Va Real Estate Exam 1

It must be assumed that our buyer has found another home that was equally desirable but
at a much lower price. This is the idea behind the Principle of Substitution.

Acceleration indicates the right to declare the entire sum of a note to be due and payable
immediately. Most trust deeds contains several acceleration clauses. Most common states: “if you become delinquent in the payment on this note, the entire sum of the note
becomes due and payable immediately. Another states: “The entire sum of the note is due
upon the sale or transfer of the property”. – triggered by the sale of the property and
therefore is a specific “acceleration clause”. The rule is: alienation clauses are types of
acceleration clauses but not all acceleration clauses are alienation clauses.

Capitalization of income is a method of establishing the value of income type properties.

A blanket encumbrance is created when more than one property is placed as security for a
note and trust deed. Six properties are security for a single note and deed of trust,
therefore it is a blanket encumbrance.

A judgment by the court ordering the sale of property is known as Writ of Execution. An
attachment holds property for court judgment. An abstract of judgment is a written
decision of the court, when recorded creates a lien. A sheriff’s deed is issued to the
holder of a certificate of sale after the one year redemption period has passed under the
terms of the mortgage foreclosure proceeding.

A trust deed is not a contract, but rather a conveyance of the naked legal title with the
power of sale from the trustor to the trustee. Therefore, the trustee retains the right to sell
the property under the trust deed at any time for the benefit of the beneficiary. The
conveyance has been performed and thus is not under the Statute of Limitations;
therefore, it never ‘outlaws’.

The settlement in choice “c” describes a ‘complete’ escrow. Usually an escrow is
‘complete’ in the evening and closes the following morning when the deed is recorded.

Appurtenant easements ‘run with the land’ and automatically pass to future grantees,
whether mentioned in the deed or not.

The lender is not going to be given easy terms or long term financing without securing
something in return. This usually results in increase financing costs.

In the safety clause of the standard listing form, Broker Stiles would agree to relinquish
his safety period if the property were listed with another broker.

When you consider the condominium units as well as the common areas, you have a
condominium project.

Advising and guiding investors and other buyers is counseling them. Many states require
a person to have a real estate license to serve as a real estate advisor/counselor for a fee,
since it involves skills and duties closely related to real estate brokerage.

A seller on a cash sale would be reluctant to cancel an existing transferable fire insurance
policy because the seller would receive a short term cancellation rate. Therefore, the seller
would prefer to transfer the existing policy to the buyer.

The lender's first line of defense in making a loan is the loan-to-value ratio. This is a financial ratio that compares the amount of the loan to the appraised value of the property being used as collateral. It helps the lender assess the risk associated with the loan and determine the amount of financing that can be provided. A lower loan-to-value ratio indicates a lower risk for the lender, as there is more equity in the property to cover potential losses. Therefore, the loan-to-value ratio is an important factor in the lender's decision-making process.

The first half of real property taxes become delinquent on December 10.

An open end mortgage is the type that allows additional funds to be borrowed up to the
agreed face amount of the loan without rewriting or re-qualifying on the note. This allows
one to stay in debt into the unknown future.

Brokers are licensed by their state; REALTORS® are voluntary members of the NAR, a
trade association.

If the borrower's residence is being used as security for the loan, then the Federal Right to Cancellation form must be given to the borrower by the agent. This means that if the borrower defaults on the loan, their residence can be seized by the lender to recover the amount owed. The Federal Right to Cancellation form provides the borrower with information about their right to cancel the loan within a certain timeframe, typically three days, if they change their mind about borrowing the money.

Statement of fact.

Under any type of ownership, each owner has an equal right of possession. This means
that any owner can go anywhere on the property regardless of the percentage of their
overall interest.

A subordination clause written into a loan gives a lower (secondary) position to that loan
if another loan is recorded later.

The term ‘alienate’ means to transfer or convey. To alienate title means to convey it.

All three choices refer to the lessee’s interest in real property. Always keep in mind that a
lessee’s interest is personal property known as chattel real.

People are licensed by their respective states to be real estate brokers and salespersons. A
licensee who then joins the National Association of REALTORS®, is called a
REALTOR®; one who joins the National Association of Real Estate Brokers is called a
Realtist.

All choices are open to the principal in question.

An option to renew a lease is a promise by the lessor to do so in the event the lessee
desires it. A promise in a contract is a ‘covenant’.

This type of construction financing is referred to as obligatory advances or fixed
disbursement schedule.

Choices “b”, “c” and “d” are all methods of estimating the building cost; “a” is the method
used to estimate value of vacant land.

A construction loan for a tract of homes might be $100,000,000. Each home is
encumbered with a lien for $100,000,000. Example: if you wish to remove one of the
homes from that lien, then the release clause will permit you, upon payment of $100,000
to have one home removed.

Section 5 = 640 acres and + Section 4 = 640 acres
NE ¼ = 160 acres NW ¼ = 160 acres
NE ¼ = 40 acres E ½ = 80 acres
W ½ = 20 acres N ½ = 40 acres
N ½ = 20 acres
20 acres + 20 acres = 40 acres

As the stock will be sold, it cannot be used to secure a loan.

Usually made at the conclusion of the transaction, the tender is the offer to perform on the
terms agreed to. If the other party cannot perform, then the party that made the tender can
rightfully claim the other party defaulted.

The Truth-in-Lending Law concerning advertising contains what are known as “triggers”.
If you place an ad with a statement about the amount of down payment, then you must
state all the facts: the APR, the amount of monthly payment and the length of the loan.

A recorded land contract show an equitable interest in the property. When the vendee
(buyer) defaults and abandons the property the land contract becomes a “cloud on the
title” until it is removed by either a quitclaim deed or a quiet title action.

None of the possible answers to this question is real property. A tax lien and a trust deed,
although having to do with real property, are not real property. Oil which has been
‘captured’ is personal property.

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.

Mortgage yield refers to the effective interest return obtained by an investor from a first trust deed. This means that it represents the rate of return or profit that an investor receives from investing in a mortgage-backed security. It takes into account the interest payments received from the borrower, as well as any fees or costs associated with the loan. Therefore, the correct answer is "The effective interest return obtained from a first trust deed by an investor."

Also called Due on Sale. It states that the lender may demand the loan plus accrued
interest be paid in full in the event the property is sold. The purpose of this clause is to
prevent a buyer from assuming or taking title subject to an existing loan without the
consent of the lender.

A straight note has no principal payments and principal is due all at one time.

Upon request, the lender must allow the borrower to inspect the uniform settlement
statement one day prior to the close of the transaction but the statement must be delivered
only at or before the date of settlement.

All of these statements are true. Read them over again.

The Real Estate Commissioner is very much concerned that parcels of land in a
subdivision be capable of being used for the purposes stated in the final report. The
parcels may be sold without utilities, as long as they were not included in the report filed
by the subdivider. Assessment bonds would be for sewers, street lights, curbs, etc.

Subordination means lie, trickery or deceit; hence, it cannot be a valid way to create an
agency.

Answer ‘b’ would result in assessment liens; answers “a” and “d” are not specifically
financing means for such improvements, by elimination, answer “c” is the best choice.

Trade fixtures are considered personal property.

$60 x 12 = $720
$720 divided by 0.072 = $10,000

Section 27 = 640 acres
S ½ = 320 acres
S ½ = 160 acres
S ½ = 80 acres
W ½ = 40 acres

As discrimination is not a criminal act, we would eliminate answers “c” and “d”. “b” is
incorrect as the remedy available to the injured party is not limited to only action through
a state court. It could take place through the federal courts.

A Chapter 7 bankruptcy petition creates an Automatic Stay of a creditor’s foreclosure
against the debtor. Creditor must file a petition with the Bankruptcy Court seeking
relief from the Automatic Stay and approval to institute foreclosure action. If the note
is over-secured by collateral, the Bankruptcy Court trustee may sell the property, pay
the secured creditor and use the excess proceeds to pay unsecured creditors. If the
debtor does not make payments on the note during the Automatic Stay, the Bankruptcy
trustee will pay interest to the secured creditor from the date of petition to the date of
sale.

A party purchasing property under a land contract of sale may sell their interest without
difficulty by assigning the contract, provided there is no prohibition on the agreement.
The assignee would still be secondarily liable for some of the terms of the contract unless
the seller’s approval was obtained.

The documentary transfer tax need not be paid at the time a deed is recorded if the
consideration or value of the interest, or property conveyed, exclusive of the value of any
liens or encumbrances remaining thereon, does not exceed $100.

“By statute” – most lenders allow longer (i.e. 15 days) but this law establishes the
minimum.

$4,800 divided by 48 (payments) = $100 (principal)
$4,800 - $200 (payments made) = $4,600 (balance at 10% interest)
$4,600 divided by 0.10 = $460 (annual interest)
$460 divided by 12 (months) = $38.33 (interest per month)
$100.00 (principle) + $38.33 (interest) = $138.33

An exclusive agency listing, a seller agrees to pay a commission to the listing broker. It is
the listing broker’s responsibility to pay any other agent who sell the property.

Population, demographics and employment impact demand for a commodity, but
government fiscal (spending and taxing) policies strongly influence availability and cost
of credit for those who produce things to be sold (like new homes).

Wear and tear from use in physical deterioration. Out-of-date equipment is functional
obsolescence. Change of locational demand and misplacement of improvement are both
economic obsolescence.

The existence of a better offer that is imminent could very well be a material fact to the
seller. If would probably influence his decision on a present offer.

A loan and a trust deed that contains a subordination clause supercedes the rule “the first
to record is the first in right” - a subordination clause in a note and trust deed is evidence
that the lender agrees that a future obtained trust deed may be prior to this loan even though the future loan is recorded later. Often times builders use this clause in a trust
deed and note used to purchase raw land from the owner. They offer the owner the full
price contingent upon him carrying back financing for the land. The trust deed that he is
to receive from the builder must contain a subordination clause in which the owner of the
land agrees to be junior in priority to a future recorded construction loan.

The vendee is the buyer. The buyer normally receives the prepaid rents.

100% - 3.5% = 96.5%
$34,790 divided by 965 = $36,051.81

Any type of subdivision located within the city limits is exempt under the Subdivided
Lands Act but a condominium conversion of 5 units or more is covered under the Map
Act and must be filed with the local authorities.

A fence would be a capital improvement. The cost of it should be added to the cost basis
of the property and depreciated.

The 200% declining balance method of depreciation allows the most depreciation for the
first year. The sum-of the-years digits method allows the most depreciation in the earlier
years.

When the parties to a Bulk Sale do not comply with the Bulk Sales Law, any outstanding
creditor may step in and invalidate the sale and take the goods and have them sold to
satisfy the debt. The only recourse the buyer has it to chase down the seller who has
probably left the country.

Debts are cut off (discharged) the date bankruptcy court issues a discharge.

Under the Federal Truth-in-Lending Law (Regulation Z), business loans are exempt.

All sales staff members employed by a licensed real estate corporation must have some
form of a license, either a salesperson or a broker.

Stating the ARP is sufficient disclosure for the ad. The disclosure statement issued at or
before closing would include a breakdown of the costs of credit, but not the ad.

Prima facie means “on its face without further evidence”. Real Estate Law specifically
states that no place an advertisement concerning a note with an effective yield that does
not also state the rate on the face of the note is prima facie evidence of fraud.

A 24 mile square area would be 24 miles by 24 miles (24 x 24 = 576). Each township is
6 miles by 6 miles (6 x 6 = 36). Take 576 divided by 36 = 16.

$450,000 - $53,000 = $397,000
$397,000 divided by 40 = $9,925
$9,925 x 16 = $158,800
$450,000 - $158,000 = $291,200

The interest that is lost on owner’s equity is usually identified as lock in equity. This
term applies to the fact that the owner cannot utilize the funds for other investment
purposes.

A reconveyance deed is given by a trustee to the borrower (trustor) after a loan has been
paid in full. The borrower records his deed of reconveyance to clear the loan lien from
the record.

The broker is usually the agent (fiduciary) of the seller and usually does not have a powerofattorney.

The title policy would guarantee to the lender that there were no prior liens on the
property. If any did arise at a later date, the title company would protect the lender at that
time.

18% x 3 = 54% (children’s share)
54% + 37% (husband’s share) = 91%
100% - 91% = 9% (college’s share) Daughter’s share is twice the colleges share
$37,000 x 2 = $74,000

The loan being negotiated by Broker Able for property owner Baker is secured by a second deed of trust on Baker's home and funded by a private investor. In this scenario, there is no limit on the maximum interest rate that can be charged on the loan. This means that the interest rate can be set at any percentage, as there are no legal restrictions or limitations in place for this specific type of loan.

The recommended process for the lender to contact FHA for a ‘conditional’ commitment;
that is; for advance assurance that an FHA loan will be made, establishing the loan value
for the house.

By law, anyone other than the broker, such as a clerical employee, must be bonded in
order to be able to withdraw funds from the trust account.

A bill of sale should include an inventory of the stock, the trade name and a list of the
fixtures and equipment. It would not include an assignment of the leasehold because
that is personal property that should be transferred separately.