Unit 1- Real Estate Law & Practice FINAL

Broker J is a buyer agent for buyer K. Broker J has 'K' under contract to purchase L's property. 'J's commission will be paid by

'J's employing broker

Variations in the VA funding fee are based on the

1. Down payment amount 3. Number of VA loans the veteran has had

A 15,000 square foot warehouse would cost $40.00 per sq. ft. to rebuild today. Its economic life is 50 years, and its effective age is 8 years. The land is valued at $170,000.00. Today, the property is valued at

15,000 X $40.00 = $600,000. $600,000 / 50 (economic life)= $12,000 (straight line depreciation per year) x 8 (effective age) = $96,000 subtracted from $600,000 = $504,000 plus $170,000 (land value) = $674,000.00

To qualify for a tax-deferred exchange a seller must complete the acquisition of another property within how many days of closing the first transaction?

180 days

Lenders are not allowed to collect more than __________ for taxes and insurance, in addition to prorated amounts based on the date of closing

2 Month's Escrow

The Office of Interstate Land Sales Registration is concerned with unimproved land sales in interstate commerce of

25 or more parcels

The legislation demanding that loan origination fees be disclosed to borrowers is known as

3. Truth-in-Lending Act

Minimum down payment for an FHA loan? What is also required?

3.5%. MIP (Mortgage Insurance Premium)

A home 42 feet by 36 feet was built 15 years ago on a lot now valued at $27,900.00. The home would have a current value equal to a reproduction cost of $108.00 per square foot if it were not for depreciation. The depreciation of the house is due to its flat roof, which must be resurfaced at a cost of $4.00 per square foot. To the nearest thousand, the current value of the property is

42' X 36' = 1,512 square feet X $108.00 = $163,296.00; then 1,512 sq. ft. X $4.00 = $6,048.00, which is subtracted from $163,296. = $157,248; plus land = $185,148.00

A broker offers buyers one-stop shopping by providing title insurance, home inspection, mortgage origination, and other like services. This is an example o

A controlled business arrangement

As a condition of selling a lot to a builder, a broker required that the builder list the house to be constructed with the broker. This is an example of

A tie-in sale

The statute of frauds requires that a contract must be in writing for?

ALL real estate sales contracts

The lender may want to prevent a future purchaser of the property from being able to assume the loan, particularly if the original interest rate is low. For this reason, most lenders include a(n)?

Alienation Clause. Resale Clause. Due-On-Sale Clause. Call Clause. With the note.

A contract is void if it involves

An illegal purpose

Management companies may receive payment for which of the following services?

Any of the above, as agreed upon in the property management agreemen

A property manager usually has all of the following duties EXCEPT

Approval of capital expenditures

Any easement running with the land and benefiting the dominant tenement is known as an?

Appurtenant Easement

"The whole is worth more than the sum of its parts" refers to

Assemblage

An optionee properly notified the optionor that the optionee was exercising the option. The option now is a(n)?

Bilateral Contract

An optionee properly notified the optionor that the optionee was exercising the option. The option now is a(n

Bilateral contrac

Which of the following would NOT be classified as real property?

Chattels real

Any modification or addition to a previously executed will is contained in a separate document called a?

Codicil

The process by which government takes private property for public use is known as

Condemnation

Proper recordation of documents affecting title and interest to real property legally provides

Constructive notice

A conveyance from 'A' to 'B' for life and then to 'C' if 'C' is still alive. 'C' must outlive 'B' in order to obtain the property. 'C' has what interest in the property?

Contingent remainder interest

What is a good acronym for remembering the "bundle of rights" ?

DUPE. Disposition, Use, Possession, and Exclusion

On a closing statement, security deposits and prepaid rents are a

Debit Seller

Real property is given for public use by means of?

Dedication

What zoning ordinances restrict that average maximum number of houses per acre that may be built within a particular subdivision.

Density Zoning

Which of the following statements is true regarding depreciation?

Depreciation is a loss in value from any cause.

What do you NOT have in a Non-Freehold Estate?

Disposition

In order to solve a percentage problem, you have three possible questions: 1. What is the Total Amount if you know the percentage rate and the part of the total amount; 2. What is the Percentage Rate if you know the Total Amount and the Part of the Total Amount; 3. What is the Part of the Total if you know the Percentage Rate For number two (2), what must you do to get the percentage rate

Divide the Part by the Total.

An easement presumed by implication of law to be granted to the purchaser of land which is landlocked by seller's property is an

Easement by necessity

A new runway at the local airport put an existing subdivision under the aircraft- landing pattern. The resultant lowering of property values in the subdivision is known as

Economic or external obsolescence

The legal right of a government to take private property for public use is known as

Eminent domain

What law prohibits a lender from discriminating against a loan applicant because his or her income is from public assistance?

Equal Credit Opportunity Act

At the moment the seller an the buyer enter into a sales contract, a buyer's interest in the real property is known as?

Equitable Title

At the moment the seller and the buyer enter into a sales contract, a buyer's interest in the real property is known as?

Equitable Title

A buyer of a rented property would be protected against a tenant's claim that he did not owe the money if the tenant had signed a(n)?

Estoppel Certificate

Which of the following statements regarding the relationship between ethics and the law is INCORRECT?

Ethics set forth minimum acceptable standards of behavior

Who CREATES mortgage-backed securities using pool of mortgages as collateral; and deals in conventional, FHA, and VA loans?

Fannie Mae

Brothers, John, Tom, and Bill purchased forty-eight (48) acres of land as joint tenants. John suggested that they build warehouse condominiums, but Tom and Bill wanted to develop the land as a recreational vehicle resort. If none of the brothers are willing to sell their share nor give in to the other's, what can they do to resolve their difference?

File a suit for partition

Who provides a secondary market for mortgage loans, primarily conventional loans?

Freddie Mac

Who guarantees mortgage-backed securities using FHA and VA loans as collateral and administers special-assistance programs?

Ginnie Mae

What type of long-term lease is best for a commercial tenant during an inflationary period?

Gross

A month-to-month tenancy on a residential property would MOST LIKELY be on a?

Gross Lease

Tenant pays a fixed rent and some or all of the utility expenses, while the landlord pays all taxes, insurance, repairs, any other utility expenses, and maintenance connected with the property.

Gross Lease

RESPA (Real Estate Settlement Procedures Act) is administered by?

HUD

A handwritten, signed but unwitnessed testamentary document would be a?

Holographic Will

Differed tax exchange or like-for-like property exchange is also called?

IRS 1031 Exchange

A contract for deed is also called?

Installment Land Contract

Is a federal act requiring disclosure of property information to buyers when twenty-five (25) or more unimproved parcels of land in a subdivision are offered for sale

Interstate Land Sales Full Disclosure Act

An INCORRECT statement concerning tenancy in severalty is

It carries the same definition as a tenancy by the entirety

A married couple desire to buy a home and take title so that when one of them dies, the deceased's share will go to the surviving tenant. The form of ownership that would allow for this i

Joint tenancy

Upon death of the life tenant, the property reverts to the grantor or the grantor's heirs.

Reversionary Estate

Gross Rent Multiplier = ?

Sales Price / Gross monthly income

Real property becomes personal property through

Severance

The state wants to condemn and take a strip of land that bisects Farmer Brown's farm. The farm value will decrease far more than the per-acre value offered for the land taken. Farmer Brown should seek?

Severance Damages

'A' purchased a property for $175,000.00. 'A' wishes to sell the property. If the total selling costs will equal 11% of the sales price, how much will the property have to appreciate in value for 'A' to break even?

Study Hint: $175,000 represents 89% of what the property needs to sell for. $175,000 / 0.89 = $196,629; $196,629 − $175,000 = $21,629

The potential gross income of a warehouse is $38,000.00 per year, and the vacancy allowance is 2%. The taxes are $4,000.00 per year, and annual maintenance costs are $4,600.00. Annual reserves for replacement are $2,800.00, debt service is $16,500.00, and depreciation is $4,500.00. If the capitalization rate is 12%, what is the estimated value of the warehouse?

Study Hint: $38,000 X 2% = $760 Annual Vacancy Allowance. Add $760 + 4,000 + 4,600 + 2,800 = $12,160 (Operating expense). $38,000 minus $12,160 = $25,840 NOI divided by 0.12 = $215,333. Remember, debt service and depreciation are not considered in calculations.

A broker associate is listing a home with 2,000 square feet of living area. The owner insists on a listing price that reflects $95 per square foot of living area, plus $54,000 for the building site, and includes a 5% sales commission. The list price will be

Study Hint: 2,000 square feet X $95 = $190,000 + $54,000 = $244,000 $244,000 divided by 95% (0.95) = $256,842.11. Remember, the value of the home and land is 95% of the amount it must sell for to yield a 5% commission. The commission is NOT based on the $244,000.

A buyer agent on a 50/50 split with her brokerage sells a 400 acre farm at $1,500 per acre. The commission schedule calls for 5% on the first $200,000, 3.5% on the next $150,000, and 1.5% on the balance. The real estate company must pay the listing brokerage 15% of the gross commission. The net amount the buyer agent will receive is

Study Hint: 400 acres x $1,500/acre = $600,000 sales price $200,000 x 5% = $10,000+$150k x 3.5% = $5,250 +$250k balance x 1.5% = $3,750 = Total Commission - $19,000 - 15% = $16,150 to Brokerage divided by 2 (50/50 split) = $8,075

In order to accommodate a handicap, a tenant installed handrails in the public hallways leading to the tenant's apartment. As to the installation of the handrails, the

Tenant has acted within the law

A tenant verbally agrees to lease a store for 6 months. A week before she is to take occupancy, the tenant notifies the landlord that she is instead leasing a better location at a lower rent. What are the rights of the parties?

The lease is valid and enforceable by the landlord.

If an owner records her mortgage, and subsequently leases the same property, what happens in the event the mortgage is foreclosed?

The lease terminates

While verbal evidence may be used to prove fraud or misrepresentation, the principle that precludes verbal evidence from being used to modify a written document is known as?

The parol Evidence Rule

In the case of a sublease, which of the following statements is true?

The sublessor is liable for damage caused by the sublessee.

The term "quiet enjoyment" refers to

The tenant's right to use without owner's or other party's interference

A tenant in a commercial building installed a large sign that was anchored to the building with steel rods. Which of the following terms properly describes the sign?

Trade Fixture

All contracts are either express contracts or implied contracts? (True or False)

True

An oral contract for the sale of real property is?

Unenforceable

Promise for performance. It does not need the other person's promise. Example: A salesperson has a _________________ with the employing broker. If you perform I will "pay," but I cannot make you perform

Unilateral Contract

The highest and best use is the use that provides the greatest

Value

Capitalization rates are used for appraising income producing property. When the cap rate is lowered

Values increase

A seller accepts an offer one day after the acceptance deadline. The offeror may choose to treat the late acceptance by the offeree as a valid contract under the principle of?

Waiver

A seller revealed the property has no termites, but upon an inspection of the premises, the buyer learned there were termites. The buyer chose to go through with the contract and close This is an example of

Waiver

Jennifer has a life estate in a home with the provision that when Jennifer dies, the home goes to the original grantor's son. Jennifer can do all of the following EXCEPT

Will the property upon her death

Janet purchased a property several years ago for $250,000 and has decided to sell it. The sales commission and other closing costs will be 20% of the sales price. If Jane sold the home for no profit, what percentage of the sale price does $250,000 represent?

f you are given a property value and it increases by some percentage, the property value equals 100% minus (−) the percentage increase. Example: At property is purchased for $100,000 and increases in value at 30%. The $100,000 is equal to 70% (100% − 70%) of the new value. You have the Part and the Rate, so in order to get the new value (Total), you divide Part ($100,000) by rate (0.7).

Tenant pays all or most of the property expenses, such as hazard insurance, property taxes, and/ or common area maintenance (CAM) charges, in addition to the rent.

Net Lease

What are wills that are entirely oral?

Nuncupative Will

A judicial rule of procedure prohibiting oral evidence from being used to change the terms of a written contract.

Parol Evidence Rule

Exemptions to the Foreign Investment in Real Property Tax Act (FIRPTA) withholding would be

Personal residences under $300,000

Most residential leases provide for all of the following EXCEPT

Provision for rent to be applied to the purchase

Additional charges intended to "punish" above and beyond compensatory damages which are intended to return the parties to their original positions before the contract.

Punitive Damages

Within 3 days of loan application, a lender must provide a borrower an estimate of closing costs as required by

RESPA (Federal)

An appraiser used 80% of the value arrived at by the market comparison approach, 20% of the value arrived at with the cost approach, and 0% of the value by the income approach. This approach to value is known as

Reconciliation

The use of more than one appraisal method with different weights assigned to each method describes

Reconciliation

The right to pay off a debt and reclaim property after defaulting on a mortgage is referred to as

Redemption

Upon death of the life tenant, the property goes to the party NAMED in the deed with the _____________ interest.

Remainder Estate. Remainder Interest.

A "Life Estate" has a what, when the person dies?

Remainder Man

After closing and taking possession of a home, the buyer found that the seller had removed the chandelier. The buyer

Must turn to the inclusions section of the Buy/Sell Contract to determine his or her rights

A valid 1031 Exchange requires that

Like-kind property be exchanged

A valid 1031 Exchange requires that?

Like-kind property be exchanged

Contract creates an agreement in advance that earnest money is forfeited if buyer reneges. This is the SOLE remedy of the seller!

Liquidated Damages

If an executory sales contract stipulates that a specific sum be paid by any part breaching said contract, this sum is called?

Liquidated Damages

If an executory sales contract stipulates that a specific sum be paid by any party breaching said contract, this sum is called?

Liquidated Damages

In the sales comparison approach to appraisal, a comparable property next door has a garage worth $6,000.00. Subject property has no garage. In completing his or her analysis, an appraiser will

Lower the price of the comparable property with the garage

What method of real property description would include a reference to the point of origin or a point of beginning?

Metes and bounds

The lender; receives the mortgage from the borrower in exchange for the loan

Mortgagee

In order to solve a percentage problem, you have three possible questions: 1. What is the Total Amount if you know the percentage rate and the part of the total amount; 2. What is the Percentage Rate if you know the Total Amount and the Part of the Total Amount; 3. What is the Part of the Total if you know the Percentage Rate For number three (3) what must you do to get the Part of the total?

Multiply Total by Rate