Section 4 Practice Questions
A house with an outdated kitchen suffers from a) functional obsolescence b) economic obsolescence c) physical deterioration d) economic devaluation
a
For tax purposes, the initial cost of an investment property plus the cost of any improvements and minus and depreciation deductions to the property represents the investment's a) adjusted basis b) capital gains c) equity d) salvage value
a
If a seller sells a home "subject to" a loan, who has the liability to repay the loan? a) the seller only b) the buyer only c) both the seller and buyer equally d) primarily the seller but the buyer has secondary liability
a
If the replacement cost method is being used to estimate the property's value, which of the following would not be needed a) the original cost of the property b) the present cost to build a replacement of the property c) The value of the land d) The depreciation the property has suffered
a
In a market analysis, what is the purpose of weighing the adjusted sales prices of comparable properties? a) It allows the properties that are most similar to have a greater effect on the estimated value of the subject property b) It gives every comparable an equal chance to measure up to the subject property, if the repairs listed in the adjustments are made c) It gives the owner of the subject property the benefit of the doubt as to how hight the price might go on the property d) Comparable sales are not given weight they are averaged
a
One of the main reasons for the enactment of RESPA was to a) disclose settlement costs b) establish uniformity in the preparation of settlement statements c) control settlement costs for commercial property d) protect buyers fo residential properties when dealing with seller financing
a
RESPA covers all of the following loans EXCEPT a) loans between family members b) loans that use federal insurance programs c) loans that are subsidized by federal funds d) loans that might be sold on the secondary market to any federally backed agency
a
Rachel bought her house years ago for $100,000. Over the years she has made $25,000 in improvements to the home. The house is now valued at $275,000. This is an example of the principle of a) unearned increment b) progression c) conformity d) change
a
Real estate loans would be sold by a lender in the: a) Secondary mortgage market b) Primary mortgage market c) Federal Reserve Open Market d) Fannie Mae Market
a
The terms of a mortgage loan would most comprehensively be listed in the: a) promissory note b) mortgage c) Sales contract d) discount note
a
The type of depreciation used by appraisers in which the amount of depreciated value is equal each year is known as the: a) straight line method b) accrual method c) chronological method d) graduated method
a
Under which of the following conditions could a veteran who already has a VA loan obtain another VA loan? a) pay off the existing loan and convey the property b) if the property has a pending contract for sale c) the veteran can obtain a new VA loan if the first loan is more than 5 years old d) If the veteran buys a condominium to be used as rental property
a
What term is used to describe the situation in which the original maker of a note is released from liability because another has taken over his/her loan? a) novation b) assumption c) Hypothecation d) Subject yo
a
When a deed of trust is used to pledge real property as security of a loan, the lender is the a) beneficiary b) trustor c) trustee d) mortgagee
a
When determining effective gross income, an appraiser subtracts which of the following from potential gross income? a) vacancy rates and bad debts b) management costs c) maintenance, and utilities, and taxes d) all of the above
a
When should a licensee qualify a prospective buyer? a) at the first significant meeting with the buyer b) no later than signing the purchase and sale agreement c) After the buyer has chosen the property they wish to purchase, but before the contract was signed d) Not until after the buyer's offer has been accepted
a
When using the cost approach to estimate the value of a property, which of the following statements would be true? a) the construction cost refers to the current cost of construction, not the original cost of construction b) Depreciation relates only to physical wear and tear c) the construction cost method looks only at what was constructed, not at the value of the land d) if the land was compacted before construction began, there is less of it than there was originally and depreciation must be allowed for that decrease.
a
Which of the following types of loans might require private mortgage insurance? a) conventional loans only b) FHA loans only c) both conventional and FHA loans d) VA loans only
a
Which of the following will be given the greatest emphasis by a lender when qualifying an applicant for a VA loan a) income b) Marital status c) Length of military service d) all are important and would be given equal consideration
a
A clause that means that the loan is not assumable is the a) subordination clause b) alienation clause c) partial release clause d) escalator clause
b
A lender on a first mortgage has been offered a deed in lieu of foreclosure by the defaulting borrower. Would the lender want to know about any junior loans against the property? a) Yes, because it gives the lender a measure of how responsible the borrower has been in managing debt b) Yes, because the lender would have to make the payments on any junior loans c) No, because the lender on the first mortgage would have priority over any other loans d) No, because the borrower would be expected to continue making payments on any junior loan
b
A savvy real estate buyer purchases the least expensive home in the most expensive neighborhood he can afford. This is done to take advantage of the appraisal principle of: a) regression b) progression c) contribution d) unearned increment
b
A special assessment is a a) Re-evaluation of a property's value b) tax based upon benefit received c) tax levied equally against each property owner in the city or country d) tax levied only if ad valorem tax is sufficient to fund the proposed budget
b
A subdivision developer obtained a construction loan to build new houses on 20 lots. What type of clause would he request so that individual lots could be unencumbered as the loan amount is paid down? a) subordination b) partial release c) exculpatory d) safety
b
Ad valorem taxes are a) levied equally against all property owners b) based on the value of the property c) determined by the benefit of the services recieved d) paid only upon property transer
b
Appraisal fees are set by a) amounts determined by law b) the appraiser's estimate of time and effort involved in the assignment c) a percentage of the sale price d) Any of the above
b
By including an exculpatory clause in a mortgage contract, the lender a) waves her right to escalate the interest rate b) releases the borrow from personal liability c) agrees to permit an assumption to a qualified buyer d) grants the borrower immunity from foreclosure
b
Each of the following pairs might be contained in an escrow account except one - which one? a) hazard insurance and mortgage insurance b) property taxed and mortgage insurance c) property taxes and title insurance d) hazard insurance and property taxes
b
Functional obsolescence might include a) worn carpet b) no indoor plumbing c) noise from a nearby airport d) none of the above
b
Harry is buying Sally's house and wants to assume her existing loan. Harry should have Sally request a(n) a) payoff estimate b) reduction certificate c) escrow analysis d) satisfaction of mortgage
b
If a home sold for $62,500 on a loan assumption, how would the price of a comparable home be influenced if it is sold with a new, 100% VA loan? a) The price would remain the same b) the price would increase c) the price would decrease d) all of the above
b
In a fully amortized note, each month's payment is made up of a payment to principal and a payment to interest. What is the relationship, of the principal payments to the interest payments each month? a) Interest payments are a little higher each month and principal payments are a little lower b) Interest payments are a little lower each month and principal payments are a little higher c) Interest payments are a little lower, but principal is repaid in the same amount each payment d) Interest payments are level, but principal is a little higher each month
b
Professional appraisals for lenders are usually made in order to: a) sell a loan at foreclosure b) help the lender decide whether to make a loan c) establish a fair price for the purchase d) help the salesperson set the first listing
b
Real estate taxes are based upon a) fair value b) assessed value c) full value d) current value
b
The clause in a mortgage note that allows the lender to demand immediate payment in full of the remaining balance, if payment of the not is not made as contracted, is the a) alienation clause b) acceleration clause c) foreclosure clause d) amortization clause
b
The clause in a security instrument that prevents the assumption of a loan is known as a) acceleration b) alienation c) defeasance d) release
b
The four economic characteristics of value are: a) utility, scarcity, demand, and immobility b) demand, utility, scarcity, transferability c) immobility, permanence, non-homogeneity, situs d) scarcity, demand, permanence, non-homogeneity
b
The type of real estate closing is overseen by a neutral third party without a special meeting of all the principals and the attorneys is called a(n): a) Table closing b) Escrow closing c) Impound closing d) Conference closing
b
Value is best described as a) the price paid by the owner for the property b) the present worth of future benefits c) the assessed valuation d) whatever the market will bear
b
What are discount points? a) adverse factors considered when qualifying an applicant for a loan b) loan points paid in return for a lower interest rate c) the ratio between the purchase price of a home and the loan amount d) none of the above
b
What could happen if a property is sold at foreclosure and does not bring enough money to satisfy all of the debts secured by the property a) any obligation of the debtor terminates with the sale of the property b) Outstanding debts could be pursued as a result of a deficiency judgement c) All monies owed must be satisfied as a result of the foreclosure sale d) All other property owned by the debtor is automatically seized and sold at a future sale to satisfy the unpaid debt
b
What is the tax assessment rate for all real property in GA a) 35% b) 40% c) 45% d) 50%
b
When a mortgage loan is repaid, how is the lien released? a) a reconveyance deed must be recorded b) a satisfaction of mortgage must be recorded c) a lien release is signed d) any of the above
b
When a new mortgage loan is made, which of the following documents must be recorded? a) promissory note b) mortgage c) both d) none
b
Which of the following is used to determine annual real estate taxes? a) sales price times tax rate b) assessed value times tax rate c) assessed value minus tax rate d) appraised value times tax rate
b
Which of the following statements is NOT correct a) prepayment penalties are prohibited with VA and FHA financing b) HUD establishes market-based interest rates for VA and FHA loans c) VA can make certain direct loans d) conventional loans may require PMI insurance
b
A "purchase money mortgage" involves: a) any mortgage used to finance the purchase of a property b) a mortgage with an LTV above 80% c) Seller financing of the purchase of a property d) a mortgage loan not made by a depository institution, but rather by a private third party.
c
A lender has conducted a foreclosure sale after a loan default but the sale proceeds were insuffiecient to repay the debt. The lender gets a judgement from the court ordering the borrower to repay the remaining loan balance. This is an example of a(n) a) insufficiency order b) specific lien c) deficiency judgement d) repayment judgement
c
A promissory note is best described as a) a pledge of property b) an earnest money deposit c) written form of debt d) a form of unilateral contract
c
A purchase money mortgage is a loan made by: a) A lender on the secondary mortgage market b) a Fannie Mae approved lender only c) the seller in a transaction d) the purchaser in a transaction
c
A real estate salesperson uses a competitive market analysis to suggest a listing price for a home. If this CMA has been done correctly, each of the following statements would be true, EXCEPT: a) Expired listings will be included to show the upper limits of value b) recent sales will be included to show what the market has been c) the salesperson can also call the analysis an appraisal d) current listings will be included in the analysis
c
An appraiser would most likely use the capitalization approach for a) an owner-occupied dwelling b) a public library c) a restaurant that is currently rented d) vacant land
c
If a buyer assumes a seller's loan and the lender forecloses, who is responsible for the payment of the loan? a) buyer only b) Seller only c) buyer and seller d) Mortgagee's title insurance company
c
In a Land Sales Contract, who retains legal title to the property a) buyer b) mortgagee c) seller d) mortgager
c
In a graduated payment mortgage, the ____ changes and in an adjusted rate mortgage the ____ is subject to change a) principal, interest rate b) interest rate, payment c) payment, interest rate d) interest rate, principal
c
Parties to a deed of trust are a) mortgagor/ mortgagee/broker b)borrower/lender/broker c) trustor/beneficiary/trustee d) mortgager/trustee/mortgagee
c
The primary purpose of the secondary mortgage market is a) to aid in the resale of property b) to provide investment vehicles for lenders c) to ensure a flow of mortgage money to primary lenders d) to assist small mortgage companies
c
The value principle which indicates that a buyer will not pay more for a property than a price for which he can obtain a property of equal utility is the principle of: a) highest and best use b) conformity c) substitution d) anticipation
c
What document would be recorded to eliminate the lien of a trust deed loan a) a satisfaction of trust deed b) a satisfaction of mortgage c) a reconveyance deed d) a lien release
c
What type of loan is most likely not to require any down payment? a) FHA loans b) conventional loans c) VA loans d) both FHA and VA
c
When an appraiser assigns value to the rights to future income, he or she is most likely using the a) market data approach b) cost approach c) capitalization approach d) future forecast approach
c
When buyer and seller operate with knowledge and no undue pressure in consummating a transaction, it is known as a(n): a) mutual benefit agreement b) symbiotic transaction c) arms-length transaction d) economically beneficial agreement
c
Which of the following covenants is not contained in a security instrument? a) seisin b) quiet enjoyment c) payment of taxes d) further assurances
c
Which of the following statements is true regarding an assumed loan? a) the seller continues making the monthly payments b) the buyer has no personal liability for the payments c) the buyer has primary liability for making the payments d) the seller has no liability to the lender
c
You ask a friend how much he thinks his house is worth. He says "about $175,000" When you ask why he believes that, the friend says, "Because my neighbor's house just sold for that much." Your friend has perhaps unwittingly relied on the appraisal principle of: a) assemblage b) progression c) substitution d) conformity
c
A homeowner spends $40,000 installing a luxurious kitchen in his home. When the property is sold, the homeowner finds that the kitchen only added $25,000 to the value of the home. This illustrates the principle of: a) change b) unearned increment c) regression d) contribution
d
A market analysis on a property would be completed when: a) the agent is attempting to list the property b) the listing is about to expire and the agent is attempting to extend the listing c) an offer is made after the property has been on the market for an extended period d) all of these
d
A veteran with full entitlement may be able to do which of the following a) Purchase any home with no money down b) purchase an investment property through a VA loan c) obtain a guaranteed VA loan regardless of income d) None of the above
d
After a closing, all of the following documents are recorded EXCEPT a) the deed b) the deed of trust c) satisfaction of loan documents for the seller's mortgage d) a certified copy of the HUD 1 form
d
An appraiser has estimated the value of property according to the comparison approach, the cost approach and the income approach. To reach a final value estimate the appraiser will a) average the 3 values b) choose one of the 3 values c) differentiate the 3 values d) reconcile the 3 values
d
An appraiser would likely to place the greatest emphasis on the cost approach to the appraisal when appraising: a) a single family residence b) an apartment complex c) a four-plex d) a library
d
Surplus funds realized at a foreclosure sale on a mortgage in excess of the mortgage indebtedness and any other costs belong to the a) purchaser at the sheriff's sale b) sheriff c) mortgage d) foreclosed owner
d
The amendment that allows a lender to waive his lien priority in favor of another's is known as the: a) defeasance amendment b) alienation amendment c) subrogation amendment d) subordination amendment
d
The apparent age of a property is known as its: a) physical life b) chronological age c) economic life d) effective age
d
The cost approach method of appraisal is most appropriate for a) older homes b) single-family detached houses c) multi-family structures d) special use property
d
The person or firm who collects the monthly payments and keeps records regarding a mortgage loan is called a(n) a) loan officer b) loan originator c) underwriter d) loan servicer
d
The primary function of the FHA is to: a) purchase loans in the secondary market b) insure lenders against the death of a borrower c) to loan money to qualified borrowers d) to insure lenders against default by a borrower
d
What type of loan has payments of interest only with the principal paid in full at the end of the loan period a) partially amortized b) Graduated payment c) Fully amortized d) Straight loan
d
Which of the following is not major participant in the secondary mortgage market? a) GNMA b) FNMA c) FHLMC d) FHA
d
Which of the following type of loan will have an interest rate that will change? a) VA b) FHA c) GRM d) ARM
d
