Practice Real Estate Final Exam 05

A buyer assumes the mortgage. How is the owner relieved of the liability? A. Subject to mortgage B. Novation (or "full assumption) C. Substitution D. Graduation

B. Novation (or "full assumption) Essentially, novation means to substitute a new contract for an old one; thus the holder of the original is relieved of his or her responsibilities.

A borrower bought a $174,000 house with no down payment. The loan was probably A. a conventional insured loan. B. a VA loan. C. an FHA loan. D. a conventional loan.

B. a VA loan. VA loans are zero-down instruments, while FHA loans permit low down payments in the 5% range.

The amount of earnest money deposit is determined by A. the real estate licensing statutes. B. an agreement between the parties. C. the broker's office policy on such matters. D. the acceptable minimum of 5 percent of the purchase price.

B. an agreement between the parties. Earnest money is a demonstration of sincerity on the part of the purchaser and provides preliminary evidence that he or she is financially capable of completing the transaction. While it should be substantial enough to meet these two criteria, there is no set or customary amount or percentage.

Why is the RESPA closing statement allowed to be examined on or before closing? A. To allow the buyer to see costs at or before closing to see if he/she can get the loan at a cheaper price B. To make sure the title insurance came from the right company C. To check for errors D. To provide for special fees to specific parties for business related to the real estate transaction

C. To check for errors This is not a step that should be dismissed. With the increased volume in home mortgages, the fact is a significant amount of closing statements do contain errors and it's easer and better to correct them before closing than after.

Broker Nathan works for seller Ted. Nathan should do all of the following except A. accounting for all monies. B. maintain confidential information. C. provide legal advice. D. be loyal to Ted.

C. provide legal advice. Brokers should not provide legal advice unless they are also a lawyer.

A tenant leased 3,000 square feet at $10 per square foot and 8% of gross income. The total annual rent she paid was $60,000. What was the gross income on which she paid percentage rent? A. $120,000 B. $160,000 C. $300,000 D. $375,000

D. $375,000 At $10 per square foot, the tenant's base rent is $30,000. Since the total rent was $60,000, that means the remaining $30,000 was due to the gross sales percentage. Since that figure is 8%, simply divide $30,000 by .08 to arrive at $375,000.

A buyer bought a property without telling the seller of his intended purpose for the property. The contract contains no contingency clauses and it is a properly executedXXX. After the closing, the buyer is unable to obtain the zoning he needs for his commercial project. What is the contract at this stage? A. Void B. Voidable C. In Breach D. Enforceable

D. Enforceable Since there were no contingency clauses, and no restrictive covenants of record. If the buyer cannot secure a change of zoning , the contract is perfectly valid as stands and is enforceable between the parties.

Which of the following is true of a second mortgage? A. It has priority over a first mortgage. B. It cannot be used as a security instrument. C. It is subject to termination with mortgagor notification. D. It is usually issued at a higher rate of interest.

D. It is usually issued at a higher rate of interest. Second mortgages carry higher risk for lenders because they're "second" in line after the first mortgage holder. In case of foreclosure, that means the first mortgage holder is paid in full before any remaining monies are distributed. This added exposure typically results in higher interest rates.

Jim and Sandy are next-door neighbors. Sandy tells Jim that he can store his camper in her yard for a few weeks until she needs the space. Sandy did not charge Jim rent for the use of her yard. Sandy has given Jim a(n) what? A. Easement appurtenant B. Easement by necessity C. Estate in land D. License

D. License Granting the use of property for a defined period for a specific purpose is almost always a form of licensing. Easements grant only access, not ownership, use or occupancy rights. Further, that access is generally for the benefit of the property owner, such as maintaining utilities or sidewalks.

Seller Jolita lists her house with Broker Fred. Fred then buys Jolita's house and collects the agreed-upon commission. This is an example of A. commingling monies. B. a Regulation Z violation. C. truth in marketing. D. self-dealing.

D. self-dealing. Fred is taking advantage of his position to collect a commission. Self-dealing qualifies as intentional misrepresentation.

A mechanic's lien would be properly classified as a(n) A. equitable lien. B. voluntary lien. C. general lien. D. statutory lien.

D. statutory lien. A "statutory lien" is one that arises out of specific law (otherwise known as statutes). By contrast, an "equitable lien" has its roots in common law or custom. A "voluntary lien" is one entered with the property owner's knowledge and consent, such as a mortgage. A "general lien" grants a creditor the right to file a claim against all of a debtor's assets, not just a particular property. Liens are often categorized as more than one type. A mechanic's lien is statutory AND involuntary, for example.

The Pickets are purchasing a home for $780,000 and the lender is giving them a 90% loan at 5% interest, plus a 2% loan origination fee. How much is the loan origination fee? A. $14,040 B. $15,600 C. $16,500 D. $70,200

A. $14,040 A loan for 90% of the $780,000 purchase price results in a $702,000 mortgage. Since the origination fee is based on the amount of the mortgage, not the price of the home, the fee is 2% of $702,000 or $14,040.

A square is 1/8 of a mile by 1/8 of a mile. How many acres is this? A. 10 acres B. 20 acres C. 40 acres D. 160 acres

A. 10 acres One-eighth of a mile square is the same as 10 acres. Multiply 1/8 X 1/8 = 1/64 divided into 640 acres = 10 acres

The federal anti-discriminatory laws apply to which of the following? A. A broker selling a single-family home B. A private club not open to the general public C. Office building sales D. The rental of industrial property

A. A broker selling a single-family home Civil rights laws apply to owners of residential property, rental units, hotels and virtually any other building offering housing or accommodations to the general public.

A real estate licensee has a buyer agency agreement. What is the seller in this situation? A. A customer B. A client C. A fiduciary D. An agent

A. A customer There's an important distinction between client and customer. Unless there is a specific agreement to the contrary, licensees represent only one side in a transaction. In this case, it's the buyer who is the client and it's the licensee's obligation to negotiate a deal that's in that person's best interests, not the one that's "fairest" to both parties.

Broker Kiki is trying to sell a unique $15,000,000 mansion in South Beach. What advertising medium would probably be the best option for Kiki to sell this particular property? A. A magazine ad B. A billboard ad C. A telephone directory ad D. A radio ad

A. A magazine ad A magazine ad, although significantly more expensive than newspaper advertising, could be just what a firm needs to attract wealthy clients to their upscale offerings. Or a specialty magazine could be the appropriate venue for a particularly unique property. Alternatively, advertising on social media can allow relatively inexpensive, targeted marketing.

Discrimination is prohibited in lending practices under A. ECOA. B. RESPA. C. Truth in Lending Act. D. FNMA.

A. ECOA. Passed in 1992, the Equal Credit Opportunity Act prohibits a broad spectrum of discriminatory lending practices, including the granting or denial of credit or the costs associated with borrowing based on race, gender, marital status, source of income (e.g., public assistance) and other factors.

Which of the following closing costs is typically paid by the buyer? A. Private mortgage insurance (PMI) B. Broker's commission C. Satisfy existing liens D. A flip tax

A. Private mortgage insurance (PMI) A buyer has to pay private mortage insurance if they did not have a 20%+ down payment (unless they have a VA or FHA loan). The others are paid by the seller.

The Civil Rights Act of 1866 prohibits discrimination in housing based on which of the following reasons? A. Race B. Religion C. Sex D. Age

A. Race Although surprising to many, the original civil rights legislation was passed in 1866--by one vote over the veto of President Andrew Johnson.

Which of the following is a closing expense typically paid by the seller? A. The broker's commission B. Inspections C. The mortgage recording Fees D. The recording of the deed

A. The broker's commission The seller pays from the broker's commission. All the other expenses are the buyer's.

Broker Carr, with ABC Real Estate Company, listed the property of a seller. Broker Smith, with XYZ Real Estate Company, called Broker Carr, and disclosed that he was a Buyer Agent. Broker Smith wrote a contract with a buyer for the sale of the property. What, if any, is the relationship between the buyer's broker, the seller and the listing broker? A. There is not a relationship between the parties. Broker Carr represents the Seller and Broker Smith represents the Buyer. B. Customer C. Agency D. Dual agency

A. There is not a relationship between the parties. Broker Carr represents the Seller and Broker Smith represents the Buyer. Since each broker represents separate sides in the transaction, no relationship exists.

Which is true about restrictive covenants? A. They are placed by private parties in a deed. B. They are placed by government agencies in a deed. C. They are voidable by successive owners. D. They are a form of tax shelter.

A. They are placed by private parties in a deed. Restrictive covenants are most commonly associated with subdivisions and community management associations and are intended to maintain consistency within the neighborhood. While viewed as a benefit by most, they do limit the owner's use of the property and are binding on future owners.

Carl Chauvinist, the owner of an apartment complex, lives in one unit of a triplex and routinely refuses to rent either of the other two units to a female. Can he do this? A. Yes. He may do this if he does not use a broker or discriminate in advertising. B. Yes. He may do this if he doesn't ask the tenant's age. C. No. Carl can never discriminate on sex. D. No. Carl must live in a single family home to discriminate.

A. Yes. He may do this if he does not use a broker or discriminate in advertising. Although laws vary by state as to number of units that fall under this type of provision, if a person owns and lives in a unit, he or she is entitled to practice a certain measure of discrimination. The view is that a person's dwelling (which includes units such as duplexes and triplexes) enjoys a degree of "sanctity" and the person may choose whom he or she brings into their "home." Therefore, the owner could claim an exemption from federal Fair Housing laws.

A feature found in a comparable property that is not present in the subject property will result in A. a reduction adjustment to the comparable's selling price. B. an increase adjustment to the subject property's selling price. C. the reduction adjustment to the subject property's selling price. D. an increase adjustment to the comparable's selling price.

A. a reduction adjustment to the comparable's selling price. It's important to remember that adjustments are made to the comparable, not the subject property. For example, let's assume two homes are identical in every respect, except the comparable property has a swimming pool the subject home lacks. If the subject property is on the market for $175,000 and a swimming pool typically adds $8,000 to the selling price of homes in that area, the appraiser would deduct $8,000 from the sale price of the comparable rather than adding it to the subject property to make his comparison.

A special warranty deed differs from a general warranty deed in that the grantor's covenant in the special warranty deed A. applies only to a definite limited time. B. covers the time back to the original title. C. is implied and is not written in full. D. protects all subsequent owners of the property.

A. applies only to a definite limited time. The more common deed in most states is the general warranty, because it establishes the ownership trail and validity of title going back to the original recorded ownership (for example, the purchase of Manhattan Island and all subsequent divisions, subdivisions and resales). Under a special warranty deed, an owner transfers property guaranteeing the quality of title only during the period of his or her ownership, leaving subsequent buyers vulnerable to prior claims.

The maximum permissible amounts are based on "loan to value ratios" A. based on sale price or appraised value, whichever is lower. B. not determined by federal statute in the case of FHA loans. C. based on the banker's competitive market analysis. D. fixed by law for conventional loans.

A. based on sale price or appraised value, whichever is lower. Although various banks, mortgage companies and programs have different LTVs, the lower, more conservative number is used.

The list of previous owners from whom the present real estate owner derives his or her title is known as the A. chain of title. B. certificate of title. C. title insurance policy. D. abstract of title.

A. chain of title. The "chain" links together the successive owners of a property from the most recent to the original recorded title holder. In addition, it notes other relevant information such as mortgages, judgments, liens, death of title holders, inheritors and so forth.

Some expenses paid at closing must be __________ between the buyer and the seller. The most common items that fall into this category include taxes, insurance, and utilities. A. prorated B. separated C. disclosed D. depreciated

A. prorated Any item that is prorated is shown on the settlement statement as a debit to one party and a credit to the other party for the same amount.

The illegal practice of directing minorities to areas populated by the same race or religion is called A. steering. B. blockbusting. C. redlining. D. panic peddling.

A. steering. "Steering" is driving people towards particular neighborhoods, and is the correct answer to this question. On the other hand, "blockbusting" is the opposite side of the same coin. Synonymous with "panic peddling," it refers to trying to generate panic selling in a neighborhood dominated by one race or ethnic group by representing that another group is about to start moving in.

In valuing a single family residence by the sales comparison approach, an appraiser would make adjustments to A. the comparable properties. B. the subject property. C. both the comparable and the subject property. D. current properties being offered for sale.

A. the comparable properties. The objective of an appraisal is to arrive at a fair estimate of the subject property's value based on what comparable properties have actually sold for. The most reliable way of achieving this is to make additions and subtractions from the comparables rather than the other way around. In the example of a 3-bredroom ranch, property A might have sold for $225,000, but features a two-car garage instead of the subject property's 3-car garage. If the value of the extra garage space is $5,500, the first comparable is raised to $230,500. If the next property is identical to the subject, except it had a brand-new, high-end kitchen that added approximately $25,000 to the selling price and the home sold for $257,000, that comparable's price would be reduced to $232,000.

The ________ is the culmination of the real estate transaction. A. title closing B. inspection C. signing of the sales contract D. default of the mortgage

A. title closing At the title closing: the buyer completes his or her financing arrangements (referred to as closing the loan), the seller transfers the title, and both the buyer and seller pay the necessary taxes, fees and other charges.

The local utility company dug up Charlotte's garden to install a natural gas line. The company claimed it had a valid easement and proved it through the county records. Charlotte claimed the easement was not valid because she did not know about it. The easement A. was valid even though the owner did not know about it. B. was an appurtenant easement owned by the utility company. C. was not valid because it had not been used during the entire time that Charlotte owned the property. D. was not valid because Charlotte was not informed of its existence when she purchased the property.

A. was valid even though the owner did not know about it. Easements grant only access, not ownership, use or occupancy rights. Further, that access is generally for the benefit of the property owner, such as maintaining utilities or sidewalks. As such, they "attach" to a deed or lease and remain in effect, until specifically lifted. This type of easement is known as an easement-in-gross.

Anna owns 50 acres of land with 500 feet of frontage on a desirable recreational lake. She wishes to subdivide the parcel into salable lots, but she wants to retain control over the lake frontage while allowing lot owners to have access to the lake. Which of the following types of access rights would provide the greatest protection for a prospective purchaser? A. An easement in gross B. An appurtenant easement C. An easement by necessity D. A license

B. An appurtenant easement Appurtenant easements afford the most protection since they are generally a permanent feature of the property. Thus, in the case of sale, the lake access passes to any new owners. By contrast, an "easement in gross" is between two individuals, which would severely limit the attractiveness and value of the property if the original owner wished to sell.

Who is the largest purchaser in the secondary market? A. Ginnie Mae B. Fannie Mae C. FHA D. Freddie Mac

B. Fannie Mae Fannie Mae stands for the Federal National Mortgage Association (FNMA). It was established by the National Housing Act specifically to start the secondary mortgage market, thus attracting more investors and funds to help support home ownership.

Under an FHA graduated payment mortgage, which of the following fluctuates over the term of the loan? A. Interest rate B. Monthly payments C. Finance charge D. Annual rate

B. Monthly payments Graduated payment mortgages are aimed particularly at young families who expect to see their earnings rise over the next five to ten years. As such, payments for interest and principal are less than the actual costs in the early years and gradually rise to make up the difference.

A broker and seller terminate the listing contract. An offer is received in the mail by the broker after the termination of the listing contract. The offer is for full price and includes all of the terms and conditions of the seller. Why is this NOT a valid contract? A. There is no consideration involved. B. No acceptance has been given. C. No earnest money has been enclosed. D. There is no current listing agreement.

B. No acceptance has been given. It has not been presented to or accepted by the owner. Remember, contracts aren't valid until both parties agree. However, even though the listing agreement has expired, the offer should be presented. If it's accepted and the transaction closes, the broker will generally be entitled to his or her full commission.

How does one determine the gross rent multiplier? A. Monthly rent divided by the capitalization rate B. Property value divided by the monthly rent C. Property value divided by the net income D. Property value divided by the gross income

B. Property value divided by the monthly rent This is used as a quick, short-hand "guesstimate" for a property's approximate value. Far more detailed calculations are necessary to determine a complex property's market value (e.g., shopping center.)

The buyer of an apartment complex is told that the refrigerator in one of the apartments goes with the sale. After taking title, he discovered that the refrigerator belonged to the tenant. Which is true about this situation? A. Since the refrigerator was in the apartment, it automatically belongs to the new owner. B. The refrigerator is the personal property of the tenant. The seller had no right to offer it to the buyer. C. The refrigerator was plugged into the wall and that makes it real property. D. The tenant will have to get permission from the new owner to remove the refrigerator.

B. The refrigerator is the personal property of the tenant. The seller had no right to offer it to the buyer. Plugging in an appliance does not constitute installation. Thus it is personal property that belongs to the tenant.

The Rose family owns a home in a semi-rural area, which is about five years old. Recently announced plans for a new regional airport will place their home directly in line with a main runway ending 1 mile before their home. If the airport is constructed, will this diminish the value of the Rose Home? A. Yes, because of functional obsolescence. B. Yes, because of economic obsolescence. C. No, because value would increase due to the location close to the airport. D. No, because noise from aircraft passing overhead is not recognized as affecting property values.

B. Yes, because of economic obsolescence. Economic obsolescence occurs when factors unrelated to the property itself and outside of the owner's control diminish its value. A quick way to judge whether or not a property has become economically obsolete is to analyze whether, under the new circumstances, the location would still be chosen as a home site and, if yes, at what value compared with the current property.

A buyer wanted to use a promissory note for consideration on the purchase of a property. Can he do this? A. Yes. The buyer can do as he wishes if the Commission approves the action. B. Yes. This is acceptable as long as the seller agrees. C. No. Only money can be used for consideration. D. No. Only the seller can write a promissory note.

B. Yes. This is acceptable as long as the seller agrees. This is a form of owner financing and is perfectly acceptable, so long as both parties agree to the terms and conditions.

The title to real estate passes when a valid deed is A. signed and recorded. B. delivered and accepted. C. filed and uploaded to the cloud. D. executed and mailed.

B. delivered and accepted. Fundamentally, real estate transactions only involve two parties--the buyer and the seller. All that's necessary to create a legal sale is for one party to make an offer the other accepts. Recording, escrow, real estate licensees, mortgage companies and the like facilitate and support the transaction process but are not requirements of a legal sale.

When the preliminary title report reveals the existence of an easement on the property, it indicates that the easement is a(n) A. lien. B. encumbrance. C. encroachment. D. tenement.

B. encumbrance. Anything that limits a person's use of a property is an encumbrance. Easements limit use in that they generally prohibit any kind of permanent structure on the area in question. For example, if a homeowner wanted to build a swimming pool in an area of his back yard and the local sewer company had an easement for pipes running under that area, he would have to find another location for his pool, even if it was not as desirable.

Sam and Nancy bought a store building and took title as joint tenants. Nancy died testate. Sam now owns the store A. as a joint tenant with rights of survivorship. B. in severalty. C. as a tenant in common with Nancy's heirs. D. in trust.

B. in severalty. Joint tenancy means that two parties have an undivided interest in a particular property and, upon the death of one party, full ownership automatically goes to the survivor. Despite the way it sounds, "in severalty" means as sole owner.

Broker K arrives to present a purchase offer to Mrs. D, an 80 year old invalid who is not always of sound mind, and finds her son and her daughter-in-law present. In the presence of Broker K, both individuals persistently urge D to accept the offer, even though it is much lower than the price she has been asking for her home. If D accepts the offer, she may later claim that A. broker K should not have brought her such a low offer for her property. B. she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. C. broker K defrauded her by allowing her son and daughter-in-law to see the purchase offer he brought to her. D. her consumer protection rights have been usurped by her son and daughter-in-law.

B. she was under undue duress from her son and daughter-in-law, and, therefore, the contract is voidable. "Duress" is the application of coercion or pressure to influence a person to act in a way contrary to his/her best interests. Further, since voluntary participation is a key condition of any contract, Mrs. D could well be successful in such an action. A voidable contract is one that is able to be voided because Mrs D was under duress or undue influence.

When an appraiser uses the phrase "effective age," she is referring to A. the number of years since the improvements were made. B. the age of the property based upon its condition. C. the estimated total life of an improvement. D. the number of years during which the property will yield a worthwhile return on the investment made

B. the age of the property based upon its condition. Effective age is a combination of many factors, including location, quality of construction and maintenance, architectural style, actual age, climate and so forth. A well-built building in a desirable location will have a much longer effective life than a cheaply constructed space in a poorly maintained office park setting.

The right to control one's property includes all of the following EXCEPT A. the right to invite people on the property. B. the right to exclude the utilities meter reader. C. the right to erect "no trespassing" signs. D. the right to enjoy pride of ownership.

B. the right to exclude the utilities meter reader. This right to enter and work on a property is granted to utility companies (water, sewer, gas and electric) as well as telephone and cable companies. Essentially, if a company provides a service and owns the equipment (e.g., phone and cable lines), they are usually granted an easement.

The primary purpose of a deed is to A. prove ownership. B. transfer title. C. give constructive notice. D. prevent adverse possession.

B. transfer title. A deed is the instrument by which ownership of a property is transferred from one person to another, while a title is evidence of that ownership.

If additional information is not provided, which of the following would be in violation of Truth in Lending? A. "FHA financing available" B. "Assumable loan" C. "No down payment required." D. "Easy financing terms"

C. "No down payment required." "No down payment required" triggers the Truth in Lending disclosures because it is a specific statement about only one aspect of the financing. "Easy terms" does not trigger the regulation because it's non-specific.

On an 8% straight loan of $6,071, the borrower paid total interest of $1,700. How long did he have the loan? A. 30 months B. 36 months C. 42 months D. 48 months

C. 42 months Eight percent of $6,071 is $486 per year or $40.50 per month. $1,700 divided by $40.50 means the borrower held the loan for forty-two months.

A house sold for $420,000. The buyer made a 20% down payment. Monthly interest on the loan was $1,400. What was the interest rate on the loan? A. 4% B. 7% C. 5% D. 9%

C. 5% With a 20% down payment of $84,000, the buyer had a mortgage of $336,000. Since interest is expressed in annual terms, multiply the monthly payment of $1,400 times twelve. That yields an annual interest cost of $16,800, divided by the principal balance of $336,000, yields an annual rate of 5%.

Which type of loan will result in the largest reduction of the principal balance most quickly? A. 5.5% over 30 years B. 5.75% over 20 years C. 6% over 15 years D. 7% over 20 years

C. 6% over 15 years The shorter the term of a loan, the more quickly principal is paid down and the faster equity builds. A 15-year loan at 6% interest rate would provide the LARGEST and FASTEST reduction in the principal. Interestingly, the payments on a 15-year loan are often not that much higher than the same loan with a 30-year payback.

A real estate agent should tell the buyer, his customer, which of the following? A. How the area's demographics have changed recently B. The seller's motivation for marketing his property C. A pending or recent zoning change D. The seller is getting a divorce

C. A pending or recent zoning change A zoning change is a "material fact"--something that can have a direct impact on the property's value or desirability. For example, if the zoning in a middle class neighborhood on the edge of a growing city was changed from residential to mixed use, it means that a number of homes could be turned into businesses, which will make the property less desirable to people seeking a quiet place to raise a family.

Which of the following would be used to clear a defect from the title records? A. A lis pendens B. An estoppel certificate C. A suit to quiet title D. A writ of attachment

C. A suit to quiet title A owner might bring a "quiet title" action to correct a minor mistake in the property description or to remove an easement that's been unused for years. Additionally, they are used when a third party tries to asset some right to the property through a dubious claim. The suit "quiets the mouth" of that person and establishes a clear title.

A home improvement company was negotiating with a homeowner to add on two rooms to a home. The company agreed to take a second mortgage as long as the homeowner also included the rest of the property in the loan. The company and the homeowner agreed to a price and the company provided the necessary disclosure form on Monday and the homeowner signed the agreement at noon the following day. Assuming that the week had five business days, until what time could the homeowner rescind the loan? A. Tuesday, midnight B. Thursday, midnight C. Friday, midnight D. There is no rescission on a house.

C. Friday, midnight Because agreement was reached and SIGNED documents were provided on TUESDAY, Friday midnight ends the THREE-business-day period

H agrees to purchase V's real estate for $230,000 and deposits $6,900 earnest money with Broker L. However, V is unable to clear the title to the property, and H demands the return of his earnest money as provided in the purchase contract. Broker L should A. deduct his commission and return the balance to H. B. deduct his commission and give the balance to V. C. If both sides agree, return the entire amount to H. D. give the entire amount to V to dispose of as he decides.

C. If both sides agree, return the entire amount to H. Brokers and salespeople only earn their commission when a transaction closes. Since the transaction was never completed, no commission is owed. Additionally, H is entitled to have all his earnest money returned since it was the seller, not he, who defaulted on the contract. This return requires consent from all principals. Otherwise, the earnest money must be maintained in escrow until a court order dictates where the money should go.

If a single parent is applying for a real estate loan, when would the fact have to be revealed that part of the parent's income is from child support? A. When applying for a VA or FHA loan if the parent's income is less than $25,000 B. If more than 50% of the parent's income is from non-wage sources C. If the parent was relying on the income for repayment of the loan D. This type of income never needs to be disclosed. It would be a violation of ECOA.

C. If the parent was relying on the income for repayment of the loan Income of any type--whether alimony, child support, freelance work or a second job--only needs to be disclosed if the applicant is relying on it to qualify for the loan.

An owner advertised "beautiful acreage; only $5,000 down; owner will personally finance down payment." Would this be in violation of the Truth in Lending Act? A. Yes. Acreage is not exempt from Regulation Z. B. Yes--since a down payment was stated. C. No. Owners are not covered by Regulation Z. D. No. Brokers can advertise the down payment.

C. No. Owners are not covered by Regulation Z. Regulation Z requires disclosure of all financing terms and conditions if an interest rate, downpayment or other enticement is featured in an ad. This does not apply in this case, however, because Regulation Z applies only to institutions, not individuals selling their own property.

The property manager suspects that the tenants in a property are engaging in illegal drug trafficking. What should the property manager do? A. Cancel the property management agreement B. Observe the property for 30 days and then tell the owner C. Notify the owner immediately of the suspicious activity D. Do not worry. It is the owner's problem.

C. Notify the owner immediately of the suspicious activity The property manager is the owner's agent, but not his "proxy." That is, he must inform the owner but not act on his behalf without authorization. For example, while calling the police to investigate might be appropriate, if the manager's suspicions were groundless and he called the authorities without authorization, the tenants might be able to sue the owner.

A bill of sale is used to transfer the ownership of what? A. Real property B. Fixtures C. Personal property D. Appurtenances

C. Personal property Personal property differs from "real property" in a number of respects, most importantly its portability. Cars, furniture, clothing, paintings, jewelry, appliances and just about any other non-food item one buys are examples of personal property.

When the lender under a deed of trust requires title insurance, who would be the most likely person to pay for it? A. The mortgagee B. The trustee C. The trustor D. The beneficiary

C. The trustor "Trustor" is another name for the borrower and "trustee" is a "supposedly" neutral third party who holds naked legal title, the right to foreclose at the instructions of the beneficiary for non-payment of a promissory note. The beneficiary is the lender in a Deed of Trust. Even though it's the lender who requires the insurance to protect his/her position, it's the borrower who pays for it.

A partition suit is used for which of the following? A. Determination of party fences B. To allow construction of additional bedrooms or bathrooms in a house. C. To force a division of property without all the owners' consents D. To change a tenancy by entireties to some other form of ownership

C. To force a division of property without all the owners' consents Partition suits are typically pursued when a co-owner of a property wants to sell his or her share and the other owners are opposed. Since it is a legal action involving the courts, it is an expense with often unsatisfactory results.

The word "improvement" would refer to all of the following EXCEPT A. streets. B. a sanitary sewer system. C. chattel D. the foundation.

C. chattel The term "chattel" refers to personal property.

When the grantor does not wish to convey certain property rights, he or she A. must note the exceptions after the closing. B. may not do so, since the deed conveys the entire premises. C. may note the exceptions in the deed of conveyance. D. must convey the entire premises and have the grantee reconvey the rights to be retained by the grantor.

C. may note the exceptions in the deed of conveyance. Most commonly known as "restrictive covenants," such deed restrictions are often used to maintain the consistency of a neighborhood by, for example, stipulating that only traditional home styleso f a particular size and painted in traditional colors may be constructed and occupied within the subdivision. These are encumbrances on the property since they limit current and future owners in how they use the property.

The Adams family purchased the largest and most expensive house in a new subdivision. Five years later, when they were ready to move, they discovered the monetary value of the home had gone up proportionately less than the other houses in the neighborhood. This phenomenon is an example of the principle of A. diminishing return. B. balance. C. regression. D. substitution.

C. regression. The regression principle is the reason people are cautioned against owning the most expensive house in the neighborhood. It's an observation of the fact that lower priced homes (and commercial buildings) have a much greater downward pull on the value of higher end properties than the other way around.

A buyer makes an earnest money deposit of $10,000 on a $300,000 property and then withdraws her offer before the seller can accept it. The broker is responsible for disposing of the earnest money by A. turning it over to the seller. B. deducting the commission and giving the balance to the seller. C. returning it to the buyer. D. depositing it in his or her trust account.

C. returning it to the buyer. A contract only exists when it is both offered by the buyer and accepted by the seller. Since the second part of this requirement was never fulfilled, the buyer is entitled to have his earnest money returned.

The rights of the owner of property located along the banks of a river are called A. littoral rights. B. prior appropriation rights. C. riparian rights. D. hereditament rights.

C. riparian rights. "Littoral" and "prior appropriation" are different kinds of water rights: in the first case, navigation rights to an ocean or other large body of water; in the second, the right to use a water source for irrigation. A hereditament is any inheritable property.

Apartment buildings in an area were selling for $100,000 and a buyer offered $100,000 for an apartment building. The buyer is operating on the principle of A. highest and best use. B. conformity. C. substitution. D. increasing returns.

C. substitution. An appraisal principle, "substitution" holds that the maximum value of a property is that price for which a comparable, equally desirable property can be purchased in a timely manner. For example,if two 4-bedroom homes with equal features, age, condition, lot size and desirability are on the market at the same time, buyers would not pay $250,000 for one when the other is available for $240,000. However, if the $240,000 is on the market now, but the owner wants to delay closing for six months while the other is available for immediate occupancy, there may well be buyers willing to pay the premium.

The word "improvement" would refer to all of the following EXCEPT A. streets. B. a sanitary sewer system. C. trade fixtures. D. the foundation.

C. trade fixtures. The term "trade fixture" refers to an item installed by a tenant in a rented commercial property that he or she removes at the end of the occupancy.

A mortgage company makes a number of loans to be assembled into one package and sold to permanent investors. This process is an example of interim financing to the mortgage company and is called A. blanket financing. B. package financing. C. warehousing. D. discounting.

C. warehousing. Warehousing refers to the process whereby banks and other lenders make mortgage loans to consumers for the purpose of quickly selling those loans on the secondary market. The "warehousing" occurs when individual loans are bundled, often with a common element such as the size of the mortgage or credit worthiness of the borrowers, and sold as a single unit.

An agent of the seller would suggest that the buyer hire an inspector from an outside service in all of the following cases EXCEPT A. when they smell gas in the basement. B. when there is a slow drain in the toilet. C. when a hinge is off the door. D. when there is sawdust in the kitchen cabinets.

C. when a hinge is off the door. Home inspectors are hired to find significant and often hidden property defects, such as signs of a leaking roof, termites, foundation cracking and so forth. Hinges and other "wear and tear" items are obvious and not among the reasons for hiring an inspector.

The buyer and seller agreed to a purchase price of $310,500. The buyer received an 80% loan. How much was the buyer's loan and how did it appear on the settlement statement? A. $310,500. Credit the buyer and debit the seller. B. $248,400. Debit both the seller and the buyer. C. $ 248,400. Credit both the seller and the buyer. D. $ 248,400. Credit the buyer only.

D. $ 248,400. Credit the buyer only. Mortgage monies are credited to the buyer's side of the ledger as a portion of the funds he or she will use to complete the transaction. Once all the funds have been accounted for, the monies (less appropriate deductions) transfer to the seller.

What type of a listing agreement allows the owner to appoint an exclusive agent to sell his property, but retains the right to sell the property himself? A. Open B. Exclusive right to sell C. Multiple listing D. Exclusive agency

D. Exclusive agency Open listings mean that if the owner or any other broker or salesperson produces the buyer, the broker will lose his or her commission. Exclusive Right to Sell gives the broker his or her commission regardless of who actually sells the property, even if it is the owner. Exclusive Agency allows the seller to appoint an exclusive agent, but retain the right to sell the property himself.

Who is NOT an originator of primary loans? A. Savings and loans B. Credit unions C. Commercial banks D. FHA

D. FHA The FHA encourages lenders to make these low-interest, low-down payment loans by insuring them against default. It does not actually lend money itself.

When can a landlord evict a disabled blind or disabled tenant from the premises? A. If the tenant gets a guide dog and the apartment policy does not allow pets B. If the tenant insists on a handicapped parking place C. If the tenant makes modifications to his unit at his expense D. If the tenant has loud parties, makes too much noise, and is constantly disturbing other tenants

D. If the tenant has loud parties, makes too much noise, and is constantly disturbing other tenants The law requires "reasonable accommodation"--for example, allowing a guide dog for a blind person even if there's a "no pets" policy. However, that does not mean that all rules are suspended. Noise, safety, and "use of premises policies" may still be enforced.

A Savings & Loan institution would be violating the Equal Credit Opportunity Act by denying a loan to Mr. and Mrs. Happy Borrower for which of the following reasons? A. Low earnings B. No full-time job(s) C. Too many loans D. Minority background

D. Minority background The Equal Credit Opportunity Act, Fair Housing Act, and other anti-discrimination legislation doesn't force lenders or others to abandon sound business practices (such as denying loans to unqualified borrowers), merely to be fair and equally accessible to all people.

Jim Jones, the landlord, rents a property to Tom Smith, a handicapped person. Mr. Smith, with Mr. Jones' permission, modifies the house to suit his needs. When the lease expires, which of the following requirements would not have to be met by Mr. Smith? A. Mr. Smith must remove the "grab rails" in the bathroom that were installed for his use. B. Mr. Smith must raise the kitchen cabinets that were lowered for his use. C. Mr. Smith must repair the walls where the "grab rails" in the bathroom were removed. D. Mr. Smith must restore the wide doorways, that were installed for him, to the original size.

D. Mr. Smith must restore the wide doorways, that were installed for him, to the original size. Since the width of the door will not in any way be detremental to future tenants, there is not a requirement for the original width of the doors to be replaced by the handicapped tenant. All of the other issues must be restored to original status.

In doing a market analysis, an appraiser found a recently sold property where the owners had just gone through a divorce. The property had been listed for $260,000 for 3 months but was purchased for $170,000 by one of the spouses. Should the appraiser use this as a comparable? A. Yes. You would use the actual sale price of $170,000. B. Yes--because it was a comparable type property. C. No--because it had only been listed for 3 months. D. No--because of the divorce it was not an "at arms' length" transaction.

D. No--because of the divorce it was not an "at arms' length" transaction. An appraiser should not use this sale as a comparable sale. An "Arm's length transaction is defined as one in which the parties are dealing from equal bargaining positions. Parties are said to deal "at arm's length" when each stands on the strict letter of his or her rights and conducts the business in a formal manner without trusting the other's fairness or integrity and without being subject to the other's control or dominant influence as would be the case in the divorce.

When a claim is settled by a title insurance company, the company acquires all rights and claims of the insured against any other person who is responsible for the loss. This is known as what? A. Caveat emptor B. Surety bonding C. Subordination D. Subrogation

D. Subrogation For example, let's say Amanda buys a property and the seller provides a general warranty deed stipulating clear title. However, that turns out not to be the case and a third party provides a valid claim to a share of the property. Since Amada took out title insurance, the title insurance company negotiates and pays a settlement with the claimant on Amanda's behalf. Amanda's right to sue the seller then transfers to the title insurance company, which will take action to recover the amount they paid on Amanda's behalf.

When an appraiser correlates the three approaches into a final estimate, he A. averages the estimate. B. accords the greatest weight to the median value. C. selects the estimate nearest to that desired by the employer. D. reconciles the differences according to the type of property being appraised and the quantity and quality of data available.

D. reconciles the differences according to the type of property being appraised and the quantity and quality of data available In order to maintain accuracy and "transparency" of his calculations, an appraiser reconciles differences and does not average comparable sales to arrive at a final value.

Jim, Manny, and Harry are joint tenants owning a parcel of land. Harry conveys his interest to his long-time friend Wendell. After the conveyance, Jim and Manny A. become tenants in common. B. continue to be joint tenants with Harry. C. become joint tenants with Wendell. D. remain joint tenants owning a two-thirds interest.

D. remain joint tenants owning a two-thirds interest. Because joint tenancy must be declared, Jim and Manny remain joint tenants with a two-thirds interest while Wendell, because of his passive acquisition of his share of the property, becomes a tenant in common with Jim and Manny. The difference between the two forms is that Jim and Manny's share retains the right of survivorship provisions but Wendell's does not. Note that some states have laws that supercede the answer to this question.

All of the following are duties of the property manager EXCEPT A. reporting to the owner all notices of building violations. B. providing upkeep and maintenance on the property. C. maintaining financial records and accounts. D. securing tenants of a particular ethnic origin in accordance with the owner's wishes

D. securing tenants of a particular ethnic origin in accordance with the owner's wishes Except in certain circumstances regarding the rental of space within one's personal residence or unit, owners, landlords and their agents are not permitted to discriminate against people based on race, gender, creed, handicap and other personal characteristics.

A breach of contract is a refusal or a failure to comply with the terms of the contract. If the seller breaches the purchase contract, the buyer may do all of the following EXCEPT A. sue the seller for specific performance. B. rescind the contract and recover the earnest money. C. sue the seller for damages. D. sue the broker for non-performance.

D. sue the broker for non-performance. While brokers and salespeople are responsible for bringing people together, they cannot be expected to know every detail of their circumstances or intent. Thus, if a buyer cannot get clear title or a seller is unexpectedly transferred, it is not the broker's fault the transaction failed and he or she bears no responsibility or liability.

Which of the following types of ownership CANNOT be created by operation of law, but must be created by the parties' express intent? A. Community property B. Tenancy in common C. Condominium ownership D. Tenancy by the entireties

D. Tenancy by the entireties Tenancy by the entireties is a form of ownership that husbands and wives can choose or create by deciding to do so and declaring it as such in contracts and deeds. Tenancy in common is put in motion by state law. Community Property is a law of ownership that exists in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and some other states. Tenancy by the Entireties is an estate that is recognized in some states between husband and wife, who have equal right of possession and enjoyment during their joint lives and with the right of survivorship--that is when one dies, the property goes to the surviving tenant. (In many states, if couples do not specify "Joint Tenancy," this form of ownership will be automatically assumed.) Tenancy in Common is a type of joint ownership by parties NOT married, that allows a person to sell his share or leave it in a will without the consent of the other owners. If a person dies without a will, his share goes to his heirs, not to the other owners.

Why would a mortgagee require an appraisal on the property? A. To make sure the buyer did not pay too much B. To render an opinion of property value C. To protect the buyer from fraud D. To assure the property value is sufficient to cover the loan

D. To assure the property value is sufficient to cover the loan Appraisals are third-party valuations of a property based on a wide range of variables. Lenders generally insist on this independent assessment to make sure the value of the property is at least sufficient to pay off the loan amount in case of default. While B is technically correct, D is the better choice.

Tom leases store space to Kim for a restaurant, and Kim installs her ovens, booths, counters, and other equipment. When do these items become real property? A. When they are installed B. When Kim defaults on her rental payments C. When the lease takes effect D. When the lease expires, if the items are not taken by the tenant

D. When the lease expires, if the items are not taken by the tenant Kim is free to move these fixtures at the end of her lease. However, if she chooses to leave them behind, they are considered a permanent part of the structure (just like a dining room chandelier in a home) and revert to Tom.

An owner was selling his own home. Can he advertise the down payment? A. No, because it violates RESPA. B. No, because it violates Regulation Z. C. Yes--as long as it was listed with a broker. D. Yes, because it was his own home.

D. Yes, because it was his own home. Broadly speaking, an individual homeowner is free to sell his/her own home as he/she chooses and is not subject to Truth in Lending or real estate practice restrictions.

Homeowner Tanya acquired the ownership of land that was deposited by a river running through her property by A. reliction. B. succession. C. avulsion. D. accretion.

D. accretion. Accretion means the addition to a parcel of land by sand or soil deposits due to the action of a river or other body of water over time. Avulsion refers to the loss of land as a result of its being washed away by sudden or unexpected action of nature, such as a flash flood that re-routes a river.

Restrictive covenants that run with the land A. are no longer effective when the title is transferred. B. apply only until the developer has conveyed the title. C. can be removed by a court of competent jurisdiction. D. apply to and bind all successive owners of the property.

D. apply to and bind all successive owners of the property. Often put in place to maintain the consistency and desirability of a neighborhood, restrictive covenants have withstood court tests and prohibit all future owners from certain actions or modifications of their property, such as adding out-buildings or creating additions above a certain height, putting up lights to illuminate a sports court, changing the architectural style of a home and so forth.

The primary purpose of Truth in Lending is to A. control interest rates on behalf of the consumer. B. control the true costs to close a transaction. C. prevent usury. D. disclose the true costs of obtaining credit.

D. disclose the true costs of obtaining credit. Truth in Lending, otherwise known as Regulation Z, is intended to do away with deceptive financing tactics, especially those involving hidden costs--for example, advertising a $250 car lease as zero-down and then tacking a $1,200 upfront payment at the time of contract disguised as an "incidental" acquisition fee.

Personal property includes all of the following EXCEPT A. chattels. B. fructus industriales. C. emblements. D. fixtures.

D. fixtures. "Chattel" is a legal term that means personal property. Emblements and fructus industriales refer to profit from crops that are grown as a result of a person's labor, such as corn, as opposed to those that occur naturally, such as grass or minerals. By the custom of English common law, they are considered personal property. By contrast, a fixture is considered attached to a property and thus part of the structure.