Master National Questions: part 2

An appraiser is responsible for A) determining value. B) computing value. C) estimating value. D) finding value.

An appraiser is estimating value. The appraiser does not make or determine value. After the appraiser completes the analysis and considers all the data, an estimate of value will be provided. An appraisal is an official estimate of value.

An appraiser using the GRM (gross rent multiplier) would consider which of following? A) Capitalization and net operating income B) Market value and potential rent income C) Market price of comparables and adjustments to the subject D) Rental income and market price

An appraiser using the GRM (gross rent multiplier) would consider which of following? A) Capitalization and net operating income B) Market value and potential rent income C) Market price of comparables and adjustments to the subject D) Rental income and market price

Two years ago, a buyer paid $175,000 for a house. Since that time, the property has depreciated 3% each year. What is the value of the property today? A) $185,657 B) $164,500 C) $164,658 D) $185,500

The answer is $164,658. $175,000 - 3% (.03) - 3% (.03) = $164,657.50 round up to $164,658

Which of the following would be considered a trigger item under Regulation Z? A) "A steal at only $175,000!" B) "Only $10,000 down." C) "Low monthly payments." D) "FHA financing available."

The answer is "Only $10,000 down." Specific credit terms, such as a down payment, monthly payment, dollar amount of the finance charge, or term of the loan, are referred to as trigger items. If such items are included in any advertisement, the advertisement must include additional information required by the regulation.

An apartment building with a $90,000 net operating income and an 8% cap rate has a value of A) $1,125,000. B) $1,720,000. C) $1,000,000. D) $1,500,000.

The answer is $1,125,000. $90,000 ÷ 8% (.08) = $1,125,000

A property is appraised for $125,000. If the assessment rate is 100% and the tax rate is $1 per $100, what are the annual property taxes? A) $1,350 B) $1,520 C) $1,550 D) $1,250

The answer is $1,250. $1 ÷ 100 = .01 Tax rate $125,000 × .01= $1,250

An agent who works for XYZ Realty referred a buyer to a broker, who works for ABC Realty. The referring agent is to receive 25% of buyer's agent's share of the commission when the transaction closes. The buyer purchased a $350,000 home, and the 7% commission was split as follows: listing brokerage, 2%; listing agent, 2%; buyer's brokerage, 1.5%; buyer's agent, 1.5%. How much was the referring agent paid? A) $1,312.50 B) $7,000 C) $5,250.50 D) $24,500

The answer is $1,312.50. $350,000 × 1.5% (.015) = $5,250 $5,250 × 25% (.25) = $1,312.50

The rooms in Sandy's house measure as follows: living room, 20' × 25'; dining room, 18' × 20'; bedroom, 14' × 26'; bedroom, 15' × 15'; bedroom, 12' × 14'. The carpet she has selected costs $9.95 per square yard. How much will it cost to carpet the entire house? A) $950.77 B) $732.39 C) $1,787.68 D) $836.91

The answer is $1,787.68. To determine the total square footage, see chart. 1,617 ÷ 9 = 179.6667 Square yards 179.667 × $9.95 = $1,787.68 for entire house Total house square footage 20' × 25' = 500 sq. ft. 18' × 20' = 360 sq. ft. 14' × 26' = 364 sq. ft. 15' × 15' = 225 sq. ft. 12' × 14' = 168 sq. ft. Total 1,617 sq. ft.

How much monthly PITI payment can a purchaser qualify for if he earns $6,600 gross income monthly and the lender applies 28/36 qualifying ratios? A) $2,376 B) $2,300 C) $1,848 D) $1,650

The answer is $1,848. $6,600 income × 28% (.28) = $1,848 (monthly PITI payment). The lender's 28/36 qualifying ratios mean that the purchaser's total monthly housing expenses should be no more than 28% of his total monthly gross income, and that the purchaser's total monthly obligations must not exceed 36% of his total monthly gross income.

A buyer has an annual income of $82,000 with recurring monthly debt of $500 that does not include housing expenses. If the lender's qualifying ratios are 28% and 36%, what is the maximum monthly house payment for which he can qualify? A) $1,413 B) $1,913 C) $1,960 D) $2,460

The answer is $1,913. $82,000 ÷ 12 = $6,833.33 × 28% (.28) = $1,913.33 round to $1,913 $6,833.33 × 36% (.36) = $2,460 − $500 = $1,960

What is the sales price of a property whose owner paid a $7,000 commission at a 7% rate? A) $136,000 B) $100,000 C) $420,000 D) $42,000

The answer is $100,000. $7,000 (commission) ÷ 7% (.07) = $100,000 (sales price)

An agent is managing a 15-unit apartment building and is paid 9% of the gross income. She leases five apartments for $500, five for $550, and five for $600. There is a 3% vacancy rate and additional income of $450 per month. The monthly operating expenses are $1,749, and the owner is generating an 8% return on the investment. What is the effective gross income on the building? A) $101,430 B) $99,000 C) $80,442 D) $96,030

The answer is $101,430. 5 × $500 × 12 = $30,000 5 × $550 × 12 = $33,000 5 × $600 × 12 = $36,000 Total PGI = $99,000 $99,000 - $2,970 (3%) = $96,030. $450 × 12 = $5,400. $ 96,030 + 5,400= $101,430.

A lender negotiated an $82,250 loan, which was 80% of the appraised value. The appraised value of the property is A) $68,500.50. B) $65,800.50. C) $102,812.50. D) $82,250.50.

The answer is $102,812.50. $82,250 ÷ 80% (.80) = $102,812.50

A property is now worth $117,978. If it has appreciated 6% each year for the past 2 years, what was the original investment? A) $110,899 B) $105,000 C) $104,245 D) $111,300

The answer is $105,000. Year 1 $117,978 ÷ 106% (100% + 6%) (1.06) = $111,300 Year 2 $111,300 ÷ 106% (1.06) = $105,000

A property is now worth $98,250. If it has depreciated in value 5% each year for the past 2 years, what was the original investment? A) $103,241 B) $108,320 C) $103,421 D) $108,864

The answer is $108,864. Year 1 $98,250 ÷ 95% (100% - 5%) (.95) = $103,421 Year 2 $103,421 ÷ 95% (.95) = $108,864.

If the quarterly interest at 10.5% is $3,150, the principal amount of a loan is A) $30,000. B) $120,000. C) $60,000. D) $90,000.

The answer is $120,000. To find the principal, divide the annual interest by the percent of interest. In this problem, to find the annual interest multiply the quarterly amount by 4: 4 × $3,150 = $12,500 (annual interest) $12,600 ÷ 10.5% (.105) = $120,000 (principal amount)

An owner wants to receive a net of $82,000 after selling her home. She has an existing mortgage of $32,500 and will have selling expenses of $444. If the broker is to receive a 7% commission, what is the lowest offer that she can accept for the property? A) $122,515.08 B) $123,595.70 C) $123,959.70 D) $122,990.08

The answer is $123,595.70. $82,000 + $32,500 + $444 = $114,944 $114,944 ÷ 93% (.93) = $123,595.70

A broker sold a property for $250,000. He was paid 6% on the first $100,000, 5% on the next $100,000, and 4% on the balance. How much was the broker paid? A) $6,000 B) $13,000 C) $5,000 D) $24,000

The answer is $13,000. $100,000 × 6% (.06) = $6,000 $100,000 × 5% (.05) = $5,000 $50,000 × 4% (.04) = $2,000 $6,000 + $5,000 + $2,000 = $13,000

The owners pay $137.81 in monthly property taxes. If the tax rate is $3.50 per $100 and the assessment rate is 35%, what is the value of the property? A) $166,532.72 B) $134,997.54 C) $143,997.45 D) $153,998.69

The answer is $134,997.54. Tax rate= $3.50 ÷ 100 = .035 $137.81 × 12 = $1,653.72 Annual tax $1,653.72 ÷ .035= $47,249.14 Assessed value $47,249.14 ÷ 35% (.35) = $134,997.54

The semiannual interest paid on a loan was $4,387.50. If the interest rate is 6.5%, what was the loan amount? A) $135,000 B) $270,000 C) $540,000 D) $67,500

The answer is $135,000. $4,387.50 × 2 = $8,775 Annual interest $8,775 ÷ 6.5% (.065)= $135,000

A building measures 30' × 80' × 15'. A buyer made an offer of $35 per square foot on the property. The owner made a counteroffer of $2.75 per cubic foot. How much more will it cost the buyer if he accepts the counteroffer? A) $16,000 B) $15,000 C) $18,000 D) $17,000

The answer is $15,000. First offer 30' × 80' = 2,400 sq. ft. × $35 = $84,000. Counteroffer 30' × 80' × 15' = 36,000 cubic ft. × $2.75 = $99,000. $99,000 - 84,000 = $15,000

Ann listed her property with a XYZ Realty that charges a flat fee of $2,995 to list the property. If a sales associate within XYZ sells the property, the total commission paid is $2,995. However, if a sales associate from another company brings the buyer that purchases the property, the owner agreed to pay that company an additional 3% commission. A sales associate from JFK presented an offer of $425,000. If the offer is accepted, the total commission that the owner will pay is A) $10,500. B) $12,750. C) $11,250. D) $15,745.

The answer is $15,745. $425,000 × 3% (.03) = $12,750 $12,750 + 2,995 = $15,745

A house is now worth $105,000. The lot is now worth $50,000. If the house depreciated 4% each year for the past 2 years, and the lot appreciated 6% each year for the past 2 years, what was the approximate combined original value of the house and lot? A) $109,375 B) $158,432 C) $156,544 D) $113,932

The answer is $158,432. House Year 1 $105,000 ÷ 96% (100% - 4%) (.96) = $109,375 ÷ 96% (.96) = $113,932 Lot year 1 $50,000 ÷ 106% (100% = 6%) (1.06) = $47,170 Lot year 2 $47,170 ÷ 106% (1.06) = $44,500 Total of house and lot together $113,932 + $44,500 = $158,432

After closing expenses of $550 and a 6% commission was paid, the seller received a check for $149,850. What was the sale price of the property? A) $155,424 B) $159,424 C) $160,000 D) $150,400

The answer is $160,000. 100% - 6% = 94% $149,850 + 550= $150,400 (needed before commission) $150,400 ÷ 94% (.94) = $160,000.

What did it cost to construct a building that is worth $155,200 today if it has depreciated at the rate of 2% per year (50 years useful life) for the past 4 years? A) $167,993.47 B) $167.616 C) $143,703.70 D) $168,695.65

The answer is $168,695.65. Depreciation is 2% per year for 4 years = 8% depreciation. Original cost at 100% - depreciation at 8% = 92%. $155,200 (the current value) ÷ 92% (.92) = $168,695.65 (the original cost)

Three years ago, a buyer paid $150,000 for a three-bedroom home. The property has appreciated at 5% each year. What is the value of the property today? A) $179,300 B) $172,500 C) $173,644 D) $175,464

The answer is $173,644. $150,000 + 5% (.05) + 5% (.05) + 5% (.05) = $173,643.75 round up to $173,644

An owner of a fourplex has one unit that rents for $450 a month, one unit that rents for $475 per month, and two units that rent for $500 per month. The vacancy rate is 4%, and the monthly expenses average $350. If the rate of return on the property is 10%, what is the value? A) $218,260 B) $189,760 C) $179,760 D) $118,260

The answer is $179,760. $17,976 ÷ 10% (.10) = $179,760 1 × $450 × 12 = 1 × $475 × 12 = 2 × $500 × 12 = $ 5,400 $ 5,700 $12,000 Income From Units $23,100 Potential Gross Income - 924 (4)% Vacancy Rate $22,176 Effective Gross Income $350 × 12 = - 4,200 Annual Expenses $17,975 Annual Net Operating Income

An offer was made 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. The buyer 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 the buyer need to close on the property? A) $18,111 B) $23,111 C) $10,159 D) $15,159

The answer is $18,111. $108,810 × 90% (.90) = $120,900 $87,048 × 80% (.80) = $108,810 Debits Credits $108,810 $87,048 $350 $5,000 $250 $749 $110,159 $92,048 $110,159 -$92,048 = $18,111

A broker sold a property and received a 6.5% commission. The broker gave the listing salesperson $3,575, which was 30% of the firm's commission. What was the selling price of the property? A) $55,000 B) $183,333 C) $95,775 D) $152,580

The answer is $183,333. The answer requires two steps: (1) find the firm's full commission, and (2) find the selling price using the full commission and the rate. $3,575 (the listing salesperson's commission) = 30% × Full commission (1) To find the full commission, divide the listing salesperson's commission by the salesperson's share of 30%: Full commission = $3,575 ÷ 30% (.30) = $11,916.67. (2) To find the sales price, divide the full commission by the brokerage commission rate: Full commission ($11,916.67) ÷ Brokerage rate (6.5%) = Sales price ($183,333).

The buyer had a 20% down payment on a property she purchased for $89,500. She also must pay a 1% origination fee, $350 for title insurance, and one discount point. How much money will the buyer owe at the closing? A) $19,682 B) $20,350 C) $18,966 D) $17,423

The answer is $19,682. Step 1, determine the loan amount $89,500 × 80% (.80) = $71,600. Step 2, determine the down payment $89,500 - 71,600 = $17,900. Determine the points and origination fee $71,600 × 1% (.01) = $716. Total as shown below + $17,900 down payment $716 Discount points $716 Origination fee $350 insurance $19,682 Total due at closing

A broker received a 6% commission from the sale of a property. The broker gave the salesperson $3,500, which was 30% of the firm's commission. What was the selling price of the property? A) $75,000 B) $194,450 C) $83,333 D) $196,000

The answer is $194,450. To find the broker's total commission, divide the salesperson's commission by the percentage of the salesperson's commission: $3500 ÷ .30 (30%) = $11,667. The broker's commission is 6% of the sales price. To find the sales price, divide the broker's commission by the percentage of the broker's commission: $11,667 ÷ .06 (6%) = $194,450.

Semiannual property taxes of $450 were paid only for the first half of the year. The property sold on July 11 and closed on September 19 with the seller having the day of closing. If the taxes were prorated and paid between the buyer and seller as of the date of sale, using a 360 day year, what will the seller owe at closing? A) $252.50 B) $387.50 C) $197.50 D) $251.50

The answer is $197.50. The seller owes July, August and 19 days of September for a total of 79 days. The formula is Total due ÷ Total days × Days owed. $450 ÷ 180 × 79 = $197.50

If a house sells for $80,000 and the buyer obtains a loan for $72,000, how much money will the buyer pay at closing for points if the lender charges three discount points? A) $2,400 B) $240 C) $2,328 D) $2,160

The answer is $2,160. A discount point equals 1% of the loan amount. Three discount points is 3% of the loan amount of $72,000. $72,000 (loan amount) × 3% (.03) = $2,160

The listing broker and the buyer's broker agree to split a 7% commission 50-50 on a $196,900 sale. The buyer's brokerage firm gives its salesperson 35% of the commission. How much does the buyer's salesperson earn from the sale? A) $1,206.01 B) $1,174.78 C) $2,412.03 D) $4,824.05

The answer is $2,412.03. $196,900 × 7% (.07) = $13,783 (total commission) $13,783 ÷ 2 (between both brokers) = $6,891.50 $6,891.50 × 35% (.35) = $2,412.03 (salesperson's commission)

An owner sold his condo and paid 6% commission to the selling broker. If his net was $200,000, what was the sale price? A) $205,698.49 B) $225,349.59 C) $212,765.95 D) $229,879.39

The answer is $212,765.95. 100% - 6% = 94% Seller's percent $200,000 ÷ 94% (.94) = $212,765.95

The buyer assumed a loan of $50,000 at 8.25% interest. Payments are due on the first of the month. The last payment was made on April 1, and the closing took place on April 20 with the seller having the day of closing and using a 360 day year. Which of the following is TRUE? A) $229.20 CS, DB B) $119.60 DB, CS C) $229.17 DS, CB D) $119.60 CS, DB

The answer is $229.17 DS, CB. Step 1, determine the amount of interest owed $50,000 × 8.25% (.0825) = $4,125. Step 2, determine what days the buyer owes April 1 to April20 = 20 days. Step 3, determine the amount owed. Total amount due ÷ Total days × Days owed, $4,125 ÷ 360 × 20= $229.17.

If a circular property has a diameter of 50' and costs $120 per square foot, what is the cost of the property? A) $235,620 B) $942,480 C) $2,356,200 D) $1,235,620

The answer is $235,620. A = 3.1416 × 25' × 25' = 1,963.5 sq. ft. A = 1,963.5 sq. ft. × $120 = $235,620

A builder wants to purchase a parcel of land of 17,500 square feet at $60,000 per acre. What is the cost of the land? A) $48,300 B) $62,000 C) $124,000 D) $24,150

The answer is $24,150. To find the cost of the parcel, first convert the cost per acre into the cost per square foot: $60,000 per acre ÷ 43,560 square feet (square feet per acre) = $1.38 (rounded) per square foot. Then, multiply the square feet of the parcel by the cost per square foot: $1.38 × 17,500 = $24,150.

A lender agreed to a 90% loan-to-value ratio with an interest rate of 7%. If the annual interest is $17,640, what was the loan amount? A) $280,000 B) $290,000 C) $252,000 D) $176,400

The answer is $252,000. $17,640 ÷ 7% (.07) = $252,000

A commercial lease calls for a minimum rent of $1,200 per month plus additional annual rent of 4% of the year's gross business exceeding $150,000. If the total rent paid at the end of one year was $19,200, how much business did the tenant do during the year? A) $250,200 B) $279,200 C) $270,000 D) $159,800

The answer is $270,000. There are four steps: (1) minimum rental for the year is 12 times the monthly amount: 12 months x $1,200 per month = $14,400, (2) rental above the minimum is found by subtracting the minimum rent from the total rent paid for the year: $19,200 - $14,400 = $4,800, (3) this overage is 4% of the amount of business that exceeded $150,000. The amount of business that exceeded $150,000 is found by dividing $4,800 by 4%: $4,800 ÷ 4% = $120,000, and (4) total business is the sum of the basic $150,000 and the $120,000 overage: $150,000 + $120,000 = $270,000.

The replacement cost of a building is $250,000. It has an annual depreciation of 8%, a site value of $50,000, and annual taxes of $3,950. What is the value of the property? A) $280,000 B) $230,000 C) $283,950 D) $276,050

The answer is $280,000. $250,000 - $20,000 (8%) = $230,000 $230,000 + 50,000= $280,000

A broker and sales associate split commissions on a 60/40 basis. How much commission will the sales associate earn if he sells a property for $125,000, and a 6% commission is paid? A) $4,500 B) $3,000 C) $3,500 D) $7,500

The answer is $3,000. $125,000 × 6% (.06) = $7,500 $7,500 × 40% (.40) = $3,000

At closing, the seller paid the broker $21,000, which was equivalent to 7% of the selling price. What was the selling price of the property? A) $400,000 B) $210,000 C) $147,000 D) $300,000

The answer is $300,000. Commission divided by rate = sales price. $21,000 ÷ 7% (.07) = $300,000.

Three years ago, the owner paid $165,000 for her investment property. During her period of ownership, she added a family room valued at $16,500 and $10,000 worth of other improvements. If she sells the property for $240,000 and pays a 7% commission, what capital gains may she exclude? A) $38,700 B) $25,300 C) $31,700 D) $48,500

The answer is $31,700. $240,000 - $16,800 (7%) = $223,200 $165,000 + $16,500 + $10,000 = $191,500 $223,200 - $191,500 = $31,700

A homeowner sold his property for $99,500. He paid a real estate commission of 6%, paid an attorney $250, paid a transfer tax of $99.50, paid his existing mortgage of $50,140, and agreed to a purchase money mortgage of $10,000. What were his net proceeds at the closing? A) $33,050.40 B) $43,050.40 C) $53,040.50 D) $33,040.50

The answer is $33,040.50. $99,500 × 6% (.06) = $5,970 Debits Credits $5,970.00 $99.500 $250 $99.50 $50,140 $10,000 $66,459.50 $99,500 $99,500 - $66,459.50 = $33,040.50

A homeowner sold his property for $99,500. He paid a real estate commission of 6%, paid an attorney $250, paid a transfer tax of $99.50, paid his existing mortgage of $50,140, and agreed to a purchase money mortgage of $10,000. What were his net proceeds at the closing? A) $53,040.50 B) $33,050.40 C) $43,050.40 D) $33,040.50

The answer is $33,040.50. $99,500 × 6% (.06) = $5,970 Debits Credits $5,970.00 $99.500 $250 $99.50 $50,140 $10,000 $66,459.50 $99.500 $99.500 - $66,459.50 = $33,040.50

A purchaser borrowed $85,000, to be repaid in monthly installments of $530.20 at 7% annual interest. How much of the borrower's first month's payment was applied to reducing the principal amount of the loan? A) $34.37 B) $49.58 C) $40 D) $53.02

The answer is $34.37. There are three steps to solving this problem: (1) find the amount of interest in the first monthly payment by multiplying the annual interest rate by the original amount of the loan (Rate × Principal = Interest) 7% (.07) × $85,000 = $5,950, (2) divide the annual interest by 12 (12 months in a year) to find the first month's interest $5,950 ÷ 12 = $495.83, and (3) subtract that interest amount from the amount of the regular monthly payment to find the amount available to apply to the principal $530.20 - $495.83 = $34.37.

A homeowner received $321,480 after 6% was deducted as the agreed upon brokerage commission. What was the selling price of the property? A) $345,000 B) $342,000 C) $340,785 D) $340,000

The answer is $342,000. $321,480 (seller's net) ÷ 94% (.94) (100% - 6% commission) = $342,000 (the sales price)

What is the two discount points fee on a $180,000 VA guaranteed loan? A) $2,700 B) $1,800 C) $3,600 D)

The answer is $3600. $180,000 loan × 2% (.02) = $3,600 (discount point fee) A point is equal to 1% of the total loan amount. 1% (.01) × $180,000 = $1,800 × 2 (2 points) = $3,600

A developer wants to purchase four acres of land that sells for $2.20 per square foot. What is the cost for the parcel of land? A) $287,496 B) $191,664 C) $383,328 D) $574,992

The answer is $383,328. To find the cost of the land, first convert the acreage to square feet: 43,540 square feet (per acre) × 4 = 174,240 square feet. Then multiply the total square feet times the price per square foot: 174,240 × $2.20 = $383,328.

A two-story house measures 25' × 50'. A one-story family room was added that measures 20' × 20'. At a cost of $9.95 per square yard for carpet and $2.50 per square yard for installation, how much will it cost to carpet the house and family room? A) $2,282.50 B) $20,542.50 C) $4,011.67 D) $36,105

The answer is $4,011.67. Step 1, determine the square feet of the house: A = 25' × 50' = 1,250 sq. ft. × 2= 2,500 total square feet for the two story house. Step 2, determine the square feet of the addition 20' × 20'= 400 sq. ft. Step 3, determine the total square footage 2,500+ 400= 2,900. Step 4, determine the cost of carpet: Total cost of carpet and install = $12.45 ($9.95 + $2.50) 2,900 ÷ 9 = 322.222 Square yards 322.222 × $12.45 = $4,011.67.

A sales associate for XYZ Realty listed and sold a $175,000 home. The seller paid a 6% commission of which the sales associate received 2% for listing the property, and 1.5% for selling the property. How much was the brokerage's share of the commission? A) $5,250 B) $10,500 C) $6,125 D) $4,375

The answer is $4,375. Total commission = $175,000 × 6% (.06) = $10,500. Sales associate's share = 3.5% (2% + 1.5%) $175,000 × 3.5% (.035) = $6,125. $10,500 - $6,125= $4,375 for the brokerage. Or 6% -3.5% = 2.5% for the brokerage times the sales price.

A vacant lot that measures 125 feet by 200 feet is listed at $325 per front foot. What is the listing price of the property? A) $40,625 B) $50,000 C) $65,000 D) $40,800

The answer is $40,625. The front foot refers to the measurement along the frontage of a lot. The frontage is usually the street frontage, but it might be the water footage for lots bordering on water. When two dimensions are given for a tract of land and they are not labeled, the first dimension is the frontage. The word width also means frontage, as the length of a parcel is called the depth. To solve this problem, multiply 125 feet by the cost per front foot, $325. 125 × $325 = $40,625.

A building has a semiannual effective gross income of $250,000. If the annual expenses are 20% of the effective gross income, what is the net operating income? A) $400,000 B) $200,000 C) $100,000 D) $500,000

The answer is $400,000. $250,000 × 2 = $500,000 $500,000 - $100,000 (20%) = $400,000

The buyers secured an $82,000 loan at 9.25% interest for 30 years. Their monthly payment is $674.59. How much of their first payment will be applied to the principal balance? A) $64.51 B) $42.51 C) $632.08 D) $785.55

The answer is $42.51. $82,000 × 9.25% (.0925) = $7,585 Annual interest $7,585 ÷ 12 = $632.08 Monthly interest $674.59 - $632.08 = $42.51

The appraised value of a property is $52,350. It is assessed at 38% of the appraised value, and the tax rate is 95 mills. What are the quarterly property taxes? A) $1,889.83 B) $1,998.83 C) $472.45 D) $589.83

The answer is $472.45. Tax Rate = 95 ÷ 1,000 = .095 Assessed value = $52,350 × 38% (.38) = $19,893 $19,893 × .095 = $1,889.83 Annual taxes $1,889.83 ÷ 4 = $472.45 Quarterly taxes

The N½ of the SW¼ of the NE¼ sold for $2,500 per acre. What was the selling price? A) $50,000 B) $10,000 C) $40,000 D) $20,000

The answer is $50,000. Use the denominator for each section to determine how many acres. Chain them in the calculator without totaling. 640 ÷ 4 ÷ 4 ÷ 2 = 20 acres 20 × $2,500 = $50,000

When the owners sold their property, they paid a 6% commission. Their check after the commission was paid was $470,000. What was the selling price of the property? A) $900,000 B) $500,000 C) $783,333 D) $800,000

The answer is $500,000. 100% - 6% = 94% Seller's percent $470,000 ÷ 94% (.94)= $500,000

Federal income tax law excludes gains realized on the sale of a primary residence for couples filing jointly. The amount of this exclusion is A) $500,000. B) $250,000. C) $600,000. D) $200,000.

The answer is $500,000. Federal tax laws permit a couple filing jointly to exclude up to $500,000 in profits from capital gains taxes on a primary home not an investment property.

Last year, an apartment building had an effective gross income of $55,575 and expenses of $5,500. If the cap rate is 10%, what is the value? A) $555,750 B) $555,555 C) $500,000 D) $500,750

The answer is $500,750. $55,575 - 5,500 = $50,075 $50,075 ÷ 10% (.10) = $500,750

A borrower pays $200,000 for a home, makes a down payment of $40,000 and obtains a loan for the balance of the purchase price. The lender charges four (4) discount points for the loan. How much will the borrower pay in discount points? A) $12,800 B) $16,000 C) $6,400 D) $8,000

The answer is $6,400. A discount point is 1% of the loan amount. Four discount points is 4% of the loan amount. The loan amount is $160,000 (subtract the down payment of $40,000 from the purchase price of $200,000). To find the amount of the discount points, multiply the loan amount by 4%: 4% (.04) x $160,000 = $6,400.

When the seller listed a property, he agreed to pay a 7% commission. The property sold for $190,000. If the listing agent was paid 2%, and the selling agent was paid 1.5%, how much was the broker paid after paying his agents? A) $6,650 B) $3,800 C) $2,850 D) $13,300

The answer is $6,650. 7% - 2% - 1.5% = 3.5% to the broker. $190,000 × 3.5% (.035) = $6,650

A first-time buyer paid $135,500 for her property. Taxes in her community are assessed at 80% of the market value. If the tax rate is 700 mills per $100, how much will be escrowed for taxes for her monthly PITI payment? A) $63.23 B) $75.60 C) $75.88 D) $63

The answer is $63.23. Tax rate = 700 mills ÷ 1,000 = 0.7 ÷ 100 = .007 Assessed value $135,500 × 80% (.80) = $108,400 $108,400 × .007 = $758.80 Annual taxes $758.80 ÷ 12 = $63.23 Monthly tax

The rent collected in a 12-unit building is as follows: three apartments, $550; three apartments, $600; and three apartments, $650. There is a vacancy rate of 4%, additional annual income of $2,400, and annual expenses of $5,000. With a cap rate of 9%, how much should the buyer pay for this property? A) $698,534 B) $773,422 C) $661,244 D) $717,866

The answer is $661,244. $59,512 (NOI) ÷ .09% (Cap Rate) = $661,244 Value $550 × 12 × 3 = $19,800 $64,800 $67,200 $64,512 $600 × 12 × 3 = $21,600 + 2,400 - 2,688 (4% Vacancy ) - 5,000 $650 × 12 × 3 = $23,400 $64,800 Annual Income From Units $67,200 Potential Gross Income $64,512 Effective Income $59,512 Net Operating Income (NOI) Reference: Real Estate Calculations > Calculations for Valuation

If the gross rent multiplier of a property is 112 and the rent is $600 monthly, what is the value of the property? A) $62,700 B) $67,200 C) $27,600 D) $76,200

The answer is $67,200. 112 × $600 = $67,200

One lender charges 6.5% interest and the second lender charges 7%. How much money will the borrower save the first year on a $150,000 loan if he goes with the first lender? A) $500 B) $750 C) $650 D) $850

The answer is $750. The first lender would charge $150,000 × 6.5% (.065) = $9,750. The second lender would charge $150,000 × 7% (.07) = $10,500. $10,500 - $9,750 = $750.

A broker sold a residence for $210,000 and received $10,500 as commission in accordance with the terms of the listing contract. What was the broker's commission rate? A) 6% B) 8% C) 7.5% D) 5%

The answer is 5%. To find the commission rate, divide the selling price by the actual amount of the commission: $210,000 ÷ $10,500 = 5% (.05).

Five apartments rent for $550 per month and five others for $600 per month. There is an 8% vacancy rate and monthly expenses of $250. If a buyer wants to yield an 8% return, what should he pay for the property? A) $765,000 B) $790,735 C) $756,000 D) $790,375

The answer is $756,000. Potential income = (5 × $550 × 12 = $33,000) + (5 × $600 × 12 =$36,000) = $69,000 PGI $69,000 - $5,520 (8%) = $63,480 EGI $250 × 12 = $3,000 Expenses $63,480 - $3,000 = $60,480 ÷ 8% (.08) = $756,000

The listing price of a property was $135,000. The buyer made an offer of 90% of the listing price, which was accepted by the sellers. The property appraised for the offer price and the buyers secured an 85% loan at 9% interest for 30 years. How much interest will be paid in the first payment? A) $747.56 B) $839.24 C) $860.62 D) $774.56

The answer is $774.56. $135,000 × 90% (.90) = $121,500 Sales price $121,500 × 85% (.85) = $103,275 Loan amount $103,275 × 9% (.09) = $9,294.75 Annual interest $9,294.75 ÷ 12 = $774.56

An investment property had a net operating income of $75,230, and expenses of $4,900, a cap rate of 8%. What is the effective gross income? A) $77,730 B) $79,500 C) $80,130 D) $82,630

The answer is $80,130. $75,230 net operating income + 4,900 expenses = $80,130 effective gross income Reference: Real Estate Calculations > Calculations for Valuation

This month's interest payment is $585.70. If the buyer secured a 90% loan at an 8.75% annual rate of interest, what was the sale price? A) $89,500 B) $89,250 C) $80,235 D) $80,325

The answer is $89,250 $585.75 × 12 = $7,028.40 Annual interest $7,028.40 ÷ 8.75% (.0875) = $80,324.57 Loan amount $80,324.57 ÷ 90% (.90) = $89,249.52 round to $89,250

Two brokers split the 6% commission equally on the sale of a small commercial tract of land. What was the selling price of the tract if the selling salesperson received $1,074, which was 40% of the portion of the total commission coming to the selling broker? A) $71,600 B) $89,500 C) $44,750 D) $78,750

The answer is $89,500. $1,074 (salesperson's commission) ÷ 40% (.40) = $2,685 (total commission) ÷ 3% (.03) (1/2 of total 6% commission) = $89,500 (the sales price)

The owners live in a county were taxes are paid in arrears and 360 days are used to compute the property tax bill. The house closed on April 13 with the seller owning the day of closing. If the annual tax bill is $3,355, how much will be credited to the buyer on the settlement statement for taxes for this year? A) $959.90 B) $2,407.78 C) $946.57 D) $2,441.84

The answer is $959.90. The taxes were paid in arrears and the buyer will pay the bill next year. The seller will owe the buyer for the time the seller owns the house—January 1 to April 13. Total owed ÷ Total days × Days owed = Amount due $3,355 ÷ 360 × 103= 959.90.

A parcel of vacant land is 80 feet wide on the street side of the property and 200 feet deep. The parcel was sold for $200 per front foot. How much money would a salesperson receive for his 60% share in the 10% commission? A) $640 B) $1,600 C) $2,400 D) $960

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 (.10) = $1,600 (total commission) $1,600 × 60% (.60) = $960 (the salesperson's commission)

A real estate brokerage firm used a third-party email service to send an unsolicited email to announce a reduced price on a listed property. A person who received the email chose to opt-out from receiving additional emails from the licensee. The opt-out request must be honored within A) 5 days. B) 30 days. C) 2 days. D) 10 days.

The answer is 10 days. The CAN-SPAM Act requires that requests to opt-out of unsolicited emails must be honored within 10 business days. The Act also requires that the method to opt-out must be prominent within the email, and that the receiver must be able to opt-out from receiving future emails for at least 30 days after the message is sent.

A rectangular lot is 275 feet deep, and it contains 2/3 of an acre. What is the length of the lot? A) 158.4' B) 105.6' C) 290.04' D) 106.5'

The answer is 105.6'. 43,560 ÷ 3 = 14,520 × 2 = 29,040 sq. ft. 29,040 ÷ 275' = 105.60 ft. 43,560 × .6667 (2 ÷ 3 = .6667) = 29,041.45 sq. ft. 29,041.45 ÷ 275' = 105.6052 ft.

If an interest payment of $1,500 is made every 3 months on a $50,000 loan, what is the interest rate? A) 3% B) 9% C) 6% D) 12%

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% (.12)

As mandated by federal do-not-call legislation, real estate licensees may call consumers with whom they have established a business relationship up to A) 12 months after the consumer's last purchase, delivery, or payment. B) 3 months after the consumer's last purchase, delivery, or payment. C) 20 months after the consumer's last purchase, delivery, or payment. D) 18 months after the consumer's last purchase, delivery, or payment

The answer is 18 months after the consumer's last purchase, delivery, or payment. Real estate licensees may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment. A real estate licensee may call a consumer for up to 3 months after the consumer makes an inquiry or submits an application. If a consumer asks a company not to call, the company must abide by the consumer's request, which stays in effect for 5 years.

A lot contains 9/10 of an acre. What is the depth of the lot if the front measures 150'? A) 216.36' B) 322.67' C) 261.36' D) 323.67'

The answer is 261.36'. 9 ÷ 10 = 90% 43,560 × 90% (.90) = 39,204 39,204 ÷ 150 = 261.36'

How many acres are in a lot that is 1/4 of a mile wide by 1/4 of a mile long? A) 10 acres B) 80 acres C) 120 acres D) 40 acres

The answer is 40 acres. 1,320 feet (1/4 (.25) of 5,280 feet {one mile}) × 1,320 feet = 1,742,400 square feet ÷ 43,560 (square feet in an acre) = 40 acres

The following legal description contains how many acres: the S½ of the SE¼ of the NW¼ of the NE¼ of Section 7? A) 10 acres B) 2.5 acres C) 20 acres D) 5 acres

The answer is 5 acres. To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply all denominators: 2 × 4 × 4 × 4 = 128. Then divide 640 by 128: 640 (acres in a section) ÷ 128 = 5 acres.

To secure a $100,000 loan, the buyer paid $3,000 in discount points, and the seller paid $2,000 in discount points. How many points were charged? A) 5 B) 2 C) 3 D) 4

The answer is 5. Knowing each point is 1% of the loan amount and with the total amount being paid of $5,000, it is easy to see 5 points. $5,000 ÷ $100,000 = 5 points (.05)

How many acres are in a parcel described as the NW¼ of the SE¼ and the S½ of the SW¼ of the NE¼ of Section 4? A) 80 acres B) 50 acres C) 60 acres D) 40 acres

The answer is 60 acres. To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply denominators for the first part: 4 × 4 = 16; 640 acres ÷ 16 = 40 acres. Multiply denominators for the second part: 2 × 4 × 4 = 32; 640 ÷ 32 = 20 acres. Then add 40 acres + 20 acres = 60 acres.

A section in the rectangular survey system contains A) 160 government lots. B) 160 acres per section. C) 36 townships. D) 640 acres per section.

The answer is 640 acres per section. Each township contains 36 sections, and each section is 1 square mile, or 640 acres per section.

A property sold for $235,000, and the selling broker's half of the commission was $8,225. What was the commission rate? A) 6% B) 4% C) 5% D) 7%

The answer is 7%. $8,225 × 2 = $16,450 total commission paid $16,450 ÷ $235,000 = 7% (.07)

An apartment building has a semiannual net income of $48,000 and has been appraised for $1,250,000. What is the cap rate? A) 7.68% B) 7.86% C) 4.38% D) 3.84%

The answer is 7.68% $48,000 × 2 = $96,000 $96,000 ÷ $1,250,000 = 7.68% (.0768)

A property was purchased for $175,000. If the loan was $131,250, what was the loan-to-value ratio? A) 90% B) 70% C) 75% D) 80%

The answer is 75%. $131,250 ÷ $175,000 = 75% (.75)

What is the rate of interest if the mortgagor makes quarterly interest payments of $1,340.63 on a $65,000 loan? A) 9.3% B) 2.06% C) 8.3% D) 7.8%

The answer is 8.3%. Step 1, find the total interest paid annually $1,340.63 × 4= $5,362.52. Step 2, divide the interest by the principal to determine the rate $5,362.52 ÷ $65,000 = 8.3% (.083).

A savings and loan agreed to make a $65,000 mortgage at 8% interest for 30 years and charged three points to negotiate the loan. What was the effective yield to the lender? A) 8.25% B) 8.35% C) 8.735% D) 8.38%

The answer is 8.38%. The lender yield per point is 1.25% (.125). .125 × 3 = .375 8% + .38 = 8.38%

A property has an appraised value of $400,000, secured by a $360,000 loan. What is the loan-to-value ratio (LTV)? A) 90% B) 80% C) 70% D) 75%

The answer is 90%. To find the loan-to-value ratio (LTV), divide the amount of the loan by the appraised value of the property: 360,000 ÷ 400,000 = 90% (.9).

Most states require what be included on all real estate advertising? A) Salesperson's phone number B) Brokerage firm's name C) Principal brokers name. D) Salesperson's or broker associates name and license number

The answer is Brokerage firm's name. Ads required the brokerage firm name as a minimum requirement so the ad can be traced back to the brokerage if there is an issue.

If a mortgage lender discriminates against a loan applicant on the basis of age, it violates what law? A) ADA B) VA C) ECOA D) FHA

The answer is ECOA. Age is a protected category only under the Equal Credit Opportunity Act (ECOA). ADA (Americans with Disability Act), FHA (Federal Housing Administration, and VA (U.S. Department of Veterans Affairs) do not have laws in regard to the age of applicants since the issue is covered under ECOA and applies to FHA and VA loans.

Discrimination based on familial status was prohibited with the passage of the A) Fair Housing Act of 1968. B) Civil Rights Act of 1964. C) Fair Housing Amendments Act of 1988. D) Civil Rights Act of 1866.

The answer is Fair Housing Amendments Act of 1988. Familial status and handicap (disability) were added as protected classes under the federal Fair Housing Amendments Act of 1988. The federal Civil Rights Act of 1964 prohibits discrimination on the basis of race, ethnicity, national origin, religion, or sex in voting laws and practice, in education, in the workplace, and in facilities that serve the general public. The federal Fair Housing Act of 1968 forbids discrimination in housing and mortgage lending on the basis of race, color, religion, and national origin. Additional laws passed in 1974 and 1988 added sex, familial status, and disability as protected classes. The federal Civil Rights Act of 1866 prohibited discrimination based on race.

All of the following are true about asbestos EXCEPT A) removal can cause further contamination of a building. B) HUD requires all residential buildings be tested for asbestos-containing materials. C) it is most dangerous when airborne. D) it was commonly used as insulation.

The answer is HUD requires all residential buildings be tested for asbestos-containing materials. The federal government does not require asbestos testing in residential buildings. Asbestos was commonly used as insulation prior to 1978. Asbestos is harmful only if it is disturbed or exposed as can occur during remodeling or renovations. Tiny airborne particles when inhaled can cause a variety of respiratory diseases. Federal government regulations establish guidelines for owners of public and commercial buildings to test for asbestos-containing materials. The removal process, though, requires state-licensed technicians and specially sealed environments.

Which of the following would be considered dual agency? A) A broker's representing more than one seller. B) Two brokerage companies cooperating with each other. C) A broker's listing and then selling the same property. D) A broker's acting for both the landlord and tenant in the same transaction.

The answer is a broker's acting for both the landlord and tenant in the same transaction. In dual agency, the agent represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of the tenant or buyer and either the agent or subagent of the landlord or seller. Brokerage companies cooperate with each other through multiple listing services and other agreements. Brokerage companies represent many sellers through different listing agreements in which the broker agrees to represent the sellers in selling their properties.

A common feature of an adjustable-rate mortgage (ARM) is A) negative amortization if rates decrease. B) automatic conversion to a fixed-rate loan. C) the interest rate is fixed for a maximum of five years. D) a cap on the amount the rate may increase.

The answer is a cap on the amount the rate may increase. Rate caps limit the amount the interest rate may change. Most ARMs have two types of rate caps: periodic and for the life of the loan. An ARM does not include an automatic conversion to a fixed-rate loan. A borrower who wants to convert to a fixed-rate loan will usually work with a lender to refinance the loan.

The construction of a family room, additional bedroom, and extra bath has been completed on the owner's home. Before the addition can be used, which of the following is TRUE? A) A certificate of occupancy must be issued. B) The bath must be inspected by the plumbing inspector. C) The municipality must issue a building permit. D) The municipality must issue a conditional-use permit.

The answer is a certificate of occupancy must be issued. A certificate of occupancy grants permission to occupy a completed building structure after it has been inspected. A building inspector may inspect the plumbing during the actual building process before completion. A building permit is issued before construction begins. A conditional use permit does not relate to actual building construction but permits use of a property for a use related to, but not permitted by, zoning ordinances.

An owner who is interested in selling his house is usually concerned about how much money he can get when it sells. A competitive market analysis (CMA) may help the seller determine a realistic listing price. Which of the following statements is TRUE? A) A competitive market analysis contains a compilation of facts about similar properties that have recently sold. B) A competitive market analysis is what is prepared by a certified real estate appraiser. C) A broker, but not a salesperson, is permitted to prepare a competitive market analysis. D) A competitive market analysis is the same as an appraisal.

The answer is a competitive market analysis contains a compilation of facts about similar properties that have recently sold. A competitive market analysis (CMA) is a comparison of the prices of properties recently sold, properties currently on the market, and properties that did not sell. It is an analysis of the market activity among comparable properties designed to arrive at a fair market value for a subject property. Any real estate competent broker or salesperson may prepare a CMA. The CMA is not an appraisal, which may only be prepared by a state licensed or certified real estate appraiser.

Personal property includes all of the following EXCEPT A) trade fixtures. B) emblements. C) a custom built-in bookcase. D) a chair or sofa.

The answer is a custom built-in bookcase. The key word is built-in, since the bookcase is attached it is real property. Chairs, emblements, and trade fixtures are all examples of personal property.

A real estate agent acting as a single agent owes either fiduciary or statutory agency duties to any of the following EXCEPT A) a buyer. B) a customer. C) a seller. D) a landlord.

The answer is a customer. In single agency, the agent represents only one party in any single transaction. The agent owes fiduciary or statutory agency duties exclusively to one principal, who may be a seller, buyer, landlord, or tenant. The customer is the other party not represented by the agent in the transaction.

All the following clauses in a loan agreement enable the lender to demand the entire remaining debt be paid immediately EXCEPT A) an acceleration clause. B) a due-on-sale clause. C) a defeasance clause. D) an alienation clause.

The answer is a defeasance clause. A defeasance clause requires a lender to execute a satisfaction when the note has been fully paid. An alienation clause, also known as a due-on-sale clause, provides that when the property is sold the lender may declare the entire debt due immediately. An acceleration clause permits the lender to demand payment of a loan balance immediately if the buyer defaults on the loan payments.

Under 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) All residential housing built prior to 1978 must be tested for the presence of lead-based paint before being listed for sale or rent. C) A disclosure statement must be included with all sales contracts and leases involving residential properties built prior to 1978. D) A lead hazard pamphlet must be distributed to all prospective buyers but not to tenants.

The answer is a disclosure statement must be included with all sales contracts and leases involving residential properties built prior to 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 included with 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 their families from lead-based paint hazards. The pamphlet "Protect Your Family From Lead in the Home" must be provided to lessees as well as to buyers. The length of time given the buyer to inspect the property is listed in the lead-based paint disclosure provided by the seller.

A loan fee charged by a lender to increase the lender's yield on a loan is A) the yield. B) a discount point. C) the interest. D) the principal.

The answer is a discount point. Discount points are used to increase the lender's yield on its investment. The yield is the profit the lender makes on a loan, the spread between the cost of acquiring the funds lent to the borrower, and the interest rate charged to the borrower. Interest is the sum paid or accrued in return for the use of a lender's money. The principal is the balanced owed on the original loan amount.

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

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 piece of real or personal property. Both general and specific liens may be enforced in court.

A borrower negotiates a fifteen-year term for a mortgage rather than choosing a longer, thirty-year term. The shorter term for the mortgage will result in A) a higher monthly payment. B) a lower monthly payment. C) the same monthly payment as for a longer term loan. D) a higher interest rate.

The answer is a higher monthly payment. Because the borrower will be paying off the loan in a shorter time period, the borrower will be required to pay a higher monthly payment. The lender may offer a lower interest rate for a shorter loan term, but the lender may offer the same interest rate for a loan regardless of its term.

A homeowner has equity in their property and would like to consolidate some of his debt. Which of the following loans would be the BEST for the homeowner? A) A new term loan B) A reverse mortgage C) An ARM loan D) A home equity loan

The answer is a home equity loan. This loan is designed to allow the homeowner to tap into equity to pay off bills. A reverse mortgage may only be used by those over 62 and would not consolidate debt. A term and an ARM loan would not be used in this situation.

A woman has permission from her friend to hike on his property during the autumn months. Her friend has granted her A) a conditional use permit. B) a license. C) an easement by necessity. D) riparian rights.

The answer is a license. A license is a personal revocable right to use another's property with permission of the owner. The permission is personal, nontransferable, and can be revoked at any time. A conditional use permit is granted by a city or municipality to a property owner to allow a special nonconforming use of property in a residential district. Riparian rights give to owners of land along the course of a river, stream, or similar body of water the rights to use the water according to state or local laws. An easement by necessity is created by a court when an owner sells a parcel of land that has no access to a public way except over the seller's remaining land.

When a lien against a parcel of real estate may result from a lawsuit currently before the court, someone examining the public records would look for A) the chain of title. B) a lis pendens. C) a suit to quiet title. D) a judgment lien.

The answer is a lis pendens. A lis pendens is a notice of a possible future lien and is filed because there is often considerable delay between the time a lawsuit is filed and the time final judgment is rendered. The chain of title is the record of a property's ownership and would not indicate a pending action on the property. A suit to quiet title is a court action to establish ownership of a property when a gap or cloud exists in the chain of title. A judgment lien is already recorded in the county in which the property is located and does not indicate any other pending liens.

All of the following would be considered to be fixtures EXCEPT A) a refrigerator that has been installed into the cupboards. B) wall ovens and a farm sink. C) rose bushes and grape vines. D) a microwave which is plugged into the wall.

The answer is a microwave which is plugged into the wall. Fixtures are determined by attachment, adaptation and agreement. A microwave which is plugged into the wall is personal property.

In computing the square footage of a single family home, an appraiser measures the external dimensions of the gross living area, which includes all of the following EXCEPT A) an extra bedroom. B) a laundry room. C) a patio. D) a finished basement.

The answer is a patio. To compute the square footage of a single family home, the external dimensions of the building are measured. A garage, porch, patio, or unfinished areas are not used when computing the square footage of a property. Unfinished areas are included in another section of an appraisal report.

When defining ownership estates, the term estate refers to A) residential properties over twenty-five acres. B) only the possessionary rights of tenants and owners. C) the quantity of land as shown on a plat map for a property. D) a person's legal rights in the land or property.

The answer is a person's legal rights in the land or property. With respect to property ownership, the word estate refers to a person's legal use or the bundle of rights in land which, depending upon the type of estate, include the right to possess, transfer, encumber, et cetera. Estates are not tied to the physical quantity or the value of the land itself. A fee simple estate is the highest estate one can hold in land since it has the most or maximum rights to the land.

In computing the square footage of a single family home, an appraiser measures the external dimensions of the gross living area, which includes all of the following EXCEPT A) a laundry room. B) an extra bedroom. C) a porch. D) a finished basement

The answer is a porch. To compute the square footage of a single family home, the external dimensions of the building are measured. A garage, porch, patio, or unfinished areas are not used when computing the square footage of a property. Unfinished areas are included in another section of an appraisal report.

A title search for a property under contract has revealed several outstanding liens against the property. Which of the following liens has highest priority? A) A property tax lien for the current year B) A special assessment for the current year C) A judgment lien rendered and recorded last month D) An outstanding first mortgage lien dated and recorded one year ago

The answer is a property tax lien for the current year. Tax liens have priority over previously recorded liens and over a special assessment, which will also take priority over previously recorded liens. The priority of the other liens will be based on the dates they were recorded. Liens recorded first will have a first right to payment or priority.

A title search for a property under contract has revealed several outstanding liens against the property. Which of the following liens has highest priority? A) A special assessment for the current year B) A judgment lien rendered and recorded last month C) A property tax lien for the current year D) An outstanding first mortgage lien dated and recorded one year ago

The answer is a property tax lien for the current year. Tax liens have priority over previously recorded liens and over a special assessment, which will also take priority over previously recorded liens. The priority of the other liens will be based on the dates they were recorded. Liens recorded first will have a first right to payment or priority.

Which of the following is a specific, involuntary lien? A) A judgment lien B) A real estate property tax lien C) An income tax lien D) An estate tax lien

The answer is a real estate property tax lien. A real estate property tax lien is always on a specific piece of real estate; it happens without permission of the property owner and so is involuntary. Income tax liens, estate tax liens, and judgment liens are general, as they are levied against both personal and real property owned by a debtor but do not take priority over other liens.

Which of the following is a specific, involuntary lien? A) An income tax lien B) An estate tax lien C) A judgment lien D) A real estate property tax lien

The answer is a real estate property tax lien. A real estate property tax lien is always on a specific piece of real estate; it happens without permission of the property owner and so is involuntary. Income tax liens, estate tax liens, and judgment liens are general, as they are levied against both personal and real property owned by a debtor but do not take priority over other liens.

Which of the following is a lien on real estate? A) An encroachment B) A recorded mortgage C) An easement D) A restrictive covenant

The answer is a recorded mortgage. A recorded mortgage is a voluntary, specific lien on real estate. Easements, encroachments, and restrictive covenants are all encumbrances and not liens. An encroachment is an intrusion of an improvement or other real property onto another's property. An easement is a right of use in another's property. A restrictive covenant is a limitation on the use of property imposed on a past or current owner and binding on a future owner of the property.

All of the following documents would create an agency relationship EXCEPT A) a listing contract. B) a sales contract. C) a property management contract. D) a buyer agency contract.

The answer is a sales contract. A sales contract is a contract between an owner and a buyer to purchase a property. It does not create a relationship in which a person acts on behalf of another. The other contracts create agency relationships establishing the duties of a brokerage firm on behalf of a principal.

All of the following would require an appraisal EXCEPT A) A new conventional loan B) A FHA loan C) A seller carry loan D) A VA loanAll of the following would require an appraisal EXCEPT A) A new conventional loan B) A FHA loan C) A seller carry loan D) A VA loan

The answer is a seller carry loan. Appraisals are required for all loans that involve federal funding, only a seller carry loan would not meet this requirement.

A property that has an undesirable reputation because of an event that has occurred on or near the property is A) a dangerous property. B) a stigmatized property. C) considered a physical hazard. D) a polluted property.

The answer is a stigmatized property. A property that has been the site of an event such as a suicide, murder, or other undesirable event is known as a stigmatized property. The property is not necessarily dangerous or polluted because of that event.

A married couple owns a farm together, with the right of survivorship. Their ownership is MOST likely A) severalty ownership. B) a tenancy in common. C) a tenancy by the entirety. D) community property.

The answer is a tenancy by the entirety. A married couple, in certain states, may use a special form of co-ownership called tenancy by the entirety. Each spouse has an equal, undivided interest in the property, with the right of survivorship. Severalty ownership occurs when real estate is owned by one person only. Tenancy in common and community property forms of ownership do not include the right of survivorship.

A broker helps a buyer and a seller with paperwork but does not represent either party. This arrangement is A) designated agency. B) a transaction brokerage. C) dual agency. D) prohibited in all states as a broker must always represent one party.

The answer is a transaction brokerage. When a broker does not represent either party in a transaction and acts as a facilitator or non-agent, the arrangement is known as transaction 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 clause in a trust deed or mortgage that permits the lender to declare the entire unpaid balance immediately due and payable upon default is the A) judgment clause. B) forfeiture clause. C) acceleration clause. D) alienation clause.

The answer is acceleration clause. An acceleration clause gives the lender the right to declare the entire debt due and payable immediately if the borrower has defaulted. The alienation/due-on-sale clause allows the lender to accelerate the balance due if borrowers alienate/sell their mortgaged property. A forfeiture clause in a contract for deed requires the borrower to forfeit all amounts paid if the borrower defaults. A judgment clause permits a lender to file a lien against a borrower without having to initiate court proceedings.

The clause in a mortgage or deed of trust which gives a lender the right to demand the entire loan balance to be due upon the buyer's default is the A) alienation clause. B) defeasance clause. C) acceleration clause. D) due-on-sale clause.

The answer is acceleration clause. The acceleration (speedup) clause allows the lender to declare the entire loan balance due on a borrower's default. The alienation/due-on-sale clause allows the lender to accelerate the balance due if borrowers alienate/sell their mortgaged property. The defeasance clause requires the lender to release its lien claim against the property when the entire debt has been paid.

The clause in a mortgage document that permits a lender to declare the entire debt payable if the borrower defaults on loan payments is a(n) A) acceleration clause. B) alienation clause. C) subordination agreement. D) defeasance clause.

The answer is acceleration clause. The acceleration clause in a mortgage permits the lender to declare the entire debt due and payable immediately if the borrower defaults on payments. The defeasance clause requires the lender to execute a satisfaction (a release or discharge) of the debt when the note has been fully paid. An alienation clause states that the lender may collect full payment on a loan when the property is conveyed to another party without the lender's consent. In a subordination agreement, a lender with a first lien position will agree to take a second lien position to another loan on the property.

A listing agent loses the seller's house keys. The agent has breached her fiduciary duty of A) disclosure. B) loyalty. C) care. D) accounting.

The answer is accounting. The fiduciary duty of accounting requires real estate professional s to be accountable for money and the property of others that come into their possession in the performance of the agent's duties. The duty of care requires that agents use their skill and experience to the client's benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction. The duty of loyalty means that the agent must place the client's interests above all others, including the agent's own self-interest.

A new salesperson lists a unit in a condominium building for sale. In this transaction, the sales person A) acts on behalf of the condominium association as well as the seller. B) acts on behalf of the brokerage firm. C) must personally find a buyer for the unit to obtain a share of the commission. D) has a direct agency relationship with the owners of the unit.

The answer is acts on behalf of the brokerage firm. Salespersons or associate brokers act as an agent of their broker. Only the broker has a direct agency relationship with the owners of the unit but not with the condominium association. Under the terms of most listing agreements, the broker, and in turn the salesperson, is entitled to a share of the commission even if the broker or salesperson does not personally find a buyer for the unit.

General real estate property taxes levied for the operation of the government are called A) improvement taxes. B) ad valorem taxes. C) special taxes. D) special assessment taxes.

The answer is ad valorem taxes. The general real estate property taxes, the ad valorem tax, creates a specific lien on a particular property. The word general in this context distinguishes this tax from the special assessment tax, a tax levied on real estate to fund a public improvement beneficial to the property.

An appraiser conducting an appraisal of a single-family home discovers that the subject home has one more bedroom than any of the three comparable properties the appraiser wants to use in the appraisal. To account for the extra bedroom, the appraiser will A) add the value of the bedroom to the sales price of each comparable. B) add the value of the bedroom to the subject property. C) subtract the value of the bedroom from the subject property. D) subtract the value of the bedroom from the sales price of each comparable.

The answer is add the value of the bedroom to the sales price of each comparable. Adjustments are made only to comparable properties never the subject. If the comparable is better than the subject or has a feature that is present in a comparable but not in the subject, the value of the amenity is subtracted from the sales price of the comparable. If the subject is better than, the value of the amenity is added.

A farmer bought acreage in a distant county but never went to see the acreage and did not use the land. After the purchase, a woman moved her mobile home onto the land, drilled a well, and lived on the property for twenty years. The woman may become the owner of the land if she has complied with the law regarding A) adverse possession. B) quitclaim deeds. C) voluntary alienation. D) prescriptive easements.

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, and 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.

It is the duty of an agent to disclose to the principal every material step taken in the transaction of the principal's business. This duty exists because the A) agent has fiduciary obligations to the principal. B) state license laws have this requirement. C) commission can be adjusted up or down according to the agent's efforts. D) terms of the purchase contract require the agent to do so.

The answer is agent has fiduciary obligations to the principal. One of the duties of a fiduciary is that of disclosure, keeping the principal informed of all facts or information related to the transaction. The duty exists because of the law of agency, not because of the terms of any contract. An agent's commission is established under a contract between the agent's broker and the principal and is based on the successful completion of a transaction.

The amount of earnest money deposit is determined by A) agreement between the parties. B) listing broker's office policy on such matters. C) meeting the acceptable minimum of 5% of the purchase price. D) real estate licensing statutes.

The answer is agreement between the parties. The amount of earnest money deposit is determined by agreement of the parties. Under the terms of most listing agreements, a real estate broker is required to accept a "reasonable amount" as earnest money. Brokerage firms and license law may not set the amount of earnest money required. The amount is set by the seller and negotiated by the buye

When a seller and a buyer agree to a land contract, the buyer typically A) agrees to acquire a loan from a lender who will make payments to the seller. B) becomes legally responsible for the seller's current mortgage on the property. C) agrees to pay the purchase price in monthly installments paid directly to the seller. D) pays interest only on the loan in regular installments.

The answer is agrees to pay the purchase price in monthly installments paid directly to the seller. Under a land contract, also known as a contract for deed, the buyer agrees to pay the purchase price in monthly installments made directly to the seller. The buyer may pay installments of principal and interest or of interest only with the balance of the loan due at maturity. The seller remains legally responsible for the mortgage on the property.

Discount points on a mortgage are computed as a percentage of the A) closing costs. B) selling price. C) amount borrowed. D) down payment.

The answer is amount borrowed. A discount point is 1% of the loan amount and is charged to the borrower at closing. Discount points are not based on the selling price or down payment.

In a fixed-rate home loan that is amortized according to its original payment schedule, the A) loan cannot be sold in the secondary market. B) interest rate may change based on an index. C) amount of interest to be paid is predetermined. D) monthly payment amount will fluctuate each month.

The answer is amount of interest to be paid is predetermined. The monthly principal plus interest payment will remain constant throughout the term of a fixed-rate residential loan. The interest rate in a fixed-rate loan does not vary. The loan will probably be sold on the secondary market.

A purchaser is qualified to obtain an FHA loan for his new home. Which of the following would he apply to? A) An FHA lender B) Fannie Mae C) Freddie Mac D) The FHA

The answer is an FHA lender. The FHA does not negotiate loans. The FHA insures loans, which means the loan is backed by the government. Loans are made through an FHA-approved lending institution. Fannie Mae does not lend money directly to homebuyers but purchases mortgages in the secondary market. Freddie Mac is a federally chartered corporation that purchases mortgages in the secondary market.

All of the following events terminate an agency relationship EXCEPT A) bankruptcy of the principal. B) an appraisal with a value less than the selling price. C) completion of the purpose of the agency. D) destruction of the property.

The answer is an appraisal with a value less than the selling price. If an appraisal reveals a market value less than the stated selling price in a contract, the parties will have to renegotiate their contract if both parties are still interested in the sale. The appraisal does not affect any agency relationship. Completion of the agency's purpose, destruction of the property, and bankruptcy of the principal terminate an agency relationship.

The type of listing contract that provides for payment of a commission to the broker even though the owner makes the sale without the broker's aid is called an A) open listing. B) option listing. C) exclusive agency listing. D) exclusive right-to-sell listing.

The answer is an exclusive right-to-sell listing. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive agency listing provides the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on their own. An option listing permits the broker to retain an option to purchase the property for the broker's own account.

The answer is the salesperson may receive compensation only from her broker. Most state statutes require that compensation for real estate brokerage activities be paid to licensed salespersons only by their own broker for work on any given transaction. The salesperson in this case may not receive a check directly from the client.

The answer is an odorless, colorless radioactive gas. Radon is odorless and tasteless, and is impossible to detect without testing. Radon can cause health problems, and evidence suggests that it may be a cause of lung cancer. It is found in every state, and radon accumulation may be found in older and in newer homes.

An example of a voluntary alienation of a property is? A) An owner selling the property B) Condemnation C) Foreclosure D) Adverse possession

The answer is an owner selling the property. Voluntary alienation is the legal term for the voluntary transfer of title, such as when the owner sells the property. Condemnation, foreclosure, and adverse possession are examples of involuntary alienation. Involuntary alienation takes place when property is transferred against the owner's will.

The term reconciliation refers to which of the following? A) Analyzing and weighing the findings obtained by the different approaches to value to arrive at a final estimate of value B) Loss of value due to any cause C) Separating the value of the land from the total value of the property to compute depreciation D) The process by which an appraiser determines the highest and best use for a parcel of land

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.

Reconciliation is BEST described as A) selecting the highest value given by the three approaches to value. B) analyzing the findings obtained from the three approaches to value. C) comparing similar properties and identifying their amenities. D) determining the final estimate of value by selecting the best value from the three approaches.

The answer is analyzing the findings obtained from the three approaches to value. Reconciliation is analyzing the findings obtained from the three approaches to value and deciding how much weight to give to each approach. A final value is estimated from the results of the analysis and the judgment of the appraiser. Comparable properties are used to estimate a value in the sales comparison approach. Reconciliation is a process of weighing the findings from the approaches to value and the reliability of the data each approach offers for the type of property appraised. Averaging is never used in any step of the appraisal process.

A step used in the income approach to determine value is to A) estimate reproduction cost. B) apply a depreciation schedule. C) apply the capitalization rate. D) calculate the replacement cost.

The answer is apply the capitalization rate. In the income approach to value, the capitalization rate is applied to the property's annual net operating income to arrive at the estimate of the property's value. Calculating reproduction costs, replacement costs, and depreciation are procedures used in the cost approach to value.

A disadvantage of a term or partial amortization loan over a fully amortized is the A) higher interest costs. B) balloon payment due at the end of the term. C) longer term of repayment required. D) higher LTV required.

The answer is balloon payment due at the end of the term. Term and partially amortized loans have lower interest costs, due to a shorter term of repayment. The higher the LTV the lower the down payment so a high LTV would be an advantage.

A divorce attorney hires a broker to determine the value of the property the couple owns. The broker will most likely prepare a(n) A) sales comparison approach. B) broker's price opinion. C) real estate appraisal. D) cost approach to value.

The answer is broker's price opinion. A broker price opinion (BPO) is a broker's opinion of the value of a particular property, often in the form of a competitive market analysis. The BPO may not be labeled an appraisal, which may only be conducted by a state licensed or certified appraiser. The sales comparison approach is used in both the BPO and an appraisal. The cost approach is used when conducting an appraisal.

A listing taken by a real estate salesperson is technically an employment contract between the seller and the A) local multiple listing service. B) salesperson and principal broker together. C) brokerage firm. D) salesperson.

The answer is brokerage firm. Only a principal or employing broker for the brokerage firm may enter into brokerage agreements. The broker's salespeople have authority only to assist in negotiating the agreements. The salesperson is merely the sub-agent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The salesperson is not a party to it.

A real estate broker wants to end racial segregation. As an office policy, the broker requires that salespeople show prospective buyers from racial or ethnic minority groups only properties that are in certain areas of town where few members of those groups currently live. The broker has prepared a map illustrating the appropriate neighborhoods for each racial or ethnic group. Through this policy, the broker hopes to achieve racial balance in residential housing. Which statement is TRUE regarding this broker's policy? A) Because the effect of the broker's policy is discriminatory, it constitutes illegal steering regardless of the broker's intentions. B) The broker's policy clearly shows the intent to discriminate. C) While the broker's policy may appear to constitute blockbusting, the broker's good intentions outweigh the law and as such is acceptable. D) This type of steering is allowed in cases where equality is the end result.

The answer is because the effect of the broker's policy is discriminatory, it constitutes illegal steering regardless of the broker's intentions. Violations of fair housing laws occur when the effects of a practice result in illegal discrimination, regardless of intentions. The broker's policy in this case has the effect of steering purchasers to particular neighborhoods and is illegal steering. Blockbusting would occur if the broker induced owners to sell their property by claiming that members of a protected class were buying in the area and lowering property values.

Because a couple no longer needs their large house, they decide to sell it and move into a cooperative apartment building. In a cooperative, they will A) own and finance their individual apartment. B) have fee simple title to unit. C) become shareholders in a corporation. D) receive a 20-year lease to their apartment.

The answer is become shareholders in a corporation. In a cooperative, a corporation holds title to the land and building and offers shares of stock to inhabitants of the cooperative's units. Owners in a cooperative occupy their units through proprietary leases, and their interests are treated as personal property. If the couple were to move to a condominium complex, they would own and finance their individual unit. Condominium ownership provides fee simple title to each individual unit, while a cooperative is ownership in the corporation, which owns the property.

A legally enforceable contract in which two parties exchange promises to do something for each other is known as a(n) A) void contract. B) bilateral contract. C) option contract. D) unilateral contract.

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. Reference: Contracts > General Knowledge of Contract Law

A developer receives a loan that covers five parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan is known as a A) purchase money loan. B) reverse loan. C) blanket loan. D) package loan.

The answer is blanket loan. A blanket loan covers more than one parcel or lot and may be used to finance subdivision developments. The loan permits a borrower to obtain the release of any one parcel or lot from the blanket lien by repaying a certain amount of the loan when a lot or parcel is sold. A purchase money loan involves a seller taking back a second mortgage from the buyer to fill the gap between a down payment and the first mortgage on the property. In a package loan, the borrower secures the loan with both real and personal property. A reverse mortgage allows people 62 years of age or older who have considerable equity in their homes to borrow money against that equity.

"I hear they're moving in. There goes the neighborhood! Better put your house on the market before values drop!" This statement is an example of what illegal practice? A) Redlining B) Fraudulent advertising C) Blockbusting D) Steering

The answer is blockbusting. Such statements, made by a person in real estate brokerage, constitute blockbusting and usually are attempts to get listings by frightening owners into selling. Blockbusting is a violation of the federal Fair Housing Act. Steering is the channeling of homebuyers to a particular neighborhood to maintain or change the character of the neighborhood. Redlining is the illegal practice of refusing to make a mortgage loan or restricting the number of loans in a particular area. Fraudulent advertising involves providing untrue statements or promises in the advertising of a property.

In a bilateral contract A) consideration is not an essential element. B) only one of the parties is bound to the contract. C) a restriction is placed in the contract. D) both parties to the contract have duties to be performed.

The answer is both parties to the contract have duties to be performed. In a bilateral contract, both parties are obligated to perform what they have promised to do. Only one party is bound in a unilateral contract. Consideration is an essential element of all contracts.

A broker may act as a dual agent and represent both the seller and the buyer in the same transaction if A) both the seller and the buyer give their informed consent, usually in writing. B) both parties are represented by attorneys. C) the seller and the buyer are related by blood or marriage. D) the broker informs either the buyer or the seller that the broker is representing both parties to the transaction.

The answer is both the seller and the buyer give their informed consent, usually in writing. When a broker represents both the seller and the buyer in the same transaction, the broker is practicing dual agency. State laws, where dual agency is allowed, require both parties give written consent of dual agency. Informing only one party of the dual agency does not meet the requirements for practicing dual agency.

When a party is in default in a contract due to missing a payment deadline, the contract is considered A) unilateral. B) illegal. C) breached. D) executed.

The answer is breached. Anytime one of the parties misses a deadline or payment that party is in breach of the contract.

A mortgage broker generally A) handles the escrow procedures. B) provides credit qualification and evaluation reports. C) grants real estate loans using investor funds. D) brings the borrower and the lender together.

The answer is brings the borrower and the lender together. A mortgage broker is an intermediary who brings borrowers and lenders together. A mortgage broker locates potential borrowers, processes preliminary loan applications, and submits the applications to lenders for final approval. Mortgage brokers do not provide loans, handle escrow funds, or check borrowers' creditworthiness for loans.

A listing taken by a real estate salesperson is an employment contract between the seller and the A) salesperson. B) local multiple listing service. C) both the salesperson and the broker. D) brokerage firm.

The answer is brokerage firm. The parties to a listing contract are the seller and the broker. The brokerage firm and principal broker represent the seller to list and sell the property. The salesperson does so in the name and under the supervision of the brokerage firm and principal broker.

Abandoned factories, former dry cleaning properties, and vacant gas stations that may contain environmental hazards are classified as A) wetlands. B) priority list sites. C) green fields. D) brownfields.

The answer is brownfields. A brownfield site is real property that is affected by the presence or potential presence of a hazardous substance. Brownfields that are not corrected may be prevented from redevelopment and can cause decreased property values in a neighborhood. Wetlands are land areas with significant groundwater at or near the surface that produces a wetland plant community. Wetlands are often subject to federal, state, or local conservation controls.

A wooded area with biking and hiking trails is situated between old cotton mills and a housing development. This area is considered a A) buffer zone. B) variance to the existing zoning. C) nonconforming use. D) utility easement.

The answer is buffer zone. Buffer zones, such as parks and hiking trails, are used by municipalities to screen residential areas from nonresidential zones. A variance is permission to build a structure or conduct a use expressly prohibited by zoning ordinances. A utility easement is an interest in land permitting the land to be used for utilities such as electrical, gas, or water lines. A nonconforming use exists before zoning ordinances that currently prohibit such use.

The primary activity of Fannie Mae is to A) buy and sell only VA and FHA mortgages. B) buy and pool blocks of conventional mortgages and sell bonds that use them as security. C) guarantee mortgages with the full faith and credit of the federal government. D) act in tandem with Ginnie Mae to provide special assistance in times of tight money.

The answer is buy and pool blocks of conventional mortgages and sell bonds that use them as security. Fannie Mae buys and gathers existing conventional mortgages into bundles (pools) and raises money to do this by selling bonds backed by these pools of mortgages. Ginnie Mae is a division of HUD that administers programs using VA and FHA loans as collateral.

The broker receives an earnest money deposit with a written offer to purchase that includes a 10-day acceptance clause. On the fifth day, before the offer is accepted, the buyer notifies the broker that she is withdrawing the offer and requests the return of her earnest money deposit. In this situation, the A) buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money. B) 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) buyer cannot withdraw the offer because it must be held open for the full 10 days. D) seller and broker have the right to each retain one-half of the deposit.

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 contract that secures a brokerage firm to assist a buyer in finding a suitable property to buy is a(n) A) option contract. B) sales contract. C) escrow contract. D) buyer representation contract.

The answer is buyer representation contract. A buyer representation contract is an employment contract in which the broker is employed as the buyer's agent in finding a suitable 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. An option contract is a contract by which the optionor (usually an owner) gives an optionee the right to buy or lease a property at a fixed price within a certain period of time

Whose signature is necessary for a signed offer to purchase real estate to become a contract? A) Seller's and seller's broker B) Seller's only C) Buyer's and seller's D) Buyer's only

The answer is buyer's and seller's. A signed offer already has the buyer's signature, but to be a ratified contract, both the buyer's and the seller's signatures are necessary.

In determining whether a prospective buyer can afford a mortgage, a lender will typically use percentages based upon the A) buyer's gross monthly income, total housing expense, and debt expenses. B) buyer's gross monthly income and most recent federal taxes. C) buyer's gross monthly income and debt expenses. D) buyer's gross monthly income and projected housing expenses.

The answer is buyer's gross monthly income, total housing expense, and debt expenses. In addition to reviewing a borrower's credit score, loan underwriters and automated underwriting programs use a formula allowing a maximum percentage of the buyer's gross monthly income for the monthly cost of buying and maintaining a home (for example, 28%). That cost includes mortgage principal and interest, plus amounts for taxes and property insurance. In addition, the formula sets a maximum percentage of the buyer's gross monthly income allowed for long-term debts such as car payments, credit cards, student loans, and other mortgages (for example , 36%).

A buyer purchased a property but did not record the deed. Under these circumstances, the A) deed is invalid after 90 days. B) deed is void as recording is required to make it valid. C) transfer of property between buyer and seller is invalid. D) buyer's interest is not fully protected against third parties.

The answer is buyer's interest is not fully protected against third parties. Properly recording a deed in the public record serves as constructive notice to the world of the buyer's rights or interests in the property. If a buyer does not record the deed, a third party may make a claim on the property. Not recording the deed does not affect the validity of the transfer or of the deed to the property, as recording is not an essential element to create a valid deed.

All listing agreements must contain a A) broker protection clause. B) multiple listing service (MLS) clause. C) automatic extension clause. D) definite contract termination date.

The answer is definite contract termination date. Failing to specify a definite termination date in a listing can be grounds for suspension or revocation of a license. Broker protection clauses, MLS clauses, and automatic extensions of the contract are not required.

A joint tenancy with right of survivorship is created A) automatically if the property is distributed to the surviving children. B) automatically if a deed is signed by both spouses. C) by a deed. D) by presumption if another form of ownership is not described.

The answer is by a deed. Joint tenancy, like all ownership, is not implied by law or through any action. All tenancy is created when the deed in conveyed to the grantee. To create joint tenancy the deed must specifically identify the parties as joint tenants. When a deed does not indicate the form of tenancy and two or more people acquire title to property, the new owners are presumed to be tenants in common. Joint tenancy is the right to survivorship, so that when an owner dies, the interest transfers directly to the surviving co-tenants, not heirs. Signature by spouses does not create joint tenancy.

An amendment to a contract is created A) only by attorneys before the closing. B) by adding provisions to an accepted contract. C) before the original contract is written. D) only if using fill-in-the-blank agreements.

The answer is by adding provisions to an accepted contract. An addendum is a change to an original contract. An amendment is created to make changes or to add provisions after the original contract is created.

When a salesperson tells homeowners that minorities are moving into the area in order to get those homeowners to sell their properties, this activity is A) called power selling. B) called blockbusting. C) discriminatory advertising. D) legal as long as it is true.

The answer is called blockbusting. Blockbusting is inducing panic selling by claiming the entry of a protected class will have some sort of negative impact on property values. Blockbusting is never legal.

The income approach as used by an appraiser makes use of which of the following? A) Appreciation B) Depreciation C) Equalization D) Capitalization

The answer is capitalization. Capitalization is a method of estimating today the future value of an income stream. Depreciation is the loss of value for any reason. Appreciation is an increase of value. Equalization is used by tax assessors and is a process of adjusting the assessed rate in a taxing district to achieve more conformity with other tax districts.

What document should a buyer's agent confirm has been issued when representing a purchaser of a home in a new subdivision? A) Certificate of occupancy B) Building permit C) Code certificate D) Certificate of compliance

The answer is certificate of occupancy. A certificate of occupancy is issued by a local jurisdiction to indicate that a new building is in compliance with a building code or with minimum standards of construction. A building permit must be issued prior to the construction of the new home.

When an eligible veteran is negotiating to purchase a home with a VA-guaranteed loan, as part of the loan process the VA will issue a A) certificate of indebtedness. B) certificate of reasonable value (CRV). C) uniform residential appraisal report (URAR). D) certificate of discount.

The answer is certificate of reasonable value (CRV). The VA will issue a certificate of reasonable value based on a VA-approved appraisal of the property. The URAR is a standardized form used by licensed and certified appraisers to produce an opinion of value on residential property.

All of the following are examples of private controls of real property EXCEPT A) a requirement to make monthly payments to maintain common elements within the complex. B) criteria the establish the color of house paint that can be used. C) a condition stating the property may not be used to sell alcohol. D) certificates of occupancy.

The answer is certificates of occupancy. Certificates of occupancy are public control created by zoning laws. Deed conditions, Owner association or cooperative fees and covenants on paint color are all private controls.

The principal to whom an agent gives professional opinions and counsel is a A) customer. B) fiduciary. C) client. D) subagent.

The answer is client. The client is the principal to whom the agent owes fiduciary duties. The customer is the third party or non-represented consumer for whom some level of service is provided and who is entitled to fairness and honesty. A subagent is the agent of a person already acting as an agent for the client.

A broker deposits earnest money into the company operations account. This action is A) legal if both parties to a transaction give consent in writing. B) legal if the seller gives consent in writing. C) legal if the trust account is reimbursed by the end of the calendar month. D) commingling of funds and is illegal.

The answer is commingling of funds and is illegal. The mixing of trust funds with a broker's personal funds is commingling. Commingling is illegal regardless of any plan to later reimburse the account and is not legal even with written consent from any party in a transaction.

A broker on reconciling realized his office manager had deposited operation funds into the earnest money account. This could be considered to be A) misappropriation. B) nothing to worry about. C) commingling. D) conversion.

The answer is commingling. Commingling of funds is when funds for one account are mixed with those of another. In this case the broker would be obligated to remove the funds, note the comingling and re-train the manager. Conversion and misappropriation are knowingly using someone else's funds.

To be classified by the Internal Revenue Service as an independent contractor, a real estate salesperson may receive A) company-provided health insurance if negotiated with the broker. B) a monthly salary or hourly wage as negotiated with the broker. C) commissions on transactions as negotiated with the broker. D) a company-provided automobile if negotiated with the broker.

The answer is commissions on transactions as negotiated with the broker. An independent contractor may not receive any employee benefits, such as health insurance or a company-provided automobile. An independent contractor must not be treated as an employee for federal tax purposes by receiving a monthly salary or hourly wage.

A broker would have the right to dictate which of the following to an independent contractor? A) Sales meetings the person would need to attend B) Number of hours the person would have to work C) Work schedule the person would have to follow D) Compensation the person would receive

The answer is compensation the person would receive. Brokers may dictate the compensation their independent contractors will receive for work not yet done, but they may not dictate working schedules or sales meetings to be attended. The Internal Revenue Service would most likely classify persons employed with defined work schedules, including the numbers of hours worked, and required sales meetings as employees rather than independent contractors for income tax purposes.

A broker would have the right to dictate which of the following to an independent contractor? A) Sales meetings the person would need to attend B) Work schedule the person would have to follow C) Number of hours the person would have to work D) Compensation the person would receive

The answer is compensation the person would receive. Brokers may dictate the compensation their independent contractors will receive for work not yet done, but they may not dictate working schedules or sales meetings to be attended. The Internal Revenue Service would most likely classify persons employed with defined work schedules, including the numbers of hours worked, and required sales meetings as employees rather than independent contractors for income tax purposes.

When a property is misrepresented because defects are not disclosed to a buyer, the buyer may be able to rescind a sales contract or receive A) special damages due to the inconvenience to the buyer. B) incidental damages that occur in every real estate transaction. C) compensatory damages for repair of the defect. D) a return of any earnest money paid to the seller.

The answer is compensatory damages for repair of the defect. Compensatory damages are a monetary payment for the repair of the defect. In some cases, a court may award other payments to the buyer for flagrant misrepresentation.

An example of involuntary alienation of property is A) gifting. B) inheritance. C) condemnation. D) quitclaim.

The answer is condemnation. Condemnation is the operation of a government to take private property for public use and is an involuntary transfer of the property. Property inherited or given as a gift transfers voluntarily. A quitclaim deed voluntarily transfers the interest a grantor may have in a property to a grantee with no covenants or warranties.

A homeowner constructs a five-bedroom, brick house with a tennis court and a pool in a neighborhood of modest two-bedroom and three-bedroom frame houses on narrow lots. The value of the five-bedroom house is MOST likely to be affected by the principle of A) contribution. B) conformity. C) progression. D) substitution.

The answer is conformity. Under the principle of conformity regression states the larger, more lavish home with a pool would tend to be valued in the same range as the modest homes on narrow lots existing in the same neighborhood. Under the principle of progression, the value of a modest, less expensive home will increase if it is located among larger, fancier, more expensive properties. Substitution states a property that offers the same attributes for the least amount will sell first. Contribution determines the value improvements bring to a property.

All of the following are steps in the appraisal process EXCEPT A) reconciling the data collected by the approaches used for the subject property. B) gathering general data for the area of the subject property. C) considering the seller's estimate of the property's value. D) gathering specific data on the subject property.

The answer is considering the seller's estimate of the property's value. The opinions of a seller as to the value of the property are often not an accurate estimate of value, as the seller's opinion could be based on emotion rather than objective reasoning. In estimating the property's value, the appraiser will gather data on the area of the property and data on the subject property. The appraiser will apply the approach or approaches to value appropriate for the type of property being appraised and will reconcile the data from the approaches to find a final estimate of value.

The sales contract says the buyer will purchase the property only if an attorney approves the sale by the following Saturday. The attorney's approval is a A) contingency. B) lis pendens. C) consideration. D) warranty.

The answer is contingency. A contingency requires something to happen or the contract can be terminated and the earnest money returned. A lis pendens is notice of a pending law suit. A warranty promises that certain stated facts are true. Consideration is one of the essential elements of the contract to make it valid and is something of value offered in exchange for something from another.

The value of a swimming pool or other property amenities is determined by the principle of A) Substitution B) Conformity C) Contribution D) Progression

The answer is contribution. The principle of contribution is used to determine value of amenities such as a pool. Substitution underlies all approaches to value and states the market must be used to verify pricing. Conformity is used to determine if property conforms to the area and uses progression and regression

The type of loan that will MOST likely have the lowest loan-to-value ratio is a(n) A) FHA loan. B) PMI loan. C) conventional loan. D) VA loan.

The answer is conventional loan. Conventional loans are viewed as the most secure loans because their loan-to-value ratios are often the lowest. Buyers in conventional loans make larger down payments than borrowers in FHA, PMI, or VA loans. Usually with the larger down payment in a conventional loan, no additional insurance or guarantee on the loan is necessary to protect the lender's interest.

A contract for deed provides for the A) conveyance of legal title at a future date. B) sale of unimproved land only. C) sale of real property under an option agreement. D) immediate transfer of legal title to the buyer at closing.

The answer is conveyance of legal title at a future date. In a contract for deed, the seller retains legal title to the property. When the buyer pays off the loan and all requirements under the land contract have been met, the buyer receives legal title to the property. A land contract may be used in the sale of improved and unimproved land. The buyer receives possession upon closing of the contract but will not get legal title until the final payment is made.

Which of the following is NOT an example of governmental power? A) Taxation B) Police power C) Declaration D) Eminent domain

The answer is declaration. The four governmental powers that limit private rights on land are represented by the acronym PETE—police power, eminent domain, taxation, and escheat. Declaration is used to establish common interest property such as condominiums.

Which of the following act as security for the loan? A) Conveyance deed B) Promissory note C) Deed of trust D) Subordination agreement

The answer is deed of trust. A deed of trust or a mortgage are the two security instruments used in loans. The promissory note is a promise to pay the debt. A conveyance deed conveys title to real property and a subordination agreement is used to hold positions when new documents are recorded.

A contract that has been fully performed is A) executed. B) executory. C) voidable. D) unenforceable.

The answer is executed. Prior to execution, the contract is executory. Once the parties have performed, it is called executed.

MOST states require that listing and buyer representation contracts contain a(n) A) automatic extension clause. B) definite contract termination date. C) broker protection clause. D) multiple listing service (MLS) clause.

The answer is definite contract termination date. If brokers fail to specify a specific listing contract termination date in a listing, they may be subject to suspension or revocation of their real estate license in many states. In some states, automatic extension clauses that extend a listing past its expiration date are illegal. A listing may contain a broker protection clause which provides that within a specified period of time a property owner will pay the listing broker a commission if the owner transfers the property to someone the broker originally introduced to the seller. Many listing and buyer representation contracts do contain a multiple listing clause permitting the broker to share the listing with other brokers through the MLS, but states do not usually require such a clause. These same requirements hold true for buyer representation contracts.

Upon notice that an offer has been accepted, what should the listing broker do with the earnest money deposit? A) Give the earnest money to the seller to hold until closing B) Have the buyer's broker who typically holds the funds deposit them into the listing brokers trust account C) Deposit the earnest money into the brokerage or title company's trust account D) Hold the earnest money until all the contingencies have been met and then deposit it into a trust account

The answer is deposit the earnest money into the brokerage or title company's trust account. Upon acceptance of the offer, which creates an executory contract, the earnest money is deposited into the brokerage or a title company's trust account. The money may not be held by the buyer's broker or seller or until the contingencies are completed.

Which of the following is NOT considered by an appraiser using the income approach to value? A) Annual gross income B) Depreciation C) Annual net operating income D) Capitalization rate

The answer is depreciation. Depreciation is one of the calculations used in the cost approach and not in the income approach. The capitalization rate and the annual net operating income (NOI) are factors used in the income approach to determine a property's value (NOI ÷ Rate = Value). Estimating the annual gross income of a property is the first step in the income approach to value.

An agent for a brokerage firm has six listings. Another agent for the same firm represents a buyer who wants to purchase one of the six listings. The firm's broker appoints the listing agent as an agent for the seller, while appointing the other agent to represent the buyer in the same transaction. The broker has both the seller and the buyer sign a statement acknowledging that arrangement. The arrangement that results is A) implied agency. B) undisclosed agency. C) designated agency. D) single agency.

The answer is designated agency. The brokerage firm represents both parties to the transaction as a dual agent, and the broker designates two salespersons from the company to represent opposite sides in the same transaction. Implied agency occurs when an agency relationship is accidental. In single agency, a broker represents only one party to a transaction. The broker in this case has disclosed the firm's dual agency and the designated agent to each party in the transaction.

A principal broker authorizes one agent in her firm to represent the seller and another to represent the buyer in the same real estate transaction. Each agent is a A) dual agent. B) designated agent. C) universal agent. D) single agent.

The answer is designated agent. A designated agent or representative is a person authorized by a real estate brokerage to act as the agent of a specific principal. The designated agent has a fiduciary relationship toward the principal, and the brokerage is a dual agent in the transaction. In a single agent, a brokerage represents only the buyer or the seller in a transaction. Universal agency empowers an agent to do anything the principal could do personally.

A CMA or BPO would be acceptable for all of the following EXCEPT A) Determining conventional loan value. B) Setting the selling price of a home. C) Setting the estimated rent values. D) Used to determine what to offer for a property.

The answer is determining conventional loan value. A CMA (competitive market analysis) or a BPO (brokers price opinion) may not be used for any federal loan.

All of the following factors would be important in comparing properties under the sales comparison approach to value EXCEPT A) differences in size of the improvements and land. B) differences in appearance and condition. C) differences in original cost. D) differences in dates of sale.

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 approach-sometimes called the market data approach.

In an FHA insured loan transaction, the A) interest rate is set by the FHA. B) mortgage insurance premium may be paid by the seller or the buyer. C) discount points may be paid by the seller or the buyer. D) mortgage insurance premium must be paid by the seller.

The answer is discount points may be paid by the seller or the buyer. Either the seller or the buyer may pay discount points in an FHA loan transaction. Interest rates are not set by the FHA, but are negotiated between the lender and the buyer. An FHA loan includes a one-time upfront mortgage insurance premium (MIP), which can be financed, paid by the buyer, with an additional ½% MIP added to the monthly payments.

To increase yield on a loan, the lender charges A) discount points rates. B) loan origination fees. C) setup fees interest. D) origination fees and points prepayment fees.

The answer is discount points rates. The lender charges the borrower discount points to increase the yield, the true rate of return required by investors. Discount rates increase the lender's yield on loans. Loan origination fees cover the lender's costs in generating a loan. Interest is a charge for the use of the lender's money. A lender may recover unearned interest for payments made ahead of schedule by charging a prepayment penalty to a borrower who pays off a loan early.

Mutual rescission is BEST defined as the A) ability of one party to sue a defaulting party. B) dissolution of a contract with the return of all funds or things of value to both sides. C) agreement of both sides to allow one party to prevail and keep any funds. D) agreement that the party in default will make payment to the non-defaulting party.

The answer is dissolution of a contract with the return of all funds or things of value to both sides. Mutual rescission is when both parties agree to terminate any agreement and return all funds, property, or things of value to the respective parties.

Two salespersons both work for the same real estate firm. One afternoon they agree to divide their town into a northern region and a southern region. One will handle listings in the northern region, and the other will handle listings in the southern region. Their agreement A) violates the Sherman Antitrust Act and makes the salespersons liable for triple damages. B) does not violate antitrust laws. C) is an illegal boycott of other salespeople in their office. D) constitutes illegal price-fixing.

The answer is does not violate antitrust laws. Antitrust laws prohibit price-fixing and other antitrust activities between competing firms. Because both salespersons work for the same firm, their agreement is not an agreement between competing companies to divide markets. The salespersons are merely fixing responsibilities within one company. Their agreement is quite proper and not subject to antitrust law.

The clause in a mortgage instrument that would prevent the assumption of the mortgage by a new purchaser is a(n) A) defeasance clause. B) due-on-sale clause. C) power of sale clause. D) acceleration clause.

The answer is due-on-sale clause. A due-on-sale clause, or alienation clause, provides that when property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at an interest rate acceptable to the lender. The due-on-sale clause allows the lender to prevent a future purchaser of the property from being able to assume the loan, particularly if the original interest rate is low. A defeasance clause requires a lender to execute a satisfaction of mortgage once the loan has been fully repaid. The acceleration clause is used if the borrower is in default.

In a limited partnership A) all the partners participate in running the business. B) each limited partner is liable for no more than their investment. C) investors may participate with only a small amount of capital but with unlimited liability. D) the number of investors is limited to 10.

The answer is each limited partner is liable for no more than their investment. In a limited partnership, each limited partner can be held liable for losses only to the extent of their investment. There is no limitation on the number of investors in the partnership. The limited partners are not legally permitted to participate in the running of the business.

In a fixed-rate, fully amortized loan A) the principal amount in each payment is greater than the interest amount. B) each mortgage payment reduces the principal by the same amount. C) a balloon payment will be made at the end of the loan. D) each mortgage payment amount is the same.

The answer is each mortgage payment is the same. A fully amortized loan is paid off slowly, over time, in equal payments. Regular periodic payments are made over a term of years. In a partially amortized loan, such as a balloon mortgage, the principal and interest payments do not pay off the entire loan. A loan balance remains when the final payment is made. In the fully-amortized loan, the lender credits each payment first to the interest due, then to the principal amount of the loan. As a result, while each payment remains the same, the portion applied to repayment of the principal grows and the interest due declines as the unpaid balance of the loan is reduced.

Which of the following about a condominium is FALSE? A) Each owner receives a separate real estate tax statement. B) Each owner must carry their own property insurance. C) Each unit owner owns the common elements as tenants in common with all other unit owners D) Each owner has a proprietary lease with the association for their own unit.

The answer is each owner has a proprietary lease with the association for their own unit. In a condominium, each owner has fee simple title to the unit. Owners of cooperatives have proprietary leases. In a condominium each owner owns the common elements as tenants in common with all other unit owners. Each owner receives a separate real estate tax statement. Each owner of a condominium unit must carry their own property casualty insurance on the individual unit based upon the condominium declaration. The association carries insurance for the common elements.

In order for contracts transferring real property to be valid they must include all of the following EXCEPT A) the parties must come to a mutual agreement as to all terms and conditions. B) all parties must meet the legal definition of competency. C) the objective of the offer/contract must have legal purpose with the ability to transfer title. D) earnest money must be given from the buyer to the seller as consideration for selling.

The answer is earnest money must be given from the buyer to the seller as consideration for selling. Consideration is a required element of a valid contract but earnest money is not. The parties must be competent; come to a meeting of the minds; the contract must have a lawful objective or purpose; and if for the transfer of real estate (except for certain leases) it must be in writing and signed.

Consideration could be all of the following EXCEPT A) something of value. B) money. C) a promise. D) earnest money.

The answer is earnest money. Consideration is defined as a promise, money, or something of value. Earnest money is not consideration; it is the seller's remedy in a liquated damages contract.

Which of the following is NOT required to create a valid sales contract? A) Signatures B) Offer and acceptance C) Earnest money D) Consideration

The answer is earnest money. Earnest money is not consideration and is not necessary to create a binding contract.

A landowner divided much of her land into smaller parcels and has recently sold a tract adjacent to a nature preserve. The preserve and the tract that was sold are landlocked and cannot be entered except through one of the other tracts still belonging to the landowner. The buyer of the tract will probably be granted what type of easement by a court action? A) Easement in gross B) Easement by prescription C) Easement by necessity D) Conditional use permit

The answer is easement by necessity. An easement by necessity arises when there is no ingress or egress (entry or exit) from one piece of property without crossing over a parcel of land owned by another. An easement in gross permits a right-of-way for an individual or company to use another's property. An easement by prescription is acquired when a person makes continuous and visible use of another's land for a certain period of time without the owner's permission. A conditional use permit is granted by a municipality to a property owner to allow a special nonconforming use of property in a residential district.

A contract that may be rescinded by one party due to duress, fraud, misrepresentation, or because one party is a minor, is also known as a(n) A) voidable contract. B) valid. C) novation. D) void contract.

The answer is voidable contract. A contract is voidable if only one party may enforce or rescind it against the other party. Valid contracts contain all the essential elements and are binding and enforceable. Void contracts lack an essential element and are not binding. Novation is a new contact replacing an old one.

A developer grants a local power company the right to install necessary transmission lines. The developer has granted the power company a(n) A) license. B) easement in gross. C) easement by prescription. D) conditional use permit.

The answer is easement in gross. An easement in gross is a company's right to use another's land. A license is a personal privilege to enter the land of another for a specific purpose. A license can be terminated or canceled. An easement by prescription is acquired when a person makes continuous and visible use of another's land for a certain period of time without the owner's permission. A conditional use permit is granted by a municipality to a property owner to allow a special nonconforming use of property in a residential district.

The type of easement granting a right-of-way for a utility company's power lines is a(n) A) easement by prescription. B) easement by necessity. C) easement in gross. D) appurtenant easement.

The answer is easement in gross. Easements in gross are individual rights to use someone's land, as in the case of the utility company. An easement in gross can be assigned, conveyed, and inherited. An easement by necessity is created by a court when an owner sells a parcel of land that has no access to a public way except over the seller's remaining land. An easement by prescription is acquired when a person makes continuous and visible use of another's land for a certain period of time without the owner's permission. An appurtenant easement has two parties an example would be a right to drive across a neighbors land.

The ability of a community to attract income and business is known as the community's A) market value. B) life cycle. C) zoning plan. D) economic base.

The answer is economic base. The economic base measures the ability of a community to attract business and income. Life cycle refers to the expected useful lifetime of equipment or property. Market value is the most probable price a property would bring in an arm's-length transaction under normal conditions on the open market. A zoning plan determines the types of improvements permitted on specific properties in a community.

A salesperson's written contract with her broker specifies that she is not an employee. In the last year, just less than half of the salesperson's income from real estate activity came from sales commissions. The remainder was based on an hourly wage paid by the broker. Using these facts, it is MOST likely that the Internal Revenue Service (IRS) would classify the salesperson as which of the following for federal income tax purposes? A) Employee B) Part-time real estate salesperson C) Independent contractor D) Self-employed

The answer is employee. Because her earnings were more than half in non-commissions, the IRS would not see her as a self-employed independent contractor and could treat her as an employee.

A homeowner recently fenced his property. By mistake, the fence extends one foot over his own lot line onto a neighbor's property. The fence has created a(n) A) easement by necessity. B) easement by prescription. C) encroachment. D) license.

The answer is encroachment. An encroachment occurs when a building or a structure illegally extends onto or over another's property. A license is a personal revocable right to use another's property with permission. An easement by necessity is created by a court when an owner sells a parcel of land that has no access to a street except over the seller's remaining land. An easement by prescription is created when a person openly, continuously, exclusively, actually, and notoriously (hostile) uses land of another without the owner's permission. REMEMBER: OCEAN.

A portion of a homeowner's building was inadvertently built on his neighbor's land causing a(n) A) encroachment. B) easement. C) lien. D) license.

The answer is encroachment. When all or part of a structure illegally extends beyond the land of its owner, an encroachment occurs. A license is a revocable right to use a property. A lien is an obligation to pay a debt. An easement is the right to use the land of another for a specific purpose.

A tax lien on a property can hinder the sale of the property because it is a(n) A) monetary charge that the purchaser must satisfy. B) general lien and will attach to the real and personal property. C) encroachment. D) encumbrance.

The answer is encumbrance. An encumbrance is a claim, charge, or liability that attaches to real estate. It is a right or interest held by someone else other than the fee owner of the property and affects title to real estate it. A tax lien is a specific lien attached to the real property when real estate property taxes are not paid by the owner. It is not an encroachment, which is an illegal extension of a building or structure onto another's property. A purchaser is not required to satisfy a tax lien unless agreed to by the purchaser in the purchase contract.

The purpose of building permits is to A) control the activities of building inspectors. B) generate revenue for the municipality. C) ensure compliance with building codes. D) prevent encroachments.

The answer is ensure compliance with building codes. Through the permit requirement, municipal officials become aware of new construction and alterations and can verify compliance with building codes. Building inspectors review new construction, repairs, and modifications to judge compliance with building codes. While fees may be charged for building permits, their primary purpose is public safety. Building permits do not regulate encroachments to a property. Reference: Land Use Controls and Regulations > Public Contr

A seller agrees to sell a house to a buyer for $100,000. The buyer is unable to qualify for a mortgage loan for this amount, so the seller and buyer enter into a contract for deed. The legal interest the buyer has in the property under a contract for deed is A) legal title. B) equitable title. C) bare title. D) joint title.

The answer is equitable title. The buyer in a contract for deed holds equitable title to the property. Equitable title gives the borrower the rights of possession and use of the property, while the seller retains the legal title during the contract term. If the buyer defaults, the seller can evict the buyer and keep any money the buyer has already paid, which is considered rent.

A sales contract or land contract would give the buyer a(n) A) legal title. B) quiet title. C) cloud on the title. D) equitable title.

The answer is equitable title. The sales contract, land contract, or trust deed would give the buyer an equitable title. Legal title is transferred from the seller to the buyer via deed at closing of a sales contract and upon last payment to the seller from the buyer in a land contract.

A real estate contract with a minor is A) void. B) illegal. C) voidable. D) unilateral.

The answer is voidable. Duress, fraud, misrepresentation, and minors always make contracts voidable. A promise exchanged for performance is a unilateral contract. A void contract lacks an essential element an illegal contract lacks a lawful purpose so is also void.

A buyer makes an offer on a house, and the seller accepts the offer. At this point, the buyer has what type of title to the property? A) Equitable B) Possessionary C) Voidable D) Legal

The answer is equitable. On formation of the contract between both parties, the contract is now an executory contract with the buyer having equitable title. Voidable is a term used to describe a contract that is able to be voided because of duress, fraud, misrepresentation, or because one party to the contract is a minor. In the executory stage the seller holds legal title and possession until closing, unless a different time of possession is negotiated.

A buyer and a seller have entered into a binding contract for the sale of real estate. During this phase and until closing, the buyer has which type of title? A) Legal B) Executory C) Escalating D) Equitable

The answer is equitable. The buyer has equitable title, which recognizes that he has an interest but has not received legal title. Legal title will pass at closing when the seller gives the buyer the deed.

The difference between the current value and any liens on a property is the owner's A) equity. B) term. C) interest. D) principal.

The answer is equity. An owner's equity is the amount of money remaining once current liens, including the mortgage, are subtracted from the current market value of the property. The current value of a property, minus any liens, will provide the owner's equity in a property. The term is the length of time the borrower has to repay the lender. The principal is the balance remaining on the original loan amount. Interest is the charge from the lending institution for the use of money. Reference: Financing > General Concepts

The lease states upon the end of the lease term the tenancy will become month-to-month. This is known as an A) estate from period to period. B) estate for years. C) estate at sufferance. D) estate at will.

The answer is estate from period to period. An estate from period to period (a periodic tenancy) is created when the landlord and tenant enter into an agreement for an indefinite period of time with no specific expiration date. A month-to-month tenancy is an example of a periodic tenancy. A periodic lease is created to run for a definite time period, continues indefinitely, and automatically renews. An estate for years is a leasehold estate that continues for a definite period, whether that period is days, weeks, months, or years. An estate at will permits a tenant to possess property with the landlord's consent for an unspecified term. An estate at sufferance arises when a tenant continues to possess the property without the landlord's consent after the tenant's rights expire.

Capitalization is a mathematical process by which annual net operating income is used to A) estimate present value. B) determine replacement cost. C) establish effective gross income. D) establish depreciation.

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 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.

The purpose of an appraisal is to A) estimate the market value of a property. B) determine the projected income of a property. C) set the amount of earnest money the seller should accept from a purchaser. D) set the market price of a property.

The answer is estimate the market value of a property. In an appraisal, the appraiser estimates the market value of the property. They do not determine the market price, which is the price for which the property actually sells, which may be higher or lower than the appraised value or estimated market value. An appraiser may determine the projected income of a property as part of the income approach. Earnest money and other contract considerations do not have an impact on the market value.

In the cost approach to value, the appraiser makes use of the A) owner's original cost of the building. B) estimated replacement cost of the building. C) assessed value of the building. D) sales prices of similar buildings in the area.

The answer is estimated replacement cost of the building. The cost approach is used to estimate the replacement or reproduction cost of the building. Estimated replacement or reproduction cost less accrued depreciation plus estimated land value equals the estimated value by the cost approach. The owner's original purchase cost is not used in any approach to value since the process is determining current value. The sale of similar buildings is used in the sales comparison approach. Assessed value is used only by taxing authorities never in determining market value.

A buyer entered into a buyer agency agreement that gave him the right to purchase property on his own and not pay the buyer's agent. This BEST describes a(n) A) Exclusive right-to-buy buyer agency contract. B) open buyer agency contract. C) Exclusive agency buyer agency contract. D) designated buyer agency contract.

The answer is exclusive agency buyer agency contract. Exclusive buyer or seller agency contracts allow the buyer find a property and buy it without owing the buyer's agent a commission. A seller under these agreements is allowed to sell the property on her own without paying a commission.

A buyer signed a listing contract and agreed to pay the buyer's brokerage firm when the buyer purchased any property. The buyer signed a(n) A) exclusive agency buyer contract. B) buyer agency disclosure form. C) exclusive buyer agency contract. D) open buyer contract.

The answer is exclusive buyer agency contract. The buyer signed an exclusive buyer agency contract, which states that whenever the buyer purchases the property described in the contract, the buyer's brokerage firm will be paid. An exclusive agency and open listing would let the buyer purchase properties the broker had not shown them, and the buyer would not be obligated to pay the brokerage firm.

A seller has sold property to a neighbor without the services of a real estate broker. However, the seller still owes the broker a commission because the seller signed a(n) A) option listing. B) open listing. C) exclusive agency listing. D) exclusive right-to-sell listing.

The answer is exclusive right-to-sell listing. In an exclusive right-to-sell listing, a commission will be owed to a broker regardless of which party sells the house. In exclusive agency and open listings, the seller retains the right to sell without obligation to the broker. An option listing permits the broker to retain an option to purchase the property for the broker's own account.

An optionee has communicated to the optionor that the optionee will purchase the property. This option contract is now exercised and is BEST described as a(n) A) executed unilateral purchase contract. B) executed bilateral purchase contract. C) executory bilateral purchase contract. D) executory unilateral purchase contract.

The answer is executory bilateral purchase contract. When the buyer informs the seller that he is going to purchase the property, the option is exercised, and an executory bilateral purchase contract exists.

The buyer has made an offer that the seller has accepted and proper notice has been given to the buyer of the seller's acceptance. The offer is now considered an A) unilateral contract. B) executory contract. C) executed contract. D) assignment.

The answer is executory contract. The period from when the contract is agreed to and signed by both parties until it is executed (closed) is called the executory period. Executed contracts have been closed. Unilateral contracts bind only one party such as an option. Assignments transfer the contract duties but not liabilities.

The sales comparison approach to value is MOST important when estimating the value of a(n) A) retail location. B) existing residence. C) apartment building. D) hotel.

The answer is existing residence. The sales comparison approach arrives at an estimate of value by comparing the existing residence with recently sold comparable properties. This approach is normally considered the most reliable in appraising single-family homes to the large number of current sales. To find an estimate of value for an apartment building, retail location, or hotel, an appraiser would normally rely on the income approach to value for each of these income-producing properties.

Rising mortgage rates are an example of A) incurable depreciation. B) curable depreciation. C) functional obsolescence. D) external obsolescence.

The answer is external obsolescence. Factors outside the property boundary lines that affect a property's value are examples of external obsolescence. Rising mortgage interest rates is an example of external obsolescence. Functional obsolescence occurs when a property has outmoded or unacceptable physical or design features that are no longer considered desirable by purchasers. Physical deterioration of a property may be curable or incurable; a curable item is economically feasible and would result in value equal to or exceeding the cost of repairs. An item is incurable if its correction would not be economically feasible or create a comparable value to the building.

Economic, environmental, and external obsolescence refer to A) outdated items and changes in technology. B) obsolescence that is reasonable and economically feasible to correct. C) factors outside of the property lines that affect the property's value. D) lack of maintenance and ordinary wear and tear.

The answer is factors outside of the property lines that affect the property's value. Lack of maintenance and ordinary wear and tear are marks of physical deterioration. Outdated items and outdated technology indicate functional obsolescence in a property. Obsolescence that is economically feasible to correct is curable obsolescence.

A buyer learns from his real estate professional the ownership rights of the seller's property will continue forever and that no other person claims to be the owner or has any ownership control over the property other than the seller. The buyer will have what type of estate upon closing? A) A fee simple absolute estate B) A leasehold estate C) A fee simple qualified fee estate D) A life estate

The answer is fee simple absolute estate. Fee simple ownership is absolute ownership; the buyer has all rights to the property. A fee simple qualified fee estate exists when an estate is qualified by a special limitation, and may end if the current owner fails to comply with the limitations set on the estate by the former owner. A leasehold estate is an estate of possession only by a tenant. A life estate is a freehold estate limited in duration to the life of the owner or to the life of some other designated person or persons.

An owner held fee simple title to a vacant lot adjacent to a hospital. She decided to make the lot available to the hospital. Her attorney prepared a deed that conveyed ownership of the lot to the hospital "so long as it is used for medical purposes.'' After the completion of the gift, the hospital will own a A) fee simple defeasible estate. B) tenancy for years. C) periodic tenancy. D) life estate.

The answer is fee simple defeasible estate. A fee simple defeasible estate creates a limited use by a deed condition. The former owner retains reversionary interest in that the owner may reacquire full ownership if the hospital does not use the land for medical purposes. A life estate is a freehold estate that lasts as long as the life of the tenant. A tenancy for years is a leasehold estate that continues for a definite period of time, for years, months, even days. A periodic tenancy is a less-than-freehold estate that creates the right of possession of a property from year to year.

A property owner deeds a parcel of his property to a town "for recreational purposes only." The deed conveys to the town a A) life estate. B) leasehold estate. C) fee simple absolute estate. D) fee simple defeasible estate.

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 woman grants a parcel of land to a religious organization for as long as the parcel is used for religious purposes. The religious organization's ownership rights to the parcel constitute a A) leasehold estate. B) fee simple defeasible estate. C) life estate. D) fee simple absolute estate.

The answer is fee simple defeasible estate. The religious organization's ownership of the land is qualified by the limitation that the land be used for religious purposes. The limitation creates a fee simple defeasible or qualified fee estate. If the religious organization decides to use the property for some other purpose, title to the property may revert back to the woman or her heirs. A fee simple absolute estate is the highest form of real estate ownership. A life estate is limited to the life of the estate owner or some other designated person. A leasehold estate is an estate of possession only granted from the property owner to a tenant and lasts for a fixed period of time.

A purchaser of real estate learns that his ownership rights could continue forever and that no other person claims to be the owner or has any ownership control over the property. This person owns a A) qualified fee estate. B) fee simple interest. C) life estate. D) remainder interest.

The answer is fee simple interest. Fee simple is an absolute ownership, an inheritable interest "with no strings attached." A life estate is a non-inheritable freehold estate that ends with the death of the owner or the death of some other designated person. A remainder interest is tied to a life estate. A qualified fee estate exists as long as a determined use of the property continues.

Which of the following is an example of private property controls? A) All homes must be set back at least 30' from the street B) Fences may not exceed 6' in height C) Only single family residences can be built in the area D) Fences in the subdivision must all be white pickets

The answer is fences in the subdivision must all be white pickets. Height of fences, setbacks and what type of property is allowed fall under zoning or public controls.

The relationship of agents to their principal is that of a(n) A) trustee. B) subagent. C) attorney-in-fact. D) fiduciary.

The answer is fiduciary. The principal is the party to whom the agent gives advice and counsel. The agent's fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties. A trustee holds property for another as a fiduciary, but an agent does not hold the principal's property. A subagent, though working in the principal's interest, is an agent of the brokerage firm/principal broker who is already acting as agent for the principal. An attorney-in-fact is a competent third-party authorized by the principal to act in the principal's place through a written and recorded power of attorney.

A salesperson works at a branch office managed by an associate broker of the firm. The salesperson makes a change in the listing price of a listing contract without the knowledge or consent of the seller. The ultimate responsibility for the salesperson's actions rests with the A) associate broker and the salesperson. B) firm's principal broker. C) associate broker managing the office. D) salesperson.

The answer is firm's principal broker. The principal broker of a real estate brokerage firm holds ultimate responsibility for the actions of associate brokers and salespersons employed by the firm. The broker's responsibility extends to both employees and independent contractors working for the firm. While a real estate regulatory agency may find the principal broker ultimately responsible for the salesperson's actions, the agency may also hold the managing associate broker and the salesperson responsible.

A title insurance policy protects against title defects A) that occurred before closing. B) which have been cleared by a quiet title suit. C) found after closing. D) no matter when they are discovered.

The answer is found after closing. The title commitment would list any defects found before closing and would excluded them from coverage, so only defects arising after closing are covered. A defect cleared by a quiet title suit is no longer a defect.

A contract entered into without duress, menace, misrepresentation, or fraud means that it meets the legal requirement of the A) proper legal form. B) meeting of the minds. C) full consent. D) valuable consideration.

The answer is full consent. Full consent means a contract was entered into without duress, menace, misrepresentation, or fraud.

A buyer wants a loan that has no adjustments or balloons and that will pay all the monthly taxes and insurance along with principal and interest. The buyer also wants to have the loan fully paid off when the last payment is made. The lender will MOST likely recommend which loan? A) Term budget loan B) Partially amortized budget loan C) ARM budget loan D) Fully amortized budget loan

The answer is fully amortized budget loan. Budget loans include payments for taxes and insurance and can be used with any loan payment type. The buyer also wanted the loan fully paid off with the last payment and only a fully amortized loan can do that without a balloon.

A real estate loan payable in periodic installments that are sufficient to pay the principal in full during the term of the loan is a(n) A) straight loan. B) fully amortized loan. C) interest-only loan. D) partially amortized loan.

The answer is fully amortized loan. The payment in an amortized loan partially pays off both principal and interest. The mortgagor pays a constant amount, usually monthly. At the end of the term, the full amount of the principal and interest due is reduced to zero. In straight loan and interest only loans, the borrower makes periodic payments of interest only, followed by a lump sum balloon payment of full principal balance at the end of the loan term. In a partially amortized loan, the periodic payments are not enough to pay the principal balance, so a final payment (a balloon payment) is larger than the other payments to satisfy the debt.

A purchaser negotiates a mortgage loan in which she will make equal monthly payments over a period of 30 years, with the balance of the loan being zero at the end of that term. The purchaser has negotiated a(n) A) partially-amortized loan. B) balloon mortgage. C) straight mortgage. D) fully-amortized loan.

The answer is fully-amortized loan. A loan with equal, constant payments which result in a zero balance at the end of the term is a fully-amortized loan. A balloon mortgage is one type of partially-amortized loan. In a partially-amortized loan, the principal and interest payments do not pay off the entire loan; a balance remains and is due at the end of the term. A straight mortgage is a loan that requires periodic interest payments to the lender but nothing is applied to the principal balance. A construction loan is a type of straight loan in which the borrower receives money in draws and makes periodic payments of interest on those draws.

The appraised value of a residence with four bedrooms and one bathroom would probably be reduced because of A) incurable physical deterioration. B) functional obsolescence. C) external obsolescence. D) curable physical deterioration.

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).

A home with its kitchen next to the master bedroom would be considered A) functionally obsolete. B) diminished. C) physically obsolete. D) economically obsolete.

The answer is functionally obsolete. A kitchen adjacent to the master bedroom is considered functionally obsolete. The kitchen could be converted to a family room, provided there was adequate space in the house for the kitchen elsewhere. This conversion would be considered curable obsolescence if the cost did not exceed the increased value of the property. A property may be economically obsolete due to environmental, social, or economic forces outside of the property, such as a deteriorating neighborhood.

A property manager is typically a(n) A) universal agent. B) designated agent. C) general agent. D) special agent.

The answer is general agent. A general agent represents a principal in a broad range of matters related to a particular business or activity. A broker has a property management contract with a property owner and may bind the owner to contracts or agreements related to management of the property. A universal agent is a person empowered to do anything the principal could do personally, authorized by a general power of attorney. A special agent may represent the principal in a specific transaction only and has no power to bind the principal; a real estate broker is typically a special agent. A designated agent is an individual licensee authorized by a broker to represent one party in a transaction in which the other party is also represented by the broker.

The BEST way to ensure that there are no encroachments to a property and to properly verify the boundaries of a parcel of land is to A) find the monuments. B) get a survey. C) write a legal description. D) verify the benchmarks.

The answer is get a survey. Encroachments are found through actual notice or visual inspection by the buyer or someone working for the buyer. A survey shows the location of all improvements on a property and whether any improvements extend over the property lines. A legal description is a description of a specific real estate parcel complete enough for an independent surveyor to locate and identify the parcel. Monuments are fixed objects or markers to identify corners or places where boundary lines change directions, but they will not identify encroachments. Benchmarks are permanent reference points established for use in surveys to measure differences in elevation, but they will not identify encroachments.

In order for a deed to be valid, the A) grantee must sign the deed. B) grantee must be legally competent. C) deed must be recorded. D) grantor must be legally competent.

The answer is grantor must be legally competent. Competency of the grantor, not the grantee, is one of the requirements for a valid deed. The grantor must be of lawful age and sound mind. Only the grantor, not the grantee, is required to sign the deed. Recording a deed is not required for the validity of deed.

For a deed to be valid, the A) grantor must be legally competent. B) deed must be recorded. C) grantee must sign the deed and be legally competent. D) signature of the grantor must be witnessed by an attorney.

The answer is grantor must be legally competent. The grantor must have the legal competency to sign a deed. An attorney or notary is not required to witness a deed. Deeds do not have to be recorded to be valid. The grantor not grantee is required to sign a deed in order for the deed to be valid. The grantee does not have to be legally competent.

A deed must be signed by the A) grantee and two witnesses. B) grantor. C) grantor and grantee. D) grantee.

The answer is grantor. A deed must be signed by all grantors named in the deed. The grantee must be named but does not sign the deed. Some states may require witnesses to sign a deed in order for it to be recorded, but the grantee does not sign.

A purchaser cannot qualify for conventional financing and negotiates a contract for deed with a seller. The buyer in this arrangement A) has possession and pays the property expenses and taxes. B) receives a deed to the property at closing. C) must lease the property from the seller for the duration of the contract term. D) has a full legal interest in the property.

The answer is has possession and pays the property expenses and taxes. In a contract for deed arrangement, the buyer takes full possession of the property and gets equitable title to the property. The buyer agrees to pay real property taxes, insurance premiums, and for the upkeep of the property. The seller is not obligated to execute and deliver the deed for the property to the buyer until all the terms of the contract have been satisfied.

A buyer's agent reveals to a listing agent that the buyer is moving into the area for a new job and must be in a new home as soon as possible. The buyer's agent A) has violated her duty of confidentiality to the buyer. B) may share this information with anyone as it is not relevant to the transaction. C) is required to share this information with the seller or the seller's agent as a material fact relevant to the transaction. D) terminates the agency relationship by revealing this information to the seller's agent.

The answer is has violated her duty of confidentiality to the buyer. Confidentiality about the principal's personal affairs is an important element of an agent's fiduciary duties. Providing the information to the listing agent may weaken the bargaining power of the buyer. The buyer's agent is not allowed to share confidential information with anyone without explicit permission from the buyer.

In a standard sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to A) have each party write a letter to the other approving the changes. B) have both parties initial or sign in the margin near each change. C) write a letter to each party listing the changes. D) redraw the entire contract.

The answer is have both parties initial or sign in the margin near each change. All parties must initial or sign the changes. If negotiations had gone back and forth a number of times it might merit redrawing the contract for clarity, in this case initialing is sufficient. Letters approving all changes might be treated as part of the contract but such a cumbersome procedure is seldom seen. More often changes are done with pre-printed standard or approved addendum forms.

The term of a loan is the A) time period in which a borrower may cancel a loan contract. B) time required to underwrite the loan. C) years required to pay private mortgage insurance. D) length of time the borrower has to repay the loan.

The answer is length of time the borrower has to repay the loan. For residential loans, a borrower generally negotiates with the lender a term of between fifteen to thirty years. A longer term to repay the loan results in a lower monthly payment. A shorter term results in a higher monthly payment. Reference: Financing > General Concepts

In a preprinted sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to A) have each party write a letter to the other approving the changes. B) have both parties initial or sign in the margin near each change. C) write a letter to each party listing the changes. D) redraw the entire contract.

The answer is have both parties initial or sign in the margin near each change. If there are minor changes in a contract the initialing or signature at the changes notes the party saw and agreed to the change. The best course of action if there are many or major changes to a contract is to draft a new one with all the agreed to changes.

A salesperson finally concluded some extremely difficult negotiations resulting in the sale of a listed parcel of land. For all of her extra efforts, she can legally receive a performance bonus directly from A) the buyer. B) the seller. C) her principal broker. D) no one.

The answer is her principal broker. Bonus and commissions are paid directly to the broker, who then pays the salesperson. The salesperson may not receive commissions or bonus from anyone other than her principal broker.

A homeowner may be allowed certain protection from the judgments of creditors as a result of a state's A) littoral rights. B) homestead rights. C) prior appropriation rights. D) fee simple rights.

The answer is homestead rights. A homestead is land that is owned and occupied as a family home. In many states, homestead rights protect or exempt a portion of the area or value of the land from judgments or debts. Littoral and prior appropriation rights, both water rights, are the rights of a homeowner to land bordering on the shore of a sea or ocean. Fee simple rights are tied to fee simple absolute ownership. Reference: Property Ownership > Types of Ownership

A company agreed to lease a space for 10 years. Five years later, the company's owners sold the company to another organization. In this instance, what will occur with the lease? A) The current tenant may not assign the leasehold interest, but they may sublease the space to the other organization. B) If allowed, the current tenant may assign the leasehold interest to the new organization. C) The current tenant will not be allowed to assign the leasehold interest to another company under any circumstances. D) The new tenant will be forced to negotiate a new lease with the landlord.

The answer is if allowed, the current tenant may assign the leasehold interest to the new organization. Unless the original tenant's lease contract forbids an assignment, the tenant may assign the lease to the new organization. An assignment is the total transfer of the lessee's rights to the other party; however, the original tenant is still liable for the rent. The landlord may agree to do a novation or new lease with the new tenant, but this is not a requirement. Subleasing and assignment are the same thing.

A buyer and a seller agree on a purchase price of $200,000 for a house. The contract contains a clause stating that "time is of the essence." Which statement is TRUE? A) If the closing date passes and no closing takes place, the party who failed to close is considered to in default. B) The closing must take place within a reasonable period before the stated date. C) A "time is of the essence" clause is not binding on either party. D) The closing date must be stated as a particular calendar date and not simply as a formula, such as "two weeks after loan approval."

The answer is if the closing date passes and no closing takes place, the party who failed to close is considered to in default. The non-defaulting party may have remedies to retain the earnest money (liquidated damages) or to sue the defaulting party to perform the contract terms (specific performance).

The holder of a reversionary interest in a qualified fee estate might be able to obtain title to the property A) if the holder of the qualified fee estate sells the property. B) if the holder of the qualified fee estate breaks the deed condition. C) if the conditions changed and the owner was unable to meet the requirements. D) only if the remainderman died first.

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 the 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.

Under an exclusive agency listing, the listing broker would be entitled to a commission EXCEPT A) if a salesperson from a cooperating brokerage secures a qualified buyer for the property. B) if the broker sells the property himself. C) if the seller sells the property himself to a relative moving from out-of-town. D) if another co-op broker secures a qualified buyer for the property.

The answer is if the seller sells the property himself to a relative moving from out-of-town. An exclusive agency listing authorizes the listing brokerage or co-op broker to sell and receive a commission, but the seller retains the right to sell the property without obligation to the broker. A seller who sells the property himself to a relative is not required under an exclusive agency listing to pay the listing broker a commission. The seller is obligated to pay a commission to the listing broker when that broker, another broker, or a salesperson from a cooperating brokerage firm sells the property.

A principal broker uses earnest money placed in the company trust account to pay for the rent owed on the brokerage firm's office. Using escrow funds for this purpose is A) Illegal conversion. B) legal if the trust account is reimbursed by the end of the calendar month. C) legal if the seller gives consent in writing. D) illegal unless the client has approved the expenditure.

The answer is illegal conversion. Trust funds may not be deposited into an operations or personal account.

A lender's refusal to lend money to potential homeowners attempting to purchase properties in areas with high crime rates is known as A) legal redlining. B) steering. C) blockbusting. D) illegal redlining.

The answer is illegal redlining. Failing to lend or to insure in areas with high crime rates is a form of redlining and a violation of the federal Fair Housing Act and is never legal. Such practices tend to discriminate against protected classes who largely populate such areas. Blockbusting is inducing panic selling by claiming the entry of a protected class will have some sort of negative impact on property values. Steering is the channeling of homebuyers to a particular neighborhood to maintain or change the character of the neighborhood.

A couple enters 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 property. Without having the couple sign a written buyer agency contract, the salesperson drives the couple 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) implied agency relationship with the buyers. B) general agency relationship with the buyers. C) express agency relationship with the buyers. D) universal agency relationship with the buyers.

The answer is implied agency relationship 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.

A woman tells her neighbor, a real estate broker, that she is thinking about selling her home. The broker contacts several prospective buyers to whom she has shown her firm's listings in the past month. One of the buyers makes an attractive offer on the woman's home without even seeing the property. The broker goes to the woman's house and presents the offer, which the homeowner accepts. What is the agency relationship between the homeowner and the broker? A) Implied agency B) Universal agency C) Express agency D) General agency

The answer is implied agency. The homeowner and the broker did not have an oral or written agency contract, but the broker's actions implied to prospective buyers that the broker was acting as the homeowner's agent. 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.

Real estate law governing advertising apply to all of the following EXCEPT A) In house notes for showing B) Social media C) MLS systems D) communications with consumers

The answer is in house notes for showing. In house notes for showing are not to be seen by consumers so do not have to follow state or federal laws. Any other advertisement that may be seen by a consumer must follow the law.

In regard to an offer and acceptance all the following are true EXCEPT A) an offer can be revoked at any time before acceptance. B) a counter offer reverses the legal positions of the offeror and offeree. C) in real estate, an oral acceptance creates a binding contract. D) to offer means to put forward for acceptance or rejection.

The answer is in real estate, an oral acceptance creates a binding contract. The oral acceptance of an offer does not create a binding contract. The offer must be signed followed with communication of acceptance to become a binding contract.

A couple bought a store building and took title as joint tenants. One woman died testate. The other woman now owns the store A) in severalty. B) as a tenant in common with the dead woman's heirs. C) as a joint tenant with rights of survivorship. D) in trust.

The answer is in severalty. Joint tenancy includes the right to survivorship, to the property passing to the other owner(s) upon the death of one tenant. In this case, the women took title as joint tenants, meaning that upon one's death, there is only one owner who owns the property in severalty. In a tenancy in common, the owners own an undivided fractional interest in the property and that interest is passed on according to the owner's will, to heirs, or to a trust.

Under the statute of frauds, all contracts for the sale of real estate must be A) in writing to be enforceable. B) originated by a real estate broker. C) accompanied by earnest money deposits. D) on preprinted forms.

The answer is in writing to be enforceable. Statutes of frauds call for real estate sales contracts to be in writing. The law does not address who writes the agreements or on what forms they are written. Earnest money is not consideration and is not an essential element of a contract of sale, although it is often mistakenly said to be.

Under the statute of frauds, all contracts for the sale of real estate must be A) in writing to be enforceable. B) accompanied by earnest money deposits. C) on preprinted forms. D) originated by a real estate professional.

The answer is in writing to be enforceable. The statue of frauds requires all documents for the transfer of real estate be in writing; the exception is leases of 12 months or less.

In the valuation of a large apartment complex, the MOST weight would be given to which approach to value? A) Cost approach B) Sales comparison approach C) Income approach D) All approaches equally weighted

The answer is income approach. The income approach is the primary approach used for income producing properties such as an apartment complex. The cost approach would most likely not be used due to the difficulty of determining a replacement or reproduction cost for the property. The sales comparison approach is most commonly used in the appraisal of single family residences. The process of reconciliation requires the appraiser to weigh which of the three approaches is most appropriate, as they do not have equal weight and may not be averaged together to determine a value.

Which appraisal method uses a rate of investment return in estimating a property's value? A) Income approach B) Sales comparison approach C) Gross income multiplier D) Cost approach

The answer is income approach. The income approach uses the rate of investment return, also known as the capitalization rate, to estimate a property's value. The value is determined by dividing the annual net income by the capitalization rate (NOI ÷ Rate = Value). The capitalization rate is not used in the cost approach or the income approach. The gross rent multiplier is a factor used in the income approach to estimate the value of five or more residential units, commercial, or industrial properties.

When the buyer is in default and the seller keeps the earnest money, the contract MOST likely provided for A) executed damages. B) actual damages. C) liquidated damages. D) specific performance.

The answer is liquidated damages. Earnest money is not consideration; it is the seller's remedy in a liquated damages contract if the buyer defaults.

A smaller home is surrounded by larger, more expensive homes. The value of the smaller home will most likely A) be anticipated to increase for the first five years. B) increase because of the larger, more expensive properties. C) not be affected by surrounding properties. D) decrease because of the larger surrounding properties.

The answer is increase because of the larger, more expensive properties. Under the principle of conformity progression shows the value of a modest, less expensive home will increase if it is located among larger, fancier, more expensive properties. Under regression, a structure that is larger or more luxurious would tend to be valued in the same range of less lavish homes in a neighborhood of modest homes.

On discovering a latent defect in a property, a salesperson should discuss the problem with the seller and then A) contact the city building inspector about the defect. B) arrange for the repairs. C) tell the seller that the defect must be repaired. D) inform any prospective buyers of the defect.

The answer is inform any prospective buyers of the defect. A salesperson or broker is also expected to disclose information about material defects in the property to prospective buyers. The seller is not required to correct the defects, but the salesperson should inform the seller that not repairing the defects may result in lower offers from buyers. The salesperson should not arrange for repairs without explicit instructions from the seller and is not required to contact a city inspector about the defect. The salesperson should be sure that the defect is included in any property inspection report to the buyer if not corrected by the seller.

A mortgage loan in which the borrower only pays interest for a stated period of time and pays off the principal balance at the end of that term is a(n) A) package loan. B) interest-only loan. C) amortized loan. D) balloon loan.

The answer is interest-only loan. Interest-only mortgages require payment of interest only for a certain period of time with the principal balance and interest recalculated over the remaining years of the loan. A balloon payment loan is a partially amortized loan in which the periodic payments are not enough to fully amortize the loan by the time the final payment is due so that the final payment (called a balloon payment) is larger than the others. In a package loan the borrower secures the loan with both personal and real property. In an amortized loan the monthly payment partially pays off both principal and interest so that both are paid off slowly, over time, in equal payments.

The charge for the use of the lender's money in a loan is the A) rate of return. B) interest. C) equity. D) principal.

The answer is interest. Interest is the sum paid or accrued in return for the use of a lender's money. Interest on a promissory note is usually due in arrears at the end of each payment period. The rate of return is the return on the investment in a property. An owner's equity is the amount of money remaining once current liens, including the mortgage, are subtracted from the current value of the property. The principal is the balance owed on the original loan amount.

A broker found that he was short funds for a week in the firm's operations account. He deposited an earnest money check into the account and then after a closing the following week put the earnest money amount into the trust account. In this case the broker A) is fine since the movement of funds occurred within a week. B) is guilty of conversion. C) maybe guilty of commingling. D) used standard operating procedures for trust account.

The answer is is guilty of conversion. Conversion is knowingly misappropriating funds which the broker in this instance did. Commingling is mixing of funds but without the intention. Depositing trust funds into an operations account is never acceptable.

A landowner constructed a building seven stories high. Several years later, the municipality changed the zoning ordinance, prohibiting buildings that exceed six stories in height. Which of the following is TRUE regarding the existing seven-story building? A) It is a nonconforming use. B) The building must be demolished. C) It is a conditional use. D) The owner must obtain a variance.

The answer is it is a nonconforming use. A building that existed prior to the current zoning ordinance may be allowed to continue legally with some restrictions. The owner does not need to obtain a variance or a special use permit for the building. A conditional or special use permit allows a property to be used for a common good not currently allowed in zoning ordinances. A variance is permission to use a property in a way expressly prohibited by zoning ordinances. Reference: Land Use Controls and Regulations > Public Controls

A landowner constructed a building seven stories high. Several years later, the municipality changed the zoning ordinance, prohibiting buildings that exceed six stories in height. Which of the following is TRUE regarding the existing seven-story building? A) The owner must obtain a variance. B) It is a nonconforming use. C) The building must be demolished. D) It is a conditional use.

The answer is it is a nonconforming use. A building that existed prior to the current zoning ordinance may be allowed to continue legally with some restrictions. The owner does not need to obtain a variance or a special use permit for the building. A conditional or special use permit allows a property to be used for a common good not currently allowed in zoning ordinances. A variance is permission to use a property in a way expressly prohibited by zoning ordinances. Reference: Specialty Areas > Subdivisions

Which of the following best describes fee simple absolute estate? A) It is the maximum estate in land and lasts forever. B) It will have the maximum rights unless a deed condition limits. C) The duration is dependent up the language of the deed. D) It is the maximum estate in land but last only for the duration of the property ownership.

The answer is it is the maximum estate in land and lasts forever. Fee simple absolute estates, which have the largest (maximum) bundle of rights, are typically transferred from one owner to another when title is passed so they continue on forever. A deed condition would create a fee simple defeasible or qualified estate

Two men are co-owners in fee simple of a small office building. One of the men dies intestate and leaves nothing to be distributed to his heirs. The surviving owner is neither related to the deceased owner nor his creditor. What would explain how the surviving owner acquired the deceased owner's interest in the office building? A) Reversionary rights B) Remainder interests C) Adverse possession D) Joint tenancy

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 parcel of property was purchased by two friends. The deed they received from the seller at closing conveyed the property by name to each of the two friends, with equal shares and interest. Upon death of either owner the interest and shares will automatically become those of the other co-owner. What form of title and ownership to the friends has? A) Joint tenants B) Community property owners C) Tenants in common D) Tenants by the entirety

The answer is joint tenants. The deed clearly stated the requirements of joint tenancy which are PITT— equal possession, interests, title all taken at the same time. Once this is established the rights of survivorship are created. If joint tenancy is not clearly stated in the deed, grantees would take title as tenants in common. Friends are unable to hold community property or be tenants by the entirety as those forms of ownership are available only for married couples.

The answer is agrees to pay the purchase price in monthly installments paid directly to the seller. Under a land contract, also known as a contract for deed, the buyer agrees to pay the purchase price in monthly installments made directly to the seller. The buyer may pay installments of principal and interest or of interest only with the balance of the loan due at maturity. The seller remains legally responsible for the mortgage on the property.

The answer is judgment lien. A judgment is a general, involuntary, equitable lien on both real and personal property owned by the debtor. A mechanic's lien is a specific lien against real property filed by a contractor, subcontractor, or supplier when an owner or contractor has not paid for work or supplies for improvements on a property. A real estate tax lien is a statutory lien against real property for nonpayment of taxes. An assessment lien is a special assessment levied on real property to fund public improvements to property.

In the purchase agreement, the buyer and seller agreed to liquidated damages as a remedy for default. If the buyer defaults, this means the seller A) sues the buyer and keeps the earnest money. B) needs to notify the buyer of the intent to sue for liquidated damages. C) sues the buyer to buy the property. D) keeps only the buyer's earnest money.

The answer is keeps only the buyer's earnest money. Liquidated damages as a remedy allows the seller to keep the earnest money and nothing more. Specific performance is a lawsuit to have the buyer perform the terms of the contract.

When real estate is sold under an installment land contract and the buyer takes possession of the property, the legal title is A) subject to a purchase money mortgage. B) kept by the seller until the purchase price is paid according to the contract. C) transferred to the buyer. D) transferred to a land trustee.

The answer is kept by the seller until the purchase price is paid according to the contract. In a land contract, the seller retains legal title to the property during the contract term, and the buyer is granted equitable title and possession. At the end of the loan term, the seller delivers a clear title to the buyer.

In order for a purchase agreement to be binding on all parties it must contain certain essential elements. Of the following, which is essential for a purchase agreement to be valid? A) Notarization B) Competent grantor C) Recordation D) Lawful objective

The answer is lawful objective. The essential elements of a contract are competent parties, mutual agreement, lawful objective, consideration, and the document in writing. To be valid, a contract does not need to be recorded or notarized. Competent grantor is a requirement of a valid deed.

A contract that conveys the right to the possess the real property of another, but does not convey title, is a A) dedication. B) bill of sale. C) quitclaim deed. D) lease.

The answer is lease. The lessor (landlord) grants the right of possession to the lessee (tenant); the lessor retains title.

A promise, or something of value, made by one party to induce another party to enter into a contract is A) legal consideration. B) the authorization to perform. C) words of conveyance. D) the meeting of the minds.

The answer is legal consideration. Legal consideration is a promise, or something of value, made by one party to induce another party to enter into a contract. In a purchase contract, consideration is the promise of the seller to sell and the buyer to buy. Words of conveyance are used in deeds to create the estate being transferred.

Fiduciary means that there is a(n) A) oral agreement between the parties that does not create an agency agreement. B) legal relationship between parties that creates a position of trust and confidence. C) written agreement between the parties to pay a real estate commission. D) legal relationship in which only the duties of honesty and good faith are owed to the parties.

The answer is legal relationship between parties that creates a position of trust and confidence. The term fiduciary refers to the relationship in which the agent (the real estate broker) is held in a position of special trust and confidence by the principal (the client). An agent owes the duties of honesty and good faith to the customer, the third party or non-represented consumer in the transaction. The payment of compensation in the form of a commission does not determine or define an agency relationship.

The CFPB (Consumer Financial Protection Bureau) requires that A) brokers are responsible for verifying the new loan disclosure matches the new loan estimate. B) lenders provide the borrower with a new loan estimate at the time of application or no more than three days after application. C) lenders provide a closing statement to all purchasers of residential or commercial properties. D) real estate brokers and lenders must include the APR and all charges in all real estate advertisements.

The answer is lenders provide the borrower with a new loan estimate at the time of application or no more than three days after application. CFPB provides that the lender provide the borrower with a new loan estimate of the settlement costs no more than three business days after receiving the loan application. The law requires full disclosure of APR and terms if certain items are included in the advertisement, it does not apply to all ads. . The law does not apply to the purchase of commercial properties. CFPB does not require brokers to verify the new loan closing disclosure matches a new loan estimate as there may have been changes.

Mortgagee title insurance policies protect A) lenders. B) buyers and lenders. C) sellers. D) buyers.

The answer is lenders. A mortgagee title insurance policy protects the mortgagee—the lender. An owner's policy protects the owner, heirs, and devisees. Reference: Transfer of Title > Title Insurance

The remedy available only to the seller as compensation if a buyer is in default is known as A) liquidated damages. B) consideration. C) rescission. D) actual damages.

The answer is liquidated damages. When parties agree that a certain amount of money will compensate the non-breaching party in the event one party defaults on a contract, that money is called liquidated damages. Earnest money typically serves as liquidated damages in a purchase contract in case the buyer defaults. Actual damages refer to monies awarded by a court to a plaintiff for a wrong committed against the plaintiff. Rescission is the mutual agreement of the parties to return to their original state. Consideration is an essential element of a contract, something of value offered by one party and accepted by the other.

A general contractor recently filed suit against a homeowner for nonpayment. The contractor now learns that the homeowner has listed the property for sale with a real estate broker. In this situation, which of the following will the contractor's attorney use to protect the contractor's interest? A) Assessment B) Mortgage lien C) Lis pendens D) Buyer's lien

The answer is lis pendens. A recorded lis pendens (a notice of action pending) warns any potential purchaser that a property is subject to a pending legal action. This notice would prompt a buyer to consider very carefully whether to proceed, but it would not absolutely prevent it. The contractor may also have the right to use a mechanic's lien to obtain payment. The lis pendens would give notice until the mechanic's lien was in place. An assessment is a special levy for a definite purpose, such as adding curbs or sewers in a neighborhood. A mortgage lien is a voluntary specific lien the borrower signs.

From the reproduction or replacement cost of a building, the appraiser deducts depreciation, which represents the A) costs to modernize the building. B) remodeling costs to increase rentals. C) loss of value due to any cause. D) remaining economic life of the building.

The answer is loss of value due to any cause. Depreciation is loss of value from any cause. Some examples of such causes are physical deterioration (wearing out and/or deferred maintenance), economic (external) obsolescence, and functional obsolescence (lack of modernity). Remodeling and modernization costs may increase value by reducing the effects of deterioration and obsolescence, making a property more desirable and acceptable to buyers. Depreciation occurs over the economic life of a structure, the period during which it is expected to remain useful for its original intended purpose.

When estimating the value of property using the cost approach, all of the following are considered by an appraiser EXCEPT A) estimated loss attributable to an outdated heating system. B) quality of materials and workmanship in the original structure. C) loss of value due to uncollected delinquent rent. D) excessive amount of traffic noise outside the property.

The answer is loss of value due to uncollected delinquent rent. Loss of value due to uncollected delinquent rent is a factor in determining a property's effective gross income in the income approach to value. An outdated heating system, the quality of original materials and workmanship, and traffic noise are considered in the cost approach in determining the depreciation of a property due to deterioration or obsolescence.

The term depreciation refers to the A) capitalized value of lost rental income. B) costs incurred to renovate or modernize a building. C) value of real estate after the expiration of its useful life. D) loss of value in real estate from any cause.

The answer is loss of value in real estate from any cause. The term ''depreciation'' refers to the loss of value in real estate from any cause either on the property or off the property, or a combination of the two.

The owner has a large parcel of land surveyed into lots and streets and files a subdivision plat. Each lot can be legally described by use of which of the following? A) Metes-and-bounds system B) Lot and block system C) Street address D) Government survey

The answer is lot and block system. The lot and block system is often used to describe property in subdivisions. The rectangular government survey system divides land into rectangles and describes those rectangles with principal meridians and base lines. The metes-and-bounds system outlines the perimeter of a parcel by starting at one point and ending at the same point. A street address is not a legal property description.

The purpose of a building code is to A) ensure compliance with a deed's restrictive covenant. B) make sure buildings are structurally safe. C) maintain municipal control over the volume of new construction. D) enforce zoning ordinances.

The answer is make sure buildings are structurally safe. Building codes are used to make sure buildings are structurally sound and safe. A restrictive covenant is a restriction established by a private entity, not a public government. Building codes do not affect a deed's restrictive covenant. Zoning ordinances regulate the types of new construction but are not enforced through building codes.

A municipality establishes development goals that are often used to control growth in its A) master plan. B) building codes. C) restrictive covenants. D) environmental regulations.

The answer is master plan. Local governments establish development goals by creating a master plan, which is also known as a comprehensive plan. Restrictive covenants are private limitations on the use of property established by a developer or owner and binding on future owners. Governments pass environmental regulations to help maintain clean air and water. Building codes are ordinances that specify construction standards that must be met when constructing or repairing buildings.

Information that is important to buyers that could change their decision to purchase a property is known as a A) material fact. B) observable defect. C) physical defect. D) latent defect.

The answer is material fact. A material fact is any fact relevant to a person making a decision to buy a property. A latent defect is a hidden structural defect usually resulting from faulty construction known to a seller but not readily discoverable by inspection.

A property owner contracted to have a swimming pool installed on her property. When the pool was completed, she refused to pay for the improvement, and the contractor filed a lien for nonpayment. This lien was MOST likely a A) voluntary lien. B) special lien. C) general lien. D) mechanic's lien.

The answer is mechanic's lien. A mechanic's lien may be filed by a contractor when an owner refuses to pay for work on an improvement. The lien is a specific, involuntary lien on the property. A general lien applies to both personal and real property.

A listing broker presents an offer to her client, a seller, with a selling price much lower than what the seller is asking for the property. The offer allows the seller 24 hours to accept. The broker recommends the seller counter the offer and leaves a blank counter with the seller. The seller emails the broker in the morning saying that based on the wishes of her children, who are not on the title, she has accepted the offer. It this case the offer A) gives the buyer possession until closing. B) is void due to undue influence by the children. C) may be a voidable contract due to duress. D) is a valid contract which may be voidable due to fraud.

The answer is may be a voidable contract due to duress. The seller would have to claim her children forced her to accept the buyer's offer under duress in order to terminate the contract or make it voidable. Void contracts lack one or all of the essential elements of a contract. A contract must be entered into freely and voluntarily by each party, without undue influence. Duress, undue influence, misrepresentation, fraud, or a minor party entering into a contract are all circumstances that may create a contract that is voidable by the injured party.

A broker associate and salesperson of the firm have been found guilty of violating the state real estate license law and have had their real estate licenses revoked. In this case the principal broker A) may be found guilty of improper supervision. B) might have to make a claim against his E&O insurance. C) would most likely have to pay a civil fine in addition to having his license revoked D) should not be concerned since broker associates do not need to be supervised.

The answer is may be found guilty of improper supervision. A principal broker is responsible to supervise all licensees in the firm. Errors and Omissions (E&O) insurance would not cover this type of issue. Civil fines are created in civil court not through a hearing at a real estate Commission.

A broker associate and salesperson of the firm have been found guilty of violating the state real estate license law and have had their real estate licenses revoked. In this case the principal broker A) should not be concerned since broker associates do not need to be supervised. B) would most likely have to pay a civil fine in addition to having his license revoked. C) might have to make a claim against his E&O insurance. D) may be found guilty of improper supervision.

The answer is may be found guilty of improper supervision. A principal broker is responsible to supervise all licensees in the firm. Errors and Omissions (E&O) insurance would not cover this type of issue. Civil fines are created in civil court not through a hearing at a real estate Commission.

Earnest money A) is required as part of all purchase agreements. B) may become the seller's if the buyer defaults. C) is considered to be consideration and is required in a purchase offer. D) will be a credit to the seller and a debit to the buyer at closing.

The answer is may become the seller's if the buyer defaults. Earnest money is not consideration. Therefore, it is not an essential element of a contract or required; it is a show of good faith on the part of the buyer and liquidated damages for the seller, if the buyer defaults.

In an appointment with a seller, a salesperson presents a competitive market analysis (CMA) that provides a reasonable market value for the seller's property. The seller insists on pricing the property $15,000 higher than the salesperson's suggested price. Under these circumstances, the salesperson A) may change the listing price in the contract once it is executed. B) may choose to refuse the listing. C) must accept the listing with the seller's higher listing price. D) must hire an appraiser to conduct a formal appraisal.

The answer is may choose to refuse the listing. An unrealistic listing price may make it difficult for the broker to properly market the property within the time period of the listing. The salesperson is not required to accept the listing with the higher listing price or to hire an appraiser for a formal appraisal. The salesperson may not change the listing price in a listing contract without the explicit permission of the seller.

A listing broker knows that a known sex offender lives within a block of a home she has listed. The prospective buyers are a family with three small children. The broker A) may have a responsibility under state law to inform the buyers of the offender's presence in the neighborhood. B) should inform the seller not to accept an offer from any families with small children. C) has no responsibility under any law since states release information about convicted sex offenders to the public. D) should tell the buyers that the home is under contract with another buyer.

The answer is may have a responsibility under state law to inform the buyers of the offender's presence in the neighborhood. While federal law requires all states to release information about known convicted sex offenders to the public, many state laws require active notification to a buyer about a sex offender living in the area. Under fair housing laws, the broker and the seller may not discriminate in the sale of the house against a family with children.

A landlord has discovered that the tenant who has applied for a unit has a history of alcoholism and violence. The landlord A) must rent on a provisional basis as long as the tenant agrees to regular drug testing. B) must rent to the tenant but can charge an additional damage deposit. C) must rent to the violent tenant since alcoholism is covered under disability. D) may refuse to rent to the tenant because of the tenant's history of violence

The answer is may refuse to rent to the tenant because of the tenant's history of violence. Alcoholism is a disability under the law, but the landlord does not have to rent to anyone who might be a danger to the landlord or other tenants. There is no legal requirement for the landlord to rent with additional fees or required drug testing.

When a company furnishes materials for the construction of a house, and the company is NOT paid, it may file a A) default judgment. B) deficiency judgment. C) mechanic's lien. D) lis pendens.

The answer is mechanic's lien. A mechanic's lien gives security to persons or companies that perform labor or furnish material to improve real property and can be filed when the owner has not fully paid for the work. Lis pendens is a recorded notice of a suit that may affect title to real property. A default judgment is granted when a creditor files for unpaid bills and wins the right to place a general lien on all the debtors' property to collect payment. A deficiency judgment is a personal judgment a lender may file against a borrower for the unpaid balance on a mortgage loan when a foreclosure sale has not produced enough cash to pay the loan balance.

A property description states, "Starting at the corner of Ash Street so many feet to 2nd Street," and so forth. This description is most likely a A) metes-and-bounds. B) lot and block. C) government survey. D) rectangular survey.

The answer is metes-and-bounds. This the only legal description which uses a starting point. The rectangular survey system or government survey system divides land into rectangles and describes those rectangles with principal meridians and base lines. The lot and block system uses lot and block numbers referred to in a plat map and is often used in subdivisions.

The lender who provides a real estate loan to a borrower is known as the A) mortgagee. B) optionor. C) mortgagor. D) optionee.

The answer is mortgagee. The lender is the mortgagee. The borrower who receives a loan and in return gives a note and mortgage to the lender is the mortgagor. An optionor is an owner who gives an optionee, a prospective purchaser or lessee, the right to buy or lease the owner's property at a fixed price within a certain period of time.

If the amount realized at a sheriff's sale as part of a mortgage foreclosure is more than the amount of the indebtedness and expenses, then the excess belongs to the A) sheriff's office. B) county. C) mortgagor. D) mortgagee.

The answer is mortgagor. The mortgagor, or borrower, receives any money remaining from a foreclosure sale after paying the debt and any other liens.

A listing broker discovers a latent defect in the home, which the seller has not disclosed on the seller's property disclosure form. The broker A) is not required to disclose defects that the seller does not indicate on the property disclosure form. B) should report the seller to the state real estate commission. C) must disclose the defect to the buyer or the buyer's representative. D) should trust that the buyer's property inspection will discover the defect.

The answer is must disclose the defect to the buyer or the buyer's representative. It is the broker's duty to discover any material facts that may affect the home's value, whether or not they are disclosed by the seller. The material facts must be disclosed to prospective buyers. A buyer's property inspection may not discover a latent defect that a seller does not disclose and does not relieve the agent of the responsibility to disclose the defect.

A broker was told by her principal not to advertise her property in a certain newspaper, which was out of the area. The broker complied because he A) was not intending to advertise the property at all. B) had never advertised in that newspaper anyway. C) is allowed to advertise only in local newspapers. D) must obey the lawful instructions of her principal.

The answer is must obey the lawful instructions of her principal. The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. The seller has a right to advertise in a newspaper of her choice, provided any advertisement does not violate fair housing laws.

A buyer under an executory contract has found numerous inspection issues the seller is unwilling to repair. The seller and the buyer agree to terminate the contract with all things of value returned to each party. This is known as A) mutual rescission. B) specific performance. C) mutual performance. D) liquidated damages.

The answer is mutual rescission. When both parties to a contract are returned to their original position, it is known as mutual rescission. Liquidated damages and specific performance are types of purchase contracts chosen for the remedy for default by one of the parties. Mutual performance is when both parties complete the contract.

A broker is aware that a property near his new listing may have environmental concerns. In this situation, the environmental issues A) need to be disclosed only if they are not obvious and would not be easy for a buyer to discover. B) need to be disclosed because they can impact the value of the listing. C) do not need to be disclosed unless they are within the property's boundaries. D) do not need to be disclosed because issues outside the neighborhood have no impact on value.

The answer is need to be disclosed because they can impact the value of the listing. Environmental issues, both inside and outside property boundaries, may impact value and must be disclosed no matter how obvious they are.

Under the common laws of agency, in a typical agency relationship between broker and client, the broker's commission is determined by A) the top three office producers. B) the Sherman Antitrust Act. C) local real estate boards. D) negotiation in advance.

The answer is negotiation in advance. A broker and client negotiate and determine what commission schedule will apply to the transaction. Commissions are always negotiable. Each brokerage firm may determine its own commission guidelines and suggestions for its salespeople, but the actual commission is negotiated with the client. The Sherman Antitrust Act of 1980 makes it illegal to competing companies or real estate boards to set standard commission rates for brokerage firms.

A broker lists a property for sale at $100,000 with a 5% commission. He later obtains an oral offer from a prospective buyer to purchase the property. The seller indicates to the broker that the offer would be acceptable if it were submitted in writing. Before it can be put in writing, the buyer backs out and revokes the oral offer. In this situation, the broker would be entitled to A) only a partial commission. B) no commission. C) a commission of $5,000. D) the standard rate of commission for the area.

The answer is no commission. The broker only earns a commission with the procuring of a ready, willing, and able buyer who purchases the property on the seller's terms. There is no standard rate of commission for a locality, as commission rates are determined by individual agreements between a broker and client.

According to TRID disclosure rules, when must the Loan Estimate form be provided to consumers? A) No later than three business days prior to the closing B) No later than three business days after the loan application is received by the lender C) No later than three calendar days after the loan application is received by the lender D) No later than three calendar days prior to the closing

The answer is no later than three business days after the loan application is received by the lender. A business day includes Saturdays the lender is open for business.

With a tenancy for years A) the term of the lease must be for at least one year. B) the lessee has a freehold estate. C) a 30-day notice is required to terminate the lease. D) no notice is required to terminate the lease.

The answer is no notice is required to terminate the lease. An estate (tenancy) for years is a leasehold estate that continues for a definite period of time. Because it always has specific beginning and ending dates, no notice is required. A tenancy for years may be for any specified period of time. In a tenancy for years, the lessee has a leasehold estate.

A commercial brokerage firm has hired a local advertising firm to send our email blasts about new listings. In this case all of the following statements are true about the emails EXCEPT A) requests to opt-out must be honored within 10 business days. B) no opt-out method is required for emails sent by a third party. C) the receiver must be able to opt-out for at least 30 days after the message is sent. D) the method to opt-out from receiving future emails must be prominent in the email message.

The answer is no opt-out method is required for emails sent by a third party. The CAN SPAM Act requires an opt-out method for all unsolicited commercial emails. When a licensee uses a third party person or service to send unsolicited emails, the licensee must monitor the emails to ensure that they comply with the Act and have an opt-out in the email. All the other statements are true regarding the CAN-SPAM Act.

A buyer makes an offer on a property and gives the listing agent a check for $1,000 for earnest money. The listing agent deposits the check into his personal account, and a week later, wrote the broker a check from his account to deposit into the broker's trust account. Has the agent fulfilled his fiduciary duty to the client? A) No, because he has commingled funds. B) Yes, if the buyer has given him permission to follow that procedure. C) No, because he has embezzled the funds. D) Yes, if he has followed procedures provided by the broker.

The answer is no, because he has commingled funds. Under the fiduciary duty of accountability, the agent must account for funds received on behalf of the seller. His action violates not only his fiduciary duty, but most license laws require that earnest money deposits be deposited immediately (or within a specific time limit) into the brokerage firm's trust account. Depositing the money into the agent's own checking account is commingling, and it is illegal.

A couple declined to purchase an owner's title policy at closing, but the lender required them to purchase a mortgagee's title policy. Six months after the closing, a man knocked on their door. He explained that he had an ownership interest in the property because his spouse sold the property while he was in another country. The man at the closing table, who said he was the spouse, was not. If the man's claim is true, are the buyers covered under the lender's policy? A) No, because the owner's policy does not protect against forgery. B) No, because the buyers are not covered by the mortgagee's policy. C) Yes, because the mortgagee's policy protects the buyer against forgery. D) Yes, because the closing took place only six months ago.

The answer is no, because the buyers are not covered by the mortgagee's policy. The couple decided not to purchase an owner's title policy, which would have covered them in this situation. The mortgagee's or lender's title policy protects only the lender against the forgery.

A listing salesperson schedules an open house with the sellers. Before the open house, she advises the sellers to place valuable jewelry that is visible in the bedroom into a safe or another secure place. The sellers ignore the salesperson's advice. The morning after the open house, the sellers call the salesperson to inform her that some of their jewelry is missing from the bedroom. Will the salesperson likely be held accountable for the missing jewelry? A) No, because the salesperson advised the sellers to remove or hide all valuables before the open house. B) Yes, because the salesperson is accountable for the money or property of her clients. C) Yes, because the salesperson should have checked every visitor leaving the open house for any stolen valuables. D) No, because the sellers should have watched over their valuables during the open house.

The answer is no, because the salesperson advised the sellers to remove or hide all valuables before the open house. The salesperson has a duty to account for any money or possessions given to her by her clients, and to exercise care in her actions on their behalf. Because she advised them to remove the jewelry, she has fulfilled her duty to them. In most cases, sellers will not be present during an open house. It is not reasonable and may not be lawful for the salesperson to search visitors leaving the open house.

A store owner has operated a neighborhood grocery store for the last 30 years. Her store is the only retail property in the area which is zoned residential. The store is an example of a(n) A) nonconforming use. B) illegal enterprise. C) violation of the zoning laws. D) variance of the zoning laws.

The answer is nonconforming use. A nonconforming use is the legal use that existed prior to current zoning ordinances but no longer conforms to current zoning laws. The grocery store operated prior to current zoning ordinances and is legally permitted to operate as a nonconforming use. A variance is permission for a use expressly prohibited by zoning ordinances.

A store owner has operated a neighborhood grocery store for the last 30 years. Her store is the only retail property in the area which is zoned residential. The store is an example of a(n) A) variance of the zoning laws. B) nonconforming use. C) illegal enterprise. D) violation of the zoning laws.

The answer is nonconforming use. A nonconforming use is the legal use that existed prior to current zoning ordinances but no longer conforms to current zoning laws. The grocery store operated prior to current zoning ordinances and is legally permitted to operate as a nonconforming use. A variance is permission for a use expressly prohibited by zoning ordinances.

A town enacts a new zoning code. Under the new code, commercial buildings are not permitted within 1,000 feet of a nearby lake. A commercial building built years before on the lakeshore but permitted to continue in its former use operates as a(n) A) special use. B) nonconforming use. C) variance. D) adverse possession.

The answer is nonconforming use. Nonconforming use permits allow uses existing before zoning restrictions were enacted prohibiting those uses. A municipality may allow the uses to continue for a specified length of time and with a limited right of transfer to later buyers. A variance is permission for a property use expressly prohibited by zoning ordinances. A special use or conditional use is permission to use a property for a related but nonconforming use for the public good. Adverse possession is not related to zoning issues but refers to the open, hostile, and continuous possession of another's property.

Three years ago a couple moved from the house they had owned for 20 years but did not sell it. They decided to travel and bought a mobile home as their residence. They now decide to sell the house. How much of their capital gain on the house will be taxable? A) None of it, if the capital gain is less than $500,000. B) 15%, depending on their tax bracket. C) 28%, depending on their tax bracket. D) All of it, if the capital gain is over $500,000.

The answer is none of it, if the capital gain is less than $500,000. Federal law requires that the couple must have lived in the house for two out of the last five years to receive the $500,000 exemption from capital gains tax. The couple lived in the house for two years before they purchased the mobile home three years ago. The couple qualifies for the capital gain exception of $500,000.

A couple makes a written request that a real estate brokerage firm not contact the seller once the sale of their home is completed. Under this circumstance, the broker may A) contact the seller to conduct a consumer survey about the transaction. B) contact the seller for up to 18 months after the transaction. C) not contact the seller at any time. D) contact the seller for up to 3 months after the transaction.

The answer is not contact the seller at any time. If a consumer asks a company not to call, even if the company has an established business relationship with the consumer, the company must abide by the consumer's request. The request says in effect for 5 years. If a consumer does not make such a request, a broker may contact the consumer for up to 18 months after the consumer's last purchase, delivery, or payment. The broker may call a consumer for up to 3 months after the consumer makes an inquiry or submits an application.

A tenant has an estate for years. According to the written one-year lease, the tenancy will expire on May 1. To obtain possession after May 1, the landlord A) must give the tenant 15 days' notice. B) is not required to give the tenant any notice. C) must give the tenant 60 days' notice. D) must give the tenant 30 days' notice.

The answer is not required to give the tenant any notice. Notice is not required to terminate an estate for years because the lease agreement states a specific expiration date. When the date comes, the lease expires, and the tenant's rights are terminated.

The unfinished area of a single family home is that area A) entirely above grade or ground level. B) wholly or partially below grade. C) not suitable for year-round use. D) suitable for year-round use.

The answer is not suitable for year-round use. An area suitable for year-round use is considered a finished area. The area of the house that is entirely above grade or ground level is above grade. The area of a house that is wholly or partially below grade is below grade.

A new contract that transfers all rights and liabilities is a(n) A) novation. B) subordination. C) option. D) assignment.

The answer is novation. In a novation a new contract is used to replace the original contract. Subordination is used in recording to keep liens in place. An assignment is the transfer of contract duties but not liabilities. An option is a contract that exchanges a promise for performance.

A deed of trust differs from a mortgage in the A) obligation of the borrower to repay the funds. B) time period permitted to cure a default. C) number of parties involved in the loan. D) redemption rights allowed after foreclosure.

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.

Before the buyer signs a buyer agency contract, a real estate professional must do all of the following EXCEPT A) inform the buyer of the charges or compensation for services. B) explain the forms of agency available. C) obtain financial information from the buyer. D) describe specific services to be provided.

The answer is obtain financial information from the buyer. Once the buyer representation contract is signed, not before, the real estate professional should obtain detailed financial information from the buyer. State regulations require that real estate professionals inform the buyer of all types of agency available, the broker's compensation requirements, and the services that the broker will provide under the agreement.

A broker has found a buyer for a seller's home. The buyer has indicated in writing a willingness to buy the property by signing a written agreement. The seller is out of town for the weekend, and the broker has been unable to inform the seller of the signed document. At this point, the buyer has signed a(n) A) voidable contract. B) implied contract. C) executory contract. D) offer.

The answer is offer. A form that offers to buy property but has not been seen or acted on by the property owner is simply an offer. Even if the offer had been for full price, no contract or agreement would yet exist, and the offeror (buyer) would have no claim on the offeree (seller).

A real estate professional has found a buyer for a seller's home. The buyer has indicated in writing a willingness to buy the property for $1,000 less than the asking price and has deposited $5,000 in earnest money with the real estate professional. The seller is out of town for the weekend, and the real estate professional has been unable to inform the seller of the signed document. At this point, the buyer has a(n) A) voidable contract. B) implied contract. C) offer. D) executory contract.

The answer is offer. Until the seller accepts the offer and the buyer is notified of the acceptance there is no contract only an offer.

The listing contract on a residential property states that it expires on May 2. Which event would NOT terminate the listing? A) The owner dies on April 29. B) On April 15, the owner tells the listing broker that the owner is dissatisfied with the broker's marketing efforts. C) The contract is not renewed prior to May 2. D) The house is destroyed by fire on April 25.

The answer is on April 15, the owner tells the listing broker that the owner is dissatisfied with the broker's marketing efforts. A mere complaint to the broker by the principal does not end the listing, whereas expiration of the listing with no renewal, death of the owner, or destruction of the property would end the listing.

In most real estate brokerage firms, a real estate salesperson may expect to work A) for two principal brokers at the same time. B) a minimum forty-hour week. C) on salary with an employee benefit plan. D) on a commission based on the salesperson's productivity.

The answer is on a commission based on the salesperson's productivity. Most brokers hire salespersons as independent contractors with a commission payment plan based on the salesperson's participation in sales and/or rentals. A broker may not pay an independent contractor any company benefits, or mandate regular work hours or meetings for the independent contractor. A salesperson may work only for one principal broker at a time.

In order to ensure that future real estate taxes will be paid by a borrower, lenders may require a borrower to A) obtain title insurance. B) submit paid tax receipts. C) sign a note. D) pay tax funds into an escrow account.

The answer is pay tax funds into an escrow account. An escrow account, or impound account, is a reserve fund into which a borrower deposits funds to cover the amount of unpaid real estate taxes and insurance premiums. The lender will make tax and insurance payments on the borrower's behalf. A borrower signs a promissory note obligating the borrower to repay the loan. Title insurance protects the borrower from covered defects in the chain of title.

Under which of the following listing agreements can owners of listed property sell the property on their own without having to pay the listing broker a commission? A) Open listing and exclusive agency listing B) Exclusive right-to-sell listing and exclusive agency listing C) Open listing only D) Exclusive agency listing only

The answer is open listing and exclusive agency listing. In an exclusive agency listing, one brokerage is authorized to act as the exclusive agent of the principal. However, the seller retains the right to sell the property without obligation to the brokerage. In an open listing, the seller retains the right to employ any number of brokers to sell the property. In an open listing, the seller is obligated to pay the listing broker a commission only if the listing broker is the procuring cause of the sale. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property.

The type of listing contract that provides the LEAST protection for the listing broker is the A) net listing. B) open listing. C) exclusive agency listing. D) exclusive right-to-sell listing.

The answer is open listing. In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A broker entering into an open listing should negotiate terms in writing that specify a commission due the broker if the broker is the procuring cause of a sale. An exclusive agency listing authorizes a broker to act as sole agent of the seller, but the seller may sell the property without the broker and without paying the broker a commission. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged but illegal in many states.

Fannie Mae is an agency that A) operates mostly in the primary mortgage market. B) operates mostly in the secondary mortgage market. C) buys mostly FHA loans. D) guarantees payment of Freddie Mac mortgages.

The answer is operates mostly in the secondary mortgage market. Fannie Mae provides a secondary market for mortgage loans. Fannie Mae does buy FHA loans but deals primarily in conventional loans. Fannie Mae does not provide loans in the primary mortgage market or guarantee payment of loans.

A contract in which one party purchases the right to buy at a fixed price within a specified period is a(n) A) lease contract. B) listing contract. C) purchase contract. D) option contract.

The answer is option contract. An option is a unilateral contract binding on the seller with an obligation to sell for a set price if the buyer decides to buy. Typically, if the buyer does not buy the seller will keep the option fee, which the amount of was set by the option contract. A listing, lease, and purchase contract are all bilateral contracts.

An investor 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. The investor should try to negotiate a(n) A) option. B) purchase money mortgage. C) purchase agreement. D) contract for deed.

The answer is 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 a homeowner with an existing mortgage gets a home equity loan to consolidate existing credit card loans, the A) home equity loan amount is added to the existing mortgage balance. B) home equity loan takes a senior position to the original mortgage. C) original mortgage loan remains in place. D) lender will usually require the homeowner to refinance the existing mortgage.

The answer is original mortgage loan remains in place. Home equity loans are a source of funds using the equity built up in a home and are an alternative to refinancing an existing mortgage. The original mortgage loan remains in place, and the home equity loan takes a junior position to the original mortgage lien. The home equity loan is a separate loan contract, with its own balance and repayment schedule.

The principal distinction between the primary mortgage market and the secondary mortgage market is in the A) origination versus the purchase of mortgage loans. B) use of mortgages versus the use of deeds of trust. C) use of discount points versus the use of origination fees. D) insuring versus the guaranteeing of mortgage loans.

The answer is origination versus the purchase of mortgage loans. Loans are originated in the primary mortgage market and bought and sold in the secondary mortgage market after they have been funded. The use of mortgages or deeds of trust is determined by state law. Insuring, guaranteeing, and use of discount points and loan origination fees all occur in the primary lending market.

A life estate conveys to the life tenant A) a reversionary interest. B) a periodic tenancy. C) a legal life estate. D) ownership for life.

The answer is ownership for life. A conventional life estate is a freehold estate that lasts as long as the life of the life tenant. A conventional life estate occurs by a voluntary agreement of two parties. A legal life estate arises out of law, such as a spouse's dowry rights when the other spouse dies. A periodic tenancy is a less-than-freehold estate that creates the right of possession of a property from year to year. A reversionary interest exists when the creator of a life estate reserves for himself a fee simple estate once a life estate ends.

The law of agency is a common-law concept. As common-law, it is A) enacted by a legislatures and other governing bodies. B) part of a body of law established by tradition and court decisions. C) a legal doctrine that is formed from common sense and usual practices. D) may not be superseded by statutory law.

The answer 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.

The component of an adjustable-rate mortgage (ARM) that sets the maximum amount the borrower will have to pay for a mortgage payment is the A) periodic rate cap. B) life-of-the loan rate cap. C) payment cap. D) margin.

The answer is payment cap. The payment cap sets the maximum amount a borrower will have to pay for a mortgage payment in the term of an ARM. The periodic rate cap limits the amount an ARM's interest rate may change over a specific period of time, usually a year. The life-of-the loan rate cap limits the amount the interest rate may increase over the entire life of an ARM. The margin is the premium added to the index rate to adjust an ARM's current interest rate.

A tenant enters into a commercial lease that requires a monthly rent of a minimum fixed amount, plus an additional amount determined by the tenant's gross receipts exceeding $5,000. This type of lease is called a A) index lease. B) net lease. C) percentage lease. D) fixed lease.

The answer is percentage lease. When a business tenant pays rent that varies with the tenant's gross business receipts, the arrangement is called a percentage lease. In such a situation, the landlord shares in the tenant's business risk because of the possibility of receiving no more than the minimum fixed amount. In a fixed lease, the tenant pays a fixed monthly amount, and the landlord pays the expenses of ownership. Index leases increase or decrease the rent amount paid based upon pre-agreed to index—typically, the lease is tied to the consumer price index. With a net lease, the tenant pays a base rent plus certain costs in the operation of the property, such as utilities, property taxes, and assessments. The landlord may pay some property expenses.

A prospective buyer looking to build on a vacant lot asks his salesperson if a septic tank could be built on the lot. The salesperson may suggest that the buyer conduct a A) percolation test. B) septic soil test. C) hydroponics test. D) topography test.

The answer is percolation test. A percolation test determines how quickly the ground will absorb water and would be conducted to determine if a septic tank could be installed on the lot. A septic tank can be installed only if the soil has the ability to absorb and drain water. Hydroponic refers to a method of growing plants in water rather than in soil and is not related to septic tank installation.

With a construction loan the borrower makes A) periodic payments of interest during the construction period. B) principal payments only during the construction period. C) constant payments of principal and interest during the construction period. D) monthly payments of interest and part of the principal.

The answer is periodic payments of interest during the construction period. A construction loan is a type of non-amortized loan in which periodic interest payments are made to the lender but nothing is applied during the construction period to the principal balance. When the construction is complete, the borrower must secure long-term financing that will pay off the entire principal balance.

A fixed-rate home loan that is fully amortized according to the original payment schedule A) cannot be sold in the secondary market. B) has an interest rate that fluctuates based on an economic index. C) permits the borrower to pay the same amount each payment period. D) requires a monthly payment amount that fluctuates each month.

The answer is permits the borrower to pay the same amount each payment period. A fully amortized loan is a level-payment loan, with the same amount being paid by the borrower each payment period (usually monthly). The loan can be sold in the secondary market. An adjustable-rate mortgage has an interest rate that in fluctuates based on an economic index.

A listing contract is BEST described as a(n) A) property management contract. B) personal service contract. C) sales contract. D) escrow contract.

The answer is personal service contract. A listing is a personal employment contract between brokers and their clients 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.

A person who assumes an existing mortgage loan is A) generally released from liability, but not always. B) personally responsible for paying the principal balance. C) not in danger of losing the property by default. D) not personally liable for the repayment of the debt.

The answer is personally responsible for paying the principal balance. A buyer who purchases property and assumes the seller's debt becomes personally obligated for the payment of the entire debt. If the buyer defaults on the loan the buyer is in danger of losing the property.

Which of the following would be classified as external depreciation? A) A poorly designed floor plan that could be modified B) Convenient access to schools and recreational facilities C) A leaking roof that needs to be completely replaced D) Poorly maintained properties in the neighborhood

The answer is poorly maintained properties in the neighborhood. External depreciation is caused by factors not on the subject property, such as poorly maintained properties in the neighborhood. A leaky roof is an example of physical deterioration. A poorly designed floor plan is an example of functional obsolescence. Convenient access to schools and recreational facilities are examples of good features that may add to the desirability of a neighborhood. Reference: Valuation and Market Analysis > Methods of Estimating Value/Appraisal Process

The provision in a mortgage or deed of trust that permits the lender upon the default of the borrower to proceed to a foreclosure sale without a court action is the A) alienation clause. B) acceleration clause. C) hypothecation. D) power-of-sale clause.

The answer is power-of-sale clause. A power-of-sale clause in a mortgage permits the lender to foreclose and sell a mortgaged property that is in default without any court action. An acceleration clause permits the lender to demand payment of a loan balance immediately when a buyer defaults on mortgage payments. An alienation clause permits the lender to require payment of a loan balance when a buyer sells the property to another purchaser. Hypothecation is the pledging of specific real property as security for a debt while maintaining possession of the property.

When the supply decreases while demand remains the same A) demand tends to drop. B) demand tends to rise. C) price tends to rise. D) price tends to drop.

The answer is price tends to rise. Under the laws of supply and demand, if supply of a commodity decreases with demand remaining the same or increasing, the price of a commodity increases. Prices tend to drop if the demand for the commodity decreases while the supply remains the same or increases.

A broker was accused of violating antitrust laws. Of the following, he was MOST likely accused of A) not having an equal housing opportunity sign in her office window. B) undisclosed dual agencies. C) blockbusting in a community. D) price-fixing.

The answer is price-fixing. Antitrust laws prohibit competing brokers from setting a standard commission rate, a practice known as price-fixing. Practicing undisclosed dual agency would violate agency law. Not posting the required fair housing sign in her office violates fair housing law. Blockbusting is violating fair housing laws not antitrust laws.

A broker was accused of violating antitrust laws. Of the following, he was MOST likely accused of A) undisclosed dual agencies. B) price-fixing. C) not having an equal housing opportunity sign in her office window. D) blockbusting in a community.

The answer is price-fixing. Antitrust laws prohibit competing brokers from setting a standard commission rate, a practice known as price-fixing. Practicing undisclosed dual agency would violate agency law. Not posting the required fair housing sign in her office violates fair housing law. Blockbusting is violating fair housing laws not antitrust laws.

Brokerage commissions charged to sellers in listing contracts for the sale of real property are MOST typically set by the A) brokerage firm and board of REALTORS®. B) negotiation between local brokerage firms. C) principal broker then negotiated with the seller. D) state Commission and the principal broker negotiations.

The answer is principal broker then negotiated with the seller. The principal broker has the right to set the minimum commission for the firm and then the broker associates and salespeople can negotiate the level of commission they need to complete the job as created by the listing contract. The Commission, local firms, and the board of REALTORS® may not be a party to the firm's commission decision or negotiations.

Brokerage commissions charged to sellers in listing contracts for the sale of real property are MOST typically set by the A) state Commission and the principal broker negotiations. B) negotiation between local brokerage firms. C) brokerage firm and board of REALTORS®. D) principal broker then negotiated with the seller.

The answer is principal broker then negotiated with the seller. The principal broker has the right to set the minimum commission for the firm and then the broker associates and salespeople can negotiate the level of commission they need to complete the job as created by the listing contract. The Commission, local firms, and the board of REALTORS® may not be a party to the firm's commission decision or negotiations.

A lender's interest in a mortgage loan with a high LTV (loan-to-value) ratio is protected by obtaining additional security from A) private mortgage insurance. B) the borrower's note. C) title insurance. D) impound accounts.

The answer is private mortgage insurance. Loans over an 80% LTV are more risky and will typically require PMI (private mortgage insurance). With PMI, the borrower purchases an insurance policy that provides the lender with funds in the event that the borrower defaults on the loan. Title insurance protects a lender or buyer from defects in the chain of title. The borrower's note is a promise to repay the loan. Impound accounts hold buyers' funds for property insurance and taxes which the lender pays on behalf of the buyer.

When property is owned in severalty, the A) property owner may sell, will, or lease the property to another person. B) property may be owned by more than one person. C) property may not be owned by spouses. D) owner cannot be a corporation.

The answer is property owner may sell, will, or lease the property to another person. Property owned in severalty is owned by one person. The owner may be an individual or a corporation and has sole discretion to transfer the use or ownership of the property to another person. Spouses may own separate property in severalty.

Involuntary alienation occurs when a A) property owner grants a neighbor the right to use a well on his land. B) property owner sells a property to pay off debts. C) property owner sells a parcel of land to the zoo. D) property owner's land is sold for delinquent taxes.

The answer is property owner's land is sold for delinquent taxes. Involuntary alienation occurs when title to property is transferred without the owner's consent. Involuntary transfers of property are usually carried out by an operation of law and can include having the property sold to satisfy delinquent taxes. Voluntary alienation is the legal term for a voluntary transfer of title when an owner sells property or gives the property to another. The property owner who grants a neighbor access and use of a well has granted a license to the neighbor, which is the revocable right to use the land for a specific purpose for a limited time period.

The loan-to-value ratio (LTV) may be defined as the ratio of a mortgage loan principal to the A) listed price of the property. B) property's value. C) interest rate on the loan. D) assessed value of the property.

The answer is property's value. Mortgage loans are generally classified based on their LTV, which is the ratio of the mortgage loan principal to the value of the property. The value the lender will use is the sales price or the appraised value, whichever is less.

The purpose of a mortgage is to A) restrict the borrower's use of the property. B) provide security for a loan. C) convey title of the property to a lender. D) create a lien on the property.

The answer is provide security for a loan. A mortgage is a financing instrument by which real estate is used as security, or collateral, for a debt. A restrictive covenant may limit a borrower's use of a property. While a mortgage does create a lien on the property, the lien is removed when the lender records satisfaction of the mortgage in the public record.

The majority of the terms for closing are established by the A) purchase contract. B) deed of trust. C) escrow agent. D) title company.

The answer is purchase contract. The purchase contract establishes the terms of closing with additional items being added by the escrow or settlement company. A deed of trust creates a lien when money is loaned on the property.

The defeasance clause in a mortgage requires the mortgagee to execute a(n) A) partial release agreement. B) assignment of mortgage. C) subordination agreement. D) satisfaction of mortgage.

The answer is satisfaction of mortgage. A defeasance clause requires the lender to execute a satisfaction, also known as a release or discharge, when the note has been fully paid. Satisfaction of the mortgage returns to the borrower all interest in the real estate originally conveyed to the lender. A mortgagee may assign a note to a third party, such as investor or another mortgage company (the assignee). When the debt is paid in full, the assignee is required to execute the satisfaction of the mortgage.

A couple purchased a residence for $195,000. They made a down payment of $25,000 and agreed to assume the seller's existing mortgage, which had a current balance of $123,000. The buyers financed the remaining $47,000 of the purchase price by executing a mortgage and note to the seller. The type of loan, in which the seller becomes the mortgagee, is called a A) balloon note. B) purchase money mortgage. C) reverse mortgage. D) package mortgage.

The answer is purchase money mortgage. A purchase money mortgage is created when a seller agrees to finance all or part of the purchase price. In this case the seller agrees to finance $47,000 of the purchase price and takes back a mortgage and note from the buyer. The term purchase money mortgage can mean either owner financing or any mortgage used as acquisition debt in the purchase of a property. Here the owner-seller took back a mortgage for $47,000. An owner take back is a purchase money mortgage. In a package mortgage, a borrower secures a loan with both real and personal property. A balloon note includes a final payment called a balloon payment that is larger than the periodic payments made on the note. A reverse mortgage is created when the bank makes payments to an older home owner who wants to stay in the home but take advantage of equity.

A buyer makes an offer to purchase a certain property listed with a real estate professional and leaves an earnest money deposit to show good faith. The offer is accepted. The real estate professional should A) give the deposit to the seller when the offer is presented. B) put the deposit in a trust account, as provided by state law. C) put the deposit in the real estate professional's personal checking account. D) immediately apply the deposit to the listing expenses.

The answer is put the deposit in an account, as provided by state law. Once an offer becomes an accepted contract the earnest money must be deposited in a trust account per rules of the state law.

Funds for Federal Housing Administration (FHA) loans are usually provided by A) the Federal Reserve. B) qualified lenders. C) the FHA. D) the seller.

The answer is qualified lenders. An FHA loan is insured by the FHA, and funds must be made available by FHA-approved lenders. Funds are not provided by the Federal Reserve, the FHA, or the seller.

The Civil Rights Act of 1866 prohibits any limitation of property rights based on A) sex. B) religion. C) race. D) handicap.

The answer is race. The federal government's effort to guarantee equal housing opportunities to all U.S. citizens began with the passage of the Civil Rights Act of 1866. This law prohibits any discrimination based on race. Religion, sex, and handicap are protected classes under federal fair housing laws enacted in 1968 and 1988.

The financial return on investment in a property is known as the A) equity. B) interest. C) rate of return. D) principal.

The answer is rate of return. The rate of return, usually expressed as a percentage, is the financial return on the initial investment or the appraised value of a property. The principal is the balance owed on the original loan amount. Interest is the sum paid or accrued in return for the use of a lender's money. An owner's equity is the amount of money remaining once current liens, including the mortgage, are subtracted from the current market value of the property. Reference: Financing > General Concepts

A formal estimate of a property's market value, based on established methods and using a licensed professional, is performed by a A) real estate appraiser. B) real estate counselor. C) home inspector. D) real estate broker.

The answer is real estate appraiser. Although brokers, counselors, and inspectors also look closely at a specific property, only a licensed appraiser is qualified to produce a formal opinion of value—an appraisal. State and federal laws require licensure and classification of real property appraisers based on their education and experience.

Which tax targets homeowners in particular? A) Personal property tax B) Sales tax C) Real property tax D) Luxury tax

The answer is real property tax. A real property tax (ad valorem tax) taxes homeowners on the value of their real estate. A sales tax is a tax on the price of an item purchased. A personal property tax (such as the tax on a boat) is a tax levied by a government entity on personal property. A luxury tax is a tax levied on expensive, luxury items other than real estate.

A salesperson is working with a young married couple expecting a child who are buying their first home. The couple has found a home they want to make and offer on and in completing the offer the salesperson explains the options for taking title and then asks how the couple wants to take title. The couple states they are still not sure what will be best for them and their family. The salesperson should A) leave the form blank to be completed by the title company. B) recommend they speak to an attorney. C) recommend they take title as joint tenants with right of survivorship. D) recommend they take title as tenancy in common.

The answer is recommend they speak to an attorney. A real estate professional may not recommend how title should be taken. Suggesting the buyer's speak to an attorney who can advise them is part of the obligations of competent real estate professionals.

After real estate has been sold by the state or county to satisfy a delinquent property tax lien, if state law permits, the defaulted owner has a right to A) record a notice of non-responsibility for the unpaid taxes. B) redeem the property within the time specified by the law. C) pay the creditors directly and have their liens removed. D) have the sale canceled by paying the back taxes and penalties.

The answer is redeem the property within the time specified by law. Generally, a delinquent taxpayer can redeem the property before the tax sale by paying the delinquent taxes plus interest and charges (court costs and attorney fees). This right is known as the equitable right of redemption. After the real estate has been sold, the defaulted owner may redeem the property by paying the amount collected at the tax sale plus interest, charges, and any taxes levied since the sale. This right is known as the statutory right of redemption.

All of the following are typically prorated at closing EXCEPT A) water. B) security deposits. C) property taxes D) rent.

The answer is security deposits. Security deposits are transferred in full from the seller to the buyer to hold for the tenants.

It is necessary to calculate a dollar value for depreciation when using which of the following? A) The income approach to value B) Gross rent multipliers C) The sales comparison approach to value D) The cost approach to value

The answer is the cost approach to value. One of the components of the cost approach is the calculation of depreciation caused by wear and tear, functionality of items, or outside influences. The calculation is not used in the sales comparison or income approaches to value. A gross rent multiplier is used in the income approach to value for one-to-four residential rental properties.

After real estate has been sold by the state or county to satisfy a delinquent property tax lien, if state law permits, the defaulted owner has a right to A) pay the creditors directly and have their liens removed. B) record a notice of non-responsibility for the unpaid taxes. C) have the sale canceled by paying the back taxes and penalties. D) redeem the property within the time specified by the law.

The answer is redeem the property within the time specified by the law. Generally, a delinquent taxpayer can redeem the property before the tax sale by paying the delinquent taxes plus interest and charges (court costs and attorney fees). This right is known as the equitable right of redemption. After the real estate has been sold, the defaulted owner may redeem the property by paying the amount collected at the tax sale plus interest, charges, and any taxes levied since the sale. This right is known as the statutory right of redemption. These terms also used in the foreclosure process used with mortgages or deeds of trust.

All of the following actions are illegal under federal and state fair housing laws EXCEPT A) channeling members of a certain minority group into an area already predominately occupied by members of that minority. B) refusing to show certain residential property to people who are not financially qualified to purchase it. C) offering advantageous loan terms to encourage the integration of a residential area. D) refusing to show certain residential property to non-English-speaking individuals.

The answer is refusing to show certain residential property to people who are not financially qualified to purchase it. People who are not financially qualified to buy are not protected under the federal Fair Housing Act. The Act does prohibit discriminating against persons based on their race or ethnicity or steering persons to a particular area based on their minority status. Lenders may not steer racial or ethnic groups to a particular residential area through loan terms designed to attract those groups.

An owner conveys a life estate to her grandson and stipulates that on her death the estate will pass to her son-in-law. The son-in-law has a(n) A) reversionary interest. B) legal life estate. C) estate for years. D) remainder interest.

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.

Zoning ordinances normally define specific uses for land that are permitted within a municipality. All of the following are land uses traditionally classified in such ordinances EXCEPT A) residential. B) rental. C) commercial. D) industrial.

The answer is rental. Zoning ordinances have traditionally classified land use into residential, commercial, industrial, and agricultural and do not include rental as one of the classifications. Rental refers to a type of property use and ownership, a leasehold, rather than a usage of the land.

What action returns a contract's parties to their positions before the contract, including return of any deposit? A) Cancellation B) Rescission C) Substitution D) Subordination

The answer is rescission. A rescission occurs when one party cancels or terminates the contract as if it had never been made. Cancellation terminates the contract without a return to the original position. Substitution is an appraisal principle of value. Subordination is used as place holder and indicates a mortgage or other interest will not move in front of a newer recording.

A broker listing an older home secures his own property inspection to discover any defects in the property. The inspection reveals that water has been seeping into the basement and the crawl space beneath the house for years. What should the broker advise the seller to do? A) Tell buyers that any drainage problems have been corrected B) Hide the problem as much as possible to get the best price from a buyer C) Reveal the problem on the property disclosure form D) Leave the discovery of the problem up to the buyers

The answer is reveal the problem on the property disclosure form and expect that the problem will affect how much buyers are willing to offer for the house. The seller has a duty to discover and disclose any known defects that threaten structural soundness or personal safety. A broker must disclose any known material fact to a buyer or a buyer's agent. A buyer's property inspection does not relieve the seller or the broker of the duty to disclose the problem to the buyer.

A couple purchased a home for cash over 25 years ago. Today they receive monthly checks from a lender that supplement their retirement income. The couple MOST likely have obtained a(n) A) adjustable-rate mortgage. B) reverse mortgage. C) home equity loan. D) interest-only loan.

The answer is reverse mortgage. A reverse mortgage allows people 62 or older to borrow money against the equity they have built in their home. The borrower is charged a fixed rate of interest and no payments are due until the property is sold or the borrower defaults, moves, or die. Adjustable-rate mortgages and interest-only loans require payments on the loans and do not provide any income to the borrower during the life of the loan. In a home equity loan, a borrower uses the equity built up in the home as a source of cash; the original mortgage remains in place, with the home equity loan being junior to the original lien.

A homeowner 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 her the funds to make the necessary repairs? A) Home equity loan B) Reverse-mortgage C) Open-end loan D) Blanket loan

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 borrowers are given a limit up to which they may borrow, with each advance secured by the same mortgage.

A borrower defaulted on a loan and the lender foreclosed. The lender obtained the property, which sold for less than what the borrower owed. In this case the lender may A) file for a default judgment and attach all the borrower's real and personal property. B) do nothing since the property has gone through foreclosure. C) start a new foreclose suit to collect the balance due from the borrower. D) seek a deficiency judgment, which can be used to collect the balance owed.

The answer is seek a deficiency judgment which can be used to collect the balance owed. After the buyer defaulted and the loan has been foreclosed, lenders may seek deficiency judgments.

A land contract, contract for deed, or installment contract has been reached between the seller and buyer. It MOST likely means that the A) mortgagor finances the property and retains title until the final payment is made by the mortgagee. B) buyer finances the property and retains title until the final payment is made by the seller. C) seller finances the property and retains title until the final payment is made by the buyer. D) mortgagee finances the property and retains title until the final payment is made by the mortgagor.

The answer is seller finances the property and retains title until the final payment is made by the buyer. In a land contract, the seller will finance the property and retain title until final payment from the buyer is made. Mortgagor/borrower and mortgagee/lender are used when a mortgage is being used not a land contract. Reference: Financing > Types of Loans and Sources of Loan Money

A purchaser makes a 10% down payment on a house and acquires an 80% first mortgage from a lender. The seller takes back a purchase money mortgage from the buyer for the remaining 10%. In this arrangement, the A) seller retains possession of the property and transfers equitable title to the buyer. B) buyer takes possession and the seller will deliver title upon the last payment. C) seller delivers a home equity line of credit to the buyer at closing. D) seller has financed a portion of the purchase price and placed a junior lien on the property.

The answer is seller has financed a portion of the purchase price and placed a junior lien on the property. A purchase money mortgage is usually used to fill a gap between a buyer's down payment and a new first mortgage, as in this case in which the buyer is not able to make a full 20% down payment. The seller agrees to finance part of the purchase price (10% in this case) and records the purchase money mortgage against the property creating a lien on the property. The buyer gains possession of the property and legal title to the property. In a contract for deed the buyer would take possession but not have legal title until paying the seller the final payment.

An option to purchase binds which of the following parties? A) Neither buyer nor seller B) Both buyer and seller C) Seller only D) Buyer only

The answer is seller only. An option contract is a unilateral contract in which the seller agrees to sell the property at a set price in the future if the buyer decides to buy.

An option to purchase binds which of the following parties? A) Seller only B) Neither buyer nor seller C) Buyer only D) Both buyer and seller

The answer is seller only. In an option the seller has agreed to not sell the property to anyone else and to give the buyer the right to sell during the option period. The potential buyer (optionee) who purchases an option to purchase is not bound to purchase the property. However, should the buyer decide to exercise the option, the seller is bound to proceed with the sale in keeping with all the details contained in the option. Once the option is accepted the buyer and seller move forward with a bilateral purchase contract.

Before a buyer makes an offer on a property, the buyer should have received and read the A) independent contractor agreement. B) seller's property disclosure form. C) broker policy manual. D) general warranty deed.

The answer is seller's property disclosure form. The buyer should receive and read a seller's property disclosure statement before making an offer on a property. The independent contractor agreement establishes the employment relationship between a broker and salesperson and is not read by the buyer. The broker policy manual provides policies and procedures for the brokerage firm and is not a document usually provided to buyers. The general warranty deed fully warrants good clear title to the premises.

The final decision on a property's listing price should be made by the A) seller. B) appraiser. C) listing broker. D) seller's attorney.

The answer is seller. The seller must determine the listing price of the seller's property. It is the responsibility of the broker to advise and assist the seller in making that decision. A broker or salesperson may use a competitive market analysis (CMA) to help the seller determine a reasonable listing price.

The seller has completed a property disclosure for an "as is" sale, which states all items are in working order. After closing the buyer finds out the sewer system has had long-term problems. The person or persons MOST likely to be held responsible for the misrepresentation is the A) buyer's broker. B) listing broker and seller. C) no one since it is an "as is" sale. D) seller.

The answer is seller. The seller must disclose all materials facts on all sales. "As is" simply means the seller is not repairing issues, not that the seller has no obligation to disclose them.

Under a contract for deed or installment contract, the legal title to the property is held by the A) seller/vendor. B) buyer/vendee. C) seller/vendee. D) buyer/vendor.

The answer is seller/vendor. A contract for deed or installment contract is also known as a land contract. Under the contract, the buyer/vendee holds equitable titles and agrees to make a down payment and a monthly loan payment that includes interest and principal. The seller/vendor retains legal title to the property during the contract term.

Neighbor A uses Neighbor B's driveway to reach A's garage, which is on their property. B's attorney explains that ownership rights of A's real estate includes an easement appurtenant giving them the right to use B's driveway. In this case, B's property is the A) servient tenement. B) leasehold interest. C) dominant tenement. D) licensed property.

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. B's property is the servient tenement, and A's is the dominant tenement. The easement does not create a leasehold estate. A license is a personal privilege with permission from a landowner to enter the land for a specific purpose.

All of the following are true of the government's police power EXCEPT A) set private controls in certain subdivisions on the types of floor plans, fencing, and house colors. B) take private land if the public will benefit from the taking. C) it is used to ensure the health, safety, and welfare of the community. D) set land use policy to demonstrate the authority of the state.

The answer is set private controls in certain subdivisions on the types of floor plans, fencing, and house colors. The government's right of police power is used to ensure health, safety, and welfare within a community along with setting land use policy and the right to take private land for public use or benefit. Government rights do not include the private right to control issues within only certain neighborhoods; these are known as deed restrictions and are usually set by the original developer.

Which of the following terms refers to sole ownership by one person? A) Severalty B) Tenancy by the entirety C) Tenancy in common D) Community property

The answer is severalty. Severalty ownership is ownership by one person severed and cut-off from all others. Tenancy in common and tenancy by the entirety are forms of joint ownership. Community property is personal or real property belonging to spouses according to state laws.

All of the following are protected under federal fair housing laws EXCEPT A) Baptists. B) Muslims. C) sexual orientation. D) children.

The answer is sexual orientation. Sexual orientation may be protected under state or local fair housing laws, but sexual orientation is not a protected class under federal law. Protected classes under federal law include: race, color, religion, or national origin, sex, disability, and familial status.

A buyer's agent duty of care to a buyer includes all of the following EXCEPT A) sharing with a listing agent that the buyer is willing to pay more for the property. B) helping the buyer to evaluate a seller's counteroffer. C) evaluating neighborhood and property conditions. D) helping the buyer to locate a suitable property.

The answer is sharing with a listing agent that the buyer is willing to pay more for the property. Sharing with a seller how much a buyer is willing to pay for a property violates the buyer's agent's duty of care and confidentiality to the buyer-client. All of the other activities are examples of a buyer's agent exercising the duty of care for the buyer.

The income approach to value would be MOST important in the appraisal of a A) single-family residence. B) shopping center. C) residential condominium. D) vacant residential lot.

The answer is shopping center. The income approach would be used to estimate the value of income-producing properties, such as shopping centers and office buildings. The sales comparison approach or the cost approach may be used to determine the value of other types of properties.

The process through which a lender agrees to accept less from a distressed homeowner than the current principal balance on the outstanding loan is a(n) A) judicial foreclosure. B) strict foreclosure. C) short sale. D) redemption.

The answer is short sale. When a lender agrees to accept less from a distressed homeowner than the current balance on the outstanding loan, the process is known as a short sale. In a strict foreclosure, the court establishes a deadline for the defaulted balance on a mortgage to be paid, and if not paid, awards full legal title to the lender. A judicial foreclosure allows a property in default to be sold by a court order after the mortgagee has given sufficient public notice. Redemption is the right of a defaulted borrower to redeem a property either before a foreclosure sale (the equitable right of redemption) or for a specific period of time after a foreclosure sale (a statutory right of redemption).

The listing broker learned, while he was out of town, there was a large hail and rain storm that caused some flooding in the area of the property he is due to close on this week. The seller has not called to report any issues with the property, even though many properties in the neighborhood were damaged. The listing broker A) has no duty to inform the buyer since he represents the seller. B) should verify no damage has occurred to the property. C) does not need to worry since only the seller will be liable if there is undisclosed damage. D) has no responsibility because it will be the buyer's broker who should request an inspection.

The answer is should verify no damage has occurred to the property. The listing broker will want to make sure the seller understands that disclosure of material facts is required until title passes. The buyer's broker would also need to be proactive in requesting a new seller's property disclosure or asking to have the roof certified, but since the listing broker knows the storm occurred, he must verify if there is damage.

Normally, a deed will be considered valid even if A) the grantor did not deliver the deed. B) signed by the attorney-in-fact of the grantor. C) the grantor is not a legal entity. D) the grantor is a minor.

The answer is signed by the attorney-in-fact of the grantor. The attorney-in-fact must act under a power of attorney, the specific written authority to execute and sign for another person. A valid deed requires that the grantor be a legal entity and deliver the deed to the grantee. A minor is not considered legally competent to sign a deed as a grantor.

According to its state's laws, a brokerage firm is allowed to have an agency relationship with only one party in the same transaction. This relationship is known as A) designated agency. B) exclusive buyer agency. C) single agency. D) disclosed dual agency.

The answer is single agency. In single agency, the agent represents only one party in any single transaction. Designated agency exists when a brokerage 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. Dual agency exists when an agent represents both the buyer and the seller in the same transaction. In an exclusive buyer agency relationship, the agent represents the buyer and is entitled to a commission regardless of whether or not the agent actually locates the property purchased by the buyer.

The type of agency that exists when a broker represents the seller or buyer in a transaction, but not both, is A) single agency. B) dual agency. C) facilitator or transaction broker. D) designated agency.

The answer is single agency. When a broker is representing only the seller or buyer in a transaction, the agency is single agency. Dual agency exists when an agent represents two principals in the same transaction. Designated agency is created when an agent is appointed by a broker to act for a specific principal or client when the brokerage firm represents both parties in the same transaction. A transaction broker does not have the fiduciary obligations to either party in a transaction.

As an agent for the seller, a real estate broker can A) change the terms of the listing contract on behalf of the seller. B) advise a prospective buyer as to the best manner of taking title to the property. C) guarantee a prospective buyer that the seller will accept an offer at the price and terms offered. D) solicit an offer to purchase the property from a prospective buyer.

The answer is solicit an offer to purchase the property from a prospective buyer. An agent representing the seller has a fiduciary responsibility to exercise skill and care to market the property to secure a buyer. The agent is a special agent for the seller, and as such is not authorized to make a decision for the seller or to change the listing contract. The agent cannot guarantee that the seller will accept an offer and must present the offer to the seller. The agent must not provide advice to the prospective buyer as doing so might create an agency relationship with the buyer.

A lien against specific properties that benefit from public improvement is known as a(n) A) special assessment. B) mortgage lien. C) mechanic's lien. D) ad valorem tax.

The answer is special assessment. Special assessments are taxes levied on real estate to fund improvements beneficial to the property. The specific improvements are paid for by the special assessments. A mechanic's lien is a specific lien against real property filed by a contractor, subcontractor or supplier when an owner or contractor has not paid for work or supplies for improvements on a property. An ad valorem tax is a real estate property tax levied by a government entity and based on the assessed value of the specific property being taxed. A mortgage lien is a specific voluntary lien created as collateral for debt.

The typical relationship between a listing broker and a seller represents what type of agency? A) General B) Special C) Implied D) Universal

The answer is special. The broker serves the client—either a buyer or a seller—usually by performing the specific brokerage acts spelled out in the employment contract (listing or buyer brokerage agreement). Specific assignments create a special agency. In a general agency relationship, the agent is authorized by a principal to perform any and all acts associated with a particular job or business. Implied agency arises out of the words or conducts of the parties. A universal agent is a person empowered to do anything that a principal could do personally, and is a general agent.

A buyer defaults on a purchase agreement, and the seller goes to court to force the buyer to buy. The seller's remedy is A) money damages. B) partial performance. C) specific performance. D) liquidated damages.

The answer is specific performance. An action in court to have the defaulting party perform on the contract is called a suit for specific performance.

When a buyer and a seller enter into a purchase agreement (contract of sale), the legal remedy that each has to force the other party to perform the terms of the agreement is A) unilateral rescission. B) specific performance. C) liquidated damages. D) actual damages.

The answer is specific performance. Specific performance is defined as suing to perform if this is the remedy being used as the default when the suing party wants the other party to complete the terms of the transaction. In a purchase agreement, this is available to both the buyer and seller. Actual damages is a suit to receive money in return for damages not necessarily requiring the performance of the contract. Liquidated damages is where the buyer's earnest money is kept, and unilateral recession is a one-sided terminate when that party feels the other party has failed to complete their side of the agreement.

Every enforceable contract for the sale of real estate must be in writing and signed by all parties, in accordance with the A) Uniform Commercial Code. B) Real Estate License Act. C) Truth in Lending Act. D) statute of frauds.

The answer is statute of frauds. Contracts for the sale of real estate must be in writing to be enforceable, according to the statute of frauds.

Which of the following requires that real estate sales contracts be in writing? A) Truth in Lending Act B) Statute of frauds C) Statute of limitations D) Caveat emptor law

The answer is statute of frauds. The statute of frauds requires all transfers of interests in real estate be in writing, the exception is a lease of 12 months or less. The statute of limitations sets the amount of time law suits can be filed. Truth in Lending Act sets disclosure requirements for lender fees. Caveat emptor means buyer beware.

The law that requires real estate contracts to be in writing to be enforceable is the A) probate requirement. B) statute of frauds. C) statute of limitations. D) law of descent.

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, is still valid between parties. The law of descent regulates the processes by which an heir acquires an intestate estate. Probate is used to distribute property in a will. The statute of limitations is law dictating a period of time within which actions regarding an alleged offense may be brought to court by an accuser.

The right of borrowers who have defaulted on a loan to redeem their property after foreclosure for a certain period of time established by law is called a(n) A) equitable right of redemption. B) mortgagee's right of redemption. C) statutory right of redemption. D) owner's right of redemption.

The answer is statutory right of redemption. Certain states have a period of time after a foreclosure sale in which the borrower in default may redeem the property if the borrower pays the court; the right to redeem the property within the period is called a statutory right of redemption. If a borrower in default pays the lender the amount in default, plus costs, before the foreclosure sale, the debt will be reinstated in some states. This right is known as an equitable right of redemption. Reference: Financing > Mortgages/Deeds of Trust

The LEAST specific method for identifying real property is A) rectangular survey. B) street address. C) metes and bounds. D) lot and block.

The answer is street address. A legal description is a precise method of identifying a parcel of land and includes metes and bounds, rectangular survey, and lot and block as methods that can be used for identification. A street address is not a legal description and, therefore, not as precise.

The answer is $105,000. Year 1 $117,978 ÷ 106% (100% + 6%) (1.06) = $111,300 Year 2 $111,300 ÷ 106% (1.06) = $105,000

The answer is subdivision plat. A plat is a map. A subdivision plat is a map of a subdivision showing at least those details required by local subdivision regulations. A survey is the process by which boundaries and land areas are measured and determined. Metes and bounds and government survey are not part of a plat map.

A broker who represents a seller under an exclusive agency listing receives two offers for the property at the same time, one from one of his salespeople and one from the salesperson of a cooperating broker. What should the broker do? A) Submit both offers at the same time. B) Submit the higher offer first. C) Submit the offer from the other salesperson first. D) Submit the offer from his salesperson first.

The answer is submit both offers at the same time. An agent for the seller has a duty to disclose all offers, unless directed by the seller to not present an offer after one has been accepted. The broker may not prioritize offers made at the same time by salespersons from competing companies. The broker must submit both low and high offers on the property no matter when the offers are received.

A junior lien may become first in priority if the original lender agrees to execute a(n) A) second mortgage agreement. B) subordination agreement. C) deed of trust. D) alienation clause.

The answer is subordination agreement. If the original (first mortgage) lender signs a subordination agreement, another loan made more recently (later) may be allowed to take first place and the original one drop to second place. A deed of trust is a third-party instrument in which the deed is given as security for the loan to a third party, the trustee. A second mortgage agreement binds a borrower to repay a loan taken on a property on which the borrower already has a first mortgage. An alienation clause provides that when a property is sold a lender may declare the entire debt due immediately.

A couple refinances their home with a new lender under a new loan agreement. They currently have a separate line of credit under their original lender. The original lender granting the line of credit agrees to take a second lien position on the property, granting first position to the new lender. The lenders have made this arrangement through a(n) A) acceleration clause. B) due-on-sale clause. C) defeasance clause. D) subordination agreement.

The answer is subordination agreement. The lenders sign a subordination agreement which places the line of credit in a junior position to the new loan created through the refinancing of the property. A defeasance clause requires a lender to execute a satisfaction (release or discharge) of a loan when the borrower fully pays off the loan. A due-on-sale clause provides that when the property is sold the lender may declare the entire debt due or permit the buyer to assume the loan. The acceleration clause in a mortgage permits the lender to declare the entire debt due and payable immediately if the borrower defaults on payments.

The terms of a residential lease require the landlord to maintain the water heater. 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. In this situation, the tenant could do all of the following EXCEPT A) sue the landlord for damages. B) abandon the premises claiming constructive eviction. C) terminate the lease agreement. D) sue the landlord for breach of quiet enjoyment.

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.

A principal broker has hired three new salespeople all with new licenses. In working with the new people the principal broker's most important obligation is to make sure the new salespeople are A) given a regular schedule. B) mentored. C) supervised. D) trained.

The answer is supervised. The number one requirement for a principal broker is to assure all licensees of the firm are properly supervised.

A principal broker has hired three new salespeople all with new licenses. In working with the new people the principal broker's most important obligation is to make sure the new salespeople are A) trained. B) given a regular schedule. C) supervised. D) mentored.

The answer is supervised. The number one requirement for a principal broker is to assure all licensees of the firm are properly supervised.

In MOST market areas, rents are determined by A) HUD. B) supply and demand factors. C) a tenants' union. D) the local apartment owners' association.

The answer is supply and demand factors. The amount of properties and vacancy determine rent values. If the supply is low and demand is high rents go up. If the supply is high and demand is low rents go down. HUD, tenants' unions, and apartment owner associations do not play a major factor in determining rents.

Rents have gone up in the area. The principle that BEST describes this increase is A) supply and demand. B) substitution. C) contribution. D) conformity.

The answer is supply and demand. Under the concept of supply and demand, if demand decreases and supply remains the same, the supply becomes more valuable. Fewer rental properties will produce higher rents. The principle of substitution says that the maximum value of a property tends to be how much it would cost to purchase an equally desirable substitute property. The principle of contribution is used to determine if improvements will increase or decrease the value of the real property. Conformity is the appraisal principle that holds that the greater the similarity among properties in an area, the better the properties will hold their value.

A broker who has done a proper CMA (competitive market analysis) discusses the probable market value of the property with the seller, and the seller wants an unrealistic price on the property. The broker may do all of the following EXCEPT A) suggest the seller have a formal appraisal done. B) decline to take the listing at the high price. C) take the listing with the understanding from the seller that price reductions may be needed to sell the property. D) take the listing at the seller's proposed price planning on reducing the price himself in the future when the seller is more realistic.

The answer is take the listing at the seller's proposed price planning on reducing the price himself in the future when the seller is more realistic. Whether a CMA or a formal appraisal is conducted, the value sought is the property's market value. While it is the property owner's privilege to set whatever listing price they choose, a broker should consider rejecting any listing that is severely out of line. If the broker chooses to accept the listing at the seller's proposed price, the broker should advise the seller that the price may have to be reduced in the future in order to sell the house.

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 A) tenancy at will. B) tenancy at sufferance. C) an estate from period to period. D) an estate for years.

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 lease rights expire, typically from an estate for years. An estate from period to period automatically renews unless notice is given. A tenancy at will permits a tenant to possess property with the landlord's consent for an unspecified term. An estate for years is a leasehold estate that continues for a definite period, whether that period is days, weeks, months, or years and has a definite expiration date.

A couple's apartment lease has expired, but their landlord has accepted rent and indicated to them that they may remain on the premises until a sale of the building is closed. They will be charged their normal monthly rental during this period, but there will be no automatic renewal of the lease. The right held by the couple is called a(n) A) a holdover tenancy. B) tenancy at will. C) periodic tenancy. D) estate at sufferance.

The answer is tenancy at will. A tenancy (estate) at will gives the tenant the right to possess property with the landlord's consent for an unspecified or indefinite term and does not automatically renew. A periodic tenancy runs for an indefinite period, has no expiration date, and automatically renews. An estate at sufferance arises after a tenant's rights to possession expire, and the tenant continues to possess the property without the landlord's consent. A holdover tenancy is created when a tenant with an estate for years holds on to a property after the lease has expired and no new lease agreement has been made.

A tenant who holds possession of a landlord's property without a definite lease term but with the consent of the landlord has a A) holdover tenancy. B) tenancy at sufferance. C) tenancy at will. D) tenancy in common.

The answer is tenancy at will. An estate (tenancy) at will gives the tenant the right to possess property with the landlord's consent for an unspecified term. It continues until it is terminated by either party giving notice. A tenancy at sufferance arises when a tenant continues to possess the property without the landlord's consent after the tenant's rights expire. Tenancy in common is a form of co-ownership in which each owner holds an undivided interest in a property as if each were the sole owner. A holdover tenancy is created when a tenant with an estate for years holds on to a property after the lease term expires when no new lease has been signed.

Tenancy with survivorship means the A) tenancy interest will be inherited. B) surviving tenants must sign a new deed. C) tenancy interest will pass to the surviving tenants upon the death of a co-tenant. D) tenant's heirs must sign a new deed.

The answer is tenancy interest will pass to the surviving tenants upon the death of a co-tenant. Tenancy with survivorship, joint tenancy, means that the entire ownership remains with the surviving joint tenant or tenants. In a tenancy in common deceased tenants' interests may be passed on to their heirs. Joint tenancy does not require a new deed upon the death of one of the tenants.

Adaptations of property specifications to suit tenant requirements are A) tenant improvements. B) tax-exempt improvements. C) prohibited by most nonresidential leases. D) generally not a good idea.

The answer is tenant improvements. Tenant improvements are more likely to occur in commercial rental spaces then in residential. Both the owner and the tenant benefit from improvements; they are not tax-exempt.

In 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. They now hold title as A) tenants in common. B) joint tenants. C) community property owners. D) cooperative owners.

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 the unit.

The difference between a term loan and a partially amortized loan is the A) term loan will have a larger payment and a smaller balloon. B) term loan will have a smaller monthly payment with a larger balloon. C) partially amortized loan payment will pay the loan in full with the final payment. D) partially amortized loan will have a lower payment and balloon.

The answer is term loan will have a smaller payment with a larger balloon. Term loans payments are interest only so will be smaller than a partially amortized loan in which the payment pays both interest and principal.

A seller has received an offer. The seller crossed out a number of items, wrote in the changes the seller wanted, initialed them, and returned the document to the buyer. The original offer the offeror gave the seller is considered to be A) a partial acceptance of the original offer. B) binding only on the original offeror. C) a partial termination with conditional acceptance of the offer. D) terminated and countered.

The answer is terminated and countered. The counteroffer effectively terminates the original offer and creates a new offer. Therefore, the original offer is not valid, accepted, or binding.

A property owner individually signed a 90-day listing contract with a brokerage. The owner was killed in an accident before the listing expired. Now the listing is A) still in effect as the owner's intention was clearly defined. B) binding on the owner's spouse for the remainder of the 90 days. C) binding only if the broker can produce offers to purchase the property. D) terminated automatically because of the death of the principal.

The answer is terminated automatically because of the death of the principal. A listing contract may be terminated if either party dies or becomes incapacitated. Neither the dead owner's intention nor the 90-day listing period keeps the listing in effect.

The buyer has made an offer to the seller who has countered and given the buyer 24 hours to accept the counter. In this case the original offer is considered to be A) voidable. B) void. C) terminated. D) executory.

The answer is terminated. A counter offer terminates the original offer and creates a new offer. Since there is not a contract, the terms are executory. An offer is not a contract, and cannot be considered voidable or void.

When a seller takes back a purchase money mortgage from a buyer the A) seller and the buyer may enter into an enforceable oral agreement. B) seller agrees to collect the buyer's payments directly from the lender. C) terms and conditions of the mortgage must be set forth in writing. D) terms and conditions of the mortgage are included in the borrower's first mortgage.

The answer is terms and conditions of the mortgage must be set forth in writing. In order for the purchase money mortgage to be enforceable, the terms and conditions, such as principal and interest, must be set forth in detail in writing. The mortgage contract is made directly between the buyer and the seller. An oral agreement is not enforceable. The buyer makes payments directly to the seller.

An appraisal differs from a competitive market analysis conducted by a broker in that an appraisal is based on an analysis of properties A) currently on the market. B) within a broader geographic area. C) that have actually sold. D) whose listings have expired.

The answer is that have actually sold. An appraisal is based on the analysis of properties that have actually sold. A competitive market analysis (CMA) features properties similar to the subject property in location, size, and amenities. A CMA includes analysis of properties currently on the market; those properties currently listed that compete for buyers with the subject property; properties that have actually sold (recently closed properties); and properties whose listings have expired.

The Americans with Disabilities Act (ADA) requires A) that reasonable accommodations be provided for people with disabilities. B) all real estate properties to be free of barriers to people with disabilities. C) all employers to adopt nondiscriminatory employment practices. D) that existing premises be remodeled for people with disabilities regardless of the cost involved.

The answer is that reasonable accommodations be provided for people with disabilities. The ADA requires that reasonable accommodations be provided for the disabled both in employment and in places of public accommodation. The ADA does not address all discriminatory employment practices. Discriminatory employment practices are prohibited by other federal and state laws. The ADA does not require that all real estate be free of barriers but does require places of public accommodation, such as a rental office, to be handicap accessible. The ADA does allow for disabled persons to pay for costs for reasonable accommodations to rental property.

A principal broker hires a salesperson as an employee of the brokerage firm. The employment contract between the broker and the salesperson will most likely include all of the following EXCEPT A) the broker will withhold federal income taxes and Social Security taxes from the salesperson's paycheck. B) the salesperson attend weekly sales meeting. C) the salesperson is entitled to the firm's health insurance plan. D) the salesperson is responsible for direct payment of all income taxes and Social Security payments from each paycheck.

The answer is that the salesperson is responsible for direct payment of all income taxes and Social Security payments from each paycheck. A broker is responsible for withholding federal income taxes and Social Security payments from an employee's paycheck. The broker may require that the employee attend sales meeting and may include the employee in the firm's benefits, including a health insurance plan. A salesperson employed as an independent contractor is responsible for direct payment of all federal taxes and any required state taxes.

All of the following are true regarding public records EXCEPT A) that they guarantee marketable title. B) that they establish priority of liens. C) that they provide constructive notice about interests in the property. D) that they give notice of encumbrances.

The answer is that they guarantee marketable title. Nothing guarantees marketable title. An abstract with a title opinion or a title commitment show if the seller currently appears to have marketable title and offer protection to the buyer if title issues arise after closing. The recording of public records establishes the priority of liens, gives notice of encumbrances, and provides constructive notice of interests in real property.

Reconciliation is an appraisal term used to describe A) the appraiser's determination of a property's highest value. B) the appraiser's analysis and weighing of the findings of all three appraisal approaches. C) an average of real estate values for properties similar to the subject property. D) the method used to determine the most appropriate capitalization rate for a property.

The answer is the appraiser's analysis and weighing of the findings of all three appraisal approaches. Reconciliation is the process used by the appraiser in determining how much weight should be given to each of the three approaches to value, if any. After considering all the data, the appraiser will estimate a final indication of value. Reconciliation does not mean taking the average of the estimates of value from the approaches; averaging is not used in any part of the appraisal process. It does not determine a highest value, but the fair market value of the property. Determining the capitalization rate is involved in the income approach to value.

CFPB states all of the following for residential loans EXCEPT A) borrowers must receive information on settlement charges. B) the borrower may cancel the first home purchase loan transaction within three days after settlement. C) a new loan closing disclosure must be used at new loan closings. D) lenders must provide borrowers with a new loan estimate of closing costs.

The answer is the borrower may cancel the first home purchase loan transaction within three days after settlement. A borrower has no rights to cancel a first or second home purchase loan but does have cancelation rights for other loans such as those for refinancing or home equity. CFPB does require that lenders provide borrowers with a new loan closing disclosure that states all charges to be paid by the borrower and the seller at settlement of the loan. Lenders must provide a new loan estimate of closing costs no more than three business days after receiving a loan application along with information on settlement costs.

With a VA-guaranteed mortgage A) discount points must be paid by the seller. B) the funding fee amounts are negotiable. C) the borrower must apply for a certificate of eligibility. D) the borrower may have a prepayment penalty clause in the loan.

The answer is the borrower must apply for a certificate of eligibility. A borrower must apply for a certificate of eligibility which sets forth the maximum guarantee to which the veteran is entitled. Discount points can be paid by either the buyer or the seller. Prepayment penalties are prohibited. Funding fees are determined by the VA (Veterans Affairs).

Which statement is TRUE of a real estate broker acting as the agent of the seller? A) The broker has a fiduciary obligation of loyalty to the seller. B) The broker can agree to a change in price without the seller's approval. C) The broker can disclose confidential information about the seller to a buyer if the buyer is also represented by the broker. D) The broker can accept a commission from the buyer without the seller's approval.

The answer is the broker has a fiduciary obligation of loyalty to the seller. Loyalty to the client-seller requires confidentiality—not revealing confidential information; it involves obedience—not publishing a price different from the one set by the client; and it requires disclosure. Dual agents have duties of confidentiality to both of the parties they represent.

Two salespeople 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 statements is TRUE? A) The broker's actions are permissible provided the commission is split between the two salespeople. B) The broker was smart to protect the seller from getting into a negotiating battle over two offers. C) 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. D) The broker has no authority to withhold any offers from the seller.

The answer is the broker has no authority to withhold any offers from the seller. It is the broker's duty to keep the principal informed of all facts or information that could affect a transaction. A broker for the seller has a duty to disclose all offers. A commission split does not affect the broker's responsibilities to submit all offers to the seller.

Designated agency will MOST likely occur under what circumstance? A) The seller and the buyer are represented by different brokerage firms. B) The buyer is a client of the firm and the seller is the customer of the firm. C) Both the buyer and the seller are customers of the firm. D) The buyer and the seller in the same transaction are both represented by the same brokerage firm.

The answer is the buyer and the seller in the same transaction are both represented by the same brokerage firm. Designated agency occurs when one brokerage firm practices dual agency in representing both the seller and the buyer in the same transaction. Both parties are clients of the firm. In many states, designated agency is a process that permits the firm's broker to appoint one agent to represent the seller, and another agent from the same firm to represent the buyer. Each of the agents is a designated agency for her respective client, the seller or the buyer and may not share confidential information about the party they represent.

A seller may keep the buyer's earnest money as liquidated damages if A) that is stated in the listing agreement as a remedy for the seller. B) the seller and the broker agree that the buyer defaulted and the contract calls for specific performance. C) the buyer defaults and the purchase agreement stipulates liquidated damages as a remedy. D) the seller failed to perform an essential element of the contract.

The answer is the buyer defaults and the purchase agreement stipulates liquidated damages as a remedy. A liquidated damages purchase contract allows the seller to keep the earnest money if the buyer defaults. Typically the buyer will have specific performance remedies if the seller is in default.

Which of the following is TRUE of condominium ownership? A) The common elements cannot be sold separately. B) The association pays the unit real estate taxes. C) The ownership of a unit cannot be willed. D) The ownership of a unit cannot be mortgaged.

The answer is the common elements cannot be sold separately. Although an individual unit owner owns an interest in the common elements as a tenant in common, they may not be sold separately by a unit owner; unit owners do not have the same right to partition that other tenants in common have. Individual owners pay the real estate taxes for their units. Condominium owners may will or mortgage their fee simple ownership in a condominium.

Fee for services means A) working only with for-sale-by-owners. B) the consumer only pays for services actually used. C) allowing non-licensees to conduct real estate transactions. D) providing consumers all the same services for a discounted price.

The answer is the consumer only pays for services actually used. Fee for services is a piecemeal arrangement where the consumer, not just a FSBO, decides which services are needed and works with and pays the broker solely for those services. This arrangement is unlike discounted real estate where the consumer receives all of the real estate services for a discounted price. All real estate professionals must be careful with this type of service that meets the required minimum duties as set forth by the state license law.

Which statement is TRUE of a listing contract? A) The contract is an employment contract for the professional services of a brokerage firm. B) It obligates the brokerage firm to work diligently for both the seller and the buyer. C) A seller must transfer the property if the brokerage firm produces a ready, willing, and able buyer. D) The contract usually includes an automatic extension clause upon expiration of its term.

The answer is the contract is an employment contract for the professional services of a brokerage firm. The listing contract obligates the brokerage firm to work only for the seller. The seller may negotiate terms through the brokerage with a ready, willing, and able buyer, and refuse to sell to a buyer who is not willing to come to terms with the seller. A contract usually specifies a definite termination date and may not include an automatic extension of the term.

The buyer and the seller have entered into a binding contract for sale. However, before closing the law changes and the buyer's intended use of the property becomes illegal. Which is TRUE? A) The contract is valid and enforceable under the rules of risk. B) The contract is void due to impossibility of performance. C) The contract is valid, but the price must be renegotiated. D) The contract is terminated due to fraud by the seller.

The answer is the contract is void due to impossibility of performance. An essential element of a contract is the lawful objective or purpose; if this is no longer part of the contract then the contract is void. In this case the seller did not commit fraud and no contract requires the price to be renegotiated if it becomes void.

All of the following are typically found in a listing contract EXCEPT A) the responsibilities of the broker and seller. B) the commission rate to be paid to the listing broker. C) the price the seller is asking for the property. D) the date the broker will schedule an open house.

The answer is the date the broker will schedule an open house. All listing and buyer representation contracts tend to require similar information: type of listing agreement, broker's authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, et cetera. They are not required to provide the dates of open houses.

All of the following reasons are valid bases for terminating a listing or buyer's contract EXCEPT A) destruction of the premises. B) the death of the salesperson. C) the sale of the property. D) agreement of the parties.

The answer is the death of the salesperson. Since the listing and buyer's contract is a contract with the broker, and not with the salesperson, the death of the salesperson does not terminate the listing. The broker may assign another salesperson to the listing. The sale of the property, an agreement by the seller and the broker, and the destruction of the property are all valid bases for terminating a listing contract.

A judgment lien filed in a county usually covers A) only the debtor's real property located in that county. B) only the debtor's personal property located in that county. C) the debtor's real and personal property in the state in which it was recorded. D) the debtor's real and personal property located in that county.

The answer is the debtor's real and personal property located in that county. A judgment is a general, involuntary, equitable lien on both the real and personal property owned by the debtor. Usually the lien covers only property located in the county in which the lien was recorded. Notices of the lien must be filed in another county if a creditor wishes to extend the coverage to that county.

A salesperson lists a residence. The owner confides to the salesperson that a lower price would be acceptable. The salesperson tells a prospective buyer that the seller will accept up to $5,000 less than the asking price for the property. Based on these facts, which statement is TRUE? A) The salesperson has not violated any agency responsibilities to the seller. B) The salesperson should have disclosed this information, regardless of its accuracy. C) The relationship between the salesperson and the seller ends automatically if the purchaser submits an offer. D) The disclosure is improper-and possibly illegal-regardless of the salesperson's motive.

The answer is the disclosure is improper—and possibly illegal—regardless of the salesperson's motives. Such action is an example of the salespersons failure to obey the seller and maintain confidentiality—both breaches of fiduciary duties. The salesperson may not disclose such information without the seller's written permission. Such an action does not terminate the agency relationship upon the submission of an offer.

A father and daughter have equal shares in a home they bought one year ago. They list the home and sell it within six weeks. According to federal tax laws, what is their exclusion on any capital gains acquired from selling the house? A) The father and daughter do not qualify for any exclusion from capital gains taxes. B) The father and daughter qualify for a $500,000 exclusion from capital gains taxes. C) The father and daughter qualify for a $250,000 exclusion from capital gains taxes. D) Each qualifies for a $125,000 exclusion from capital gains taxes.

The answer is the father and daughter do not qualify for any exclusion from capital gains taxes. The father and daughter did not live in the house for the two years required to qualify for any exclusion from capital gains taxes. If they had lived in the house for two of the most recent five years and each filed a separate income tax return, then each of them as a co-owner of the property would qualify for an exclusion of $250,000.

Typically trust accounts are the name of A) the broker and ach salespersons who makes a deposit. B) the firm and principal broker. C) the firm only. D) all broker's in the firm.

The answer is the firm and principal broker. State laws dictate how trust accounts are to be created but most often they include the firms and principal broker's name.

When appraising a commercial property, the appraiser is MOST concerned with the A) sales prices of comparable properties. B) income generated by the property. C) accrued depreciation on the property. D) total debt service on the property.

The answer is the income generated by the property. The appraiser is most concerned with the income generated by the property in estimating the value of the property. Accrued depreciation is a factor used in the cost approach. The sales prices of comparable properties are used in the sales comparison approach, but finding comparable properties for commercial properties is often difficult. Debt service (mortgage payments) is not considered an operating expense deducted from annual operating expenses to determine the net operating income of a commercial property.

Which of the following is a TRUE statement about interest on a fully amortized loan? A) The interest is paid each period without any payment on the principal. B) The interest increases throughout the term of the loan. C) The interest is paid in arrears. D) The interest requires that the final interest payment will be determined after the last loan payment is made.

The answer is the interest is paid in arrears. A fully amortized loan requires a constant payment for both the principal and interest with each payment for the life of the loan. Interest or principal do not increase in a fully amortized loan because the terms are set in the original loan documents and don't change.

Which of the following is TRUE about a holdover tenant? A) The tenant may continue to occupy the premises without permission of the landlord. B) The landlord may evict the tenant. C) The tenant must give the landlord a 30-day notice to vacate. D) The landlord must accept additional rent if the tenant remains on the premises.

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 broker helps a buyer and a seller with paperwork but does not have fiduciary obligations to either party. The broker's activity in this situation is that of a A) dual agent. B) transaction broker. C) designated agent. D) single agent.

The answer is transaction broker. In some states, a broker may be an agent of neither party to a transaction, but help both the buyer and the seller with necessary paperwork and formalities in a transaction. The broker acts as a transaction broker or facilitator but not as an agent of either party.

A lease agreement is signed by a lessee who is 16 years of age. Which of the following is TRUE? A) The lease agreement is void. B) A 16-year-old person cannot sign a lease. C) The lease agreement is voidable by the minor. D) The lease agreement is valid provided the security deposit is increased.

The answer is the lease agreement is voidable by the minor. A 16-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 16-year-old may in fact decide to enforce the lease contract, in which case the lease is valid. Reference: Contracts > General Knowledge of Contract Law

An appraiser has been employed to estimate the market value of a parcel of vacant land. The resulting appraisal report would NOT include reference to the A) physical dimensions of the parcel. B) listed price of the parcel. C) highest and best use of the parcel. D) most probable price the parcel will bring.

The answer is the listed price of the parcel. The listed price of the parcel is the price that the owner wants for the property. It may or may not be a realistic price or reflect the fair market value of the property. Highest and best use, the most probable price the parcel will bring, and the physical dimensions of the parcel are all applicable to the analysis by the appraiser in determining the market value of the parcel.

A purchaser buys a home using a mortgage loan from a local lender. The lender promptly recorded the mortgage. Three years later, the homeowner needs additional cash, so he places a second mortgage with a different lender. Based on these facts, which statement is TRUE? A) The loan from the original lender is a subordination loan. B) Because it is older, the loan from the original lender is subject to the loan from the new lender, which assumes priority in time. C) The new lender cannot hold a security interest in the property already held as collateral by the original lender. D) The loan from the original lender has priority over the loan made three years later with the new lender.

The answer is the loan from the original lender has priority over the loan made three years later with the new lender. The dates of the recording of the liens establishes their priority. The loan from the new lender is made and recorded more recently and is subject to (second in line behind) the loan from the original lender. If a second mortgage has a higher amount than a first mortgage, the second lender may require a subordination agreement in which the first lender lowers its lien position to that of the second lender; both lenders must sign the agreement.

A single man with two small children has been told by a real estate salesperson that homes for sale in a condominium complex are available only to married couples with no children. Which statement is TRUE? A) Condominium complexes are exempt from the fair housing laws and can therefore restrict children. B) The man may file a complaint alleging discrimination on the basis of familial status. C) Restrictive covenants in a condominium take precedence over the fair housing laws. D) Because a single-parent family can be disruptive, if the parent provides little supervision of the children the condominium is permitted to discriminate.

The answer is the man may file a complaint alleging discrimination on the basis of familial status. The salesperson, and by implication the broker, and the property owner-principals have violated the prohibition against familial status discrimination. Anyone in charge of one or more children under age 18 who is denied access because of the children is the victim of discrimination based on familial status. Restrictive covenants do not take precedence over fair housing laws.

The market value of a parcel of real estate is A) its value without improvements. B) an estimate of its future benefits. C) the most probable price it should bring. D) the amount of money paid for the property.

The answer is the most probable price it should bring. An appraisal estimates the market value—the price a property would most probably bring. The amount of money actually paid for a property is the market price, which may or may not equal the market value. An estimate of a property's future benefits may be used by an appraiser as part of the income approach to value. The value of a property without improvements consists of the value of the land itself. Reference: Valuation and Market Analysis > Value

A real estate broker lists her neighbor's home for $212,000. Later that same day a buyer to the community comes into her office and asks for information on houses for sale in the $180,000 - $225,000 price range. The broker offers to represent the buyer as a buyer's agent, but the newcomer refuses representation by her company at this time. Based on these facts, which of the following statements is TRUE? A) If the buyer later asks for buyer representation from the broker's firm, the broker cannot offer buyer representation because of her listing contract with the neighbor. B) The neighbor is the broker's client, and the buyer is her customer. C) The real estate broker owes fiduciary duties to both her neighbor and the buyer. D) Both the neighbor and the buyer are the broker's customers.

The answer is the neighbor is the broker's client, and the buyer is her customer. The listing contract with the neighbor establishes an agency relationship with the neighbor, who becomes the client of the broker. Without representation, the buyer remains a customer of the broker, a non-represented consumer who is entitled to fairness and honesty. The broker owes fiduciary duties only to the neighbor, her client. The broker may offer buyer representation to the buyer at a later date if the broker's company policy permits dual agency in a situation in which the buyer may want to purchase one of the company's own listings.

The priority of liens refers to which of the following? A) The order in which a debtor assumes responsibility for payment of obligations B) The order in which liens will be paid if property is sold to satisfy a debt C) The dates liens are recorded D) The fact that specific liens have greater priority than general liens

The answer is the order in which liens will be paid if property is sold to satisfy a debt. The priority of liens refers to the order in which claims against the property will be paid off. In general, the rule for priority of liens is ''first to record, first in right." The priority is created by the recording date, but property taxes and special assessments are exceptions to the rule, as they take priority over all other liens regardless of when the liens were recorded.

A minor entered into a contract to sell the house she had inherited to a buyer. This contract is MOST likely A) voidable by the minor. B) voidable by the buyer. C) valid. D) void.

The answer is voidable by the minor. Contracts with minors are always voidable. In this case, the contract is not voidable by the buyer since the buyer is the adult.

The priority of liens refers to which of the following? A) The dates liens are recorded B) The order in which liens will be paid if property is sold to satisfy a debt C) The fact that specific liens have greater priority than general liens D) The order in which a debtor assumes responsibility for payment of obligations

The answer is the order in which liens will be paid if property is sold to satisfy a debt. The priority of liens refers to the order in which claims against the property will be paid off. In general, the rule for priority of liens is ''first to record, first in right." The priority is created by the recording date, but property taxes and special assessments are exceptions to the rule, as they take priority over all other liens, regardless of when the liens were recorded.

Under an assignment of a lease, who is primarily responsible for rental payments to the landlord? A) The original tenant B) The owner and the new tenant C) The new tenant D) Both the original tenant and the new tenant

The answer is the original tenant. Unless a novation has occurred by a new lease contract being signed between the landlord and the assignee, the original tenant is primarily responsible for rental payments to the landlord. The assignee is secondarily responsible if it was agreed upon to pay the rent, and may even make rental payments directly to the landlord. However, the original tenant remains primarily responsible for rental payments.

Which of the following does NOT create an agency relationship? A) A listing contract B) A buyer agency contract C) The payment of money or commissions D) A property management contract

The answer is the payment of money or commissions. The payment of money or commissions does not create an agency relationship. A written contract or actions of the parties create agency. In real estate, a listing contract, buyer agency contract, or property management contract create an agency relationship between the broker and the principal to the contract.

A broker employs several salespeople, one of whom is a member of a protected group. The broker directs her to work only with members of her group and to solicit sales only in similar neighborhoods. Which of the following is TRUE? A) The fair housing laws do not apply to the broker's practices. B) The salesperson should be satisfied with the broker's policy. C) The broker is entitled to direct a salesperson's activities in this way. D) The practice could establish or continue the unlawful practice of steering.

The answer is the practice could establish or continue the unlawful practice of steering. Fair housing laws prohibit steering and do apply to the effects of a broker's practices. The broker's actions could be considered to be designed to steer the salesperson's activities only to prospective clients or customers of her racial or ethnic group. The salesperson's acceptance of the broker's directive could result in the actual steering of minorities to specific neighborhoods.

To be an independent contractor the requirements for the salesperson and principle broker would include all of the following EXCEPT A) the salesperson has signed an independent contractor agreement with the principal broker. B) the principal broker withhold taxes from the salesperson's compensation. C) the salesperson has a current real estate license. D) the majority of the salespersons income be based on sales production.

The answer is the principal broker withhold from the salesperson's compensation. A broker does not withhold federal taxes or Social Security from an independent contractor's commissions. A principal broker is required to make those withholdings for all employees. An independent contractor situation must include the other three requirements to meet the conditions for independent contractor status established by the IRS.

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) something is to be done by one party only. C) only one of the parties is obligated to act. D) a restriction is placed in the contract by one party to limit the performance by the other.

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.

Legal descriptions are used in purchase contracts and deeds and must be accurate. All of the following would be considered a good and accurate legal description EXCEPT A) the lot and block number. B) the section, township and range where the property is located. C) the property address with full zip code. D) a description using compass degrees and a point of beginning.

The answer is the property address with full zip code. Addresses which change are not used as legal descriptions but are often included as a property reference. Lot and block, metes and bounds, and the government survey are all acceptable legal descriptions.

The broker protection clause in a real estate listing contract provides A) the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner. B) the seller may not file a complaint against the broker with the state regulatory commission. C) the seller may not file a lawsuit against the broker for lack of performance. D) how the broker will be compensated.

The answer is the property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner. The listing contract must also state the circumstances under which the broker will be paid. Nothing in the listing contract prohibits a seller from taking action through the courts or a real estate commission if the broker does not perform according to the terms of the listing contract.

All of the following will terminate an easement EXCEPT A) when the need for the easement no longer exists. B) the release of the right of easement from the servient tenant to the dominant tenement. C) the nonuse of a prescriptive easement. D) the abandonment of an easement.

The answer is the release of the right of easement from the servient tenant to the dominant tenant. An easement is terminated when the owner of the dominant tenement who benefits from the easement releases that right to the owner of the servient tenement. All of the other events shown will terminate an easement.

A quiet title suit refers to A) the removal of a cloud on a title by court action. B) a mortgagor relinquishing title after foreclosure. C) a title insurance company's search of the title. D) the deposit of a title with an escrow agent.

The answer is the removal of a cloud on a title by court action. If a title search reveals an unbroken chain of ownership, a gap or cloud in the chain of title exists. Such a cloud in the chain requires a court action called a quiet title suit to establish title for a grantor who wants to convey the property.

An appraiser determines that the cost approach is the most reliable approach in determining the value of an older government building. In estimating the value, the appraiser will MOST likely start by determining the A) gross effective income. B) reproduction cost. C) gross rent multiplier. D) replacement cost.

The answer is the replacement cost. Replacement cost new is the cost to construct an improvement similar to the subject property, using current construction methods and materials, but not necessarily an exact duplicate. Replacement cost new is more frequently used in appraising older structures because it eliminates obsolete features and takes advantage of current construction materials and techniques. Reproduction cost is the construction cost at current prices of an exact duplicate of the improvement, including both the benefits and the drawbacks of the property. The gross rent multiplier and gross effective income are used in the income approach to value.

A salesperson working with a commercial client for the first time follows the client's orders and drafts a contract for the purchase of a small strip center. Which of the following is TRUE? A) Commercial brokers are allowed to draft contracts under the direction of clients. B) The salesperson is in violation of truth-in-lending laws. C) The salesperson is legally practicing law since the client ordered him. D) The salesperson is illegally practicing law and is most likely not competent.

The answer is the salesperson is illegally practicing law and is most likely not competent. Real estate professionals are not allowed to practice law and drafting contracts comes under that practice. This is not allowed even if the client directs, requests, or the sale is commercial.

After a particularly challenging transaction finally closes, a client gives the salesperson a check for $500 "for all your extra work." Which of the following statements is TRUE? A) While such compensation is irregular, it is appropriate for the salesperson to accept the check. B) The salesperson may accept the check if she deposits it immediately in a special escrow account. C) The salesperson may receive compensation only from her broker. D) The salesperson may accept the check, but the salesperson's broker is entitled to 80% of the check.

The answer is the salesperson may receive compensation only from her broker. Most state statutes require that compensation for real estate brokerage activities be paid to licensed salespersons only by their own broker for work on any given transaction. The salesperson in this case may not receive a check directly from the client.

Who is ultimately responsible for a salesperson's mistakes in writing a sales contract? A) The salesperson's principal broker. B) The managing associate broker. C) The salesperson and the managing associate broker. D) The salesperson's office manager.

The answer is the salesperson's principal broker. A real estate brokerage firm's principal broker has ultimate responsibility for all activities of the real estate licensees in the firm. Salespersons may be held accountable for any of their mistakes in a sales contract, but the principal broker holds ultimate responsibility for the salesperson's actions. A managing broker or office manager may share responsibility for the salesperson's actions.

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 buyer should not have been shown a house listed by the broker. B) The broker must refer the buyer to another broker to negotiate the sale. C) The broker must treat the buyer as a consumer/customer and proceed to write an offer on the property and submit it. D) The seller and buyer must be informed of the situation and agree, usually in writing, to the broker's representing both of them.

The answer is the seller and buyer must be informed of the situation and agree, usually in writing, to the broker's representing both of them. Both buyer and seller must give informed consent, generally written, for dual representation. The broker is not required to treat the buyer as a client or to refer the buyer to another broker. In many areas it may be common for buyer-clients to purchase a home listed by their broker, however, both the seller and buyer must agree to the dual agency in writing.

The multiple listing service clause in a listing contract provides that A) a buyer broker may not represent a purchaser in the transaction. B) the seller grants permission for the broker to make the listing available through an MLS (multiple listing service). C) the broker agrees to the standard commission rate set by the MLS. D) the seller enter the listing into the MLS.

The answer is the seller grants permission for the broker to make the listing available through an MLS (multiple listing service). The multiple listing service clause grants authority for brokers to share the listing with other brokers through an MLS. Brokers enter the listing into the MLS within a time period stated in their contract with the MLS. The sellers do not enter the information with the MLS. Brokers negotiate their own commission rate with the sellers, and buyer brokers may represent buyers for properties listed in an MLS.

In regulations regarding lead-based paints for houses built before 1978, HUD requires that A) lead paint must be removed from surfaces before selling. B) the buyer complete a lead inspection and testing before closing. C) the seller is required to give all buyers a lead-based paint disclosure. D) the broker must make sure the buyer receives the required lead-based paint disclosure.

The answer is the seller is required to give all buyers a lead-based paint disclosure. It is the seller's not the broker's obligation to provide the required disclosure to the buyer. The buyer may waive the inspection, and lead paint if found does not have to be removed.

MOST states require a property condition disclosure in a residential transaction. The statement is completed by the A) property inspector. B) seller. C) seller and salesperson or broker. D) broker.

The answer is the seller. Most states require the seller to complete a property condition disclosure. The listing broker should review the disclosure form and question the seller about any items that are incomplete. The disclosure does not replace the need for a property inspection to be conducted on behalf of the buyer. A buyer's agent should recommend that a buyer secure an independent property inspection.

All of the following are required for a deed to be valid EXCEPT A) the signature of the grantee. B) the execution of the grantor. C) the legal description. D) the consideration.

The answer is the 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.

For land to be taken by the government under its right of eminent domain, which of the following MUST apply? A) The state takes the property through adverse possession. B) There must be a statutory dedication. C) There must be constructive notice. D) The taking must be for a public purpose.

The answer is the taking must be for a public purpose. Under the right of eminent domain, the government can acquire privately owned real estate for public use, which is defined very broadly. A government exercises this right through the process of condemnation, not through the passing of a statute. Adverse possession involves a person, not a government, taking ownership of a property through open and continuous use of a property. Under eminent domain, a government must work to negotiate with a property owner for the fair value of a property. Constructive notice is the legal presumption that a person through due diligence may be informed of a property's ownership.

The landlord's lease prohibits tenants from altering the property in any way. A young woman who uses a wheelchair cannot maneuver over the doorstep into the apartment by herself. In addition, she cannot access the bathroom facilities in her wheelchair. Which of the following is TRUE? A) The landlord is responsible for making all apartments accessible to people with disabilities. B) The landlord should not have rented this apartment to the tenant. C) The tenant cannot remedy these conditions because of the terms of the lease. D) The tenant is entitled to make the necessary alterations.

The answer is the tenant is entitled to make the necessary alterations. The Fair Housing Amendments Act of 1998 provides that people with disabilities must be permitted to make reasonable modifications to the premises at their own expense. The Act does not require the landlord to make all apartments accessible to people with disabilities.

Unless some other written agreement has been made, the brokerage will usually receive his brokerage commission when A) the purchaser takes possession of the property. B) an offer, procured from a ready, willing, and able buyer, has been accepted by the seller. C) the transaction is closed. D) the seller lists the property with the broker.

The answer is the transaction is closed. Although a commission is usually earned when the buyer has been procured, it is usually payable when the sale is closed unless another arrangement for payment has been agreed to in writing.

Conventional loans are viewed as the MOST secure loans because A) their loan-to-value ratios are often lower than other types of loans. B) they are not purchased by investors in the secondary mortgage market. C) private mortgage insurance protects the lender for the full amount of the loan. D) they are government insured loans.

The answer is their loan-to-value ratios are often lower than other types of loans. The borrower with a conventional loan usually makes a down payment of at least 20%, so that the loan-to-value ratio is 80%. The security for the loan is provided by the mortgage, and the payment of the debt rests on the borrower's ability to pay. Conventional loans are not insured or guaranteed by the government, unlike FHA or VA loans. Private mortgage insurance (PMI) protects the lender only for the excess of the loan amount over 80% of the property's appraised value. Conventional loans are often purchased from the original lenders through the secondary mortgage market.

A house for sale was advertised, ''Fine executive home in an exclusive neighborhood, suitable for an older couple; near St. Mary's Church.'' All of the following are true EXCEPT A) the neighborhood could appear to be undesirable for people who do not follow the same religion as those at St. Mary's Church. B) this is descriptive of the property for sale and a good ad. C) the ad could appear to imply that younger families with children are not welcome. D) an exclusive neighborhood could be interpreted to mean that minorities are not welcome.

The answer is this is descriptive of the property for sale and a good ad. The ad could be construed as discriminatory as it may indicate a preference for younger families with no children and possibly those of a certain faith. The term "exclusive" could be considered to indicate the neighborhood is not appropriate for minorities.

The clause in a contract that makes timely performance a condition of the contract is called the A) drop dead clause. B) unity of time clause. C) within a reasonable time clause. D) time is of the essence clause.

The answer is time is of the essence clause. Time is of the essence means that timely performance is a condition of the contract.

An ownership interest that is based on occupancy during a specified period of time, is a A) time-share. B) leasehold. C) cooperative. D) condominium.

The answer is time-share. A real property interest with the right to use the facilities for a certain period of time is called a time-share. While a time-share may be sold as a leasehold or freehold interest, time-share intervals are usually shorter intervals of time, typically weekly intervals. A leasehold interest occurs when a tenant leases a property from an owner but usually for an extended longer period of time (such as one year). A condominium owner holds a fee simple absolute ownership to the unit and owns the common elements as tenants in common with the other owners. In a cooperative, tenants own shares in a corporation, partnership or trust that holds title to the building, with tenants having the right to occupy their own units but do not have a deed.

Acceptable evidence of marketable title is a A) copy of the seller's current deed. B) deed of trust. C) seller signing a general warranty deed. D) title insurance policy.

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.

According to federal do-not-call legislation, when a consumer makes an inquiry or submits an application, a real estate licensee may call the consumer for up A) to 4 months. B) to 3 months. C) to 6 months. D) to 18 months.

The answer is to 3 months. A real estate licensee may call a consumer for up to 3 months after the consumer makes an inquiry or submits an application. A licensee may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment.

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

The answer is total destruction of the property. Neither death of the tenant, failure to pay rent, nor sale of the rented premises would end a residential lease. Destruction of the property terminates the residential lease.

To assign a contract for the sale of real estate means to A) record the contract with the county recorder's office. B) allow the seller and the buyer to exchange positions. C) permit another broker to act as agent for the principal. D) transfer one's rights under the contract.

The answer is transfer one's rights under the contract. An assignment is a transfer of the interest of one person to another. In an assignment, rights are assigned to a third party, but the original party remains primarily liable unless specifically released. Assignment of a contract does not change the broker/agent relationship.

The primary purpose of a deed is to A) transfer title rights. B) prevent adverse possession. C) assign a lease. D) give constructive notice.

The answer is transfer title rights. Title is the right to or the ownership of land. A deed is the document by which the owner transfers the title to real property. If the lease allows assignment, a deed would not be used to establish the transfer. Recording the deed provides constructive notice of a transfer of the property. A deed does not prevent adverse possession, which occurs when a person acquires title through the open, continuous, exclusive, actual/visible and notorious/hostile (Remember: OCEAN) possession of another's property without the owner's permission.

How long is allowed for parties to file a discrimination suit in federal court? A) Six months B) One year C) Three years D) Two years

The answer is two years. Parties to discrimination have one year to file with HUD and two years to file in federal court.

All of the following are true of an open listing and an exclusive-agency listing EXCEPT A) the seller may offer an open listing to several brokers while an exclusive-agency listing is given to one broker. B) under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. C) under each listing, the seller avoids paying the broker a commission if the seller sells the property to someone the broker did not procure. D) each type of listing grants a commission to any brokerage who procures a buyer for the seller's property.

The answer is under each listing, the broker earns a commission regardless of who sells the property, as long as it is sold within the listing period. Both open and excusive-agency listings allow the owner to sell without the assistance of the broker thus avoiding the seller from having to pay a commission. Each require the broker to be the procuring cause or in an exclusive-agency tied to the procuring broker through the MLS agreements.

When neither party can sue the other to force performance, the real estate contract is said to be A) voidable. B) void. C) valid. D) unenforceable.

The answer is unenforceable. When neither party can sue the other to force performance, the contract is said to be unenforceable. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void real estate contracts lack an essential element and are unenforceable.

A contract that exchanges a promise for performance is A) unilateral. B) bilateral. C) executory. D) implied.

The answer is unilateral. In a unilateral contract like an option the seller promises to sell if the buyer decides to buy (perform). Bilateral contracts have both parties promising to each other. An implied contract is created by actions and an executory contract is yet to be performed.

Which of the following would create a lien on real estate? A) License B) Easement running with the land C) Unpaid mortgage loan D) Encroachment

The answer is unpaid mortgage loan. A mortgage agreement creates a voluntary, specific lien and is an encumbrance on the property. However, encumbrances such as easements and encroachments do not involve liens. An encroachment is an intrusion of an improvement or other real property onto another's property. An easement is a right of use in another's property. A license is a personal, revocable privilege.

Which of the following liens usually would be given highest priority in disbursing funds from a foreclosure sale? A) A mechanic's lien for work started before the mortgage was made B) A mortgage dated last year C) Unpaid real estate property taxes D) A judgment rendered the day before foreclosure

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.

Good faith as applied to agency is BEST defined as A) putting the interest of a principal above those of an agent. B) using honest and sincere intentions. C) using professional skills to support all parties in a transaction. D) following all lawful instructions of a principal.

The answer is using honest and sincere intentions. All parties to a contract are to use their best good faith effort to fulfill the contract. Putting a principal interest above an agent's is loyalty. Following lawful instructions of a principal is obedience and using professional skills is considered to be skill and care for all consumers including a principal.

Laws that determine the maximum interest rate a lender can charge are known as A) fraud statutes. B) borrower protection laws. C) truth-in-lending laws. D) usury laws.

The answer is usury laws. Usury is the act of charging an interest rate in excess of limits permitted by law. Laws that set the maximum interest rate are known as usury laws. Some states have set a specific interest limit, while others have set what is known as a floating interest rate, usually pegged each month at a certain percent above a fluctuating economic indicator. Truth-in-lending laws and fraud statutes are designed to provide honesty and disclosures in lending transactions but do not set minimum interest rates.

Charging more interest than is legally allowed is A) a deficiency. B) escheat. C) usury. D) allowed at a federal level.

The answer is usury. Usury is charging more interest on a loan than permitted by law. Escheat is the reversion of property to a state or county in cases where a property owner dies intestate with no eligible heirs. A deficiency occurs when the foreclosure sale of a property produces less than the amount to pay for the foreclosure process and the outstanding debt on the property. Usury rates are set at the state not federal level.

A lender that charges a rate of interest in excess of that permitted by state law may be guilty of A) fraud. B) misrepresentation. C) truth-in-lending violations. D) usury.

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.

The status of a contract that meets all the essential elements and is enforceable is called a(n) A) valid contract. B) void contract. C) voidable contract. D) unenforceable contract.

The answer is valid contract. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void or unenforceable real estate contracts lack an essential element and do not exist in the eyes of the court for enforcement.

Change, contribution, and substitution are some of the basic principles that affect what aspect of real estate? A) Supply B) Value C) Depreciation D) Demand

The answer is value. Change, contribution, and substitution all affect value—the most probable price a property will bring. Change relates to the reality that nothing is constant and variations in various aspects of a property will affect its value. Contribution means that the value of any part of property is measured by how it affects the value of the whole property. Substitution says that the maximum value of a property tends to be determined by how much it would cost to purchase an equally desirable substitute property. Depreciation is a loss of value for any reason. Under the principle of supply and demand, when supply increases the value decreases and when demand increases, the value increases.

Under an existing zoning ordinance, no signs that extend more than three feet above the highest point of a roof may be placed on any building. An owner wants to erect a nine-foot-high revolving sign on the roof of his store. In order to do this legally, the owner must get a A) special use permit. B) nonconforming use permit. C) variance. D) deed to the air rights.

The answer is variance. A variance permits a landowner to use the property in a manner that is strictly prohibited by the existing zoning. A nonconforming use permit would only apply to a use that existed prior to the zoning ordinances. A variance does not require ownership of air rights. Special use permits are tied to how the property is used, e.g. as a school or daycare.

Under an existing zoning ordinance, no signs that extend more than three feet above the highest point of a roof may be placed on any building. An owner wants to erect a nine-foot-high revolving sign on the roof of his store. In order to do this legally, the owner must get a A) variance. B) deed to the air rights. C) special use permit. D) nonconforming use permit.

The answer is variance. A variance permits a landowner to use the property in a manner that is strictly prohibited by the existing zoning. A nonconforming use permit would only apply to a use that existed prior to the zoning ordinances. A variance does not require ownership of air rights. Special use permits are tied to how the property is used, e.g. as a school or daycare.

While notarizing is NOT required to create a valid deed, the primary purpose of acknowledgement in this use is to A) guarantee a marketable title. B) convey title to the grantee. C) ensure the identity of the grantee. D) verify that the deed was signed without duress.

The answer is verify that the deed was signed without duress. An acknowledgement is a formal declaration before notary public or another authorized public officer that the person who signs a deed does so voluntarily and that the signature is genuine. The primary purpose of acknowledgment is to verify that the document was executed without duress, which would make the deed voidable. The secondary purpose is to ensure the identity of the party signing the document, which is only the grantor.

A contract for the sale of real estate that does not state the consideration and is not signed by the parties is considered to be A) executory. B) valid. C) void. D) enforceable.

The answer is void. A contract is void when no consideration is stated; consideration is an essential element of a contract. An executory contract is one that has been signed by both parties but all the requirements of the contract have not yet been performed. A contract that lacks all the essential elements is not valid but void and unenforceable.

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) voidable by the broker. B) void. C) valid. D) voidable by the incompetent client.

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 not valid or voidable as it is missing the essential element of competency or competent parties.

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 A) enforceable. B) executory. C) void. D) voidable.

The answer is void. Consideration is an essential element of a real estate contract along with competent parties, meeting of the minds, lawful objective, and in writing. Without all the elements a contract is void and cannot be voidable, executory, or enforceable.

A contract that has no legal force or effect is A) void. B) unenforceable. C) valid. D) voidable.

The answer is void. When a contract has no legal force or effect, it is void and unenforceable. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable.

At the time a buyer was negotiating the purchase of a lot on which to build a new home, the seller represented that the soil was firm enough to support the construction of a building when, in fact, the seller knew it was not. This contract is A) voidable by the buyer because of fraud. B) valid because no harm was done yet. C) voidable by the seller because of the mistake. D) void because of the seller's misrepresentation.

The answer is voidable by the buyer because of fraud. The contract is voidable because it contains all the essential elements of a contract but could be rescinded due to fraud by the seller. A void contract lacks one of the essential elements of a contract. In this voidable contract the buyer has the right to terminate but the seller does not. The contract is not valid since the seller has misrepresented the property.

vThe seller told the buyer that the property had no roof leaks. But when the buyer had the property inspected, a roofing contractor found leaks and said they had been leaking for months. The contract between the seller and the buyer is probably A) voidable. B) valid. C) implied. D) void.

The answer is voidable. Duress, fraud, misrepresentation, and minors always make contracts voidable. The seller either misrepresented the property or committed fraud, which means the contract is voidable by the buyer. The buyer may choose to move forward and continue the sale or terminate the contact. If the buyer terminates the seller would have to return the earnest money.

The length and terms of home warranties are determined by the A) warranty contract. B) city and local laws. C) state laws. D) federal laws.

The answer is warranty contract. Home warranties are provided by private companies and the coverage given and length of the coverage is determined by the contract signed between the company and the consumer.

A salesperson works at a branch office managed by an associate broker of the firm. The salesperson makes a change in the listing price of a listing contract without the knowledge or consent of the seller. The ultimate responsibility for the salesperson's actions rests with the A) firm's principal broker. B) salesperson. C) associate broker managing the office. D) associate broker and the salesperson.

The answer is with the firm's principal broker. The principal broker of a real estate brokerage firm holds ultimate responsibility for the actions of associate brokers and salespersons employed by the firm. The broker's responsibility extends to both employees and independent contractors working for the firm. While a real estate regulatory agency may find the principal broker ultimately responsible for the salesperson's actions, the agency may also hold the managing associate broker and the salesperson responsible.

When hiring an employee rather than an independent contractor, a broker is obligated to A) not split commissions. B) give paid vacations. C) guarantee a set schedule. D) withhold employment taxes.

The answer is withhold employment taxes. A broker hiring an employee must withhold from the employee's wages employment taxes such as income and social security taxes. The broker is not required to give paid vacations, guarantee a set schedule, or split commissions, but may do so if agreed to by both the broker and the employee.

Salespersons working as an employee for a principal broker can be required to A) deposit all earnest money into their personal escrow account. B) work specific hours each day as assigned by the broker. C) decline to have their federal income tax withheld by the broker. D) advertise properties only in their name.

The answer is work specific hours each day as assigned by the broker. A broker who hires a salesperson as an employee may expect the salesperson to follow rules governing such activities as working hours, office hours, and attendance at meetings. A broker is required to withhold federal income taxes and Social Security taxes from the payroll of any employee. A salesperson hired as an employee or as an independent contractor must advertise properties in the name of the brokerage firm and deposit earnest money into the broker's designated escrow account.

Salespersons working as an employee for a principal broker can be required to A) work specific hours each day as assigned by the broker. B) deposit all earnest money into their personal escrow account. C) decline to have their federal income tax withheld by the broker. D) advertise properties only in their name.

The answer is work specific hours each day as assigned by the broker. A broker who hires a salesperson as an employee may expect the salesperson to follow rules governing such activities as working hours, office hours, and attendance at meetings. A broker is required to withhold federal income taxes and Social Security taxes from the payroll of any employee. A salesperson hired as an employee or as an independent contractor must advertise properties in the name of the brokerage firm and deposit earnest money into the broker's designated escrow account.

A tire 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 tire company MOST likely A) could construct another plant without the residents' consent as long as the homeowners' association approves it. B) would not be allowed to rebuild the plant in that location under any circumstances. C) could rebuild the plant in that neighborhood by applying for a zoning variance. D) could construct another plant by obtaining the consent of the residents then living in the neighborhood.

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 tire 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 tire company MOST likely A) would not be allowed to rebuild the plant in that location under any circumstances. B) could construct another plant without the residents' consent as long as the homeowners' association approves it. C) could rebuild the plant in that neighborhood by applying for a zoning variance. D) could construct another plant by obtaining the consent of the residents then living in the neighborhood.

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 woman has a nine-year-old grandson living with her, and her application for an apartment has been rejected as the community does not allow anyone under the age of 18. Is this permissible? A) No, if less than 30% of the occupants are over the age of 55. B) Yes, if the policy is consistently applied to all tenants. C) Yes, if the housing complies with regulations for senior housing. D) No, because familial status is always a protected class in all housing.

The answer is yes, if the housing complies with regulations for senior housing. Certain properties can be restricted to occupancy by seniors as an exemption to the familial status protection. Senior housing properties in which 80% of the units are occupied by individuals 55 or older may refuse to rent or sell to families with children and may exclude owners and tenants from having children under 18 living in the senior housing. In all other cases familial status is always a protected class in housing.

A school leased a small, commercial shopping strip. When classes started, the other tenants started complaining to the landlord that the students of the school were taking up the majority of the parking spaces, and their customers had no place to park. The lease required that the students park in spaces away from the other businesses. The school asked the students to park in the assigned spaces but most continued to park where it was convenient. The landlord evicted the school. Is this action legal? A) No, because the school asked the students to park in the assigned spaces, they cannot be evicted. B) Yes, the landlord can evict the school for breach of the lease terms. C) No, the landlord cannot evict the school because parking is available to the public. D) Yes, the landlord can evict the school, and it is called constructive eviction.

The answer is yes, the landlord can evict the school, for breach of the lease terms. If a tenant fails to fulfill any of the terms of the lease, they are in breach and may be evicted. A constructive eviction would take place if the landlord was at fault and the tenant could not use the property for the purposes defined in the lease.

To determine whether a location can be put to future use as a retail store, you would examine the A) list of permitted nonconforming uses. B) zoning ordinances or regulations. C) building code. D) housing code.

The answer is zoning ordinances or regulations. Zoning ordinances regulate how properties in various parts of a jurisdiction may be used. Nonconforming uses refer to uses existing prior to current zoning ordinances but now permitted by a jurisdiction. Building codes are ordinances that specify construction standards that must be met when constructing or repairing buildings.

A rectangular lot measures 200' × 300'. Property in the area is selling for $150,000 per acre. If the broker charges 8%, how much is she paid? A) $15,290 B) $16,529 C) $19,243 D) $16,730

he answer is $16,529. 200' × 300' = 60,000 sq. ft. ÷ 43,560 = 1.3774 acres 1.3774 × $150,000 = $206,610 $206,610 × 8% (.08) = $16,528.80 round to $16,529

If a property's net operating income is $24,000, and the property is valued at $300,000, what is its capitalization rate? A) 15% B) 8% C) 10.5% D) 12%

he answer is 8%. The formula is: Net operating income ÷ market value = capitalization rate. $24,000 ÷ $300,000 = 8% (.08)

The buyer and seller are under contract when the title work is delivered. The buyer discovers the seller does not have clear title to the property. The buyer sends the seller notice to clear the title. The best way for the seller to clear the defective or clouded title is A) to have both an owner's and mortgagee's title policy. B) by paying cash for the property at the closing. C) through a quiet title suit. D) having title conveyed with a quitclaim deed.

xThe answer is through a quiet title suit. A quiet title suit removes all clouds on title and then allows the seller to convey the property to the buyer. The disadvantage is it may take months to go through the court system. Title insurance does not cover defects found before closing. Paying cash for the property or using a quitclaim deed would not clear title.