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50 Cards in this Set
- Front
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A licensed salesperson was assisting a seller in establishing a listing price for the seller's home. Prior to giving the seller the information the salesperson had gathered, the seller told the salesperson what price the seller wanted to use to list the home. Which of the following statements BEST describes what the salesperson should suggest as a list price:
A) at or above the highest ‘asking’ comparable property, regardless of the seller’s desired price. B) at or below the lowest comparable sold property. C) within range of the most recent ‘asking’ and ‘sold’ comparables in view of the seller’s urgency and market conditions. D) the amount the seller initially wanted to use for a list price. |
The correct answer is "C - within range of the most recent ‘asking’ and ‘sold’ comparables in view of the seller’s urgency and market conditions. " This is often a touchy issue for brokers and salespeople because many homeowners have an inflated idea of how much their home is really worth. They tend to discount things like quality of materials and age and focus only on the highest prices paid for houses of comparable size in their area. That's why gathering appropriate comps and carefully explaining all the key points of comparison is critical for establishing the best price at which a home will actually sell.
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An owner was constructing a building and was using second-hand materials. A building inspector checked the construction on numerous occasions; however, the construction continued. Which of the following would this accelerate?
A) external obsolescence B) functional obsolescence C) economic obsolescence D) physical depreciation |
The correct answer is "D - physical depreciation " Because the building was inspected numerous times during construction, we can assume that the use of second-hand materials was permissible and that they met minimum established safety standards. Even so, those materials can be expected to have a shorter useful lifespan than new and so it is physical depreciation that is accelerated.
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Which of the following deeds is the most commonly used in the United States?
A) quit claim B) bargain and sale C) warranty D) universal |
The correct answer is "C - warranty " Warranty deeds guarantee that the seller is giving the buyer a "clean" title with no other claims on it. It should be noted, however, that the period covered by the warranty can vary. In some cases, the warranty is made all the way back to the original deed, which can be hundreds of years. In others, the warranty may go no further back than when the seller first acquired the property.
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Ann Carr planted a rose garden on the corner of Mrs. Baird's property. Mrs. Baird was homebound and never left her house. Mrs. Baird never knew that Ann Carr had planted a rose garden on her property. The statutory period had elapsed and Ann Carr claimed the rose garden. Would Ann Carr have a good chance of getting rights to an easement by prescription?
A) Yes, because she had made open use of the property. B) Yes, because she made improvements that would not have been made otherwise. C) No, because Mrs. Baird did not know of the rose garden. D) No, because no improvements had been made to the property. |
The correct answer is "A - Yes, because she had made open use of the property. " An easement by prescription is similar to adverse possession and has three requirements beyond the varying time limits mandated by states. First, it must be continuous--as Ann's would have been since a rose garden needs maintenance. Second, it must be "open"--meaning Ann made no secret of planting and tending her garden. Third, it must be "hostile" to the interests of the owner--meaning Ann established her garden without the owner's knowledge or consent.
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Ross and Amanda Troutman own a $199,999 home that's insured with a $120,000 policy that includes an 80% coinsurance requirement. What amount will they receive from the insurance company if they sustain a loss of $175,000?
A) $165,000 B) $120,000 C) $175,000 D) $131,250.66 |
The correct answer is "D - $131,250.66 " To calculate the amount due the homeowners: Step 1 - 199,999.00 X 80% = $159,999.20 Step 2 - 120,000.00 divided by $159,999.20 = 0.7500038 Step 3 - Leaving 0.7500038 in my calculator and multiplying by $175,000.00 the amount of the loss = exactly $131,250.66
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The owner of an apartment complex hired a broker to rent six of the units. The owner further requested that the broker do everything possible to find women tenants only as the owner did not want the units rented to men as they are prone to have loud parties. Can the broker follow these instruction?
A) No, this would not be allowed as discrimination based on sex is prohibited by the fair housing laws B) No, but the broker would be allowed to discourage men by charging a higher security deposit C) Yes, this would be allowed since the owner was using the service of a broker to screen tenants D) Yes, this is allowed as long as the stipulation is placed in all advertisements |
The correct answer is "A - No, this would not be allowed as discrimination based on sex is prohibited by the fair housing laws " Although licensees are obligated to protect their clients' interests and follow their instructions to the best of their ability, violating fair housing regulations is not among those obligations. To follow a client's request to discriminate on any basis is no more legal than stealing a car to show a property because an agent's vehicle happened to be in the shop.
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After contracting for a house a buyer applied for a conventional loan at a mortgage banker. Which of the following items would NOT be listed on the good faith estimate of closing costs?
A) total credits B) broker's commission C) loan payments and dates D) pre-payment penalty and the amounts |
The correct answer is "B - broker's commission " Brokers' commissions are generally paid by the seller. Thus they are not part of the purchase price or closing costs.
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Which of the following is true of discount points?
A) They are usually charged to stimulate more interest in the secondary mortgage market. B) They are usually charged to improve the yield on a mortgage. C) They are determined by the Federal Reserve during periods of relatively high inflation, but are determined by banks in periods of lower inflation. D) They are determined by banks as a means of estimating the funds the banks need to keep in reserve. |
The correct answer is "B - They are usually charged to improve the yield on a mortgage. " Points are a form of fee charged by lenders and mean the borrower pays a slightly lower rate of interest, which can result in greater savings over time.
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Dole purchased a home and applied for a mortgage at Southgate Bank. The loan was made and payments were to be made on the 1st of each month. After making payments for three years, Dole lost his job and could not make the payments. Which of the following statements is correct?
A) The mortgagor could file a court action to have the house sold to satisfy the debt. B) The mortgagee could file a court action to have the house sold to satisfy the debt. C) The mortgagee could automatically sell the property to satisfy the debt. D) The mortgagor could automatically sell the property to satisfy the debt. |
The correct answer is "B - The mortgagee could file a court action to have the house sold to satisfy the debt. " In real estate terms, the "mortgagee" is the person who holds the loan, not the borrower. Since the lender is no longer receiving monthly payments, he may initiate court action. However, that is a last resort and most lenders are eager to work with borrowers to find other alternatives.
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A listing agreement is a legal:
A) contract between the seller and/or buyer and a broker that establishes their agency or non-agency relationships. B) rental agreement. C) assignment agreement. D) novation. |
The correct answer is "A - contract between the seller and/or buyer and a broker that establishes their agency or non-agency relationships. " A listing agreement is a contract between the broker and the seller and/or buyer, laying out their agency relationship.
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A residential real estate listing is generally considered to be:
A) A non-transferrable service contract B) A general agency agreement C) A granting of rights to contract D) None of the above |
The correct answer is "A - A non-transferrable service contract " Typical residential real estate listings are limited agency agreements that are personal service contracts between the broker and the principal. As such they may not be assigned to other brokers. The broker may, however, delegate fulfillment tasks to his or her employed agents.
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Which is an example of ostensible agency?
A) The principal showed by actions that the agent's actions were accepted. B) A broker was able to sell any or all of an owner's properties. C) A broker was able to sell only one of an owner's properties. D) A selling broker acting as a sub-agent of a listing broker |
The correct answer is "A - The principal showed by actions that the agent's actions were accepted. " Ostensible agency is the same as implied agency and means that the relationship is created by the actions of the parties rather than written contract. Even in those states that recognize implied agency as binding, a written agency agreement should be obtained as soon as possible to clarify the understandings of all parties and protect interests.
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An agent wishes to purchase his principal’s house. The laws of agency state that an agent:
A) may not deal in his/her own behalf with a principal. B) may not purchase the house in another person's name and later convey it to himself/herself without full disclosure. C) may purchase a principal's house only by paying the full asking price. D) may purchase a principal's house once it has been offered on the open market for a minimum of 30 days. |
The correct answer is "B - may not purchase the house in another person's name and later convey it to himself/herself without full disclosure. " Other than disclosure, there are no restrictions on licensees buying or selling property on their own behalf.
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A listing broker had a signed sale contract on a house. The broker then noticed a crumbling wall in the basement. Which of the following should the broker inform about the wall?
A) buyer only B) seller only C) both buyer and seller D) buyer, seller and mortgage company |
The correct answer is "C - both buyer and seller " Licensees owe honesty and disclosure of all material facts to both buyer and seller. Material facts do not need to be disclosed to mortgage companies. That's because their primary interest in the property is value and any material defects will already have been factored into the price well before closing.
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A seller was selling an unimproved 1.1-acre lot for $10,000. The seller listed the property with a broker who was also going to help any buyers in trying to locate suitable financing. The broker ran an ad in the paper on the property which said, "3,000 down will buy." Does the broker have to disclose anything else in the ad?
A) Yes, because the broker must also put in the ad that he would help buyers find financing. B) Yes, because the broker mentioned the down payment in the ad, he is also required to disclose all other financing terms. as well C) No, because on an unimproved lot, you can simply advertise the down payment. D) No, because a seller can advertise however he/she wants to. |
The correct answer is "B - Yes, because the broker mentioned the down payment in the ad, he is also required to disclose all other financing terms. as well " As a general rule, all advertisements, including those for real estate, that emphasize low down or monthly payments must also disclose other financing terms. For example, automobile manufacturers can not just advertise a low monthly lease payment. They must also disclose the total purchase price the lease is based on, mileage limitations, capital reduction fees and so forth.
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A borrower applied for a VA guaranteed first time mortgage for $50,000. However, the property appraised for $46,000. If the buyer still wished to buy the property, which could happen?
A) The broker could write up a different contract for a different sale price to take to the lender that is different from the actual contract. B) The VA could allow the borrower to make up the difference in cash. C) The VA could make the seller carry a second mortgage for the difference. D) The veteran could not get a VA loan because it appraised for over $35,000. |
The correct answer is "B - The VA could allow the borrower to make up the difference in cash. " In this instance, the VA loan permits the applicant to borrow up to 100% of the property's value, but not more than 100%. Thus, if the seller's price is firm despite the lower appraisal and the buyer still wishes to move forward, he may do so by making up the difference in cash, which will still secure 100% of the VA's interest in the property.
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A promissory note:
A) may not be executed in connection with a real estate loan. B) is an agreement to perform or not to perform certain acts. C) is the primary evidence of a debt. D) is a guarantee by a government agency. |
The correct answer is "C - is the primary evidence of a debt. " When a borrower signs a promissory note, he or she acknowledges the debt and all its terms and conditions. It is the primary instrument in virtually every type of loan.
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Which of the following is NOT a type of listing contract?
A) open listing B) exclusive agency C) exclusive right to sell D) MLS contract |
The correct answer is "D - MLS contract " An MLS contract is simply an agreement by which a recognized real estate firm agrees to pay a fee for the privilege of advertising properties in general. Listing agreements are between the firm and a specific seller concerning a specific property.
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The major intent of zoning regulations is to:
A) demonstrate the police power of the state. B) ensure the health, safety and welfare of the community. C) set limits on the amount and kinds of businesses in a given area. D) protect residential neighborhoods from encroachment by business and industry. |
The correct answer is "B - ensure the health, safety and welfare of the community. " Zoning regulations are, in fact, an example of police power. And they do set limits on the number and types of business permitted in a given area as well as protect residential neighborhoods from commercial encroachment. However, these are all effects of zoning regulations. They are established and enforced to protect the "good of the community" in the broadest, fairest way possible.
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As an agent for the seller, a real estate broker can:
A) guarantee a prospective buyer that the seller will accept an offer at the listed price and terms. B) solicit an offer to purchase the property from a prospective buyer. C) advise a prospective buyer of the best manner of taking title to the property. D) change the terms of the listing contract on behalf of the seller. |
The correct answer is "B - solicit an offer to purchase the property from a prospective buyer. " Soliciting offers to buy a client's property is a primary responsibility of an agent. Regarding the other choices, remember licensees cannot guarantee anything because there's no way to know another person's mind. Further, advising on forms of ownership and changing the terms of a contract are highly illegal.
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The foremost consideration in the purchase of a home is its affordability. What is the second?
A) construction specifications B) the age of the improvements C) the location of the property D) the landscaping and exterior |
The correct answer is "C - the location of the property " "Location, location and location," more than any other feature, determines a property's present and future value.
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Property over which an easement runs in favor of another parcel of real estate is known as a:
A) prescriptive estate. B) dominant estate. C) servient estate. D) condemned estate. |
The correct answer is "C - servient estate. " The dominant estate is the one benefiting from the easement and the servient is the one burdened by it. Said another way, the property is "burdened" because it has given up some right, even if it is fairly inconsequential.
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If the amount realized at a sheriff's sale as part of a mortgage foreclosure is more than the amount of the indebtedness and expenses, then the excess belongs to:
A) the mortgagor. B) the mortgagee. C) the sheriff's office. D) the county. |
The correct answer is "A - the mortgagor. " The mortgagor is the previous owner. Since bankruptcy is intended to satisfy debt, not punish the debtor, any excess funds belong to him or her.
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A buyer took delivery of the deed to his new house but forgot to record the deed. Under these circumstances:
A) The transfer of the property from the seller is ineffective. B) The buyer's interest is not fully protected against third parties. C) The deed is invalid after 90 days. D) The deed is invalid after 6 months. |
The correct answer is "B - The buyer's interest is not fully protected against third parties. " Recording a deed does not consummate the sale, but serves as due notice that the person named on the deed is the owner of record.
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A high vacancy rate may be caused by any of the following EXCEPT:
A) inept management. B) poor location. C) excessive rent. D) strong amenities. |
The correct answer is "D - strong amenities. " "Amenities" refer to the design and "lifestyle" features of a property such as pools, tennis courts, parking facilities, views, quality of fixtures, size of rooms and so forth. Obviously, the higher the level of amenities relative to the rent, the more likely a property is to be fully occupied.
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A buyer who is shown properties listed for sale by a broker is the broker's:
A) client. B) principal. C) customer. D) fiduciary. |
The correct answer is "C - customer. " Unless specific buyer's agency exists, the broker can be presumed to represent the seller. Thus the buyer is a customer, not the client.
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The seller conveyed a quitclaim deed to the buyer. Upon receipt of the deed, the buyer may be certain that:
A) The seller owned the property. B) There are no encumbrances against the property. C) The buyer now owns the property subject to certain claims of the seller. D) All of the seller's interests in the property belong to the buyer. |
The correct answer is "D - All of the seller's interests in the property belong to the buyer. " It's important to remember that quit claim deeds have no guarantees beyond the signer's declaration that he or she is giving up all claims to the title. Accordingly, they are generally used to clear up minor issues and almost never as the primary form of transferring ownership.
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L conveys the ownership of his house to his mother and stipulates that upon her death he will recapture the ownership. The interest L has in the ownership is a:
A) remainder estate. B) courtesy estate. C) legal life estate. D) reversion estate. |
The correct answer is "D - reversion estate. " Just as the term implies, a reversion estate occurs when an owner grants use of a property to another for a period of time, with the stipulation that when a defined event occurs (death, the passage of a certain number of years, etc.), all rights revert back to the grantor.
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The listing and selling brokers agree to split a 7% commission fifty-fifty on a $96,900 sale. The listing broker gives the listing salesperson 30% of his commission and the selling broker gives the selling salesperson 35% of his commission. How much does the selling salesperson earn from the sale?
A) $1,139.78 B) $1,174.78 C) $971.95 D) $1,187.03 |
The correct answer is "D - $1,187.03 " At 7%, the commission to be shared equals $6,783. Since the brokers agreed to an even split, each receives $3,391. Since the selling salesperson received 35% of his broker's share, he would earn $1,187.03.
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A joint tenancy with right of survivorship may be created:
A) automatically, if the property is distributed to the surviving children. B) by presumption, if another form of ownership is not described. C) by deed or will. D) when a deed is signed by both spouses. |
The correct answer is "C - by deed or will. " Joint tenancy can never be presumed or established by default; it must be specifically declared to be the chosen form of ownership.
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An offeree has the right to:
A) reject an offer. B) revoke an offer. C) rescind an offer. D) release an offer. |
The correct answer is "A - reject an offer. " The "offeree" is the person to whom an offer is made, usually the seller, and he or she is free to accept or reject it for any reason.
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T leases store space to K for a restaurant, and K installs his ovens, booths, counters and other equipment. When do these items become real property?
A) when they are installed B) when K defaults on his rental payments C) when the lease takes effect D) when the lease expires |
The correct answer is "D - when the lease expires " Unless T removes them at the end of the lease and restores the property, they become "trade fixtures" that are part of the real property and thus now belong to the owner.
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The severalty owner of a parcel of land sells it to a buyer. The buyer insists that the owner's wife join in signing the deed. The purpose of obtaining the wife's signature is to:
A) Terminate any rights the wife may have in the property. B) Defeat any courtesy rights. C) Provide evidence that the owner is married. D) Subordinate the wife's interests to the buyer. |
The correct answer is "A - Terminate any rights the wife may have in the property. " Even though severalty means the husband is the sole owner, without the wife signing as well, it's possible she could come back at some future point and assert spousal rights.
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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) amortization ratio. B) loan to value ratio. C) debt to equity ratio. D) capital use ratio. |
The correct answer is "B - loan to value ratio. " Loan-to-value, or LTV, is the first and usually most important lending consideration. Other problems, such as a borrower's poor credit, can often be overcome, but without an acceptable LTV, most deals won't go through.
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There is a spectacular house that a salesperson from Firm A has been trying for several weeks to list for sale. The owners have been interviewing salespeople from different firms. They tell A's salesperson that Firm B will charge 2% less commission for selling the house. What should A's salesperson say to the owner to get the listing?
A) Salespeople will not show Firm B's listings because of their commission fees. B) Most brokers in the area charge a standard rate of commission, including Firm A. C) Firm B cannot provide good services because they charge less. D) Firm A provides excellent services to market their sellers' properties. |
The correct answer is "D - Firm A provides excellent services to market their sellers' properties. " Not only is criticizing another firm's compensation policy a bad business practice, it's also potentially illegal under the Sherman Anti-Trust Act.
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In a typical agency relationship between the broker and the client, the broker's commission is determined by:
A) state law. B) the local real estate board. C) mutual agreement. D) minimums based on the property type. |
The correct answer is "C - mutual agreement. " There are no rules, regulations, guidelines or "preferred" rates or means of compensation for brokers and salespeople and each relationship is negotiated separately.
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Which of the following is a means of transferring title from one party to another?
A) an abstract of title B) title insurance C) a deed D) a title search |
The correct answer is "C - a deed " Deeds are the written form by which land is transferred from one owner to another. In order to be legal, they must be executed, delivered by the current owner and accepted by the new owner.
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A land contract provides for the:
A) sale of unimproved land only. B) sale of real property under an option agreement. C) Conveyance of legal title at a future date. D) immediate transfer of reversionary rights. |
The correct answer is "C - Conveyance of legal title at a future date. " This is also known as an installment sale. The person acquiring the property usually occupies it and makes payments to the owner but doesn't take title until (often) the final payment is made.
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An easement granting a personal right to use a singular property, but which does not attach to the property is called an:
A) easement in gross. B) easement by condemnation. C) easement by necessity. D) easement by prescription. |
The correct answer is "A - easement in gross. " Don't confuse this with the other types of easements: easement by condemnation, in which the property is acquired for PUBLIC purpose; an easement by prescription, which is acquired by continuous, open and hostile use of another's property over a period of years; or an easement by necessity, which is necessary for another to enter and exit his own property.
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A lease that goes from month to month is known as:
A) a life estate. B) an estate at will. C) an estate from period to period. D) a fee simple estate. |
The correct answer is "C - an estate from period to period. " An estate from period to period is an interest in a leased property that goes from period to period, be it week to week, month to month, or year to year. Don't confuse this with fee simple, which is the highest degree of ownership; a life estate, which expires over time; or an estate at will, which is indefinite in length.
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What is the main responsibility of a county tax assessor?
A) Establish the tax rate. B) Adjust the tax rate. C) Estimate the value of properties for tax purposes. D) Estimate total tax revenue for the county. |
The correct answer is "C - Estimate the value of properties for tax purposes. " In many states, the tax assessor must make a number of sometimes subjective judgments about properties to establish value for tax purposes, including "curb appeal." In California, it's more cut and dried, with a maximum increase of 2% a year, except for structural modifications which will trigger a re-assessment.
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Which of these principles states that "a person will not pay more for one property than he or she would for another that's equally desirable?"
A) The principle of substitution. B) The principle of price conformity. C) The principle of fair distribution. D) The principle of liaise-faire. |
The correct answer is "A - The principle of substitution. " The principle of substitution is at the heart of real estate pricing and competitive market analyses.
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What is RESPA?
A) A standard for closing procedures. B) A federal anti-discrimination statute. C) A low-income housing program. D) A standard for access and accommodation for persons with disabilities. |
The correct answer is "A - A standard for closing procedures. " The intent of RESPA -- the federal Real Estate Settlement Procedures Act -- is to make borrowers more aware of costs and charges.
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Which of the following transaction types would appear on a RESPA statement?
A) A finder's fee. B) An appraisal fee. C) Fees paid for the preparation of the statement. D) Real estate sales commissions. |
The correct answer is "B - An appraisal fee. " To emphasize, the point of RESPA is to disclose costs and discourage the use of "junk fees." Accordingly only legitimate costs such as an appraiser's fee are included. Commissions are not fees and are covered under separate agreements... a legitimate finder's fee is a cost borne by licensees and/or others on the "professional services" side of the transaction... and fees for preparing the RESPA document are specifically prohibited.
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Brad is a salesperson showing a home to first-time buyers. He tells them builder's grade kitchen counters are, "custom, hand-painted Mexican tile"… that the cooktop is a "$2,500 restaurant grade" appliance when it's actually a low-priced knock-off and other such exaggerations. Is this just good salesmanship?
A) Yes. B) Yes, as long as Brad is not knowingly misrepresenting facts. C) No, it's a form of, "puffery." D) No, it's fraud. |
The correct answer is "C - No, it's a form of, "puffery." " Brad is treading on dangerous ground. It's not quite fraud or misrepresentation, because Brad could claim he thought he was describing the features accurately… though given the price of the house, a practiced eye and professional diligence, he should have known better. Moreover, if the couple bought the house on the basis of Brad's assertions, he could be open to discipline because, first-time buyers can be considered "unsophisticated" and thus victims by the courts. Rule of thumb: don't make specific or comparative claims like Brad's without verifying their accuracy.
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Which of the following are ways to acquire title in California?
A) By deed. B) By succession. C) By occupancy. D) All of the above. |
The correct answer is "D - All of the above. " Typically, a person acquires title through "succession" when a relative dies without a will and he or she is granted possession through California's intestate laws. Title can, of course, also be gained by inheritance through a will... and by occupancy, whether by adverse possession or because the property appears to be unclaimed by anyone.
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Which of the following is NOT necessary for acquiring title to a property by adverse possession?
A) Occupying the property for at least five years. B) "Open and notorious use." C) Residing on the property. D) A claim of right. |
The correct answer is "C - Residing on the property. " Occupancy and residency are not necessarily the same thing. A "claim of right" or "color of title" means that the occupier must have some evidence, though not a clear title, that he or she has a right to the property.
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Which of the following IS an additional requirement for adverse possession?
A) Paying taxes on the property. B) "Exclusive and hostile" occupation. C) Neither a nor b. D) Both a and b. |
The correct answer is "D - Both a and b. " The occupier must pay taxes on the property during the entire term of his or her occupancy. In addition, the occupation must be exclusive with no other party attempting to gain possession and of such conspicuousness as to serve reasonable notice on the rightful owner of the intent to gain possession.
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Of the following types of real estate syndicates or "group investments," which requires participation by at least 100 investors?
A) A general partnership. B) A limited partnership. C) A REIT, or Real Estate Investment Trust. D) A Corporation. |
The correct answer is "C - A REIT, or Real Estate Investment Trust. " REITS own, and in most cases, manage income-producing properties such as apartment buildings and shopping centers. Like securities, their shares are freely traded on stock exchanges. Like limited partnerships, an investor's risk is limited to his or her investment. However, unlike partnerships a REIT cannot pass tax losses on to its investors... while shares in a limited partnership are not traded like stocks and are therefore not as liquid.
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Who establishes, "successor's liability?"
A) The real estate commissioner. B) The Franchise Tax Board. C) The Department of Commerce. D) The State Board of Equalization. |
The correct answer is "D - The State Board of Equalization. " Successor's liability refers to unpaid taxes owed by a business owner prior to he or she selling that business to a third party. Unless disclosed and reflected in the selling price, those taxes become the liability of the new owner. That's why it's wise for business buyers to obtain a "clearance receipt" from the Board of Equalization prior to closing.
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