National PreTest

Asbestos, an environmental hazard, is a mineral that has been used for many years as:

Asbestos has been used in insulation and is an environmental hazard.

If a borrower is behind on payments, the acceleration clause gives the lender the ability to:

The acceleration clause gives lenders the ability to ask for the remainder of the mortgage

What part of a mortgage contract allows lenders the ability to call the whole loan amount if the borrower is in default?

The acceleration clause gives lenders the ability to ask for the remainder of the mortgage if the borrower is in default.

The party responsible for paying the origination fee when obtaining conventional financing is:

The borrower is the party responsible for paying the origination fee.

John submitted an offer to buy a condo, but he can only carry out the purchase if the bank approves his request for a loan. For this reason, the contract must contain a

The contract must contain a financing contingency to account for the fact that John will only be able to make the purchase if he obtains the loan.

To determine the value of a highly specialized building, like a museum, an appraiser would most likely use and heavily weight which of the following appraisal methods?

The cost approach is a great approach to value for appraisers to use on new construction and highly specialized buildings, such as public libraries or museums.

Mary has a loan whose payments and interest rate will stay the same throughout the life of the loan (not including the cost changes caused by insurance and tax rates). What kind of loan does Mary have?

With fixed-rate mortgages that are fully amortized, the payment amount and interest rate will stay the same.

Emmy just bought a house. To purchase the house, she got a loan for $300,000 with 4 discount points. How much did she pay for the discount points?

1 discount point costs 1% of the loan amount; therefore, 1 discount point costs $3,000 in Emmy's case. Emmy paid $12,000 for 4 discount points.

Arturo is buying a house for $400,000. He will be making a down payment of 5%. He already submitted a check for $2,000 as earnest money, which will be applied to the purchase. How much will Arturo need to pay on closing day?

5% of $400,000 is $20,000, so that's Arturo's down payment. He has already paid $2,000 in earnest money, which will be subtracted from his down payment due. He will need $18,000 on closing day.

Which of these is an example of a general agency relationship?

A broker and a sponsored agent is an example of a general agency relationship.

In general, a broker is responsible for:

A broker is responsible for their own actions and the actions of agents they supervise.

What civil rights law prohibits discrimination based on disability, and creates consistent and enforceable standards regarding discrimination based on disability?

A civil rights law that prohibits discrimination based on disability, and creates consistent and enforceable standards regarding discrimination based on disability, is the Americans with Disabilities Act.

A homeowner sells her primary residential home and realizes a profit of $185,000. How much tax will this homeowner pay on the capital gains?

A homeowner will not pay any capital gain taxes on a profit of $185,000. Homeowners are exempt from capital gains up to $250,000 per person every two years.

A metes and bounds legal description always returns to:

A metes and bounds legal description always returns to the point of beginning (POB).

A new contract substituting the obligations of an original contract is a(n):

A new contract substituting the obligations of an original contract is a novation.

Which of these is an example of a legally competent party who can enter an enforceable contract?

A person is not considered a legally competent party if they are underage, impaired, or not of sound mind.

Which of the following terms refers to a surveyor's or developer's map that identifies lots and blocks?

A plat (a.k.a. plat map or recorded plat) is used to identify lot and block references for legal descriptions.

A potentially valid contract in which at least one party has the option to rescind is described as:

A potentially valid contract in which at least one party has the option to rescind is described as voidable.

What does a standard title insurance policy do?

A standard title insurance policy is meant to protect against any defects discovered in the title after closing.

In order to be valid, what MUST a deed have?

A valid deed must contain a legal description.

What type of permission allows an individual property to deviate from a specific provision of a zoning ordinance?

A variance allows an individual property to deviate from a specific provision of a zoning ordinance.

How long after an incident does a victim of housing discrimination have to file a complaint with HUD?

A victim of housing discrimination has one year to file a complaint with HUD.

What is attached to an original contract before it is signed?

Addenda are attached to an original contract before it is signed.

Under federal Fair Housing law, which of the following acts is illegal?

Advertising property for sale only to married couples is a violation of the Fair Housing Act. Race, color, national origin, gender, familial status, religion, and disability are all protected classes under the Federal Fair Housing Act.

Which of the following statements may represent the unauthorized practice of law?

An agent saying, "You should proceed without ordering a new abstract - this title is clear" would be considered giving legal advice. This is unauthorized practice of law

Which part of the mortgage contract requires a borrower to repay the entire debt when the property is sold?

An alienation clause would require a borrower to pay the mortgage debt in its entirety upon the property being sold.

An appraisal is required for all:

An appraisal is required for all federally related loan programs.

An appraisal report is a report from a

An appraisal report is a report from a licensed appraiser that sums up a property's market value based on collected data.

What is a report from a licensed appraiser that sums up a property's market value based on collected data called?

An appraisal report is a report from a licensed appraiser that sums up a property's market value based on collected data.

An example of a voidable contract is a contract that:

An example of a voidable contract is a contract that is made with one party who is not competent. Such a contract may be voided.

An executory contract is a contract that:

An executory contract is a contract that is not completely executed or performed. The terms are not fully carried out or are in the process of being carried out by one or more parties in the agreement. The contract will not be considered executed until it is closed.

What type of listing provides a commission to the broker ONLY if their activities bring about a sale?

An open listing provides a commission to the broker only if their activities bring about a sale.

Brenda and her husband are interested in buying a house that was constructed in 1971 that has all the original paint, windows, and flooring. What is required from the listing agent in this situation?

Because the house is a residential property built before 1978, the agent needs to furnish the buyers with a pamphlet approved by the EPA concerning lead-based paint prior to closing.

Burt is buying a house for $100,000 and is making a 20% down payment. He is paying a 1-point origination fee to a mortgage lender, $500 for a new survey, and $800 for an environmental report. Based on this, before any prorations, how much cash will Burt have to bring to the closing?

By adding together the costs of Burt's down payment ($20,000 - calculated using the down payment percentage and sales price), origination fee (1% of the loan amount, which is the sales price minus the down payment), survey, and environmental report, we find that he would have to bring $22,100 to closing.

In most cases, broker compensation, as a percentage of home price, falls somewhere between:

Compensation is negotiable and is determined by how brokerages charge property buyers and sellers. In most cases, broker compensation falls somewhere between 5 to 7% of the home's price, with an average commission of 6% of the home's sales price.

A contract can still be valid even if it lacks:

Consideration, lawful objective, mutual consent, competent parties, and adherence to the statute of frauds are the five requirements for a valid contract. Earnest money is NOT a requirement.

Which statement BEST defines the term contingency?

Contingencies are stipulations that must be satisfied before the contract can be performed.

Which one of the following actions would be considered the unauthorized practice of law by a broker?

Drafting an legal document that transfers an interest in real property would be considered the unauthorized practice of law by a broker.

Which of these is a protected class under the federal Fair Housing law?

Disability is a protected class under the federal Fair Housing law.

Ben manages an apartment complex that has an effective gross income of $100,000. Operating expenses were $60,000. What is the net operating income of the property?

Effective gross income - Operating expenses = Net operating income. $100,000 - $60,000 = $40,000.

What is eminent domain?

Eminent domain is the power of the state to seize a citizen's private property, or seize a citizen's rights in property (with compensation), but without the consent of the owner. The property is taken for government use.

Erin pays a flat fee every month to rent her apartment. Her landlord pays for the property's maintenance, security, taxes, utilities, and all other operating expenses. What kind of lease is this?

Erin has a gross lease. In this type of lease, the tenant pays a flat fee and the landlord is responsible for all operating expenses.

Flood damage is covered by:

Flood damage is only covered by flood insurance policies.

Who provides flood insurance to homeowners?

Flood insurance can be purchased only from the National Flood Insurance Program (NFIP).

Hans bought an investment property for $5,250,000. The NOI of this property is $367,500. At what cap rate did he purchase this property?

He purchased the property at a 7% cap rate. The cap rate is found by dividing the NOI by the property value.

Who can require a buyer to purchase homeowners insurance?

Homeowners insurance is required by most lenders.

Your buyer client asks you if a property is located in a flood zone. What should you do?

If a buyer client asks you if a property is located in a flood zone, you should direct the buyer to obtain an up-to-date flood map from FEMA.

If a contract specifies a legal land description, it is most likely a(n):

If a contract specifies a legal land description, it is most likely a listing agreement.

Which is an example of a freehold estate?

In order for something to be a freehold estate, it must be immobile and owned for an indefinite amount of time. Any type of lease or sublet does not qualify as a freehold estate.

Liability for others by mandate of law or by express agreement is called:

Liability for others by mandate of law or by express agreement is called vicarious liability.

With the exception of tax liens, how are liens generally prioritized?

Liens are prioritized by date of creation, with older liens being paid off first in the event of a foreclosure.

Listing agreements are between a broker and a(n):

Listing agreements are between a broker and a seller.

In terms of contract validity, what does mutual consent mean?

Mutual consent occurs when all parties to a contract agree to the terms of the contract. It's a necessary element of a valid contract.

Which type of listing agreement is most likely to cause a conflict of interest, and is therefor discouraged?

Net listings are most likely to cause a conflict of interest, and are therefor discouraged.

Which of these is the best example of stigmatized property?

Property is described as stigmatized when its value may be reduced by things that occurred on the property, such as death, crime, or paranormal activity. These things may be undesirable to buyers, but they do not affect the physical condition of the property.

What is the purpose of RESPA?

RESPA is designed to educate consumers about closing and settlement services.

Sabrina accepted Rebecca's offer to purchase her house, and the closing date is in a few weeks. Until then, what does Rebecca have?

Rebecca has equitable title. When a seller accepts an offer from a buyer to purchase a property and begins to enter a sales contract, the buyer holds equitable title in that property.

An investor has purchased a one-family home that they plan to rent as an investment. Which of these statements accurately describes how it can be depreciated?

Residential investment properties are depreciated over 27.5 years.

When Shondra originally bought her house, she made a 30% down payment on the $600,000 purchase. Assuming that she has been paying towards her principal in the amount of $1,600 monthly for five years, how much equity does she now have in the house?

She has $276,000 in equity. Equity = Value of asset - Amount owed on asset

Steering is the practice of

Steering is the act of directing people to or away from a particular area due to the protected class of the buyer or residents of the neighborhood in a manner that perpetuates segregated housing.

TILA does NOT apply to which of the following kinds of loans?

TILA does not apply to business loans.

The Civil Rights Act of 1866 protected the right to fair housing regardless of:

The Civil Rights Act of 1866 was the first legislation to protect the right to fair housing regardless of race, with no exceptions.

The Fair Housing Act covers:

The Fair Housing Act covers residential transactions only.

Which is exempt from the federal Fair Housing Act?

The Fair Housing Act does not apply to the rental of rooms or units in a dwelling containing living quarters occupied or intended to be occupied by no more than four families living independently of each other if the owner actually occupies one of the living units as their residence.

An unmarried Texas couple purchased real estate together. How would the deed identify how they hold their interests if they specify they want them passed to the survivor in case of death?

The deed would identify the interests of the owners as joint tenants with the right of survivorship.

When you're talking about mortgages, what is another name for an origination fee?

The origination fee may also be described as points. The borrower is the party responsible for paying the origination fee.

The owner of a landlocked parcel of land may gain access to their land through an:

The owner of a landlocked parcel of land may gain access to their land through an easement by necessity.

What does the principle of anticipation state about the valuation of property?

The principle of anticipation states that the present value of a property is affected by the anticipated income or utility that property will give its property owner.

The rectangular survey system depends on what?

The rectangular survey system uses latitude and longitude to map land.

Who must fill out the Seller's Disclosure Notice?

The seller must fill out the Seller's Disclosure Notice.

The statute of frauds requires that real estate agreements:

The statute of frauds requires that real estate contracts be in writing in order to be enforceable in court.

The term for when the client initiates the termination of the agency agreement is known as:

The term for when the client initiates the termination of the agency agreement is known as revocation.

There are no exceptions for discrimination based on:

There are no exceptions for discrimination based on race. That's thanks to the Civil Rights Act of 1866.

Molly and Jeff are currently in the process of paying off a loan. Each month they pay the same amount, which contributes to both the principal and interest. Which type of loan is this an example of?

This is an example of an amortized loan, in which the same monthly amount contributes to both the principal and interest.

What happens to trade fixtures after a business moves out of a leased property?

Trade fixtures are items that a tenant uses in their business that will be removed at the end of the lease. They are considered the personal property of the tenant.

Undivided ownership of an estate, with an interest that is exclusive from other owners is called:

Undivided ownership of an estate, with an interest that is exclusive from other owners is called ownership in severalty.

When an object that was once personal property becomes permanently attached to real estate, what happens?

When an object that was once personal property becomes permanently attached to real estate, it becomes a fixture.

When the terms of a contract have not yet been fully performed by both parties, the contract is best described as:

When the terms of a contract have not yet been fully performed by both parties, the contract is best described as executory.

When there is a breach of contract, the non-breaching party can rescind the contract, forfeit the contract, or:

When there is a breach of contract, the non-breaching party or the party who fulfills (or wants to fulfill) their part of the contract can either forfeit, rescind, sue for compensatory damages, or sue for specific performance.

A Christian organization owns a fourplex. It wants to rent to only Christian tenants. Under the federal Fair Housing Act, is this legal?

Yes. Religious organizations which rent to tenants for residential purposes are exempt from the Fair Housing Act.