Principles of Real Estate Quiz | Test Your Real Estate Knowledge

1. 14.8 A due-on-sale clause in a sale contract puts parties on notice that

The full price of the property is due the seller at closing.

Any loans surviving closing become immediately payable.

All of the seller's debts must be retired before or upon closing.

Third-party loans surviving closing may be accelerated by the lender.

Due-on-sale clause. The parties state their understanding that loans that survive the closing may be called due by the lender. Both parties agree to hold the other party harmless for the consequences of an acceleration.

Explanation

Due-on-sale clause. The parties state their understanding that loans that survive the closing may be called due by the lender. Both parties agree to hold the other party harmless for the consequences of an acceleration.

2. 14.9 A sale contract may specifically deal with tax withholding responsibility if the seller is a foreigner. What is this responsibility?

The buyer must withhold 10% of the purchase price at closing for the seller's capital gain tax payment.

The buyer must withhold 10% of the purchase price at closing for the buyer's capital gain tax payment.

The seller must withhold 10% of the buyer's funds as a deposit on the buyer's capital gain tax.

The seller must withhold 10% of the sale price to pay the seller's capital gain tax.

3. 14.10 An important legal characteristic of an option-to-buy agreement is that

The potential buyer, the optionee, is obligated to buy the property once the option agreement is completed.

The optionor must perform if the optionee takes the option, but the optionee is under no obligation to do so.

The contract can be executed at no cost to the optionee.

It is a bilateral agreement.

4. 14.11 A tenant has an option-to-purchase agreement with the landlord that expires on June 30. On July 1, the tenant frantically calls the landlord to exercise the option, offering the apology that she was busy with a death in the family. Which of the following is true?

Since options contain grace periods, the landlord must sell.

The tenant loses the right to buy, but can claim the money paid for the option from the landlord.

The landlord does not have to sell, but must renew the option.

The option is expired, and the tenant has no rightful claim to money paid for the option.

5. 14.12 A tenant exercises an option to buy a condominium. The landlord agrees, but raises the agreed price by$3,000, claiming financial distress. The landlord does, however, offer the tenant two months of free rent before closing as an offset. Which of the following is true?

The tenant can force the sale at the original terms.

The landlord has taken a fully legal action which the tenant must abide by.

The option is null, and the optionee may reclaim any option money paid.

The landlord must offer sufficient free rent to equal the $3,000 price increase.

6. 14.13 Which of the following is true regarding the legal nature of option contracts?

They are not assignable.

They are enforceable, whether written or oral.

They give the optionee an equitable interest in the property.

They must be recorded to be valid.

The optionee enjoys an equitable interest in the property because the option creates the right to obtain legal title. However, the option does not in itself convey an interest in real property, only a right to do something governed by contract law.

Explanation

The optionee enjoys an equitable interest in the property because the option creates the right to obtain legal title. However, the option does not in itself convey an interest in real property, only a right to do something governed by contract law.

7. 14.14 An important distinction between a contract for deed and a contract for sale is

A contract for deed requires no action on the part of the seller.

A contract for deed requires no action on the part of the buyer.

The seller retains legal title in a contract for deed transaction until fully executed.

The buyer acquires legal title in a contract for deed transaction.

It is a bilateral agreement between a seller, the vendor, and a buyer, the vendee, in which the vendor defers receipt of

some or all of the purchase price of a property over a specified period of time. During the period, the vendor retains legal title and the vendee acquires equitable title.

Explanation

It is a bilateral agreement between a seller, the vendor, and a buyer, the vendee, in which the vendor defers receipt of

some or all of the purchase price of a property over a specified period of time. During the period, the vendor retains legal title and the vendee acquires equitable title.

8. 14.15 While a property is under a contract for deed, the seller, or vendor, mortgages her equity in the property, and has a separate judgment lien placed on the property. Faced with financial loss, the vendor assigns the contract to another party, then leaves town. What can the vendee do in this case?

Rightfully cancel the agreement and reclaim all deposits.

Sue the creditor for removal of the judgment lien.

Disclaim the lien and the mortgage due to homestead rights.

Comply with the contract and take legal title when its terms are fulfilled.

9. 14.16 A potential danger involved in a contract for deed is that

The vendor may rightfully sell legal title to another party during the contract period.

The vendor's rights to encumber the property are extinguished.

The vendee may not have a right of redemption.

The vendee must make an inordinately high down payment, which can be lost.

In some states, a breach of the contract for deed is remedied under local contract law rather than foreclosure law. The buyer may not have the protections of a redemption period or other buyer-protection laws which accompany formal

foreclosure proceedings. The vendor might sue the vendee for breach of contract for the slightest infraction of the contract terms.

Explanation

In some states, a breach of the contract for deed is remedied under local contract law rather than foreclosure law. The buyer may not have the protections of a redemption period or other buyer-protection laws which accompany formal

foreclosure proceedings. The vendor might sue the vendee for breach of contract for the slightest infraction of the contract terms.

10. 15.1 Price is best described as

What suppliers charge for goods and services.

The amount of money consumers are willing to pay for a product or service.

The amount of money a buyer and seller agree to exchange to complete a transaction.

A control placed on prices by the federal government.

11. 15.2 Four principal determinants of value underlying the price for a product are

Durability, quality, scarcity, and materials.

Desire, utility, scarcity, and purchasing power.

Popularity, utility, quality, and discount.

Desire, costs, convenience, and time.

The value of something is based on the answers to four questions:

< How much do I desire it?

< How useful is it?

< How scarce is it?

< Am I able to pay for it?

Explanation

The value of something is based on the answers to four questions:

< How much do I desire it?

< How useful is it?

< How scarce is it?

< Am I able to pay for it?

12. 15.3 A town has a rapidly growing population, but there are no longer any vacant lots around the lake to build more houses. In this case, it is likely that the price of existing homes on the lake

Will stabilize, since the population must stabilize.

Will increase.

Will decline, since no further building can take place.

Will not show any predictable movement.

13. 15.4 If there is a significant undersupply of homes in a market, construction will tend to increase. This is an example of

Supply outstripping demand.

Overpricing products.

The price mechanism.

The market tending toward equilibrium.

market demand moves to meet supply, and supply moves to meet demand. If there is an extreme shortage of an item for which there is normally a strong demand, suppliers will rush to increase production to close the gap. If inventories of an item are very high, suppliers will stop production until the oversupply has been depleted.

Explanation

market demand moves to meet supply, and supply moves to meet demand. If there is an extreme shortage of an item for which there is normally a strong demand, suppliers will rush to increase production to close the gap. If inventories of an item are very high, suppliers will stop production until the oversupply has been depleted.

14. 15.5 If commercial real estate rental prices are falling in a market, it is likely that

Demand has outstripped supply of space.

The market is in equilibrium.

The market is over-supplied.

Employment is increasing.

15. 15.6 Which of the following is an important economic characteristic of real estate?

The demand must literally come to the supply.

Real estate is a highly liquid product.

The product is quick to adapt to market changes.

The market is centralized.

Since real property cannot be moved, real property investors and users must come to the supply. This creates risk, because if demand drops, the supply cannot be transported to a higher demand market.

Explanation

Since real property cannot be moved, real property investors and users must come to the supply. This creates risk, because if demand drops, the supply cannot be transported to a higher demand market.

16. 15.7 The foremost factor contributing to commercial and residential demand in a market is

Marketing

Base employment.

Existing supply of properties.

Household income.

17. 15.8 A construction boom in a market is an indication that prices

Have been increasing.

Have been declining.

Have been in equilibrium.

Have exceeded supply.

18. 15.9 A local government could stimulate the real estate market by

Increasing labor costs and curbing the money supply.

Increasing taxes and interest rates.

Declaring a moratorium on construction.

Expanding the sewer system.

Option 5

19. 15.10 Two important concerns of retail property users are

Trade area population and spending patterns.

Quality of life and dwelling amenities.

Costs of occupancy and building efficiency.

Environmental regulations and access by suppliers.

20. 15.11 Two important concerns of office property users are

Trade area population and visibility.

Convenience and neighborhood make-up.

Costs of occupancy and building efficiency.

Environmental regulations and zoning.

21. 16.1 As a component of real estate value, the principle of substitution suggests that

If two similar properties are for sale, a buyer will purchase the cheaper of the two.

If one of two adjacent homes is more valuable, the price of the other home will tend to rise.

If too many properties are built in a market, the prices will tend to go down.

People will readily move to another home if it is of equal value.

22. 16.2 Highest and best use of a property is that use which

Is physically and financially feasible, legal, and the most productive.

Is legal, feasible, and deemed the most appropriate by zoning authorities.

Entails the largest building that zoning ordinances will allow developers to erect.

Conforms to other properties in the area.

23. 16.3 The concept of market value is best described as

The price a buyer will pay for a property, assuming other similar properties are within the same price range.

24. 16.4 A significant difference between an appraisal and a broker's opinion of value is

The appraiser tends to use only one or two of the approaches to value.

The broker may not be a disinterested party.

The broker is subject to government regulation in generating the opinion.

The appraiser uses less current market data.

25. 16.5 A notable weakness of the sales comparison approach to value is that

There may be no recent sale price data in the market.

The approach is not based on the principle of substitution.

The approach is only accurate with unique, special purpose properties.

Sale prices cannot be compared, since all real estate is different.

26. 16.6 The steps in the market data approach are

Choose nearby comparables, adjust the subject for differences, estimate the value.

Gather relevant price data, apply the data to the subject, estimate the value.

Select comparable properties, adjust the comparables, estimate the value.

Identify previous price paid, apply an appreciation rate, estimate the value.

1. Identify comparable sales.

2. Compare comparables to the subject and make adjustments to comparables.

3. Weight values indicated by adjusted comparables for the final value estimate of the subject.

Explanation

1. Identify comparable sales.

2. Compare comparables to the subject and make adjustments to comparables.

3. Weight values indicated by adjusted comparables for the final value estimate of the subject.

27. 16.7 In the sales comparison approach, an adjustment is warranted if

The buyer obtains conventional financing for the property.

The seller offers below-market seller financing.

A comparable is located in another, albeit similar neighborhood

One property has a hip roof and the other has a gabled roof.

28. 16.8 To complete the sales comparison approach, the appraiser

Averages the adjustments.

Weights the comparables.

Discards all comparables having a lower value.

Identifies the subject's value as that of the nearest comparable.

29. Property management and real estate asset mangement are both real estate management professions. The primary distinction between the two is:

Property managers always report to an asset manager.

Asset managers have greater knowledge of a property's finances.

Property managers handle day-to-day operations while asset managers manage portfolios of properties.

Asset managers are primarily responsible for maintenance technicians.

30. 16.9 One weakness of the cost approach for appraising market value is that

Builders may not pay market value for materials or labor.

Market value is not always the same as what the property cost.

Comparables used may not have similar quality of construction.

New properties have inestimable costs and rates of depreciation.

The limitations of the cost approach are that:

< the cost to create improvements is not necessarily the same as market value

< depreciation is difficult to measure, especially for older buildings

Explanation

The limitations of the cost approach are that:

< the cost to create improvements is not necessarily the same as market value

< depreciation is difficult to measure, especially for older buildings

31. People in the real estate business who primarily focus on creating new properties are

Broker

Developer

Zoning administrators

Excavators.

32. 16.10 The cost of constructing a functional equivalent of a subject property is known as

Reproduction cost.

Replacement cost.

Restitution cost.

Reconstruction cost.

33. The term "commercial property" generally refers to

Non-owner-occupied properties.

Retail, office, and industrial properties.

Multi-tenant properties.

Retail properties.

34. 16.11 An office building lacks sufficient cooling capability to accommodate modern computer equipment. This is an example of

Physical deterioration.

Economic obsolescence.

Incurable depreciation.

Functional obsolescence.

35. Which of the following professionals involved in the real estate business are most concerned about procuring buyers and seller for clients?

Brokers and agents.

Property Managers

Corporate real estate managers.

Appraisers

36. 16.12 A home is located in a neighborhood where homeowners on the block have failed to maintain their properties. This is an example of

Curable external obsolescence.

Incurable economic obsolescence.

Functional obsolescence.

Physical deterioration.

Economic obsolescence. Economic (or external) obsolescence is the loss of value due to adverse changes in the surroundings of the subject property that make the subject less desirable. Since such changes are usually beyond the control of the property owner, economic obsolescence is considered an incurable value loss. Examples of economic obsolescence include a deteriorating neighborhood, a rezoning of adjacent properties, or the bankruptcy of a large employer.

Explanation

Economic obsolescence. Economic (or external) obsolescence is the loss of value due to adverse changes in the surroundings of the subject property that make the subject less desirable. Since such changes are usually beyond the control of the property owner, economic obsolescence is considered an incurable value loss. Examples of economic obsolescence include a deteriorating neighborhood, a rezoning of adjacent properties, or the bankruptcy of a large employer.

37. 1.5 Which of the following ways of specializing is common in the real estate brokerage buisness?

By type of houses.

By geography.

By financial background of client.

By type of mortgage.

38. 16.13 In appraisal, loss of value in a property from any cause is referred to as

Deterioration.

Obsolescence.

Depreciation.

Deflation.

Depreciation is the loss of value in an improvement over time. Since land is assumed to retain its value indefinitely, depreciation only applies to the improved portion of real property. The loss of an improvement's value can come from any cause, such as deterioration, obsolescence, or changes in the neighborhood. The sum of depreciation from all causes is accrued depreciation.

Explanation

Depreciation is the loss of value in an improvement over time. Since land is assumed to retain its value indefinitely, depreciation only applies to the improved portion of real property. The loss of an improvement's value can come from any cause, such as deterioration, obsolescence, or changes in the neighborhood. The sum of depreciation from all causes is accrued depreciation.

39. 1.6 What is an advisory service provider?

A broker of fee simple titles.

A corporate real estate broker.

A broker performing non-transactional services for a commission.

A broker who renders real estate services for a fee.

40. 16.14 The first two steps in the cost approach are to estimate the value of the land and the cost of the improvements. The remaining steps are

Estimate depreciation, subtract depreciation from cost, and add back the land value.

Subtract deterioration from cost, estimate land depreciation, and total the two values.

Estimate depreciation of land and improvements, subtract from original cost.

Estimate obsolescence, subtract from the cost of land and improvements.

Steps in the Cost Approach

1. Estimate land value.

2. Estimate reproduction or replacement cost of improvements.

3. Estimate accrued depreciation.

4. Subtract accrued depreciation from reproduction or replacement cost.

5. Add land value to depreciated reproduction or replacement cost.

Explanation

Steps in the Cost Approach

1. Estimate land value.

2. Estimate reproduction or replacement cost of improvements.

3. Estimate accrued depreciation.

4. Subtract accrued depreciation from reproduction or replacement cost.

5. Add land value to depreciated reproduction or replacement cost.

41. 1.7 The level of government which is most active in regulating real estate licensees is the

Federal goverment

State goverment

County goverment

Municipal government where the person resides.

42. 16.15 The roof of a property cost $10,000. The economic life of the roof is 20 years. Assuming the straight- line method of depreciation, what is the depreciated value of the roof after 3 years?

$10,000

$8,500

$7,000

$1,500

43. 2.1 - What guarantees the right of the private ownership of real estate in the United States.

Common law.

Local statutes

The Napoleonic Code

The constitution.

44. 16.16 The income capitalization approach to appraising value is most applicable for which of the following property types?

Single family homes

Apartment buildings

Undeveloped land

Churches

45. 2.2 Which of the following is the best definition of real estate?

Land and personal property

Unimproved land

Land and everything permanently attached to it.

An ownership interest in land and improvements

46. 16.17 The steps in the income capitalization approach are:

Estimate gross income, multiply times the gross income multiplier.

Estimate effective income, subtract tax, apply a capitalization rate.

Estimate net income, and apply a capitalization rate to it.

Estimate potential income, apply a capitalization rate to it.

47. 2.3 Which of the following is included in the legal concept of land?

The surface of the earth and all natural things permanently attached to the earth.

Only the surface of the earth that is delineated by boundaries.

The surface of the earth except for lakes and streams.

Everything above, on and below the surface of the earth.

The legal concept of land encompasses:

the surface area of the earth

everything beneath the surface of the earth extending downward to its center

all natural things permanently attached to the earth

the air above the surface of the earth extending outward to infinity.

Explanation

The legal concept of land encompasses:

the surface area of the earth

everything beneath the surface of the earth extending downward to its center

all natural things permanently attached to the earth

the air above the surface of the earth extending outward to infinity.

48. 16.18 Net operating income is equal to

Gross income minus potential income minus expenses.

Effective gross income minus debt service.

Potential gross income minus vacancy and credit loss minus expenses.

Effective gross income minus vacancy and credit loss.

49. 2.4 What are the three unique physical characteristics of land?

Fixed, unchangeable, homogenous.

Immobile, indestructible, heterogenous.

Three-dimensional, buildable, marketable.

Natural, measurable, inorganic.

Physical characteristics. Land has three unique physical characteristics: immobility, indestructibility, and heterogeneity.

Explanation

Physical characteristics. Land has three unique physical characteristics: immobility, indestructibility, and heterogeneity.

50. 16.19 If net income on a property is $20,000 and the cap rate is 5%, the value of the property using the income capitalization method is

$100,000.

$400,000.

$1,000,000.

$4,000,000.

NOI / Cap rate = value 20,000 / .05 = 400,000

Explanation

NOI / Cap rate = value 20,000 / .05 = 400,000

51. 2.5 The primary distinction between the legal concepts of land and real estate is that

Real estate includes air above the surface and minerals below the surface.

Real estate is indestructable.

Land has no defined boundaries.

Land does not include man-made structures.

52. 16.20 The principal shortcoming of the gross rent multiplier approach to estimating value is that

Numerous expenses are not taken into account.

The multiplier does not relate to the market.

The method is too complex and cumbersome.

The method only applies to residential properties.

The advantage of the income multiplier is that it offers a relatively quick indication of value using an informal methodology. However, the approach leaves many variables out of consideration such as vacancies, credit losses, and operating expenses. In addition, the appraiser must have market rental data to establish multipliers.

Explanation

The advantage of the income multiplier is that it offers a relatively quick indication of value using an informal methodology. However, the approach leaves many variables out of consideration such as vacancies, credit losses, and operating expenses. In addition, the appraiser must have market rental data to establish multipliers.

53. 2.6 The primary distinction between the legal concept of real estate and real property is that

Real property includes ownership of a bundle of rights.

Real property includes improvements.

Real property is physical, not abstract.

Real estate can be owned.

Real property is ownership of real estate and the bundle of rights associated with owning the real estate.

Explanation

Real property is ownership of real estate and the bundle of rights associated with owning the real estate.

54. 16.21 If the monthly rent of a property is $3,000, and the gross rent multiplier (GRM) is 80, what is the value of the property?

$45,000

$267,000

$240,000

$288,000

55. 2.7 Which of the following is included in the bundle of rights inherent in ownership?

To inherit

To tax

To transfer

To vote

56. 17.1 A homeowner borrows money from a lender and gives the lender a mortgage on the property as collateral for the loan. The homeowner retains title to the property. This is an example of

Intermediation.

Forfeiture.

Hypothecation.

Subordination.

57. 2.8 Which of the following is an example of intangible property?

Real estate

Personal property

Artwork

Stock

58. 17.2 Which of the following best expresses the mechanics of a mortgage loan transaction?

The borrower gives the lender a note and a mortgage in exchange for loan funds.

The lender gives the borrower a mortgage and receives a note in exchange for loan funds.

The borrower receives a note in exchange for a mortgage from the lender.

The lender gives the borrower a note, loan funds and a mortgage.

It is common to use borrowed money to purchase real estate. When a borrower gives a note promising to repay the borrowed money and executes a mortgage on the real estate for which the money is being borrowed as security, the financing method is called mortgage financing.

Explanation

It is common to use borrowed money to purchase real estate. When a borrower gives a note promising to repay the borrowed money and executes a mortgage on the real estate for which the money is being borrowed as security, the financing method is called mortgage financing.

59. 2.9 The right to use real property is limited by

The right of others to use and enjoy their property.

The police.

Taxation and subordination.

Title 12 of the U.S. Civil code.

60. 17.3 In a deed of trust transaction, which of the following occurs?

The beneficiary conveys title to a trustee in exchange for loan funds.

The trustee conveys title to a beneficiary in exchange for loan funds.

The trustor conveys title to a trustee in exchange for loan funds from the beneficiary.

The trustee conveys title to a trustor in exchange for loan funds from the beneficiary.

A deed of trust conveys title to the property in question from the borrower (trustor) to a trustee as security for the loan.

Explanation

A deed of trust conveys title to the property in question from the borrower (trustor) to a trustee as security for the loan.

61. 2.10 Surface rights, air rights and subsurface rights are

Inviolable.

Unrelated.

Seperable.

Not transferrable.

62. 17.4 A lender lends money to a homeowner and takes legal title to the property as collateral during the payoff period. They are in a

Title-theory state.

Lien-theory state.

State allowing land trusts.

State where hypothecation is illegal.

63. 2.11 Which of the following terms refers to the rights of a property that abuts a stream or river?

Allodial

Alluvial

Littoral

Riparian

64. 17.5 A lender who charges a rate of interest in excess of legal limits is guilty of

Redlining.

Usury.

Profit-taking.

Nothing; there are no legal limits to interest rates.

65. 2.12 What part of a non-navigable waterway does the owner of an abutting property own?

To the low-water mark.

To the middle of the waterway.

To the high-water mark.

None

66. 17.6 A lender is charging 3 points on a $50,000 loan. The borrower must therefore pay the lender an advance amount of

$150

$300

$1,500

$3,000

67. 2.13 What is the "Doctrine of Prior Appropriation?"

A pre-emptive zoning ordiance

The right of government to confiscate land and improvements.

A doctrine that gives the state control of water use and the water supply.

A real estate tax applied to owners of water rights

68. 17.7 The difference between a balloon loan and an amortized loan is

An amortized loan is paid off over the loan period.

A balloon loan always has a shorter loan term.

An amortized loan requires interest-payments.

A balloon loan must be retired in five years.

69. 2.14 Which of the following is considered real property?

A tree growing on a parcel of land.

A tree that has been cut down and is lying on a parcel of land.

A tractor used to mow grass on a parcel of land.

A prefabricated shed not yet assembled on a parcel of land.

70. 17.8 A distinctive feature of a promissory note is that

It is not assignable.

It must be accompanied by a mortgage.

It is a negotiable instrument.

It may not be prepaid.

71. 2.15 The overriding test of whether an item is a fixture or personal property is

How long it has been attached to the real property.

Its definition as one or the other in a sale or lease contract

How essential it is to the function if the property.

How it was treated in previous transactions

72. 17.9 When the terms of the mortgage loan are satisfied, the mortgagee

May retain any overage in the escrow account.

May inspect the property before returning legal title.

May be entitled to charge the borrower a small fee to close the loan.

May be required to execute a release of mortgage document.

73. 2.16 What is an emblement?

A piece of equipment affixed to the earth.

B. A limited right to use personal property

C. A sign indicating a property boundary

D. A plant or crop that is considered personal property

Plants and crops requiring human intervention and labor are called emblements. Emblements, despite their attachment to land, are considered personal property.

Explanation

Plants and crops requiring human intervention and labor are called emblements. Emblements, despite their attachment to land, are considered personal property.

74. 17.10 In addition to income, credit, and employment data, a mortgage lender requires additional documentation, usually including

An appraisal report.

A criminal record report.

A subordination agreement.

A default recourse waiver.

75. 2.17 An item can be converted from real to personal property and vice versa by means of which processes?

Assemblage and plottage

Application and dissolution

Affixing and severance

Personalty and severalty

76. 17.11 The three overriding considerations of a lender's mortgage loan decision are

Points, interest rate, and loan term.

The location of the mortgaged property, the borrower's cash, and the amount of the borrower's equity.

The ability to re-pay, the value of the collateral, and the profitability of the loan.

The amount of the loan, the borrower's income, and the down payment.

77. 2.18 The major sources of real estate law are legislation at federal, state and local level, and

Court decision

Professional real estate associations

Real estate commissions

Local practices

78. 17.12 The loan-to-value ratio is an important underwriting criterion, for the primary reason that

Borrowers with no equity will default and abandon the property.

The lender wants to ensure the loan is fully collateralized.

A borrower can only afford to borrow a portion of the entire purchase price.

A fair amount of borrower equity demonstrates good faith.

79. 2.19 What is the primary thrust of federal involvement in real estate law?

Taxation

Licensing

Broad regulation of usage

Zoning

In regulating real property rights, the federal government is primarily concerned with broad standards of real property usage, natural disaster, land description, and discrimination.

The federal government does not levy real estate taxes.

Explanation

In regulating real property rights, the federal government is primarily concerned with broad standards of real property usage, natural disaster, land description, and discrimination.

The federal government does not levy real estate taxes.

80. 17.13 The Equal Credit Opportunity Act (ECOA) requires lenders to

Extend equal credit to all prospective borrowers.

Consider the income of a spouse in evaluating a family's creditworthiness.

Discount the income of a person involved in child- rearing or child-bearing.

Specialize lending activity by geographical area for improved customer service.

81. 2.20 Which level of government controls zoning laws?

State

Taxing authorities

Federal

County and local

82. 17.14 The purpose of an income ratio in qualifying a borrower is to

Safeguard against over-indebtedness.

Compare one's earnings to one's short-term debt.

Identify the highest possible interest rate that the borrower can afford.

Quantify the borrower's assets to the fullest extent.

83. 2.21 A grocer temporarily installs special fruit and vegetable coolers in a leased grocery store in order to prevent spoilage. The coolers would be considered which of the following?

Trade fixtures that are real property.

Trade fixtures that are personal property

Permanent fixtures that are real property

Permanent fixtures that are personal property.

84. 17.15 A borrower's debt ratio is derived by

Dividing one's total debt by one's debt payments.

Dividing one's gross income by one's assets.

Dividing one's gross income by one's debts.

Dividing one's debts by one's gross income.

85. 2.22 Under the doctrine of littoral rights, an owner claims ownership of all of the land underlying a lake where there are three other abutting property owners. Which of the following is true?

The owner's claim is invalid, because the state owns the underlying land.

The owner's claim is invalid, because the underlying land is shared equally with the other owners.

The owner's claim is invalid, because he may only own underlying land to the middle of the lake.

The owner's claim is valid, because the lake is navigable.

Littoral rights: abutting property owners own land to high water mark; may use, but state owns underlying land.

Explanation

Littoral rights: abutting property owners own land to high water mark; may use, but state owns underlying land.

86. 17.16 A lender's commitment to lend funds to a borrower in order to retire another outstanding loan is called a

Conditional loan commitment.

Firm loan commitment.

Take-out loan commitment.

Lock-in loan commitment.

87. 3.1 An interest in real estate is best defined as ownership of?

The full bundle of rights to real property an estate.

One or more of the bundle of rights to real property.

An estate

The right to possession and use of real property.

88. 17.17 At the closing of a mortgage loan

The borrower pays off the note and receives clear title.

The lender issues a firm loan commitment.

The parties complete all loan origination documents and the loan is funded.

The borrower's loan application is complete and the file closed.

89. 3.2 Encumbrances and police powers are

Interest that do not include possession.

Limited forms of an estate.

Unrelated to interests.

Types of public interests.

Interests are principally distinguished by whether they include possession. If the interest-holder enjoys the right of possession, the party is considered to have an estate in land, or, familiarly an estate. If a private interest-holder does not have the right to possess, the interest is an encumbrance. If the interest-holder is not private, such as a government entity, and does not have the right to possess, the interest is some form of public interest. An encumbrance enables a non-owning party to restrict the owner's bundle of rights. Tax liens, mortgages, easements, and encroachments are examples.

Explanation

Interests are principally distinguished by whether they include possession. If the interest-holder enjoys the right of possession, the party is considered to have an estate in land, or, familiarly an estate. If a private interest-holder does not have the right to possess, the interest is an encumbrance. If the interest-holder is not private, such as a government entity, and does not have the right to possess, the interest is some form of public interest. An encumbrance enables a non-owning party to restrict the owner's bundle of rights. Tax liens, mortgages, easements, and encroachments are examples.

90. 17.18 Which laws or regulations require mortgage lenders to disclose financing costs and annual percentage rate to a borrower before funding a loan?

The Equal Credit Opportunity Act

Truth-in-Lending laws

The Real Estate Settlement and Procedures Act

Federal Fair Housing Laws

91. 3.3 What distinguishes a freehold estate from a leasehold estate?

A freehold includes the right to dispose or use.

A leasehold endures only for a specific period of time.

A freehold cannot be defeasible.

A leasehold is subject to government restrictions.

92. 17.19 Which laws or regulations prevent mortgage lenders from discriminating in extending credit to potential borrowers based on race, color, religion, national origin, sex, marital status, age, and dependency on public assistance?

The Equal Credit Opportunity Act

Truth-in-Lending laws

The Real Estate Settlement and Procedures Act

Federal Fair Housing Laws

93. 3.4 The highest form of ownership interest one can acquire in real estate is the

Dower and curtsey.

Conventional life estate.

Defeasible fee simple estate.

Absolute fee simple estate.

94. 17.20 Which laws or regulations require mortgage lenders to provide an estimate of closing costs to a borrower and forbid them to pay kickbacks for referrals?

The Equal Credit Opportunity Act.

Truth-in-Lending laws.

The Real Estate Settlement and Procedures Act.

Federal Fair Housing Laws.

95. 3.5 The distinguishing feature of a defeasible free simple estate is that

It can be passed on to heirs.

It has no restrictions on use.

The estate may revert to a grantor or heirs if the prescribed use changes.

It is of unlimited duration.

The two types of fee simple defeasible are determinable and condition subsequent. Determinable. The deed to the determinable estate states usage limitations. If the restrictions are violated, the estate automatically reverts to the grantor or heirs. Condition subsequent. If any condition is violated, the previous owner may repossess the property. However, reversion of the estate is not automatic: the grantor must re-take physical possession within a certain time frame.

Explanation

The two types of fee simple defeasible are determinable and condition subsequent. Determinable. The deed to the determinable estate states usage limitations. If the restrictions are violated, the estate automatically reverts to the grantor or heirs. Condition subsequent. If any condition is violated, the previous owner may repossess the property. However, reversion of the estate is not automatic: the grantor must re-take physical possession within a certain time frame.

96. 17.21 The Federal Reserve System regulates the money supply in which of the following ways?

Selling securities, printing money, and controlling lending underwriting requirements

Buying securities, changing the discount rate, and controlling banking reserves

Printing money, changing interest rates, and selling T-bills

Controlling the prime rate, trading securities, and purchasing loans

97. 3.6 Upon the death of the owner, a life estate passes to

The original owner or other named person.

The owner's heirs.

The state.

The owner's spouse.

98. 17.22 One of the primary purposes for the secondary mortgage market is to

Cycle funds back to primary lenders so they can make more loans.

Issue second mortgages and sell them in the home equity market.

Lend funds to banks so they can make more loans.

Pay off defaulted loans made by primary mortgage lenders.

99. 3.7 How is a conventional life estate created?

It happens automatically when title transfers unless a fee simple is specifically claimed.

A fee simple owner grants the life estate to a life tenant.

It is created by judicial action.

It is created by a statutory period of adverse possession.

100. 17.23 The major players in the secondary mortgage market are

Fannie Mae, Freddie Mac, and Ginnie Mae.

Fannie Mae, GMAC, and MGIC.

Freddie Mac, FHA, and VA.

Fannie Mae, Freddie Mac, and the Federal Reserve.

101. 3.8 What distinguishes a pur autre vie life estate from an ordinary life estate?

The pur autre vie estate endures only for the lifetime of the grantor.

The pur autre estate endures only for the lifetime of the grantee.

The pur autre estate endures only for the lifetime of a person other than the grantee.

The pur autre estate cannot revert to the grantor.

Pur autre vie. A pur autre vie life estate endures over the lifetime of a third person, after which the property passes from the tenant holder to the original grantor (reversion) or a third party (remainderman).

Explanation

Pur autre vie. A pur autre vie life estate endures over the lifetime of a third person, after which the property passes from the tenant holder to the original grantor (reversion) or a third party (remainderman).

102. 17.24 A principal role of FNMA is to

Guarantee FHA-backed and VA-backed loans.

Insure FHA-backed and VA-backed loans.

Purchase FHA-backed and VA-backed loans.

Originate FHA-backed and VA-backed loans.

103. 3.9 Which of the following life estates is created by someone other than the owner?

Conventional life estate.

Ordinary life estate.

Legal life estate.

Community property life estate.

104. 17.25 The primary role of the Federal Housing Authority in the mortgage lending market is to

Guarantee loans made by approved lenders.

Insure loans made by approved lenders.

Purchase loans made by approved lenders.

Originate loans made by approved lenders.

105. 3.10 Which of the following is true of a homestead?

A homestead interest cannot be conveyed by one spouse.

A homestead interest cannot be passed to the children of the head of household.

A homestead interest is a form of conventional life estate.

A homestead is a primary or secondary residence occupied by a family.

Homestead. A homestead is one's principal residence. Homestead laws protect family members against losing their homes to general creditors attempting to collect on debts.

Homestead laws generally provide that:

all or portions of one's homestead are exempt from a forced sale executed for the collection of general debts (judgment liens). The various states place different limits on this exemption.

tax debts, seller financing debt, debts for home improvement, and mortgage debt are not exempt

the family must occupy the homestead

the homestead interest cannot be conveyed by one spouse; both spouses must sign the deed conveying homestead property

the homestead exemption and restrictions endure over the life of the head of the household, and pass on to children under legal age. State laws define specifically how the interest transfers upon the death of the household head

homestead interests in a property are extinguished if the property is sold or abandoned

in some states the exemption is automatic; in others, homeowners must file for the exemption.

Explanation

Homestead. A homestead is one's principal residence. Homestead laws protect family members against losing their homes to general creditors attempting to collect on debts.

Homestead laws generally provide that:

all or portions of one's homestead are exempt from a forced sale executed for the collection of general debts (judgment liens). The various states place different limits on this exemption.

tax debts, seller financing debt, debts for home improvement, and mortgage debt are not exempt

the family must occupy the homestead

the homestead interest cannot be conveyed by one spouse; both spouses must sign the deed conveying homestead property

the homestead exemption and restrictions endure over the life of the head of the household, and pass on to children under legal age. State laws define specifically how the interest transfers upon the death of the household head

homestead interests in a property are extinguished if the property is sold or abandoned

in some states the exemption is automatic; in others, homeowners must file for the exemption.

106. 17.26 The principal role of the Veteran's Administration in the mortgage lending market is to

Guarantee loans made by approved lenders.

Insure loans made by approved lenders.

Purchase loans made by approved lenders.

Originate loans made by approved lenders.

107. 3.11 Dower refers to

Joint tenancy of husband and wife.

A wife's life estate interest in her husband's property.

A wife's homestead interest.

A child's life estate interest in his or her parents' homestead.

108. 17.27 A graduated payment loan is a mortgage loan where

Loan funds are disbursed to the borrower on a graduated basis.

The interest rate periodically increases in graduated phases.

The loan payments gradually increase.

The loan payments gradually increase and the loan term gradually decreases.

109. 3.12 Which of the following is an illustration of the legal concept of elective share?

A surviving spouse places a lien on a debtor's property.

A widow who was excluded from a will makes a claim to a portion of the couple's principal residence.

A spouse who loses her home because of her husband's gambling debt sues in court for exemption from the debt.

A widower whose spouse died without a will sues to change the provisions of the will.

Elective share. Elective share is a state-level statute enabling a surviving spouse to make a minimum claim to the deceased spouse's real and personal property in place of the provisions for such property in the decedent's will.

Explanation

Elective share. Elective share is a state-level statute enabling a surviving spouse to make a minimum claim to the deceased spouse's real and personal property in place of the provisions for such property in the decedent's will.

110. 17.28 A buydown is a financing arrangement where

The lender lowers the interest rate on a loan in exchange for a prepayment of principal.

The borrower pays additional interest at the onset in order to obtain a lower interest rate.

The lender requires the borrower to buy down the price of the property by increasing the down payment.

The borrower pays the lender additional funds to buy down the term of the loan.

111. 3.13 A one-year lease on a house has expired, but the tenant continues sending monthly rent checks to the owner, and the owner accepts them. What kind of leasehold estate exists?

Estate for years

Estate from period to period

Estate at will

Estate at sufferance

The estate for years is a leasehold estate for a definite period of time, with a beginning date and an ending date.

In an estate from period-to-period, also called a periodic tenancy, the tenancy period automatically renews for an indefinite period of time, subject to timely payment of rent. At the end of a tenancy period, if the landlord accepts another regular payment of rent, the leasehold is considered to be renewed for another period.

The estate at will, also called a tenancy at will, has no definite expiration date and hence no "renewal" cycle. The landlord and tenant agree that the tenancy will have no specified termination date, provided rent is paid on time and other lease conditions are met.

In an estate at sufferance, a tenant occupies the premises without consent of the landlord or other legal agreement with the landlord. Usually such an estate involves a tenant who fails to vacate at the expiration of the lease, continuing occupancy without any right to do so.

Explanation

The estate for years is a leasehold estate for a definite period of time, with a beginning date and an ending date.

In an estate from period-to-period, also called a periodic tenancy, the tenancy period automatically renews for an indefinite period of time, subject to timely payment of rent. At the end of a tenancy period, if the landlord accepts another regular payment of rent, the leasehold is considered to be renewed for another period.

The estate at will, also called a tenancy at will, has no definite expiration date and hence no "renewal" cycle. The landlord and tenant agree that the tenancy will have no specified termination date, provided rent is paid on time and other lease conditions are met.

In an estate at sufferance, a tenant occupies the premises without consent of the landlord or other legal agreement with the landlord. Usually such an estate involves a tenant who fails to vacate at the expiration of the lease, continuing occupancy without any right to do so.

112. 17.29 The key feature of an adjustable mortgage loan is that

The interest rate may vary.

The monthly payment increases over the life of the loan.

The principal balance does not amortize.

The loan term can be shortened or lengthened.

113. 4.1 When a single individual or entity owns a fee or life estate in a real property, the type of ownership is

Tenancy in severalty.

Tenancy by the entireties.

Absolute fee simple.

Legal fee simple.

If a single party owns the fee or life estate, the ownership is a tenancy in severalty. Synonyms are sole ownership, ownership in severalty, and estate in severalty.

Tenancy by the entireties is a form of ownership reserved exclusively for husband

and wife. It features survivorship, equal interests, and limited exposure to

foreclosure.

fee simple An estate representing the highest form of legal ownership of real property, particularly the fee simple absolute estate.

Explanation

If a single party owns the fee or life estate, the ownership is a tenancy in severalty. Synonyms are sole ownership, ownership in severalty, and estate in severalty.

Tenancy by the entireties is a form of ownership reserved exclusively for husband

and wife. It features survivorship, equal interests, and limited exposure to

foreclosure.

fee simple An estate representing the highest form of legal ownership of real property, particularly the fee simple absolute estate.

114. 17.29 One feature of a wraparound mortgage loan is that

The loan is a senior loan.

The seller offering the buyer a wraparound can profit from a difference in interest rates.

The underlying loan must be retired.

The second mortgage borrower may make payments directly to the first mortgage lender.

115. 4.2 Three people have identical rights but unequal shares in a property, share an indivisible interest, and may sell or transfer their interest without consent of the others. This type of ownership is

Joint tenancy.

Equal ownership.

Tenancy in common

Estate in severalty.

116. 17.30 A builder is required to secure a loan with mortgages on three properties. This is an example of

A participation mortgage loan.

A blanket mortgage loan.

A permanent mortgage loan.

A bridge loan.

117. 4.3 The "four unities" required to create a joint tenancy include which of the following conditions?

Parties must acquire respective interests at the same time.

Parties must be legally married at the time of acquiring interest.

Parties must be family members.

Parties must have joint financial resources.

joint tenancy A form of real property ownership in which co-owners share all rights and interests equally

and indivisibly; entails right of survivorship. Parties must establish tenancy at the same time and with a

single deed.

Explanation

joint tenancy A form of real property ownership in which co-owners share all rights and interests equally

and indivisibly; entails right of survivorship. Parties must establish tenancy at the same time and with a

single deed.

118. 17.31 Which of the following is true of a loan with negative amortization?

The loan is an interest-only loan.

Payments are not sufficient to retire the loan.

The loan balance is diminishing, or going negative.

Additional interest is being added to the monthly payment.

119. 4.4 Unlike tenants in common, joint tenants

Own distinct portions of the physical properties.

Cannot will their interest to a party outside the tenancy.

May own unequal shares of the property.

Cannot sell their interest to outside parties.

In a joint tenancy, two or more persons collectively own a property as if they were a single person. Rights and interests are indivisible and equal: each has a shared interest in the whole property which cannot be divided up.

Explanation

In a joint tenancy, two or more persons collectively own a property as if they were a single person. Rights and interests are indivisible and equal: each has a shared interest in the whole property which cannot be divided up.

120. 17.32 Which of the following is true of a loan with negative amortization?

The loan is an interest-only loan.

Payments are not sufficient to retire the loan.

The loan balance is diminishing, or going negative.

Additional interest is being added to the monthly payment.

121. 4.5 In a community property state, a basic distinction is made between

Property acquired together and property acquired separately over the duration of the marriage.

Property owned privately versus property owned by the state.

Property acquired during a marriage and property already owned by each party at the time of marriage.

Property acquired during the marriage and property acquired after the marriage.

122. 18.1 All investors desire their investments to increase in value. However,

The degree of return is inversely related to the degree of risk.

The more the investor stands to gain, the greater the risk that the investor may lose.

Investments requiring intense management have lesser returns.

The more liquid an investment is, the greater the chances are that the investment will not appreciate.

123. 4.6 Who are the essential parties involved in an estate in trust?

Owner, trustor and lawyer.

Owner, trustor and trustee.

Trustee, title company, and beneficiary.

Trustor, trustee and beneficiary.

124. 18.2 Two of the rewards that investments offer are

Income and tax benefits.

Negative leverage and appreciation.

Appreciation and taxation.

Positive leverage and prestige.

125. 4.7 The distinguishing features of a condominium estate are

Ownership of a share in an association that owns one's apartment.

Tenancy in common interest in airspace and common areas of the property.

Fee simple ownership of the airspace in a unit and an undivided share of the entire property's common areas.

Fee simple ownership of a pro rata share of the entire property.

A condominium unit is one airspace unit together with the associated interest in the

common elements.

Explanation

A condominium unit is one airspace unit together with the associated interest in the

common elements.

126. 18.3 An investor invests in fifteen diversified bond funds. This is an example of an investment in

Money.

Equity.

Debt.

Real estate.

127. 4.8 Who owns the property in a time-share estate?

Ownership is shared by the developer and the broker.

The property is owned by tenants in common or by a freehold owner who leases on a time-share basis.

A real estate investment trust holds a fee simple estate.

A general partner holds a fee simple interest and interval estates are owned by limited partners.

128. 18.4 A real estate investment can take a long period of time to sell. For the investor, this means that real estate is

Management intensive.

Insensitive to marketing.

Vulnerable to seller's markets.

Relatively illiquid.

129. 4.9 Which of the following is true of a cooperative?

A cooperative may hold an owner liable for the unpaid operating expenses of other owners.

The owners have a fee simple interest in the airspace of their respective apartments.

Owners may retain their apartments even if they sell their stock in the cooperative.

The proprietary lease is guaranteed to have a fixed rate of rent over the life of the lease term.

In a cooperative, or co-op, one owns shares in a non-profit corporation or cooperative association, which in turn acquires and owns an apartment building as its principal asset. Along with this stock, the shareholder acquires a proprietary lease to occupy one of the apartment units.

Since the corporation owns an undivided interest in the property, debts and financial obligations apply to the property as a whole, not to individual units. Should the corporation fail to meet its obligations, creditors and mortgagees may foreclose on the entire property.

Explanation

In a cooperative, or co-op, one owns shares in a non-profit corporation or cooperative association, which in turn acquires and owns an apartment building as its principal asset. Along with this stock, the shareholder acquires a proprietary lease to occupy one of the apartment units.

Since the corporation owns an undivided interest in the property, debts and financial obligations apply to the property as a whole, not to individual units. Should the corporation fail to meet its obligations, creditors and mortgagees may foreclose on the entire property.

130. 4.10 One difference between a cooperative estate and a condominium estate is that

The condominium owner must pay expenses as well as rent.

The coop owner owns stock and a freehold real estate interest whereas the condominium owner simply owns real estate.

The condominium owner owns the common elements and the airspace whereas the coop owner only owns the apartment.

131. 18.5 Compared to a stock portfolio, a real estate investment would be considered

A riskier investment.

A more management-intensive investment.

A shorter-term investment.

A more leveraged investment.

132. 4.11 A unique feature of a land trust is that

The trustee controls both the trustor and the beneficiary.

The trustee takes ownership of both land and improvements.

The identity of the beneficiary may not be identified.

The properties in the trust are probated in the states where the properties are located.

133. 18.6 Six investors purchase a shopping center. One investor manages the tenants and another handles the marketing and leasing. Two investors manage accounting and finance, and the remaining two run the management office. This is a possible example of

A general partnership.

A limited partnership.

A real estate investment trust.

An investment conduit.

134. 5.1 Easements and encroachments are types of

Lein.

Deed restriction.

Encumbrance.

Appurtenance

135. 18.7 Taxable income produced by an income property is

Gross income minus expenses plus land and building depreciation.

Gross income minus expenses minus land and building depreciation.

Gross income minus building depreciation plus land depreciation.

Gross income minus expenses minus building depreciation.

136. 5.2 An affirmative easement gives the benefited party

The right to possess a defined portion of another's real property.

The right to prevent the owner of a real property from using it in a defined way.

The right to a defined use of a portion of another's real property.

The right to receive a portion of any income generated by another's real property.

137. 18.8 As a general rule, in deriving taxable income on an investment property, it is legal to

Deduct principal and interest payments from income.

Deduct principal payments from income.

Deduct interest payments from income.

Deduct principal and interest payments from income and capital gain.

138. 5.3 There are two adjoining properties. An easement allows property A to use the access road that belongs to property B. In this situation, property A is said to be which of the following in relation to property B?

Subservient estate

Servient estate

Senior tenant

Dominant tenement

dominant tenement The property that benefits from the existence of an easement appurtenant. The holder of

the easement is the dominant tenant.

Servient tenement A property containing an easement that must "serve" the easement use belonging to a

dominant tenement.

Explanation

dominant tenement The property that benefits from the existence of an easement appurtenant. The holder of

the easement is the dominant tenant.

Servient tenement A property containing an easement that must "serve" the easement use belonging to a

dominant tenement.

139. 18.9 Which of the following is true of the tax treatment of a principal residence?

The owner may deduct the property's interest and principal from ordinary income.

The owner may depreciate the property and deduct depreciation expenses.

The owner can deduct any capital gain when the property is sold.

The owner may be able to avoid capital gain tax when the property is sold.

140. 5.4 Which of the following describes a situation in which an easement might be created against the wishes of the property owner?

141. 18.10 An investment property seller pays $14,000 in closing costs. These costs

May be deducted from personal income.

May be deducted from the property's income.

May be deducted from the sale price for gains tax purposes.

May be deducted from the adjusted basis for gains tax purposes.

142. 5.5 What is the primary danger of allowing an encroachment?

An encroachment automatically grants the benefiting party an easement.

Over time, the encroachment may become an easement by prescription that damages the property's market value.

An encroachment creates a lien.

143. 18.11 Capital gain tax is figured by multiplying one's tax bracket times

The sum of the beginning basis plus gain.

The difference between net sale proceeds and adjusted basis.

The sum of net sale proceeds and capital gain.

The difference between net sale proceeds and capital gain.

144. 5.6 A property owner who is selling her land wants to control how it is used in the future. She might accomplish her aim by means of

An injunction.

A deed restriction.

An easement

A land trust.

145. 5.7 What distinguishes a lien from other types of encumbrance?

It involves a monetary claim against the value of a property.

It lowers the value of a property.

It is created voluntarily by the property owner.

It attaches to the property rather than to the owner of the property.

146. 18.12 Cash flow is a measure of how much pre-tax or after- tax cash an investment property generates. To derive cash flow it is therefore necessary to exclude

Cost recovery expense.

Interest expense.

Loan principal payments.

Net operating income.

147. 5.8 A certain property has the following liens recorded against it: a mortgage lien dating from three years ago; a mechanic's lien dating from two years ago; a real estate tax lien for the current year; and a second mortgage lien dating from the current year. In case of a foreclosure, which of these liens will be paid first?

First mortgage lien

Mechanic's lien

Real estate tax lien

Second mortgage lien

148. 18.13 One way investors measure the yield of an investment is by

Dividing net operating income by cash flow.

Multiplying the investor's required yield times after-tax cash flow.

Dividing cash flow by the investor's equity.

Multiplying cash flow times the price paid for the property.

149. 5.9 The lien priority of junior liens can be changed by a lienor's agreement to

Forgive portions of the debt.

Assign the note.

Foreclose on the note.

Subordinate.

150. 19.1 Which of the following is true with respect to real property taxation by the federal government?

It may impose ad valorem property taxes and capital gain tax.

It may not impose property taxes nor tax liens.

There are no federal ad valorem taxes on real property.

It may impose ad valorem tax, but not capital gain tax.

151. 5.10 Among junior liens, the order of priority is generally established according to

The date of recordation

The amount

The order of disbursement

Special agreement among lienees

152. 19.2 According to law, states

May not levy real estate taxes.

May not impose tax liens.

May delegate taxing authority to county governments.

May prevent federal taxation of real estate within their respective jurisdictions, if properly legislated.

153. 5.11 What is meant by a "lien-theory" state?

A state in which liens are given priority over other encumbrances

A state in which a mortgagor retains title to the property when a mortgage lien is created

A state in which liens exist in theory but not in practice

154. 19.3 The role of local tax districts is to

Levy income, sales, and property taxes to meet their budget requirements.

Manage their budgeted portion of real estate tax revenues levied and distributed by the state.

Impose property taxes for specific municipal services.

Place tax liens on its facilities.

155. 5.12 A homeowner has hired a contractor to build a room addition. The work has been completed and the contractor has been paid for all work and materials but fails to pay the lumber yard for a load of lumber. What potential problem may the home owner experience?

The contractor may place a mechanic's lien for the amount of the lumber against the homeowner's real property.

The lumber yard may place a vendor's lien against the contractor and the homeowner for the amount of the lumber.

The lumber yard may place a mechanic's lien for the amount of the lumber against the homeowner's real property.

The homeowner has no liability because the contractor was paid for the lumber.

156. 19.4 A special tax district might be created to

Construct and manage a park district.

Create a two-mile extension of county sewer facilities.

Establish and maintain a public library.

Create a fire department.

157. 5.13 The process of enforcing a lien by forcing sale of the lienee's property is called

Excution.

Attachment.

Foreclosure.

Subordination.

158. 5.14 An important difference between a judicial foreclosure and a non-judicial foreclosure is

There is no right to redeem the property in a non- judicial foreclosure.

A judicial foreclosure forces a sale of the property.

A non-judicial foreclosure ensures that all liens are paid in order of priority.

The lienor receives title directly in a non-judicial foreclosure.

159. 19.5 Ad valorem taxes are based on

The replacement value of property.

The assessed value of property.

The millage value of property.

The broker's estimate of value.

160. 5.15 A defaulting borrower may avoid foreclosure by giving the mortgagee

A promissory note.

A deed in lieu of foreclosure.

A redemption notice.

A lis pendens.

161. 19.6 The ad valorem tax base of a municipal jurisdiction is equal to

The jurisdiction's annual budget times the tax rate.

The total of all assessed values of properties minus exemptions.

The total amount of ad valorem taxes required by the budget.

the municipality's budget multiplied times the millage rate.

162. 5.16 A property survey reveals that a new driveway extends one foot onto a neighbor's property. This is an example of

A easement appurtenant.

An encroachment.

An easement by prescription.

A party wall easement.

163. 19.7 As part of the assessment process, many taxing entities utilize equalization boards in order to

Adjust millage rates within the district to ensure fairness.

Modify the tax rate from one neighborhood to the next.

Ensure that property owners have nearly equal tax bills.

Smooth out wide discrepancies of assessed values within the district.

164. 5.17 A property owner has an easement appurtenant on her property. When the property is sold to another party, the easement

Terminates.

Transfers with the property.

Transfers with the owner to a new property.

Becomes a lien on the property.

The term appurtenant means "attaching to."

Explanation

The term appurtenant means "attaching to."

165. 19.8 A homeowner receives a tax bill that she feels is outrageous. This taxpayer may

Appeal to adjust the millage rate.

Appeal to adjust the district's budget.

Appeal to adjust the assessed valuation.

Not appeal.

166. 5.18 A brick fence straddles the property line of two neighbors. The neighbors agree not to damage it in any way. This is an example of

A party wall.

An encroachment.

A trade fixture.

A deed restriction.

167. 19.9 The purpose of a homestead tax exemption is

To exempt qualified property owners from ad valorem taxation.

To offer an amount of tax relief on an owner's principal residence.

To encourage multiple property investment.

To exempt owners of principal residences who rent their properties.

168. 5.19 A property owner allows Betty Luanne to cross his property as a shortcut to her kindergarten school bus. One day the property owner dies. What right was Betty given, and what happens to it in the future?

A personal easement in gross, which continues after the owner's death

An easement by prescription, which continues after the owner's death.

A license, which continues after the owner's death.

A license, which terminates at the owner's death.

169. 19.10 A millage rate is derived by

Dividing the tax requirement by the tax base.

Multiplying the tax base times the tax requirement.

Adding an inflation factor to the prior year's tax rate.

Dividing the tax base by the tax requirement.

170. 5.20 A court renders a judgment which authorizes a lien to be placed against the defendant's house, car, and personal belongings. This is an example of a

Specific judgment lien.

General judgment lien.

Voluntary judgment lien.

Superior judgment lien.

171. 19.11 A homeowner's total tax bill is derived by

Dividing the tax requirement by the tax base.

Multiplying each district's tax rate times the assessed value of the property.

Multiplying each district's tax rate times the taxable value of the property.

Averaging the tax rate for each tax district, and multiplying the average tax rate times the assessed value.

172. 6.1 Which of the following best describes the concept of "legal title" to real estate?"

Ownership of the bundle of righs to real estate.

The right of a buyer or lender to obtain ownership under certain circumstances.

Possession of a deed.

Absolute proof of ownership of real estate.

173. 19.12 A unique characteristic of a special assessment tax is that

It only applies to properties which will benefit from the public improvement.

The equalization board discounts levies for properties not affected by the public improvement.

More valuable properties which stand to benefit will pay proportionately more taxes.

It creates an involuntary junior lien on the property.

174. 6.2 A person claims ownership of a parcel of real estate to a prospective buyer, stating that she has lived on the property for five years and nobody has ever bothered her. The claimant also shows the buyer a copy of the deed. The legal basis of this claim is referred to as

Prescriptive notice.

Constructive notice.

Hostile notice.

Actual notice.

evidence of title Actual or constructive notice of real property ownership, including opinion of title, certificate of title, and title insurance.

constructive notice Knowledge one could or should have, according to the presumption of law; a demonstration to the public of property ownership through title recordation, "for all to see."

Explanation

evidence of title Actual or constructive notice of real property ownership, including opinion of title, certificate of title, and title insurance.

constructive notice Knowledge one could or should have, according to the presumption of law; a demonstration to the public of property ownership through title recordation, "for all to see."

175. 19.13 A tax certificate

Entitles its holder to apply for a tax deed after a certain period.

Exempts its holder from paying taxes on the particular property referenced by the certificate.

Waives a property owner's rights of redemption in a foreclosure.

176. 6.3 Constructive notice of ownership of a parcel of real estate is primarily demonstrated through

Direct inspection to see who is in possession.

Title insurance.

Title records.

A construction permit.

177. 19.14 An equitable right of redemption

Allows a holder of a tax certificate to redeem it for a tax deed.

Gives a delinquent taxpayer a grace period prior to the tax sale to pay property taxes.

Gives a holder of a tax deed the right to acquire the property named in the tax certificate.

Gives a delinquent taxpayer a grace period after the tax sale to pay property taxes.

178. 6.4 An owner transfers title to a property to a buyer in exchange for a consideration. This is an example of

Voluntary alienation.

Escheat.

Hypothecation.

Estoppel.

Voluntary alienation. Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party.

Explanation

Voluntary alienation. Voluntary alienation is an unforced transfer of title by sale or gift from an owner to another party.

179. 20.1 The principal theme of federal fair housing laws is to

Ensure all Americans a fair chance to own a home.

Prohibit discrimination in housing transactions.

Ensure that housing transactions are negotiated fairly.

Prohibit agents from dealing unfairly with clients and customers.

180. 6.5 For a deed to convey title, it is necessary for the deed to be

On a standard form.

Certified by the grantor.

Accepted by the grantee.

Signed by the grantee.

181. 20.2 It is illegal to discriminate in selling a house based on race, color, religion, or national origin. This is provided for through

The Civil Rights Act of 1866.

Executive Order 11063.

The Civil Rights Act of 1968.

The Fair Housing Amendments Act of 1988.

182. 6.6 The only required clause in a deed of conveyance is one that

States restrictions and limitations to the estate being conveyed.

States the parties and the type of estate being conveyed.

States that the grantor has done nothing to impair title to the property being conveyed.

States the grantor's intention, names the parties, describes the property, and indicates a consideration.

Granting clause, or premises clause

the only required clause; contains the conveyance intentions; names the parties; describes the property; indicates nominal consideration

Explanation

Granting clause, or premises clause

the only required clause; contains the conveyance intentions; names the parties; describes the property; indicates nominal consideration

183. 20.3 Which of the following laws or rulings extended discrimination to include gender, handicapped status, and family status?

Executive Order 11063

The Civil Rights Act of 1968

The Fair Housing Amendments Act of 1988

Jones v Mayer

184. 6.7 The purpose of a covenant clause in a deed of conveyance is to

State the grantor's assurance or warrant to the grantee that a certain condition or fact concerning the property is true.

State the grantee's promise to use the property in a prescribed manner.

Warrant that the grantor has never encumbered title.

Describe the consideration that the grantee promises to give in return for title.

Covenant, or warrant, clauses. Covenant clauses present the grantor's assurances

to the grantee.

Explanation

Covenant, or warrant, clauses. Covenant clauses present the grantor's assurances

to the grantee.

185. 20.4 An agent informs numerous families in a neighborhood that several minority families are planning to move into the immediate area, and that the trend could have adverse effects on property values. This activity is

Blockbusting.

Legal but unprofessional redlining.

Discriminatory misrepresentation.

Negligent misrepresentation.

186. 6.8 The type of statutory deed that contains the most complete protection for the grantee is a

Guardian's deed.

Special warranty deed.

General warranty deed.

Quitclaim deed.

187. 20.5 A minority family would like to buy a home in a certain price range. The agent shows the family all available properties in a neighborhood of families with similar backgrounds. The agent did not mention a number of homes in the family's price range in other neighborhoods. This agent could be liable for

Blockbusting.

Providing unequal services.

Steering.

Nothing; his services were legal and acceptable.

188. 6.9 A person wishes to convey any and all interest in a property to another without making any assurances as to encumbrances, liens, or any other title defects on the property. This party would most likely use which of the following types of deed?

A sheriff's deed.

A special warranty deed.

A partition deed.

A quitclaim deed.

189. 20.6 An agent does not like a particular minority buyer, and is very short with the person, refusing to engage in lengthy conversation or show him any properties. A second minority party visits the office the next day. The agent is very forthcoming, and shows the person five prospective properties. This agent could be liable for

Providing unequal services.

Steering.

Misrepresentation.

Nothing; both parties were minorities, and therefore no discrimination occurred.

190. 6.10 A one-time tax levied on a property for purposes of recording a transaction is called

An intangible sales tax.

A documentary stamp tax.

An ad valorem stamp tax.

A franchise tax.

191. 20.7 Following the client's recommendation, an agent conceals the availability of a property from an employed but pregnant and unmarried minority woman. This agent could be liable for

Discriminatory misrepresentation.

Steering.

Violating fiduciary duty.

Nothing: an agent may show or not show any property at his or her discretion.

192. 6.11 If a person dies with no legal heirs or relations and has left no valid will, what happens to real property owned by that person?

It is taken by the state according to the process called escheat.

It is reconveyed to the previous owner in the chain of title.

It is taken by the title insurance company according to the process called involuntary alienation.

It is conveyed to the highest bidder at a public auction.

193. 20.8 A condominium complex prohibits ownership of any unit by persons under 55 years of age. The association claims it has made the prohibition properly. Which of the following is true?

They are violating the Civil Rights Act of 1866.

They are violating the Fair Housing Amendments Act of 1988.

They are guilty of age discrimination.

The prohibition may be legal.

194. 6.12 Just prior to passing away, a person tells two witnesses that she would like her estate to pass to her husband. One witness records the statement and signs his name. This is an example of

An enforceable holographic will.

An unenforceable holographic will.

An enforceable nuncupative will.

An unenforceable nuncupative will.

Nuncupative

made orally, and written down by a witness; generally not valid for the transfer of real property

Explanation

Nuncupative

made orally, and written down by a witness; generally not valid for the transfer of real property

195. 20.9 An owner suddenly pulls a property off the market after hearing from the agent on the phone that the agent had received a full-price offer from a minority party. The agent then informs the offeror that the home has been removed from the market and is unavailable. Which party or parties, if any, have violated fair housing laws?

The agent only

The owner only

The agent and the owner

Neither agent nor owner

196. 6.13 If a person having several heirs dies intestate, the property will

Pass to heirs by the laws of descent and distribution.

Escheat to the state.

Pass to the surviving spouse through elective share.

Pass to the surviving heirs according to the provisions of the will.

A court proceeding called probate generally settles a decedent's estate, whether the person has died testate (having left a valid will) or intestate (having failed to do so)

Explanation

A court proceeding called probate generally settles a decedent's estate, whether the person has died testate (having left a valid will) or intestate (having failed to do so)

197. 20.10 Real estate trade associations promote a code of ethics primarily to establish

Minimum standards of practice as imposed by law.

Fair housing law.

High standards of practice for all facets of the business.

Grounds for license revocation.

198. 6.14 A property owner can avert the danger of losing title by adverse possession by

Recording proof of ownership in county title records.

Inspecting the property and evicting any trespassers found.

Claiming hostile and notorious possession.

Filing a claim of right with the county recorder.

199. 21.1 The purpose of the closing event is to

Confirm that the buyer has fulfilled all contract requirements prior to title transfer immediately after closing.

Ensure that the seller has marketable title before monies are transferred.

Conclude the process for loan approval.

Exchange legal title for the sale price.

200. 6.15 A hermit secretly lives in a cave on a 200-acre property. After twenty years, the person makes a claim of ownership to the property. This claim will likely be

Upheld through adverse possession.

Upheld because of the length of possession.

Declined through the doctrine of prior appropriation.

Declined because possession was secretive.