AZ Course Exam

You get a loan from the Loan Star Bank to help pay for your home. Find the interest on the loan if you borrowed $12,000 at 10% for one year.

$1,200 You can find the annual interest owed by multiplying the total loan amount (total x rate = interest).

We know that the original loan was for $17,000 with an interest rate of 9.5%. How much interest would be charged if the loan is paid off in 11 months?

$1,480 First find the annual interest amount: $17,000 (principal) x 0.095 (interest rate as a decimal) = $1,615. Then divide by 12 to get the monthly rate, which is $134.58. Finally, multiply the monthly interest by 11: $134.58 x 11 = $1,480.42 which we can round down to $1,480.

Using the capitalization formula, what is the value if the net operating income is $20,000 and the rate of capitalization is 10%?

$200,000 Net operating income / rate of capitalization

A parcel of land measures one half mile by 3,000 feet. If price per acre is $4,200, what's the list price for this parcel?

$763,560 Area = length x width. One mile = 5,280 feet. The area of this parcel is 7,920,000 s.f. ([5,280 ÷ 2] x 3,000). One acre = 43,560 s.f. The parcel is 181.8 acres (7,920,000 ÷ 43,560). So, the list price is $763,560 ($4,200 x 181.8).

Alaina wants to build 5,000 SF house on two acres of land. Once the land is built, how many acres of land will they have left?

1.89 Acres

How many SF in an acre.

43,560 SF

What type of capital gain is considered short term?

A gain on a property owned for less than one year

Burt owns a development company that specializes in constructing new, energy-efficient houses. The best approach for an appraiser to use in the appraisal of Burt's newly built homes is the ______.

Cost Approach The cost approach is the best method to determine the cost of acquiring the land and constructing the homes.

Over the life span of owning a home, homeowners may take advantage from what tax benefit?

Property tax deductions The amount of homeowner's annual property tax obligation can be deducted from their taxes.

What types of capital gains may property owners encounter?

Short and Long term

A developer, Howard, has purchased land with the expectation of constructing an apartment building. He explains to his lender that he'll need a construction loan as well, so the mortgage they sign includes what kind of clause to allow the construction loan's lien position to take priority?

Subordination The subordination clause allows a junior lien to take priority over a senior lien.

Betty hired a contractor to replace her gutters. Within days, the gutters leaked and flooded her basement. She complained to the contractor, who replaced the gutters again. The next time it rained, the gutters leaked and flooded Betty's basement a second time. Frustrated, Betty decided to file a lawsuit against the contractor in an attempt to recover the money she lost. This is an example of ______.

Suing for damages and breach of contract

When the property is financed, who is named as an additional insured entity on the homeowner's insurance policy?

The lender The lender is also named on the homeowner's insurance policy to protect the lender's interest in the property.

Developer A has a project planned that does not conform to the community zoning regulations and wants to make a change request. Which local land use group would the developer ask, and for what?

The zoning board of appeals for a variance

Landlord Lou asks tenant Tom to sign a written rental agreement that has a provision that attorney fees may be awarded to the prevailing party if there is a court action. Tom signs it. Which of the following is true in this situation?

This is not a prohibited provision, so Lou's done nothing wrong, and the lease is valid (assuming all other elements are legal). While Arizona prohibits rental agreements that state the tenant will pay the landlord's attorney's fees, it's acceptable to have agree in writing that attorney fees may be awarded to the prevailing party if there is a court action.

Which of the following statements is true regarding timeshare estates?

Timeshare estates can be sold and passed down to heirs

A creditor holding a junior lien on an Arizona property that's being foreclosed on judicially has which of these rights?

To pay off all amounts owed to the senior lender and then continue with the foreclosure. In a judicial foreclosure, the junior lien holder can pay off the borrower's home loan and any other costs required to cure the default. At that point the junior lien holder becomes the senior lien holder and can carry on with the foreclosure.

A quitclaim deed does which of the following?

Transfers without warranty any interest or title the grantor has when conveying it.

What type of timeshare involves a buyer agreeing to pay a one-time purchase price and an annual maintenance fee, and in return an accommodation time and having the right to use the unit or a specific number of years.

Vacation Vacation ownership is basically a way prepay r a vacation rather than renting it.

What are seven federally protected classes?

race, color, religion, national origin, sex, familial status, disability

News spreads fast when the proposed new subdivision near Mesa began accepting deposits for lot reservations. Before long, the developer had obtained reservations for all the lots in the high-end development. How long must the deposits be held in escrow?

Until the purchase contract is executed or the reservation is terminated or cancelled. Once a deposit is received, an escrow agent must place it in an escrow account within one business day. The deposit must stay in the escrow account until the reservation is cancelled or terminated, or a purchase contract is executed.

When is an elevation certificate required?

When attempting to obtain floor insurance in some areas An elevation certificate provides documented proof that all new buildings and improvements are properly elevated to minimize flood damage, thereby allowing homeowners to obtain flood insurance.

Which Arizona statutory duty requires agents to provide information to clients that they might want to take into consideration as a part of the transaction?

obtaining effectively communication information that would be impactful to a client's interest.

How many feet in a mile?

5,280 ft

What percentage of loss would the seller have if he paid $18,000 for a vacant lot, built a home on the lot that cost $145,000, and then sold the property for $153,000? Round your answer to the nearest percent.

6% Add the cost of the lot and the cost of the house together to get the total cost ($163,000). Next, subtract the sales price from the total cost to get the amount of loss ($10,000) he took. Finally, divide the total cost by the loss amount ($10,000 ÷ $163,000).

Glenn is purchasing a home for $400,000. The property was appraised at $415,000 and Glenn is financing $300,000. What's the loan to value ratio?

75% Lenders use the lesser of the sale price or appraised value. $300,000 / $400,000 (financing /purchase price)

John and Michelle received a general warranty deed when they purchased their house from Ted. A couple of months after they moved in, their neighbor, Bryant, drove his four-wheeler across their property to access the lake front. John discovered that Ted and Bryant agreed to an easement over Ted's property several years earlier. Which general warranty deed covenant does this represent?

A covenant against encumbrances The covenant against encumbrances assures the grantee that no encumbrances exist other than those that are publicly recorded or noted in the deed.

What's a deficiency judgment?

A judgment that allows the lender to collect the difference from the borrower if the foreclosure sale does not satisfy the debt.

Jim decided to refinance his three-year-old mortgage that has a balance of $300,000. He has to pay a fee of 5% of the loan amount to the original lender for paying off the mortgage early. What is this fee called?

A prepayment penalty

Along with the public report, what must developers send to ll reservations holders?

A proposed purchase contract When a public report is received, the subdivide must send it and a copy of the proposed purchase contract to all reservation holders.

Which type of property tax is based on the value of the property?

Ad Valorem Ad valorem taxes are based on the value of the property. Remember that ad valorem is Latin for "according to value."

If a private individual tries to lay claim to someone else's property because he has been living on and using the property as his own for an extended period of time, the individual may acquire the property through _______.

Adverse possession The method by which trespassers may take legal title to a property is called adverse possession. It requires open, notorious, and hostile use for a statutory period of time.

Which of the following options describes a subordination agreement?

An agreement between two lien holders to modify the order of the lien priority

According to the national standards for measuring square footage of a dwelling, which face shouldn't be included?

An attached accessory apartment Garages, and unfinished basements may be included as unfinished square footage only.

Buyer April is interested in Wayne's condo. Steve represents April, and Wanda represents Wayne. Who are the principal(s) in this sales transaction?

April and Wayne April and Wayne are the principals. Each is a party to the transaction.

What entity does the Arizona Real Estate Commissioner oversee in order to enforce the state's real estate laws?

Arizona Department of Real Estate The commissioner oversees the Arizona Department of Real Estate, which regulates the activities of licensees.

Which type of lawsuit is commonly filed against property managers by building owners?

Breach of contract Building owners commonly file breach of contract lawsuits against property managers. The others are types of lawsuits tenants file against property managers.

Hanna represents the buyer, and Hank, an agent from a different firm, represents the seller in the same transaction. What type of agency relationship does Hanna have with her client?

Buyer agency

What are the steps in proration

Calculate the daily rate then multiple rate by the number of days in the proration period.

Clint was looking for alternatives to the traditional vacation condo rental for his family. He purchased the right to use a given set of facilities at any point throughout the year. What did Clint purchase?

Campground Membership A campground membership gives the purchaser the right to use all of the campground facilities, such as water or electric hookups, restrooms, and recreational facilities, like pools or playgrounds. Members may use the facilities at any time during the year.

Payden sold his home and made a nice profit. His real estate agent told him he can offset his capital gains from what home costs?

Capital Improvements Large improvements (paved driveway, garage, upgraded windows) increase the property value.

In what type of market is pricing a home below market value an especially good strategy, as buyers are scarce and unlikely to consider at or above-market homes?

Cold Market This is a good strategy for a cold market because it will help generate interest from buyers. It doesn't mean that a full-price offer will be received, however.

In a real estate transaction, which of the following is established when the parties enter into an agreement voluntarily with full understanding of the contract terms?

Consent

California licensed real estate agent Darshna is representing her California buyer in his home search in Phoenix. Arizona broker Ted must have a ______ with Darshna in order for the two to work together in a transaction.

Cooperating Broker Agreement An Arizona broker must have a cooperation agreement in place with an out-of-state broker in order for the out-of-state broker to participate in a real estate transaction in Arizona.

Which of the following is a form of commercial bank revenue related to mortgage financing?

Demand deposits Commercial banks derive most of their funds for mortgage lending from demand deposits.

What's an up front charge to make up for the difference between the interest rate the borrower is paying and the rate the lender normally requires?

Discount Points A lender may charge discount points to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires.

Woody has a lease with an option to buy on his penthouse apartment. Each month, 20% of his lease payment goes toward ________.

Down payment towards the purchase price The option fee is typically a one-time fee that the buyer will forfeit if the right to purchase isn't exercised. If a portion of the monthly rent is set aside, it's usually applied toward the property's purchase price.

_______ provide a limited right to use a property for a specified purpose.

Easements Ex. Shared driveway

Regarding timeshares, Arizona has ______.

Enhanced a law to protect the consumers. Consumer complaints have led to state legislatures and agencies stepping in to ensure appropriate consumer disclosure and built-in safeguards. Arizona is one of those states.

Cedric is opening a model railroad shop, but he knows that he'll only run the store until his partner finishes law school. He signed a three-year lease, after which the lease will terminate. What kind of leasehold is this?

Estate for years An estate for years is a lease with a fixed termination date. It may be for one month, three months, or three years, but at the end of the lease period it automatically terminates.

Ideally, what guides real estate professional's behaviors?

Ethics and laws.

Which of the following is NOT a step that the ADEQ takes to assess a potential WQARF site?

Evaluating who will pay for the cleanup Once information is received about a potential contamination site, the ADEQ assess whether there is credible evidence of need, whether another program has jurisdiction, and if the site is already being cleaned up voluntarily.

Bonnie likes to keep to herself. She has a heavy-duty gate installed at the entrance to her 80- acre ranch so that she can control who accesses her property. Which right in the bundle of rights allows her to do this?

Exclusion Having the right to control who is allowed on your property

Fee simple ______ includes two categories, which can be distinguished in part by the way in which ownership may be regained by the original grantor of the estate.

Fee simple defeasible Fee simple defeasible estates include two types: fee simple determinable and fee simple subject to a condition subsequent.

When you're using the sales comparison approach to value a property, which of the following is considered a category of adjustment?

Financing terms and cash equivalency Categories of adjustment include financing terms and cash equivalency, conditions of sale, market conditions at time of contract and closing, location, and physical characteristics.

A _____ is a crack in the Earth caused by extensive groundwater withdrawal.

Fissure

You're working for a brokerage that allows sellers to choose from several tiered packages of services ranging in price from $199 to $700, rather than paying a commission. The sellers do most of the work to sell the properties, but you provide photos, upload the properties to the MLS, and in some cases even host open houses. What type of listing service does this describe?

Flat fee/ Limited Service This describes a limited service/flat fee listing, which is popular with sellers who want to do most of the work to sell their homes and not have to pay a commission.

Lacey and Don live in a newer Arizona subdivision, and they'd like to install solar panels to help with utility costs. However, they've just found out that the HOA will only allow them to put them on the north side of the home, which is not visible from the street but also gets the least amount of sun. Which of the following is true?

HOA can regulate the placement of solar panels, as long as the regulation doesn't adversely affect their efficiency Arizona HOAs can legally adopt reasonable regulations related to placement of these devices, as long as they don't prevent their use or functionality, or adversely affect their cost or efficiency.

Ally's HOA recently posted this in the monthly newsletter: "No Homemade For Sale/Rent Signs Allowed." Which of the following is true?

HOA's that rent/lease/sale signage be commercially produced.

The ______ permits anyone who's not a licensed contractor in Arizona to perform minor repairs that cost less than $1,000 in total.

Handyman Exemption

From a lender's perspective, what does a low credit score indicate?

High Risk A credit score is a number ranging between 300 and 850. The lower the number, the higher the risk.

Which of the following does the use restriction provision describe?

How the tenant will use the property Including allowed activities

Sole ownership of a real estate means a title is held ____ ?

In Severalty

Which approach to value is typically used for investment property of two-to-four family units?

Income approach The income approach to value analyzes a property's ability to earn future income and is typically used for single-family houses (where the primary use is as a rental property) and for two- to four-family units.

Which one of these would NOT be an element of comparison an appraiser would use when applying the sales comparison approach to a property valuation?

Income generated The sales comparison approach doesn't factor in any income a property may have generated; that's an aspect of the income approach.

The equal credit opportunity act specifies that credit applicants must be judged using only what criteria?

Income, net worth, job stability, and credit rating. The ECOA specifies that applicants for credit be judged only on creditworthiness (income, net worth, job stability, and credit rating), and not on their membership in a protected class, age, marital status, or whether they receive public assistance.

With a straight mortgage, what type of payments are made up until the end of the loan term?

Interest A straight mortgage is one where interest-only payments are made until the end of the loan term, when the full principal becomes due.

Arizona resident Pablo has a piece of land that was irrigated with groundwater between 1975 and 1980. Which of the following grandfathered rights does Pablo likely have?

Irrigation Grandfathered Rights An irrigation grandfathered right specifies how much groundwater the owner can use based on a formula in the AMA's management plan. This type of right can't be sold separately from the land to which it's attached.

Which option best describes what an environmental impact statement is?

It describes and analyzes a proposed action that may have a significant effect on the environment.

If a tenant moves out before a lease term expires and the landlord is able to rent the unit, the tenant is ______.

Liable for rent for the month during which the move-out occurred and any month until the end of the lease that the landlord is unable to rent the unit

Cooperation agreements with out-of-state brokers may only be entered into by Arizona ______.

Licensed brokers

When Kris had to cut her work hours, her income wasn't quite enough to keep up with her mortgage payments. She doesn't want to lose her home to foreclosure, so she asks her lender for a ______.

Loan modification Lenders may be willing to adjust loan payments, the loan term, and even the interest rate in order to keep a loan and avoid foreclosure. Kris doesn't want to lose her property, which she would with a deed- in-lieu or a short sale.

Which type of legal description is this: "Plat of Block 28, Woodmen Heights Tract, recorded in Map Book 27, page 68, at the Eldor County Records Office"?

Lot and block

John is considering purchasing an office building and is trying to determine whether or not it's a good investment. The methods of income approach he may use when estimating the value are all of the following EXCEPT for which?

Market or Sales Comparison Properties that rely heavily on rental income often use the income approach to estimate their value. Three ways to estimate value are the capitalization method, the gross income multiplier, and the gross rent multiplier.

Meg is considering a move to a foreign country and wants to deed her property to her son, Christian, who's 16. Which of these must occur to make this transfer legal?

Meg must sign the deed and have her signature acknowledged. As the grantee, Christian doesn't have to sign the deed, and he doesn't have to be legally competent or of legal age. The property can be conveyed only if some consideration is in place, but it doesn't have to have a monetary value.

"Beginning at a stake and stones about 30 feet from the center of the brook that runs across the road Southwesterly from the dwelling house of the late Henry Nelson ..." is an example of what type of legal description?

Metes and bounds

What is the federal program that was created to help mitigate flood losses across the country?

NFIP National Floor Insurance Program

Chloe's Arizona salesperson's license expired 18 months ago while it was inactive due to suspension. The suspension period has passed and there are no other outstanding issues, so she will apply for reinstatement by ______.

Original application Licensed expired for more than one year - original application

A property owner wants to know whether or not he should expect to invest capital funds into major repairs for the property. What part of the property management plan should he refer to for this information?

Property Analysis The property analysis includes discussion of the property's current condition and recommendations to stall or reverse obsolescence.

Which of the following is a method of preventing or minimizing risk?

Providing regular relevant training to licensees

Which of the following is a true statement regarding record keeping requirements for Arizona real estate licensees?

Records are subject to an ADRE audit It's fine for licensees to retain transactional records electronically, subject to certain conditions. One of those conditions is having the ability to access them within 24 hours of a ADRE audit.

Which of the following renovation projects is most likely permitted to be completed by a handyman, per the handyman exemption in Arizona?

Replacing the hardware on the kitchen cabinets

Jayne was tired of waiting for her subcontractor to get his part of the deal done. The agreed- upon deadlines came and went, and Jayne lost money waiting for the subcontractor to come through. She decided that if the subcontractor wasn't going to honor his commitments, neither was she, so Jayne consulted with her attorney and then terminated the contract. This is an example of ______.

Rescinding the contract unilaterally In this example, Jayne rescinded the contract unilaterally as a means of remedying the breach of contract.

Which of the following statements about EPA's environmental impact study is true?

Results are often reviewed and approved by a community board. An EIS is generally conducted in phases and is often followed up by some sort of community forum to discuss the results, as well as to obtain community board approval.

Jared is buying a condo from Luke. Sally is Jared's lender, and Thomas is Jared's agent. Meredith is Luke's agent. Who is responsible for providing the Loan Estimate?

Sally - the Lender Lenders must provide prospective borrowers with the Loan Estimate within three business days of receiving the loan application.

Charlise has an important meeting this afternoon and dropped by her firm's Mesa office to restock her supply of real estate employment agreements because she'll need one for her meeting. What do we know about her meeting?

She'll be meeting with a potential client A real estate employment agreement is Arizona's term for a listing agreement or buyer agency agreement.

Which of these scenarios is an example of two parties rescinding a contract?

Sherman, the seller, decides not to sell his condo after all. Fortunately, his buyer, Alice, decided to join the Peace Corps. They mutually agree to cancel the sale with no penalty on either side, and each signs paperwork to this effect. A contract is rescinded when both parties agree to cancel the agreement and return both parties to their pre-contract position.

What's one reason that buyers might need additional cash at closing for a short sale?

Short sales don't cover liens from the title, so buyers may need to pay debts at closing. When a property is sold through a short sale, it hasn't been through the lien-clearing process. In order to take possession of the title, buyers may have to first pay any debts or liens against the title.

Elisa agreed to list Simone's house for sale. After the listing contract was signed, Simone lost her job, and her father, George, offered to help Simone by paying Elisa's listing commission. The buyer's agent, Carl, also reduced his commission by a quarter percent to help Simone. Who is Elisa's client?

Simone The only person that Elisa has signed an agency agreement with is Simone, so Simone is her only client.

If a private individual owner doesn't own more than three single-family homes at one time, which exemption from the Fair Housing Act could apply?

Single-family housing sold or rented without the use of a broker Single-family housing sold or rented without the use of a broker is exempt, provided the owner doesn't own more than three single-family homes at one time.

Glenn was still living in the house his lender foreclosed on, but he moved out the day after the sheriff's sale. He stayed in a cheap apartment in town, because he hoped to save enough money to redeem his adobe home on a full acre one day. What's the length of the redemption period that Arizona law gives Glenn?

Six months After a judicial foreclosure, Arizona gives the borrower the right of redemption. For residential property less than 2.5 acres that's not abandoned, as in Glenn's case, the redemption period is six months.

Sonja is purchasing some land from her landlord, Jonathan, in a contract-for-deed situation. Which of these is true?

Sonja's equitable interest in the property gives her the right to live in, improve, or rent the property. Jonathan retains legal title until Sonja pays the loan in full. Sonja has equitable title, which allows her to live in, improve, or rent the property. Most lenders won't write a home equity loan in a contract-for- deed transaction.

Cheyenne needs a licensed contractor to install drywall in her home, what kind of contractor does she need?

Specialty Commercial Specialty commercial contractors deal with areas of construction work that require special skill sets, such as acoustical systems, elevators, drywall, electrical, plumbing, and carpentry.

Which of the following involves street specifications, lot size, single - or multi-family dwellings, utilities provided and easements, how far houses must be set back from property lines, and drainage requirements?

Subdivision regulations

What is the term for sites identified by the EPA under the Comprehensive Environmental Response, Compensation and Liability acts?

Superfund Sites A Superfund site is a site identified by the EPA as requiring clean-up of hazardous waste under CERCLA.

Which of these scenarios is a covenant not to compete likely to address?

Teeny Tots Clothing is leasing a retail condominium unit. A covenant not to compete is most often used when a commercial buyer or tenant wants to prevent a similar business from locating in the same small geographical area over which the landlord or seller has control.

The ADEQ administers and enforces ____?

The ADEQ administers environmental law at both the federal and state levels.

What source of law enables real estate licensees to draft or fill out documents relating to real estate transactions?

The Arizona State Constitution

What's the relationship between TILA, RESPA, and TRID?

The Dodd-Frank Act requires that lenders use the TILA-RESPA Integrated Disclosures (TRID). TRID stands for TILA-RESPA Integrated Disclosures, which the Dodd-Frank Act implemented for all federally related mortgage transactions.

Select the statement that best illustrates the relationship between the commissioner and the Arizona Real Estate Advisory Board.

The advisory board completes a research project related to the need for a third level of Arizona licensure (associate broker). The governor appoints advisory board members, who serve at the pleasure of the governor and the commissioner. The board's purpose is to provide recommendations to the commissioner, who's responsible for implementing and enforcing license laws and rules.