Real Estate Test + Vocabulary 1

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Real Estate Test + Vocabulary 1 - Quiz

Vocabulary words. PSI test questions


Questions and Answers
  • 1. 

    A physical or mental impairment that substantially limits one or more of the major life activities of an individual.

    • A.

      Handicap

    • B.

      Ignorance

    • C.

      Disability

    • D.

      Retardation

    Correct Answer
    C. Disability
    Explanation
    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 "Retardation" is an outdated and offensive term for intellectual disability, which falls under the broader category of disability.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."

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  • 2. 

    Failure to make payments on time.

    • A.

      Deficiency

    • B.

      Delinquency

    • C.

      Default

    • D.

      Deferment

    Correct Answer
    B. Delinquency
    Explanation
    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.

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  • 3. 

    A special purpose deed given by lean holders, remaindermen or mortgagees to relinquish their claims on a property. 

    • A.

      Quitclaim deed

    • B.

      Deed of release

    • C.

      Deed of trust

    • D.

      Direct deeding

    Correct Answer
    B. Deed of release
    Explanation
    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.

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  • 4. 

    A special deed that conveys interest to a neutral, third party for security on an outstanding debt; a security device similar to a mortgage. 

    • A.

      Quitclaim deed

    • B.

      Deed of release

    • C.

      Deed of trust

    • D.

      Direct deeding

    Correct Answer
    C. Deed of trust
    Explanation
    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.

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  • 5. 

    A transfer to another of an estate for years, for life, or at will. 

    • A.

      Dominion

    • B.

      Fee simple

    • C.

      Demise

    • D.

      Transferance

    Correct Answer
    C. Demise
    Explanation
    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.

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  • 6. 

    A loss in value for any reason or from any cause. 

    • A.

      Depreciation (Real Estate)

    • B.

      Depreciation (Accounting)

    • C.

      Demise

    • D.

      Destruction

    Correct Answer
    A. Depreciation (Real Estate)
    Explanation
    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.

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  • 7. 

    The Real Estate Commissioner would be prevented from proceeding with a formal action against the license of a real estate broker by the: 

    • A.

      Closing of the broker’s office

    • B.

      Broker moving to another state

    • C.

      Lapse of three years from the occurrence of the grounds of complaint

    • D.

      Expiration of the broker’s license

    Correct Answer
    C. Lapse of three years from the occurrence of the grounds of complaint
    Explanation
    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.

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  • 8. 

    A licensee who has several years of experience in the industry decided to retire from actively marketing properties. Now she helps clients choose among the various alternatives involved in purchasing, using, or investing in property. What is her profession?

    • A.

      Real estate counselor

    • B.

      Real estate appraiser

    • C.

      Real estate educator

    • D.

      Realtor

    Correct Answer
    A. Real estate counselor
    Explanation
    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.

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  • 9. 

    A primary justification for zoning ordinances is to:

    • A.

      Maintain conformity to buildings in the zoned area

    • B.

      Prevent an oversupply of certain types of businesses

    • C.

      Promote public health, safety, morals and general welfare

    • D.

      Control the quality of building construction

    Correct Answer
    C. Promote public health, safety, morals and general welfare
    Explanation
    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.

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  • 10. 

    For a loan, amortization tables are used to determine the:

    • A.

      APR

    • B.

      Term of the loan

    • C.

      Monthly payment

    • D.

      Interest rate

    Correct Answer
    C. Monthly payment
    Explanation
    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."

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  • 11. 

    What supports the floor and ceiling loads?

    • A.

      Joists

    • B.

      Studs

    • C.

      Supporters

    • D.

      Mud sills

    Correct Answer
    A. Joists
    Explanation
    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.

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  • 12. 

    The following are essential to the creation of an “agency” relationship, except:

    • A.

      Parties are competent.

    • B.

      Agreement to pay consideration.

    • C.

      Agreement between principle and agent.

    • D.

      Fiduciary relationship.

    Correct Answer
    B. Agreement to pay consideration.
    Explanation
    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.

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  • 13. 

    A broker secures a listing, negotiates a sale and parties enter into escrow. Before escrow closes, the broker’s license is revoked and the seller refuses to pay commission because the broker is unlicensed. To collect commission, the following is correct:

    • A.

      Broker must prove he actually introduced buyer to seller

    • B.

      Broker must prove he was licensed at the time of sale

    • C.

      Broker must prove he executed the sales contract

    • D.

      Broker cannot sue for a commission in view of license revocation

    Correct Answer
    B. Broker must prove he was licensed at the time of sale
    Explanation
    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.

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  • 14. 

    The purchaser of a lot which is subject to a lien for street improvements under the Street Improvement Act of 1911, may prevent the assessment from going to bond if he pays the assessment in full within how many days after the completion of the work:

    • A.

      Thirty

    • B.

      Sixty

    • C.

      Ninety

    • D.

      120

    Correct Answer
    A. Thirty
    Explanation
    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.

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  • 15. 

    An acre is divided into four equal lots. If the lots are parallel to each other, rectangular, and 240 feet deep, the width of each lot would most nearly be:

    • A.

      280 feet

    • B.

      181.5 feet

    • C.

      87.8 feet

    • D.

      45.4 feet

    Correct Answer
    D. 45.4 feet
    Explanation
    43,560 divided by 4 = 10,890. 10,890 divided by 240 = 45.375

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  • 16. 

    A fixture would be defined as something:

    • A.

      Incorporated into the land

    • B.

      That is made part of the chattel real

    • C.

      Referred to by actions but not referred to in the sales contract

    • D.

      Used in an extraordinary way with the land

    Correct Answer
    A. Incorporated into the land
    Explanation
    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.

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  • 17. 

    A parcel having dimensions of 220 yards by 110 yards contains the following number of acres:

    • A.

      5

    • B.

      0.06

    • C.

      1.67

    • D.

      37.8

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

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  • 18. 

    In a valid quitclaim deed:

    • A.

      The grantor must be seized of fee

    • B.

      The only warranty is the expressed or implied warranty that the grantor owns, or has an interest in, the property

    • C.

      There is a conveyance of after acquired title

    • D.

      None of the above

    Correct Answer
    D. None of the above
    Explanation
    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.

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  • 19. 

    A type of 3-party 1031 exchange wherein the exchanger deeds his property to a second arty, and the second party pays a third party who then deeds his or her property to the exchanger. 

    • A.

      Indirect Deeding

    • B.

      Delayed exchange

    • C.

      Alderson Exchange

    • D.

      Direct Deeding

    Correct Answer
    D. Direct Deeding
    Explanation
    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.

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  • 20. 

    The percentage used in the income capitalization approach to appraisal that represents an annual rate of return on one's investment.                            (V = I / R) : V = Value, I = Net Operating Income, R = ?. 

    • A.

      Capitalization Rate (CAP)

    • B.

      Cost Approach

    • C.

      Depreciation

    • D.

      Interest Rate

    Correct Answer
    A. Capitalization Rate (CAP)
    Explanation
    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.

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  • 21. 

    Profits made from the sale or transfer of property.

    • A.

      Capital funds

    • B.

      Capital gains

    • C.

      Capital domain

    • D.

      Escrow

    Correct Answer
    B. Capital gains
    Explanation
    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.

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  • 22. 

    The Real Estate Commissioner issues special permits to real estate brokers for:

    • A.

      Business Opportunity transactions

    • B.

      Subdivision lot transactions

    • C.

      Mineral, oil and gas transactions

    • D.

      Cemetery lot sales

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

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  • 23. 

    Money available for real estate loans normally would increase, except when:

    • A.

      One desires to save for old age

    • B.

      There is an increase in the interest rate paid on corporate and government bonds

    • C.

      Personal savings are high

    • D.

      The savings-to consumption ratio increases

    Correct Answer
    B. There is an increase in the interest rate paid on corporate and government bonds
    Explanation
    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.

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  • 24. 

    Three months interest on a $14,000 straight note amounts to $460. what is the annual rate?

    • A.

      0.1

    • B.

      0.2

    • C.

      0.25

    • D.

      0.13

    Correct Answer
    D. 0.13
    Explanation
    $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%

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  • 25. 

    A grouped or connected series of lots segmented from other lots by a series of streets or major thoroughfares.

    • A.

      Subdivision

    • B.

      Block

    • C.

      Segment

    • D.

      Plat

    Correct Answer
    B. Block
    Explanation
    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.

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  • 26. 

    Define Bilateral Contract.

    • A.

      An agreement where one party gives consideration and promises to perform the actions specified in the contract.

    • B.

      An Agreement where both parties give consideration and promise to perform the actions specified in the contract.

    Correct Answer
    B. An Agreement where both parties give consideration and promise to perform the actions specified in the contract.
    Explanation
    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.

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  • 27. 

    Real property, the expansion, redevelopment or reuse of which may be complicated by the presence or potential presence of hazardous substance, pollutant or contaminant.

    • A.

      Wasteland

    • B.

      Greenfield

    • C.

      Brownfield

    • D.

      Landfill

    Correct Answer
    C. Brownfield
    Explanation
    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.

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  • 28. 

    Occurs when there is  a violation of the terms of a legally binding agreement. 

    • A.

      Default

    • B.

      Judgment

    • C.

      Foreclosure

    • D.

      Breech of contract

    Correct Answer
    D. Breech of contract
    Explanation
    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.

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  • 29. 

    Bob Smith owns a property which he wishes to re-zone or upon which he would like to have a variance. In this case he must petition which of the following?

    • A.

      Planning commission

    • B.

      Building department

    • C.

      Board of supervisors or city council in which the jurisdiction to the property lies

    • D.

      Any of the above

    Correct Answer
    A. Planning commission
    Explanation
    The planning commission is responsible for zoning.

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  • 30. 

    The maximum amount of property taxes that can be pre-paid and held in a impound collection account by a Saving and Loan bank is:  

    • A.

      Six months

    • B.

      One year

    • C.

      Three months

    • D.

      After ten years

    Correct Answer
    C. Three months
    Explanation
    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.

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  • 31. 

    Definitions of market value are least concerned with:

    • A.

      Material cost

    • B.

      Value in exchange

    • C.

      Objective value

    • D.

      An open market

    Correct Answer
    A. Material cost
    Explanation
    The original cost of the materials has very little to do with value.

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  • 32. 

    Which of the following is most correct concerning delinquent taxes and redemption rights?

    • A.

      The important effect of a “sale to the state” by the tax collector is to start the redemption period running but the delinquent owner’s possession remains undisturbed

    • B.

      The homeowner is required to make monthly installment payments to liquidate the delinquent property taxes and accrued penalties which are owed

    • C.

      In the event the delinquent owner transfer or otherwise alienates the property, the redemption period is automatically terminated

    • D.

      The property is automatically deeded to the state if the property is not redeemed within one year

    Correct Answer
    A. The important effect of a “sale to the state” by the tax collector is to start the redemption period running but the delinquent owner’s possession remains undisturbed
    Explanation
    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.

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  • 33. 

    The oldest and largest organizations for property managers and owners. 

    • A.

      The Real Estate Commission

    • B.

      Business Owners and Managers Association

    • C.

      Building Owners and Managers Association

    • D.

      Building Owners and Managers Affiliation

    Correct Answer
    C. Building Owners and Managers Association
    Explanation
    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.

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  • 34. 

    Five years ago, Marcia bought a home for $250,000. Home values in her area have improved, and the current market value of Marcia’s house has increased by 15 percent. If Marcia has $95,875 left to pay on her mortgage loan, what is her current equity in her home?

    • A.

      138712

    • B.

      154125

    • C.

      191625

    • D.

      250000

    Correct Answer
    C. 191625
    Explanation
    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).

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  • 35. 

    Encouraging the panic selling of homes at below market value by raising fears that the entry of persons of a particular minority group will result in raising fears that the entity of persons of a particular minority group will result in decreased property values in a neighborhood and negatively impact the area. 

    • A.

      Redlining

    • B.

      Steering

    • C.

      Blockbusting

    Correct Answer
    C. Blockbusting
    Explanation
    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.

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  • 36. 

    The Southern Pacific Railroad Company sold ABS Developers three sections of land that had been divided into 20 acre parcels. 16 sold at $4,000 each and the remainder sold at $5,000 each. Which of the following was most nearly the total amount realized by the seller?

    • A.

      350000

    • B.

      358000

    • C.

      475000

    • D.

      500000

    Correct Answer
    C. 475000
    Explanation
    Three sections = 3 x 640 acres = 1920 acres; 1920 divided by 20 acres per parcel = 96 parcels; 16 parcels x $4,000 each = $ 64,000; 80 parcels x $5,000 each = $400,000; 96 parcels = $464,000; Closest answer is $475,000

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  • 37. 

    A fixed location of known elevation set my a government agency commonly used as a permanent reference point for the metes and bounds method of land location and description.

    • A.

      Rectangular Survey

    • B.

      Recorded Plat

    • C.

      Grid

    • D.

      Benchmark

    Correct Answer
    D. Benchmark
    Explanation
    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.

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  • 38. 

    The cost to a taxpayer of obtaining and maintaining a property, used for tax purposes.

    • A.

      Interest

    • B.

      Basis

    • C.

      Capitalization Rate

    • D.

      Encumbrance

    Correct Answer
    B. Basis
    Explanation
    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.

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  • 39. 

    Rule stating that exchanger conducting a Delayed exchange must close the sale of the replacement property within           days of closing the sale of the relinquished property.

    • A.

      45 day rule

    • B.

      180 day exchange period

    • C.

      1031 exchange

    • D.

      Alderson exchange

    Correct Answer
    B. 180 day exchange period
    Explanation
    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.

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  • 40. 

    Adjusted Basis is: 

    • A.

      (Purchase Price of Real Estate + Cost of Improvements) - Depreciation

    • B.

      (Depreciation + Cost of Improvements) - Purchase Price of Real Estate

    • C.

      (Purchase Price of Real Estate - Cost of Improvements) - Depreciation

    • D.

      (Purchase Price of Real Estate - Cost of Improvements) + Depreciation

    Correct Answer
    A. (Purchase Price of Real Estate + Cost of Improvements) - Depreciation
    Explanation
    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.

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  • 41. 

    The rule stating that an exchanger conducting a Delayed exchange must identify a replacement property within        days of selling the property he or she is relinquishing. 

    • A.

      45 day rule

    • B.

      1031 exchange

    • C.

      180 day exchange period

    • D.

      Alderson exchange

    Correct Answer
    A. 45 day rule
    Explanation
    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.

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  • 42. 

    An exchange of like properties on a tax-deferred basis. 

    • A.

      Aldous exchange

    • B.

      Delayed exchange

    • C.

      1031 Exchange

    • D.

      Ad Velorem Tax exchange

    Correct Answer
    C. 1031 Exchange
    Explanation
    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.

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  • 43. 

    A compressed listing of a title's history to a particular parcel of real estate that chronicles any transfers in ownership as ell as any liabilities and encumbrances attached to the property

    • A.

      Deed of trust

    • B.

      Affidavit

    • C.

      Abstract of Title

    • D.

      Deed of Title

    Correct Answer
    C. Abstract of Title
    Explanation
    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.

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  • 44. 

    Accrued Items are: 

    • A.

      Billed to the seller but owed by the buyer

    • B.

      Billed to the buyer but owed to the seller

    • C.

      Credited to the seller but debited to the buyer

    • D.

      Debited to the seller but credited to the buyer

    Correct Answer
    B. Billed to the buyer but owed to the seller
    Explanation
    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.

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  • 45. 

    Knowledge an individual has gained after researching a property through public records or by performing a property inspection; also known as direct knowledge. 

    • A.

      Appraisal

    • B.

      Disclosures

    • C.

      Final Notice

    • D.

      Actual Notice

    Correct Answer
    D. Actual Notice
    Explanation
    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.

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  • 46. 

    General real estate taxes, calculated according to the assessed value of individual properties. 

    • A.

      Tax assessments

    • B.

      Annuity

    • C.

      Appraised value

    • D.

      Ad velorem

    Correct Answer
    D. Ad velorem
    Explanation
    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.

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  • 47. 

    The document in which the seller states that he or she has had no judgments, bankruptcies or divorces since the date of the title examination, that he or she possesses the property, that there are no unrecorded deeds or  contracts for the property, that all repairs and improvements have been paid and that there are no defects in the title. 

    • A.

      Abstract of Title

    • B.

      Deed of Title

    • C.

      Affidavit of Title

    • D.

      Deed of Trust

    Correct Answer
    C. Affidavit of Title
    Explanation
    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.

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  • 48. 

    A type of three-party exchange wherein the buyer purchases the property of a third party in order to exchange it with the seller. 

    • A.

      1031 Exchange

    • B.

      Aldous Exchange

    • C.

      Delayed exchange

    • D.

      180 day exchange

    Correct Answer
    B. Aldous Exchange
    Explanation
    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.

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  • 49. 

    To use the capitalization approach to appraising you need the:

    • A.

      Gross income

    • B.

      Occupations of the tenants

    • C.

      Net income

    • D.

      Case flow

    Correct Answer
    C. Net income
    Explanation
    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.

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  • 50. 

    In general, when the supply of a certain commodity increases,

    • A.

      Price tends to rise.

    • B.

      Price tends to drop.

    • C.

      Demand for it tends to rise.

    • D.

      Demand for it tends to drop.

    Correct Answer
    B. Price tends to drop.
    Explanation
    If demand is constant and supply increases, sellers compete with each other by lowering prices.

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