Facts You Need to Know
McHugh purchased a home for $80,000, paying 21.25% down and financing the balance on a 30-year amortized loan with interest at 10.25% per annum. The lender will require monthly impounds for taxes ($800 per year) and casualty insurance ($978 for a three-year policy). Assuming that the first monthly payment on the principal is $119, the total amount McHugh will have to pay the first month would be approximately
$80,000 x 21.25% = $17,000 cash down payment $80,000 - 17,000 = $63,000 loan amount $63,000 x 10.25% = $6,457.50 annual interest $6,457.50 divided by 12 = $538.13 monthly interest $978 divided by 36 = $27.17 monthly insurance $800 divided by 12 = $66.67 monthly taxes $538.13 + $27.17 + $66.67 + $119 principal = $750.97
An acre is divided into four equal lots. If the lots are parallel to each other, rectangular, and 240 feet deep, the width of each lot would most nearly be
(1) 43,560 divided by 4 = 10,890 (2) 10,890 divided by 240 =45.375
A rectangular lot contains 540 square yards. It has a 45 foot frontage. The depth of the lot would be
(1) 540 x 9 = 4,860 (2) 4860 divided 45 = 108
When appraising an apartment building, all of the following are deducted, except
-Financing cost To arrive at the annual net income, you do not deduct principal and interest payments on any loans.
Richards agreed to list his property for sale with Broker Jackson. In using a standard listing form, Richards completed Paragraph 10 with the following words: "Delete provisions in Paragraph 3c above which says, Agency is hereby authorized to accept on my behalf a deposit toward the purchase price in any amount." If Broker Jackson produced a buyer:
-If he accepts a deposit, he holds it as agent of the buyer until the offer is accepted by the seller -If a broker is not authorized to accept a deposit and he does so, he becomes the agent of the buyer for that one act
A standard policy of title insurance protects the insured against
-Lack of capacity of a party to any transaction involving title to the land No insurance will cover choice (A) which represents fraud, nor choice (C) which is governmental regulations. Choice (D) is covered by extended coverage but not by a standard policy
An acre is divided into four equal lots. If the lots are parallel to each other, rectangular, and 240 feet deep, the width of each lot would most nearly be
43,560 divided by 4 = 10,890 (2) 10,890 divided by 240 =45.375
When is a broker who conducts escrow services for a fee exempt from escrow laws administered by the Department of Corporations:
A broker may escrow his own transaction, with or without fee, without being licensed as an escrow agent.
Which of the following statements concerning ownership of land by tenants in common is incorrect
A co-tenant cannot create an easement on all of the property on behalf of all of the owners.
What type of lien is created when an abstract of judgment for money is duly recorded.
A court order to pay money creates a general obligation upon all assets of a debtor. GENERAL LIEN
Which of the following is not essential to a valid deed
A deed is valid, even though it is not acknowledged. However, it must be acknowledged to be recorded
A Lease- Conveys an interest in real property
A lease does not have to be signed by both parties since the lessee may be bound by his acts rather than his signature. The lease does not have to be recorded to be valid and no specific words are required.
A leasehold interest for a definite specified period of time is considered to be
A leasehold interest whether it be an estate for years, an estate at will, etc... is considered to be a personal interest in real property and therefore would be personal property.
Which of the following would not be legally proper for a licensee to do
A licensee must reveal all material facts to a prospective buyer. Certainly the fact that the roof leaks would be a material fact which might influence the buyer's decision
Freehold estates would include which of the following
A life estate is correct. It is inheritable and of an undefinite duration and completely transferable, would be considered to be a freehold estate. The leasehold estate and estate for years would be less-than-freehold estates.
When examining a properly-prepared closing statement, the broker would discover that a mortgage assumed by the buyer would appear as
A mortgage assumed by the buyer would be charged against the seller's proceeds, since the seller had the obligation to pay off that mortgage. Such an entry would be recorded as a credit to the buyer against the purchase price; and a debit to the seller.
Landlords often require a net lease on commercial property to
A net lease is one in which the lessee (tenant) assumes responsiblity for the taxes and insurance, this providing a net income for the lessor (landlord).
What would the term be for a type of lease whose rent is computed on the gross sales of their business that is occupying the property.
A percentage lease is where the rent is tied to a percentage of the gross receipts of a business.
Salesperson Kingston presented to Broker Wright Buyer Kingsford's offer to purchase Seller Brightwood's real estate, accompanied by an earnest money deposit in the form of a personal note in the amount of $1,000. Broker Wright should inform Salesperson Kingston that:
A promissory note is legal consideration as an earnest money deposit, but the principal should be informed of this information
The real estate financing instrument which transfers equitable title to real property, but retains legal title in the seller, is called
A real property conditional installment sales contract (land contract) is a financing device by which the seller (vendor) retains legal title, but transfers equitable title to the buyer (vendee)
An instrument which usually transfers possession of real property, but does not transfer ownership is
A sublease transfers possession of property from the lessor to the lessee. A mortgage and a security agreement are used for borrowing money and an easement gives the right to use someone else's property. With an easement, that right to use is usually not an exclusive right to use nor a right to possess.
What is a Sublease -A transfer of less than the entire leasehold
A sublessor gives up possession of part or all of the property he is leasing, but the sublessor is still the holder and owner of the original lease. The sublessee would have a use interest, but not the entire leasehold. You typically see these types of leases in commercial real estate activities.
When a landlord and a tenant mutually agree to terminate an existing lease on the property and the tenant relinquishes possession to the landlord, those events together constitute
A surrender is the mutual termination of a lease, together with relinquishment of possession.
RESPA (Real Estate Settlement Procedures Act) provides for specific legal penalties concerning all of the following activities, except
A.) Unearned fees B.) Kickbacks C.) Seller requiring a specific title insurer D.) Buyer requiring a specific loan provider Explained: The other three matters are prohibited; a buyer may always require a specific lender.
Which of the following statements is false regarding townships?
All townships contain the same land area
The existence of an easement appurtenant requires all of the following, except -Adjoinment at their respective borders by the dominant tenement and servient tenement
An appurtenant easement is a right to use adjoining property that transfers with the land. The parcel of land that benefits from the easement is the dominant tenement. The servient tenement is the parcel of land that provides the easement.
"Of indefinite duration" is a characteristic which is particularly descriptive of an
An estate of inheritance is a fee simple estate. In order to be a fee simple estate, it must be indefinite in duration, capable of being conveyed during life, or upon death.
Mrs. Paulson owned an apartment house but failed to declare the income from the rental payments collected. The United States Government filed a tax lien which is
An income tax lien is a general lien applying to any and all property owned by the person.
When two or more parties own property together as tenants in common
As tenant in common, each owner can convey his interest separately. Each owner's interest does not have to be equal, and there is no right of survivorship. Each owner's interest may be transferred by will or intestate distribution.
Of the following, which one is least important in making an appraisal on improved real property
Assessed property values may have little relationship to the current value; since potentially, the base year would be 1975, provided title of the property has not changed since that year. The appraiser is concerned with current value.
The customary procedure used to enforce private property restrictions on real property is
B - An injunction is a court order restraining a party from doing an act. A - judgment is the final determination of a court in a case. C - An indictment is used when someone has performed a criminal act. D - A desist and refrain order is used when the Real Estate Commissioner wants to halt some activity which may be illegal or unjust.
Which of the following would be least satisfactory in providing a legal description for a parcel of real property
Bills for real property taxes usually use a tax assessor's parcel number, rather than a legal description for the property. The other three items usually contain legal descriptions.
Private restrictions on land can be created
By deed or by written agreement
For federal income tax purposes, capital expenditures for improvements are
Capital expenditures cannot be deducted as an expense. They are added to the cost basis and depreciated.
Which of the following factors contributes most to the maintenance of value in a well-planned residential community
Conformity to proper land use objectives would tend to keep values high in a well-planned residential community.
Of the following which would be considered to constitute constructive eviction by a landlord
Constructive eviction is considered to be any action taken by a landlord/owner that makes the property uninhabitable by the tenant. This could include renting the premises to others while it is still occupies, making the premises unlivable or making alterations to the dwelling to an extent that it becomes uninhabitable.
Which of the following would be considered real property
Crops before they are harvested could be either real or personal property. Crops which have been cut, mortgaged or sold are considered personal property. Minerals removed from the ground are considered personal property. Therefore, stock in a mutual water company is real property.
Deed restrictions are appropriately classified as
Deed restrictions (private limitations on real property) are encumbrances; that is, burdens on the title to the property.
Ownerships rights and interests in real estate are called:
Estates or fees deal with the degree, quantity, nature and extent of ownership rights along with interest in real estate.
Prices have risen 20%. What has happened to the value of the dollar
For instance, an item that used to sell for $1.00 now sells for $1.20. The dollar now buys 5/6 of what it used to buy. Its value has gone down 1/6 or 16 2/3%.
A broker who solicits and accepts a deposit on the purchase price of a parcel of real property without express written authorization from the owner to sell the property, is
For this act, he is the agent of the buyer. A broker is generally employed by the seller (i.e., seller's agent), but a broker can be employed by the buyer. In either case, a fiduciary relationship exists from the broker to "employer.
Of the following, which would be classified as real property
Generally speaking, mobile homes are considered personal property and any items in the mobile home would also be considered personal property. Trade fixtures installed by a tenant and removed prior to the expiration of the lease and a grape crop sold under a sales contract would both be considered personal property. The remaining choice "D" a stand of virgin timber is the correct choice since it is embedded in the soil and would be considered real property.
On March 5, a prospective buyer gave a broker his personal check for $1,000 payable to the seller along with an offer to buy the property. He told the broker that the check should not be cashed until March 30. Which of the following is correct
If a buyer asks a broker to hold a check uncashed for a period of time, the broker may do so, but the agent must tell the seller the circumstances before the seller accepts the offer
If the lease does not covenant to repair, a landlord could possibly be liable to third parties to keep commonly used areas in good condition in each of the following instances, except
In each of the other cases there are common areas to be maintained. Choice "C" involves the use of the property by only the lessee.
Appraiser Irvine employed a land residual technique. The unknown factor and desired result would be
In employing the land residual technique, the end result would be the land value.
In financing for new construction, the lender will usually release the final payment to the builder when the:
In loans for new construction, the lender usually holds the final payment until the lien period has expired to be sure that there will be no mechanic's liens filed against the property. These mechanic's liens might take precedence over the construction loans, depending upon the date when the work or improvement was first begun
From the date they are taken, receipts for copies of the Real Estate Commissioner's subdivision final report must be retained for a period of
Most documents must be kept for three years by the real estate broker. The main exceptions are those documents used in loan transactions or real property security transactions. These are kept four years.
An acceleration clause is inserted in a note that is otherwise negotiable. The addition of this clause
Negotiability of a note is not affected by the inclusion of an acceleration clause, but it does protect the beneficiary by allowing the lender to call all sums due and payable in case of default (i.e., breach of contract) should occur.
The trustees who are designated by lenders and borrowers in creating loans secured by trust deeds, come under the supervisory jurisdiction of
No regulatory agency has, as yet, been created to supervise the activities of the trustee.
In May, 2000, Mr. Delareaux leased a unit in his apartment house to a tenant for a two-year term. The tenant prepaid the last two months' rent at the time he entered into the lease agreement. For federal income tax purposes, that amount will be considered as income for Mr. Delareaux
Prepaid rents are reported to the Internal Revenue Service in the year that they are collected.
An interest in real property can be acquired through "adverse possession" or by "prescription." The interest acquired by prescription is
Prescription refers to an easement, which is the right to use the property of another.
The provisions of the Real Estate Settlement Procedures Act (RESPA) apply only to transactions involving certain types of property. Of the following, which type of property must comply with RESPA
RESPA requirements apply to loans which are for the purpose of acquiring title to one-to-four family residential dwellings.
When Sarah conveys to Marshall a portion of his fee estate for a term less than his own, Sarahs interest would best be identified as (Reversion)
Sarah has granted a leasehold interest to Marshall, but reserves a reversionary interest, in that the possession will revert to Sarah upon termination of the lease.
When Sarah conveys to Marshall a portion of his fee estate for a term less than his own, Sarahs interest would best be identified as
Sarah has granted a leasehold interest to Marshall, but reserves a reversionary interest, in that the possession will revert to Sarah upon termination of the lease. - Reversion
Which of the following pairs of words are synonymous
Take-out loan - is considered the final or long-term loan. Construction loan - loan made to complete the improvements on real property. Interim loan - another name for a construction loan. Progressive loan - another type of construction loa
All of the following are methods used by the Federal Reserve System to control the supply of money in the United States, except:
The Federal Reserve System does not have any control over the interest rates on government-insured loans.
Under the Federal Truth-in-Lending Law, the cost of credit on certain loans is expressed as
The Truth-in-Lending Law (Regulation Z) of the Federal Consumer Credit Protection Law, requires lenders to state interest rates in annual percentage rates (APR) to afford borrowers the opportunity to comparatively shop for money.
Most likely, the United States Attorney General would act to enforce the Federal Open Housing Law whenever
The United States Attorney General has authority to enforce the Federal Open Housing Law, especially in an area where there is evi≠dence that a conspiracy exists to resist the Fair Housing Law
Of the following factors, which is NOT considered when determining whether an item of personal property has become real property.
The acronym IMAAR has the five tests of a fixture: Intention of the person attaching it, Method of attachment, Adaptability of the item, Agreement of the parties, and Relationship of the parties. However, the cost of an item is not considered.
The Federal Truth-in-Lending Law defines the annual percentage rate which is charged on a real estate loan. It is the
The annual percentage rate is the cost of the credit expressed in percentage terms. The total of all direct costs of credit which the borrower pays is the definition for the finance charge.
An appraiser is appraising the value of an older building using the replacement cost approach (Cost, Separate appraisal, depreciation) . He would include all of the following items except
The capitalization rate would be used in the income approach, but not in the replacement cost approach.
Mrs. Kelly Clark is seeking an FHA loan. Mrs. Clark will be evaluated in relation to
The credit history of the borrower will be evaluated in securing the loan
Who is usually responsible for assuring the availability of paved streets, utilities, curbs, and gutters in new subdivisions
The developer usually is responsible for putting in the streets, utilities, curbs and gutters in new subdivisions.
A valid deed must contain
The granting clause is referred to as the action clause and is considered one of the essential elements to a valid deed. Although the deed may contain the choices (A), (B), and (C), they are not needed to make the deed valid
In appraising real property, a separate valuation for the site is considered least important
The gross rent multiplier method is a variation of the income approach and does not involve separate valuation for the site.
The lessor who has just completed a sale-leaseback transaction would be protected best by a net lease against unforeseen or changing costs, which requires the lessee (tenant) to pay expenses such as taxes, insurance and maintenance. In a gross lease, the lessor would be responsible for such variable costs. A percentage lease would depend upon the success of the enterprise in gross sales and an escalator lease might not provide for all of the expenses.
The lessor who has just completed a sale-leaseback transaction would be protected best by a net lease against unforeseen or changing costs, which requires the lessee (tenant) to pay expenses such as taxes, insurance and maintenance. In a gross lease, the lessor would be responsible for such variable costs. A percentage lease would depend upon the success of the enterprise in gross sales and an escalator lease might not provide for all of the expenses.
Broker Smyth arranged a $7,000, five-year second trust deed loan for Johnson. The maximum percentage of the loan amount that Smyth may charge Johnson as a commission for negotiating the loan is
The maximum commission allowable in negotiating a second trust deed loan for a period of three years or more is 15%.
Which of the following statements about real estate financing is incorrect
The mortgage is security for the promissory note; but the reverse is not true. Each of the other statements is correct. -A promissory note is security for a mortgage;
An owner of property wants to sell his property and wants to offer any prospective buyer the opportunity to use an FHA loan. In order to obtain an FHA appraisal he should
The owner will have a lender who is approved by FHA apply for a conditional commitment. The commitment is conditional because the borrower also must be approved by FHA.
Joists
The parallel timbers which support the load of the ceiling and floors of a frame house are called
The basis of the market data approach to appraising is found in
The principle of substitution says that the value of a property tends to be set by the cost of acquiring an equally desirable substitute property.
If the parties to the document have no other agreement, which of the following trust deeds would usually have priority
The priority among trust deeds and mortgages is established by the date of recording; that is to say, that the first recorded has priority.
The phrase "the secondary mortgage market" refers to
The secondary mortgage market is where existing loans are bought and sold
An advance fee
The solicitation of a fee from an owner to promote the sale or rental of any property by any means other than advertising in a newspaper of general circulation is called
It is generally felt that the successful real estate licensee possesses certain characteristics such as honesty, sincerity and a compelling desire to serve people. Which of the following attitudes should the licensee possess in dealing with clients
The successful licensee should have an attitude that is absolutely free from bias when dealing with minorities.
Which of the following statements is true concerning a trust deed and note
The trust deed is simply the security for the debt. The debt is evidenced by the note. Therefore, the lien of the trust deed is merely incidental to the debt
Who pays the points on a Cal-Vet loan
There are no points on a Cal-Vet loan because the property is purchased outright by the Department of Veterans Affairs and then resold to the qualifying veteran with a land contract
The words "time, title, interest, and possession" are most closely related to which of the following concepts
These are the unities of a joint tenancy which has the right of survivorship.
A lessee renting a business office often attaches certain items to the real property. Prior to the expiration of the lease, these items may be removed provided no substantial damage to the property results. Of the following, which best exemplifies such items
These would be trade fixtures. B - you would not attach manufacturing equipment in a business office and C - items attached for domestice use would not be trade fixtures.
A person sold his home and took back a note secured by a purchase-money deed of trust. He selected a real estate broker from the telephone book and asked him to service this loan. If the broker takes on this duty, state law requires him to
This is required by state law. A real property securities dealer is a broker who sells an existing trust deed and guarantees a return on it. A loan broker's statement is used in negotiating brand new loans under Article 7. A mortgage loan correspondent creates or negotiates a loan, sells it to someone else, and then services that loan.
Listing a home at an inflated price requiring minority prospects to pay that price, but accepting a lower price from other prospects
To require minorities to pay higher prices than other people is discrimination under both federal and state law and subjects the licensees involved to liability for money damages.
If an appraiser were appraising a residence built in 1910, which of the following would be used
Today's cost of reproduction less depreciation
A release clause in a mortgage
When a blanket mortgage is used to secure a debt, there is usually a provision in the mortgage which provides for the "release" of part of the property held as security
A real estate broker charges owners of the businesses a fee for advertising their businesses for sale in a special pamphlet he publishes. He does not take a listing to sell or lease the business. He is required to do which of the following
When a broker charges an advance fee for advertising in a special publication, he must furnish an accounting to the owner of the use of the fee.
Jackson sued his former tenant, Claude for one months rent, claiming that Claude left without giving the 30-day notice required by statute, Claude asserted that he had notified Jackson to repair a broken water pipe, but the request had been ignored, and therefore did not need to give the 30-day notice. Assuming only these facts, the court will probably decide
When a property becomes untenantable (a broken water pipe qualifies), the tenant must notify the landlord. If the landlord does not repair the property within a reasonable time the tenant may either have is it fixed and deduct the costs from the rent (up to one months rent) or may vacate the property. If the tenant chooses to vacate the property there are no further obligations under the rental agreement.
When a deed of trust is foreclosed by court sale, the action
When a trust deed is foreclosed by court sale, it is treated like a mortgage. There is a redemption period and the possibility of a deficiency judgment.
Bryan acted as an agent for Peter without having the authority (or the appearance of authority) to do so. Peter later chose to accept Brian's unauthorized acts. This is an example of the creation of an agency by
When an agency is created by ratification, the agent has been performing as an agent before he had the authority to do so, and the principal later accepts or ratifies his actions.
All of the following are correct statements about life estates, except
When the holder of a life estate (the life tenant) is a person other than the person on whom the life estate is based (the designated person), the death of the holder does not extinguish the life estate, but it passes to the heirs of that person until the designated person dies.
Life estate
When the holder of a life estate (the life tenant) is a person other than the person on whom the life estate is based (the designated person), the death of the holder does not extinguish the life estate, but it passes to the heirs of that person until the designated person dies.
John, Alex and Peter each owned an undivided one-third interest as tenants in common in a 600-acre farm. Without the consent of John and Peter, Alex gave a 5-year lease to Phil as a lessee-co-tenant. Concerning the rights of the parties to the tenancy in common, all of the following are correct, except
Without the consent of John and Peter, this lease is invalid as to the lessor/lessee In a tenancy in common, any party of the tenancy in common could lease the interest that party possesses to any other party.