Practice Real Estate Final Exam 04

The seller and the buyer finally agreed to a purchase price of $203,500 with the closing to occur on June 15. The taxes for the year in the amount of $2,500 have not been paid by the seller. (Taxes are paid in arrears). How much would the tax proration amount to, and how would it appear on a full settlement statement? Base your answer on a 365 day year, and the buyer is responsible for the day of settlement. A. $1,130.14 debit the seller and credit the buyer B. $1,130.14 debit the buyer and credit the seller C. $2,500 credit the seller and debit the buyer D. Nothing. The seller does not owe since the buyer is buying.

A. $1,130.14 debit the seller and credit the buyer The seller would owe money, and the buyer would receive money, because the seller has not paid the taxes. $2,500 divided by 365 is $6.849315 times the actual days of 165 is $1,130.14.

Which of the following activities is a violation of the Federal Fair Housing Act? A. A nonprofit church that denies access to its retirement home to any person because of race B. A nonprofit private club that gives preference in renting units to its members at lower rates C. The owner of a single-family residence selling his/her own home who gives preference to a buyer based on his/her sex D. Discrimination in the sale of a warehouse based on the prospective purchaser's gender

A. A nonprofit church that denies access to its retirement home to any person because of race The private club is exempt because its preferential treatment is based on its membership; the home owner is exempt, so long as he is selling his home without a broker; the warehouse is exempt because it's not a housing unit.

A zoning change has been announced that will result in the loss of value of the property to a property owner. What should a property manager do? A. Advise the owner immediately. B. Terminate the property management agreement. C. Follow the owner's instructions that were previously given. D. Start lobbying against the zoning change.

A. Advise the owner immediately. Again, the property manager is the owner's "eyes and ears" for protecting the owner's best interests. Anything that can impact the property's value in either a positive or negative way should be communicated immediately.

Which of the following describes a mortgage that requires principal and interest payments at regular intervals and is called the liquidation of debt by periodic installment until the debt is satisfied? A. Amortized loan B. Annuity loan C. Acceleration loan D. Assemblage loan

A. Amortized loan This question is a formal description of amortized loans--the most common form of mortgage where monthly payments include both principal and interes (as opposed to balloon or interest-only seconds). Typically, monthly payment amounts remain constant, while the interest portion is higher in the earlier years, giving homeowners a larger tax deduction with higher percentages of principal paid in the later years.

What do liens and easements have in common? A. Both are encumbrances. B. Both must be on the public record to be valid. C. Neither can be done without the consent of the owner. D. Both are money claims against the property.

A. Both are encumbrances. Liens are, of course, serious in that they indicate the owner has failed to pay a debt secured directly or indirectly by the property. Easements, on the other hand, are generally a practical necessity for most residential properties.

A person agrees to sell a property for $500,000. The buyer gives the seller $150 as valuable consideration for a six-month option. Which of the following statements is true? A. The $150 is valuable consideration if the seller accepted it. B. The buyer must have at least 5% down as valuable consideration. C. The buyer must have at least 20% down. D. The seller cannot accept money for the option.

A. The $150 is valuable consideration if the seller accepted it. "Valuable consideration" is a necessary component of all contracts. It is the benefit one party receives in exchange for granting benefit to the other. Generally it is money in any amount both parties agree to, though it can take other forms such as personal property, work or refraining from an act.

The Federal Fair Housing Act states that a prima facie case against a broker for discrimination be established after a complaint has been received because the broker has failed to do which of the following? A. The broker has failed to display a HUD Equal Opportunity poster. B. The broker has failed to hire any minority salespeople. C. The broker has failed to join the NAACP anti-discriminatory task force. D. The broker has failed to attend mandatory classes on fair housing.

A. The broker has failed to display a HUD Equal Opportunity poster. Included among Fair Housing regulations is the requirement that the HUD Equal Opportunity signage be prominently displayed.

A homeowner owned a house on a lot. The front ten feet of the lot were taken by eminent domain for a sidewalk. Would the homeowner be entitled to compensation? A. Yes. The land was taken for public use by eminent domain. B. Yes. He must be paid for the use of the sidewalk. C. No. He still had use of the house and lot. D. No. Compensation is not given on land taken for public use.

A. Yes. The land was taken for public use by eminent domain. Governments and municipalities can only seize property (other than in criminal cases) for the public good and through eminent domain, which is a process, not an arbitrary action. Part of that process involves determining fair compensation to the owner.

A competent and disinterested person who is authorized by another person to act in his or her place and sign a contract of sale is called A. an attorney in fact. B. a substitute grantor. C. an agent. D. a licensee.

A. an attorney in fact. "Disinterested" means being able to act in an objective manner without any hidden motivation or prospect of gain. For example, a person who made a secret deal to sign a contract contrary to his client's best interests in exchange for an under-the-table payment would not be "disinterested."

A buyer wants to take out an FHA loan. The broker should refer the buyer directly to A. any approved lending institution such as a bank or savings and loan association. B. an FHA appraiser in the area. C. the Federal Housing Administration Office. D. the Federal National Mortgage Association.

A. any approved lending institution such as a bank or savings and loan association. Lenders must be approved by the Federal Housing Authority before they can offer FHA loans. Part of the approval process includes waiving fees customarily charged on conventional mortgages.

A three-story apartment complex built in 1965 does not meet with the handicapped access provisions for the 1988 Fair Housing Act. The owner must A. make the ground floor handicapped accessible. B. make the 1st and 2nd floors accessible. C. make the entire building accessible. D. the owner doesn't have to comply since it's less than 4 stories.

A. make the ground floor handicapped accessible. Because the building was constructed before the 1991 standards went into effect, only the first floor needs to be modified.

Looking at shopping centers in the appraisal process, the social fiber of the community and distances from schools is called A. neighborhood analysis. B. market data approach. C. site analysis. D. social analysis.

A. neighborhood analysis. This involves more than just driving around. It is a formal process of identifying, measuring and analyzing the influences that help determine a neighborhood's vitality and desirability.

A(n) _______ is when an owner takes his property off the market for a definite period of time in exchange for some consideration, but he grants the right to purchase the property within that period for a stated price. A. option B. contract of sale C. right of first refusal D. installment agreement

A. option It's important to note that options generally give flexibility to only one side of the transaction. For example, let's say Barney is expecting a big promotion in six months and wants to buy Fred's house for $300,000 if it comes through. In exchange for keeping his home off the market for six months and agreeing to sell it to Barney for $300,000 at Barney's option, Barney gives Fred $3,000. The $3,000 is Fred's to keep no matter what. However, Barney is not obligated to buy Fred's house; it's his choice. Further, if he does get the promotion and wants to exercise his option, Fred must sell Barney his home for $300,000, even if market conditions have now made it worth more.

An option A. requires the optionor to complete the transaction. B. gives the optionee an easement on the property. C. does not keep the offer open for a specified time. D. makes the seller liable for a commission.

A. requires the optionor to complete the transaction. It is up to the optionor (seller)to finish the transaction IF the optionee (buyer) decides to exercise the option. The optionee does not have to exercise the option, but would lose whatever option monies that have been deposited.

Which phrase is not acceptable to use when advertising? A. "Quiet streets" B. "Christian home" C. "Non-smoking" D. "Desirable neighborhood"

B. "Christian home" If a licensee creates an ad which is explicit in its preference for or limitation of any particular religion, the ad is discriminatory. It is probably safe to say that any advertising that describes the property would be considered acceptable, while advertising that describes buyers could be considered discriminatory, especially if the buyers are from a protected class.

A property has a back yard 125 x 150 feet and a side yard of 195 x 25 feet. What is the combined square footage of the side and back yard? A. 20,395 sq feet B. 23,625 sq feet C. 18,750 sq feet D. 24,375 sq feet

B. 23,625 sq feet Calculate the back yard sq footage (125 x 150 = 18,750 sq feet). Calculate the side yard square footage (195 x 25 = 4,875). Then add those two values (18,750 + 4875 = 23,625 square feet).

The purchase of a ticket for a professional sporting event gives the bearer what? A. An easement right to park his car B. A license to enter and claim a seat for the duration of the game C. Partial ownership in the professional sporting team D. A license to sell food and beverages at the sporting event

B. A license to enter and claim a seat for the duration of the game Easements grant access, not use. Commercial licenses, such as those required to sell beverages, souvenirs or services, cover extended periods. Although tickets to sporting events, concerts, shows and the like are technically licenses, they differ from most in their degree of restriction. For example, a concert ticket does not give the bearer the right to sit anywhere he or she chooses or wander backstage to meet the performers.

Jack owns a leasehold interest in a property whose owners or tenants agree to use the property on a periodic, non-overlapping basis. With what type of property does Jack have this leasehold interest? A. A cooperative B. A time-share C. A condominium D. A planned-urban development

B. A time-share Time-shares are most common with vacation and resort properties. Time-share arrangements provide for equal sharing of the property's expenses among the owners.

The system of ownership of real property in the United States is what? A. Incorporeal B. Allodial C. Command D. Feudal

B. Allodial "Allodial" is the modern form of ownership and is often contrasted with "feudal" in which land is held on the condition of rent or service due the government. For example, a medieval knight held property subject to coming to his baron's service when called. Similarly, the baron's land holdings were conditional on his raising an army and fighting for the king in times of conflict. Failure of any party to "perform as promised" was cause for holdings to be confiscated, often as a preliminary step to more extreme actions.

An optionor and an optionee make a contract for an option on a commercial piece of property. If the optionee decides to exercise his option, when must he perform? A. He must exercise his option within 6 months under state law. B. He must exercise his option under the terms of the option contract. C. He must exercise his option when the optionor demands it. D. He can exercise his option whenever he wants.

B. He must exercise his option under the terms of the option contract. Options are generally concerned with only two things: time and price. Whatever the parties agree to in those regards defines the terms of the option and the obligations of the parties.

An increase in the availability of money would lead to which effect? A. Interest rates would go up. B. Interest rates would go down. C. Interest rates would NOT be affected due to RESPA guidelines. D. Interest rates would NOT be affected due to Truth in Lending.

B. Interest rates would go down. Just like most things in a free market economy, mortgage loans are subject to the laws of supply and demand. Thus, when there is more mortgage money in the market place "looking for a home," borrowers have more choices, which leads to increased competition among lenders, which leads to lower interest rates.

When real estate under an estate for years is sold, what happens to the lease? A. It expires with the conveyance. B. It binds the new owner. C. It is subject to termination with proper notice. D. It is valid but unenforceable.

B. It binds the new owner. Tenancy for years is the common form of rental agreements and binds all future owners for the term of the lease.

A seller listed his home for six months on February 26. On April 29, a buyer made an offer on the property. The listing broker presented the offer to the seller on April 30. The seller accepted the offer on May 1, with the closing to occur on June 15. Assuming the closing took place on June 15, when did the listing expire? A. May 26th B. June 15th C. August 26th D. December 15th

B. June 15th Listing contracts set forth the terms and conditions under which a broker will sell a property for his or her client. When the closing takes place, the terms of the contract have been fulfilled and it expires automatically.

In an installment land contract, what type of title did the seller retain? A. Joint B. Legal C. Equitable D. Record

B. Legal In this type of contract, the BUYER doesn't receive legal (i.e. statutory) title to the property until the final payment is made. The BUYER receives equitable title at closing, and upon final payment to the seller receives legal title.

RESPA would prohibit which of the following acts? A. Steering B. Paying of kickbacks C. Blockbusting D. Redlining

B. Paying of kickbacks RESPA concerns itself only with educating consumers about the true costs of borrowing and standardizing lending practices. As such, referral "fees" are prohibited.

Which of the following liens does not need to be recorded to be valid? A. Materialman's lien B. Real estate tax lien C. Judgment lien D. Mechanic's lien

B. Real estate tax lien The requirement for individuals to record liens is due in part to the necessity of correctly identifying the complainant. For example, not just "Jones Contracting," but the specific Jones Contracting that performed the work and is owed the money. Because they bear the authority of government and are easily identified, liens by taxing authorities do not need to be recorded.

Mrs. Jones, an appraiser, is appraising a single family residence for which she has located six comparable properties, all sold within the past six months. The subject property is rented for $1,500 per month. It is a custom-built home, approximately three years old. Mrs. Jones would probably give the most weight in her final estimate of value to which of the following appraisal methods? A. Cost approach B. Sales comparison approach C. Income approach D. Gross rent multiplier

B. Sales comparison approach The sales comparison approach would be used because it is the most reliable indicator of a home's true value. Since it is a single family residence rather than a multi-unit investment property, the fact that it is rented, as well as the amount of rent, is irrelevant to the calculations.

In which of the following markets may a lender sell a loan that a mortgage banker has previously originated? A. Primary market B. Secondary market C. Stock market D. Consumer market

B. Secondary market Many homeowners are surprised the first time they receive a letter from a lender they've never heard of informing them that they now hold the mortgage on their home and that future payments should be sent to them. This secondary market is where lenders buy and sell mortgages to balance their portfolios according to market conditions and their internal needs and objectives. It should be noted that the terms of mortgages bought and sold cannot be changed by the new note holders.

Owner Stan has been defaulting on mortgage payments and owes more than his property is worth. Stan's lender is allowing him to sell the property for less money than necessary to satisfy the loan. The bank has permitted Stan to do what? A. Commit tax fraud B. Short sale the property C. Deed the property to HUD D. "Flip" the property

B. Short sale the property Short sales avoid the delay and expense of a foreclosure sale. The lender usually forgives the mortgage balance owed after the sale.

An impound or reserve account MOST benefits whom? A. The borrower B. The lender C. The trustee D. The trustor

B. The lender Also known as escrow accounts, impound accounts accumulate funds from closing costs and monthly payments to ensure that property taxes and homeowner's insurance are kept current.

Which of the following would usually occur in a sale-and-leaseback transaction? A. The seller only gets a return on the purchase in the form of rental payments. B. The property is sold on the condition that the new owner lease it back to the seller at the time title passes. C. The new owner leases the property out to a third party. D. The rent that the seller pays is not income-tax deductible.

B. The property is sold on the condition that the new owner lease it back to the seller at the time title passes. A sale-leaseback is usually used for the purpose of creating cash flow from a commercial property. As the name implies, the owner transfers title to the buyer in exchange for cash, then leases the property back at a monthly rate while continuing to run his business from that location or otherwise use the property.

All of the following are true of conventional loans except what? A. They are made to the buyer without governmental insurance or guarantee. B. The qualification requirements are uniformly fixed by state law. C. They require a higher down payment than non-conventional loans. D. The policy requirements of the lenders are not uniform.

B. The qualification requirements are uniformly fixed by state law. Not only are guidelines not uniform, qualification standards can vary enormously from lender to lender. There are no state-mandated qualifying requirements for conventional loans.

Which of the following provides a buyer with the best assurance of clear, marketable title? A. Certificate of title B. Title insurance C. Abstract of title D. General warranty deed

B. Title insurance Title insurance provides the best assurance of marketable title.

When the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end, this payment is called A. an escalation payment. B. a balloon payment. C. a satisfaction payment. D. an acceleration payment.

B. a balloon payment. Typically, mortgages with balloon payments are used as a creative financing tool in which buyers plan to refinance the balance in three to five years with better terms than they can qualify for now.

An appraiser is usually paid A. a fee based on a percentage of the appraised value. B. a fee based on the amount of time and effort. C. a fee agreed upon after the appraisal is completed. D. a standard fee agreed upon by the National Appraisal Association.

B. a fee based on the amount of time and effort. There are two fundamental reasons for the "time and effort" rather than valuation method. First is the fact that the differences between any two properties make it impossible to relate the complexity of the task to the value of the property. A high-end property could be a relative "no brainer" while a particular mid-market home could have dozens of variables to be analyzed. The second reason is that basing fees on value places an obvious incentive on appraisers to estimate high, thus distorting reality. It is a violation of the appraiser's Uniform Standards to charge a fee based upon a percentage of value.

The appraisal approach most likely to be used in valuing a public library building would be the A. sales comparison. B. cost. C. income. D. residual.

B. cost. The cost method is most often used for buildings where actual income or comparative commercial value are unavailable--such as schools and libraries.

A person who has complete control over a parcel of real estate is said to own a A. leasehold estate. B. fee simple estate. C. life estate. D. defeasible fee estate.

B. fee simple estate. Fee simple estates have the entire bundle of rights for the property so they have complete control.

The recording of a deed A. is all that is required to transfer the title to real estate. B. gives constructive notice of the ownership of real property. C. insures the interest in a parcel of real estate. D. warrants the title to real property.

B. gives constructive notice of the ownership of real property. Recording a deed does not convey, insure or warrant ownership. However, it does protect the owner's interest in a property by serving notice that the recorded owner is the only recognized holder of title. This places a larger burden of proof and process on someone trying to assert a prior ownership interest and/or claiming a deedholder's title is clouded.

For the past 30 years Lois has operated a neighborhood grocery store. Last week the city council passed a zoning ordinance that prohibits packaged food sales in the area where Lois's grocery store is located. The store is now an example of a/an A. illegal enterprise. B. nonconforming use. C. violation of eminent domain. D. variance of the zoning laws.

B. nonconforming use. This is an example of "grandfathering" that's common when new zoning rules are put into place. Basically it means that businesses and buildings that were in compliance before the new code was established may continue to operate or exist under their present owners. However, if Lois want to sell her business, it must be to an enterprise that meets the new requirement.

The essential elements of a contract include all of the following EXCEPT A. offer and acceptance. B. notarized signatures. C. competent parties. D. consideration.

B. notarized signatures. A contract sets forth the terms and conditions of a real estate transaction, but does not itself transfer ownership. Thus it does not need to be notarized.

The economic life of an investment can be described as A. the remaining chronological life of the improvements. B. the time over which value generated exceeds cost of operation. C. the time when yield is attributable to the land itself. D. the actual age of the property.

B. the time over which value generated exceeds cost of operation. Just like cars, buildings and their systems deteriorate over time and require repairs. Additionally, code changes can trigger expensive upgrades. At some point, those repairs begin to exceed the income generated and the building has reached the end of its economic life.

The first step in an appraisal is A. a market data comparison. B. to define the problem. C. a neighborhood analysis. D. to gather information.

B. to define the problem. Appraisers can legitimately come up with different values for the same property depending on the purpose of the appraisal. For example, an appraisal for a second mortgage generally would be more conservative than one for a competitive market analysis for the purpose of selling the home. Additionally, an appraisal for insurance purposes focuses more on the costs of replacing the structure rather than what the house, land and intangibles, such as curb appeal, would be worth on the open market.

On a $500,000 loan the borrower is required to pay two points. How much does the borrower have to pay the lender? A. $490,000 B. $500,000 C. $510,000 D. $520,000

C. $510,000 One point equals one percent; thus two points are two percent of $500,000, or $10,000, which becomes part of the buyer's total obligation to the lender.

An aggrieved party with a Fair Housing violation claim has how long to file a complaint with the Department of Housing and Urban Development? A. 1 month B. 6 months C. 1 year D. 3 years

C. 1 year If the complaint is not filed within one year, a person may still file a civil suit in a Federal Court.

In general, the Foreign Investment in Real Property Tax Act (FIRPTA) requires a buyer to withhold estimated taxes equal to ____ of the sale price in any sale or exchange of property owned by a foreigner (not a US citizen). A. 3% B. 5% C. 15% D. 20%

C. 15% Congress passed the Foreign Investment in Real Property Tax Act (FIRPTA) to eliminate the problem of collecting delinquent taxes from foreigners who owned and sold property in the US and left the country without paying the taxes due on the sale. The IRS currently keeps this 15% to ensure that any capital gains on the sale are paid.

Which is the best example of functional obsolescence? A. A residential home built next to a factory B. Peeling paint C. A house with no electricity or running water D. A residential home with central air conditioning

C. A house with no electricity or running water "Functional obsolescence" typically shows itself in one of two forms: first, in poor initial design, as in this case; second, when the features and design of the home have become outdated compared with competing properties.

A salesperson is involved in a transaction where an individual wishes a six-month lease with an option to buy. What is true about this situation? A. The individual must go to an attorney since it is too complicated a transaction for a salesperson. B. This transaction is too complicated for a salesperson. Only a person with a broker's license should handle this transaction. C. A salesperson could use two standard forms, fill in the blanks and request that his or her broker review the forms before signing. D. The salesperson should write the purchase offer. A lease for 6 months does not need to be in writing.

C. A salesperson could use two standard forms, fill in the blanks and request that his or her broker review the forms before signing. Generally speaking, salespeople may complete standard forms so long as they are reviewed by and with the approval of their broker.

A standardized measurement expressing the true annual cost of borrowing is expressed as the what? A. ECOA B. AGI C. APR D. RESPA

C. APR APR stands for "Annual Percentage Rate" and expresses the true cost of the loan by factoring fees such as points, recording fees, appraisal fees and such into the interest rate. For example, a mortgage that showed an interest rate of 4.85% on the promissory note might have an APR of 5% when associated costs are factored in.

Which of the following is considered a conventional loan? A. FHA insured B. VA guaranteed C. Commercial bank's 15 year loan D. Contract for deed

C. Commercial bank's 15 year loan Though 30 year loans are more common, 15 year loans are considered standard, conventional loans. Options A and B are part of various government programs to help low and moderate income families as well as veterans find affordable home financing.

Under which of the following types of liens can both the real property and the personal property of the debtor be sold to pay the debt? A. Real estate tax lien B. Mechanic's lien C. Judgment lien D. Assessment lien

C. Judgment lien Most liens are against a specific property, such as a primary residence. Thus, a contractor seeking payment for a new deck cannot have a homeowner's car attached in settlement. A judgment lien, however, is a decision directed by the courts and can apply to whatever assets it deems appropriate.

What is a Schedule of Exceptions on a title policy? A. Encumbrances B. Tax liens C. List of things not insured in the policy D. Defects

C. List of things not insured in the policy Almost no title insurance policy protects against all conceivable events. As the name suggests, the Schedule of Exceptions is a specific list of items not covered and can include things such as unrecorded mechanic's liens, assessments, water rights and mining claims.

Which transaction requires a securities license? A. Leasing a commercial building B. Selling a commercial warehouse C. Selling shares in Fannie Mae D. Arranging a sale-leaseback on a commercial property

C. Selling shares in Fannie Mae Even though Fannie Mae is a mortgage-based business, its shares sell just like any other stock and only people with a securities license may offer them for sale.

Which of the following would not terminate an agency relationship? A. Abandonment by the agent B. Revocation by the principal C. Submission by the agent of two offers at the same time D. Fulfillment of the agency purpose

C. Submission by the agent of two offers at the same time Submitting offers doesn't end the relationship--only the owner's acceptance of one and ultimately closing on the transaction.

If the owner of the dominant tenement becomes the owner of the servient tenement and merges the two properties, what happens? A. The easement becomes dormant. B. The easement is unaffected. C. The easement is terminated. D. The properties retain their former status.

C. The easement is terminated. "Dominant" and "servient" tenements involve two adjacent properties in which an easement is involved. For example, let's say Bridle Creek Farms and Barnstable Farms are separate parcels divided by a country lane that provides access to the county road system. The lane is owned by Bridle Creek, but the deeds of both properties stipulate that Barnstable Farms shall have unrestricted access for the purpose of accessing county roads. That access is an easement. Thus, if the owner of Barnstable Farms buys Bridle Creek Farms, the need for the easement disappears.

All real estate sales must be reported to the Internal Revenue Service after closing. The sale must be reported on A. a W-2. B. a Form-2555. C. a Form-1099. D. a Form-5305

C. a Form-1099. The responsibility for filling out and submitting the 1099 generally falls to the person who conducted the closing.

The Closing Disclosure (CD) form is A. the document used to make Fair Housing complaints. B. provided after signing a listing agreement. C. a statement of actual charges and adjustments. D. the document that must be displayed in brokerages.

C. a statement of actual charges and adjustments. The Closing Disclosure (CD) is a standard form in use which is used to itemize services and fees charged to the borrower by the lender. The form is called for in the TILA RESPA Integrated Disclosure (TRID).

The market data approach allows A. buyers to buy based on their emotion. B. buyers to research local businesses before purchasing a home. C. buyers to buy by comparing one house to another. D. buyers to know what the neighborhood of a house is like.

C. buyers to buy by comparing one house to another. The market data approach allows buyers to compare different properties to determine which best meets their needs in terms of price, features, quality, condition, and other factors.

The covenant in a deed which states that the grantor is the owner and has the right to convey the title is called A. covenant of power. B. covenant of warranty forever. C. covenant of seisin. D. covenant against encumbrances.

C. covenant of seisin. Another outgrowth of the feudal system, "seisen" derives from the French meaning to "sit upon or own" and gives owners the right to sell or transfer property at will.

A defaulting borrower who faces foreclosure may avoid court actions and costs by voluntarily deeding the property to the mortgagee. This is accomplished with a __________, which transfers legal title to the lienholder. A. short sale B. deficiency judgment C. deed in lieu of foreclosure D. caveat emptor

C. deed in lieu of foreclosure With the deed in lieu option, a borrower voluntarily deeds collateral property in exchange for a release from all obligations under the mortgage. The transfer, however, does not terminate any existing liens on the property. For this reason, some jurisdictions (e.g., judicial foreclosure states) frown on the usage of deeds in lieu of foreclosure.

A portion of Wendell's building was inadvertently built on Ginny's land. This is called an A. accretion. B. avulsion. C. encroachment. D. easement.

C. encroachment. The principal attributes of an encroachment are: 1) It is accidental and 2) it involves only part of a structure. Typically, the issue would be resolved by selling Wendell an easement or a lease or, if practical, actually moving the structure.

A broker is discussing a new listing with a prospective Mexican-American buyer. The buyer wants to inspect the property immediately, but the owner of the property has instructed the broker, in writing, not to show the house during the owner's three-week absence. The buyer insists on viewing the property. The broker should A. show the property to avoid a violation of the Federal Fair Housing Act. B. request the Real Estate Commission arbitrate the problem. C. inform the buyer of the seller's instructions. D. notify the nearest HUD office.

C. inform the buyer of the seller's instructions. Following an owner's lawful instructions is not only allowable, but a responsibility of the licensee. However, if the owner instructed the broker to tell minority buyers that he was out of town when he was not in order to avoid selling to a minority, the broker would be in violation of the law if he acted as the owner requested.

Physical deterioration is considered curable whenever A. it is caused by lack of maintenance. B. it does not result in loss of economic utility. C. it costs less to correct than the resulting value increase. D. it can be repaired regardless of the cost.

C. it costs less to correct than the resulting value increase. For example, let's say an older office building needs to update electric and add bathrooms, repartition offices and fire safety features to meet code for resale. The cost to complete the work is estimated at $2.2 million. However, the building is fully paid for and can easily be sold for $4 million. In this case, curing the defects makes sense. However, if those numbers were reversed, as is often the case, demolishing the building and starting over with a new structure or different use (e.g., retail space, a parking garage, etc.) would be the wiser choice.

The discount points charged by a lender on a federal VA or FHA loan are a percentage of the A. sales price. B. appraised price. C. loan amount. D. down payment.

C. loan amount. Like points, discount points are one-time charges equal to one percent of the loan amount for each point charged.

A recorded subdivision plat is used in the A. metric survey system. B. rectangular survey system. C. lot and block system. D. metes and bounds system.

C. lot and block system. Lot and block is the "final" survey of property being readied for development and identifies each individual parcel in a subdivision.

A mobility impaired person was renting a unit in an apartment complex. Half the units had been assigned parking spaces near the door; the other half had not. The owner A. may charge extra money to the handicapped person for providing the parking space near the door. B. must take a vote of all tenants to see if they want to allow the handicapped person a parking space. C. must give a parking space near the door to the handicapped person, if one is available and a need is demonstrated. D. does not have to offer the handicapped person the parking spot near the door.

C. must give a parking space near the door to the handicapped person, if one is available and a need is demonstrated. The "equal access" aspects of fair housing legislation do not necessarily mean equal treatment. "Reasonable accommodation" must also be made to meet the needs of handicapped people, including exceptions to standard policies such as convenient parking and guide dogs.

A void contract is one that is A. not in writing. B. voidable by only one of the parties. C. not legally enforceable. D. rescindable by agreement.

C. not legally enforceable. In order to be enforceable, real estate contracts must meet the legal requirements for contracts in general. For example, a contract signed by a minor or a "seller" who doesn't own the property in question was never legal to begin with and is thus "void." 0

To create a joint tenancy relationship in the ownership of real estate, there must be unities of A. desires, ownership, claim of right, and possession. B. title, interest, liens, and survivorship. C. possession, time, interest, and title. D. ownership, possession, heirs, and title.

C. possession, time, interest, and title. This essentially means that all parties to the agreement share equally in all aspects of the property, including the length of time it's been held. That means if one party sells or transfers interest in a joint tenancy relationship, his or her place is taken by another in the same capacity.

The illegal process of a banker refusing to approve loans for a neighborhood based on the racial composition of the area is A. blockbusting. B. steering. C. redlining. D. panic peddling.

C. redlining. Loans may only be approved or denied on the basis of whether a specific individual and property meet established standards. Thus lenders are well within their rights to deny a loan to a particular person because he or she lacks sufficient income or has poor credit. Additionally, a loan for a partially completed home or one that doesn't meet code can also be denied. However, "macro" issues such as race or neighborhood cannot be considered.

The seller under a land contract is called A. the grantor. B. the grantee. C. the vendor. D. the vendee.

C. the vendor. The seller of the land is the grantor. They buyer is the grantee.

To assign a contract for the sale of real estate means to A. record the contract with the county recorder's office. B. permit another broker to act as agent for the principal. C. transfer one's rights under the contract. D. allow the seller and the buyer to exchange positions.

C. transfer one's rights under the contract. Assigning a contract means to transfer it to another.

he sellers listed their property for six months on February 26 for $522,500. They agreed to pay the listing broker a 7% commission at closing on the agreed upon sale price. A buyer made an offer on the property on March 29 for $510,000. The seller countered the offer on April 1 at $517,500, and the buyer accepted the counter offer with the closing to occur on June 15. How much commission did the seller owe the listing broker, and how would it appear on the settlement statement? A. $18,113. Debit the seller. B. $35,700. Credit the seller. C. $36,575. Debit the seller. D. $36,225. Debit the seller.

D. $36,225. Debit the seller. Commissions are paid based on the actual selling price, not the listing price. Additionally, since the broker represented the sellers in this transaction, the commission is debited from their side of the ledger.

The zoning commission of Jefferson County requires that all new construction in a specific area adhere to a specific type of architecture. What type of zoning is this? A. Bulk B. Retro C. Directive D. Aesthetic

D. Aesthetic Aesthetic zoning helps ensure consistency within a neighborhood or area, thus raising its visual appeal and, very often, its desirability and value as a place to live.

The seller and the buyer agreed to a purchase price of $270,000 with the closing to occur on June 15. The seller's loan balance after the June 1 payment was $170,000. with an interest rate of 6%.The monthly payment was $1,800 principal and interest. What was the loan balance the day of closing, and how much interest did the seller owe the bank? A. Loan balance $171,800; interest due $850 B. Loan balance $170,000; interest due $2,550 C. Loan balance $270,000; interest due $862.50 D. Loan balance $170,000; interest due $425

D. Loan balance $170,000; interest due $425 Although many types of loans can become more complex in their calculations of remaining principal and interest at a particular point in time, in this case the interest portion of the payment is calculated simply by multiplying $170,000 by 6% and dividing by twelve. That results in monthly interest of $850, with half that amount, or $425 added to the principal payment at closing.

In most states, by paying the debt after a foreclosure sale, the mortgagor has the right to regain the property. What is this right called? A. Equitable right of redemption B. Right of acceptance C. Vendee's right of redemption D. Statutory right of redemption

D. Statutory right of redemption This right of redemption is called "statutory" because it is legally mandated by law, as opposed to a custom lenders could follow or not at their option.

Which of the following is/are considered to be personal property? A. Wood-burning fireplace B. Furnace C. Bathtubs D. Table Lamps

D. Table Lamps The concept of personal property typically comes into play at the time of sale. Things that are part of the house--bathroom fixtures, fireplaces, carpeting and such--go with the sale. (Unless specifically excluded, as can happen in the case of a dining room chandelier or one or two other objects with which the owners have an emotional attachment.) Furniture, rugs, lamps and other portable items that are not "nailed down" constitute personal property and are not included in the sale.

In a gift of a parcel of real estate, one of the two owners was given an undivided 60 percent interest and the other received an undivided 40 percent interest. The two owners hold their interests as what? A. Cooperative owners B. Joint tenants C. Community property owners D. Tenants in common

D. Tenants in common In order to create joint tenancy, some form of relationship must exist between the parties involved, whether business, spousal or other. Because their interests were acquired as a gift, the parties in this instance become tenants in common, with all the ownership benefits of joint tenancy, but not the survivorship rights.

Which entity is prohibited from collecting taxes on real property? A. Counties B. Townships C. Cities D. The Federal Government

D. The Federal Government There are no federal taxes on real property. The Constitution of the United States specifically prohibits such taxes. The federal government does, however, tax income derived from real property and gains realized on the sale of real property. The federal government can impose a tax lien against property for failure to pay any tax due the Internal Revenue Service.

A mortgage broker A. is a lender. B. buys mortgages in the secondary mortgage market. C. buys mortgages and resells them at a profit. D. arranges loans between borrowers and investors.

D. arranges loans between borrowers and investors. Mortgage brokers function much like independent insurance agents and represent a variety of lenders. Their role is to match the circumstances of individual buyers with the mortgage program best suited to their needs.

When a prospective buyer makes a written purchase offer that the seller accepts, then the A. buyer may take possession of the real estate. B. seller grants the buyer ownership rights. C. buyer receives legal title to the property. D. buyer receives equitable title to the property.

D. buyer receives equitable title to the property. "Equitable title" means that the prospective buyer has obtained the right to acquire ownership of a property currently owned and occupied by another.

Evan lives in an apartment building. The land and structures are owned by a corporation, with one mortgage loan covering the entire property. Like the other residents, Evan owns stock in the corporation and has a lease on his apartment. This type of ownership is called a(n) A. condominium. B. planned unit development. C. time-share. D. cooperative.

D. cooperative. This is the distinguishing characteristic that differentiates cooperative from condominium ownership. Although often confused, a condominium owner holds title to his individual unit. A co-op owner, on the other hand, is technically a renter. It's his stock in the corporation holding title to the property that gives him the right to lease the unit as well as sell that right to another.

Owner Grace's property has been foreclosed. After the property was sold for $340,000, she still owed $60,000 to the lender. The lender may be able to get a personal judgment against Grace for the $60,000. This is called a A. leverage lien. B. partition lawsuit. C. reverse foreclosure judgment. D. deficiency judgment.

D. deficiency judgment. A deficiency judgment enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.The lender's ability to pursue such a judgment may be limited, however.

Usury MOST nearly means A. making loans without the benefit of co-signors. B. lending money at fluctuating interest rates. C. redlining. D. illegal interest.

D. illegal interest. Each state sets its own ceiling for the maximum interest rate lenders may charge. Rates above that ceiling are considered usurious and illegal. No reputable lender exceeds those rates and those that make a practice of it are commonly known as loan sharks.

The Smiths' purchased a residence for $750,000. They made a down payment of $150,000 and agreed to assume the seller's existing mortgage, which had a current balance of $230,000. The Smiths' financed the remaining $370,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a A. wraparound mortgage. B. package mortgage. C. balloon note. D. part (junior) purchase money mortgage.

D. part (junior) purchase money mortgage. Also known as a "purchase money second," this is a streamlined and often cost-effective financing option.

The primary survey line running north and south in the rectangular survey system is the A. township line. B. base line. C. range line. D. principal meridian.

D. principal meridian. Crossing a base line, the principlal meridan is the primary reference point for locating and describing land falling within its boundaries.

The finance charges recorded on the Truth in Lending statements would include all of the following EXCEPT A. loan fees charged by the lender. B. insurance premiums for mortgage insurance payment. C. discount points and service fees. D. recording fees and title insurance premiums.

D. recording fees and title insurance premiums. These are considered legal, not financing fees and therefore are not part of the Truth in Lending statement.

If, upon the receipt of an offer to purchase his property, the seller makes a counteroffer, the prospective buyer is A. bound by his original offer. B. bound to accept the counteroffer. C. bound by whichever offer is lower. D. relieved of his original offer.

D. relieved of his original offer. Offers are "one-time-only" events that must be accepted or rejected. Once the seller made a counter-proposal, he rejected the buyer's offer and no contract exists. The buyer is under no obligation to continue and is entitled to have any earnest money that accompanied the offer returned immediately.

All of the following are physical characteristics of land EXCEPT A. indestructibility. B. uniqueness. C. immobility. D. scarcity.

D. scarcity. Scarcity is a fundamental economic concept that holds that the rarer and more desirable something is, the more valuable it will be. For example, professional athletes are highly paid because only the smallest percentage of people have the ability to perform at that level. Land is "scarce" because there is a finite amount available and, as Will Rogers once said, "They ain't making any more of it."

A VA loan may be granted for the purchase of a one-family to four-family property if A. the veteran certifies the rent collected will equal the mortgage payments. B. the loan will be amortized for not more than 20 years. C. the down payment will be at least 10%. D. the veteran agrees to live there.

D. the veteran agrees to live there. Although the rules and terms can fluctuate, the low down payment and below market interest features of VA loans come with the condition that the borrower live in the property.

One of the main purposes of RESPA regulations is? A. to protect the real estate agent from fraud. B. to better inform the real estate agent about the financing of a real estate transaction C. to protect the home buyer from fraud. D. to better inform the buyer about the financing of a real estate transaction

D. to better inform the buyer about the financing of a real estate transaction RESPA has two main purposes. One is to better inform the buyer through mandated disclosure statements. The second is to prohibit some settlement practices like kickbacks and referral fees.