Correct Answers

Alabama counties that do not use the older tax assessor and tax collector system for local taxing authorities have a _____ who is in charge of those same functions.

Revenue commissioner.

How much is a mill?

The answer is $0.001. Expressed in dollars, one mill is $0.001. The millage rate is the number of mills of tax charged for every dollar of assessed value. A "mill" is one-thousandth of a dollar. If one-hundredth of a dollar is $0.01, then one-thousandth of a dollar is $0.001 cents, or one-tenth of a penny.

A specific parcel of real estate has a tax appraisal value of $100,000 and is an owner-occupied residence. The tax rate for the county in which the property is located is 25 mills. The tax bill will be

The answer is $250. $100,000 tax appraisal ×10% assessment rate = $10,000. $10,000 × 2.5% millage rate (25 mills is 2.5%) = $250. The assessment rate for owner occupied residences is 10%.

Group homes for mentally disabled persons must be at LEAST _____ feet from each other.

The answer is 1,000. The rule is to prevent high concentrations of group homes in particular areas, because that would dilute the beneficial effects of living in a natural residential environment. This is another example of zoning regulations that affect population densities.

In Alabama, the statutory period for adverse possession is an uninterrupted period of how many years?

The answer is 20. There are three adverse possession time periods in Alabama, depending on the origin of the title problem. They are 20 years, 10 years, or 3 years.

What percentage of a county's property must be reappraised for tax purposes each year?

The answer is 25%. By virtue of a state Department of Revenue regulation issued in 2003, one-fourth of each county's property must be reappraised every year. The regulation is controversial because it was passed without a vote of the electorate. As a result, it is subject to change at any time.

Both commercial contractors and residential homebuilders are licensed by the

The answer is Alabama Building Commission. Both commercial contractors and residential homebuilders are licensed under the Alabama Building Commission.

Who has the authority to investigate claims of home repair fraud and prosecute individuals?

The answer is Alabama attorney general. The Alabama Attorney General Consumer Affairs Division will investigate claims of home repair fraud and, if evidence exists, will prosecute individuals. Further, the Home Builders Licensure Board (HBLB) has a complaint procedure for consumers aggrieved by licensed homebuilders.

In Alabama, property tax assessments for the coming tax year are mailed out in what month of each year?

The answer is April. After a property has been reassessed, the assessor's office notifies the taxpayer of any changes. Reassessments are mailed out (in the year of reassessment) at the beginning of April. This gives taxpayers plenty of time to protest the assessments before taxes become due on October 1.

Residential homebuilders are licensed under the

The answer is Home Builders Licensure Board. Established in 1992, the board has a makeup very similar to that of the Alabama Real Estate Commission, with nine board members appointed by the governor.

Many trade organizations serve the real estate business. The largest is the

The answer is National Association of REALTORS® (NAR). The National Association of REALTORS® (NAR) is the largest real estate trade organization serving the real estate industry.

Alabama's fiscal tax year for property taxes runs

The answer is October 1 through September 30. For property taxes, Alabama's fiscal tax year runs October 1 through September 30, and property taxes are paid in arrears. Taxes become a lien on October 1. Property owners have until December 31 to pay without being delinquent.

Alabama ad valorem taxes become a lien on

The answer is October 1. The ad valorem tax year runs from October 1 of one year to September 30 of the next year. By September 30, the taxes for the prior year are now fully "earned" by the government and become a lien on October 1.

Practical applications of the articles of the REALTORS® Code of Ethics are known as

The answer is Standards of Practice. Practical applications of the articles of the REALTORS® Code of Ethics are known as Standards of Practice.

A building that is remodeled into residential units and no longer used for its original purpose is an example of

The answer is a converted-use property. Commercial storage lofts fitted out to serve as apartments are a fairly common example of converted-use property.

A person who performs a visual survey of a property structure and writes a report for a buyer is

The answer is a home inspector. The home inspector, who prepares an analytical report of a visual inspection of the property's structure and systems, is becoming more important in the real estate transaction as more consumers rely on these reports when buying property.

A real estate professional who performs a visual survey of a property's structure and prepares a report for a purchaser or an owner is

The answer is a home inspector. The home inspector, who prepares an analytical report of a visual inspection of the property's structure and systems, is becoming more important in the real estate transaction as more consumers rely on these reports when buying property.

A maintenance easement might be in favor of

The answer is a homeowners association. When encountered, care should be taken to determine what is considered maintenance, because there is no specific legal definition. It might include only the right to maintain storm water drainage ditches and clear culverts. It might include cutting trees that block another owner's view, cutting shrubberies that seem unruly, or any number of other things

A person or company responsible for maintaining a client's property and maximizing the return on the client's investment is serving as

The answer is a property manager. The basic responsibility of the property manager is to protect the owner's investment and maximize the return on investment.

Under a cooperative form of ownership, an owner

The answer is a shareholder in the corporation that owns the building. Cooperative owners hold shares in the cooperative corporation.

An owner of land is entitled to all land created through an increase in the land resulting from the deposit of soil by the water's action called

The answer is accretion. An owner of land is entitled to all land created through an increase in the land resulting from the deposit of soil by the water's action called accretion.

A homeowner acquired ownership of land that was deposited by a river running through his property by

The answer is accretion. Increases in land adjacent to a body of water resulting from the deposit of soil by the water's action is known as accretion, and the owner is entitled to that land.

A licensed real estate broker may charge a fee for all of the following services EXCEPT

The answer is appraising. While a real estate licensee may be asked to estimate a property's likely sales price, most transactions require a licensed or certified real estate appraiser to develop an opinion of a property's market value.

A licensed real estate broker may charge a fee for providing services involving real estate EXCEPT

The answer is appraising. While a real estate licensee may be asked to estimate a property's likely sales price, most transactions require a licensed or certified real estate appraiser to develop an opinion of a property's market value.

Real estate brokers and real estate salespeople may NOT act as attorneys unless they

The answer is are also licensed attorneys representing clients in that capacity. Real estate brokers and real estate salespeople may not act as attorneys unless they are also licensed attorneys representing clients in that capacity.

A licensed real estate professional acting as a point of contact between two or more people in negotiating the sale, rental, or purchase of a property is known as a(n)

The answer is broker. A broker is a person licensed to conduct real estate activities for others and is able to charge a fee for those activities.

Local factors affecting the number of properties that are marketed include

The answer is building codes. In a specific market area, local governments can influence the supply of real estate by use of land-use controls, building codes, and zoning ordinances. Nationally, the supply of real estate is affected by the discount rate set by the Federal Reserve Board (the Fed), as well as the actions of the Federal Housing Administration (FHA) and the Government National Mortgage Association (Ginnie Mae).

The market for each type of real property can be divided into the three main functions of

The answer is buying, selling, and leasing. The market for each type of real property can be divided into the three main functions of buying, selling, and leasing.

Property taxes are typically prorated at closing between the seller and the buyer. This is necessary because property taxes

The answer is can only be paid at certain times of the year. Alabama taxing bodies do not send out partial bills, only the total for the year. The closing agent prorates the taxes between the seller and the buyer. When the property owner sells, taxes are divided into current taxes and prorated taxes. Normally, the selling taxpayer pays the taxes that are due and prorates to the buyer those that are due but not payable.

Special-purpose real estate includes

The answer is churches, schools, cemeteries, and government-held lands. Special-purpose real estate includes churches, schools, cemeteries, and government-held lands.

Many organizations seek to ensure a high standard of conduct in their members by developing and requiring adherence to a

The answer is code of ethics. One way that an organization can work to ensure a high standard of conduct is by adopting and enforcing a code of ethics.

All of the following affect how quickly the forces of supply and demand work EXCEPT

The answer is degree of standardization of the property's price. Uniqueness and immobility of product and parties to the transaction, not the standardization of the product price, govern the way the market reacts to the pressures of supply and demand.

Detailed information about the age, education, behavior, and other characteristics of members of a population group is called

The answer is demographics. Information about members of a population group is called demographics. These factors are important because they contribute to the amount and type of housing needed.

Information including age, education, behavior, and other characteristics of members in a certain population is

The answer is demographics. Information about members of a population group is called demographics. These factors are important because they contribute to the amount and type of housing needed.

All of the following are categories of the uses of real property EXCEPT

The answer is developmental. Residential, agricultural, and industrial are all classifications of real estate. Development can occur with any of these types.

Which of the following is personal property?

The answer is emblements. Annually cultivated crops such as fruit, vegetables, and grain are known as emblements and are generally considered personal property. Vineyards and orchards generally yield perennial crops and are considered real property.

The BEST way for owners to determine the market value of their home is to

The answer is get an appraisal. The key word here is best. The most accurate way to determine value is to have an appraisal. Only if an appraisal is not available would a CMA be a good answer.

Management and maintenance of condominium building exteriors and common areas is provided by the

The answer is governing association. Management and maintenance of the exterior and common areas of a condominium building is provided by the governing association, which typically uses the services of a management company, as well as outside contractors.

Salespersons representing spring and summer purchasers of residential properties should advise them that

The answer is homestead exemptions must be claimed by July 1. The title company is not allowed to assess property in the new owner's name and also cannot claim exemptions for the new owner. Owners purchasing property in late spring and early summer should be advised to make haste in assessing the property and claiming their exemptions; otherwise, the October 1 tax bill could be much higher than anticipated.

A major manufacturer of automobiles announces that it will relocate one of its factories, along with 2,000 employees, to a small town. What effect will this announcement MOST likely have on the small town's housing market?

The answer is houses will likely become more expensive. The expected arrival of 2,000 employees and their families in a small town will cause sellers to raise their prices in expectation of the greatly increased demand and the long time it takes to build new housing. It becomes a sellers' market, and the many buyers will have to compete for the few houses available.

The development of one parcel of land can have a significant impact on its value, as well as the value of nearby parcels, because of the economic characteristic that considers

The answer is improvements to the land. An improvement on one parcel of land can affect the land's value and use, as well as that of neighboring tracts and whole communities.

Alabama's property taxes are paid

The answer is in arrears. Taxes become a lien on October 1. Property owners have until December 31 of the year to pay without being delinquent.

To initiate a mechanic's lien, where does the contractor or subcontractor file the lien?

The answer is in the probate office of the county where the property is located. To enforce a mechanic's lien, the general contractor must file an affidavit of lien with the probate office of county where the property is located within six months of the last day of work.

If demand remains steady when the supply of a commodity decreases, the price will

The answer is increase. Under the laws of supply and demand, if supply of a commodity decreases with demand remaining the same or increasing, prices go up.

The supply of homes on the market decreases, but demand remains steady. What will happen to the price of homes?

The answer is increase. Under the laws of supply and demand, if supply of a commodity decreases with demand remaining the same or increasing, prices go up.

A real estate salesperson

The answer is is a licensee employed by or associated with a broker. A real estate salesperson, who may also be called a sales associate or associate licensee, is a licensee employed by or associated with a broker and may not provide any service that requires a real estate license without also having the broker affiliation.

The National Association of REALTORS® (NAR)

The answer is is the largest real estate trade association in the country. The National Association of REALTORS® (NAR) is the largest real estate trade association in the country.

Which of the following statements is TRUE about the real estate industry?

The answer is it includes many specialized areas of business. Appraisal, property management, financing, subdivision and development, home inspection, counseling, and education are all separate businesses within the large and complex real estate field. Prudent real estate professionals will have a basic knowledge of these specialized areas.

The National Association of REALTORS® has adopted a code of ethics for

The answer is its members. The National Association of REALTORS® adopted a code of ethics for its members in 1913.

Properties are sold for unpaid taxes after the

The answer is judge of probate holds a hearing for the taxpayers in default and decrees that a tax sale be held. Property taxes are considered delinquent on January 1. The county tax collector must prepare a list of all delinquent taxpayers and the amount of taxes due from each. The list is turned over to the judge of probate. After the judge of probate holds a hearing for the taxpayers in default, the court will order a tax sale.

A man pays a homeowner a fee in order to park in the homeowner's driveway while attending a football game. In this situation, the man has a

The answer is license. A license is considered a privilege, not a right.

What term describes a person's interest in a homeowner's yard in which a fee was paid to park in the yard all day to attend an event at a state fair?

The answer is license. License is considered a privilege, not a right.

The phrase "revocable permission" refers to

The answer is licenses. The word license has different meanings. In real estate usage, it can mean permission. For example, someone can allow another to go hunting or fishing on his property or to enter the property to pick apples or get water from a spring. A license is personal privilege, and as such, it is considered to be revocable permission rather than a right that transfers with ownership.

Who makes zoning laws?

The answer is local government. Zoning commissions make recommendations to local government; they do not make the laws.

A development that combines office space, stores, and residential units in a single, vertical community is called a

The answer is mixed-use development. A mixed-use development (MUD) combines commercial and residential uses in a single high-rise building.

A highrise development that includes office space, stores, theaters, and apartment units is an example of

The answer is mixed-use development. A mixed-use development (MUD) is a small community built vertically in one building.

Tax rates are determined by the

The answer is monetary needs of the taxing body. The first step in determining the amount of property taxes is to determine the monetary needs of the taxing body. Revenues received from other sources of taxation are determined and subtracted from the total money needs of the taxing body. The balance needed is obtained from the property owners.

All of the following would affect demand EXCEPT

The answer is monetary policy. Government monetary policies affect the supply of land available for development. Population, demographics, and wage levels affect demand for real estate.

There are three parcels of property, all in a row. Parcel A is owned by a woman, parcel B is owned by a man, and parcel C is owned by the woman's daughter. The man gives the woman oral permission to take a shortcut across his property to visit the daughter whenever she wants. After two years, the woman and the man have a dispute, and the man withdraws the permission. Does the woman have any rights?

The answer is no, because the agreement was verbal. Easement rights must be in writing or must arise by prescription, in order to be enforceable. Two years is too short a time for prescriptive rights.

Commercial real estate includes

The answer is office space, shopping centers, and stores, as well as theaters, hotels, and parking facilities. Warehouses, factories, and land in industrial districts are considered industrial properties.

A mechanic's lien is filed against

The answer is only the real property for which the work was performed. The property must be described in the lien, so third parties will know what property is encumbered by the lien and what property is not encumbered.

As a result of shoddy work performed by a contractor, a consumer files a complaint with the licensing body for residential homebuilders. The licensing body finds the complaint is valid. Which punishment is NOT allowed?

The answer is order the builder to make repairs. Discipline can include reprimands, fines, license suspension or revocation, and/or required additional education. The board cannot order a licensee to make any repairs, order the homeowner to pay the licensee for work performed, or order the homeowner to make any repairs. Those matters are left to the civil courts.

In Alabama, which of the following may qualify for a property tax reduction?

The answer is owners who qualify for the homestead exemption. In Alabama, taxpayers who claim the purchased property as their personal residence are eligible for a lower assessment rate called the homestead exemption.

Significant repair work is performed on a home, and it is then placed on the market and sold four months later. The licensee representing a buyer should discuss what matters with the buyer?

The answer is possible mechanics' and materialmen's liens. Such liens may be filed anytime up to six months (for a general contractor) or four months (for subcontractors) after the last work performed. They could be filed after closing but relate back to the time of the work. As a result, they take priority over the buyer's mortgage and put the buyer's property in peril of foreclosure by the lienholder. For this reason, recent repairs should cause additional due diligence to make sure all bills were paid.

An owner who failed to survey her property built a detached garage that encroached four feet onto a neighboring property. If the action was open, notorious, and without permission for a statutory period of 10 years, what kind of easement did the owner create for herself?

The answer is prescriptive easement. Prescriptive easements are created without permission and are notorious, hostile, open, and distinct, and they must be used without challenge for more than 10 years in Alabama.

When demand for a commodity decreases and supply remains the same,

The answer is price tends to fall. Under the concept of supply and demand, if demand decreases and supply remains the same, producers need to attract more customers, and so prices fall.

The property manager's basic responsibility is to

The answer is protect the owner's investment and maximize return. The property manager accepts the responsibility under the management agreement to protect the property owner's investment.

The MOST common real estate transaction is the

The answer is purchase of a home. First-time buyers, repeat buyers, and investors combine to make home sales the most frequently occurring real estate transactions.

Alabama law grants communities the legal authority to regulate and restrict development for all of the following reasons EXCEPT

The answer is raise tax revenue for the community. Alabama law grants cities the authority to regulate and restrict development in order to promote the health, safety, or general welfare of the community.

A real estate firm or an individual real estate professional

The answer is rarely performs all the services or handles all classes of property. Although it is possible for a single real estate firm or an individual real estate professional to perform all the services and handle all classes of property discussed here (unless restricted by a state's license law), this is rarely done, except in small towns.

Home inspection is a profession that combines interest in

The answer is real estate and construction skills. Home inspection is a profession that allows the practitioner the chance to combine an interest in real estate with professional skill in construction.

A professional opinion of a property's market value, based on established methods and using trained judgment, is performed by a

The answer is real estate appraiser. Although real estate professionals, counselors, and inspectors also look closely at a specific property, only an appraiser is qualified to produce a formal opinion of value—an appraisal.

A real estate professional who helps clients choose among the various alternatives involved in purchasing, using, or investing in property is a

The answer is real estate counselor. A real estate counselor advises and guides investors and other buyers.

A real estate professional who has several years of experience in the industry decided to retire from actively marketing properties. Now this person helps clients choose among the various alternatives involved in purchasing, using, or investing in property. What is this person's profession?

The answer is real estate counselor. Advising and guiding investors and other buyers is counseling them. Many states require a person to have a real estate license to serve as a real estate advisor/counselor for a fee because it involves skills and duties closely related to real estate brokerage.

When the supply of a commodity decreases while demand remains the same, price tends to

The answer is rise. Under the laws of supply and demand, if supply of a commodity decreases with demand remaining the same or increasing, prices go up.

Imposition of additional property taxes for a time period of up to three years before a change of use is called a _____ tax.

The answer is rollback. Taxes will often change when the use of the property changes, such as from agricultural to commercial. In this situation, the tax authority is allowed to reappraise the property for the prior three years, recalculate the taxes for that time period, and then bill all the taxes on the next October 1. This concept is called rollback taxes. Licensees should encourage buyers to consult with the local taxing authority office about tax rates, rollback taxes, and exemptions.

A general contractor must file an affidavit of lien with the probate office of the county where the property is located within how much time after the work is completed?

The answer is six months. A subcontractor or materialman must file an affidavit of lien within four months of the subcontractor's completion of work or the materialman's furnishing of materials. Notice must be given to the owner before filing a mechanic's lien.

Schools would be considered part of which real estate classification?

The answer is special-purpose. Special-purpose properties include schools, churches, cemeteries, and municipal service buildings.

Property management, appraisal, financing, and development are all examples of

The answer is specializations within the real estate industry. All are specializations in the field of real estate, and every real estate professional must have a basic knowledge of these specialties.

The moral principles of a profession include

The answer is standards for integrity as well as a code of conduct. The moral principles of a profession include standards for integrity and competence in dealing with consumers and a code of conduct for relations within the industry among its professionals.

The National Association of REALTORS® is composed of

The answer is state, regional, and local associations. Many trade organizations serve the real estate business. The largest is the National Association of REALTORS® (NAR), whose website is www.realtor.org. NAR is composed of state, regional, and local associations.

The concept of successive owners adding their possessory periods together to add up to the number of years required for adverse possession is called

The answer is tacking. Successive owners who engage in acts of adverse possession are allowed to "tack" their time periods together until the required number of years has been reached. The only limitation is that the possession be continuous. There cannot be gaps in possession.

The organization which arose out of the early days of the civil rights movement as an association of racial minority real estate brokers in response to the conditions and abuses that eventually gave rise to fair housing laws is

The answer is the National Association of Real Estate Brokers (NAREB). NAREB arose out of the early days of the civil rights movement as an association of racial minority real estate brokers in response to the conditions and abuses that eventually gave rise to fair housing laws.

An Alabama property owner has not paid his property taxes, and his house was sold at a tax sale. How long does the property owner have to redeem his property?

The answer is three years. The delinquent taxpayer has the right to redeem the property anytime during the three years from the date of tax sale. The taxpayer must pay all past-due taxes, ensuing years' taxes, interest on past-due taxes, and any cost of conducting the tax sale.

A counter, stools, and other restaurant equipment that are attached to real property would be considered

The answer is trade fixtures. Equipment installed by a tenant and used for business purposes is an exception to the rule of fixtures. The equipment may be removed by the tenant and is considered personal property (trade fixtures).

Mixed-use real estate is property that allows for

The answer is two uses—commercial and residential—in the same building. Mixed-use real estate is property that allows for two different uses—commercial and residential—in the same building.

Which factor is MOST likely to influence demand for real estate?

The answer is wage levels and employment opportunities. When wage levels and job expansion are increasing, workers are more likely to buy real estate; when job opportunities are scarce or wage levels low, demand for real estate usually drops.

Industrial real estate includes

The answer is warehouses, factories, land in industrial districts, and power plants. Industrial real estate includes warehouses, factories, land in industrial districts, and power plants.

Local government approval for subdivisions might be necessary

The answer is whenever larger parcels of land are divided into smaller parcels. If property is within the city limits of local government, subdivisions laws often provide that any division of any parcel into two or more smaller parcels requires subdivision approval.

Do licensees in Alabama have lien rights for unpaid fees and commissions?

The answer is yes, but only for commercial transactions. Residential real estate licensees are not entitled to file a mechanic's lien for an unpaid commission. Licensees who assist with the purchase or sale of commercial property are given lien rights for their commission, but it is not in the part of the code that deals with mechanics' and materialmen's liens.

A homeowner hires a general contractor to make repairs on her home. She pays the general contractor in full, but the general contractor does not pay the plumbing subcontractor. May the plumbing subcontractor file a lien against the property?

The answer is yes. General contractors (anyone who contracts directly with the owner), subcontractors, and materialmen may file liens. Subcontractors and materialmen are defined as anyone who furnishes labor, materials, or services for improvements but deal directly with the general contractor rather than the owner. It is irrelevant whether the general contractor was paid in full. This comes as a terrible surprise to property owners, who often find they have to pay twice for the same work—once to the general contractor and then again to the subcontractor who actually did the work but was not paid.

The regulation of structures and uses of property within designated areas is called

The answer is zoning. Zoning is the regulation of structures and uses of property within designated areas or zones. While building codes might regulate structures, they do not regulate the uses to which those structures may be put.

Someone looking for a tax-advantaged investment similar to a mutual fund would probably invest in a

A Real Estate Investment Trust is similar to a mutual fund. Both are marketed by stock brokers rather than by real estate agents and allow the investor to own a portion of a big real estate property.

Alabama is characterized as

A Title Theory State.

A legally enforceable agreement under which both parties promise to do something for each other is called

A bilateral contract is a legally enforceable agreement under which two parties exchange promises to do something for each other.

A developer who wishes to finance a subdivision and provide for a release from the lien of individual lots or parcels as they are sold will obtain a(n)

A blanket loan usually includes a provision known as a partial release clause, which permits the developer/borrower to obtain the release of any one lot or parcel from the blanket lien by repaying a certain amount of the loan.

Which of the following is considered dual agency?

A broker acting for both parties in the same transaction. In dual agency, the agent represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of both parties to a transaction, such as the buyer and the seller.

All of the following are prohibited under the antitrust laws EXCEPT

A broker setting a company commission schedule. A broker may independently determine commission rates or fees for the firm only.

A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. Then the buyer signs a note and a mortgage. In this example, the buyer is called the

A buyer who signs a mortgage—the document to be given to the lender—is a mortgagor. The buyer is also the maker (obligor) on the note.

All of the following would be considered evidence of marketable title EXCEPT

A certificate of title by a real estate broker. A certificate of title may be prepared by a title company, licensed abstractor, or attorney, but not a real estate broker.

A management agreement is to a property manager as

A client representation agreement is to a broker. The management contract defines the relationship between the parties. This agreement creates an agency relationship between the owner and the property manager as a client representation agreement may between the seller and the broker.

An abstract, or title policy, will tell the state of the title and whether any title defects have been found.

A cloud on title can be created by a misspelling of a grantor's name, an incorrect date, or a slight error in the legal description.

Which of the following would create a cloud on title?

A cloud on title can be created by a misspelling of a grantor's name, an incorrect date, or a slight error in the legal description.

A landowner who wants to use property in a manner that is prohibited by a local zoning ordinance but which would benefit the community can apply for which of the following?

A conditional use is based on a benefit to the community despite a deviation from zoning.

A contract for the sale of real estate that does not state the consideration and provides no basis on which the consideration could be determined is considered

A contract is void when a consideration is not stated because consideration is an essential element of a contract.

What is the status of a contract for the sale of real estate that does NOT state the consideration and provides no basis on which the consideration could be determined?

A contract is void when a consideration is not stated because consideration is an essential element of a contract.

A contract that has no legal force or effect is

A contract that is void was never a legal contract because it lacked some or all of the essential elements of a contract.

Which lien affects all real and personal property of a debtor?

A general lien attaches to all of a debtor's property as opposed to a specific lien, which affects only a specific property.

A lien that arises as a result of a judgment is which type of lien?

A general lien is a claim against all the personal and real property of the debtor. A general lien attaches to all real and personal property until full payment is made.

Rights to the property above the earth's surface are

Called air rights. Rights to the property above the earth's surface are called air rights.

Depending on the type of trust and its purpose, the trustor, trustee, and beneficiary

Can all be either people or legal entities. Depending on the type of trust and its purpose, the trustor, trustee, and beneficiary can all be natural persons or legal entities.

The services performed by a licensed real estate professional

Can be customized to the needs of the client or customer. Some states require that licensees offer a minimum level of service, but most allow the client and customer to decide on the specific level of services that will be provided.

In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called

Closing escrow. In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called closing escrow.

Once a contract has been agreed upon and signed by all parties

Changes must be addressed through the use of an amendment. Once the original contract has been ratified (signed by all parties), any changes need to be addressed in an amendment.

A lease would be terminated by which of the following?

Expiration of the term in a lease for years. A tenancy (estate) for years is a leasehold estate that continues for a definite period with specific beginning and ending dates.

An agreement that is specific in its terms and conditions is considered a(n)

Express agreement. In an express agency agreement, the parties formally express their intention to establish an agency and state its terms and conditions.

The closing statement used for MOST residential closings is the

Closing Disclosure. The closing statement used for most residential closings is the Closing Disclosure prepared by the CFPB.

One of the distinguishing characteristics of a land trust is that

Public records usually do not name the beneficiary. One of the distinguishing characteristics of a land trust is that the public records usually do not name the beneficiary.

Properties exempt from real estate taxes may be owned by all of the following EXCEPT

Publicly traded businesses. Exempt properties typically are owned by a government or other public entity, or a religious, educational, or charitable organization.

A buyer makes an offer to purchase certain property listed with a real estate professional and leaves an escrow deposit with the real estate professional to show good faith. The real estate professional should

Put the deposit in an account, as provided by state law. Most states require real estate professionals to place earnest money and other funds held in trust in a specified account used only for such money. Real estate professionals who mix the company's money with deposits and trust funds are guilty of commingling funds.

To be valid, a deed must include all of the following EXCEPT

Tax is not included in the deed. Typically. the tax is disclosed through the county where the property is located.

In a single agency

The agent has only one client. In single agency, the agent represents only one party to a transaction. A brokerage that practices single agency can represent both seller and buyer (or landlord and tenant) in separate transactions.

By executing a listing agreement with a seller, a real estate broker becomes

The agent of the seller. As agent, the broker represents the seller with whom the broker executed the listing agreement.

Sales associate A and sales associate B work for the same firm. They agree to divide their region into an eastern half and a western half; sales associate A will handle listings in the east, and sales associate B will handle listings in the west. Which statement is TRUE?

The agreement does not violate antitrust laws. Because both sales associates are in the same firm, their agreement is not an intercompany agreement to allocate markets; it is merely fixing responsibility within one company and is quite proper and not subject to antitrust law.

Which of the following is TRUE about a buyer brokerage agreement in Alabama?

The agreement is terminated at expiration of the term or at fulfillment of the purpose.

Which characteristic of a fixed-rate home loan that is amortized according to the original payment schedule is TRUE?

The amount of interest to be paid is predetermined. The monthly principal plus interest payment will remain constant throughout the term of the loan. The interest rate in a fixed-rate loan does not vary. The loan will probably be sold on the secondary market.

A prospective homebuyer who is black inquires about the availability of a home in a predominantly white residential neighborhood for which the prospective buyer has been financially qualified. What should the broker say to this prospect?

The answer is "I'll be pleased to show you houses in that area." The broker must not channel homeseekers toward or away from particular neighborhoods based on race, which would be the illegal practice of steering.

A developer wishes to drain a 20-acre swamp in order to create a subdivision of garden homes, with a fishing and boating lake in the center. What agency might cause delays if NOT consulted early in the process?

U.S. Army Corps of Engineers

Anyone who feels that their rights under fair housing laws have been violated may file a complaint with the

U.S. Department of Housing and Urban Development

The set of standards that governs appraisers is called

USPAP (Uniform Standards of Professional Appraisal Practice) is the set of governing standards followed by appraisers.

Which situation would result in the highest degree of leverage?

Using Borrowed Funds Entirely. Leveraging means using other people's money to own property. The more funds one is able to borrow to own property, the higher degree of leverage. If an investor could borrow 100% of the purchase price, this would be the highest degree of leverage.

A buyer uses a 1031 tax-deferred exchange to buy a property. The buyer is MOST likely

Using The Exchange To Defer Payment of Capital Gains Taxes On An Investment Property. Investors may use 1031 tax-deferred exchanges to avoid paying capital gains at closing on investment properties. The investor will still owe the taxes in the future. Owners of a primary home may avoid paying any capital gains taxes if they live in the property two out of five years.

Charging more interest than is legally allowed is called

Usury is charging interest in excess of the maximum rate allowed by law.

Net listing agreement

What type of agreement specifies a set amount that will be received by the owner, with the excess over that price to be received by the broker as commission?

If a seller returns a buyer's offer by signing it but making a change in one of the terms, there is a

counteroffer that the buyer is free to accept or reject. Any change by the seller to the terms proposed by the buyer creates a counteroffer.

The grantor of property transferred by deed promises to compensate the grantee for any future loss sustained by a defect in the title to the property by the

covenant of warranty forever. With this covenant, the grantor promises to compensate the grantee for any loss sustained by the grantee if the title to the property fails at any time in the future.

The property management agreement

creates the authority of the property manager. Property management agreements create the authority of the property manager to act for the owner.

How would the buyer's earnest money deposit be entered on a closing statement in a typical real estate transaction?

credit to buyer only. Earnest money is a credit to the buyer (borrower). No notation is made for the seller.

In states that have adopted it, the Uniform Vendor and Purchaser Risk Act will come into play if

damage occurs to the property between the time a contract is entered into and the buyer takes possession.

A second mortgage can be distinguished from a first mortgage by the

date the mortgage was recorded. Priority of rights is determined by the date of public notice. The most accepted form of public notice is document recordation.

A real estate professional filed a complaint with the Real Estate Commission alleging that a seller failed to pay a commission she owed him. The AREC will

decline involvement in a dispute over commissions or fees between licensees.

Proof of ownership is

is evidence that title is marketable. The grantee needs assurance that ownership is actually being acquired and that the title is marketable, before accepting a deed.

A property manager is expected to

maintain the value of and generate income from the property. The job of a property manager is to maintain values and generate income based on the requirements of the property owner, as outlined in the management agreement.

The Alabama Fair Housing Law protects all of the following classes EXCEPT

marital status.

Earnest money

may become the seller's if the buyer defaults. Earnest money is not consideration. Therefore, it is not an essential element of a contract nor is it required; it is a show of good faith on the part of the buyer and liquidated damages for the seller, if the buyer defaults.

A type of foreclosure in which the note has a power-of-sale clause is

nonjudicial foreclosure. When the mortgage has a power-of-sale clause, it allows the lender to proceed with the foreclosure without the courts taking action.

An inactive Alabama licensee may

not engage in conducting real estate transactions.

The borrower's personal promise is known as

note. The borrower's personal promise to repay a debt according to the agreed terms is known as the note, promissory note, or financing instrument.

Which of the following is NOT a form of co-ownership?

ownership in severalty. When just one individual owns property, the form of ownership is known as ownership in severalty.

Capped landfills have been used as

parks and golf courses.

Establishing relationships with community and fair housing groups

to discuss common concerns and find solutions to problems is a worthwhile activity for the real estate professional. Establishing relationships with community and fair housing groups to discuss common concerns and find solutions to problems is a worthwhile activity for the real estate professional.

Under the Fair Housing Act, which action is legally permitted?

refusing to make a mortgage loan to a member of a protected class because of a poor credit history. Bad credit can cause anyone to be rejected, even those who are members of protected classes.

Disadvantages of investment in real estate include all the following EXCEPT

relatively low degree of risk.

Zoning ordinances should

remain flexible to meet changing needs

What is the difference between a trust account and an escrow account?

there is no difference are used interchangeably.

Salespersons who are scrupulously honest and ethical and follow all rules and regulations of the Alabama Real Estate Commission should nevertheless understand the various Commission punishments because

they might suffer adverse consequences as a result of a qualifying broker's punishment.

What do urea-formaldehyde foam insulation (UFFI), lead-based paint, and asbestos have in common?

they were all used at one time in residential construction

Under Alabama rules, how long must real estate brokers keep records of funds deposited and withdrawn from their trust account?

three years.

Cash flow is a term that refers to the

total amount of income left after all expenses have been paid

A type of ownership with stock in a corporation and a lease on an apartment is called

a co-op

Applicants for an Alabama real estate license must successfully complete

a criminal background check.

At closing, the new loan proceeds would be

are always a credit to the buyer.

Who is entitled to a reverse mortgage?

are available to homeowners age 62 or older.

A salesperson obtains a broker's license after the appropriate experience, education, and testing. At the time of issuance of the broker's license, how much is the Alabama Real Estate Recovery Fund fee?

$ 0

A 10-acre parcel was sold for $3.50 per square foot. What was the total selling price for the parcel?

$1,524,600. An acre consists of 43,560 square feet. 43,560 × 10 = 435,600 total square feet. 435,600 × 3.50 = $1,524,600.

A parcel of land is two acres. It sells for $1.18 per square foot. What is the total selling price for the parcel?

$102,801.60. An acre consists of 43,560 square feet. 43,560 × 2 = 87,120 total square feet. 87,120 × $1.18 = $102,801.60.

A real estate company has adopted a 100% commission plan. The monthly desk rent required of sales associates is $1,500, payable on the last day of the month. In August, a sales associate closed a transaction that earned a commission of $11,370 and a second transaction that earned a commission of $6,875. The sales associate's additional expenses for the month were $2,170. How much of the total monthly income did the sales associate keep?

$14,575. The associate's earnings: $189,500 × 6% = $11,370; $125,000 × 5.5% = $6,875; $11,370 + $6,875 = $18,245 total earnings. Her expenses: $1,500 desk fee + $2,170 other = $3,670 total expenses. Net earnings: $18,245 total earnings - $3,670 total expenses = $14,575 net earnings.

If a farm described as "the NW¼ of the SE¼ of Section 10, Township 2 North, Range 3 West of the 6th. P.M." sold for $4,500 an acre, what was the total sales price?

$180,000. Disregard all elements of the description except those showing area. It is a quarter of a quarter of a section, or 1/16 of 640, or 40 acres. When sold, each acre brought $4,500, so the gross selling price is calculated as follows: 40 acres × $4,500 = $180,000.

A broker sold a property that was owned by a bank that had acquired it through foreclosure, and the broker received a 6.5% commission. The broker gave the listing sales associate $3,575, which was 30% of the firm's commission. What was the selling price of the property?

$183,333. Two steps are involved: (1) Find the firm's full commission. (2) Find the selling price using the full commission and the rate. (1) $3,575 amount to salesperson = 30% × Full commission; $3,575 amount to salesperson ÷ 30% = $11,916.67 full commission (rounded to the nearest cent). (2) $11,916.67 full commission ÷ 6.5% brokerage rate = $183,333.38 sales price (rounded to the nearest cent). The closest answer is $183,333.

Appraisers generally are limited in the approximate value of properties they are allowed to appraise. Those value "break point" limitations are

$250,000 and $1 million.

A 640-acre farm is being sold for $6,500 per acre. What is the purchase price?

$4,160,000. 640 acres multiplied by $6,500 per acre is $4,160,000.

A buyer purchased a half-acre parcel for $2.15 per square foot. What was the selling price of the parcel?

$46,827. An acre consists of 43,560 square feet; therefore, a half-acre has 21,780 square feet. If each square foot sells for $2.15, 21,780 sq ft × $2.15 per sq ft = $46,827.

What is the limit of compensation from the Alabama Real Estate Recovery Fund against any one person?

$50,000

The current market value of a property is $35,000. For tax purposes, it is assessed at 40% of market value. The tax rate is $4 per $100 of assessed value. What is the amount of the tax due?

$560. $35,000 (market value) × 40% (0.40) = $14,000 (assessed value); $14,000 ÷ 100 = 140; and 140 × $4 tax rate = $560 tax due.

A man buys 4.5 acres of land for $78,400. An adjoining owner wants to purchase a strip of this land measuring 150 feet by 100 feet. What should this strip cost the adjoining owner if the owner sells it for the same price per square foot he originally paid for it?

$6,000. Price divided by area (in square feet) gives cost per square foot. The area is 4.5 times the size of one acre, or 4.5 × 43,560 sq ft = 196,020 sq ft. Then, $78,400 divided by 196,020 sq ft = $0.3996 (essentially, $0.40) per square foot. Determining the purchase price of a 100-by-150-foot lot at the same cost per square foot requires finding the area of the lot: 100 × 150 = 15,000 sq ft. Multiply this area by $0.40: 15,000 sq ft × $0.40 = $6,000.

What is the cost of one acre of land at $2.25 per square foot?

$98,010. An acre of land has 43,560 square feet, so 43,560 multiplied by $2.25 per square foot is $98,010.

The federal underground storage tanks (UST) program is regulated by the

The federal UST program is regulated by the Environmental Protection Agency.

What document is available to the mortgagor when the mortgage debt is completely repaid?

. A document that indicates the mortgage has been fully paid off is a satisfaction of mortgage, sometime called a satisfaction piece.

In mortgage lending, a borrower is required to pledge specific real property as security (collateral) for the loan in a practice called

. In mortgage lending, a borrower is required to pledge specific real property as security (collateral) for the loan, a practice called hypothecation.

Federal regulation of numerous environmental hazards is carried out by the

. The Environmental Protection Agency (EPA) i

The purpose of building permits is to

. Through the permit requirement, municipal officials are made aware of new construction and alterations and can verify Compliance With Building Codes.

How many members of the Alabama Real Estate Commission are required to be African-American?

1

In order to receive legal recognition in the judicial system, Alabama code requires all lease agreements be in writing if the agreement is for more than

1 Year

What is the number of the section designated as the school section in any township?

16. Section 16 is one of the centrally located sections in the standard township and is designated as the school section.

A chain is 66 feet long or four rods; a rod is

16.5 feet. A chain is 66 feet long and the same length as four rods, each being 16.5 feet long.

Under the Alabama Home Inspectors Registration Act, how much insurance must home inspectors obtain for injury or damage, including death, to more than one person?

100,000

A buyer acquired a property with three acres. How many square feet does the property have?

130,680. Because one acre contains 43,560 square feet, three acres will contain 3 × 43,560 sq. ft. = 130,680 sq. ft.

How many days in advance of a scheduled hearing must the Commission send a written notice to the licensee?

15

In Alabama, all active status license brokers and salespeople applying for renewal of their license must successfully complete how much continuing education?

15 hours every two years.

In any township, the number of the school section is

16. Historically, the school was usually located in Section 16 of the rectangular (government) survey system. Section 16 is still called the "school section," although the actual school may be located elsewhere.

In any township, what is the number of the section designated as the school section?

16. Section 16 is one of the centrally located sections in the standard township and is designated as the school section.

In MOST states, the age at which a person is considered to have the capacity to enter into a contract is

18. In most states, 18 is the age at which a person is considered to have the legal capacity to enter into a contract. A contract entered into with a minor (someone under the age of contractual capacity) is voidable.

Lead-based disclosures must be given to potential buyers and tenants in residential property built before

1978

If premises of 2,500 square feet are to be leased at a cost of $3.50 per square foot per month, what will be the annual rental cost of the space?

2,500 × $3.50 = $8,750 per month and $8,750 × 12 = $105,000 per year

A parcel of land is 400 feet by 640 feet. The parcel is cut in half diagonally by a stream. How many acres are in each half of the parcel?

2.94. The parcel is 256,000 square feet: 400' ×640' = 256,000 sq ft. Half of it is 128,000 square feet. Each acre requires 43,560 square feet. Therefore: 128,000 sq ft ÷ 43,560 sq ft per acre = 2.938 acres (rounded to three decimal places). The nearest answer is 2.94.

Alabama leases for a term greater than _____ years must be acknowledged the same as deeds and must be recorded to be enforceable, otherwise they will be limited to the time period indicated.

20 Years

A salesperson is eligible to take the broker's exam only if _____ months of the preceding _____ months have been spent in the active practice of real estate.

24, 36.

The Interstate Land Sales Full Disclosure Act does NOT apply to subdivisions consisting of fewer than

25 lots or to those in which each lot is 20 acres or more.

For residential property, the statutory depreciation period for federal tax purposes is

27.5 years for residential real estate. The statutory depreciation period for federal tax purposes is 39 years for commercial real estate.

In the case of most consumer credit transactions covered by Regulation Z, except for owner-occupied purchase-money or first deed of trust or mortgage loans, the borrower may rescind (cancel) the transaction by notifying the lender within

3 business days. In the case of most consumer credit transactions covered by Regulation Z, except for owner-occupied purchase money or first deed of trust or mortgage loans, the borrower may rescind (cancel) the transaction by notifying the lender within three business days.

Within how many days of the final hearing must the Real Estate Commission issue a written report?

30

What is the grace period after a license revocation or suspension?

30 Days

The accused licensee or any other person has the right to file for an application for a rehearing within _____ after an adverse decision by the AREC.

30 days

To qualify as a real estate investment trust, what percentage of the trust's income must come from real estate?

75%. To qualify as a REIT, at least 75% of the trust's income must come from real estate. Investors purchase certificates in the trust, which invests in real estate or mortgages or both, with profits distributed to investors.

If a temporary license is issued on an active status with a qualifying broker, the licensee must complete a postlicensing training class of _____ or the license will automatically convert to inactive status.

30 hours within six months. The important part of the question is the word active. If a temporary license is issued on an active status, the licensee has six months to complete postlicense education or the license will automatically convert to inactive status. At that point, the licensee will have an additional 6 months (making a total of 12 months) to complete postlicense education. If the temporary license is issued on inactive status, then the licensee has the full 12 months to complete the education requirements.

In the rectangular survey system, a township is divided into

36 sections with 640 acres per section. A township contains 36 sections, and each section is one square mile or 640 acres.

Townships are subdivided into how many sections?

36. Townships are subdivided into 36 section

What is the number of the sections in any township?

36. Townships are subdivided into 36 sections.

How big is an acre?

43,560 sq. ft. One acre equals 43,560 square feet.

In Alabama, the purchaser of a time-share may rescind the contract in writing without any reason within _____ days of receiving all required documents.

5

What is the length of a mile and number of square feet in an acre?

5,280 feet and 43,560 square feet. A mile is 5,280 feet long and an acre is 43,560 square feet.

A broker sold a residence for $485,000 and received $26,675 as commission in accordance with the terms of the listing agreement. What was the broker's commission rate?

5.5%. Commission rate × Selling price = Commission, so Commission ÷ Selling price = Commission rate; therefore, $26,675 commission ÷ $485,000 selling price = 0.055, or 5.5% commission rate.

As a rule, how many days after closing the transaction must escrow funds be disbursed?

7

The passing score for the real estate license exam is

70%

How many acres are contained in the tract described as "beginning at the NW corner of the SW¼, then south along the west line to the SW corner of the section, then east along the south line of the section 2,640 feet, more or less, to the SE corner of the said SW¼, then in a straight line to the POB

80 acres. The area described is a triangle formed when a quarter of a section is cut from one corner to the opposite corner. A section has 640 acres, a quarter-section has 160 acres, and half of that quarter has 80 acres.

Conventional loans are viewed as the most secure loans because their loan-to-value ratios are often lowest. Traditionally, the ratio is

80% of the value of the property. Conventional loans are viewed as the most secure loans because their loan-to-value ratios are often lowest. Traditionally, the ratio is 80% of the value of the property.

The N½ of the SW¼ of a section contains how many acres?

80. A section contains 640 acres. A ½ of ¼ of 640 equals 80 acres. Using decimals, the equation is 0.5 × 0.25 × 640 = 80.

A property contains 10 acres. How many lots of not less than 50 feet by 100 feet can be subdivided from the property if 26,000 square feet were dedicated for roads?

81. The area of ten acres in square feet is figured as follows: 10 acres × 43,560 sq ft = 435,600 sq ft. Reserving 26,000 square feet for roads leaves 409,600 square feet. The area of each lot is to be not less than 5,000 square feet: 50' ×100' = 5,000 sq ft. Divide the available square footage by the square footage needed for each lot: 409,600 sq ft ÷ 5,000 square feet = 81.92. Because each lot must be "not less than 50 feet × 100 feet," the property can be subdivided into 81 such lots.

A couple listed their home for $237,000. They accepted an offer of $230,000 from a buyer who is obtaining financing with a $46,000 down payment. The seller has agreed to pay the agent a commission of 5.5%, which would be

A couple listed their home for $237,000. They accepted an offer of $230,000 from a buyer who is obtaining financing with a $46,000 down payment. The seller has agreed to pay the agent a commission of 5.5%, which would be $230,000 × 5.5%, or $12,650.

A creditor, for purposes of Regulation Z, is any person who extends consumer credit in transactions involving dwellings as security more than

A creditor, for purposes of Regulation Z, is any person who extends consumer credit in transactions involving dwellings as security more than 5 times a year.

To verify property boundaries and location of improvements before real estate is sold,

A current survey should be made to confirm that no encroachments have arisen since the last transfer of title. The title company or lender typically will require the survey, payment for which is negotiated as part of the sales contract.

All of the following may be used to prove ownership EXCEPT

A deed. Proof of ownership is evidence that title is marketable. A deed by itself is not considered sufficient evidence of ownership. Even though a warranty deed conveys the grantor's interest, it contains no proof of the condition of the grantor's title at the time of the conveyance. The grantee needs some assurance that ownership is actually being acquired and that the title is marketable. A certificate of title, title insurance, or a Torrens certificate is commonly used to prove ownership.

A lease agreement that specifies an end date for tenancy and does not require advanced notice to terminate is a(n)

A definite termination date defines an estate for years.

In an agency relationship, the relationship of broker to client is that of

A fiduciary. The client in an agency relationship is the principal to whom the agent gives advice and counsel. The agency agreement usually authorizes the broker to act for the principal. The agent's fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties.

Chain of title is MOST accurately defined as

A history of all documents and legal proceedings affecting a specific parcel of land. Chain of title is the entire history, or record, of transactions affecting a property, while an abstract is a summary of relevant facts found when examining the history. Title insurance is used to protect against defects in the record of a property's ownership and is issued only after a title examination, which evaluates the public records of the property.

A licensee's check for its license renewal fee is returned by the bank for insufficient funds. What is the minimum charge that will have to be paid to the Alabama Real Estate Commission?

A licensee's check returned for nonsufficient funds (NSF) is considered a violation of Alabama license law. Violations may result in licensees being fined no less than $100 and no more than $2,500, being reprimanded, or the suspension or revocation of their license.

A claim against real property to secure repayment of a debt is a(n)

A lien secures payment of an indebtedness.

A lien against a parcel of real estate may result from a lawsuit currently before the court. Notice of a possible future judgment could be found by examining the public records for

A lis pendens. A lis pendens is a notice of a possible future lien that is filed to alert the public that there may be a claim against the property when the final judgment in the case is rendered.

A map illustrating the sizes and locations of streets and lots in a subdivision is called a

A plat is a map. A Subdivision Plat is a Map of a subdivision showing at least those details required by local subdivision regulations.

What action returns a contract's parties to their positions before the contract, including return of any deposit?

A rescission occurs when the parties agree to terminate the contract as though it had never been made. Cancellation terminates the contract without a return to the original position.

The fee charged to process a loan application is

A loan origination fee. An origination fee is the fee charged to cover expenses involved with processing a loan application.

A loan that includes both real and personal property is called

A loan that includes both real and personal property is called a package loan.

The lower the loan-to-value ratio, the higher the

A lower loan-to-value ratio has a smaller loan and a higher down payment. The down payment represents the owner's equity.

Under the Sherman Antitrust Act, the penalty for a person found guilty of fixing prices or allocating markets is

A maximum $1 million fine and 10 years in prison. For corporations, the penalty may be as high as $100 billion.

When a company furnishes materials for the construction of a house and is subsequently not paid, it may file

A mechanic's lien. A mechanic's lien gives security to persons or companies that perform labor or furnish material to improve real property and can be filed when the owner has not fully paid for the work.

Which of the following is a voluntary lien?

A mortgage lien is created intentionally by the owner's action and so is a voluntary lien.

Which of the following is a voluntary, specific lien?

A mortgage lien is created voluntarily by the borrower. The borrower names specific property in the mortgage agreement that serves as security for the lender.

A land use that does not meet current zoning requirements may be allowed to continue as a

A nonconforming use may be allowed to continue legally as long as it complies with the regulations governing nonconformities in the local ordinance, until the improvement is destroyed or torn down, or until the current use is abandoned.

The buyers purchased a model home and all its furnishings and appliances by using a

A package loan is a real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances.

A loan that includes both real and personal property is a(n)

A package loan usually includes furniture, drapes, kitchen appliances, and washer/dryer as part of the sales price of the home.

Most adjustable-rate mortgages (ARMs) have two types of rate caps:

A periodic rate cap limits the amount the rate may increase over a stated term, usually a year. A life-of-the-loan rate cap limits the amount the rate may increase over the entire life of the loan.

Which of the following allows a mortgagee to proceed to a foreclosure sale without going to court first?

A power-of-sale provision in a mortgage permits the lender to foreclose and sell a mortgaged property that is in default without petitioning to get the court to conduct the sale. Nevertheless, the procedure is often supervised—although not conducted—by the court.

When a property is mortgaged, the owner must execute (sign) which two separate instruments?

A promissory note stating the amount owed and a security instrument. When a property is mortgaged, the owner must execute (sign) two separate instruments—a promissory note stating the amount owed and a security instrument, which will take the form of either a mortgage or deed of trust, specifying the collateral used to secure the loan.

The form of tenancy that will expire on a specific date and requires no notice is

A rental tenancy that will expire on a fixed date is an estate for years.

Parties to a contract are returned to their original positions, including return of any deposits, under what action?

A rescission occurs when the parties agree to terminate the contract as though it had never been made. Cancellation terminates the contract without a return to the original position.

A buyer purchased a home for cash 30 years ago. Today the buyer receives monthly checks from a mortgage lender that supplement her retirement income. The buyer MOST likely has obtained

A reverse mortgage. In a reverse mortgage, typically an older citizen whose home has very little or is free and clear of mortgage debt will enter into a special mortgage arrangement under which the lender pays the borrower regular monthly payments as long as the citizen lives or until the property is sold, at which time the debt is paid off by the sale proceeds. Interest accrues and compounds throughout the term of this arrangement. The terms vary with the age of the borrower and value of the property.

A woman has just made the final payment on her home mortgage to her lender. There will still be a lien on her property until the lender records

A satisfaction of mortgage. A satisfaction of mortgage, also known as a release or discharge, is executed by the lender when the note has been fully paid. This document returns to the borrower all interest in the real estate originally conveyed to the lender. This release must be recorded in the public record to show that the debt has been removed from the property.

What is the difference between a general lien and a specific lien?

A specific lien is a lien against a certain parcel of real estate, while a general lien covers all of a debtor's property. A specific lien is against a certain property, but a general lien covers the entire debtor's property, both personal and real. Both are enforceable in court.

A loan in which the borrower makes only interest payments is called a(n)

A straight loan (also known as a term loan or interest-only loan) essentially divides the loan into two amounts to be paid off separately. The borrower makes periodic payments of interest only, followed by the payment of the principal in full at the end of the term.

A property manager hires a full-time maintenance person. While repairing a faucet in one of the apartments, the maintenance person steals a laptop computer and the tenant sues the owner. The property manager could protect the owner against this type of loss by purchasing

A surety bond. The manager can protect the owner by urging the purchase of a surety bond on the building employee at the time the employee is hired. Property managers usually formulate and recommend insurance plans for an owner's consideration and decision.

A family's apartment lease has expired, but their landlord has indicated to them that they may remain on the premises until a sale of the building is closed. They will be charged their normal monthly rental during this period. The right held by the family is called

A tenancy at will. A tenancy (estate) at will gives the tenant the right to possess property with the landlord's consent for an unspecified or indefinite term.

The tenant who remains in possession of real estate after the lease expires, and does so without the landlord's consent,

A tenant staying after lease expiration, without permission, is a holdover tenant who has a tenancy at sufferance.

A state law prohibits lenders from charging more than 24% interest on any loan. This kind of law is called

A usury law. A law that set limits on rates of interest that may be charged is a usury law. Usury is charging a higher interest rate than the law allows for a specific kind of loan. Federal law currently exempts federally related residential first mortgage loans from state usury laws.

Hinting to prospective clients that there is a "going rate" of commission or a "normal" fee implies that rates are, in fact, standardized and is

A violation of antitrust laws. The challenge for real estate brokers and sales associates is to avoid even the impression of price-fixing. Hinting to prospective clients that there is a "going rate" of commission or a "normal" fee implies that rates are, in fact, standardized. The broker must make it clear to clients that the rate stated is only what that broker's firm charges.

Which of the following is NOT proof of ownership?

A warranty deed contains no proof of the condition of the grantor's title at the time of the conveyance.

A person who dies testate can transfer title to his real estate upon his death through which type of document?

A will is made by an owner to convey title to real property after the owner's death.

To enforce a judgment, what must the creditor obtain?

A writ of execution directs the sheriff to seize and sell as much of the debtor's property as necessary to pay for the debt and the expenses of the sale.

A salesperson with an active license fails to renew that license by the deadline. In addition to the need to pay a penalty upon renewal, what other consequences are there?

ANSWER Automatic license conversion to inactive status, with licensee unable to engage in real estate activities or claim to be able to engage in such activities. The licensee can reactivate—reinstate—the license by paying the license renewal fee, in addition to the research and education fund fee and a $150 penalty. But the licensee must do so by September 30 of that same year. If not renewed by the second deadline, the license will lapse and cannot be renewed or reinstated.

Proof of title to real estate may be provided by a warranty deed, title insurance policy, or

Abstract of title with attorney's opinion. Proof of ownership of real estate may be provided by a warranty deed, title insurance policy, or abstract of title with attorney's opinion.

A written summary of the history of all conveyances and legal proceedings affecting a specific parcel of real estate is called a(n)

Abstract of title. An abstract of title summarizes the various events and proceedings that affected the title throughout its history.

The document that is a historical summary of all the documents of title is a(n)

Abstract of title. The abstract summarizes all the documents that create the chain of title; an attorney then reviews the abstract and renders a title opinion.

If a borrower on a home loan defaults, the lender typically has the right to

Accelerate the maturity of the debt. The lender may declare the entire principal balance due and payable immediately so that the borrower doesn't have to be sued every time a payment is overdue.

For appraisal purposes, accrued depreciation is NOT caused by

Accelerated depreciation. Functional obsolescence, physical deterioration, and external (economic) obsolescence are all sources of depreciation as a loss in value. Depreciation also refers to a deduction for income tax purposes. Accelerated depreciation falls within this definition and is not used for appraisal purposes.

Which clause would give a lender the right to have all future installments become due upon default?

Acceleration. The acceleration (speed-up) clause allows the lender to declare the entire loan balance due upon borrower default. The alienation clause allows the lender to accelerate the balance due if borrowers alienate (transfer) their mortgaged property. The defeasance clause requires the lender to release its lien claim against the property when the entire debt has been paid.

Which of the following is NOT used by an appraiser applying the income approach to value?

Accrued depreciation. Depreciation is one of the calculations used in the replacement (cost) approach and not in the income approach.

A tenant moves a pet into an apartment community that has a no-pets policy. The landlord wishes to remove the tenant due to the breach. The legal process to remove a tenant is known as

Actual eviction. A tenant's breach of a lease can result in actual eviction, whereas landlord negligence can result in a tenant's being forced to move, and this is known as constructive eviction.

When a tenant breaches a lease or improperly retains possession of the premises, the landlord may regain possession through the legal process called

Actual eviction. The landlord must serve notice on the tenant before commencing the lawsuit.

Direct knowledge is also known as

Actual notice. A person who has searched the public record has direct knowledge and cannot use a lack of constructive notice to justify a claim.

General real estate taxes levied for the operation of the government are

Ad valorem taxes. Confusingly, the general real estate tax—the ad valorem tax—creates a specific lien. The word general, in this context, distinguishes this tax from a special assessment for a specific project or neighborhood.

Exposure to risk as it relates to environmental hazards is created for individuals involved in other aspects of real estate transactions, such as

Additional exposure to risk is created for individuals involved in other aspects of Real Estate transactions, such as Real Estate Appraisers.

The courts usually do NOT inquire into the

Adequacy of the consideration provided in a contract. The only requirements are that the parties agree and that no undue influence or fraud has occurred.

A man made an initial real estate investment of $245,000. He subsequently made $80,000 worth of improvements to the property. If the man subtracts depreciation from the initial cost and adds the cost of improvements, what will be the result?

Adjusted Basis is the original cost plus capital (long-term) improvements minus cost recovery (depreciation). Depreciation lowers an investor's adjusted basis. The lower an investor's adjusted basis, the larger will be the capital gain to be taxed when a property is sold. The depreciation tax deductions taken along the way are somewhat taken back by capital gains taxes upon sale.

An investor made an initial real estate investment of $45,000 and subsequently made $20,000 worth of improvements to the property. If the investor subtracts depreciation from the initial cost and adds the cost of improvements, what will be the result?

Adjusted basis is the original cost plus capital (long-term) improvements minus cost recovery (depreciation). Depreciation lowers an investor's adjusted basis. The lower an investor's adjusted basis, the larger will be the capital gain to be taxed when a property is sold. The depreciation tax deductions taken along the way are somewhat taken back by capital gains taxes upon sale.

A broker's agreement to represent a property buyer may be terminated because the

Agreement's purpose is fulfilled by the transfer of title to the buyer. The death or incapacity of a sales associate does not the terminate the agreement, which is with the employing broker.

A woman bought acreage in a distant county, never went to see the acreage, and did not use the ground. A man moved his mobile home onto the land, had a water well drilled, and lived there for 22 years. The man may become the owner of the land if he has complied with the state law regarding

Adverse possession. Adverse possession is (hostile) possession of real estate without the permission of the owner and contrary to the owner's best interests. If it continues in an open, conspicuous (notorious) way for the time set by statute (the statutory period), the adverse possessor may take legal action to be declared the owner on the basis of all these facts.

An example of involuntary alienation is

Adverse possession. Involuntary alienation means that a property owner is forced to give up ownership to all or a portion of the property involuntarily; only adverse possession represents such an instance. When another individual meets the adverse possession criteria for the required length of time, the individual can go to court and obtain title to the property from the original owner. Property owners who neglect their property for a long enough period may find someone else in possession.

A listing agent transmits a purchase offer to her client that is less than the list price. Because they both belong to the same Rotary Club, the agent knows that the buyer wants to live near her mother, who lives on the same street as the listed property. The listing agent also knows the buyer can afford the list price, which is a reasonable price for the property. There are no other active listings in the area. But, because the agent and the buyer are in the same civic club, the agent does not feel comfortable disclosing this information to the seller. What should the agent do?

Advise the seller of the buyer's motivations and financial strength, and discuss the pros and cons of accepting the offer or making a counter-offer.

A package of services may be offered to the parties to a real estate transaction as part of a(n)

Affiliated business arrangement. To streamline the settlement process, a real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company may agree to offer a package of services to consumers.

When is a certificate of occupancy issued?

After Building Construction Work Has Been Inspected and Found Satisfactory By The Municipal Inspector. The certificate of occupancy, granted by an inspector from the jurisdiction, is necessary before a building can be occupied.

Title insurance will cover title defects found

After closing.Title insurance covers only those defects listed in the policy and found after closing. If defects are found before closing (called exceptions), the seller must clear them and the title or the buyer must accept the property title with the defect.

The "bring down" is the second title search and is made

After the closing and before any new documents are filed. The "bring down" is the second title search that is made after the closing and before any new documents are filed.

In a real estate transaction, the term fiduciary typically refers to the

Agent's relationship to the principal. The relationship of the agent to the principal involves care, obedience, loyalty, disclosure, accounting, and confidentiality (COLD AC)—a fiduciary relationship. A person with legal power to act for another is an attorney-in-fact; most real estate agents do not have such power.

The individual who is authorized and consents to represent the interests of another person in dealings with a third person is the

Agent. In an agency relationship, the agent is authorized and consents to represent the interests of the principal in dealings with a third person. In a real estate agency, the principal is usually referred to as the client, and the third person is referred to as the customer.

A contract is said to be implied if the

Agreement of the parties is demonstrated by their acts and conduct. In an implied contract, the agreement of the parties is demonstrated by their acts and conduct. For example, when someone enters a restaurant and orders a meal, there is an implied contract that the customer will pay the bill when it comes.

Rules adopted by the Alabama Real Estate Commission can be found in the

Alabama Administrative Code Chapters 790-X-1 through 790-X-3. Administrative rules and regulations supplement the statutes found in the Alabama Real Estate License Law of 1951, found in Title 34, Chapter 27, of the Alabama Code. Statutes are passed by publicly elected legislators, while the rules are written and put into effect by the Alabama Real Estate Commission.

Proposed members of the Alabama Real Estate Commission are nominated by

Alabama Association of REALTORS®. The association must submit three names for each available position. At least one nominee for each position must be someone who is not a member of the association. Membership in the association is voluntary, and not all licensees choose to become members. By requiring that at least one nominee be a nonmember, the system is designed to promote diversity

What department in Alabama is responsible for overseeing most of the implementation of federal environmental laws?

Alabama Department of Environmental Management

In Alabama, a written complaint against a licensee should be sent to the

Alabama Real Estate Commission

The best source of advice for proper handling of trust funds is to use checklists provided by the

Alabama Real Estate Commission.

The MOST common source of harmful lead in older residential properties is

Alkyd Oil-Based Paint. Lead was used as a pigment and drying agent in alkyd oil-based paint that is common on doors, windows, and other woodwork. The federal government estimates that lead is present in about 75 percent of all private housing built before 1978.

Which of the following is FALSE about assignments?

All contracts must allow assignments. Generally, rights and obligations may be assigned to a third party. Obligations may be delegated, but the original party remains primarily liable unless specifically released. Most contracts have a clause to either allow or forbid assignment.

A real estate broker hired by an owner to sell a parcel of real estate must comply with

All lawful instructions of the owner. Lawful instructions from one's broker require obedience. An agency statute may modify aspects of the common law of agency. Caveat emptor is a warning to purchasers, not brokers.

Valley Place is a condominium community with a swimming pool, tennis courts, and biking trail. These common elements are MOST likely owned by

All unit owners as tenants in common. Common elements and common areas, including amenities such as swimming, biking, and tennis areas, are owned by the unit owners as tenants in common.

The Consumer Financial Protection Bureau requires mortgage lenders to

Allow a borrower to seek review of a decision about a loan workout request. The rules of the Consumer Financial Protection Bureau that took effect on January 10, 2014, allow a borrower to seek review of a decision about a loan workout request and require that the lender quickly resolve complaints, generally within 30 to 45 business days; give the borrower two months' warning if an adjustable-rate mortgage will have a rate change; and work with the borrower, if the borrower is having trouble paying the mortgage, including contacting the borrower to help.

A town located near a small recreational lake enacts a new zoning code. Under the new code, commercial buildings are not permitted within 1,000 feet of the lake. A commercial building that is permitted to continue in its former use even though it is built on the lakeshore is an example of

Allowing a Nonconforming use is a way to grandfather in a use that was present before the enactment of certain zoning restrictions forbade it. Once allowed, the use may continue for a stipulated length of time and with limited right of transfer to a later buyer.

Removing existing barriers when readily achievable in public buildings, such as adding Braille markings to elevator buttons, is a requirement of which law?

Americans with Disabilities Act. The Americans with Disabilities Act (ADA) requires that places of public accommodation remove existing barriers when readily achievable to provide access to facilities and services.

Which of the following is a variance?

An Exception To A Zoning Ordinance. A variance is an allowed use that does not meet current zoning requirements and permits a landowner to use the property in a manner that is strictly prohibited by the existing zoning.

A buyer who wants to know whether the title for a property is in good standing would order a(n)

An abstract, or title policy, will tell the state of the title and whether any title defects have been found.

The clause that appears in both the promissory note and the mortgage, and allows the lender to call the balance due and payable in full upon default, is known as the

An acceleration clause allows the lender to call the entire loan due for several reasons listed in the agreements, including default. The due-on-sale or alienation clause is specific to the sale of the property.

In an implied contract, the agreement of the parties is demonstrated by

An act of one party that is accepted by the other party. The existence of the agreement then imposes the usual contract obligations, such as the payment of compensation in return for the performance of a legal act.

The individual who is authorized and consents to represent the interests of another person is

An agent. The agent is the individual who is authorized and consents to represent the interests of another person.

A tenant signs a lease that includes a schedule of rent increases on specific dates over the course of the lease term. What kind of lease has this tenant signed?

An agreement in which tenant agrees to pay predicted, regular increases during its term is called a graduated lease.

A loan that provides for the full payment of the principal over the life of the loan is a(n)

An amortized loan is paid off slowly, over time, in regular periodic payments that include both principal and interest over a term of years.

An arrangement whereby the owner of property sells the property and then leases it back again for an agreed period and rental is called

An arrangement whereby the owner of property sells the property and then leases it back again for an agreed period and rental is called a sale and leaseback.

A claim against another's property is known as

An encumbrance. An encumbrance is a right to, or claim against, property held by someone other than the property owner.

If there are inequalities in statewide tax assessments, some jurisdictions might apply

An equalization factor. An assessment equalization factor is used to achieve uniformity. Assessments might be raised or lowered based on the factor.

The tenancy that arises when a tenant who lawfully took possession of real property continues in possession of the premises without the landlord's consent after the right of possession has expired is the

An estate at sufferance can arise when a tenant for years fails to surrender possession at the expiration of the lease. The tenant still is responsible for the payment of rent at the existing terms and rate.

A tenancy is which the tenant continues in possession after the lease has expired, without the landlord's permission is

An estate at sufferance is created when a tenant who lawfully occupied the property continues to stay on after the expiration date of the lease without the permission of the landlord. If the lease does not have a "hold-over" clause that governs the rights of both landlord and tenant, state law will govern.

A leasehold estate has a definite expiration date that requires no notice. This is a(n)

An estate for years has a specific termination date.

A leasehold estate that requires no notice and has a definite expiration date is a(n)

An estate for years has a specific termination date.

Which type of leasehold estate lasts for a definite period of time and then ends?

An estate for years is a leasehold estate that continues for a definite period and always has specific starting and ending dates.

The market value of a parcel of real estate is

An estimate of the most probable price it should bring. An appraisal is the appraiser's opinion of a property's market value—the price a property would most probably bring.

A contract that has been signed by all parties is

An executed contract also is one in which all parties have fulfilled their promises; that is, the contract has been performed. An executed contract may or may not be enforceable depending on its terms.

In an adjustable-rate mortgage (ARM), the interest rate is tied to an objective economic indicator called

An index. The interest charged in an ARM varies with an outside economic indicator called an index. This index is beyond the control of either the borrower or the lender.

Real estate can be purchased under a land contract, also called

An installment contract or contract for deed. Real estate can be purchased under a land contract, also called an installment contract or contract for deed.

A real estate professional has found a buyer for a seller's home. The buyer has indicated in writing a willingness to buy the property for $1,000 less than the asking price and has deposited $5,000 in earnest money with the real estate professional. The seller is out of town for the weekend, and the real estate professional has been unable to inform the seller of the signed document. At this point, the buyer has

An offer. A written offer to buy property—an offer that has not been seen or acted upon by the property owner—is simply an offer. Even if the offer had been for full price, no contract would yet exist and the offeror would have no claim on the offeree

The buyers of a residence in Happy Hollow have a mortgage that allows them to borrow additional funds that will be secured by the home at any time. They have a(n)

An open-end loan provides a security interest when a note is executed by the borrower to the lender, but also secures any future advances of funds made by the lender to the borrower.

An appraisal is

An opinion of value based on supportable evidence and approved methods. An appraisal is an estimate or opinion of value based on supportable evidence and approved methods.

The property owner has given a potential buyer the right to buy the property at a set price for a set period of time; this is a(n)

An option provides a buyer with the right to buy, if the buyer chooses, within the option period and at specific terms.

The term reconciliation refers to which of the following?

Analyzing the results obtained by the different approaches to value to form an opinion of value. The three approaches to value typically produce three different values. An in-depth analysis of these values is required to determine the most valid, logical, and reliable approach that will provide the final opinion of value.

If one or more of a property's owners is married, the spouse's consent

And signature on the contract to release any marital rights is required. If one or more of a property's owners is married, the spouse's consent and signature on the contract to release any marital rights is required.

For purposes of a tax-deferred exchange, one parcel of investment real estate is considered of like kind to

Another Parcel of Investment Real Estate, Even If They Have Different Uses.T he key is that both parcels must be held for investment and not be owner-occupied, and they cannot be located in a foreign country.

Which of the following is a requirement under the Alabama License Act regarding signage for a real estate business?

Answer If an interior sign is used, it should be posted in the entry area and on the door of the office or suite of offices. A place of business must be identified by a sign that includes the name of the company as licensed with the Commission. In places where an exterior sign is permitted, a sign must be posted outside of the office so that it is plainly and readily visible to the public. In places where an exterior sign is not permitted, an interior sign must be posted. The interior sign must keep with the building restrictions and, if permitted, must be posted in the entry area and on the door of the office or suite of offices.

Which of the following is TRUE about a broker and a property owner in Alabama who enter into an exclusive right-to-sell listing agreement to sell the owner's property?

Answer It gives the broker the exclusive right to market the seller's property during the term of the listing period. listing broker is due a commission if property is sold under listed terms during the listing period regardless of who sells the property

The reason commingling (mixing personal funds with those belonging to other people) is a problem is because

Answer Legal action against the broker could put the consumer's funds at risk of seizure by the broker's creditors. There are many reasons for the separation of a broker's private funds from those belonging to the public. For example, if the broker commingled personal funds into the escrow account and the IRS froze the broker's accounts, the escrow account would also be frozen.

If an Alabama licensee does NOT receive a license renewal form in the mail, the licensee

Answer Must notify the Commission by August 10. The licensee must submit the application form and pay the appropriate renewal fee. The renewal must be postmarked by August 30 of the final year of the license period.

Which of the following activities would LEAST likely result in a discrimination complaint?

Answer Selecting properties to show based on a buyer's financial capacity to purchase. It is illegal to refuse to sell or rent after a bona fide offer, to refuse to negotiate for the sale or rental of, or otherwise to make unavailable or deny a dwelling to any person in the terms, conditions, or privileges of sale or rental.

A licensed salesperson is a member of a team within a brokerage. Her team wishes to place advertising to let people know about their special expertise in a particular part of town. What must they include in the advertising?

Answer The Team Name, The Name Of The Qualifying Broker or Company, and The Name Of Any Team Member. If some licensees within a real estate office work together as a team or group, they are allowed to advertise their team name, in addition to the regular requirement that the broker or company name be prominently displayed on all advertising. When advertising in the team name, they must also include the name of at least one licensee who is a member of the team. It does not have to be a team leader, or associate broker, or any other specific person.

A real estate contract specifies that the earnest money check must be held, without deposit, until after successful completion of a home inspection. The home inspection must occur within 10 business days. With the broker's verbal permission, the salesperson holds the check in her property file and then gives it to the broker for deposit after the home inspection and the buyer's approval to proceed to closing. Can the salesperson be disciplined after an office audit uncovers this transaction?

Answer Yes, because the check should have been turned over to the broker to hold. If a check is received as earnest money and the contract form states that the check is to be held for a specific length of time or until the occurrence of a specific event, the qualifying broker may hold the check and then deposit it at the time stated in the contract. If no time for deposit is specified in the contract form, the check must be deposited at the time when the offer becomes a binding contract. Under no circumstances may salespeople or associate brokers hold checks, undeposited. Only the qualifying broker may hold the checks.

Real estate firm A represents the seller in a transaction, and real estate firm B represents the buyer. The contract calls for $3,000 in earnest money. Which firm must hold the earnest money?

Answer either firm, as specified in the contract. Funds to be held in trust under a contract for sale involving co-brokerage with more than one qualifying broker may be held and deposited by either qualifying broker.

A temporary salesperson's license is issued to inactive status. What fees must be paid at the time of application?

Answer license fee, criminal background fee, and research and education fee. If the temporary salesperson's license is issued to inactive status, there is no payment to the recovery fund. In the future, if the license is transferred from inactive to active status, the active licensee must pay a fee to the recovery fund. Remember: The recovery fund fee is for licensee liability to a consumer for damages that cannot be collected from the licensee or from E&O insurance. If the license is issued on inactive status, there is no opportunity for a consumer to be damaged because the licensee is not supposed to engage in real estate activities.

A survey indicates the location of all improvements located on the premises plus

Any existing easements and encroachments. A survey indicates the location of all improvements located on the premises plus any existing easements and encroachments.

Which of the following must the seller's agent disclose to the buyer?

Any known material defects that affect health or safety

Which of the following is TRUE regarding community property rights?

Any property acquired during a marriage is considered to be obtained by mutual effort. Community property laws are based on the idea that a husband and wife, rather than merging into one entity, are equal partners in the marriage. Under community property laws, any property acquired during a marriage is considered to be obtained by mutual effort. Community property law varies widely among the states, but they all recognize two kinds of property: separate property and community property.

When considering whether or not to reveal information regarding a stigmatized property, a real estate professional should be aware of

Any relevant state laws. Many states provide statutory direction to real estate professionals by identifying stigmas that are not considered material facts and that therefore do not require disclosure.

A title search in the public records may be conducted by

Anyone. Real estate records are public records, open to all members of the public.

No real estate license is required for managing rental properties consisting of

Apartment Complexes With More Than Four Units Each. Persons must hold an active real estate license to manage residential or commercial rental properties, except that managers of apartments (defined as more than four units per property) are not required to have an active license. This exception was written into the law because of lobbying efforts by apartment owners and managers.

All of the following probably would be exempt from real estate taxes EXCEPT

Apartment buildings. Properties such as public hospitals and public parks, as well as religious institutions such as synagogues and churches, are usually exempt from real estate taxes. Apartment buildings, typically operated as investment properties, are taxed.

Restrictive covenants

Apply to and bind successive owners of the property. The deed conveying a particular lot in the subdivision will refer to the plat or declaration of restrictions, thus limiting the title conveyed and binding all grantees.

Real estate is an avenue of investment open to those interested in holding property primarily for increasing value, which is called

Appreciation

The Real Estate Settlement Procedures Act (RESPA) permits an affiliated business arrangement (ABA)

As long as a consumer is clearly informed of the relationship among the service providers. RESPA permits an ABA as long as a consumer is clearly informed of the relationship among the service providers.

A salesperson decides to act as the subagent of a listing agent but solicit buyers for the listed property. The salesperson is approached by a qualified buyer and makes the appropriate disclosures indicating that the salesperson represents the seller in the transaction. Despite that, the buyer constantly refers to the salesperson as her agent. What action should the salesperson take?

As soon as possible, discuss brokerage relationship again with the buyer and explain that the salesperson is not the buyer's agent but the seller's agent

An Alabama licensee represents the seller. When should the licensee disclose her agency relationship to the buyer?

As soon as reasonably possible

When considering an investment in real estate, the prospective investor should consider all of the following EXCEPT

Assessed Valuation of The Property. The anticipated appreciation of the property, possible effects of inflation on the property, and the intrinsic value of the property are all things an investor should consider. The assessed valuation is usually "old" information and may have little relevance to the investor.

A property owner's real estate tax bill is computed by applying the tax rate to the

Assessed valuation of the property. The state may base that assessment initially on the purchase price of the property, but with an allowable increase every year to account for inflation or specific assessments. Any liens on the property have no effect on the assessed value.

Managers who monitor a portfolio of properties similar to a securities portfolio by analyzing the performance of the properties and making recommendations to the owners of the properties are called

Asset managers. Managers who monitor a portfolio of properties similar to a securities portfolio by analyzing the performance of the properties and making recommendations to the owners of the properties are called asset managers.

Which of the following transfers the rights or duties under a contract?

Assignment refers to a transfer of rights or duties under a contract. Generally, rights and obligations may be assigned to a third party.

A buyer has given her right under a sales contract to a third party but has not been released of the liability under the contract. This is called

Assignment refers to a transfer of rights or duties under a contract. The obligations may be delegated to a third party but the original party remains primarily liable unless specifically released.

Rights and duties under a contract are transferred by

Assignment. Assignment refers to a transfer of rights or duties under a contract. Generally, rights and obligations may be assigned to a third party.

A transfer of rights or duties under a contract is a(n)

Assignment. Generally, rights and obligations under a contract may be assigned to a third party as long as they do not involve a contract for personal services. Many contracts have a clause that either allows or forbids assignment.

The transfer of rights or duties under a contract to a third party is called

Assignment. The transfer of rights or duties under a contract to a third party is called an assignment.

Real estate is more likely to have better-than-average investment potential when it is held for

At Least 10 To 20 Years Or Longer. In some parts of the country, an impressive return can be received on a real estate investment even after a relatively short period of ownership, but in general, the purchase of real estate should expect to retain the investment

In some areas of the country, acceptable proof of title is an abstract and

Attorney's opinion of title. The abstract accompanied by an attorney's opinion is sufficient in some areas to establish marketable title.

In a loan that requires periodic payments that do not fully amortize the loan balance by the final payment, what term BEST describes the final payment?

Balloon. When the term of the loan is over and the payments made have not paid off the debt, the last payment is a balloon payment. Thus the loan is called a balloon loan.

A real estate sales associate who is an independent contractor, as opposed to an employee, will have a substantial portion of the individual's income

Based on sales production or other output. An independent contractor's compensation will be based on sales production or other output and not on the number of hours worked.

A holdover from English common law, the statute of frauds that is found in all states requires that a deed

Be in writing. A deed need not be drafted by an attorney, although that is one way to insure that it will be legally sufficient to transfer title to the identified property.

In order for a broker to be paid on an open listing, the broker must

Be the procuring cause of the sale. In an open listing, the seller will only pay the broker who procures (brings) the buyer.

An insurance policy package that includes standard commercial property coverage such as fire, hazard, public liability, and casualty is called what kind of policy?

Because such insurance addresses several dangers, it is called a multiperil policy.

A contract that has been fully performed is

Before execution, the contract is executory. Once the parties have performed, it is executed.

A trust is a device by which one person transfers ownership of property to someone else to hold or manage for

Benefit of a third party. A trust is a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party.

In a listing agreement, the broker protection clause describes the circumstances under which the

Broker may be entitled to a commission after the termination of the listing. The broker's protection clause describes the circumstances under which the broker may be entitled to a commission after the termination of the listing.

Two real estate firms agree they will not bid against each other when attending foreclosure auctions on behalf of their respective clients. What laws have been violated?

Bid-rigging is a collusive and anticompetitive behavior that violates both state and federal Antitrust Laws.

At the closing of a real estate transaction, the person performing the settlement gave the buyer a credit for certain accrued items. These items were

Bills relating to the property that the buyer needed to pay. Accrued items are those property-related expenses (bills) that remain on the property as it is sold and that the purchasers will have to pay later.

An advertisement states: "Affordable 4-bedroom, 2-story, 2½-bath home with a large great room and spacious yard. Call 555-5555." If written by a real estate broker, this is considered a

Blind ad

In a PITI loan payment, the funds collected to pay for the taxes and insurance that are held in the lender's reserve or escrow account belong to the

Borrower. The lender is holding the money in a reserve and will pay the bills for the borrower.

A seller hired a broker under the terms of an open listing agreement. While that agreement was still in effect, the seller—without informing the first broker—hired another broker from a separate firm under an exclusive right-to-sell listing for the same property. If the first broker produces a buyer for the property whose offer the seller accepts, the seller must pay a full commission to

Both brokers. The broker with the open listing who procures the buyer is due her full commission. The broker with an exclusive right to sell listing is due a full commission if the listed property is sold by anyone during the term of the listing. Both these events occurred. Two full commissions are due.

In a dual agency situation, a broker may represent both the seller and the buyer in the same transaction if

Both parties consent in writing to the dual agency. Dual agency requires nothing less than written, informed consent from both parties. Any family relationship of the parties or whether they have legal representation does not change this rule.

A broker is permitted to represent both the seller and the buyer in the same transaction when

Both parties have been informed and agree in writing to the dual representation. Real estate licensing laws that permit dual agency typically require that the buyer and the seller must be informed of the nature of the proposed relationship and give written consent to the broker's representation of both parties in the same transaction.

A contract is said to be bilateral if

Both parties to the contract exchange binding promises. When both parties to a contract are bound by it, the contract is said to be bilateral. A contract yet to be performed is executory. A contract that binds only one party to act is unilateral. A contract made with a minor is usually voidable by the minor.

A general lien affects the debtor's property,

Both real and personal. A general lien affects the debtor's property, both real and personal.

Who has the right to require the attendance of subpoenaed witnesses?

Both the respondent and the complainant

Which of the following is a similarity between an exclusive agency listing and an exclusive right-to-sell listing?

Both types of listings give the responsibility of representing the seller to one broker only. Each listing is exclusive, meaning it is granted to one broker exclusively. While the exclusive agency listing would allow the seller to find a buyer without paying a commission, the exclusive right-to-sell listing would require a commission to be paid even if the seller alone procured the buyer. Open listings impose no limit on the number of additional brokers that might be hired by the seller.

A property listing taken by a real estate sales associate is technically an employment agreement between the seller and the

Broker. Only a licensed broker may enter into brokerage agreements. The broker's sales associates have authority only to assist in negotiating the agreements. The sales associate is merely the agent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The sales associate is not a party to it.

The Supreme Court decision that ended the separate but equal doctrine of legalized racial segregation was

Brown v. Board of Education. The separate but equal doctrine of legalized racial segregation was ended by the U.S. Supreme Court's 1954 decision in Brown v. Board of Education.

The transition from one land use to another is often eased by the creation of a

Buffer Zone. Some municipalities use buffer zones, such a strip of land used for a landscaped park, playground, or hiking trail, to ease the transition from one land use to another.

Which of the following is a legal entity that exists independently of its members?

Business organizations such as limited liability companies, partnerships, and corporations, are legal entities that exist independently of their members. Ownership by a business organization makes it possible for many people to hold an interest in the same parcel of real estate. Investors may be organized to finance a real estate project in various ways. Some provide for the real estate to be owned by the entity; others provide for direct ownership by the investors.

The primary activity of Freddie Mac is to

Buy and pool blocks of conventional mortgages. Freddie Mac—the Federal Home Loan Mortgage Corporation (FHLMC)—buys and gathers into bundles (pools) existing conventional mortgages. They raise money to do this by selling bonds backed by these pools of mortgages.

A corporation is a legal entity that can

Buy and sell real estate as set out in its charter. The corporation can own real estate in severalty or as a tenant in common. A corporation continues to exist until it is formally dissolved and the death of an officer or director does not affect the existence of the corporation or its title to property.

A buyer purchased a new residence from a builder for $350,000. The buyer made a down payment of $30,000 and obtained a $320,000 mortgage loan. The builder of the house paid the lender 3% of the loan balance for the first year and 2% for the second year. This represented a total savings for the buyer of $16,000. What type of mortgage arrangement is this?

Buydown. The builder brought down the purchaser's interest rate for two years by paying the lender advance interest. This is a buydown arrangement.

Designated agency is MOST likely to occur when

Buyer and the seller are represented by the same company. Designated agency is a process that accommodates an in-house sale in which two different sales associates of the same broker are involved. The broker designates one sales associate to represent the seller and one sales associate to represent the buyer.

A buyer took delivery of the deed to a new house but neither recorded the deed nor took possession of the property. Under these circumstances, the

Buyer's interest is not fully protected against third parties. Constructive notice to the public of interest in a parcel of real estate is served when the deed is recorded and physical possession of the property is taken. Without this, an owner's interests could be jeopardized.

Security deposits should be listed on a closing statement as a credit to the

Buyer. When investors buy an income property, rental security deposits held by the former owner are transferred to them. Buyers are credited for all existing security deposits at closing.

Buyers believe they have been victims of discrimination from a real estate broker. The buyers filed a complaint, and the next step is that

Buyers believe they have been victims of discrimination from a real estate broker. The buyers filed a complaint, and the next step is that

Buyers purchasing a home for $230,000 are obtaining a mortgage loan in the amount of $184,000, paying a 1.25% loan origination fee and a 1% loan discount fee. Based on this information, the total amount the buyer will pay at closing for the loan origination fee is

Buyers purchasing a home for $230,000 are obtaining a purchase-money loan in the amount of $184,000, paying a 1.25% loan origination fee and a 1% loan discount fee. Based on the information provided, the total amount the buyer will pay at closing for the loan origination fee is $2,300 ($184,000 × 1.25% = $2,300).

Zoning powers are conferred on municipal governments in which of the following ways?

By State Enabling Acts. Zoning powers lie with state governments. Local zoning power is conferred by the state through enabling acts.

To avoid liability associated with environmental issues, the real estate professional should

By becoming familiar with common environmental problems found in the real estate professional's area of practice, the licensee will recognize signs of environmental contamination and know when to suggest that an environmental audit be performed. The licensee should never claim to be an environmental expert, but should know enough to recognize warning signs of environmental issues.

The buyers purchased a residence for $195,000. They made a down payment of $25,000 and agreed to make monthly payments of $869.71 for a term of 30 years, at which point the loan will be paid in full. This type of loan is called a

By making level payments over the life of the loan that include both principal and interest, the buyers have a fully amortized loan.

How might a jurisdiction raise or lower property assessments?

By using an equalization factor. If there are inequalities in statewide tax assessments, some jurisdictions might apply. An assessment equalization factor is used to achieve uniformity. Assessments might be raised or lowered based on the factor.

A sells a portion of property to B. B promptly records the deed in the appropriate county office. If A tries to sell the same portion of property to C, which of the following statements is TRUE?

C has been given constructive notice of the prior sale because B promptly recorded the deed. C is presumed to know all these facts, even if C doesn't examine the public record and therefore never gets actual notice of the sale to B. Actual notice to a buyer is not necessary if a deed has been recorded. The courts construe recording of a deed as notice to the world. C is construed (i.e., considered) to have notice. C has no claim to the property that B owns, even if C later "buys" it from A. Recording the deed to real estate gives constructive notice to the world (which includes C) of the grantee's (A's) claim of ownership.

Junk emails are prohibited by what legislation?

CAN-SPAM Act. The federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, known as the CAN-SPAM Act, prohibits junk emails. An important feature of this law, which applies to commercial electronic mail messages, is that email solicitations must include a means by which the recipient can "unsubscribe" from future messages.

A property with encumbrances that will outlast the closing

Can be sold if a buyer agrees to take it subject to the encumbrances. A buyer can agree to purchase property with existing encumbrances (e.g., when assuming a mortgage loan).

Property owned by a married person

Can belong to the spouses together or be the separate property of one spouse. Some states recognize community property rights and others recognize tenancy by the entirety as a form of marital property ownership. A married individual still has the right to own separate property as long as the property is acquired as specified by state law and is not commingled with marital property.

Default in payment of real estate taxes by a condominium unit owner

Can result in a forced sale of that unit. The default by a condominium unit owner in payment of taxes or a mortgage loan can result in a tax or foreclosure sale of that unit.

What action terminates a contract without the parties returning to their original positions?

Cancellation terminates the contract without a return to the original position. Rescission returns a contract's parties to their positions before the contract, including return of any deposit.

A seller is selling an investment property. The original cost of the property was $800,000. The selling price is $1,250,000. The seller paid an 8% commission and $10,000 in closing costs. Two years ago, the seller made $100,000 worth of improvements to the property. Depreciation is $150,000. What is the seller's total capital gain?

Capital gain is computed by subtracting the seller's adjusted basis, costs of sale, and brokerage commission from the selling price. In the seller's case, the selling price ($1,250,000) is reduced by the seller's adjusted basis ($750,000), by the brokerage fee (8% of $1,250,000 = $100,000), and by closing expenses ($10,000): $1,250,000 selling price - $750,000 adjusted basis - $100,000 brokerage fee - $10,000 closing expenses = $390,000 capital gain.

The colorless, odorless, and tasteless gas that occurs as a by-product of incomplete combustion of fuels such as wood, oil, and natural gas, is

Carbon monoxide is quickly absorbed by the body, where it inhibits the blood's ability to transport oxygen, resulting in dizziness and nausea, and death may occur within a short time. Many cases of carbon monoxide poisoning arise from the use of portable generators in areas that have undergone a natural disaster.

A real estate sales associate represents a buyer. At their first meeting, the buyer reveals plans to operate a dog-grooming business out of the purchased house. The sales associate did not check the local zoning ordinances to determine in which parts of town such a business could be conducted. Which common law duty did the sales associate violate?

Care. The broker was careless in failing to check zoning for a proposed business. To be careless is to fail to use proper care.

A buyer's agent, upon learning that the home being purchased is to house a dog-grooming business, didn't check zoning. What fiduciary duty did the buyer's agent violate?

Care. The buyer's agent was careless in failing to check zoning for a proposed business. To be careless is to fail to use proper care.

A buyer purchases a home in an area where closings are traditionally conducted in escrow. Which item would a buyer deposit with the escrow agent before the closing date?

Cash needed to complete the purchase. The buyer is normally responsible for depositing the cash needed to complete the transaction.

Which of the following would be considered a variable expense when a manager develops an operating budget?

Cash reserves are needed to deal with unscheduled or variable expenses such as unexpected building repairs.

Which term means "let the buyer beware?"

Caveat emptor

The main difference between an amendment and an addendum is that an amendment

Change to the existing content in the contract. The use of an amendment and an addendum are often confused. An amendment is a change to what is in the original contract; an addendum is material being added to the contract. In either case, the other party must sign off on the change or addition for the contract to remain in full force.

The supposition that no physical or economic condition remains constant is exemplified by the principle of

Change. Real estate is subject to natural phenomena, routine wear and tear, and the demands of the market, just as any business is.

Standard coverage in an owner's title insurance policy would cover all of the following EXCEPT

Changes in land use brought about by zoning ordinances. Standard coverage in an owner's title insurance policy would cover defects found in public records, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds. It would not include changes in land use brought about by zoning ordinances.

Nontoxic, nonflammable chemicals used as refrigerants in air conditioners, refrigerators, and freezers are

Chlorofluorocarbons (CFCs) are also used in aerosol sprays, paints, solvents, and foam-blowing applications. Although they are safe in most applications and inert in the lower atmosphere, CFC vapors rise to the upper atmosphere, where they may survive from 2 to 150 years and are broken down by ultraviolet light into chemicals that deplete the ozone layer.

Title III of the Americans with Disabilities Act (ADA) impacts which type of property?

Commercial and public accommodations. The ADA impacts commercial properties and public accommodations. Type of ownership has no bearing on compliance.

An exercise room available to all occupants in a condominium development would be regarded as a(n)

Common element. All owners are able to use the exercise room; therefore, it is known as a common element. A limited common element might be a balcony that only the unit owner would be allowed (limited) to use.

Real estate agency relationships are governed by which kinds of law?

Common law, statutory law, and administrative law. Agency is governed by common law, the rules of a society established by tradition and court decisions; statutory law, the laws, rules, and regulations enacted by the legislature; and administrative law, the rules and regulations created by real estate commissions and departments, as authorized by the legislature.

What is prepared by a sales associate by a review of MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred?

Comparative market analysis. The preparer of a comparative market analysis, also rcalled a competitive market analysis, will review MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred. While the sales associate should be sensitive to the seller's purchase price and financial needs, the market is the best indicator of the property's current value.

An independent contractor and a broker can agree upon which of the following?

Compensation the contractor would receive. Brokers may agree upon the compensation that their independent contractors will receive for work not yet done, but they may not dictate working schedules or attendance at sales meetings.

A broker can agree upon which of the following with an independent contractor?

Compensation the person would receive. Brokers may agree upon the compensation that their independent contractors will receive for work not yet done, but they may not dictate working schedules or attendance at sales meetings.

A deed would be valid without

Competent grantee. While the grantor must be legally competent, the grantee could be legally incompetent—for example, a minor.

Which principle of value indicates that a developer's very profitable real estate project will attract others to engage in similar activity in the same area and thus drive down profits?

Competition. A successful project invites imitators (competitors) to do the same thing nearby. This drives profits down for a developer and costs down for a consumer-buyer.

Which of the following is a requirement of residential property sellers in many states?

Complete a property condition disclosure form. By completing such a form, the seller does not guarantee the condition of the property, but does reveal the present condition of the property so that a prospective buyer can make an informed decision. The buyer usually will make a satisfactory property inspection a condition of the sale.

All of the following are required of a broker who is seeking to collect a commission for brokering the sale of a property EXCEPT

Complying with a commission rate set by a trade organization. Professional organizations may not set fees or commissions splits.

The electronic network for handling loan applications through remote computer terminals linked to several lenders' computers is called

Computerized loan origination (CLO). The electronic network for handling loan applications through remote computer terminals linked to several lenders' computers is called computerized loan origination (CLO).

Ownership of property by two people is considered

Concurrent ownership. Ownership in severalty is ownership by one individual. Two or more individuals can own property together in a form of concurrent ownership.

Which of the following is NOT a governmental power?

Condemnation. Governmental powers are police, escheat, eminent domain, and taxation. Condemnation is the process by which the government exercises the right of eminent domain, by either judicial or administrative proceedings.

A man owns one of 20 units in fee simple, along with a 5% ownership share in the parking facilities, recreation center, and grounds. What kind of property does he own?

Condominium. When a person owns part of a development in fee and a percentage of the rest in common with the other unit owners, this is condominium ownership.

At the risk of seeming boring or monotonous, properties will still be at their highest value if the neighborhood exhibits

Conformity. Maximum value is created when a property is in harmony with its surroundings.

An agent owes the principal all of the following EXCEPT

Consideration. The agent owes the duties of OLD CAR: obedience, loyalty, disclosure, confidentially, accounting, and reasonable skill and care.

The tenant leases a heated apartment, but the landlord fails to provide heat because of a defective central heating plant. The tenant vacates the premises and refuses to pay any rent. This is an example of

Constructive eviction terminates the lease when the landlord breaches any clause of the lease agreement. The tenant must prove that the premises have become unusable because of the conscious neglect of the landlord.

If leased premises become unusable for the purpose stated in the lease, the tenant may have the right to abandon the property and sue and recover damages against the landlord in a legal action called

Constructive eviction. The suit terminates the lease agreement, and the tenant must prove that the premises have become unusable because of the conscious neglect of the landlord.

Properly recording documents in the public record provides what type of notice to the world of an individual's rights or interest?

Constructive notice is the legal presumption that information may be obtained by an individual through due diligence. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.

The deed to a farm was made part of the public record, and the new owners proceeded to take possession of the property, living there and cultivating the acreage. The fact that the new owners live on the property serves as

Constructive notice to the world of the rights of the new owners in the property. The fact that someone occupies the property serves to alert other persons of a possible claim of ownership.

The legal presumption that information may be obtained by an individual through due diligence is

Constructive notice. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest.

A deed that has not been recorded will NOT provide

Constructive notice. Properly recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of a property. Because the information or evidence is readily available to the world, a prospective purchaser or lender is responsible for discovering the interest. A deed that has not been recorded lacks constructive notice, which is also known as legal notice.

As directed by the Dodd-Frank Act, new mortgage disclosure rules were issued in 2014 by the

Consumer Financial Protection Bureau. CFPB issued the mortgage disclosure rules that took effect January 10, 2014.

The Interstate Land Sales Full Disclosures Act is administered by the

Consumer Financial Protection Bureau. With the passage of the Dodd-Frank Act in 2011, the Interstate Land Sales Full Disclosure Act

The recovery fund provides payment to

Consumers who have suffered monetary damage as a result of a licensee's violation(s) of the Alabama Real Estate License Law.

Real estate license laws exist primarily to protect

Consumers. The main objective of real estate license laws is to make sure that the rights of purchasers, sellers, tenants, and owners are protected from unscrupulous or negligent practices.

The primary reason real estate license laws exist is to protect

Consumers. The main objective of real estate license laws is to make sure that the rights of purchasers, sellers, tenants, and owners are protected from unscrupulous or negligent practices.

A clause in a purchase agreement that would allow the buyer to cancel the contract if the buyer cannot secure financing from a lender is a(n)

Contingency clause. This would be the financing contingency. Contingency clauses are clauses that allow the contract to be canceled if an event happens or does not happen.

The sales contract says the buyer will purchase only if an attorney approves the sale by the following Saturday. The attorney's approval is a

Contingency. The contract is said to be contingent upon the attorney's approval. If the contingency is not satisfied—if the attorney doesn't approve—the contract is null and void.

An estate for years is a leasehold estate that

Continues for a definite period. Even though it is called an estate for years, or an estate for term, this form of tenancy always has specific starting and ending dates, which may be more or less than a year. Any extension of the tenancy requires that a new contract be negotiated.

While suffering from a mental illness that caused delusions, hallucinations, and loss of memory, a person signed a contract to purchase real estate. Which statement regarding the contract to purchase is TRUE?

Contract is voidable. A person suffering from a mental illness may either declare the contract void or hold the seller of the real estate to the contract. That is to say, the contract is voidable, but only by the person who is mentally ill.

The Federal Reserve System regulates the flow of money and interest rates in the marketplace by

Controlling the reserve requirements of member banks and setting the discount rate. The Federal Reserve System regulates the flow of money and interest rates in the marketplace by controlling the reserve requirements of the member banks and setting the discount rate it charges for loans it makes to those banks.

A land contract provides for the

Conveyance of legal title at a future date. In a land contract, the seller, or vendor, retains legal title to the property during the contract term and the buyer is granted equitable title and possession. At the end of the loan term, the seller delivers a clear title.

The real property interest that takes the form of personal property is the

Cooperative unit ownership. Because it involves receiving shares of stock and a leasehold—both of which are considered by common law to be personal property—cooperative ownership is personal, not real, property.

A person lives in an apartment building. The land and structures are owned by a corporation, with one mortgage loan securing the entire property. Like the other residents, this person owns stock in the corporation and has a lease to the apartment. This type of ownership is called

Cooperative. In a cooperative, a corporation holds title to the property and offers stock shares to the residents, who then receive a proprietary lease to the apartment.

The person who assists a corporation with real estate investments, usually as an employee and not an independent contractor, is a

Corporate property manager. A real estate asset manager monitors a portfolio of properties for a variety of clients, while a corporate property manager is responsible for monitoring the portfolio of only the employing corporation.

What does the loan origination fee cover?

Costs involved in generating the loan. Most lenders charge origination fees to cover the expenses involved in generating the loan. A loan origination fee is not prepaid interest; it is a charge that must be paid to the lender. The typical loan origination fee is 1% of the loan amount, although origination fees may range from 1 to 3 points (1 point equals 1% of the loan amount).

The partition of property that is owned concurrently can be accomplished by

Court action. If co-owners do not voluntarily agree to terminate their interests in the property, a court can be asked to determine whether the property can be divided into separate parcels without destroying its value or whether it must be sold and the proceeds distributed to the owners according to their fractional interests.

All of the following maintain public records EXCEPT

Court secretaries. Public records are maintained by recorders of deeds, county clerks, county treasurers, city clerks, and collectors. Court secretaries do not maintain public records.

At closing, the principal amount of a purchaser's new mortgage loan is a

Credit to the buyer. The purchasers see to it that money is available in the form of a mortgage loan for the purchase of the property. They are given credit for getting this money to the table.

A point, line, or surface from which elevations are measured or indicated is a

Datum. A point, line, or surface from which elevations are measured or indicated is a datum.

All of the following reasons are valid bases for terminating a buyer representation agreement EXCEPT

Death of the sales associate who worked with the buyer. A listing agreement is a personal service agreement between a broker and a seller, not between a sales associate and a seller.

How will taxes paid in arrears show on the closing statement?

Debit seller, credit buyer prorated share. Taxes paid in arrears are prorated, and the seller will owe the buyer for the portion of time the seller owns the property.

At closing, the listing agent's commission is usually shown as a

Debit to the seller. When the sellers have engaged the agent, they will be debited (charged) for the agent's commission at closing.

Police powers include all of the following EXCEPT

Deed restrictions. Deed restrictions are an example of private land-use control. Zoning, building codes, and subdivision regulations are examples of the exercise of police power.

Which of the following would NOT be acceptable evidence of ownership?

Deed to the current owner signed by the last seller. The existence of a deed to the current owner is not evidence that the owner actually received title. The absence of any deed, however, would indicate that the owner probably does not have title. A favorable attorney's opinion based on examination of an abstract (the report of a title search) and a policy of title insurance are strong evidence of title held by the owner.

Which of the following would convey an owner's interest in real property?

Deeds are used to convey real property. A deed of trust and mortgage create a lien interest but do not convey title. A bill of sale conveys personal property.

After a foreclosure proceeding, if the mortgagor owes the mortgagee more than what was received through the foreclosure process, the mortgagee may file for a

Deficiency judgment. If the borrower/mortgagor still owes the lender/mortgagee money after the foreclosure sale, the lender may file for a deficiency judgment.

Most states require that a real estate listing agreement contain

Definite contract termination date. Failing to specify a definite termination date in a real estate listing can be grounds for suspension or revocation of a license in most states. Automatic extensions have been discouraged by courts. Broker protection clauses and MLS clauses are not required.

Title is conveyed by deed only when the deed has been

Delivered to and accepted by the grantee. Title to property is not considered transferred until the deed to the property is actually delivered to and accepted by the grantee. Sometimes, the grantee may refuse to take title to property.

The Real Estate Settlement Procedures Act (RESPA) is a federal statute administered by the

Department of Housing and Urban Development (HUD). RESPA is administered by HUD.

The federal Fair Housing Act is administered by the

Department of Housing and Urban Development. The federal Fair Housing Act is administered by the Department of Housing and Urban Development (HUD), which has established rules and regulations that interpret the practices affected by the law.

An appraiser would need to determine depreciation when using the

Depreciation always relates to the cost approach.

The primary source of tax shelters in real estate investments comes from which accounting concept?

Depreciation. The greatest source of real estate investment tax shelter is depreciation. Depreciation is a tax concept according to which an investor writes off—as if it were an annual outlay—part of the original cost of a property during each year of its ownership. The IRS decides the time period on which this computation must be based. A shorter period would give larger deductions. Currently, the IRS allows depreciation over 27.5 years for residential real estate and 39 years for commercial real estate. Depreciation is often called cost recovery. Interestingly, while a property is depreciating in book value, it may also be appreciating rapidly at the same time in market value.

Some states allow two sales associates in the same brokerage to represent opposing sides to a transaction without creating a dual agency by using a(n)

Designated agency. In a designated agency, also called assigned agency or appointed agency, two sales associates of the same broker represent seller and buyer separately as agents with fiduciary responsibilities to that client.

The condominium form of property ownership can be used for

Detached structures. While many types of structure have been designed for or converted to the condominium form of ownership, there is no requirement that individual units share walls or floors.

All of the following factors would be important in comparing properties under the sales comparison approach to value EXCEPT

Differences in original cost. None of the approaches to appraisal considers the original (historical) cost of a property. The other three factors would be relevant to the sales comparison—sometimes called the market data—approach. Original cost, however, is used in computations of book-value depreciation.

A recent important change to real estate brokerage practice is

Digital communication in all its forms. The smartphone, laptop, and desktop computer have greatly enhanced the ability of real estate licensees to stay in contact with clients and customers. The use of online listings and other resources has made consumers much more active participants in the transaction.

Often, the only way to ensure that enough land is set aside for recreational and conservation purposes is through

Direct Governmental Ownership Of National and State Parks and Forest Preserves. Often, the only way to ensure that enough land is set aside for recreational and conservation purposes is through direct governmental ownership of national and state parks and forest preserves. Private nonprofit organizations, such as the Nature Conservancy, can also play an important role in preserving ecosystems for future generations.

The fiduciary responsibilities of an agent to the principal include

Disclosure of material facts that the agent knows. The agent must exercise a reasonable degree of care, which should be superior to that of the average person. The agent must obey all lawful instructions of the principal that are in accordance with the contract and place the principal's interests above the agent's.

A seller tells his agent in confidence that he must sell fast and may accept less than the list price. The agent tells a buyer the seller will accept up to $5,000 less than the list price. Which is TRUE?

Disclosure was improper and possibly illegal, regardless of the agent's motive. Such action is an example of the agent's failure to both obey and maintain confidentiality—both breaches of fiduciary duties.

Maria tells her agent in confidence that she must sell fast and may accept less than the list price. The agent tells a buyer the seller will accept up to $10,000 less than the list price. Which is TRUE?

Disclosure was improper and possibly illegal, regardless of the agent's motive. Such action is an example of the agent's failure to both obey and maintain confidentiality—both breaches of fiduciary duties.

A real estate broker's responsibility to keep the principal informed of all the facts that might affect a transaction is the duty of

Disclosure. The agent's duty of disclosure requires that the principal be informed of all facts or information that might affect a transaction.

In order to increase the yield on a loan, the lender would charge

Discount points. To make money on the loan transaction, the lender will add an additional cost called a point (or discount fee) to the loan. A point equals 1% of the loan amount.

Mutual rescission is BEST defined as the

Dissolution of a contract with the return of all funds or things of value to both sides. Mutual rescission is when both parties agree to terminate any agreement and return all funds, property, or things of value to the respective parties.

A property owner owns a large tract of land. After an adequate study of all the relevant facts, the owner legally divides the land into 30 lots suitable for the construction of residences. In this situation, the property owner is acting as a(n)

Dividing land for later construction or sale is Subdividing.

A real estate investment

Does Not Guarantee a Profit and Involves a High Degree Of Risk. A real estate investment does not guarantee a profit and involves a high degree of risk

The death of one of the directors of a corporation

Does not affect title to property owned by the corporation. The corporation is a separate entity in itself. Corporations live forever and the corporation would simply replace the director without any discontinuation of operations.

To be eligible for recording, and thus made part of the public record, a document should be

Drawn and executed according to state law. States may have specific rules about the size of documents and the color and quality of paper they are printed on. Electronic recording also may be permitted.

The seller told the listing broker that the seller's loan was assumable. Upon reviewing the seller's loan documents the listing broker found the mortgage was not assumable and the seller would have to pay off the mortgage upon sale. What clause did the listing broker discover upon reading the mortgage document?

Due-on-sale clause. Upon sale of the property, the due-on-sale or alienation clause requires payment of the lien before the transfer of title and does not allow for assumption of the loan.

Condominium association _____ are used for routine expenses, such as maintaining the common areas, common area property taxes, and insurance.

Dues

Which of the following statements about a condominium unit is TRUE?

Each owner owns and finances an individual unit. Condominium owners own their units separately and therefore finance them separately. Taxes are based on the value of each unit plus that owner's share of common elements. Association insurance covers the common elements but not the unit contents. A proprietary lease is part of a cooperative ownership where there is no ownership of the individual unit.

A parcel of land that has no direct access to a street or public way, except over land of its previous owner, will benefit from an

Easement by necessity. An easement by necessity is created when an owner sells a parcel of land that has no legal access to a street or public way, except over the seller's remaining land.

The type of easement that is a right-of-way for a utility company's power lines is a(n)

Easement in gross. Easements in gross are individual rights to use someone's land, as in the case of the utility company. An easement in gross can be assigned, conveyed, and inherited.

A property owner who has the legal right to use a neighbor's land holds a(n)

Easement. An easement is a right of use or passage, not of ownership—nor is it is an example of encroachment or the exercise of police power.

Condemnation is the process by which the government exercises the right of

Eminent domain. Condemnation is the process by which the government exercises the right of eminent domain.

The city wants to acquire private land for a park. The city can obtain the land by paying fair value under the right of

Eminent domain. The city has the right to take private property under eminent domain and must pay fair value to the owner.

A suit for condemnation would be used to exercise which governmental right?

Eminent domain. The process is condemnation; the power is eminent domain.

The right by which the government takes private lands for public use is

Eminent domain. The process is condemnation; the power is eminent domain.

Buyers can be liable for cleanup of contaminated property

Even if they had no knowledge of the contamination.

The right of a government body to take ownership of real estate for public use is called

Eminent domain. The right is eminent domain; the process by which the right is exercised is condemnation. Escheat and police power are other examples of government limitations on rights of private ownership.

A method of sealing off disintegrating asbestos is called

Encapsulation, or the sealing off of disintegrating asbestos, is an alternate method of asbestos control that may be preferable to removal in certain circumstances.

An owner has a fence on his property. By mistake, the fence extends one foot over the lot line onto a neighbor's property. The fence is an example of a(n)

Encroachment. To build over a property line is to encroach on the property of another.

All of the following would be revealed by a title search EXCEPT

Encroachments. A title search will find items recorded in the public record. Encroachments are only able to be discovered through a physical inspection of the land.

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to

Ensure that buyers know all settlement costs that will be charged to them. RESPA seeks to ensure that borrowers will know all settlement costs that will be charged to them.

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is administered and enforced by the

Environmental Protection Agency

If a mortgage lender discriminates against a loan applicant on the basis of marital status, what law is violated?

Equal Credit Opportunity Act (ECOA). Marital status is a protected category only under the Equal Credit Opportunity Act.

In evaluating rental applications, it is important for the property manager to establish consistent criteria for acceptable debt and income ratios in order to be in compliance with

Equal Credit Opportunity Act. A lease is an extension of credit, so the property manager must comply with the provisions of the Equal Credit Opportunity Act (ECOA) and be consistent when evaluating the financial information provided on rental applications.

The right of a defaulted taxpayer to recover property before its sale for unpaid taxes is the

Equitable right of redemption. An equitable right of redemption exists because it is only fair (equitable) that a property owner be permitted to save the property before a tax sale—or even a foreclosure sale—by paying the amount owed in full.

What kind of title passes to a buyer once her purchase agreement is accepted and notification of acceptance takes place?

Equitable title

Under a land contract, the vendee receives

Equitable title with the right of possession. Under a land contract, the vendee receives equitable title with the right of possession.

Misrepresentation or omission might result in broker liability

Even if unintentional. Misrepresentation or omission does not have to be intentional to result in broker liability.

The seller agrees to sell the house to the buyer for $100,000. The buyer is unable to qualify for a mortgage loan for this amount, so the seller and the buyer enter into a contract for deed. The interest the buyer has in the property under a contract for deed is

Equitable title. Equitable title in a contract for deed gives the borrower rights of possession and use while the seller retains the legal title during the contract term. If the buyer defaults, the traditional view of a land contract (contract for deed) provides that the seller can evict the buyer and keep any money the buyer has already paid, which is construed as rent. The current view, which may be found in state law, is that the buyer who has made successful loan payments for a specified amount of time has an equitable interest in the property, and if there is a subsequent default, the seller must comply with the legal requirements for a foreclosure.

A buyer makes an offer on a seller's house and the seller accepts. Both parties sign the sales contract. At this point, the buyer has what type of title to the property?

Equitable. Upon formation of the agreement of sale between the seller and the buyer, the buyer received equitable title. Upon later delivery and acceptance of the deed, the buyer will also receive legal title—sometimes called actual title.

What does E&O stand for?

Errors and omissions

When an individual dies and leaves no will, any real property will transfer to the state through a process called

Escheat. Escheat (revert) is the process whereby the state may acquire privately owned property when an owner dies and has no heirs or a will or living trust indicating how the real estate is to be distributed.

The process by which government takes control of a property after the owner dies without a will or lawful heirs is

Escheat. Escheat is a process by which the state may acquire privately owned real or personal property. State laws provide for ownership to transfer, or escheat, to the state when an owner dies and leaves no heirs (as defined by the law) and there is no will or living trust instrument that directs how the real estate is to be distributed.

Government powers include police power, eminent domain, taxation, and

Escheat. Government powers include police power, eminent domain, taxation, and escheat.

A property owner dies without a will or lawful heirs. By what process does the property revert back to the government?

Escheat. State laws provide for ownership to transfer, or escheat, to the state when an owner dies and leaves no heirs (as defined by state law) and there is no will or living trust instrument that directs how the real estate is to be distributed.

The reversion of real estate to the state because of the lack of heirs or other people legally entitled to own the property is called

Escheat. When a person dies intestate and no heirs can be located, title to the real estate passes to the state by the state's power of escheat and is an involuntary alienation.

In order to prevent property from being ownerless or abandoned, the government acquires property through the process of

Escheat. Whenever a property owner dies and leaves no will, the government has the power to acquire the property through a process called escheat.

All of the following should be a consideration in selecting tenants for the property EXCEPT

Ethnic background of the tenants and their employees. The criteria for tenant selection should include the spatial requirements of the tenants, their ability to pay the rent, and compatibility of their business with that of the other tenants. Ethnic background of tenants or employees should not be considered in order to avoid violation of any local, state, or federal fair housing laws.

Which of the following is considered lawful practice in real estate brokerage?

Exaggerated statements about the property. Puffing is legal exaggeration of a property's benefits.

One method a real estate investor may use to defer capital gains tax is to

Exchange Property For Like-Kind Property. The tax on capital gains is normally due when a taxpayer files a tax return for the previous year. Complying with Section 1031 of the U.S. Internal Revenue Code will defer the tax due until a future date. This is commonly called a Section 1031 or like-kind exchange.

Once a sales contract is completed with all parties fulfilling their promises, the ownership changing hands, and the seller receiving the sales price amount, the sales contract is a(n)

Executed contract. At closing, after the seller has conveyed the property to the buyer and the seller has received the sales price amount, the contract is considered an executed contract.

A buyer who owns the property in equity has a(n)

Executory contract. During any point in the executory contract (time period between signed offer to title transfer), the buyer has equitable title (also called the owner in equity).

The buyer has made an offer that the seller has accepted, and proper notice has been given to the buyer of the seller's acceptance. The offer is now considered an

Executory contract. The period from when the contract is agreed to and signed by both parties until it is executed (closed) is called the executory period.

During the period of time after a real estate sales contract is signed, but before title actually passes, the status of the contract is

Executory. A contract is in executory status when its terms of agreement have not yet been carried out. When it has been carried out, it is said to be executed.

When the parties agree to terms and show their intentions in words, whether orally or written, the agreement is said to be a(n)

Express contract. In an express contract, the parties state the terms and show their intentions in words—oral or written. Most real estate contracts are express contracts; they have been committed to writing. Under the statute of frauds, certain types of contracts must be in writing to be enforceable in a court of law.

Appraisals are required for

FHA and all federally related loans. Appraisals are required for all federal loan programs.

An FHA-insured mortgage loan would be obtained from which of the following?

FHA insures loans but does not lend money. Loans must be obtained from FHA-approved lending institutions.

The National Do Not Call Registry is managed by

Federal Trade Commission (FTC). The registry is a list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls they receive.

All Commission investigations begin as a result of verified consumer complaints.

False, because the Commission will also investigate if AREC auditors reveal problems

Which of the following is a protected class under the Alabama Fair Housing Law?

Familial status is a protected class under the Alabama Fair Housing Law.

The conservatorship of Fannie Mae and Freddie Mac is the responsibility of the

Fannie Mae has shareholders but is under the conservatorship of the Federal Housing Finance Agency (FHFA). It creates mortgage-backed securities using pool of mortgages as collateral and deals in conventional, FHA, and VA loans.

Another name for a qualified fee estate is the

Fee simple defeasible. A fee simple defeasible estate is a qualified fee estate subject to the occurrence or nonoccurrence of some specified event.

A person who has complete control of a parcel of real estate is said to own a

Fee simple estate. The highest interest in real estate recognized by law is the fee simple or fee simple absolute estate, providing the holder all rights to the property.

The relationship of broker to client in an agency relationship is that of

Fiduciary. The client in an agency relationship is the principal to whom the agent gives advice and counsel. The agency agreement usually authorizes the broker to act for the principal. The agent's fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties.

In Alabama, which of the following actions are legally acceptable for a landlord to take when a tenant has NOT paid the rent?

File legal notice. To evict a tenant, legal notice has to be made and a judge decides whether the eviction action is appropriate. Note that the order a judge issues after an eviction lawsuit is an unlawful detainer writ, not a warrant. A warrant is a criminal procedure.

An appraisal used in connection with a federally related transaction must be performed by a competent individual whose professional conduct is subject to supervision and regulation by the state as mandated by the

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). An appraisal used in connection with a federally related transaction must be performed by a competent individual whose professional conduct is subject to supervision and regulation by the state as mandated by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).

Personal property included in a sale of real estate may include

Fireplace equipment. Personal property may include fireplace equipment.

At the termination of a rental agreement,

Lease is discharged. Termination can occur either when all parties have fully performed their obligations under the agreement or when the parties agree to cancel the lease.

The priority of liens means

First to record, first in right. As specified by the state, the priority of liens refers to the order in which order in which claims against the property will be satisfied if the property is sold by the debtor. Typically, the priority of payment is established by the date the liens are placed in the public record of the county in which the property is located.

A property manager repairs a leaking sink. This is classified as which type of maintenance?

Fixing something that is not working properly (malfunctioning) is making a Corrective repair.

Which of the following is NOT an encumbrance on real estate?

Fixture. An encumbrance is a right in, or claim against, property held by someone other than the property owner.

If a commercial property recently sold for $760,000 and its annual gross income was $85,400, the GIM for the property would be

For a commercial property, sales price divided by annual gross income is the formula for the gross income multiplier (GIM). $760,000 ÷ $85,400 = 8.899, rounded to 8.9

How does a condominium board enforce payment of unpaid dues and assessments?

Foreclosure

Should the buyer default, an example of liquidated damages to the seller in a purchase contract could be

Forfeiture of the earnest money deposit. If a buyer provides earnest money, the earnest money is often identified in the contract as predetermined liquidated damages and is the seller's remedy for a buyer's default.

The process of probate is

Formal judicial process. Probate is a legal procedure for verifying the validity of a will and accounting for the decedent's assets. The process can take several months to complete.

Which of the following has an indeterminable duration?

Freehold estate. Freehold estates, which last an indeterminable length of time, include fee simple, defeasible fee, and life estates.

A deed in lieu of foreclosure is also known as

Friendly foreclosure. A deed in lieu of foreclosure is also called a friendly foreclosure because it is carried out by mutual agreement rather than by lawsuit.

The commitment to issue a title policy includes all of the following EXCEPT

Full sale price of the property. The commitment to issue a title policy includes the name of the insured party, legal description of the real estate, estate or interest covered, conditions and stipulations under which the policy is issued, and a schedule of all exceptions, including encumbrances and defects found in the public records and any known unrecorded defects. It does not include the full sale price of the property.

A loss in value as the result of the market's response to an item, rather than a deterioration of the item's physical condition, is

Functional obsolescence. The design features that were most desirable in the 1970s may make a home seem outmoded, and undesirable features may not be economical to correct.

A deed contains a promise that the title conveyed is good and a promise to obtain and deliver any documents necessary to ensure good title. This deed contains an example of which covenant?

Further assurances. Any promise to obtain documents to make the title good is the covenant of further assurance. The covenants of quiet enjoyment, seisin, and warranty forever are not addressed.

A property manager who enters into a management agreement with an owner is usually a

General agent. While residential real estate brokers are special agents in each transaction, property managers are typically general agents; their work usually continues and involves multiple representations of the same principal (owner/investor/landlord) because they are involved in ongoing dealings with many tenants.

The data collected by the appraiser for the appraisal process includes

General data and specific data. The data collected by the appraiser for the appraisal process includes general data and specific data.

A grantor conveys property by delivering a deed. The deed contains five covenants. This is MOST likely a

General warranty deed. A general warranty deed contains covenants of seisin, further assurance, quiet enjoyment, freedom from encumbrances, and warranty forever.

The grantee receives greatest protection with what type of deed?

General warranty. In the general warranty—often just called warranty—deed, the grantor makes more promises and gives the grantee more covenants than in any other deed.

The three principal responsibilities of the property manager do NOT include

Generating maximum income for the property manager. The three principal responsibilities of the property manager do not include generating maximum income for the property manager.

A subdivision had a deed restriction, covering all the properties in the subdivision, that set aside the back six feet of each parcel as a combination green-belt area and bicycle path. A homeowner plans to convert the back one-half of her yard, including this set-aside space, into an organic garden. Her neighbor can

Go To Court In An Attempt To Obtain an Injunctive Relief. Restrictive covenants can be enforced in court when one lot owner applies to the court for an injunction to prevent a neighboring lot owner from violating recorded restrictions.

To be valid, a deed must name

Grantee. The person to whom the property is being conveyed must be readily identified from the deed itself.

The disadvantage to a buyer receiving a quitclaim deed is that

Grantor makes no warranties regarding the title of the real property. The quitclaim deed contains no warranties of title. It is often used to cure title problems.

A contract that conveys the right to the possess the real property of another, but does not convey title, is a

Lease. The lessor (landlord) grants the right of possession to the lessee (tenant); the lessor retains title.

In one city, developers are limited by the zoning law to constructing no more than an average of three houses per acre in any subdivision. What does this restriction regulate?

Gross Density. Public land-use controls commonly seek to control density—such as how many living units will be allowed per acre.

A lease in which a commercial tenant's rent amount stays the same for the term of the lease, and the tenant pays only rent to the landlord is what type of lease?

Gross. A lease with fixed rent (the monthly rent amount stays the same throughout the entire lease) with the landlord paying other expenses such as taxes, insurance, and maintenance, is called a gross lease. These are commonly used in residential rentals but could be used for any type of property.

A homebuyer has a mortgage that provides for increasing payments over the life of the loan so that it can be paid off earlier than would be the case with a regular amortized loan. The homebuyer has a

Growing-equity mortgage. The growing-equity mortgage uses a fixed interest rate, but payments of principal are increased according to an index or schedule. The total payment thus increases, and the loan is paid off more quickly.

Which of the following is FALSE about asbestos?

HUD requires that all residential buildings be tested for asbestos-containing materials. Federal government regulations establish guidelines for owners of public and commercial buildings (not residential) to test for asbestos-containing materials. The removal process, though, requires state-licensed technicians and specially sealed environments.

Which regulatory body administers RESPA?

HUD. The Real Estate Settlement Procedures Act (RESPA) is a federal consumer law administered by HUD. It requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the costs of settlement services, such as kickbacks and referral fees that can increase settlement costs for homebuyers.

Which agency, upon receiving a complaint regarding a Fair Housing Act violation, investigates?

HUD. The federal Fair Housing Act is administered by the Office of Fair Housing and Equal Opportunity under the direction of the secretary of HUD. Upon receiving a complaint, HUD initiates an investigation.

Where is it necessary to define or explain in the deed the ownership to be enjoyed by the grantee?

Habendum clause. A habendum clause may follow the granting clause. The habendum clause begins with the words "to have and to hold."

An individual who makes a claim to certain property, takes possession of it, and most important, uses it, and takes title away from an owner who fails to use or inspect the property for a period of years

Has acquired the title through adverse possession. An individual who makes a claim to certain property, takes possession of it and, most important, uses it, and takes title away from an owner who fails to use or inspect the property for a period of years has acquired the title through the principle of adverse possession.

When parties own property as tenants in common, each owner

Has equal rights of possession with the other owners. Tenants in common have undivided rights of possession in the entire property but may have different shares of ownership.

The purchaser of real estate under an installment contract

Has only an equitable interest in the property's title. The purchaser (vendee) holds equitable title during the executory period, while the seller (vendor) retains legal title.

In a land contract, the vendee

Has possession during the term of the contract. In a land (installment) contract, the vendee is the buyer, who has possession during the term of the contract. The buyer also has equitable, but not legal, title.

In a preprinted sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to

Have both parties initial or sign in the margin near each change. All parties must initial or sign the changes. To draw a new contract would be to invite a new round of negotiation. Letters approving all changes might then be treated as part of the contract, but such a cumbersome procedure is seldom seen.

In a standard sales contract, several words were crossed out or inserted by the parties. To eliminate future controversy as to whether the changes were made before or after the contract was signed, the usual procedure is to

Have both parties initial or sign in the margin near each change. All parties must initial or sign the changes. To draw a new contract would be to invite a new round of negotiation. Letters approving all changes might then be treated as part of the contract, but such a cumbersome procedure is seldom used.

Property tax liens

Have priority over other liens. A property tax lien can take priority over other recorded liens.

A person is NOT required to have an active real estate license in order to sell

Her mother's property or a property belonging to a spouse, child, or parent.

What would a listing agent be legally required to disclose about the property to prospective buyers?

High levels of lead have been detected on the property.

For an investor and a lender, a high degree of leverage translates to

Higher Risk For Both Investor and Lender. Because of the high ratio of borrowed money to the value of the real estate, if property values drop and/or vacancy rates rise, there is an increased chance that the investor may be unable to pay even the financing costs of the property.

A buyer purchased a home under a land contract. In this form of seller-carry lending, the seller

Holds the deed to the home until final payment. The deed is passed to the purchaser in a land (installment) contract upon payment in full.

Many states now require at LEAST a real estate license or an association management license for those who specialize in managing

Homeowners and condominium associations. Many states now require at least a real estate license or an association management license for those who specialize in managing homeowners and condominium associations.

Homes built in factories meeting Department of Housing and Urban Development (HUD) specifications are called

Homes built in factories meeting HUD specifications are called manufactured homes.

Which of the following is a legal life estate?

Homestead. Homestead rights are granted by statute in some states to provide some protection to debtors and their families against the execution of judgment liens on their homes by the action of unsecured creditors.

What is another name for a federal tax lien?

IRS tax lien. This type of lien results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes.

If someone fails to pay part of their federal income taxes, what type of lien results?

IRS tax lien. This type of lien, also known as a federal tax lien, results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes.

Under its police powers, a municipality may regulate all of the following about housing in a development EXCEPT

Identity Of Ownership. Police powers may control the use, size, details of construction, and density of occupancy—but not who may own buildings.

In order to create maximum impact and "buzz," a real estate agent puts out yard signs that simply say For Sale and also contain a very large QR code. Is this a good strategy?

No, this is a blind ad and is illegal.

The law providing that a loan applicant who is rejected must be provided with a statement of the reasons for the rejection within 30 days is the

If a loan application is rejected, the federal Fair Credit Reporting Act (FCRA) requires that the lender detail the reasons for the rejection in a statement that must be provided to the loan applicant within 30 days. The loan applicant also has the right to a free copy of any credit report that was considered in the loan application process. Additional state protections may also apply.

A special assessment is generally paid

In equal annual installments over a period of years. The first installment is usually due during the year following the approval of the assessment and the first bill includes on year's interest.

One way in which a homeowner can set aside funds for future real estate taxes and property insurance premiums is to make regular payments into a(n)

Impound account set up by the lender. The lender may require that the borrower provide a reserve fund to meet future real estate taxes and property insurance premiums.

Which of the following is TRUE regarding asbestos?

Improper Removal Of Asbestos Can Cause Further Contamination Of a Building. Removing asbestos runs a great risk of further contaminating a building. Removal must only be done by skilled, licensed contractors, not by brokerage personnel. Once disturbed, asbestos can remain suspended in air for long periods of time before settling and then being disturbed once again.

limited consensual dual agency

In Alabama, a licensee may represent both parties in the same real estate transaction as long as all parties to the transaction have given their written consent. This practice is called

Special Agency

In Alabama, real estate agents cannot bind their principals to a contract. This is an example of

The lease that provides for the tenant to pay the LEAST amount of expenses other than rent is the

In a gross lease, the 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.

In which type of loan is the loan amount divided into two parts to be paid off separately by periodic interest payments followed by payment of the principal in full at the end of the term?

In a straight or term loan, the borrower makes periodic payments of interest only. At the end of the loan term, the entire original principal debt must be paid.

In Alabama, which is TRUE regarding property ownership by married couples?

In divorce actions, the concept of separate property and marital property exists.While Alabama is not a community property state, a similar concept exists in Alabama case law under property distribution.

An individual's or company's interest in or right to use someone else's land that is not adjacent to or near property of the individual or company is an easement

In gross. Commercial easements in gross may be assigned, conveyed, and inherited. Person easements in gross are usually not assignable and terminate on the death of the easement owner.

Which of the following would cause a cloud on title?

In more serious cases, such as a missing name of the grantor or a gap in the chain of title, it may be necessary to file a suit for quiet title.

A fee simple estate may be held

In three basic ways. A fee simple estate may be held in three basic ways: in severalty, in trust, or in co-ownership.

A federally related transaction is any real estate-related financial transaction

In which a federal financial institution or regulatory agency is engaged. A federally related transaction is any real estate-related financial transaction in which a federal financial institution or regulatory agency is engaged.

Under the statute of frauds, all contracts for the sale of real estate must be

In writing to be enforceable. A statute of frauds calls for real estate sales contracts to be in writing. Such statutes do not address who writes the agreements or on what forms they are written. Earnest money is not an essential feature of a contract of sale, although it is often mistakenly said to be.

A successful property manager has demonstrated that he has the ability to

Increase property income over previous levels. Successful managers show that they can increase property income over previous levels.

A licensed real estate salesperson has a written contract with his broker specifying that he will not be treated as an employee. The salesperson's entire income is from sales commissions rather than an hourly wage. Based on these facts, the salesperson is considered a(n)

Independent contractor. The salesperson meets the IRS's three requirements to be treated as a self-employed independent contractor: the individual (1) is a real estate licensee, (2) has an agreement with the broker that the licensee will not be treated as an employee for federal tax purposes, and (3) earns the majority of income from the firm in commissions, not wages.

Leasing agents are usually

Independent contractors working on a commission basis. Leasing agents are usually independent contractors working on a commission basis.

All parties identified in the contract must sign a listing agreement, including

Individuals having a legal interest in the property. All parties identified in the contract must sign the listing, including individuals having a legal interest in the property.

The main factors that affect a property's potential price increase are

Inflation and Intrinsic value. Inflation results from an increase in the amount of money in circulation; the value of money declines, which means that interest rates and prices rise. The intrinsic value of real estate is a result of the individual choices and preferences of buyers for a given geographic area.

Upon discovering a latent defect in a property, the real estate professional should discuss the problem with the seller and then

Inform any prospective buyers of the defect. A seller's agent is expected to disclose information about material defects in the property to prospective buyers.

Information about the exact location and size of the property is obtained through a(n)

Information about the exact location and size of the property is obtained through a survey.

Which of the following is NOT one of the four unities of title?

Insurance. The unities are PITT: possession, interest, time, and title.

Which statement about interest on a fully amortized mortgage or deed of trust loan is TRUE?

Interest may be paid in arrears; that is, at the end of each period for which it is earned. Interest may—and typically is—paid in arrears. The February 1 payment pays for the use of the borrowed money in January.

The charge for the use of money is

Interest on the remaining principal. Interest may be due at either the end (in arrears) or the beginning (in advance) of each payment period, as specified in the promissory note.

An Alabama broker is holding an earnest money deposit. If the sales contract does not close and the parties dispute whether the earnest money should be refunded or not, the broker should

Interplead the funds into court

A person who has died without a will has died

Intestate. When a property owner dies intestate, title to the property will pass to the decedent's heirs, as provided in the state laws of decent.

A property owner can seek compensation when the property's value has been diminished because of an adjacent public use by claiming

Inverse condemnation. Even though property is not used when constructing an adjacent public improvement, such as a highway, its value may be significantly diminished because of the existence of the improvement.

When properly recorded in the county where the real estate of the defendant is located, a judgment becomes

Involuntary lien. A judgment is a general, involuntary, equitable lien on both real and personal property owned by the debtor.

How much interest is paid the first month of a $400,000 mortgage loan at 4.25% interest?

Is $1,416.67. For the first month of a $400,000 loan at 4.25% interest, the interest paid is $1,416.67, which is annual interest of $400,000 x 4.25%, or $17,000, divided by 12.

What is the annual real estate tax on a property valued at $135,000 and assessed for tax purposes at $47,250, with an equalization factor of 125%, when the tax rate is 25 mills?

Is $1,477. Tax = assessed value × equalization factor × tax rate. The millage rate is the tax on each dollar of assessed value: 1 mill = $0.001; 25 mills = $0.025. Therefore: $47,250 × 125% = $59,062.50, and $59,062.50 × $0.025 = $1,476.56. The best answer is $1,477.

The sale of a single-family house produced a total commission of $45,825. The sales associate who was responsible for bringing the buyer to the transaction has a 60/40 commission split arrangement with her employing broker, with the sales associate receiving the 60 percent. If the total commission was split between the listing and selling firms, what is the commission that the buyer's sales associate will receive?

Is $13,747.50. Fifty percent of $45,825 is $22,912.50, and 60 percent of that amount is $13,747.50, which is the buyer's sales associate's compensation for the transaction.

A charge of three discount points on a $120,000 loan equals

Is $3,600. A point is 1 percent of the amount borrowed (the loan amount). Three points would be three times as much: 3% × $120,000 = $3,600.

A married couple who file a joint tax return sell their principal residence after making it their principal residence for 14 years are entitled to exclude what amount of profit from capital gains tax?

Is $500,000. The exclusion may be used repeatedly, as along as the homeowners have both owned and occupied the property as their principal residence for at least two of the past five years.

The investor who sells property on an installment sale basis

Is Taxed on That Part of The Gain Received in Each Year's Installment Payments. The idea of an installment sale is to spread the tax liability out over the years of the installment sale; the taxpayer pays taxes only on the portion received in each taxable year.

The property manager's chief concern should be that the property

Is managed to achieve the highest overall rate of return possible on the owner's investment. The three principal responsibilities of the property manager are to achieve the objectives of the property owner, to generate income for the owner, and to preserve and/or increase the value of the investment property. In the process of meeting the goals of the property owner, the property manager is responsible for maintaining the owner's investment and ensuring that the property earns income.

A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. Then the buyer signs a note and a mortgage. In this example, the mortgage company is the

Is mortgagee. Because it receives the mortgage document, the mortgage company is the mortgagee.

RESPA prohibits certain practices that increase the cost of settlement services, including all of the following EXCEPT

Is spousal survivor benefits. When one of the property owners dies before the closing on the sale can take place, title to the property may be held in the name of the surviving spouse or other individual.

The maximum loss for which the company may be liable is

Is the face amount of the policy. The policy's face value is the maximum loss for which the company is liable unless the amount of coverage has been extended by use of an inflation rider.

A subdivision declaration reads, "No property within this subdivision may be further subdivided for sale or otherwise, and no property may be used for other than single-family housing." This is an example of

It is a restrictive covenant—in this case, a limitation placed on the entire subdivision by its developer and recorded with the plat of subdivision. It is an example of private land-use control.

Which statement is TRUE of a listing agreement?

It is an employment contract for the professional services of the broker. The listing is the broker's contract of employment by the seller. It is not a contract between the seller and any buyer and so cannot be enforced on the seller by a buyer, even though the buyer might make an offer that is the "mirror image" of the terms of the listing. In such an event, however, the seller may owe the broker a full commission for having produced the result the listing called for: an able buyer who is ready and willing to buy according to the terms of the listing.

A licensee's license was suspended and on the day after the suspension, the licensee had a closing on a listing. What is TRUE concerning the agent's listing commission?

It is okay for the licensee to collect the earned commission.

What does the phrase the law of agency is a common law doctrine mean?

It is part of a body of law established by tradition and court decisions. The basic framework of the agency law that governs the legal responsibilities of real estate brokers to the people they represent is known as common law.

Which of the following is TRUE about a promissory note?

It makes the borrower personally liable for the debt. A promissory note is the borrower's personal promise to repay a debt according to agreed-upon terms.

James W. Smith wishes to obtain a real estate license. He is commonly known as Jimmy Smith, which is how he plans to advertise listings once he is licensed. What name must he put on his application?

James (Jimmy) W. Smith. If the prospective licensee is usually known by a nickname, that nickname must be included on the license application. An example is "James (Jimmy) W. Smith." Inclusion of the nickname on the license applications allows advertising in the nickname, and not just the formal name. If the license is issued to James W. Smith, the licensee can later pay a fee and have it changed to "James (Jimmy) W. Smith" but must use "James W. Smith" in advertising until the new license has been issued.

The four unities of possession, interest, time, and title are associated with which of the following?

Joint tenancy. A joint tenancy can only be created by an intentional act and requires the four unities—PITT—to be present.

A brother and his sister were co-owners of a lot. The sister became the sole owner automatically when the brother died. The form of ownership they had was

Joint tenancy. Because the sister automatically inherited, she and her brother must have been joint tenants.

Two people are co-owners of a small office building with the right of survivorship. One of the co-owners dies intestate and leaves nothing to be distributed to his heirs. Which of the following would explain why the surviving co-owner acquired the deceased's interest?

Joint tenancy. Upon the death of one party in a joint tenancy arrangement, all remaining interests do not pass to the heirs or according to the will but to the surviving joint tenant.

A type of foreclosure that allows the property to be sold by court order is

Judicial foreclosure. When a borrower defaults, the lender's attorney can file a suit to foreclose the lien. After presentation of the facts in court, the property is ordered sold.

Successful property managers do all of the following EXCEPT

Keep on good terms with tenants by overlooking infractions of the building rules. If a property manager fails to treat all tenants the same in terms of rent collection and enforcement of lease terms or rules and regulations, the manager could be in violation of fair housing laws. A good manager is tactful and decisive and acts to the benefit of both owner and tenant.

The buyer of real estate takes possession but not legal title to property under a(n)

Land contract. The land contract, also known as a contract for deed, contract of sale, installment contract, or one of many other names, provides for the buyer of property to take possession and acquire equitable title, while legal title is held by the seller until sufficient payment is made by the buyer to the seller. With a purchase money mortgage, the buyer receives legal title to the property but places a security interest on it in favor of the seller.

A buyer and a seller enter into a real estate sales contract. Under the contract's terms, the buyer will pay the seller $500 a month for 10 years. The seller will continue to hold legal title, while the buyer will live in the home and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do the buyer and seller have?

Land sales contract. This arrangement has a variety of names: contract for a deed, land contract, installment contract, land sales contract, and more. Its most important characteristic is that no deed is given to the buyer (vendee) until all the payments in the contract have been made, although some states give the buyer an equitable interest in the property after a specified period of successful payments.

If, after a 12-month period, the temporary licensee has NOT completed the Commission's required postlicensing course, the temporary license will

Lapse If a new licensee does not complete the 30-hours of postlicense education within 12 months of the date the temporary license was issued, then the license will lapse. At that point, if the person still desires to become a real estate licensee, the process will need to be started all over again and the license exam retaken.

A tenant who rents an apartment from the owner of the property holds

Leasehold interest. The leasehold interest held by a tenant is not revocable like a license and lasts for a fixed period. It is less than a life estate and so is not a freehold. Finally, unlike an easement, it gives its holder the right to possess the land.

In a deed of trust, the borrower gives

Legal title to the trustee. With a deed of trust, the borrower gives legal title to the trustee.

Which charge noted on the Closing Disclosure must be the same or less than the charge noted on the Loan Estimate form?

Lender charges for taking and underwriting the loan stated on the Closing Disclosure must be the same or less than the charge noted on the Loan Estimate form.

A mortgage becomes a lien on real property when the

Lender records the financing documents. It is not until the financing documents are recorded that the lien actually takes effect.

A mortgage reduction certificate is executed by a(n)

Lending institution. A mortgage reduction certificate, issued by the seller's lender, confirms the balance remaining on a loan to be assumed as well as the interest rate and the date through which interest has been paid.

A mortgage servicing transfer statement is executed by

Lending institution. A mortgage servicing transfer statement, issued by the seller's lender, tells the borrower whether the lender intends to service the loan or transfer it to another lender for servicing.

Documents affecting real estate are recorded or filed in the county in which the property is located in order to

Let interested parties know where to discover the various interests of other parties to the transaction. All recording acts provide that any written document affecting interests in land be recorded where the land is located to serve as public notice. Then any parties interested in the title of the property know where to discover the various interests of all parties.

The use of borrowed money to finance an investment is called

Leverage

A guest slips on an icy apartment building stair and is hospitalized. A claim against the building owner for medical expenses may be paid under which of the following policies held by the owner?

Liability insurance protects an insured who becomes obliged to pay (liable) for damage or injury to others.

What amount of personal funds may an Alabama broker keep in a trust account?

Licensees may keep up to $1,000 of personal funds in a trust account but should disburse at least once every 30 days and reduce the balance to an amount necessary to cover normal banking fees for the account.

The owner of a condominium unit learns that a neighbor has failed to pay real estate taxes. If this neighbor does not pay the taxes,

Lien can be filed against the neighbor's unit and percentage of the common elements. Real estate taxes are assessed and collected on each unit as an individual property. Failure to pay taxes may result in a lien against the neighbor's unit.

A state in which a mortgage that can be foreclosed is the preferred method of security for a home loan is called a

Lien theory state. A mortgage creates a lien on the property used as collateral for a debt. A state in which a deed of trust is the preferred method of security interest for a home loan is called a title theory state.

In a certain state, a mortgagee holds a lien on real property offered as collateral for a loan. The mortgagor retains both legal and equitable title to this real property. The state where this real property is located is BEST characterized as which type?

Lien theory. The mortgagor retains both legal and equitable title to the real property. If the borrower defaults on the loan, the lender must go through formal foreclosure proceedings to recover the debt.

A mortgage or deed of trust recorded against real property to secure the repayment of a debt is a(n)

Lien. A lien secures payment of indebtedness.

Because a homeowner failed to pay the real estate taxes on time, the taxing authority imposed a claim against the homeowner's property. This claim is known as a(n)

Lien. Unpaid real estate taxes are a lien on the property because they are a charge against the property that provides security for a debt or an obligation of the property owner.

Which of the following forms of ownership is recognized in Alabama and provides for ownership of property during the life of a designated person, with remainder to someone else?

Life estate

If buyers seek a mortgage on a single-family house, they would be LEAST likely to obtain the mortgage from a

Life insurance companies make mortgage loans on large projects but rarely, if ever, on individual home purchases.

How quickly an asset may be converted into cash is called

Liquidity

Notice of a pending legal action that can be filed in the public record is the

Lis pendens. The lis pendens is a notice filed in the public record of a pending legal action affecting the title to or possession of property.

The encumbrances and defects that will NOT be insured against under a title insurance policy are included in the

List of exclusions. Title insurance does not offer guaranteed protection against all defects. The policy names uninsurable losses called exclusions.

TRID requires borrowers be given which document within three days of loan application?

Loan Estimate. TRID (TILA-RESPA Integrated Disclosure rule) requires a borrower to be given the Loan Estimate at the loan application or no later than three days after the application.

Which of the following items are typically prorated at closing?

Loan interest on an assumed loan. Most closings involve the division of financial responsibility between the buyer and the seller for such items as loan interest, taxes, rents, fuel, and condominium or homeowners association fees.

The note includes all of the following EXCEPT

Loan origination fee. The note generally states the amount of the debt, the time and method of payment, and the rate of interest. The loan origination fee is to cover the expenses involved in generating the loan, which include the loan officer's salary, paperwork, and the lender's other costs of doing business.

At closing, the buyer would typically be credited for

Loans being assumed. Loans, whether new or assumed by the buyer, are always a credit to the buyer because they reduce the amount of cash the buyer is required to bring to closing. Listing brokerage commissions and payoff of existing loans are a seller debit. The sale price is a buyer debit.

Loans that exceed the limits of loans eligible to be sold to Fannie Mae and Freddie Mac are called

Loans that exceed the limits of loans eligible to be sold to Fannie Mae and Freddie Mac are called nonconforming loans.

From the reproduction or replacement cost of a building, the appraiser deducts depreciation, which represents

Loss of value due to any reason. Depreciation is loss of value from any reason. Some examples of such causes are physical deterioration (wearing out and/or deferred maintenance), external (economic) obsolescence, and functional obsolescence (lack of modernity or good design).

All written documents that affect title to real estate should be

Made a part of the public record. The public record for the jurisdiction in which the real estate is located serves notice to the world of the existence of the documents of transfer, liens, and other instruments that affect title to real estate.

A promissory note

Makes the borrower personally liable for the debt. A promissory note is the borrower's personal promise to repay a debt according to agreed terms.

Which of the following is TRUE about a promissory note?

Makes the borrower personally liable for the debt. A promissory note is the borrower's personal promise to repay a debt according to agreed-upon terms.

The amount of money a property is likely to command in the marketplace is its

Market price is a property's asking, offer, or sales price.

When appraisers use the expression "most probable price," they are referring to a property's

Market value reflects what buyers and sellers feel is a fair price.

A seller delivered title to a buyer at closing. A title search had disclosed no serious defects, and the title did not appear to be based on doubtful questions of law or fact or to expose the buyer to possible litigation. The seller's title did not appear to present a threat to the buyer's quiet enjoyment, and the title insurance policy provided was sufficient to convince a reasonably well-informed person that the property could be resold. The title conveyed would commonly be referred to as a(n)

Marketable title. Title that is good enough that a reasonably well-informed person would accept it is called marketable title.

MOST contracts state that the seller is responsible for providing what type of title to the property?

Marketable. Most contracts clearly state that the seller is responsible for providing marketable title to the property. The term marketable means a title that has no defects that could carry over as a problem for the new owners at whatever time they decide to sell.

A homeowner listed her home and advised her agent that the home had been tested for radon. She said that although the levels exceeded EPA guidelines, nothing had been done to remedy the condition. Which disclosure phrase BEST describes this health risk situation?

Material adverse fact

Once a property is established as a condominium, each unit becomes a separate parcel of real estate that is owned in fee simple

May be held by one or more persons in any type of ownership or tenancy recognized by state law. Once a property is established as a condominium, each unit becomes a separate parcel of real estate that is owned in fee simple and may be held by one or more persons in any type of ownership or tenancy recognized by state law.

In a nonjudicial foreclosure, if the borrower does not pay the defaulted loan in full, the lender

May record a notice of default. The trustee or mortgagee may be required to record a notice of default at the county recorder's office.

The law that requires certain sex offenders to register their residence is called

Megan's law

In describing real estate, the method that may use a property's physical features to determine boundaries and measurements is

Metes and bounds. Monuments are the turning points in the metes-and-bounds method of describing property. In this method, natural, tangible features, such as a distinctive rock or a great tree, were sometimes used as monuments. The path of a stream might serve as all or part of a boundary line. Metes means distance; bounds refers to direction (not boundaries). The description gives distance in a compass direction from the point of beginning (POB) and then from each succeeding monument, until it returns to the POB.

In describing real estate, which of the following methods uses a property's physical features to determine boundaries and measurements?

Metes and bounds. Monuments are the turning points in the metes-and-bounds method of describing property. In this method, natural, tangible features, such as a distinctive rock or a great tree, were sometimes used as monuments. The path of a stream might serve as all or part of a boundary line. Metes means distance; bounds refers to direction (not boundaries). The description gives distance in a compass direction from the point of beginning (POB) and then from each succeeding monument, until it returns to the POB.

What is the key to an accurate appraisal?

Methodical collection and analysis of data. The appraisal process is an orderly set of procedures used to collect and analyze data to arrive at a justifiable conclusion of value.

Escheat is intended to prevent property being

Ownerless or abandoned. Escheat is intended to prevent property from being ownerless or abandoned.

The organism that can be found almost anywhere and which can grow on almost any organic substance is

Mold can be found almost anywhere and can grow on almost any organic substance, as long as moisture, oxygen, and an organic food source are present.

What are the turning points in the metes-and-bounds method of property description?

Monuments are the turning points in the metes-and-bounds method of describing property. In this method, natural, tangible features, such as a distinctive rock or a great tree, were sometimes used as monuments. The path of a stream might serve as all or part of a boundary line. Metes means distance; bounds refers to direction (not boundaries). The description gives distance in a compass direction from the point of beginning (POB) and then from each succeeding monument, until it returns to the POB.

Under the terms of a net lease, a commercial tenant would usually be responsible for paying all of the following property expenses EXCEPT

Mortgage debt service. Under a net lease, the tenant pays all property expenses, including taxes and insurance, utilities, maintenance, and so on, but not debt service (the landlord's mortgage payment).

An agent shows a listed property to a consumer who professed a lack of interest. The two have no written agreement regarding brokerage services. The consumer then contacts the listing agent directly and makes an offer that is 3% less than the list price. The consumer explains that because the listing agent does not have to split a commission, he should reduce the listing commission to 3%, thereby netting the seller the same funds at closing as if there had been a full price offer and a 6% commission expense. The first agent learns about this and claims to be entitled to a commission split as the procuring cause of the sale. Who will resolve this dispute?

Most likely the local association of REALTORS®, if both agents are members

The price under consideration in the definition of market value is the

Most probable price that a property should bring. The definition assumes that the property is offered in an open market under all conditions requisite to a fair sale, with both buyer and seller acting prudently and knowledgeably and the price not affected by undue stimulus.

The provision in a contract with a property seller that gives additional authority to the broker and obligates the broker to alert other brokers to the availability of the property is a(n)

Multiple listing clause. A multiple listing service (MLS) is a marketing organization whose broker members make their own exclusive listings available through other brokers.

A plat for a proposed subdivision is submitted to the

Municipality. The plat for a proposed subdivision usually must be approved by the municipality before it can be recorded; when property does not fall within city limits, the county may have this responsibility.

In evaluating the income and debt of applicants and in determining whether to rent to an applicant, the manager

Must be consistent. In evaluating the income and debt of applicants and in determining whether to rent to an applicant, the manager must be consistent.

The listing contract should provide that if the broker is to have the authority to sign legal documents on behalf of the seller, the broker

Must first obtain a power of attorney from the seller. The listing contract should provide that if the broker is to have the authority to sign legal documents on behalf of the seller, the broker must first obtain a power of attorney from the seller.

If a tenant breaches the duty to pay rent, the landlord

Must give legal notice and a judge will decide whether the eviction action is appropriate.

The Real Estate Settlement Procedures Act (RESPA) does not apply to loans on

Properties located on more than 25 acres. RESPA does not apply to loans on properties located on more than 25 acres.

A real estate broker acting as an owner's property manager

Must not profit from private contracts at the expense of the owner. As the general agent, the property manager is charged with the fiduciary responsibilities of care, obedience, accounting, loyalty, and disclosure. In all activities, the manager's first responsibility is to realize the highest return on the property in a manner consistent with the owner's instructions.

A real estate broker acting as the agent of the seller

Must promote and safeguard the seller's best interests. A broker acting as the agent of the seller is responsible to the seller and must promote and safeguard the seller's best interest.

Another term for the meeting of the minds that occurs in the formation of a contract when there is an offer and acceptance is

Mutual assent. There must be complete agreement between the parties about the purpose and terms of the contract.

A buyer under an executory contract has found numerous inspection issues the seller is unwilling to repair. The seller and the buyer agree to terminate the contract with all things of value returned to each party. This is known as

Mutual rescission. When both parties to a contract are returned to their original position, it is known as mutual rescission.

A service member is transferred overseas. Rather than hiring a real estate agent, she plans to save money by giving her neighbor a power of attorney to advertise, show, and sign contracts for the sale of her home, with no compensation. If they proceed with this plan, has anybody violated Alabama license laws?

NO. A person acting under a power of attorney, and without compensation, is exempt from the licensing requirements.

An agent listed a home and was told by the homeowner that there was 10 inches of insulation in the attic. Consequently, the agent wrote 10 inches of insulation on an information sheet that a prospective buyer picked up and relied on to buy the home. After moving into the property, the buyer discovered that the attic had only four inches of insulation. If the agent were taken to court and lost the argument that the seller should be held liable, what legal name would describe the agent's liability?

Negligent misrepresentation

When the broker should have known that a statement about a material fact was false, it is considered

Negligent misrepresentation. Negligent misrepresentation occurs when the broker should have known that a statement about a material fact was false.

A real estate sales associate, classified by the IRS as an independent contractor, receives

Negotiated share of commissions on transactions. An independent contractor may not receive any employee benefits and must not be treated as an employee for federal tax purposes. An independent contractor may negotiate with the broker for commissions on transactions.

If a property's annual net income is $24,000 and it is valued at $300,000, what is its capitalization rate?

Net annual income ÷ Market value = Capitalization rate ($24,000 ÷ $300,000 = 0.08, or 8%). Given any two elements, the third can be easily computed.

Which type of listing is prohibited in some states?

Net listing. A net listing may be prohibited by state law.

The form of listing that is illegal in many states is the

Net listing. A net listing, which specifies an amount the seller will receive from a property sale, with any excess going to the listing broker, is illegal in many states and discouraged in others.

Under a brokerage agreement with a property owner, the broker is entitled to sell the property for any price, as long as the seller receives $85,000. The broker may keep any amount over $85,000 as a commission. This type of listing might be illegal and is called a(n)

Net listing. Whether an open, an exclusive-agency, or an exclusive-right-to-sell, any listing that allows the broker to keep all of the selling price over the net amount that the seller requires is a net listing. Net listings are illegal in many states.

Besides the purchase agreement, what other document must licensees provide to purchasers and sellers of single-family residential properties before signing a contract?

Net sheet

A void contract is one that was

Never legally enforceable. A void contract lacks some or all of the essential elements of a contract and so was never a contract in the eyes of the law.

An Alabama property management firm maintains a client trust account. The account contains $3,000 that belongs to landlord A and $8,000 that belongs to landlord B. Property belonging to A needs $4,000 worth of repairs after a fire. Insurance will cover the loss. Can the licensee write a check from the trust account to pay for the repairs?

No

A property management company manages student housing in a college town. Typically, vacated properties show a high degree of wear and tear, although no specific instances of abuse or neglect can be identified. It is just that the walls are dingier, the carpet shabbier, and the cabinets more scuffed than in nonstudent housing. As a result, the management company routinely deducts 10% from each security deposit for wear and tear. Is this allowed?

No in all circumstances. Residential landlords may not deduct sums from security deposits for normal wear and tear. While the wear and tear on student housing might be greater than the wear and tear on senior housing, it is still normal wear and tear for student housing.

The branch manager for a large mortgage company also holds an active Alabama real estate broker's license. Can that person act as the qualifying broker for other real estate licensees?

No, Because The Person's Principal Business Is Not Being a Real Estate Broker. A broker may serve as qualifying broker for a salesperson or associate broker only if licensed in Alabama and with a principal business as real estate broker. The qualifying broker must be in a position to actually supervise the real estate activities of the salespersons or associate brokers on a full-time basis.

A qualifying broker decides to retire, and sell the real estate company to his son, who will become the new qualifying broker. Can the retiring broker simply transfer all the listing contracts to the son without involving the sellers?

No, because listing contracts are personal services contracts

Do agency disclosure agreements include any provisions to pay compensation to a licensee?

No, because the obligation to pay compensation does not determine an agency agreement

A qualifying broker owes one of his licensees $25,000 in unpaid commissions. If the licensee files a lawsuit against the broker, wins, and meets all other conditions, can the licensee collect from the recovery fund?

No, because the recovery fund is for the protection of consumers, not licensees with commission disputes

A salesperson is charged with placing real estate signs on property without the owner's permission. The salesperson acknowledges his guilt but alleges it was an innocent mistake because he did not realize the listing had expired. He offers to plead guilty in return for a $50 fine and attendance at a Risk Management for Salespersons class. Is the Commission likely to accept this offer?

No, because this is not an allowed punishment

In order to earn some extra money for her clients, a broker establishes a trust account with an FDIC-insured bank in Alabama and then monthly "sweeps" anything over $10,000 into a money market account that earns 3% interest. Is this allowed?

No, because trust funds cannot be deposited in money market accounts

An Alabama real estate licensee was assured by his seller clients that the basement recreation room was finished by a licensed contractor and that all plumbing and electric work was done by licensed professionals. Unfortunately, six months after buyers purchased the home, a short circuit in the wiring behind the wall in the recreation room caused a fire that resulted in more than $20,000 of damage. The subsequent insurance investigation found that none of the work had been done by licensed professionals. Will the licensee be held liable for this misinformation?

No, he has no liability because the false information came from the seller and he did not know it was false.

A real estate brokerage has three divisions with a different qualifying broker for each division. One division sells condos, another manages vacation rentals, and a third is simply a referral company. A salesperson wants to be licensed under the condo sales and the condo rental company so he can learn both businesses. Is this possible?

No, he is allowed to be licensed under only one broker.

A facilitator functions as a(n)

Nonagent. Someone who works with a buyer and a seller (or landlord and tenant), assisting one or both with the transaction without representing either party's interests acts as a nonagent and may be called a facilitator, intermediary, transactional broker, transaction coordinator, or contract broker.

An intermediary functions as a(n)

Nonagent. Someone who works with a buyer and a seller (or landlord and tenant), assisting one or both with the transaction without representing either party's interests acts as a nonagent and may be called a facilitator, intermediary, transactional broker, transaction coordinator, or contract broker.

The functions of a facilitator or intermediary are those of a(n)

Nonagent. Someone who works with a buyer and a seller (or landlord and tenant), assisting one or both with the transaction without representing either party's interests acts as a nonagent and may be called a facilitator, intermediary, transactional broker, transaction coordinator, or contract broker.

A salesperson works in real estate part-time and often shows property for sale on her lunch hour. Because she is usually pressed for time, she delivers a copy of the mandated agency disclosure to the prospect and says, "Read this when you have a chance, but before I unlock the door, I have to get your signature confirming that I gave you a copy." By doing this, the salesperson has

Not fulfilled the disclosure requirement and may have additional liability. Disclosure must be meaningful and accepted only after a consumer has read and understood its consequences. In addition to a potential license law violation, the salesperson is at risk for a breach-of-fiduciary-duty allegation from the prospect if her expectations about the relationship are different from the salesperson's. Disclosure is a valuable risk-management tool for licensees and good for the consumer. The time it takes to properly accomplish meaningful disclosure and gain informed consent is time well spent. While it is advisable to also have a buyer representation agreement if the buyer is to be a client, it is not mandatory except when the buyer representation is exclusive. An agent must annotate the AREC agency disclosure form if, after presenting it to a consumer, the consumer refuses to sign the form. The annotation is not intended to replace an attempt to gain the consumer's signature.

A licensed salesperson wishes to change brokers and go to work for a different real estate company. The current broker refuses to send the license back to the AREC so it can be assigned to the new broker. What can the salesperson do to remedy this situation?

Nothing; The New Broker Can Simply File a Request For The Transfer and Pay a $25 Fee. A current qualifying broker cannot prevent a licensee from changing brokers. When the new broker requests the transfer and pays the $25 fee, the AREC will automatically transfer the license. It is not necessary for the old broker to agree, and the old broker cannot protest or do anything to stop the transfer. Payment of commissions earned while with the old broker is a different matter that must be settled between the parties. The AREC will not become involved in those disputes.

To institute a nonjudicial foreclosure, the trustee or mortgagee may be required to record a

Notice of default at the county recorder's office. To institute a nonjudicial foreclosure, the trustee or mortgagee will send a notice of default to the borrower indicating the amount that must be paid to make the debt current, as well as the action that will be taken if the required payment is not made.

Substitution of a new contract for an existing contract is called

Novation. Substitution of a new contract for an existing contract is called novation.

A buyer and a seller sign a contract for the sale of real property. A few days later, they decide to change many terms of the contract, while retaining the basic intent to buy and sell. The process by which the new contract replaces the old one is called

Novation. When a new contract replaces an old one, the process is novation. The new contract may be between the same parties or between one of the original parties and a new party. In any event, the parties' obligations under the old contract are terminated.

A real estate buyer takes over the seller's FHA loan that originated in 2005. The lender releases the seller of liability and substitutes the buyer as the party primarily liable for the mortgage debt. This type of transaction is

Novation. When a real estate purchaser assumes the seller's existing mortgage loan, the lender may choose to release the seller and substitute the buyer as the party primarily liable for the mortgage debt.

A provider of construction materials may give constructive notice of his unpaid invoices by

Obtaining a mechanic's lien against the subject property. A mechanic's lien is an involuntary lien that provides security for a person or company that has not been fully paid for the labor performed or material furnished to improve real property.

A homestead is a legal life estate in real estate that is

Occupied as the family home. In many states, a portion of the area or value of this land is protected or exempt from judgments for debts other than those secured by the property.

The covenant implied in a lease that ensures that the landlord will not interfere in the tenant's possession or use of the property is the covenant

Of quiet enjoyment. The covenant of quiet enjoyment is a promise by the lessor that the lessee may take possession of the premises and the landlord will not interfere in the tenant's possession or use of the property.

Mutual agreement of a real estate contract is indicated by

Offer and acceptance. An offer and acceptance would show that both parties mutually agree to a contract.

The listing agreement on a residential property states that it expires on May 2. Which event would NOT terminate the listing?

On April 15, the owner tells the listing broker that the broker's marketing efforts are not satisfactory. A mere complaint to the broker by the principal does not end the listing, whereas the expiration of the listing, the death of owner, or the destruction of the property would end it.

Ownership in severalty is property owned by

One individual or corporation. Ownership in severalty is property owned by one individual or corporation.

Real Estate Settlement Procedures Act (RESPA) regulations apply to first-lien mortgage loans made to finance the purchase of

One- to four-family homes, cooperatives, and condominiums. RESPA regulations apply to first-lien mortgage loans made to finance the purchase of one- to four-family homes, cooperatives, and condominiums.

An estate left the decedent's farm to eight grandchildren. Because no form of ownership was specified in the decedent's will, each of the grandchildren receives a

One-eighth interest in the property as a tenant in common. If no other form of ownership is specified, each co-owner is a tenant in common with the other co-owners. While each owner in this case has a one-eighth ownership interest, each shares unity of possession, which means the right to use the entire property.

The listing agreement that allows the property seller to employ multiple brokers is the

Open listing. In an open listing, which may also be called a nonexclusive listing, the seller retains the right to employ any number of brokers as agents.

Priority of liens refers to which of the following?

Order in which liens will be paid if property is sold to satisfy a debt. Priority of liens refers to the order in which claims against a property will be paid off. In general, the rule for priority of liens is "first come, first served," but there are some exceptions, such as taxes and assessments.

A seller listed her residence with a broker. The broker brought an offer at full price and terms of the listing agreement from a buyer who is ready, willing, and able to pay cash for the property, but the seller rejected the buyer's offer. In this situation, the seller

Owes a commission to the broker. The broker has fulfilled all the requirements. Even though no contract is signed with the willing buyer, the broker is due a full commission. The seller does not have to sell, just pay the commission.

A property manager's primary obligation is to the

Owner. The management agreement creates the agency relationship between the property manager and the owner in which the fiduciary relationship that is established requires the duty of loyalty of the property manager to the owner.

The flame-resistant chemical compounds that were often used in electrical equipment, such as transformers, are known as

PCBs Polychlorinated biphenyls (PCBs) consist of more than 200 chemical compounds that are not naturally occurring. They were often used in electrical equipment, including transformers, electrical motors in refrigerators, caulking compounds, and hydraulic oil in older equipment. Although use of PCBs was banned in 1979, many remain in the environment because burning them at more than 2,400 degrees in a closed environment is the only known way to destroy them.

A real estate sales associate has a license personal assistant who usually must be

Paid by the sales associate's employing broker. A sales associate's licensed personal assistant is also considered under the supervision of the sales associate's employing broker.

A standard title search would reveal all of the following EXCEPT

Parties in possession. Title searches use public records to find all items that have been recorded. Items that are typically recorded are tax liens, deed restrictions, easements, and mortgages. The parties in possession of the property would be found through a physical inspection of the property.

Which of the following is a requirement for Alabama real estate licensees?

Payment to the recovery fund when obtaining their initial real estate license

A tenant enters into a commercial lease that requires a monthly rent of a minimum fixed amount, plus an additional amount determined by the tenant's gross receipts exceeding $5,000. This type of lease is called a

Percentage lease. When a business tenant pays rent that varies according to the tenant's gross business receipts, the arrangement is called a percentage lease. In such a situation, the landlord shares in the tenant's business risk because of the possibility of receiving no more in rent than the minimum fixed amount.

All of the following are essential to the formation of a contract EXCEPT

Performance becomes an issue when a contract is terminated, not when it is formed.

If there is no expiration set forth in a residential tenancy, but rent is to be paid monthly, the lease is considered a

Periodic tenancy. If rent is paid monthly with no provision for a definite termination date, the lease could be a periodic tenancy (month to month) or a tenancy at will.

A license is an example of a(n)

Personal privilege. A license is a personal, revocable right of use. It is temporary in that it can be withdrawn at will by the one who issued it.

Collateral for a loan includes all of these EXCEPT

Personal property. The mortgage or deed of trust is the collateral for the loan. Personal property is typically not included in the loan, unless it is a package mortgage loan.

If a condominium unit owner has not paid homeowners association fees for the length of time required by state law, the HOA's remedy may be to

Place a lien on the property. When HOA fees are unpaid, the association's remedies may include seeking a court-ordered judgment to have the delinquent owner's unit sold to cover the outstanding amount or to place a lien on the property.

The 1896 U.S. Supreme Court case that upheld racial segregation in public facilities and the 1954 case that overturned it are

Plessy v. Ferguson and Brown v. Board of Education. Plessy established the "separate but equal" doctrine, but the Brown decision overturned it by holding that separate schools for black and white students are inherently unconstitutional.

There are two vacant adjacent lots, each worth approximately $50,000. If their owner sells them as a single lot, however, the combined parcel will be worth $120,000. What principle does this illustrate?

Plottage. The principal of plottage is that additional market value can be obtained in some instances by combining, and selling as a single parcel, two or more contiguous (i.e., adjacent) properties. This value exceeds the combined total that the individual properties would bring if sold separately.

There are two vacant adjacent lots, each worth approximately $50,000. If their owner sells them as a single lot, however, the combined parcel will be worth $120,000. What principle does this illustrate?V

Plottage. The principal of plottage is that additional market value can be obtained in some instances by combining, and selling as a single parcel, two or more contiguous (i.e., adjacent) properties. This value exceeds the combined total that the individual properties would bring if sold separately.

Documents referred to as title evidence include

Policies of title insurance. Deeds are never considered title evidence. Policies of title insurance are the best title evidence.

Which of the five rights to real property does the landlord sell to the tenant in a lease?

Possession. The landlord sells (rents) the right of possession to the tenant. The tenant now has rights that the landlord cannot violate. The landlord still holds the rest of the rights to the property. The tenant does not have the right to sell it (disposition) but the landlord still does.

A form authorizing one person to execute documents for another is called a

Power of attorney. That document is a power of attorney; the person named in it is an attorney-in-fact. Deeds do not authorize one person to act for another.

Every state has the power to enact legislation to preserve order, protect the public health and safety, and promote the general welfare of its citizens. That authority is known as a state's police

Power. Every state has the power to enact legislation to preserve order, protect the public health and safety, and promote the general welfare of its citizens. That authority is known as a state's police power.

Regulations that govern the use, occupancy, size, location, and construction of real estate also fall within the government's police

Power. Regulations that govern the use, occupancy, size, location, and construction of real estate also fall within the government's police power.

Before making a listing presentation to a prospective property seller, a real estate sales associate should

Prepare a comparative market analysis. The comparative market analysis, also called a competitive market analysis, will review MLS data for the asking prices of properties currently available, as well as the sales prices of properties that have sold recently and the asking prices of listings that have expired without a sale having occurred. While the sales associate should be sensitive to the seller's purchase price and financial needs, it is the market that is the best indicator of the property's current value.

All of the following are important functions of a property manager EXCEPT

Preparing the owner's income tax return. The management agreement defines the property manager's responsibilities. These duties generally include creating financial reports, renting property, selecting tenants, maintaining good relations with tenants, marketing, and maintaining the property. The financial reports may be used by a professional tax preparer in completing the income tax return.

If a property owner believes an error was made in determining the assessed property value, the owner can

Present the objection to a local board of appeal or review. A protest or appeal regarding a tax assessment may ultimately be taken to court.

The manager's primary goal is to operate and maintain the physical property in such a way as to

Preserve and enhance the owner's capital investment. The manager's primary goal is to operate and maintain the physical property in such a way as to preserve and enhance the owner's capital investment.

The three principal responsibilities of the property manager are to achieve the objectives of the property owners, generate income for the owners, and

Preserve and/or increase the value of the investment property. The property manager works for the property owner, and while avoiding a high tenant turnover is desirable, that goal serves the objective of generating income for the property owner.

A buyer's agent's client's offer was countered. What are the buyer's agent's options?

Promptly tender the counteroffer to the buyer

What agreement authorizes the property manager to act for the owner?

Property management agreements create the authority of the property manager to act on the owner's behalf.

Which of the following items would usually NOT be shown on the plat map for a new subdivision?

Prices of Residential and Commercial Lots. Prices are not a matter of public record and are subject to constant change. They do not belong on the recorded plat of subdivision.

The basic components of the real estate financing market are

Primary mortgage market, secondary mortgage market, and government influences, primarily the Federal Reserve System. The real estate financing market has the following basic components: primary mortgage ma

Another name for the client in a real estate agency relationship is

Principal

A legal description must contain a reference to

Principal meridian. A property description based on the rectangular survey system must always make reference to the principal meridian and the base line of the survey system area in which the property lies.

A small group of closely associated or experienced investors is typically a

Private Syndication

A deed restriction is considered a

Private restriction, and it is conveyed in the deed to the current property owner. A deed restriction will run with the land (convey to a subsequent property owner) and cannot violate any law, such as a fair housing law.

Constructive notice is

Properly recording documents in the public record. Recording documents in the public record serves as constructive notice to the world of an individual's rights or interest, as does the physical possession of the property.

A real estate broker was responsible for a chain of events that resulted in the sale of a client's property. This is called

Procuring cause. A broker who starts a chain of events that results in a sale and does so without abandoning the transaction, may be considered the procuring cause of sale.

An owner tells a group of brokers, "I will pay a commission to whoever brings me a buyer." In this case, the broker who is going to get paid must be the

Procuring cause. In an open listing, where any brokerage can sell the property and get paid, the broker must be the procuring cause of the sale in order to receive a commission.

A statement sent to an owner that does not reflect the entire debt service as an expense is called a(n)

Profit and loss statement. The profit and loss statement provides a general financial picture based on monthly cash flow reports. Only the interest portion of the debt service is reflected as an expense.

The owners of a modest ranch house in a neighborhood of larger, more expensive homes may find that the value of their home is affected by what principle?

Progression. The value of modest homes in an area may increase with the presence of luxurious homes. This is an example of the principle of progression.

A developer buys the last five vacant lots in a subdivision and constructs a large, expensive home on each lot. The homes sell for what are record-setting high prices for the area. The owners of the older, lesser-valued houses in the neighborhood may find that the values of their homes are affected by what principle?

Progression. The value of modest homes in an area may increase with the presence of more expensive homes. This is an example of the principle of progression.

The financing instrument that sets out the terms of a borrower's debt is the

Promissory note. The promissory note, referred to as the note or financing instrument, is a borrower's personal promise to repay a debt according to the agreed terms.

MOST closings involve the division of financial responsibility between the buyer and the seller for such items as taxes, rents, and other items. These divisions are called

Prorations. Most closings involve the division of financial responsibility between the buyer and the seller for such taxes, rents, and other items. These expenses are said to be prorated to determine how much the buyer and seller pay.

A listing contract contains what type of clause that gives the broker the right to collect a commission if the owner sells the property after the listing contract terminates, but only if the sale is to someone procured by the broker?

Protection clause. Protects the broker from unscrupulous sellers or buyers who take the broker's leads and then buy or sell the property after the listing agreement expires to avoid paying a commission to the broker.

To protect the public from fraudulent interstate land sales, a developer involved in interstate land sales of 25 or more lots must

Provide Each Purchaser With a Printed Report Disclosing Details Of The Property. The printed report summarizes the developer's detailed filing with HUD and reveals to the purchaser any legal and financial or physical difficulties the project is facing. Buyers who are not given this report can rescind the contract up to seven days after a copy is delivered or until settlement occurs.

A man has been a licensed broker in Pennsylvania for more than 10 years. He is planning to move to Montgomery next year and apply for an Alabama broker's license. Almost 10 years ago, he was brought before the Pennsylvania Real Estate Commission and found guilty of commingling funds in his broker's escrow account when he allowed his property management fees to remain in the account instead of disbursing them every month. The Pennsylvania board fined him $500 and suspended his broker's license for three months. What will the man have to do in order to obtain a license in Alabama?

Provide a Detailed Explanation of The Circumstances That Led To The Conviction, Along With His Application. When applicants for licensure have had their license suspended, revoked, or surrendered in connection with a disciplinary action, they must submit a detailed explanation of the circumstances involved. This is in addition to the usual certificate of good standing that must be provided for any reciprocal license application.

The purpose of a building permit is to

Provide evidence of compliance with municipal regulations. A building permit is issued only after municipal regulations have been complied with. It is, therefore, evidence of such compliance.

A large group of investors who may or may not be knowledgeable about real estate as an investment are typically those MOST likely to invest in a

Public Syndication

A real estate professional receives an escrow deposit from a buyer who makes an offer to purchase certain property listed with the real estate professional. The real estate professional should

Put the deposit in an account, as provided by state law. Most states require real estate professionals to place earnest money and other funds held in trust in a specified account used only for such money. Real estate professionals who mix the company's money with deposits and trust funds are guilty of commingling funds.

Jeff is a real estate professional. His buyer makes an offer to purchase certain property that Jeff has listed. As part of the offer, the buyer makes an escrow deposit with Jeff to show good faith. Jeff should

Put the deposit in an account, as provided by state law. Most states require real estate professionals to place earnest money and other funds held in trust in a specified account used only for such money. Real estate professionals who mix the company's money with deposits and trust funds are guilty of commingling funds.

The process of using one property to drive the acquisition of additional properties is called

Pyramiding

Purchasing a property using leverage, refinancing it after it has appreciated, and using the cash from the refinancing to purchase additional property is one form of

Pyramiding is the term used to describe the purchasing of property and then refinancing the investment after it has appreciated and using the borrowed funds to purchase new properties.

A woman refinanced her house and used the proceeds to purchase two rental properties. This method of increasing her holdings is called

Pyramiding through refinancing uses the value of the original property to drive the acquisition of additional properties while retaining all properties acquired.

A woman refinanced her house to pay off her old loan and generate $100,000 cash, which she used to purchase two rental properties. This method of increasing her holdings is called

Pyramiding through refinancing uses the value of the original property to drive the acquisition of additional properties while retaining all properties acquired.

Some investments have failed to produce returns greater than the

Rate of Inflation

Which of the following BEST describes a capitalization rate?

Rate of return an income property will produce. In the income approach to appraisal, the capitalization rate is the relationship of the net annual income to the appraised value. Net annual income ÷ appraised value = capitalization rate. Therefore, it expresses the return an income property will produce.

When multiple persons claim ownership of property and each has a recorded deed, but no one occupies the property, the person who is awarded ownership is likely to be the one who

Recorded the deed first. If there is no notice of ownership based on occupancy of the property, the person with the earliest recorded deed is likely to prevail.

The type of real estate investment that is required by federal law to distribute 90% of its income to its shareholders is the

Real Estate Investment Trust. One of the federal requirements of a real estate investment trust is that it distribute at least 90% of its income to its shareholders.

The federal law that regulates the mortgage and settlement process is the

Real Estate Settlement Procedures Act (RESPA). While the Fair Housing Act and Equal Credit Opportunity Act may come into play during the property search, sale negotiation, and loan application, RESPA regulations affect the closing of a sale.

A certificate of title may be prepared by all of the following EXCEPT

Real estate broker. The certificate may be prepared by a title company, licensed abstractor, or attorney. An owner, mortgage lender, or buyer may request the certificate.

A property management agreement is usually

Real estate contract between a property owner and a licensed real estate professional. The complexity of lease agreements, ongoing financial matters, and arranging for property maintenance often call for the services of a real estate professional.

A mechanic's lien would be available to all of the following EXCEPT

Real estate professionals. Contractors, subcontractors, and surveyors all have standing to seek a mechanic's lien. Real estate professionals typically do not have the right to place liens on property they have sold and for which they have not been paid the commission owed to them.

Which of the following is a specific, involuntary, statutory lien?

Real estate tax lien. A real estate tax lien is always on a specific piece of realty; it happens without permission of the property owner and so is involuntary; it is created by statute. Therefore, it is specific, involuntary, and statutory.

Which tax targets homeowners in particular?

Real property tax. The real property (ad valorem) tax falls on those who own real property, such as homeowners.

What is an allowed activity for a licensee whose license is suspended or revoked?

Receive compensation earned before the effective date of the suspension or revocation

Which of the following is a lawful activity for an unlicensed assistant to conduct in the state of Alabama?

Receiving, recording, and depositing earnest money.

Which of the following describes recognition of a real estate license from another state with reduced requirements for licensure in Alabama?

Reciprocity. As a courtesy, many states makes it easier for licensees in good standing from other jurisdictions (including real estate agents, attorneys, CPAs and others) to obtain a license in the additional jurisdiction. This system is called reciprocity. While comity might seem to be the correct answer, this concept has to do with states and nations recognizing that something legal in one state is legal in the other state. An example is common law marriages; if two Alabama residents have a common law marriage, as allowed in Alabama, then it will be recognized if they move to another state that might not allow common law marriages for its own residents.

A mechanic's lien claim arises when a contractor has performed work or provided material to improve a parcel of real estate on the owner's order and the work has not been paid for. Such a contractor has a right to

Record a notice of the lien and file a court suit within the time required by state law. In this situation, the contractor may record a notice of the lien and file a court suit within the time required by state law.

Which statement BEST explains why instruments affecting real estate are recorded?

Recording gives constructive notice to the world of the rights and interests claimed by a party in a particular parcel of real estate. The recording of an instrument affecting real estate puts the transaction into the public record so that anyone interested in the title of a parcel will know where to look. Constructive notice means that everyone is charged with knowledge of such documents.

Which of the following is TRUE about the recording of documents?

Recording real estate documents provides constructive notice of their contents to the world. Not all real estate documents have to be recorded to be valid (i.e., an unrecorded deed can transfer title to the grantee). Recording provides constructive notice of the contents of a document to the public.

In Alabama, legal descriptions of land may be based on

Rectangular survey, metes and bounds, and recorded plat maps are commonly used to describe property in Alabama. Once subdivisions have been approved, lot and block descriptions are most often used.

A homeowner constructs a five-bedroom brick house with an indoor pool in a neighborhood of modest two-bedroom and three-bedroom frame houses on narrow lots. The value of this house is MOST likely to be affected by what principle?

Regression. The value of larger lavish homes in a modest neighborhood will be drawn down by the presence of modest less lavish homes; regression is the opposite of progression.

A homeowner constructs an eight-bedroom brick house with a tennis court, a greenhouse, and an indoor pool in a neighborhood of modest two-bedroom and three-bedroom frame houses on narrow lots. The value of this house is MOST likely to be affected by what principle?

Regression. The value of larger lavish homes in a modest neighborhood will be drawn down by the presence of modest, less-lavish homes. Regression is the opposite of progression.

All of the following are examples of loans to individuals that are affected by the Truth in Lending Act under Regulation Z EXCEPT

Regulation Z applies when credit is extended to individuals for personal, familial, or household uses, but not for business or commercial use.

The provisions of Regulation Z require all of the following to be disclosed to a residential buyer EXCEPT

Regulation Z has to do with disclosing details of the proposed loan. It does not deal with brokerage commissions.

Which of the following requires that all advertising that references mortgage financing terms contain certain disclosures?

Regulation Z of the Truth in Lending Act requires that trigger terms about mortgage financing in any kind of advertising must also include additional disclosures in the advertisement.

All of the following will terminate an easement EXCEPT

Release of the right of easement to the dominant tenement. An easement is terminated when the owner of the dominant tenement releases that right to the owner of the servient tenement.

If, upon the receipt of an offer to purchase a property, the seller makes a counteroffer, the prospective buyer is

Relieved of the original offer. When the original offer is rejected by the seller, it ceases to exist. The buyer may accept or reject the seller's counteroffer.

Which of the following is NOT an example of governmental power?

Remainder. The four governmental powers that limit private rights to ownership of land are represented by the acronym PETE (police power, eminent domain, taxation, and escheat).

An owner conveys ownership of his residence to his church but reserves for himself a life estate in the residence. The future interest held by the church is a

Remainder. Until the owner dies, the church will have a remainder interest. The owner reserved for himself a life estate. The church may legally sell its future (remainder) interest, even during the lifetime of the life tenant.

The essential elements of value are

Remember the memory aid DUST: demand, utility, scarcity, and transferability.

Zoning ordinances normally define specific uses for land that are permitted within a municipality. All of the following are designated uses in such ordinances EXCEPT

Rental. Zoning ordinances have traditionally classified land use as residential, commercial, industrial, and agricultural and do not specify the form of allowed property ownership.

The parties are returned to their original positions before the contract was created if there is a(n)

Rescission. Any monies or property exchanged must be returned.

Which of the following is NOT one of the ways a lien is created?

Rescission. There are four ways to create a lien: voluntary, involuntary, statutory, and equitable.

The Closing Disclosure must be used to illustrate all settlement charges for

Residential transactions financed by federally related mortgage loans. Except for owner financing, very few loans for the purchase of residential properties are not—or will not sometime be—federally related, either directly or indirectly. For example, if they are not insured or guaranteed by FHA or VA, they may still be later traded on the secondary mortgage market by Fannie Mae, Freddie Mac, or other government-related entities.

A cloud on the title to a parcel of real estate is

Resolved by an action to quiet title. Legal action might be required if there is a gap in the chain of title, as may happen if a grantor acquired title under one name and conveyed it under another name. Evidence can be presented in court to show that the grantee under the earlier deed was the same person who was the grantor in a later deed.

A licensee commingled personal and trust account funds, giving the IRS grounds to seize the entire trust account for the licensee's past due taxes. The commission ordered the licensee to repay clients all of their money that was seized by the IRS. This punishment is called

Restitution.

All of the following should be included in a management agreement EXCEPT

Restrictions regarding ages of children. A management agreement should include an adequate description of the property, compensation arrangements, and what the manager's authority is to be. Restricting occupancy based on ages of children violates the federal Fair Housing Act.

Upon the death of the life tenant, the property returned to the grantor. The type of interest held by the grantor in the life estate must have been a

Reversionary interest. If the estate returns to the grantor, it is known as a reversionary interest. If the estate goes to another party, that party has a remainder interest.

The right of a landlord to possession of leased property after the lease term expires is a

Reversionary right. During the term of the lease, the landlord retains a reversionary right to possession after the lease term expires.

In Alabama, one of the required continuing education courses is called

Risk Management: Avoiding Violations.Licensees must complete six hours of risk management classes every two years.

Avoid, control, transfer, or retain are the four alternative techniques of

Risk management. Ways to manage risk are to avoid it (removing source of risk), to control it (take safety measures), to shift or transfer it (insure), or to retain it (increase deductible).

An easement appurtenant

Runs with the land. An easement appurtenant can only be created if the adjacent properties have different owners. This easement runs with the land and transfers with the deed.

Many states have modified the traditional terms broker and salesperson to stress that all licensees must be knowledgeable of and comply with the law. The person who performs licensed activities under the authority of a broker is frequently called a

Sales associate. Some states require all real estate licensees to have a broker's license, but a managing broker is always distinguished from those employed by the brokerage as sales associates.

The original owners of a commercial property may decide to pull their equity out of the property to use on other projects and reduce taxable income by paying rent to the property's new owner by means of a

Sale-and-leaseback. The original owner frees capital from the building, and the new owner has a reliable source of rental income for an extended time.

A sales associate of a broker told a prospective buyer that the house she was looking at is "the best house in the area." Because of this statement, the

Sales associate was practicing puffing. Exaggeration of a property's benefits is called puffing.

Another name for the market data approach to appraising is the

Sales comparison approach. Value is obtained by comparing the property being appraised with recently sold comparable properties. A competitive market analysis is the informal method of valuation performed by a real estate analysis to assist buyers and sellers.

If a home recently sold for $384,800 and its monthly rental income was $2,600, the GRM for the property would be

Sales price divided by monthly gross rent is the formula for the gross rent multiplier (GRM). $384,800 ÷ $2,600 = 148

The person who prepares an abstract of title for a parcel of real estate

Searches the public records and then summarizes the events and proceedings that affect title. Abstractors search public records concerning property and prepare a relatively brief, written summary of their findings. This report is the abstract of title. Title insurance companies and attorneys who are asked to give an opinion of title rely on these abstracts.

Probate is a formal judicial process that does all of the following EXCEPT

See that assets are distributed correctly for single people only. Married couples cannot normally avoid probate. Probate confirms the validity of a will, determines the precise assets, and identifies to whom those assets will pass.

A broker who is asked how a married couple should take title would advise them

Seek legal advice. A broker, broker associate, or salesperson should never provide advice to prospective buyers on how they should take title to real estate.

An option to purchase binds which of the following parties?

Seller only. The potential buyer (optionee) who purchases an option to purchase is not bound to purchase the property. However, should the optionee decide to exercise the option, the optionor (seller) is bound to proceed with the sale in keeping with all the details contained in the option.

The broker's commission on a real estate sale is usually paid at closing directly by the

Seller or the party handling the closing. The broker's commission on a real estate sale is usually paid at closing directly by the seller or the party handling the closing.

The final decision on a property's asking price should be made by the

Seller. Although a listing agent, an appraiser, and an attorney voice their opinions, the seller finally sets the listing (offering) price for a property.

If leased equipment is to be included in the listing agreement terms upon a sale, the lessor must be notified of the change of ownership by the

Seller. If leased equipment is to be included in the listing agreement terms upon a sale, the lessor must be notified of the change of ownership by the seller.

All encumbrances and liens shown on the report of title, other than those waived or agreed to by the purchaser and listed in the contract, must be removed so that the title can be delivered free and clear. The removal of such encumbrances is typically the duty of the

Seller. Removal of encumbrance is the (financial) responsibility of the seller.

The seller's main concern in listing the property typically is the

Selling price of the property and resulting net proceeds. The seller's main concern in listing the property typically is the selling price of the property and resulting net proceeds.

All active and inactive licenses expire on

September 30 of even-numbered years.

When A recorded the deed she received from B, the legal consequence of the recording was to

Serve constructive notice of A's interest. Recording serves constructive notice (also called legal notice) of interests in real property.

Your neighbors use your driveway to reach their garage, which is on their property. Your attorney explains that ownership of the neighbors' real estate includes an easement appurtenant giving them the right to do this. Your property is the

Servient tenement. Your driveway is on the property over which the easement runs and is the servient tenement. The adjacent property owned by the neighbors is known as the dominant tenement.

Because a corporation is a legal entity, it can own real estate

Severalty or as a tenant in common. Because a corporation is a legal entity, it can own real estate in severalty or as a tenant in common.

Which of the following refers to ownership by one person?

Severalty ownership is ownership by one person severed—cut off—from all others.

Real properties owned by public entities, such as cities, counties, states, and public agencies are generally owned in

Severalty. Real properties owned by public entities, such as cities, counties, states, and public agencies are generally owned in severalty.

A corporation is a legal entity, recognized as an artificial person. Property owned solely by the corporation is owned in

Severalty. The term person does not always refer to a natural individual—a human; the law regards a corporation as an artificial person. Because this is so, a corporation can own real estate in severalty (alone).

Which of the following is MOST likely evidence of ownership in a cooperative?

Shareholder's stock. The documents that show ownership in a cooperative are shares of stock in the cooperative corporation and a proprietary lease.

Price-fixing is punishable by up to a $1 million fine and 10 years in prison under the

Sherman Antitrust Act. Price-fixing or market allocation is a violation of the Sherman Antitrust Act and a penalty can be up to a maximum $1 million find and 10 years in prison. For corporations, the penalty may be as high as $100 billion.

Activities such as price-fixing, group boycotting, allocation of customers or markets, and tie-in agreements are violations of the

Sherman Antitrust Act. The real estate industry is subject to antitrust laws. At the federal level, the Sherman Antitrust Act provides specific penalties for a number of illegal business activities.

When a proposed property sales price is less than the amount outstanding on the seller's mortgage debt, the sale may be possible if the lender approves a

Short sale. When market value diminishes, there is the possibility that a homeowner may carry more debt on a property than it is currently worth. In this situation, the lender may agree to a sale of the property for less than the remaining indebtedness.

All of the following are essential elements of a deed EXCEPT

Signature of the grantee. The grantee is not required to sign the deed; only the grantor must sign it. The grantee is identified in the deed as the party receiving the conveyance. The elements for a valid deed include competent grantor, execution of the deed by grantor, identifiable grantee, delivery of the deed (by the grantor) and acceptance (by the grantee), legal description, consideration, and words of conveyance

A contract is said to be executed when it includes the

Signatures of the parties. A contract is said to be executed when it is signed, even though the parties have not fully executed the contract by fulfilling all of the promises that it contains.

Which of the following leases may be oral and enforceable?

Six-month residential lease

The information required for the listing agreement does NOT include

Social Security number of seller(s). The information necessary to prepare the listing agreement does not include a seller's personal data, such as Social Security number.

The term severalty comes from the fact that

Sole owner is severed or cut off from other owners. The term severalty comes from the fact that a sole owner is severed or cut off from other owners.

Some states' laws regulate sales of land located both inside and outside the states. These state land sales laws tend to be

Some states' laws regulate sales of land located both inside and outside the states. These state land sales laws tend to be Stricter and More Detailed Than Federal Law.

The deed promising only that the grantor holds title to the identified property and has not encumbered the property during the time it was held by the grantor is the

Special warranty deed. The special warranty deed promises that the grantor will defend the title against the grantor's actions, but not those of earlier owners of the property.

The relationship between real estate broker and seller is generally what type of agency?

Special. A broker serves a client—either a buyer or a seller—usually by performing the specific brokerage act spelled out in the employment contract (representation agreement). A specific assignment creates a special agency.

The legal proceeding or legal action brought by either the buyer or the seller under a purchase contract to enforce the terms of the contract is called

Specific performance. In a suit for specific performance, the court may force the buyer or the seller to go through the sale and convert the property as previously agreed.

Ad valorem taxes are based on the value of the property taxes and create liens that are

Specific, involuntary, and statutory. The lien is placed on the specific property taxes, occurs without the consent of the property owner, and is created by state law.

Because senior housing includes subsidized units, the property manager needs to be familiar with

State and federal rules pertaining to eligibility requirements and income verification. When senior housing includes subsidized units, the property manager needs to be familiar with state and federal rules pertaining to eligibility requirements and income verification.

The basic requirements for a valid conveyance are governed by

State law. Although all the listed items influence it somewhat, state law has the greatest influence on requirements for a valid real property conveyance.

The period during which the parties to a contract may begin legal action to enforce their rights is determined by a state's

Statute of limitations. The statute of limitations will vary for different legal actions, and any rights not enforced within the applicable time period are lost.

The federal legislation known as Megan's Law has promoted the establishment of

State registries of residential information on sex offenders. Megan's Law promotes the establishment of state registration systems to main residential information on every person who kidnaps children, commits sexual crimes against children, or commits sexually violent crimes.

The forms of property ownership are controlled by the

State. The forms of property ownership are controlled by the state.

If a buyer defaulted some time ago on a written contract to purchase a seller's real estate, the seller can still sue for damages if he is not prohibited from doing so by the

Statute of limitations. The statute of limitations in every state limits the time within which parties to a contract may bring legal suit to enforce their rights.

After a foreclosure sale, the borrower who has defaulted on the loan may seek to pay off the mortgage debt plus any accrued interest and costs under what right?

Statutory redemption. The redemption of property by paying off the mortgage debt plus interest and other charges after foreclosure is the right of statutory redemption. It is only possible in states that have statutes permitting it. All states, however, permit redemption before the foreclosure sale; this right is the right of equitable redemption.

Properties that society has found undesirable because of events that occurred there or because a known sex offender lives in the area are considered

Stigmatized properties. Stigmatized properties are those that society has found undesirable because of events that occurred there or because a known sex offender lives in the area.

When a borrower defaults, a mortgage lender acquires full legal title to the property using

Strict foreclosure. Under strict foreclosure, notice is given to the delinquent borrower and the court sets a deadline for the balance of the defaulted debt to be paid in full. If the debt is not paid by that date, the court awards full legal title to the lender. No sale takes place.

A real estate contract requires the seller to make up to $1,000 of repairs before closing, as indicated on the buyer's home inspection report. At the final walk-through on the morning of closing, the buyer discovers that no repairs have been made. You are working with the buyer, who instructs you to demand that $1,000 be withheld from sales proceeds in order to fund the seller's responsibility, or the buyer will not close. You should

Strongly urge the buyer to consult with an attorney, and if the buyer still has any demands, the agent will transmit them.

The compensation received by a sales associate of the real estate broker is

Subject to negotiation between broker and sales associate. There are no state laws or regulations regarding the method or amount of compensation that the sales associate can be paid.

What are the consequences for a real estate licensee who did not discuss any form of agency representation with the buyer until after the closing?

Subjects the licensee to disciplinary action by the Alabama Real Estate Commission

An existing mortgage loan can have its lien priority lowered through the use of a.

Subordination agreement. A subordination agreement can change the priority of an existing mortgage by the first lender agreeing to release its position as a first lien to that of a second lender.

A junior lien may become first in priority if the original lender agrees to execute a

Subordination agreement. If the original (first mortgage) lender signs a subordination agreement, another loan made more recently (later) may be allowed to take first place; the original loan then drops to second place in priority.

A buyer asks a court to enforce the provisions of a contract by bringing a

Suit for specific performance. The buyer asks the court to force the seller to go through with the sale and transfer the property as previously agreed.

Legal action taken on a title claimant's behalf to resolve all clouds on title is known as a

Suit to quiet title. Clouds are removed from title in a suit to quiet title

The legal process used to clear a title is a

Suit to quiet title. The legal process used to clear title issues is a lawsuit to quiet title. A court will recognize valid claims to real property and "quiet" the rest. A quitclaim deed is often used to cure a single problem with the title.

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was created in 1980 and established a $9 billion fund called the

Superfund

In determining rental amounts, a property manager considers the economic principle of

Supply and demand in real estate recognizes that the marketplace can influence trends in occupancy and vacancy rates, which in turn affect rental rates.

A legal description is a detailed way of describing a parcel of land and is based on information collected through a

Survey. A legal description is a detailed way of describing a parcel of land and is based on information collected through a survey.

Groundwater, water that exists under the earth's surface within the tiny spaces or crevices in geological formations, forms the water

Table

Even though it is not recorded immediately, a lien for payment of real estate taxes will

Take priority over an earlier recorded document. Real estate taxes and special assessments are liens on specific parcels of real estate and are not usually recorded until after the taxes or assessments are past due.

When like-kind properties of different values are transferred in a tax-deferred exchange, any additional capital or property made a part of the exchange is called boot and is

Taxed To The Party Receiving It. The value of the boot is added to the basis of the property for which it is given.

How many years of active licensed real estate experience are required to become a member of the Alabama Real Estate Commission?

Ten years of licensed and active real estate experience are required to become a member of the Alabama Real Estate Commission. Ten years with a license on inactive status do not qualify one for membership on the AREC.

A house is owned by three joint tenants, and one of the owners, as permitted by state law, sells that interest to a new owner. The result is a

Tenancy in common between the new owner and the remaining joint tenants. The remaining joint tenants still have a joint tenancy as to their interests in the property, and the new owner is a tenant in common as to that interest.

A deed conveying land on a one-third and two-thirds share basis establishes a

Tenancy in common. Only tenants in common can have unequal shares of ownership.

Three women were concurrent owners of a parcel of real estate. When one of the women died, her interest, according to her will, became part of the estate. The deceased was a

Tenant in common. If the deceased had been a joint tenant, the property would not have passed to an heir as prescribed in her will because joint tenancy supersedes a will. She also was not a tenant by the entirety, a category reserved for husbands and wives. Nor was she an owner in severalty because that requires property to be held by only one person.

If a tenant moved out of a rented store building because access to the building was blocked as a result of the landlord's negligence, the

Tenant may be entitled to recover damages from the landlord. The tenant suffering financial losses (damages) because of the landlord's negligence could enter an action against (sue) the landlord for those damages.

A parcel of property was purchased by two friends. The deed they received from the seller at closing transferred the property without further explanation. The two friends took title as which of the following?

Tenants in common. When joint tenancy is not clearly prescribed by the deed, grantees take title as tenants in common—to avoid accidental joint tenancy. Unmarried persons are unable to hold community property or be tenants by the entirety because both are reserved for married couples.

A property owner signed a 90-day listing agreement with a real estate professional. The owner was killed in an accident before the listing expired. Now the listing is

Terminated automatically because of the death of the principal. A listing agreement may be terminated if either party dies or becomes incapacitated.

Last month a broker took a listing on a property. She now learns that her client has been declared incompetent by the court. Her listing now is

Terminated. A listing agreement may be terminated if either party dies or becomes incapacitated.

The details of a closing are ALWAYS governed by the

Terms of the properly executed purchase contract. A closing involves fulfilling the promises made in a sales contract.

The trust established by a decedent's will is

Testamentary trust. A living trust is established before death, and a testamentary trust is established by will after the owner's death. The living will deals with the right to refuse medical treatment. All trusts identify a beneficiary.

Builders in low-lying areas should be familiar with

The Alabama Coastal Wetlands Protection Act.

Real estate appraisers may be disciplined by

The Alabama Real Estate Appraisers Board.

Which statement is TRUE concerning errors and omissions coverage in Alabama?

The Alabama Real Estate Commission has been unable to obtain a group insurance policy to be made available to all licensees.

In Alabama, residential landlord-tenant relationships are governed by

The Alabama Uniform Residential Landlord Tenant Act of 2006

Environmental hazards are primarily the concern of the

The Environmental Protection Agency (EPA) and Department of Housing and Urban Development (HUD) are the primary agencies of the federal government concerned with environmental issues.

Programs to help families purchase or operate family farms are provided by

The Farm Service Agency (FSA) is a federal agency of the Department of Agriculture. The FSA offers programs to help families purchase or operate family farms and has taken over the functions of the former Farmers Home Administration (FmHA).

The Federal Reserve System divides the country into

The Federal Reserve System divides the country into 12 federal reserve districts.

The Homeowners Protection Act of 1998 (HPA) requires that a lender automatically terminate payment of PMI if the borrower has accrued at least how much equity in the home?

The Homeowners Protection Act of 1998 (HPA) requires that a lender automatically terminate the payment of private mortgage insurance (PMI) if the borrower has accrued at least 22% equity in the home.

Either a gross lease or a net lease may be a(n)

The Percentage lease usually is used for a retail business. The percentage charged is negotiable and varies depending on the nature of the business, location of the property, and general economic conditions. Ground leases are generally net leases.

What legislation includes provisions that govern the use of computerized loan origination?

The Real Estate Settlement Procedures Act (RESPA), which covers loan closings, also includes provisions that govern brokerage involvement in the loan process by means of a the use of computerized loan origination (CLO) system, when permitted by state law. CLO allows real estate professionals to assist loan applicants in surveying lenders and providing information.

Who can waive the right to a hearing for a formal complaint by the Commission?

The accused

The purchase is a cash sale for $1 million. What amount should the agent put on the estimated settlement sheet for deed recordation tax, as one of the closing expenses?

The answer is $1,000. At the time of recording a deed, Alabama requires that a deed tax be paid on the difference in the amount paid for a property and the amount of mortgage being recorded. The amount of deed tax is $0.50 for every $500 of equity in the property, or 0.1% of the equity, rounded up to the nearest $0.50 if necessary. Because this is a cash sale, you calculate the tax on the entire purchase price. To solve this easily, you might say: 10% of $1 million is $100,000. Therefore, 1% of $1 million is $10,000. Therefore, 0.1% of $1 million is $1,000. If using a calculator, you would divide $1,000,000 by $500 to result in 2,000 and then multiply 2,000 by $0.50 to result in $1,000.

The agency responsible for the enforcement of the Fair Housing Act is the

The answer is Department of Housing and Urban Development. The Fair Housing Act is administered by the Department of Housing and Urban Development (HUD).

Protection from threats or acts of violence against those who assist and encourage open housing rights is found in the

The answer is Fair Housing Act. Under the Fair Housing Act, threats, coercion, and intimidation are punishable by criminal action.

The equal housing opportunity poster is created and distributed by

The answer is HUD. The equal housing opportunity poster has been created and is distributed by the U.S. Department of Housing and Urban Development (HUD), which administers the Fair Housing Act.

Method of annexation, adaptation to real estate, and agreement between the parties are the legal tests for determining whether an item is

The answer is a fixture or personal property. The overall test in determining whether an item is a fixture (real property) is the intention of the person installing it, how uniquely adapted the item is to the property in which it is installed, how item was installed and the damage its removal would cause, the relationship of the parties, and what the parties have agreed to.

The buyer, after closing, finds that the built-in microwave was removed by the seller. The microwave was considered

The answer is a fixture that should have remained because it was real property. Fixtures are not listed in the contract and, as part of the real property, are not to be removed, as they transfer with the deed.

For purposes of the Fair Housing Act, a family can consist of

The answer is a single individual. For purposes of the Fair Housing Act, a family can be as small as a single individual. Familial status is defined as one or more individuals under age 18 living with a parent or guardian. Housing cannot be limited to adults only, although housing for persons 55 years of age or older can be so designated.

Parking spaces in multiunit buildings, water rights, and similar things of value that convey with property are classified as

The answer is appurtenances. Appurtenances are rights or privileges associated with the property, although not necessarily part of the property.

A buyer is interested in a house that fits most of her needs, but it is located in a busy area where she is not sure she wants to live. Her concern about the property's location is called

The answer is area preference. Area preference, or location, is also known as situs and is the single most important economic characteristic of land.

The owner of a bicycle repair business installs trade fixtures in a rented space. When the business owner's lease expires, the business is moved to a new location. Any trade fixtures that remain on the premises after the end of the lease term

The answer is became the real property of the landlord. While the tenant's lease was in effect, the tenant was entitled to install and remove trade fixtures. Once the lease expired, any fixtures remaining of the premises became the real property of the landlord.

A real estate professional said to a homeowner, "I hear they're moving in. There goes the neighborhood! Better put your house on the market before values drop!" This is an example of what illegal practice?

The answer is blockbusting. Such statements, made by a person in real estate brokerage, constitute blockbusting—usually an attempt to get listings by frightening owners into selling by encouraging the belief that a member of a protected class is moving into the neighborhood. To do this for financial gain is a violation of the federal Fair Housing Act.

Failure of the real estate professional to comply with fair housing laws is

The answer is both a civil and a criminal violation and grounds for disciplinary action. Failure of the real estate professional to comply with fair housing laws is both a civil and a criminal violation and constitutes grounds for disciplinary action against a real estate professional.

Real estate professionals can't be experts in all areas of real estate law,

The answer is but they should know and understand some basic principles. A real estate professional can't be an expert in all areas of real estate law; however, real estate professionals should know and understand some basic principles.

A 16-unit apartment building has been designed specifically for persons with a disability. A person who does not have a disability

The answer is can be restricted from occupying a unit in the building. Housing that has been designed to accommodate persons with a disability may be restricted to those occupants

While moving into a newly purchased home, the buyer discovered that the seller had taken the ceiling fan that hung over the dining room table. The seller had not indicated that the ceiling fan would be removed, and the contract did not address this issue. Which statement is TRUE?

The answer is ceiling fans are usually considered real estate. Whatever fixtures are present in the structure at the time of contract, and not mentioned in the contract, convey with the property (pass to the purchaser). Replacement fixtures are not personal property of the resident; they became real estate when annexed (attached) to the building.

Real estate professionals must scrutinize their practices and be particularly careful NOT to fall victim to

The answer is clients or customers who expect to discriminate. Real estate professionals must scrutinize their practices and be particularly careful not to fall victim to clients or customers who intentionally expect to discriminate. They must also reject illegal practices of other real estate professionals based on "the way we've always done things," officials who expect a pattern of discrimination, and schemes that are too good to be true.

Laws that govern the ownership and use of water as well as the adjacent land vary among the states, but all are closely linked to

The answer is climactic and topographical conditions. Laws that govern the ownership and use of water as well as the adjacent land vary among the states, but all are closely linked to climatic and topographical considerations.

Water rights are created by

The answer is common law or statute. Water rights originate by historical usage (the common law) or are created by statute and held by owners of land adjacent to a body of water.

Which of the following is NOT a test in determining whether the intent of the person who installed an item was that it be a fixture or personal property?

The answer is cost of the item. The overall test used to determine whether an item is a fixture (real property) or personal property is a question of intent. Did the person who installed the item intend for it to remain permanently on the property or to be removable in the future? In determining intent, courts use the following three basic tests: method of annexation, adaptation to real estate, and agreement. Cost is not one of the tests applied.

A property that is being sold has a water bill of $150 that has been paid in advance at the beginning of the month. How will the water bill be handled at the closing on June 20 with the seller having the day of closing?

The answer is credit seller $50 and debit buyer $50. The key to all prorations is to draw the picture accurately. The water was paid in advance, so the buyer will owe the seller. Total Due / Total Days x Days Owed = Amount Owed $150/30 x 10 = $50 debit buyer and credit seller

The document by which the owner of real estate transfers title to the property to someone else is called a

The answer is deed. The ability to transfer title to a parcel of real estate is a legal right, but the document by which title is transferred is the deed.

The real estate licensing laws passed by all 50 states, the District of Columbia, and all Canadian provinces

The answer is differ in some details, such as prelicensing education requirements. All 50 states, the District of Columbia, and all Canadian provinces have passed laws that require real estate brokers and real estate salespeople to be licensed, and all differ in some details, such as prelicensing education requirements. There are no federal standards for real estate licensing, even though there are many federal laws that affect real estate transactions.

The federal Fair Housing Act does NOT prohibit

The answer is discriminating on the basis of marital status. Marital status is not one of the seven protected classes under the federal Fair Housing Act.

When an owner of real estate sells the property to someone else, which of the "sticks" in the bundle of legal rights is the owner as seller using?

The answer is disposition. To sell, will, transfer, or otherwise dispose of or encumber property is called disposition.

A property owner wants to use water from a river that runs through the property to irrigate a potato field. To do so, the owner is required by state law to submit an application to the Department of Water Resources describing in detail the plan for beneficial use of the water. If the department approves the owner's application, it will issue a permit allowing a limited amount of river water to be diverted onto the property. Based on these facts, it can be assumed that this property owner's state relies on which rule of law?

The answer is doctrine of prior appropriation. Many states whose water is in relatively short supply have passed statutes authorizing a system of prior appropriation in which owners downstream do not necessarily have to wait for "what's left" after those upstream have drawn their fill. Priority—who is allowed to appropriate water first—is established, instead, by the date of approved filing and continued conformity with any rules and limitations on use imposed by the jurisdiction.

The characteristics of real property fall into which two broad categories?

The answer is economic and physical. Real property possesses seven basic characteristics that define its nature and affect its use. These characteristics fall into two broad categories: economic and physical.

A property on Main Street that was formerly a retail store will become the site of a new city hall, made possible by the government's power of

The answer is eminent domain. Eminent domain is the right of the government to acquire privately owned real estate for public use.

It is illegal for a lending institution to refuse to make a residential real estate loan in a particular area based on the

The answer is ethnicity of the residents of the area. Redlining refers to literally drawing a line around a particular area and refusing to make loans in that area because of the ethnicity of the residents, rather than looking at the economic qualifications of the applicant.

A body of complex laws is involved in

The answer is even the most simple real estate transaction. A body of complex laws is involved in even the most simple real estate transaction.

The civil rights laws that affect the real estate industry help ensure that

The answer is everyone has the opportunity to live wherever they can afford to live. The civil rights laws that affect the real estate industry help ensure that everyone has the opportunity to live wherever they can afford to live.

A property owner's bundle of legal rights entitles the owner to do all of the following EXCEPT

The answer is exclude utility meter readers. The right of exclusion generally allows an owner to exclude someone else from entering the property, but this does not include the right to exclude the utility meter reader.

An owner-occupied building with no more than four dwelling units is

The answer is exempt from the provisions of the Fair Housing Act. A single-family dwelling sold or rented without the use of a real estate professional, housing operated by organizations, and private clubs that limit occupancy to members are also exempt from the Fair Housing Act.

After a real estate professional takes a sale listing of a residence, the owners specify that they will not sell the home to any Asian family. The real estate professional should do which of the following?

The answer is explain to the owners that the instruction violates federal law and that the real estate professional cannot comply with it. The fiduciary duty of obedience requires that the broker obey all LAWFUL instructions. This is not a lawful instruction as it requires a violation of the Fair Housing Act. If the owners are adamant, to avoid breaking the law, the real estate professional must terminate the representation.

Familial status protects

The answer is families with dependent children younger than 18. Families with dependent children younger than the age of 18 are covered under familial status.

Real estate professionals must have a thorough knowledge of

The answer is federal, state, and local fair housing laws. While federal law generally preempts state and local laws when they are in conflict, state and local fair housing laws may provide additional protections to persons not covered by federal fair housing law. While trade associations may prohibit illegal or unethical practices, they do not establish fair housing laws.

The specific areas of law that are important to the real estate professional do NOT include

The answer is maritime law. The specific areas of law that are important to the real estate professional include the law of contracts, the general property law, and the law of agency.

The provisions of the federal Fair Housing Act apply

The answer is in all states. The federal Fair Housing Act applies to all states, and many states and municipalities have their own fair housing laws.

The purpose of real estate license laws is to protect the public in real estate transactions from fraud, dishonesty, and

The answer is incompetence. The purpose of real estate license laws is to protect the public from fraud, dishonesty, and incompetence in real estate transactions.

Which of the following is a physical characteristic of land?

The answer is indestructibility. The ability to make improvements, preference for the area, and relative scarcity of similar property are all economic matters. The land's indestructibility is a physical matter, even though it is subject to both natural and human forces.

A real estate broker who accidentally violates fair housing laws

The answer is is still subject to prosecution; that the offense was unintentional is no defense. A real estate broker who accidentally violates fair housing laws is still subject to prosecution; that the offense was unintentional is no defense.

Why is the Civil Rights Act of 1866 unique?

The answer is it provides no exceptions that would permit racial discrimination. Unlike other exemptions permitted under the federal Fair Housing Act of 1968, the Civil Rights Act of 1866 allows no exceptions that would permit discrimination on the basis of race.

Under the HUD regulations that enforce the Fair Housing Act, advertisements of residential property for sale or rent

The answer is may not include language indicating a preference or limitation. HUD permits no exception to this rule, regardless of the subtlety of the language used. Even selective use of media to advertise to a specific audience may have discriminatory impact.

A prospective tenant requests necessary and reasonable modifications to an apartment to accommodate a wheelchair. The modifications

The answer is must be made by the tenant at the tenant's expense. As long as the modifications are necessary and reasonable, tenants with a disability are permitted to make modifications at their own expense. If the modifications make the property undesirable to the general population, the landlord may require that the property be restored to its previous condition when the lease period ends.

The concept that no two parcels of property are exactly the same or in the same location is called

The answer is nonhomogeneity. Uniqueness, or nonhomogeneity, is the concept that no two parcels of property are exactly the same or in the same location. The characteristics of each property, no matter how small, differ from those of every other. An individual parcel has no substitute because each is unique.

The definition of a dwelling under the Fair Housing Act includes all of the following except

The answer is office with lavatory. The Fair Housing Act defines a dwelling as any building or part of a building designed for occupancy as a residence by one or more families, including vacant land on which an applicable structure will be built. A commercial building composed of office or retail space does not fall under the Fair Housing Act.

An apartment building owned by a religious organization may be restricted to people of the same religion, provided membership in the organization is not restricted

The answer is on the basis of race, color, or national origin. Housing owned by a religious organization may be restricted to people of the same religion if membership in the organization is not restricted on the basis of race, color, or national origin.

Which of the following is considered personal property?

The answer is patio furniture. Personal property, such as patio furniture, is movable. A fireplace, bathtubs, and awnings are all attached to the property and considered real property.

A truckload of lumber that a homeowner purchased has been left in the driveway for use in building a porch. The lumber is considered

The answer is personal property. The lumber will become realty if and when it is later affixed in the course of construction. Until then, it is personal property—a chattel—of the landowner.

The answer is became the real property of the landlord. While the tenant's lease was in effect, the tenant was entitled to install and remove trade fixtures. Once the lease expired, any fixtures remaining of the premises became the real property of the landlord.

The answer is physical characteristics of land. Even when it is denuded of vegetation by strip mining, eroded by a flood or dust storm, or one of many near-identical parcels, land is still considered to have the characteristics of immobility, indestructibility, and uniqueness.

A violation of fair housing laws

The answer is places the livelihood of the real estate professional in jeopardy as well as making the real estate professional subject to financial penalties. A violation of fair housing laws places the livelihood of the real estate professional in jeopardy as well as making the real estate professional subject to financial penalties. There may also be consequences for the property owner or landlord.

The Americans with Disabilities Act exempts from its requirements

The answer is property that is covered by the Fair Housing Act. ADA requires reasonable accommodations in employment and access to goods, services, and public buildings. The law applies to any employer with 15 or more employees.

A person who has a physical or mental disability is

The answer is protected by the provisions of the Fair Housing Act. It is unlawful to discriminate against a prospective buyer or tenant on the basis of disability. Persons who have AIDS are protected, but those who are current, illegal users of a controlled substance are not protected.

Senior housing may be restricted to occupancy by older persons and may

The answer is provide temporary occupancy by younger visitors. Senior housing is exempt from familial status protection, although temporary occupancy by younger visitors is typically allowed. Senior housing remains subject to all other provisions of the Fair Housing Act unless another exemption applies.

MOST real estate transactions involve

The answer is purchasing a residential property. Home sales are the most common real estate transaction.

The Civil Rights Act of 1866 prohibits any limitation of property rights based on

The answer is race. The federal government's effort to guarantee equal housing opportunities to all U.S. citizens began with the passage of the Civil Rights Act of 1866. This law prohibits any discrimination based on race.

Which of the following is legal?

The answer is requiring a person with a disability to establish an escrow account for the costs to restore a property after it has been modified. A landlord may negotiate, as part of a restoration agreement, a provision requiring the tenant to pay an amount not exceeding the cost of restoration into an interest-bearing escrow account. The interest in the account accrues to the benefit of the tenant.

Common law rights granted to owners of land along the course of a river, stream, or similar body of water are called

The answer is riparian rights. Common law rights granted to owners of land along the course of a river, stream, or similar body of water are called riparian rights.

A property owner's land is located along the banks of a river. This owner's water rights are called

The answer is riparian rights. Riparian rights are common law rights granted owners of land along the course of a river.

The four economic characteristics of land that affect its value as a product in the marketplace are

The answer is scarcity, improvements, permanence of investment, and area preference. The four economic characteristics of land that affect its value as a product in the marketplace are scarcity, improvements, permanence of investment, and area preference.

An item of real property can become personal property by

The answer is severance. For example, a tree is classified as real property until the owner cuts it down, severing it from the property.

Which of the following describes the act by which real property can be converted into personal property?

The answer is severance. When we sever something, we cut it loose. Severing (felling) a tree from its roots converts it from realty—real(proper)ty—to personalty—personal(proper)ty. The process is called severance.

In addition to state licensing laws, other laws that have a significant effect on the practice of real estate include

The answer is state and local land-use and zoning laws. In addition to state licensing laws, other laws that have a significant effect on the practice of real estate include state and local land-use and zoning laws.

A buyer purchased a parcel of land and immediately sold the mineral rights to an oil company. The buyer gave up which of the following?

The answer is subsurface rights. Sub means under or beneath. Subsurface, then, is below the surface—the place where most minerals are found.

A landowner sells his property but retains the rights to any oil and gas found beneath the property. These rights are called

The answer is subsurface rights. They are the rights to natural resources below the earth's surface. An owner may transfer surface rights without transferring subsurface rights.

Advertising property only in a Korean-language newspaper

The answer is tends to discriminate against non-Koreans. Advertising property only in a Korean-language newspaper tends to discriminate against non-Koreans.

The legal framework that preserves the federal constitutional rights of citizens, including those that would be thwarted by discriminatory practices, has been created and protected by

The answer is the U.S. Congress and U.S. Supreme Court. The legal framework that preserves the federal constitutional rights of citizens, including those that would be thwarted by discriminatory practices, has been created and protected by the U.S. Congress and U.S. Supreme Court. Various presidential orders have also bolstered these rights.

The following ad appeared in the newspaper: "For sale: 4 BR brick home; Redwood School District; excellent Elm Street location; short walk to St. John's Church; and right on the bus line. Move-in condition; priced to sell." Which statement is TRUE?

The answer is the ad should not mention St. John's Church. Reference to a nearby church implies religious preference. This violates HUD advertising regulations designed to enforce the Federal Fair Housing Act.

A paint company purchases a large tract of scenic forest land and builds several tin shacks there to store used turpentine and other items. Which statement is TRUE?

The answer is the company's action constitutes improvement of the property. The technical term improvement refers to any permanent structure—building, fence, shed, or shack—erected on a property, despite the inherent value of the structure.

In determining whether an item is real or personal property, a court would NOT consider which of the following?

The answer is the cost of the item when it was purchased. The overall test in determining whether an item is a fixture or real property is the intention of the person installing it, how uniquely adapted the item is to the property in which it is installed, how the item was installed and the damage its removal would cause, and what the parties have agreed to. The original cost of the installation, although important to one or the other of the parties, is not considered in this decision.

A man inherited a piece of vacant land, removed and sold all the topsoil, limestone, and gravel. At his death, he left the property to his daughter. Which is TRUE?

The answer is the daughter inherits the property as is. The daughter inherits exactly what the man owned just before his death: a location on the earth's surface, everything below it to the center of the earth, and the space above it toward infinity.

The phrase bundle of legal rights is properly included in

The answer is the definition of real property. Purchasing real property means buying rights of ownership, or a bundle of legal rights.

The need for regulation of the activities of real estate brokers and salespeople has long been recognized because

The answer is their work involves other people's real estate and money. The need for regulation of the activities of real estate brokers and salespeople has long been recognized because their work involves other people's real estate and money.

A woman rents space in a commercial building and fastens shelves to the walls and large tables to the floor. These items are

The answer is trade fixtures and may be properly removed. Common law protects business tenants who install fixtures for their business by treating these trade fixtures as their personal property and giving tenants the right to remove them before the end of their lease. Any damage to the building due to removal of the fixtures must be repaired by the departing tenant. A real estate professional who participates in the sale of business properties should make known to purchasers what, if any, trade fixtures will not convey with the building.

A person who believes illegal discrimination has occurred in violation of the Fair Housing Act may file a complaint with HUD

The answer is within 1 year of the alleged act. HUD also may initiate its own complaint.

Any aggrieved person who believes illegal discrimination has occurred may file a complaint with HUD

The answer is within one year of the alleged act. Any aggrieved person who believes illegal discrimination has occurred may file a complaint with HUD within one year of the alleged act.

A buyer and a seller have entered into a binding contract for the sale of real estate. During this phase and until closing, the buyer has which type of title?

The buyer has equitable title, which recognizes that they buyer has an interest, but has not received legal title. Legal title will pass at closing when the seller gives the buyer the deed.

The TILA-RESPA Integrated Disclosure rule (TRID) requires that

The borrower be given an estimate of the closing costs before the time of the closing. TRID requires that the lender provide the borrower with the Loan Estimate no more than three business days after receiving the loan application.

A prospective buyer signs an agreement with a broker to find a property for the buyer, and the buyer agrees to work only with that broker. While this agreement is in effect,

The broker can represent other buyers. The broker is free to represent other buyers; the buyer cannot sign an agreement or work with another broker while the first agreement is still in effect.

A buyer would like to place an offer on a property but doesn't have good credit. Which of the following is a logical next step?

The broker could find out whether the seller is willing to provide financing for the buyer; if the seller agrees, they could fill out a seller financing addendum. In the case where the seller has agreed to provide the financing for the sale, an addendum needs to be prepared outlining credit terms, taxes, assessments, payment information, all disclosures, title insurance, and any other pertinent information under local jurisdiction regulations.

Two salespeople working for the same broker obtained offers on a property listed with their firm. The first offer was obtained in the morning. A second offer for a higher purchase price was obtained later in the afternoon. The broker presented the first offer to the seller that evening. The broker did not inform the seller about the second offer while the seller was making a decision about the first offer. Which of the following is TRUE?

The broker has no authority to withhold any offers from the seller

A broker tells a buyer, "This home has the most beautiful river view." In fact, the view includes the river and the back of a shopping center. Which is TRUE?

The broker is merely puffing. The broker was puffing—stating something that anyone with common sense and open eyes would know to be an exaggeration.

Which statement is TRUE of a real estate broker acting as the agent of the seller?

The broker is obligated to render loyalty to the seller. Loyalty to the client-seller requires confidentiality—not revealing confidential information; it involves obedience—not publishing a price different from the one set by the client; and it requires disclosure of any fact or action which might affect the principal or the relationship between the agent and principal.

A broker's policy requires a 7% commission on all listings; no lower commission rate is acceptable. Which statement is TRUE?

The broker may legally set the minimum commission rate acceptable for the firm. Brokers have the right to set commissions within their own firm. This is not an antitrust violation. Sales associates who wish to continue with that broker can be required to comply.

A broker sold his listing to the buyers. One week before closing the transaction, the buyers decided they did not want to buy the property. The broker felt that he had earned his commission. He may pursue which of the following options?

The broker may not take his fees directly from the trust account. Should a transaction fail to consummate, the broker under no circumstances is entitled to withhold any portion of the earnest money, even though a commission may have been earned.

The manager of a commercial building has many responsibilities in connection with the operation and maintenance of the structure. The manager would normally be considered the agent of

The building's owner. The management contract establishes the agency relationship between the property manager and the owner.

The buyer must deposit in escrow 7/12 of the anticipated county real estate tax of $3,450 annually and two months of the homeowners association fee of $690 annually. The total amount to be deposited is

The buyer must deposit in escrow 7/12 of the anticipated county real estate tax of $3,450 annually and two months of the homeowners association fee of $690 annually. The total amount to be deposited is $2,127.50 ($3,450 ÷ 12 = $287.50; $287.50 × 7 = $2,012,50) + ($690 ÷ 12 = $57.50 and $57.50 × 2 = $115); $2,012.50 + $115 = $2,127.50.

The buyer and the seller are negotiating an offer. During the final stages of negotiations, the buyer crosses out part of paragraph 19 that states the seller has the right to continue to show the property and receive, negotiate, and accept back up offers and the seller agrees. What are the implications?

The change should be initialed in the margin by the buyer before presentation to the seller. All changes and additions are usually initialed in the margin or on the rider by both parties when a contract is signed.

The characteristics of value include which of the following?

The characteristics of value are remembered by the acronym DUST: demand, utility, scarcity, and transferability.

The closing agent will deduct the balance due on the seller's loan at closing plus any accrued interest. The unpaid balance is $115,400 with a rate of 4%. Based on a closing date of June 15, the amount deducted will be

The closing agent will deduct the balance due on the seller's loan at closing plus any accrued interest. The unpaid balance is $115,400 with a rate of 4%. Based on a closing date of June 15, the amount deducted will be $115,592.33. $115,400 × 4% = $4,616; $4,616 ÷ 360 = $12.82 daily interest; $12.82 × 15 days to closing = $192.33 accrued interest. $115,400 + $192.33 = $115,592.33.

Which statement MOST accurately describes handling compensation for brokers representing the seller and the buyer?

The compensation for services should be negotiated between the seller and the listing broker and stated in the listing agreement.

Who determines the consumer's eligibility to receive compensation from the recovery fund?

The court that entered judgment against the licensee

All of the following are typically found in a listing agreement EXCEPT

The date the real estate professional will schedule an open house. All listing contracts tend to require similar information: type of listing agreement, real estate professional's authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, and so on, but not the dates of open houses.

A homeowner's equity in the property is

The difference between the property's market value and the amount still owed on it. Equity in a property can be borrowed against in future or realized on a sale of the property.

The death of the landlord will terminate the lease and the parties' heirs will NOT be bound by its terms under which of the following estates?

The estate at will gives the tenant the right to possess property with the landlord's consent for an unspecified or uncertain term. It continues until it is terminated by either party giving proper notice or until it is automatically terminated by the death of either the landlord or the tenant.

All of the following are true of the holder of a fee simple absolute estate EXCEPT

The estate terminates upon death. Fee simple absolute estates potentially last forever.

The federal legislation which was passed to protect public health by regulating the nation's public drinking water supply was the

The federal legislation which was passed to protect public health by regulating the nation's public drinking water supply was the Safe Drinking Water Act (SDWA).

Contamination from underground storage tanks is

The federal underground storage tank program is Regulated By The EPA. The regulations apply to tanks that contain hazardous substances or liquid petroleum products and that store at least 10% of their volume underground.

A full-time college student passes his license exam and has his license issued on inactive status because he does not plan to practice real estate until after graduation. When does he pay the Alabama Real Estate Recovery Fund fee?

The first time the license is issued to active status

The first title search shows the status of the seller's title on that date. The second search is made after closing and is called a

The first title search shows the status of the seller's title on that date. The second search is made after closing and is called a bring down.

A buyer and a seller enter a contract for the sale of a three-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller refuses. How should the parties proceed?

The fixes do not become part of the sales agreement. If one party is not willing to agree to an amendment to a contract, the original contract remains in place.

The scope of a property manager's work depends on the terms of the

The management agreement defines the manager's authority and responsibilities.

Which parties must sign a deed to make it valid?

The grantors sign (execute) the deed.

Which appraisal method uses a rate of investment return?

The income approach uses the rate of investment return, which is the relationship between the appraised value and the net annual income.

An appraiser asked for an opinion of the value of an existing shopping center would probably give the MOST weight to which approach to value?

The income approach will have the most weight in an analysis of income-producing property.

Which of the following is FALSE about probate?

The laws of probate are set at the national level. Estate taxes must be paid before any distribution. The laws of each state govern the probate proceedings. Property held in tenancy by the entirety passes immediately.

A contract that conveys the right to use and possess the property for a period of time without transferring ownership is a

The lessor (landlord) grants the right of possession to the lessee (tenant); the lessor retains title.

A lease is a contract between

The lessor (landlord) leases property to the lessee (tenant). The tenant's right to possess the real estate for the term of the lease is called a leasehold estate.

A licensee representing the seller shows a house to his daughter, who is interested in buying it. The licensee presents the daughter's full-price offer to the seller, who eagerly accepts it. Both the seller and the daughter are happy with the transaction. Which of the following statements is TRUE?

The licensee has violated his fiduciary duties to the seller by failing to disclose his relationship with his daughter and could be subject to disciplinary action.

What must a real estate licensee disclose to sellers about lead-based paint?

The licensee's obligation to disclose known lead-based paint hazards to buyers

A broker accepted a listing and later discovered that the client had been declared incompetent by a court. What is the current status of the listing?

The listing is of no value to the broker because the contract is void. If the seller has been declared legally incompetent, the listing is void.

What is the current status of a listing that a broker initially accepted but later discovered the client had been declared incompetent by a court?

The listing is of no value to the broker because the contract is void. If the seller has been declared legally incompetent, the listing is void.

After due process, the Alabama Real Estate Commission revokes the qualifying broker's license. What is the effect on the listing agreements?

The listings are canceled, and the sellers may list with any broker they choose.

If a lender agrees to make a loan based on an 80% LTV, what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900?

The loan-to-value ratio will be based on the relationship of the loan to either the appraisal or the purchase price, whichever is less. In this case, the appraisal is less. Therefore, the loan will be 80 percent of $114,500, which equals $91,600.

If a lender agrees to make a loan based on an 80% LTV, what is the amount of the loan if the property appraises for $314,500 and the sales price is $316,900?

The loan-to-value ratio will be based on the relationship of the loan to either the appraisal or the purchase price, whichever is less. In this case, the appraisal is less. Therefore, the loan will be 80% of $314,500, which equals $251,600.

Three people are joint tenants with rights of survivorship in a tract of land. One owner conveys his interest to a friend. Which statement is TRUE?

The other two owners remain joint tenants. When one of three joint tenants sells to a new person, the other two remain joint tenants with respect to each other. The new person is a tenant in common and is not owner in severalty of the entire property because severalty is sole ownership.

Which event will terminate an agency in a broker-seller relationship?

The owner declares personal bankruptcy. Common law holds that the bankruptcy of either the broker or the seller ends the agency relationship created by the listing.

A buyer and a seller enter a contract for the sale of a three-bedroom residential property. Shortly after the contract is in place, the buyer has an inspection done. As a result of the inspection, the buyer wants the seller to fix the fence and replace the garage door opener. The seller agrees. How should the parties proceed?

The parties must use an amendment form. If a change is made after all parties have signed off, a separate amendment must be prepared requiring the signature of all parties.

A real estate agent's duty of confidentiality usually extends for how long?

The period of time specified in state law. In addition, a real estate licensee who is a member of the National Association of Realtors® must observe the duty of confidentiality forever.

How long does a real estate agent's duty of confidentiality extend?

The period of time specified in state law. In addition, a real estate licensee who is a member of the National Association of Realtors® must observe the duty of confidentiality forever.

The possession of property by an adverse possession claimant must be

The possession by the claimant must be open (obvious to anyone who looks), notorious (known by others), continuous (uninterrupted), hostile (without the true owner's consent), and adverse (to the true owner's possession).

Advantages of an investment in real estate include all of the following EXCEPT

The possibility of a tax-deferred exchange, the use of leverage to increase rates of return, and tax deductions are all advantages of an investment in real estate. High Liquidity (the ability to convert an asset to cash) is not an advantage that real estate enjoys.

A seller has just learned from a home inspection that her home has mold identified as allergenic/pathogenic. The affected area is small, and the seller is afraid that if she discloses the mold to a purchaser that the purchaser will become concerned and buy another property, even though the seller believes it likely that any other home in the area undergoing the test would have a similar outcome. The seller asked her agent if they could refrain from mentioning the mold. The agent must advise the seller that

The presence of mold is a material adverse fact and could affect the health of the person(s) occupying the house.

The sellers are not sure whether to renovate the kitchen before selling their home. The principle of value that will determine whether the renovation is financially feasible is

The principle of contribution states that if the increase in the value of the real estate is more than the cost to renovate, the sellers would financially benefit by doing the renovation.

A small multifamily property generates $50,000 in rental income, $10,000 in expenses, and $25,000 in debt service. The property appreciates about $25,000 each year. What is the cash flow on this property?

The property brings in $50,000 and has costs of $35,000 in property expenses and mortgage payments. That leaves only $15,000 in positive cash flow. Appreciation on a property that is not yet sold does not create cash flow and is not considered in this computation.

To be entitled to a mechanic's lien on real estate, the person who did the work or supplied the materials for which payment is claimed must have a contract with

The property owner or the owner's authorized representative. The contract for the work or materials establishes the liability that enables the filing of a mechanic's lien if the person filing has not received payment.

What must be done with a suspended license?

The qualifying broker must return the license to the Commission.

The real estate license exam includes how many questions specific to Alabama license law?

The real estate license exam contains 140 questions. One hundred are general, and 40 are specific to Alabama.

Which of the following occurs under the Torrens system?

The registration of a title can be canceled by the owner at any time. Under the Torrens system, the applicant needs to prove ownership and then the court enters an order to register the real estate and the registrar of titles issues a certificate of title. A person acquires title only when it is registered.

At closing, the seller would be credited for

The sales price is credited to the seller.

The listing broker and the seller find a small roof leak in the attic. Because the property is being sold "as is,"

The seller and the broker must both disclose this material fact. All material facts must be disclosed by both the seller and the broker, even if the property is being sold "as is."

A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which of the following statements is TRUE?

The seller and the buyer must be informed of the situation and agree to the broker representing both of them.

An owner decides to sell his property and discovers that there is a lien on his title for a swimming pool he paid off 10 years ago. The pool company is out of business. What is the owner to do?

The seller could seek a suit for quiet title. A suit for quiet title can eliminate a cloud on title through court action.

A purchaser went to the county building to check the recorder's records, which showed that the seller was the grantee in the last recorded deed and that no mortgage was on record against the property. The purchaser may assume which of the following?

The seller did not mortgage the property. The fact that no mortgage is on record against the property indicates, with a reasonable degree of certainty, that the seller did not mortgage the property.

How many title policies are typically issued at a closing?

Two. The owner's policy is for the benefit of the owner (buyer), and the lender's policy is for the benefit of the mortgage company.

Responsibility for paying a real estate broker's commission is determined by previous agreement before the closing statement is prepared, but if the broker represents the seller,

The seller normally is responsible for paying the commission. The sales contract should indicate how a broker representing the buyer is to be paid, which is usually out of the commission paid to the seller's broker, although the buyer may have a separate arrangement with the buyer's broker.

In most states,

The seller owns the property on the day of closing. This means that expenses for ownership on the day of closing (such as property taxes) are paid by the seller. The buyer would be responsible for expenses such as mortgage interest and property taxes as of the day following the day of closing. As a practical matter, the deed from seller to buyer typically is not recorded until the day following the day of closing, so this result is a recognition of that fact.

A prospective buyer signs an offer to purchase a residential property. All of the following circumstances would automatically terminate the offer EXCEPT

The seller received a better offer from another buyer. The question is about terminating an offer, not a contract. Death of the offeror, revocation before acceptance, and a counteroffer from the seller would all terminate an offer. The seller's simply receiving a better offer from another purchaser would not terminate the original offer.

When rental property is conveyed, it is customary practice for

The seller to receive the rents for the day of closing and pay all expenses for day. Although the parties may agree on a different outcome, the seller usually is responsible for expenses on the day of closing and is entitled to rents received for that day.

At the closing of a real estate transaction, recording charges necessary to clear all defects and furnish the purchaser with a marketable title usually are paid by the

The seller typically pays for the recording of any release deed or satisfaction of mortgage, quitclaim deed, affidavit, or satisfaction of a mechanic's lien.

A seller is selling an investment property. The original cost of the property was $80,000. The selling price is $225,000. The seller paid an 8% commission and $2,000 in closing costs. Two years ago, the seller made $10,000 worth of improvements to the property. Depreciation is $15,000. What is the seller's adjusted basis in the property?

The seller's adjusted basis is the original cost of the property plus the cost of capital improvements the seller has made, less the depreciation (cost recovery) enjoyed while owning the property. To calculate the adjusted basis, cost is added to improvements and the total is reduced by depreciation: $80,000 cost + $10,000 improvements cost - $15,000 depreciation = $75,000 adjusted basis.

A seller is selling an investment property. The original cost of the property was $800,000. The selling price is $1,250,000. The seller paid an 8% commission and $10,000 in closing costs. Two years ago, the seller made $100,000 worth of improvements to the property. Depreciation is $150,000. What is the seller's adjusted basis in the property?

The seller's adjusted basis is the original cost of the property plus the cost of capital improvements the seller has made, less the depreciation (cost recovery) enjoyed while owning the property. To calculate the adjusted basis, cost is added to improvements and the total is reduced by depreciation: $800,000 cost + $100,000 improvements cost - $150,000 depreciation = $750,000 adjusted basis.

Who is usually responsible for providing marketable title to the property?

The seller. Most contracts clearly state that the seller is responsible for providing marketable title to the property.

If a seller collected rent of $900 from the buyer, payable in advance, on August 1, which statement is TRUE at the closing on August 15, if the closing date is an expense to the seller? (Use a 30-day month)

The sellers have housed the tenant for half a month and so have earned one-half of the $900 month's rent they received. But they owe the rent for the second half of the month, $450, to the purchaser.

The annual real estate taxes on a property amount to $3,900. The seller has paid the taxes in advance for the calendar year. If the closing is set for June 15, which statement is TRUE?

The sellers should get credit for the unused portion of their prepaid real estate taxes. When taxes are paid on a calendar-year basis, the sellers get credit for that portion of the year between closing and December 31. A property with an annual real estate tax of $3,900 is taxed $325 per month ($3,900 ÷ 12 months = $325). Between June 15 and December 31, there are 6½ months. So 6½ times the monthly taxes of $325 yields a proration of $2,112.50 to be credited to the seller and the same amount debited (charged) to the buyer at closing.

Information that a real estate sales associate should obtain from a prospective property seller to make sure that all contingencies are covered in the listing agreement include

The status of all existing loans on the property. Current liens on the property, especially if they total more than the property's likely selling price, will affect a sale. Information must be obtained from the current owners of the property.

A building was purchased new five years ago for $240,000. It currently has an estimated remaining useful life of 55 years. What is the current market value of the building if its construction cost has not increased?

The structure has 60 years of economic life, of which 5 have been used. Therefore, the calculations are as follows: $240,000 purchase price ÷ 60 years = $4,000 depreciation per year. Because five years have passed, $20,000 in total depreciation has occurred: 5 years × $4,000 depreciation per year = $20,000 accrued depreciation. Purchase price minus accrued depreciation equals current value, so using the above depreciation-to-date figure of $20,000, the current value of the building is calculated as follows: $240,000 purchase price - $20,000 accrued depreciation = $220,000 current value.

A property owner had a stroke and is unable to take care of himself. He has no heirs, so a court placed him in a nursing home and assigned a local attorney to represent him and take care of his financial affairs. The property owner has no will or any money available for expenses and hasn't paid any property taxes in the past four years. The court has been notified that the property owner's health is not improving, so he will not be leaving the nursing home. What would the state file to eventually collect the unpaid back taxes?A property owner had a stroke and is unable to take care of himself. He has no heirs, so a court placed him in a nursing home and assigned a local attorney to represent him and take care of his financial affairs. The property owner has no will or any money available for expenses and hasn't paid any property taxes in the past four years. The court has been notified that the property owner's health is not improving, so he will not be leaving the nursing home. What would the state file to eventually collect the unpaid back taxes?

The tax lien would then take first priority and would be paid first from the proceeds of a court-ordered sale of the property.

The sale price of a property is $230,000. Transfer tax to be paid by the seller at closing, based on $0.50 per $500, will be

Transfer tax to be paid by the seller at closing, based on $0.50 per $500 or fraction thereof, will be: $230,000 ÷ $500 = 460; 460 × $0.50 = $230 transfer tax owed by seller.

The buyers purchased a residence for $195,000. They made a down payment of $25,000 and agreed to assume the seller's existing mortgage, which had a current balance of $123,000. The buyers financed the remaining $47,000 of the purchase price by executing a mortgage and note to the seller. This type of loan, by which the seller becomes a mortgagee, is called a

The term purchase money mortgage can mean either owner financing or any mortgage used as acquisition debt in the purchase of a property. Here the owner-seller took back a mortgage for $47,000. An ownertakeback is a purchase-money mortgage.

What does marketable title mean?

The title is free of defects. Marketable title means that the title has no defects that could carry over as a problem for the new owners at whatever time they decide to sell.

The document that sets forth the maximum loan guarantee to which a veteran is entitled is the

The veteran must apply for a certificate of eligibility. This certificate sets forth the maximum guarantee to which the veteran is entitled, but the veteran must still qualify for the loan with the lender.

A real estate broker lists a woman's home for sale for $189,500. Later that same day, a man comes into the broker's office and asks for general information about homes for sale in the $130,000 to $140,000 price range but refuses representation by the broker's company at this time. Based on these facts, which statement is TRUE?

The woman is the broker's client; the man is a customer. One who lists property with a broker is the broker's client. A prospective purchaser who refuses buyer representation is a customer. Customers are not owed fiduciary duties but may later contract with the broker for buyer representation.

When is the first installment of a special assessment generally due?

The year after the assessment is approved. Special assessments are usually paid in equal annual installments over a period of years. The first installment is usually due during the year following the approval of the assessment and the first bill includes on year's interest.

Under the Alabama Real Estate License Act, the license of a qualifying broker is suspended. Which of the following statements is TRUE regarding the licenses of salespersons employed under that broker?

Their licenses are placed on inactive status on the effective date of suspension.

A borrower obtains a $100,000 home equity loan for 30 years at 6% interest. If the monthly payments of $599.55 are credited first to interest and then to principal, what will be the balance of the principal after the borrower makes the first payment?

There are four steps: (1) First, find the amount of interest in the first monthly payment by multiplying the annual interest rate by the original amount of the loan: Principal × rate = interest ($100,000 × 0.06 = $6,000). (2) Then, divide the annual interest by 12 to find the first month's interest: $6,000 ÷ 12 = $500. (3) Next, subtract that interest from the regular monthly payment to find the amount of the first payment to be applied to the principal debt: $599.55 - $500 = $99.55. (4) Finally, subtract that amount from the original loan balance to find the balance remaining after the first payment: $100,000 - $99.55 = $99,900.45.

A lien is created in which of the following ways?

There are four ways to create a lien: voluntary, involuntary, statutory, and equitable.

A buyer borrowed $85,000 to be repaid over 30 years in monthly installments of $456.30 at 5% annual interest. How much of the buyer's first month's payment was applied to reducing the principal amount of the loan?

There are three steps: (1) First, find the amount of interest in the first monthly payment by multiplying the annual interest rate by the original amount of the loan: Principal × rate = interest ($85,000 × 5% = $4,250). (2) Then, divide the annual interest by 12 to find the first month's interest: $4,250 ÷ 12 = $354.17. (3) Finally, subtract that interest from the amount of the regular monthly payment to find the amount available to apply to principal: $456.30 - $354.17 = $102.13.

A primary feature of property held in joint tenancy is that

There is always right of survivorship. Right of survivorship is the distinctive feature of joint tenancy. Any number of persons can own a property in joint tenancy providing they all have equal shares and identical interests, come into ownership at the same moment and on the same granting document, and have equal rights of possession.

Associate brokers must have more experience and complete more education than a salesperson. What additional responsibilities does an associate broker have that a salesperson does not?

There is only one qualifying broker for one specific company in any office. Other people who hold a broker's license but who are not the qualifying broker for an office are called associate brokers. An associate broker's legal responsibilities are identical to a salesperson's.

A real estate mortgage investment conduit (REMIC) has complex rules regarding

These very technically defined entities have existed since the Tax Reform Act of 1986. Liquidation, Transfer, Qualification

If the parties change their original promises on an amendment and then decide they want to make a change to the closing date

They can do so as long as both parties agree to the changes. The process can continue until all parties have reached agreement or the amendment is declared void.

In Alabama, which of the following statements is TRUE regarding licensed real estate salespeople who sell their own property?

They must disclose in writing to all prospective purchasers that they are real estate licensees. Licensees may act on their own behalf only with prior timely written disclosure of this interest to all parties to the transaction.

A developer received a loan that covers five parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan arrangement is called a

This is a blanket loan with a provision for partial release as properties are sold. In a blanket loan, a borrower puts up several parcels of real estate to be used as security for the debt.

In one state, a lender holds a lien on real property offered as collateral for a loan. The borrower retains both legal and equitable title to real property. If the borrower defaults on the loan, the lender must go through formal foreclosure proceedings to recover the debt. This state can be BEST characterized as what kind of state?

This state is a lien theory state. The court is enlisted to order and oversee the mortgage foreclosure procedure.

Under the TILA-RESPA Integrated Disclosure rule (TRID), a lender must extend the closing how many days if the annual percentage rate (APR) has changed more than 0.125% before closing?

Three business days. If the APR has changed more than 0.125% before closing, the TILA-RESPA Integrated Disclosure Act (TRID) provides that a lender must extend the closing three business days.

An ownership interest that is based on annual occupancy intervals is a

Time-share. A real property interest and the right to use the facilities for a certain period of time is called a time-share.

An owner purchased an interest in a house in Beachfront. The owner is entitled to the right of possession only between July 10 and August 4 of each year. Which of the following is MOST likely the type of ownership that has been purchased?

Time-share. When a person holds an interest in property for a stated time each year, that person is sharing the property according to a time plan. It is a time-share.

The federal law we call the Fair Housing Act is

Title VIII of the Civil Rights Act of 1968. The law has been amended since then by the Housing and Community Development act of 1974 and the Fair Housing Amendments Act of 1988, so that it now prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, or disability.

The Fair Housing Act of 1968 became law as

Title VIII of the Civil Rights Act of 1968. Title VIII of the Civil Rights Act of 1968 is also called the federal Fair Housing Act.

Which item would a lender generally require at the closing?

Title insurance commitment. Credit report, application for the mortgage loan, and appraisal of the subject property are all required by a lender well before closing. The title insurance binder is due at closing.

A document that protects against hidden risks, such as forgeries and loss due to defects in the title, and is subject to specific exceptions is called

Title insurance policy. Although a certificate of title is used as evidence of ownership, it does not protect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.

Which of the following is acceptable evidence of marketable title?

Title insurance policy. Proof of ownership is evidence the title is marketable, and title insurance is used to prove ownership.

An examination of the public records to determine the relevant documents related to transfers of a property is called a(n)

Title search. A title search is an examination of the public records to determine whether any defects exist in the chain of title.

What is a marketable title?

Title that has no defects that could carry over as a problem for the new owners at whatever time they decide to sell. Most contracts clearly state that the seller is responsible for providing marketable title to the property. The term marketable means a title that has no defects that could carry over as a problem for the new owners at whatever time they decide to sell.

In one state, a mortgagee holds legal title to real property offered as collateral for a loan, and the mortgagor retains the rights of possession and use. If the borrower defaults, the lender is entitled to immediate possession and rents. This state can be BEST characterized as what kind of state?

Title theory. In title theory states, the mortgagor actually gives legal title to the mortgagee (or some other designated individual) and retains equitable title. Legal title is returned to the mortgagor only when the debt is paid in full (or some other obligation is performed).

In a special warranty deed, the grantor promises

To defend the title against any encumbrances during the grantor's period of ownership. A special warranty deed has only one promise: while the seller owned the property, the seller did not cloud the title. The seller only defends against clouds on title that may have occurred during the seller's ownership period.

The BEST reason for a buyer to obtain title insurance is

To ensure that the seller can deliver marketable title. Title insurance is considered the best defense of title and is assurance that the grantee is actually acquiring ownership and that the title is marketable.

Title is held by two persons as joint tenants with rights of survivorship. If one party dies, the deceased party's interest goes

To the co-owner. Rights of survivorship created in joint tenancy mean that title and interest pass to the other owners upon death of one of the joint tenants or co-owners.

Which of the following would automatically terminate a residential lease?

Total destruction of the property. Death of the tenant, failure to pay rent, or sale of the rented premises would not end a residential lease. Destruction of the property would terminate a lease.

The various appraisal designations depend on experience. Which appraiser designation requires the LEAST experience?

Trainee real property appraiser

A broker helps a buyer and a seller with paperwork but does not represent either party. This relationship is

Transactional brokerage. A nonagent (transactional broker, facilitator, coordinator, or contract broker) is not an agent of either party. A nonagent's job is simply to help both the buyer and the seller with the necessary paperwork and formalities involved in transferring ownership of real property.

At the closing of a real estate transaction, most states, counties, and local municipalities require some form of

Transfer tax, conveyance fee, or tax stamps. Usually, there will be a fee when real estate is conveyed, and responsibility for paying the fee varies according to local practice and the terms of the sales contract.

A lien is an encumbrance, which means that it attaches to property and

Transfers along with the property. Liens differ from other encumbrances because they are financial in nature and attach to the property because of a debt. The debt must be paid or satisfied within a specified time before the lien will be removed from the property. If a lien is not paid in the allotted time, the lienholder may foreclose on the lien, potentially forcing the sale of the property.

The RECAD disclosure form is required in a Commercial Real estate License

True

A neutral individual holds title for the benefit of another when property is held in

Trust. Property held by a neutral individual for the benefit of another is being held in trust.

A legal arrangement under which the title to real property is held to protect the interests of a beneficiary is a

Trust. Trusts protect beneficiaries. Partnerships can protect limited partners; corporations can protect stockholder-owners.

The person who creates a trust conveys real or personal property to a

Trustee. The person who creates a trust conveys real or personal property to a trustee, with the understanding that the trustee will assume certain duties.

A trust is a legal arrangement in which property is held for the benefit of a third party by a(n)

Trustee. The trustor creates trust that is held for the benefit of the beneficiary who will ultimately benefit from the trust. A third party, the trustee, holds legal title to the property and is entrusted with carrying out the trustor's instructions.

The borrower under a deed of trust is known as the

Trustor. A borrower gives a deed of trust to a trustee and a note to the lender, thus becoming a trustor on the deed of trust and a maker—or obligor—on the note. The deed is held by the trustee, and the lender is the beneficiary of the trust.

What law requires disclosure of the annual percentage rate (APR) to a borrower?

Truth in Lending Act. APR is the true cost of borrowing and is required to be disclosed by the federal Truth in Lending Act.

Group boycotting is illegal and occurs when

Two or more businesses conspire against another business or agree to withhold their patronage to reduce competition. Group boycotting occurs when two or more businesses conspire against another business or agree to withhold their patronage to reduce competition. Group boycotting is illegal under the antitrust laws.

Joint tenancy is a form of concurrent ownership of property that is available to

Two or more people, whether married or unmarried. An unlimited number of individuals can own property in a joint tenancy. At each successive joint tenant's death, the surviving owners acquire the deceased's interest.

A written agreement between lienholders to change the priority of a mortgage is a

Under a subordination agreement, the holder of a superior or prior lien agrees to permit a later lienholder's interest to take precedence.

A listing agent knows that a neighborhood is predominantly a particular ethnic group. A potential buyer asks about the racial makeup of the neighborhood. Which of the following should the listing agent say?

Under fair housing laws, I am not able to provide that information."

The law that requires lenders to find ways to help meet the housing needs of those of low and moderate incomes is the

Under the Community Reinvestment Act of 1977 (CRA), financial institutions are expected to meet the deposit and credit needs of their communities, participate and invest in local community development and rehabilitation projects, and participate in loan programs for housing, small businesses, and small farms.

Exclusive Right To Sell

Under which type of listing agreement would the agent be compensated for a full listing commission even if the owner sold the house to someone located and negotiated completely by the owner?

The use of electronic signatures makes routine paperwork more efficient and has been encouraged by adoption by most states of the

Uniform Electronic Transactions Act. The Electronic Signatures in Global and National Commerce Act (E-Sign) applies to those states that have not adopted UETA, and some sections of the law also apply to those states that have adopted UETA.

Which act encourages the use of electronic signatures, making routine paperwork much more efficient?

Uniform Electronic Transactions Act. The Electronic Signatures in Global and National Commerce Act (E-Sign) applies to those states that have not adopted UETA, and some sections of the law also apply to those states that have adopted UETA.

The appraisal form required by many government agencies is the

Uniform Residential Appraisal Report. The URAR form is required by many government agencies for a property appraisal. The VA uses of a certificate of reasonable value (CRV).

Appraisers are expected to follow the

Uniform Standards of Professional Appraisal Practice (USPAP). Appraisers are expected to follow the Uniform Standards of Professional Appraisal Practice (USPAP) that are established by the Appraisal Standards Board of the Appraisal Foundation.

The work of an appraiser should comply with the

Uniform Standards of Professional Appraisal Practice. USPAP was established and is continually reviewed by the Appraisal Standards Board of the Appraisal foundation.

An assessment equalization factor is used to achieve

Uniformity. If there are inequalities in statewide tax assessments, some jurisdictions might apply an equalization factor. Assessments might be raised or lowered based on the factor.

A seller accepted money from a buyer for his unrestricted right to cancel the purchase transaction (option to terminate) within 10 days of the executed date of the sales contract. This agreement is a(n)

Unilateral contract. This is a one-sided agreement with the seller's promise to sell enticing the buyer to buy his property. The buyer is not legally obligated to act, but the seller is obligated to keep his promise.

A prospective buyer of commercial or industrial property should include in an offer to purchase

a contingency to allow for an environmental site assessment

To compensate for past racial discrimination in housing in an area, a property manager specifically sought to attract non-white tenants. This practice is

Unlawful because it violates fair housing laws. All advertising and promotional activities must comply with federal, state, and local nondiscrimination laws. The content cannot market to one protected class, such as race, color, religion, sex, national origin, familial status, or disability.

Which of the following is TRUE regarding a real estate investment?

Unlike Stocks and Bonds, Real Estate is Not Highly Liquid Over The Short Term. The length of time it takes to market and sell real estate means that, unlike stocks and bonds, real estate is not highly liquid over the short term.

How many licensees may be affiliated with a real estate office?

Unlimited

Which of the following creates a lien on real estate?

Unpaid mortgage loan. Encumbrances such as easements and encroachments do not involve liens. A license is a personal, revocable privilege. A mortgage agreement creates a voluntary, specific lien

Extended coverage in an owner's title insurance policy would cover which of the following?

Unrecorded liens not known by the policyholder. Extended coverage in an owner's title insurance policy would cover standard coverage plus defects discoverable through a property inspection, including unrecorded rights of persons in possession, an examination of the survey, and unrecorded liens not known by the policyholder.

Which of the following is NOT covered by a standard title insurance policy?

Unrecorded rights of parties in possession. All are covered except unrecorded rights of parties in possession. These are covered by an extended coverage policy.

A feature of holding title as joint tenants is that

Upon death the title transfers without going through probate. The right of survivorship is transferred without a will or the process of probate.

An important feature of adverse possession is that the individual who intends to make a claim to property owned by someone else must

Use the property. The claimant's property use must be open, notorious, continuous, hostile, and adverse to the true owner's right of possession for the statutory period.

Compliance with the Equal Credit Opportunity Act requires that a property manager

Use the same lease application for each applicant. If a manager requires a credit report from one applicant, the manager should require credit reports from all applicants.

Change, contribution, plottage, and substitution are some of the basic principles that affect what aspect of real estate?

Value. They all affect value—the most probable price a property will bring.

A mortgage for the unpaid purchase price that belongs to the seller of real estate is a

Vendor's lien. The lien in favor of the seller attaches to the property being purchased.

Public records are

Viewable to anyone. Public records are records available to the public. Anyone interested in a particular property can review the public records to learn about the documents, claims, and other details that affect its ownership.

The listing broker and the seller know that the foundation of the seller's house is unsafe. If they do not inform the buyer of this condition, the contract to purchase the property would be

Voidable by the buyer. Intentional deceit of material facts is fraud. Fraud is one of the conditions that can make a contract voidable by the party defrauded.

A minor signed a sales contract to purchase a home. Which of the following describes this contract?

Voidable by the minor. Minors who are parties to a contract always make the contract voidable. It is incumbent upon the seller to not allow a minor to enter into a contract. The seller will have to wait for the minor to cancel or move forward.

A contract that may be rescinded by one party because of duress, fraud, misrepresentation, or one party being a minor is also known as a(n)

Voidable contract. A contract is voidable if only one party may enforce or rescind it against the other party.

A deed contains a guarantee that the grantor will compensate the grantee for any loss resulting from the title's failure in the future. This is an example of which covenant?

Warranty forever. The grantor promises to compensate the grantee for the loss sustained if the title fails at any time in the future in the covenant of warranty forever.

A deed contains a guarantee that the grantor will compensate the grantee. This is an example of which type of covenant?

Warranty forever. The grantor promises to compensate the grantee for the loss sustained if the title fails at any time in the future.

Earnest money checks should be deposited

When an accepted offer becomes a contract. Each state has deposit requirements once the offer becomes a contract. The earnest money is typically deposited in the listing brokerage firm's account or a title company account.

Under the oldest kind of land contract, when does the vendor give the deed to the vendee?

When the contract is fulfilled and all payments have been made. In the oldest form of land (installment) contract arrangement, the vendor (seller) does not have to give a deed to the vendee (purchaser) until the last payment has been made. A number of states have softened the harsh effect of the traditional land contract by providing for equitable title in the buyer after as little as one year of successfully making loan payments.

Legal title ALWAYS passes from the seller to the buyer

When the deed is delivered and accepted. Although the buyer received equitable title upon contract, legal title does not pass until delivery and acceptance of the deed. If the buyer, or someone acting on the buyer's behalf, records the deed, acceptance is presumed.

When must Alabama licensees pay a $30 fee to the state's recovery fund

When they are issued their initial real estate licenses

A broker's price opinion (BPO) should not be confused with an appraisal, which consists of a more in-depth analysis of gathered information and

Which may be performed only by a licensed or certified appraiser. A BPO should not be confused with an appraisal, which consists of more in-depth analysis of gathered information and which may be performed only by a licensed or certified appraiser.

An example of constructive eviction would be a tenant

Who moves because the unit no longer has water. When conditions cause a rental unit to no longer be habitable, the renter is said to have suffered constructive eviction. Without water, the tenant could not bathe, cook, wash clothes, and so on. The tenant must leave and not just withhold rent.

Title to real estate can be transferred upon death by what type of document?

Will. A will transfers title to real estate upon the death of the testator. Deeds must be delivered and accepted during the lifetime of the grantor to transfer title.

In one type of financing, a third party holds legal title to real property offered as collateral for a loan, and the borrower retains the rights of possession and use. If the borrower defaults, the lender is entitled to ask that the third party sell the property. What type of security instrument has been used in this case?

With a deed of trust, the borrower/property owner deeds the property to a third party, called the trustee, to hold on behalf of the lender, called the beneficiary. If the owner (the trustor) defaults in payment of the underlying debt, the beneficiary can notify the trustee to begin foreclosure proceedings.

A lessee who pays some or all of the property expenses, such as hazard insurance and property tax, has a

With a net lease, the tenant pays a base rent plus operating costs of the property, such as utilities, insurance, property taxes, and assessments.

The holder of the possibility of reverter of ownership of real estate (or the holder's heir or successor) can reacquire full ownership of the property on violation of a special limitation

With no need to bring a legal action in court. If the holder of a fee simple determinable violates the special limitation that has been imposed on the title, the holder of the possibility of reverter (or heir or successor) can reacquire full ownership with no need to bring a legal action in court.

When surveying land, a surveyor refers to the principal meridian that is

Within the rectangular survey system area in which the land being surveyed is located. No matter how many ranges or tiers it takes, the description must always refer to the principal meridian and the base line of the survey system area in which the land being described is located.

An informational booklet prepared by the CFPB must be given to the borrower under TRID at the time of application or provided

Within three days of loan application. An informational booklet prepared by the CFPB must be given to the borrower under TRID at the time of application or provided within three days of loan application.

Alabama license law requires agents to have written buyer agency agreements with every client they represent in order to find a house. A new salesman with a brokerage is uncomfortable with this responsibility. His broker should explain that

Without a signed agreement, an agent can only act as a transaction broker and provide only customer-level services. The broker cannot provide client-level services without a written agency agreement.

Which type of insurance coverage insures an employer against MOST claims for job-related injuries?

Workers' compensation insurance protects employers against claims for on-the-job injuries to their employees.

How does the consumer notify the Commission that it plans to make a claim against the recovery fund?

Written notice to the commission that a verified claim has been entered in the court by the consumer

A qualifying broker has what is commonly called a 100% office. Salespeople and associate brokers pay a fixed fee to the qualifying broker each month, but they also keep 100% of all real estate commissions on listings or sales procured by them. The broker has a rule that all listing agreements include a commission of at least 7%, even though this rule does not affect the broker's compensation. Is this legal?

Yes

A salesperson lists a property for sale on her personal social media page, indicating that it is in a very desirable school district. As the salesperson knows, the property is actually located in a much less desirable school district. Can the broker be disciplined by the Commission for that advertising?

Yes, because any advertising should not intentionally misrepresent any property.

An associate broker routinely gives RECAD disclosure pamphlets to Spanish-speaking clients and customers and obtains their signatures, but the associate broker never explains the various brokerage relationships to anyone or engages in any dialogue to be sure they understand. Can the qualifying broker be charged with a violation of the license law as a result?

Yes, because the broker is responsible for all licensees in the office.

A buyer presents a written offer for property. The sellers verbally accept the offer through their real estate agent, and the parties move forward to closing. Three days before scheduled closing, the sellers sign a contract with a third party for a higher price. Can the seller do this?

Yes, because the first buyer did not have an enforceable contract

Is there any criminal liability for violating Alabama's license laws?

Yes, they are considered Class A misdemeanors.

A licensee agrees to plead guilty to a minor license law violation in exchange for a punishment of taking specified risk management courses within the next 30 days. Is this allowed?

Yes, this is an allowed punishment.

The document that provides the borrower with general information about settlement costs, RESPA provisions, and what happens at settlement is

Your Home Loan Toolkit. It provides numerous resources for further information as well as a line-by-line description of the Loan Disclosure form.

A policy of title insurance typically does NOT cover

Zoning changes. The standard policy of title insurance will cover defects found in public records, forged documents, incompetent grantors, incorrect marital statements, and improperly delivered deeds, but not defects known to the buyer or changes in land use brought about by zoning ordinances.

A local government implements the guidelines set out in the long-term plan by enacting

Zoning ordinances

All of the following would be permitted under the federal Fair Housing Act EXCEPT

a 20-unit residential apartment building renting to men only. Sex is a protected category under the federal Fair Housing Act but the owner of the building doesn't qualify for any exception to the law. Even if the owner lives in one of the units, doesn't use a broker, and does not advertise discriminatorily, the property is not an exception to the law because it has more than four units.

Someone who performs home inspections without a license can be charged with

a Class A misdemeanor

A listing agreement is

a broker's employment contract with a principal.

A real estate transaction may be completed by using an escrow agent or escrow holder who acts as

a disinterested third party to make sure required documents and funding are in place before the transaction is completed. The escrow agent may be an attorney, title company, trust company, escrow company, or the escrow department of a landing institution.

Which of the following describes a net lease?

a lease in which the tenant pays rent, plus all—or most—of the operating expenses related to the property. Under a net lease, the tenant pays all or most of a property's operating expenses.

In the absence of clear limitations in the lease as to the use of the premises,

a lessee may use the premises for any lawful purpose. The lessee still must comply with local zoning and/or subdivision restrictions.

A discrimination suit may be filed in federal court by

a person aggrieved by racial discrimination. A person aggrieved by racial discrimination may file suit under the Civil Rights Act of 1866 directly to federal courts.

Ownership in severalty means

a sole owner is cut off from other owners. Ownership in severalty occurs when property is owned by one individual, corporation, or other entity. The owner in severalty has sole rights to the property and sole discretion to sell, will, lease, or otherwise transfer part or all of the ownership rights to another person.

Mortgage banking companies originate

originate mortgage loans with money belonging to insurance companies, pension funds, and individuals, as well as funds of their own.

Expenses to be prorated (such as water bills and unpaid property taxes) that are owed by the seller but will be paid late by the buyer are called

accrued items.

The definition of addendum is

additional information given in the offer. An addendum is any additional material that is part of the original agreement. If an addendum is needed, it is ideal to have it added to the original contract form during the offer stage.

Because Alabama is not a community property state, a licensee handling a transaction for divorcing parties should

advise the parties to consult an attorney regarding property rights. While Alabama is not a community property state, a similar concept exists under Alabama case law under property distribution. In divorce actions, the concept of separate property and marital property exists.

The Equal Credit Opportunity Act provides that credit applications can be considered on the basis of all of the following except

age of the borrower, provided the applicant is of legal age. ECOA prohibits discrimination in the lending process based on the credit applicant's race, color, religion, national origin, sex, marital status, age (provided the applicant is of legal age), or receipt of public assistance.

The federal Equal Credit Opportunity Act allows lenders to discriminate against potential borrowers on the basis of

amount of income. Lenders may reject applicants who have insufficient income for the loans they are requesting, but lenders may not discriminate based on any of the other criteria listed.

To make a change to a contract

an amendment must be used. In order to make any changes to the contract, a separate written amendment must be incorporated into the original contract and signed by all the parties.

When it insures a home loan, FHA tries to minimize its risk by requiring

an appraisal of the real estate by an FHA-approved appraiser. An important feature of an FHA-insured loan is its low down payment, although the borrower must still beet standard FHA credit qualifications.

The parties to a real estate transaction should be aware that many older tanks have never been registered

and may not comply with federal and state laws.

Which situation falls under the category of specific assistance?

asking a buyer financial questions

A buyer purchased a home under an agreement that made the buyer personally obligated to continue making payments under the seller's existing mortgage. If the buyer defaults and the court sale of the property does not satisfy the debt, the buyer will be liable for making up the difference. The buyer has

assumed the seller's mortgage. Purchasers who buy a property and formally assume an existing mortgage debt become liable for any deficiency arising from a foreclosure sale. Purchasers who buy a property subject to an existing mortgage are not liable for such a deficiency; the original borrower is still liable for the debt.

An important purpose of a living trust is to

avoid having property in the trust go through probate. On the trustor's death, the trust need not go through a probate proceeding because title automatically passes to the beneficiary named in the trust. The living trust has no effect on the value of the estate for estate tax purposes, however.

Which of the following are NOT basic components of a metes-and-bounds description?

base lines, principal meridians, and townships. Base lines, meridians, and townships are elements of the rectangular survey system, not the metes-and-bounds system.

A metes-and-bounds property description must always conclude at the point of

beginning. This method of property description always ends back at the point of beginning so that the tract being described is completely enclosed.

A real estate professional's duties to a customer do NOT include

being primarily responsible to the customer. Even though an agent's primary responsibility is to the principal, the agent also has duties to third parties. Any time a real estate professional works with a third party, or customer, the real estate professional is responsible for adhering to state and federal consumer protection laws, as well as the ethical requirements imposed by professional associations and state regulators. In addition, the real estate professional's duties to the customer include reasonable care and skill in performance, honest and fair dealing, and disclosure of all facts that the real estate professional knows or should reasonably be expected to know that materially affect the value or desirability of the property.

A legally enforceable agreement under which two parties promise to do something for each other is classified as a(n)

bilateral contract. A contract is bilateral if both parties to the agreement promise to do something in exchange for the other's promise to do something.

A contract that exchanges a promise for a promise is said to be

bilateral. Whenever all parties to the contract make promises to give something, the contract is said to be bilateral.

Any pooling of individuals' funds raises questions of securities registration under federal and state securities laws, called

blue-sky laws

Loan servicing includes

bookkeeping. Loan servicing involves collecting payments, accounting, bookkeeping, preparing insurance, and maintaining tax records.

The acronym BPO stands for

broker's price opinion. The acronym BPO stands for broker's price opinion.

Construction standards that must be met when repairing or erecting buildings are called

building codes.

A property owner who wants to build a structure or alter or repair an existing building usually must obtain a

building permit

BRI stands for

building-related illness. BRI is a clinically diagnosed condition that can be attributed directly to airborne building contaminants. BRI and SBS (sick building syndrome) are illnesses that have become more prevalent because of energy efficiency standards that make buildings more airtight with less ventilation.

A buyer purchased a new residence for $175,000. The buyer made a down payment of $15,000 and obtained a $160,000 mortgage loan. The builder of the house paid the lender 3% of the loan balance for the first year and 2% for the second year. This represented a total savings for the buyer of $8,000. What type of mortgage arrangement is this?

buydown. The builder brought down the purchaser's interest rate for two years by paying the lender advance interest. This is a buydown arrangement.

Whose signature is necessary for a signed offer, to purchase real estate, to become a contract?

buyer's and seller's. A signed offer already has the buyer's signature, but to be a ratified contract, both the buyer's and the seller's signatures are necessary.

Some traditional terms of measurement NOT often used today include rods, cubic yards, and

chains. Some traditional terms of measurement are not often used today, but may be found in older deeds. These include rods, cubic yards, and chains.

An amendment

changes the contract. An amendment is a change or modification to the existing content of a contract.

The closing statement involves debits and credits to the parties in the transaction. A debit is

charge to be paid by the buyer or the seller.

Title to a property is held by two or more individuals; this property is held in

co-ownership. When title to a property is held by two or more individuals, the property is being held in co-ownership.

According to some states, any real property that either spouse owns at the time of marriage remains separate property. Further, any real property acquired by either spouse during the marriage (except by gift or inheritance of with the proceeds of separate property) belongs to both of them equally. What is this form of ownership called?

community property. This arrangement falls under community property law, which is found—with some variations in details—in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington

Besides having a qualifying broker license, what else is legally required to open a real estate office?

company license

The acronym CMA stands for

comparative market analysis. The acronym CMA stands for comparative market analysis.

A municipality establishes development goals in its

comprehensive plan known as a master plan

A person who owns one unit in a multiunit structure together with a specified undivided interest in the common elements owns a

condominium. A person who holds a fee simple title to a unit and a specified share of the undivided interest in the common elements owns a condominium.

All of the following can be classified as real property EXCEPT

cooperative unit ownership. Because it involves receiving shares of stock and a leasehold—both of which are considered by common law to be personal property—cooperative ownership is personal, not real, property.

Conveyance of title occurs the moment a deed is

delivered and accepted. Delivery by the grantor and acceptance by the grantee defines the moment of conveyance.

The MOST prevalent form of real estate investment is

direct ownership

A family owns a house across the street from a lake but has the right to use the lakefront homeowner's driveway to access the lake because of the existence of an

easement. An easement is the right to use the land of another for a particular purpose.

What is the ratio of licensed and unlicensed members on the Alabama Real Estate Commission?

eight licensed and one unlicensed. The Alabama Real Estate Commission is a nine-member body composed of eight licensed members and one unlicensed member. The unlicensed member is called the consumer commissioner and is supposed to present a consumer point of view on issues.

The condemnation of private property for public use is allowed under the state's right of

eminent domain

A state's authority to enact legislation to preserve order, protect the public health and safety, and promote the general welfare of its citizens can be passed on to municipalities and counties through legislation called

enabling acts. The state's authority to enact legislation for the common good can be passed on to the municipalities and counties by means of enabling acts.

Asbestos, sick building syndrome (SBS), and lead-based paint are all examples of

environmental concerns that a property manager may have to address. These are all environmental issues that might impact any managed property.

Alabama's version of fair housing law

essentially mirrors the federal fair housing laws

Capitalization is the process by which annual net operating income is used to

estimate value (the income approach) requires the use of the net operating income, value, and capitalization rate.

Federal, state, and local fair housing or equal opportunity laws affect

every phase of a real estate transaction, from listing to closing. Federal, state, and local fair housing or equal opportunity laws affect every phase of a real estate transaction, from listing to closing.

A woman's son will start college soon. She has lived in her home for 10 years. What financing option is available for the woman to obtain funds to pay for her son's schooling?

home equity loan. A homeowner can use the equity buildup in a home to finance such things as education; it is an alternative to refinancing.

RESPA is a federal law that was enacted to protect consumers from all of the following in the settlement process EXCEPT

excessive broker commissions. RESPA is a federal law enacted to protect the consumer in the settlement process by requiring accurate and timely information about the actual costs of a transaction, eliminating kickbacks and regulating referral fees, and prohibiting lenders from requiring excessive escrow account deposits. Broker's commissions are always negotiable.

Real estate investments are

expensive, usually requiring large amounts of capital.

An encroachment describes improvements that

extend over adjoining lot lines. An example of an encroachment is a shed that extends six feet onto the neighbor's property.

If a shareholder in a cooperative defaults in maintenance payments, the burden of the default

falls on the remaining shareholders. Each shareholder is affected by the financial ability of the others.

What is another name for an IRS tax lien?

federal tax lien. This type of lien results from a person's failure to pay any portion of federal taxes, such as income and withholding taxes.

What is the shortest distance between Section 1 and Section 36 in the same township?

four miles. The shortest distance from Section 1 to Section 36 is from the bottom of Section 1 to the top of Section 36, or four miles.

A seller's home was inspected and termites were found. A buyer came to an open house and asked the listing agent if there were any problems with the house. The listing agent told her there were not. The buyer purchased the house for cash without a wood infestation report. She later learned that when she stepped through the living room floor, there had been prior termite infestation and the seller had treated the property for active termites. She also learned that the company treating the property had delivered a report showing the damage to the listing agent before the closing. The buyer accused the listing agent of fraud. The listing agent acted

fraudulently.

Which type of deed provides the BEST protection to the buyer?

general warranty deed. The general warranty deed has the most promises or warranties.

In the rectangular survey system, a section is further divided into

halves and quarters. A half-section has 320 acres and a quarter-section has 160 acres.

Radon is

has been classified as a Class A known human carcinogen.

To be eligible to take the real estate license exam, an applicant must

have a high school diploma or its equivalent

The U.S. Congress created the Interstate Land Sales Full Disclosure Act to prevent fraudulent marketing schemes that may arise when land is sold

he U.S. Congress created the Interstate Land Sales Full Disclosure Act to prevent fraudulent marketing schemes that may arise when land is sold Without Being Seen By The Purchasers.

Inflation is higher when there is an increase in

he amount of money in circulation.

A salesperson has terminated his association with his qualifying broker and is changing to a new qualifying broker. Which of the following is TRUE for the salesperson in this situation?

he may not perform any act for which a license is required until he has a new qualifying broker.

If a real estate professional is the subject of threats or acts of violence brought about by compliance with the Fair Housing Act,

he perpetrator of the acts is punishable by criminal action. The Fair Housing Act protects owners and real estate professionals who aid or encourage the enjoyment of fair housing rights. Threats, coercion, and intimidation are punishable by criminal action.

The lower the ratio of debt to value, the

higher the down payment made by the borrower. The lower the ratio of debt to value, the higher the down payment made by the borrower.

In Alabama, a person planning to open a real estate office must

hold a qualifying broker's license or hire a qualifying broker.

The acronym HELOC stands for

home equity line of credit is junior to the original lien.

Someone who is the victim of discrimination under the Fair Housing Act may seek damages that can include noneconomic injuries, such as

humiliation. The Fair Housing Act allows a victim of discrimination to seek both economic and noneconomic damages, which can include humiliation, embarrassment, inconvenience, and mental anguish.

The purpose of Alabama's license law is to

protect the public

A brokerage is the only commercial real estate company in town. If it takes a listing on property, there is a high probability any potential buyer will also be a client. Knowing this in advance, the brokerage refuses to enter into any listing agreements unless the seller provides preapproval for dual agency. This practice is

illegal.

A real estate professional uses earnest money placed in the company trust account to pay for the rent owed on the real estate professional's office. Using escrow funds for this purpose is

illegal. Earnest money does not belong to the real estate professional and must be placed in an escrow (trust) account. To convert that money for personal use is illegal, regardless of any plan to later reimburse the account. It doesn't make any difference if there remains enough money in the trust account to cover immediate client needs.

A salesperson finds a buyer for a home he has listed. The buyer gives the salesperson an earnest money cashier's check for $2,000. According to Alabama regulations, what should the salesperson do with the check?

immediately give it to the broker

Time-share property is BEST described as a form of ownership interest that

includes the use of a property for a fixed or variable period.

Discount points paid to a lender are used to

increase the lender's yield (rate of return) on its investment. Discount points paid to a lender are used to increase the lender's yield (rate of return) on its investment.

The two main factors affecting appreciation are

inflation and intrinsic value

What are the two main factors that affect appreciation?

inflation and intrinsic value. Inflation essentially is the increase in money in circulation, which causes values to decline. Intrinsic value is the result of an individual's personal choices and preference for a given geographic area.

An example of complying with the Americans with Disabilities Act (ADA) could be

installing auditory signals in elevators. An example of complying with the ADA could be installing auditory signals in elevators.

Urea-formaldehyde is found in residential properties in

insulating foam. In the 1970s, many homeowners had urea-formaldehyde foam insulation installed in their homes to conserve energy.

The result of a person's individual choices and preferences for a given geographic area is

intrinsic value

A sale to satisfy delinquent tax or mortgage liens is an example of

involuntary alienation. A sale to satisfy delinquent tax or mortgage liens is an example of involuntary alienation.

Title to property may be transferred without the owner's consent by

involuntary alienation. Involuntary alienation is the transfer of property without the consent of the property owner.

Eminent domain and escheat are two examples of

involuntary alienation. The right of eminent domain allows a government entity to compel the sale of a property to that entity for a price set by court process—condemnation. This transfer of title (alienation) is forced and so is involuntary. When a person dies without a will (intestate) and without heirs, the property passes (escheats) to the state. This process was neither planned nor initiated by the owner before death and so is classified as involuntary.

When a person dies intestate (with no will), the title to the real estate may pass to the state in an example of

involuntary alienation. When a person dies intestate (with no will) and no heirs can be located, the title to the real estate passes to the state, an example of involuntary alienation.

A $2,400 term loan has a 10% annual interest rate. What is the monthly payment?

is $20. A term loan is interest only. $2,400 × 0.10 = $240 240 ÷ 12 = $20 per month

If the Real Estate Recovery Fund falls below $500,000, the Alabama Real Estate Commission assesses

is $30 from each active salesperson and broker

A property sold for $500,000 with a 90% loan, which has a 2% loan origination fee. The cost of the origination fee is

is $9,000. $500,000 × 0.90 = $450,000 (loan) × 0.02 = $9,000.

A credit score can range from

is 300 to 850. Lenders will require a minimum credit score for a loan, often depending on whether or not the borrower is making use of a government-sponsored program, or the lender will sell the loan after initiating it.

In a landfill, waste is laid on the liner at the bottom of the excavation, and

is a layer of topsoil is then compacted onto the waste.

The air above a property owner's land may be subdivided into

is air lots. The air above a property owner's land may be subdivided into air lots.

A straight loan is a(n)

is also known as a term loan or interest-only loan. The borrower makes periodic payments of interest only, followed by the payment of the principal in full at the end of the loan term.

In some parts of the country, closing is called

is called settlement and transfer.

The channeling of protected class members to certain buildings or neighborhoods is called

is called steering.

A tenant's tenancy for years will expire in two weeks. The tenant plans to move to a larger apartment across town when the current tenancy expires. In order to terminate this agreement, the tenant must

is do nothing because the agreement will terminate automatically at the end of the current term. In common law, a tenant for a specified period (one who holds a lease for years) does not have to give notice because the lease ends by contractual agreement. Nor does the landlord have to give the tenant notice in such a case, unless required to do so by state law.

A judgment creates a lien on both real and personal property owned by a debtor and is

is general, involuntary, and equitable. The decree issued by a court is a general, involuntary, equitable lien on both real and personal property owned by the debtor. A judgment will expire after a number of years, but some states allow a judgment to be renewed indefinitely by the judgment creditor.

A broker listed a house for $247,900. A member of a racial minority group saw the house and was interested in it. When the prospective buyer asked the broker the price of the house, the broker said it was listed for $253,000 and that the seller was very firm on the price. Under the federal Fair Housing Act, such a statement is

is illegal because the terms of the potential sale were changed for the prospective buyer. Quoting a different price or terms based on the prospect's membership in a protected group is a blatant violation of the federal Fair Housing Act.

Funds for FHA-insured loans are usually provided by

is insured by the agency, and funds must be made available by FHA-approved lenders.

Approved senior housing that does not allow children is

is legal because this type of housing can discriminate based on familial status. Senior housing in which 80% of the housing is for age 55 and older are allowed to discriminate based on familial status. Age is not a protected class.

A broker showing properties to an Asian couple intentionally selects properties exclusively in neighborhoods that she knows have some Asian residents. This action likely constitutes

is steering. Steering occurs when a broker selects property to show based on a protected class characteristic. Blockbusting and panic selling are also violations of fair housing laws but do not match the definition of steering.

A real estate appraiser is

is subject to the requirements of fair housing laws. The appraiser may consider factors that affect value, but not any of the factors based on identification of an individual or individuals protected by fair housing laws.

Actual notice is

is the information is available and someone has been given it and actually knows it. An individual who has searched the public records and inspected the property has actual notice.

A single man with two small children has been told by a real estate professional that homes for sale in a condominium complex are available only to married couples with no children. Which statement is TRUE?

is the man may file a complaint alleging discrimination on the basis of familial status. The salesperson and, by implication, the broker and the property owners/principals have violated the prohibition against familial-status discrimination. Anyone in charge of one or more children under age 18 who is denied access because of the children is the victim of discrimination based on familial status.

Government ownership of national and state parks and forests, schools, museums, and various government buildings helps serve the best interests of

is the public

Cash flow is

is the total amount of spendable income left after expenses. spendable income generated by an investment, minus expenses.

The purpose of bulk zoning is to

is to Control Density and Avoid Overcrowding by imposing restrictions such as setbacks, building heights, and percentage of open area or by restricting new construction projects.

Which statement is TRUE about a syndicate?

it is a private or public business venture to own property. A real estate investment syndicate is a private or public business venture in which people pool their resources to own or develop a particular piece of property. Syndicate members may hold property as tenants in common or joint tenants. The main return on the investment usually comes with the sale of the property. Syndicates could be impacted by blue-sky laws, which are federal and state securities laws.

The general types of foreclosure proceedings are

judicial, nonjudicial, and strict foreclosure. Judicial foreclosure allows the property to be sold by court order after the mortgagee has given sufficient public notice.

In regulations regarding lead-based paints, HUD requires that

known lead-based paint hazards be disclosed.

When a tenant holds possession of a landlord's property without a current lease agreement and without the landlord's approval, the

landlord can file suit for possession. The tenant described is a tenant at sufferance. The landlord may regain possession through a legal process known as an actual eviction.

The Real Estate Settlement Procedures Act (RESPA) applies to the activities of

lenders financing the purchase of residential properties.

The Real Estate Settlement Procedures Act prohibits

lenders from requiring excessive escrow account deposits.

A property owner has given a neighbor permission to park a camper in the owner's yard for a few weeks free of charge. The neighbor has a(n)

license. Personal, revocable, and unassignable permission to use another's land is a license.

An LLC is a form of business organization that combines the MOST attractive features of

limited partnerships and corporations. The LLC has the individualism of a limited partnership with the protection of a corporation. Many smaller companies are now LLCs for these reasons.

The buyer has defaulted on a purchase contract, and the seller's only remedy is to keep the buyer's earnest money. In this case, the seller's remedy is known as

liquidated damages. If the buyer defaults with liquidated damages, the only remedy for the seller is to keep the earnest money.

If a buyer defaults on a purchase agreement and the seller keeps the buyer's earnest money, which of the following remedies has the seller elected?

liquidated damages. The earnest money a seller retains after the buyer breaches is called liquidated damages.

Zoning is typically implemented by

local authority municipality

Asbestos dust can cause

lung disease

Complying with the letter of the law

may not be enough; real estate professionals might perform legally yet not ethically. Complying with the letter of the law may not be enough; real estate professionals might perform legally yet not ethically.

Civil penalties for a violation of the Fair Housing Act

may not exceed $50,000 for a first violation and $100,000 for second and subsequent violations.

A person who fails the real estate examination

may retake it immediately

A method of property description using monuments, distances, and compass directions is the

metes-and-bounds method. The metes-and-bounds method of legal description uses distance and direction measurements to describe the boundaries of a property.

The term encapsulation refers to the

method of sealing disintegrating asbestos. Wrapping or enclosing with an airtight covering is encapsulating. This is the safest way of dealing with much of the friable (flaking) asbestos that already exists in housing and office buildings.

A buyer is purchasing a condominium unit in a subdivision and obtains financing from a local savings and loan association. In this situation, which of the following BEST describes this buyer?

mortgagor. What is implied is a "mortgage loan." A lender (mortgagee) always receives a mortgage (document); the borrower (mortgagor) always gives one in order to get the loan.

Construction standards that must be met when repairing or erecting buildings are usually enacted by

municipalities

Under the Alabama Home Inspectors Registration Act, home inspectors

must be licensed with the Alabama Building Commission

Complaints relating to the Civil Rights Act of 1866

must be taken directly to federal courts. Complaints under the Civil Rights Act of 1866 are heard in federal courts.

Which of the following is TRUE about a note?

negotiable instrument. Promissory notes are always negotiable contracts between the lender and the borrower.

The lessor and lessee have agreed to a lease term of five years. In order to ensure that the rental income during the term is reflective of market conditions, the lessor could

negotiate an index lease. An index lease allows rent to be increased or decreased periodically based on changes in the consumer price index or some other economic factor.

Alabama law requires

neither bonding nor E&O insurance.

The Alabama Real Estate Commission comprises

nine members appointed by the governor. The Commission consists of one member from each of the seven congressional districts, with two members at large. One member at large is an African American who meets the same qualifications as those from the congressional districts. The ninth member is a consumer who has not been licensed for the 10 years preceding the appointment and is not related to, by blood or marriage, or employed by a real estate licensee.

Residential security deposits in Alabama must be

no more than one month's rent

A licensed salesperson, who is also a college student, wants to have two different qualifying brokers so that she can sell real estate in Mobile County, where she attends the University of South Alabama, and in Jefferson County, where her parents live. Can she do this?

no, because she can have only one qualifying broker at a time. Each actively licensed associate broker and salesperson must be licensed under a qualifying broker. Salespersons can be licensed under only one broker at a time, although associate brokers may be licensed under multiple brokers at the same location.

An associate broker who is also a team leader has her license suspended for 90 days. Must all the members of the team stop their real estate activities?

no, they need not stop in any circumstances. All licenses in an office are held by the qualifying broker. If the qualifying broker's license is not suspended, no other licenses in the office are affected

If an out-of-state broker also obtains a license in Alabama, but the broker's home-state license is later revoked because of license law violations in that state, the licensee must then

notify the Alabama Real Estate Commission.

The buyer's agent received a counteroffer that has been faxed back and forth with another agent that has counters on both sides and is no longer legible. He drafts a new, clear contract with all the accepted changes and has it signed by all the parties. This substitution of new contract is called

novation. However difficult the original contract is to read, it should be saved in case there are any later disagreements over the agreed upon terms.

All of the following are associated with adverse possession EXCEPT

off and on for the last five years. The law recognizes that the use of land is an important function of its ownership. The statutory periods range from as few as 5 years in some states to as many as 30 years in others.

Transaction brokers may NOT

offer negotiation assistance

In a real estate mortgage investment conduit (REMIC), holders of residual interests receive distributions (if any)

on a pro rata basis

Temporary salesperson (and temporary broker) licenses expire

one year after issuance, unless previously converted to permanent active or inactive status. Temporary salesperson licenses and temporary broker licenses do not expire on September 30. Instead, their holders have their own deadline of one year to convert them to permanent active or inactive licenses. Once converted, those licenses are subject to the normal September 30 biennial (every other year) deadlines.

A person who has no related certifications and is not a licensed contractor, architect, engineer or residential home builder but who wishes to be licensed as a home inspector will generally need to pass an exam and have at LEAST

one year of work experience and 100 home inspections under someone else's supervision.

MOST seller property disclosures are required for

only residential properties

A borrower wants to obtain a loan that will allow regular payments of principal and interest for five years and then a final balloon payment to pay off the remaining principal balance. This type of loan is known as a

partially amortized loan. A partially amortized loan allows the borrower to make principal and interest payments, with a final balloon payment at the end. A term loan has interest-only payments, a fully amortized loan has no balloon payment, and a reverse mortgage is when the lender pays the borrower.

Underground storage tanks (USTs) are commonly found on sites where

petroleum products are used or where gas stations and auto repair shops are or were located.

Alabama has authority to enact real estate licensing laws because of the concept of

police power

The inherent authority for states to create regulations needed to protect the public health, safety, and welfare is provided through the

police power of the states

In Alabama, an unlicensed assistant may perform all of the following duties EXCEPT

preparing or having a prospect sign an offer to purchase or lease.

As a legal description, "the northwest ¼ of the southwest ¼ of Section 6, Township 4 North, Range 7 West" is defective because it contains no reference to

principal meridian. A property description based on the rectangular survey system must always make reference to the principal meridian and the base line of the survey system area in which the property lies. This description makes no reference to a principal meridian.

What does PMI stand for?

private mortgage insurance. In a PMI program, the buyer purchases an insurance policy that provides the lender with funds in the event that the borrower defaults on the loan.

Section 8 of RESPA prohibits which of the following actions?

prohibits kickbacks and fee-splitting for referrals of settlement services, as well as unearned fees for services not actually performed. Violations are subject to criminal and civil penalties, including fines up to $10,000 and/or imprisonment up to one year. Consumers may privately pursue a violator in court; the violator may be liable for an amount up to three times the amount of the charge paid for the service.

The active real estate licenses of all companies, branch offices, brokers, and salespersons must be

publicly displayed at the place of business

A branch office must have a

qualifying broker's license and a branch office license

What type of deed provides the grantee with the LEAST protection?

quitclaim deed. The quitclaim deed carries no covenants or warranties and generally conveys only whatever interest the grantor may have when the deed is delivered.

Which statement describes the Supreme Court's decision in the case of Jones v. Alfred H. Mayer Company?

racial discrimination is prohibited by any party in the sale or rental of real estate. The Jones v. Mayer decision held that the Civil Rights Act of 1866, banning all limitation on property rights on the basis of race, is the law of the land. Racial discrimination by anyone in the sale or rental of any kind of property violates this law.

Tombs, buried deep underground, contain materials such as

radioactive waste and are designed to last thousands of years.

The provisions of the Truth in Lending Act (Regulation Z) require all of the following to be disclosed to a residential buyer EXCEPT

real estate brokerage commission. Regulation Z has to do with disclosing details of the proposed loan. It does not deal with brokerage commissions.

Real estate can be owned under a variety of trusts, including living or testamentary trusts, land trusts, and by investors in

real estate investment trust (REIT). Real estate can be owned under a variety of trusts, including living or testamentary trusts, land trusts, and by investors in a real estate investment trust (REIT).

What does RESPA stand for?

real estate settlement procedures act. RESPA is designed to ensure that the buyer and seller are both fully informed of all settlement costs.

A broker wants to place a For Sale sign on some vacant property in order to receive calls from prospects. The broker must first

receive permission from the owner.

A grantee who wants to obtain merchantable title via a valid deed should make sure the deed has all of the following EXCEPT

recording stamp after closing. Deeds do not need to be recorded to be valid.

The method of land measurement established by Congress in 1785 is the

rectangular survey system. This method of land measurement, also called the government survey system, was established by Congress in 1785 to standardize the description of land acquired by the newly formed federal government.

A salesperson is low on funds for promoting her business and has found that if she leaves yard signs up for an extra couple of weeks after a listing expires, she can generate a few extra calls and occasionally interest the caller in other properties. The salesperson should

remove the sign upon expiration of a listing unless she has the property owner's permission to leave the sign up. A listing agreement typically provides permission to place a sign on a property for sale. When a listing expires, the permission authorized in the written document terminates.

Single agency occurs when a real estate agent

represents only one party in a transaction.

A property manager renting residential property may

require handicapped tenants to restore the premises at the end of a lease. Property managers must allow handicapped tenants to make reversible changes. The other answers are all examples of illegal discrimination.

A certified general real property appraiser may appraise

residential property, industrial property, commercial property

What does a suit to quiet title do?

resolves clouds on title. Clouds are removed from title in a suit to quiet title.

All of the following will terminate an offer to purchase real estate EXCEPT

revocation after acceptance. When an offer has already been accepted and becomes a contract, it cannot be revoked without incurring possible penalties.

The landlord gives up which of the following rights to a tenant in the lease in return for rent?

right of possession (occupancy) in return for rent.

The grantor becomes the lessee (tenant) and the grantee becomes the lessor (landlord) under which of the following financing arrangements?

sale and leaseback. A seller sells the land and the building to an investor and leases it back from the investor as a tenant.

In a real estate brokerage,

sales associates are agents of the broker. The broker may or may not be an agent of a client (not the customer), and a licensed personal assistant of a sales associate is the agent of the broker.

A property manager should

seek high-quality tenants. A property manager's primary responsibility is to generate income, and the best way to do this is to find high-quality tenants.

As it relates to environmental hazards,

sellers often carry the most exposure to liability. As it relates to environmental hazards, sellers often carry the most exposure to liability.

A garden apartment that is at the bottom of a 10-step stairway is for lease. A person with a disability that makes it impossible to use stairs asks to see the unit; the landlord

should advise the prospective tenant of the accessibility issue and let the tenant decide whether to proceed with the rental. If the tenant is willing to install a motorized chair lift to access the apartment, the landlord should not object.

A salesperson is working with a minority family. She should

show them properties that meet their qualifications. The Alabama Fair Housing Law reflects the federal fair housing law. Licensees should treat all clients the same.

Under the Interstate Land Sales Full Disclosure Act (ILSA), a developer is required to provide each purchaser of property with a printed report before the purchaser

signs a purchase contract.

The location and dimensions of a parcel is identified on the survey

sketch. The location and dimensions of a parcel is identified on the survey sketch.

An estate in severalty is associated with which of the following?

sole and separate ownership. An estate in severalty is "severed" from other estates and is held by an individual owner.

A real estate agent's duty of confidentiality usually extends for the period of time

specified in state law. In addition, a real estate licensee who is a member of the National Association of Realtors® must observe the duty of confidentiality forever.

In Alabama, holding which office prohibits a person from simultaneously becoming a member of the Alabama Real Estate Commission?

state senator

In the rental process, a landlord who puts members of a protected class on a certain floor or building may be found guilty of

steering. In the rental process, a landlord who puts members of a protected class on a certain floor or building may be found guilty of steering.

Use restrictions are particularly common in leases for

stores or commercial space

The advantages of the limited liability company include all of the following EXCEPT

streamlined method of formation provided by Congress. A limited liability company is established in compliance with state law, which varies from state to state. The LLC offers the tax advantages of a partnership in that income flows directly to members of the LLC and the LLC offers a flexible management structure without the complicated requirements of a corporation or the restrictions of a limited partnership.

The LEAST specific method for identifying real property is

street address. A legal description is a precise method of identifying a parcel of land and includes metes-and-bounds, rectangular survey, and lot-and-block as methods that can be used for identification. A street address is not a legal description and, therefore, not as precise.

Which of the following is NOT a valid way to define a legal description?Which of the following is NOT a valid way to define a legal description?

street address. While usually enough to find the location of a particular building, the street address is not precise enough to describe legal ownership. Addresses change as streets are renamed, or rural roads might become public streets in growing communities. Sales contracts, deeds, and mortgages require a more specific description of property to be binding.

A person who buys undeveloped acreage and divides it into smaller lots for sale to individuals or developers is called a

subdivider.

If a mortgagor defaults, the mortgagee can

sue on the note and foreclose on the mortgage. When the loan is paid in full, the mortgagee (lender) issues a satisfaction of mortgage that can be filed in the public record to clear the title.

In MOST market areas, rents are determined by

supply and demand factors. Rents (unless subject to governmental intervention) are controlled by market forces—supply and demand.

Which is the process by which boundaries are measured by calculating the dimensions and area to determine the exact location of a piece of land?

survey. A survey is the process by which boundaries are measured and land areas are determined, including the onsite measurement of lot lines, dimensions, and a house's position on a lot, as well as the determination of any existing encroachments or easements.

If property is held by two or more owners as joint tenants, the interest of a deceased co-owner will be passed to the

surviving owner or owners. Survivorship means that the interest of a deceased cotenant will pass to, and be divided equally among, the still-living (surviving) cotenants.

The natural level at which the ground is saturated is called the water

table

The Alabama Real Estate Commission's authority includes

taking disciplinary action for violations of license law

A property owner had a stroke and is unable to take care of himself. He has no heirs, so a court placed him in a nursing home and assigned a local attorney to represent him and take care of his financial affairs. The property owner has no will or any money available for expenses and hasn't paid any property taxes in the past four years. The court has been notified that the property owner's health is not improving, so he will not be leaving the nursing home. What would the state file to eventually collect the unpaid back taxes?

tax lien. The tax lien would then take first priority and would be paid first from the proceeds of a court-ordered sale of the property.

All of the following are true statements about real estate tax liens EXCEPT

tax liens have less priority than mortgage liens after a foreclosure. An outstanding tax lien would be paid first from the proceeds of a court-ordered sale of a property.

Real estate taxes that are delinquent for the period specified in state law can be collected through

tax sale of the property. The sale price must be at least the amount of the tax owed and any penalties.

A couple is buying a house together. One of the partners wants his children from a previous marriage to inherit his share of the property. The couple should hold title as

tenants in common. Because one owner wants his ownership to pass to his children, he should take title as tenants in common and write a will for the property to pass to his kids.

In a tenancy at will, the death of either the landlord or the tenant will

terminate the lease and the parties' heirs will not be bound by its terms. The only lease that is terminated by death, of either the landlord or the tenant, is a tenancy at will. A relationship at will continues only so long as both parties continue to mutually agree. If one party dies, a mutual agreement no longer exists.

The Real Estate Settlement Procedures Act (RESPA) applies in a loan assumption if the

terms of the assumed loan are modified by the lender. If the terms of the assumed loan are modified or the lender charges more than $50 for the assumption, then the transaction is subject to RESPA regulations.

A salesperson works for a broker. An assistant works for the salesperson. The assistant decides to help out and show some listings for the salesperson while the salesperson is on vacation. Who is liable for the assistant's unlicensed real estate activities?

the assistant, salesperson, and broker are all liable.

All advertising by salespersons and associate brokers should be preapproved by the qualifying broker because the broker

the broker is legally responsible for all advertising in the office.

All of the following are associated with a Section 1031 exchange EXCEPT

the elimination of capital gains tax

Over the years, the government's policy has been to

the government's policy has been to encourage private ownership of land.

If environmental hazards are discovered and the landowner had no previous knowledge of their existence,

the landowner might still be held responsible.

Groundwater that exists under the earth's surface forms the water table, which is

the natural level at which the ground becomes saturated.

exclusive-agency listing

the owner of the property promises to compensate a broker for locating a ready, willing, and able buyer, but the owner reserves the right to sell the property during the listing period without paying the broker a commission.

A real estate salesperson does not show non-Asian clients any properties in traditionally Asian neighborhoods. The salesperson bases this practice on the need to preserve the valuable, cultural integrity of Asian immigrant communities. Which of the following statements is TRUE regarding the salesperson's policy?

the policy is steering and violates fair housing laws, regardless of the salesperson's motivation. It is steering regardless of motivation.

A buyer and a seller sign a contract to purchase. The seller backs out, and the buyer sues for specific performance. What is the buyer seeking in this lawsuit?

transfer of the property. The buyer wants the seller to do what was promised in the sales agreement: convey the property. The buyer wants the seller to perform the specific actions as agreed.

Members of the Alabama Real Estate Commission are appointed by the governor for five years and allowed to serve no more than how many consecutive terms?

two

Joint tenancy is a form of concurrent ownership of property that is available to

two or more people, whether married or unmarried. An unlimited number of individuals can own property in a joint tenancy. At each successive joint tenant's death, the surviving owners acquire the deceased's interest.

A seller asserts that his 1860s home is inhabited by the ghost of a Civil War officer. When the seller's agent put the property up for sale, she consulted with the seller regarding his assertion and asked if he wanted to disclose the "stigma." The seller was insulted that the seller's agent called the friendly ghost a stigma and instructed her to be silent about the paranormal activity reported at the home, saying the officer would decide for himself whether to remain in the home or go elsewhere once the new owner was in residence. Regarding the seller's instruction, the seller's agent is

under no specific duty as a seller's agent to disclose stigmas

All of the following would cause a high vacancy rate EXCEPT

very desirable amenities. Desirable amenities would be found in properties with a low vacancy rate. When the vacancy rate is high, the manager needs to determine why. The manager should first identify and correct problems before lowering rents because the problem might be poor management or a defective or undesirable property.

When a seller deliberately deceives a buyer about the condition of real property, their contract of sale would be considered

voidable. Only the "deceived" (or potentially injured) person has the right to terminate, so the contract is voidable.

A lien can be created in which four ways?

voluntary, involuntary, statutory, equitable. These are the four ways to create a lien.

Property management begins with a

with a management plan.

A lender is required to give the borrower the Loan Estimate

within three days after loan application. TRID requires that the Loan Estimate be given to the borrower at time of application or no later than three days following.

The clause in all deeds that passes on the rights and obligations is known as

words of conveyance. The words of conveyance, or granting clause, passes title from the grantor to the grantee.

What directs a sheriff to seize and sell as much of a debtor's property as necessary to pay for the debt and the expenses of the sale?

writ of execution. A creditor must obtain a writ of execution to enforce a judgment.

When following disclosure rules, real estate agents should ensure that

written disclosure is made before the consumer enters into any written agreement.

A yard sign displays the salesperson's name in 8-inch letters, the company name in 7-inch letters, and a phone number in 9-inch letters. Is this allowed?

yes, as long as the company name can be considered "prominent.

In a large real estate office, three licensed salespersons decide to work together as a team and to advertise themselves as "The Luxury Condo Team." The Commission has not issued any license in the name of "The Luxury Condo Team." May the licensees advertise in that name?

yes, as long as they also include the company or broker name.

An associate broker personally manages a rental house for her mother, an activity that does not require a real estate license. With her qualifying broker's consent, the money and all rental activities are entirely separate from the real estate company. The associate broker's siblings discover she has been embezzling money from their mother. Is the qualifying broker liable?

yes, because the qualifying broker is responsible for all real estate activities of its licensees. Even if a licensee is engaged in personal activities or activities for a family member, the qualifying broker is still responsible for improprieties in those transactions. If the broker agrees that a licensee may conduct such business "outside the company," that the broker is referring only to advertising and compensation issues, not to the broker's liability for failure to properly supervise the licensee.

Roberta is a real estate licensee representing the buyer. The buyer asks to see homes in a specific neighborhood. Roberta refuses to show any homes in that neighborhood to the buyer and tells the buyer, "Nobody from your country lives in that neighborhood." Has Roberta violated any fair housing laws?

yes, she is practicing discrimination based on race, color, or national origin. Complying with fair housing laws is not always easy because it requires thoughtful consideration of one's own actions and those of others. Roberta may think she is looking out for her buyer's interests, but she is discriminating based on national origin. Additionally, her buyer asked specifically to see homes in a certain area. Roberta has a duty to comply with this request.

The answer is in arrears. Taxes become a lien on October 1. Property owners have until December 31 of the year to pay without being delinquent.

.

Liens, easements, and prescriptive rights are examples of

Encumbrances. Is an inconvenience, burden, or problem.

In Alabama, which of the following must be submitted for approval with the planning commission before land can be subdivided?

Plat map. The land must be surveyed and laid out so that the subdivision utilizes natural drainage and land contours. Often an environmental impact report is required with the application for subdivision approval. Plats have to be adopted by the municipality before they can be recorded.

Property owners who disagree with their property assessment may

Protest the assessment within a certain time frame. After a property has been reassessed, the assessor's office notifies the taxpayer of any changes.

Often, a subdivision application will include

environmental impact report. The land must be surveyed and laid out so that the subdivision utilizes natural drainage and land contours.

The permission a farmer gives to a friend to go fishing in a pond on the farm is BEST described as

license. Is considered revocable permission and is not a right but more of a privilege.