Unit 5

Under the interstate land sales full disclosure act how many days after ratification is the buyer given as a cooling off period which allows cancellation of the contract 3 days from ratification 5 days from ratification 10 days from ratification 7 days from ratification

7 days from ratification If a lot is subject to the Interstate Land Sales Full Disclosure Act, the contract or purchase agreement must inform the buyer of certain contractual rights. The purchase agreement must state that the buyer has a cooling-off period of 7 days following the day that the contract is signed (or longer if extended by state law) to cancel the contract, for any reason, by notice to the seller, and receive his or her money back

A broker that is acting as a property manager could be An employee of the owner A fiduciary The principal in the agreement A and b

A and b A property manager is often controlled by an agency agreement between the agent and the property owner (the principal). The agency relationship makes the property manager a fiduciary of the client (a position of trust and confidence that carries specified duties). Depending upon the terms of the contract and nature of the relationship, the broker could also be an employee or an independent contractor of the property owner. Therefore, a broker acting as a property manager is likely to be a fiduciary AND could be an employee of the property owner.

A net lease affords the lessee with The right to depreciate the building A deduction for interest payments on the loan A pro rata share of building expenses The right to assign the lease

A pro rata share of building expenses Depreciation is only available to those who own property. In a net lease, the tenant does not own the building. Similarly, interest payments accompany mortgages, which are only a deductible for the landlord. A net lease may or may not permit assignment; however, the tenant agrees to pay a pro rata share of building expenses in addition to any rental payment.

A contract made with an intoxicated person is Valid Enforceable Voidable All of the above

All of the above

Buyer-broker agreements could be: Oral Executory Unassignable All of the above

All of the above

The title clause of contract states: Whether the title is marketable Settlement date may be extended to correct title defects Purchaser is willing to accept common easements All of the above

All of the above

Vernon presents an offer to a seller with the provision that it must be accepted within 72 hours. Under which of the following circumstances would the offer terminate? Vernon dies before the seller accepts the offer The seller resubmits the offer with a minor change as to settlement date The seller proposes to wait a week before acceptance All of the above

All of the above

Which of the following would a property manager be responsible for ensuring compliance with Fair housing law Equal credit opportunity act Lead based paint hazard reduction act All of the above

All of the above A property manager's duties may include ensuring that managed properties conform to applicable laws, including: Fair Housing Laws, Equal Credit Opportunity Act (ECOA), and the Lead Based Paint Hazard Reduction Act.

Which of the following describes a subdivision? A mix of residential, retail and commercial property Small lots to maximize open space Common areas managed by community associations All of the above

All of the above Subdivisions are planned communities that often mix residential, retail, and commercial uses through special zoning. Subdivisions are often designed to produce a high density of dwellings on small lots to maximize open space. A subdivision developer must record a subdivision plat, declarations containing covenants and restrictions, and provide for a non-profit community association to oversee any common areas. Like a condominium, subdivisions have community associations that manage the common areas and enforce the covenants, conditions, and restrictions of the development.

If a person has contracted for the opportunity to purchase at a specified price, within a specified time the person has A right of first refusal An option A sales contract Both a and b

An option

To be a professional property manager of a large apartment complex, one would need to know about all of the following except Property maintenance Property insurance Human relations Appraisal techniques

Appraisal techniques Property maintenance, property insurance, and human relations (dealing with lessees and the lessor) would be important knowledge for a property manager. Appraisal techniques are the purview of the real estate appraiser.

Merging adjacent properties is known as Annexation Abutment Marshaling Assemblage

Assemblage Assemblage is when two or more adjoining properties are combined into a larger tract of land. Assemblage may increase the value of both parcels. Think of this as assembling more than one property together.

Teresa owns three .25 acre parcels of land which she has been trying to sell for $10,000 each with no luck. Teresa decides to adjoin the three parcels into one deed and sell as a .75 acre lot, within days she has an offer of $45,000 for the lot. Clearly joining the lots has made the land more valuable to a buyer. What is this an example of? Depreciation and appreciation Potential gross income and effective gross income Assemblage and plattage Useful life and economic life

Assemblage and plattage Assemblage is viable when the combined property will be more valuable than the sum of the individual parcels. Any increase in value resulting from assemblage is known as plottage value

The real estate sales contract is ______ meaning both the buyer and seller must perform Bilateral Enforceable Unilateral Voidable

Bilateral

Regarding a real estate sales contract what does the statute of frauds require: All sales contracts less than one year be in writing All sales contract more than a year be in writing Be signed Both b and c

Both b and c

A purchaser receives equitable title to real estate By accepting the deed to the property By closing on the property By receiving an estoppel certificate from the seller By signing a valid sale contract on the property

By signing a valid sale contract on the property

Regarding commercial property, which of the below equations calculates net operating income? Effective gross income - operating expenses= net operating income (actual gross income) Actual rent received + potential rent from vacancies = net operating income ( actual gross income) Gross income - expenses and deductions = net operating income (actual income) Effective gross income - vacancies = net operating income (actual gross income)

Effective gross income - operating expenses= net operating income (actual gross income) Net operating income (NOI) is the actual gross income derived by subtracting all other operating expenses from the effective gross income. Potential Gross Income is the maximum potential rental income a rental property could produce if all units were occupied; also known as projected gross income and scheduled gross income. Effective gross income is the actual rental income received after deducting any rental losses and vacancies. Taxable income is gross income minus allowable expenses and deductions.

In a typical agreement the property manager would be authorized to do all of the following except Enter into a 2 year lease verbally Hire and fire employees Collect rent every month Furnish the owner with a monthly statement of income and expenditures

Enter into a 2 year lease verbally An oral lease that is longer than ONE year is unenforceable (statute of frauds). Regardless of the time period, a property owner would probably not be authorized to enter into a verbal lease agreement. It's in the best interest of the owner to have all lease contracts in writing.

Megan is renting a condo and signed a lease with the condo owner Otto. Otto installs a new pool, hot tub and coffee/internet cafe in the common areas of the condo property. Subsequently Otto raises the rent of all the tenants and allows use of all the new amenities. What type of clause must have been in the lease in order for Otto to be able to raise Megan's rent? Subordination clause Option clause Escalator clause None of the above, this type of rent increase would not be legal

Escalator clause Escalator Clause allows the lessor to adjust payments up or down in response to specified contingencies. As long as new amenities were listed in the escalator clause within the lease then Megan was put on notice of the potential for rent increases and Otto has the right to raise the rent

The buyer-broker agreement that is most similar to the exclusive right-to-sell contract is an: Exclusive buyer agency agreement Open buyer agreement Exclusive agency buyer agency agreement Exclusive right-to- market

Exclusive buyer agency agreement

Property management agreements usually represent which type of agency General agency Special agency Dual agency Universal agency

General agency Property managers typically have a general agency relationship with the property owner. General agents are authorized to perform any and all acts related to the service,

A graduated lease is defined as one That includes an option to purchase In which all expenses are paid by the lessor In which ren is adjusted in intervals Whereby rent increase with each new tenant

In which ren is adjusted in intervals A graduated lease can be compared to an adjustable rate mortgage. This type of lease provides for predetermined rental increases at specified times. There is usually a cap set on the maximum change allowed over a specified period.

What are the two main reasons investors buy real property Income production/appreciation potential Income production/leverage Income production/investment permanence Income production/ economic life

Income production/appreciation potential Most investors buy real property primarily for its income production, and secondarily for its appreciation potential. Leverage is the amount of funds borrowed to finance an investment, investment permanence describes long term returns gained from infrastructure improvements and economic life refers to the length of time in which an improvement yields a return

Regarding the value of real property, what is plottage? Increase in value due to assemblage Decrease in value due to assemblage Profit resulting from sale of commercial property Profit resulting from sale of industrial property

Increase in value due to assemblage Assemblage is viable when the combined property will be more valuable than the sum of the individual parcels. Any increase in value resulting from assemblage is known as plottage value.

For tax purposes which of the following deductions is a homeowner allowed if he only uses his residence as a home Depreciation Principal payments Interest payments Cost of improvements

Interest payments A homeowner may deduct the interest paid on a home mortgage from his or her personal income tax calculation. Depreciation and the cost of improvements can only be deducted if the property is income-producing property (ex. a rental).

When a seller makes a counter offer, which of the following statements is not true It is a partial acceptance of the original offer The original offeror becomes the offeree in the counter offer The seller has obligated herself It is a rejection of an earlier offer

It is a partial acceptance of the original offer

What restriction is placed on lease that exceed one year in duration Lease must include an escalator clause Must be a proprietary lease Lease must be written None of the above

Lease must be written Leases must be written if they exceed one year in duration, in accordance with the Statute of Frauds.

The process of subdividing land is governed by which authority Federal laws State laws Local laws HOAs

Local laws The process of subdividing land is governed by local regulations that specify the look and feel of a large project, including the precise placement of lots, streets, sidewalks, curbs, gutters, sewers, storm drains, street lighting, open spaces, and drainage and erosion controls. Subdivision regulations generally require that the developer submit a plat map to the local government for approval

Under a net lease what is the tenant not required to pay Taxes Repairs Utilities Mortgage

Mortgage Under the typical net lease, the tenant agrees to pay a pro-rated share of all of the listed items except the mortgage, which is paid by the landlord.

Broker Sam lists a house and sells it 2 months into the listing period. After closing, Sam tries to collect his commission, but the seller refuses and correctly asserts that he is not legally obligated to pay. What type of listing did Sam have? Exclusive agency listing Open listing Net listing Exclusive right-to-sell listing

Net listing

A 19-year-old inherits property from his grandfather and immediately enters into a contract to sell it. Can he later refuse to sell the property? Yes because contracts with minors are void Yes because contracts with minors are voidable No the contract is valid and binding on all parties Yes because the contract is unenforceable

No the contract is valid and binding on all parties

A buyer and a seller enter into a valid sales contract. For personal reasons, the buyer asks to be released by the seller. The buyer also locates another person to buy the property. The seller then enters into a new sales contract with the new buyer and releases the first buyer. This is most likely an example of: Novation Implied consent agreement Redemption Assignment

Novation

Stacie makes an offer to buy a home from Mandy. Mandy likes the offer but wants a different closing date so she sends Stacie back the offer with a new closing date annotated. Mandy is the? Offeree Offeror Seller A and C

Offeror

What is a property managers responsibility regarding lead based paint disclosure On all properties provide a disclosure pamphlet and allow 14 days to inspect for lead paint On all properties provide a disclosure pamphlet and allow 10 days to inspect for lead paint On pre-1978 properties only provide a disclosure pamphlet and provide 14 days to inspect for lead paint On pre-1978 property only, provide a disclosure pamphlet and provide 10 days to inspect for lead paint

On pre-1978 property only, provide a disclosure pamphlet and provide 10 days to inspect for lead paint Sellers and lessors must disclose whether or not they have knowledge that lead based paint is present on the property and provide all lessees of pre-1978 property with a disclosure pamphlet called "Protect Your Family from Lead in Your Home." Sellers and lessees have at least ten (10) days to inspect the property for lead based paint

a listing agreement will automatically terminate: If the selling agent changes brokers On the date specified in the listing agreement If the owner abandons the property All of the above

On the date specified in the listing agreement

In a residential lease agreement the owner retains ownership rights while the tenant is afforded what right Seisin Partial ownership Possession Sharehold

Possession The tenant receives the right of possession, while the landlord retains full rights of ownership. Seisin is defined as the possession and ownership of a freehold estate. A sharehold is a stock ownership in a corporation and would not be available in a residential type lease

The non breaching party to a contract would not be awarded: Punitive damages Specific performance Monetary damages B or c

Punitive damages

Industrial property includes all of the following uses except Mines Warehouses Ranches Vacant lots

Ranches Note that industrial property includes mines, warehouses, plants, factories, utilities, and vacant land suitable for industrial development.

Which item returns the parties to their original position Recission Novation Discharge subordination

Recission

Liquidated damages from breach of a sales contract are usually available to the Broker in the event of the buyer's default Seller in the event of the buyer's default Buyer in the event of the seller's default Either the buyer or seller where the other defaults

Seller in the event of the buyer's default

if a buyer defaults on a valid sales contract, which performance remedy is available to the seller? Specific performance Monetary damages Liquidated damages Both a and b

Specific performance

If an offer is made and the offeror dies the contract_______. If a valid sales contract arises and one party dies the contract________. Survives;survives Terminates;terminates Terminates;survives Survives;terminates

Terminates;survives

Assemblage most often occurs where Demand is high Demand is low The whole is more valuable than the parts A and c

The whole is more valuable than the parts Regardless of whether demand is high or low, assemblage is usually practiced when the combined property will be more valuable than the individual parcels.

The sales contract between Barry and Jerry states the closing will take place on September 23rd at 0900. What part of the contract states the closing date? Contingency clause Time is of the essence The consideration The bilateral agreement

Time is of the essence

Which of the following is an example of fixity Upgrading the electrical system in an existing structure Planting trees on a vacant lot Including a home warranty in a sales contract Replacing an inoperable refrigerator

Upgrading the electrical system in an existing structure Fixity is the economic concept that describes the permanence of investment in infrastructure improvements. Infrastructure improvements include sewage, drainage, and electricity systems. Combined with the immobility of the underlying land, these types of improvements produce relatively stable, long-term returns. The best answer is to upgrade the electrical system as the other three answers do not actually improve the value of the infrastructure (refrigerators don't always convey with a sale).

Under the typical lease landlord are legally obligated to provide tenant all of the following except Possession of the premises Quiet enjoyment of the premises Safe and habitable premises Use of the premises as the tenant and landlord negotiate

Use of the premises as the tenant and landlord negotiate

What is the difference between the useful life of a property and the economic life of a property Useful life describes how long a property will be structurally sound, economic life is how long property will retain value Useful life is an investor term and economic life is an appraiser term Useful life refers to property value and economic lif refers to tax depreciation Useful life refers to how long a property can be used for its intended purpose and economic life refers to how long a property will be profitable

Useful life is an investor term and economic life is an appraiser term The useful life of an income producing property is the period of time that it is expected to remain economically profitable to its owner. Economic Life is the estimated time period during which an improvement yields a return over and above that which is attributable to the land. Although similar in concept to useful life, economic life is a term more commonly used by appraisers in determining property value, and useful life is a concept used by investors for tax depreciation purposes.

What real estate technique could a seller use to sell his property but the continue to live in it for a specified period of time prior to the buyer taking possession Using an option clause Using a subordination clause Using a sale-leaseback A or c

Using a sale-leaseback Sale-Leaseback is a real estate sale and financing technique whereby an owner sells property to an investor or lender, then leases that same property back from the buyer for a period of time. Sale-leasebacks are commonly used to assist homeowners who sell one home, but must remain in the home while awaiting the purchase or completion of another home. An option clause allows a lessee to purchase a leased property and a subordination clause states the lease is subordinate to all present and future mortgages.

Which of the following is not a basic element required for a valid contract offer/acceptance Valuation Consideration Lack of defenses

Valuation

If there is ever a conflict between subdivision regulations and local zoning laws which prevails? Zoning laws would be enforced over subdivision regulations Subdivisions are more strict and therefore would be enforced over zoning laws Subdivision regulation are more broad and therefore would be enforced over zoning laws Conflict between zoning laws and subdivision regulations would never arise

Zoning laws would be enforced over subdivision regulations Although subdivision regulations add greater control of a subdivision project than zoning alone, subdivisions must be consistent with local zoning laws.

Property managers typically have what type of agency relationship with the property owner General agency Special agency Limited agency Universal agency

general agency Property managers typically have a general agency relationship with the property owner. This contrasts with a listing agreement, which makes the broker a special agent of the owner, as the broker is hired to complete a very specific task

A tenant just signed a five year lease in a shopping mall. Under this lease the rent is $3,000 a month plus 3% of gross sales over $800,000. This agreement describes a Gross lease Percentage lease Graduated lease Net lease

percentage lease Under a percentage lease, the lessee pays a fixed rent and a percentage of business income that exceeds an agreed minimum of gross income.