REAL ESTATE LAW
Which of the following best describes the difference between general and limited partnerships? A » Unlike general partnerships, limited partnerships require all partners to assume full liability B » Unlike general partnerships, limited partnerships must have limited and general partners C » Unlike limited partnerships, general partnerships limit the general partner's ability to make management decisions D » Unlike limited partnerships, general partnerships require stockholders to post bonds equal to their investments
(B) All partnerships must have at least one general partner as the general partner is the one who makes management decisions. (A) Limited partners do NOT assume full liability as they are only liable for their initial investment. (C) General partners are not limited in their ability to make management decisions. (D) Stockholders do not have to post bonds equal to their investment.
A person owned a 4-plex and lived in one of the units. Which of the following would be allowed? A » Advertising "only Protestants apply" if the owner is renting it personally B » Refusing to rent to a student from a different national origin C » Advertising on the sign in the yard that only certain nationalities apply if the owner is renting it personally D » Refusing to rent to someone based on race
(B) An owner-occupant of up to a 4-plex is an exemption under Fair Housing laws and would be allowed to discriminate based on national origin. However, it can NOT be advertised (A) & (C). One can NEVER discriminate based on race (D).
Lots were being sold in a subdivision that required all building lots contain a minimum of .5 acres. This would be an example of: A » down zoning B » deed restrictions C » directive zoning D » discriminatory pricing
(B) Deed restrictions are private land use controls, such as minimum acreage, minimum square footage, certain type of roofs, etc. (A) Down zoning is going from a more intensive use to a less intensive use, such as from multi-family to single family. (C) Directive zoning encourages land to be used for the highest and best use. (D) Discriminatory pricing is not a valid term.
Which is true regarding the Federal Fair Housing Law? A » The case of Jones vs. Alfred Mayer Company negated the effects of the law B » Aggrieved parties may appeal to HUD for assistance C » It preempts state laws concerning discrimination D » It would apply to commercial buyers
(B) HUD will investigate and assist parties who are discriminated against. Jones VS Mayer was a Supreme Court case that said one can NEVER discriminate RACIALLY (A) which only strengthened the law. If a state has an equivalent law, the state would enforce it (C) (it is not pre-empted or overridden). The fair housing law applies only to residential transactions. (D) Fair Housing laws apply to residential transactions, not commercial.
A seller and buyer agreed in writing to buy and sell a piece of real estate. The seller and buyer also agreed orally that the seller would leave the refrigerator for the buyer. After closing, the buyer discovered that the seller had not left the refrigerator. The buyer then sued the seller in court for the refrigerator. Would the buyer likely prevail in this lawsuit? A » No, because the refrigerator is personal property B » No, because the agreement was not in writing C » Yes, because the refrigerator is real property D » Yes, because anything agreed to orally is enforceable in court
(B) Oral agreements generally cannot be enforced in court. (A) The refrigerator being personal property does not answer the question. (C) is incorrect as the refrigerator is personal property. (D) is incorrect as generally agreements must be in writing to be enforceable.
A couple, in trying to buy a house, thought they had been discriminated against. Under the 1988 amendments to the Federal Fair Housing Law, how long does the couple have to file a complaint with HUD? A » 6 months B » 1 year C » 18 months D » 2 years
(B) Persons have 1 year in which to file a complaint with HUD if they believe discrimination has occurred.
Which would be considered puffing in advertising? A » Advertising a property with 1000 square feet as "a property with 150 square yards" B » Advertising a hillside lot as "the most beautiful view in the state" C » Advertising a house with a septic tank as "a home attached to city sewers" D » Advertising a house with a well as "a house with a well always full of water"
(B) Puffing is a subjective (not objective) opinion which would most likely not be shared by all others. Beauty is in the eye of the beholder and is quite subjective. Size (A), sewer attachment (C) and water (D) are objective matters that can be actually determined.
A buyer signed an offer to purchase on a property listed for sale. The offer to purchase contract did not state any time period for which the offer was valid. In this case, which of the following statements is true regarding the offer to purchase contract? A » There would be a 7 day time limit for which the offer is valid B » The buyer is tied to the contract no matter what C » The buyer can revoke the contract at any time before acceptance D » The buyer cannot revoke the offer until the seller makes a counter-offer
(C) A buyer can always revoke an offer anytime before it is accepted by the seller. (A) There is not 7 day time period for offers to be valid. (B) The buyer is not always tied to the contract as the buyer can rescind the offer prior to acceptance. (D) The buyer does not have to wait for a counteroffer as the offer can be rescinded prior to acceptance.
Which of the following statements is true regarding an option to purchase real estate? A » There is no definite sales price B » It has to be recorded to be effective C » It has all the elements of a sales contract D » The option is not transferable
(C) An option, like any other contract, must contain all necessary contract terms. An option has a pre-arranged sales price that is agreed to upon the signing of the option (A). Although options may be recorded (B), it is not necessary. An option may be assigned to another (D).
If the seller asked the managing broker what race the buyers were, would the managing broker have violated the fiduciary relationship by respectfully refusing to answer? A » Yes, because the seller has a right to tell the neighbors about the buyer of the property B » Yes, because the managing broker needs to follow all the seller's instructions C » No, because race, color, religion, national origin, and sex are not material D » No, because the managing broker always represents the buyer
(C) Managing brokers must follow all lawful instructions of the client. However, to discuss race would violate the fair housing law. Therefore, a managing broker should NOT discuss the race of a buyer. (D) Managing brokers do not always represent buyers as sellers are routinely represented as well in a real estate transaction.
Which would have enough different types of measurements to accurately describe an irregularly shaped parcel of land? A » Datum plane B » Rectangular survey description C » Metes and Bounds description D » English corner system
(C) Metes and bounds can use rods, feet and inches (down to 1/100 of a foot) an is ideal for identifying irregular shaped parcels. (A) The datum plane is a level surface to which heights and depths are referred. (B) The rectangular survey system is what the government uses to identify land using meridians, base lines, townships and sections.
A managing broker presented an offer to the seller for $80,000. While the seller is considering the offer, another offer for $100,000 for the property from another brokerage firm comes in. What should the managing broker do with the second offer? A » Wait until the seller's mind is made up regarding the first offer to present the second offer B » Tell the other brokerage firm the property is already under contract C » Present the second offer immediately D » Present the offers to the seller in the order they came in to the managing broker
(C) Since the owner has the right to know about all offers before accepting any, the managing broker must present the second offer immediately. If the managing broker waited, the seller would be making a decision without knowing all the facts (A). Since the first offer had not been accepted, it would be wrong for the managing broker to tell the other brokerage firm a lie (B) about the acceptance. If there are multiple offers at or about the same time, the mafnaging broker should present them together (D).
A minority couple wanted to move into a neighborhood composed mostly of non-minorities. Which of the following statements BEST describes the obligations of the agent? A » Tell the minority that this is a non-minority neighborhood B » Suggest that the buyer procure FHA financing C » Take all necessary steps to consummate the sale D » Suggest that the buyer also consider other minority areas
(C) The agent should proceed with the deal as normal. (A) Discussing a non-minority neighborhood is not allowed. (B) Assuming FHA financing for the buyer might imply financial abilities of the buyers based on their minority status. (D) Suggesting the buyers consider other minority areas would be steering.
Each of the following contracts would be bi-lateral EXCEPT a: A » lease purchase B » sales contract C » listing contract D » lease option
(D) An option contract is a uni-lateral (one-way) contract, not a bi-lateral (two-way) contract. (A) A lease purchase, (B) sales contract and (C) listing contract are all bi-lateral contracts with two parties making promises.
A woman lived in a 4 family house and rented rooms to young college students. She advertised that she would only rent to single white women but she did not care about their religion. Was this permissible? A » Yes, because she had not discriminated because of their religion B » Yes, since she lived in one of the units, she was exempt from the Federal Fair Housing Laws C » No, discrimination based upon sex is always a violation of the Federal Fair Housing Laws D » No, discrimination based upon race is unlawful in all cases
(D) Racial discrimination is always illegal due to the Jones vs. Mayer supreme court case. Advertising the word WHITE is what made the ad illegal. (A), (B) and (C) The woman would be exempt under the Fair Housing Laws as she lived in a 1-4 plex and therefore could discriminate based on religion or sex. Using the racial issue in the ad is what made the ad illegal.
In an effort to obtain listings, a real estate agent was handing out fliers in a neighborhood telling people that communes were coming into the neighborhood. This would be: A » redlining B » steering C » dedication D » blockbusting
(D) Trying to obtain listing by saying certain groups of people are moving into the neighborhood is blockbusting and therefore illegal under Fair Housing Laws. (A) Redlining is lenders refusing to make loans in certain areas of a city. (B) Steering is directing buyers toward certain areas based upon the buyers race, color, religion, etc. (C) Dedication is donating land to the government.
A legal description is as follows: "Beginning at the intersection of Route #7 and Boone County Road proceed South 2 miles to the old oak tree, thence 1 mile West to the well by the old farm house, thence North 2 miles to an iron post at the corner of the Johnson farm, thence East 1 mile back to the point of beginning." Which of the following would NOT be true? A » This property is equal to 1/2 of a township B » This property contains 1,280 acres C » This is an accepted method of describing land D » This is an example of a metes and bounds description
1/2 of a township is 18 square miles. This describes only 2 square miles. It does contain 1,280 acres (1 sq. mile = 640 acres) (B). A metes and bounds gives a physical description (D) and is an acceptable method of describing land (C).
A lot with 15,400 square feet had a depth of 140 feet. The owner bought 2 lots, one on each side directly abutting his property, each having 4200 square feet and 140 feet of depth. What was the total of the front footage? A » 140 B » 170 C » 310 D » 420
15,400 plus 4,200 plus 4,200 equals total square footage of 23,800. 23,800 divided by 140 feet equals 170 feet for the frontage.
A corn field was bisected by a road dividing it into 2 equal lots measuring 530 feet by 430 feet each. What was the total acreage of these 2 lots? A » 5.2 acres B » 10.5 acres C » 228 acres D » 456 acres
530 times 430 equals 227,900 square feet per lot. 227,900 times two lots equals 455,800 total square feet. 455,800 divided by 43,560 equals 10.5 acres.
A property totaled 820 square yards. If it was in a rectangular position and the front footage was 45 feet, what was the depth? A » 18.22 feet B » 22.50 feet C » 164 feet D » 188 feet
820 square yards times 9 equals 7,380 square feet. 7,380 divided by 45 feet equals 164 feet for the depth.
A property had an area of 920 square yards with a 40 foot frontage. What was the depth of the lot? A » 23 feet B » 69 feet C » 207 feet D » 408 feet
920 square yards times 9 equals 8,280 square feet. 8,280 divided by 40 feet equals a depth of 207 feet.
According to the 1988 amendments to the Federal Fair Housing Law, which of the following would be allowed regarding a handicapped person in an apartment complex? A » Evicting for playing loud music (excessive noise) at night B » Confining the person to certain areas of the complex C » Only allowing the person to use the recreation areas during certain times D » Refusing to rent to the person because of the handicap
(A) A handicapped person still must follow all normal rules of any other tenant, such as not making excessive noise. (B) Confining handicapped persons to certain areas, (C) allowing access to recreation areas only during certain times and (D) refusing to rent to handicapped person would be illegal under the Fair Housing Amendments Act of 1988.
A property manager leased a space to a handicapped person. The handicapped person wanted to make some modifications to the space. The property manager can require that the handicapped person: A » pay a security deposit equal to six months rent when normally the amount is equal to one months rent B » pay the first and last months rent in advance rather than the usual first month only C » return the space to its original condition at the lessee's expense D » pay the first six months rent in advance rather than usual monthly payments
A handicapped can modify the space to accommodate the handicapped person but must return the space to the landlord in the original condition (C). A manager cannot change terms for a person who belongs to a protected class, such as being handicapped (A), (B), (D).
A contract would be considered executed when: A » the deed has been delivered and accepted B » all contract terms have been satisfied C » the deed has been recorded D » the deed has been acknowledged
An executed contract is one where all promises have been completed (B). The deed being delivered and accepted transfers title (A). Recording of the deed gives the public constructive notice of the transaction (C). An acknowledged deed is one that has been signed in the presence of a notary public (D).
A buyer purchased a piece of property. The property purchased was described as follows: Beginning North of the lake at a tall spire, proceed South 1,936 feet, then proceed East 45 feet, then proceed North 1,936 feet, then proceed West 45 feet back to the point of beginning. If the buyer purchased the total property for $17,000, what was the cost per acre? A » $ 4,500 B » $ 8,500 C » $17,000 D » $24,500
Find the square footage of the property first by taking Find the square footage of the property first by taking 1,936 feet times 45 feet. This equals 87,120 square feet. Then find the total acres by taking 87,120 / 43,560. This results in a total of 2 acres. To find the cost per acre, take the total purchase price of $17,000 and divide by 2 to arrive at a cost of $8,500 per acre.
Which is NOT true about a metes and bounds description? A » It has a point of beginning B » The metes can be as small as 1/100 of a foot C » It is a good way to define irregularly shaped parcels of land D » In the event of a discrepancy, the distances in the deed prevail over the actual distances between monuments
The actual distances will prevail over the distances stated in the deed. A metes and bounds description starts at a point of beginning (A) and lists the distances between various bounds (physical markers) with distances as low as 1/100 of a foot (B). For those reasons, it is ideal for describing land that is shaped irregularly (C).
One rectangular piece of property was divided by a stream, separating the property into two equal triangular lots. The frontage of the entire parcel measured 400' and the depth of one of the triangles measured 720'. What was the total acreage of both triangular lots? A » 4.2 B » 6.6 C » 13.2 D » 18.5
To find the total square footage, multiply 400 by 720. This gives you a total square footage of 288,000. Then, take 288,000 square feet and divide by 43,560 to arrive at a total acreage for both lots of 6.6.
Which of the following statements BEST describes the difference between a void and a voidable contract? A » A void contract can not be enforced legally; a voidable contract could remain in force until one of the parties involved decided to void it B » A voidable contract can not be enforced legally; a void contract could remain in force until one of the parties involved decided to void it C » A voidable contract can not be enforced by either of the parties; a void may be enforced by the court if its purpose is legal D » A void contract can be enforced by either or both of the parties; a voidable contract can be voided by either or both of the parties
(A) Neither side can enforce a void contract (such as a contract to commit a crime) but a voidable contract is enforceable until one of the parties decides to void it. (B) This answer is backwards. (C) A void contract cannot be enforced by the court. (D) Once again, a void contract cannot be enforced. Also, a voidable contract can only be voided by the injured party, for example, a minor or a person who signed a contract under duress (extreme pressure).
An owner of a 12 unit apartment building lived in one of the apartments. The owner refused to rent to a person because of their national origin. Does the person have a valid complaint? A » Yes, because it was a 12 unit apartment B » Yes, because other tenants were from his homeland C » No, because the owner lived there D » No, because the owner did not discriminate in advertising
(A) Only a 1-4 plex might be exempt under the 1968 Fair Housing Laws, not a 12- plex. If one is exempt, the person can discriminate based on national origin. However, even if exempt, one can NEVER discriminate based on race. (B) Other tenants being from his homeland, (C) the owner living there and (D) no discrimination in advertising are all false answers as it was a 12-plex, not a 1-4 plex.
One rectangular piece of property was divided by a stream, separating the property into two equal triangular lots. The frontage of the entire parcel measured 500' and the depth of one of the triangles measured 920'. What was the total acreage of both triangular lots? A » 5.2 B » 10.5 C » 12.7 D » 15.9
500` times 920' equals 460,000 total square feet. 460,000 square feet divided by 43,560 equals 10.5 acres.
The intent behind the Statute of Frauds is to: A » protect licensees from sellers who try and cheat licensees out of duly earned commissions B » put real estate transactions in writing C » protect the public from fraudulent actions by licensees D » prevent sellers from lying about property defects to prospective buyers
The Statute of Frauds requires real estate sales contracts, deeds, and leases over one year to be in writing to be enforceable (B). The (A), (C), and (D) answers all deal with fraudulent activities, which has nothing to do with the Statute of Frauds.
An investor built a three story apartment complex with no elevators. Under the 1988 Fair Housing Amendments Act, which of the floors must be accessible to the handicapped? A » Ground floor only B » First and second floors only C » All floors D » Ground floor only unless a handicapped person specifically asks to be on the second or third floors - then modifications must be made
Under the 1988 Fair Housing Amendments Act, if there is an elevator in the complex, then all floors must be accessible to the handicapped. If there is no elevator, then ground floor units only must be accessible. Therefore, (A) can be the only right answer.
All of the following items are required for the validity of a contract EXCEPT: A » competent parties B » consideration C » lawful purpose D » contingency clause
(D) A contingency clause, such as a buyer only buying if able to obtain a loan, is not a required element of a contract. (A) competent parties, (B) consideration, and (C) lawful purpose are all essential elements of a contract.
The area of a property that was 1/8 mile x 1/8 mile is: A » 5 acres B » 10 acres C » 12.5 acres D » 660 acres
1/8 times 1/8 equals 1/64 of a section of ground (640 acres). 640 divided by 64 equals 10 acres.
Which of the following advertisements is a violation of federal law? A » "luxury condominium - singles only" B » "honeymoon cottage in a secluded wooded area" C » "payments less than rent" D » "retirement community with a scenic view"
(A) "Singles only" implies no children and would be a violation of the Fair Housing Laws regarding familial status. (B) Honeymoon cottage, (C) payments less than rent and (D) retirement community are all legal advertisements.
An owner gave a buyer an option on a piece of property for 6 months for $300,000, receiving $150 for the option. Was this a valid option? A » Yes, because $150 is considered valuable consideration B » Yes, because it is for longer than 90 days C » No, because options cannot be for a period of longer than 90 days D » No, because 5% would have to be paid to be considered valuable consideration
(A) Since an option is a contract, consideration must be paid. Consideration is defined as something of value, here the value being the $150. There is no required amount (D). There is no requirement that options be for any specific time period (B) & (C).
A buyer and a seller entered into a contract for the purchase of a property. Prior to closing, one of the parties breached the agreement. What would be the other parties BEST remedy? A » Specific performance B » Rescission C » Sue for damages D » Go ahead and close anyway
(A) Specific performance is court action to force all parties to perform. This is the most common remedy if one party tries to back out of a deal. (B) Rescission is returning both parties in a contract back to square one. (C) When a party sues for damages, the damages are normally limited to out of pocket expenses, but this is not the most common remedy. (D) One cannot close on a transaction unless all parties consent.
A handicapped person asked the landlord for permission to alter the apartment. Which of the following is true regarding the costs of changing the apartment back after the termination of the lease? A » The landlord can require that it be restored as it was before the alteration B » The landlord may raise the security deposit to cover renovation costs C » The landlord can require the tenant to move out if not comfortable D » The federal government will reimburse the landlord for any renovation costs if the landlord is unable to re-rent it to another handicapped person
(A) The landlord must allow the handicapped person (at their own expense) to make reasonable alterations. But, they are required to return the unit to its original condition (at their expense) at the end (usually). Security deposits (B) cannot be increased to cover the renovation. (C) The landlord CANNOT require the tenant to move out. (D) The federal government does NOT reimburse for any renovation costs.
When a buyer receives an equitable title to a property, this entitles the buyer to: A » assume the seller's existing loan B » sue for specific performance C » receive a novation D » a non-freehold estate
(B) A signed contract gives the buyer an equitable title (the right to receive the deed at a later date, usually closing). Therefore, if the seller backs out of the contract, the buyer can sue for specific performance - court action to force completion. An equitable title does not deal with assuming loans (A). A novation is a new contract that takes the place of an old contract (C). A non-freehold estate is a leasehold estate (D).
Which of the following statements BEST identifies an option? A » The right to buy at a later date if the property is placed up for sale B » The possibility of buying at a set price at a later date C » The right of a tenant to adjoining space should it become available D » The right to make an offer to purchase at a later date
(B) An option gives the buyer the right to buy at a set price withing a certain time period. (A) is a right of first refusal (not an option) since the buyer does not have the right to buy unless the seller puts the property on the market (C) is also a right of first refusal. Buyers always have the right to make an offer (D). No option is required.
A person with a large amount of equity in a home would like to obtain a new loan using the equity in the home for investments. The existing mortgage on the home is 3% less than what is currently available. Which of the following steps would BEST accomplish this? A » Obtain a package mortgage B » Refinance the existing home mortgage C » Obtain a satisfaction of mortage D » Obtain a subordination agreement
(B) Refinancing the existing mortgage to a larger amount allows the owner to use the equity as security for the additional money to use for investments. A package mortgage (A) uses real and personal property as security for the loan. A satisfaction (C) piece is issued by the lender when the loan is totally paid off to record and clear the public record of the lien. A subordination (D) agreement changes a first mortgage to a second mortgage.
A buyer purchased an option on a property. Which of the following statements BEST states the rights of the parties? A » The optionee would have to sue to get the money back if the option is not exercised within the option time period B » The optionee would lose the money paid if the option is not exercised within the option time period C » The optionor could sue the optionee to complete the option D » The optionor must purchase the property at any price another buyer would offer
(B) The optionee (buyer) paid consideration for the option rights. If the optionee chooses not to exercise the rights, the optionor (seller) gets to keep the money. The optionee cannot sue to get it back (A) since the optionee got what the optionee paid for (the option). The optionor (seller) cannot force the buyer to buy it under an option (C). (D) describes a type of right of first refusal.
A managing broker had a listing on a property for $200,000. An offer of $180,000 was presented to the seller which the seller took to his accountant to review. In the meantime, another offer then came in to the managing broker on the same property for $175,000. What should the managing broker do? A » Wait until the first offer has been acted upon before presenting the second offer B » Present the second offer immediately C » Present the second offer immediately only if it was written by another agent in the managing broker's office D » Reject the second offer since it was for less than the first offer
(B) The owner has the right to know about all offers (higher or lower) before deciding on any offer. Therefore, the managing broker must present the offer at once. (A) is wrong since the seller could accept the first offer and would then not have had a chance to consider the second offer. Who wrote the second offer (C) is not relevant. The managing broker can not reject any offer (D). Only the seller can accept or reject offers.
Which of the following best describes the act of blockbusting? A » Refusing to show properties to minorities B » Threatening urban renewal to force neighboring properties to upgrade their homes C » Saying that there will be a racial mix in the neighborhood, thereby encouraging people to sell in order to make a profit D » Suggesting minorities buy only in integrated areas
(C) Blockbusting is encouraging owners to sell based on the entry of minorities into the area. Refusing to show to minorities (A) is illegal discrimination, but not blockbusting. Threatening urban renewal (B) is not, in and of itself, illegal. Suggesting minorities buy only in integrated areas (D) is illegal steering.
Which of the following statements BEST illustrates the practice of blockbusting? A » A broker raises the rent in a particular area of town because the majority of tenants belong to a protected class B » A broker goes around to neighbors advising them of the fact that people from a protected class are moving into the neighborhood C » A broker changes the terms of a sale of property because the buyer belongs to a protected class D » A broker shows a minority buyer homes only in minority neighborhoods
Blockbusting is where a licensee tries to scare people into selling by saying persons of a protected class are moving into the neighborhood (B). Raising the rent (A) or changing terms (C) based on a person belonging to a protected class is also illegal but is NOT blockbusting. (D) refers to steering which is directing people to certain areas of town based on their protected class.
A managing broker listed a new home for sale that was nearly complete. The garage on the house was still under construction. A buyer approached the managing broker and said they would buy the house only when and if the garage was completely finished. Was this a contractual obligation for the buyer? A » Yes, because the garage being completed before the buyer would buy would be considered as a contingency clause B » Yes, because the buyer told the managing broker they would buy C » No, this was just an offer from the buyer to negotiate a possible contract D » No, because the offer had to be in writing and notarized to be a binding contract
In order to have a contractual obligation, there must be a meeting of the minds on behalf of both buyer and seller on the exact terms of the contract. Here, the buyer has just made an offer with the garage being completed as part of that offer. The seller would have to agree to those terms to have a valid contract. Therefore, (C) is the best answer. (D) is incorrect as a contract does not have to be in writing nor notarized.
An out of town buyer writes to a seller agreeing to pay the list price of the property and also agreeing to all other terms laid out by the seller. The seller, however, does not receive the letter until after the listing has expired. Would this result in a valid contract? A » No, because there was no consideration given by the buyer B » No, because there was no acceptance by the seller C » Yes, because the listing expiring only affects the broker's commission, not the sales contract D » Yes, because the buyer had met all of the seller's terms
One of the essential elements of a sales contract is that there must be an offer and acceptance. (B) is the correct answer as there was not an acceptance of the offer by the seller. (A) is incorrect as the promise to pay made by the buyer is sufficient consideration for a contract. (C) is a true statement but does not answer the question dealing with the sales contract being valid. (D) is incorrect because even if a buyer meets the seller`s terms in a listing contract, the seller does not have to agree to sell to that particular buyer.
Which of the following activities is NOT covered under the Fair Housing Law? A » Mortgage lending activities B » Real estate brokerage activities C » Activities of real estate salespersons D » Activities of an owner-occupant of a duplex
Owner-occupants of up to a 4-plex are exempted from most of the fair housing law. Lenders (A), brokers (B) and salespersons (C) are covered.
A mobility impaired person was renting a unit in an apartment complex. Half of the units have assigned parking spaces near the door. The other half do 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 the tenants to see if the other tenants 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 » must give a parking space near the door only if other disabled persons had also been given parking spaces near the door
Owners must make exceptions to the rules if a good case is made (C). Owners may not charge extra (A) when exceptions are made. (B) is wrong as the obligation is on the owner, not the other tenants. (D) is wrong as discriminating, even for a month, may keep the person from renting the space.
Which of the following statements BEST illustrates the difference between puffing and misrepresentation? A » Puffing is illegal whereas misrepresentation is legal B » Puffing is a misdemeanor violation whereas misrepresentation is a felony violation C » Puffing is an exaggeration, not concealing material facts; misrepresentation is unjustly harming a person by concealing material facts D » Puffing is unjustly harming a person by concealing material facts; misrepresentation is an exaggeration
Puffing is a subjective opinion whereas misrepresentation is a false statement or concealment of a material fact (C). (A) is backwards as misrepresentation is illegal, not puffing. Puffing is not a misdemeanor (B). (D) is simply reversed.
Which of the following terms describes a court action to bring both parties to a contract back to their original position? A » Reversion B » Rescission C » Reconveyance D » Reverse annuity
Rescission (B) returns both parties to the status quo, or the way they were before - back to square one. (A) deals with rights reverting back to an original party, (C) is a document given a borrower once a loan has been paid off in a trust deed state, and (D) is where older persons use the equity in their house to obtain money each month to help them live in retirement.
An owner told a licensee not to present offers below $50,000. An offer came in for $40,000. Following orders, the licensee did not present it. Several months later the seller had financial troubles and had to sell for less than $40,000. Which of the following statements is NOT true about this situation? A » The salesperson did nothing wrong as the seller's orders were being followed B » The salesperson should have taken the $40,000 offer to the seller C » The seller could sue the salesperson for damages D » The seller could sue the salesperson's broker for damages
Usually a seller cannot give the agent the right to turn down offers. The salesperson must present all offers to the principal (B). Since the owner suffered damages, both salesperson (C) and broker (D) may be sued for damages.
A tenant leased a space from a landlord with the provision that the tenant would purchase the property at a set price in the future. This type of arrangement would BEST be described as a: A » lease/option B » lease/purchase C » right of first refusal D » leasehold improvement
When a tenant agrees to purchase at a set price in the future, this is called a lease/purchase (B). The right to purchase in the future at a stated price within a stated time period is a lease/option; however, the tenant is under no obligation to actually purchase (A). When a person has the first opportunity to buy if a property becomes available for sale is a right of first refusal (C). Leasehold improvements are improvements made to the lease property by the tenant (D).
A buyer wrote an offer contingent on the buyer's spouse approving the property within 24 hours. Would this result in a valid contract? A » It is permissible as long as it is agreed to by both parties B » It is permissible as long as the contingency is on an addendum contract C » It is NOT permissible as a contingency invalidates a contract D » It is NOT permissible as the contingency allows for a personal judgment
(A) A contingency is something written into the contract that allows a party to "opt out" of the contract should something happen or fail to happen. A spouse`s approval is a valid contingency. It does not have to be on a later addition (addendum) and is usually in the body of the contract itself (B). Contingencies do not automatically invalidate a contract (C). A personal judgment (such as a spouse's approval or an attorney's opinion, etc.) is a valid area on which a contingency can be based (D).
In which of the following transactions would a securities license be needed? A » An investment in a real estate transaction involving stock B » A sale of a restaurant involving a profit C » If it's a sale of a historical structure D » If it's a sale involving commercial property
(A) A sale of property involving a transfer of stock requires a securities license. (B) A restaurant, (C) historical structure, or (D) commercial property transfer does not necessarily require someone with a securities license.
A "For Sale By Owner" placed an advertisement on their property which read, "couples only - no children, please." This advertisement is: A » illegal because of Fair Housing Laws regarding familial status B » illegal because one cannot advertise based on couples only C » legal because Fair Housing Laws do NOT apply to For Sale By Owners D » legal because the seller was NOT using the services of a broker
(A) A seller cannot advertise in a discriminatory manner, such as no children, even if the seller is exempt from the Fair Housing Laws. (B), (C) and (D) are all false because of the same reason.
If a seller instructed a managing broker NOT to show a house to buyers with children, what should the managing broker do? A » Inform the seller that the managing broker must show the property to all qualified buyers B » Follow the instructions as this is a single family residence and the seller is within the seller's legal rights C » Follow the seller's instructions but NOT discriminate in the advertising itself D » Follow the seller's instructions but make sure all advertising informs all potential purchasers of the seller's restrictions
(A) Buyers with children are a protected class under the Amendments Act of 1988. Therefore, the managing broker must inform the seller of that fact and show the property to all interested purchasers. (B) A seller does not receive an exemption if the property is listed with a broker. (C) The managing broker cannot discriminate in advertising or the showing of property. (D) The managing broker CANNOT legally follow the sellers` instructions as the instruction are illegal.
A buyer signed an offer to purchase contract which was presented to the seller. There was a clause in the contract that said the offer was irrevocable for five days. There was no consideration in the contract for this statement. Which of the following statements is true regarding this contract? A » Since there was no mention of earnest money, there was no consideration with this offer B » The buyer could NOT revoke the offer for five days C » The offer was freely revocable until it had been accepted by the seller D » The buyer could withdraw the offer before the five days was up only with the consent of the seller
A buyer or seller always has a right to withdraw an offer up until the offer has been accepted (C). The price submitted in the offer by the buyer is sufficient consideration for a contract - no earnest money is required (A). A clause in a contract not allowing revocation is not valid (B).
Which of the following methods would NOT be a legal description? A » Metes and Bounds B » Government Survey C » Recorded Plat Map D » Topographical Survey
A topographical survey deals with the lay of the land and is NOT a legal descriptions (D). (A), (B), and (C) are all acceptable methods of giving a legal description.
Which method of survey includes meridians and base lines? A » Metes and bounds B » Lot and block C » Rectangular survey system D » Geodetic survey system
(C) is correct as the rectangular survey system is based on meridians and base lines. (A) gives a physical description of the land, (B) uses lot and block numbers, and (D) uses benchmarks to describe property locations.
If a property sold for $3,000 per acre and the buyer bought 5 acres and one square mile, what was the total purchase price? A » $ 15,000 B » $1,920,000 C » $1,935,000 D » $2,500,000
One square mile is a section of ground which contains 640 acres. 640 plus 5 equals 645 total acres times $3,000 per acre equals a price of $1,935,000.
A 16 year old signed a contract to buy a piece of property. The seller, after realizing that the buyer was a minor, attempted to void the transaction. Is this permissible? A » Yes, because the buyer is not of legal age B » Yes, because the buyer did not inform the seller of the buyer's correct age C » No, only the buyer could void the contract D » No, because both the buyer and seller have to agree
(C) A contract signed by a minor is voidable only by the minor. Only the injured party can void a contract, i.e., a minor, a person under duress or a person who was misrepresented. (A) The seller cannot void the contract as the buyer is the injured party, not the seller. The buyer is not required to inform the seller of the buyer`s age (B). The minor cannot contract with the seller (D) even to agree to void as the buyer is a minor.
The owner of an apartment complex hired a managing broker to rent six of the units. The owner further requested that the managing broker do everything possible to find women tenants only as the owner did not want the units rented to men as they are prone to have loud parties. Can the managing broker follow these instructions? A » No, this would not be allowed as discrimination based on sex is prohibited by the fair housing laws B » No, but the managing broker would be allowed to discourage men by charging a higher security deposit C » Yes, this would be allowed since the owner was using the services of a managing broker to screen tenants D » Yes, this is allowed as long as the stipulation is placed in all advertisements
(A) Owner-occupants of up to a 4-plex may choose to allow only one sex in units. However, since this is 6 units, sex discrimination is illegal. Changing the terms based on sex is also illegal (B). Managing brokers cannot discriminate (C) even if an owner may. It is always illegal to discriminate in advertising (D).
If a buyer purchases an option on a property for 30 days, when would the sale price be established? A » When the option is initially entered into B » 30 days later when the option is exercised C » At the time of closing D » Anytime prior to closing
(A) The purchase or an option obtains the right to buy at a specific price when they buy the option. Otherwise, what have they bought? If one waited until the time of exercising of the option (B), what if the buyer and seller disagreed on the price? One would wait until closing for the same reason (C). Anytime prior to closing (D) is far too vague. The purchaser of an option wants to lock in the price when the option is signed.
A corporation took sole title to a piece of property. This would be: A » a life estate B » an estate in severalty C » an estate in remainder D » a tenancy by the entirety
(B) A corporation is legally thought of as a single person. A property owned by a single person is owned in severalty. A life estate (A) terminates upon death and since corporations do not die, they cannot own a life estate. An estate in remainder (C) is also a life estate that passes to a 3rd party upon the death of the life tenant. Tenancy by the entirety (D) can only be owned by a husband and wife.
A person invested $5,000 in a limited partnership. One of his concerns was the amount of his liability. Since he is one of the limited partners, can he be held liable for more than his initial investment? A » No, because he is guaranteed a 25% return on his investment B » No, because he is only liable for his initial investment C » Yes, because he is liable for three times the initial investment D » Yes, because limited partners are responsible for a limited amount of all debts
(B) A limited partner is normally only liable for the amount of initial investment. (A) A limited partner is not guaranteed any return on investment. (C) A limited partner is not liable for three times the investment. (D) Limited partners are not responsible for a limited amount of all debts.
A person owned a retail establishment. The seller was considering selling the retail business through a stock exchange. The seller contacted a licensee about this idea. The licensee should: A » contact the managing broker of the office and have the managing broker handle the transaction B » tell the seller to contact a securities agent regarding this sale C » contact an attorney to assist the licensee in handling the sale D » handle the sale personally
(B) A securities agent is needed in the sale of property involving stock. (A) A real estate managing broker CANNOT legally handle a sale involving stock. (C) An attorney may not have expertise in the area of stock exchanges as would someone with a securities license. (D) The licensee CANNOT legally handle a sale involving stock.
A property manager was leasing units in an apartment complex. Which of the following activities would the manager be allowed to do? A » Increase the security deposit of a tenant due to ethnic background B » Check the background of a tenant regarding the tenant's financial status C » Refuse to rent to a tenant based on race per the owner's instructions D » Refuse to rent to women as women are prone to have loud parties
(B) Checking out one`s financial status is allowed under Fair Housing Laws. (A) Increasing the security deposit based on ethnicity, (C) refusing to rent based upon race and (D) refusing to rent based on sex are all illegal under the Fair Housing Laws.
$1,000 is paid for a 30 day option to buy. Which of the following BEST describes the listing agent's commission? A » It is earned at the time the option is entered into B » It is earned only if the option is exercised C » The commission comes out of the $1,000 D » The commission is payable at the end of the 30 day option period
(B) Until the option is exercised (i.e. the buyer agrees to buy it), the buyer is not ready, willing and able. Once exercised, the agent has procured a ready, willing and able buyer so the commission is earned. Entering the option (A) only indicates the buyer MAY buy so no commission is due at that point. The $1,000 (C) is paid to the seller for the option. It is not paid to the broker. The commission may not be paid at all (the option might not be exercised) so it is not payable at the end of the option period automatically (D).
Which of the following statements BEST illustrates the difference between a bilateral and unilateral contract? A » The number of parties involved B » The performance obligation of the parties C » The value of the object in question D » The nature of the object in question
(B) With a bilateral contract, one has a promise for a promise, where both parties have performance obligations. With a unilateral contract, one has a promise for an action, where only one party has a performance obligation. (A) In both bilateral and unilateral, typically there are at least two parties involved. (C) The value of the object and (D) the nature of the object really have nothing to do with the question.
A buyer and seller negotiated a sale by sending contracts through the mail. Would this result in a valid contract? A » Yes, as long as it is filed through an attorney B » Yes, under the Statute of Frauds as long as it is in writing, it is valid C » No, because a buyer and seller must come physically together to have a meeting of the minds D » No, because under the Statute of Frauds, signatures must be witnessed by all parties to be enforceable
(B) Written contracts are enforceable under the Statute of Frauds even if the two parties have not made actual contact (C). Attorneys are not required (A). The two parties do not have to have seen each other sign (D).
Two rooms in a house measure 18' by 15' and 12' by 22.5'. If the owner was going to carpet both rooms, how many square yards of carpet would be needed? A » 50 B » 60 C » 70 D » 80
18` times 15' equals 270 square feet. 12' times 22.5' equals 270 square feet. Both rooms added together total 540 square feet. 540 square feet divided by nine gives the answer of 60 square yards. Remember, square feet divided by nine gives square yards.
A buyer made an offer on a property with earnest money being part of the contract. The buyer wanted to make sure the earnest money would be returned if the buyer could not qualify for a loan. The buyer would need to put which of the following clauses in the contract to make sure this would happen? A » Escalation clause B » Defeasance clause C » Mortgage contingency clause D » Alienation clause
(C) A mortgage contingency clause states that a buyer will only buy if the buyer is able to obtain financing. If the buyer cannot, typically the earnest money will be returned to the buyer. (A) An escalation clause is used under two different circumstances: (1) to allow a lender to raise interest rates on a loan and (2) to allow a landlord to raise the rent under a lease contract. (B) A defeasance clause in a mortgage voids the security once the loan is paid off. (D) An alienation clause in a mortgage makes the loan non-assumable.
Regarding Fair Housing Laws, which is true? A » It prohibits discrimination based on race, national origin, and religion only B » All properties that do not discriminate in advertising and do not use an agent are exempt C » It applies only to discrimination involved in the acts of selling or renting property D » It applies only to commercial property transactions
(C) Fair Housing Laws do apply to transactions involved in the selling or renting of property. (A) Fair Housing Laws prohibit discrimination on the basis of race, color, religion, national origin, sex, handicap or familial status. (B) All properties are not exempt as one can NEVER discriminate racially under any circumstances. (D) Fair Housing Laws (1968) only apply to residential property, not commercial property.
Q agreed in writing to give a neighbor the piece of land between the rose bush and the neighbor's property line. The transfer was to take place within 6 months. After the 6 month period had passed, Q refused to transfer the property. Would the neighbor have any recourse? A » Yes, if the agreement was in writing, it would be enforceable B » Yes, since the Statute of Frauds had been violated, the agreement would be enforceable C » No, as there was no consideration given, the agreement was not enforceable D » No, as the 6 month period had elapsed, the agreement was not enforceable
(C) In order for a contract to be enforced, both sides must give some consideration (something of value). The seller was giving something and was under no legal obligation to do so since the buyer gave no consideration in return. The issue of writing (A) & (B) is not relevant nor is the time (D).
Managing Broker Dole was showing a buyer different apartments for rent in a specific area of a city. The buyer asked Dole to find an apartment that did not allow children as the buyer desired peace and quiet and felt that children would destroy their privacy. Managing Broker Dole should: A » tell the buyer to look for ads that read "adults only" apartments B » inform the buyer that this would be "steering" and therefore illegal C » inform the buyer that only bona fide retirement communities can legally restrict children D » inform the buyers that all properties are now open to children due to the 1988 amendments to the Fair Housing Act
(C) Only certain retirement communities may prohibit children. As a general rule, discriminatory advertising (A) is illegal. Steering is an agent directing persons to an area based on where the agent thought they belonged (B) (usually based on ethnic concerns). (D) is wrong as retirement communities are not required to be open to children.
A handicapped person rented an apartment from a property manager. The handicapped person made several modifications to the apartment to enable the handicapped person easier living conditions. Under the 1988 amendments to the Federal Fair Housing Law, which of the following items would the handicapped person NOT have to restore to its original condition when the lease expires? A » Removing special bars installed for the benefit of the handicapped person B » Repairing the walls in the removal of special bars that had been installed C » Returning the doorway in the apartment to its original width D » Returning the cabinets in the apartment to its original height
(C) Returning the doorway to its original width is the one item HUD has said does NOT have to be done as this would not be detrimental to the next user. (A) Removing special bars, (B) repairing the walls and (D) returning the cabinets to original height would be required of a handicapped tenant.
For an option to be valid, an optionee must: A » sign the option B » complete the option C » pay consideration D » make a down payment
(C) Since an option is a contract, it must have consideration. (A) Only the optionor (seller) has to sign the option. The optionee (buyer) may or may not complete the option (B). A down payment is not required until the buyer (optionee) exercises the option (D).
Buyer Baird wrote a letter to Seller Carr offering to purchase Carr's home for $85,000 and asked Carr to sign a general warranty deed. Seller Carr wrote back agreeing to sell for $85,000 but would only sign a special warranty deed. This represents: A » an information gathering method and has no legal implications B » an illegal act since no brokers were involved C » a rejected offer and a counter-offer by the seller D » a legal contract since the price was agreed to in writing
(C) Since the seller did not agree to the deed provision, the offer was rejected. The seller then made a new (counter) offer to the buyer. It is far more than an information gathering technique (A) and has the legal implication that a contract is created if accepted by the buyer. Brokers are not required for a contract to be legal (B). Although the seller agreed to the price (D), there is no contract since other terms were not agreed to.
A buyer signed a contract to buy a piece of vacant ground for $350,000. The buyer planned on building a commercial building on the vacant ground. After signing the contract, the buyer found the zoning did not allow commercial properties to be built on that ground. The buyer had not told the seller the buyer's plans of building a commercial building on the property. This contract would be: A » void B » voidable C » enforceable D » unenforceable
(C) The contract is enforceable as no misrepresentations were made to the buyer. (A) A void contract has no legal effect at all, such as a person who has been declared mentally incompetent by a court signing a contract. (B) A voidable contract is typically a contract signed by a minor, by a person under duress or by a person who was misrepresented. (D) An unenforceable contract is typically an oral contract.
A property described as follows sold for $1,500 per acre. "Beginning at a boulder go 249' north; then 140' east; then 249' south; then 140' west to the point of beginning." What was the sale price? A » $ 349 B » $ 1,200 C » $ 1,500 D » $34,860
249 feet times 140 feet equals 34,860 square feet. 34,860 divided by 43,560 equals .80 acres. .80 acres times $1,500 per acre equals a price of $1,200.
A seller's home was listed for sale by a managing broker. A buyer made an oral offer for the property which the seller accepted. The oral agreement between seller and buyer called for the seller to pay all closing costs. When the contract was put in writing for all to sign, the contract read that the buyer would pay all closing costs. Both seller and buyer signed the contract. Who would MOST likely be responsible for paying the closing costs? A » Seller and buyer would split the closing costs equally B » Seller, buyer and managing broker would split the closing costs equally C » Buyer D » Seller
(C) is correct as a signed written agreement takes precedence over anything that was earlier agreed to orally. (A), (B), and (D) are all incorrect in that the seller would not be liable as the written agreement takes precedence.
ABC Incorporated was organized with five stockholders. How would ABC Incorporated take title to the property? A » Tenants in common B » Joint tenants C » Tenancy by the entirety D » Severalty
(D) A corporation acts as a single entity (just like a single person) and takes title in severalty. The rest require at least two entities or persons. Tenants in common (A) allows different amounts of ownership for the various owners and is inheritable upon an owner`s death. Joint tenants (B) requires the TTIP unities (time, title, interest and possession) and upon one's death would pass to the surviving joint tenants. Tenancy by the entirety (C) is much like joint tenancy but requires the two owners to be married.
What is the name of the map that shows the individual lots in a subdivision? A » Record of lots B » Lot Register C » Subdivision map D » Plat map
(D) A plat map shows how the individual lots are platted (drawn) out. Record of lots (A) is not a real estate term. A lot register (B) is where a person signs to reserve a lot when buying from a developer. A subdivision map is more of a colloquial term for a plat map (C).
A licensee, under a managing broker, directly collects a commission from a seller on an option. Is this legal? A » Yes, but only if the option has been exercised B » Yes, because the licensee delivered a ready, willing and able buyer C » No, because commissions are not paid on options D » No, because the commission should have been paid to the managing broker
(D) All commissions, whether for an option or a sale, must be paid to the managing broker (who would then pay the licensee). (A) A commission is earned if a buyer exercises an option, but the commission is paid to the managing broker, not the licensee. (B) The buyer is not ready to buy at this point; the buyer is only willing to consider buying (hence, the option). Commissions may be paid on options (C); otherwise no broker would handle them.
A metes and bounds description is given as follows: "A piece of property beginning at the cross section of highways 32 and 7, thence South 355 feet, thence West 280 feet, thence North 260 feet, thence East 315 feet." Is this a valid description? A » Yes, it is perfect as it begins at the intersection of two highways B » Yes, it is perfect as it has a point of beginning C » No, it is imperfect as it uses feet instead of rods D » No, it is imperfect as it does not end at the point of beginning
(D) All metes and bounds descriptions must begin and end at the same point (point of beginning). It may begin anywhere (A) but must also end there. (B) A point of beginning is not enough as it must also end at the point of beginning. It may use feet and/or rods (C).
A buyer who had been a victim of discrimination should file a complaint with: A » FBI B » Federal Reserve C » SEC D » HUD
(D) Fair Housing complaints go to HUD (Department of Housing and Urban Development). Fair Housing complaints do NOT go to (A) the FBI, (B) the Federal Reserve or (C) the SEC (Securities and Exchange Commission).
Which of the following statements BEST distinguishes general from limited partnerships? A » Limited partners are involved in the day to day running of the business B » General partnerships also must have limited partners C » Limited partners are totally liable for all debts of a partnership D » Limited partnerships also must have general partners
(D) There must be at least one general partner to run any partnership. Limited (silent) partners are investors only and are not involved in running the business (A). There is no requirement to have limited partners (B). Limited partners can only lose what they have invested (C).
A husband and wife listed their home for sale with a real estate agent. The agent received two offers from two different buyers at the same time on the property. What is the best advice the agent can give to the seller regarding these two offers? A » Counteroffer to both buyers at the same time B » Accept both offers since the seller does not know which of the buyers is better qualified C » Hold onto the two offers and wait for a third offer D » Accept or counteroffer only one offer or reject both offers
(D) When a seller is considering two offers at the same time, the BEST idea is to have the seller counteroffer one at a time to the different buyers. (A) Counteroffering to both buyers simultaneously is not normal BEST advice. (B) Accepting both offers would put the seller in a precarious legal position as both buyers would then claim the property. (C) Holding onto the two offers and waiting for a third could be done, but the seller might end up losing all the buyers.
