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93 Cards in this Set

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Mark does not have a real estate license. Cutler's father owns an apartment building, and cutler routinly shows the apartments to prospective tenants and negotiates rental agreements. This is legal:

a) only if Mark is the resident manager
b) Only if Mark has power of attorney from his father
c) only if the building has 5 units or less
d) because cutler is a member of the owner's family.
d) because cutler is a member of the owner's family.
Peterson hires an assist him with phone calls, paperwork etc. The assistant:
a) need not be licensed
b) must have a real estate license
c) need not have a license as long as has permission from broker
d) must have a special RE assistant license
a) need not be licensed
Cortez has one year of experience as a RE salesperson. He wants to become a broker. He may get the 2 year experience requirement waived if he can show:
a) post secondary education with an emphasis on real estate studies.
b) six months experience as an attorney specializing in RE.
c) three years closing RE transactions for an escrow company
d) all of the above
a) post secondary education with an emphasis on real estate studies.
Harper had her experience requirement waived and took the real estate broker exam, but failed. Now:
a) may retake immediately
b) must wait 6 months before retaking
c) must now fulfill the 2 year experience requirement before retaking
d) may not retake
c) must now fulfill the 2 year experience requirement before retaking
Trust funds a licensee receives in a sales transaction must be placed in:
a) an account that does not bear interest, by the third banking day after recieving
b) an interest bearing account, by the third banking day after recieving
c) an account that does not bear interest, by the first banking day after recieving
d) an interest bearing account, by the first banking day after recieving
d) an interest bearing account, by the first banking day after recieving
Susan is a licensed sales person, and selling her own house. License law requires that her advertisements must:
a) say she is a licensed RE sales person
b) the name of her broker
c) both of the above
d) none of the above
a) say she is a licensed RE sales person
If a licensee accused of violating the license law does not request a hearing within 20 days after recieving the statement of charges:
a) his or her license is automatically revoked
b) the director may enter a decision based on the facts
c) hearing will automatically be scheduled
d) The director will order a cease and desist order
b) the director may enter a decision based on the facts
Howard was in a traffic accident, and the other driver was hurt and sued howie for compensation. Judgement has been entered. He is:
a) required to notify the Department of Licensing within 5 days
b) required to notify the Department of Licensing within 30 days
c) Not required to notify, not a criminal charge
d) not required to notify b/c did not involve his RE or business activities
d) not required to notify b/c did not involve his RE or business activities
Great count MLS publishes a monthly list of the commission rates charged by all member firms. THe MLS association:
a) could be found guilty of price fixing
b) is not guilty of price fixing, b/c it is simply reporting newsworthy info
c) is not guilty of price fixing, because no competing firms are discussing the rates.
d) is not guilty, b/c only RE brokers can be found guilty of price fixing, not MLS services.
a) could be found guilty of price fixing

Even publishing a list of the "going rates" for commissions could be considered price fixing.
How many people make up the Real Estate commission, and who are they appointed by?
7 total (6 commissioners and 1 director), appointed by governor
How many years after a transaction has closed must the Broker keep the records?
Three years (as required by license law).
When a licensee performs services for a client (in exchange for commission), what is created?
Agency
How many years are the Real Estate commissioners appointed for?
6 years.
The most important consideration in determining whether an article is a fixture is:
a) Physical Attachment
b) The annexor's intention
c) Adaptation of the article to the realty
d) intended use of the article
b) The annexor's intention
Rights to oil and gas are determined by:
a) the rule of capture
b) offset wells
c) the bureau of Land Management
d) The Department of the Interior
a) the rule of capture
In a government survey system, a strip of land six miles wide, running north and south.
Range
The intersection of a range and a township tier in the government survey system. It is a parcel of land that is six miles square and contains 36 sections.
Township
A right incidental to the land that is transferred with it.
Appurtenance

Riparian = right to stream on property
Littoral = Lakefront
Crops, such as wheat, produced annually through the labor of the cultivator
Emblements
Water rights established by obtaining a government permit, and not based on ownership of land beside a body of water.
Appropriative rights.
Real property owned by a government agency would hold title as:

a) joint tenancy
b) severalty
c) community property
d) tenants in common
b) severalty
X conveys a life estate to Y with instructions that the property will pass to Z when Y dies. Z's interest in the property, during the life of Y, would be described as a:
a) remainder
b) period of waiting
c) redemption
d) reversion
a) remainder
A tenant holds a leasehold estate that renews itself automaticlly unless notice is given by the owner to terminate the leasehold. The tenant's estate is called:
a) periodic
b) at sufferance
c) for years
d) at will
a) periodic
A leasehold estate with a fixed term.
Estate for Years
A leasehold estate that is renewed at the end of each period unless one party gives notice of termination.
Periodic Estate / Periodic Tenancy
Joint ownership with right of survivorship.
Joint Tenancy
The 4 "unities of title" must exist to create joint tenancy. These are:
* Unity of interest
* Unity of title
* Unity of time
* Unity of possession

-- Property held in joint tenancy can't be willed (because of the right of survivorship)
Lewis was given real property for the term of his natural life. Which of the following statements is incorrect?
a) Lewis has a freehold estate
b) Lewis has a fee simple estate
c) Lewis is the life tenant
d) If Lewis leases the property to someone else, the lease will terminate if lewis dies during its term
b) Lewis has a fee simple estate

* Although a life estate is a freehold estate, it is not a fee simple estate
All of the following statements about a corporation are true, except:
a) a corporation has a potentially perpetual existance
b) Each shareholder is individually liable for the corporation's acts
c) Corporations are subject to double taxation
d) A corporation can enter into contracts in essentially the same way as an individual person
b) Each shareholder is individually liable for the corporation's acts

* Shareholders have limited liability
In a condominium:
a) individual units are owned in severalty, while common elements are owned in joint tenancy
b) individual units are owned in joint tenancy , while common elements are owned in severalty
c) Individual unites are owned in severalty, while common elements are owned as tenants in common
d) the entire building is owned in tenancy in common, with residents owning shares
c) Individual units are owned in severalty, while common elements are owned as tenants in common
Freehold vs. Less-than-freehold
Freehold =
ownership (estate in fee, life estate)

Less-than-freehold =
tenancy (estates - i.e. for years, at will, etc)
The five essentials of a vailied real estate contract are:
Lawful objective
Consideration
In Writing
Mutual Consent
Legal Capacity
A term meaning that the offer is terminated by offeror (buyer) before it is presented to the seller
Revocation
The Statute of Frauds vs. Statue of Limitations
Frauds = certian contracts must always be in writing.

Limitations = certian time to perform (usually 3-7 years)
Compelling someone to do something against their will
Duress
Mutual consent to re-write a contract

and

New contract to cancel out first contract and attempt to put both parties back where they started before
Novation

and

Rescission
An amount that the parties agree in advance will serve as full compensation if one of them defaults.
Liquidated damages
An unconditional offer by one of the parties to perform his or her part of the agreement, made when it appears that the other party is going to default.
Tender
An offer to purchase property would be terminated by any of the following, except:
a) failure ot communicate acceptance of the offer within the prescribed period
b) revocation after acceptance has been communicated
c) a qualified acceptance of the offer by the offeree
d) death or insanity of the offeror
b) revocation after acceptance has been communicated

* If it is accepted before the offer is revocated, then a binding contract is formed
Which of these would be consideration for a contract?
a) $5,000
b) A promise to convey title
c) A promise not to sell property during the next 30 days
d) All of the above
d) All of the above

* consideration can be anything of value: money, goods, services, or a promise
A voidable contract is:
a) not enforceable by either party
b) enforceable unless action is taken to rescind it
c) void unless action is taken to rescind it
d) none of the above
b) enforceable unless action is taken to rescind it
A contract can be discharged by all of the following except:
a) novation
b) performance
c) cancellation
d) breach
d) breach

* breach does not discharge a contract... the party which breached is still liable to the other party
All of the following are encumbrances, EXCEPT an:
a) promissory note
b) 1st or 2nd mortgage
c) easement of any type
d) judgement for money only
a) promissory note
The order of a court prohibiting or compelling an act of a property owner is called a:
a) judgement lien
b) restriction
c) attachment
d) injunction
d) injunction
An easement may be terminated in all of the following ways, EXCEPT:
a) merger of both dominant and servient tenement properties
b) destruction of the servient property
c) express written release by dominant tenant
d) express written revocation by the servient tenant
b) destruction of the servient property
An appurtenant easement benefits:
a) the servient tenant
b) the land owner
c) a person or company
d) the dominant tenant
d) the dominant tenant
The right to use another's land for a particular purpose that burdens one parcel of land (the servient tenement) for the benefit of another parcel (the dominent tenement)
Easement Appurtenant
An easement that benefits a person rather than a parcel of land
Easement in gross
A physical object that intrudes onto another's property, such as a branch or a fence
Encroachment
Private restrictions imposed by a subdivision developer
CC&R's -- Conditions, Covenants, and Restrictions
In the state of Washington:
1) What is the maximum amount for homestead exemption?

2) How many years must one have been in adverse possession in order to claim an easement by prescription?
1) $40,000 -- offers protection only against general judgement liens (no mortgages, construction liens, etc)

2) 10 years
Real estate property taxes are:
a) general, involuntary liens
b) general, voluntary liens
c) specific, voluntary liens
d) specific, involuntary liens
d) specific, involuntary liens

* specific because propery taxes only apply to taxed property
Which of the following has priority over a mortgage that has already been recorded?
a) A deed of trust
b) a judgement lien
c) a property tax lien
d) None of the above
c) a property tax lien

* property taxes always have priority over other liens
An easement in gross benefits:
a) a dominant tenement
b) a servient tenement
c) both of the above
d) neither of the above
d) neither of the above

* easement in gross benefits an individual (the dominent TENANT) rather than a parcel of land (TENEMENT)
Which of the following is not a method of creating an easement?
a) implication
b) express grant in a deed
c) dedication
d) spoken grant
d) spoken grant

* All interests in land must be granted in writing (unless created by operation of the law)
An interest in real property held by someone other than the property owner is called a:
Encumbrance
A one-time cost of ownership would be:
a) hazard insurance (fire)
b) title insurance
c) loan interest paid at close of escrow
d) advance impound funds
b) title insurance
A homeowner has which of the following tax deductions as an advantage?
a) depreciation
b) repairs and insurance premiums
c) real property taxes
d) all of the above
c) real property taxes
How is the exemption on the sale of a principal residence determined?
a) by an appraisal
b) by taxes paid times years owed
c) minimum of 2 years residence
d) not possible anymore
c) minimum of 2 years residence
An expense that can be used to reduce taxable income
Deduction
Money spent on improvements to property, which add to its value or prolong its economic life
Capital expenditures
A homeowner's basis would be adjusted to reflect:
a) cost recovery deductions
b) expenses incurred to keep the property in good repair
c) mortgage interest paid
d) the cost of installing a deck
d) the cost of installing a deck

* this cost is a capital expenditure, which would be added to the taxpayer's basis. Remember that the personal residences do not qualify for depreciation or cost recovery deductions
A married couple bought a home for 150,000. After living in it for three years, they sold it for only, 146,000. How much of this loss can they deduct from their federal income taxes?
None of it, the loss on a sale of a personal residence is never deductable.
Which of the following could the owner of a unimproved investment property deduct on his federal income tax return?
a) A loss on the sale of the property
b) the depreciation of the land
c) cost recovery deductions
d) any of the above
a) A loss on the sale of the property

* Depreciation and cost recovery aren't allowed fro unimproved investment property, because land is not depreciable.
Under the federal income tax code, income is always taxed in the year it is:
a) realized
b) recognized
c) recovered
d) deferred
b) recognized

* Income is taxed when it is recognized. It is often recognized in the same year it is realized, but that is not true if a nonrecognition provision applies.
The initial basis plus capital expenditures and minus allowable depreciation or cost recovery deductions, is?
Adjusted basis
When a broker is acting as an agent for the seller, he/she:
a) may agree to small price reductions
b) is permitted to make a small profit
c) must represent the seller's interest with loyalty
d) all of the above
c) must represent the seller's interest with loyalty
A principal may terminate the listing agreement before its expiration date by:
a) tearing up the listing agreement
b) filing an affidavit of release
c) renouncing the agent
d) revocation
d) revocation
Which of the following is NOT required to create agency?
a) mutuality
b) agreement between parties
c) consideration
d) capacity
c) consideration
A buyer must receive the seller's disclosure statement (form 17) within ______ the sellers acceptance.
a) 1 day before
b) 2 days after
c) 6 days of
d) 5 days of
d) 5 days of

* and then the buyer has 3 days after that to approve / disapprove
A non-exclusive listing under which the broker earns a commission only if he or she is the procuring cause of the sale.
Open Listing
The person who directly or indirectly brings about a sale.
Procuring Cause
A listing in which the commission is any amount received from the sale over and above the "net" required by the seller.
Net Listing (Net Listings are not enforceable in Washington)
Which of these types of listings is considered to be a unilateral contract?
a) open listing
b) exclusive agency listing
c) exclusive right to sell listing
d) net listing
a) open listing

considered unilateral becasue only the seller promises performance.
In the listing agreement, the seller agrees to pay certian closing costs. This creates a legal obligation to:
a) the buyer only
b) the broker only
c) both the buyer and the broker
d) neither the buyer or the broker
b) the broker only

Listing agreement is a contract which only involves seller and broker, buyer is not involved
The clause in the Purchase and Sale agreement which calls for the seller to keep the earnest money deposit in the event of the buyer's default is called:
a) retainter clause
b) punitive clause
c) default clause
d) forfeiture clause
c) default clause
The offer to purchase is terminated when:
a) accepted by the buyer
b) revoked by the seller
c) reviewed by the buyer
d) all of the above are correct
b) revoked by the seller
What is always true of counteroffers?
a) made by the offeree
b) made by the seller's agent
c) terminates the first offer
d) signed by offeree
c) terminates the first offer
Most contracts NOT dealing with fraud or secret profit are limited in time by leagal statute for:
a) one year
b) three years
c) six years
d) ten years
c) six years
The sum the buyer gives to the seller when making an offer to purchase, as a shign of good faith. It is applied to the purchase price if the buyer goes through with the transaction, and forfeited to the seller if the buyer defaults.
Earnest Money
A contract clause which provides that unless some spcified event occurs, the contract is null and void
Contingency clause
A clause that allows the seller to demand that the buyer waive the "sale of the buyer's home" contingency or rescind the contract
Bump clause
The purchase and sale agreement includes a financing contingency. If the buyer applies to lenders but cannot obtain financing on the specific terms:

a) the seller is required to finance the purchase
b) the buyer is required to accept less favorable terms
c) the transaction is terminated, and the seller will return the buyers earnest money
d) the transaction is terminated, and the seller will return the buyers earnest money
c) the transaction is terminated, and the seller will return the buyers earnest money
A mortgage company:
a) arranges loans but does not service them
b) services loans but does not make them
c) is the same as a mortgage broker
d) is sometimes called a mortgage banker
d) is sometimes called a mortgage banker

Mortgage companies make loans and also service loans on behalf of investor.
A loan's APR expresses the relationship between:
a) the total finance charge and the loan amount
b) the interest rate on the loan and the discout rate
c) the downpayment and the total finance charge
d) the monthly payment and the interest rate
a) the total finance charge and the loan amount
To qualify for a conventional loan, the borrower is typically required to have:
a) at least two month's mortgage payments in reserve
b) secondary financing for the downpayment
c) residual income that metts minimum requirements
d) a 3% margin to provide for emergencies
a) at least two month's mortgage payments in reserve
The FHA:

a) makes loans
b) insures loans
c) buys and sells loans
d) all of the above
b) insures loans

insures loans made by institutional lenders.
The amount the VA lender may loan a veteran is limited to:
a) the assessed value of the property
b) sales price + costs to close
c) the amount of the veteran's entitlement
d) the amount on the CRV
d) the amount on the CRV
Should a non veteran purchase property encumbered by a VA gaurenteed loan, the debt:
a) must be repaid immediately
b) both a and c
c) can be assumed by the buyer
d) neither
c) can be assumed by the buyer
A fee that a lender may charge to increase the yield on the loan, over and above the interest rate.
Discount points
Evaluating the creditworthiness of the buyer and the value of the property to determine if a loan should be approved
Loan underwriting
The difference between the index value on an ARM and the interest rate a borrower is charged.
Margin
The amount of monthly income a VA borrower has left over after deducting monthly expenses and taxes.
Residual Income