Practice National Exam #3

What does the Federal Trade Commission consider to be an unfair ad? A. Any ad or business practice that causes or is likely to cause injury B. Any ad that is likely to mislead consumers acting reasonably under the circumstances C. Any ad that makes a health claim D. Any ad with a claim that's difficult to evaluate

A. Any ad or business practice that causes or is likely to cause injury 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.

Bill is joining his inspector Hank for an inspection of the property he hopes to purchase. Hank notices that the dirt on the exterior of the home slopes toward the house. He explains that it should slope away from the home. When it doesn't, what problem might this create? A. Basement leaks B. Chimney issues C. Contamination of the home's water source D. Mosquito breeding

A. Basement leaks Soil sloping toward a home means that rain runs off toward the home. This improper drainage can lead to leaks and moisture issues.

All terms and conditions the client authorizes must be specified and included in an offer to sell or buy. When is it acceptable to offer the property under other terms? A. Never B. Only when your designated broker approves it C. Only when you're reasonably certain you can get your client a better deal by doing so D. Only when you're representing the seller

A. Never Regardless of whether you think you could make a much better deal for your client by offering other terms in a sales contract, you must never offer terms other than those specified by your client.

You're explaining to your client that using electronic documents and signatures simplifies the home buying process. Your client is skeptical about these signatures. You describe the Uniform Electronic Transactions Act (UETA) and tell your client ______. A. The UETA gives electronic signatures the same legal weight as "wet" signatures B. The UETA provides a guarantee that electronic signatures will hold up in court C. The UETA requires states to permit electronic signatures on all real estate-related documents D. UETA takes precedence over state laws

A. The UETA gives electronic signatures the same legal weight as "wet" signatures The UETA is an attempt to standardize acceptance of electronic documents and signatures, but state laws govern the use of these electronic items. In states that have adopted UETA (or similar laws), an electronic signature is considered equally valid as a wet signature.

A "homes for sale" magazine contains the following ad: "Cozy two-bedroom starter home, neat and clean, ready for move-in. $140,000. Low down payment and easy financing!" Which of these statements is true? A. The ad complies with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms. B. The ad complies with TILA because the sales price is below the minimum that triggers full disclosure. C. The ad does not comply with TILA because financing terms must be provided on any residential real estate ad. D. The ad does not comply with TILA because it mentions financing without including all of the terms of the financing.

A. The ad complies with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms. Regulation Z requires all financing terms to be included in an ad only if certain trigger terms are present, but "low down payment and easy financing" are not triggers.

A small duplex sold for $550,000. Each unit can gross $2,500 in monthly rent for the owner, and there are no additional income sources from the property. What's the GRM? A. 100 B. 110 C. 200 D. 220

B. 110 To find the GRM, divide the sales price by the gross monthly rent, remembering that there are two units, so a total monthly rent of $5,000. So, $550,000 ÷ $5,000 = 110.

A strip mall valued at $850,000 has a $67,500 annual net operating income. What is the capitalization rate for the strip mall? A. 12.59% B. 7.9% C. 8.67% D. 9.2%

B. 7.9% The cap rate formula is: net operating income ÷ value = rate (I ÷ V = R). So $67,500 ÷ $850,000 = .079 or 7.9%. This formula can work in reverse as well: value (purchase price) × cap rate = net operating income (V × R = I).

The Truth in Lending Act requires lenders to make certain ______ to consumers. A. Concessions B. Disclosures C. Loans D. Rates available

B. Disclosures Lenders are required to disclose the annual percentage rate, total principal and interest, finance charges, and amount financed.

The doctrine of laches refers to the _______ of restrictive covenants/deed restrictions. A. Creation B. Enforcement C. History D. Types

B. Enforcement The doctrine of laches refers to the enforcement of restrictive covenants. If property owners don't protect their rights to enforce these covenants, they can lose them.

While conducting a property valuation site visit, Todd realizes that nearly half of the property has no improvements on it. There's no apparent reason why the land would be unusable, which indicates that it is _____. A. Additional land that may have potential problems B. Excess land that could be separated and sold C. Surplus land with no additional value D. Underutilized land that needs to be developed

B. Excess land that could be separated and sold The correct term to use for unused land that could be separated and sold is "excess."

Marge's broker, Geoffrey, told her that the lease on the property she wants to buy runs with the land. What does that mean? A. A new property owner can require tenants to relocate to a similar piece of land. B. If property ownership changes, the new owner must abide by the lease terms. C. The land area leased is fully described in the lease agreement. D. The lease terminates as soon as the land (property) changes hands.

B. If property ownership changes, the new owner must abide by the lease terms. Items that run with the land continue to be in effect when the property changes hands. A lease agreement is one of these items. Water bills are another.

What's the primary difference between an ordinary and a pur autre vie life estate? A. An ordinary life estate ends when the grantor dies; a pur autre vie life estate ends when the estate holder dies. B. An ordinary life estate ends within a specified period of time; a pur autre vie life estate ends when the estate holder dies. C. An ordinary life estate ends with the death of the estate holder; a pur autre vie life estate ends with the death of someone other than the life estate holder. D. A pur autre vie life estate ends within a specified time period; an ordinary life estate ends when someone other than the estate holder dies.

C. An ordinary life estate ends with the death of the estate holder; a pur autre vie life estate ends with the death of someone other than the life estate holder. An ordinary life estate ends when the estate holder dies. A pur autre vie life estate ends when a named person other than the estate holder dies.

Which of these statements about title marketability standards is correct? A. Insurable title carries a higher standard of assurance than marketable title. B. Marketable title can only be achieved if there are no title defects or broken links in the title chain. C. Marketable title carries a higher standard of assurance than insurable title. D. Marketable title guarantees that there are no known or unknown title defects.

C. Marketable title carries a higher standard of assurance than insurable title. Marketable title isn't necessarily perfect title. It may have unknown defects or even known defects that are considered acceptable to a reasonable buyer.

Which clause in the listing agreement gives the listing broker the authority and obligates the broker to market the property to other brokers? A. Broadcast clause B. Marketing clause C. Multiple listing clause D. Provisionary clause

C. Multiple listing clause This is the MLS clause.

Harini had a lease with an option to buy on her condo since she wasn't financially stable enough to purchase the condo when she first signed the lease. Two years later Harini was in great financial shape, but she found out that the owner legally sold the condo to another buyer. Harini has to move out next month. What must have happened? A. Harini and the seller had a falling out. B. Harini exercised her right of first refusal. C. The option expired. D. The seller breached the contract.

C. The option expired Because options are unilateral contracts, they leave a seller hanging until the optionee exercises the option. Thus, they typically have an end date. If the optionee doesn't exercise the option before the expiration date, the owner is free to sell.

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? A. $1,527,273 B. $752,066 C. $756,000 D. $763,560

D. $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).

Municipality XYZ created a document that regulates the permitted land uses and zoning classifications within the town boundaries, and does so while staying within the parameters of the comprehensive plan. Municipality XYZ has created _______. A. An environmental impact statement B. A SEQRA document C. A TDR document D. A zoning ordinance

D. A zoning ordinance This is a description of a zoning ordinance.

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 states that its purpose, in part, is to require that real estate appraisals used in connection with federally related transactions be performed ______. A. By licensed real estate professionals B. By members of the Appraisal Foundation C. In the most expeditious and inexpensive way possible D. In writing, and in accordance with uniform standards

D. In writing, and in accordance with uniform standards FIRREA helps to regulate the ways that lenders value real property by requiring that appraisals be done by licensed, qualified personnel, and that the appraisal report be in writing.

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? A. Arbitration B. Choice of law C. Damages block D. Indemnification

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

Tim and Tina Wells bought a home with absolutely beautiful perennial gardens in the back. The plantings were designed to bring birds, bees, and butterflies and to provide color for most of the year. When they did the final walkthrough, they were dismayed to see that many of the shrubs and flowering plants had been removed. They expected these plantings to be considered part of the real property because of the ________. A. Adaptation to the land B. Agreement of the parties C. Intention in placing the item D. Method of annexation

D. Method of annexation The method of annexation—planting in the ground—implies that the plantings were expected to stay with the land.

Bob signed a contract to purchase Ingrid's apartment building. Bob decided he didn't want to be a landlord, and Ingrid decided she didn't want to sell and move to Maui. They mutually agreed to cancel the contract and Ingrid returned Bob's earnest money. This is referred to as ______. A. Assignment B. Breach of contract C. Novation D. Rescission

D. Rescission A rescission is a definitive end of the parties' commitments under an agreement—one in which the parties are returned to their pre-contract status. Each party gives back anything he or she received under the contract.

What type of insurance protects a lender's collateral interest in a property that's being financed? A. Collateral insurance B. Hazard insurance C. Mortgage insurance D. Title insurance

D. Title insurance Lender's title insurance policies protect the lender's collateral investment in a given property.

The Richards family farm is located on a 10-acre parcel of land, which is very rare to come by in their area. However, the house is rundown and in need of many repairs. Most buyers in the area are looking for a move-in ready home, which means they would need to either look elsewhere or wait several months for the home to be renovated. Which factor is most negatively impacting the value of the Richards' property? A. Demand B. Scarcity C. Transferability D. Utility

D. Utility Although large parcels in the area are scarce, buyers are unwilling to buy and wait to live in a property that needs significant repairs, which is affecting the value.