National Exam Questions

Under the statute of frauds, an oral listing is: Select one: A. Void B. Voidable C. Unenforceable D. Valid

(general knowledge of contract law) A listing is an agency agreement for a broker to perform services (sell a house). A listing is not a contract for the sale of land or transferring an interest in land (a lease). Therefore, a listing need not be written under the statute of frauds. Note that some states may require listings to be written under state license laws (applicable only to the State Portion of the exam). However, the question addresses the statute of frauds, not state license laws. The correct answer is: Valid

Which of the following items could be valid consideration for a contract? Select one: A. A mortgage note with interest B. A promise to install a cabinet C. A cash payment D. Any of the above

(general knowledge of contract law) A promise to perform is consideration. Consideration does NOT have to be money, but can be anything of value. A mortgage note is a promise to perform. The correct answer is: Any of the above

The state decides to widen a highway. It will be necessary to use six feet of private property on each side. The state's power to take this property is derived from: Select one: A. Police power B. Zoning power C. Condemnation proceedings D. None of the above

(government rights in land) When the state takes property for the good of the public, it does so through the POWER of Eminent Domain. This is a separate from the police power. Like all government powers, eminent domain is derived from the Constitution. The PROCESS through which the state takes property from a person who refuses to give it up is a condemnation proceeding. The correct answer is: None of the above

Which method of legally property description relies on range lines? Select one: A. Vertical B. Lot, block, an subdivision C. Rectangular D. Monument

(land characteristics and property descriptions) The rectangular method (government survey) uses range lines, which are north-south lines in a township. The correct answer is: Rectangular

What would the appraisal of a single-family residence probably NOT take into consideration? Select one: A. The potential rental income B. The location of the property C. The floor plan of the house D. The sales price of the house across the street

(methods of estimating value) The appraiser would place most emphasis on the market data (comparable sales) approach, which is based on the recent selling price of similar properties in the area. More likely than not, a single-family home would not be intended as a rental income property. Remember that the primary determination of value is situs, or "LOCATION, LOCATION, LOCATION". The correct answer is: The potential rental income

A property was purchased for $125,000 with a down payment of $25,000. The current loan balance is $94,000 and the appraised value is $132,400. What is the owner's equity? Select one: A. $31,400 B. $37,400 C. $38,400 D. None of the above

(calculations for transactions) By definition, equity is the difference between the stated value of property and the debt directly associated with the property. In this case, the value is $132,400 and the debt is $94,000. Equity = $132,400 - $94,000 = $38,400 The correct answer is: $38,400

In relation to the Closing Disclosure Form, which situation would not trigger an additional 3 day waiting period before settlement? Select one: A. Increasing the APR B. Increasing the loan amount C. Switching to a different type of loan D. Adding a pre-payment penalty to the loan

After presenting the Closing Disclosure Form, there are only 3 situations which trigger an additional waiting period: an increase in the APR rate; the addition of a prepayment penalty; or changing the basic loan product (for example, switching from a fixed rate to an adjustable rate loan). The correct answer is: Increasing the loan amount

What loan has constant payments, where increasing amounts are credited to the principal and decreasing amounts are charged for interest? Select one: A. A variable loan B. A variable constant loan C. An amortized loan D. A straight loan

An amortized loan has a fixed payment for the life of the loan. The amount paid to principal increases and the amount paid to interest decreases with each succeeding payment. The correct answer is: An amortized loan

A new residential development requires all single-family houses to have brick fronts. This requirement is most likely an example of: Select one: A. Local building codes B. Municipal regulations C. A covenant D. A zoning ordinance

C. A covenant A covenant (promise to keep) is a form of deed restriction. This type of restriction would be imposed by a developer, not a local government through use of zoning powers. The restriction described is most likely an aesthetic consideration.

Under the Truth-In-Lending Act, all of the following items must be in the Loan Estimate EXCEPT: Select one: A. Total finance charges B. Pay-off penalties C. Attorney fees D. Annual percentage rate

C. Attorney fees Under the Truth In-Lending, the lender is only required to disclose the charges related to obtaining credit, like the total finance charges, payoff penalties (pre-payment penalties), and the annual percentage rate (APR). Attorney fees need not be included in this disclosure.

Zoning ordinances are established by: Select one: A. The federal government B. Individual state governments C. Counties, towns, and municipalities D. All of the abov

C. Counties, towns, and municipalities

The town hall leaders want to restore the town's original church. Marcus the Appraiser has been asked to provide a report for the town's unique and historical church. Which method should Marcus use to estimate the reproduction and replacement costs? Select one: A. Capitalization rate method B. Unit-in-place method C. Quantity survey method D. Square foot method

C. Quantity survey method The quantity survey method prices all raw materials separately (lumber, bricks, plaster, etc.) and estimates installation costs. Because it is detailed and time-consuming, the quantity survey method is primarily used on properties being restored for historical reasons.

Which item returns the parties to their original positions? Select one: A. Novation B. Subordination C. Recission D. Discharge

C. Recission A rescission or cancellation agreement is an agreed upon remedy in a contract which allows parties to terminate under specified conditions. Rescission allows the parties to return to their original positions from before the contract.

Which of the following circumstances would diminish a fee simple estate? Select one: A. Death of the owner B. Sale of the property C. Rental of the property D. All of the above

C. Rental of the property If the owner dies or sells property, he has nothing to diminish. If the owner rents his property, he gives up his right of possession, thereby reducing his rights of ownership.

Government rights to control private land stem from: Select one: A. Municipal governments B. Local zoning authorities C. The Constitution D. Common law

C. The Constitution The government derives its right to control private land use from the U.S. Constitution. Many state constitutions echo the same rights. These rights are known as Police Powers. While police power is delegated to local authorities, it stems (derives) from the Constitution.

Valid restrictive covenants: Select one: A. Restrict what an owner may do on his own land B. Run with the land C. May appear in a lease D. All of the above

D. All of the above

Which of the following provisions is NOT an enforceable deed restriction? Select one: A. Exterior design B. Building size C. Landscaping set back D. All of the above are enforceable

D. All of the above are enforceable

Helen listed her property for $145,000. Jim made an offer to purchase for $135,000. Helen made a counteroffer for $140,000. Which of the following statements is correct? Select one: A. Helen's counteroffer is a partial acceptance of Jim's original offer B. Jim is the offeree in his original offer C. Helen is the offeree in her original offer D. In the original offer, Helen is the offeree

D. In the original offer, Helen is the offeree There is no such thing as a partial acceptance--an offer is either accepted, rejected, or it expires. Helen's listing is NOT an offer; it is only an invitation to others to make offers (with some indication of what Helen wants). Therefore, the original offer was made by Jim (offeror) and the only true statement is that Helen is the offeree in the original offer.

The FDIC: Select one: A. Insures depositors up to $100,000 total B. Insures depositors up to $250,000 total C. Insures depositors up to $100,000 per individual account and institution D. Insures depositors up to $250,000 per individual account and institution

D. Insures depositors up to $250,000 per individual account and institution

A restrictive covenant in a deed could: Select one: A. Prohibit resale of the property B. Override zoning regulations C. Prevent the resale of the property to people with children D. Prevent the use of the property as a bar

D. Prevent the use of the property as a bar Restrictive covenants restrict how the property owner may use his or her land. A restrictive covenant MUST be legal. Restraints on alienation (resale) are illegal because the right to convey property is one of the rights inherent to property ownership. However, preventing people with children from buying the property is a Fair Housing violation (familial status protection). Often, deed restrictions are more restrictive than local zoning, but they cannot be less restrictive. In short, they cannot "override" the zoning regulations. Restricting a specified use (for example, not being allowed to use the property as a bar) is not uncommon.

All of the following statements are true about valid restrictive covenants except: Select one: A. The covenant runs with the land B. The covenant may be removed without legal action C. The covenant does not need a termination date D. The covenant may be at variance with Fair Housing laws

D. The covenant may be at variance with Fair Housing laws

When must a licensee disclose agency relationships? Select one: A. When a prospective buyer asks for information about a particular property B. As soon as a prospective buyer enters the broker's office C. Any time prior to preparing an offer to purchase D. When the licensee has substantive discussions about specific property

D. When the licensee has substantive discussions about specific property

What would most likely to be included in the sale of real property? Select one: A. An easement B. Enjoyment C. Trade fixtures D. A kitchen sink

Enjoyment refers to one of the legal rights that ALWAYS accompanies property ownership. An easement may not always convey (ex. if it is an easement in gross). Trade fixtures are personal property of the tenant for the operation of business, and will not convey so long as they are timely removed. A kitchen sink could be either a fixture or a trade fixture. As a trade fixture, it would not automatically convey if it were timely removed. As a fixture, it would not automatically convey if there were an agreement to the contrary or severance was otherwise possible. Therefore, enjoyment is the best answer. The correct answer is: Enjoyment

A man buys a house for $11,000. In the years following his purchase, the value of his house appreciates 45%, then decreases 11.5% below the high point. What is the current value of the house? Select one: A. $14,116 B. $14,575 C. $15,950 D. $18,342

First, calculate the appreciated value and depreciation amounts: Appreciated value = $11, 000 x 1.45 (145%) = $15,950. Depreciation: $15,950 x 0.115 = $1,834.25. From here, we can determine the current value of the property: Current value = $15,950 - $1,834.25 = $14,115.75. Rounded to the nearest dollar, the current value of the house is $14,116. The correct answer is: $14,116

Vernon presents an offer to a seller, with the provision that it must be accepted within 72 hours. Under which of the following circumstances would the offer terminate? Select one: A. Vernon dies before the seller accepts the offer B. The seller re-submits the offer with a minor change to the settlement date C. The seller proposes to wait a week before acceptance D. Any of the above would terminate the offer

If Vernon dies before the seller accepts the offer, the offer terminates. Re-submitting an offer with a different settlement date and proposing to wait a week before acceptance are both counteroffers. Counteroffers are new offers that terminate the original offer. The correct answer is: Any of the above would terminate the offer

A seller contacted three brokers to suggest the list price for his property. Broker A said $78,000, Broker B said $79,000, and Broker C said $91,000. The seller listed with Broker C and the house ended up selling for $76,000. In this situation, Broker C might be guilty of violating which fiduciary duty? Select one: A. Loyalty B. Reasonable care C. Disclosure D. None of the above

Of the fiduciary duties listed, reasonable care is the best description. The agent must exercise care to properly advise and consider the best interests of his client. In doing this, he's expected to act with the same degree of competence that any other reasonable broker would in similar circumstances. Quoting a drastically different (and unrealistic) list price was not in the client's best interest. The correct answer is: Reasonable care

In order to be legally binding on all parties, a contract for sale of real estate MUST include: Select one: A. The signature of the spouse, if the seller is married B. An earnest money deposit C. A method to calculate the licensee's commission D. Legally competent parties

Of the listed choices, only competent parties are required for a binding sales contract. Attorneys usually require the spouse's signature if the seller is married, but it is not a necessary element. Neither is an earnest money deposit required, although it is frequently included as a condition. The correct answer is: Legally competent parties

Each floor of a two-story office building is 10.5 feet high, 18 feet wide, and 54 feet long. How many cubic yards is in the entire building? Select one: A. 378 B. 756 C. 10,206 D. 20,412

Remember that Volume = Length x Width x Height. Use this formula to calculate the volume of the building in cubic feet: Volume (per floor)= 54ft x 18ft x 10.5ft = 10,206 cubic ft. Volume (entire building) = 10,206 cubic ft. x 2 = 20,412 cubic ft Now, we can convert the volume into cubic yards. 1 cubic yard = 27 cubic ft. Volume = 20,412 cubic ft. / 27 = 756 cubic yd. The correct answer is: 756

What is the result of recording a deed in the public office? Select one: A. Title will pass to the new owner on the date of recording B. Constructive notice C. Actual notice D. Both B and C

The act of recording provides constructive notice to the world, regardless of whether anyone actually looks for it. Alone, the act of recording does not create actual notice (when an individual is directly informed about something). Recording the deed also has no affect on whether title will transfer. The correct answer is: Constructive notice

A house sold for $140,000 and the buyer made a 20% down payment. Assuming a rate of $1.00 per $1,000, the grantor's tax would be: Select one: A. $28, based on the down payment B. $112, based on the loan amount C. $140, based on the selling price D. None of the above

The grantor's tax (also known as the transfer tax) is based on the selling price of the property. Calculate the Grantor's tax as follows: Tax rate = $1 / $1,000 = 0.001 Grantors's Tax = Sales Price x Tax Rate Grantor's Tax = $140,000 x 0.001 = $140. The correct answer is: $140, based on the selling price

The promissory note accompanying a mortgage could create a: Select one: A. Personal obligation B. Two-way obligation C. Three-way obligation D. None of the above

The promissory note accompanying a mortgage is legal evidence of the debt. This expresses the personal obligation of the borrower. The correct answer is: Personal obligation

The replacement cost of a property is the cost of constructing: Select one: A. A new building with the same functional utility as the original B. A new building with the same size, shape, and design as the original C. A new building using the original construction materials D. None of the above

The replacement cost is the cost of constructing a new building at today's prices and with the same functional utility as the original, but not necessarily using the same size, shape, design, or materials. Appraisers frequently estimate the construction costs of older structures by computing the replacement cost because it allows them to replace outdated features and take advantage of current construction materials. The correct answer is: A new building with the same functional utility as the original

Two brokers agree that they will charge the same commission rate on all property listed by their offices. Such an action: Select one: A. Is common practice B. Is in violation of anti-trust laws C. Is prohibited by RESPA D. Both B and C

This action is in direct violation of anti-trust laws. You should never discuss commission rates with another licensee. The correct answer is: Is in violation of anti-trust laws

What is NOT a cloud on title? Select one: A. A valid first mortgage B. A recorded contract for deed under which the buyer's rights have been judicially terminated C. A recorded option contract whose option period has expired D. A recorded mortgage that has been paid in full, but a satisfaction has never been recorded

This question is intended to distinguish between "cloud on title," "title defect," and "marketable title." Cloud on title is an indication of a potential, but uncertain, defect that may be cleared. A valid first mortgage is certain to be a title defect (encumbrance) that prevents marketable title. Therefore, it is not a "cloud" because there is no ambiguity. The question is intended to illustrate these very fine distinctions, and more importantly, to demonstrate the difficulty of the licensing exam. The test will have a few questions that most students get wrong, no matter how hard they study! The correct answer is: A valid first mortgage

The right of a person to possess and use real property, while pledging its title to another, is known as: Select one: A. Seisin B. Hypothecation C. Novation D. Habendum

To hypothecate is to pledge something while retaining possession of the item. The correct answer is: Hypothecation

Larry sells property to David and the deed contains the following covenants: seisin, quiet enjoyment, against encumbrances, and further assurances. Following the transfer, David discovers utility poles on the property that lead to a nearby transformer. Larry failed to list the utility poles in the deed. Larry's failure to identify such encumbrances violates: Select one: A. The covenant of quiet enjoyment B. The covenant against encumbrances C. The covenant against grantor's acts D. None of the above

Your answer is incorrect. (deed elements) A covenant against encumbrances is the grantor's guarantee that there are no encumbrances against the property except those specifically disclosed. The utility poles are indeed an encumbrance. However, the covenant against encumbrances is NOT breached by failing to list an open and visible encumbrance, like a power line or drainage ditch. Open and visible encumbrances provide actual notice to purchasers. Therefore, such encumbrances need not be listed in the deed. The correct answer is: None of the above

When a contract is breached, the injured party may: Select one: A. Not sue for monetary damages B. Not sue for specific damages C. Rescind the contract bilaterally D. Rescind the contract unilaterally

A breach justifies rescission by the non-defaulting party. However, parties must be careful to ensure that there actually is a breach, or the rescission will be itself a breach. The correct answer is: Rescind the contract unilaterally

A person buys the right to purchase land up until a stated date, at a specified price. Which of the following items would be used to create such an arrangement? Select one: A. An option agreement B. A deed C. An offer to purchase agreement D. A contract for deed

A option agreement provides the right to buy land at a stated price for a specified period of time. The correct answer is: An option agreement

The difference between a first and second mortgage must depend upon: Select one: A. The principal B. The position C. The term D. All of the above

A second mortgage MUST have a subordinate lien position. That is what makes it a 2nd mortgage. It could include the other items mentioned, but the only thing it MUST be is subordinate. The correct answer is: The position

The 1988 Amendment to the Federal Fair Housing Act, Title VIII, declared it unlawful to discriminate: Select one: A. Against households with children under 18 years of age B. On the basis of age C. Because of sexual preference D. On the basis of gender

A. Against households with children under 18 years of age

The funds for originating VA loans are usually provided by: Select one: A. Approved lenders B. FHA C. FNMA D. None of the above

A. Approved lenders

Betty and Billy had a contract for sale, but it discharged. Which of the following statements must be true about Betty and Billy's conduct? Select one: A. Both Betty and Billy fully performed B. Either Betty or Billy is in breach C. Both parties may seek damages D. Both B and C

A. Both Betty and Billy fully performed A contract is only "discharged" after both parties fully perform. Therefore, neither party could be in breach or entitled to seek damages.

A property has a deed restriction that prohibits raising livestock. However, local zoning permits livestock on the property in question. May the property owner raise livestock? Select one: A. No, because the owner must follow the deed restriction over the zoning ordinance B. No, because the deed restriction existed before the zoning ordinance C. Yes, because private agreements cannot overrule a zoning ordinance D. Yes, because estoppel will prevent enforcement of the deed restriction

A. No, because the owner must follow the deed restriction over the zoning ordinance Deed restrictions may always be more restrictive, but never less restrictive, than zoning laws. Therefore, the owner must follow a more restrictive (but legal) deed restriction. Being more restrictive is not equivalent to "overruling" a zoning ordinance--a more restrictive requirement remains consistent with the minimum standard.

There is a geometric theorem which states that "the whole is equal to the sum of its parts." In real estate, there is a theorem which states that "the whole can be GREATER than the sum of its parts." This is an example of: Select one: A. Plottage B. Depreciation C. Accretion D. Progression

A. Plottage

Which of the following amounts is NOT prorated between buyer and seller at closing? Select one: A. Recording fees B. Real estate taxes C. Rents D. Homeowner's insurance premiums

A. Recording fees Recording fees are NOT prorated; each party pays his own. I

Which of the following practices would most likely deteriorate the economic status of a neighborhood? Select one: A. Redlining B. Steering C. Overdevelopment of property D. Bulk zoning

A. Redlining

John Doe is trying to rent a bedroom in his house. A Latin American applies and is told by the owner (Doe), "I will only rent to a Caucasian." Which law has John violated, if any? Select one: A. 1968 Fair Housing Law B. Civil Rights Act of 1988 C. Civil Rights Act of 1964 D. None of the above

A. 1968 Fair Housing Law While owner/sellers are exempt from the 1968 Federal Fair Housing Law, they may not make, print, or publish a discriminatory statement which indicates any preference or limitation.

In the event of any conflict, which clause would best state the extent of ownership? Select one: A. Premises B. Testimonium C. Habendum D. None of the above

(deed elements) While both the premises and habendum clauses could state the event of ownership being transferred, the premises clause controls in the event of a conflict. The correct answer is: Premises

Which characteristic is NOT associated with an FHA loan? Select one: A. Must be owner occupied B. Insured C. Guaranteed D. Second trusts are not permitted

B. Insured FHA loans are insured, but they are not guaranteed.

The Federal Civil Rights Act of 1866 prohibits discrimination on the basis of: Select one: A. Sex B. Race C. Religion D. Marital status

B. Race

After failing to locate an owner or rightful heirs, the state may acquire ownership of abandoned property through: Select one: A. Eminent domain B. Adverse possession C. Escheat D. Estoppel

C. Escheat

Which of the following is NOT required for a valid real estate sales contract? Select one: A. Performance B. Offer and acceptance C. Consideration D. Must be in writing

A. Performance

The government's right to take private property for public improvements is subject to all of the following requirements, except: Select one: A. The ownership interest held by the current owner B. Public purpose C. Economically profitable uses of the land by the owner D. Both A and C

A. The ownership interest held by the current owner

When the grantor of a deed swears that he is conveying title of his own free will, this action is referred to as: Select one: A. Execution B. Acknowledgment C. Novation D. Authentication

B. Acknowledgment

Agency relationships include all of the following duties, EXCEPT: Select one: A. Obedience B. Notice C. Confidentiality D. Accounting

B. Notice Fiduciary duties include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care and due diligence. "Notice" is too vague compared to the other options. Therefore, notice is the best answer choice.

A general agency empowers the agent to: Select one: A. Transact matters of all types for the client B. Transact the client's affairs in a certain business C. Perform only specific acts for the client D. Perform any legal act for the client

B. Transact the client's affairs in a certain business

Under a contract of sale, the seller is most likely to be the: Select one: A. Offeror B. Vendor C. Grantee D. Vendee

B. Vendor The vendee is known as the buyer and the vendor is known as the seller.

Which phrase best explains why two physically similar parcels of real estate might have very different economic values? Select one: A. The supply of land of earth is fixed B. Land cannot be created or destroyed C. Location, location, location D. Land cannot be moved from one place to another

C. Location, location, location

The land description that uses a recorded subdivision plat is the: Select one: A. Geodetic survey method B. Rectangular survey system C. Lot and block system D. Metes and bounds survey method

C. Lot and block system

Smith and Brown own abutting property that borders a river. Over the years, soil from Smith's riverbank is washed onto Brown's riverbank. Who owns the soil that was washed from Smith's riverbank to Brown's? Select one: A. Smith B. Brown C. The state D. None of the above, because all river bank owners have riparian rights

Accretion occurs where natural forces such as water cause land to move from one parcel to another. Once moved, it belongs to the receiving property owner. The correct answer is: Brown

The Federal Fair Housing Law is intended to protect the public from all of the following actions, EXCEPT: Select one: A. Blockbusting B. Price fixing C. Steering D. Redlining

B. Price fixing All of the listed choices are discriminatory practices which violate Federal Fair Housing, except price fixing. Price fixing is a violation of anti-trust laws, NOT the Fair Housing Act.