Real Estate Law Examination

Which section of the Internal Revenue Code allows the owner of real property to sell that property, then reinvest the proceeds in a "like-kind" property and defer paying any capital gains taxes?

1031

The CE credits required for your first license renewal will be prorated depending on the amount of time you've been licensed prior to the renewal date. It includes __ hours from the newly licensed salesperson module in your first year of licensure.

12

If licensees advertise they will buy a home that they can't sell, how many days do they have to purchase and close on the property if it hasn't sold when the listing period expires?

60 days

A ground lease is a residential lease or sublease for a specific term—up to a maximum of __ years—that is renewable forever, subject to the payment of ground rent.

99

What does a lot release provision require?

A portion of the loan must be repaid when each lot is sold.

What is a ground lease?

A residential lease or sublease for a specific term that is renewable forever, subject to the payment of ground rent

Jose is an investor who found and closed on an investment property, then decided to sell a property other than the one originally marked for the exchange. What is this an example of?

A reverse tax-deferred exchange

What's true about an escrow closing?

All settlement services are handled by a closing agent.

__ restricts the density of buildings in an area through practices like setbacks and open space requirements.

Bulk zoning

Delaware's __ law prohibits placing signs on state right-of-way property, which includes bus shelters.

Clear Zone Safety

Which agency administers the Interstate Land Sales Full Disclosure Act?

Consumer Financial Protection Bureau

What information related to closing costs can be obtained from the county assessor or other property tax authority?

Current and previous years' property tax assessments

Residents of Tinytown have been complaining to town officials that the village-like character of their town is being affected by the medium-rise condos that developers are building on the edge of town. In response, local government officials rezoned the areas on the edges of town as parklands. What type of zoning is this?

Downzoning

__ assigns a lower density use to an area that previously allowed a higher density.

Downzoning

The Arbor Heights community passed a zoning ordinance that requires group homes designated for disabled citizens to be situated outside of city limits. This is a violation of the ______.

Fair Housing Act

__ investors may also participate in the 1031 tax exchange and are subject to the same rules as other investors.

Foreign

Which of the following statements related to 1031 tax-deferred exchanges is true?

Foreign investors may participate.

Which of the following does the use restrictions provision describe?

How the tenant is allowed to use the property

What advantage does the 1031 tax-deferred exchange offer?

It allows investors to defer capital gains taxes when selling a property, provided they buy another property.

What purpose does bulk zoning serve?

It restricts building density.

__ is a requirement. The replacement property has to come with the same or greater debt load for the investor, and the basis of the original property carries over to the new property. It must also be a non-owner-occupied (investment) property.

Like-kind

The __ Disclosure forms allow borrowers to understand the loans they are offered so they can make good decisions about them.

Loan Estimate and Closing

At what level are budgeting, site plan review, and building codes controlled?

Local

__ title insurance provides the buyer (and the buyer's lender, if the buyer is financing the purchase) with assurance of the title's marketability.

Owner's and lender's

An inheritable freehold estate that's a fee simple defeasible (where the grantor can reclaim ownership) is also known as ______.

Qualified fee

Cheng is selling his property to Jericho. What's the best method Jericho can use to ensure his interest in the property?

Record the deed in his name.

Which legal description method is regulated by the U.S. Department of the Interior's Bureau of Land Management?

Rectangular government survey

______ is the gradual receding of water, which uncovers new land.

Reliction

What type of investment strategy is most similar to a 1031 tax-deferred exchange?

Rolling over funds from one IRA into another

Ron's company leased a building so that they could build an escape room experience. After operating for two years, their attendance (and thus their profits) started to drop significantly, so they decided it was time to close the location. When they started taking down the installation, they realized that some of the structures they built will damage the walls if they try to remove them. Which of these is true about these trade fixtures?

Ron may take the fixtures as long as he repairs any damage caused by removal.

Ari owned acreage in a rural area. He sold a small portion of it to a neighbor in an informal transaction but made no record of the sale or change of ownership. A developer offered Ari several million dollars for the entire acreage, and Ari eagerly accepted the offer. What covenant is Ari in danger of violating?

Seisin

Once the market study has been conducted, a developer can apply to ________________ for approvals.

State and local agencies

What is the name of a term which explains the complexity of property ownership rights and how rights for a single property can be "owned" by multiple parties at the same time?

The bundle of rights

If there's no state or local building code to cover a specific situation, what code must the builder abide by?

The federal building code

In a 1031 exchange, there are rules governed by Section 1031 of the Internal Revenue Code. The rules include _______.

The property in an exchange must be like-kind.

Two intoxicated co-workers sign a contract in which they agree to marry each other if they're both still single when they reach age 40. Which of the following is true about this contract?

This is a voidable contract because the parties were intoxicated at the time they signed it.

Your buyer is worried that after she closes on her property, she'll find out someone else has a claim to its ownership. What can reassure her?

Title insurance

What type of police power allows cities to identify specific uses for an area?

Zoning

If your client finds and closes on an investment property and then decides to sell a property other than the one originally marked for the exchange, they can do a tax deferral "__." This is called a reverse exchange.

backward

Under a land contract—also known as a __—the seller finances the property and holds the title until the loan is paid off. The buyer makes payments directly to the seller.

contract for a deed

The __ office or other property tax authority will provide information about current and previous years' tax assessments, as well as special taxing district designations.

county assessor's

The __ guarantees that the grantor owns the property that appears in the deed. Because the sale of property to Ari's neighbor was never recorded, his deed still shows that he owns the entire parcel.

covenant of seisin

A __ is a life estate in a property held by a widower.

curtesy

The 1031 exchange is similar to rolling over retirement funds the investor rolls over the capital gains from the sale of one property into the purchase price of the next property, __ (but not avoiding) taxes on that gain.

deferring

An __ closing is one in which the parties don't meet face to face. Settlement paperwork and services are handled by a closing agent.

escrow

In Delaware, monthly rent is due at the beginning of each month with a __ grace period, unless the landlord's office is in another county, in which case there's an eight-day grace period.

five-day

Title insurance protects property buyers from financial loss due to title defects. However, it covers only those items __ in the policy.

included

Brokerages are required to maintain at least one designated escrow account in the firm's name at a federally insured financial institution with offices in Delaware with the broker as signatory, but it doesn't need to be __.

interest-bearing

Seller John has a contract with Sue. John is providing Sue with financing for the property and will hold onto the property title until Sue's paid off the loan. What type of contract is this?

land contract

The 1031 tax-deferred exchange allows investors to defer capital gains taxes when selling a property, provided the money is rolled into another "__" purchase.

like

A developer can apply to state and local agencies for approvals once the __ has been completed.

market study

A lot release provision requires that a portion of the loan be repaid when each lot is sold. This is typical of a __ mortgage where all lots in the subdivision are used as collateral and a lien is placed on each lot.

purchase money

The __ is an estimate prepared by the seller's agent. It outlines what the seller's net proceeds will look like if the seller accepts the buyer's offer.

seller net sheet

According to the law, commercial tenants may remove __when the lease ends, but only if they are detachable without damaging the property or if the damage is repaired.

trade fixtures

The __ restriction provision describes how the tenant will use the property, including allowable activities.

use