Virginia Final Exams

Which of the following describes a mortgage that requires principal and interest payments at regular intervals and is called the liquidation of debt by periodic installment until the debt is satisfied? A. Amortized loan B. Annuity loan C. Acceleration loan D. Assemblage loan

A. Amortized loan

The ________ is the culmination of the real estate transaction. A. title closing B. inspection C. signing of the sales contract D. default of the mortgage

A. title closing.

A borrower bought a $174,000 house with no down payment. The loan was probably A. a conventional insured loan. B. a VA loan. C. an FHA loan. D. a conventional loan.

B. a VA loan. VA loans are zero-down instruments, while FHA loans permit low down payments in the 5% range.

The recording of a deed A. is all that is required to transfer the title to real estate. B. gives constructive notice of the ownership of real property. C. insures the interest in a parcel of real estate. D. warrants the title to real property.

B. gives constructive notice of the ownership of real property. Recording a deed does not convey, insure or warrant ownership. However, it does protect the owner's interest in a property by serving notice that the recorded owner is the only recognized holder of title. This places a larger burden of proof and process on someone trying to assert a prior ownership interest and/or claiming a deed holder's title is clouded.

Which is the best example of functional obsolescence? A. A residential home built next to a factory B. Peeling paint C. A house with no electricity or running water D. A residential home with central air conditioning

C. A house with no electricity or running water." Functional obsolescence" typically shows itself in one of two forms: first, in poor initial design, as in this case; second, when the features and design of the home have become outdated compared with competing properties.

Which of the following activities is a violation of the Federal Fair Housing Act? A. A nonprofit church that denies access to its retirement home to any person because of race B. A nonprofit private club that gives preference in renting units to its members at lower rates C. The owner of a single-family residence selling his/her own home who gives preference to a buyer based on his/her sex D. Discrimination in the sale of a warehouse based on the prospective purchaser's gender

A. A nonprofit church that denies access to its retirement home to any person because of race. The private club is exempt because its preferential treatment is based on its membership; the homeowner is exempt, so long as he is selling his home without a broker; the warehouse is exempt because it's not a housing unit.

What do liens and easements have in common? A. Both are encumbrances. B. Both must be on the public record to be valid. C. Neither can be done without the consent of the owner. D. Both are money claims against the property.

A. Both are encumbrances. Liens are, of course, serious in that they indicate the owner has failed to pay a debt secured directly or indirectly by the property. Easements, on the other hand, are generally a practical necessity for most residential properties.

Discrimination is prohibited in lending practices under A. ECOA. B. RESPA. C. Truth in Lending Act. D. FNMA.

A. ECOA. Passed in 1992, the Equal Credit Opportunity Act prohibits a broad spectrum of discriminatory lending practices, including the granting or denial of credit or the costs associated with borrowing based on race, gender, marital status, source of income (e.g., public assistance) and other factors.

Which of the following closing costs is typically paid by the buyer? A. Private mortgage insurance (PMI) B. Broker's commission C. Satisfy existing liens D. A flip tax

A. Private mortgage insurance (PMI)

The Federal Fair Housing Act states that a prima facie case against a broker for discrimination be established after a complaint has been received because the broker has failed to do which of the following? A. The broker has failed to display a HUD Equal Opportunity poster. B. The broker has failed to hire any minority salespeople. C. The broker has failed to join the NAACP anti-discriminatory task force. D. The broker has failed to attend mandatory classes on fair housing.

A. The broker has failed to display a HUD Equal Opportunity poster. Included among Fair Housing regulations is the requirement that the HUD Equal Opportunity signage be prominently displayed.

Which of the following is a closing expense typically paid by the seller? A. The broker's commission B. Inspections C. The mortgage recording Fees D. The recording of the deed

A. The broker's commission. The seller pays from the broker's commission. All the other expenses are the buyer's.

Broker Carr, with ABC Real Estate Company, listed the property of a seller. Broker Smith, with XYZ Real Estate Company, called Broker Carr, and disclosed that he was a Buyer Agent. Broker Smith wrote a contract with a buyer for the sale of the property. What, if any, is the relationship between the buyer's broker, the seller and the listing broker? A. There is not a relationship between the parties. Broker Carr represents the Seller and Broker Smith represents the Buyer. B. Customer C. Agency D. Dual agency

A. There is not a relationship between the parties. Broker Carr represents the Seller and Broker Smith represents the Buyer. Since each broker represents separate sides in the transaction, no relationship exists.

Which is true about restrictive covenants? A. They are placed by private parties in a deed. B. They are placed by government agencies in a deed. C. They are voidable by successive owners. D. They are a form of tax shelter.

A. They are placed by private parties in a deed. Restrictive covenants are most commonly associated with subdivisions and community management associations and are intended to maintain consistency within the neighborhood. While viewed as a benefit by most, they do limit the owner's use of the property and are binding on future owners.

Carl Chauvinist, the owner of an apartment complex, lives in one unit of a triplex and routinely refuses to rent either of the other two units to a female. Can he do this? A. Yes. He may do this if he does not use a broker or discriminate in advertising. B. Yes. He may do this if he doesn't ask the tenant's age. C. No. Carl can never discriminate on sex. D. No. Carl must live in a single family home to discriminate.

A. Yes. He may do this if he does not use a broker or discriminate in advertising. Although laws vary by state as to number of units that fall under this type of provision, if a person owns and lives in a unit, he or she is entitled to practice a certain measure of discrimination. The view is that a person's dwelling (which includes units such as duplexes and triplexes) enjoys a degree of "sanctity" and the person may choose whom he or she brings into their "home." Therefore, the owner could claim an exemption from federal Fair Housing laws.

A homeowner owned a house on a lot. The front ten feet of the lot were taken by eminent domain for a sidewalk. Would the homeowner be entitled to compensation? A. Yes. The land was taken for public use by eminent domain. B. Yes. He must be paid for the use of the sidewalk. C. No. He still had use of the house and lot. D. No. Compensation is not given on land taken for public use.

A. Yes. The land was taken for public use by eminent domain. Governments and municipalities can only seize property (other than in criminal cases) for the public good and through eminent domain, which is a process, not an arbitrary action. Part of that process involves determining fair compensation to the owner.

A competent and disinterested person who is authorized by another person to act in his or her place and sign a contract of sale is called A. an attorney in fact. B. a substitute grantor. C. an agent. D. a licensee.

A. an attorney in fact. "Disinterested" means being able to act in an objective manner without any hidden motivation or prospect of gain. For example, a person who made a secret deal to sign a contract contrary to his client's best interests in exchange for an under-the-table payment would not be "disinterested."

The maximum permissible amounts are based on "loan to value ratios" A. based on sale price or appraised value, whichever is lower. B. not determined by federal statute in the case of FHA loans. C. based on the banker's competitive market analysis. D. fixed by law for conventional loans.

A. based on sale price or appraised value, whichever is lower. Although various banks, mortgage companies and programs have different LTVs, the lower, more conservative number is used.

A real estate licensee has a buyer agency agreement. What is the seller in this situation? A. customer B. A client C. A fiduciary D. An agent

A. customer. There's an important distinction between client and customer. Unless there is a specific agreement to the contrary, licensees represent only one side in a transaction. In this case, it's the buyer who is the client and it's the licensee's obligation to negotiate a deal that's in that person's best interests, not the one that's "fairest" to both parties.

A three-story apartment complex built in 1965 does not meet with the handicapped access provisions for the 1988 Fair Housing Act. The owner must A. make the ground floor handicapped accessible. B. make the 1st and 2nd floors accessible. C. make the entire building accessible. D. the owner doesn't have to comply since it's less than 4 stories.

A. make the ground floor handicapped accessible. Because the building was constructed before the 1991 standards went into effect, only the first floor needs to be modified.

Looking at shopping centers in the appraisal process, the social fiber of the community and distances from schools is called A. neighborhood analysis. B. market data approach. C. site analysis. D. social analysis.

A. neighborhood analysis. This involves more than just driving around. It is a formal process of identifying, measuring and analyzing the influences that help determine a neighborhood's vitality and desirability.

An option A. requires the optionor to complete the transaction. B. gives the optionee an easement on the property. C. does not keep the offer open for a specified time. D. makes the seller liable for a commission.

A. requires the optionor to complete the transaction. It is up to the optionor (seller)to finish the transaction IF the optionee (buyer) decides to exercise the option. The optionee does not have to exercise the option, but would lose whatever option monies that have been deposited.

The illegal practice of directing minorities to areas populated by the same race or religion is called A. steering. B. blockbusting. C. redlining. D. panic peddling.

A. steering. "Steering" is driving people towards particular neighborhoods, and is the correct answer to this question. On the other hand, "blockbusting" is the opposite side of the same coin. Synonymous with "panic peddling," it refers to trying to generate panic selling in a neighborhood dominated by one race or ethnic group by representing that another group is about to start moving in.

The local utility company dug up Charlotte's garden to install a natural gas line. The company claimed it had a valid easement and proved it through the county records. Charlotte claimed the easement was not valid because she did not know about it. The easement A. was valid even though the owner did not know about it. B. was an appurtenant easement owned by the utility company. C. was not valid because it had not been used during the entire time that Charlotte owned the property. D. was not valid because Charlotte was not informed of its existence when she purchased the property.

A. was valid even though the owner did not know about it. Easements grant only access, not ownership, use or occupancy rights. Further, that access is generally for the benefit of the property owner, such as maintaining utilities or sidewalks. As such, they "attach" to a deed or lease and remain in effect, until specifically lifted. This type of easement is known as an easement-in-gross.

Which phrase is not acceptable to use when advertising? A. "Quiet streets" B. "Christian home" C. "Non-smoking" D. "Desirable neighborhood"

B. "Christian home". If a licensee creates an ad which is explicit in its preference for or limitation of any particular religion, the ad is discriminatory. It is probably safe to say that any advertising that describes the property would be considered acceptable, while advertising that describes buyers could be considered discriminatory, especially if the buyers are from a protected class.

The system of ownership of real property in the United States is what? A. Incorporeal B. Allodial C. Command D. Feudal

B. Allodial. "Allodial" is the modern form of ownership and is often contrasted with "feudal" in which land is held on the condition of rent or service due the government. For example, a medieval knight held property subject to coming to his baron's service when called. Similarly, the baron's land holdings were conditional on his raising an army and fighting for the king in times of conflict. Failure of any party to "perform as promised" was cause for holdings to be confiscated, often as a preliminary step to more extreme actions.

Who is the largest purchaser in the secondary market? A. Ginnie Mae B. Fannie Mae C. FHA D. Freddie Mac

B. Fannie Mae. Fannie Mae stands for the Federal National Mortgage Association (FNMA). It was established by the National Housing Act specifically to start the secondary mortgage market, thus attracting more investors and funds to help support home ownership.

An increase in the availability of money would lead to which effect? A. Interest rates would go up. B. Interest rates would go down. C. Interest rates would NOT be affected due to RESPA guidelines. D. Interest rates would NOT be affected due to Truth in Lending.

B. Interest rates would go down. Just like most things in a free market economy, mortgage loans are subject to the laws of supply and demand. Thus, when there is more mortgage money in the market place "looking for a home," borrowers have more choices, which leads to increased competition among lenders, which leads to lower interest rates.

When real estate under an estate for years is sold, what happens to the lease? A. It expires with the conveyance. B. It binds the new owner. C. It is subject to termination with proper notice. D. It is valid but unenforceable.

B. It binds the new owner. Tenancy for years is the common form of rental agreements and binds all future owners for the term of the lease.

A seller listed his home for six months on February 26. On April 29, a buyer made an offer on the property. The listing broker presented the offer to the seller on April 30. The seller accepted the offer on May 1, with the closing to occur on June 15. Assuming the closing took place on June 15, when did the listing expire? A. May 26th B. June 15th C. August 26th D. December 15th

B. June 15th. Listing contracts set forth the terms and conditions under which a broker will sell a property for his or her client. When the closing takes place, the terms of the contract have been fulfilled and it expires automatically.

In an installment land contract, what type of title did the seller retain? A. Joint B. Legal C. Equitable D. Record

B. Legal. In this type of contract, the BUYER doesn't receive legal (i.e. statutory) title to the property until the final payment is made. The BUYER receives equitable title at closing, and upon final payment to the seller receives legal title.

Under an FHA graduated payment mortgage, which of the following fluctuates over the term of the loan? A. Interest rate B. Monthly payments C. Finance charge D. Annual rate

B. Monthly payments. Graduated payment mortgages are aimed particularly at young families who expect to see their earnings rise over the next five to ten years. As such, payments for interest and principal are less than the actual costs in the early years and gradually rise to make up the difference.

A broker and seller terminate the listing contract. An offer is received in the mail by the broker after the termination of the listing contract. The offer is for full price and includes all of the terms and conditions of the seller. Why is this NOT a valid contract? A. There is no consideration involved. B. No acceptance has been given. C. No earnest money has been enclosed. D. There is no current listing agreement.

B. No acceptance has been given. It has not been presented to or accepted by the owner. Remember, contracts aren't valid until both parties agree. However, even though the listing agreement has expired, the offer should be presented. If it's accepted and the transaction closes, the broker will generally be entitled to his or her full commission.

A buyer assumes the mortgage. How is the owner relieved of the liability? A. Subject to mortgage B. Novation (or "full assumption) C. Substitution D. Graduation

B. Novation (or "full assumption). Essentially, novation means to substitute a new contract for an old one; thus the holder of the original is relieved of his or her responsibilities.

RESPA would prohibit which of the following acts? A. Steering B. Paying of kickbacks C. Blockbusting D. Redlining

B. Paying of kickbacks. RESPA concerns itself only with educating consumers about the true costs of borrowing and standardizing lending practices. As such, referral "fees" are prohibited.

Which of the following liens does not need to be recorded to be valid? A. Materialman's lien B. Real estate tax lien C. Judgment lien D. Mechanic's lien

B. Real estate tax lien. The requirement for individuals to record liens is due in part to the necessity of correctly identifying the complainant. For example, not just "Jones Contracting," but the specific Jones Contracting that performed the work and is owed the money. Because they bear the authority of government and are easily identified, liens by taxing authorities do not need to be recorded.

Mrs. Jones, an appraiser, is appraising a single family residence for which she has located six comparable properties, all sold within the past six months. The subject property is rented for $1,500 per month. It is a custom-built home, approximately three years old. Mrs. Jones would probably give the most weight in her final estimate of value to which of the following appraisal methods? A. Cost approach B. Sales comparison approach C. Income approach D. Gross rent multiplier

B. Sales comparison approach. The sales comparison approach would be used because it is the most reliable indicator of a home's true value. Since it is a single family residence rather than a multi-unit investment property, the fact that it is rented, as well as the amount of rent, is irrelevant to the calculations.

In which of the following markets may a lender sell a loan that a mortgage banker has previously originated? A. Primary market B. Secondary market C. Stock market D. Consumer market

B. Secondary market. Many homeowners are surprised the first time they receive a letter from a lender they've never heard of informing them that they now hold the mortgage on their home and that future payments should be sent to them. This secondary market is where lenders buy and sell mortgages to balance their portfolios according to market conditions and their internal needs and objectives. It should be noted that the terms of mortgages bought and sold cannot be changed by the new note holders.

An impound or reserve account MOST benefits whom? A. The borrower B. The lender C. The trustee D. The trustor

B. The lender. Also known as escrow accounts, impound accounts accumulate funds from closing costs and monthly payments to ensure that property taxes and homeowner's insurance are kept current.

All of the following are true of conventional loans except what? A. They are made to the buyer without governmental insurance or guarantee. B. The qualification requirements are uniformly fixed by state law. C. They require a higher down payment than non-conventional loans. D. The policy requirements of the lenders are not uniform.

B. The qualification requirements are uniformly fixed by state law. Not only are guidelines not uniform, qualification standards can vary enormously from lender to lender. There are no state-mandated qualifying requirements for conventional loans.

Which of the following provides a buyer with the best assurance of clear, marketable title? A. Certificate of title B. Title insurance C. Abstract of title D. General warranty deed

B. Title insurance

An appraiser is usually paid A. a fee based on a percentage of the appraised value. B. a fee based on the amount of time and effort. C. a fee agreed upon after the appraisal is completed. D. a standard fee agreed upon by the National Appraisal Association.

B. a fee based on the amount of time and effort.

The appraisal approach most likely to be used in valuing a public library building would be the A. sales comparison. B. cost. C. income. D. residual.

B. cost. The cost method is most often used for buildings where actual income or comparative commercial value are unavailable--such as schools and libraries.

The title to real estate passes when a valid deed is A. signed and recorded. B. delivered and accepted. C. filed and uploaded to the cloud. D. executed and mailed.

B. delivered and accepted. Fundamentally, real estate transactions only involve two parties--the buyer and the seller. All that's necessary to create a legal sale is for one party to make an offer the other accepts. Recording, escrow, real estate licensees, mortgage companies and the like facilitate and support the transaction process but are not requirements of a legal sale.

For the past 30 years Lois has operated a neighborhood grocery store. Last week the city council passed a zoning ordinance that prohibits packaged food sales in the area where Lois's grocery store is located. The store is now an example of a/an A. illegal enterprise. B. nonconforming use. C. violation of eminent domain. D. variance of the zoning laws.

B. nonconforming use. This is an example of "grandfathering" that's common when new zoning rules are put into place. Basically it means that businesses and buildings that were in compliance before the new code was established may continue to operate or exist under their present owners. However, if Lois want to sell her business, it must be to an enterprise that meets the new requirement.

Broker K arrives to present a purchase offer to Mrs. D, an 80 year old invalid who is not always of sound mind, and finds her son and her daughter-in-law present. In the presence of Broker K, both individuals persistently urge D to accept the offer, even though it is much lower than the price she has been asking for her home. If D accepts the offer, she may later claim that A. broker K should not have brought her such a low offer for her property. B. she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. C. broker K defrauded her by allowing her son and daughter-in-law to see the purchase offer he brought to her. D. her consumer protection rights have been usurped by her son and daughter-in-law.

B. she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. "Duress" is the application of coercion or pressure to influence a person to act in a way contrary to his/her best interests. Further, since voluntary participation is a key condition of any contract, Mrs. D could well be successful in such an action. A voidable contract is one that is able to be voided because Mrs D was under duress or undue influence.

The economic life of an investment can be described as A. the remaining chronological life of the improvements. B. the time over which value generated exceeds cost of operation. C. the time when yield is attributable to the land itself. D. the actual age of the property.

B. the time over which value generated exceeds cost of operation. Just like cars, buildings and their systems deteriorate over time and require repairs. Additionally, code changes can trigger expensive upgrades. At some point, those repairs begin to exceed the income generated and the building has reached the end of its economic life.

The first step in an appraisal is A. a market data comparison. B. to define the problem. C. a neighborhood analysis. D. to gather information.

B. to define the problem.

If additional information is not provided, which of the following would be in violation of Truth in Lending? A. "FHA financing available" B. "Assumable loan" C. "No down payment required." D. "Easy financing terms"

C. "No down payment required." "No down payment required" triggers the Truth in Lending disclosures because it is a specific statement about only one aspect of the financing. "Easy terms" does not trigger the regulation because it's non-specific.

An aggrieved party with a Fair Housing violation claim has how long to file a complaint with the Department of Housing and Urban Development? A. 1 month B. 6 months C. 1 year D. 3 years

C. 1 year. If the complaint is not filed within one year, a person may still file a civil suit in a Federal Court.

In general, the Foreign Investment in Real Property Tax Act (FIRPTA) requires a buyer to withhold estimated taxes equal to ____ of the sale price in any sale or exchange of property owned by a foreigner (not a US citizen). A. 3% B. 5% C. 15% D. 20%

C. 15%. Congress passed the Foreign Investment in Real Property Tax Act (FIRPTA) to eliminate the problem of collecting delinquent taxes from foreigners who owned and sold property in the US and left the country without paying the taxes due on the sale. The IRS currently keeps this 15% to ensure that any capital gains on the sale are paid.

Which type of loan will result in the largest reduction of the principal balance most quickly? A. 5.5% over 30 years B. 5.75% over 20 years C. 6% over 15 years D. 7% over 20 years

C. 6% over 15 years. The shorter the term of a loan, the more quickly principal is paid down and the faster equity builds. A 15-year loan at 6% interest rate would provide the LARGEST and FASTEST reduction in the principal. Interestingly, the payments on a 15-year loan are often not that much higher than the same loan with a 30-year payback.

A real estate agent should tell the buyer, his customer, which of the following? A. How the area's demographics have changed recently B. The seller's motivation for marketing his property C. A pending or recent zoning change D. The seller is getting a divorce

C. A pending or recent zoning change. A zoning change is a "material fact"--something that can have a direct impact on the property's value or desirability. For example, if the zoning in a middle class neighborhood on the edge of a growing city was changed from residential to mixed use, it means that a number of homes could be turned into businesses, which will make the property less desirable to people seeking a quiet place to raise a family.

A salesperson is involved in a transaction where an individual wishes a six-month lease with an option to buy. What is true about this situation? A. The individual must go to an attorney since it is too complicated a transaction for a salesperson. B. This transaction is too complicated for a salesperson. Only a person with a broker's license should handle this transaction. C. A salesperson could use two standard forms, fill in the blanks and request that his or her broker review the forms before signing. D. The salesperson should write the purchase offer. A lease for 6 months does not need to be in writing.

C. A salesperson could use two standard forms, fill in the blanks and request that his or her broker review the forms before signing. Generally speaking, salespeople may complete standard forms so long as they are reviewed by and with the approval of their broker.

A standardized measurement expressing the true annual cost of borrowing is expressed as the what? A. ECOA B. AGI C. APR D. RESPA

C. APR. APR stands for "Annual Percentage Rate" and expresses the true cost of the loan by factoring fees such as points, recording fees, appraisal fees and such into the interest rate. For example, a mortgage that showed an interest rate of 4.85% on the promissory note might have an APR of 5% when associated costs are factored in.

Which of the following is considered a conventional loan? A. FHA insured B. VA guaranteed C. Commercial bank's 15 year loan D. Contract for deed

C. Commercial bank's 15 year loan. Though 30 year loans are more common, 15 year loans are considered standard, conventional loans. Options A and B are part of various government programs to help low and moderate income families as well as veterans find affordable home financing.

A home improvement company was negotiating with a homeowner to add on two rooms to a home. The company agreed to take a second mortgage as long as the homeowner also included the rest of the property in the loan. The company and the homeowner agreed to a price and the company provided the necessary disclosure form on Monday and the homeowner signed the agreement at noon the following day. Assuming that the week had five business days, until what time could the homeowner rescind the loan? A. Tuesday, midnight B. Thursday, midnight C. Friday, midnight D. There is no rescission on a house.

C. Friday, midnight. Because agreement was reached and SIGNED documents were provided on TUESDAY, Friday midnight ends the THREE-business-day period.

Under which of the following types of liens can both the real property and the personal property of the debtor be sold to pay the debt? A. Real estate tax lien B. Mechanic's lien C. Judgment lien D. Assessment lien

C. Judgment lien. Most liens are against a specific property, such as a primary residence. Thus, a contractor seeking payment for a new deck cannot have a homeowner's car attached in settlement. A judgment lien, however, is a decision directed by the courts and can apply to whatever assets it deems appropriate.

What is a Schedule of Exceptions on a title policy? A. Encumbrances B. Tax liens C. List of things not insured in the policy D. Defects

C. List of things not insured in the policy. Almost no title insurance policy protects against all conceivable events. As the name suggests, the Schedule of Exceptions is a specific list of items not covered and can include things such as unrecorded mechanic's liens, assessments, water rights and mining claims.

An owner advertised "beautiful acreage; only $5,000 down; owner will personally finance down payment." Would this be in violation of the Truth in Lending Act? A. Yes. Acreage is not exempt from Regulation Z. B. Yes--since a down payment was stated. C. No. Owners are not covered by Regulation Z. D. No. Brokers can advertise the down payment.

C. No. Owners are not covered by Regulation Z. Regulation Z requires disclosure of all financing terms and conditions if an interest rate, downpayment or other enticement is featured in an ad. This does not apply in this case, however, because Regulation Z applies only to institutions, not individuals selling their own property.

The property manager suspects that the tenants in a property are engaging in illegal drug trafficking. What should the property manager do? A. Cancel the property management agreement B. Observe the property for 30 days and then tell the owner C. Notify the owner immediately of the suspicious activity D. Do not worry. It is the owner's problem.

C. Notify the owner immediately of the suspicious activity

If the owner of the dominant tenement becomes the owner of the servient tenement and merges the two properties, what happens? A. The easement becomes dormant. B. The easement is unaffected. C. The easement is terminated. D. The properties retain their former status.

C. The easement is terminated. "Dominant" and "servient" tenements involve two adjacent properties in which an easement is involved. For example, let's say Bridle Creek Farms and Barnstable Farms are separate parcels divided by a country lane that provides access to the county road system. The lane is owned by Bridle Creek, but the deeds of both properties stipulate that Barnstable Farms shall have unrestricted access for the purpose of accessing county roads. That access is an easement. Thus, if the owner of Barnstable Farms buys Bridle Creek Farms, the need for the easement disappears.

When the lender under a deed of trust requires title insurance, who would be the most likely person to pay for it? A. The mortgagee B. The trustee C. The trustor D. The beneficiary

C. The trustor. "Trustor" is another name for the borrower and "trustee" is a "supposedly" neutral third party who holds naked legal title, the right to foreclose at the instructions of the beneficiary for non-payment of a promissory note. The beneficiary is the lender in a Deed of Trust. Even though it's the lender who requires the insurance to protect his/her position, it's the borrower who pays for it.

Why is the RESPA closing statement allowed to be examined on or before closing? A. To allow the buyer to see costs at or before closing to see if he/she can get the loan at a cheaper price B. To make sure the title insurance came from the right company C. To check for errors D. To provide for special fees to specific parties for business related to the real estate transaction

C. To check for errors. This is not a step that should be dismissed. With the increased volume in home mortgages, the fact is a significant amount of closing statements do contain errors and it's easier and better to correct them before closing than after.

A partition suit is used for which of the following? A. Determination of party fences B. To allow construction of additional bedrooms or bathrooms in a house. C. To force a division of property without all the owners' consents D. To change a tenancy by entireties to some other form of ownership

C. To force a division of property without all the owners' consents. Partition suits are typically pursued when a co-owner of a property wants to sell his or her share and the other owners are opposed. Since it is a legal action involving the courts, it is an expense with often unsatisfactory results.

The Closing Disclosure (CD) form is A. the document used to make Fair Housing complaints. B. provided after signing a listing agreement. C. a statement of actual charges and adjustments. D. the document that must be displayed in brokerages.

C. a statement of actual charges and adjustments. The Closing Disclosure (CD) is a standard form in use which is used to itemize services and fees charged to the borrower by the lender. The form is called for in the TILA RESPA Integrated Disclosure (TRID).

The market data approach allows A. buyers to buy based on their emotion. B. buyers to research local businesses before purchasing a home. C. buyers to buy by comparing one house to another. D. buyers to know what the neighborhood of a house is like.

C. buyers to buy by comparing one house to another. The market data approach allows buyers to compare different properties to determine which best meets their needs in terms of price, features, quality, condition, and other factors.

The covenant in a deed which states that the grantor is the owner and has the right to convey the title is called A. covenant of power. B. covenant of warranty forever. C. covenant of seisin. D. covenant against encumbrances.

C. covenant of seisin. Another outgrowth of the feudal system, "seisen" derives from the French meaning to "sit upon or own" and gives owners the right to sell or transfer property at will.

A defaulting borrower who faces foreclosure may avoid court actions and costs by voluntarily deeding the property to the mortgagee. This is accomplished with a __________, which transfers legal title to the lienholder. A. short sale B. deficiency judgment C. deed in lieu of foreclosure D. caveat emptor

C. deed in lieu of foreclosure. With the deed in lieu option, a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. The transfer, however, does not terminate any existing liens on the property. For this reason, some jurisdictions (e.g., judicial foreclosure states) frown on the usage of deeds in lieu of foreclosure.

A portion of Wendell's building was inadvertently built on Ginny's land. This is called an A. accretion. B. avulsion. C. encroachment. D. easement.

C. encroachment. The principal attributes of an encroachment are: 1) It is accidental and 2) it involves only part of a structure. Typically, the issue would be resolved by selling Wendell an easement or a lease or, if practical, actually moving the structure.

A broker is discussing a new listing with a prospective Mexican-American buyer. The buyer wants to inspect the property immediately, but the owner of the property has instructed the broker, in writing, not to show the house during the owner's three-week absence. The buyer insists on viewing the property. The broker should A. show the property to avoid a violation of the Federal Fair Housing Act. B. request the Real Estate Commission arbitrate the problem. C. inform the buyer of the seller's instructions. D. notify the nearest HUD office.

C. inform the buyer of the seller's instructions.

A recorded subdivision plat is used in the A. metric survey system. B. rectangular survey system. C. lot and block system. D. metes and bounds system.

C. lot and block system. Lot and block is the "final" survey of property being readied for development and identifies each individual parcel in a subdivision.

A mobility impaired person was renting a unit in an apartment complex. Half the units had been assigned parking spaces near the door; the other half had not. The owner A. may charge extra money to the handicapped person for providing the parking space near the door. B. must take a vote of all tenants to see if they want to allow the handicapped person a parking space. C. must give a parking space near the door to the handicapped person, if one is available and a need is demonstrated. D. does not have to offer the handicapped person the parking spot near the door.

C. must give a parking space near the door to the handicapped person, if one is available and a need is demonstrated. The "equal access" aspects of fair housing legislation do not necessarily mean equal treatment. "Reasonable accommodation" must also be made to meet the needs of handicapped people, including exceptions to standard policies such as convenient parking and guide dogs.

To create a joint tenancy relationship in the ownership of real estate, there must be unities of A. desires, ownership, claim of right, and possession. B. title, interest, liens, and survivorship. C. possession, time, interest, and title. D. ownership, possession, heirs, and title.

C. possession, time, interest, and title. This essentially means that all parties to the agreement share equally in all aspects of the property, including the length of time it's been held. That means if one party sells or transfers interest in a joint tenancy relationship, his or her place is taken by another in the same capacity.

The illegal process of a banker refusing to approve loans for a neighborhood based on the racial composition of the area is A. blockbusting. B. steering. C. redlining. D. panic peddling.

C. redlining. Loans may only be approved or denied on the basis of whether a specific individual and property meet established standards. Thus lenders are well within their rights to deny a loan to a particular person because he or she lacks sufficient income or has poor credit. Additionally, a loan for a partially completed home or one that doesn't meet code can also be denied. However, "macro" issues such as race or neighborhood cannot be considered.

The seller under a land contract is called A. the grantor. B. the grantee. C. the vendor. D. the vendee.

C. the vendor.

To assign a contract for the sale of real estate means to A. record the contract with the county recorder's office. B. permit another broker to act as agent for the principal. C. transfer one's rights under the contract. D. allow the seller and the buyer to exchange positions.

C. transfer one's rights under the contract. Assigning a contract means to transfer it to another.

A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called A. blanket financing. B. package financing. C. warehousing. D. discounting.

C. warehousing. Warehousing refers to the process whereby banks and other lenders make mortgage loans to consumers for the purpose of quickly selling those loans on the secondary market. The "warehousing" occurs when individual loans are bundled, often with a common element such as the size of the mortgage or credit worthiness of the borrowers, and sold as a single unit.

An agent of the seller would suggest that the buyer hire an inspector from an outside service in all of the following cases EXCEPT A. when they smell gas in the basement. B. when there is a slow drain in the toilet. C. when a hinge is off the door. D. when there is sawdust in the kitchen cabinets.

C. when a hinge is off the door. Home inspectors are hired to find significant and often hidden property defects, such as signs of a leaking roof, termites, foundation cracking and so forth. Hinges and other "wear and tear" items are obvious and not among the reasons for hiring an inspector.

The buyer and seller agreed to a purchase price of $310,500. The buyer received an 80% loan. How much was the buyer's loan and how did it appear on the settlement statement? A. $310,500. Credit the buyer and debit the seller. B. $248,400. Debit both the seller and the buyer. C. $ 248,400. Credit both the seller and the buyer. D. $ 248,400. Credit the buyer only.

D. $ 248,400. Credit the buyer only. Mortgage monies are credited to the buyer's side of the ledger as a portion of the funds he or she will use to complete the transaction. Once all the funds have been accounted for, the monies (less appropriate deductions) transfer to the seller.

The zoning commission of Jefferson County requires that all new construction in a specific area adhere to a specific type of architecture. What type of zoning is this? A. Bulk B. Retro C. Directive D. Aesthetic

D. Aesthetic. Aesthetic zoning helps ensure consistency within a neighborhood or area, thus raising its visual appeal and, very often, its desirability and value as a place to live.

A buyer bought a property without telling the seller of his intended purpose for the property. The contract contains no contingency clauses and it is a properly executedXXX. After the closing, the buyer is unable to obtain the zoning he needs for his commercial project. What is the contract at this stage? A. Void B. Voidable C. In Breach D. Enforceable

D. Enforceable. Since there were no contingency clauses, and no restrictive covenants of record. If the buyer cannot secure a change of zoning , the contract is perfectly valid as stands and is enforceable between the parties.

What type of a listing agreement allows the owner to appoint an exclusive agent to sell his property, but retains the right to sell the property himself? A. Open B. Exclusive right to sell C. Multiple listing D. Exclusive agency

D. Exclusive agency. Open listings mean that if the owner or any other broker or salesperson produces the buyer, the broker will lose his or her commission. Exclusive Right to Sell gives the broker his or her commission regardless of who actually sells the property, even if it is the owner. Exclusive Agency allows the seller to appoint an exclusive agent, but retain the right to sell the property himself.

Which of the following is true of a second mortgage? A. It has priority over a first mortgage. B. It cannot be used as a security instrument. C. It is subject to termination with mortgagor notification. D. It is usually issued at a higher rate of interest.

D. It is usually issued at a higher rate of interest. Second mortgages carry higher risk for lenders because they're "second" in line after the first mortgage holder. In case of foreclosure, that means the first mortgage holder is paid in full before any remaining monies are distributed. This added exposure typically results in higher interest rates.

The seller and the buyer agreed to a purchase price of $270,000 with the closing to occur on June 15. The seller's loan balance after the June 1 payment was $170,000. with an interest rate of 6%.The monthly payment was $1,800 principal and interest. What was the loan balance the day of closing, and how much interest did the seller owe the bank? A. Loan balance $171,800; interest due $850 B. Loan balance $170,000; interest due $2,550 C. Loan balance $270,000; interest due $862.50 D. Loan balance $170,000; interest due $425

D. Loan balance $170,000; interest due $425. Although many types of loans can become more complex in their calculations of remaining principal and interest at a particular point in time, in this case the interest portion of the payment is calculated simply by multiplying $170,000 by 6% and dividing by twelve. That results in monthly interest of $850, with half that amount, or $425 added to the principal payment at closing.

Jim Jones, the landlord, rents a property to Tom Smith, a handicapped person. Mr. Smith, with Mr. Jones' permission, modifies the house to suit his needs. When the lease expires, which of the following requirements would not have to be met by Mr. Smith? A. Mr. Smith must remove the "grab rails" in the bathroom that were installed for his use. B. Mr. Smith must raise the kitchen cabinets that were lowered for his use. C. Mr. Smith must repair the walls where the "grab rails" in the bathroom were removed. D. Mr. Smith must restore the wide doorways, that were installed for him, to the original size.

D. Mr. Smith must restore the wide doorways, that were installed for him, to the original size. Since the width of the door will not in any way be detrimental to future tenants, there is not a requirement for the original width of the doors to be replaced by the handicapped tenant. All of the other issues must be restored to original status.

In a gift of a parcel of real estate, one of the two owners was given an undivided 60 percent interest and the other received an undivided 40 percent interest. The two owners hold their interests as what? A. Cooperative owners B. Joint tenants C. Community property owners D. Tenants in common

D. Tenants in common. In order to create joint tenancy, some form of relationship must exist between the parties involved, whether business, spousal or other. Because their interests were acquired as a gift, the parties in this instance become tenants in common, with all the ownership benefits of joint tenancy, but not the survivorship rights.

Why would a mortgagee require an appraisal on the property? A. To make sure the buyer did not pay too much B. To render an opinion of property value C. To protect the buyer from fraud D. To assure the property value is sufficient to cover the loan

D. To assure the property value is sufficient to cover the loan.

An owner was selling his own home. Can he advertise the down payment? A. No, because it violates RESPA. B. No, because it violates Regulation Z. C. Yes--as long as it was listed with a broker. D. Yes, because it was his own home.

D. Yes, because it was his own home. Broadly speaking, an individual homeowner is free to sell his/her own home as he/she chooses and is not subject to Truth in Lending or real estate practice restrictions.

A mortgage broker A. is a lender. B. buys mortgages in the secondary mortgage market. C. buys mortgages and resells them at a profit. D. arranges loans between borrowers and investors.

D. arranges loans between borrowers and investors. Mortgage brokers function much like independent insurance agents and represent a variety of lenders. Their role is to match the circumstances of individual buyers with the mortgage program best suited to their needs.

When a prospective buyer makes a written purchase offer that the seller accepts, then the A. buyer may take possession of the real estate. B. seller grants the buyer ownership rights. C. buyer receives legal title to the property. D. buyer receives equitable title to the property.

D. buyer receives equitable title to the property. "Equitable title" means that the prospective buyer has obtained the right to acquire ownership of a property currently owned and occupied by another.

The primary purpose of Truth in Lending is to A. control interest rates on behalf of the consumer. B. control the true costs to close a transaction. C. prevent usury. D. disclose the true costs of obtaining credit.

D. disclose the true costs of obtaining credit. Truth in Lending, otherwise known as Regulation Z, is intended to do away with deceptive financing tactics, especially those involving hidden costs--for example, advertising a $250 car lease as zero-down and then tacking a $1,200 upfront payment at the time of contract disguised as an "incidental" acquisition fee.

A void contract is one that is A. not in writing. B. voidable by only one of the parties. C. rescindable by agreement. D. not legally enforceable.

D. not legally enforceable. In order to be enforceable, real estate contracts must meet the legal requirements for contracts in general. For example, a contract signed by a minor or a "seller" who doesn't own the property in question was never legal to begin with and is thus "void."

The Smiths' purchased a residence for $750,000. They made a down payment of $150,000 and agreed to assume the seller's existing mortgage, which had a current balance of $230,000. The Smiths' financed the remaining $370,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a A. wraparound mortgage. B. package mortgage. C. balloon note. D. part (junior) purchase money mortgage.

D. part (junior) purchase money mortgage. Also known as a "purchase money second," this is a streamlined and often cost-effective financing option.

The primary survey line running north and south in the rectangular survey system is the A. township line. B. base line. C. range line. D. principal meridian.

D. principal meridian. Crossing a base line, the principal meridian is the primary reference point for locating and describing land falling within its boundaries.

The finance charges recorded on the Truth in Lending statements would include all of the following EXCEPT A. loan fees charged by the lender. B. insurance premiums for mortgage insurance payment. C. discount points and service fees. D. recording fees and title insurance premiums.

D. recording fees and title insurance premiums. These are considered legal, not financing fees and therefore are not part of the Truth in Lending statement.

All of the following are physical characteristics of land EXCEPT A. indestructibility. B. uniqueness. C. immobility. D. scarcity.

D. scarcity. Scarcity is a fundamental economic concept that holds that the rarer and more desirable something is, the more valuable it will be.

Seller Jolita lists her house with Broker Fred. Fred then buys Jolita's house and collects the agreed-upon commission. This is an example of A. commingling monies. B. a Regulation Z violation. C. truth in marketing. D. self-dealing.

D. self-dealing. Fred is taking advantage of his position to collect a commission. Self-dealing qualifies as intentional misrepresentation.

A mechanic's lien would be properly classified as a(n) A. equitable lien. B. voluntary lien. C. general lien. D. statutory lien.

D. statutory lien. A "statutory lien" is one that arises out of specific law (otherwise known as statutes). By contrast, an "equitable lien" has its roots in common law or custom. A "voluntary lien" is one entered with the property owner's knowledge and consent, such as a mortgage. A "general lien" grants a creditor the right to file a claim against all of a debtor's assets, not just a particular property. Liens are often categorized as more than one type. A mechanic's lien is statutory AND involuntary, for example.

One of the main purposes of RESPA regulations is? A. to protect the real estate agent from fraud. B. to better inform the real estate agent about the financing of a real estate transaction C. to protect the home buyer from fraud. D. to better inform the buyer about the financing of a real estate transaction

D. to better inform the buyer about the financing of a real estate transaction. RESPA has two main purposes. One is to better inform the buyer through mandated disclosure statements. The second is to prohibit some settlement practices like kickbacks and referral fees.