need not disclose known lead-based paint in a residence. A) True B) False C) True, but only because of the "as is" language in the contract D) True, but only if the residence was built after 1978

The answer is false. As previously mentioned, Alabama is a caveat emptor state. There are no state legal disclosure requirements for environmental concerns such as asbestos, urea-formaldehyde foam insulation (UFFI), and so on. Some disclosures must be made under federal law (e.g., lead-based paint). In the case of lead-based paint, the federal law supersedes the state law of caveat emptor.

How can property owners help avoid carbon monoxide exposure? A) Have their basements tested for carbon monoxide seeping in from the soil B) Encapsulate sources of carbon monoxide emissions C) Have fuel-burning heating systems checked and maintained annually D) Install attic vents

The answer is have fuel-burning heating systems checked and maintained annually. Heating systems are prime sources of carbon monoxide if they are poorly vented or poorly maintained.

The Real Estate Settlement Procedures Act (RESPA) does NOT prohibit A) lenders from requiring excessive escrow account deposits, money set aside to insure the payment of taxes, hazard insurance, and other charges related to the property. B) fee-splitting for referrals of settlement services. C) fees for settlement services performed. D) home sellers from requiring that home buyers buy title insurance from a particular company.

The answer is fees for settlements services performed. RESPA does not prohibit fees for performing settlement services, but does prohibit fee-splitting, lenders requiring excessive escrow account deposits, and a home seller requiring use by the buyer of a particular title insurer.

The Office of the Comptroller of the Currency (OCC) establishes regulations and standards for

The answer is fiduciary lenders. The Office of the Comptroller of the Currency (OCC) establishes regulations and standards for fiduciary lenders.

All of these reflect basic principles of value EXCEPT A) change. B) anticipation and conformity. C) competition and plottage. D) financing concessions.

The answer is financing concessions. The basic principles of value include the concepts of anticipation, change, competition, conformity, contribution, highest and best use, increasing and diminishing returns, plottage, regression and progression, substitution, and supply and demand. Financing concessions do not reflect the basic principles of property value.

Personal property included in a sale of real estate may include

The answer is fireplace equipment. Personal property may include fireplace equipment.

Which of the following is NOT an encumbrance on real estate? A) Easement B) Fixture C) Restrictive covenant D) Lien

The answer is fixture. An encumbrance is a right in, or claim against, property held by someone other than the property owner.

All of these are principal responsibilities of the property manager EXCEPT A) forcibly removing tenants for nonpayment of rent. B) achieving the objectives of the owners. C) generating income for the owners. D) preserving and/or increasing the value of the property.

The answer is forcibly removing tenants for nonpayment of rent. The property manager may start eviction proceedings but does not carry out the proceedings, which must be carried out by an officer of the court.

Should the buyer default, an example of liquidated damages to the seller in a purchase contract could be

The answer is forfeiture of the earnest money deposit. If a buyer provides earnest money, the earnest money is often identified in the contract as predetermined liquidated damages and is the seller's remedy for a buyer's default.

What is the shortest distance between Section 1 and Section 36 in the same township?

The answer is four miles. The shortest distance from Section 1 to Section 36 is from the bottom of Section 1 to the top of Section 36, or four miles.

Which of the following has an indeterminable duration? A) Freehold estate B) License C) Less-than-freehold estate D) Estate for years

The answer is freehold estate. Freehold estates, which last an indeterminable length of time, include fee simple, defeasible fee, and life estates.

Which statement is TRUE of the process a developer must follow when developing a parcel of land? A) An environmental impact report is always required with the application for subdivision approval. B) From the subdivision plans, plats are drawn dividing the land into lots. C) Plats have to be adopted by the municipality after they are recorded. D) The developer never pays the costs for the streets and sewers in the development.

The answer is from the subdivision plans, plats are drawn dividing the land into lots. The land must be surveyed and laid out so that the subdivision uses natural drainage and land contours. Often an environmental impact report is required with the application for subdivision approval, but it is not always required. Plats have to be adopted by the municipality before they can be recorded, not afterward. Often the developer pays the costs for streets and sewers.

A seller signed an exclusive right-to-sell agreement with a brokerage firm. If the seller finds a suitable buyer with no assistance, the firm is entitled to

The answer is full compensation from the seller. If a seller signs an exclusive right-to-sell listing with a broker, the seller owes the broker a commission, regardless of who sells the property.

A house has been on the market for several months because most buyers do not want to walk through the master bedroom from the garage to reach the kitchen. This floor plan is an example of

The answer is functional obsolescence. There is nothing physically wrong with the house, but the design is awkward (functionally obsolescent). Perhaps buyers would be more interested if another room could be used as the master bedroom and the room adjacent to the garage could be used as a home office or hobby room.

A tenant signs a lease that includes a schedule of rent increases on specific dates over the course of the lease term. What kind of lease has this tenant signed?

The answer is graduated. An agreement in which tenant agrees to pay predicted, regular increases during its term is called a graduated lease.

The words of conveyance are found in which clause?

The answer is granting clause. For a deed to be valid, it must contain words of conveyance, which are in the granting clause.

In one city, developers are limited by the zoning law to constructing no more than an average of three houses per acre in any subdivision. What does this restriction regulate? A) Covenants B) Clustering C) Gross density D) Out-lots

The answer is gross density. Public land-use controls commonly seek to control density—such as how many living units will be allowed per acre.

Which of the following is an unlicensed assistant permitted to perform in Alabama? A) Driving prospects to view properties for sale B) Handing potential buyers preprinted property information that has been prepared by a licensee C) Negotiating an agreement regarding collecting and holding the earnest money D) Independently hosting an open house

The answer is handing potential buyers preprinted property information that has been prepared by a licensee. Alabama law permits unlicensed assistants to perform certain administrative tasks. While driving potential buyers to view properties for sale might seem like a mere chauffeur-type activity, the activity is viewed as something requiring an active real estate license because of the opportunity for conversation and interaction with the consumer.

Many states now require at LEAST a real estate license or an association management license for those who specialize in managing A) shopping centers. B) medical buildings. C) mobile home parks. D) homeowners and condominium associations.

The answer is homeowners and condominium associations. Many states now require at least a real estate license or an association management license for those who specialize in managing homeowners and condominium associations.

Salespersons representing spring and summer purchasers of residential properties should advise them that A) floodplain maps are redrawn on June 1 of each year. B) school lets out soon. C) property taxes increase on May 1 each year. D) homestead exemptions must by claimed by July 1.

The answer is homestead exemptions must be claimed by July 1. The title company is not allowed to assess property in the new owner's name and also cannot claim exemptions for the new owner. Owners purchasing property in late spring and early summer should be advised to make haste in assessing the property and claiming their exemptions; otherwise, the October 1 tax bill could be much higher than anticipated.

A homeowner may be allowed certain protection from judgments of creditors as a result of the state's

The answer is homestead rights. Homestead rights are granted by statute in some states to provide some protection to debtors and their families against the execution of judgment liens on their homes by the action of unsecured creditors.

A buyer and a seller agree on a purchase price of $300,000 for a house. The contract contains a clause stating that "time is of the essence." Which statement is TRUE? A) A "time is of the essence" clause is not binding on either party. B) If the closing date passes and no closing takes place, the contract may be rescinded by the party who was ready to settle on the scheduled date. C) The closing date must be stated as a particular calendar date, and not simply as a formula, such as "two weeks after loan approval." D) The closing must take place within a reasonable period before the stated date.

The answer is if the closing date passes and no closing takes place, the contract may be rescinded by the party who was ready to settle on the scheduled date. "Time is of the essence" refers to the settlement date. If one party fails to go to settlement by that date, the other party may rescind (cancel) the contract.

All of the following are alternative risk management techniques EXCEPT A) retaining it. B) transferring it. C) avoiding it. D) ignoring it.

The answer is ignoring it. Risk management attempts to reduce the consequences of unforeseen events that could potentially create financial and personal losses. The four risk management techniques are avoid, control, transfer, and retain.

A broker listed a house for $247,900. A member of a racial minority group saw the house and was interested in it. When the prospective buyer asked the broker the price of the house, the broker said it was listed for $253,000 and that the seller was very firm on the price. Under the federal Fair Housing Act, such a statement is A) legal because the representation was made by the broker and not directly by the owner. B) illegal because the difference in the offering price and the quoted price was greater than 10%. C) illegal because the terms of the potential sale were changed for the prospective buyer. D) legal because the law requires only that the buyer be given the opportunity to buy the house.

The answer is illegal because the terms of the potential sale were changed for the prospective buyer. Quoting a different price or terms based on the prospect's membership in a protected group is a blatant violation of the federal Fair Housing Act.

A real estate broker uses earnest money placed in the company trust account to pay for the rent owed on the brokerage's office. Using escrow funds for this purpose is

The answer is illegal. Earnest money does not belong to the brokerage and must be placed in an escrow (trust) account. To convert that money for personal use is illegal, regardless of any plan to later reimburse the account. It doesn't make any difference if there remains enough money in the trust account to cover immediate client needs.

A qualifying broker's license is suspended for 30 days. Immediately upon receipt of the order, the broker files a motion for rehearing. Despite repeated requests by the broker for an expedited hearing, the Commission fails to rule on the motion. Thirty days after filing the motion, the broker appeals the original adverse decision to the Circuit Court. When may the qualifying broker and her licensees return to normal real estate activities? A) Immediately B) Not until there has been a ruling in the broker's favor by the Circuit Court C) Not until the appeal bond has been paid by the broker D) 30 days after the appeal has been filed, if there has not yet been an adverse decision by then

The answer is immediately. It was only a 30-day suspension. Suspensions and revocations take effect immediately upon issuance of the order. If the Commission fails to rule on a motion for rehearing within 30 days, it is considered automatically denied. Under the facts in this question, however, the 30-day suspension has already been completed by the same 30-day deadline for a Commission ruling. The broker and her licensees could then return to real estate activities because the suspension would be over by then. Under the circumstances, it was probably a waste of time and money for the broker to appeal, except to clear her good name.

Which activity does the Real Estate Commission NOT have the authority to do? A) Subpoena books, papers, and records B) Impose a civil penalty not to exceed $5,000 C) Investigate a licensee without a consumer complaint D) Compel the attendance of witnesses

The answer is impose a civil penalty not to exceed $5,000. The Real Estate Commission has authority to investigate a licensee upon that body's own motion; to subpoena books, papers, records, and witnesses; and to require a mental examination. The Real Estate Commission also has the authority to impose a civil penalty not to exceed $2,500.

A buyer signs an agreement to be represented by a broker. This agreement is an acceptable exclusive agency

The answer is in all cases. A broker may represent a buyer.

Alabama's property taxes are paid A) in arrears. B) on December 15. C) in advance. D) on January 15.

The answer is in arrears. Taxes become a lien on October 1. Property owners have until December 31 of the year to pay without being delinquent

Generally, where does a probate proceeding involving real property take place?

The answer is in both the county where the decedent resided and the county in which the property is located. There will be two probates conducted: one in the county where the decedent resided and another in the county where the real estate is located.

A special assessment is generally paid

The answer is in equal annual installments over a period of years. The first installment is usually due during the year following the approval of the assessment and the first bill includes on year's interest.

When is the first installment of a special assessment generally due?

The answer is in the year after the assessment is approved. Special assessments are usually paid in equal annual installments over a period of years. The first installment is usually due during the year following the approval of the assessment and the first bill includes on year's interest.

The property manager should ask to be A) paid the standard rate of commission. B) reimbursed for all office expenses. C) included as an additional insured on the property liability policy. D) made a principal of the company that owns the managed property.

The answer is included as an additional insured on the property liability policy. The property manager should have the confidence of knowing that the property owner stands behind the reasonable, lawful, and conscientious actions undertaken by the property manager on the property owner's behalf. Management fees are subject to the same antitrust considerations as sales commissions and cannot be standardized because standardization would be considered price-fixing.

Housing that qualifies for exemption from familial status provisions A) is permitted for owner-occupied buildings with four or more units. B) is not permitted under the federal Fair Housing Act. C) includes housing intended for persons 50 or older. D) includes a restriction that 80% of the units be occupied by persons 55 or older.

The answer is includes a restriction that 80% of the units be occupied by persons aged 55 or older. The Fair Housing Act allows for two exemptions to familial status protection in housing for older persons. One permissible exemption is for housing in which 80% of the units are occupied by persons 55 years of age or older.

Time-share property is BEST described as a form of ownership interest that A) includes the use of a property for a fixed or variable period. B) includes the right of survivorship if one of the owners dies. C) is available only to married couples. D) does not include the use of a property.

The answer is includes the use of a property for a fixed or variable period. Time-shares are a form of ownership interest that includes the use of a property for a fixed or variable period and may be either a freehold or a nonfreehold estate.

An appraiser asked for an opinion of the value of an existing shopping center would probably give the MOST weight to which approach to value? A) Sales comparison approach B) Income approach C) Index method D) Cost approach

The answer is income approach. The income approach is likely to be given the most weight in an analysis of income-producing property. Circumstances may dictate a different approach when, for instance, the property's current use is no longer its highest and best use.

Discount points paid to a lender are used to

The answer is increase the lender's yield (rate of return) on its investment. Discount points paid to a lender are used to increase the lender's yield (rate of return) on its investment.

All parties identified in the contract must sign a listing agreement, including

The answer is individuals having a legal interest in the property. All parties identified in the contract must sign the listing, including individuals having a legal interest in the property.

Which of the following is NOT one of the four unities of title? A) Title B) Possession C) Insurance D) Time

The answer is insurance. The unities are PITT: possession, interest, time, and title.

Which terms are synonymous?

The answer is interim financing and construction loan. Construction loans are generally short-term or interim financing. The takeout loan is permanent financing to repay the construction financing lender.

Under the Fair Housing Act, what is HUD's first action on receiving a complaint of illegal discrimination? A) Issues an injunction against the offender B) Holds an administrative hearing C) Investigates for reasonable cause to bring a charge D) Files a civil action in federal district court

The answer is investigates for reasonable cause to bring a charge. Within 100 days of the filing of the complaint, HUD either determines that reasonable cause exists to bring a charge of illegal discrimination or dismisses the complaint.

Title to property may be transferred without the owner's consent by

The answer is involuntary alienation. Involuntary alienation is the transfer of property without the consent of the property owner.

Land lost through erosion is an example of

The answer is involuntary alienation. Land lost through erosion is an example of involuntary alienation.

Eminent domain and escheat are two examples of

The answer is involuntary alienation. The right of eminent domain allows a government entity to compel the transfer of a property to that entity for a price set by court process—condemnation. This transfer of title (alienation) is forced and so is involuntary. When a person dies without a will (intestate) and without heirs, the property passes (escheats) to the state. This process was neither planned nor initiated by the owner before death and so is classified as involuntary.

Title to real estate may be transferred during a person's lifetime by

The answer is involuntary alienation. Transfer of title by devise (will), descent (death intestate), or escheat (for lack of a will and lack of heirs) all occur after death. Involuntary alienation, such as condemnation, foreclosure sale, or tax sale, can occur during a person's lifetime.

When a person dies intestate, the title to real estate owned by the deceased may pass to the state in an example of

The answer is involuntary alienation. When a person dies intestate (with no will) and no heirs can be located, the title to the real estate passes to the state, an example of involuntary alienation.

In an exclusive buyer representation agreement, the broker

The answer is is free to represent other buyer clients. It would be rare for a broker to work exclusively with one client and that arrangement would have to be made part of the representation agreement.

A broker's price opinion (BPO) should not be confused with an appraisal, which consists of a more in-depth analysis of gathered information and

The answer is is likely to require a licensed or certified appraiser. A BPO may be useful in certain situations, such as when a homeowner is requesting a refinance of an existing mortgage from the same lender.

Which of the following is TRUE about an estate in land? A) All interests in real estate are estates in land. B) It defines an owner's interest in real property. C) It must be measured according to value. D) It land doesn't include possession.

The answer is it defines an owner's interest in real property. An estate in land defines the degree, quantity, nature, and extent of an owner's interest in real property. Many types of estate exist, but not all interests in real estate are estates. To be an estate in land, an interest must allow possession, meaning the holding and enjoyment of the property either now or in the future, and must be measured according to time. Historically, estates in land have been classified primarily by their length of time of possession.

What is the purpose of the Brownfields Law enacted in 2002? A) It is specifically dedicated to cleaning up PCB spills and dumps. B) It restores wilderness and agricultural areas damaged by toxic waste. C) It establishes incinerators to destroy UFFI, DDT, and other persistent chemicals. D) It distributes funds to clean up polluted industrial sites so they can be restored to productive use

The answer is it distributes funds to clean up polluted industrial sites so they can be restored to productive use. Brownfields are defined as defunct, derelict, or abandoned commercial or industrial sites. Many have toxic wastes.

Which of the following is TRUE about a broker and a property owner in Alabama who enter into an exclusive right-to-sell listing agreement to sell the owner's property? A) The broker is due a commission only if the broker sells the property. B) It gives the broker the exclusive right to market the seller's property during the term of the listing period and earn a commission no matter who procured the buyer, even if by the seller himself. C) The owner reserves the right to sell the property during the listing period without paying the broker a commission. D) Alabama law assumes the listing agreement is an exclusive right-to-sell listing unless it states otherwise.

The answer is it gives the broker the exclusive right to market the seller's property during the term of the listing period and earn a commission no matter who procured the buyer, even if by the seller himself. With an exclusive right-to-sell listing, the listing broker is due a commission if property is sold under listed terms during the listing period regardless of who sells the property, including the owner. If it is an exclusive-agency listing, the owner of the property promises to compensate a broker for locating a ready, willing, and able buyer, but the owner reserves the right to sell the property during the listing period without paying the broker a commission. The listing agreement should clearly state whether the agreement is an exclusive-agency listing or an exclusive right-to-sell listing.

All of the following are true about underground water contamination EXCEPT A) it is a minor problem in the United States. B) any contamination of underground water can threaten the supply of pure, clean water from private wells and public water systems. C) real estate professionals need to be aware of potential contamination sources. D) protective state and federal laws concerning water supply have been enacted.

The answer is it is a minor problem in the United States. According to the EPA, approximately 40% of the 3 million to 5 million underground storage tanks that exist in the United States are leaking.

Which of the following is TRUE about a note? A) It is required by statute. B) It is a nonnegotiable instrument. C) It is common law. D) It is a negotiable instrument.

The answer is it is a negotiable instrument. Promissory notes are always negotiable contracts between the lender and the borrower.

Which statement is TRUE of a listing agreement? A) It obligates the broker to work diligently for both the seller and the buyer. B) It automatically binds the owner, the broker, and the MLS to its agreed provisions. C) It is an employment contract for the professional services of the broker. D) It obligates the seller to transfer the property if the broker procures a ready, willing, and able buyer.

The answer is it is an employment contract for the professional services of the broker. The listing is the broker's contract of employment by the seller. It is not a contract between the seller and any buyer and so cannot be enforced on the seller by a buyer, even though the buyer might make an offer that is the "mirror image" of the terms of the listing. In such an event, however, the seller may owe the broker a full commission for having produced the result the listing called for: an able buyer who is ready and willing to buy according to the terms of the listing.

What is one negative result of redlining? A) Real estate professionals are not able to advertise in local newspapers. B) The effects test must be applied to determine whether to file a lawsuit. C) Appraisers have a difficult time evaluating properties in the area. D) It is often a contributor to the deterioration of older neighborhoods.

The answer is it is often a contributor to the deterioration of older neighborhoods. Redlining is a prohibited practice by lenders and insurance companies. It frequently leads to the deterioration of older neighborhoods because loans are not made based on racial grounds as opposed to any real objection to an applicant's creditworthiness.

What does the phrase the law of agency is a common law doctrine mean?

The answer is it is part of a body of law established by tradition and court decisions. The basic framework of the agency law that governs the legal responsibilities of real estate brokers to the people they represent is known as common law.

Why is the Civil Rights Act of 1866 unique? A) It contains "choose your neighbor" provisions. B) It has been broadened to protect the aged. C) It adds welfare recipients as a protected class. D) It provides no exceptions that would permit racial discrimination.

The answer is it provides no exceptions that would permit racial discrimination. Unlike other exemptions permitted under the federal Fair Housing Act of 1968, the Civil Rights Act of 1866 allows no exceptions that would permit discrimination on the basis of race.

A homestead exemption protects the property owner entitled to the exemption from

The answer is judgments for debts, but not those used to purchase or improve the homestead property. With homestead protection, a portion of the land or value of the property occupied as the family home is exempt from certain judgments for debts, such as charge accounts and personal loans but not a mortgage for the purchase or improvement of the property. A family can have only one homestead at a time.

What is the position of home equity line of credit (HELOC) in relation to the original lien?

The answer is junior. A HELOC is junior to the original lien. The original lien takes priority over the HELOC.

Even after the termination or expiration of a buyer brokerage agreement with a client, the licensee still has what legal and ethical agency duty? A) Deliver copies of all new listing information that might interest the former client B) Refer the former client to another broker C) Avoid bringing any new buyers to properties the licensee had shown to the former client D) Keep any information the licensee learned about the former client confidential

The answer is keep any information the licensee learned about the former client confidential. Certain duties of loyalty (confidentiality) may survive even after the termination or expiration of a buyer's agreement. Examples include accounting for monies and property related to and received during the contractual period, keeping requested information confidential, and even keeping the buyer's property search confidential.

Successful property managers do all of the following EXCEPT A) study rental rates in the area to get the best possible sense of supply and demand. B) consider the type of business a tenant has and how it will fit businesses already on the property. C) screen the tenants' ability to pay and their space needs. D) keep on good terms with tenants by overlooking infractions of the building rules.

The answer is keep on good terms with tenants by overlooking infractions of the building rules. If a property manager fails to treat all tenants the same in terms of rent collection and enforcement of lease terms or rules and regulations, the manager could be in violation of fair housing laws. A good manager is tactful and decisive and acts to the benefit of both owner and tenant.

The methodical collection and analysis of data is

The answer is key to an accurate appraisal. The appraisal process is an orderly set of procedures used to collect and analyze data to arrive at a justifiable conclusion of value.

The real estate professional should be familiar with the state real estate licensing law and

The answer is know enough about federal, state, and local laws relevant to real estate practice to recommend that clients and customers seek help from an attorney or other appropriate professional when necessary. Real estate professionals must be familiar with the requirements of the licensing law and should know the basics of other areas of the law, but they should never give legal advice and should always encourage clients and customers to seek additional professional assistance when warranted.

In regulations regarding lead-based paints, HUD requires that A) paint be removed from surfaces before selling. B) homeowners test for its presence. C) known lead-based paint hazards be disclosed. D) only homeowners deal with its removal.

The answer is known lead-based paint hazards be disclosed. HUD issued the Lead-Based Paint Hazard Reduction Act of 1992, which requires disclosure of any known lead-based paint hazards to potential buyers or renters.

Real estate can be owned under a variety of trusts, including living or testamentary trusts and

The answer is land trusts. Real estate can be owned under a variety of trusts, including living or testamentary trusts and land trusts.

Certain real estate closings must be reported to the Internal Revenue Service (IRS) on Form 1099-S. The affected properties include sales or exchanges of

The answer is land, residential or commercial structures, condominiums, and shares in a cooperative housing corporation. Certain real estate closings must be reported to the Internal Revenue Service (IRS) on Form 1099-S. The affected properties include sales or exchanges of land, residential or commercial structures, condominiums, and shares in a cooperative housing corporation.

An easement of necessity refers to A) wheelchair access. B) condemnation of water rights. C) flood control. D) landlocked land.

The answer is landlocked land. Should a landowner sell a landlocked piece of real estate, implied consent is given for an easement. This is called an easement of necessity.

Capping is the method of A) compacting waste and sealing it in a container. B) piling waste into a hill at surface level and covering with clay. C) burying waste and covering with soil. D) laying soil over the surface of a landfill and planting vegetation.

The answer is laying soil over the surface of a landfill and planting vegetation. Capping is the process of laying two to four feet of soil over the waste in a landfill site and then planting grass on it to enhance the landfill's aesthetic value and prevent erosion.

A broker is experiencing cash flow problems and believes that real estate sales transactions handled by attorneys in connection with trusts, estate settlements, and divorces and without the assistance of a licensed real estate broker infringes on his ability to be profitable. The broker complains to the Commission that attorneys are practicing real estate without a license. The broker will likely A) learn that he can practice law when it is incidental to his real estate transaction. B) experience a boycott from local attorneys. C) stop this practice by notifying the Commission. D) learn that attorneys are exempt from licensing if they are admitted to practice law in Alabama as long as the real estate transaction is solely incidental to the practice of law.

The answer is learn that attorneys are exempt from licensing if they are admitted to practice law in Alabama as long as the real estate transaction is solely incidental to the practice of law. Attorneys who are involved in the general practice of real estate must obtain a license but are exempt from licensing when handling a real estate transaction in connection with their primary duty of representing a client.

The reason commingling (mixing personal funds with those belonging to other people) is a problem is because A) brokers are not as diligent in accounting for their own assets as they are of consumer's assets. B) financial statements could become inflated and not provide an accurate picture of a broker's net worth. C) the Real Estate Commission does not have the right to audit a broker's personal funds. D) legal action against the broker could put the consumer's funds at risk of seizure by the broker's creditors.

The answer is legal action against the broker could put the consumer's funds at risk of seizure by the broker's creditors. There are many reasons for the separation of a broker's private funds from those belonging to the public. For example, if the broker commingled personal funds into the escrow account and the IRS froze the broker's accounts, the escrow account would also be frozen.

The Real Estate Settlement Procedures Act prohibits

The answer is lenders from requiring excessive escrow account deposits. While other laws, such as the Fair Housing Act, may be violated by an activity, only the first item listed here is a violation of RESPA..

A lease is a contract between

The answer is lessor and lessee. The lessor (landlord) leases property to the lessee (tenant). The tenant's right to possess the real estate for the term of the lease is called a leasehold estate.

A man pays a homeowner a fee in order to park in the homeowner's driveway while attending a football game. In this situation, the man has a A) right of way. B) license. C) freehold interest. D) one-time permission.

The answer is license. A license is considered a privilege, not a right.

Which of the following forms of ownership is recognized in Alabama and provides for ownership of property during the life of a designated person, with remainder to someone else? A) Ownership in severalty B) Springing executory interest C) Life estate D) Rule in Shelley's case

The answer is life estate. Although the "measuring life" is typically the life span of the life tenant, other variations are possible. For example a church might be granted a life estate during the lifetime of a grantor who previously owned the property. The church owns the property until the prior owner dies, and then it passes to the designated remainderman.

In Alabama, a licensee may represent both parties in the same real estate transaction as long as all parties to the transaction have given their written consent. This practice is called A) designated representation. B) acknowledged dual representation. C) limited consensual dual agency. D) disclosed designated representation.

The answer is limited consensual dual agency. Undisclosed dual representation occurs if one party has not given written consent. It is illegal.

In the states in which it has been adopted, the Marketable Title Act

The answer is limits the time beyond which title records must be searched. The law extinguishes certain interests and cures certain defects arising before the root of the title.

In case the buyer decides not to buy for no legal reason, the contract may provide that the earnest money be used as

The answer is liquidated damages. Liquidated damages limit the compensation available to the injured party should a breach of contract occur.

Most lenders charge borrowers to cover the expenses in generating a mortgage loan. This charge is known as a

The answer is loan origination fee. Interest is a charge for the use of money, and discount points are used to increase a lender's return on investment.

The amount of the loan as a percentage of the purchase price of a property is known as

The answer is loan-to-value ratio. The lower the LTV (the greater the down payment), the less risk is assumed by the lender.

Mortgage banking companies originate

The answer is loans. Mortgage banking companies originate mortgage loans with money belonging to insurance companies, pension funds, and individuals, as well as funds of their own.

Lenders that originate mortgage loans

The answer is make up the primary mortgage market. Not all lenders in the primary mortgage market are federally insured depositories. Insurance companies, pension funds, mortgage banking companies, and others also are part of the primary mortgage market.

Every state now requires

The answer is mandatory agency disclosure. The disclosure laws stipulate when, how, and to whom disclosures must be made.

Homes built in factories meeting Department of Housing and Urban Development (HUD) specifications are called A) trailers. B) manufactured homes. C) prefab housing. D) mobile homes.

The answer is manufactured homes. These homes meet certain HUD guidelines and are built in factories.

When appraisers use the expression "most probable price," they are referring to a property's

The answer is market value. Market value reflects what knowledgeable buyers are willing to pay and realistic sellers are willing to accept.

The water table A) may be several hundred feet underground or near the surface. B) is usually always near the surface. C) is usually several hundred feet underground. D) is never near the surface.

The answer is may be several hundred feet underground or near the surface.

Complying with the letter of the law A) may not be enough; real estate professionals might perform legally yet not ethically. B) is not as important as performing in what the real estate professional considers the best interest of a client. C) should be adequate for the real estate professionals to avoid violating fair housing laws. D) is all that is necessary as far as the National Association of REALTORS® is concerned.

The answer is may not be enough; real estate professionals might perform legally yet not ethically. Complying with the letter of the law may not be enough; a real estate professional might perform legally yet not comply with the code of ethics established by the state licensing agency or a trade group to which the licensee belongs.

Under the HUD regulations that enforce the Fair Housing Act, advertisements of residential property for sale or rent A) cannot be considered discriminatory if they provide a statement of compliance with HUD regulations. B) may not include language indicating a preference or limitation. C) may not refer to any fair housing law or regulation. D) must provide a rationale for any stated preference or limitation.

The answer is may not include language indicating a preference or limitation. HUD permits no exception to this rule, regardless of the subtlety of the language used. Even selective use of media to advertise to a specific audience may have discriminatory impact.

A person who fails the real estate examination A) may retake it immediately. B) must wait two months before retaking the exam. C) must complete another 10 hours of post-exam education before retaking the exam. D) can retake it only two more times in any 12-month period.

The answer is may retake it immediately. A person who fails to pass the real estate exam is allowed to immediately retake the exam by telephoning or filing a new registration form with AMP and paying the examination fee. There is no limit to the number of times the applicant may take the exam.

A buyer is looking at a new construction home to purchase. What type of lien should the buyer be MOST concerned about? A) Mortgage lien B) Mechanic's lien C) IRS tax lien D) Attachment lien

The answer is mechanic's lien. A prospective purchaser of a property that has recently been constructed, altered, or repaired should be cautious about possible unrecorded mechanics' liens. In most states, a mechanic's lien takes priority from the time it attaches, even though a claimant's notice of lien will not be filed in the public record until sometime later.

What is the key to an accurate appraisal?

The answer is methodical collection and analysis of data. The appraisal process is an orderly set of procedures used to collect and analyze data to arrive at a justifiable conclusion of value.

Which of the following is a voluntary, specific lien? A) Mechanic's lien B) IRS tax lien C) Mortgage lien D) Seller's lien

The answer is mortgage lien. A mortgage lien is created voluntarily by the borrower. The borrower names specific property in the mortgage agreement that serves as security for the lender.

Agent A shows a listed property to a consumer, who professes a lack of interest. The consumer then goes directly to the listing agent, Agent B, and is able to buy the property at a reduced price, because there will be no second agent involved and no commission split. Agent A learns about this and claims to be entitled to a commission split as the procuring cause of the sale. Who will resolve this dispute? A) No one; there was no written agreement with the consumer buyer. This is an open-and-shut case. B) The Alabama Real Estate Commission C) Most likely the local association of REALTORS®, if both agents are members D) RECAD requires good faith negotiations between the agents to settle the dispute.

The answer is most likely the local association of REALTORS®, if both agents are members. Procuring cause disputes sometimes happen between cooperative brokers and are normally settled by arbitration through local boards or associations. The AREC specifically does not have jurisdiction over disputes between brokers about fees and commissions. AREC exists to protect consumers, not to protect licensees from each other. RECAD describes duties and disclosures to consumers, and does not address disputes among licensees.

An important characteristic of personal property is that it is

The answer is movable. Personal property is all the property than can be owned and that does not fit the definition of real property; the most important distinction between real and personal property is that personal property is moveable.

Construction standards that must be met when repairing or erecting buildings are usually enacted by A) the state governments. B) trade organizations. C) municipalities. D) the federal government.

The answer is municipalities. Construction standards that must be met when repairing or erecting buildings are usually enacted by municipalities, in accordance with state law.

Complaints relating to the Civil Rights Act of 1866 A) must be taken directly to federal courts. B) are no longer reviewed in the courts. C) are handled by HUD. D) are handled by state enforcement agencies.

The answer is must be taken directly to federal courts. Complaints under the Civil Rights Act of 1866 are heard in federal courts.

If a tenant breaches the duty to pay rent, the landlord A) may turn off the tenant's utilities. B) may change the locks and prevent the tenant from entering the premises. C) must give legal notice and a judge will decide whether the eviction action is appropriate. D) may seize the tenant's possessions.

The answer is must give legal notice and a judge will decide whether the eviction action is appropriate. To evict a tenant, legal notice has to be made and a judge decides whether the eviction action is appropriate.

If an Alabama licensee does NOT receive a license renewal form in the mail, the licensee A) may renew the license up to six months later with a $500 fine. B) must notify the Commission by August 10. C) has an additional month to file the renewal application. D) has a legal excuse for not renewing on time and will not have to pay the $150 penalty.

The answer is must notify the Commission by August 10. As a practical matter, virtually all renewals are accomplished via an online form and credit or debit card payment of fees. The requirement to notify the Commission by August 10 is a holdover from the pre-internet era, when a form would be mailed to the licensee with time enough to submit it by mail before the deadline. It is still relevant, though, in case the AREC needs to correct address information on its computers. The licensee must submit the application form and pay the appropriate renewal fee, even if he never receives a renewal form in the mail. The renewal must be postmarked, or completed online, by August 31 of the final year of the license period to avoid a $150 penalty, or by September 30 of the renewal year to avoid automatic conversion to inactive status.

An agent listed a home and was told by the homeowner that there was 10 inches of insulation in the attic. Consequently, the agent wrote 10 inches of insulation on an information sheet that a prospective buyer picked up and relied on to buy the home. After moving into the property, the buyer discovered that the attic had only four inches of insulation. If the agent were taken to court and lost the argument that she should be held liable, what legal name would describe the agent's liability? A) Innocent misrepresentation B) Reckless misrepresentation C) Conduit liability for client's misrepresentation D) Negligent misrepresentation

The answer is negligent misrepresentation. Negligence is the failure of a licensee to use reasonable care in performing an act for which the licensee was employed to perform. The agent was a conduit of misinformation and should have identified the source of the information as coming from the seller in order to avoid liability. There is no such legal principle called conduit liability.

When the broker should have known that a statement about a material fact was false, it is considered

The answer is negligent misrepresentation. Negligent misrepresentation occurs when the broker should have known that a statement about a material fact was false.

Alabama law requires A) neither bonding nor E&O insurance. B) that all active licensees be both bonded and carry E&O insurance. C) that all active licensees be bonded. D) that all active licensees carry errors and omissions (E&O) insurance.

The answer is neither bonding nor E&O insurance. Alabama law does not require that licensees be bonded or carry errors and omissions (E&O) insurance.

What kind of listing agreement is illegal in many states because of the potential for conflict of interest between a broker's fiduciary responsibility to the seller and the broker's profit motive?

The answer is net listing. Because a broker is free to offer the property at any price greater than the net amount to be paid to the seller, a net listing can create a conflict of interest between the broker's fiduciary responsibility to the seller and the broker's profit motive. Net listings are illegal in many states and discouraged in others.

A void contract is one that was

The answer is never legally enforceable. A void contract lacks some or all of the essential elements of a contract and so was never a contract in the eyes of the law.

The AREC comprises A) nine members appointed by the governor. B) eight members, of whom five are real estate licensees and three are citizen members. C) six members elected by the public. D) seven members appointed by the governor.

The answer is nine members appointed by the governor. The AREC is composed of nine members. The Commission consists of one member from each of the seven congressional districts, with two members at large. One member at large is an African American who meets the same qualifications as those from the congressional districts. The ninth member is a consumer who has not been licensed for the 10 years preceding the appointment and is not related to, by blood or marriage, or employed by a real estate licensee.

What limits are set by the covenants in a general warranty deed?

The answer is no limits are set. No limits are set by the covenants in a general warranty deed; the grantor defends the title against the grantor and all those who previously held title.

Alabama-licensed real estate appraisers are also required to hold A) a real estate license. B) a law license. C) a driver's license. D) no other license.

The answer is no other license. Many appraisers also hold real estate licenses, but it is not required.

The buyer and the seller sign a purchase contract, and the buyer provides an earnest money check in the required amount of $5,000. The next morning, the listing agent receives an offer for a higher price. That same afternoon, the first buyer's earnest money check is returned from the bank due to nonsufficient funds. Can the seller sign a contract with the second buyer at that point? A) Yes, because when the check was returned with insufficient funds, the purchase contract no longer had consideration and was not enforceable B) No, because the broker must redeposit the check to give it one more chance to clear through the bank C) No, because earnest money is irrelevant to the enforceability of the contract D) Yes, because the first buyer was guilty of fraud in presenting a worthless check as earnest money.

The answer is no, because earnest money is irrelevant to the enforceability of the contract. Earnest money is not consideration, so if the earnest money check bounces, there has not been a failure of consideration. Unless the purchase contract specifically states that a bounced check voids the contract, the first contract is still enforceable and the seller cannot enter into a second contract.

A real estate appraiser also holds a qualifying broker's license but has no licensees and has no plans to engage in any real estate brokerage or property management activities. Must the appraiser maintain a trust account? A) No, because he has no plans to engage in any activities that would generate trust funds B) Yes, because every real estate brokerage firm must maintain a separate trust account C) No, because he is also a licensed appraiser and appraisers are not required to maintain a trust account D) Yes, because he has two separate licenses and, therefore, twice the liability exposure and must maintain a trust account

The answer is no, because he has no plans to engage in any activities that would generate trust funds. Every Alabama-based real estate brokerage firm that expects to handle funds belonging to others must maintain a trust account, identified by the words trust or escrow, to indicate that the funds are not those of the broker's operating or personal account.

In order to earn some extra money for her clients, a broker establishes a trust account with an FDIC-insured bank that has no branches in Alabama but pays 1% interest on checking accounts. All banking is done online, including photo deposits of checks and deposits. Is this allowed? A) No, because it has no branches in Alabama B) Yes, because there is no true need for a local branch presence C) Yes, because the bank is FDIC-insured D) No, because trust accounts are not allowed to earn interest

The answer is no, because it has no branches in Alabama. Trust account funds must be deposited in federally insured institutions located in Alabama.

There are three parcels of property, all in a row. Parcel A is owned by a woman, parcel B is owned by a man, and parcel C is owned by the woman's daughter. The man gives the woman oral permission to take a shortcut across his property to visit the daughter whenever she wants. After two years, the woman and the man have a dispute, and the man withdraws the permission. Does the woman have any rights? A) No, because the man is not related to the woman B) Yes, if the man admits to the oral agreement C) Yes, because the woman gained prescriptive rights D) No, because the agreement was verbal

The answer is no, because the agreement was verbal. Easement rights must be in writing or must arise by prescription, in order to be enforceable. Two years is too short a time for prescriptive rights.

A gated residential community desires to dedicate its streets. Will this be allowed? A) Yes, assuming the community posts a five-year repair bond in case of shoddy construction B) Yes, assuming they meet local government's construction requirements C) No, unless a two-thirds majority of the property owners vote in favor D) No, because the community is gated and the public is not allowed to use the streets

The answer is no, because the community is gated and the public is not allowed to use the streets. Local government cannot agree to assume the maintenance expense of the streets in a gated community, if only the residents of the gated community, and their allowed visitors, will ever use those streets.

A qualifying broker owes one of his licensees $25,000 in unpaid commissions. If the licensee files a lawsuit against the broker, wins, and meets all other conditions, can the licensee collect from the recovery fund? A) Yes, because brokers are not immune from suit by their licensees B) No, because it exceeds the maximum recovery amount from the fund C) Yes, because all conditions were met by the licensee D) No, because the recovery fund is for the protection of consumers, not licensees with commission disputes

The answer is no, because the recovery fund is for the protection of consumers, not licensees with commission disputes. The licensee cannot collect from the recovery fund because it is for the protection of consumers, not licensees with commission disputes against each other.

A homeowner considered having a new garage built and talked about the project with a contractor. In April, while the homeowner was on vacation, the contractor began building the garage according to the man's specifications. Work was complete by the end of May. In June, the homeowner returned from vacation and refused to pay for the garage. The contractor decided to file a mechanic's lien in July. Is the contractor entitled to a lien?

The answer is no, because there was no express or implied contract between the homeowner and the contractor. Because the contractor was in no way given authority to act, the contractor has no right to file a mechanic's lien.

An Alabama real estate licensee was assured by his seller clients that the basement recreation room was finished by a licensed contractor and that all plumbing and electric work was done by licensed professionals. The buyer never asked the agent any specific questions about the work in the basement. Unfortunately, six months after buyers purchased the home, a short circuit in the wiring behind the wall in the recreation room caused a fire that resulted in more than $20,000 of damage. The subsequent insurance investigation found that none of the work had been done by licensed professionals. Will the licensee be held liable for this misinformation? A) No, he has no liability because the false information came from the seller and he did not know it was false. B) Yes, he was entirely responsible. C) No, he has no liability for the false information even though he had been told by a neighbor that, in fact, the owner had done the work himself. D) Yes, he will be equally responsible with the former owners.

The answer is no, he has no liability because the false information came from the seller and he did not know it was false. In Alabama, no one can stop the new owners from attempting to place liability on the licensee, but he will have the defense that he did not know the information was false, he could not have reasonably discovered this fact in a routine property visit and listing preparation, and he was not acting in reckless disregard of the truth. If the buyer had asked specific questions about the work in the basement, and the agent answered that it had all been done by licensed contractors but did not check, then the licensee might be guilty of negligent fraud.

In 1967, a lieutenant in the Air Force served for six months on active duty in Vietnam. In 1998, the veteran was killed in a skiing accident. The veteran's surviving spouse wishes to use the veteran's life insurance proceeds to make a down payment on a condominium and finance the remainder of the purchase with a VA-guaranteed loan. Is the surviving spouse entitled to a VA-guaranteed loan?

The answer is no, the veteran's death was not service-related. The surviving spouse of a veteran whose death is service-related may use the veteran's entitlements. In this situation, the surviving spouse does not qualify.

In order to create maximum impact and "buzz," a real estate agent puts out yard signs that simply say For Sale and also contain a very large QR code that links viewers to the company website. Is this a good strategy? A) No, QR codes on yard signs are illegal distractions for drivers. B) Yes, this is an excellent strategy and highly recommended by industry experts. C) Yes, but only if the owner approves it in writing. D) No, this is a blind ad and is illegal.

The answer is no, this is a blind ad and is illegal. When advertising real estate belonging to a client or customer, all licensees must use the regular business name and unmistakably indicate that the party is a real estate licensee, not a private concern. Blind ads are considered unscrupulous. Someone clicking on the QR code can reach a website with the company name, but not everybody knows how to use QR codes, so this constitutes a blind ad.

A salesperson works for a brokerage and obtains listing agreements from her mother, brother, and daughter, none of whom have met the qualifying broker. The salesperson becomes dissatisfied with the support services offered by the brokerage and moves her license to another brokerage. Can the salesperson ask her relatives to terminate their listing agreements with the first brokerage and move them to the second brokerage? A) No permission is necessary because the listings automatically go with the salesperson who was the procuring cause. B) Yes, but only if the qualifying broker for the new brokerage agrees to the transfer. C) Yes, but only because the clients are her parent, child, or spouse. D) No.

The answer is no. Listing contracts belong to the qualifying broker, not the salesperson. No matter what relationship the salesperson has with the sellers, if the salesperson solicits those sellers to terminate their contracts, she is interfering with a contractual relationship.

A married couple own property together. Only one spouse signs the listing agreement. Can the licensee represent both in the sale of the property? A) Yes, because one owner's signature is enough to list a property. B) No, unless one spouse verbally agrees and the other spouse actually signs. C) Yes, because the spouses are legally the same person in such situations. D) No.

The answer is no. The listing agreement must include the signatures of all concerned parties, which includes all persons with an ownership interest in the property. While listing agreements for a broker to act as a transaction broker need not be in writing to be enforceable, this is a technicality that should be avoided in practice. Remember, too, that the question says, "Can the licensee represent them..." Because of the use of the word "represent," we know the question does not contemplate a transaction brokerage.

A licensee has a practice of failing to return phone calls to buyers who have a Hispanic accent because he has a difficult time understanding them. In addition, he can document the fact, from prior experiences, that they rarely make offers for properties unless they can also receive seller financing arrangements. Is this allowed? A) No, unless he is acting on instructions of the property owner B) No C) Yes, but only because his reasons can be documented D) Yes, because he is only discriminating against accents, not people

The answer is no. This is a violation of the fair housing laws. It is illegal to refuse to negotiate for the sale of a dwelling to any person because of national origin. Failing to return phone calls, or failing to keep appointments, is considered a refusal to negotiate. The reason is irrelevant if it is based on the status of national origin.

An appraiser is asked to appraise a vacant automobile dealership building and associated land located in a part of town known as "dealership row." Every major brand has dealerships on the same street, plus many older dealership buildings are now owned by used car companies. Properties usually sell quickly. Under federal regulations, this type of appraisal is called A) non-complicated. B) complicated. C) noncomplex. D) complex.

The answer is noncomplex. A noncomplex appraisal is for a property that is typical in the marketplace. A complex appraisal is for a property that is unusual. The bank ordering the appraisal makes the call about whether something is complex or noncomplex. Most likely, an auto dealership in a submarket that contains many auto dealerships is not a complex appraisal.

Alabama licensing law requires that which of the following be disclosed on each page of a real estate company's website? A) The state in which the main office is located B) The city in which the main office is located C) None of these D) The firm's abbreviated name as registered with the state

The answer is none of these. At the present time, Alabama does not have any specific rules governing internet advertising. The Association of Real Estate License Law Officials (ARELLO) recommends that websites disclose the physical location of the real estate office in order to avoid confusion, and AREC recommends the same thing, but there are no specific rules in the state.

A broker sold his listing to the buyers, who paid $5,000 of earnest money that was deposited into the listing broker's trust account. One week before closing the transaction, the buyers decided they did not want to buy the property. According to the written contract, they forfeited their earnest money. The broker felt that he had earned his commission. He may pursue which of the following options? A) None of these B) Retain one-tenth of his commission from the earnest money C) Take half of his commission from the earnest money D) Take his commission from the earnest money

The answer is none of these. The broker may not take his fees directly from the trust account. Should a transaction fail to consummate, the broker under no circumstances is entitled to withhold any portion of the earnest money, even though a commission may have been earned. In addition, the broker is not allowed to unilaterally decide ownership of the earnest money. The buyer and seller must agree in writing to how it will be disbursed, or the broker will have to pay it into court with an interpleader suit.

When conveying interests in real estate using a quitclaim deed, the extent of promises given by the grantor to the grantee are

The answer is none. A quitclaim deed gives no warrants to the grantee. Claims during the grantor's ownership would be covered by a special warranty deed. A general warranty deed provides the same warranties as a special warranty deed but also covers claims made before the grantor's ownership of the property. No deed requires the grantor to supply title insurance.

The primary difference between Alabama's tenancy in common with right of survivorship and a tenancy by the entireties is that the tenancy in common with right of survivorship is A) not limited to residential properties. B) limited to married couples. C) not limited to married couples. D) limited to residential properties.

The answer is not limited to married couples. Alabama's tenancy in common with right of survivorship, also sometimes called tenancy in common with cross contingent remainders, can be used by any number of individuals, whether married or not, and irrespective of property type.

You are assisting a buyer in purchasing a ground lease that was signed on January 1, 2000, for a term of 50 years. The property contains a shopping center and is extremely valuable. You discover the lease was never recorded. What should you do? A) Nothing is possible; the lease is not enforceable and there is nothing to purchase. B) Nothing is possible; the lease expires on December 31, 2019, and very little value now remains. C) Obtain a copy and record it, solving all problems. D) Nothing is necessary; proceed with negotiating the purchase.

The answer is nothing is possible; the lease expires on December 31, 2022, and very little value now remains. Leases with a term of more than 20 years(1) must be acknowledged in the same way as a deed, and (2) the lease or a memorandum of lease must be recorded in the real estate records within one year of lease execution. Because the lease in the question was executed many years ago, it is now too late to record and cure the problem. The initial term of 50 years is now only 20 years, and the lease will expire soon.

A licensed salesperson wishes to change brokers and go to work for a different real estate company. The current broker refuses to send the license back to the AREC so it can be assigned to the new broker. What can the salesperson do to remedy this situation? A) Nothing; the salesperson cannot change brokers unless both of them agree. B) The new broker should file a complaint with the AREC. C) The salesperson should file a complaint with the AREC. D) Nothing; the new broker can simply file a request for the transfer and pay a $25 fee.

The answer is nothing; the new broker can simply file a request for the transfer and pay a $25 fee. A current qualifying broker cannot prevent a licensee from changing brokers. When the new broker requests the transfer and pays the $25 fee, the AREC will automatically transfer the license. It is not necessary for the old broker to agree, and the old broker cannot protest or do anything to stop the transfer. Payment of commissions earned while with the old broker is a different matter that must be settled between the parties. The AREC will not become involved in those disputes.

If an out-of-state broker also obtains a license in Alabama, but the broker's home-state license is later revoked because of license law violations in that state, the licensee must then A) surrender the Alabama license. B) notify the Alabama Real Estate Commission. C) do nothing, because the violation did not involve an Alabama consumer. D) immediately cease all Alabama real estate activities until the broker completes an additional nine hours of risk management education.

The answer is notify the Alabama Real Estate Commission. If the home-state license of a nonresident Alabama licensee is revoked or suspended, the licensee must notify the AREC. A hearing may be held to determine whether similar disciplinary action should be taken against the Alabama license.

A buyer and a seller sign a contract for the sale of real property. A few days later, they decide to change many terms of the contract, while retaining the basic intent to buy and sell. The process by which the new contract replaces the old one is called

The answer is novation. When a new contract replaces an old one, the process is novation. The new contract may be between the same parties or between one of the original parties and a new party. In any event, the parties' obligations under the old contract are terminated.

The listing agreement on a residential property states that it expires on May 2. Which event would terminate the listing before that date?

The answer is on April 15, the owner and agent cancel the agreement. Mutual agreement by the owner and the agent would terminate a listing agreement before its expiration date. The death of the owner or the destruction of the property also would end the listing agreement before the expiration date.

The listing agreement on a residential property states that it expires on May 2. Which event would NOT terminate the listing? A) The agreement is not renewed prior to May 2. B) The house is destroyed by fire on April 25. C) On April 15, the owner tells the listing broker that the broker's marketing efforts are not satisfactory. D) The owner dies on April 29.

The answer is on April 15, the owner tells the listing broker that the broker's marketing efforts are not satisfactory. A mere complaint to the broker by the principal does not end the listing, whereas the expiration of the listing, the death of the owner, or the destruction of the property would end it.

In order to be legally enforceable by the courts, Alabama code requires all lease agreements be in writing if the agreement is for more than A) one year. B) two years. C) six months. D) 30 days.

The answer is one year. Alabama code requires all lease agreements of more than one year be in writing. An oral lease for one year or less is enforceable.

A seller listed a residence with a broker. The broker brought an offer at full price and terms of the listing agreement from a buyer who is ready, willing, and able to pay cash for the property, but the seller rejected the buyer's offer. In this situation, the seller

The answer is owes a commission to the broker. The broker has fulfilled all the requirements. Even though no contract is signed with the willing buyer, the broker is due a full commission. The seller does not have to sell, just pay the commission.

It is customary for the cost of a survey to be

The answer is paid by the buyer. The purchaser who obtains the mortgage financing customarily pays a survey fee. Other arrangements may be negotiated in the contract but are not customary.

Most adjustable-rate mortgages (ARMs) have two types of rate caps called

The answer is periodic and life of the loan. A periodic rate cap limits the amount the rate may increase over a stated term, usually a year. A life-of-the-loan rate cap limits the amount the rate may increase over the entire life of the loan.

Two years ago, a landowner rented a parcel of property to a tenant farmer. The agreement stated only that the tenant agreed to pay the landowner $500 per month. What type of tenancy does the tenant have?

The answer is periodic. Any lease that automatically renews itself is a periodic tenancy. It will continue until either party gives proper notice requesting a change.

If a condominium unit owner has not paid homeowners association fees for the length of time required by state law, the HOA's remedy may be to

The answer is place a lien on the property. When HOA fees are unpaid, the association's remedies may include seeking a court-ordered judgment to have the delinquent owner's unit sold to cover the outstanding amount or to place a lien on the property.

A violation of fair housing laws A) makes the real estate professional subject only to financial penalties. B) carries no significant consequences for a real estate professional, but does carry consequences for the property owner or landlord. C) places the livelihood of the real estate professional in jeopardy as well as making the real estate professional subject to financial penalties. D) carries no financial penalties for a real estate sales associate.

The answer is places the livelihood of the real estate professional in jeopardy as well as making the real estate professional subject to financial penalties. There may also be consequences for the property owner or landlord.

There are two vacant adjacent lots in an area zoned for commercial use, each worth approximately $50,000. If their owner sells them as a single lot, however, the combined parcel will be worth $120,000. What principle does this illustrate? A) Plottage B) Progression C) Substitution D) Regression

The answer is plottage. The principal of plottage is that additional market value can be obtained in some instances by combining, and selling as a single parcel, two or more contiguous (i.e., adjacent) properties. This value exceeds the combined total that the individual properties would bring if sold separately.

Under the EPA classification, PRPs are A) probable responsible parties. B) possible responsible parties. C) potentially responsible parties. D) principal responsible parties.

The answer is potentially responsible parties. Once the EPA determines that hazardous material has been released into the environment, the agency attempts to identify the potentially responsible parties (PRPs).

Which of the following allows a mortgagee to proceed to a foreclosure sale without going to court first?

The answer is power of sale. A power-of-sale provision in a mortgage permits the lender to foreclose and sell a mortgaged property that is in default without petitioning to get the court to conduct the sale. Nevertheless, the procedure is often supervised—although not conducted—by the court.

Expenses to be prorated (such as lawn care services) that have been paid by the seller but not fully used up are called

The answer is prepaid items. Expenses to be prorated are those for services that the seller has paid for, but which have not yet been performed.

Before making a listing presentation to a prospective property seller, a real estate sales associate should

The answer is prepare a comparative market analysis. The comparative market analysis, also called a competitive market analysis, will review MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred. While the sales associate should be sensitive to the seller's purchase price and financial needs, it is the market that is the best indicator of the property's current value.

In Alabama, an unlicensed assistant may perform all the following duties EXCEPT A) preparing or having a prospect sign an offer to purchase or lease. B) clerical duties such as typing, answering the phone, forwarding calls, and scheduling appointments for licensees. C) serving as a courier delivering documents or picking up keys. D) placing signs on property.

The answer is preparing or having a prospect sign an offer to purchase or lease. Unlicensed assistants may not perform duties that require a license. The attorney for the AREC advises that an unlicensed person may perform clerical duties, forward calls, schedule appointments, place signs on properties, and act as a courier.

The three principal responsibilities of the property manager are to achieve the objectives of the property owner, generate income for the owner, and A) keep maintenance and other expenses to a minimum. B) preserve and/or increase the value of the investment property. C) make sure that rents are steadily increased. D) keep the tenants happy.

The answer is preserve and/or increase the value of the investment property. The property manager works for the property owner, and while avoiding a high tenant turnover is desirable, that goal serves the objective of generating income for the property owner.

The basic components of the real estate financing market are

The answer is primary mortgage market, secondary mortgage market, and government influences, primarily the Federal Reserve System. The real estate financing market has the following basic components: primary mortgage market, secondary mortgage market, and government influences, primarily the Federal Reserve System.

Another name for the client in a real estate agency relationship is A) beneficiary. B) fiduciary. C) principal. D) agent.

The answer is principal. The agent owes fiduciary obligations to the principal. Because of this, the agent is sometimes called a fiduciary, but the client is the principal.

The right to use any water (other than for limited domestic use) that is controlled by the state rather than the landowner adjacent to the water is called

The answer is prior appropriation. The right to use any water (other than for limited domestic use) that is controlled by the state rather than the landowner adjacent to the water is called prior appropriation.

VA and FHA loans require all of the following EXCEPT A) borrower must occupy. B) no prepayment penalty. C) private mortgage insurance. D) purchase agreement must have escape clause.

The answer is private mortgage insurance. A requirement of both loan programs is that the loan can be repaid without penalty. Owners must occupy the property and the purchase agreement must contain an escape clause. If the property does not appraise for the loan amount, the borrower will have the earnest money refunded. Private mortgage insurance (PMI) is required for conventional loans, not government loans.

What mechanism does the Commission use to pursue complaints against nonlicensees? A) Proceedings in civil or criminal courts B) Binding arbitration C) Hearing before the state's attorney general D) Hearing before the Commission

The answer is proceedings in civil or criminal courts. Because the Commission does not have jurisdiction over nonlicensees, those hearings may not be conducted by the Commission. They must be pursued in the court system of the state, which has jurisdiction over all state residents and all persons who commit wrongdoing in the state, even if they are nonresidents.

A buyer's agent's client's offer was countered. What are the buyer's agent's options? A) Counter the offer on the buyer's behalf B) Promptly tender the counteroffer to the buyer C) Void the offer D) Do nothing

The answer is promptly tender the counteroffer to the buyer. AREC rule states that any counteroffer must be promptly tendered to the buyer. The agent may not make any decisions for the buyer.

Constructive notice is a result of

The answer is properly recording documents in the public record. Recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of the property.

What agreement authorizes the property manager to act for the owner? A) Brokerage agreement B) Listing agreement C) Exclusive right-to-sell agreement D) Property management agreement

The answer is property management agreement. Property management agreements create the authority of the property manager to act on the owner's behalf.

What document grants possessory rights to co-op owners? A) Proprietary lease B) Perpetual lease C) Co-op stock D) Deed

The answer is proprietary lease. Ownership of stock in the building entitles the owner to a lease on a particular unit. It is the proprietary lease that grants possessory rights, not the stock in the co-op. Typically, the rent is just enough to cover building operating expenses and capital reserves for things such as roof replacement or parking lot renovation.

MOST closings involve the division of financial responsibility between the buyer and the seller for such items as taxes, rents, and other items. These divisions are called A) allocations. B) divisions. C) disbursements. D) prorations.

The answer is prorations. The expenses that involve the division of financial responsibility are said to be prorated to determine how much the buyer and seller pay.

The purpose of Alabama's license law is to A) provide the recovery fund with a revenue stream. B) protect the public. C) arbitrate disputes regarding commissions. D) standardize the rate of commission for residential real estate transactions

The answer is protect the public. The mission of the AREC is to protect the public through the examination, licensing, and regulation of real estate brokers, salespersons, and firms. It does not regulate commission rates or arbitrate disputes between brokers.

To protect the public from fraudulent interstate land sales, a developer involved in interstate land sales of 25 or more lots must A) pay the prospective buyer's expenses to see the property involved. B) provide preferential financing. C) provide each purchaser with a printed report disclosing details of the property. D) allow a 30-day cancellation period.

The answer is provide each purchaser with a printed report disclosing details of the property. The printed report summarizes the developer's detailed filing with HUD and reveals to the purchaser any legal and financial or physical difficulties the project is facing. Buyers who are not given this report can rescind the contract up to seven days after a copy is delivered or until settlement occurs.

A residential tenant does not pay his last month's rent and then moves out without providing the landlord with a forwarding address, in violation of the law. Under the circumstances, the landlord will not refund any of the one month's rent it is holding as a security deposit. The property management company for the landlord must A) post a notice on the tenant's door that the security deposit has been forfeited due to nonpayment of rent and allow the notice to remain for seven days, or until rented to another tenant, whichever comes first. B) provide written notice of itemized deductions from the security deposit, mailed to the tenant's last known address. C) do nothing, other than disburse the forfeited security deposit directly to the landlord. D) disburse the security deposit from the security deposit trust account to the landlord trust account, and then disburse to the landlord.

The answer is provide written notice of itemized deductions from the security deposit, mailed to the tenant's last known address. This is true even if the last known address is the leased property. The tenant's failure to provide a forwarding address does not void the landlord's legal responsibility to provide an itemized list of security deposit deductions. The fact that it should be perfectly obvious to the tenant why the security deposit was forfeited also does not void the landlord's responsibilities. Alabama property management companies are not required to maintain separate trust accounts for landlord money and security deposits; they can be kept in the same trust account.

A general power of attorney

The answer is provides authority to carry out all of the business dealings of the person giving it. A general power of attorney provides authority to carry out all of the business dealings of the person giving it. A special power of attorney permits the execution of only certain acts.

One of the distinguishing characteristics of a land trust is that

The answer is public records usually do not name the beneficiary. One of the distinguishing characteristics of a land trust is that the public records usually do not name the beneficiary.

A branch office must have a A) qualifying broker's license and a branch office license. B) minimum of 500 square feet. C) salesperson's license. D) minimum of five salespersons.

The answer is qualifying broker's license and a branch office license. There can be any number of licensees affiliated with the office.

The person assigned to supervise a real estate office is called the A) qualifying broker. B) regional supervisor. C) office manager. D) associate salesperson.

The answer is qualifying broker. The qualifying broker may apply for a company license and must be in a position to actually supervise on a full-time basis the real estate activities of all licensees affiliated with the company.

Alabama law grants communities the legal authority to regulate and restrict development for all of the following reasons EXCEPT A) promote the safety of the community. B) raise tax revenue for the community. C) promote the general welfare of the community. D) promote the health of the community.

The answer is raise tax revenue for the community. Alabama law grants cities the authority to regulate and restrict development in order to promote the health, safety, or general welfare of the community.

Which of the following BEST describes a capitalization rate? A) Amount determined by the gross rent multiplier B) Rate at which the amount of property depreciation is measured C) Rate of return an income property will produce D) Mathematical value determined by a sales price

The answer is rate of return an income property will produce. In the income approach to appraisal, the capitalization rate is the relationship of the net annual income to the appraised value. Net annual income ÷ appraised value = capitalization rate.

Exposure to risk as it relates to environmental hazards is created for individuals involved in other aspects of real estate transactions, such as A) real estate appraisers. B) title searchers. C) transaction coordinators. D) surveyors.

The answer is real estate appraisers. Exposure to risk is created for individuals involved in certain aspects of real estate transactions, such as real estate appraisers. The other individuals noted are not typically in contact with the actual improvements on a property.

A mechanic's lien would be available to all of the following EXCEPT A) real estate professionals. B) subcontractors. C) surveyors. D) contractors.

The answer is real estate professionals. Contractors, subcontractors, and surveyors all have standing to seek a mechanic's lien. Real estate professionals typically do not have the right to place liens on property they have sold and for which they have not been paid the commission owed to them.

All of these liens must be recorded to be effective EXCEPT A) real estate tax lien. B) voluntary lien. C) money judgment. D) mechanic's lien.

The answer is real estate tax lien. Real estate tax liens do not have to be recorded to be effective, and they always take precedence over all other liens. This is why many lenders collect 1/12 of the taxes each month, so that the lender can pay the taxes when due. Unpaid taxes take priority over mortgage liens.

Which of the following is TRUE about real estate taxes? A) Real estate taxes include only general taxes. B) Real estate taxes automatically become liens against a property. C) Real estate taxes include only special assessments. D) Real estate taxes have the lowest priority of lines.

The answer is real estate taxes automatically become liens against a property. There are two types of real estate taxes: general real estate taxes and special assessments or improvement taxes. Both are levied against specific parcels of property and automatically become liens on those properties. The annual taxes levied on real estate in most states usually have priority over previously recorded liens and may be enforced by a court-ordered sale.

Which of the following is a lawful activity for an unlicensed assistant to conduct in the state of Alabama? A) Receiving, recording, and depositing earnest money B) Negotiating an agreement with a seller over the phone C) Independently hosting a home-show booth D) Using the telephone to prospect for listings

The answer is receiving, recording, and depositing earnest money. This is a lawful activity for an unlicensed assistant to conduct. Unlicensed assistants may not independently host open houses, prospect, or act in any way as though they were licensed.

Which of the following describes recognition of a real estate license from another state with reduced requirements for obtaining a license in Alabama? A) Reciprocity B) Comity C) Equivalency D) Restitution

The answer is reciprocity. As a courtesy, many states make it easier for licensees in good standing from other jurisdictions (including real estate agents, attorneys, CPAs and others) to obtain a license in the additional jurisdiction. This system is called reciprocity. While comity might seem to be the correct answer, this concept has to do with states and nations recognizing that something legal in one state is legal in the other state. An example is common law marriages; if two Alabama residents have a common law marriage, as allowed in Alabama, then it will be recognized if they move to another state that might not allow common law marriages for its own residents.

When multiple persons claim ownership of property and each has a recorded deed, but no one occupies the property, the person who is awarded ownership is likely to be the one who

The answer is recorded the deed first. If there is no notice of ownership based on occupancy of the property, the person with the earliest recorded deed is likely to prevail.

A homeowner constructs a five-bedroom brick house with an indoor pool in a neighborhood of modest two-bedroom and three-bedroom frame houses on narrow lots. The value of this house is MOST likely to be affected by what principle? A) Progression B) Assemblage C) Regression D) Change

The answer is regression. The value of larger lavish homes in a modest neighborhood will be drawn down by the presence of modest less lavish homes; regression is the opposite of progression.

All of the following will terminate an easement EXCEPT A) nonuse of a prescriptive easement. B) abandonment of easement. C) when the need no longer exists. D) release of the right of easement to the dominant tenement.

The answer is release of the right of easement to the dominant tenement. An easement is terminated when the owner of the dominant tenement releases that right to the owner of the servient tenement.

Which of the following is NOT an example of governmental power? A) Police power B) Remainder C) Taxation D) Eminent domain

The answer is remainder. The four governmental powers that limit private rights to ownership of land are represented by the acronym PETE (police power, eminent domain, taxation, and escheat).

What is the minimum punishment that the Commission is allowed to impose? A) $100 fine B) Counseling by commission staff C) Reprimand D) License suspension

The answer is reprimand. Counseling by commission staff is not an allowed punishment. Because all punishments are publicly reported, the reprimand is public. A $100 fine is not an allowed punishment.

A property manager renting residential property may A) refuse to rent to pregnant persons. B) require handicapped tenants to restore the premises at the end of a lease. C) designate adult and family sections in an apartment complex. D) properly charge families higher security deposits than single renters.

The answer is require handicapped tenants to restore the premises at the end of a lease. Property managers must allow handicapped tenants to make reversible changes. The other answers are all examples of illegal discrimination.

Buyers hire an agent to help them purchase a home and want seller financing because they filed for bankruptcy two years ago. The agent is

The answer is required to disclose the information because it is a material fact important to the seller. Most state statutes require that material facts to a transaction, such as credit issues, be disclosed to a seller, even if the buyer is a client. Such disclosure is not prevented by the requirement for client confidentiality.

Which of the following is legal? A) Charging a family with children a higher security deposit than those with no children B) Requiring a person with a disability to establish an escrow account for the costs to restore a property after it has been modified C) Refusing to sell a house to a person who has a history of mental illness D) Picturing only white people in a brochure as the "happy residents" in a housing development

The answer is requiring a person with a disability to establish an escrow account for the costs to restore a property after it has been modified. A landlord may negotiate, as part of a restoration agreement, a provision requiring the tenant to pay an amount not exceeding the cost of restoration into an interest- bearing escrow account. The interest in the account accrues to the benefit of the tenant.

The Closing Disclosure must be used to illustrate all settlement charges for

The answer is residential transactions financed by federally related mortgage loans. Except for owner financing, very few loans for the purchase of residential properties are not—or will not sometime be—federally related, either directly or indirectly. For example, if they are not insured or guaranteed by FHA or VA, they may still be later traded on the secondary mortgage market by Fannie Mae, Freddie Mac, or other government-sponsored enterprises.

A cloud on the title to a parcel of real estate is

The answer is resolved by an action to quiet title. Legal action might be required if there is a gap in the chain of title, as may happen if a grantor acquired title under one name and conveyed it under another name. Evidence can be presented in court to show that the grantee under the earlier deed was the same person who was the grantor in a later deed.

An option to purchase binds which of the following parties?

The answer is seller only. The potential buyer (optionee) who purchases an option to purchase is not bound to purchase the property. Should the optionee decide to exercise the option, the optionor (seller) is bound to proceed with the sale in keeping with all the details contained in the option.

In Alabama, which of the following actions are legally acceptable for a landlord to take when a tenant has NOT paid the rent? A) Serve a seven-day notice of default and opportunity to cure B) Post a five-day pay-or-quit notice C) Change the locks on the door D) Have an unlawful detainer warrant issued

The answer is serve a seven-day notice of default and opportunity to cure. To evict a tenant, legal notice has to be made, the eviction lawsuit filed, and then a judge decides whether the eviction action is appropriate. Note that the order a judge issues after an eviction lawsuit is an unlawful detainer writ, not a warrant. A warrant is a criminal procedure

Generally, the relationship between real estate broker and seller is

The answer is special agency. A broker serves a client—either a buyer or a seller—usually by performing the specific brokerage act spelled out in the employment contract (representation agreement). A specific assignment creates a special agency.

A lien on real estate made to secure payment for a specific municipal improvement project is which of the following? A) Mechanic's lien B) Ad valorem C) Utility lien D) Special assessment lien

The answer is special assessment lien. Specific improvements are paid for by special assessments.

After a foreclosure sale, the borrower who has defaulted on the loan may seek to pay off the mortgage debt plus any accrued interest and costs under what right?

The answer is statutory redemption. The redemption of property by paying off the mortgage debt plus interest and other charges after foreclosure is the right of statutory redemption. It is only possible in states that have statutes permitting it. All states, however, permit redemption before the foreclosure sale; this right is the right of equitable redemption.

With the exception of the innocent landowner, liability under the Superfund is A) limited to the owner of record. B) joint and several and retroactive, but not strict. C) strict, joint and several, and retroactive. D) voluntary.

The answer is strict, joint and several, and retroactive. Strict means that the victim's fault does not reduce the violation; joint and several means that if everyone associated with the problem is judged responsible, any one of the parties might have to pay the entire fine and all damages, not just a party's proportionate share; retroactive means that present violations can be charged as well as violations that occurred before the laws were passed. The Superfund Amendments and Reauthorization Act (SARA) created an exception for the innocent landowner who is completely innocent of all wrongdoing and thus should not be subject to liability.

Flexibility, economy, and ingenuity in the use of land are promoted by enactment of A) subdivision ordinances. B) enabling acts. C) national land development legislation. D) restrictions on land use.

The answer is subdivision ordinances. A subdivision ordinance will include provisions for submitting and processing a proposed subdivision, encouraging flexibility, economy, and ingenuity in the use of land.

The deed promising that the grantor holds title to the identified property and has not encumbered the property during the time it was held by the grantor is

The answer is the special warranty deed. The special warranty deed promises that the grantor will defend the title against the grantor's actions, but not those of earlier owners of the property.

The sale of property in one state to buyers in another state is A) not regulated by either the federal or state governments. B) regulated only by each local municipality. C) subject to only federal regulations. D) subject to strict federal and state regulations.

The answer is subject to strict federal and state regulations. In addition to the laws of the state in which the property is located or marketed, federal law regulates interstate property sales.

The seller's agent has certain duties to the client-principal. All of these are duties of the principal EXCEPT A) suggesting marketing strategies to the agent. B) dealing with the agent in good faith. C) cooperating with the agent. D) compensating the agent.

The answer is suggesting marketing strategies to the agent. Marketing is the agent's responsibility. The principal who hired the agent is responsible for cooperating with the agent, disclosing material defects, and compensating the agent.

Which is the process by which boundaries are measured by calculating the dimensions and area to determine the exact location of a piece of land?

The answer is survey. A survey is the process by which boundaries are measured and land areas are determined, including the onsite measurement of lot lines, dimensions, and a house's position on a lot, as well as the determination of any existing encroachments or easements.

Even though it is not recorded immediately, a lien for payment of real estate taxes will

The answer is take priority over an earlier recorded document. Real estate taxes and special assessments are liens on specific parcels of real estate and are not usually recorded until after the taxes or assessments are past due.

In most states, a broker's license can be suspended or revoked if the broker

The answer is takes a listing that does not include a date on which the listing expires. If the broker breaches the listing contract or cancels it without cause, the broker may be liable for damages; however, it is not usually grounds for suspension or revocation of the license. Courts discourage the use of automatic extension clauses, and these clauses are even illegal in some states.

A tenant's lease has expired, but the tenant has not vacated the premises or negotiated a renewal lease. The landlord has declared that the tenant is not to remain in the building. This situation is an example of

The answer is tenancy at sufferance. Tenancy (estate) at sufferance occurs when a tenant who lawfully possessed real property continues in possession of the premises without the landlord's consent after the rights expire.

A tenancy in common differs from a joint tenancy in that

The answer is tenants in common may have unequal interests. Tenancy in common is the only form of ownership that can have unequal shares of ownership.

The Homeowner's Protection Act of 1998 (HPA) requires that the lender automatically

The answer is terminate the private mortgage insurance payment if the borrower has accrued at least 22% equity in the home. The borrower must also be current on mortgage payments.

Last month a broker took a listing on a property The broker learned later that the client has been declared incompetent by the court. The listing now is

The answer is terminated. A listing agreement may be terminated if either party dies or becomes incapacitated.

A person who has died with a will has died

The answer is testate. A person who has died testate has prepared a will indicating how the deceased's property should be disposed of.

Ownership in severalty is property

The answer is that has a single owner. Ownership in severalty is property owned by one individual or corporation.

The law that requires lenders to find ways to help meet the housing needs of those of low and moderate incomes is

The answer is the Community Reinvestment Act. Under the Community Reinvestment Act of 1977 (CRA), financial institutions are expected to meet the deposit and credit needs of their communities, participate and invest in local community development and rehabilitation projects, and participate in loan programs for housing, small businesses, and small farms.

The federal Fair Housing Act is administered by

The answer is the Department of Housing and Urban Development. HUD has established rules and regulations that interpret the practices affected by the law.

The conservatorship of Fannie Mae and Freddie Mac is the responsibility of

The answer is the Federal Housing Finance Agency. Fannie Mae has shareholders but is under the conservatorship of the Federal Housing Finance Agency (FHFA). It creates mortgage-backed securities using pool of mortgages as collateral and deals in conventional, FHA, and VA loans.

The name for the current policy of the National Association of REALTORS® that allows all multiple listing service (MLS) members equal rights to display MLS data is

The answer is the Internet Data Exchange. NAR has adopted the Internet Data Exchange (IDX). The policy allows all MLS members to have equal rights to display MLS data, while also respecting the rights of the property owners and the brokers who represent them to market the property as they wish.

Activities such as price-fixing, group boycotting, allocation of customers or markets, and tie-in agreements are violations of

The answer is the Sherman Antitrust Act. The real estate industry is subject to antitrust laws. At the federal level, the Sherman Antitrust Act provides specific penalties for a number of illegal business activities.

A history of all recorded liens and encumbrances is revealed in

The answer is the abstract. The title insurance policy lists coverage and exceptions to the policy. Unrecorded documents have not been examined. The chain of title traces ownership. The abstract is the most complete documentation of recorded liens and encumbrances.

The clause that appears in both the promissory note and the mortgage, and allows the lender to call the balance due and payable in full upon default, is known as

The answer is the acceleration clause. An acceleration clause allows the lender to call the entire loan due for several reasons listed in the loan documents, including default. The due-on-sale or alienation clause is specific to the sale of the property.

The forms of property ownership are controlled by

The answer is the state. The forms of property ownership are controlled by the state.

Which of the following is TRUE about a buyer brokerage agreement in Alabama? A) The agreement is terminated at expiration of the term or at fulfillment of the purpose. B) The broker owes no legal duties after the agreement is terminated. C) An agreement for agency services is not required to be in writing. D) It can be assigned to another broker.

The answer is the agreement is terminated at expiration of the term or at fulfillment of the purpose. Ignoring default on the part of one party or other, the buyer brokerage agreement is terminated at expiration of the term or at fulfillment of the purpose. Brokerage agreements cannot be assigned, they must be in writing if agency services are included, and brokers owe some legal duties even after the agreement is terminated.

A mortgagee received a title insurance policy on the property a buyer is pledging as security for the mortgage loan. Which of the following is TRUE? A) The amount of coverage is commensurate with the loan amount. B) The amount of coverage increases as the borrower grows older. C) The policy guarantees that the buyer's equity will be protected. D) The policy is issued for the benefit of the buyer.

The answer is the amount of coverage is commensurate with the loan amount. A lender's policy is used for the benefit of the mortgagee. The amount of coverage depends on the amount of the mortgage loan and is decreased as the loan balance is reduced.

A buyer would like to place an offer on a property but doesn't have good credit. Which of the following is a logical next step?

The answer is the broker could find out whether the seller is willing to provide financing for the buyer; if the seller agrees, they could fill out a seller financing addendum. In the case where the seller has agreed to provide the financing for the sale, an addendum needs to be prepared outlining credit terms, taxes, assessments, payment information, all disclosures, title insurance, and any other pertinent information under local jurisdiction regulations.

Two salespeople working for the same broker obtained offers on a property listed with their firm. The first offer was obtained in the morning. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer while the seller was making a decision about the first offer. Which of the following is TRUE? A) After the first offer was received, the broker should have told the salespeople that no additional offers would be accepted until the seller decided on the offer. B) The broker was smart to protect the seller from getting into a negotiating battle over two offers. C) The broker has no authority to withhold any offers from the seller. D) The broker's actions are permissible, provided the commission is split between the two salespeople.

The answer is the broker has no authority to withhold any offers from the seller. The seller has the right to see all offers that arrive.

A qualifying broker hires a real estate agent as an independent contractor. The written agreement between them specifically states that the agent is not the employee of the broker but acts independently at all times and under all circumstances. Which statement is FALSE? A) The broker is not responsible if the agent is guilty of negligence in a real estate transaction, and the injured party must collect from the agent or from the agent's E&O insurance. B) The agent must keep the broker fully informed of all its activities. C) The broker must supervise the agent. D) The agent must advise the broker of any problems in a real estate transaction that might impact the broker's responsibilities.

The answer is the broker is not responsible if the agent is guilty of negligence in a real estate transaction, and the injured party must collect from the agent or from the agent's E&O insurance. The independent contractor relationship merely affects things such as workers compensation insurance, IRS withholding taxes, and broker liability for the agent's injuries to third parties, such as an automobile accident with a third party while showing properties to a buyer. If the agent is an employee, the broker might be liable for the automobile accident. As an independent contractor, the broker is probably not liable. As far as real estate activities, the broker is always responsible for the agent's actions or inactions.

Since 2002, a real estate broker has had an understanding with two of the five mortgage lenders in town. The broker recommends only those two lenders to clients and does not tell clients about any other lenders. In return, the recommended lenders pay for the vacations the broker offers sales associates as rewards for high performance. Based on these facts, which of these statements is TRUE? A) This is a permissible controlled business arrangement under RESPA because the broker is not paid a fee for the recommendations. B) The broker's arrangement with the lenders is an illegal kickback under RESPA. C) Because this arrangement has been in existence for more than 10 years, it is exempt from RESPA. D) The broker is not doing anything illegal.

The answer is the broker's arrangement with the lenders is an illegal kickback under RESPA. By not telling clients about the other lenders in town, the broker is limiting their ability to get the best possible financing. That, added to the fact that the lender pays for the sales associates' vacations, makes the broker's behavior look very suspicious.

Which of the following is TRUE about net listings? A) The broker's commission is the amount the property sells that exceeds the amount to be received by the owner. B) This type of listing is always an exclusive-agency listing. C) This type of listing is legal in Alabama. D) The broker's commission is based on a percentage of the selling price.

The answer is the broker's commission is the amount the property sells for that exceeds the amount to be received by the owner. A net listing is an agreement that specifies a net sale price to be received by the owner, with the excess going to the broker as commission. Alabama law prohibits net listings.

Designated agency is MOST likely to occur when A) there is a client-buyer and a customer-seller. B) the seller and the buyer are represented by different companies. C) both the buyer and the seller are customers. D) the buyer and the seller are represented by the same company.

The answer is the buyer and the seller are represented by the same company. Designated agency is a process that accommodates an in-house sale in which two different sales associates of the same broker are involved. The broker designates one sales associate to represent the seller and one sales associate to represent the buyer.

Which event will terminate an agency in a broker-seller relationship? A) The broker discovers that the market value of the property is such that an adequate commission will not be earned. B) The owner declares personal bankruptcy. C) The broker appoints other brokers to help sell the property. D) The owner abandons the property.

The answer is the owner declares personal bankruptcy. Common law holds that the bankruptcy of either the broker or the seller ends the agency relationship created by the listing.

Which of the following is NOT a valid reason to terminate an agency relationship? A) The buyer went bankrupt. B) The agent found a home for a buyer to purchase, and the sale closed. C) The property was condemned. D) The buyer wanted to work with a new agent, but the terms of agency had not yet expired and the current agent did not agree to terminate.

The answer is the buyer wanted to work with a new agent, but the terms of agency had not yet expired and the current agent did not agree to terminate. Termination of agency requires mutual agreement by all parties to cancel the contract.

A buyer took delivery of the deed to a new house but neither recorded the deed nor took possession of the property. Under these circumstances,

The answer is the buyer's interest is not fully protected against third parties. Constructive notice to the public of interest in a parcel of real estate is served when the deed is recorded and physical possession of the property is taken. Without this, an owner's interests could be jeopardized.

Which statement BEST explains this sentence: "To recover a commission for brokerage services, a broker must be employed by a client"? A) The broker must have a sales associate employed in the office. B) The broker must express an interest in representing the client. C) The broker must work in a real estate office. D) The client must make an express or implied agreement to pay a commission to the broker.

The answer is the client must make an express or implied agreement to pay a commission to the broker. A broker's contract of employment by a client is the listing or buyer representation agreement signed by them both. A valid employment agreement is one of the usual requirements in a suit for a brokerage commission; it is proof of employment.

The rules established by tradition and court decisions are found in

The answer is the common law. Common law refers to the rules established by tradition and court decisions.

A company owns a 2,000-acre tract of undeveloped woodland surrounding a scenic lake. The tract has been divided into 106 individual lots, ranging in size from 15 acres to 100 acres. Telemarketers are hired to sell the lots to residents of the state and the three states with which it shares a common border. Based on these facts, how does the Interstate Land Sales Full Disclosure Act apply to the project? A) The company must file a disclosure statement with HUD. B) This development project is exempt from the law because of the lot size exemption. C) Because the project is not fraudulent, it is exempt from the requirements of the law. D) The project is exempt from the law because it is not being marketed outside a contiguous multistate region.

The answer is the company must file a disclosure statement with HUD. The company must file the disclosure statement; the project is being marketed over state lines, it consists of more than 25 lots, and some lots are smaller than 25 acres.

If the Commission decides there has been no violation of Alabama license law and declines to pursue a formal complaint, it sends notice of its decision to A) the complainant and the licensee's qualifying broker. B) nobody, because this is confidential. C) the complainant and the licensee. D) the complainant only.

The answer is the complainant only. A licensee could be the subject of dozens of verified complaints filed by consumers or other licensees, but if none of them give rise to a formal complaint, the licensee will never know about all the allegations.

The phrase bundle of legal rights is properly included in

The answer is the definition of real property. Purchasing real property means buying rights of ownership, or a bundle of legal rights.

In legal terminology, the property owner is

The answer is the devisor, grantor, lessor, and mortgagor. In most cases, a good way to remember the term that applies to the property owner is to look for the term ending in "or."

A homeowner's equity in the property is

The answer is the difference between the property's market value and the amount still owed on it. Equity in a property can be borrowed against in future or realized on a sale of the property.

If the dominant estate merges with the servient estate, which of these is TRUE? A) The easement is terminated. B) The easement remains in effect for the entire parcel. C) The easement is suspended but cannot be terminated. D) The new owner must bring a suit seeking severance of the easement from the combined properties.

The answer is the easement is terminated. If the owner of the dominant tenement also becomes owner of the servient tenement (or vice versa), the easement terminates. Because the same person owns both properties, there is no need for the easement to exist.

Government ownership of land refers to land owned by A) the state government only. B) the federal government only. C) the federal, state, and local governments. D) the federal and state governments.

The answer is the federal, state, and local governments. Any of the three may own land for public use and regulate land use within the applicable jurisdiction.

The lower the ratio of debt to value,

The answer is the higher the down payment made by the borrower. The lower the ratio of debt to value, the higher the down payment made by the borrower.

A prospective tenants wants to rent an apartment. Because of a physical disability, it would be necessary for the tenant to have all the doorknobs replaced with lever-type handles. In this case, which of these statements is TRUE? A) The landlord is legally obligated to permit the modifications to be made at the tenant's expense. B) Because the modifications demanded by the tenant are not reasonable, the landlord is not legally required to permit them. C) The Fair Housing Act requires that the man make the accommodation for the tenant at the landlord's expense; no additional rent may be charged for the tenant's modified unit. D) Because the proposed modifications would interfere with a future tenant's use of the premises, the landlord may refuse to permit them.

The answer is the landlord is legally obligated to permit the modifications to be made at the tenant's expense. These modifications would appear to be within the scope of reasonable modifications. They also would not interfere with a future tenant's use of the property.

A property manager's primary obligation is to A) the banker. B) the owner. C) the government authority. D) the tenant.

The answer is the owner. The management agreement creates the agency relationship between the property manager and the owner in which the fiduciary relationship that is established requires the duty of the property manager's loyalty to the owner.

A 16-year-old applied for a conventional loan in order to purchase a condominium. The lender denied the application, citing the applicant's age as the reason for the denial. Which of these is TRUE? A) The lender lawfully denied the application because the applicant was under 18 and therefore was too young to legally sign a contract. B) The lender violated the ECOA because the applicant is too young to be expected to have an employment history. C) None of these are true. D) The lender violated the ECOA because lending decisions cannot be based on age.

The answer is the lender lawfully denied the application because the applicant was under 18 and therefore was too young to legally sign a contract. A lender may not consider age unless the applicant is too young to legally sign a contract.

A licensee representing the seller shows a house to his daughter, who is interested in buying it. The licensee presents the daughter's full-price offer to the seller, but without disclosing that the buyer is his daughter. The seller eagerly accepts the offer. Both the seller and the daughter are happy with the transaction. Which of the following statements is TRUE? A) The licensee has done nothing wrong; he was not required to disclose his relationship with his daughter. B) The seller cannot complain about the licensee's actions because his daughter's offer was for the full listing price. C) Because both parties are happy with the transaction, it does not matter whether the licensee disclosed his relationship with his daughter to the seller. D) The licensee has violated his fiduciary duties to the seller by failing to disclose his relationship with his daughter and could be subject to disciplinary action.

The answer is the licensee has violated his fiduciary duties to the seller by failing to disclose his relationship with his daughter and could be subject to disciplinary action. Disclosure is required for the licensee's immediate family (parent, child, or spouse) and companies in which the licensee holds an interest. If in any doubt about the necessity of disclosure, licensees should disclose any family or business relationships to clients.

What must a real estate licensee disclose to sellers about lead-based paint? A) Nothing, if the residence was constructed after 1978 B) The licensee's obligation to disclose known lead-based paint hazards to buyers C) The licensee's obligation to provide buyers with the EPA's webpage with addresses of properties known to have lead-based paint D) That all buyers must be provided with a lead-based paint pamphlet provided by the EPA

The answer is the licensee's obligation to disclose known lead-based paint hazards to buyers. This must be disclosed to the seller, no matter when the residence was constructed, because it relates to known hazards, not just the possibility of a hazard based on the home's age.

Which is TRUE regarding listing agreements in Alabama? A) The listing agreement must include a legal description of the property. B) The listing agreement must include a definite expiration date. C) The listing agreement for a broker to act as a transaction broker must be in writing to be enforceable. D) Agents are required to give a legible copy of the listing agreement to all parties within 24 hours of signing it.

The answer is the listing agreement must include a definite expiration date. Agents are required to give a legible copy of any agreement to all parties to the agreement as soon as reasonably practical after it has been signed by all parties. Recall that while good business practices would encourage written agreements in all circumstances, listing agreements for a broker to act as a transaction broker need not be in writing to be enforceable.

Discount points on a mortgage are computed as a percentage of

The answer is the loan amount. Discount points are based on a percentage of the loan amount, not the purchase price.

MOST governmental controls on property occur at A) the federal level. B) the local level. C) the state level. D) the regional level.

The answer is the local level. Local jurisdictions enact most regulations on property.

The scope of a property manager's work depends on the terms of A) the rental agreement. B) the listing agreement C) the management agreement. D) the transactional agreement.

The answer is the management agreement. The management agreement defines the manager's authority and responsibilities.

For the purpose of the United States Geological Survey (USGS), the term datum is defined as

The answer is the mean sea level at New York Harbor. For the purpose of the United States Geological Survey (USGS), the term datum is defined as the mean sea level at New York Harbor.

The term encapsulation refers to A) the method of sealing disintegrating asbestos. B) the way in which insulation is applied to pipes and wiring systems. C) the way in which lead-based paint particles become airborne. D) the process of sealing a landfill with three to four feet of topsoil.

The answer is the method of sealing disintegrating asbestos. Wrapping or enclosing with an airtight covering is encapsulating. This is the safest way of dealing with much of the friable (flaking) asbestos that already exists in housing and office buildings.

A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. Then the buyer signs a note and a mortgage. In this example, the buyer is called

The answer is the mortgagor. A buyer who signs a mortgage—the document to be given to the lender—is a mortgagor. The buyer is also the maker (obligor) on the note

The price under consideration in the definition of market value is

The answer is the most probable price that a property should bring. The definition assumes that the property is offered in an open market under all conditions requisite to a fair sale, with both buyer and seller acting prudently and knowledgeably and the price not affected by undue stimulus.

A licensee sells his mother a vacation condo with known mold and Chinese drywall problems. When asked about these issues by her mother, the licensee denies they exist. After closing, correcting the problems cost the mother $35,000. The mother sues the licensee, provides proper notice to the correct parties, and completes all steps to receive compensation from the fund. Why will a court deny any recovery to the mother? A) The loss exceeds the recovery fund limits. B) The mother is not an allowed party for recovery from the fund. C) It will not deny recovery—the mother is entitled to recover from the fund. D) Casualty losses are not covered by the fund.

The answer is the mother is not an allowed party for recovery from the fund. The spouse, child, or parent of a licensee is not allowed to recover from the fund, probably because of the opportunity for collusion, whether it actually occurs or not. Even though the loss exceeds the fund limits, if recovery were otherwise allowed, it would be reduced to the allowed amount, not denied entirely.

A real estate sales associate does not show non-Latino clients any properties in traditionally Latino neighborhoods. The sales associate bases this practice on the need to preserve the cultural integrity of Latino immigrant communities. Which of the following statements is TRUE regarding the sales associate's policy? A) The policy has the effect, but not the intent, of steering. B) The policy is steering, but it does not violate the fair housing laws because the sales associate is motivated by cultural preservation, not by exclusion or discrimination. C) The sales associate is not attempting to restrict the rights of any single minority group; therefore, the practice does not constitute steering. D) The policy is steering and violates fair housing laws, regardless of the sales associate's motivation.

The answer is the policy is steering and violates fair housing laws, regardless of the sales associate's motivation. It is steering regardless of motivation, even if the client had asked to be shown property in such a neighborhood.

To be entitled to a mechanic's lien on real estate, the person who did the work or supplied the materials for which payment is claimed must have a contract with

The answer is the property owner or the owner's authorized representative. The contract for the work or materials establishes the liability that enables the filing of a mechanic's lien if the person filing has not received payment.

Deed restrictions may NOT legally control or limit A) exterior finish and decoration of the structures. B) the race or religion of future owners and occupants of a property. C) the sizes and types of structures to be built. D) potential future uses of the properties.

The answer is the race or religion of future owners and occupants of a property. Deed restrictions cannot be used for illegal purposes, such as the exclusion of certain races, nationalities, or religions.

Another name for the lot-and-block method of describing a parcel of land is

The answer is the recorded plat method. This system uses lot and block numbers referred to in a plat map filed in the public records of the county where the land is located.

Assuming all monies are accounted for and there is no wrongdoing, why is it illegal to commingle funds? A) The appearance of impropriety B) The principal of appropriation C) The difficulty of conducting an audit by the AREC D) The risk of creditor seizure of client funds

The answer is the risk of creditor seizure of client funds. If a licensee is not scrupulous about separating client funds from his own funds, the IRS or other creditors of the licensee can disregard the "escrow" or "trust" account name on the bank account and seize all funds to satisfy the licensee's debts. The argument is that the licensee did not treat the account as a true trust account, so the creditors may act in the same manner.

Which of the following is TRUE of a listing agreement? A) Only the sales associate of the employing broker needs to be identified. B) The sales associate of the employing broker is not a party to the agreement. C) The listing price is not included. D) Broker's compensation is not included.

The answer is the sales associate of the employing broker is not a party to the agreement. The brokerage company name, the employing broker, and if applicable, the sales associate taking the listing must all be identified, even though the sales associate only acts on behalf of the broker and is not a party to the agreement.

A sales associate of a broker told a prospective buyer that the house being shown is "the best house in the area." Because of this statement,

The answer is the sales associate was practicing puffing. Exaggeration of a property's benefits is called puffing.

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of the following statements is TRUE? A) The seller and the buyer must be informed of the situation and agree to the broker representing both of them. B) The broker should refer the buyer to another broker to negotiate the sale. C) The buyer should not have been shown a house listed by the broker. D) State law no longer regulates this situation.

The answer is the seller and the buyer must be informed of the situation and agree to the broker representing both of them. Or they must be informed of the ability to hire another broker. This is limited consensual dual agency and is permitted with the informed written consent of both parties.

The broker may still be entitled to a commission in which of these situations where a pending property sale did NOT close? A) The buyer decided not to buy the property. B) The buyer wanted to add the kitchen appliances to the sale, but the seller refused. C) The seller decided not to sell. D) Financing fell through for the buyer.

The answer is the seller decided not to sell. If the sale is not completed due to the seller's default (deciding not to sell), then the broker is generally due a commission. Courts may prevent a real estate broker from receiving a commission if the broker knew that the buyer was unable to perform.

A real estate broker lists a home for sale for $189,500. Later that same day, a prospective buyer comes into the broker's office and asks for general information about homes for sale in the $130,000 to $140,000 price range but refuses representation by the broker's company at this time. Based on these facts, which statement is TRUE? A) The seller is the broker's client; the buyer is a customer. B) Both the seller and the potential buyer are the broker's customers. C) The broker owes fiduciary duties to both seller and buyer. D) If the buyer later asks for buyer representation by the broker's firm, it will not be possible because of the firm's earlier agreement with the seller.

The answer is the seller is the broker's client; the buyer is a customer. One who lists property with a broker is the broker's client. A prospective purchaser who refuses buyer representation is a customer. Customers are not owed fiduciary duties but may later contract with the broker for buyer representation.

All encumbrances and liens shown on the report of title, other than those waived or agreed to by the purchaser and listed in the contract, must be removed so that the title can be delivered free and clear. The removal of such encumbrances is typically the duty of

The answer is the seller. Removal of encumbrance is the (financial) responsibility of the seller.

A contract is said to be executed when it includes

The answer is the signatures of the parties. A contract is said to be executed when it is signed, even though the parties have not fully executed the contract by fulfilling all of the promises that it contains.

Information that a real estate sales associate should obtain from a prospective property seller to make sure that all contingencies are covered in the listing agreement includes

The answer is the status of all existing loans on the property. Current liens on the property, especially if they total more than the property's likely selling price, will affect a sale. Information must be obtained from the current owners of the property.

If a buyer defaulted some time ago on a written contract to purchase a seller's real estate, the seller can still sue for damages if he is not prohibited from doing so by

The answer is the statute of limitations. The statute of limitations in every state limits the time within which parties to a contract may bring legal suit to enforce their rights.

All of these are characteristics of a tenancy by the entirety EXCEPT A) each spouse owns an equal, undivided interest in the property as a single, indivisible unit. B) the surviving spouse automatically becomes sole owner of the property upon the death of the other spouse. C) title may be conveyed only by a deed signed by both parties. D) the surviving spouse automatically owns one-half of the property acquired during the marriage.

The answer is the surviving spouse automatically owns one-half of the property acquired during the marriage. Under tenancy by the entirety, title may be conveyed only by a deed signed by both parties, each spouse owns an equal, undivided interest in the property, and the surviving spouse automatically becomes the owner of the entire property upon the death of the other.

A licensed salesperson is a member of a team within a brokerage. Her team wishes to place advertising to let people know about their special expertise in a particular part of town. What must they include in the advertising? A) The team name, plus the name of the qualifying broker and the team leader B) The team name and the name of the qualifying broker C) The team name alone, as long as it is prominently displayed D) The team name, the name of the qualifying broker or company, and the name of any team member

The answer is the team name, the name of the qualifying broker or company, and the name of any team member. If some licensees within a real estate office work together as a team or group, they are allowed to advertise their team name, in addition to the regular requirement that the broker or company name be prominently displayed on all advertising. When advertising in the team name, they must also include the name of at least one licensee who is a member of the team. It does not have to be a team leader, or associate broker, or any other specific person.

A tenant rented a house. During the lease term, the tenant moved out of the state without telling the landlord. The tenant assigned the lease to a friend, who failed to make any rental payments. In this situation, which of these statements is TRUE? A) The tenant is still liable to the landlord for the outstanding rent because the landlord did not release the tenant when the lease was assigned to the friend. B) The tenant has no obligation to the landlord because the lease was assigned, not sublet. C) The tenant is still liable to the landlord because the tenant's arrangement with the friend, as described, is a sublease, not an assignment. D) The friend has no obligation to the landlord because the friend's lease agreement is with the tenant.

The answer is the tenant is still liable to the landlord for the outstanding rent because the landlord did not release the tenant when the lease was assigned to the friend. While rights to possession may be assigned or sublet, the obligation to pay rent may not be assigned to another party unless the landlord agrees to the plan.

What does marketable title mean?

The answer is the title is free of defects. Marketable title means that the title has no defects that could carry over as a problem for the new owner at whatever time the new owner decides to sell.

The natural level at which ground is saturated with water is called A) the water table. B) the high tide. C) the riverbed. D) the water shelf.

The answer is the water table. The water table may be several hundred feet underground or near the surface.

To determine whether a location can be put to future use as a retail store, one would examine A) the zoning ordinance. B) the building code. C) the list of permitted nonconforming uses. D) the housing code.

The answer is the zoning ordinance. Zoning ordinances deal with the uses to which properties in various parts of the jurisdiction can be put.

The need for regulation of the activities of real estate brokers and salespeople has long been recognized because

The answer is their work involves other people's real estate and money. The need for regulation of the activities of real estate brokers and salespeople has long been recognized because their work involves other people's real estate and money.

All of the following are true of deeds EXCEPT A) they guarantee ownership. B) there must be a competent grantor. C) they differ in the promises they offer the grantee. D) they are used to transfer title to real estate.

The answer is they guarantee ownership. Deeds differ in the promises or warrants they give, they are used to transfer title in real estate, and they must have a competent grantor (which is one of the seven elements that make a deed valid). Deeds do not guarantee ownership.

Which item would a lender generally require at the closing? A) Credit report B) Title insurance commitment C) Market value appraisal D) Application

The answer is title insurance commitment. Credit report, application for the mortgage loan, and appraisal of the subject property are all required by a lender well before closing. The title insurance binder is due at closing.

In many states, acceptable proof of good title to real estate is bolstered by the purchase of

The answer is title insurance. Title insurance is a contract under which the policyholder is protected from losses arising from defects in the title to the property.

Establishing relationships with community and fair housing groups A) to discuss new opportunities for business is a worthwhile activity for the real estate professional. B) to discuss common concerns and find solutions to problems is a worthwhile activity for the real estate professional. C) while admirable is not a profitable activity for the real estate professional. D) has been difficult for the real estate professional to achieve.

The answer is to discuss common concerns and find solutions to problems is a worthwhile activity for the real estate professional. Establishing relationships with community and fair housing groups to discuss common concerns and find solutions to problems can provide a real estate professional with an important way to both assess community needs and help fulfill those needs.

A security deposit made by a tenant to cover the last month's rent of the lease or the cost of repairing damage caused by the tenant is generally

The answer is transferred by the seller to the buyer. The buyer will receive any security deposits that tenants of the property have made, and are required to comply with state law regarding the disposition of security deposits.

A qualifying broker opens a real estate office under his own name as a sole proprietorship. How many licenses are required? A) One B) Three C) Two D) None

The answer is two. Every Alabama real estate firm must be properly licensed. All qualifying brokers must be licensed under a real estate firm, even if the firm is a sole proprietorship owned by the qualifying broker.

Which of the following is NOT covered by a standard title insurance policy? A) Incorrect marital statements B) Unrecorded rights of parties in possession C) Incompetent grantors D) Forged documents

The answer is unrecorded rights of parties in possession. All are covered except unrecorded rights of parties in possession. These are covered by an extended coverage policy.

What is the term that refers to a lender charging an interest rate that is higher than that permitted by law?

The answer is usury. To protect consumers from unscrupulous lenders, many states have enacted laws limiting the interest rate that may be charged on loans.

Charging more interest than is legally allowed is called

The answer is usury. Usury is charging interest in excess of the maximum rate allowed by law.

Change, contribution, plottage, and substitution are some of the basic principles that affect what aspect of real estate?

The answer is value. They all affect value—the most probable price a property will bring.

A contract that has no legal force or effect is

The answer is void. A contract that is void was never a legal contract because it lacked some or all of the essential elements of a contract.

An example of constructive eviction would be a tenant A) who moves because the unit no longer has water. B) who moves because he doesn't like the neighborhood. C) who remains in possession after termination of the lease. D) being given a notice to quit or pay rent.

The answer is who moves because the unit no longer has water. When conditions cause a rental unit to no longer be habitable, the renter is said to have suffered constructive eviction. Without water, the tenant could not bathe, cook, wash clothes, and so on. The tenant must leave and not just withhold rent.

Who is the agent's principal?

The answer is whoever hired the agent. The most complete answer is whoever hired the agent. That could be either the buyer or the seller, but the source of the agent's compensation is not the determining factor.

The holder of the possibility of reverter of ownership of real estate (or the holder's heir or successor) can reacquire full ownership of the property on violation of a special limitation

The answer is with no need to bring a legal action in court. If the holder of a fee simple determinable violates the special limitation that has been imposed on the title, the holder of the possibility of reverter (or heir or successor) can reacquire full ownership with no need to bring a legal action in court.

A suit may be filed in federal court by a person aggrieved by an alleged act of discrimination under the Fair Housing Act A) no later than one year after the discriminatory act. B) within two years of the discriminatory act. C) with the approval of the state or county nondiscrimination officer. D) if the Federal Housing Administration refuses to pursue the case.

The answer is within two years of the discriminatory act. A civil suit alleging an act of discrimination under the Fair Housing Act may be filed in federal court within two years of the discriminatory act. A complaint may be filed with HUD within one year of the alleged discriminatory act.

All of the following are essential elements of a contract EXCEPT A) consideration. B) words of conveyance. C) mutual agreement. D) lawful objective.

The answer is words of conveyance. The essential elements of a valid contract are the following: competent parties, mutual agreement, lawful objective, consideration, and in writing. Words of conveyance are required in deeds.

A licensee agrees to sell a neighbor's home in return for a 6% commission. The licensee makes all the proper disclosures and writes up a listing agreement for agency services, but leaves it with the neighbor so the neighbor's spouse can also sign it after returning from a business trip. The licensee forgets to follow up and never obtains a written listing agreement. At closing, the neighbor refuses to authorize payment of a commission, citing the lack of a written listing agreement. Is the licensee entitled to the commission? A) No, because the qualifying broker was the procuring cause of the contract and sale. B) Yes, because it was the procuring cause of the contract and sale. C) No, because the parties had no contract for agency services. D) Yes, because the parties had an implied contract for agency services.

The answer is yes, because it was the procuring cause of the contract and sale. The seller knowingly accepted the services of the broker, and the benefit of a buyer. No agency agreement was created because there was no writing, but the broker was acting as a transaction broker. There are no implied agency relationships in real estate brokerage, although they might be allowed and recognized in other situations.

The qualifying broker for a property management firm suffers a license suspension for 30 days. If she arranges for another qualifying broker to take over the company during that time, must she disclose the suspension to the landlords whose property she manages? A) Yes, because landlords must be given the opportunity to change brokers to someone of their own choice B) Yes, because the Commission will advise the landlords anyway, so it is best if the broker gets in front of the situation C) No, because business can proceed under the replacement broker for a temporary period D) No, because it is none of their business if they were not harmed by the action that gave rise to the suspension

The answer is yes, because landlords must be given the opportunity to change brokers to someone of their own choice. Upon receipt of the AREC's order, the suspended or revoked broker must cancel all listings, buyer agency agreements, tenant representations, and property management agreements. The sellers, buyers, tenant clients, and lessors must be advised of their rights to change brokers. Although the disciplined broker can recommend a replacement, she cannot simply transfer the contracts to someone else, not even to another broker from the same office who agrees to temporarily take over as qualifying broker.

An associate broker routinely gives RECAD disclosure pamphlets to Spanish-speaking clients and customers and obtains their signatures, but the associate broker never explains the various brokerage relationships to anyone or engages in any dialogue to be sure they understand. Can the qualifying broker be charged with a violation of the license law as a result? A) Yes, because the broker is responsible for all licensees in the office. B) No, because an associate broker is supposed to know better and the qualifying broker is not responsible for an associate broker's actions. C) No, because the only requirement is that the pamphlet be provided and signed. D) Yes, but only because it is obvious they will not understand the pamphlet.

The answer is yes, because the broker is responsible for all licensees in the office. It makes no difference if they are salespersons or associate brokers. There are only two differences between salespersons and associate brokers: (1) Associate brokers can work for more than one qualifying broker, while salespersons can work for only one; and (2) associate brokers can become qualifying brokers simply by paying a fee and having a new license issued. It is the licensee's responsibility to make sure the RECAD disclosures are understood by a consumer.

A buyer presents a written offer for property. The sellers verbally accept the offer through their real estate agent, and the parties move forward to closing. Three days before scheduled closing, the sellers sign a contract with a third party for a higher price. Can the seller do this? A) Yes, but only if the listing agreement was an exclusive right to sell B) No, because it was within seven days of closing and the parties were required to proceed C) Yes, because the first buyer did not have an enforceable contract D) No, because the first buyer did have an enforceable contract

The answer is yes, because the first buyer did not have an enforceable contract. All contracts related to the transfer of real estate must be in writing and signed by the person who is to be bound to the contract to be enforceable. The seller, who only verbally accepted the buyer's offer, never signed it.

A landlord claims he has a lien on a tenant's property located in the leased premises. Is this accurate? A) No B) Yes, but only for commercial property C) Yes D) Yes, but only for residential property

The answer is yes, but only for commercial property. The Uniform Alabama Residential Landlord and Tenant Act made landlords' liens illegal in the residential context.

Do licensees in Alabama have lien rights for unpaid fees and commissions? A) Yes, but only for residential transactions B) Yes, but only for commercial transactions C) Yes, for all transactions D) No

The answer is yes, but only for commercial transactions. Residential real estate licensees are not entitled to file a lien for an unpaid commission. Licensees who assist with the purchase or sale of commercial property are given lien rights for their commission, but it is not in the part of the code that deals with mechanics' and materialmen's liens.

A licensee's mother wishes to make an offer on a piece of real estate and use the licensee to assist her in the sale. Must the purchase contract disclose the relationship to the owner? A) Yes, disclosure is required because the mother is a member of the licensee's immediate family. B) No, disclosure is not required. C) No, disclosure is required only if the licensee lists his mother's property, not if his mother is the buyer. D) No, disclosure is not required to the owner, only to the listing broker.

The answer is yes, disclosure is required because the mother is a member of the licensee's immediate family. This includes spouse, child, or parent. The disclosure requirement extends to any real estate dealings on behalf of the licensee, the licensee's immediate family, or any other individual, organization, or business entity in which the licensee has a personal interest.

A policy of title insurance typically does NOT cover

The answer is zoning changes. The standard policy of title insurance will cover defects found in public records, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds, but not defects known to the buyer or changes in land use brought about by zoning ordinances.

Which of these MOST accurately describes the dimensions of a quarter-section? A) ½ mile by 1 mile B) ¼ mile by ¼ mile C) ½ mile by ½ mile D) ⅛ mile by ⅛ mile

The answer is ½ mile by ½ mile. A section is 1 square mile.

What is the annual rent per square foot for a 30 ft × 40 ft property that rents for $2,950 per month? A) $2.46 B) $24.65 C) $l.20 D) $29.50

The asnwer is $29.50. The annual rent is $29.50 per square foot: 30 × 40 = 1,200 square feet; $2,950 × 12 = $35,400; $35,400 ÷ 1,200 = $29.50.

A tenant signed a one-year lease with a landlord on April 10. On the following March 1, the landlord asked the tenant whether the lease would be renewed. The tenant did not respond but was still in the apartment on April 11. What can the landlord do? A) The landlord may either evict the holdover tenant or accept a rent check, creating a holdover or periodic tenancy. B) The landlord cannot evict the tenant; because the tenant remained in possession of the premises, the lease has been automatically renewed for an additional year. C) The landlord must initiate eviction proceedings within the first one-month rental period. D) If the tenant offers a rent check, the landlord must accept it and the tenant is entitled to a renewal of the one-year lease.

The original lease was an estate for years and no notice was required to terminate. If the tenant does not pay rent, it will become a tenancy at sufferance. If the tenant pays rent and the landlord accepts it, it will be a holdover or periodic tenancy, which could be changed into an estate for years if they enter into yet another year-long lease.

A buyer and a seller enter a contract for the sale of a three-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller refuses. How should the parties proceed?

There may be a dollar limit to repairs indicated by the property inspection that the buyer requests the seller to perform. Buyer and seller also may come to an accommodation on the work to be performed, such as the seller giving the buyer a credit for an agreed amount, but the buyer arranging for the work only after taking possession of the property.

Which of the following principles would affect the value of smaller homes in a neighborhood that also contains large houses? a. Progression b. Increasing returns c. Competition d. Regression

a. The answer is progression. Under the principle of progression, the smaller homes in an area with larger homes will have their value increased. The principle of regression is the opposite of progression and states that the owners of larger homes in an area with smaller homes may find the values of their homes decrease. Competition is the interaction of supply and demand causing prices for property to rise or fall. Under the principle of contribution the law of increasing returns applies when money spent on improvements to a property produce an increase in income or value.

A prospective homebuyer with four children inquires about a listing in an area of predominately single and married couples without children. What should the broker say to this prospect? a. "I'll be pleased to show you houses in any area that you're interested in." b. "I'd be happy to show you homes in other areas where there are more children." c. "The residents here have expressed a desire to keep the area quiet and without children." d. "You wouldn't want to live in this area because the neighbors don't like children and may be disrespectful to your family."

a. The answer is "I'll be pleased to show you houses in any area that you're interested in." The broker must not channel home seekers toward or away from particular neighborhoods based on familial status. This practice is called steering.

You are the listing agent for a property under contract. After expiration of the inspection contingency period, the buyer sends you notice of contract cancellation and demands a full refund of the earnest money because you failed to disclose the known presence of asbestos floor tiles under the vinyl flooring in the game room. You should advise your client, a. "You had no duty to disclose this. You can agree to cancellation or not, but are under no obligation to do so." b. "You had a duty to disclose. I recommend allowing cancellation." c. "You had a duty to disclose. I recommend allowing cancellation but requiring a full release before we refund the earnest money." d. "You had a duty to disclose and should allow contract cancellation, but you will still owe me the full commission for presenting a ready, willing, and able buyer."

a. The answer is "You had no duty to disclose this. You can agree to cancellation or not, but you are under no obligation to do so." In this situation, the seller had no duty to disclose the presence of the asbestos tiles.

By way of custom in Alabama, the buyer usually pays the deed recordation fee for a property being purchased. If you are working with a buyer, what would you advise him regarding the amount of the deed recordation tax for a $119,000 house? a. $119.00 b. $129.00 c. $178.50 d. $238.00

a. The answer is $119.00. The deed tax due when recording a deed is 0.1% of the equity in the property, rounded upward to the nearest $0.50. $119,000 × 0.01 = $119.00.

Five years ago, Juanita bought a home for $250,000. Home values in her area have improved, and the current market value of the house has increased by 15%. If Juanita has $95,875 left to pay on her mortgage loan, what is her current equity in her home? a. $191,625 b. $138,712 c. $154,125 d. $250,000

a. The answer is $191,625. The homeowner's equity is the difference between the market value of her property and the debt that encumbers it. Original cost ($250,000) + increase in value ($250,000 × 15% (0.15) = $37,500) = current market value ($287,500) Current market value ($287,500) - mortgage debt ($95,875) = the homeowner's equity ($191,625)

If the annual net income from a certain commercial property is $22,000 and the capitalization rate is 8%, what is the value of the property using the income approach? a. $275,000 b. $176,000 c. $200,000 d. $183,000

a. The answer is $275,000. $22,000 net income ÷ 8% cap rate = $275,000 value of property.

In a $13,500 loan with an interest rate of 6%, what is the amount of semiannual interest payment? a. $405 b. $59,655 c. $810 d. $20,250

a. The answer is $405. A semiannual interest payment is paid twice a year. To find the amount of the payment, divide the annual interest amount by 2: $13,500 × 6% (0.06) (the interest rate) = $810 (annual interest amount); $810 ÷ 2 = $405 (semiannual interest).

What would it cost to put new carpeting in a room measuring 15 feet by 20 feet if the carpet costs $16.95 per square yard, plus a $250 installation charge? a. $815 b. $589 c. $505 d. $5,335

a. The answer is $815. One square yard contains nine square feet. Three steps: (1) Find the area of the floor to be covered in square feet by multiplying length by width (15 ft × 20 ft = 300 sq ft). (2) Change square feet to square yards by dividing by 9 (300 sq ft ÷ 9 = 33.33 sq yd). (3) Multiply the number of square yards needed by the price per square yard (33.33 × $16.95 = $565). (4) Add the installation charge to the carpet cost ($565 + $250 = $815). Total cost is $815.

A small office building sold for $949,000, and the broker received a commission of $55,042. What was the broker's commission rate? a. 5.8% b. 6.2% c. 7% d. 11.3%

a. The answer is 5.8%. $55,042 commission ÷ $949,000 sales price = 5.8% (0.058) commission rate.

The estimated net sheet for a residential real estate transaction must be prepared by the a. listing and selling agent for her own customer or client. b. listing agent. c. selling agent. d. title company.

a. The answer is Listing and selling agent for her own customer or client. Buyers and sellers must be given a net sheet before they sign an offer, acceptance, or counteroffer.

Alabama real estate taxes are assessed on _____ for the year in _____. a. October 1, arrears b. October 1, advance c. January 1, arrears d. January 1, advance

a. The answer is October 1, arrears. Taxes are assessed and due on October 1 of each year, for the prior 12-month period. They may be paid any time between October 1 and December 31 without penalty, but will become liable for penalties, expenses, and interest starting on January 1. This information is important when preparing an estimated settlement sheet for a buyer or seller because the contract often calls for proration of real estate taxes.

In which of the following situations is RECAD disclosure NOT required? a. A corporation buys a single-family residence. b. An individual buys a single-family residence. c. An individual buys an office building. d. None of these; disclosure is required in all situations.

a. The answer is a corporation buys a single-family residence. RECAD disclosures are required any time an individual buys or sells real estate. The character of the real estate—residential or commercial—does not matter. However, the identity of the buyer/seller—individual or artificial entity—does matter.

A property manager is hired to manage a property while the owner is overseas for two years. The property manager is a. a general agent. b. a special agent. c. a universal agent. d. an attorney-in-fact

a. The answer is a general agent. A property manager usually represents the principal in a broad range of matters and is usually considered a general agent.

Which of the following best defines reconciliation? a. Analyzing and weighing the findings obtained by the different approaches to arrive at a final estimate of value b. Separating the value of the land from the total value of the property to compute depreciation c. Loss of value due to any cause d. The process by which an appraiser determines the highest and best use for a parcel of land

a. The answer is analyzing and weighing the findings obtained by the different approaches to value to arrive at a final estimate of value. The three approaches to value typically produce three different values. An in-depth analysis of these values is required to determine the most valid, logical, and reliable approach to be used to provide the final value estimate. Determining depreciation, a loss of value due to any cause, is part of the process of the cost approach. The highest and best use of a property is the single most profitable use for that property. Determining highest and best use is only one of the factors considered in an appraisal prior to choosing an approach to value and reconciliation.

Dual contracts could result in a. civil and criminal liability. b. a higher sales price for the property. c. more advantageous seller financing terms. d. deferral of income taxes through Section 1031 of the Internal Revenue Code.

a. The answer is civil and criminal liability. A dual contract is the situation in which one contract—usually at a higher purchase price—is disclosed to the title company and the purchaser's lender. The real contract—at a lower price—is the second contract. Typically, the seller "agrees" to hold a second mortgage for the difference between the two contracts, and then cancels the mortgage shortly after closing. It is a method for buyers to borrow more money than would be supportable under the real purchase contract and constitutes bank fraud.

The federal Fair Housing Act prohibits all of the following EXCEPT a. discriminating on the basis of marital status. b. discriminatory advertising. c. redlining. d. blockbusting.

a. The answer is discriminating on the basis of marital status. Marital status is not one of the seven protected classes under the federal Fair Housing Act. The Act and regulations based on the Act do prohibit discriminatory advertising, redlining, and blockbusting.

Which of the following describes the purpose of the Real Estate Settlement Procedures Act (RESPA)? a. Ensure that buyers understand the settlement costs that will be charged to them b. Require real estate brokers to provide a summary of the settlement costs for both buyers and sellers c. Require lenders to provide financial counseling to new homebuyers d. Prohibit lenders from lending buyers more money than they can repay

a. The answer is ensure that buyers understand the settlement costs that will be charged to them. RESPA was enacted to protect consumers from abusive lending practices by ensuring that buyers have an understanding of the settlement costs that will be charged to the. RESPA does not require real estate brokers to provide a summary of settlement costs; it does require the lender to provide an estimate of the cost. Brokers representing sellers and buyers should see that their clients are provided the required HUD-1 form at closing. RESPA does not require financial counseling. RESPA does not regulate the amount of residential loans lenders may offer.

Capitalization uses annual net operating income in order to a. estimate present value. b. determine replacement cost. c. establish depreciation. d. establish effective gross income

a. The answer is estimate present value. Capitalization converts the net operating income (NOI) into an indication of value in the income approach to determine the current or present market value. An appraiser estimates the return on investment (ROI) an investor would demand for the property being appraised. An appraiser will determine replacement costs, reproduction costs, and depreciation for a property when using the cost approach to value. The effective gross income is estimated by deducting an appropriate amount for vacancy and rent loss in an income-producing property.

Peter deeds a parcel of his property to a town "for recreational purposes only." The deed conveys to the town a a. fee simple defeasible estate. b. leasehold estate. c. fee simple absolute estate. d. life estate.

a. The answer is fee simple defeasible estate. The deed conveys a fee simple defeasible estate which includes a specific condition on the use of the parcel. If the town uses the parcel for any purpose other than for recreational use, Peter can take possession of the property through legal action. Holder of a leasehold estate has no ownership only possession. A fee simple absolute estate has no restrictions on the use of the property. A life estate is limited in duration to the life of the owner of the estate or to the life of some other designated person.

The type of deed in which the grantor defends the title back to its beginning is a a. general warranty deed. b. trustee's deed. c. quitclaim deed. d. special warranty deed.

a. The answer is general warranty deed. The general warranty deed provides the greatest protection to the buyer because grantors defend the title against both themselves and all those who previously had title.

A broker took a listing and later discovered that the client had been declared legally incompetent before signing the listing. The listing is now a. of no value to the broker because it is void. b. binding because the broker was acting as the owner's agent in good faith. c. the basis for the recovery of a commission if the broker produces a buyer. d. renegotiable.

a. The answer is of no value to the broker because it is void. A contract made by a person who has been adjudicated insane is void on the theory that the judgment that this is not a competent party is a matter of public record.

Which of the following will result in disciplinary action? a. Pay an AREC fee with a check that will bounce b. Enter a listing contract with an expiration date one year in the future c. Have your E&O insurance cancelled d. Fail to pay a fully earned commission split to another agent.

a. The answer is pay an AREC fee with a check that will bounce. This is usually an automatic finding of guilty and publication in the quarterly newsletter, The Update. Although not common, residential listing agreements for one year are allowed, or any time period, as long as they have a definite expiration date. E&O insurance is not required in Alabama. Disputes among brokers agents over compensation do not rise to disciplinary proceedings. The Commission's role is to protect the public.

A buyer offers $26,280 for a 20% share in a property. What is the total value of the property? a. $31,536 b. $131,400 c. $32,850 d. $105,120

b. The answer is $131,400. $26,280 offer ÷ 20% share = $131,400 total value of property

When appraisers use the GRM (gross rent multiplier), they would consider which of the following? a. Rental income and market price b. Market price of comparables and adjustments to the subject c. Market value and potential rent income d. Capitalization and net operating income

a. The answer is rental income and market price. The GRM (gross rent multiplier) time's the rental income will determine the properties market value or anticipated sales price. Comparables and adjustments are used in the sales comparison approach. Market value is what the GRM is determining not market price which is the actual sale price. Capitalization and net operating income are used in the income approach.

A licensed real estate salesperson from another state may apply for an Alabama real estate license after completing a a. six-clock-hour reciprocal salesperson license course. b. credit and background check. c. 90-day internship under an Alabama broker. d. 60 clock-hour pre-license course.

a. The answer is six-clock-hour reciprocal salesperson course. A licensed real estate salesperson from another state may apply for an Alabama real estate license after completing a six-clock-hour reciprocal salesperson license course.

The terms of a residential lease require the landlord to maintain the water heater. If a tenant is unable to get hot water to her apartment because of a faulty water heater that the landlord has failed to repair after repeated notifications, the tenant could do all of the following EXCEPT a. sue the landlord for breach of quiet enjoyment. b. sue the landlord for damages. c. abandon the premises claiming constructive eviction. d. terminate the lease agreement.

a. The answer is sue the landlord for breach of quiet enjoyment. The landlord's behavior provides a basis for any of the actions except a suit for breach of quiet enjoyment. Quiet enjoyment is tied to the tenant not being disturbed by others claiming possession. The water heater falls under the issue of habitability.

Two sales associates working for the same broker obtained offers on a property listed with their firm. The first offer was obtained early in the day. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer so that the seller could make an informed decision about the first offer. Which of the following is TRUE? a. The broker has no authority to withhold any offers from the seller. b. The broker's actions are permissible provided the commission is split between the two sales associates. c. After the first offer was received, the broker should have told the sales associates that no additional offers would be accepted until the seller decided on the offer. d. The broker was smart to protect the seller from getting into a negotiating battle over two offers.

a. The answer is the broker has no authority to withhold any offers from the seller. It is the agent's (broker's) duty to keep the principal informed of all facts or information that could affect a transaction. An agent for the seller has a duty to disclose all offers

Which of the following statements about a holdover tenant is TRUE? a. The landlord may evict the tenant. b. The tenant must give the landlord a 30-day notice to vacate. c. The tenant may continue to occupy the premises without permission of the landlord. d. The landlord must accept additional rent if the tenant remains on the premises.

a. The answer is the landlord may evict the tenant. A tenant who remains in possession of the premises after an estate for years has expired is called a holdover tenant. If the landlord accepts a rental payment from the holdover tenant, acceptance of the payment will usually create a periodic tenancy. However, a landlord can evict the holdover tenant and not accept any additional payments.

A bilateral contract is one in which a. the promise of one party is given in exchange for the promise of the other party. b. only one of the parties is obligated to act. c. something is to be done by one party only. d. a restriction is placed in the contract by one party to limit the performance by the other.

a. The answer is the promise of one party is given in exchange for the promise of the other party. In a bilateral contract, both parties agree to do something and promises are exchanged. A unilateral contract is a one-sided agreement that does not obligate a second party.

Which of the following would be considered acceptable evidence of marketable title? a. Title insurance policy b. Seller signing a general warranty deed c. Deed of trust d. Copy of the seller's current deed

a. The answer is title insurance policy. Nothing can guarantee ownership or marketable title. An abstract with a title opinion or a title insurance policy show the title was researched and offer protection against future defects in the title. A deed by itself is not considered evidence of marketability.

What type of arrangement is established when a broker helps a buyer and a seller with paperwork but does not represent either party? a. A transactional brokerage b. Prohibited in all states as a broker must always represent one party c. Dual agency d. Designated agency

a. The answer is transactional brokerage. When a broker does not represent either party in a transaction and acts as a facilitator or nonagent, the arrangement is known as transactional brokerage and is legal in some states. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. Designated agency exists when a broker acting as a dual agent for both parties in a transaction assigns an individual agent to represent the seller and another agent to represent the buyer in the same real estate transaction; each agent is known as a designated agent.

The owner of a secluded area adjacent to an ocean noticed that people from town walked along the shore in front of his property. The owner learned that the local citizens had been walking along this beach for several years. He went to court to try to stop people from walking along the water's edge in front of his property. The owner is likely to be a. unsuccessful because the owner's property extends only to the high-water mark and the public may use the land beyond this point. b. unsuccessful because the local citizens have been doing this for years and thus have an easement. c. successful because the owner's property extends to the low-water mark. d. successful because the owner can control access to his own property.

a. The answer is unsuccessful because the owner's property extends only to the high-water mark and the public may use the land beyond this point. Under the doctrine of littoral rights, an owner whose land borders an ocean would own the property up to the mean high-water mark. Any land below this is owned by the government. The homeowner could not block other people from walking along the water's edge.

A property manager in a college town charges a higher rent for male students because they typically cause more property damage than female students. This practice a. violates fair housing laws. b. violates no state laws. c. is allowed because it has a rational basis related to preservation of property values. d. is allowed because of the student exemption.

a. The answer is violates fair housing laws. This practice discriminates on the basis of sex and is illegal. There is no student exemption, and it does not matter if the landlord has a plausible reason for its prohibition. If the landlord had a sexually neutral policy of refusing to rent to people who previously forfeited some or all of their security deposit, that would not violate fair housing law and would have achieved the same goal.

Which of the following defines a contract between two parties that legally binds one party to perform but allows the other party to disaffirm it? a. Voidable b. Void c. Executed d. Bilateral

a. The answer is voidable. Voidable contracts have one side obligated but the other party able to rescind the contract if they wish. A contract with a minor is always voidable; for example, if an adult agrees to buy a property a minor owns, the contract is voidable by the minor. Executed contracts are closed and completed. Void contracts lack an essential element and bilateral contracts exchange promises.

Appreciation can be an advantage of real estate investment. Appreciation is

an increase in value. Real estate is an avenue of investment open to those interested in holding property primarily for increasing value, known as appreciation.

A licensed real estate broker is permitted to charge a fee for providing services involving real estate EXCEPT

appraising. While a real estate licensee may be asked to estimate a property's likely sales price, most transactions require a licensed or certified real estate appraiser to develop an opinion of a property's market value.

The commission on the sale of a house is $9,410, and 30% goes to the broker who listed the property. Of the remainder, the broker whose sales associate completed the transaction gets 45%, and the sales associate receives the balance. How much does the sales associate who made the sale receive? a. $4,389 b. $3,622.85 c. $3,728 d. $2,425

b. The answer is $3,622.85. $9,410 total commission × 30% = $2,823 commission to listing broker; $9,410 - $2,823 listing broker commission = $6,587 remainder of commission. Sales associate's share of selling broker's commission is 55% (100% - 45%), and $6,587 × 55% = $3,622.85 commission sales associate receives.

What is the interest rate in a mortgage that requires an interest payment of $1,500 made every 3 months on a $50,000 loan? a. 6% b. 12% c. 9% d. 3%

b. The answer is 12%. $1,500 × 4 (every 3 months is ¼ of a year) = $6,000 (the annual interest). $6,000 ÷ $50,000 (the loan amount) = 12% (0.12).

The listing agent is most often a. a dual agent. b. a special agent. c. a general agent. d. either a special or a general agent, but almost never a dual agent.

b. The answer is a special agent. Real estate brokerage agents are special agents, having only the ability to expose a property to the marketplace, show it, and negotiate. The listing agent does not have the ability to bind the seller to a contract. General agents, on the other hand, have the ability to bind their principals. A property manager is usually a general agent and may sign leases on behalf of the landlord, in addition to other commitments.

Franklin bought acreage in a distant county, but never went to see the acreage and did not use the land. After the purchase, Susan moved her mobile home onto the land, drilled a well, and lived on the property for 20 years. Susan may become the owner of the land if she has complied with the law regarding a. quitclaim deeds. b. adverse possession. c. voluntary alienation. d. prescriptive easements.

b. The answer is adverse possession. The woman may file an action in court to receive title to the property if she has complied with state laws. Her possession must have been open, notorious, continuous and uninterrupted, hostile and adverse. Adverse possession is a form of involuntary alienation. A quitclaim deed is frequently used to correct an error in a deed or to release an interest in a property. Prescriptive easements while similar to adverse possession are used to gain permanent access to the property not title.

The parties enter into a signed contract to buy/sell the property for $250,000. The earnest money is $10,000. Two days later, someone submits a backup offer for $275,000. One day after that, the listing agent receives notice the earnest money check bounced. In this situation, the a. listing agent should send the 24-hour notice of contract failure to the buyer, and a contract should be signed with the backup buyer. b. agent should try to get replacement funds for the earnest money, but the contract is still fully enforceable. c. listing agent's broker should send the 24-hour notice of contract failure to the buyer, and a contract should be signed with the backup buyer. d. listing agent's broker should contact the buyer's broker and advise of contract failure due to the bounced check and that a contract will be executed with the buyer.

b. The answer is agent should try to get replacement funds for the earnest money, but the contract is still fully enforceable. Many sales contracts contain a specific clause stating that if the earnest money check bounces, the contract is immediately cancelled. Without such a clause, the contract is still enforceable, because the earnest money is not consideration. There is no failure of consideration if the earnest money check bounces. The promise to sell, and the promise to buy, are the consideration that supports the contract.

Which of the following is an example of prohibited anti-trust behavior? a. All qualifying brokers in a marketplace agree to hire at least one bi-lingual agent. b. All agents in a marketplace agree they will not engage in buyer brokerage. c. All personal assistants in a marketplace agree to help each other place yard signs on weekends. d. The majority of qualifying brokers in a marketplace follow a local custom of businesses closing their offices on Wednesday afternoons.

b. The answer is all agents in a marketplace agree they will not engage in buyer brokerage. This limits the choices for consumers in a marketplace and is anti-competitive. None of the other activities are anti-competitive.

The qualifying broker for a property management firm has her license suspended for 90 days. What action must be taken? a. All management contracts must be transferred by the broker to another management company. b. All landlords must be advised their management contracts are cancelled and that they are free to hire another property management firm for as long a period as they choose. c. Any associate broker may temporarily take over the qualifying broker's responsibilities for the period of suspension. d. All tenant security deposits must be refunded within 60 days.

b. The answer is all landlords must be advised their management contracts are cancelled and that they are free to hire another property management firm for as long a period as they choose. There is no getting around this, unless the disciplined broker hires another qualifying broker and obtains the landlord's agreement to the temporary arrangement. Real estate contracts are always with a particular broker, not with a particular company. They are personal services contracts. Personal services contracts cannot be assigned to another person.

A new real estate agent in town does not know very many local inhabitants. In order to build up her business, she targets owners of properties that have been listed for sale for more than 12 months. She assumes the reason for the failure to sell must be some fault of the listing agent. She tells each owner they have a right to expect better service and the legal grounds they can use to cancel their listing agreements with their current agents. This practice is a. a public service assisting under-represented homeowners. b. an illegal interference with a contractual relationship. c. legal because a listing agreement may be cancelled at will by the consumer after the first six months. d. unethical but legal.

b. The answer is an illegal interference with a contractual relationship. Consumers can cancel listing agreements and choose another agent to represent them. They might owe two separate commissions as a result, but that sometimes happens. What is illegal is to take any action to persuade a consumer to cancel a listing agreement

When a prospective buyer makes a written purchase offer that the seller accepts, then the a. buyer may take possession of the real estate. b. buyer receives equitable title to the property. c. seller grants the buyer possessory rights. d. buyer receives legal title to the property.

b. The answer is buyer receives equitable title to the property. Equitable title occurs when the buyer and the seller have executed a sales contract and the buyer acquires an interest in the land. Legal title will not pass until the transaction is closed.

Stuart, a salesperson representing a buyer, is told that the buyer plans to operate a pet grooming business out of any house he buys. Stuart does tell the buyer to verify local zoning ordinances to determine in which parts of town such a business can be conducted. Which duty does Stuart violate? a. Obedience b. Care c. Loyalty d. Disclosure

b. The answer is care. A salesperson must use his or her skills and knowledge to protect the client's interests in purchasing. In this case the salesperson should have told the buyer to verify local zoning ordinances that might prohibit a buyer conducting a business from a home. All salespersons and broker's owe this duty and the disclosure of material facts to the consumer. An agent would owe obedience and loyalty to the principal.

The mixing of trust funds with a broker's personal funds is a. conversion. b. commingling. c. legal in most states. d. permitted in offices with fewer than three agents.

b. The answer is commingling. Commingling, or mixing of funds, is illegal, regardless of the size of an office. Conversion occurs when a broker takes escrow funds for the broker's own use.

RESPA (Real Estate Settlement Procedures Act) permits real estate firms to be affiliated with title insurance companies or mortgage brokers as long as a. consumers are required to use the services of the affiliated companies. b. companies disclose their relationships with one another to the consumer. c. companies pay referral fees between them. d. consumers are unaware of these arrangements

b. The answer is companies disclose their relationship with one another to the consumer. RESPA permits such arrangements as long as a consumer is clearly informed of the relationship among the affiliated companies and provided information that the consumer may use other service providers for the same services. The companies may not require a consumer to use the services of any affiliated company. The companies may not pay one another referral fees.

The process by which government can acquire ownership of private land for public use is a. escheat. b. condemnation. c. eminent domain. d. doctrine of public acquisition

b. The answer is condemnation. Condemnation is the process; eminent domain is the right of the government to acquire ownership of private land for public use.

Which of the following would terminate a lease for years? a. Death of the tenant b. Expiration of the term c. Abandonment of the leased premises by the tenant d. Sale of the leased premises

b. The answer is expiration of the term. A tenancy (estate) for years is a leasehold estate that continues for a definite period of time with specific beginning and ending dates. The death of either party does not terminate the lease. If the tenant abandons the property, the tenant is still responsible for lease payments. If the property is sold, the new owner is subject to the terms of the lease.

Jeff and Susan enter a real estate office asking to see a property listed with another brokerage office. A real estate salesperson calls the listing agent and makes an appointment to show the couple the property. Without having the couple sign a written buyer agency contract, the salesperson drives Jeff and Susan to the house, and even recommends that before they buy the house they secure an independent property inspection. He also confides to the couple that he knows the owners are getting a divorce and want to sell the house quickly. In this case, the salesperson has created a(n) a. express agency relationship with the buyers. b. implied agency relationship with the buyers. c. general agency relationship with the buyers. d. universal agency relationship with the buyers.

b. The answer is implied agency contract with the buyers. The salesperson has unintentionally created an agency relationship with the buyers. There is no formal oral or written agency contract with the buyers. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract.

An injured party can sue if a fraudulent statement was a. intentional only. b. intentional, reckless, or negligent. c. not a negligent mistake. d.made with the intention of providing an advantage or profit to the person who made the statement

b. The answer is intentional, reckless or negligent. It is irrelevant whether the person being sued profited from the fraud. The injured party's damage is the proper important focus.

Anita is assigned to appraise a house in an area with very few sales over the past year. One of the comparable properties she chooses is a home similar to the subject property. The house recently sold as a foreclosure property. When writing her appraisal report, what action will Anita take as a result of the foreclosed sale? a. Make a positive adjustment to the value of the subject property b. Make a positive adjustment to the sales price of the foreclosed home c. Make a negative adjustment to the sales price of the foreclosed home d. Make a negative adjustment to the value of the subject property

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

On Monday, the seller offers to sell his vacant lot to the buyer for $42,000. On Tuesday, the buyer counteroffers to buy for $40,500. On Friday, the buyer learns that several other prospects may be making offers on the property, so he withdraws the counteroffer and agrees to the original asking price of $42,000. Under these conditions, there is a. a valid agreement because the buyer accepted the seller's offer exactly as it was made. b. not a valid agreement because the buyer's counteroffer was a rejection of the seller's offer, and once rejected, an offer cannot be accepted later. c. a valid agreement because the buyer accepted before the seller advised the buyer that the offer is withdrawn. d.nota valid agreementbecause theseller'sofferwas notacceptedwithin72 hours

b. The answer is not a valid agreement because the buyer's counteroffer was a rejection of the seller's offer, and once rejected, an offer cannot be accepted later. A counteroffer is a new offer; it voids the original offer.

What is the first step a consumer must take in order to make a claim against the Recovery Fund? a. File a verified complaint against the licensee, with the Commission b. Notify the Commission shortly after filing a lawsuit against the licensee c. Exhaust all post-judgment remedies to collect from the licensee d. Add the Commission as a party in the lawsuit against the licensee

b. The answer is notify the Commission shortly after filing a lawsuit against the licensee. The right to make a claim arises only if the consumer has a judgment against a licensee. Although there is no precise time limit, the consumer must notify the Commission of the lawsuit fairly quickly, so the Commission has time to enter an appearance on behalf in the case. This might be necessary to avoid the situation in which a licensee simply fails to appear at all, the consumer takes a very large judgment even though the facts might not have supported it. In that case, the Commission will have lost valuable rights to contest recovery from the Fund.

Which of the following activities will expose a salesperson to disciplinary action? a. Failure to put an "under contract" rider on a yard sign b. Posting a For Sale sign on property without the owner's consent c. Failing to obtain the consent of all property owners before placing a sign on the property d. Failure to remove a For Sale sign when the property goes under contract

b. The answer is posting a For Sale sign on property without the owner's consent. "Under contract" riders are encouraged by brokers as a good business practice, but they are not required. Only one owner need consent to placement of a For Sale sign. The sign may remain as long as the owner still owns the property, which is until closing takes place.

Henrietta has owned her house for over 50 years. It has fallen into disrepair, but because she lives on a fixed income, she does not have the money to make the needed repairs. She has a considerable amount of equity in the house. What type of loan would BEST provide Henrietta the funds to make the necessary repairs? a. Home equity loan b. Reverse mortgage c. Blanket loan d. Open-end loan

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

Which of the following is NOT required for a deed to be valid? a. Legal description b. Signature of the grantee c. Execution of the grantor d. Consideration

b. The answer is signature of the grantee. A valid deed does not require signature of the grantee, but does require that the deed be executed or signed by the grantor. A legal description and consideration are among the essential elements required for a valid deed.

If lease agreement is signed by a lessee who is 15 years of age, which of the following statements is TRUE? a. A 15-year-old person cannot sign a lease. b. The lease agreement is voidable by the minor. c. The lease agreement is valid provided the security deposit is increased. d. The lease agreement is void.

b. The answer is the lease agreement is voidable by the minor. A 15-year-old person can sign a contract. However, it was incumbent on an adult who is the other party to the contract to stop the minor from signing the contract. If this does not occur because the lessee is a minor, the lease is voidable by the minor. The amount of the security deposit does not affect the validity of a lease contract. The 15-year- old may in fact decide to enforce the lease contract, in which case the lease is valid.

If a property owner conveys a life estate to his sister for her lifetime and then designates his nephew as the person to whom the property will pass when the life estate ends, when the sister dies, what happens to the property? a. The property reverts back to the original property owner. b. The nephew automatically becomes the fee simple owner of the property. c. The property passes to the sister's heirs. d. The property owner must designate a remainderman for the property.

b. The answer is the nephew automatically becomes the fee simple owner of the property. The property owner named his nephew as the remainderman, the one to whom the property would pass upon the death of his sister. On his sister's death, the life estate ends, and the property automatically passes to the nephew. If the property owner does not choose a remainderman when conveying the life estate to his sister, ownership reverts back to the original property owner or to his or her heirs (or other individuals specified in the property owner's will).

What will happen to real estate when its deceased owner did NOT write a will and no heirs can be located? a. The ownership will pass by devise. b. The ownership will escheat. c. The ownership will revert to the previous owner. d. The courts will seize the ownership.

b. The answer is the ownership will escheat. Title to real estate passes to the state by the state's power of escheat in the event a person dies intestate and no heirs can be located.

A salesperson's personal assistant helps at an open house by answering questions about the whole-house computerized lighting and security system. The assistant also answers questions posed by visitors. The salesperson is present at all times during the demonstration and Q&A. Who, if anybody, is liable as a result of the assistant's actions? a. The salesperson and the personal assistant b. The qualifying broker, the salesperson, and the personal assistant c. The qualifying broker and the salesperson d. None of these

b. The answer is the qualifying broker, the salesperson, and the personal assistant. The personal assistant who does not have a real estate license may not engage in activities that cause her to interact with visitors to an open house and is liable for her own actions. The salesperson for whom she works, and the qualifying broker for whom the salesperson works, are all liable for their failure to supervise.

What is the minimum number of licenses required to operate a real estate office in Alabama? a. One b. Two c. Three d. Four

b. The answer is two. Each real estate office must have a company license, even if it is a sole proprietorship. It must also have a qualifying broker with his own license.

Of the following liens, which would usually be given highest priority in disbursing funds from a foreclosure sale? a. A mortgage dated last year b. Unpaid real estate property taxes c. A mechanic's lien for work started before the mortgage was made d. A judgment rendered the day before foreclosure

b. The answer is unpaid real estate property taxes. Unpaid real estate property taxes have first priority and "move to the head of the line" when property is liquidated at a foreclosure sale. They are a statutory lien with priority over liens created by contract, such as mortgages. Unpaid real estate property taxes take priority over mechanic's liens and judgments, no matter when those liens were recorded.

If a broker took a listing and later discovered that the client had been declared legally incompetent before signing the listing, the listing is now considered a. voidable by the broker. b. void. c. valid. d. voidable by the incompetent client.

b. The answer is void. A contract made by a person who has been adjudicated incompetent is void because the judgment of sanity is a matter of public record. The contract is neither valid nor voidable as it is missing the essential element of a contract, that the contract be made by legally competent parties.

An asphalt company has a manufacturing plant located in an area that has just been rezoned for residential use. The company is allowed to continue operating the plant under the new zoning classification as a nonconforming use. However, if the plant is destroyed by fire or other hazard, the asphalt company MOST likely a. could rebuild the plant in that neighborhood by applying for a zoning variance. b. would not be allowed to rebuild the plant in that location under any circumstances. c. could construct another plant by obtaining the consent of the residents then living in the neighborhood. d. could construct another plant without the residents' consent as long as the homeowners' association approves it.

b. The answer is would not be allowed to rebuild the plant in that location under any circumstances. Under a nonconforming use, if an improvement is destroyed or torn down, then rebuilding an improvement to its former use is usually prohibited. A variance usually applies only to building a new structure or improvement that does not conform to zoning ordinances or laws.

A property owner has 40 acres of land with road frontage on only the northern boundary. He sells the southern 20 acres to his sister, who reaches the road by a driveway that passes over her brother's land. No documents give her ingress and egress rights because they are siblings and don't think it is necessary. Five years later, the brother dies and his 20 acres are sold to pay estate taxes. Can this landlocked property be sold? a. Yes, because Alabama is a caveat emptor state and the buyer must beware b. Yes, because the southern 20 acres has an easement by necessity over the northern 20 acres c. No, because the property is landlocked and a purchaser cannot obtain clear title d. No, because it is fraudulent to offer landlocked property for sale

b. The answer is yes, because the southern 20 acres has an easement by necessity over the northern 20 acres. The law seeks to avoid land being landlocked and will not allow it at all when a common owner created the situation giving rise to the property being landlocked.

The current property taxes on a parcel are $1,743.25 and have not been paid. If the sale is to be closed on August 12, what is the approximate tax proration that will be charged to the seller based on a 360- day year? a. $1,104 b. $1,220 c. $1,074 d. $668

c. The answer is $1,074. $1,743.25 annual taxes ÷ 360 days = $4.84 daily rate for taxes; January 1 to August 12, based on 30-day months = 222 days (30 days for each of the 7 months for January through July plus 12 days in August, or 210 + 12 = 222 days); 222 days × $4.84 daily rate = $1,074.48 prorated taxes seller owes.

On January 1, George paid the $2,345 in taxes for the current year. If he sold the property on June 23 of that same year, how much would he be credited at closing? (Use a 360-day year.) a. $1,158.78 b. $1,293.53 c. $1,218.10 d. $1,772.50

c. The answer is $1,218.10. Because the taxes were paid in advance the buyer will owe the seller for the time the buyer owns the house: June 24 to December 30, since this is a 360-day year. Total owed ÷ total days × days owed = amount due $2,345 ÷360 × 187 = $1,218.097 rounded to $1,218.10

Alex made an offer for 90% of the $120,900 list price of a property. The offer was accepted, and the lender agreed to negotiate an 80% loan at 8% interest for 30 years. Alex had a $5,000 earnest money deposit, paid $350 for title expenses, $250 for attorney fees, and had other expenses of $749. How much money does Alex need to close on the property? a. $23,111 b. $10,159 c. $18,111 d. $15,159

c. The answer is $18,111. $108,810 = 90% × $120,900. $87,048 = 80% × $108,810. $108,810 - $87,048 = $21,762. $21,762 - $5,000 + $350 + $250 + $749 = $18,111.

Property purchased five years ago was assessed for tax purposes at 50% of market value. The tax rate was $4.90 per $100 of assessed valuation. Today, the taxes, imposed at the same tax and assessment rates, have increased by $637. How much has the market value of the property increased assuming straight-line appreciation? a. $3,121.30 b. $6,242.60 c. $26,000.00 d. $13,000.00

c. The answer is $26,000.00. $637 tax increase ÷ $4.90 tax rate = 130; 130 × $100 = $13,000 assessed value and $13,000 ÷ 50% (or $13,000 × 2, since 100% ÷ 50% = 2) = $26,000 increase.

A buyer has deposited 10% of the sales price of a condominium with the broker as earnest money, and the bank has agreed to lend $51,000, which is 80% of the sales price. How much additional funding must the buyer provide to complete this transaction? a. $5,100 b. $5,500 c. $6,375 d. $6,125

c. The answer is $6,375. $51,000 loan balance ÷ 80% = $63,750 sales price; $63,750 sales price × 20% (100% sales price - 80% loan = 20% down payment) = $12,750 down payment; $63,750 sales price × 10% deposit = $6,375 earnest money; $12,750 down payment - $6,375 earnest money = $6,375 needed.

A seller-landlord has collected the September rent from all five tenants: two pay $345 per month each and three pay $425 per month each. Determine the prorated amount to be allowed the buyer when the sale closes on September 19. a. $786.00 b. $1,244.50 c. $720.50 d. $1,965.00

c. The answer is $720.50. ($345 × 2) + ($425 × 3) = $690 + $1,275 = $1,965 total rent; $1,965 ÷ 30 days in September = $65.50 daily rent; 30 days in September - 19 days = 11 days buyer due rent; $65.50 daily rent × 11 days = $720.50 rent due to buyer.

What is the sale price of a 1.25-acre lot that is 150 feet deep if the selling price of the lot is $26,500 per front foot? a. $3,975,000 b. $932,800 c. $9,619,500 d. $1,442,920

c. The answer is $9,619,500. 1.25 acres × 43,560 (sq. ft. per acre) = 54,450 (total sq. ft.) ÷ 150 ft (the depth of the lot) = 363 front feet × $26,500 per front foot = $9,619,500 (the selling price). The term front foot refers to a unit on frontage of a lot, usually the street frontage or water frontage. When two dimensions are given for a tract and not labeled, the first dimension is the frontage. Each front foot extends the depth of the lot.

A licensee facing disciplinary charges for not disclosing dual agency wishes the presence of his attorney at all hearings. This is a. not allowed because the charges are open-and-shut, and only punishment is an issue. b. allowed, but only if the attorney is related to the licensee. c. allowed. d.not allowed because no hearing is allowed for this type of charge

c. The answer is allowed. The licensee is allowed an attorney at all phases of a disciplinary proceeding.

A tax lien on the property can hinder the sale of a property because it is a. a monetary charge that the purchaser must satisfy. b. an appurtenance that does not affect the title. c. an encumbrance. d.an encroachment

c. The answer is an encumbrance. An encumbrance is a claim, charge, or liability that attaches to real estate. It is a right or interest held by someone other than the fee owner of the property that affects title to real estate.

Dianne owns 50 acres of land with 500 feet of frontage on a desirable recreational lake. She wishes to subdivide the parcel into salable lots. Dianne also wants to retain control over the lake frontage while allowing lot owners to access the lake. Which right would provide the greatest protection for a prospective lot purchaser? a. Easement in gross b. Easement by necessity c. Appurtenant easement d. License

c. The answer is appurtenant easement. An appurtenant easement is attached to the ownership of one parcel and allows the owner use of the neighbor's land. The easement transfers with the title and so provides the greatest protection for a prospective purchaser. An easement in gross is a company's right to the use of another's land. An easement by necessity is created by a court order. An easement by necessity is created when an owner sells a parcel of land that has no access to a street except over the seller's remaining land. A license is a personal privilege to enter the land of another for a specific purpose. A license can be terminated or revoked at any time.

Emily, the broker, receives an earnest money deposit with a written offer to purchase that includes a ten-day acceptance clause. On the fifth day, before the offer is accepted, the buyer notifies Emily that she is withdrawing the offer and requests the return of her earnest money deposit. In this situation, the a. buyer cannot withdraw the offer because it must be held open for the full 10 days. b. seller and broker have the right to each retain one-half of the deposit. c. buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money. d. the buyer may revoke the offer but will not have the earnest money returned since the buyer failed to give the seller the full acceptance time.

c. The answer is buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money. The offeror (the buyer) may revoke the offer at any time before the offer is accepted, even if the person making the offer agreed to keep the offer open for a set period of time. At that point, the earnest money deposit should be refunded to the buyer.

A sales contract requires that the seller re-sod the front lawn before closing. At final walkthrough on the morning of closing, the purchaser sees that only half the lawn has been re-sod. On your advice, he refuses to proceed with closing unless $1,000 is withheld from the seller's funds in order to pay for completing the job. Your advice a. is good, assuming the $1,000 figure is a reasonable amount. b. is a conflict of interest. c. could result in the purchaser being sued for breach of contract. d. was legally required because of your obligations to your client.

c. The answer is could result in the purchaser being sued for breach of contract. Agents may not instruct the withholding of funds at closing.

Emily is a listing broker. After she takes a listing of a residence, the owner specifies that he will not sell his home to any family that is not of the same Asian background as the seller. Emily should do which of the following? a. Advertise the property exclusively in Asian language newspapers. b. Abide by the principal's directions despite the fact that they conflict with the fair housing laws. c. Explain to the owner that his instruction violates federal law and that the broker cannot comply with it. d. Require that the owner sign a separate legal document stating the additional instruction as an amendment to the listing agreement.

c. The answer is explain to the owner that his instruction violates federal law and that the broker cannot comply with it. The situation places the broker in the position of either violating the fiduciary duty of obedience or violating the federal Fair Housing Act. To avoid breaking the law, the broker must end the agency agreement if the owner insists on the discriminatory instruction. The broker may not advertise the property exclusively in foreign-language newspapers, and a legal document signed by the owner does not exempt the broker from following fair housing laws.

What type of estate is created when a property owner deeds a parcel of his property to a town "for recreational purposes only?" a. Leasehold estate b. Fee simple absolute estate c. Fee simple defeasible estate d. Life estate

c. The answer is fee simple defeasible estate. The deed conveys a fee simple defeasible estate which includes a specific condition on the use of the parcel. If the town uses the parcel for any purpose other than for recreational use, the property owner can take possession of the property through legal action. Holder of a leasehold estate has no ownership, only possession. A fee simple absolute estate has no restrictions on the use of the property. A life estate is limited in duration to the life of the owner of the estate or to the life of some other designated person.

A four-bedroom home that only has one bathroom would probably have its appraised value reduced due to a. external obsolescence. b. curable physical deterioration. c. functional obsolescence. d.incurable physical deterioration

c. The answer is functional obsolescence. Functional obsolescence exists when a property has outmoded or unacceptable physical or design features. A four-bedroom home with one bath is not desirable for buyers. External obsolescence exists due to economic, environmental, or social forces outside a property. Physical deterioration refers to a loss of value because a property has not been maintained property (deferred maintenance).

In a standard deed, which of the following clauses conveys the rights and privileges of ownership? a. Exception clause b. Seisin clause c. Granting clause d. Acknowledgment

c. The answer is granting clause. The granting clause states the grantor's intention to convey the property at the present time. An exception and reservations clause notes any encumbrances, reservations, or limitations affecting the title. The convent of seisin is the grantor's promise of ownership and ability to convey title in a general warranty deed. The acknowledgement is a formal declaration under oath that the person signing the deed does so voluntarily and that the signature is genuine and is not required to make a deed valid but is often required to record the deed.

When may the holder of a reversionary interest in a qualified fee estate be able to obtain title to the property? a. Only if the remainderman died first b. If he or she changed the conditions and the owner was unable to meet the requirements c. If the holder of the qualified fee estate breaks the deed condition d. If the holder of the qualified fee estate sells the property

c. The answer is if the holder of the qualified fee estate breaks the deed condition. The holder of a reversionary interest retains the right to repossess a property if a deed condition is not met or broken. If the condition is broken, the holder of the reversionary interest can go to court to try and obtain ownership of the property. If a remainderman dies, the remainder interest in a life estate passes to his or her heirs. The holder of a reversionary interest does not have the right to change the conditions of a qualified fee estate. A holder of a qualified fee estate may sell the property so long as the conditions or limitations of the qualified fee estate continue.

Escheat and eminent domain are both examples of a. adverse possession. b. transfers of title by descent. c. involuntary alienation. d. voluntary alienation.

c. The answer is involuntary alienation. Involuntary alienation occurs when property is transferred without the owner's consent. The right of eminent domain allows a government to acquire property for a public purpose through condemnation. When a person dies without a will (intestate) and without heirs, the property passes (escheats) to the state. This process was neither planned nor initiated by the owner before death. Voluntary alienation occurs when property is transferred with the owner's consent. Adverse possession is the acquiring of title through open, notorious, hostile, and continuous use of another's property. Descent occurs when an heir inherits a property through probate from a deceased owner who died intestate, without a will.

Owen tells his next door neighbor that she can store her camper in his yard for a few weeks until he needs the space. Owen does not charge the neighbor any rent for the use of his yard. Owen has given his neighbor a(n) a. easement by necessity. b. estate in land. c. license. d. easement appurtenant.

c. The answer is license. A license is a revocable personal privilege to use the land of another for a specific purpose, and the right is given orally or informally. The property owner's permission does not grant the neighbor an easement or an estate in the land.

A buyer gives the listing agent $2,000 in cash as earnest money. The real estate contract signed by the buyer and the seller states the money will not officially become earnest money until three days after contract signing. The listing agent a. must turn over the cash to the broker to hold in the company safe for three days. b. may place the cash in the file and put it in a secure location for three days. c. must turn over the cash to the broker for immediate deposit. d. may not accept cash as earnest money.

c. The answer is must turn over the cash to the broker for immediate deposit. Cash must always be deposited immediately. If the parties want the money held for a certain period of time, the buyer should have given the agent a check, which could be turned over to the broker but held, un-deposited, for the agreed time period. Upon expiration, the buyer could always substitute cash for the check at that time.

In what way does a deed of trust differ from a mortgage? a. Obligation of the borrower to repay the funds b. Redemption rights allowed after foreclosure c. Number of parties involved in the loan d. Time period permitted to cure a default

c. The answer is number of parties involved in the loan. A deed of trust is a three-party instrument that conveys naked title to a third party, the trustee, who holds the title on behalf of the lender, also known as the beneficiary. The borrower is the trustor. A mortgage is a two-part instrument between the mortgagor and the mortgagee.

The phrases caveat emptor, property sold as-is, and time is of the essence are all contract clauses and concepts that favor the a. buyer and should be disclosed to seller, but are not required to be separately identified and disclosed. b. seller and must be separately identified and initialed by the buyer. c. seller but are not required to be separately identified and disclosed to the buyer. d. buyer and must be separately identified and initialed by the seller.

c. The answer is seller but are not required to be separately identified and disclosed to the buyer. Caveat emptor stands for the proposition there are no warranties in the sale of used residential properties. Use of the phrase as-is means the buyer is not entitled to rely on any verbal representations, even if known to be false by the person making the statement. Time is of the essence means all deadlines are firm, with no grace periods of a "reasonable time." For example, under a time is of the essence contract, if closing must be completed by 4 pm on a certain date and the buyer does not arrive at the lawyer's office until 4:05 pm, the seller can cancel the sale.

Susan uses her neighbor Joe's driveway to reach her garage, which is on Susan's property. Susan's attorney explains that ownership rights of Susan's real estate includes an easement appurtenant giving her the right to use Joe's driveway. In this case Joe's property is the a. dominant tenement. b. leasehold interest. c. servient tenement. d. licensed property

c. The answer is servient tenement. In an appurtenant easement the parcel over which the easement runs is known as the servient tenement, and the neighboring parcel that benefits from the easement is known as the dominant tenement. Joe's property is the servient tenement, and Susan's is the dominant tenement. The easement does not create a leasehold estate.

When receiving a gift of a parcel of real estate, one of the two new owners was given an undivided 60% share, and the other received an undivided 40% share. The new owners now hold title as a. joint tenants. b. community property owners. c. tenants in common. d. cooperative owners

c. The answer is tenants in common. Tenants in common hold property with undivided fractional interests, and the shares do not have to be equal. In a joint tenancy, each owner holds equal shares and interests to the property. Community property consists of personal or real property acquired by either party in a marriage and belonging to both parties to the marriage. In a cooperative, owners own shares in a corporation, partnership, or trust which owns a property, with each owner holding a proprietary lease and the right to occupy his or her unit

A real estate salesperson has a home in Huntsville and a condo at the beach. Under what circumstances can she be licensed with two different brokers, one in each county? a. If she spends at least 25% of her time in one county and 75% in the other b. If both qualifying brokers agree in writing c. Under no circumstances d. If the Commission grants a waiver

c. The answer is under no circumstances. Salespersons can be licensed under only one broker at a time. Each real estate office must have its own qualifying broker, who must be able to supervise the activities of that office on a full-time basis. The same person cannot be the qualifying broker for the two offices, and, even if she were, it would be two different licenses.

An investment property now worth $180,000 was purchased seven years ago for $142,000. At the time of the purchase, the land was valued at $18,000. Using a 39-year life for straight-line depreciation purposes, the present book value of the property is a. $95,071.35. b. $113,071.00. c. $126,000.50. d. $119,743.59.

d. The answer is $119,743.59. The book value of the property is not related to the market value; book value is an accounting technique for getting the tax benefits of paper depreciation. Land does not depreciate in book value. The property (including land and improvements) was purchased for $142,000. Five steps: (1) Find the original book value of the improvements by subtracting the value of the land from the entire purchase price ($142,000 - $18,000 = $124,000). (2) Find the depreciation for one year using a 39-year economic life ($124,000 ÷ 39 = $3,179.49). (3) Find total depreciation over the last 7 years ($3,179.49 × 7 = $22,256.41). (4) Find the present book value of the improvement ($124,000 - $22,256.41 = $101,743.59). (5) Find the present book value of the improvement plus the land ($101,743.59 + $18,000 = $119,743.59).

If the quarterly interest on a loan at 7.5% is $562.50, the principal amount of the loan is a. $7,500. b. $15,000. c. $75,000. d. $30,000.

d. The answer is $30,000. Two steps: (1) Multiply the interest for one quarter by 4 to get one year's interest ($562.50 × 4 = $2,250). (2) Find the principal by dividing the amount of annual interest by the interest rate ($2,250 ÷ 7.5% = $30,000).

A developer is planning a warehouse that will contain 103,000 square feet. Construction costs are estimated to be $62 per square foot. Ninety-five percent financing is available for the structure. How much money must the developer put up to complete the project? a. $638,600 b. $5,747,400 c. $6,066,700 d.$319,300

d. The answer is $319,300. 103,000 sq ft × $62 per sq ft = $6,386,000 total construction cost; 6,386,000 × 5% down payment (100% sales price - 95% amount financed) = $319,300 developer needs to complete the project.

A parcel of vacant land has an assessed valuation of $274,550. If the assessment is 85% of market value, on what market value is the assessment based? a. $315,732.50 b. $320,000.00 c. $830,333.33 d. $323,000.00

d. The answer is $323,000.00. If the assessment, $274,550, is 85% of market value, find the market value on which the assessment is based by dividing the assessment by 85% ($274,550 ÷ 0.85 = $323,000).

A buyer agrees to purchase a house for $234,500. The buyer pays $2,000 as earnest money and obtains a new mortgage loan for $167,500. The purchase contract provides for a March 15 settlement. The buyer and the sellers prorate the previous year's real estate taxes of $4,880.96, which have been prepaid. The buyer has additional closing costs of $2,250, and the sellers have other closing costs of $1,850. How much cash must the buyer bring to the settlement? a. $76,389.00 b. $77,839.89 c. $79,639.17 d. $71,114.09

d. The answer is $71,114.09. Four steps: (1) Find the buyer's required down payment by subtracting the loan from the price ($234,500 - $167,500 = $67,000). (2) Find the monthly taxes by dividing the annual taxes by 12 ($4,880.96 ÷ 12 = $406.746). (3) Find the value of 9.5 months' taxes at $406.746 per month ($406.746 × 9.5 = $3,864.09). (4) Find how much cash the buyer needs so far, and then subtract the deposit already paid ($67,000 down payment + $3,864.09 prorated tax + $2,250 other closing costs - $2,000 deposit = $71,114.09).

A parcel of vacant land, which is 80 feet wide on the street side of the property and 200 feet deep, is sold for $200 per front foot. How much money would a salesperson receive for her 60% share in the 10% commission? a. $640 b. $1,600 c. $2,400 d. $960

d. The answer is $960. A front foot measures frontage on the front of the property. 80 feet × $200 = $16,000 sale price. $16,000 × 10% commission (0.10) = $1,600 (total commission). $1,600 × 60% (0.60) = $960 (the salesperson's commission).

If a home sold as a mortgage foreclosure does NOT bring an amount sufficient to satisfy the outstanding mortgage debt, the mortgagor may be responsible for a. a default judgment. b. liquidated damages. c. punitive damages. d. a deficiency judgment.

d. The answer is a deficiency judgment. A deficiency judgment entitles the mortgagee to a personal judgment against the borrower for the unpaid balance when a foreclosure sale does not produce enough cash to pay the loan balance in full after deducting expenses and accrued unpaid interest. It may also be obtained against any endorsers or guarantors of the note and against any owners of the mortgaged property who assumed the debt by written agreement. The mortgagee is not entitled to any damages. A default judgment is a judgment in favor of a plaintiff when a defendant does not appear in court.

Which of the following terms describes a legally enforceable contract in which two parties exchange promises to do something for each other? a. Unilateral contract b. Void contract c. Option contract d. Bilateral contract

d. The answer is bilateral contract. A bilateral contract is one in which both parties make a promise to the other. A unilateral contract is a one-sided contract in which one party makes a promise to induce a second party to do something. A void contract lacks one or all of the essential elements of a contract. An option contract is a unilateral contract in which only one party makes a promise to perform, in this case to hold open the right for a buyer to purchase a property in the future.

According to team advertising rules in Alabama, teams may a. display the team name but must also display company name and names of all team members. b. not display a team name unless a real state license has been issued in that name. c. not display a team name at all. d. display the team name, but must also display the company or broker name and the name of at least one member of the team.

d. The answer is display the team name, but must also display the company or broker name and the name of at least one member of the team. Teams are not issued real estate licenses, and it is not necessary to display the names of all team members, although that is commonly done.

The main purpose of police power is to a. demonstrate the authority of the state. b. set limits on the amount and kinds of businesses in a given area. c. protect residential neighborhoods from encroachment by business and industry. d. ensure the health, safety, and welfare of the community.

d. The answer is ensure the health, safety, and welfare of the community. Individual rights are subject to certain powers, one of which is police power: the power to preserve order, protect the public health and safety, and promote the general welfare of the community.

In order for a deed to be valid, the a. signature of the grantee must be witnessed. b. deed must be recorded. c. grantee must sign the deed. d. grantor must be legally competent

d. The answer is grantor must be legally competent. Competency of the grantor is one of the requirements for a valid deed. The grantor must be of lawful age and sound mind. Witnessing the grantee's signature is never needed as the grantee does not sign the deed and recording a deed is not required for validity of the deed

Which of the following best defines common law concepts, such as agency? a. It is a legal doctrine that is formed from common sense and usual practices. b. It is enacted by legislatures and other governing bodies. c. It may not be superseded by statutory law. d.Itispartofa bodyoflawestablishedbytraditionandcourtdecisions

d. The answer is it is part of a body of law established by tradition and court decisions. The law of agency is law from judgments and decrees as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers

Eric and Benito are co-owners in fee simple of a small office building. Benito dies intestate and leaves nothing to be distributed to his heirs. Eric is neither related to Benito nor his creditor. What would explain how Eric acquired Benito's interest in the office building? a. Reversionary rights b. Adverse possession c. Remainder interests d. Joint tenancy

d. The answer is joint tenancy. Upon the death of an owner in a joint tenancy, all remaining interests do not pass to the heirs of the deceased owner or according to the will but to the surviving joint tenant or tenants. Reversionary rights and remainder interests refer to the future right to an estate in real property. Adverse possession occurs when a person acquires title to another's property by means of open, hostile, and continuous possession over time.

A qualifying broker has her license suspended for 90 days. The office remains open during that time period, but with only a receptionist. The receptionist answers the phones with the company name and tells people they are not accepting any new business for 90 days. Is this allowed? a. No, only an associate broker can answer the phones during the suspension period. b. Yes, this is an acceptable method of handling the situation. c. Yes, but only with specific permission from the Commission. d. No, this is considered engaging in real estate and is not allowed.

d. The answer is no, this is considered engaging in real estate and is not allowed. Answering the phone with the company name is equivalent to advertising.

What is the maximum number of licensees allowed to operate a branch real estate office in Alabama? a. Two b. Three c. Four d. None of these

d. The answer is none of these. A branch office can be as large as its qualifying broker is able to manage.

Which of the following would be the BEST description of a listing contract? a. Property management contract b. Escrow contract c. Sales contract d. Personal service contract

d. The answer is personal service contract. A listing is a personal employment contract between a broker and his or her client setting forth the broker's responsibilities in finding for the seller a ready, willing, and able buyer. A property management contract establishes the responsibilities of a broker in managing a principal's property. A sales contract is a contract between a buyer and seller for purchase of a property. An escrow contract is an agreement between a buyer, seller, and escrow holder (such as a broker) defining the responsibilities of each.

The road to a man's home is winding and long, and the shorter, more direct route is across a neighbor's land. The man has used the more direct route for years and has never seen the neighbor. He hopes to eventually gain an easement by a. necessity. b. condemnation. c. license. d. prescription.

d. The answer is prescription. If the man's use of the land is visible and open, and if the owner must have been able to learn of it, he may be able to acquire an easement by prescription, depending on the time period required by state law.

What is the primary purpose of security deposits? a. Provide additional revenue for the landlord b. Pay for the last month's rent c. Ensure that the lease is valid d. Repair damage to the property caused by the tenant

d. The answer is repair damage to the property caused by the tenant. A security deposit is held by the landlord during the term of a lease to pay for damage to the property or to pay rent if the tenant defaults on the rent. The deposit is not required for the validity of a lease. Normally a security deposit does not pay for the last month's rent. A lease should identify any advance payments as a security deposit or as an advance payment for the last month's rent.

A real estate professional is a licensed real estate salesperson who has a written contract with his broker that specifies that he will not be treated as an employee. The real estate professional's entire income is from sales commissions rather than an hourly wage. Based on these facts, the real estate professional will be treated by the IRS as a. a real estate assistant. b. an employee. c. a subagent. d. self-employed.

d. The answer is self-employed. The real estate professional meets the IRS's three requirements to be treated as a qualified real estate agent, and thus self-employed, which are that the real estate professional (1) is a real estate licensee, (2) has a written agreement with the broker indicating the licensee will not be treated as an employee by broker contributions to Social Security or the withholding of income taxes, and (3) earns a substantial portion of income from the firm in commissions, not wages

Bo signed a purchase agreement, but then the seller decided not to sell. Bo sued the seller successfully and was able to purchase the house. What was the contract remedy if the seller was in default? a. Mutual agreement b. Unilateral rescission c. Liquidated damages d. Specific performance

d. The answer is specific performance. The buyer does not have the option of liquidated damages since the seller has not brought any earnest money to the contract. Mutual agreement is when the parties terminate and return all items of value to each party as if the contract did not exist. Unilateral rescission is one party terminating.

Which of the following is FALSE about contingencies? a. They must specify what is required to satisfy the contingency. b. They must identify who will pay for any costs involved. c. Common contingencies include mortgage and inspection contingencies. d. They create a contract that is unenforceable.

d. The answer is they create a contract that is unenforceable. A contingency creates a voidable contract but not an unenforceable one; if the contingency is not satisfied, the contract is voidable by the party for whose benefit the contingency was created. For example, a home purchase may have a financing contingency stating the loan terms that the buyer will accept; if the only loan available to the buyer is on stricter terms (higher interest rate; longer loan term), the buyer may still decide to proceed with the loan and close the sale.

If a lender charges a rate of interest in excess of that permitted by state law, the lender may be guilty of a. fraud. b. truth-in-lending violations. c. misrepresentation. d. usury.

d. The answer is usury. Usury is the act of charging a rate of interest in excess of limits established by law. Fraud is a form of deceit or misrepresentation by which a lender or some other party attempts to gain some unfair advantage over a borrower or another person. Truth-in-lending violations involve improper disclosures or the lack of disclosures regarding the cost of credit from a lender. Truth-in- lending laws do not establish any set minimum or maximum interest rate in lending transactions.

Information including age, education, behavior, and other characteristics of members in a certain population is

demographics. Information about members of a population group is called demographics. These factors are important because they contribute to the amount and type of housing needed.

The development of a parcel of land can have a significant impact on its value, as well as the value of nearby parcels, because of the economic characteristic that considers

improvements to the land. An improvement on a parcel of land can affect the land's value and use, as well as that of neighboring tracts and whole communities.

When the supply of a certain commodity decreases while demand remains the same, the price of that commodity will tend to A) decrease significantly. B) remain the same. C) decrease slightly. D) increase.

increase. When consumers continue to demand a product for which there is limited supply, the price generally increases.

Under a cooperative form of ownership, an owner

is a shareholder in the corporation that owns the building. Cooperative owners hold shares in the cooperative corporation.

Which of the following factors affects supply? A) Wage levels B) Monetary policy C) Demographics D) Population

monetary policy. Government monetary policies affect the supply of land available for development. Population, demographics, and wage levels affect demand for real estate.

A commercial building with eight storefront spaces rented to eight tenants was sold. The new owner has acquired

none of the trade fixtures installed by the tenants. While the business premises are rented, each tenant is entitled to install and remove trade fixtures. At a later date, if a tenant leaves a trade fixture on the premises after the tenant's lease terminates, the fixture will then be considered part of the real estate and belong to the property owner.

In some states, a landowner must demonstrate a beneficial use for water under the doctrine of

prior appropriation. In a state that recognizes the doctrine of prior appropriation, a landowner must demonstrate to a state agency that a proposed use of water (aside from limited domestic use) is beneficial.

Common law rights granted to owners of land along the course of a river, stream, or similar body of water are called

riparian rights. Common law rights granted to owners of land along the course of a river, stream, or similar body of water are called riparian rights. Littoral rights belong to owners of land that borders commercially navigable lakes, seas, and oceans.

Property management, appraisal, financing, and development are all examples of

specializations within the real estate industry. All are specializations in the field of real estate, and every real estate professional must have a basic knowledge of these specialties.

Real estate is unique and immobile. This means that

the market adjusts slowly to the forces of supply and demand. Because of the uniqueness and immobility of real estate, the market for real estate reacts slowly to the forces of supply and demand, which are subject to changes in the national financial market as well as natural disasters.

Scarcity means that

the supply of land is finite. While a considerable amount of land has not been developed, the supply in a given location that is suitable for a particular use is finite. There is also value in leaving land in its natural condition to preserve species that might otherwise be extinguished, as well as to benefit the earth's environment overall.

Which factor is MOST likely to influence demand for real estate?

wage levels and employment opportunities. When wage levels and job expansion are increasing, workers are more likely to buy real estate; when job opportunities are scarce or wage levels low, demand for real estate usually drops.