National Real Estate Exam

Esmerelda makes regular monthly payments on her loan. In addition to paying interest, she's slowly paying down the principal of the loan. With each payment she makes, more will go towards the principal and less to interest. What type of loan does she have?

Amortized mortgages are paid off in periodic regular payments of interest and principal. Over time, the portion of the payment made toward principal increases as the portion used to pay interest decreases.

When an area uses its zoning powers, what must be followed?

An area's comprehensive plan outlines future development plans and goals of the area. Zoning decisions should follow this plan.

Dean and Michael have an oral contract. Dean said he would sell Michael his bike in return for Michael's vinyl album collection. What does the record collection represent?

Consideration, which is an essential element of a contract, is something of value which is given from one party to the other party in exchange for goods or services.

Which of the following is a potential disadvantage for a buyer who enters into a lease with an option to buy contract?

Depending upon the contract's terms, a potential disadvantage for a buyer who enters into a lease with an option to buy is that he could lose any funds credited to the purchase price if he breaches the terms of the lease.

When appraisers look past how a property is being used to determine a more optimal function, what are they determining?

Highest and best use looks past the current use (if there is one) to determine if there is another use that provides a higher value.

Local authorities lack police power over which of the following?

Local authorities have police power over budgeting, zoning, and subdivision development, but they lack police power over federal government construction projects.

Which amendment to CERCLA says that "innocent landowners" aren't responsible for clean-up of hazardous contamination?

The Superfund Amendments and Reauthorization Act, or SARA, says that innocent landowners aren't responsible for clean-up of hazardous contamination.

Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he so rarely used the cabin that he was thinking of selling it. Drew said that he'd buy it from Hank for $80,000, and Hank agreed that was a fair price. It's two months later, and Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable?

The statute of frauds requires that real estate contracts be in writing. Drew's offer was oral, and thus didn't create an enforceable contract.

When is a lead disclosure required?

A lead disclosure is required for residential properties built before 1978 because paint manufacturers used lead in paint before it was banned that year.

Your buyer client, Percival, was pre-approved for the exact amount he needed to buy the home of his dreams, and he made an offer that was accepted by the seller. What's his next step?

After his offer is accepted, he's ready to begin the loan application.

Darren and Natalie are first-time buyers who have decided to purchase a newly built townhouse. Their agent Jenner tells them that they're required to purchase a third-party home warranty. Which of the following conditions must be true?

All loans that are either FHA-insured or VA-guaranteed require a home warranty to protect both the buyer and the home's value.

Alluvion describes new deposits of land that are the result of what natural process?

Alluvion, or new deposits of land, is the result of the process of accretion.

Another term for a valuation is ______.

Another term for a valuation is a formal appraisal. This is a professional appraiser's unbiased opinion of value.

What does the Federal Trade Commission consider to be an unfair ad?

Any ad or business practice that causes or is likely to cause injury is considered an unfair ad, according to the FTC's Unfairness Policy Statement.

Jerrica is set to close on the property she's buying on Friday. Because of other delays in the closing date, Jerrica's interest rate as of the day of closing will increase by 1/4 of a percent. What impact does this have on the closing?

Any interest rate change of more than 1/8 of a percent requires a new Closing Disclosure, triggering a new three-day waiting period.

Marcus listed his property with Home Sweet Home Realty and one of its listing agents, Ron Savage. About a month later, Ron filed for bankruptcy. Which of these statements about this situation is true?

Bankruptcy of the broker (not the agent) or the principal terminates an agency agreement by force of law.

In the sales comparison approach, using comparables that are five and 15 years old when appraising a subject that is 10 years old is an example of what?

Bracketing is a process in which an appraiser determines a probable range of values for a property by comparing a group of comparable sales to the subject. The appraiser attempts to include both superior and inferior units of comparison such as age, transaction price, etc.

You represent the buyer, and another licensee from your brokerage represents the seller in the same transaction. What type of agency relationship do you and the other licensee have with your clients?

You and the other licensee from your firm are in a dual-licensee dual agency relationship. The broker is the dual agent and has designated you to represent the buyer and the other licensee to represent the seller.

What does Aesthetic zoning regulate?

Ensure the architectural and/or visual integrity and cohesiveness of a given area.

In which of the following situations would the state be able to use its power of escheat?

Escheat occurs when a property owner dies without a will in place, and no heirs or creditors can be found.

What is estate at sufferance?

Estate at sufferance is when a tenant remains on the property after the lawful authority has expired (a holdover tenant), after which the landlord may evict.

You represent the buyer in one transaction and the seller in a different transaction. What type of agency relationship do you have with the buyer?

You have a buyer agency relationship with the buyer in one transaction and a seller agency relationship with the seller in the other transaction.

The MARIA acronym helps to identify the five tests of a fixture. Which of the following tests refers to how and whether the item is attached to the property?

Method of annexation refers to how and whether the item is attached to the property. This is the M in MARIA.

Jeanetta leases an apartment from Quad City Leasing. Jeanetta has filed a complaint with the state real estate licensing division stating that Marissa, Quad City's property manager, breached her fiduciary duty of loyalty to Jeanetta. Which of these statements about this situation is true?

Property managers owe fiduciary duties to their clients (the landlord) and the community as a whole, not to individual residents.

Steve is preparing a market analysis for the Joneses and has selected three comparable (competitive) properties. What's the maximum number of adjustments Steve should make to the Joneses' property?

Steve won't adjust the subject property. Only the comparable sales price is adjusted. If it is inferior, adjust upward. If it's superior, adjust downward.

On average, how many years does a home warranty cover structural damage?

Structural damage can take a while to appear, so homeowners will want to file a claim if it's a decade or less.

Prior to the ______, there was no legal protection for women who endured sexual harassment from landlords and sellers when they attempted to obtain housing.

The Housing and Community Development Act of 1974 included gender or a person's sex in the list of protected classes.

Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. What agency offers guaranteed loans?

The USDA Farm Service Agency offers guaranteed loans to agricultural lenders.

Moira has delivered a counter-offer to some potential buyers for her property. Which of these best states the time frame for the buyers' acceptance?

The buyers must respond by the time and date specified in the counter-offer.

Jamison, the seller, is closing on his property with Conrad, the buyer. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?

These taxes have already been paid, so are a prepaid item. They'll appear as a buyer debit and seller credit at closing.

Taxes, insurance, and maintenance are property expenses that are sometimes covered in a tenant's lease payment. These are collectively referred to as the ________.

These three items together are known as the nets—or you can use the acronym TIM for taxes, insurance, and maintenance.

Casey signed a contract form offering a purchase price of $309,000 on Karen's home, and gave his agent a $5,000 earnest money deposit. Karen's out of town, though, and her agent can't reach her. At this point what does Casey have?

Until the terms are negotiated and the contract signed by both parties, acceptance hasn't occurred and the sales contract is considered an offer.

What's it called when all parties sign a contract, but before the seller's acceptance is delivered to the buyer?

Acceptance occurs when all parties have signed a given contract. Binding acceptance occurs when the accepted offer is delivered.

What is bulk zoning?

Bulk zoning regulates density by mandating setbacks as well as limits on building heights and lot widths.

Physical characteristics of land include its immobility, indestructibility, and ______.

Nonhomogeneity is a unique characteristic of land. Even within a single subdivision, two identically sized parcels will have their own unique characteristics: views, access, proximity to other amenities, etc.

Two essential elements of a deed are ______.

Only the grantor's signature is required, not the grantee's. The habendum clause is required only if the deed is conveying less than a fee simple estate.

Under which types of agency agreement may a buyer and agent operate?

Open, exclusive right to represent, and exclusive agency

What factors affect an adjustable rate mortgage?

Rate, index, and margin

Which task is NOT the responsibility of an escrow officer?

The escrow officer is responsible for distributing the earnest money as outlined by the parties or the courts in case of dispute but doesn't have the authority to determine how it should be distributed.

Morty, a land surveyor, was called out to survey a property. After doing some research, he located the legal description for the property in question. Now, if he could just find the point of beginning located at the iron pin on the southerly line of state route 117, 30 feet east of the oak tree next to Bear Creek. What type of legal description is Morty working with?

Point of beginning is common with metes and bounds descriptions.

An example of this type of leasehold estate is a month-to-month lease.

A periodic estate automatically renews at the end of its lease term, such as at the end of a given month.

Joe gave land to a school, but still wanted to have some control over its use, so a deed was prepared that gave the school title as long as the land is used for educational purposes. What type of interest does the school have?

A fee simple determinable has limitations as to what can or can't be done with a property. It uses phrases such as "so long as," "while," or "during" to describe the required condition.

Which of these situations might be addressed by limitations or a subject to clause in the deed Jane is using to convey property to Moira?

A great example of deed limitations is the restrictions that may be placed on a property by an owners association. A subject to clause may refer to an easement held by a neighboring property to get to a road or water source.

"Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues, which have now been fixed?" What's the agent's best response to Lamar's question?

A home warranty often covers items that weren't inspected. Also, even the systems that WERE inspected are subject to problems or failure.

Warren signed a contract with the Samsons for the sale of property he didn't own. What type of contract is this?

A party can't promise to do something impossible in a contract. Doing so makes the contract void.

Brandon has a right-to-use timeshare. What can he NOT do with this type of timeshare?

A right-to-use timeshare conveys the right of possession, but it isn't ownership and therefore can't be sold or passed on to another individual.

What is a survey?

A survey is used to create, verify, or correct a legal description. It's a professional on-site measurement of the lot lines and dimensions of a property.

Sylvia, 15, and her neighbor, Marge, 24, agree that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?

A voidable contract appears to be valid but because of legal principal, one or both parties have the right to rescind the contract. In this case Sylvia can enforce the contract against Marge but Marge cannot enforce against Sylvia.

As part of the sales contract, Garth, the seller, was supposed to provide a copy of the seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is this?

A voidable contract can be cancelled by one or more parties because it's missing an essential element. In this situation, Melanie, the buyer, has the right to cancel the contract and have her earnest money refunded.

What is the mechanism by which asbestos can cause cancer?

Asbestos is a fibrous material found in certain types of tile, insulation, and siding. These fiber particles are then inhaled and can damage the lungs over time.

Lowell used to own 17 acres of property on the bay. After last year's hurricanes, Lowell now owns 15.5 acres of bayfront property. Which natural process was responsible for Lowell's loss of acreage?

Avulsion is the loss of land by a sudden, large-scale change in water flow. A hurricane would create a sudden large change in water flow.

Luci's client Kaden wants to purchase a new construction property, and he wants to get as much house as he can afford. Which of the following does Luci need to advise Kaden about regarding interest rates when purchasing a newly built home?

Because lenders won't lock in an interest rate for more than 90 days before closing, Kaden needs to plan for the possibility of a 1% interest rate increase between now and closing, or risk not qualifying for the loan when the time comes.

Which of these statements about the homeowner's rights of redemption is true?

Because of the length of time it takes to process a property after the foreclosure sale, the homeowner's redemption period may have expired before the lender puts the REO on the market.

Candace and Phil Tolson listed their home for sale with Trent Richards, the broker for Richards Homes. Sadly, Trent became incapacitated due to a car accident. What's the status of the listing agreement?

Because the broker has become incapacitated, the listing agreement terminates by force of law.

Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?

Because the property deed was held by a third-party trustee instead of the lender, the trustee grants a reconveyance deed to Olivia.

Jenson signed a seller's agency agreement with Susan. A few weeks after that, right before closing, a hurricane destroyed the property. What happens to Jenson and Susan's agreement?

Because the property was destroyed, the listing agreement terminates by force of law.

What does "Beginning at the corner of State Route 61 and Hallowell Road" represent?

Bounds are physical features that define the boundaries of the property. Combined with directions and distances (metes), these form the basis of a metes and bounds legal description.

Citytown officials know that they have an abandoned factory site that has been identified for cleanup under CERCLA. When city officials tried to trace the ownership of the property, they found several shell corporations but can't seem to determine which individual or corporate entity actually owns the property. What is a likely outcome of this situation?

CERCLA established a trust fund to finance both cleanup and enforcement actions. This fund is sometimes called the Superfund.

Which entity enforces subdivision covenants?

Covenants are enforced through the court system if an agreement can't be otherwise reached.

How are principal meridians and baselines used in the rectangular government survey system?

Each legal description in this system originates at the intersection of a principal meridian and a baseline.

Easements are a type of encumbrance that can affect a property. Which of the following is true about easements?

Easements are a type of encumbrance that can affect a property. Which of the following is true about easements?

Robert is the general contractor for a home being constructed in a new development. The foundation has been poured, and he's working with the homeowners to make some decisions that weren't identified in the blueprints he's working from. Which of the following details will be guided by local building codes?

Electrical safety standards are typically a component of building codes in almost any location.

Stu is buying Freddie's property. What must occur for the transfer of title to take place?

Freddie must intend to convey the property to Stu. The seller (grantor) must deliver a marketable title. The grantee isn't required to sign.

Related to reasonable accommodation of being allowed to have an assistance animal, which statement is true?

Housing providers may inquire as to the nature of the disability if it's not apparent, and they must permit assistance animals for tenants with documented disabilities without charging an additional pet deposit.

Virginia is finally living her dream—she bought a coffeehouse in a charming college town. After she closed on it, her attorney sat down with her to discuss various business licensing and legal requirements she'll have to meet. Virginia was surprised to learn that her five-table establishment is affected by the Americans with Disabilities Act. What must be true about the coffeehouse?

If a business in a constructed building that serves the public, then it falls under the ADA.

Which of the following can have an extremely adverse effect on the time and cost of a development project?

If the EPA determines that hazardous contamination has occurred on a project site, it is authorized to shut down development and begin remedial action. This impacts development time and cost, and can negatively affect the investor's return.

Which of the following scenarios accurately describes the similarities between an open listing and an exclusive agency listing?

In both open listings and exclusive agency listings the seller doesn't have to pay a listing agent commission if the seller finds a buyer herself.

Turns out that there are hazardous materials that need to be cleaned up first. Latrell took the prior owners to court, and the court ruled that Latrell is responsible for the costs of cleanup. What kind of liability is this?

In strict liability, the owner is responsible for cleanup, regardless of who created the initial problem.

Hannah wasn't able to get the financing to open her boutique, so her mother came on as a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?

Indemnifying one of the contract parties releases that party from all liability or loss.

In addition to fines, individuals who violate antitrust laws may face imprisonment for up to what length of time?

Individuals who violate state antitrust law may be liable for $100,000 and up to 10 years of imprisonment.

Kennedy tells Matthew she'll perform all the tasks she'd perform for any listing, though she has no written agency agreement with Matthew. Do Matthew and Kennedy have a legal agreement?

Kennedy and Matthew have an express verbal agreement. The agreement isn't implied because Kennedy agreed to perform all the tasks she'd perform for any listing.

Richard is interested in purchasing some rural land and included outbuildings. When reviewing the legal description, he sees the name of a principal meridian. What type of legal description is this?

Legal descriptions that use the RGSS usually include the state, name of the principal meridian, township, and range designations with compass directions and section numbers.

Which of the following is the price a lender believes the property will bring at a foreclosure sale?

Lenders won't lend on what they can't recoup. Therefore, a loan will be based on what a lender would hope to recoup, should a foreclosure sale be necessary.

Which legal description method uses compass headings and directions?

Metes and bounds uses compass headings and directions. The rectangular system divides land into townships and further divides those into sections.

When real estate licensee Brian discovered that Arnold was using a 'Choose Your Neighbor' letter to market a property without also listing the property in the MLS, in the local paper, or even putting a for sale sign in the yard, what charge could he bring against Arnold to the National Association of REALTORS®?

REALTOR® Brian could charge Arnold with violating Article 10 of the Code of Ethics, which prohibits REALTORS® from agreeing to discriminate against people belonging to a protected class.

What's the best definition of real property?

Real property includes real estate, plus all of the interest, benefits, and rights included in ownership.

Cambridge Apartments provides an open parking lot for their residents. There is adequate parking and all spaces are available on a "first-come, first-served" basis. Alton has MS and uses a motorized wheelchair. Must Cambridge reserve a parking place specifically for Alton if he requests?

Reasonable accommodation requirements preserve Alton's right to a reserved parking space that fits his needs.

When property changes hands, the deed is recorded. There's a fee for recording, so why would anyone choose to pay this fee?

Recording and possession give the public constructive notice that ownership has changed hands. It also protects the buyer from others' claims on the property.

What is the doctrine of estoppel?

The doctrine of estoppel prevents individuals from making an assertion or claim, even by actions or behavior, and later denying it.

Antje's clients closed on their property yesterday, but Antje still has some paperwork that she needs to deliver to them as soon as possible. Under which fiduciary duty is Antje acting?

The duty of accounting may continue even after the transaction closes. The agent must account for any documents or money belonging to the client until it is delivered to the appropriate party.

In a residential real estate sale involving a federally related loan, who's required to provide Real Estate Settlement Procedures Act disclosures to the consumer?

The lender must provide the borrower with a written disclosure of the estimated and final settlement costs.

Sondra thinks the new business contract she's signed with her business partner is valid. Both parties are legally competent, the purpose is a business transaction so it's a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?

The only element Sondra hasn't considered is whether the consent to enter into the contract was voluntarily given. Only real estate contracts have to be in writing, and parties are legally competent to enter into contracts from the age of 18.

When considering loan risk, which two items will lenders consider in equal measure?

The property's value (as underlying collateral) and the borrower's ability to repay the loan will be equal considerations for the lender.

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

The replacement cost reflects the cost to build a functionally equivalent improvement, as opposed to the reproduction cost, which is the cost to build an exact replica of the subject, with the same materials and deficiencies.

Jane and Micah are seller and buyer of Jane's property, respectively. What must occur for Jane to effect a transfer of title to Micah?

The seller (grantor) must deliver a marketable title. The grantee isn't required to sign.

Victor buys a property from Yolanda for $200,000. Using a land contract, Victor agrees to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title?

The seller retains the title in a land contract. When the loan balance is paid in full, the seller gives the buyer title.

The MARIA acronym helps to identify the five tests of a fixture. In MARIA, what do the two As stand for?

The two As in MARIA stand for adaptability of the item to the land's use and agreement of the parties.

When the lender gathers all kinds of information about the borrower's assets, debts, income, employment history, and pulls their credit report, the buyer is ___________________.

This is all part of the application process.

A buyer, hoping to beat out all other offers, included a clause in the offer that reads, "Buyer to beat all competing offers by $1,000 up to a price of $700,000. Seller to provide copies of competing offer to buyer on acceptance." What type of offer is this an example of?

This is an example of an escalator offer.

Which department typically decides which development projects require a permit or approval?

This is the building department's domain.

Leon and Beth own 1/13 of a timeshare estate. They own weeks 20 and 21, and 40 and 41. These weeks are inheritable. What type of ownership is this?

Timeshare estates are owned as fee simple estates. They convey all rights of ownership and can be sold or passed down to heirs.

Which document is used to give a buyer an overview of the title history and information about what is or isn't covered in an insurance policy?

Title insurance companies issue a preliminary report with the current title history and any liens or encumbrances. It outlines what the insurance company will or won't cover on its forthcoming insurance policy if the title is found to be acceptable.

Melisa's mother gave her house to Melisa, along with a signed copy of the deed granting ownership to Melisa. Years later, Melisa decides to downsize by selling the property. The title company shows that the property is still in Melisa's mother's name. What does Melisa have to do to clear this up?

To preserve the chain of title, Melisa needs to record the signed deed. Then future records will show an unbroken chain of title.

What are the two types of physical depreciation?

Two types of physical depreciation are curable and incurable depreciation.

Which of the following can be defined as what a property is worth?

Value means worth. It is different from cost and price.

Elaina and Allen just purchased a home using a deed of trust. Which of the following is most likely true about their home loan?

When a deed of trust secures a loan, a trustee holds the title until the loan is paid. Because the right to sell in the event of a default is part of the deed of trust's language, a non-judicial foreclosure may be used.

Travis has made the final payment on his loan according to the loan terms. What must the note holder do to acknowledge that the debt has been repaid?

When the note has been paid off, the holder must sign the note, mark it as paid in full, and return it to the maker. The satisfaction of mortgage is recorded with the county land office, removing the associated lien from the property.

Which entity typically enforces the code restrictions and licensing and insurance requirements for contractors, thereby enforcing the building code?

While builders and developers self-regulate to some degree, they're not responsible for enforcing the building code. This is the local building department's responsibility.

All of the homes on Elm Street are currently on septic systems. However, the county plans to extend the sewer lines to Elm Street within the next two years. What's the biggest reason why it's important for your buyers to know this?

While construction traffic may be an annoyance, the real reason it's important for prospective buyers to know about the sewer extension is that it could be costly for residents. Localities may charge up to $10,000 for a home to tie into the sewer system—and in many cases, it's required, not optional.

Which of these guarantees is offered by a general warranty deed but not a special warranty deed?

With a general warranty deed, the seller will defend against all claims on title; with a special warranty deed, the seller warrants only those claims that stem from when he owned the property.