Real Estate Test + Vocabulary 1

A bilateral contract is an agreement in which both parties involved provide consideration and make promises to fulfill the obligations outlined in the contract. This means that each party is bound to perform certain actions as specified in the contract, and both parties must give something of value in return for the promises made. In a bilateral contract, the obligations and promises are mutual, creating a balanced and reciprocal agreement between the parties involved.

A breach of contract occurs when one party fails to fulfill their obligations as stated in a legally binding agreement. This can include not delivering goods or services as promised, not paying for services rendered, or not meeting any other terms outlined in the contract. When a breach of contract occurs, the non-breaching party may seek legal remedies, such as suing for damages or specific performance.

Capital gains refer to the profits made from the sale or transfer of property. When an individual or organization sells an asset such as stocks, real estate, or businesses, and the selling price is higher than the purchase price, the difference is considered a capital gain. This gain is subject to taxation in many countries. Capital gains are an important source of income for investors and can significantly contribute to their overall financial growth.

The term "disability" refers to a physical or mental impairment that significantly restricts one or more of an individual's major life activities. This could include limitations in mobility, communication, learning, or performing daily tasks. The term "handicap" generally refers to a disadvantage or limitation imposed on an individual due to their disability. "Ignorance" refers to a lack of knowledge or awareness, which is unrelated to the given definition. "Retardation" is an outdated and offensive term for intellectual disability, which falls under the broader category of disability. Therefore, the correct answer is "disability."

Depreciation in real estate refers to the decrease in the value of a property over time due to various factors such as wear and tear, obsolescence, or changes in market conditions. This loss in value can occur for any reason or from any cause, making it the most suitable explanation for the given answer. Depreciation in accounting, on the other hand, refers to the systematic allocation of the cost of an asset over its useful life, and is not necessarily related to real estate. Demise and destruction, although they can also lead to a loss in value, do not encompass the wide range of reasons and causes that depreciation in real estate does.

Blockbusting is the correct answer because it involves the practice of encouraging panic selling of homes at below market value by raising fears about the entry of persons from a particular minority group. This is done by spreading false information that the presence of these individuals will decrease property values in a neighborhood and negatively impact the area. Blockbusting is a discriminatory and unethical practice that aims to exploit racial or ethnic tensions for financial gain.

The licensee who has decided to retire from actively marketing properties and now helps clients choose among the various alternatives involved in purchasing, using, or investing in property is a real estate counselor. This profession involves providing guidance and advice to clients in making informed decisions related to real estate transactions.

The Real Estate Commissioner would be prevented from proceeding with a formal action against the license of a real estate broker if three years have passed since the grounds of complaint occurred. After three years, the Commissioner's ability to take action is time-barred, and they would no longer have the authority to pursue disciplinary actions against the broker. The other options, such as closing the broker's office, the broker moving to another state, or the expiration of the broker's license, do not necessarily prevent the Commissioner from taking action.

A broker who negotiates a sale while his license is in good standing, has earned a commission and may collect it by proving that he was duly licensed at the time the sale was made, even though he was subsequently deprived of this license.

An abstract of title is a compressed listing of a title's history to a particular parcel of real estate. It includes information about any transfers in ownership as well as any liabilities and encumbrances attached to the property. This document provides a summary of the key details related to the property's ownership and any potential issues that may affect it. It is commonly used in real estate transactions to provide a clear understanding of the property's title history to potential buyers or lenders.

The correct answer is the Capitalization Rate (CAP). In the income capitalization approach to appraisal, the capitalization rate represents the annual rate of return on one's investment. It is used to convert the net operating income (I) into an estimated property value (V) by dividing the net operating income by the capitalization rate (V = I / R). The capitalization rate reflects the risk and return expectations of investors and is an important factor in determining the value of an income-producing property.

Delinquency refers to the failure to make payments on time. It is a term commonly used in financial contexts to describe the state of being behind schedule or overdue in making payments. When someone is delinquent, they have not fulfilled their financial obligations within the agreed timeframe. This can have negative consequences, such as late fees, penalties, or damage to credit scores. Therefore, delinquency is the most appropriate term to describe the given situation.

Zoning laws are exercise of the police powers which are for the public health, safety, morals and general welfare. No compensation need be paid in exercise of police power, as they are for public protection.

Joists are horizontal beams that provide support to the floor and ceiling loads. They are typically made of wood or steel and are placed parallel to each other to distribute the weight evenly. Joists play a crucial role in maintaining the structural integrity of a building by transferring the loads to the walls or beams. They are commonly used in construction to create a sturdy and stable framework for floors and ceilings.

Amortization tables are used to determine the monthly payment for a loan. These tables provide a breakdown of how the loan balance is paid off over time, including the principal and interest portions of each payment. By using an amortization table, borrowers can see exactly how much they need to pay each month in order to fully repay the loan within the specified term. Therefore, the correct answer is "Monthly payment."

The question deals with an increasing supply of money for real estate loans, but asks which of the available choices do not increase the money supply. “1” does increase the money supply. When people want to save for old age, they save money and increase the money supply. “2” is the correct answer. When there is an increase in interest on corporate and government bonds, people place their money in government bonds an remove it from depositories of real estate lenders, therefore lessening the money supply. Both “3” and “4” also increase the money supply, because more money is being put into savings and is therefore available to lend.

A benchmark is a fixed location of known elevation set by a government agency. It is commonly used as a permanent reference point for the metes and bounds method of land location and description. This means that it serves as a reliable and consistent point of reference for measuring and describing land boundaries and locations.

Marcia’s equity is the difference between the market value of her property and the debt that encumbers it. Original cost ($250,000) + increase in value ($250,000 x 15%) = current market value ($287,500). Current market value ($287,500) - mortgage debt ($95,875) = her equity ($191,625).

A fixture is something that is permanently attached to the land and becomes part of the real property. It cannot be easily removed without causing damage to the property. Therefore, the correct answer "Incorporated into the land" accurately describes the definition of a fixture.

A deed of trust is a special deed that is used to convey interest in a property to a neutral third party as security for an outstanding debt. It is similar to a mortgage and provides protection for the lender in case the borrower defaults on the loan. The third party, known as the trustee, holds the legal title to the property until the debt is fully paid off. This arrangement allows for a quicker and more efficient foreclosure process if necessary.

If demand is constant and supply increases, sellers compete with each other by lowering prices.

The original cost of the materials has very little to do with value.

In appraising income property, it is necessary to know the net income of the property in order to use the capitalization approach. Such net income is calculated by subtracting from the gross income nearly all expenses except the debt service.

43,560 divided by 4 = 10,890. 10,890 divided by 240 = 45.375

The adjusted basis of a real estate property is calculated by subtracting the depreciation from the sum of the purchase price of the property and the cost of improvements made to it. This adjusted basis represents the original cost of the property plus any additional investments made to improve it, while accounting for the depreciation that has occurred over time.

220 x 110 = 24,200 square yards x 9 = 217,800 sq. ft. divided by 43,560 = 5 acres.

A 1031 exchange refers to a tax-deferred transaction where like properties are exchanged. This means that the taxpayer can sell a property and use the proceeds to acquire another property, without having to pay immediate taxes on the capital gains. The 1031 exchange allows individuals to defer their tax liability and potentially increase their investment portfolio. It is a commonly used strategy in real estate investing.

Of the choices given, only mineral, oil and gas transactions require a permit from the Department of Real Estate.

$460 for three months means $1,840 for twelve months. $1,840 per year is ____% of $14,000 loan balance. $1,840 divided by $14,000 = 13.14%. Closest answer 13%

A brownfield is a term used to describe real property that may be complicated by the presence or potential presence of hazardous substances, pollutants, or contaminants. This means that the land has previously been used for industrial or commercial purposes and may require cleanup or remediation before it can be safely redeveloped or reused. Unlike greenfields, which are undeveloped land, brownfields often have existing infrastructure and utilities in place, making them attractive for redevelopment. The presence of hazardous substances on brownfields can pose challenges and additional costs for developers, but it also presents opportunities for revitalizing and repurposing underutilized land.

The purchaser of a lot subject to a lien for street improvements under the Street Improvement Act of 1911 can prevent the assessment from going to bond if they pay the assessment in full within thirty days after the completion of the work.

Actual notice refers to the knowledge an individual has gained after researching a property through public records or by performing a property inspection. It is also known as direct knowledge. This means that the person has obtained information about the property through their own efforts and is aware of its details and condition. It is important in real estate transactions as it ensures that the buyer or seller has accurate and firsthand knowledge about the property before making any decisions.

An affidavit of title is a document in which the seller declares certain facts about the property being sold. It states that the seller has not had any judgments, bankruptcies, or divorces since the date of the title examination. It also confirms that the seller possesses the property and that there are no unrecorded deeds or contracts for the property. Additionally, it asserts that all repairs and improvements have been paid for and that there are no defects in the title. This document is used to provide assurance to the buyer that the seller has a clear and marketable title to the property.

The 45 day rule refers to the requirement in a Delayed exchange, also known as a 1031 exchange, where the exchanger must identify a replacement property within 45 days of selling the property they are relinquishing. This rule is part of the guidelines set by the IRS for tax-deferred exchanges. It ensures that the exchanger has a limited time frame to find a suitable replacement property to complete the exchange and defer capital gains taxes. The identification of the replacement property must be done in writing and meet certain criteria outlined by the IRS.

Ad valorem is a Latin term meaning "according to value." In the context of real estate taxes, ad valorem taxes are calculated based on the assessed value of individual properties. This means that the amount of tax owed is directly proportional to the value of the property. The higher the assessed value, the higher the tax amount. Ad valorem taxes are commonly used by local governments to generate revenue for public services and infrastructure projects.

An "agency" relationship is formed when there is an agreement between a principal and an agent, where the agent acts on behalf of the principal. This relationship is based on trust and involves a fiduciary duty, meaning the agent must act in the best interest of the principal. Competence of the parties is necessary to ensure they are capable of fulfilling their roles. However, the agreement to pay consideration, or compensation, is not essential to the creation of an agency relationship. While it is common for agents to be paid for their services, it is not a requirement for the relationship to exist.

The correct answer is Building Owners and Managers Association. This organization is described as the oldest and largest in the field of property management and ownership. It is likely that this association provides resources, support, and networking opportunities for professionals in the industry.

A quitclaim deed is a release of any and all, pass or present, interests the grantor may have, but it does not contain any warranties and does not convey after acquired title. To seize property means to take possession of it, and the grantor would certainly not take possession.

A block refers to a grouped or connected series of lots that are separated from other lots by a series of streets or major thoroughfares. It is a commonly used term in urban planning and real estate to describe a specific area or section within a larger development or neighborhood. Blocks are typically defined by their boundaries and serve as a convenient way to organize and refer to different sections of a city or town.

The term "basis" refers to the cost that a taxpayer incurs in acquiring and maintaining a property for tax purposes. It includes the original purchase price of the property, as well as any additional costs such as closing costs, legal fees, and improvements made to the property. The basis is important because it is used to calculate the taxpayer's gain or loss when the property is sold or disposed of.

A deed of release is a special purpose deed that is given by lien holders, remaindermen, or mortgagees to relinquish their claims on a property. This means that they are releasing any rights or interests they may have had in the property. A quitclaim deed, on the other hand, is a type of deed that transfers whatever interest the grantor has in the property, without making any warranties or guarantees. A deed of trust is a type of security instrument used in mortgage loans. Direct deeding is not a recognized term in real estate law.

A commercial lease is a type of lease agreement, not a form of ownership. Fee simple, leasehold, and joint tenancy are common ways to own real estate. Fee simple grants complete ownership, leasehold grants temporary possession, and joint tenancy involves shared ownership by multiple individuals.

The planning commission is responsible for zoning.

The maximum amount of property taxes that can be pre-paid and held in an impound collection account by a Savings and Loan bank is three months. This means that the bank can collect and hold three months' worth of property taxes in advance on behalf of the property owner. This helps ensure that the property taxes are paid on time and prevents any potential penalties or foreclosure due to non-payment.

The important effect of a “sale to the state” by the tax collector is that it starts the redemption period running; however, the delinquent owner’s possession remains undisturbed for five years.

The explanation for the correct answer, Aldous Exchange, is that it is a type of three-party exchange where the buyer purchases a property from a third party with the intention of exchanging it with the seller. This type of exchange is commonly used in real estate transactions to defer capital gains taxes.

Demise refers to the transfer of an estate for a specific period of time, whether it is for years, for life, or at will. This term is commonly used in property law to describe the transfer of a leasehold interest. It is different from fee simple, which is the highest form of ownership in real property, and transferance, which is not a recognized legal term. Dominion does not accurately describe the concept of transferring an estate.

The correct answer is 180 day exchange period. This rule states that when conducting a Delayed exchange, the exchanger must close the sale of the replacement property within 180 days of closing the sale of the relinquished property. This allows the exchanger enough time to find and close on a suitable replacement property within the specified timeframe.

Direct Deeding is the correct answer because it accurately describes the process of the exchanger directly deeding their property to a second party, who then pays a third party to deed their property to the exchanger. This type of 1031 exchange involves a direct transfer of ownership between the exchanger and the second party, without the need for any intermediaries or additional steps.

Accrued items refer to expenses or revenues that have been incurred but have not yet been paid or received. In this case, the correct answer states that accrued items are billed to the buyer but owed to the seller. This means that the buyer has been billed for the expense or service provided by the seller, but the payment has not yet been made. Therefore, the buyer owes the seller the amount billed.