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361 Cards in this Set
- Front
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The Counselors of Real Estate (CRE), Commercial Investment Real Estate Institute (CIREI), and Institute of Real Estate Management (IREM) are affiliated institutes of
A) ARA. B) NAREA. C) NOR. D) NAR. |
NAR. |
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A professional estimate of a property's market value, based on established methods and using trained judgment, is performed by a A) real estate broker. B) real estate appraiser. C) home inspector. D) real estate counselor |
The answer is REAL ESTATE APPRAISER. Although brokers, counselors, and inspectors also look closely at a specific property, only an appraiser is qualified to produce a formal opinion of value—an appraisal. |
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When demand for a commodity decreases and supply remains the same,
A) price tends to fall. B) the market becomes stagnant. C) price tends to rise. D) price is not affected. |
The answer is PRICE TENDS TO FALL. Under the concept of supply and demand, if demand decreases and supply remains the same, producers need to attract more customers, and so prices fall. |
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Home inspection is a profession that combines A) interest in real estate and construction skills. B) interests in pest control and construction skills. C) interests in property management and landscaping. D) interests in government ordinances and remodeling. |
The answer is INTEREST IN REAL ESTATE AND CONSTRUCTION SKILLS. Home inspection is a profession that allows the practitioners the chance to combine their interest in real estate with professional skills in construction. |
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Special-purpose real estate includes
A) agricultural land and cemeteries. B) churches, schools, cemeteries, and government-held lands. C) retail stores with apartments attached. D) specialty stores in shopping districts. |
The answer is CHURCHES, SCHOOLS, CEMETERIES, AND GOVERNMENT-HELD LANDS. Special-purpose real estate includes churches, schools, cemeteries, and government-held lands. |
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A broker responsible for maintaining a client's property and maximizing the return on the client's investment is serving as a(n)
A) investment counselor. B) property manager. C) building maintenance specialist. D) rental agent. |
The answer is PROPERTY MANAGER. The basic responsibility of the property manager is to protect the owner's investment and maximize the return on investment. |
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Which factor primarily affects supply in the real estate market?
A) Population B) Demographics C) Employment D) Governmental financial policies |
The answer is GOVERNMENTAL FINANCIAL POLICIES. Population, demographics, and employment impact demand for a commodity, but government fiscal (spending and taxing) policies strongly influence availability and cost of credit for those who buy or sell properties. |
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Which factor is MOST likely to influence demand for real estate?
A) Number of real estate brokers in the area B) Price of new homes being built in the area C) Wage levels and employment opportunities D) Number of full-time real estate salespeople in area |
The answer is WAGE LEVELS AND EMPLOYMENT OPPORTUNITIES. When wage levels and job expansion are increasing, workers are more likely to buy real estate; when job opportunities are scarce or wage levels low, demand for real estate usually drops. |
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Schools are considered part of which real estate classification?
A) Industrial B) Special purpose C) Commercial D) Government-held |
The answer is SPECIAL PURPOSE. Special-purpose properties include schools, churches, cemeteries, and government-held lands. |
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A licensee who helps clients choose among the various alternatives involved in purchasing, using, or investing in property is a
A) real estate educator. B) real estate counselor. C) REALTOR®. D) real estate appraiser. |
The answer is REAL ESTATE COUNSELOR. Advising and guiding investors and other buyers is counseling them. |
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All of the following would affect demand EXCEPT A) demographics. B) population. C) wage levels. D) fiscal policy. |
The answer is FISCAL POLICY. Government financial policies (fiscal policies) affect supply. Population, demographics, and wage levels affect demand for real estate. |
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A real estate professional who performs a visual survey of a property's structure and prepares a report for a purchaser or an owner is a(n)
A) home inspector. B) appraiser. C) educator. D) property manager. |
The answer is HOME INSPECTOR. The home inspector, who prepares an analytical report of a visual inspection of the property's structure and systems, is becoming more important in the real estate transaction as more consumers rely on these reports when buying property. |
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In determining whether an item is real or personal property, a court would NOT consider which of the following?
A) The cost of the item when it was purchased B) Whether its removal would cause severe damage to the real estate C) Any relevant agreement of the parties in their contract of sale D) Whether the item is clearly adapted to the real estate |
The answer is THE COST OF THE ITEM WHEN IT WAS PURCHASED. The overall test in determining whether an item is a fixture or real property is the intention of the person installing it, how uniquely adapted the item is to the property in which it is installed, how the item was installed and the damage its removal would cause, and what the parties have agreed to. The original cost of the installation, although important to one or the other of the parties, is not considered in this decision. |
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A buyer discovered upon moving into his home that the seller had taken a ceiling fan. The seller had not indicated that the ceiling fan would be removed, and the contract did not address the removal. To whom did the ceiling fan belong?
A) Ceiling fans are considered personal property. B) Ceiling fans are normally considered real estate. C) The ceiling fan belongs to the seller. D) Ceiling fans are considered trade fixtures. |
The answer is CEILING FANS ARE NORMALLY CONSIDERED REAL ESTATE. Whatever fixtures are present in the structure at the time of contract, and not mentioned in the contract, convey (pass to the purchaser). Replacement fixtures are not personal property of the resident; they became real estate when annexed (attached) to the building. |
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Which of the following is a physical characteristic of land?
A) Scarcity B) Area preference C) Indestructibility D) Improvements |
The answer is INDESTRUCTIBILITY. The ability to make improvements, preference for the area, and relative scarcity of similar property are all economic matters. The land's indestructibility is a physical matter. |
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All 50 states, the District of Columbia, and all Canadian provinces have passed laws that require real estate brokers and real estate salespeople to be licensed and
A) differ in some details, such as prelicensing education requirements. B) do not differ in details such as prelicensing education requirements. C) differ in almost every respect. D) differ in all but prelicensing education requirements. |
The answer is DIFFER IN SOME DETAILS, SUCH AS PRELICENSING EDUCATION REQUIREMENTS. All 50 states, the District of Columbia, and all Canadian provinces have passed laws that require real estate brokers and real estate salespeople to be licensed, and all differ in some details, such as prelicensing education requirements. |
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All of the following are economic characteristics of land EXCEPT
A) area preference. B) scarcity. C) uniqueness. D) permanence of investment. |
The answer is UNIQUENESS. Uniqueness is a physical characteristic of real estate, along with immobility and indestructibility. |
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Real estate brokers or real estate salespeople may NOT act as attorneys unless they
A) request an approval to do so from the state real estate licensing department. B) provide appropriate disclaimers to their clients. C) are also licensed attorneys representing clients in that capacity. D) are asked to do so by their clients. |
The answer is ARE ALSO LICENSED ATTORNEYS REPRESENTING CLIENTS IN THAT CAPACITY. Real estate brokers or real estate salespeople may not act |
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Land is considered to be
A) indestructible. B) subject to personal property rights. C) immune to the forces of supply and demand. D) a wasting asset. |
The answer is INDESTRUCTIBLE. Land is permanent and indestructible. This does not mean it is immune to the forces of supply and demand. |
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A woman rents space in a commercial building and installs large tables fastened to the walls and shelves to the floor. These items are
A) are treated the same as other fixtures. B) trade fixtures and will transfer to the property owner. C) trade fixtures and may properly be removed. D) may not be removed with building owner's permission. |
The answer is TRADE FIXTURES AND MAY PROPERLY BE REMOVED. Common law protects business tenants who install fixtures for their business by treating these trade fixtures as their personal property and giving tenants the right to remove them before the end of their lease. Any damage to the building due to removal of the fixtures must be repaired by the departing tenant. A licensee who participates in the sale of business properties should make known to purchasers what, if any, trade fixtures will not convey with the building. |
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The characteristics of real property fall into which two broad categories?
A) Functional and economic B) Economic and physical C) Economic and utilization D) Functional and physical |
The answer is ECONOMIC AND PHYSICAL. Real property possesses seven basic characteristics that define its nature and affect its use. These characteristics fall into two broad categories—economic and physical. |
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The four economic characteristics of land that affect its value as a product in the marketplace are
A) scarcity, improvements, area preference, and utility. B) scarcity, immobility, area preference, and utility. C) scarcity, improvements, permanence of investment, and area preference. D) scarcity, improvements, area preference, and uniqueness. |
The answer is SCARCITY, IMPROVEMENTS, PERMANENCE OF INVESTMENT, AND AREA PREFERENCE. The four economic characteristics of land that affect its value as a product in the marketplace are scarcity, improvements, permanence of investment, and area preference. |
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A paint company purchases 100 acres of scenic forest land and builds several tin shacks there to store used turpentine and other items. Which statement is TRUE?
A) It constitutes improvement of the property. B) The chemicals are considered appurtenances. C) The tin shacks are considered trade fixtures. D) Altering the property to store waste is not included in the bundle of legal rights. |
The answer is IT CONSTITUTES IMPROVEMENT OF THE PROPERTY. The technical term improvement refers to any permanent structure—building, fence, shed, or shack—erected on a property, despite the negative esthetic and environmental impact. |
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In addition to state licensing laws, other laws that have a significant effect on the practice of real estate include
A) state and local land-use and zoning laws. B) state income tax laws. C) federal income tax laws. D) state and local sales tax laws and regulations. |
The answer is STATE AND LOCAL LAND-USE AND ZONING LAWS. In addition to state licensing laws, other laws that have a significant effect on the practice of real estate include state and local land-use and zoning laws. |
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Policies are of which of the following two types?
A) Replacement cost value (RCV) or actual cost value (ACV) B) Recovery cost value (RCV) or anticipated cost value (ACV) C) Recovery cost value (RCV) or actual cost value (ACV) D) Replacement cost value (RCV) or anticipated cost value (ACV) |
The answer is REPLACEMENT COST VALUE (RCV) OR ACTUAL COST VALUE (ACV). Policies are of two types: replacement cost value (RCV) or actual cost value (ACV). |
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Theft, smoke damage, and damage from fire are covered under which type of homeowners' insurance policy?
A) National Flood Insurance Program policies B) Basic form C) Broad form D) Coinsurance |
The answer is BASIC FORM. Basic (standard) homeowner policies provide the narrowest range of coverage. Losses from fire, smoke, and theft are basic coverages. Broad form covers additional perils. Coinsurance is the risk that homeowners bear by insuring their home for less than 80 percent of replacement cost. National Flood Insurance covers only one named peril: floods. In insurance and elsewhere, standard is often a code word for bottom-of-the-line—the minimum allowable or acceptable. |
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Efforts to increase home ownership include all the following EXCEPT
A) lowering closing costs for first-time homebuyers. B) offering adjustable-rate mortgages. C) requiring lower down payments. D) penalizing first-time homebuyers for using funds from IRAs. |
The answer is PENALIZING FIRST-TIME HOMEBUYERS FOR USING FUNDS FROM IRAS. First-time homebuyers may make penalty-free withdrawals from their IRAs with some restrictions. |
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Condominium owners own
A) a proprietary lease to their unit. B) shares of stock in the corporation that owns the property. C) their units individually and share ownership of common facilities. D) their units in common with all owners, along with common facilities. |
The answer is THEIR UNITS INDIVIDUALLY AND SHARE OWNERSHIP OF COMMON FACILITIES. Condominium owners own their units individually and share ownership of common facilities (called common elements), such as halls, elevators, swimming pools, clubhouses, tennis courts, and surrounding grounds. |
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CLUE stands for
A) None of these. B) Comprehensive Loss Underwriting Exchange. C) Coinsurance Loss Underwriting Exchange. D) Coverage Loss Underwriting Exchange. |
The answer is COMPREHENSIVE LOSS UNDERWRITING EXCHANGE. The Comprehensive Loss Underwriting Exchange (CLUE) is a database containing the history of consumer insurance claims. |
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A highrise development that includes office space, stores, theaters, and apartment units is an example of
A) mixed-use development. B) planned unit development. C) special cluster zoning. D) proprietary lease properties. |
The answer is MIXED-USE DEVELOPMENT. A mixed-use development (MUD) is a small community built vertically in one building. |
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A coinsurance clause is a provision that usually requires the owner to maintain insurance equal to a specified percentage of the
A) replacement cost of the dwelling, not including the price of the land. B) replacement cost of the dwelling, including the value of the land. C) 50 percent of the replacement cost of the dwelling, not including the land value. D) 50 percent of the replacement cost of the dwelling, including the land value. |
The answer is REPLACEMENT COST OF THE DWELLING, NOT INCLUDING THE PRICE OF THE LAND. Most homeowners' insurance policies contain a coinsurance clause. This provision usually requires that the owner maintain insurance equal to a specified percentage (usually 80 percent) of the replacement cost of the dwelling (not including the price of the land). |
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That portion of the value of an owners' property that exceeds the amount of their mortgage debt is called
A) equality. B) equity. C) surplus. D) escrow. |
The answer is EQUITY. The equity represents the increasing ownership interest (the paid-off share) in the property as the mortgage debt, the principal, is reduced. The value of the property minus the mortgage debt equals equity. |
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A borrower may be exempted from flood insurance by
A) filing an exemption request based on the fact that no floods have occurred in the past 50 years. B) planning to resell the property within 36 months. C) filing an exemption request based on financial hardship. D) producing a survey showing that the lowest part of the building is located above the 100-year flood mark. |
The answer is PRODUCING A SURVEY SHOWING THAT THE LOWEST PART OF THE BUILDING IS LOCATED ABOVE THE 100-YEAR FLOOD MARK. A borrower may be exempted from flood insurance by producing a survey showing that the lowest part of the building is located above the 100-year flood mark. |
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Homeowners may deduct all of the following expenses when preparing their income tax return EXCEPT
A) mortgage interest on a third home. B) mortgage interest on a second home. C) mortgage interest on a first home. D) real estate taxes. |
The answer is MORTGAGE INTEREST ON A THIRD HOME. Homeowners may deduct from their gross income the mortgage interest payments on first and second homes (for mortgage balances below $1 million or $500,000 if married filing separately) and real estate taxes. Mortgage interest on a third home is not tax deductible. |
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FEMA defines a flood as a general and temporary condition of partial or complete inundation of
A) 640 acres or more of normally dry land. B) two or more acres of normally dry land or two or more properties. C) two or more sections of normally dry land. D) three or more acres of normally dry land or three or more properties. |
The answer is TWO OR MORE ACRES OF NORMALLY DRY LAND OR TWO OR MORE PROPERTIES. FEMA defines a flood as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land or two or more properties. |
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Legislation enacted by Congress to help owners of property in flood-prone areas by subsidizing flood insurance and by taking land-use and land-control measures to improve future management for floodplain areas was the
A) National Flood Insurance Act of 1968. B) National Floodlands Act of 1968. C) National Flood Protection Act of 1968. D) National Tidelands Act of 1968. |
The answer is NATIONAL FLOOD INSURANCE ACT OF 1968. The National Flood Insurance Act of 1968 was enacted by Congress to help owners of property in flood-prone areas by subsidizing flood insurance and by taking land-use and land-control measures to improve future management for floodplain areas. |
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Misrepresentation or omission might result in broker liability
A) must be intentional. B) unless unintentional. C) even if unintentional. D) unless it was considered puffing. |
The answer is EVEN IF UNINTENTIONAL. Misrepresentation or omission does not have to be intentional to result in broker liability. |
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The principal-agent relationship evolved from the
A) nobleman and commoner concept. B) owner-servant relationship in English common law. C) master-servant relationship in English common law. D) lord-serf relationship in English common law. |
The answer is MASTER-SERVANT RELATIONSHIP IN ENGLISH COMMON LAW. The principal-agent relationship evolved from the master-servant relationship in English common law. The loyalty replaced the servant's personal interests as well as any loyalty the servant might owe to others. |
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A broker is permitted to represent both the seller and the buyer in the same transaction when
A) commissions are collected from both parties. B) the broker is a subagent rather than the agent of the seller. C) both parties have been informed and agree to the dual representation. D) the principals are not aware of such action. |
The answer is BOTH PARTIES HAVE BEEN INFORMED AND AGREE TO THE DUAL REPRESENTATION. Real estate licensing laws may permit dual agency only if the buyer and the seller are informed and consent to the broker's representation of both parties in the same transaction. |
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A buyer who is a client of the broker wants to purchase a house that the broker has listed. Which statement is TRUE?
A) The broker should refer the buyer to another broker to negotiate the sale. B) The seller and the buyer must be informed of the situation and agree to the broker's representing both of them. C) The buyer should not have been shown a house listed by the broker. D) The broker may proceed to write an offer on the property and submit it. |
The answer is THE SELLER AND THE BUYER MUST BE INFORMED OF THE SITUATION AND AGREE TO THE BROKER'S REPRESENTING BOTH OF THEM. Both buyer and seller must give informed, generally written, consent for dual representation. |
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Which of the following is considered dual agency?
A) A licensee's listing and then selling the same property B) A licensee's representing more than one principal C) A licensee's acting for both the buyer and the seller in the same transaction D) Two brokerage companies' cooperating with each other |
The answer is A LICENSEE'S ACTING FOR BOTH THE BUYER AND THE SELLER IN THE SAME TRANSACTION. In dual agency, the licensee represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of the buyer and either the agent or subagent of the seller. |
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The relationship of broker to client is that of a(n)
A) subagent. B) attorney-in-fact. C) fiduciary. D) trustee. |
The answer is FIDUCIARY. The client is the principal to whom the agent gives advice and counsel. The agency agreement usually authorizes the broker to act for the principal. The agent's fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties. |
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In a dual agency situation, a broker may represent both the seller and the buyer if
A) the buyer and the seller are related by blood or marriage. B) both parties are represented by attorneys. C) the broker informs either the buyer or the seller of this fact. D) both parties consent to the dual agency. |
The answer is BOTH PARTIES CONSENT TO THE DUAL AGENCY. Dual agency requires nothing less than informed consent from both parties. Any family relationship of the parties or whether they have legal representation does not change this rule. |
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A licensee's duties to a customer do NOT include
A) honest and fair dealing. B) care and skill in performance. C) being primarily responsible to the customer. D) disclosure of all facts that the licensee knows or should reasonably be expected to know that materially affect the value or desirability of the property. |
The answer is BEING PRIMARILY RESPONSIBLE TO THE CUSTOMER. Even though an agent's primary responsibility is to the principal, the agent also has duties to third parties. Anytime a licensee works with a third party, or customer, the licensee is responsible for adhering to state and federal consumer protection laws, as well as the ethical requirements imposed by professional associations and state regulators. In addition, the licensee's duties to the customer include reasonable care and skill in performance, honest and fair dealing, and disclosure of all facts that the licensee knows or should reasonably be expected to know that materially affect the value or desirability of the property. |
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Which of the following is considered dual agency?
A) A broker listing and then selling the same property B) A broker representing more than one principal C) A broker acting for both the buyer and the seller in the same transaction D) Two brokerage companies cooperating with each other |
The answer is A BROKER ACTING FOR BOTH THE BUYER AND THE SELLER IN THE SAME TRANSACTION. In dual agency, the agent represents two principals in the same transaction. Because the agency originates with the broker, dual agency arises when the broker is the agent of the buyer and the seller. |
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The relationship in which the agent is held in a position of special trust and confidence by the principal is a(n)
A) agent. B) principal. C) beneficiary. D) fiduciary. |
The answer is FIDUCIARY. The relationship in which the agent is held in a position of special trust and confidence by the principal is a fiduciary. |
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Agency is governed by which two kinds of law?
A) Administrative law and common law B) Administrative law and statutory law C) Common law and representative law D) Common law and statutory law |
The answer is COMMON LAW AND STATUTORY LAW. Agency is governed by two kinds of law: common law, the rules of a society established by tradition and court decisions; and statutory law, the laws, rules, and regulations enacted by legislatures and other governing bodies. |
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A real estate broker acting as the agent of the seller
A) should present to the seller only the highest offer for the property. B) must promote and safeguard the seller's best interests. C) can disclose the seller's minimum price. D) can accept an offer on behalf of the seller. |
The answer is MUST PROMOTE AND SAFEGUARD THE SELLER'S BEST INTERESTS. A broker acting as the agent of the seller is responsible to the seller and must promote and safeguard the seller's best interest. |
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Which statement BEST explains this sentence: "To recover a commission for brokerage services, a broker must be employed as the agent of the client"?
A) The broker must express an interest in representing the client. B) The broker must work in a real estate office. C) The client must make an express or implied agreement to pay a commission to the broker. D) The broker must have a salesperson employed in the office. |
The answer is THE CLIENT MUST MAKE AN EXPRESS OR IMPLIED AGREEMENT TO PAY A COMMISSION TO THE BROKER. A broker's contract of employment by a client is the listing (or buyer representation agreement) signed by them both. A valid listing is one of the usual requirements in a suit for a brokerage commission; it is proof of employment. |
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All of the following are required of a broker who is seeking to collect a commission for brokering the sale of a property EXCEPT
A) having been the procuring cause in the transaction or having an exclusive-right-to-sell agreement. B) having had a contract of employment—an agency representation agreement. C) complying with a set commission rate set by a trade organization. D) having a valid real estate broker's license. |
The answer is COMPLYING WITH A SET COMMISSION RATE SET BY A TRADE ORGANIZATION. Professional organizations may not set fees or commissions splits. |
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A broker asks a neighbor who wishes to sell her home if she can present an offer from a prospective buyer, and the neighbor agrees. At this point, which statement is TRUE?
A) The broker may not be considered the procuring cause without a written contract. B) The neighbor is not obligated to pay the broker a commission. C) The neighbor is obligated to pay the broker a commission for producing an offer to purchase. D) The buyer is obligated to pay the broker for locating the property. |
The answer is THE NEIGHBOR IS NOT OBLIGATED TO PAY THE BROKER A COMMISSION. At this point, there is no agreement between owner and broker for a service in return for compensation. The broker has done nothing yet that relies on the response of the seller. The buyer might have signed an offer and be ready, willing, and able to buy, but with no contract of employment with the homeowner—either written or oral—there can be no claim for a commission. Moreover, state real estate brokerage regulations generally require that a representation agreement be in writing and signed. |
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A broker's policy requires a 7 percent commission on all listings. No lower commission rate is acceptable. Which statement is TRUE?
A) The salespeople associated with the brokerage will not be bound by the requirement and may negotiate any commission rate they choose. B) A homeowner may sue the broker for violating the antitrust law's prohibition against price-fixing. C) The broker must present the uniform commission policy to the local professional association for approval. D) The broker may legally set the minimum commission rate acceptable for the firm. |
The answer is THE BROKER MAY LEGALLY SET THE MINIMUM COMMISSION RATE ACCEPTABLE FOR THE FIRM. Brokers have the right to set commissions within their own firm. This is not an antitrust violation. Salespeople who wish to continue with that broker can be required to comply. |
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Licensees who are paid in a lump sum and who are personally responsible for paying their own taxes are probably
A) buyer's agents. B) employees. C) independent contractors. D) transactional brokers. |
The answer is INDEPENDENT CONTRACTORS. Most associate real estate brokers and real estate salespersons are said to be independent contractors. They receive gross earnings—paid as though they were self-employed—with no withholding of income taxes or employer contributions to Social Security or Medicare, workers' compensation, and unemployment insurance. |
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A state has recently updated its Rules and Regulations for the Real Estate Profession. Assuming this state is like all others, which statement is TRUE regarding this publication?
A) The rules and regulations do not have the same force and effect as the statutory license law. B) The rules and regulations have the same force and effect as the license law itself. C) The rules and regulations are state laws enacted by the legislature. D) The rules and regulations are not enforceable against real estate licensees. |
The answer is THE RULES AND REGULATIONS HAVE THE SAME FORCE AND EFFECT AS THE LICENSE LAW ITSELF. Each state has a licensing authority with power to issue licenses and enforce the statutes of real estate law. |
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A seller has sold property to a neighbor without the services of a real estate broker. However, the seller still owes the broker a commission because the seller signed a(n)
A) net listing. B) exclusive-right-to-sell listing. C) open listing. D) exclusive-agency listing. |
The answer is EXCLUSIVE-RIGHT-TO-SELL LISTING. In an exclusive-right-to-sell listing, a commission will be owed to a broker regardless of which party sells the house. In exclusive-agency and open listings, the seller retains the right to sell without obligation to the broker. |
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The seller's main concerns in listing the property typically is/are the
A) length of the listing agreement. B) selling price of the property and the net proceeds. C) broker's commission. D) showing the property. |
The answer is SELLING PRICE OF THE PROPERTY AND THE NET PROCEEDS. The seller's main concerns in listing the property typically are the selling price of the property and the net proceeds. |
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Which of the following is a similarity between an exclusive-agency listing and an exclusive-right-to-sell listing?
A) Under each, the seller authorizes only one particular salesperson to show the property. B) Under each, the seller retains the right to sell the real estate without the broker's help and without paying the broker a commission. C) Both types of listings are open listings. D) Both types of listings give the responsibility of representing the seller to one broker only. |
The answer is BOTH TYPES OF LISTINGS GIVE THE RESPONSIBILITY OF REPRESENTING THE SELLER TO ONE BROKER ONLY. Each listing is exclusive, meaning it is granted to one broker exclusively. While the exclusive-agency listing would allow the seller to find a buyer without paying a commission, the exclusive-right-to-sell listing would require a commission to be paid even if the seller alone procured the buyer. Open listings impose no limit on the number of additional brokers that might be hired by the seller. |
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A seller listed her residence with a broker. The broker brought an offer at full price and terms of the listing from buyers who are ready, willing, and able to pay cash for the property. However, the seller rejected the buyers' offer. In this situation, the seller
A) is liable to the buyers for compensatory damages. B) must sell her property. C) is liable to the buyers for specific performance. D) owes a commission to the broker. |
The answer is OWES A COMMISSION TO THE BROKER. The broker has fulfilled all the requirements. Even though no contract is signed with the willing buyer, the broker is due a full commission. The seller does not have to sell, just pay the commission. |
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A listing taken by a real estate salesperson is technically an employment agreement between the seller and the
A) local multiple listing service. B) salesperson. C) salesperson and broker together. D) broker. |
The answer is BROKER. Only a licensed broker may enter into brokerage agreements. The broker's salespeople have authority only to assist in negotiating the agreements. The salesperson is merely the agent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The salesperson is not a party to it. |
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All parties identified in the contract must sign the listing agreement, including
A) individuals having a legal interest in the property. B) any third-party advisors of the seller. C) the broker's errors and omissions insurance agent. D) the sellers' attorney. |
The answer is INDIVIDUALS HAVING A LEGAL INTEREST IN THE PROPERTY. All parties identified in the contract must sign the listing, including individuals having a legal interest in the property. |
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If leased equipment is to be included in the listing agreement terms upon a sale, the lessor must be notified of the change of ownership by the
A) buyer. B) seller. C) broker. D) escrow holder. |
The answer is SELLER. If leased equipment is to be included in the listing agreement terms upon a sale, the lessor must be notified of the change of ownership by the seller. |
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The listing agreement on a residential property states that it expires on May 2. Which event would NOT terminate the listing?
A) The agreement is not renewed prior to May 2. B) On April 15, the owner tells the listing broker that the broker's marketing efforts are not satisfactory. C) The owner dies on April 29. D) The house is destroyed by fire on April 25. |
The answer is ON APRIL 15, THE OWNER TELLS THE LISTING BROKER THAT THE BROKER'S MARKETING EFFORTS ARE NOT SATISFACTORY. A mere complaint to the broker by the principal does not end the listing, whereas the expiration of the listing, the death of owner, or the destruction of the property would end it. |
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Which statement is TRUE of a listing contract?
A) It automatically binds the owner, the broker, and the MLS to its agreed provisions. B) It is an employment contract for the professional services of the broker. C) It obligates the broker to work diligently for both the seller and the buyer. D) It obligates the seller to transfer the property if the broker procures a ready, willing, and able buyer. |
The answer is IT IS AN EMPLOYMENT CONTRACT FOR THE PROFESSIONAL SERVICES OF THE BROKER. The listing is the broker's contract of employment by the seller. It is not a contract between the seller and any buyer and so cannot be enforced on the seller by a buyer, even though the buyer might make an offer that is the "mirror image" of the terms of the listing. However, in such an event, the seller may owe the broker a full commission for having produced the result the listing called for: an able buyer who is ready and willing to buy according to the terms of the listing. |
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The right to use any water except for limited domestic use and controlled by the state rather than the landowner adjacent to the water is called
A) police appropriation. B) principal appropriation. C) prior appropriation. D) proper appropriation. |
The answer is PRIOR APPROPRIATION. The right to use any water except for limited domestic use and controlled by the state rather than the landowner adjacent to the water is called prior appropriation. |
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A process by which the state may acquire privately owned real or personal property is called
A) condemnation. B) escheat. C) eminent domain. D) taxation. |
The answer is ESCHEAT. State laws provide for ownership to transfer, or escheat, to the state when an owner dies and leaves no heirs (as defined by the law) and there is no will or living trust instrument that directs how the real estate is to be distributed. |
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A tenant who rents an apartment from the owner of the property holds a(n)
A) freehold interest. B) easement. C) leasehold interest. D) license. |
The answer is LEASEHOLD INTEREST. The leasehold interest held by a tenant is not revocable like a license and lasts for a fixed period. It is less than a life estate and so is not a freehold. And, unlike an easement, it gives its holder the right to possess the land. |
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Your neighbors use your driveway to reach their garage, which is on their property. Your attorney explains that ownership of the neighbors' real estate includes an easement appurtenant giving them the right to do this. Your property is the
A) leasehold interest. B) dominant tenement. C) license property. D) servient tenement. |
The answer is SERVIENT TENEMENT. Your driveway is on the property over which the easement runs and is the servient tenement. The adjacent property owned by the neighbors is known as the dominant tenement. |
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A statutory right that a family has in its residence is called
A) curtesy. B) survivorship. C) homestead. D) entirety. |
The answer is HOMESTEAD. A homestead is a legal life estate that ensures that the home (or part of it) is protected from creditors during the occupants' lifetime. |
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The state's power to regulate land use is
A) not absolute. B) absolute. C) never challengeable. D) never questionable. |
The answer is NOT ABSOLUTE. The state's power to regulate land use is not absolute, just like the rights of ownership. |
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The sudden removal of soil by an act of nature is called
A) accretion. B) avulsion. C) erosion. D) acceleration. |
The answer is AVULSION. The sudden removal of soil by an act of nature is called avulsion. |
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Laws that govern the ownership and use of water as well as the adjacent land vary among the states, but all are closely linked to
A) economic considerations. B) climactic and topographical conditions. C) historical considerations. D) political considerations. |
The answer is CLIMACTIC AND TOPOGRAPHICAL CONDITIONS. Laws that govern the ownership and use of water as well as the adjacent land vary among the states, but all are closed linked to climatic and topographical considerations. |
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Government powers include police power, eminent domain, taxation, and
A) reliction. B) escheat. C) accretion. D) avulsion. |
The answer is ESCHEAT. Government powers include police power, eminent domain, taxation, and escheat. |
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Because a homeowner failed to pay the real estate taxes on time, the taxing authority imposed a claim against the homeowner's property. This claim is known as a(n)
A) lien. B) deed restriction. C) reversionary interest. D) easement. |
The answer is LIEN. Unpaid real estate taxes are a lien on the property because they are a charge against the property that provides security for a debt or an obligation of the property owner. |
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The type of easement that is a right-of-way for a utility company's power lines is a(n)
A) nonassignable easement. B) easement in gross. C) easement by necessity. D) easement by prescription. |
The answer is EASEMENT IN GROSS. Easements in gross are individual rights to use someone's land, as in the case of the utility company. An easement in gross can be assigned, conveyed, and inherited. |
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A person has permission from a property owner to hike on the owner's property during the autumn months. The hiker has
A) an easement by necessity. B) riparian rights. C) an easement by condemnation. D) a license. |
The answer is A LICENSE. Such permission given to an individual is personal, nontransferable, and can be withdrawn. |
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A person who owns one unit in a multiunit structure together with a specified undivided interest in the common elements owns a
A) time-share interest. B) condominium. C) share in a real estate investment trust. D) cooperative |
The answer is CONDOMINIUM. A person who holds a fee simple title to a unit and a specified share of the undivided interest in the common elements owns a condominium. |
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A man owns one of 20 units in a building in fee simple, along with a 5 percent ownership share in the parking facilities, recreation center, and grounds. What kind of property does he own?
A) Cooperative B) Time-share C) Land trust D) Condominium |
The answer is CONDOMINIUM. When a person owns part of a development in fee and a percentage of the rest in common with the other unit owners, this is condominium ownership. |
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A parcel of property was purchased by two friends. The deed they received from the seller at closing transferred the property without further explanation. The two friends took title as which of the following?
A) Joint tenants B) Tenants in common C) Community property owners D) Tenants by the entirety |
The answer is TENANTS IN COMMON. When joint tenancy is not clearly prescribed by the deed, grantees take title as tenants in common—to avoid accidental joint tenancy. Friends are unable to hold community property or be tenants by the entirety because both are reserved for married couples. |
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Two people are co-owners of a small office building with the right of survivorship. One of the co-owners dies intestate and leaves nothing to be distributed to his heirs. Which of the following would explain why the second co-owner acquired the deceased's interest?
A) Reversionary interest B) Adverse possession C) Foreclosure D) Joint tenancy |
The answer is JOINT TENANCY. Upon the death of one party in a joint tenancy arrangement, all remaining interests do not pass to the heirs or according to the will but to the surviving joint tenant. |
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The person who creates the trust conveys real or personal property to a
A) beneficiary. B) trustor. C) trustee. D) benefactor. |
The answer is TRUSTEE. The person who creates the trust conveys real or personal property to a trustee, with the understanding that the trustee will assume certain duties. |
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A neutral individual holds title for the benefit of another; this property is held
A) in co-ownership. B) in trust. C) in co-severalty. D) in severalty. |
The answer is IN TRUST. Property held by a neutral individual holding title for the benefit of another is being held in trust.The answer is IN TRUST. Property held by a neutral individual holding title for the benefit of another is being held in trust. |
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A trust is a legal arrangement in which title to property is held for the benefit of a third party by a(n)
A) trustee. B) trustor. C) attorney-in-fact. D) beneficiary. |
The answer is TRUSTEE. A trustor creates a trust for a beneficiary who benefits from the trust. A third party, a trustee, holds legal title to the property and is entrusted with carrying out a trustor's instructions. |
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A corporation is a legal entity, recognized as an artificial person. Property owned by the corporation is owned in
A) severalty. B) survivorship tenancy. C) partnership. D) trust. |
The answer is SEVERALTY. The term person does not always refer to a natural individual—a human; the law regards a corporation as an artificial person. Because this is so, a corporation owns real estate in severalty (alone). |
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If property is held by two or more owners as joint tenants, the interest of the deceased co-owners will be passed to the
A) surviving owner or owners. B) heirs of the deceased. C) trust under which the property was owned. D) state, under the law of escheat. |
The answer is SURVIVING OWNER OR OWNERS. Survivorship means that the interest of a deceased cotenant will pass to, and be divided equally among, the still-living (surviving) cotenants. |
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A trust is a device by which one person transfers ownership of property to someone else to hold or manage for
A) a governmental entity. B) only a related party. C) the benefit of a corporation. D) the benefit of a third party. |
The answer is THE BENEFIT OF A THIRD PARTY. A trust is a devise by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party. |
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A fee simple estate may be held
A) only in trust. B) in three basic ways. C) only in severalty. D) only by joint tenants. |
The answer is IN THREE BASIC WAYS. A fee simple estate may be held in three basic ways: in severalty, in trust, or in co-ownership. |
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An owner purchased an interest in a house in Beachfront. The owner is entitled to the right of possession only between July 10 and August 4 of each year. Which of the following is MOST likely the type of ownership that has been purchased?
A) Town house B) Time-share C) Condominium D) Cooperative |
The answer is TIME-SHARE. When a person holds an interest in property for a stated time each year, that person is sharing the property according to a time plan. It is a time-share. |
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A man buys 4.5 acres of land for $78,400. An adjoining owner wants to purchase a strip of this land measuring 150 feet by 100 feet. What should this strip cost the adjoining owner if the owner sells it for the same price per square foot he originally paid for it?
A)$7,800 B) $9,400 C) $6,000 D) $3,000 |
The answer is $6,000. Price divided by area (in square feet) gives cost per square foot. The area is 4.5 the size of one acre (43,560 sq ft): 4.5 × 43,560 sq ft = 196,020 sq ft. Then, $78,400 divided by 196,020 sq ft = $0.3996 (essentially, $0.40) per square foot. Determining the purchase price of a 100-by-150-foot lot at the same cost per square foot requires finding the area of the lot: 100 × 150 = 15,000 sq ft. Multiply this area by $0.40: 15,000 sq ft × $0.40 = $6,000. |
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In describing real estate, the system that may use a property's physical features to determine boundaries and measurements is
A) lot and block. B) metes and bounds. C) rectangular survey. D) government survey. |
The answer is METES AND BOUNDS. Monuments are the turning points in the metes-and-bounds method of describing property. In this method, natural, tangible features, such as a distinctive rock or a great tree, were sometimes used as monuments. The path of a stream might serve as all or part of a boundary line. Metes means distance; bounds refers to direction (not boundaries). The description gives distance in a compass direction from the point of beginning (POB) and then from each succeeding monument, until it returns to the POB. |
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Rights to the property above the earth's surface are
A) referred to as air rights. B) referred to as intangible property rights. C) referred to as non-land rights. D) incapable of being "owned." |
The answer is REFERRED TO AS AIR RIGHTS. Rights to the property above the earth's surface are referred to as air rights. |
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As a legal description, "the northwest ¼ of the southwest ¼ of Section 6, Township 4 North, Range 7 West" is defective because it contains no reference to
A) boundary lines. B) a record of survey. C) a principal meridian. D) lot numbers. |
The answer is A PRINCIPAL MERIDIAN. A property description based on the rectangular survey system must always make reference to the principal meridian and the base line of the survey system area in which the property lies. This description makes no reference to a principal meridian. |
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Cities with local datums also have designated official local
A) plat lines. B) data lines. C) benchmarks. D) data points. |
The answer is BENCHMARKS. Cities with local datums also have designated official local benchmarks. |
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The N½ of the SW¼ of a section contains how many acres?
A) 20 B) 40 C) 80 D) 60 |
The answer is 80. A section contains 640 acres. A ½ of ¼ of 640 equals 80 acres. Using decimals, the equation is 0.5 × 0.25 × 640 = 80. |
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What is the annual real estate tax on a property valued at $135,000 and assessed for tax purposes at $47,250, with an equalization factor of 125 percent, when the tax rate is 25 mills?
A) $1,418 B) $1,181 C) $1,477 D) $945 |
The answer is $1,477. Tax = Assessed value × Equalization factor × Tax rate. The millage rate is the tax on each dollar of assessed value: 1 mill = $0.001; 25 mills = $0.025. Therefore: $47,250 × 125% × $0.025 = $1,476.56. The best answer is $1,477. |
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A mechanic's lien would be available to all of the following EXCEPT
A) contractors. B) surveyors. C) brokers. D) subcontractors. |
The answer is BROKERS. Contractors, subcontractors, and surveyors all have standing to seek a mechanic's lien. Brokers typically do not have the right to place liens on property they have sold and for which they have not been paid the commission owed to them. |
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A mechanic's lien claim arises when a contractor has performed work or provided material to improve a parcel of real estate on the owner's order and the work has not been paid for. Such a contractor has a right to
A) tear out the work. B) record a notice of the lien. C) have personal property of the owner sold to satisfy the lien. D) record a notice of the lien and file a court suit within the time required by state law. |
The answer is RECORD A NOTICE OF THE LIEN AND FILE A COURT SUIT WITHIN THE TIME REQUIRED BY STATE LAW. In this situation, the contractor may record a notice of the lien and file a court suit within the time required by state law. |
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Which of the following creates a lien on real estate?
A) Unpaid mortgage loan B) Easement running with the land C) Encroachment D) License |
The answer is UNPAID MORTGAGE LOAN. Encumbrances such as easements and encroachments do not involve liens. A license is a personal, revocable privilege. A mortgage agreement creates a voluntary, specific lien. |
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The current market value of a property is $35,000. For tax purposes, it is assessed at 40 percent of market value. The tax rate is $4 per $100 of assessed value. What is the amount of the tax due?
A) $705 B) $560 C) $740 D) $625 |
The answer is $560. $35,000 (market value) × 40% (0.40) = $14,000 (assessed value); $14,000 divided by 100 = 140 × $4 tax rate = $560 tax due. |
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General liens affect the debtors' property,
A) both personal and real but excluding the debtor's primary residence. B) but are limited to only personal property. C) but are limited to only real property. D) both real and personal. |
The answer is BOTH REAL AND PERSONAL. General liens affect the debtors' property, both real and personal. |
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A mechanic's lien is properly classified as a(n)
A) specific lien. B) general lien. C) voluntary lien. D) equitable lien. |
The answer is SPECIFIC LIEN. A mechanic's lien is a specific lien because it affects a specific property and only that particular property. |
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All of the following probably would be exempt from real estate taxes EXCEPT
A) golf courses operated by the park district. B) apartment buildings. C) public hospitals. D) community churches |
The answer is APARTMENT BUILDINGS. Properties such as public hospitals and public parks, as well as charitable institutions such as churches, are usually exempt from real estate taxes. Apartment buildings, typically operated as investment properties, are taxed. |
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A lien on real estate made to secure payment for a specific municipal improvement project is which of the following?
A) Utility lien B) Ad valorem C) Special assessment D) Mechanic's lien |
The answer is SPECIAL ASSESSMENT. Specific improvements are paid for by special assessments. |
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A person approaches an owner and says, "I'd like to buy your house." The owner says, "Sure," and they agree on a price. What kind of contract is this?
A) Implied B) Void C) Unenforceable D) No contract |
The answer is UNENFORCEABLE. The parties may like to do business this way and proceed to carry out their oral agreement. There is no law against it. However, under the Statute of Frauds, an oral agreement for the sale of real property is unenforceable. |
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A buyer and a seller agree to purchase a house for $200,000. The contract contains a clause stating that "time is of the essence." Which statement is TRUE?
A) The closing date must be stated as a particular calendar date, and not simply as a formula, such as "two weeks after loan approval." B) A "time is of the essence" clause is not binding on either party. C) If the closing date passes and no closing takes place, the contract may be rescinded by the party who was ready to settle on the scheduled date. D) The closing must take place within a reasonable period before the stated date. |
The answer is IF THE CLOSING DATE PASSES AND NO CLOSING TAKES PLACE, THE CONTRACT MAY BE RESCINDED BY THE PARTY WHO WAS READY TO SETTLE ON THE SCHEDULED DATE. "Time is of the essence" refers to the settlement date. If one party fails to go to settlement by that date, the other party may rescind (cancel) the contract. |
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During the period after a real estate sales contract is signed, but before title actually passes, the status of the contract is
A) voidable. B) unilateral. C) implied. D) executory. |
The answer is EXECUTORY. A contract is in executory status when its terms of agreement have not yet been carried out. When it has been carried out, it is said to be executed. |
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A buyer and a seller enter into a real estate sales contract. Under the contract's terms, the buyer will pay the seller $500 a month for ten years. The seller will continue to hold legal title, while the buyer will live in the home and pay all real estate taxes, insurance premiums, and regular upkeep costs. What kind of contract do the buyer and seller have?
A) Option contract B) Unilateral contract C) Land or installment contract D) Contract for mortgage |
The answer is LAND OR INSTALLMENT CONTRACT. This arrangement has a variety of names: contract for a deed, land contract, installment contract, land sales contract, and more. Its most important characteristic is that no deed is given to the buyer (vendee) until all the payments in the contract have been made. |
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An option to purchase binds which of the following parties?
A) Seller only B) Both buyer and seller C) Buyer only D) Neither buyer nor seller |
The answer is SELLER ONLY. The potential buyer (optionee) who purchases an option to purchase is not bound to purchase the property. However, should the optionee decide to exercise the option, the optionor (seller) is bound to proceed with the sale in keeping with all the details contained in the option. |
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A buyer makes an offer on a seller's house and the seller accepts. Both parties sign the sales contract. At this point, the buyer has what type of title to the property?
A) Contract B) Equitable C) Escrow D) Voidable |
The answer is EQUITABLE. Upon formation of the agreement of sale between the seller and the buyer, the buyer received equitable title. Upon later delivery and acceptance of the deed, the buyer will also receive legal title—sometimes called actual title. |
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A legally enforceable agreement under which two parties promise to do something for each other is known as a(n)
A) bilateral contract. B) escrow agreement. C) legal pledge. D) option agreement. |
The answer is BILATERAL CONTRACT. A bilateral contract is a legally enforceable agreement under which two parties exchange promises to do something for each other. |
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While suffering from a mental illness that caused delusions, hallucinations, and loss of memory, a person signed a contract to purchase real estate. Which statement regarding the contract to purchase is TRUE?
A) The contract is voidable. B) The contract is fully valid and enforceable. C) The contract lacks consent. D) The contract is void. |
The answer is THE CONTRACT IS VOIDABLE. A person suffering from a mental illness may either declare the contract void or hold the seller of the real estate to the contract. That is to say, the contract is voidable, but only by the person who is mentally ill. |
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A licensee has found a buyer for a seller's home. The buyer has indicated in writing a willingness to buy the property for $1,000 less than the asking price and has deposited $5,000 in earnest money with the licensee. The seller is out of town for the weekend, and the licensee has been unable to inform the seller of the signed document. At this point, the buyer has signed a(n)
A) offer. B) executory agreement. C) implied contract. D) voidable contract. |
The answer is OFFER. A written offer to buy property—an offer that has not been seen or acted upon by the property owner—is simply an offer. Even if the offer had been for full price, no contract would yet exist and the offeror would have no claim on the offeree. |
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A person who dies testate has
A) prepared a will indicating how the deceased's property will be disposed of. B) been residing in a state other than that in which the property is located. C) failed to prepare a will. D) been residing in a state in which title automatically escheats if one dies testate. |
The answer is PREPARED A WILL INDICATING HOW THE DECEASED'S PROPERTY WILL BE DISPOSED OF. A person who dies testate has prepared a will indicating how the deceased's property will be disposed of. |
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A valid will devises a decedent's real estate after payment of all debts, claims, inheritance taxes, and expenses through the
A) administrator of the estate. B) law of testate succession. C) granting clause established in the will. D) court action known as probate. |
The answer is COURT ACTION KNOWN AS PROBATE. For the title to pass to the devisees, state laws require that on the death of a testor, the will must be filed with the court and probated. Probate is the legal procedure verifying the validity of a will accounting for the decedent's assets. |
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A man receives a deed from a woman. The granting clause of the deed states, "I hereby remise, release, alienate, and convey to the man the real property." What type of deed has the man received?
A) General warranty B) Special warranty C) Bargain and sale D) Quitclaim |
The answer is SPECIAL WARRANTY. The quoted granting clause does not use the word quitclaim but does use the word convey. Hence, it is not a quitclaim deed. It does not use the words warrant generally, and so it is not a general warranty deed. Neither does it use the phrase bargain and sell. A special warranty deed uses such words as remise, alienate, and convey. |
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Eminent domain and escheat are two examples of
A) transfers of title by descent. B) voluntary alienation. C) adverse possession. D) involuntary alienation. |
The answer is INVOLUNTARY ALIENATION. The right of eminent domain allows a government entity to compel the sale of a property to that entity for a price set by court process—condemnation. This transfer of title (alienation) is forced and so is involuntary. When a person dies without a will (intestate) and without heirs, the property passes (escheats) to the state. This process was neither planned nor initiated by the owner before death and so is classified as involuntary. |
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The grantee receives greatest protection with what type of deed?
A) Executor's B) Bargain and sale with covenant C) General warranty D) Quitclaim |
The answer is GENERAL WARRANTY. In the general warranty—often just called warranty—deed, the grantor makes more promises and gives the grantee more covenants than in any other deed. |
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The basic requirements for a valid conveyance are governed by
A) local custom. B) national law. C) the law of descent. D) state law. |
The answer is STATE LAW. Although all the listed items influence it somewhat, state law has the greatest influence on requirements for a valid real property conveyance. |
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The reversion of real estate to the state because of the lack of heirs or other people legally entitled to own the property is called
A) attachment. B) escheat. C) eminent domain. D) estoppel. |
The answer is ESCHEAT. When a person dies intestate, title to the real estate passes to the state by the state's power of escheat and is an involuntary alienation. |
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The person who makes a will is called the
A) testant. B) testamonor. C) testator. D) testamentor. |
The answer is TESTATOR. The person who makes a will is called the testator. |
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Title to real estate may be transferred during a person's lifetime by
A) devise. B) descent. C) escheat. D) involuntary alienation. |
The answer is INVOLUNTARY ALIENATION. Transfer of title by devise (will), descent (death intestate), and escheat (for lack of a will and lack of heirs) all occur after death. Involuntary alienation, such as condemnation, foreclosure sale, or tax sale, can occur during a person's lifetime. |
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The BEST reason for a buyer to obtain title insurance is
A) to pay future liens that may be filed. B) to ensure that the abstractor has prepared a complete summary of title. C) that the mortgage lender requires it. D) to ensure that the seller can deliver marketable title. |
The answer is TO ENSURE THAT THE SELLER CAN DELIVER MARKETABLE TITLE. Title insurance is considered the best defense of title and is assurance that the grantee is actually acquiring ownership and that the title is marketable. |
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A buyer bought a house, received a deed, and moved into the residence but neglected to record the document. One week later, the seller died and the heirs in another city, unaware that the property had been sold, conveyed title to a relative, who recorded the deed. Who owns the property?
A) The buyer B) Both the buyer and the relative C) The seller's heirs D) The relative |
The answer is THE BUYER. Constructive notice can be given in either or both of two ways: taking possession and recording one's deed. The buyer took possession. The relative who purchased the property from the seller's heirs was responsible for both checking the public records (which still showed the seller as owner because the buyer had not yet recorded the purchase) and visiting the property to inquire into the rights of any parties in possession. The relative-purchaser's investigation would have revealed that the seller's heirs could not sell the property in question. |
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A seller delivered title to a buyer at closing. A title search had disclosed no serious defects, and the title did not appear to be based on doubtful questions of law or fact or to expose the buyer to possible litigation. The seller's title did not appear to present a threat to the buyer's quiet enjoyment, and the title insurance policy provided was sufficient to convince a reasonably well-informed person that the property could be resold. The title conveyed would commonly be referred to as a(n)
A) attorney's opinion of title. B) marketable title. C) abstract of title. D) certificate of title. |
The answer is MARKETABLE TITLE. Title that is good enough that a reasonably well-informed person would accept it is called marketable title. |
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Documents referred to as title evidence include
A) general warranty deeds. B) special warranty deeds. C) security agreements. D) policies of title insurance. |
The answer is POLICIES OF TITLE INSURANCE. Deeds are never considered title evidence. Policies of title insurance are the best title evidence. |
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The person who prepares an abstract of title for a parcel of real estate
A) inspects the property. B) insures the condition of the title. C) issues title insurance. D) searches the public records and then summarizes the events and proceedings that affect title. |
The answer is SEARCHES THE PUBLIC RECORDS AND THEN SUMMARIZES THE EVENTS AND PROCEEDINGS THAT AFFECT TITLE. Abstractors search public records concerning property and prepare a relatively brief, written summary of their findings. This report is the abstract of title. Title insurance companies and attorneys who are asked to give an opinion of title rely on these abstracts. |
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Which statement BEST explains why instruments affecting real estate are recorded?
A) Failing to record will void the transfer. B) Recording proves the execution of the instrument. C) Recording gives constructive notice to the world of the rights and interests claimed by a party in a particular parcel of real estate. D) The instruments must be recorded to comply with the terms of the statute of frauds. |
The answer is RECORDING GIVES CONSTRUCTIVE NOTICE TO THE WORLD OF THE RIGHTS AND INTERESTS CLAIMED BY A PARTY IN A PARTICULAR PARCEL OF REAL ESTATE. The recording of an instrument affecting real estate puts the transaction into the public record so that anyone interested in the title of a parcel will know where to look. Constructive notice means that everyone is charged with knowledge of such documents. |
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A woman has just made the final payment on her home mortgage to her lender. There will still be a lien on her property until the lender records a(n)
A) satisfaction of mortgage. B) alienation of mortgage. C) reconveyance of mortgage. D) reversion of mortgage. |
The answer is SATISFACTION OF MORTGAGE. A satisfaction of mortgage, also known as a release or discharge, is executed by the lender when the note has been fully paid. This document returns to the borrower all interest in the real estate originally conveyed to the lender. This release must be recorded in the public record to show that the debt has been removed from the property. |
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Discount points paid to a lender are used to
A) cover the expenses in generating the loan. B) increase the lender's yield (rate of return) on its investment, and to cover the expenses in generating the loan. C) provide a higher interest to the borrower. D) increase the lender's yield (rate of return) on its investment. |
The answer is INCREASE THE LENDER'S YIELD (RATE OF RETURN) ON ITS INVESTMENT. Discount points paid to a lender are used to increase the lender's yield (rate of return) on its investment. |
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Which of the following allows a mortgagee to proceed to a foreclosure sale without going to court first?
A) Waiver of redemption right B) Alienation clause C) Possession rights D) Power of sale |
The answer is POWER OF SALE. A power-of-sale provision in a mortgage permits the lender to foreclose and sell a mortgaged property that is in default without petitioning to get the court to conduct the sale. Nevertheless, the procedure is often supervised—although not conducted—by the court. |
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Under a land contract, the buyer is called the
A) vendor. B) vendee. C) beneficiary. D) trustor. |
The answer is VENDEE. Under a land contract, the buyer is called the vendee. |
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In title theory states, the mortgagor actually gives what is called
A) vested title to the county assessor. B) equitable title to the mortgagee. C) marketable title to the county assessor. D) legal title to the mortgagee. |
The answer is LEGAL TITLE TO THE MORTGAGEE. In title theory states, the mortgagor actually gives what is called legal title to the mortgagee. |
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The fee charged by a mortgage broker to arrange a loan is a(n)
A) advance interest payment. B) prepayment of mortgage insurance. C) prepayment penalty. D) loan origination fee. |
The answer is LOAN ORIGINATION FEE. An origination fee is the fee charged to cover expenses involved with generating a loan. |
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In one state, a mortgagee holds a lien on real property offered as collateral for a loan. The mortgagor retains both legal and equitable title to real property. If the borrower defaults on the loan, the lender must go through formal foreclosure proceedings to recover the debt. This state can be BEST characterized as what kind of state?
A) Title theory B) Lien theory C) Mortgage theory D) Intermediate theory |
The answer is LIEN THEORY. This state is a lien theory state. The court is enlisted to order and oversee the foreclosure procedure. |
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Some states allow nonjudicial foreclosure procedures to be used when the security instrument contains a
A) power-of-sale clause. B) nonjudicial power clause. C) nonjudicial court-order clause. D) power-of-foreclosure clause. |
The answer is POWER-OF-SALE CLAUSE. To institute a nonjudicial foreclosure, the trustee or mortgagee may be required to record a notice of default at the county recorder's office. |
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A junior lien may become first in priority if the original lender agrees to execute a
A) deed of trust. B) subordination agreement. C) call clause. D) second mortgage agreement. |
The answer is SUBORDINATION AGREEMENT. If the original (first mortgage) lender signs a subordination agreement, another loan made more recently (later) may be allowed to take first place; the original loan then drops to second place in priority. |
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A prospective buyer needs to borrow money to buy a house. The buyer applies for and obtains a real estate loan from a mortgage company. Then the buyer signs a note and a mortgage. In this example, the mortgage company is the
A) mortgagor. B) vendor. C) mortgagee. D) beneficiary. |
The answer is MORTGAGEE. Because it receives the mortgage document, the mortgage company is the mortgagee. |
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The right a mortgagor has to regain the property by paying the debt after a foreclosure sale is called
A) acceleration. B) reversion. C) recapture. D) redemption. |
The answer is REDEMPTION. Statutory right of redemption allows a defaulted borrower a period of time to pay the debt and redeem the real estate after the foreclosure sale. |
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Real estate can be purchased under a land contract, also known as
A) an installment contract or contract for deed. B) a contract for note or installment contract. C) an installment deed. D) a contract for note. |
The answer is AN INSTALLMENT CONTRACT OR CONTRACT FOR DEED. Real estate can be purchased under a land contract, also known as an installment contract or contract for deed. |
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A charge of three discount points on a $120,000 loan equals
A) $450. B) $4,500. C) $116,400. D) $3,600. |
The answer is $3,600. A point is 1 percent of the amount borrowed (the loan amount). Three points would be three times as much: 3% × $120,000 = $3,600. |
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A promissory note
A) makes the borrower personally liable for the debt. B) is an agreement to perform or not to perform certain acts. C) is a guarantee by a government agency. D) may not be executed in connection with a real estate loan. |
The answer is MAKES THE BORROWER PERSONALLY LIABLE FOR THE DEBT. A promissory note is the borrower's personal promise to repay a debt according to agreed terms. |
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An existing mortgage loan can have its lien priority lowered through the use of a
A) hypothecation agreement. B) reconveyance of mortgage. C) satisfaction of mortgage. D) subordination agreement. |
The answer is SUBORDINATION AGREEMENT. A subordination agreement can change the priority of an existing mortgage by the first lender agreeing to release its position as a first lien to that of a second lender. |
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If buyers seek a mortgage on a single-family house, they would be LEAST likely to obtain the mortgage from a
A) mutual savings bank. B) credit union. C) commercial bank. D) life insurance company. |
The answer is LIFE INSURANCE COMPANY. Life insurance companies make mortgage loans on large projects but rarely, if ever, on individual home purchases. |
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The buyer borrowed $85,000, to be repaid in monthly installments of $530.20 at 7 percent annual interest. How much of the buyer's first month's payment was applied to reducing the principal amount of the loan?
A) $34.37 B) $530.20 C) $40.00 D) $495.83 |
The answer is $34.37. Three steps: (1) First, find the amount of interest in the first monthly payment by multiplying the annual interest rate by the original amount of the loan: Rate × Principal = Interest (7% × $85,000 = $5,950). (2) Then, divide the annual interest by 12 to find the first month's interest: $5,950 ÷ 12 = $495.83. (3) Finally, subtract that interest from the amount of the regular monthly payment to find the amount available to apply to principal: $530.20 – 495.83 = $34.37. |
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Which statement about interest on a fully amortized mortgage or deed of trust loan is TRUE?
A) The final interest payment will be determined after the last payment is made. B) Only interest is paid each period. C) Interest may be paid in arrears—that is, at the end of each period for which it is earned. D) The interest portion of each payment increases throughout the term of the loan. |
The answer is INTEREST MAY BE PAID IN ARREARS—THAT IS, AT THE END OF EACH PERIOD FOR WHICH IT IS EARNED. Interest may—and typically is—paid in arrears. The February 1 payment pays for the use of the borrowed money in January. |
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A loan that includes both real and personal property is called
A) a blanket loan. B) a package loan. C) an open-end loan. D) a wraparound loan. |
The answer is A PACKAGE LOAN. A loan that includes both real and personal property is called a package loan. |
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The maximum loan limits for loans sold to Fannie Mae is published by the
A) Federal Housing Administration (FHA). B) Federal Deposit Insurance Corporation (FDIC). C) Federal Reserve Board (FRB). D) Federal Housing Finance Agency (FHFA). |
The answer is FEDERAL HOUSING FINANCE AGENCY (FHFA). The maximum loan limits for loans sold to Fannie Mae is published by the Federal Housing Finance Agency (FHFA). |
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A home is purchased using a fixed-rate, fully amortized mortgage loan. Which statement regarding this mortgage is TRUE?
A) The principal amount in each payment is greater than the interest amount. B) Each mortgage payment reduces the principal by the same amount. C) Each mortgage payment amount is the same. D) A balloon payment will be made at the end of the loan. |
The answer is EACH MORTGAGE PAYMENT AMOUNT IS THE SAME. In a fully amortized loan, there will be no balloon payment. Each mortgage payment reduces the principal by a slightly different (increasing) amount, but each mortgage (principal plus interest) payment is the same. |
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The federal Equal Credit Opportunity Act allows lenders to discriminate against potential borrowers on the basis of
A) sex. B) race. C) age. D) amount of income. |
The answer is AMOUNT OF INCOME. Lenders may reject applicants who have insufficient income for the loans they are requesting, but lenders may not discriminate based on any of the other criteria listed. |
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To qualify for a conventional loan under Fannie Mae guidelines, for instance, the borrower's monthly housing expenses, including PITI (principal, interest, taxes, and insurance), must NOT exceed
A) 31 percent of the total monthly gross income. B) 28 percent of the total monthly gross income. C) 22 percent of the total monthly gross income. D) 33 percent of the total monthly gross income. |
The answer is 28 PERCENT OF THE TOTAL MONTHLY GROSS INCOME. To qualify for a conventional loan under Fannie Mae guidelines, for instance, the borrower's monthly housing expenses, including PITI (principal, interest, taxes, and insurance), must not exceed 28 percent of the total gross monthly income. |
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The amount of a loan expressed as a percentage of the value of the real estate offered as collateral is the
A) capital-use ratio. B) debt-to-equity ratio. C) amortization ratio. D) loan-to-value ratio. |
The answer is LOAN-TO-VALUE RATIO. The loan-to-value ratio (LTV) is the ratio of debt to the value of the property, value being the sales price or appraisal value, whichever is less. |
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A buyer purchased a home for cash 30 years ago. Today the buyer receives monthly checks from a mortgage lender that supplement her retirement income. The buyer MOST likely has obtained a(n)
A) purchase-money mortgage. B) reverse mortgage. C) overriding deed of trust. D) adjustable-rate mortgage. |
The answer is REVERSE MORTGAGE. In a reverse mortgage, typically an older citizen whose home is free and clear of mortgage debt will enter into a special mortgage arrangement under which the lender pays the borrower regular monthly payments as long as the citizen lives or until the property is sold, at which time the debt is paid off by the sale proceeds. Interest accrues and compounds throughout the term of this arrangement. The terms vary with age of the borrower and value of the property. |
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All of the following loans to individuals are affected by the truth-in-lending law under Regulation Z EXCEPT
A) household use. B) room additions. C) swimming pools. D) business use. |
The answer is BUSINESS USE. Regulation Z applies when credit is extended to individuals for personal, familial, or household uses, not for business use |
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A woman's son will start college soon. She has lived in her home for ten years. What financing option would be preferable for the woman to obtain funds to pay for her son's schooling?
A) Wraparound loan B) Open-end loan C) Participation financing D) Home equity loan |
The answer is HOME EQUITY LOAN. A homeowner can use the equity buildup in a home to finance such things as education; it is an alternative to refinancing. |
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A buyer purchased a new residence for $175,000. The buyer made a down payment of $15,000 and obtained a $160,000 mortgage loan. The builder of the house paid the lender 3 percent of the loan balance for the first year and 2 percent for the second year. This represented a total savings for the buyer of $8,000. What type of mortgage arrangement is this?
A) Package B) Wraparound C) Buydown D) Blanket |
The answer is BUYDOWN. The builder brought down the purchaser's interest rate for two years by paying the lender advance interest. This is a buydown arrangement. |
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Regulation Z provides penalties for noncompliance. The penalty for violation of an administrative order enforcing Regulation Z is
A) $10,000 for each day the violation continues. B) $1,000 for each day the violation continues. C) $5,000 for each day the violation continues. D) $100 for each day the violation continues. |
The answer is $10,000 FOR EACH DAY THE VIOLATION CONTINUES. Regulation Z provides penalties for noncompliance. The penalty for violation of an administrative order enforcing Regulation Z is $10,000 for each day the violation continues. |
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Conventional loans are viewed as the most secure loans because their loan-to-value ratios are often lowest. Traditionally, the ratio is
A) 80 percent of the value of the property. B) 70 percent of the value of the property. C) 60 percent of the value of the property. D) 50 percent of the value of the property. |
The answer is 80 PERCENT OF THE VALUE OF THE PROPERTY. Conventional loans are viewed as the most secure loans because their loan-to-value ratios are often lowest. Traditionally, the ratio is 80 percent of the value of the property. |
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To be valid, a lease must meet the same essential elements as any other contract, which are
A) capacity to contract, legal objectives, and offer and acceptance. B) legal objectives, offer and acceptance, and consideration. C) capacity to contract, legal objectives, offer and acceptance, and consideration. D) capacity to contract and offer and acceptance. |
The answer is CAPACITY TO CONTRACT, LEGAL OBJECTIVES, OFFER AND ACCEPTANCE, AND CONSIDERATION. To be valid, a lease must meet the same essential elements as any other contract: capacity to contract, legal objectives, offer and acceptance, and consideration. |
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A tenant's tenancy for years will expire in two weeks. The tenant plans to move to a larger apartment across town when the current tenancy expires. In order to terminate this agreement, the tenant must
A) sign a lease for the new apartment, which will automatically terminate the existing lease. B) do nothing because the agreement will terminate automatically at the end of the current term. C) give the landlord immediate notice or the lease will automatically renew. D) give the landlord one week's prior notice or the lease will automatically renew. |
The answer is DO NOTHING BECAUSE THE AGREEMENT WILL TERMINATE AUTOMATICALLY AT THE END OF THE CURRENT TERM. In common law, a tenant for a specified period (one who holds a lease for years) does not have to give notice because the lease ends by contractual agreement. Nor does the landlord have to give the tenant notice in such a case. |
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A tenant enters into a commercial lease that requires a monthly rent of a minimum fixed amount, plus an additional amount determined by the tenant's gross receipts exceeding $5,000. This type of lease is called a
A) percentage lease. B) standard lease. C) net lease. D) gross lease. |
The answer is PERCENTAGE LEASE. When a business tenant pays rent that varies according to the tenant's gross business receipts, the arrangement is called a percentage lease. In such a situation, the landlord shares in the tenant's business risk because of the possibility of receiving no more in rent than the minimum fixed amount. |
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A tenancy in which the tenant continues in possession after the lease has expired, without the landlord's permission, is a
A) tenancy at sufferance. B) periodic tenancy. C) tenancy at will. D) tenancy for years. |
The answer is TENANCY AT SUFFERANCE. Tenants who stay after the end of their lease without their landlord's permission hold a tenancy at sufferance. |
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A tenant's lease has expired, but the tenant has not vacated the premises or negotiated a renewal lease. The landlord has declared that the tenant is not to remain in the building. This situation is an example of
A) an estate for years. B) tenancy at sufferance. C) an estate from year to year. D) tenancy at will. |
The answer is TENANCY AT SUFFERANCE. Tenancy (estate) at sufferance occurs when a tenant who lawfully possessed real property continues in possession of the premises without the landlord's consent after the rights expire. |
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A lease would be terminated by which of the following?
A) Expiration of the term in a lease for years B) Death of the tenant C) Abandonment of the leased premises by the tenant D) Sale of the leased premises |
The answer is EXPIRATION OF THE TERM IN A LEASE FOR YEARS. A tenancy (estate) for years is a leasehold estate that continues for a definite period with specific beginning and ending dates. |
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When a tenant holds possession of a landlord's property without a current lease agreement and without the landlord's approval, the
A) tenant is maintaining a gross lease. B) tenant has no obligation to pay rent. C) landlord may be subject to a constructive eviction. D) landlord can file suit for possession. |
The answer is LANDLORD CAN FILE SUIT FOR POSSESSION. The tenant described is a tenant at sufferance. The landlord may regain possession through a legal process known as an actual eviction. |
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A percentage lease calls for a minimum rent of $1,200 per month plus additional annual rent of 4 percent of the year's gross business exceeding $150,000. If the business generated $270,000, how much annual rent does the tenant owe?
A) $19,200 B) $14,400 C) $10,800 D) $25,200 |
The answer is $19,200. Minimum rent is $14,400 ($1,200 per month × 12 months). Percentage rent is $4,800 ($270,000 – $150,000 = $120,000 × .04% = $4,800). $14,400 + $4,800 = $19,200. |
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A tenant signs a lease that includes the following clause: "The stated rent under this agreement will be increased or decreased every three months based on the percentage increase in the consumer price index (CPI) for that period." What kind of lease has this tenant signed?
A) Graduated B) Net C) Index D) Percentage |
The answer is INDEX. When the rental varies with an outside index, such as the consumer price index, the agreement is called an index lease. |
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Which transaction is BEST described as involving a ground lease?
A) A landlord charges a commercial tenant separate amounts for the rented land and for the leased building. B) A landowner agrees to let a tenant drill for oil on a property for 75 years. C) A tenant pays a base amount for the property plus a percentage of business-generated income. D) A tenant agrees to pay proportionate, increased rent based on annual appraisals of the rented property. |
The answer is A LANDLORD CHARGES A COMMERCIAL TENANT SEPARATE AMOUNTS FOR THE RENTED LAND AND FOR THE LEASED BUILDING. When a tenant has separate leases and pays separate rents on the building and the ground under it, the second agreement is a ground lease. The consideration paid for it is ground rent. |
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The covenant implied in a lease that ensures that the landlord will not interfere in the tenant's possession or use of the property is the covenant
A) against encumbrances. B) of seisin. C) of warranty forever. D) of quiet enjoyment. |
The answer is OF QUIET ENJOYMENT. The covenant of quiet enjoyment is a promise by the lessor that the lessee may take possession of the premises and the landlord will not interfere in the tenant's possession or use of the property. |
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A lease agreement that contains language that permits a new landlord to terminate existing leases is
A) unenforceable. B) illegal. C) void. D) permissible and enforceable. |
The answer is PERMISSIBLE AND ENFORCEABLE. A lease agreement that contains language that permits a new landlord to terminate existing leases is permissible and enforceable. |
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Leasing agents are usually
A) independent contractors working on a commission basis. B) employees of the property owner. C) employees of the broker. D) independent contractors working on a salary basis. |
The answer is INDEPENDENT CONTRACTORS WORKING ON A COMMISSION BASIS. Leasing agents are usually independent contractors working on a commission basis. |
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The property manager's chief concern should be that the property
A) is managed to achieve the highest overall rate of return possible on the owner's investment. B) exhibits the proper amount of the owner's pride of ownership. C) manager's time is maximized in the management of the property. D) is seldom vacant because it is consistently rented at the lowest possible rents. |
The answer is IS MANAGED TO ACHIEVE THE HIGHEST OVERALL RATE OF RETURN POSSIBLE ON THE OWNER'S INVESTMENT. The three principal responsibilities of the property manager are to achieve the objectives of the property owner, to generate income for the owner, and to preserve and/or increase the value of the investment property. In the process of meeting the goals of the property owner, the property manager is responsible for maintaining the owner's investment and ensuring that the property earns income. |
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All of the following should be included in a management agreement EXCEPT
A) compensation. B) the extent of the manager's authority. C) restrictions regarding ages of children. D) a description of the property. |
The answer is RESTRICTIONS REGARDING AGES OF CHILDREN. A management agreement should include an adequate description of the property, compensation arrangements, and what the manager's authority is to be. Restricting occupancy based on ages of children violates the federal Fair Housing Act. |
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In evaluating rental applications, it is important for the property manager to establish consistent criteria for acceptable debt and income ratios to be in compliance with
A) the Equal Credit Opportunity Act. B) Regulation Z. C) the Americans with Disabilities Act. D) federal antitrust laws. |
The answer is THE EQUAL CREDIT OPPORTUNITY ACT. A lease is an extension of credit, so the property manager must comply with the provisions of the Equal Credit Opportunity Act (ECOA) and be consistent when evaluating the financial information provided on rental applications. |
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Which of the following would be considered a variable expense when a manager develops an operating budget?
A) Utilities B) Building repairs C) Employee wages D) Basic operating costs |
The answer is BUILDING REPAIRS. Cash reserves are needed to deal with unscheduled or variable expenses such as unexpected building repairs. |
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All of the following are important functions of a property manager EXCEPT
A) supervising the maintenance of the property. B) protecting the physical integrity of the property. C) preparing the owner's income tax returns. D) meeting the functional requirements of the tenants. |
The answer is PREPARING THE OWNER'S INCOME TAX RETURNS. The management agreement defines the property manager's responsibilities. These duties generally include creating financial reports, renting property, selecting tenants, maintaining good relations with tenants, marketing, and maintaining the property. The financial reports may be used by a professional tax preparer in completing the income tax reports. |
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A property manager who enters into a management agreement with an owner is usually a
A) universal agent. B) general agent. C) designated agent. D) special agent. |
The answer is GENERAL AGENT. While residential real estate brokers are special agents in each transaction, property managers are typically general agents: their work usually continues and involves multiple representations of the same principal (owner/investor/landlord) because they are involved in ongoing dealings with many tenants. |
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The responsibilities of the property manager, in both building amenities and employment issues have been impacted considerably by the
A) Americans with Disabilities Act (ADA). B) Equal Credit Opportunity Act (ECOA). C) Fair Housing Act. D) Fair Debt Collections Practices Act. |
The answer is AMERICANS WITH DISABILITIES ACT (ADA). The responsibilities of the property manager, in both building amenities and employment issues have been impacted considerably by the Americans with Disabilities Act (ADA). |
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In determining rental amounts, a property manager considers the economic principle of
A) marginal contribution. B) conformity. C) supply and demand. D) balance. |
The answer is SUPPLY AND DEMAND. Supply and demand in real estate recognizes that the marketplace can influence trends in occupancy and vacancy rates, which in turn affect rental rates. |
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The manager's primary goal is to operate and maintain the physical property in such a way as to
A) earn the greatest commission from management activities. B) preserve and enhance the owner's capital investment. C) attract only higher-income tenants. D) facilitate optimum time management. |
The answer is PRESERVE AND ENHANCE THE OWNER'S CAPITAL INVESTMENT. The manager's primary goal is to operate and maintain the physical property in such a way as to preserve and enhance the owner's capital investment. |
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A statement sent to an owner that does not reflect the entire debt service as an expense is called a(n)
A) cash flow report. B) profit and loss statement. C) budget comparison statement. D) operating budget statement. |
The answer is PROFIT AND LOSS STATEMENT. The profit and loss statement provides a general financial picture based on monthly cash flow reports. Only the interest portion of the debt service is reflected as an expense. |
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A property manager hires a full-time maintenance person. While repairing a faucet in one of the apartments, the maintenance person steals a television set, and the tenant sues the owner. The property manager could protect the owner against this type of loss by purchasing
A) liability insurance. B) a surety bond. C) casualty insurance. D) workers' compensation insurance. |
The answer is A SURETY BOND. The manager can protect the owner by urging the purchase of a surety bond on the building employee at the time the employee is hired. Property managers usually formulate and recommend insurance plans for an owner's consideration and decision. |
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A guest slips on an icy apartment building stair and is hospitalized. A claim against the building owner for medical expenses may be paid under which of the following policies held by the owner?
A) Casualty B) Liability C) Fire and hazard D) Workers' compensation |
The answer is LIABILITY. Liability insurance protects an insured who becomes obliged to pay (liable) for damage or injury to others. |
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The scope of a property manager's work depends on the terms of the
A) rental agreement. B) escrow contract. C) tenant rules. D) management agreement. |
The answer is MANAGEMENT AGREEMENT. The management agreement defines the manager's authority and responsibilities. |
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Real estate brokers acting as an owner's property manager
A) must not profit from private contracts at the expense of the owner. B) need not maintain complete and accurate trust account records. C) may manage the client's property to their own advantage. D) can personally collect the interest earned on trust account funds. |
The answer is MUST NOT PROFIT FROM PRIVATE CONTRACTS AT THE EXPENSE OF THE OWNER. As the general agent, the property manager is charged with the fiduciary responsibilities of care, obedience, accounting, loyalty, and disclosure. In all activities, the manager's first responsibility is to realize the highest return on the property in a manner consistent with the owner's instructions. |
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An appraisal is
A) an idea of the price a buyer would be willing to pay for a property based on current market conditions. B) an estimate or opinion of value based on supportable evidence and approved methods. C) the actual value based on supportable evidence and approved methods. D) the best "educated guess" based on market research. |
The answer is AN ESTIMATE OR OPINION OF VALUE BASED ON SUPPORTABLE EVIDENCE AND APPROVED METHODS. An appraisal is an estimate or opinion of value based on supportable evidence and approved methods. |
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Which appraisal method uses a rate of investment return?
A) Cost approach B) Gross income multiplier method C) Sales comparison approach D) Income approach |
The answer is INCOME APPROACH. The income approach uses the rate of investment return, which is the relationship between the appraised value and the net annual income. |
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An appraiser is responsible for
A) finding value. B) computing value. C) determining value. D) estimating value. |
The answer is ESTIMATING VALUE. The appraiser does not make or determine value. After appraisers complete their analysis and consider all the data, they will then provide an estimate of value. |
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An appraisal used in connection with a federally related transaction must be performed by a competent individual whose professional conduct is subject to supervision and regulation under the
A) Equal Credit Opportunity Act (ECOA). B) Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). C) regulations established by the Department of Housing and Urban Development. D) Fair Housing Act. |
The answer is FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989 (FIRREA). An appraisal used in connection with a federally related transaction must be performed by a competent individual whose professional conduct is subject to supervision and regulation under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). |
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Which of the following is NOT used by an appraiser applying the income approach to value?
A) Capitalization rate B) Annual net operating income C) Annual gross income D) Accrued depreciation |
The answer is ACCRUED DEPRECIATION. Depreciation is one of the calculations used in the replacement (cost) approach and not in the income approach. |
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Appraisers are expected to follow the
A) Uniform Standards of Professional Appraisal Practice (USPAP). B) directions of the real estate broker as to expectations of value. C) directions of the client as to expectations of value. D) directions of the mortgage lender as to expectations of value. |
The answer is UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP). Appraisers are expected to follow the Uniform Standards of Professional Appraisal Practice (USPAP). |
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Capitalization is the process by which annual net operating income is used to
A) determine cost. B) estimate value. C) establish depreciation. D) determine potential tax value. |
The answer is ESTIMATE VALUE. Capitalization (the income approach) requires the use of the net operating income, value, and capitalization rate. |
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A homeowner constructs an eight-bedroom brick house with a tennis court, a greenhouse, and an indoor pool in a neighborhood of modest two-bedroom and three-bedroom frame houses on narrow lots. The owners of the lesser-valued houses in the neighborhood may find that the values of their homes are affected by what principle?
A) Competition B) Progression C) Regression D) Increasing returns |
The answer is PROGRESSION. The value of modest homes in an area may increase with the presence luxurious homes. This is an example of the principle of progression. |
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If a property's annual net income is $24,000 and it is valued at $300,000, what is its capitalization rate?
A) 15 percent B) 10.5 percent C) 12 percent D) 8 percent |
The answer is 8 PERCENT. Net annual income ÷ Market value = Capitalization rate ($24,000 ÷ $300,000 = 0.08, or 8%). Given any two elements, the third can easily be computed. |
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Deed restrictions may NOT legally control or limit
A) sizes and types of structures to be built. B) potential future uses of the properties. C) exterior finish and decoration of the structures. D) the race of future owners and occupants of a property. |
The answer is THE RACE OF FUTURE OWNERS AND OCCUPANTS OF A PROPERTY. Deed restrictions cannot be for illegal purposes, such as for the exclusion of certain races, nationalities, or religions. |
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Most governmental controls on property occur at the
A) regional level. B) state level. C) local level. D) federal level. |
The answer is LOCAL LEVEL. Most governmental controls on property occur at the local level. |
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Systematic planning for orderly growth does NOT include
A) commerical needs and interests. B) housing needs. C) promotion of nonrenewable energy sources. D) movement of people and goods. |
The answer is PROMOTION OF NONRENEWABLE ENERGY SOURCES. Systematic planning for orderly growth does not include promotion of nonrenewable energy sources. |
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The Interstate Land Sales Full Disclosure Act does NOT apply to subdivisions consisting of fewer than
A) 25 lots or to those in which each lot is 25 acres or more. B) 25 lots or to those in which each lot is 40 acres or more. C) 20 lots or to those in which each lot is 25 acres or more. D) 25 lots or to those in which each lot is 20 acres or more. |
The answer is 25 LOTS OR TO THOSE IN WHICH EACH LOT IS 20 ACRES OR MORE. The Interstate Land Sales Full Disclosure Act does not apply to subdivisions consisting of fewer than 25 lots or to those in which each lot is 20 acres or more. |
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Some states' laws regulate sales of land located both inside and outside the states. These state land sales laws tend to be
A) exactly the same as the federal law. B) stricter and more detailed than the federal law. C) less strict than the federal law. D) less detailed than the federal law. |
The answer is STRICTER AND MORE DETAILED THAN THE FEDERAL LAW. Some states' laws regulate sales of land located both inside and outside the states. These state land sales laws tend to be stricter and more detailed than federal law. |
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The U.S. Congress created the Interstate Land Sales Full Disclosure Act to prevent fraudulent marketing schemes that may arise when land is sold
A) to unsophisticated buyers. B) to investors. C) without being seen by the purchasers. D) to developers. |
The answer is WITHOUT BEING SEEN BY THE PURCHASERS. The U.S. Congress created the Interstate Land Sales Full Disclosure Act to prevent fraudulent marketing schemes that may arise when land is sold without being seen by the purchasers. |
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The occupancy permit is issued before anyone moves in and often before a lender will allow closing to insure
A) the financial qualifications of the contractor have been met. B) certain safety and health standards have been met. C) the financial qualifications of the occupant have been met. D) esthetic requirements have been met. |
The answer is CERTAIN SAFETY AND HEALTH STANDARDS HAVE BEEN MET. The occupancy permit is issued before anyone moves in and often before a lender will allow closing to insure certain safety and health standards have been met. |
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The sale of property in one state to buyers in another state is
A) regulated only by each local municipality. B) not regulated by either the federal or state governments. C) subject to strict federal and state regulations. D) subject to only federal regulations. |
The answer is SUBJECT TO STRICT FEDERAL AND STATE REGULATIONS. The sale of property in one state to buyers in another state is subject to strict federal and state regulations. |
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Governmental ownership through urban renewal efforts, public housing, and streets and highways helps serve the best interests of
A) private developers. B) the public. C) the government. D) investors. |
The answer is THE PUBLIC. Government ownership through urban renewal efforts, public housing, and streets and highways helps serve the best interests of the public. |
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A buyer owns a large tract of land. After an adequate study of all the relevant facts, the buyer legally divides the land into 30 lots suitable for the construction of residences. In this situation, the buyer is acting as a(n)
A) subdivider. B) urban planner. C) developer. D) land planner. |
The answer is SUBDIVIDER. Dividing land for later construction or sale is subdividing. |
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When is a certificate of occupancy issued?
A) At the time a property owner applies for a building permit B) After a newly constructed building has been inspected and found satisfactory by the municipal inspector C) When an application for a variance or conditional-use permit has been granted by the zoning board D) When the owner of a multifamily residential property wishes to limit the number of individuals who may live in a single unit |
The answer is AFTER A NEWLY CONSTRUCTED BUILDING HAS BEEN INSPECTED AND FOUND SATISFACTORY BY THE MUNICIPAL INSPECTOR. The certificate of occupancy, granted by an inspector from the jurisdiction, is necessary before a newly constructed building can be used. |
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A subdivision declaration reads, "No property within this subdivision may be further subdivided for sale or otherwise, and no property may be used for other than single-family housing." This is an example of
A) a restrictive covenant. B) an illegal reverter clause. C) R-1 zoning. D) a conditional-use clause. |
The answer is A RESTRICTIVE COVENANT. It is a restrictive covenant—in this case, a limitation placed on the entire subdivision by its developer and recorded with the plat of subdivision. It is an example of private land-use control. |
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A subdivision declaration reads, "No property within this subdivision may be further subdivided for sale or otherwise, and no property may be used for other than single-family housing." This is an example of
A) a restrictive covenant. B) an illegal reverter clause. C) R-1 zoning. D) a conditional-use clause. |
The answer is A RESTRICTIVE COVENANT. It is a restrictive covenant—in this case, a limitation placed on the entire subdivision by its developer and recorded with the plat of subdivision. It is an example of private land-use control. |
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Which of the following items would usually NOT be shown on the plat for a new subdivision?
A) Easements for sewer and water mains B) Prices of residential and commercial lots C) Land to be used for streets D) Numbered lots and blocks |
The answer is PRICES OF RESIDENTIAL AND COMMERCIAL LOTS. Prices are not a matter of public record and are subject to constant change. They do not belong on the recorded plat of subdivision. |
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The purpose of bulk zoning is to
A) specify certain types of architecture for new buildings. B) ensure that certain kinds of uses are incorporated into developments. C) control density and avoid overcrowding. D) set overall development goals for the community. |
The answer is CONTROL DENSITY AND AVOID OVERCROWDING. The purpose of bulk zoning is to control density and avoid overcrowding by imposing restrictions such as setbacks, building heights, and percentage of open area or by restricting new construction projects. |
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A town enacts a new zoning code. Under the new code, commercial buildings are not permitted within 1,000 feet of the lake. A commercial building that is permitted to continue in its former use even though it is built on the lakeshore is an example of
A) special use. B) variance. C) nonconforming use. D) adverse possession. |
The answer is NONCONFORMING USE. Nonconforming use grandfathers in those uses that were present before the enactment of certain zoning restrictions forbade them. They are allowed to continue for various lengths of time and with limited right of transfer to later buyers. |
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Specific information required to be disclosed in the report from a seller subject to the Interstate Land Sales Full Disclosure Act does NOT include
A) the population of nearby cities or communities. B) type of title being transferred to the buyer. C) availability of recreation facilities. D) number of homes currently occupied on the site. |
The answer is THE POPULATION OF NEARBY CITIES OR COMMUNITIES. Specific information required to be disclosed in the report from a seller subject to the Interstate Land Sales Full Disclosure Act does not include the population of nearby cities or communities. |
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The inherent authority for states to create regulations needed to protect the public health, safety, and welfare is provided through
A) their police power. B) their police provision. C) the court system. D) the electorate. |
The answer is THEIR POLICE POWER. The inherent authority for states to create regulations needed to protect the public health, safety, and welfare is provided through their police power. |
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Zoning powers are conferred on municipal governments in which of the following ways?
A) By state enabling acts B) Through city charters C) By popular local vote D) Through the master plan |
The answer is BY STATE ENABLING ACTS. Zoning powers lie with state governments. Local zoning power is conferred by the state through enabling acts. |
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The act of directing homeseekers toward or away from particular areas, either to maintain or to change the character of the neighborhood, is
A) redlining. B) blockbusting. C) steering. D) permitted under the Fair Housing Act of 1968. |
The answer is STEERING. A person who guides prospects either toward or away from certain neighborhoods based on racial, ethnic, religious, or similar concerns is guilty of steering. This practice is outlawed by the federal Fair Housing Act of 1968. Whether it is done to promote housing segregation or integration or whether it was intentional or unintentional is immaterial. |
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A single man with two small children has been told by a real estate licensee that homes for sale in a condominium complex are available only to married couples with no children. Which statement is TRUE?
A) Condominium complexes are exempt from the fair housing laws and can therefore restrict children. B) Because a single-parent family can be disruptive if the parent provides little supervision of the children, the condominium is permitted to discriminate against the family under the principle of rational basis. C) The man may file a complaint alleging discrimination on the basis of familial status. D) Restrictive covenants in a condominium take precedence over fair housing laws. |
The answer is THE MAN MAY FILE A COMPLAINT ALLEGING DISCRIMINATION ON THE BASIS OF FAMILIAL STATUS. The salesperson and, by implication, the broker and the property owners-principals have violated the prohibition against familial-status discrimination. Anyone in charge of one or more children under age 18 who is denied access because of the children is the victim of discrimination based on familial status. |
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In the rental process, a landlord who puts members of a protected class on a certain floor or building may be found guilty of
A) blockbusting. B) redlining. C) nothing because the practice is not illegal. D) steering. |
The answer is STEERING. In the rental process, a landlord who puts members of a protected class on a certain floor or building may be found guilty of steering. |
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A violation of fair housing laws
A) places the livelihood of real estate licensees in jeopardy as well as being subject to financial penalties. B) carries no significant consequences for the real estate licensee, only for property owners or landlords. C) makes the real estate licensee subject to financial penalties. D) carries no financial penalties for real estate salespersons. |
The answer is PLACES THE LIVELIHOOD OF REAL ESTATE LICENSEES IN JEOPARDY AS WELL AS BEING SUBJECT TO FINANCIAL PENALTIES. A violation of fair housing laws places the livelihood of real estate licensees in jeopardy as well as being subject to financial penalties. |
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Under the Fair Housing Act, which action is legally permitted?
A) Refusing to make a mortgage loan to a minority individual because of a poor credit history B) Advertising property for sale only to a special group C) Telling an individual that an apartment has been rented when in fact it has not D) Altering the terms of a loan for a member of a minority group |
The answer is REFUSING TO MAKE A MORTGAGE LOAN TO A MINORITY INDIVIDUAL BECAUSE OF A POOR CREDIT HISTORY. Bad credit can cause anyone to be rejected, even those who are members of protected classes. |
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Federal, state, and local fair housing or equal opportunity laws affect
A) few phases of a real estate transaction. B) only transactions involving discrimination based on race, national origin, and religion. C) most phases of a real estate transaction. D) every phase of a real estate transaction, from listing to closing. |
The answer is EVERY PHASE OF A REAL ESTATE TRANSACTION, FROM LISTING TO CLOSING. Federal, state, and local fair housing or equal opportunity laws affect every phase of a real estate transaction, from listing to closing. |
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Complying with the letter of the law
A) is not as important as performing in what the licensee considers the best interest of a client. B) is all that is necessary as far as the National Association of REALTORS® is concerned. C) may not be enough; licensees might perform legally yet not ethically. D) should be adequate for the licensee to avoid violating fair housing laws. |
The answer is MAY NOT BE ENOUGH; LICENSEES MIGHT PERFORM LEGALLY YET NOT ETHICALLY. Complying with the letter of the law may not be enough; licensees might perform legally yet not ethically. |
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Protection from threats or acts of violence against those who assist and encourage open housing rights is found in the
A) Fair Housing Amendments Act of 1988. B) Civil Rights Act of 1964. C) Civil Rights Act of 1866. D) Fair Housing Act of 1968. |
The answer is FAIR HOUSING ACT OF 1968. Under the Fair Housing Act of 1968, threats, coercion, and intimidation are punishable by criminal action. |
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It is illegal for a lending institution to refuse to make a residential real estate loan in a particular area only because of the
A) deteriorated condition of the premises. B) applicant not being of legal age. C) questionable economic situation of the applicant. D) physical location of the property. |
The answer is PHYSICAL LOCATION OF THE PROPERTY. Redlining refers to literally drawing a line around particular areas and refusing to make loans in that area, rather than looking at the economic qualifications of the applicant. |
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The provisions of the Fair Housing Act apply
A) only in those states that have ratified the act. B) only in those states that do not have specific state fair housing laws. C) in all states. D) only in those states that do not have substantially equivalent laws. |
The answer is IN ALL STATES. The federal Fair Housing Act applies to all states, and many states and municipalities have their own fair housing laws. |
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he moral principles of a profession include
A) neither standards for integrity and a code of conduct. B) a code of conduct for relations within the industry among its professionals. C) both standards for integrity and a code of conduct. D) standards for integrity and competence in dealing with consumers. |
The answer is BOTH STANDARDS FOR INTEGRITY AND A CODE OF CONDUCT. The moral principles of a profession include standards for integrity and competence in dealing with consumers and a code of conduct for relations within the industry among its professionals. |
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Failure of the real estate licensee to comply with fair housing laws is
A) a civil violation, which may be pursued in court by the victim. B) both a civil and a criminal violation and constitutes grounds for disciplinary action against a licensee. C) a criminal violation and could be grounds for disciplinary action against the licensee. D) only a violation of real estate licensing law in most states. |
The answer is BOTH A CIVIL AND A CRIMINAL VIOLATION AND CONSTITUTES GROUNDS FOR DISCIPLINARY ACTION AGAINST A LICENSEE. Failure of the real estate licensee to comply with fair housing laws is both a civil and a criminal violation and constitutes grounds for disciplinary action against a licensee. |
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Housing that qualifies for exemption from familial status provisions
A) includes a restriction that 80 percent of the units be occupied by persons 55 or older. B) includes housing intended for persons 50 years old or older. C) is not permitted under the federal Fair Housing Act. D) is permitted for owner-occupied buildings with four or more units. |
The answer is INCLUDES A RESTRICTION THAT 80 PERCENT OF THE UNITS BE OCCUPIED BY PERSONS 55 OR OLDER. The Fair Housing Act allows for two exemptions to familial status protection in housing for older persons. One permissible exemption is for housing in which 80 percent of the units are occupied by persons 55 years of age or older. |
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The separate but equal doctrine of legalized racial segregation was established by the
A) Civil Rights Act of 1968. B) U.S. Supreme Court's 1948 decision in Plessy v. Ferguson. C) Civil Rights Act of 1866. D) U.S. Supreme Court's 1896 decision in Plessy v. Ferguson. |
The answer is U.S. SUPREME COURT'S 1896 DECISION IN PLESSY V. FERGUSON. The separate but equal doctrine of legalized racial segregation was established by the U.S. Supreme Court's 1896 decision in Plessy v. Ferguson. |
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Practical applications of the articles of the REALTORS® code are known as
A) Covenants of Practice. B) Standards of Business. C) Standards of Practice. D) Covenants of Business. |
The answer is STANDARDS OF PRACTICE. Practical applications of the articles of the REALTORS® code are known as Standards of Practice. |
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Federally funded projects require an
A) environmental status statement (ESS). B) environmental hazard statement (EHS). C) environmental assessment statement (EAS). D) environmental impact statement (EIS). |
The answer is ENVIRONMENTAL IMPACT STATEMENT (EIS). Federally funded projects require an environmental impact statement (EIS). |
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The parties to a real estate transaction should be aware that many older tanks have never been registered
A) but are always visible. B) but are always capable of being located. C) and when discovered must always be registered. D) and may not comply with federal and state laws. |
The answer is AND MAY NOT COMPLY WITH FEDERAL AND STATE LAWS. The parties to a real estate transaction should be aware that many older tanks have never been registered and may not comply with federal and state laws. |
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All of the following may contribute to the growth of mold EXCEPT
A) low humidity. B) improperly installed gutters. C) EIFS. D) roof leaks. |
The answer is LOW HUMIDITY. Mold grows where there is moisture, such as where a roof leaks, or where water is not routed away properly by the gutters. EIFS is a building material that can trap moisture in a house. |
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The safest water is usually provided from a
A) shared well system. B) municipal water supply. C) privately owned well system. D) spring-fed stream. |
The answer is MUNICIPAL WATER SUPPLY. The safest water is usually provided from a municipal water supply. |
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The Superfund Amendments and Reauthorization Act (SARA) created
A) a "responsible party" status. B) an "innocent landowner" immunity status. C) a "liable party" status. D) an "innocent government" immunity status. |
The answer is AN "INNOCENT LANDOWNER" IMMUNITY STATUS. The Superfund Amendments and Reauthorization Act (SARA) created an "innocent landowner" immunity status. |
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Additional exposure is created for individuals involved in other aspects of real estate transactions, such as
A) transaction coordinators. B) title searchers. C) real estate appraisers. D) surveyors. |
The answer is REAL ESTATE APPRAISERS. Additional exposure is created for individuals involved in other aspects of real estate transactions, such as real estate appraisers. |
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Federal and state laws have defined many of the liabilities related to hazardous waste;
A) however, local municipalities are establishing their own interpretation. B) however, common law is being used for further interpretation. C) however they are incomplete; even common law offers no help. D) they need no clarification. |
The answer is HOWEVER, COMMON LAW IS BEING USED FOR FURTHER INTERPRETATION. Federal and state laws have defined many of the liabilities related to hazardous waste; however, common law is being used for further interpretation. |
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The real estate appraiser's greatest responsibility if financing is involved is to the
A) seller. B) buyer. C) agent. D) lender. |
The answer is LENDER. The real estate appraiser's greatest responsibility if financing is involved is to the lender. |
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Waste disposal sites are
A) capped with soil for legal reasons. B) lined for aesthetic reasons. C) never owned by private enterprise. D) capped with soil for aesthetic reasons. Waste disposal sites are |
The answer is CAPPED WITH SOIL FOR AESTHETIC REASONS. Waste disposal sites are capped with soil for aesthetic reasons. Lining prevents seepage and both private industry and governments own and operate sites. |
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The Environmental Protection Agency (EPA) was created in
A) 1999. B) 2007. C) 1970. D) 1945. |
The answer is 1970. The Environmental Protection Agency (EPA) was created in 1970. |
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Underground storage tanks (USTs) are commonly found on sites where
A) retail centers are located. B) government centers are located. C) petroleum products are used or where gas stations and auto repair shops are or were located. D) parks are located. |
The answer is PETROLEUM PRODUCTS ARE USED OR WHERE GAS STATIONS AND AUTO REPAIR SHOPS ARE OR WERE LOCATED. Underground storage tanks (USTs) are commonly found on sites where petroleum products are used or where gas stations and auto repair shops are or were located. |
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The water table
A) may be several hundred feet underground or near the surface. B) is never near the surface. C) is usually always near the surface. D) is usually several hundred feet underground. |
The answer is MAY BE SEVERAL HUNDRED FEET UNDERGROUND OR NEAR THE SURFACE. The water table may be several hundred feet underground or near the surface. |
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The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is administered and enforced by the
A) Department of Interior. B) Department of Housing and Urban Development. C) Environmental Protection Agency. D) Department of Homeland Security. |
The answer is ENVIRONMENTAL PROTECTION AGENCY. CERCLA is administered and enforced by the EPA. |
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Tanks that are exempt from federal regulation do NOT include
A) tanks on or above the floor of underground areas, such as basements or tunnels. B) a tank that holds 200 gallons. C) tanks that store heating oil burned on the premises. D) farm and residential tanks that hold 1,100 gallons or less of motor fuel used for noncommercial purposes. |
The answer is A TANK THAT HOLDS 200 GALLONS. Tanks that are exempt from federal regulation do not include a tank that holds 200 gallons. |
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The lender may be protected from liability for environmental hazards under certain conditions by virtue of the
A) 1986 amendments to the Superfund Act. B) Mortgage insurance. C) Department of Housing and Urban Development. D) FDIC. |
The answer is 1986 AMENDMENTS TO THE SUPERFUND ACT. The lender may be protected from liability for environmental hazards under certain conditions by virtue of the 1986 amendments to the Superfund Act. |
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A hole lined with clay or a synthetic liner to prevent leakage of waste material into the water supply describes a
A) brownfield. B) hazardous waste site. C) UST. D) landfill. |
The answer is LANDFILL. A hole lined with clay or a synthetic liner to prevent leakage of waste material into the water supply describes a landfill. |
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Which of the following describes the process of creating a landfill site?
A) Waste and topsoil are layered in a pit, mounded up, and then covered with dirt and plants. B) Waste is compacted and sealed in a container, then placed in a tomb designed to last several thousand years. C) Waste is liquefied, treated, and pumped through pipes to tombs under the water table. D) Waste is buried in an underground concrete vault. |
The answer is WASTE AND TOPSOIL ARE LAYERED IN A PIT, MOUNDED UP, AND THEN COVERED WITH DIRT AND PLANTS. Putting down alternate layers of waste and topsoil in a pit, and then capping it with soil and vegetation, creates a landfill. |
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Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) regulations of the Superfund, which helps pay for cleanup of uncontrolled hazardous waste sites,
A) impose strict, joint and several, and retroactive liability on potentially responsible parties. B) exempt from responsibility for sites that contaminate neighboring properties. C) make no provision for recovering Superfund expenses incurred in cleanup operations. D) release from liability those owners of contaminated property who did not actually cause the contamination. |
The answer is IMPOSE STRICT, JOINT AND SEVERAL, AND RETROACTIVE LIABILITY ON POTENTIALLY RESPONSIBLE PARTIES. Liability under the Superfund is considered to be strict, joint and several, and retroactive. Strict liability means that the owner is responsible to the injured party without excuse. Joint and several liability means that each of the individual owners is personally responsible for the total damages. If only one of the owners is financially able to handle the total damages, that owner must pay the total and collect the proportionate shares from the other owners whenever possible. Retroactive liability means that the liability is not limited to the current owner but includes people who have owned the site in the past. |
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The closing agent will deduct the balance due on the seller's loan at closing plus any accrued interest. The unpaid balance is $115,400 with a rate of 7 percent. Based on a closing date of June 15 the amount deducted will be
A) $115,731.95. B) $115,736.60. C) $123,478.00. D) $115,759.02. |
The answer is $115,736.60. The closing agent will deduct the balance due on the seller's loan at closing plus any accrued interest. The unpaid balance is $115,400 with a rate of 7 percent. Based on a closing date of June 15, the amount deducted will be $115,736.60 ($115,400 × 7% = $8,078 / 360 = $22.44 daily interest × 15 days to closing = $336.60 accrued interest) ($115,400 + $336.60 = $115,736.60). |
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In some part of the country, closing is called
A) settlement and transfer. B) table transfer. C) transfer and closing. D) settlement and closing. |
The answer is SETTLEMENT AND TRANSFER. In some parts of the country, closing is called settlement and transfer. |
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A mortgage reduction certificate is executed by a(n)
A) abstract company. B) grantor. C) lending institution. D) attorney. |
The answer is LENDING INSTITUTION. A mortgage reduction certificate, issued by the seller's lender, confirms the balance remaining on a loan to be assumed as well as the interest rate and the date through which interest has been paid. |
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The details of a closing are ALWAYS governed by the
A) terms of the properly executed purchase contract. B) wishes of the buyer as expressed orally. C) escrow instructions that both the seller and the buyer sign. D) wishes of the seller as expressed orally. |
The answer is TERMS OF THE PROPERLY EXECUTED PURCHASE CONTRACT. A closing involves fulfilling the promises made in a sales contract. |
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Which charge noted on the Good Faith Estimate (GFE) must be the same or less than the charge noted on the HUD-1 form?
A) Lender charges for taking and underwriting the loan B) Cost of homeowners' insurance C) Cost of settlement services when the lender selects the provider D) Cost of settlement services when the borrower selects the provider from the list provided by the lender |
The answer is LENDER CHARGES FOR TAKING AND UNDERWRITING THE LOAN. Lender charges for taking and underwriting the loan stated on the Good Faith Estimate (GFE) must be the same or less than the charge noted on the HUD-1 form. |
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In some parts of the country, the closing process involves the parties in the transaction sitting around a table and exchanging copies of documents, a process known as
A) closing the table. B) table papers. C) exchanging papers. D) passing papers. |
The answer is PASSING PAPERS. In some parts of the country, the closing process involves the parties in the transaction sitting around a table and exchanging copies of documents, a process known as passing papers. |
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Information to be reported to the IRS on Form 1099-S does NOT include the
A) amount of property tax reimbursement credited to the seller. B) seller's Social Security number. C) final sales price. D) buyer's Social Security number. |
The answer is BUYER'S SOCIAL SECURITY NUMBER. Information to be reported to the IRS on Form 1099-S does not include the buyer's Social Security number. |
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MOST closings involve the division of financial responsibility between the buyer and the seller, for such items as loan interest, taxes, rents, and other items, and are called
A) divisions. B) prorations. C) disbursements. D) allocations. |
The answer is PRORATIONS. Most closings involve the division of financial responsibility between the buyer and the seller, for such items as loan interest, taxes, rents, and other items, and are called prorations. |
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The Real Estate Settlement Procedures Act (RESPA) applies in a loan assumption if the
A) terms of the assumed loan are modified by the lender. B) lender charges less than $50 for the assumption. C) buyer must be approved by the lender for the assumption to occur. D) seller does not want to be liable for the loan in the future. |
The answer is TERMS OF THE ASSUMED LOAN ARE MODIFIED BY THE LENDER. If the terms of the assumed loan are modified or the lender charges more than $50 for the assumption, then the transaction is subject to RESPA regulations. |
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Real estate property taxes will be prorated at closing and are $3,450 annually. If escrow closes June 15 and taxes for the year have not yet been paid,
A) the buyer receives a credit of $1,437.50. B) the seller receives a credit of $1,581.20. C) the buyer receives a credit of $1,581.20. D) the seller receives a credit of $1,437.50. |
The answer is THE BUYER RECEIVES A CREDIT OF $1,581.20. With escrow closing June 15, real estate property taxes, which have not yet been paid, will be prorated at closing as follows: annual real estate taxes of $3,450 ÷ 12 months = $287.50 per month; $287.50 ÷ 30 days = $9.58 per day: $287.50 × 5 months (through June 30) = $1,437.50; $9.58 × 15 days = $143.70; $1437.50 + $143.70 = $1,581.20 seller owes buyer. |
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An informational booklet prepared by HUD must be given to the borrower, under RESPA, at the time of application or provided
A) prior to signing loan documents. B) prior to closing. C) within seven days of loan application. D) within three days of loan application. |
The answer is WITHIN THREE DAYS OF LOAN APPLICATION. An informational booklet prepared by HUD must be given to the borrower under RESPA at the time of application or provided within three days of loan application. |
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Legal title ALWAYS passes from the seller to the buyer
A) when the deed is placed in escrow. B) when the deed is delivered and accepted. C) when the closing statement has been signed. D) on the date of execution of the deed. |
The answer is WHEN THE DEED IS DELIVERED AND ACCEPTED. Although the buyer received equitable title upon contract, legal title does not pass until delivery and acceptance of the deed. If the buyer, or someone acting on the buyer's behalf, records the deed, acceptance is presumed. |
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Buyers purchasing a home for $230,000 are obtaining a purchase-money loan in the amount of $184,000, paying a 1.25 percent loan origination fee and a 1 percent loan discount fee. Based on this information, the total amount the buyer will pay at closing for the loan origination fee is
A) $1,840. B) $4,140. C) $2,300. D) $2,875. |
The answer is $2,300. Buyers purchasing a home for $230,000 are obtaining a purchase-money loan in the amount of $184,000, paying a 1.25 percent loan origination fee and a 1 percent loan discount fee. Based on the information provided, the total amount the buyer will pay at closing for the loan origination fee is $2,300 ($230,000 × 1% = $2,300). |
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Which statement is TRUE of real estate closings in most states?
A) The buyer must reimburse the seller for any title evidence provided by the seller. B) The buyer usually receives the rents for the day of closing. C) The seller usually pays the expenses for the day of closing. D) Closings are generally conducted by real estate salespersons. |
The answer is THE SELLER USUALLY PAYS THE EXPENSES FOR THE DAY OF CLOSING. Presumably, the sellers woke up in the house on the day of settlement; that day is theirs to enjoy and to pay for. Closings are rarely, if ever, conducted by real estate salespersons. Either the buyer or the seller—whichever orders title evidence—pays for the closing. In the sale of an income property, the seller typically receives the rents for the day of closing. |
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A buyer purchases a home in an area where closings are traditionally conducted in escrow. Which item would a buyer deposit with the escrow agent before the closing date?
A) Estoppel certificate B) Deed to the property C) Cash needed to complete the purchase D) Title evidence |
The answer is CASH NEEDED TO COMPLETE THE PURCHASE. The buyer is normally responsible for depositing the cash needed to complete the transaction. |
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Which item would a lender generally require at the closing?
A) Market value appraisal B) Title insurance commitment C) Application D) Credit report |
The answer is TITLE INSURANCE COMMITMENT. Credit report, application for the mortgage loan, and appraisal of the subject property are all required by a lender well before closing. The title insurance binder is due at closing. |
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A real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company may agree to offer a package of services to consumers, a system known as a
A) controlled business agreement (CBA). B) controlled business arrangement (CBA). C) consolidated business agreement (CBA). D) consolidated business arrangement (CBA). |
The answer is CONTROLLED BUSINESS ARRANGEMENT (CBA). A real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company may agree to offer a package of services to consumers, a system known as a controlled business arrangement (CBA). |
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A couple listed their home for $237,000. They accepted an offer of $230,000 from a buyer who is obtaining financing with a $46,000 down payment. The seller has agreed to pay the agent a commission of 6 percent, which would be
A) $2,760. B) $13,800. C) $14,220. D) $11,040. |
The answer is $13,800. A couple listed their home for $237,000. They accepted an offer of $230,000 from a buyer who is obtaining financing with a $46,000 down payment. The seller has agreed to pay the agent a commission of 6 percent, which would be $13,800. |
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The Real Estate Settlement Procedures Act (RESPA) is a federal statute administered by the
A) Federal Trade Commission (FTC). B) Department of Housing and Urban Development (HUD). C) Office of the U.S. Attorney General. D) Department of Veterans Affairs (VA). |
The answer is DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD). RESPA is administered by HUD. |
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Under the new Mortgage Disclosure Improvement Act (MDIA), a lender must extend the closing how many days if the annual percentage rate (APR) is increased prior to closing?
A) Two business days B) Five business days C) Three business days D) Four business days |
The answer is THREE BUSINESS DAYS. If the APR is increased prior to closing, the Mortgage Disclosure Improvement Act (MDIA) provides that a lender must extend the closing three business days. |
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At the closing of a real estate transaction, the person performing the settlement gave the buyer a credit for certain accrued items. These items were
A) all of the buyer's real estate bills. B) all of the seller's real estate bills. C) bills relating to the property that had already been paid by the seller. D) bills relating to the property that the buyer needed to pay. |
The answer is BILLS RELATING TO THE PROPERTY THAT THE BUYER NEEDED TO PAY. Accrued items are those property-related expenses (bills) that remain on the property as it is sold and that the purchasers will have to pay later. |
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Real estate is an avenue of investment open to those interested in holding property primarily for increasing value, which is known as
A) growth. B) appreciation. C) valuation. D) appreciative. |
The answer is APPRECIATION. Real estate is an avenue of investment open to those interested in holding property primarily for increasing value, which is known as appreciation. |
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A small group of closely associated or experienced investors is typically a
A) public syndication. B) private syndication. C) private enterprise. D) public enterprise. |
The answer is PRIVATE SYNDICATION. A small group of closely associated or experienced investors is typically a private syndication. |
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When considering an investment in real estate, the prospective investor should consider all of the following EXCEPT the
A) assessed valuation of the property. B) anticipated appreciation of the property. C) intrinsic value of the property. D) possible effects of inflation on the property. |
The answer is ASSESSED VALUATION OF THE PROPERTY. The anticipated appreciation of the property, possible effects of inflation on the property, and the intrinsic value of the property are all things an investor should consider. The assessed valuation is usually "old" information and may have little relevance to the investor. |
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The investor who sells property on an installment sale basis
A) is taxed on that part of the gain received in each year's installment payments. B) gives the buyer the privilege of deferring all the federal income tax liability. C) is taxed on all of the gain in the year the property is sold. D) gives the buyer all the federal income tax liability. |
The answer is IS TAXED ON THAT PART OF THE GAIN RECEIVED IN EACH YEAR'S INSTALLMENT PAYMENTS. The idea of an installment sale is to spread the tax liability out over the years of the installment sale; the taxpayer pays taxes only on the portion received in each taxable year. |
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A man made an initial real estate investment of $45,000. He subsequently made $20,000 worth of improvements to the property. If the man subtracts depreciation from the initial cost and adds the cost of improvements, what will be the result?
A) Basis B) Capital gain C) Adjusted basis D) Salvage value |
The answer is ADJUSTED BASIS. Adjusted basis is the original cost plus capital (long-term) improvements minus cost recovery (depreciation). Depreciation lowers an investor's adjusted basis. The lower an investor's adjusted basis, the larger will be the capital gain to be taxed when a property is sold. The depreciation tax deductions taken along the way are somewhat taken back by capital gains taxes upon sale. |
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Inflation is the increase in
A) the amount of money held by the Federal Reserve. B) gross domestic product (GDP). C) the amount of money in circulation. D) employment. |
The answer is THE AMOUNT OF MONEY IN CIRCULATION. Inflation is the increase in the amount of money in circulation. |
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As part of a Section 1031 exchange, an investor had to give the other party $11,500 and a 1953 Chevrolet. The cash and car are
A) collateral. B) equity. C) boot. D) like kind. |
The answer is BOOT. The cash and car are boot. |
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To qualify as a REIT, at LEAST
A) 65 percent of the trust's income must come from real estate. B) 95 percent of the trust's income must come from real estate. C) 75 percent of the trust's income must come from real estate. D) 80 percent of the trust's income must come from real estate. |
The answer is 75 PERCENT OF THE TRUST'S INCOME MUST COME FROM REAL ESTATE. To qualify as a REIT, at least 75 percent of the trust's income must come from real estate. |
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All of the following are associated with a Section 1031 exchange EXCEPT
A) the elimination of capital gains tax. B) like kind. C) qualified intermediary. D) boot. |
The answer is THE ELIMINATION OF CAPITAL GAINS TAX. In a 1031 exchange, the capital gains tax is deferred, not eliminated. Whenever the investor sells the property, the capital gain will be taxed. |
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Cash flow is
A) the total amount of spendable income left after expenses. B) selling costs plus depreciation. C) equivalent to operating expense. D) the use of borrowed money to finance an investment. |
The answer is THE TOTAL AMOUNT OF SPENDABLE INCOME LEFT AFTER EXPENSES. Cash flow is spendable income generated by an investment, minus expenses. |
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One method a real estate investor may use to defer capital gains tax is to
A) sell the property for cash only. B) build a reserve account for items that are likely to wear out. C) exchange one property for a like-kind property. D) obtain the maximum amount of leverage. |
The answer is EXCHANGE ONE PROPERTY FOR A LIKE-KIND PROPERTY. The tax on capital gains is normally due when a taxpayer files a tax return for the previous year. Complying with Section 1031 of the U.S. Internal Revenue Code will defer the tax due until a future date. This is commonly called a tax-free or like-kind exchange. |
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Someone looking for a tax-advantaged investment similar to a mutual fund would probably invest in a
A) corporation. B) limited partnership. C) real estate investment trust. D) general partnership. |
The answer is REAL ESTATE INVESTMENT TRUST. A real estate investment trust is similar to a mutual fund. Both are marketed by stock brokers rather than by real estate agents and allow the investor to get a piece or portion of a big real estate property. |
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A tax entity created by the Tax Reform Act of 1986 that issues securities backed by a pool of mortgages is a
A) REMIC. B) REIT. C) pyramid. D) limited partnership. |
The answer is REMIC. These very technically defined entities have existed since the Tax Reform Act of 1986. REMIC stands for Real Estate Mortgage Investment Conduit. |
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Tax considerations of installment sales include which of the following?
A) Both profit and interest received are taxed at capital gains rates. B) Interest received is taxed at capital gains rates. C) Tax is deferred on profit received. D) Interest received is taxed as ordinary income. |
The answer is INTEREST RECEIVED IS TAXED AS ORDINARY INCOME. Interest received on an installment sale is taxed as ordinary income. |
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The process of using one property to drive the acquisition of additional properties is called
A) cascading. B) compounding. C) pyramiding. D) commingling. |
The answer is PYRAMIDING. The process of using one property to drive the acquisition of additional properties is called pyramiding. |
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If an agent changing real estate firms requests that their license be returned by mail immediately to the IREC, the releasing broker must make every reasonable effort to ensure that the Commission receives the license within
A) 48 hours of the termination date. B) 1 week of the termination date. C) 24 hours of the termination date. D) no time limit. |
The answer is 48 HOURS OF THE TERMINATION DATE. When the licensee is discharged, the broker must deliver or mail the discharged person's license to the Commission within 72 hours of the discharge date. However, if an agent requests that the license be returned by mail immediately to the IREC, the releasing broker must make every reasonable effort to ensure that the Commission receives the license within 48 hours of the termination date |
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How many years of real estate experience are required to become a licensed member of the Real Estate Commission?
A) Three B) Four C) Five D) Two |
The answer is FIVE. Five years of real estate experience are required to become a licensed member of the Commission. |
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How many members comprise the Iowa Real Estate Commission (IREC)?
A) Five B) Three C) Nine D) Seven |
The answer is SEVEN. The Real Estate Commission consists of a seven-member body, with five licensed and two unlicensed members. |
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Commissioners are appointed by the governor for three years and allowed to serve no more than how many consecutive terms?
A) Three B) Two C) One D) No limit |
The answer is THREE. Commissioners are appointed by the governor for three years and may serve no more than three consecutive terms. |
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In Iowa, which office prohibits a person from simultaneously being a real estate commissioner?
A) City mayor B) School board superintendent C) State senator D) County sheriff |
The answer is STATE SENATOR. Commission members are not allowed to hold any elective or appointive state or federal office simultaneously, to avoid any hint of impropriety. |
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How many years does a commissioner serve during a term on the Iowa Real Estate Commission (IREC)? A) Six years B) Two years C) Three years D) One year |
The answer is THREE. Commissioners are appointed by the governor for three years and may serve no more than three consecutive terms. |
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What is the ratio of the seven-member Real Estate Commission?
A) Four licensed and three unlicensed B) Six licensed and one unlicensed C) Five licensed and two unlicensed D) Three licensed and four unlicensed |
The answer is FIVE LICENSED AND TWO UNLICENSED. The Real Estate Commission is made up of a seven-member body, with five licensed and two unlicensed members. |
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The mission of the Iowa Real Estate Commission (IREC) is to
A) raise funds for the state through licensing fees. B) protect the real estate industry in Iowa. C) ensure that there are enough real estate licensees in Iowa to serve consumers. D) protect the public. |
The answer is PROTECT THE PUBLIC. According to state law, the mission of the IREC is to protect the public through the examination, licensing, and regulation of real estate brokers, salespersons, and firms. |
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When a licensee is discharged from a real estate firm, the firm's broker must deliver or mail the discharged person's license to the Commission within
A) 24 hours of the discharge date. B) 48 hours of the discharge date. C) 60 hours of the discharge date. D) 72 hours of the discharge date. |
The answer is 72 HOURS OF THE DISCHARGE DATE. When the licensee is discharged, the broker must deliver or mail the discharged person's license to the Commission within 72 hours of the discharge date. |
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A broker is allowed to open a trust account with personal funds NOT to exceed what dollar amount?
A) $750 B) $500 C) $250 D) $100 |
The answer is $500. The State of Iowa allows brokerage firms to open trust accounts using personal funds not to exceed $500; the $500 is used to cover trust account service charges and the purchase of trust account checks. At no time, can trust monies be used to cover service charges. |
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During the discrimination complaint process, if the case is not resolved through mediation, the complaint will be investigated. If the administrative judge finds reasonable cause to believe discrimination occurred, each party has to choose a course of action within how many days?
A) 7 days B) 30 days C) 180 days D) 20 days |
The answer is 20 DAYS. When the investigation is complete, an administrative law judge determines whether there is reasonable cause to believe discrimination occurred. If the administrative judge finds it has, each party has 20 days to choose a course of action. They can then proceed in district court, or they can continue with the public hearing process through the Commission. |
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Which of the following may be paid directly from the trust account?
A) Secretarial salaries B) Company commissions to another real estate brokerage company C) Operational expenses D) Normal business expenses |
The answer is COMPANY COMMISSIONS TO ANOTHER REAL ESTATE BROKERAGE COMPANY. The broker may never use the trust account as a business operation account or for personal uses. Although the broker may pay company commissions or commissions to other companies from the trust account, this money may not be used to pay salaries and normal business or operational expenses. |
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Which of the following is a provision of Megan's Law?
A) Sex offenders are prohibited from obtaining a real estate license. B) Real estate licensees are required to discover or disclose the presence of a sex offender in the area. C) Certain sex offenders are prohibited from residing within 2,000 feet of a real estate office. D) Certain sex offenders, when released from prison, must register where they live with the local authorities. |
The answer is CERTAIN SEX OFFENDERS, WHEN RELEASED FROM PRISON, MUST REGISTER WHERE THEY LIVE WITH THE LOCAL AUTHORITIES. Megan's Law requires that certain sex offenders, when released from prison, register with the local authorities where they live. According to Iowa law, if an offender is 1) required to register in the state of Iowa and 2) has been convicted of an "aggravated offense against a minor," the offender is prohibited from residing within 2,000 feet of real property comprising a school or child care facility. |
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A listing agent listed some lots for a developer and sold one of them to a buyer on the condition that the buyer's present home be listed with the agent. Another lot was sold to a builder on the condition that the builder list the home that was to be built with the agent. What illegal activity do these two examples describe?
A) Joining B) Complicity C) Tying D) Rivalry |
The answer is TYING. Tying arrangements are illegal and considered a violation of the Iowa Competition Act, as well as a Commission rule prohibiting its use. |
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Which of the following examples BEST illustrates how a licensee who uses personal e-mail to advertise or market property belonging to others must provide disclosure on the first or last page of the e-mail?
A) Joe Realtor/XYZ Realty, Inc./Des Moines, IA 50266 B) Joe Realtor/Des Moines, IA 50266/515-555-5555/Licensed as a salesperson in Iowa C) Joe Realtor/XYZ Realty, Inc./Des Moines, IA 50266/Licensed as a salesperson in Iowa D) Joe Realtor/licensed as a salesperson in Iowa |
The answer is JOE REALTOR/XYZ REALTY, INC./DES MOINES, IA 50266/LICENSED AS A SALESPERSON IN IOWA. This example best illustrates how a licensee who uses personal e-mail to advertise or market property belonging to others must provide disclosure on the first or last page of the e-mail. The signature block includes the same information as a business card. |
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What may be paid out of a broker's trust account?
A) Commissions B) Salaries C) All of these D) Normal business expenses |
The answer is COMMISSIONS. Commissions may be paid out of a broker's trust account, but never salaries or normal business expenses. |
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"Affordable 4-bedroom, 2-story, 2½-bath, large great room, and spacious yard. Call 555-5555." If written by a real estate broker, the Real Estate Commission would consider this a
A) blind ad. B) feature ad. C) classified ad. D) lawful ad. |
The answer is BLIND AD. If written by a real estate broker, this would be an illegal blind ad because it does not include the regular business name of the brokerage. |
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The Iowa Civil Rights Commission performs all of the following EXCEPT
A) pass fair housing laws B) provide dispute resolution services C) handle fair housing complaints D) increase public awareness of civil rights |
The answer is PASS FAIR HOUSING LAWS. The purpose of the Commission is to enforce civil rights laws, increase public awareness of civil rights, provide dispute resolution services, and offer community services throughout the state. While the Commission may provide input, the state legislature passes new fair housing legislation. |
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The person assigned to supervise a branch office is called the
A) regional supervisor. B) office manager. C) associate salesperson. D) designated broker. |
The answer is DESIGNATED BROKER. One branch office license is issued in the name of the firm or the proprietor, and one is issued in the name of the designated broker or the broker associate assigned to supervise the branch office. |
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Which of the following business entities may be used to set up a real estate firm in Iowa?
A) Partnership B) All of these C) Corporation D) Association |
The answer is ALL OF THESE. Business entities that can be used to form a real estate company are partnership, association, corporation, professional corporation, or limited liability company. |
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Which statement is TRUE regarding real estate firms in Iowa?
A) Real estate firms must be either corporations or partnerships. B) A real estate office may be managed by someone with either a salesperson or a broker license. C) At minimum, a branch office must have a designated broker's license, a salesperson license, and a branch office license. D) Every real estate firm must maintain an office open to the public. |
The answer is EVERY REAL ESTATE FIRM MUST MAINTAIN AN OFFICE OPEN TO THE PUBLIC. Every Iowa real estate firm or self-employed broker must maintain an office for the transaction of business in the state of Iowa. The office must be open to the public during business hours or by appointment. |
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A licensee took a listing for broker A. The property was shown by licensees representing broker C and broker D. Ultimately, the seller accepted an offer from broker E. In this situation, the licensee who took the listing in the name of A was acting as
A) a single agent. B) an appointed agent. C) a dual agent. D) a nonagent. |
The answer is A SINGLE AGENT. In a single agency in Iowa, the licensee (agent) represents only one party in any single transaction. In this situation, the listing agent singularly represented the seller; the buyers were represented by brokers C, D, and E. |
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Even after the termination of a buyer brokerage agreement with a client, the licensee still has what legal and ethical agency duty?
A) Not bring any new buyers to properties the licensee had shown to the former client B) Deliver copies of all new listing information that might interest the former client C) Refer the former client to another broker D) Keep any confidential information the licensee learned about the former client confidential |
The answer is KEEP ANY CONFIDENTIAL INFORMATION THE LICENSEE LEARNED ABOUT THE FORMER CLIENT CONFIDENTIAL. Certain duties of loyalty (confidentiality) may survive even after the termination of a buyer's agreement. Examples include accounting for monies and property related to and received during the contractual period, as well as keeping confidentially requested information confidential |
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When would a licensee be legally allowed to discuss with another licensee's seller the possibility of listing the seller's currently listed property?
A) After a second broker had been contacted directly by a seller but with nothing discussed except the ineptness of the existing broker. B) After a second broker had been contacted directly by a seller but with no discussion of the existing broker's marketing techniques or the character of the first broker. C) After a second broker had been contacted directly by a seller to discuss the existing broker's marketing strategies. D) Never. Knowingly alienating those involved in written contractual listing agreements is illegal. |
The answer is AFTER A SECOND BROKER HAD BEEN CONTACTED DIRECTLY BY A SELLER BUT NO DISCUSSION OF THE EXISTING BROKER'S MARKETING TECHNIQUES OR THE CHARACTER OF THE FIRST BROKER. The rule is intended to prevent intentional, contractual interference. In addition, the solicitation of an unexpired exclusive listing agreement is considered unethical. |
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Which of the following is considered specific assistance that triggers a required agency disclosure?
A) Preliminary conversations concerning price range, location, and property styles B) General factual questions concerning properties that have been advertised for sale or lease C) Casual conversation at an open house D) Detailed discussion about the financial qualifications of the buyer |
The answer is DETAILED DISCUSSION ABOUT THE FINANCIAL QUALIFICATIONS OF THE BUYER. In Iowa, specific assistance includes eliciting or accepting confidential information about someone's needs, motivation, or financial qualifications. It does not include casual conversation at an open house or preliminary conversations or responding to general factual questions. |
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What should an agent say before asking prospects at an open house what prompted them to start looking?
A) I am the listing agent but can operate as a disclosed dual agent. B) How much of a down payment do you have saved? C) How large of a house payment are you comfortable paying each month? D) Do you know your credit score? |
The answer is I AM THE LISTING AGENT BUT CAN OPERATE AS A DISCLOSED DUAL AGENT. Asking about a buyer's motivation is considered to be eliciting confidential information and therefore triggers a discussion about agency. |
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Which of the following is a lawful act?
A) Requesting a referral fee for a buyer who has already made a bona fide offer that was accepted by a seller B) Requesting a referral fee for a seller who has already signed a bona fide listing agreement with another agent C) Paying a referral fee to an unlicensed friend for a prospective buyer D) Paying a referral fee to an out-of-state real estate broker |
The answer is PAYING A REFERRAL FEE TO AN OUT-OF-STATE REAL ESTATE BROKER. Requesting referral fees from agents who have already been engaged by a client is contractual interference, and paying a fee to someone who is unlicensed for the referral of a prospect is unlawful. |
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At which point must a client-buyer's signature appear on an agency disclosure form?
A) At the time any ministerial act is provided B) During the initial qualifying interview C) Before the client actually writes an offer to purchase D) At the time of specific assistance |
The answer is BEFORE THE CLIENT ACTUALLY WRITES AN OFFER TO PURCHASE. This is the point where a client-buyer's signature must appear on an agency disclosure form. |
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Under the rules for proper agency disclosure in a real estate transaction, licensees do NOT need to disclose when acting
A) on behalf of a business entity in which they have an interest. B) on behalf of a friend selling a residence. C) on behalf of an immediate family member. D) on their own behalf. |
The answer is ON BEHALF OF A FRIEND SELLING A RESIDENCE. Licensees need to provide disclose in writing when acting in a transaction on their own behalf, on behalf of an immediate family member or brokerage, or on behalf of a business entity in which the licensee has an interest. Because the licensee has no ownership interest in the friend's residence, no disclosure is necessary. |
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The document that entitles a broker to receive a commission regardless of who sells the property is called
A) a procuring cause clause. B) an exclusive-right-to-sell listing. C) an exclusive-agency listing. D) a protection clause. |
The answer is AN EXCLUSIVE-RIGHT-TO-SELL LISTING. Exclusive-right-to-sell listing agreements give brokerage firms the exclusive right to market the seller's property during the term of the listing and receive a commission regardless of which person sells it, including the owner. |
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Which would NOT be considered one of the minimum services Iowa law requires brokerage agreements to include?
A) Provide the client with a legal interpretation of clauses in the brokerage agreement B) Accept delivery of and present to the client offers and counteroffers C) Provide prospective buyers with access to listed properties D) Assist the client in the development, communication, negotiation, and presentation of offers |
The answer is PROVIDE THE CLIENT WITH A LEGAL INTERPRETATION OF CLAUSES IN THE BROKERAGE AGREEMENT. A licensee is prohibited from offering legal advice and services. |
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What is the name of the agency relationship in which either a seller-client or a buyer-client agrees to be exclusively represented by an affiliated agent of a broker?
A) Prearranged agency B) Fixed agency C) Individual agency D) Appointed agency |
The answer is APPOINTED AGENCY. Appointed agency is the name of the agency relationship in which either a seller-client or a buyer-client agrees to be exclusively represented by an affiliated agent of a broker. In this relationship, it is understood that nobody else in the brokerage office represents the principal except the appointed agent. |
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In Iowa, the broker who fails to properly supervise the activities of a salesperson or broker associate is subject to a civil penalty of
A) $2,500. B) no dollar limit. C) $10,000. D) $50,000. |
The answer is $2,500. In Iowa, the broker who fails to properly supervise the activities of a salesperson or broker associate is subject to a civil penalty of $2,500. The broker is still responsible for the associate's activities even if the associate does not keep the broker fully informed. |
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In which situation would the Iowa Real Estate Commission get involved?
A) Cooperating brokers fighting over procuring cause B) An unrepresented buyer arguing with a for sale by owner over the return of an earnest money deposit C) Installing a lockbox on a listed property without permission D) A salesperson arguing with a broker over commission splits |
The answer is INSTALLING A LOCKBOX ON A LISTED PROPERTY WITHOUT PERMISSION. The Commission gets involved in cases where someone from the public is injured as a result of a violation by a licensee. Cooperating brokers fighting over procuring cause and salespersons arguing over commission splits with their broker do not involve the public and, therefore, are outside the Commission's jurisdiction. Also, an unrepresented buyer arguing with a for sale by owner over the return of an earnest money deposit does not involve licensees and is outside of the Commission's authority. |
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The real estate licensee did not discuss any form of agency representation with the buyer until after the closing. What are the consequences?
A) Invalidation of the transfer of real property B) Prima facie evidence of a violation of Iowa Code C) Licensee sued by the buyer for negligence D) Return of all commission fees by the licensee |
The answer is PRIMA FACIE EVIDENCE OF A VIOLATION OF IOWA CODE. Failure to discuss agency in writing prior to the consumer's entering a transaction is prima facie evidence of a violation under Section 543B.34, Subsection 4. However, failure to disclose agency does not affect the validity of title to real property already transferred. |
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How is the commission or fee in any brokerage agreement determined?
A) Set by the National Association of REALTORS ® B) Set by state law C) Negotiated among the parties to the agreement D) Set by the local real estate board |
The answer is NEGOTIATED AMONG THE PARTIES TO THE AGREEMENT. Any commission or fee in any brokerage agreement is fully negotiable among the parties to that brokerage agreement. |
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A listing agent took a listing for $250,000. At an open house, the agent met a buyer and wrote a $245,000 offer. The listing agent called the seller to present the offer at 4:00 pm. Before 4:00 pm, a co-op broker stopped by the listing agent's office and presented a full price offer on the same property. What is the proper presentation procedure for the listing agent?
A) Present the offers in the order written and wait to see what the seller desires to do with the first one before disclosing the existence of a second offer B) Just present the $245,000 offer C) Present both offers for the seller's perusal D) Present the $250,000 offer first without disclosing the $245,000 offer |
The answer is PRESENT BOTH OFFERS FOR THE SELLER'S PERUSAL. All offers must be promptly presented. Therefore, both offers must be presented for the seller's perusal. The seller has the right to compare the advantages and disadvantages of each offer. |
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In Iowa, who is allowed to prepare contracts for the purchase of real estate for others?
A)Real estate licensees B) Both real estate licensees and attorneys C) Attorneys D) Real estate trainers |
The answer is ATTORNEYS. Only attorneys may legally prepare contracts for the purchase of real estate for others. Licensees are permitted to fill in purchase agreements and related forms. |
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The recorder of deeds will NOT record a deed unless which document accompanies the deed?
A) Purchase Agreement B) Declaration of Value C) Groundwater Hazard Statement D) Seller's Property Disclosure Statement |
The answer is GROUNDWATER HAZARD STATEMENT. The Groundwater Hazard Statement must be recorded with the deed. |
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What forms can a broker complete?
A) Affidavits of child support B) Preprinted purchase agreements C) Deeds D) Installment sales contracts |
The answer is PREPRINTED PURCHASE AGREEMENTS. In Iowa, real estate brokers should be cautious to avoid the charge of practicing law without a license. They may assist in the transaction by filling in the blanks of attorney-prepared forms but may not prepare deeds, affidavits of child support or spousal support, or installment sales contracts or documents necessary to correct title defects. |
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Owners of a parcel of real estate in Iowa that borders the Mississippi River would be required to get the permission of the Iowa Department of Natural Resources (DNR) if they
A) divert, store, or withdraw water. B) construct and maintain piers. C) construct a mooring for their raft. D) construct a device to maintain their boat as long as it does not obstruct navigational commerce. |
The answer is DIVERT, STORE, OR WITHDRAW WATER. Permission to divert, store, or withdraw water must be cleared with the Iowa DNR. Iowa law allows all owners or lessees of land situated on the Iowa banks of the Mississippi or Missouri rivers to construct and maintain piers, cribs, and booms in front of their property. Owners may also construct and maintain any other proper and convenient erections and devices for their respective pursuits and the protection and harbor for rafts, logs, floats, and watercraft in such a manner as to create no material or unreasonable obstruction to the navigational commerce of the rivers. |
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When completing a real estate transaction involving a home built in 1965, the transaction folder should include all of the following EXCEPT
A) agency disclosure. B) verification of religion and race of the buyers. C) groundwater hazard statement. D) lead-based paint disclosure form. |
The answer is VERIFICATION OF RELIGION AND RACE OF THE BUYERS. Forms that must be completed during a residential real estate transaction include Agency Disclosure, Groundwater Hazard Statement, Declaration of Value, and in this situation, the Lead-Based Paint Hazard Statement because the house was built before 1978. |
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What is the legality of using two contracts from the same buyer on the same property if one of the contracts is used to purchase and the other is used to finance, with the TRUE price only known between the contracting parties and their agent?
A) Valid as long as the amount financed does not exceed $125,000 B) Considered a fraudulent practice C) Legally known as a deceptive practice D) Valid as long as the buyer and seller agree to the terms |
The answer is CONSIDERED A FRAUDULENT PRACTICE. Using two contracts from the same buyer on the same property, one to purchase and the other to finance, with the true price only known between the contracting parties and their agent, is called a dual contract and is a fraudulent practice. |
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What kind of title passes to a buyer once her purchase agreement is accepted and notification of acceptance takes place?
A) Legal title B) Transition title C) Equitable title D) Insurable title |
The answer is EQUITABLE TITLE. Equitable title is important because it means that the buyer has an insurable interest. In addition, the property cannot be sold to someone else. |
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Which required disclosure category is NOT found on a groundwater hazard statement?
A) Stored chemicals in a barn B) Presence of abandoned wells on the property C) Presence of any solid-waste disposal system D) Private burial sites with one or more human graves |
The answer is STORED CHEMICALS IN A BARN. Stored chemicals in a barn is not a required disclosure category found on a groundwater hazard statement. |
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A homeowner listed her home and advised her agent that the home had been tested for radon and that although the levels exceeded EPA guidelines, nothing had been done to remedy the condition. Which disclosure phrase BEST describes this health-risk situation?
A) A material adverse fact B) Meeting of the minds C) Proper notice D) Informed consent |
The answer is A MATERIAL ADVERSE FACT. Material adverse facts are those conditions or occurrences generally recognized as being of such significance that they would affect a buyer's decision to enter into a contract. Included in this definition are situations that present a significant health risk to the occupants of the property. |
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A buyer asked an agent to write an inflated offer to cover a phantom down payment, but the agent refused. Why did the agent refuse?
A) Because it is a simple misdemeanor B) Because it is unprofessional C) Because it is a fraudulent practice D) Because it is negligent misrepresentation |
The answer is BECAUSE IT IS A FRAUDULENT PRACTICE. Dual contracts are considered fraudulent practices, and agents must not be a party to such illegal actions. |
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How long is the broker required to keep copies of all executed closing documents?
A) Five years B) Ten years C) One year D) Three years |
The answer is FIVE YEARS. At closing, the broker is required to keep copies of all executed documents for five years. |
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A licensee's license was suspended and, on the next day (after the suspension), the licensee had a closing on a listing. What is TRUE concerning the agent's listing commission?
A) It is held by the broker until the license is reinstated. B) It is forfeited to the licensee's broker. C) It is okay for the licensee to collect the earned commission. D) It is forfeited to the seller. |
The answer is IT IS OKAY FOR THE LICENSEE TO COLLECT THE EARNED COMMISSION. It is okay for the licensee to collect earned commissions while suspended, but the agent isn't allowed to conduct any future business or close any pending transactions. |
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What are the limits of compensation, if any, from Iowa's state recovery fund?
A) None B) $100,000 per occurrence C) $50,000 per occurrence D) $25,000 per occurrence |
The answer is NONE. Iowa does not have a state recovery fund, so there are no limits. |
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A broker whose license had been suspended would be allowed to perform which real estate activity?
A) Continue with scheduled advertising until all existing contracts are exhausted B) Cancel all listings and property management agreements C) Finalize any pending closings D) Answer the business phone in a manner indicating that the brokerage is still active |
The answer is CANCEL ALL LISTINGS AND PROPERTY MANAGEMENT AGREEMENTS. Obviously, it would not be right for a suspended broker to continue to finalize any pending closings, continue advertising, or answer the phone in a manner that would suggest that the brokerage was still in operation. |
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The licensee did not request a continuance, nor did the licensee appear for the hearing. What are the consequences?
A) The licensee is fined additional inconvenience costs. B) A hearing is held without the licensee. C) A hearing is rescheduled to accommodate the licensee. D) The licensee can be found guilty by neglect to contest. |
The answer is A HEARING IS HELD WITHOUT THE LICENSEE. The hearing is held without the licensee, who is bound by the decision as though in attendance; the licensee loses the right to cross-examine witnesses and to present a defense. |
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Iowa law requires that all active licensees
A) register for coverage under their firm's E&O insurance policy. B) be both bonded and carry E&O insurance. C) be bonded. D) carry errors and omissions (E&O) insurance. |
The answer is CARRY ERRORS AND OMISSIONS (E&O) INSURANCE. Iowa law does not require that licensees be bonded. Instead, it requires errors and omissions (E&O) insurance. |
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What annual requirement must licensees meet in order to remain actively licensed with the Iowa Real Estate Commission?
A) Take 36 hours of continuing education B) Be bonded C) Renew their license D) Obtain E&O insurance |
The answer is OBTAIN E&O INSURANCE. Licensees must show proof of active errors and omissions insurance each year. They must show proof of 36 hours of continuing education every three years. |
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Upon completion of a Commission-initiated investigation, an informal hearing may be used to negotiate a settlement. Which statement is TRUE about informal hearings?
A) Attendance is required. B) Representative legal counsel may attend. C) Employing brokers are discouraged from attending. D) They are held in open sessions. |
The answer is REPRESENTATIVE LEGAL COUNSEL MAY ATTEND. Informal sessions are held in closed sessions, and attendance is optional. Employing brokers are encouraged to attend, and representative legal counsel may attend. |
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What is the minimal number of days before a scheduled Commission hearing that a licensee is allowed to request a continuance?
A) Eight B) Nine C) Seven D) Ten |
The answer is SEVEN. Within seven days of a scheduled hearing, an agent may request a continuance. |
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owa real estate law authorizes the Iowa Real Estate Commission to do which of the following?
A) Establish a state recovery fund for victims of a licensee's negligent misrepresentation B) Pursue complaints only against licensees C) Require licensees to be bonded D) Obtain an injunction in district court to prohibit a person from engaging in activities that violate the licensure requirement |
The answer is OBTAIN AN INJUNCTION IN DISTRICT COURT TO PROHIBIT A PERSON FROM ENGAGING IN ACTIVITIES THAT VIOLATE THE LICENSURE REQUIREMENT. Iowa authorizes the Iowa Real Estate Commission to obtain an injunction in district court to prohibit a person from engaging in activities that violate the licensure requirement. |
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What is the Iowa Real Estate Commission (IREC) allowed to subpoena?
A) Witnesses B) All of these C) Books and papers D) Records |
The answer is ALL OF THESE. The IREC is authorized to subpoena records, books, and witnesses. |
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When a designated broker's license is revoked, what effect does it have on any existing brokerage agreements?
A) The broker has 30 days to finalize any pending closings. B) All listings must be cancelled. C) The broker has two weeks to continue answering a business phone. D) Without written authorization, they can be assigned to another brokerage. |
The answer is ALL LISTINGS MUST BE CANCELLED. Upon receipt of the Commission's order, the suspended or revoked broker must cancel all listings and property management agreements, and sellers and lessors must be apprised of their right to list or lease with someone else. It is illegal to sell or assign listings or management agreements without written authorization of the seller or the lessor. |
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For which reason would the Iowa Real Estate Commission (IREC) NOT investigate a complaint?
A) A broker who fails to remit monies in a timely fashion into the brokerage's trust account B) A commission dispute between two brokers C) Habitual intoxication D) A broker who pays a bird dog fee to an unlicensed motel clerk in exchange for a referral |
The answer is A COMMISSION DISPUTE BETWEEN TWO BROKERS. A commission dispute between two brokers is outside the purview of the IREC. |
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Which of the following types of homeowners' insurance coverage is designed for condominium owners who purchased their interior surfaces but NOT the exterior surfaces or common areas?
A) HO-2 B) HO-3 C) HO-4 D) HO-6 |
The answer is HO-6. Other types of insurance policies cover condominium town houses where the owner owns the outside and the inside of the property, as well as insurance policies that just provide liability and personal property protection. |
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Who must hold a license before practicing their trade?
A) Home inspectors B) Owners selling by owner C) Real estate agents D) Sellers of time-share uses |
The answer is REAL ESTATE AGENTS. Real estate agents must be licensed to help bring buyers and sellers together; however, home inspectors, owners selling by owner, and sellers of time-share uses are not required to be licensed. |
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Through what entity may the landlord apply to evict a tenant?
A) District court B) Iowa Real Estate Commission C) Magistrate's court D) State attorney general's office |
The answer is DISTRICT COURT. If a lessee holds over after the termination of a lease and proper service has been completed, Iowa Code Chapter 648 provides judicial action through the district court. |
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What is the name of the future potential interest that a wife has in her husband's estate?
A) Tenancy in common B) Curtesy C) Remainder interest D) Dower |
The answer is DOWER. Dower is the name of the future potential interest that a wife has in her husband's estate. This legal concept is known as inchoate, meaning "a right not yet perfected." A wife's interest in her husband's estate does not exist until her husband dies. Therefore, before her husband's death, the wife has an inchoate, dower interest. |
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To receive legal recognition in Iowa's judicial system, a lease must be in writing if it is for more than how many months?
A) 9 B) 3 C) 12 D) 6 |
The answer is 12. This legal requirement is rooted in a legal concept known as the statute of frauds. This statute requires contracts like leases to be in writing in order for the courts to render opinions on whether or not either party reneged on a promise made. |
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How can a life estate be created?
A) By will or deed B) By neither will nor deed C) By deed only D) By will only |
The answer is BY WILL OR DEED. Life estates can be created by will or deed. |
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Although licensing is not required for appraising in Iowa, MOST appraisers in Iowa are licensed and must meet what federal requirements?
A) USPAP B) CERCLA C) FDIC D) FNMA |
The answer is USPAP. Those who are licensed must meet federal requirements established in the Uniform Standards of Professional Appraisal Practice (USPAP). |
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In Iowa, how are disputed community property assets usually divided?
A) 25-75 B) 40-60 C) 50-50 D) Winner takes all |
The answer is 50-50. Both parties are considered equal owners and, therefore, property assets are divided 50-50. |
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The cooling-off period for a purchaser of a time-share to rescind in writing the contract of sale is how many business days following receipt of all required information?
A) 10 B) 14 C) No cooling-off period. D) 5 |
The answer is 5. The cooling-off period for a purchaser of a time-share to rescind in writing the contract of sale is five business days. |
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What are the dates that a taxpayer is allowed to protest a proposed property assessment?
A) April 30 to May 31 B) April 1 to July 1 C) April 16 to May 5 D) April 16 to May 16 |
The answer is APRIL 16 TO MAY 5. During this time, a homeowner can set up a hearing to discuss the homeowner's perspective. The actual hearing must be completed before July 1. |
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In Iowa, mechanics' liens
A) require a written notice to the owner prior to filing the lien. B) must be filed within 120 days of completion of the work. C) are effective as of the time the work was performed. D) take priority over each other based on the date the work contract is signed with the property owner. |
The answer is ARE EFFECTIVE AS OF THE TIME THE WORK WAS PERFORMED. No notice must be given to the owner prior to filing a mechanic's lien. The lien must be filed within 90 days of completion of the work and have priority over each other based on the date and time filed. |
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With municipal approval, a developer paid for street and sewer improvements and then relinquished ownership of them to the municipality. In this situation, what action took place?
A) Dedication B) Transfer C) Reassignment D) Conveyance |
The answer is DEDICATION. Dedication describes the conveyance of streets and sewers paid for by a developer and then given to the municipality. |
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An owner failed to survey her property and built a detached garage that encroached four feet onto a neighboring property. If the action was open, notorious, and without permission for a statutory period of ten years, what kind of easement did the owner create for herself?
A) Easement by necessity B) Easement by mistake C) Easement in gross D) Prescriptive easement |
The answer is PRESCRIPTIVE EASEMENT. Prescriptive easements are created without permission and are notorious, hostile, open, and distinct, and they must be used without challenge for more than ten years in Iowa. |
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When trying to determine whether a comparable is valid, what form is used by the assessor's office?
A) The Declaration of Intent B) The Declaration of Sale C) The Declaration of Value D) The Declaration of Revenue |
The answer is THE DECLARATION OF VALUE. It is a very valuable form and alerts the assessor if the sold property was an arm's-length transaction (market value) or less than arm's length, such as a sale to a family member, a tax sale, a foreclosure sale, etc. |
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Which appraising approach does the assessor use when determining market value for residential homes?
A) Cost approach B) Income approach C) Gross rent multiplier D) Sales comparison approach |
The answer is SALES COMPARISON APPROACH. This approach requires the use of recently sold comparable properties. It is the same approach that an appraiser uses when determining the value of a home for lending purposes. |
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In Iowa, easements may be created by adverse possession if someone's use of the property is
A) with the owner's consent. B) continuous for 20 years. C) hostile. D) hidden. |
The answer is HOSTILE. The use of the property must be hostile, meaning without the owner's consent. |
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An owner purchased and closed on a new home. After the contractor was paid and the title transferred, a subcontractor filed a mechanic's lien against the property. Which statement concerning the filed mechanic's lien is NOT true?
A) The owner is stuck with the lien. B) The owner is exempt because it was filed after title transfer. C) The contractor is liable for the subcontractor's bill. D) The lien is unenforceable. |
The answer is THE OWNER IS STUCK WITH THE LIEN. Just the opposite is true—it's the contractor's problem because title transferred to the owner before the lien was filed. The owner is now exempt. Although the lien may be filed, it is unenforceable. |
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To be enforceable, within how many days after job completion must a contractor file a mechanic's lien with the clerk of district court?
A) 90 B) 30 C) 120 D) 60 |
The answer is 90. A lien is required to prevent the property from being sold without paying the contractor. Therefore, in order for the title to be cleared, the lien must be satisfied. The 90 days helps protect an unsuspecting buyer from having a lien placed on the property after title transfer. |
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How big is a section of real estate?
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640 acres
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How big is a section of real estate?
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640 acres
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How many feet are in an acre?
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43,560
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