Real Estate Simulated Exam Questions
California's Consumer Recovery Account pays a maximum per transaction of ________________.$10,000 $50,000 $100,000 There is no monetary limit on refunds.
$10,000 $50,000 $100,000 There is no monetary limit on refunds. Correct answer is (b). A consumer who has been defrauded by a real estate licensee can potentially have their out-of-pocket losses refunded up to a maximum of $50,000 per transaction
Homestead protection can be terminated in all the following ways, except:
1) If the homestead is sold 2) if a creditor brings a legal action against the homesteader in bankruptcy court 3) if the homesteader files a declaration of abandonment 4) if the homesteader files a declaration of homestead on another property Correct answer is (2). Homestead laws are favored by law and custom and are favorably construed to protect the homestead. Once a homestead is established, it is presumed to continue until terminated.
A buyer of property in a land project may rescind his purchase and obtain a refund, even without a specific reason, within:
14 calendar days
In the wake of the widespread savings and loan failures of the 1980s, a law abolished the Federal Home Loan Bank Board and created the Office of Thrift Supervision to supervise savings institutions. The new law was called: The Savings and Loan Rescue Act (SLRA) The Thrift Authority The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) United State Savings Bank Central Command
Answer is c
Josh is a board member of two corporations which both make and market motor oil. He does not disclose this dual membership to anyone. If Josh is subsequently sued for breaching his fiduciary duties, the court would likely base its ruling on the:
Antitrust rules Duty of Loyalty Duty of Fair Dealing Duty of Implied Impartiality Correct answer is (b). Under the Duty of Loyalty, a corporate director should behave in a manner demonstrating his complete dedication to the company which employs him. Whether or not Josh is sharing information between the two competing companies, his simultaneous membership on the boards of both sets up the appearance of impropriety that violates his fiduciary responsibilities.
If a lender accepts a deed in lieu of foreclosure, the borrower is still liable for: junior liens mechanics lien judgements All of the above
Correct answers is (d). While a borrower would like to have the lenders taking the deed in lieu to assume all the borrower's obligations, most lenders will not agree to this.
A 17-year-old, who has joined the U.S. Marines, wants to sign a rental lease. He may: Not enter into a rental agreement Legally enter into a rental agreement Enter into a rental agreement if his parents or guardian give their written approval Enter into a conditional contract which becomes binding when he turns 18
B
The provision stating, a "Realtor shall not publicly disparage the business practice of a competitor" appears in the:
Commissioner's Rules and Regulations California Business and Professions code County ordinances NAR Code of Ethics Correct answer is (d). This provision is included in the National Association of Realtor's (NAR) Code of Ethics. Although it does not have the force of law, NAR — the real estate industry trade group — can enforce its own sanctions on violators.
A broker accepts a prospective buyer's deposit and deposits it in his trust account. The broker also keeps his personal funds in the account to pay his office expenses. The broker is guilty of:
Conversion Commingling Accounting mistake This is not considered wrong Correct answer is (b). Commingling is the mixing of trust funds with personal funds, a violation of state law. Conversion is the actual misappropriation of the funds of a party for the broker's own purposes and may be considered as theft under the California penal code.
If a home heating system has a high Energy Efficiency Ratio (EER) score, it signifies the heating system is: more efficient, so it costs less to operate more efficient, making the homeowner eligible for a $5,000 bounty from the Dept of Energy may be in need of repair, since too high a rating means the system is overloaded EER ratings apply only to solar panels
Correct answer is (a). A high Energy Efficiency Rating indicates the heating system is more efficient, which means it is less expensive to maintain.
While working with a subdivided property for which the Commissioner's Preliminary Public Report has been issued, a real estate agent can: Accept a listing for the property Accept a purchase offer and take a deposit Lease the property without selling it Accept an exclusive listing without a termination date since it is uncertain how much time will be needed to sell all the lots
Correct answer is (a). According to the question, taking a listing is the only one of the actions described in the answers that could be performed by a licensee. Before a final public report is issued, an agent can not accept an offer with a deposit nor lease or sell the property. Of course, under no circumstances can he take an exclusive listing without a termination date.
Another name for an amendment to a contract is a: Rider Addendum Appendix Re-interation
Correct answer is (a). Although often used interchangeably, an amendment is done after the contract is signed and must be in writing, while an addendum is added to the contract before being signed by the parties.
A(n) _____________ is a voluntary conveyance of the right to maintain land in its natural state: Conservation easement Solar easement Easement in gross Zoning variance
Correct answer is (a). Conservation easement is indicated as the right answer, based on the question's reference to keeping land in its "natural state."
The Subdivision Final Report of the Real Estate Commissioner expires: Five years from the report's issuance Seven years from the report's issuance 10 years from the report's issuance, unless a material error is found in the report The report never expires
Correct answer is (a). The preliminary report is valid for one year, but expires sooner if the final report is issued before that time.
Andy promises to paint Sandy's house if Sandy will promise to drive Andy and his dog to Canada. If Sandy makes that promise in return, it would qualify as: Consideration An option A pledged promise All of the above
Correct answer is (a). Consideration, an element of a binding contract, does not have to be in the form of money. It may consist of a promise to perform a desired act or a promise to refrain from doing an act. In a bilateral contract such as this one between Sandy and Andy (and Andy's dog) — an agreement by which both parties exchange mutual promises — each promise is regarded as sufficient consideration for the other.
A loan using real estate as security and not relying on insuring or guaranteeing the loan is called a: Conventional loan Conforming loan VA loan FHA loan
Correct answer is (a). For making conventional loans, the lender considers just the the quality of the borrower's creditworthiness and security for the debt. On the other hand, VA loans and FHA loans are guaranteed by that agency, while conforming loans meet the purchase requirements of governmental entities Fannie Mae and Freddie Mac.
A property is listed for sale with an agreement to pay the broker a commission of 7% of the sale price. The broker decides to pay 40% of the commission to his salesman. Now, if the property sells for $650,000, how much commission will the salesman earn? $18,200 $22,000 $45,500 It is unlawful for the broker to compensate the salesman out of the commission the broker earned.
Correct answer is (a). Formula: P = W x % Change the percentage (7%) to a decimal number (.07): P = $650,000 x .07 = $45,000 The total commission is $45,500, of which 40% of the total commission will be passed on to the salesman. Again, apply the percentage formula to determine the amount of the salesman's share. P = $45,500 x .40 = $18,200
While performing the duties of a listing agent, a real estate broker is liable to third parties for:His own unlawful acts Acts performed by a cooperating broker who is the seller's sub-agent Only written contracts made under the authority of the principal Illegal actions committed by his or her principal involved in the transaction
Correct answer is (a). However, errors and/or omissions (negligence) committed by a cooperating broker who is the seller's authorized sub-agent may be imputed to the seller. Also, if the cooperating broker is not the authorized sub-agent of the seller, but is instead serving as the authorized agent or sub-agent of the listing broker, any negligent acts by the cooperating broker can be imputed to the listing broker with the listing broker subject to liability to third parties under the legal theory of respondeat superior.
When a sublease is made, the following occurs: Primary responsibility for paying the rent remains with the original tenant (sublessor) Primary responsibility for paying the rent is transferred to the new tenant (sublessee) The original lease is terminated by the sublease Possession of the property is transferred to the lessor, but for less than the full term
Correct answer is (a). In a sublease, liability for paying the rent remains with the original tenant (sublessor). Possession of the leasehold is transferred to a new party (sublessee) for the remainder of the lease term. The making of a new lease contract is called a novation, terminating the liability of the original tenant.
If a lender accepts a deed instead of foreclosure from a trustor, the lender will: Assume liability for any junior liens Obtain the property without any encumbrances, regardless of junior liens Provide the trustor with a reinstatement period to pay off the default Sue the trustor in civil court
Correct answer is (a). Lenders accepting a deed in lieu of foreclosure take title subject to other existing liens.
To commit a misrepresentation, a party must have made an untrue assertion of fact or __________, which is the equivalent of an assertion of fact. Non-disclosure Affirmation Declaration Educated prediction
Correct answer is (a). Nondisclosure is the failure to volunteer required information. Disclosure is required when a party has offered some facts but further information is needed to provide an accurate description for the other party; or a relationship of trust and confidence exists between the parties; or, a party has access to information not available to the other party.
In appraisal, the reproduction approach uses this method to examine separate items of construction to build an accurate estimate of the building's total value: Quantitative survey method Total cost method Duplication method Comparison method
Correct answer is (a). Quantity survey is the most reliable method for estimating the cost of replacing a construction improvement. It involves the itemization of all building costs, direct — like materials and labor — and indirect — taxes and insurance, and then totaling these expenditures. This method should be utilized by an appraiser well-versed in construction techniques.
Once a listing agreement is signed, a fiduciary relationship exists between the: Broker and seller Broker and buyer Broker, buyer and seller No fiduciary relationship exists
Correct answer is (a). The broker and seller are the two parties to a listing agreement. The listing creates an agency relationship, which places the agent (the broker) in a position of trust — owing a fiduciary duty — to the principal (the seller).
Wayne owns a home in suburban Sacramento, with the boundary of his property bordered by the city street. A large palm tree at that end of Wayne's property has rotted and, during a particularly stormy day, falls onto the road crashing into Norman's car as he drives by and seriously injuring him. If he sues Wayne for damages, Norman will likely: Win, because Wayne should have removed the rotted tree from his property Win, because Norman was seriously injured Lose, because Wayne did not know the tree was rotted Lose, because the storm causing the tree to fall was an act of God, not Wayne's fault
Correct answer is (a). The general rule regarding duties owed to persons outside the owner's land is that the owner has no duty of care with respect to natural conditions such as trees or rocks or other naturally- existing objects. However, this general rule only applies to rural areas. Here, Wayne's land was in an urban setting, so he owed Norman a duty to keep him safe from naturally-existing conditions on his land.
A building's "highest and best use" refers to attaining its: greatest net return most equitable and socially -onscientious use greatest gross return tallest height
Correct answer is (a). The highest and best use relates to a building generating the highest net return over a given period; it is a concept used in appraisals.
Jordan agrees to trade her diamond ring for a vacant lot owned by Aaron. This will be considered: A contract supported by valid consideration Not a contract because no money for consideration was exchanged Not a contract because two unlike items can not be traded None of the above
Correct answer is (a). There is no requirement that consideration on both sides be of equal value for a contract to be made.
A purchase money mortgage refers to a: Mortgage on the property given by the buyer to the seller, with the purchase price paid off in installments by the buyer Wrap-around mortgage Loan taken on several separate properties Loan bundled together on a loan, an automobile, a rare coin collection and a new home
Correct answer is (a). With purchase money mortgages, the property is used to provide the security for the loan.
A party makes an offer to buy a property, which is accepted by the owner. Before the commencement of the escrow period, the fact comes out that the the seller is a single minor. Therefore, the contract is: Illegal Voidable by the minor Enforceable by the buyer Valid, but the escrow period cannot commence until the minor reaches the age of 18
Correct answer is (b). A contract between a minor and another party is seen as voidable by the minor. The minor may elect to carry out the contract or void it at any time during their minority or for a reasonable period after coming of age. A contract made by a minor is considered voidable by the minor. A minor can only void a contract during his minority status and only for a reasonable time after he reaches the age of majority. After a reasonable period of time, the contract is deemed to be ratified and cannot be voided.
To satisfy the Statute of Frauds, a listing agreement must: Be in writing and signed by the seller and broker Be in writing and signed by the seller Be notarized Does not have to be in writing, because it can be accomplished in less than a year
Correct answer is (b). According to the Statute of Frauds, a listing agreement must be in writing and signed by the seller, although the broker's signature is not required and nor must it be notarized.
When a real estate agent pays a portion of their commission to the buyer, the agent is required to: Inform the escrow agent Inform the seller Be subject to prosecution by the district attorney There is no requirement for the agent to do anything
Correct answer is (b). An agent paying part of his commission to a buyer is permissible only if the agent informs the selle
Agency is referred to as the relationship between the agent and his principal. All of the following statements are correct about agency, except: Agency may be an expressed contract. The principal must pay money to the agent to create an agency relationship. Agency may be an implied contract. An agreement that may be in writing or verbal
Correct answer is (b). Answers (a), (c), and (d) are correct statements applicable to an agency relationship. Answer (b) is false. An agency relationship does not require the payment of money.
Buyer Barry and Seller Sean agree to a contract for the sale of real property. They each deliver all items to the escrow agent required in their jointly-agreed to escrow agreement. During the escrow period, Barry asks if the deposit receipt can be released so he can have it examined by his accountant, but Sean refuses to allow this. The escrow agent should: Release the deposit receipt, since the escrow officer is the agent of the buyer Not release the deposit receipt Require the parties to submit the dispute to an arbitrator Resign the escrow account
Correct answer is (b). As soon as documents, funds and other required items are placed in escrow and instructions have been signed by both parties, the escrow company is not authorized to release them. As the agent of both parties, the escrow officer has no power to compel them to arbitrate.
A kind of financial institution whose members usually share the same occupation is a(n): Savings bank Credit union Commercial bank Insurance compay
Correct answer is (b). Like thrifts and banks, credit unions are depository institutions, the major difference being that credit unions generally provide services only for members of a certain group, like the military or labor unions.
Most lending contracts have a right of rescission, which provides the borrower with the opportunity to cancel the loan without penalty if the right is exercised: Within one day after the loan agreement is made Within three days after the loan agreement is made Within a week after the loan agreement is recorded at the county recording office There is no right of rescission available to cancel a loan
Correct answer is (b). Most lenders wait to deliver the loan funds to the borrower until the expiration of the three-day deadline. There is no requirement for lending agreements to be recorded.
Sometimes included in a security instrument, the clause stating that the instrument will have secondary priority against another mortgage to be taken in the future is called a: Secondary clause Subordination clause Recording clause Lien position clause
Correct answer is (b). Most subordination clauses are found in mortgage and trust deeds securing purchase loans for unimproved land, when the borrower plans to later obtain a construction loan. Lien priority is normally established by the recording date, but when a subordination clause is included in the earlier land loan, it means the later construction loan can take the first lien position.
Acting on behalf of more than one party involved in a transaction is: Illegal Permissible, if properly disclosed and agreed to by the parties. Unethical Renders the transaction voidable
Correct answer is (b). Note that failing to disclose such a dual agency violates the Real Estate Law.
The concept of "present worth of future benefits" relates to: Market value Income Rental properties only Commercial property only
Correct answer is (b). Present worth of future benefits involves income, as in the capitalization of net income involved in the the income approach to appraisal.
Which of the following is not a tool used by the Fed to regulate the economy: Manipulating interest rates Regulation of the secondary mortgage market Open market operations Reserve requirements
Correct answer is (b). The Fed has no power to regulate the secondary mortgage market. However, by raising or lowering interest rates, the Fed can slow or stimulate economic activity and control inflation. Open market operations relate to the Fed buying or selling Treasury bonds to increase or decrease the total supply of money and also affect interest rates. Reserve requirements determine the level of reserves a bank must hold in comparison to deposit liabilities; this affects how banks make loans, a key element of the economy.
A broker's "desk cost" is: Dependent on the price charged by the office furniture store where the desks are purchased The total operating expense of the office divided by the number of salespersons The total operating expense of the office with the salaries of all office employers and payments to independent contractors subtracted None of the above
Correct answer is (b). The desk cost does not include a profit margin for the broker.
The following are factors in determining whether an item is a fixture, except: Method of attachment Purpose item is used for Intention of the parties Relationship of the parties
Correct answer is (b). The five tests form the acronym of "Maria": Method of attachment, Adaptability of the item, Relationship of the parties, Intention of the parties, and Agreement between the parties. Intention of the parties trumps the other ones in significance.
The most common type of lease agreement lasts for a specific period, such as month to month or year to year. This agreement is called a: Life estate Periodic tenancy Estate at sufferance Tenancy at will
Correct answer is (b). The periodic tenancy automatically renews unless notice to end the lease is provided by the tenant.
The elevators in a high-rise apartment building stop working, and the landlord fails to make timely repairs. The renters who live have the right to move out without liability for further rent, under the concept of: Fraud Constructive eviction Inconvenience Punitive malfeasance
Correct answer is (b). The tenants can sue to recover possession or for damages based on the landlord's breach of the covenant of quiet enjoyment.
Which type of bankruptcy filing provides a firm with the opportunity to reorganize its debt and to try to re-emerge as a healthy organization: Chapter 7 Chapter 11 Master reorganization filing None of the above
Correct answer is (b). While Chapter 7 is used by firms which are past the reorganization stage and must simply liquidate their assets to pay off creditors, companies in Chapter 11 will contact their creditors in an attempt to change the loan terms such as the interest rate and dollar value of payments. Both Chapters 11 and 7 require that a trustee be appointed; however, in Chapter 11, the trustee supervises the assets of the debtor and allows business to continue.
To find the value of Greenacre, an appraiser looks at a comparable home in the same neighborhood that sold for $250,000 a year ago. During that year, property values for that neighborhood rose 8%. So, Greenacre is now worth: $290,000 $300,000 $270,000 $350,000
Correct answer is (c). $250,000 x 8% (expressed as 0.08) = $20,000 $250,000 + $20,000 = $270,000
Failing to perform a duty that was promised in a contract amounts to a: Cancellation of the contract Novation of the contract Breach of the contract Rescission of the contract
Correct answer is (c). A breach occurs when a party fails to performs all or part of the obligations required by the contract. In that case, the nonbreaching party can obtain legal relief.
Which of these actions can be legally taken by a minor without prior approval of the court: Have their real property sold by a guardian Provide a power of attorney sufficient to encumber their real property Obtain real property via inheritance or gift Both A & C
Correct answer is (c). A minor or incompetent person can receive title to real property without court authorization.
A legal document that requires a borrower to pay a particular interest rate during a certain period of time is called a: Trust deed Bond Note Certificate of deposit
Correct answer is (c). A note — short for promissory note — is a legal instrument, in which one party promises in writing to pay a specified sum of money to the other, at a certain time, under specific terms.
A primary residence is a person's: largest home first home main residence newest home
Correct answer is (c). A person's primary residence, or main residence is the dwelling where they usually live, typically a house or an apartment. A person can only have one primary residence at any given time, though they may share the residence with other people.
After property has been transferred either voluntarily or involuntarily, the method of safeguarding the new owner's interest in it is called: Land protection Registration Recording Property preserving
Correct answer is (c). A recorded document is placed in the public record of the county where the property is located.
A negligently or wrongfully-performed act which causes a breach of a lawfully-imposed duty is called a: Crime Writ Tort Malfeasance
Correct answer is (c). A tort is a financial loss or injury to a person caused by misconduct, mistake or accident. A person committing a tort may be sued by the injured party and may have to compensate him.
A void contract is: Is equivalent to a voidable contract Can be ratified by the parties' mutual consent May be ignored, with neither party having to take any further legal action May be enforced by a court
Correct answer is (c). A void contract has no legal effect and is not considered to be a contract (Unlike a voidable contract which, if no legal action to withdraw from it is taken within a stipulated time, may be declared to be ratified by the court.) The usual reason for a contract to be void is due to the complete lack of an important element of a contract, like a mutual consent or a lawful object.
An effective listing interview between an agent and prospective client should: Be standardized to cover every kind of property Focus mainly on the licensee's selling achievements Be specifically tailored for each particular property Focus mainly on the licensee's career achievements
Correct answer is (c). At the listing appointment, while the agent should try to demonstrate the qualities distinguishing her from other agents, her emphasis should be on the specifics of the property and how best to present it.
Information from a Chapter 7 bankruptcy are kept on credit records for _________. Five years Seven years 10 years Forever
Correct answer is (c). Chapter 13 bankruptcy information remains on credit reports for seven years.
A voidable contract remains in force until it is: Modified Conformed Rescinded Notarized
Correct answer is (c). If legal action to withdraw from the contract is not taken within a stipulated time, the court may declare the contract as ratified. In cases where the injured party desires to continue with the contract, he may ratify it
Under the UCC, in contracts for the sale of goods, the test for deciding whether a buyer has the right to specific performance is if the items being sold are: Expensive Readily available Unique Both A & C
Correct answer is (c). If the buyer purchases a unique item from the seller and the seller breaches, specific performance will be awarded and the seller will have to produce the item for the buyer to possess.
Mrs. Johnson, a widow, dies, leaving a life estate in her home to her brother Ben and the remainder to her only son, David. Ben planned to move into the house. However, David was currently residing there and did not want to move out. Can David remain in the home even if Ben does not agree? Yes, since David was Mrs. Johnson's son. Yes, David was left a remainder which means he is entitled to stay in one room of the house. No, David has no right to live there against Ben's wishes, until Ben dies. No, David has lost his right to ever live in the house.
Correct answer is (c). In this scenario, Ben, the life tenant, has the sole right of use/possession of the estate as long as he lives.
In business, "liquidity" refers to: Whether the business can be sold within 90 days Yearly receipts Current assets and current liabilities Bank deposits
Correct answer is (c). Liquidity refers to the availability of cash for a business. Subtracting current liabilities from current assets demonstrates how much cash is available.
If a potential client brings a friend with him on a broker's tour of properties, the broker should: Politely Inform the friend he is not allowed on the tour Double the number of properties being shown Enlist the friend as an ally None of the above
Correct answer is (c). Potential buyers tend to ask relatives and friends for their opinions on properties they are considering.
The concept of rescission means that a contract is: Altered Filed with the court Cancelled Incorrect
Correct answer is (c). Rescission refers to the act of rescinding, or unmaking or undoing a contract.
A listing is what kind of agency: Executive agency General agency Special agency Dual agency
Correct answer is (c). Specific tasks, such as a listing — a contract between a property owner and an agent authorized to obtain a buyer — are performed under a special agency.
A married couple originally from the Middle East come to Broker Betty's office San Diego and tell her they are interested in viewing potential homes to buy in the Rancho Gardens neighborhood. Even though the broker has several listings in that area, Betty, for no other reason than their national origin, tells the couple that nothing is available in Rancho Gardens. Betty has committed the illegal practice of: Blockbusting Anti-trust Steering False advertising
Correct answer is (c). Steering is specifically prohibited by the Fair Housing Act and the Regulations of the Real Estate Commissioner and can result in fines and/or suspension or license revocation for the offending licensee.
All of the following buy loans on the secondary mortgage market, except: Fannie Mae Freddie Mac FHA Ginnie Mae
Correct answer is (c). The Federal Housing Administration (FHA) is not a lender nor a purchaser of loans on the secondary mortgage market. Instead, the FHA acts as an insurer of the loan which is originated by a lender or mortgage company.
A broker owns a property that a married couple wishes to buy. As a condition for the sale, the broker requires that the couple re-list the property with the broker (list back) whenever the couple decide to sell it. Such an arrangement would be: valid valid, if the purchasers pay with cash invalid under the Sherman Antitrust Act invalid under the provisions of anti-discrimination laws
Correct answer is (c). The Sherman Antitrust Act prohibits tying (tie-in) agreements, such as this scenario of requiring a prospective buyer to perform a specific act in the future as a condition of the sale.
One of the main reasons for creating the secondary mortgage market was to: Establish an auction network for junior deeds of trust Maintain state oversight of the mortgage market Provide balance between regions with a lack of mortgage funds and those with an over-abundance of funds Enable investors to earn a high return
Correct answer is (c). The need arose to create a money market where loans could be easily bought and sold, while funds could be easily moved to an area that needed more capital from an area with excess funds. The secondary mortgage market is used by thrifts and other financial institutions to sell their assets quickly when short of mortgage funds. This has stabilized the flow of cash and solved some financial problems for many mortgage lenders.
For tax purposes, a person's primary residence is their: First home purchased Largest home purchased Main residence Only home purchased
Correct answer is (c). The property used for a majority of the time during the year will usually be considered the taxpayer's primary residence.
A property owner operating a factory on it decides to sell the property, then immediately leases the property back from the new owner to continue operating his factory. This practice is called a: Reverse sale Sale-leaseback Real property interest swap Such a practice violates the UCC.
Correct answer is (c). The sale-leaseback method allows the seller to gain operational capital, reduce debt and acquire tax deductions.
At what point in the contractual process does an option likely become enforceable: The offer of an option has been communicated from the the optionee to the optionor The optionor has received an offer from the optionee and decided to raise the consideration necessary for the granting of the option to $5000 Having received the offer, the optionee has delivered $1 of consideration to the optionor There has been a "meeting of the minds"
Correct answer is (c). To become a binding option, consideration has to actually pass between the parties. The actual amount of the consideration is not determinative.
A purchase agreement must include a(n): Acceleration clause Release clause Executory clause Alienation clause
Correct answer is (c). While other clauses may be found in a purchase agreement — also called a deposit receipt — it must include an executory clause, i.e., a promise of performance.
Express conditions include condition(s) such as: Condition subsequent Full performance Condition precedent Both A & C
Correct answer is (d). A condition precedent must be met before the performing party has a duty to perform. Then, once the condition is met, the duty to perform is triggered. A condition subsequent arises after the duty to perform has begun and, if satisfied, releases the performing party from the duty of performance.
A fire is racing toward a home that is in escrow. At this point, the risk of loss from fire damage belongs to the: New owner, since escrow has been opened New owner, since a purchase contract has been signed by the parties Seller and the new owner share the cost of risk equally Seller, since the closing documents have not yet been signed
Correct answer is (d). A seller should not cancel her homeowner's insurance policy until the closing has occurred. Until then, the seller is responsible for the the property remaining in safe condition.
A leasehold estate is: Chattel real Real property Personal property Both A & C
Correct answer is (d). Although a lessee has an interest in real property, the estate is in the form of personal property. "Chattel real" is another way of referring to personal property.
Agency relationships — like a listing — may be terminated in all of the following ways, except: If the property with which the agency is concerned is destroyed. Mutual termination agreed-upon by both the seller and agent. Resignation of the agency by the broker. Revocation by the principal if the agent owns an interest in the agency's subject.
Correct answer is (d). If an agent has an interest in the agency's subject matter — say, if a broker owns a third of the property — the principal cannot revoke the agency.
Landowner Larry conveys a deed to his property to Sam; the property contains coal. Sam now owns the right to extract and sell the coal, unless the: Mineral rights were reserved by the former owner Mineral rights were recorded Mineral rights were previously sold to another party Both A & C
Correct answer is (d). If mineral rights were retained by the original owner or previously transferred to someone else, that owner possesses an implied easement to enter the property and extract the minerals.
Listing agreements can be recorded with a title company if: Both parties agree The broker has a signed agreement with the title company The owner fails to file a written objection within 30 days of signing the listing agreement Listing agreements are not recorded
Correct answer is (d). Listing agreements can not be recorded at a title company, or other agency.
Upon the sale of a business opportunity, the seller is required to collect sales tax from the buyer on the: inventory included in the sale goodwill projected future earnings that will occur in the year after the sale fixtures and furniture that are part of the business
Correct answer is (d). Sales tax is due on tangible assets, such as trade fixtures and furniture.
Jonah sells his partnership interest in a general partnership in order to pay his largest creditor, Whale Enterprises. Jonah's sale of his partnership interest to Whale will: Dissolve the partnership Make the creditor a new partner Either A or B Have no effect on the partnership
Correct answer is (d). Since the partnership interest is the sole property of the partner, transferring it to another party has no impact on the partnership. So, any partner can transfer his interest freely without destroying or otherwise changing the partnership; the creditor has no rights in the partnership at all.
Which of the following statements regarding an offer to purchase real property is correct? The offer must be in writing, but the acceptance does not The acceptance must be in writing, but the offer does not Neither the offer and acceptance need to be in writing, unless the property price exceeds $1 million The offer and acceptance must both be in writing
Correct answer is (d). The Statute of Frauds requires both offer and acceptance to be in writing.
An escrow officer is generally authorized to: Recommend the best financing options to the buyer Suggest to the seller that he re-consider the payment arrangements as they seem unfair Hire the new home security company for the property Prepare the estimated closing statement
Correct answer is (d). The escrow officer is a neutral third party, hired to simply carry out the escrow instructions. As such, he can not make any changes to the escrow instructions, favor one party's interests over the other, or make hiring decisions.
To establish an agency relationship between a principal and broker, the most important component is the: Offer Property description Commission agreement Written employment contract
Correct answer is (d). The primary requirement for creating an enforceable principal-broker relationship is a written employment contract
A lease of property owned by an emancipated minor cannot have a term longer: The number of years between the emancipated minor's age and 21 Five years 10 years The lease term cannot be longer than a probate court would authorize.
Correct answer is (d). The probate court also determines the lease length for someone declared legally incompetent.
Land includes the following right(s): Water rights Mineral rights Surface rights All of the above
Correct answer is (d). The term "land" refers to the earth's surface, the material that extends downward to the planet's center. Land also includes the rights to the airspace above it.
A buyer who is considering making an offer to purchase a home using an FHA home loan asks his broker to appraise the house in order to verify that the asking price is fair. Although the broker is not a state-certified appraiser, he can: appraise the house appraise the house if certified appraisers charge too high a fee for the buyer to afford appraise the house as long as he gets a written waiver from the owner cannot appraise the house but can compose a comparative market analysis
Correct answer is (d). While a broker who is not a certified appraiser can make a comparative market analysis, she can perform an appraisal involving a federally-related loan transaction only if licensed or certified by the state
Which of the following refers to deferred maintenance: An apartment building with a leaking roof An apartment building lacking good views from its windows An apartment building with poor WiFi reception A commercial building with newly-installed plumbing
Correct answers is (a). Deferred maintenance is an appraisal term relating to the physical deterioration of a building, not its lack of amenities. Failure to fix the roof could lead to water damage
An intangible but valuable business asset based on the expectation of continued patronage by customers is called: Public use Anticipated income Goodwill Hoped-for revenue
Correct answers is (c). Goodwill is viewed as an intangible asset since it is not a physical asset like inventory or machinery. Examples include a secure customer base, a recognizable company brand name or patents. Goodwill is usually assigned a monetary value when companies are being evaluated in the course of a sale.
When a prospective purchaser hires qualified personnel to inspect a property before buying, it is part of a necessary process called:
Due carefulness Diligent fact-checking Due diligence None of the above Correct answer is (c). Those called upon to inspect the property should include termite inspectors, and qualified experts to check the plumbing, electrical and mechanical systems.
The performance of a contractual duty, as compelled by a court in cases where damages would not be an adequate remedy, is called:
Equitable action Recapture clause Escrow payment Specific performance Correct answer is (d). Specific performance is the legal action through which the breaching party is forced to fulfill the terms of the contract.
The way(s) in which the government acquires title to real estate include:
Escheat Municipal acquisition Eminent domain Both A & C Escheat describes what occurs when a person dies without a will — intestate — with no heirs to take ownership of his property; it is then acquired by the government. Eminent domain, the more frequently used method, refers to the right of the government to take private property for public use. Usually, property acquired by eminent domain is used for needed government buildings, public utilities, or highways
A contract that states the price and terms is:
Implied Express Executory Cannot be modified Correct answer is (b). A contract can be either express contract or implied. An express contract has its terms expressed in words, either orally or in writing. An implied contract has at least some of its terms not expressed in words.
Which is the least important factor in the appraisal of a 30-year-old residence:
Reason for the appraisal Building's physical condition Original cost of the property None of the above Correct answer is (c). The original cost of an old property has little effect on its present value.
Of these mortgage providers, which one generally offers the highest loan-to-value ratios (LTV) for conventional loans:
Savings banks Private lenders Life insurance companies Commercial banks Correct answer is (a). While savings banks, commercial banks and insurance companies are the largest providers of real estate loans, it is savings banks best known for specializing in funding home mortgages.
A would-be home buyer's loan application was turned down due to a negative credit report. If the applicant's request to see the credit report is denied, the applicant can:
Sue for actual damages Sue for attorney fees and court fees Both A & B Sue for punitive damages up to $100,000 Correct answer is (c). State law mandates that credit reporting agencies must share an applicant's credit report if requested by the applicant. Agencies that fail to do so are liable for actual damages, punitive damages up to $5,000 and legal fees.
A wooden roof's highest point is called a: Ridge board Top notch Rafter Hoist
The ridge board runs along the top of the roof.
A mortgage covering more than one parcel of property usually provides a clause allowing the release of a particular parcel on repayment of a specified part of the loan. This type of loan is called a: Blanket loan Package loan Open-end loan Swing loan
This blanket loan is typically used in connection with housing tracts, or construction loans.
The deadline for a broker to deposit a client check made out to the broker's trust account is:
Three business days Five business days A week There is no such deadline. Correct answer is (a). Three business days is the maximum allowed time allowed for a broker to deposit a client's check into the broker's trust account.
Complete title to a property can be transferred with a:
Trust deed Grant deed Both A & B Neither A or B Correct answer is (b). A grantor uses a grant deed to transfer title to a grantee. A trust deed is a security device in which legal title in real property is transferred to a trustee, who holds it as security for a loan between a borrower and lender; equitable title remains with the borrower.
Can a broker with a listing agreement that includes an option to purchase the property exercise that option for himself:
Yes, if broker provides written notice to the owner that he holds the option and discloses any profit he might take as a result of the transaction. Yes, if he shares the listing with another broker Yes, if he voluntarily suspends all other real estate activities for the duration of the option No, under any circumstances Correct answer is (a). Before dealing with the principal for his own account a real estate professional "has as a duty, not only to make no misstatements of fact, but also to disclose to the principal all relevant facts fully and completely" (BRE Reference Book).
A real property seller can recover damages from a real estate broker if the broker:
acts in excess of his authority conveyed by the seller makes a representation to the buyer authorized by the seller discloses a material fact to the buyer regarding the intended use of the property provides revised escrow instructions to the property's escrow agent Correct answer is (a). The broker would be liable for damages suffered by the seller for actions beyond the scope of his authority to his principal. The other actions are authorized. In fact, by law the broker MUST disclose to the buyer any material facts which affect the value, desirability and intended use of the property.
A property may lose its homestead status if:
homestead owner builds another property homestead owner moves out of state homestead owner records another homestead homestead property is destroyed in a flood Correct answer is (c). Someone can homestead only one property at a time. Moving from the home or its destruction does not invalidate the homestead.
The monthly net income of an investment property is $1,550. An investor is expecting a 13% rate of return. Using the capitalization appraisal approach, the value of the property is: $135,748 $143,076 $176,455 $260,000
orrect answer is (b). The capitalization formula is stated as: Income = Value x Capitalization Rate. (Note that the income in the capitalization formula is the yearly net income produced by the investment property; monthly income being $1,550, the yearly income is $18,600.) Formula: I = V x % Substitute: $18,600 = V x .13 Rearrange the formula to isolate the V (the unknown quantity): $18,600 ÷ .13 = $143,076
If rises are seen in both the employment rate and overall consumer confidence, then the following will likely occur in the next several months, except: Personal income will go up New home construction will rise Existing home sales will increase The stock market will rise by at least 15%
rrect answer is (d). The employment rate and consumer confidence are both reliable indicators of how the economy is doing. When they go up, it is likely that consumers have more money to spend and existing home sales and construction will move upward. The stock market is much harder to predict, and can move downward or upward independent of the general economy.
