Principals Of Real Estate Practice Test

1. While physical maintenance of the property is a primary function of the property manager, the level of maintenance performed must be balanced with

The cost of services and the time available.

The manager’s monetary incentives.

Owner objectives and tenant demands.

The manager’s skills and the condition of the property.

2. 16 A leased property is conveyed to a new owner. What happens to the lease?

It remains in effect.

It is cancelled.

It automatically renews at closing for its original term.

It moves with the owner to a new property, if purchased within one year.

3. PE17 The Uniform Residential Landlord and Tenant Act fundamentally attempts to

Promote the rights of tenants, particularly in lease defaults.

Standardize rental rates.

Encourage fairness and simplicity in lease forms and provisions.

Minimize rent escalations in economically depressed zones.

4. PE18 A primary objective of residential zoning is

Regulate rates of appreciation and depreciation of residences.

Promote the value and planned land use of a neighborhood.

Eliminate nonconforming uses, variances, and special exceptions.

Disperse intensity of usage.

5. PE19 A shop was originally built in a commercial zone. The zone has since been changed to a residential zone. Zoning authorities permit the use, most likely as

A variance.

A special exception.

An illegal nonconforming use.

A legal nonconforming use.

6. PE20 Authorities conduct comprehensive land use planning in order to

Balance public interests with individual property rights.

Prevent the public from exercising police powers.

Ensure positive market conditions for development projects.

Limit growth.

7. What kind of insurance would provide coverage for loss of income when a rental property is damaged so badly that it cannot be used?

Casualty

Consequential loss

Fire and hazard

Liability

8. PE21 The purpose of a formal legal description of a property is to

Eliminate encroachments.

Locate and identify the property reliably.

Eliminate the possibility of surveyor error.

Qualify for title recordation.

9. Negative amortization of a loan occurs whenever

Monthly payments are interest-only.

A payment does not pay the interest owed.

The principal loan balance is diminishing.

The interest rate increases on an adjustable rate loan.

10. A borrower earns $3,000/month and makes credit card and car note payments of $500. A conventional lender requires a 27% income ratio. What monthly amount for housing expenses (principal, interest, taxes, insurance) will the lender allow this person to have in order to qualify for a conventional mortgage loan?

$810

$972

$675

$1,040

monthly gross income x income ratio = monthly housing expense

Explanation

monthly gross income x income ratio = monthly housing expense

11. Which of the following professionals involved in the real estate business are most concerned about managing real estate for clients?

Brokers and agents

Property managers

Corporate real estate managers

Appraisers

12. Real estate can be defined as

Land and all property contained therein.

Unimproved land.

Land and everything permanently attached to it.

Air, surface, and subsurface rights.

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

To tax

To encroach

To possess

To inherit

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

Whether the owner owns the property the item is affixed to.

How it is described in a sale or lease contract.

What the title records on the property indicate.

How the buyer defines the item.

15. An owner of a lakefront property tells a fisherman that he cannot fish in a boat within fifty feet of the owner's shoreline. The fisherman protests that the owner cannot prevent him. Which of the following is true?

The fisherman is correct because the water and the land underlying it are public property.

The owner's prohibition is valid, since the underlying land belongs to abutting properties to the middle of the lake.

The owner can prevent the fisherman from fishing within ten feet, but not beyond.

Option 4

16. The distinguishing feature of a defeasible fee simple estate is that

It only endures for the lifetime of the defeasee.

It has no restrictions or conditions on use.

It may revert to a grantor if the prescribed use changes.

It is of limited duration.

17. Dower can best be defined as

A grant of foreclosure immunity extended to a homestead claimant.

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

A husband's homestead exemption.

A grantor who endows property to heirs.

18. A distinct feature of a joint tenancy is that joint tenants

May elect to have any percent of ownership in the property.

Cannot will their interest to a party outside the tenancy.

Own separate physical portions of the land.

Cannot lease the property.

19. PE22 A parcel is described as the SW 1/4 of the N 1/2 of the E 1/2 of Section 14. What is its acreage?

160 acres

40 acres

80 acres

20 acres

range (N/S) and tier (E/W) are 6 miles wide. Townships are 1 square 6 miles by 6 miles totaling 36 SQMI. Sections are 1 mile square totaling 640 acres. So SW1/4 is 1/4 of 640 = 160 acres. combine all denominators and divide by section acres to get size of the parcel. For example SW 1/4 of the N 1/2 of the E 1/2 would be 4 + 2 + 2 = 8, so 640 / 8 = 80 acres.

Explanation

range (N/S) and tier (E/W) are 6 miles wide. Townships are 1 square 6 miles by 6 miles totaling 36 SQMI. Sections are 1 mile square totaling 640 acres. So SW1/4 is 1/4 of 640 = 160 acres. combine all denominators and divide by section acres to get size of the parcel. For example SW 1/4 of the N 1/2 of the E 1/2 would be 4 + 2 + 2 = 8, so 640 / 8 = 80 acres.

20. PE23 A suburb has a growing need for single-family housing, but the land available for new construction is running low. In this case, it is likely that the price of existing homes

Will decline.

Will increase.

Will stabilize.

Will not show any predictable movement.

21. Interests in a condominium differ from those in a cooperative, in that

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

The coop owner owns stock in the cooperative association, whereas the condominium owner simply owns real estate.

The cooperative owner must pay a pro rata share of the cooperative's expenses as well as rent.

22. PE24 The demand for homes in a market is best expressed in terms of

Square feet of housing required.

Number of contracts signed with developers.

Number of houses listed in the multiple listing service.

Number of households seeking housing.

23. PE25 What is the significance of base employment in a real estate market?

It gives the basic number of people who will need housing.

It indicates the number of people at the low end of the buying power spectrum.

It drives total employment and population growth, which lead to demand for real estate.

It indicates the number of people who want to move into the market.

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

Dominant tenement

Subordinate tenant

Servient estate

Conditional life tenant

25. PE26 The concept known as substitution states that

Buyers will not substitute the quality of one home for the price of another.

The replacement cost of an item cannot be substituted for the item's original value.

A new improvement will only increase market value to the extent of the cost of a similar improvement.

Buyers will not pay more for a certain house than they would for another, similar house.

26. Title records of a property reveal several recorded liens: a one-year old judgment lien; a mechanic's lien dating from two years ago; a special assessment tax lien recorded last month; and a first mortgage lien recorded five years ago. In case of a foreclosure, which of these liens will be paid first?

First mortgage lien

Special assessment tax lien

Mechanic's lien

Judgment lien

27. PE27 The "price that a willing, informed, and unpressured seller and buyer agree upon for a property, assuming a cash price and reasonable exposure of the property to the market" describes which of the following concepts of value?

Highest and best value

Substitution value

Desirability

Market value

28. PE 28 A warehouse building lacks sufficient ceiling height for the operation of modern forklifts. This is an example of

Non-conforming use.

Functional obsolescence.

Over improvement.

Economic obsolescence.

29. A lender may terminate foreclosure proceedings if the defaulting borrower executes

A wraparound mortgage.

A lis pendens.

A waiver of redemption.

A deed in lieu of foreclosure.

30. PE30 An office building rents for $600,000, has expenses of $400,000, and a cash flow of $100,000. The prevailing gross rent multiplier is 8. Using the GRM, what is the value of the building?

$800,000

#3,200,000

$1,600,000

$4,800,000

GRM = Price / monthly rent or grm X monthly rent = estimated value.

Explanation

GRM = Price / monthly rent or grm X monthly rent = estimated value.

31. A person has occupied a property for seven years, and no one has ever attempted to evict her or co- occupy the parcel. In this case, the person might base a claim of legal ownership on

Her prescriptive easement.

Title records.

Constructive notice of possession.

Tenancy in severalty.

32. PE 31 An owner obtains a loan and gives the mortgagee a mortgage on the property as collateral. The mortgagor/owner retains title to the property, and the mortgagee records a lien. This is an example of

Intermediation.

Contracting for deed.

Subordination.

Hypothecation.

33. A person wishes to convey any and all interests in a property to another with full assurances against encumbrances, liens, or any other title defects on the property. This party would most likely use which of the following types of deed?

A quitclaim deed

A general warranty deed

A deed in lieu of warrant

A guardian's deed

34. The chain of title to a property refers to which of the following?

An abstract of the condition and marketability of title

The genealogy of successive heirs to a property

The list of all current encumbrances and clouds "chained" to title

A chronology of successive owners of record

35. A canal dredging project is to cost $100,000. There are 40 properties along the canal, and 40 others across the street from the canal. The total canal footage to be dredged is 2,500 feet. How much will the assessment be for a 150-foot property on the canal?

$1,250

$2,500

$3,000

$6,000

36. In eliciting an offer from a buyer, an owner's agent must be careful to

Avoid an overpriced offer that will cause buyer'sremorse or lawsuits.

Complete any offer the buyer might decide tomake.

Disclose what price the owner will accept.

Avoid completing an offer that containscontingencies.

37. A transaction broker should disclose his or her agency relationship to the transaction principals

Before receipt of any offer.

Upon completion of the listing agreement.

Upon first substantive contact.

Upon initial contact of any kind with eitherprincipal.

38. An office building has a potential income of $500,000 and vacancy of 10%. Its cash-paid bills total $300,000, and annual depreciation is $5,000. Payments on the loan total $100,000. What is the property's pre-tax cash flow?

$45,000

$150,000

$50,000

$155,000

Pre-tax cash flow, or cash flow before taxation, is calculated as follows:

net operating income (NOI) - debt service = pre-tax cash flow

Explanation

Pre-tax cash flow, or cash flow before taxation, is calculated as follows:

net operating income (NOI) - debt service = pre-tax cash flow

39. Mary Bright bought a home for $80,000, paying $10,000 down and taking a mortgage loan of $70,000. The following year she had a new roof put on, at a cost of $2,000. What is Mary's adjusted basis in the house if she now sells the house for $100,000?

$12,000

$18,000

$72,000

$82,000

40. The purpose of a homestead tax exemption is

To exempt owners from ad valorem taxation.

To offer tax abatement on a principal residence.

To encourage owners to finance their principle residences.

To exempt owners of principal residences who rent their properties.

41. An agent spends two hours with a minority buyer, then shows the buyer five available properties all over town. Later, a similarly qualified minority couple enter the office. The agent spends twenty minutes with the couple, gives them the MLS book to review, and encourages them to drive by the listings on their way home. If they like anything, they should come back the next day to discuss terms. This agent could be liable for

Misrepresentation.

Steering.

Providing unequal services.

Nothing.

42. An owner's agent is showing a buyer an apartment building. The buyer questions the agent as to whether some cracking paint contains lead. The agent's best course of action is to

Contract to re-paint the cracked area.

Assure the buyer the paint is lead-free.

Suggest the buyer make a lower-price offer tocover the possible problem.

Inform the seller of the inquiry and test the paint.

43. The village of Parrish has an annual budget requirement of $20,000,000 to be funded by property taxes. Assessed valuations are $400,000,000, and exemptions total $25,000,000. What must the tax rate be to finance the budget?

4.70%

5.33%

5.00%

11.25%

The tax rate for each taxing entity is calculated by dividing

the amount of revenue required by the tax base. tax base = assessed values - exemptions

Explanation

The tax rate for each taxing entity is calculated by dividing

the amount of revenue required by the tax base. tax base = assessed values - exemptions

44. The capital gain on sale of an investment is computed as

Beginning basis plus gain.

Sale price minus beginning basis.

Net sales proceeds minus beginning basis.

Net sales proceeds minus adjusted basis.

The IRS defines gain on the sale of a home as amount realized from the

sale minus the adjusted basis of the home sold.

Explanation

The IRS defines gain on the sale of a home as amount realized from the

sale minus the adjusted basis of the home sold.

45. An owner suddenly pulls a property off the market after hearing from the agent that a minority party has made a full-price offer. The agent then goes back to the minority party and reports that the seller has decided to wait until next year to sell the home. Who, if anyone, has violated fair housing laws?

Both owner and agent.

The owner.

The agent.

No one.

46. An income property is bought for $500,000. Gross income is $100,000, and net operating income is $60,000. Cash flow is $10,000. What is the return on investment (ROI)?

2.00%

10.00%

12%

Determine if additional fire hydrants are needed

- return on investment (net operating income divided by price)

Explanation

- return on investment (net operating income divided by price)

47. One aim of the statute of frauds is to

Set time limits for disputing contract provisions.

Require certain conveyances to be in writing.

Prevent fraudulent assignments of listing agreements.

Make all oral agreements unenforceable.

The statute of frauds requires that certain contracts must be in writing to be enforceable. Real estate contracts that convey an interest in real property fall in this category, with the exception that a lease of one year's duration or less may be oral. All other contracts to buy, sell, exchange, or lease interests in

real property must be in writing to be enforceable.

Explanation

The statute of frauds requires that certain contracts must be in writing to be enforceable. Real estate contracts that convey an interest in real property fall in this category, with the exception that a lease of one year's duration or less may be oral. All other contracts to buy, sell, exchange, or lease interests in

real property must be in writing to be enforceable.

48. The most common form of risk transference in brokerage firms is

Continuing education.

Errors & omissions insurance.

Company rules and regulations.

Self control.

49. A homeowner's tax bill for a taxing district is derived by

Dividing the tax base by the district's needed revenues.

Multiplying the tax rate times the assessed value of the property.

Multiplying the tax rate times the taxable value of the property.

Multiplying the millage rate times the equalization factor.

Individual owner billings. Each property owner's tax bill is determined by

multiplying the tax rate for each taxing district times the taxable value of the

property. Taxable value is the assessed value after all exemptions and

adjustments have been taken into account.

Explanation

Individual owner billings. Each property owner's tax bill is determined by

multiplying the tax rate for each taxing district times the taxable value of the

property. Taxable value is the assessed value after all exemptions and

adjustments have been taken into account.

50. A landlord promises to compensate a broker for procuring a tenant, provided the landlord's brother decides not to rent the property within a month. This would be an example of a(n)

Exclusive right-to-lease agreement.

Exclusive agency agreement.

Open listing.

Net listing.

An exclusive agency listing authorizes a single broker to sell the property and earn a commission, but leaves the owner the right to sell the property without the broker's assistance, in which case no commission is owed. Thus, if any party other than the owner is procuring cause in a completed sale of the property, including another broker, the contracted broker has earned the commission. This arrangement may also be used in a leasing transaction: if any party other than the owner procures the tenant, the owner must compensate the listing broker.

Explanation

An exclusive agency listing authorizes a single broker to sell the property and earn a commission, but leaves the owner the right to sell the property without the broker's assistance, in which case no commission is owed. Thus, if any party other than the owner is procuring cause in a completed sale of the property, including another broker, the contracted broker has earned the commission. This arrangement may also be used in a leasing transaction: if any party other than the owner procures the tenant, the owner must compensate the listing broker.

51. The formula for return on equity is

Cash flow divided by equity.

Required yield times gross income.

Net operating income divided by equity.

Cash flow times the capitalization rate.

- return on equity (cash flow divided by equity)

Explanation

- return on equity (cash flow divided by equity)

52.

A property is purchased for $200,000. Improvements account for 75% of the value. Given a 39-year depreciation term, what is the annual depreciation expense?

$3,846

$6,410

$5,128

$8,294

Property improvements / term

Explanation

Property improvements / term

53. Which of the following is the formula for deriving the tax base of a jurisdiction?

The total tax required divided by assessed values

The total of all assessed values minus exemptions

The annual budget times the tax rate

The annual budget divided by the millage rate

tax base = assessed values - exemptions

Explanation

tax base = assessed values - exemptions

54. Which of the following is generally true of a real estate investment?

The lower the price, the lower the liquidity

The greater the return, the greater the risk

The more management, the less return

The more liquidity, the greater the return

55. A prospective homebuyer offers to buy a house if the seller agrees to pay financing points at closing. The seller gets the offer, signs it, and gives it to his agent to deliver. At this point the status of the offer is

A valid contract.

An invalid contract.

Still an offer.

An invalid offer.

56. A principal discloses to the listing agent that she must sell a property within two months to avoid a financial problem. Nearly seven weeks later, a buyer's agent hears of the seller's difficulty from the listing agent and advises his buyer to submit an offer for 80% of the listed price. The buyer complies, and the seller accepts the offer. Which of the following is true?

The buyer's agent has violated fiduciary duties owed the customer.

Increase approximately twice.

The buyer's agent has violated fiduciary duties owed the client.

The listing agent has violated fiduciary duties owed the client.

57. In order to set rents and to estimate the expected return on a managed property, a property manager needs to prepare a(n)

Cash reserve statement.

Operating budget.

Expense report.

Disinfection and filtration

58. A sale transaction on rental property closes on December 16. The landlord received the December rent of $713 on December 1. Assuming the closing day is the seller's, and that the 365-day method is used for prorating, which of the following entries would appear on the settlement statement?

Debit seller $345.00

Credit seller $713.00

Debit buyer $345.00

Credit buyer $368.00

59. An option-to-purchase expires. The landlord agrees to extend it in exchange for a higher price. The optionee claims he can exercise the option within the redemption period. Which is true?

The landlord must honor the option and sellimmediately.

The landlord can extend the option term, butcannot raise the price.

The landlord must extend the option but isallowed to raise the price.

The landlord is under no obligation, sinceoptions do not have a redemption period.

60. Real estate sales agents are legally authorized to

Represent buyers on their broker's behalf.

Enter into approved listing agreements.

Execute lease contracts for less than one year.

Transfer listings to other MLS agents.

61. Disclosure of estimated closing costs is required of a lender in order to comply with

The Equal Credit Opportunity Act.

Truth-in-Lending laws.

Federal Fair Housing Laws.

The Real Estate Settlement and Procedures Act.

62. The secondary mortgage market organizations do all of the following EXCEPT

Guarantee performance on mortgages.

Buy pools of mortgages from primary lenders.

Sell securities based on pooled mortgages.

Directly originate loans.

63. An important characteristic of a promissory note is that

It is assignable.

It must be secured by collateral.

It is not a negotiable instrument.

It must be recorded to be enforceable.

64. A buyer agrees to all terms of a seller's offer and sends notice of acceptance back to the seller. The seller now tells the buyer the deal is off because he has learned that the home was underpriced. Which of the following is true?

The buyer must offer the new price to get the property.

The seller may counteroffer.

The contract is cancelled.

The buyer has a binding contract.

65. An agent obtains a listing which ensures compensation for procuring a customer, provided the agent is the procuring cause. This agent has entered into a(n)

Exclusive right-to sell agreement.

Exclusive agency agreement.

Open listing.

Net listing.

volume = l*W*H so 60ft*120ft*12ft = 86400cuft * 7.48 gallons per cuft = 646,272 gallons.

Explanation

volume = l*W*H so 60ft*120ft*12ft = 86400cuft * 7.48 gallons per cuft = 646,272 gallons.

66. Three leading agencies charge identical commission rates for brokering office properties in Phoenix. Which of the following is true?

This is a perfectly legitimate business practice.

The brokers have engaged in legal collusion.

The brokers have allocated the Phoenix market.

The brokers have illegally fixed prices.

67. An agent informs owners in an area that a decline in property values over the past five years is due to an influx of minority families. He suggests that the trend will continue, and advises them to sell before it is too late. This agent is probably guilty of

Blockbusting.

Redlining.

Discriminatory misrepresentation.

Negligent misrepresentation.

68. When an item is prorated between buyer and seller on a settlement statement, the closing officer must

Debit the buyer and seller.

Credit the buyer and seller.

Debit and credit both buyer and seller.

Debit one party and credit the other.

69. An owner completes a contract to sell her property. Before closing, she runs into financial trouble and assigns the contract to her mortgagor. Which of the following is true?

The owner has defaulted.

The buyer can sue to nullify the mortgage.

The assignment can take effect only after theclosing.

The sale contract remains valid.

70. A lender is charging 2.75 points on a $240,000 loan. How much must the borrower pay for points?

$550.

$6,600.

$5,500.

$660.

71. Buyers and sellers rely on escrow accounts in order to

Allow a third party fiduciary to handle the funds.

Have access to the funds without interferencefrom the broker.

Prevent the broker from receiving a commission until after closing.

Earn equal interest on their funds.

72. If a licensee is found guilty of obtaining a real estate license under false pretenses, the most likely penalty will be

Paying a punitive fee.

Civil suit for damages.

Extra continuing education.

License revocation.

73. Which of the following is a major risk in the fulfilling of listing agreements?

Exceeding the limits of the authority granted bythe agreement

Disclosing a material defect without the seller’spermission

Failing to receive proper compensation

Putting the client’s interests above those of thecustomer

74. Agent Jerry, who works for Broker Lucy, obtains an owner listing to lease a building. Lucy's other agent, Linda, a tenant representative, locates a tenant for Lucy's listing. If there is no arrangement to the contrary, Broker Lucy in this instance is

An implied agent.

A dual agent.

A single agent.

A cooperating agent.

75.

A $250,000 interest-only loan carries a 7% rate. Monthly payments are

$1,750.

$1,458.

$17,500.

Cannot be determined without loan term data.

76. In the contracting process, a licensee must be careful to avoid

Giving the principal any advice about the transaction.

Describing the normal requirements of a contractto a client.

Drafting a contract illegally.

Pointing out to the principals the importance ofmeeting contingency deadlines.

77. The amount of a real estate brokerage commission is determined by

State license law guidelines.

Negotiation with the client.

The Board of Realtors.

Agreement among competing brokers.

78. A broker responsible for handling a trust account is violating the law by

Depositing an earnest money check in a personal account.

Following the seller’s instructions to hold an earnest money check uncashed.

Removing an earned commission from a trust account without permission of the depository institution.

Opening an account that names the licensee as the trustee of the account.

79. Which of the following items are paid in arrears?

Taxes and insurance

Rents and interest

Taxes and interest

Rents and insurance

80. An example of conversion is

Depositing escrow funds in a business operatingaccount.

Spending a customer deposit on a surety bond forthe agency.

Spending operating income from an apartment onroof repairs.

Depositing a commission into an escrow account.

Conversion. Conversion is the act of misappropriating escrow funds for the

broker's business or personal use. More serious than mere commingling,

conversion is effectively an act of theft: using monies which do not belong to the broker. Conversion carries serious consequences, including license revocation.

Explanation

Conversion. Conversion is the act of misappropriating escrow funds for the

broker's business or personal use. More serious than mere commingling,

conversion is effectively an act of theft: using monies which do not belong to the broker. Conversion carries serious consequences, including license revocation.

81. RESPA requires specific closing procedures whenever

The loan is to be guaranteed.

The loan is to be sold to the FNMA.

The commercial property is to be bought byFHLMC.

A borrower does not fully understand closingcosts.

82. Why is it important for a property manager to maintain good relations with tenants?

If tenants like the manager they will like the owner.

Happy tenants are easier to work with.

The manager owes the landlord the fiduciary duty of pleasing the tenants.

Unhappy tenants lead to expensive tenant turnover.

83. A business owner insists on a price for his enterprise that exceeds the value of the tangible assets, claiming that it is a well-known family business with a loyal clientele. The excess value is known as

The buyer’s premium.

Goodwill.

The risk factor.

The profit margin.

84. Property managers are usually considered to be

General agents empowered to perform a wide range of duties for the landlord.

Special agents empowered to perform a specific task for the landlord.

Dual agents serving both the landlord and the tenants.

Employees who have no agency relationship with their employer.

The management agreement establishes an agency agreement between manager and owner as well as specifying such essentials as the manager's scope of authority, responsibilities, objectives, compensation, and the term of the agreement. Property managers are usually considered to be general agents empowered to perform some or all of the ongoing tasks and duties of operating the property, including the authority to enter into contracts.

Explanation

The management agreement establishes an agency agreement between manager and owner as well as specifying such essentials as the manager's scope of authority, responsibilities, objectives, compensation, and the term of the agreement. Property managers are usually considered to be general agents empowered to perform some or all of the ongoing tasks and duties of operating the property, including the authority to enter into contracts.

85. To derive value using the income capitalization approach, one must

Divide the capitalization rate by net income.

Multiply net income times the capitalization rate.

Divide the capitalization rate into net income.

Multiply cash flow by the capitalization rate.

An appraiser now obtains an indication of value from the income capitalization method by dividing the estimated net operating income for the subject by the selected capitalization rate

Explanation

An appraiser now obtains an indication of value from the income capitalization method by dividing the estimated net operating income for the subject by the selected capitalization rate

Principals Of Real Estate Practice Test

1. While physical maintenance of the property is a primary function of the property manager, the level of maintenance performed must be balanced with

2.

What first name or nickname would you like us to use?

2. 16 A leased property is conveyed to a new owner. What happens to the lease?

3. PE17 The Uniform Residential Landlord and Tenant Act fundamentally attempts to

4. PE18 A primary objective of residential zoning is

5. PE19 A​ shop was originally built in a commercial zone. The zone has since been changed to a residential zone. Zoning authorities permit the use, most likely as

6. PE20 Authorities conduct comprehensive land use planning in order to

7. What kind of insurance would provide coverage for loss of income when a rental property is damaged so badly that it cannot be used?

8. PE21 The purpose of a formal legal description of a property is to

9. Negative amortization of a loan occurs whenever

11. Which of the following professionals involved in the real estate business are most concerned about managing real estate for clients?

12. Real estate can be defined as

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

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

15. An owner of a lakefront property tells a fisherman that he cannot fish in a boat within fifty feet of the owner's shoreline. The fisherman protests that the owner cannot prevent him. Which of the following is true?

16. The distinguishing feature of a defeasible fee simple estate is that

17. Dower can best be defined as

18. A distinct feature of a joint tenancy is that joint tenants

19. PE22 A parcel is described as the SW 1/4 of the N 1/2 of the E 1/2 of Section 14. What is its acreage?

20. PE23 A suburb has a growing need for single-family housing, but the land available for new construction is running low. In this case, it is likely that the price of existing homes

21. Interests in a condominium differ from those in a cooperative, in that

22. PE24 The demand for homes in a market is best expressed in terms of

23. PE25 What is the significance of base employment in a real estate market?

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

25. PE26 The concept known as substitution states that

27. PE27 The "price that a willing, informed, and unpressured seller and buyer agree upon for a property, assuming a cash price and reasonable exposure of the property to the market" describes which of the following concepts of value?

28. PE 28 A warehouse building lacks sufficient ceiling height for the operation of modern forklifts. This is an example of

29. A lender may terminate foreclosure proceedings if the defaulting borrower executes

30. PE30 An office building rents for $600,000, has expenses of $400,000, and a cash flow of $100,000. The prevailing gross rent multiplier is 8. Using the GRM, what is the value of the building?

31. A person has occupied a property for seven years, and no one has ever attempted to evict her or co- occupy the parcel. In this case, the person might base a claim of legal ownership on

32. PE 31 An owner obtains a loan and gives the mortgagee a mortgage on the property as collateral. The mortgagor/owner retains title to the property, and the mortgagee records a lien. This is an example of

33. A person wishes to convey any and all interests in a property to another with full assurances against encumbrances, liens, or any other title defects on the property. This party would most likely use which of the following types of deed?

34. The chain of title to a property refers to which of the following?

35. A canal dredging project is to cost $100,000. There are 40 properties along the canal, and 40 others across the street from the canal. The total canal footage to be dredged is 2,500 feet. How much will the assessment be for a 150-foot property on the canal?

36. In eliciting an offer from a buyer, an owner's agent must be careful to

37. A transaction broker should disclose his or her agency relationship to the transaction principals

38. An office building has a potential income of $500,000 and vacancy of 10%. Its cash-paid bills total $300,000, and annual depreciation is $5,000. Payments on the loan total $100,000. What is the property's pre-tax cash flow?

39. Mary Bright bought a home for $80,000, paying $10,000 down and taking a mortgage loan of $70,000. The following year she had a new roof put on, at a cost of $2,000. What is Mary's adjusted basis in the house if she now sells the house for $100,000?

40. The purpose of a homestead tax exemption is

42. An owner's agent is showing a buyer an apartment building. The buyer questions the agent as to whether some cracking paint contains lead. The agent's best course of action is to

43. The village of Parrish has an annual budget requirement of $20,000,000 to be funded by property taxes. Assessed valuations are $400,000,000, and exemptions total $25,000,000. What must the tax rate be to finance the budget?

44. The capital gain on sale of an investment is computed as

46. ​​​​​​An income property is bought for $500,000. Gross income is $100,000, and net operating income is $60,000. Cash flow is $10,000. What is the return on investment (ROI)?

47. One aim of the statute of frauds is to

48. The most common form of risk transference in brokerage firms is

49. A homeowner's tax bill for a taxing district is derived by

50. A landlord promises to compensate a broker for procuring a tenant, provided the landlord's brother decides not to rent the property within a month. This would be an example of a(n)

51. The formula for return on equity is

52. A property is purchased for $200,000. Improvements account for 75% of the value. Given a 39-year depreciation term, what is the annual depreciation expense?

53. Which of the following is the formula for deriving the tax base of a jurisdiction?

54. Which of the following is generally true of a real estate investment?

55. A prospective homebuyer offers to buy a house if the seller agrees to pay financing points at closing. The seller gets the offer, signs it, and gives it to his agent to deliver. At this point the status of the offer is

57. In order to set rents and to estimate the expected return on a managed property, a property manager needs to prepare a(n)

58. A sale transaction on rental property closes on December 16. The landlord received the December rent of $713 on December 1. Assuming the closing day is the seller's, and that the 365-day method is used for prorating, which of the following entries would appear on the settlement statement?

59. An option-to-purchase expires. The landlord agrees to extend it in exchange for a higher price. The optionee claims he can exercise the option within the redemption period. Which is true?

60. Real estate sales agents are legally authorized to

61. Disclosure of estimated closing costs is required of a lender in order to comply with

62. The secondary mortgage market organizations do all of the following EXCEPT

63. An important characteristic of a promissory note is that

64. A buyer agrees to all terms of a seller's offer and sends notice of acceptance back to the seller. The seller now tells the buyer the deal is off because he has learned that the home was underpriced. Which of the following is true?

65. An agent obtains a listing which ensures compensation for procuring a customer, provided the agent is the procuring cause. This agent has entered into a(n)

66. Three leading agencies charge identical commission rates for brokering office properties in Phoenix. Which of the following is true?

67. An agent informs owners in an area that a decline in property values over the past five years is due to an influx of minority families. He suggests that the trend will continue, and advises them to sell before it is too late. This agent is probably guilty of

68. When an item is prorated between buyer and seller on a settlement statement, the closing officer must

69. An owner completes a contract to sell her property. Before closing, she runs into financial trouble and assigns the contract to her mortgagor. Which of the following is true?

70. A lender is charging 2.75 points on a $240,000 loan. How much must the borrower pay for points?

71. Buyers and sellers rely on escrow accounts in order to

72. If a licensee is found guilty of obtaining a real estate license under false pretenses, the most likely penalty will be

73. Which of the following is a major risk in the fulfilling of listing agreements?

74. Agent Jerry, who works for Broker Lucy, obtains an owner listing to lease a building. Lucy's other agent, Linda, a tenant representative, locates a tenant for Lucy's listing. If there is no arrangement to the contrary, Broker Lucy in this instance is

75. A $250,000 interest-only loan carries a 7% rate. Monthly payments are

76. In the contracting process, a licensee must be careful to avoid

77. The amount of a real estate brokerage commission is determined by

78. A broker responsible for handling a trust account is violating the law by

79. Which of the following items are paid in arrears?

80. An example of conversion is

81. RESPA requires specific closing procedures whenever

82. Why is it important for a property manager to maintain good relations with tenants?

5. PE19 A shop was originally built in a commercial zone. The zone has since been changed to a residential zone. Zoning authorities permit the use, most likely as

46. An income property is bought for $500,000. Gross income is $100,000, and net operating income is $60,000. Cash flow is $10,000. What is the return on investment (ROI)?

52.

A property is purchased for $200,000. Improvements account for 75% of the value. Given a 39-year depreciation term, what is the annual depreciation expense?

75.

A $250,000 interest-only loan carries a 7% rate. Monthly payments are