Comprehensive Exam 4

Which of the following is a triggering term when used in advertising financing?

"10% down"

An appraiser used the cost approach to estimate a property's value at $220,000. The site value was $50,000, and the total depreciation estimate was $4,000. What was the estimated cost of improvements?

$174,000 To estimate value, an appraiser adds the site value to the estimated cost to replace improvements then subtracts the estimated depreciation. So to solve the equation, you need to solve for cost of improvements. In order to do this, you have to move the given values to the other side of the equation - $50,000 + $4,000 . Here's the equation used to find the cost of improvements = $220,000 ‒ $50,000 + $4,000.

Your clients are purchasing a $160,000 home. If they have a down payment of 25% and the bank charges two points at closing, how much are they paying in points?

$2,400 $160,000 x .75 = $120,000 (the loan amount after their 25% down payment). Take $120,000 ÷ 1 (point) = $1,200. 2 points then would be $1,200 x 2 = $2,400.

Your investor client Julia wants to buy a three-bedroom, one-bath, income-producing property for $125,000. It rents for $820. Comparable three-bedroom, two-bath homes in the area rent for around $1,000 and are valued an average of $20,000 more. The area's gross rent multiplier is 147. Calculate the loss in income due to depreciation based on functional obsolescence using the capitalized value method.

$26,460 The monthly rental difference between a one-bath property and a two-bath property is $180 ($1,000 - $820). Multiply that by the area's GRM to find the loss in income due to the subject property's functional obsolescence ($180 x 147 = $26,460).

A seller wants to net $10,000 after the broker's commission of 6% and a loan balance of $250,000 are paid. For how much does the property need to sell?

$276,596 To calculate this, start with 100% minus a 6% commission, which is 94% or .94. Take $250,000 plus $10,000 and divide this amount by .94.

The Environmental Quality Incentives Program finances conservation practices through contracts of as many as _____ years.

10 EQIP practices, which can enter into contracts for as many as 10 years, focus on natural resource concerns, working to improve soil, plant, animal, water, air and other resources.

A four-unit rental property has a sales price of $800,000. Annual gross rent is estimated at $72,000. What is the gross rent multiplier? Round if necessary.

133 For this property, first calculate the monthly gross rent. The sale price divided by the monthly rent equals 133.33, making the multiplier 133.

Kelly bought Mason's home for $255,500. Mason had prepaid the annual property taxes of $2,650. If closing costs are calculated on a 365-day year, and the transaction closes on March 5, how much will Kelly owe Mason for property taxes? Carry numbers out four decimal places, but round to two decimal places for your final answer. The proration is calculated up to the day of closing, meaning that the buyer owns the day of closing. Be sure to include the last day of the year in your calculations.

2,192.61 Divide $2,650 by 365 to get property tax costs per day: $7.2603. Multiply this by the number of days of ownership (302 days) = $2,192.61 (rounded).

Alexandra sells her house to Clark for $178,000. They negotiate to split the transfer tax, which has a rate of $0.33 per $100. What do they each pay to cover the transfer tax?

293.70 The total transfer tax is $587.40 ($178,000 x .0033), so they each pay $293.70 ($587.40 ÷ 2).

Your client, a builder, is considering buying three adjacent lots. They each have the same depth: 275 feet. Lot A is 35,750 s.f., Lot B 53,900 s.f., and Lot C is 33,000 s.f. If your client buys all three lots, what total street frontage will he have?

446 feet The total street frontage is 446 feet. Add up the square footage of the three lots and divide by the lot depth (275) to get the total street frontage. (35,750 + 53,900 + 33,000) ÷ 275 = 446

A property management firm has ______ days after termination of a property management agreement to provide a final list of accounts receivable/payments.

75 A property management firms has 75 days after termination of a property management agreement to provide a final list of accounts receivable/payments. All keys and current lease contracts must be returned to the owner immediately following termination.

Which of the following is Fannie Mae most likely to purchase?

A conventional fixed-rate mortgage issued by a commercial bank Fannie Mae primarily purchases conventional loans from commercial banks.

What's the difference between agricultural and industrial water usage in Arizona?

Agricultural water usage is far greater than industrial water usage. Agriculture is responsible for about 70% of Arizona's water usage. The industrial sector uses only about 6%.

Which of the following is an OPTIONAL inclusion to the property management agreement in Arizona?

An automatic renewal of the agreement An automatic renewal is considered an optional inclusion to a property management agreement, provided that the property management firm sends the owner a reminder notice at least 30 days before the renewal date.

Carbon monoxide is a byproduct of what?

Combustion

When a landowner voluntarily creates a legal agreement with a land trust or government entity that includes permanent use and development restrictions on the land, that agreement is called a ______.

Conservation easement

With the cost approach to value, what is the replacement cost?

Cost to build a functionally equivalent improvement

As part of his lease agreement with his landlord, Alex mows the grass around his apartment building each week in return for a small reduction in rent. What is this an example of?

Covenant A covenant is an agreement or promise made between the lease parties.

Javier represents Marcus, who's selling his rental property to Ben. Ben is represented by another real estate licensee, Francis. What is Ben's relationship to Javier?

Customer

Which statement best describes an amortized loan?

Debt that is paid off by making periodic payments consisting of interest and principal

Which type of communication does the CAN-SPAM Act outlaw?

Email marketing with no "unsubscribe" option

When someone dies intestate with no heirs, the real property owned by that person may be taken by the state through _______.

Escheat

Which of the following is a leasehold estate for an unknown period of time, with either party permitted to terminate the lease by giving notice to the other?

Estate at will An estate at will is an estate for an unknown period of time, with either party permitted to terminate the lease by giving notice to the other.

A judgment that results in a payment from the Arizona real estate recovery fund counts as ______ on the part of the licensee.

Evidence of a violation A judgment that results in a payment from the recovery fund counts as evidence of a violation and grounds for disciplinary action.

What two types of data does an appraiser gather?

General and specific Appraisers gather general data about the economy and area, as well as specific data related to the property.

Which act protects a consumer's financial information, restricts which third parties can access it, and when they may do so?

Gramm-Leach-Bliley Act

Malcolm, a real estate licensee, lived next door to Peter, and they were great friends. When Peter decided to sell his house, he asked Malcolm for advice about staging, timing, and pricing. Then Peter listed his home as For Sale by Owner. What type of contract did Malcolm have with Peter?

Implied

Which of these statements is true about tenancy by the entirety?

It requires five unities to create it.

Selma and Richard have the temporary right to live at 123 Elm Street. They can come and go and use the property as they see fit, but they can't do so indefinitely. They must vacate the property at the end of next year. What sort of interest do they have in 123 Elm Street?

Leasehold estate Richard and Selma have a leasehold estate. Leaseholds are created with a contract between the owner of a given property and a tenant who is given the rights of possession and enjoyment for a specified period of time.

In most cases, what type of agent is a real estate licensee when working with a client on a real estate sale?

Limited or special Real estate licensees most often serve as special agents, also known as limited agents. They have limited scope of authority when compared to a general agent.

Sunshine Surveyors, Inc. created a lot and block survey for a new residential development, Happy Acres. The first thing the surveyor did when he surveyed the new neighborhood was to reference what type of description?

Metes and bounds description The lot and block system always begins with one of two types of land descriptions as a reference point: either a metes and bounds description or an rectangular government survey system description.

Jaxon wants to sell a new listing quickly. The property is an old, outdated cabin in poor condition. Jaxon describes the property as "a charming fairytale cottage in the woods." How would you describe this type of ad?

Misleading Ads must present a true picture of the property. Misrepresentation or misleading ads are prohibited.

Trade fixtures are considered ______.

Personal property A trade fixture is a piece of equipment or other item that is on or attached to the real estate which is used in a trade or business. The term "trade fixture" is actually a misnomer, because the item, while attached, may be removed by the business owner as a personal item.

Which act was established in 1974 to protect private information held in a system of records by federal agencies?

Privacy Act The Privacy Act of 1974 was established to protect private information held in a system of records by federal agencies.

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

Records are subject to ADRE audit.

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

Rectangular government survey The U.S. Department of the Interior's Bureau of Land Management regulates the rectangular survey system.

Most of Arizona was mapped using the public land survey system (PLSS). Which type of survey system is also known as the PLSS?

Rectangular government survey The rectangular government survey system is also known as the public land survey system (PLSS) and is regulated by the U.S. Department of the Interior, Bureau of Land Management.

The state has seized a strip of Marge's land. It's relatively small but goes right through her sheep pastures. She just found out that the state will use it for a six-lane highway. She's pretty sure that the value of her land is going to plummet, and she can't figure out how to use it as pastureland anymore. What kind of involuntary alienation is she dealing with?

Regulatory taking This is an example of regulatory taking. This act happens when private property is regulated by a government authority to the detriment of the landowner.

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 weren'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

According to Arizona law, how long does a purchaser have to back out of buying unsubdivided land without consequences?

Seven calendar days

The WQARF supports the Arizona Department of Environmental Quality to protect the state's ______.

Soil and groundwater

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 Subdivision regulations involve street specifications, lot size, single/multi-family dwellings, utilities provided and easements, how far houses must be set back from property lines, and drainage requirements.

Which of the following describes an estate for years?

Tenancy of definite duration that terminates automatically and is inheritable An estate for years is of definite duration that terminates automatically and is inheritable.

All of the following can be found in an Arizona property management agreement EXCEPT ______.

Terms that the parties agreed to, even if they conflict with state law

Jeanine has an exclusive right-to-sell agreement with her listing agent, Tera. Which of these statements about Tera's compensation is true?

The exclusive right-to-sell agreement means that, under contractual obligation, the broker will be paid no matter who brings the buyer to the transaction. The exclusive right-to-sell agreement establishes a contractual obligation for the client to compensate the brokerage firm no matter who finds the buyer (or the property), provided the terms of the contract are met.

Regarding the potential impact of buyer contingencies on a transaction, which of these statements is true?

The fewer contingencies a buyer uses, the less likely a contract is to fall through. An offer with fewer contingencies is a stronger offer because there are fewer things that can go wrong with the contract.

When a mortgage is used as a security instrument, who holds the mortgage and the promissory note?

The lender holds the mortgage and the note. The note and mortgage are the lender's leverage to foreclose in the event of default.

Which of the following is an example of easement termination by merger?

The owner of a servient estate buys the property of the dominant estate. An example of a merger that terminates the need for an easement is when the owner of a servient estate buys the property of the dominant estate, thereby making the easement unnecessary.

Martin is looking to purchase a timeshare in Mystic Mountains Resort. When he met with salesperson Kennedy at a promotional event prior to the resort's opening, she gave him a packet of documentation. What should be in the packet?

The public report submitted to the commissioner and terms of cancellation All potential buyers need to know what they're getting into and how they can get out of it, so the packet should include a copy of the public report and the timeshare's cancellation terms.

Which of the following would be considered a seller debit in the closing statement?

The seller's current mortgage payoff The seller's debits include expenses, the seller's share of prorated items, and the payoff of the seller's current mortgage loan or other lien.

Which of the following laws requires that contracts—including contracts made for the sale of real estate or for leases of more than one year—be in writing?

The statute of frauds

Which one of the following characteristics makes property taxes a reliable target for taxation?

They have a compliance rate One characteristic that makes property taxes a reliable target for taxation is that they have a high compliance rate (that is, people tend to pay their property taxes). They are also hard to conceal, hold their value, and have low collection costs.

Which of the following best describes the Arizona Real Estate Advisory Board?

Three members must be unlicensed residents of Arizona. The board consists of 10 members. Three of them must be members of the general public who aren't licensed and aren't related to an Arizona real estate licensee.

What is the purpose of the Truth in Lending Act?

To better educate consumers about the cost of credit or obtaining a loan TILA seeks to ensure that consumers are well-informed about the costs and requirements of obtaining a loan or credit.

The mortgage industry is made up of the primary and secondary markets. What's the role of the primary mortgage market?

To originate and fund mortgage loans to consumers

An advertisement through which of the following sources may include a link to the name of the employing broker (rather than the full name of the employing broker within the ad itself)?

Twitter Twitter

Consumers must submit a claim for disbursement from the Arizona real estate recovery fund within ______ year(s) after the judgment was awarded.

Two Claimants must begin legal proceedings against a licensee to win a judgment within five years of the incident, but after the judgment has been awarded, they have two years to try to get restitution from the offending licensee and file a claim to the recovery fund if the licensee can't pay.

In which form of co-ownership is a person's ownership inheritable?

tenancy in common With tenancy in common, if one owner dies, that person's ownership is inheritable. It doesn't automatically pass to the other owners as it would with joint tenancy.