Modern Real Estate Practice 17th Edition (Chapters 1 Thru 3)

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  • 1/35 Questions

    When demand for a commodity decreases and supply remains the same

    • Price tends to rise
    • Price tends to fall
    • Price is not affected
    • The market becomes stagnant
    • All of the above
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About This Quiz

This quiz will be used for practice only. The questions are from class material.

Modern Real Estate Practice 17th Edition (Chapters 1 Thru 3) - Quiz

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  • 2. 

    A licensed real estate professional acting as a point of contact between two or more people in negotiating the sale, rental, or purchase of a property is known as a(n)

    • Sales affiliate

    • Broker

    • Property manager

    • Appraiser

    Correct Answer
    A. Broker
    Explanation
    A licensed real estate professional who acts as a point of contact between multiple parties in negotiating property transactions is known as a broker. Brokers have the authority to represent buyers or sellers and facilitate the sale, rental, or purchase of properties. They have a deeper understanding of the real estate market and are responsible for ensuring that all legal and financial aspects of the transaction are handled correctly. Unlike sales affiliates, property managers, or appraisers, brokers have the authority to finalize deals and are typically more experienced and knowledgeable in the field of real estate.

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  • 3. 

    All of the following would affect supply EXCEPT

    • Population

    • Construction costs

    • Government controls

    • The labor force

    Correct Answer
    A. Population
    Explanation
    Population is not directly related to the supply of goods or services. Supply is determined by factors such as production costs, availability of resources, technology, and government regulations. While population indirectly affects demand, it does not directly impact the supply side of the market. Therefore, population is the correct answer as it does not affect supply.

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  • 4. 

    All of the following are categories of the uses of real property EXCEPT

    • Residential

    • Developmental

    • Agricultural

    • Industrial

    Correct Answer
    A. Developmental
    Explanation
    The given question asks for the category of uses of real property that is not included in the options. The options provided are Residential, Developmental, Agricultural, and Industrial. The term "Developmental" refers to the process of developing or improving real property, such as constructing new buildings or infrastructure. Therefore, the correct answer is "Developmental" as it is not a category of the uses of real property.

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  • 5. 

    All of the following would affect demand EXCEPT

    • Population

    • Demographics

    • Wage levels

    • Fiscal policy

    Correct Answer
    A. Fiscal policy
    Explanation
    Fiscal policy refers to the government's use of taxation and spending to influence the economy. It can affect aggregate demand by either increasing or decreasing government spending or changing tax rates. However, population, demographics, and wage levels directly impact the demand for goods and services in an economy. Population size determines the number of potential consumers, demographics influence the preferences and needs of different age groups, and wage levels affect people's purchasing power. Therefore, fiscal policy is the only option that does not directly affect demand.

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  • 6. 

    The phrase "bundle of legal rights" is properly included in

    • The definition of real property

    • A legal description

    • Real estate transactions

    • Leases for less than one year

    Correct Answer
    A. The definition of real property
    Explanation
    Study chapter 2 "Real Property and the Law"

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  • 7. 

    All of the following are included in the right to control one's property EXCEPT

    • The right to sell the property to a neighbor

    • The right to exclude the utilities' meter reader

    • The right to erect "no trespassing" signs

    • The right to enjoy profits from its ownership

    Correct Answer
    A. The right to exclude the utilities' meter reader
    Explanation
    The right to exclude the utilities' meter reader is not included in the right to control one's property. This means that the property owner does not have the authority to prevent the utilities' meter reader from accessing their property to read the meters. The other options listed, such as the right to sell the property, the right to erect "no trespassing" signs, and the right to enjoy profits from its ownership, are all included in the right to control one's property.

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  • 8. 

    According to law, a trade fixture is usually treated as

    • A fixture

    • An easement

    • Personalty

    • A license

    Correct Answer
    A. Personalty
    Explanation
    A trade fixture is usually treated as personalty because it is considered to be movable property that is owned by a tenant and used in their trade or business. Unlike a fixture, which is a permanent improvement attached to the property and becomes part of it, a trade fixture can be removed by the tenant when they vacate the premises. This distinction allows the tenant to retain ownership and control over their trade fixtures, treating them as personal property rather than part of the real estate.

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  • 9. 

    Kandace is interested in a house that fits most of her needs, but it is located in a busy area where she is not sure she wants to live. Her concern about the property's location is called

    • Physical deterioration

    • Area preference

    • Permanence of investment

    • Immobility

    Correct Answer
    A. Area preference
    Explanation
    Area preference refers to a person's preference or concern about the location or area where a property is situated. In this case, Kandace is interested in the house but is unsure about living in a busy area, indicating her area preference is a concern for her.

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  • 10. 

    Which of the following is considered personal property?

    • Wood-burning fireplace

    • Awnings

    • Bathtubs

    • Patio furniture

    Correct Answer
    A. Patio furniture
    Explanation
    Patio furniture is considered personal property because it is movable and not permanently attached to the structure of a building. Unlike a wood-burning fireplace, awnings, or bathtubs, which are typically fixtures and considered part of the real property, patio furniture can be easily moved and is not permanently affixed to the property. Therefore, it is classified as personal property.

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  • 11. 

    All of the following are properly described by the word "improvement" EXCEPT

    • Streets

    • A sanitary sewer system

    • Trade fixtures

    • The foundation of a building

    Correct Answer
    A. Trade fixtures
    Explanation
    The word "improvement" generally refers to something that enhances or enhances the quality or condition of something. In this context, all of the options listed can be considered as improvements. Streets can be improved by resurfacing or widening them, a sanitary sewer system improves the sanitation and hygiene of an area, and the foundation of a building can be improved to make it more stable and secure. However, trade fixtures do not necessarily fall under the category of "improvement" as they are movable items that are used in business operations and can be easily removed or replaced. Therefore, trade fixtures are the exception in this case.

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  • 12. 

    Real property can become personal property by

    • Severance

    • Purchase

    • Hypothecation

    • Attachment

    Correct Answer
    A. Severance
    Explanation
    Real property can become personal property through severance. Severance refers to the act of separating or removing something from the land, thus changing its nature from real property to personal property. This can occur when an owner physically detaches a fixture or improvement from the land, such as removing a built-in appliance or cutting down a tree. Once severed, the item becomes personal property and can be bought, sold, or transferred separately from the land. Severance allows for the conversion of real property into personal property, providing greater flexibility in its use and ownership.

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  • 13. 

    All of the following are physical characteristics of land EXCEPT

    • Indestructibility

    • Uniqueness

    • Immobility

    • Scarcity

    Correct Answer
    A. Scarcity
    Explanation
    Scarcity is not a physical characteristic of land. Physical characteristics refer to the tangible and observable qualities of land, such as its indestructibility (inability to be destroyed), uniqueness (each piece of land is distinct), and immobility (land cannot be moved). Scarcity, on the other hand, is an economic concept that relates to the limited availability of resources relative to the demand for them.

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  • 14. 

    A broker showed an owner-occupied property that had window screens, custom venetian blinds, and a wall bed to a buyer whose offer was then accepted by the owner. Before the close of escrow, the seller may remove

    • All of the identified items because they are trade fixtures

    • Only the venetian blinds as personal property

    • Only the wall bed because it is real property

    • None of the identified items

    Correct Answer
    A. None of the identified items
    Explanation
    The correct answer is "none of the identified items." In this scenario, the broker showed the buyer an owner-occupied property that had window screens, custom venetian blinds, and a wall bed. However, before the close of escrow, the seller may not remove any of these items. This is because window screens, custom venetian blinds, and a wall bed are considered fixtures, which are permanent improvements to the property and are typically included in the sale unless otherwise specified. Therefore, the seller cannot remove any of these items before the close of escrow.

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  • 15. 

    Land is considered to be

    • Indestructible

    • A wasting asset

    • Immune to the forces of supply and demand

    • Subject to personal property rights

    Correct Answer
    A. Indestructible
    Explanation
    Land is considered to be indestructible because it is a natural resource that cannot be destroyed or consumed. Unlike buildings or other man-made structures, land remains intact and unaffected by time or human activities. It is a fixed and permanent asset that retains its value over time. This characteristic of land being indestructible makes it a valuable and stable investment, as it is not subject to depreciation or obsolescence.

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  • 16. 

    A rancher owns a parcel of land on which oil is discovered. If the rancher has not previously conveyed the oil rights, who owns the oil?

    • The rancher

    • The tenant to whom the property has been leased

    • The state government

    • The federal government

    Correct Answer
    A. The rancher
    Explanation
    If the rancher has not previously conveyed the oil rights, they still retain ownership of the oil. This means that even if oil is discovered on their land, they have the right to claim ownership and benefit from it.

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  • 17. 

    The type of housing which can become permanent if affixed to the land is called

    • On-site built

    • Semi-detached single family

    • Manufactured

    • Multi-family

    Correct Answer
    A. Manufactured
    Explanation
    Manufactured housing refers to homes that are built in a factory and then transported to a specific location, where they are permanently affixed to the land. These homes are constructed in compliance with federal building codes and are designed to be long-lasting and durable. Unlike on-site built homes, which are constructed directly on the land, manufactured homes can be moved if necessary. Therefore, the correct answer is manufactured.

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  • 18. 

    Fixtures are

    • Treated as real property

    • Considered to be chattels

    • Removable by a tenant before the expiration of the lease

    • Removable by a tenant after the expiration of the lease

    Correct Answer
    A. Treated as real property
    Explanation
    Fixtures are treated as real property because they are permanently attached to the land or property and are considered to be part of it. Unlike chattels, which are movable and can be easily removed, fixtures are intended to enhance the property and are therefore considered to be a permanent part of it. This means that fixtures cannot be removed by a tenant before or after the expiration of the lease, as they are deemed to belong to the property owner.

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  • 19. 

    After the construction of a building in the air rights above a railroad right-of-way, the trains can

    • Operate as usual

    • No longer use the tracks under the building

    • Use the tracks under the building only if they cause no problem for the building's occupants

    • Use the tracks under the building as long as they first obtain the building owner's permission

    Correct Answer
    A. Operate as usual
    Explanation
    After the construction of a building in the air rights above a railroad right-of-way, the trains can operate as usual. This means that the trains can continue to run on the tracks under the building without any hindrance or restrictions. The construction of the building does not affect the operation of the trains, and they can continue to use the tracks as they did before the building was constructed.

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  • 20. 

    All of the following are economic characteristics of land EXCEPT

    • Scarcity

    • Permanence of investment

    • Uniqueness

    • Area preference

    Correct Answer
    A. Uniqueness
    Explanation
    Uniqueness is not an economic characteristic of land. Economic characteristics of land typically include scarcity, permanence of investment, and area preference. Uniqueness refers to the distinctiveness or special features of a particular piece of land, which may affect its value but is not a fundamental economic characteristic.

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  • 21. 

    Generally, personal property can be distinguished from real property by its

    • Greater variety

    • Mobility

    • Cost

    • Mutiplicity of use

    Correct Answer
    A. Mobility
    Explanation
    Personal property can be distinguished from real property by its mobility. Unlike real property, which includes land and buildings, personal property refers to movable assets such as furniture, vehicles, and personal belongings. The key characteristic of personal property is that it can be easily moved or transferred from one location to another. This distinguishes it from real property, which is fixed and immovable.

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  • 22. 

    An important characteristic of land is that it may be modified or improved at some point in time. Depending on its type, an improvement may increase the value of real estate greatly. All of the following are considered to be improvements EXCEPT

    • Sewers

    • Crops

    • Buildings

    • Roads

    Correct Answer
    A. Crops
    Explanation
    Land can be modified or improved through various means, such as constructing buildings, installing sewers, and building roads. These improvements enhance the value of the real estate. However, crops do not fall under the category of improvements because they are considered a natural feature of the land and not a man-made modification. Therefore, crops are not considered to be improvements in the context of land.

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  • 23. 

    Tonya leases store space to Klem for a restaurant, and Klem installs his ovens, booths, counters, and others equipment. When would these items become real property?

    • After they are installed

    • After Klem defaults on his rental payments

    • After the lease takes effect

    • If Klem does not remove them at lease expiration

    Correct Answer
    A. If Klem does not remove them at lease expiration
    Explanation
    The items would become real property if Klem does not remove them at lease expiration. This means that if Klem chooses to leave the ovens, booths, counters, and other equipment behind when the lease ends, they would become part of the property and belong to Tonya.

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  • 24. 

    Rights or privileges which are connected with real property, are

    • Improvements

    • Appurtenances

    • Not conveyed with the real estate

    • Restricted to air and water rights

    Correct Answer
    A. Appurtenances
    Explanation
    Appurtenances are rights or privileges that are connected with real property. They are typically conveyed with the real estate and are considered to be a part of the property. This can include things like easements, rights of way, or any other rights that are attached to the property and pass with it when it is sold or transferred. Unlike improvements, which are physical additions or enhancements to the property, appurtenances are intangible rights that are associated with the land itself. They are not restricted to air and water rights, as the question suggests, but can encompass a wide range of rights and privileges.

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  • 25. 

    Efforts to increase homeownership include all the following EXCEPT

    • Requiring lower down payments

    • Offering adjustable-rate mortages

    • Penalizing first-time homebuyers for using funds from IRA's

    • Lowering closing costs for first-time home buyers.

    Correct Answer
    A. Penalizing first-time homebuyers for using funds from IRA's
    Explanation
    Efforts to increase homeownership typically involve implementing policies and incentives that make it easier and more affordable for individuals to purchase homes. Requiring lower down payments, offering adjustable-rate mortgages, and lowering closing costs for first-time homebuyers are all strategies aimed at facilitating homeownership. However, penalizing first-time homebuyers for using funds from IRA's would discourage them from accessing their retirement savings for the purpose of buying a home, which goes against the goal of increasing homeownership.

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  • 26. 

    Margie listed her real estate for sale at $100,000. If her cost was 80 percent of the listing price, what will her percentage of profit be when her real estate is sold for the listing price?

    • 10 percent

    • 15 percent

    • 20 percent

    • 25 percent

    Correct Answer
    A. 25 percent
    Explanation
    profit = sale price minus cost divided by cost

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  • 27. 

    Most homeowners's insurance policies contain which of the following clauses?

    • A property improvement clause

    • A co-insurance clause

    • A co-ownership clause

    • A property devaluation clause

    Correct Answer
    A. A co-insurance clause
    Explanation
    A co-insurance clause is commonly found in most homeowners' insurance policies. This clause requires the homeowner to maintain insurance coverage that is equal to a specified percentage of the property's total value. If the homeowner fails to meet this requirement, they may be subject to a penalty or a reduction in the amount of coverage provided. This clause helps ensure that homeowners are adequately insured and helps protect the insurance company from assuming a disproportionate amount of risk.

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  • 28. 

    That portion of the value of owner's property that exceeds the amount of their mortgage debt is called

    • Equality

    • Escrow

    • Surplus

    • Equity

    Correct Answer
    A. Equity
    Explanation
    Equity refers to the portion of the value of an owner's property that exceeds the amount of their mortgage debt. It represents the owner's ownership interest in the property and is calculated by subtracting the mortgage debt from the property's current market value. In other words, it is the residual value of the property that belongs to the owner after all debts and liabilities have been paid off.

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  • 29. 

    Homeowners may deduct all of the following expenses when preparing their icome tax return EXCEPT

    • Real estate taxes

    • Mortgage interest on a first home

    • Mortgage interest on a second home

    • Mortgage interest on a third home

    Correct Answer
    A. Mortgage interest on a third home
    Explanation
    Homeowners are generally allowed to deduct real estate taxes and mortgage interest on their first and second homes when preparing their income tax return. However, the deduction for mortgage interest on a third home is not allowed. This means that homeowners can deduct expenses related to their primary residence and one additional home, but not for any additional homes beyond that. Therefore, the correct answer is mortgage interest on a third home.

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  • 30. 

    If a homeowner's insurance policy provides coverage for less than 80 percent of the full replacement cost of the dwelling, then the loss of the residence will be settled for

    • The market value of the property less the land value

    • The lowest repair bid

    • Either the cash value or the prorated repair cost

    • The total replacement cost

    Correct Answer
    A. Either the cash value or the prorated repair cost
    Explanation
    If a homeowner's insurance policy provides coverage for less than 80 percent of the full replacement cost of the dwelling, then the loss of the residence will be settled for either the cash value or the prorated repair cost. This means that the insurance company will either pay the actual cash value of the damaged property at the time of the loss, or they will cover the cost of repairs up to a prorated amount based on the policy's coverage percentage. This is because the policy does not provide enough coverage to fully replace the dwelling, so the settlement will be based on the actual value or repair cost.

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  • 31. 

    Federal income tax law excludes gain realized on the sale of a primary residence for individuals filling seperately and for couples filing jointly. The amount of this exclusion is (seperately/jointly):

    • $100,000/$200,000

    • $125,000/$250,000

    • $250,000/$500,000

    • $300,000/$600,000

    Correct Answer
    A. $250,000/$500,000
    Explanation
    The correct answer is $250,000/$500,000. According to federal income tax law, individuals filing separately and couples filing jointly are both eligible for an exclusion on the gain realized from the sale of their primary residence. For individuals filing separately, the exclusion amount is $250,000, while for couples filing jointly, the exclusion amount is $500,000. This means that if the gain from the sale of the primary residence is below these amounts, it is not subject to federal income tax.

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  • 32. 

    Damage from which of the following is NOT covered in a basic homeowner's policy?

    • Fire and lightning

    • Explosion

    • Windstorm and hail

    • Flood

    Correct Answer
    A. Flood
    Explanation
    Flood damage is not covered in a basic homeowner's policy. While fire and lightning, explosion, and windstorm and hail are typically covered, flood damage requires a separate flood insurance policy. This is because floods are considered a separate and specific risk that is not included in the basic coverage. Homeowners who live in flood-prone areas or areas with a high risk of flooding should consider purchasing additional flood insurance to protect their property.

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  • 33. 

    Federal income tax regulations allow homeowners to reduce their taxable income by amounts paid for

    • Repairs and maintenance

    • Hazard insurance premiums

    • Real estate taxes

    • Principal and interest

    Correct Answer
    A. Real estate taxes
    Explanation
    Homeowners are allowed to reduce their taxable income by the amounts paid for real estate taxes. This means that the money they spend on property taxes can be deducted from their taxable income, reducing the amount of income they have to pay taxes on. This deduction is a benefit for homeowners and can help to lower their overall tax liability.

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  • 34. 

    When Homeowner Harry sold his residence recently, he found that he had more than $20,000 in equity. This equity did NOT come from

    • The use of an interest-only mortgage payment plan

    • The principal portion of his PITI monthly mortage payments

    • Increases in market value of his house due to appreciation and inflation

    • His down payment

    Correct Answer
    A. The use of an interest-only mortgage payment plan
    Explanation
    The use of an interest-only mortgage payment plan does not contribute to building equity in a property. With an interest-only mortgage, the homeowner only pays the interest on the loan for a certain period of time, usually 5-10 years, without making any principal payments. This means that the loan balance remains the same, and therefore, there is no increase in equity. The equity in this case must have come from other sources such as the principal portion of the monthly mortgage payments, increases in market value, and the down payment.

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  • 35. 

    The buyer of a $125,000 home has paid $2,000 as earnest money and has a loan commitment for 70 percent of the purchase price. The balance of the cash the buyer needs to complete the transaction is

    • $3,500

    • $35,500

    • $37,000

    • $37,500

    Correct Answer
    A. $35,500
    Explanation
    The buyer of the $125,000 home has already paid $2,000 as earnest money. The loan commitment covers 70 percent of the purchase price, which is $125,000 x 0.70 = $87,500. To complete the transaction, the buyer needs to pay the remaining balance in cash, which is $125,000 - $87,500 = $37,500. Therefore, the correct answer is $37,500.

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Aug 11, 2009
    Quiz Created by
    Vi001gi

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