Section 3 Review

Which of the following terms describes a lease under which the rent is based on sales volume? Select one: a. Percentage. b. Graduated. c. Reappraisal. d. Ground.

A percentage lease is one in which the tenant pays a base rent AND also pays the owner additional rent based on a percentage of the sales of the tenant. The correct answer is: Percentage.

An offer is made to a seller. Prior to acceptance of the offer, the buyer finds another house he likes better at a cheaper price. Under these circumstances, the buyer: Select one: a. May withdraw the offer. b. May not make an offer on the second house until the first offer is rejected. c. Can make an offer on the second house without fear of recourse from the first seller. d. Is bound by the terms of the original offer.

A. Any offer may be withdrawn without recourse, PRIOR to the acceptance of that offer by the offeree. The correct answer is: May withdraw the offer.

One who engages another to act for him or her under a contractual agreement is referred to as: Select one: a. A client. b. An agent. c. A seller. d. A testator.

A. Client The one who ENGAGES is the client (this may be a buyer or a seller). The one who is engaged is the agent. The correct answer is: A client.

The legal process of removing a tenant from property is: Select one: a. Eviction. b. Ejection. c. Quitting. d. Constructive notice.

A. Eviction is a legal process to remove a tenant in possession. Ejection is an action by an owner to regain possession from someone who is in possession illegally. Quitting means departing. Constructive notice of ownership can be given by recording a deed. The correct answer is: Eviction.

A buyer enters into a contract for the purchase of property, agreeing to make a specified down payment, and further agreeing to regular monthly payments to the seller, who is holding legal title, for a specified period of time. This describes what type of contract? Select one: a. Installment contract. b. Purchase money mortgage. c. Option contract. d. Agreement contract.

A. Installment Contract This situation describes as an installment contract. The seller holds legal title. With a purchase money mortgage the seller is acting as the lender and holds only "bare or naked" title as a pledge to pay the debt. An option is a contract for the right to purchase property in the future. The term agreement contract is meaningless. The correct answer is: Installment contract.

Which of the following listings is the most advantageous to the broker? Select one: a. Exclusive right-to-sell. b. Exclusive agency. c. MLS. d. Implied.

A. The exclusive right-to-sell is most advantageous to a broker because, regardless of who sells the property, the broker receives a commission. The correct answer is: Exclusive right-to-sell.

When there is a "meeting of the minds", which of the following has been accomplished? Select one: a. Offer and acceptance. b. All of the elements of the contract have been satisfied. c. Settlement has been made. d. Acknowledgment and delivery.

A. The term 'meeting of the minds' means that there has been an offer and acceptance of the terms and conditions of the contract. The other answer choices are things that follow later. The correct answer is: Offer and acceptance.

Which of the following statements about options is true? Select one: a. The optionor can void the option if another offer is submitted. b. The optionee can allow the option to expire. c. The optionee can extend the option period automatically. d. Options only involve raw land.

B. An option is the right to purchase a property within a specified time period on specified terms and can be allowed to expire by the optionee, without further liability, by not exercising the option. The correct answer is: The optionee can allow the option to expire.

What type of estate could be present in both a life estate and a leased-fee estate? Select one: a. Fee simple estate. b. Estate in reversion. c. Estate for years. d. Estate at sufferance.

B. Estate in Reversion A leased fee estate is held by a landlord. A life estate is held by someone who owns the property based on the life of a person (usually themselves). The property will revert to the lessor upon termination of the lease. The property will revert to the donor who created the life estate. Both therefore have an estate in reversion. The correct answer is: Estate in reversion.

Two brothers who each own their own real estate companies agree to divide commissions received equally. Broker A pays for three-fourths of the advertising costs and finds the buyer. Broker B pays one-fourth of the advertising costs. If the total commission on the sale is $4,500, how much does Broker B get? Select one: a. $4,500. b. $1,125. c. $2,250. d. None of the above.

C. $2,250 Since the brokers agreed to divide the commission equally, each gets $2,250 regardless of what the expenses of each may be. You may have tried to make this more complicated than it is. The correct answer is: $2,250.

Which of the following would cause a deed to be void? Select one: a. Fraud b. Undue influence c. Illegal purpose d. Duress

C. A deed is evidence of a contract and in order for a contract to be valid, it must be for legal purpose. If the contract was entered into and there was fraud, undue influence or duress, the contract would be VOIDABLE not VOID or invalid. The correct answer is: Illegal purpose

In the process of taking a listing, a licensee noticed water stains on the ceiling in one of the rooms. What should the licensee do? Select one: a. Ignore it on the theory of caveat emptor. b. Ignore it if the stain is old. c. Inquire of the owner if there is a leak. d. Advise the owner to paint over the stain.

C. A water-stained ceiling is an indication of the possibility of a leaky roof. If that house has a leaky roof, that is a material fact that must be disclosed to any potential buyer. The licensee would be required to ask about the water stains. The correct answer is: Inquire of the owner if there is a leak.

A property manager who employs maintenance people for the property he manages would be responsible for all of the following EXCEPT: Select one: a. Unemployment insurance b. Workmen's compensation insurance c. Workers' personal liability d. Federal and state tax withholding

C. As any other employer, a property manager who employs people is responsible for unemployment insurance, workmen's compensation and tax withholding in accordance with state and federal laws. Let us hope they never become responsible for the personal liabilities of their employees. The correct answer is: Workers' personal liability

Which of the following is NOT a form of steering? Select one: a. Excluding African Americans or Hispanics from a Caucasian community. b. Attempting to attract only Hispanic prospects to an Hispanic neighborhood. c. Attempting to have Caucasian homeowners sell their homes by representing that African Americans are attempting to buy in the neighborhood. d. Efforts to keep Asians out of a Caucasian neighborhood.

C. Attempting to induce members of one race to sell their properties by saying that members of another race are moving into the neighborhood is BLOCKBUSTING rather than steering. Both blockbusting and steering are violations of the Fair Housing Act. The correct answer is: Attempting to have Caucasian homeowners sell their homes by representing that African Americans are attempting to buy in the neighborhood.

A broker would be in violation of the Federal Fair Housing Law for all of the following actions EXCEPT: Select one: a. Refusing a listing on a 4-unit apartment building because it is owned and occupied by a minority couple. b. Accepting a listing with the intention of changing the racial makeup of the neighborhood. c. Hiring salespeople, on the basis of sex, regardless of experience or qualifications. d. Refusing to show a couple from Germany, property located in a neighborhood that is composed mostly of people from Italy.

C. Hiring salespeople, on the basis of sex, regardless of the experience of qualifications. Hiring people on the basis of sex is a gross violation of the law, but NOT the Fair Housing Law. Such practice is a violation of the Equal Employment Opportunity Law. The correct answer is: Hiring salespeople, on the basis of sex, regardless of experience or qualifications.

Each of the following statements is correct about property subject to a sublease, EXCEPT: Select one: a. The sublessor remains solely liable for the rental payments. b. Landlords can include a clause in the lease requiring lessor approval of any sublease arrangement. c. The sublessee makes the rental payments directly to the landlord. d. The original lessee becomes the sublessor.

C. In a sublease, the sublessee makes the rent payment to the sublessor (the original tenant), not directly to the landlord. The correct answer is: The sublessee makes the rental payments directly to the landlord.

A buyer requests the broker take a listed property off the market until his wife sees the property. Should the broker do this? Select one: a. Yes, as long as his wife can see it before the next business day. b. Yes, if the buyer pays the brokerage firm a small fee for this service. c. No, this would violate the agency agreement. d. No, only the local Association of Realtors can approve such an arrangement.

C. This is not a question of should he do it, he CANNOT do it. Only the SELLER can authorize that the property be taken off the market. The correct answer is: No, this would violate the agency agreement.

If a contract for sale contains the words "time is of the essence," it means that the closing must be completed: Select one: a. Within 24 hours. b. Within 48 hours. c. Within 10 working days. d. As soon as possible.

D. As soon as possible

Which of the following MUST be disclosed by an agent to his client, in a real estate transaction? Select one: a. Minority groups are moving into the area. b. The average commission recommended by the local real estate association. c. The buyer intends to violate deed restrictions. d. The buyer has had previous credit problems which may have an impact on loan qualifications.

D. Disclosure of minority groups are moving into the area would be a violation of Fair Housing Laws and could be considered blockbusting. The fact that the prospective buyer has credit problems is vital to the decision of the seller to accept or reject the offer. The correct answer is: The buyer has had previous credit problems which may have an impact on loan qualifications.

When a lessee assigns his or her leasehold interest in a property, all of the following statements are true, EXCEPT: Select one: a. The assignor transfers all of his or her rights in the property to the assignee. b. The assignee pays the rent directly to the landlord. c. The lessor has the right to require prior approval of the assignment. d. The assignor remains primary liable for the rental payment

D. In an assignment of a lease, the assignor remains only secondarily liable for the rent. The correct answer is: The assignor remains primary liable for the rental payment

To be a professional property manager of a large apartment complex, one would need to know about all of the following EXCEPT: Select one: a. Property maintenance. b. Property insurance. c. Human relations. d. Appraisal techniques.

D. Property maintenance, property insurance and human relations (dealing with lessees and the lessor) would be important knowledge for a property manager. A property manager should have an idea of property values but the technicalities of a formal appraisal is the purview of a licensed real estate appraiser. The correct answer is: Appraisal techniques.

Lionel rents an apartment under a three-year lease. After the first six months of the lease, the landlord sells the building. What effect will this have on Lionel? Select one: a. Lionel must renegotiate with the new owner because the previous lease is terminated b. The new owner has 60 days to renegotiate the lease or it remains in force c. The new owner may terminate the lease at any time with 30 days notice d. The sale has no effect on the lease

D. The sale has no effect on the lease When the new buyer purchased the property he had actual knowledge or at least he should have had actual knowledge that the property was occupied. He therefore bought the property subject to the existing lease. The correct answer is: The sale has no effect on the lease

A broker, acting as a dual agent, with the knowledge and consent of all parties, collected one-half the commission from the seller and one-half from the buyer at settlement. Which of the following statements is true concerning this situation? Select one: a. This action is illegal. b. The broker needed only the consent of the seller. c. The broker needed only the consent of the buyer. d. This action is permitted only with the consent of both parties.

D. This action is permitted only with the consent of both parties. A dual agency is the type of agency where a broker represents BOTH buyer and seller to a transaction. It is lawful in most states as long as both parties (buyer and seller) know about the dual agency and provide written consent. The correct answer is: This action is permitted only with the consent of both parties.

When a contract is breached, the injured party... Select one: a. may not sue for money damages. b. may not sue for specific damages. c. may rescind the contract bilaterally. d. may rescind the contract unilaterally.

D. When a contract is breached, the injured party may rescind the contract unilaterally. The correct answer is: may rescind the contract unilaterally.

If Jan makes a counteroffer in response to Joe's offer to buy Jan's house, Joe is bound by his original offer. Select one: a. True b. False

False: A counteroffer works as a rejection of the original offer.

Which of the following would not be legally sufficient to support consideration in a sales contract? Select one: a. Money b. Property c. Service d. Love and affection

Love and affection is usually not considered sufficient consideration in real estate contracts. The correct answer is: Love and affection