A properety owner has riparian rights. This suggests that her property is next to:
A. a river or stream
Riparian rights allow property owner who have flowing water, such as a river or stream, next to or across their property to take reasonable amounts of water for use on the property.
Teresa gives her little brother, Mark, life estate pur autre vie. Which of the following is true?
C. Mark is the life tenant, but the measuring life is someone else
In a life estate pur autre vie ("for another life") the measuring life is someone other than the life tenant
A buyer received a general warranty deed when she took title to a propety. The seller's cousin showed up several months later and claimed an ownership interest in the property. The buyer would be protected against this claim by the general warranty deed's"
C. covenant of seisin
The covenant of seisin protects the buyer in this case, in that it promises that the grantor actually owns the property interest being transferred to the grantee.
When comparing an encumbrance and an appurtenance:
C. an encumbrance is a claim or liability that affects the value or use of the property
An encumbrance is any nonpossessory right that is held by someone other than the property's owner. It can affect the title to or the use of the property.
Jean has operated a store on a busy corner in a suburban area. The city decides to rezone the area from commercial to residential use. Which of the following is true?
C. Jean now has a nonconforming use
Certain established uses that wer lawful before a rezone may be permitted to continue to operate. These uses, such as Jean's store, are known as nonconforming use.
A real estate firm handles property management for a number of property owners. Rather than use one standard form, though, each lease must be separately drafted, based on individual negotiations. Which of the following statements is true?
A. An attorney must be engaged to draft each contract
Only an attorney may draft a contract for someone else; for a real estate agent to do so would be the unauthorized practice of law. The agency may fill out preprinted forms, but not draft new contract language.
XYZ Realty has the exclusive right to represent a new subdivision. An agent working for XYZ shows a property to the Meyers, who are not working with their own agent. When the Meyers decide to buy, they have XYZ's agent help them prepare an offer. Which of the following is true?
D. The buyers are not represented by an agent
An agent can provide certain levels of assistance to customers without entering into an agency relationship with them, for instance, helping to fill out a purchase and sale agreement form. Since they are not working with any other agent, the buyers in this instance would be proceeding without any representation.
"The brokerage will provide the owner with a list of names of all persons with whom the brokerage or any other person negotiated concerning the above described property during the period of this listing no later than fourteen days subsequent to the termination date of this listing agreement. If the property is sold to any person named in the list prior to the relisting of the property, without the services of another brokerage, and with ninety days of the termination date of this contract, seller agrees to pay the brokerage a commission of 6.5 percent." This is an example of a/an:
D. extender or broker protection clause
An extender (also known as a broker protection or safety clause) prevents a seller from delaying acceptance of a buyer's offer until the listing expires, in order to avoid paying a commission. They will usually require the listing brokerage to give the seller a list of potential buyers contacted during the listing period.
A contract specifies that "time is of the essence." This means that
D. all contractual duties must be fulfilled on or before the date set forth in the contract
A time is of the essence clause means that all parties to the contract are legally required to meet all deadlines set in the agreement. Failure to meet any deadline by either party is a breach of contract.
Which of the following entities would participate in the primary market for mortgage lending?
C. Commercial bank
Commercial banks, savings and loans mortgage companies, and other entities that make loans to consumers are all part of the primary mortgage market. The Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) are part of the secondary market instead.
Which of the following loans would be subject to the Truth in Lending Act?
B. A loan to a first-time homebuyer
The Truth in Lending Act to applies to consumer loans. It doesn't cover loans for business, commercial, or agricultural purposes, or loans to corporation or other organizations.
What principle underlies competitive market analysis?
B. A property's selling price can be estimated using selling prices of comparable properties
Competitive market analysis is a process similar to the sales comparison approach to appraisal, where a real estate agent uses the sales prices of similar properties to estimate what a property might sell for.
A buyer and a seller have extended their purchase and sale agreement several times due to problems with repairs. Finally, the parties meet with the title company to close the sale. The real estate agent also attends the closing. The real estate agent's primary role is to:
C. verify the amount of the brokerage commission and receive the fee
In a state where roundtable closings are used, a real estate agent might attend in order to receive payment of her commission.
Some investments allow the taxpayer to reduce her current tax bill deducting losses from income from another source. These investments are often referred to as tax:
B. shelters
A tax shelter is an investment that generates income, while also offering offsetting credits or deductions, in order to minimize the taxes on the income.
Marian needs to rent out her basement t make ends meet. She doesn't place any ads for tenant or ask for any help from a real estate agent; she merely asks some of her friends if they know of any potential tenants. She carefully screens all the prospects, and decides to rent to only to a religious, non-smoking, white female. On which basis is it illegal for her to discriminate?
A. Race
Marian fall under the "Mrs. Murphy" exemption to the federal Fair Housing Act, but there is no such exemption from the Civil Rights Act of 1866, which prohibits discrimination based on race.
One tax advantage of investing in real estate is:
B. sheltering of income
Real estate investment is often thought of as a "tax shelter" because it serves to partially shelter investors from income tax liability
Which of the following would be a violation of the Sherman Antitrust Act?
B. Establishing a commission schedule within a group brokerage
Establishing a commission schedule within a group of brokerages is conspiracy to fix prices. It is a violation of the Sherman Antitrust Act, which is the anti-monopoly act.
A test that a court might apply to determine whether an item is a fixture or personal property is:
C. use
A court might inquire into the item's use, for instance, to decide whether it is specifically adapted to the property, or what the intention of the annexor was. Age, cost, and size of the item are not at issue.
Jack receives a life estate in a property, for the life of Larry. When Larry dies, the property passes to mary, rather than the grantor or the grantor's heirs. This is a:
B. life estate pur autre vie, in remainder
A life estate pur autre vie is based on a measuring life that's someone other than the life tenant. An estate in remainder is one that passes to a third party at the end of the measuring life, rather than to the grantor or the grantor's heirs.
A property owner dies without a will or any known heirs. The property passes to the state, under its:
D. escheat power
The state's power of escheat means that property with no known owner, such as cases where an owner dies intestate and with no heirs, passes back to the state.
A lis pendens is a:
D. recorded notice that a property owner is a party to litigation that could result in a lien against the property
A lis pendens is a document that provides constructive notice of a pending lawsuit that may affect title to real property and that could bind a purchaser of the property.
A developer is planning to build a clubhouse for a condominium complex, and finds that it complies with all zoning laws except for where it extends over the sideyard line (imposed by local zoning laws) by several feet along one side. What action should the developer take?
D. Request a variance from the zoning authorities
When a project has not yet been built, and the property owner need only a small deviation from zoning laws, the appropriate course would be to request a variance.
Victoria receives an offer from Lloyd for her property. The offer is for $225,000, and she received it on Friday morning. On Saturday, she counters by changing the purchase price to $235,000. The counteroffer state that Lloyd has 48 hours to accept the offer. On Sunday, Lloyd rejects the counteroffer. Victoria immediately accepts Lloyd's original offer. Under these circumstances:
C. the agreement is not valid, because Victoria terminated Lloyd's original offer when she made the counteroffer
A counteroffer serves to terminate an offer. Once an offer has been rejected, it cannot be accepted. At this point, though, Victoria may simply make a new offer to sell the property to Lloyd for $225,000, and hope that he hasn't changed his mind.
A real estate agent shows a listing to two different buyers. One buyer decides in the early morning t make an offer on the property for less than the listed price. The agent writes up the offer and plans to meet with the seller later in the day. The other buyer then contacts the agent and says that she'd like to make a full price offer. What should the agent do?
A. Present both offers to the sellers at the same time
A real estate agent has the duty of presenting all written communication to and from all parties in a timely manner. Failing to inform a party of any offer would be a breach of duty.
An agent is ready to list a farm that was previously owned by a deceased woman with four adult children. Two of the children contacted the agent to take the listing. Before taking the listing, the agent should:
C. check the public records to see who owns the property
The agent will want to investigate, at the county recorder's office, who owns the property. The agent will want all owners of the property, not just the two children who contracted her, to sign the listing agreement.
A buyer makes an offer that's accompanied by a deposit. The deposit is sometimes called:
D. earnest money
An earnest money deposit is usually given by a buyer to a seller along with the offer to purchase, as an indication of the buyer's good faith.
A borrower defaults on a mortgage. What does the acceleration clause in the mortgage allow the lender to do?
B. Demand immediate payment of the entire loan balance
An acceleration clause allows a lender to "call" a loan, or demand the repayment of the entire loan balance, in the event of a borrower's default
A borrower obtains a home equity loan on a property he already owns. The Truth in Lending Act allows the borrower to rescind the loan transaction within:
A. three days after signing the agreement or receiving the disclosure statement
The Truth in Lending Act gives home equity loans to borrowers the right of rescission for three days after the loan agreement has been signed, the disclosure statement has been received, which ever comes first.
When performing a competitive market analysis, a real estate agent should:
B. pick comparable similar in age and quality to the subject property
A competitive market analysis should be based on comparables that are as similar as possible to the subject property, including size, age and quality, as well as nearby location. A CMA can also include current or expired listings, as well as recently sold properties.
The Barker have entered into an agreement to sell their house. Their property is subject to a special assessment for neighborhood improvements. The buyers will not assume the special assessment, as per the purchase and sale agreement. $1,500 of the assessment remains unpaid at closing. This will show up on the settlement statement as a:
D. debit to the seller
Because the buyers are not assuming the special assessment, the Barkers must pay off any remaining balance on the special assessment. This will be a debt to the sellers, and it will not affect the buyer's side of the settlement statement.
The commission income earned by real estate agents would be classified by the IRS as:
A. active income
Commission income, even though it is not paid on a regular basis like a salary or wages, is still considered to be active income.
A seller tells a real estate agent that she has lived in the neighborhood for a long time and would like to be selective about who buys her house; she would like the agent to tell her the race and nationality of all prospective buyers. How should the agent respond?
C. Refuse to do do, as it would be a violation of the federal Fair Housing Act
An agent faced with a client who wants her to violate the Fair Housing Act should refuse to follow the instructions and explain that following the instructions would be a violation of federal law.
A property management agreement must contain which of the following
D. The property manager's scope of authority
Any property manager agreement should include the scope of the manager's authority, such as whether he can collect and disburse funds. It should also discuss the manager's compensation, but the compensation does not specifically have to be either a fixed fee or a commission.
Darren and Martin are agents for a larger brokerage firm. They decide that Darren will specialize in listing and selling houses on the north side of river and Martin will specialize in listing and selling houses on the south side of river. Such practice is
D. legal, because the prohibition against market allocation does not apply to agents working for the same firm
If Darren and Martin worked for competing brokerage firms, this would be market allocation, and an illegal violation of the Sherman Act. However, because they work for the same firm, they are technically not in competition with each other and their actions are legal.
Maria and Jerry bought property together. They set it up so that the following would happen: if Maria died, Jerry would own the entire property, and if Jerry died, Maria would own the same entire property. They own the property in which manner.
B. Joint tenancy
In a joint tenancy, each joint tenant has the right of survivorship. Upon the death of one joint tenant, his or her interest passes automatically to the other joint tenant.
There's a strip of land that lies between two neighbors. One neighbor mistakenly believes the land is his, and he consistently cares for it by mowing it, fertilizing it, etc. At one point he encloses the property with a chain link fence. After enough time passes, he might be able to obtain title to this strip of land by:
A. adverse possession
Adverse possession allows a person who has occupied land in a manner that is actual, open and notorious, hostile, exclusive, and continuous and uninterrupted, to take title to the property after specified period of time.
An agent studying the results of a survey found a two easement against the property: a utility easement and a pipeline easement. These easement are:
D. gross easements
Many easement in gross are commercial easements, such as those given to utility companies. They allow company employees to enter the property to perform necessary services.
Stanley would like an exception for his diner from new zoning regulations, in that it is a nonconforming use. He would want to argue all of the following to zoning authorities, except that:
C. he would earn more by using the property for purposes that do not conform with the zoning ordinance
Whether or not a use is profitable does not enter into consideration when deciding whether a nonconforming use will be allowed to continue.
A property is listed for $275,000. The buyers offer $265,000, and insist that the gourmet six-burner stove remains with the property. When the signed offer is presented to the sellers, the sellers accept the price, but want to take the stove with them. They cross out the item about the stove, sign the form, and return it to the buyers. Under these circumstances:
D. the original offer is terminated, and the sellers have made a counteroffer
Even though the sellers accepted the price change, they still changed the terms of the offer by altering the part about the stove. This had the effect of terminating the offer and creating a counteroffer. The sellers, in essence, become the new offerors.
A real estate agent completed a listing agreement form, which the sellers signed. At what point should the agent give the seller a copy of form?
C. Immediately after they sign the listing form
Real estate agents should give copies of documents to all parties, as soon as possible after they sign.
All of the following are required for valid purchased and sale agreement, except:
B. earnest money
Earnest money is often given as part of an offer for real property, but it is not an essential element. Consideration and a lawful purpose are required as part of any contract, and the statue of frauds also requires contracts for real property to be in writing.
A mortgage that uses both real and personal property to secure the borrower's debt is a:
A. package mortgage
A package mortgage includes both real and personal property as collateral
Of the following factors, which one is the most significant in influencing value?
A. Location
A property's location is usually the most determinative factor in terms of its value. A view or a prestigious neighborhood can boost the value of an otherwise unremarkable property.
Amortization is defines as
C. paying both principal and interest on a loan on an installment basis
An amortized loan includes payments for both principal and interest. A fully amortized loan will be entirely repaid at the end of the loan term, with the monthly payment remaining the same throughout.
Of the following factors, which one is the most significant in influencing value?
C. Location
A property's location is usually the most determinative factor in terms of its value. A value a view or a prestigious neighborhood can boost the value of an otherwise unremarkable property.
State or local sales tax on the transfer of property is used as a way to generate revenue. On the uniform settlement, it is normally listed as a debit to the seller. It goes by a variety of names, such as the documentary stamp tax or the:
C. transfer tax
One name for tax paid by the seller based on a percentage of the selling price is the transfer tax (or documentary transfer tax). It may also be known as a stamp tax or exercise tax.
A property owner would like to use a tax-deferred exchange. To qualify, the owner's property must be:
A. used in a business or trade
Tax-free exchanges may be used for unimproved investment property, income-producing property, or property used in a trade or business. Principal residences and personal use properties are not eligible.
It is legal for a property manager to:
B. obtain employment information to determine if a tenant can afford the rent
Property managers may take steps to determine whether or not a tenant is able to afford the rent, such as requesting employment and credit information.
What is the most important consideration for a property manager who is deciding on appropriate rental rates?
D. The rental rates for similar properties in the same market
A property manager will perform a market analysis to examine competing managed properties in the same market, which will help him to set rental rates at a competitive level.
A store owner would like to sell common stock in her business (a chain of stores) to investors. She asks an inexperienced licensee for help. The licensee should:
A. refer the client to a securities dealer
A real estate licensee would not be involved in a sale of stock in a company that does not also involve the sale of real property. A licensed securities dealer would need to be involved instead.
A store owner would like to sell common stock in her business (a chain of stores) to investors. She asks an inexperienced licensee for help. The licensee should:
C. refer the client to a securities dealer
A real estate licensee would not be involved in a sale of stock in a company that does not also involve the sale of real property. A licensed securities dealer would need to be involved instead.
The process of acquiring title to property through open, notorious, hostile, and continuous use is known as:
B. adverse possession
Adverse possession allows a person who has put an otherwise unused property to productive use for a required number of years to obtain title.
A neighbor's fence mistakenly extends onto a property. This would be considered a/an:
C. encroachment
A physical object that is on someone's else's property is an encroachment. It is not an encumbrance, because the encroacher doesn't hold a right or interest in the other property.
A woman owns a large house in a subdivision that is zoned strictly residential. She would like to operate a preschool out of her house. She should seek to obtain a/an:
B. conditional use permit
A conditional use permit will allow certain beneficial uses (like school and churches) to operate in residential neighborhoods despite zoning laws.
You might hear the terms "offer and acceptance," "mutual assent," and "meeting of the minds" in connection with a contract. What do they all have in common.
D They refer to whether the parties have capacity to enter into a contract
B. They mean there is an unqualified acceptance of an offer
These terms all refer to whether the parties mutually consented to the terms of a contract. To be valid, it must be an unqualified acceptance. (a counteroffer is sometimes referred to as qualified acceptance.)
A buyer was considering purchasing a property sight unseen through a foreclosure auction. A friend warned him, "caveat emptor." This expression means:
A. Let the buyer beware
"Caveat emptor" is a Latin phrase meaning "let the buyer beware," suggesting that the duty of investigating a potential purchase ultimately falls on the buyer. While this phrase is generally applicable to most transactions, laws regarding real estate transactions limit this somewhat. For instance, seller must, in most cases, disclose latent defects to buyers.
The purchase and sale agreement required the seller to order a pest inspection. The inspector found an infestation, and remedial action was required. Which party was responsible for paying to fix the problem?
A. Whichever party agreed to pay for the expense in the purchase and sale agreement
If a purchase and sale agreement is contingent on the results of an inspection, the parties also should specify in the contract how repairs will be handled.
Shelly takes out a new mortgage on her house, paying off her old mortgage with part of the proceeds. The new mortgage has a rate several percentage points lower than the old mortgage. This is called:
A. refinancing
Refinancing involves taking out an entirely new mortgage loan to replace an existing one. It often is done when mortgage interest rates drop, allowing borrowers to have lower payments.
Which of the following statements about prepayment penalties is true?
D. Neither FHA nor VA loan program allow prepayment penalties
Prepayment penalties are not allowed as part of either the FHA or VA loan programs. Borrowers are allowed to prepay part or all of their loans at their own discretion.
One of the economic characteristics of real estate is:
D. Scarcity
The four elements of value, for anything at all with value, are: demand, scarcity, transferability, and utility.
All of the following charges are usually prorated between buyer and seller at closing, except:
B. recording fees
Recording fees are usually paid by both parties at closing, but rather than prorating each party pays the costs associated with recording the documents that benefit that party. (For instance, the buyer pays to record the deed, while the seller pays to record the lien release.)
Before the parties to a tax-deferred exchange can qualify for the tax benefit, they must provide notice of the exchange within:
C. 45 days
The notice period required by the IRS for tax-deferred exchanges is 45 days.
A property manager of a 10-unit building shows an apartment to a woman who uses a wheelchair. The woman says that she would need to make some modifications, such as adding grab bars in the shower and removing some carpeting in the bedroom. The landlord:
B. must allow the tenant to make the modifications at her own expense, but can require her to restore the property at the end of the lease.
The Fair Housing Act says that a disabled tenant may make reasonable modifications to a leased property at his own expense. The tenant can be required to restore the premises at the end of the tenancy.
A property manager is replacing the filter on the building's air conditioning units, which must be done quarterly. Which kind of maintenance is this?
A. Preventive
Preventive maintenance is all maintenance that is done on a routine basis, that helps to preserve the physical integrity of the property while preventing problems from cropping up that might require corrective maintenance instead.
A seller partially finances the buyer's purchase of her property. What should the seller do if she wants to give public notice of her interest in the property?
B. Record the mortgage
The seller would want to record the mortgage, to give notice to the world of her financial interest in the property. The buyer, of course, will want to record the deed, to give notice of his ownership interest.
Max would like to know if there is an encroachment on his boundary line. He should:
B. order a spot survey
The best way to ascertain if a physical object encroaches on a boundary line would be through a survey.
The purpose of a building code is to:
C. provide minimum standards for constructions
Building codes set minimum standards for constructions materials and methods, in order to protect the public from unsafe or unworkmanlike construction.
Which os the following does NOT terminate an offer?
C. an offer from a third party for a higher purchase prices
An offer can be terminated through revocation by the offeror, death of the offeror or a counteroffer. It is not terminated by a competing offer from another party.
Which of the following is a latent defect that would need to be disclosed?
D. A crack in the basement wall that is covered by paneling
A latent defect is a problem that would not be discovered by ordinary inspection. If a crack is obscured by paneling, it is not likely to be observed and therefore must be disclosed to prospective buyers.
Agent Marcus is showing a property that was built in the early 1970s. The buyer asks about the presence of lead-based paint in the house. What should the agent say?
B. Federal law requires sellers of houses built before 1978 to make disclosures concerning lead-based paint, and the buyer may request an inspection
The Residential Lead-Based Paint Reduction Act requires seller of houses built before 1978 to disclose the location of any known lead-based paint. The buyer must be offered at least a ten-day window in which the house may be tested for lead based paint.
Which of the following situations would cause prices for residential real estate to go up in a particular area?
B. A large new factory that will employ thousands
If a new large employer arrives in the area, that will increase population seeking to buy homes. The increased demand will cause prices to go up. Higher interest rates on the other hand, will lower demand and thus lower prices, while an oversupply of houses will also lower prices.
The costs of which of the following could be deducted as expenses in the year incurred from the income taxes of the owner of an investment property.
D. Repairing the building
Repairs to keep an investment property in ordinary operating condition are deductible in the year they are performed. This would include repainting. Adding a pool or installing a new furnace would be considered capital expenditures, which have tax advantages too but are not deductible in the year they are made.
All of the following are true about the Equal Credit Opportunity Act, EXCEPT:
D. it requires applicants to disclose whether they plan to have children in the near future, since that will impact their home
Credit applicants are not required to disclose plans for having children, under the Equal Credit Opportunity Act; in fact, doing so might be considered a discriminatory act.
A buyer would like protection against any unknown encumbrances on the property she plans to buy. The greatest protection would come from:
B. title insurance
Title insurance offers protection against latent or undiscovered defects in the title. Buyers almost always protect their interests with title insurance policy.
Each of the following is typical subdivision rule or regulation, except:
B. the property cannot be sold and used as a waste disposal site
Regulation of whether a property can be used for waste disposal is likely to occur through laws or ordinances. The other options, however, are common rules imposed by homeowners associations.
There are several environmental issues that would be likely t lead to a property being declared a toxic waste site. Which of the following is one of those issues?
C. A methamphetamine lab
Manufacture of illegal drugs such as methamphetamine can leave behind toxic residues that are difficult to clean up.
The purchaser signs an offer and gives it to the real estate agent to pass on the seller, along with an earnest money deposit. At this point:
B. the offer can be withdrawn any time before it is accepted
An offeror can revoke an offer at any time until he is notified that the offer has been accepted. Many contracts also include a deadline for acceptance.
A seller tells her agent that there have been leaks in a bathroom wall from some faulty plumbing, but that the leaks were repaired and that there hasn't been any other problems with those pipes. The seller tells the agent not to disclose this information to the buyers, since the problem has been fixed. The agent:
A. should tell the buyers about the leak and that the buyers are entitled to request an inspection
The agent and seller should disclose the previous leaking. Buyers should also be informed of their right to request an inspection.
Which of the following statements about the federal law on lead-based paint is false?
B. Tenants must be given ten days in which to conduct an inspection, although they may waive this right
Buyers, but not tenants, have a ten-day window in which to request an inspection for lead-based paint.
Of the following, which would have the greatest effect on the supply of real estate in a particular market?
D. Size of labor force
The size of labor force has the greatest influence on supply and demand for real estate. The size of the labor force determines how many people are able to afford to purchase homes within the local market.
Milo is filing his federal income tax return. He can deduct
A. the interest paid on his mortgage
Interest paid on a mortgage or deed of trust is deductible. Principal payments (also known as debt service) are not. Capital improvements can be factored into the property's adjusted basis when the property is sold, but are not deducted from a taxpayer's annual income.
An investor owns several different properties. Which would have to be modified in order to comply with the ADA?
B. A retail shopping center with no wheelchair accessible restrooms
Modifications for accessibility only have to occur if they are "readily achievable." Installing a wheelchair accessible restroom into a shopping center would be considered readily achievable.
A subdivision has deed restrictions that create a community nature trail from the rear ten feet of every owner's property. One owner decided that he wanted to use that part of his yard to have a storage shed instead. If the other owners want to keep him from doing that, they should:
C. file for an injunction in the appropriate court
Homeowners who wish to enforce a deed restriction against another owner who plans to violate the restriction may do so by filing for an injunction, which is a legal action that prohibits a person from taking a particular action.
Sara is interested in buying a home that is located next to a creek. Sara's agent should advise her to check whether:
B. the property is located in a flood plain
For properties that are located on or near a body of water, it is advisable to check whether the property is in a flood plain. It may affect the buyer's decision, and it should also factor into the decision whether to purchase flood insurance.
An executor listed her aunt's property. While showing the property to the agent, the executor said that her aunt always had tenants in the upstairs apartment. Without checking with zoning, the agent listed and sold the property as multifamily. If the property is not zone multifamily, does the buyer have the right to rescind the contract?
D. Yes, because the agent misrepresented the property and any contract entered into under misrepresentation is voidable
The agent's misstatement is an example of constructive fraud: when a person who occupies a position of confidence and trust makes a false statement with no intent to deceive. fraud is a negative force, that makes contracts voidable by the injured party.
A seller asks an agent to list her property "as is." After signing the listing agreement and completing the disclosure statement, she also orders an inspection that finds black mold behind some insulation in the attic. The seller tells the agent about the inspection results, but neither the seller nor the agent gets around to telling the buyer. Can the buyer sue if he finds the mold at a later date?
B. Yes, because the seller and the agent did not disclose the mold
The agent and seller both are obligated to disclose all known latent defects to prospective buyers. Mold behind some insulation, not easily discoverable upon a simple visual inspection by the buyer, would be an example of a latent defect.
A buyer who is concerned with whether a property's soils is suitable for construction of a specific system would, as part of the inspection process, order a/an:
A. percolation test
A percolation test measures the soil's ability to absorb water. It is often performed when there are questions about the suitability of the property for meeting health and safety standards concerning septic systems.
Which of the following items would a residential homeowner be able to deduct on her income taxes?
B. Points paid on the mortgage
Points paid in connection with a mortgage loan are considered by the IRS to be prepaid interest, and therefore are deductible on a homeowner's income taxes just as mortgage interest is.
All of the following are true about the ADA, EXCEPT:
B. Public accommodations includes stores, hotels, real estate offices, private clubs, religious organizations, and personal residences
Places of public accommodation include a wide range of entities, such as restaurants, hotels, theaters, doctor's office, pharmacies, retail stores, museum, libraries, parks, private schools, and day care centers. Private clubs and religious organizations are exempt from the ADA, as a personal residences.
Which of the following would be subject to real property taxes?
B. A house and the land it's on
Real property taxes are assessed on the entire value of the property, taking into account both the value of the land and the improvements
A 17-year-old purchased a house. He moved in, lived in it for several months, and then decided he didn't want the responsibility of owning a home. He refused to honor the contract. In this case:
B. The contract is voidable when signed; however, the buyer probably ratified it by living in the house
A contract entered into by a minor is voidable, and can be rescinded by the minor. However, if the minor does not act promptly, the contract may be deemed to have been ratified.
A real estate agent is helping a young couple buy a home. The husband's sister will be living with them, and the couple would like to take title so that if either the husband or wife died, the remaining spouse and the sister would own the home together. The agent should:
A. tell them to consult an attorney
A real estate agent should never give advice on matters in a transaction that are beyond the agent's expertise. For issues such as how to take title, a lawyer should be involved.
A seller asks an appraiser to help determine a realistic listing price for her single-family, owner occupied house. Which approach to value would the appraiser rely on when making this decision?
A. Market data approach
The market data approach, or sales comparison approach, is most commonly used when estimating the value of a single-family residence.
Of the following statements about ad valorem taxes, which one is false?
D. Unpaid ad valorem taxes create a general lien against all of a person's property
Real property taxes (or ad valorem taxes) create an involuntary and specific lien against the property they are assessed against.
The listing agreement states that a property is 5.1 acres. The purchase and sale agreement states that it's 5.12 acres. The mortgage notes that the property is 5.22 acres, while the deed states that the lot's size is 5.21 acres. If there is a dispute, which of the documents will take precedence?
C. Deed
When there is a conflict between several different contracts, the one that was most recently signed is considered to take precedence. The deed would most likely be the final document executed, of the four.
A listing agreement would NOT be terminated by:
B. the death of the agent who took the listing
Because a listing agreement is between a seller and a brokerage firm, rather than between the seller and an individual agent, the listing is not terminated if that particular agent dies.
a property has lost value because its maintenance and upkeep have been neglected. This would be an example of:
B. physical obsolescence
A loss in value due to wear and tear or other damage is called physical deterioration.
The statue of limitations runs out on a contract. If the contract is subsequently breached, the contract is:
B. unenforceable
A contract that has been breached cannot be enforced by a court if the statue of limitations has expired. This makes the contract unenforceable.
A buyer enters into a buyer agency agreement with a real estate licensee. The buyer then enters into a purchase and sale agreement, but the property he agreed to buy is subsequently condemned. Which of the following is true?
D. The agency is terminated
An agency is terminated by operation of law based on the extinction of the subject matter, such as the condemnation of the subject property. The buyer and agent can look for another property, but would need to form another agency relationship first. Note that this is the common law of agency tested on the national portion of the exam; in Washington, the rule is different. The agent could immediately start helping the buyer look for another property because this act itself would create an agency.
Which of the following actions would most likely create the largest increase in the value of a property?
B. Installing a second bathroom in a house with four bedrooms and only one bath
Installing a second bathroom in a house with three bedrooms and only one bathroom would rectify a serious case of functional obsolescence. Adding a swimming pool to a lower-end house is not likely to recoup the costs of the addition, while the other options are maintenance issues more oriented toward preserving, not increasing, the property's value.
The Taylors sign an exclusive right to sell listing that expire in six months. A short time later they change their minds and decide not to sell. Can they terminate the listing?
C. Yes, by mutual consent
Both parties to a contract can mutually agree to rescind a contract before it is scheduled to expire.
which of the following is an example of functional obsolescence?
B. Only bathroom can be accessed only through bedroom
A design flaw, such as bathroom that is accessible only through a bedroom, is functional obsolescence. Items that need to be replaced because of wear and tear are physical deterioration, while problems outside the property's boundaries (such as a nearby factory) are external obsolescence.
A contract gives a person the right to purchase property for a particular price within a certain timeframe. This contract is a/an:
C. option
An option is an agreement that gives one party the right to buy or lease property at a set price within a set period of time.
For which of the following is a firm's designated broker accountable?
B. Training and supervision of licensees under his control
The fact that real estate agents are generally treated as independent contractors for tax purposes (as seen in their not having income taxes withheld, or being given constant instruction or supervision) does not absolve the designated broker in charge of a real estate firm from having to properly train and supervise his licensees, and being ultimately responsible for their conduct.
Which of the following would have the greatest negative effect on a property's value?
C. The property is located next to a busy freeway
External obsolescence, such as being located next to a freeway often has the greatest effect on a property's value.
In an option contract, the optionee is the:
A. vendee
In an option contract, the person who is buying the property receives the option to purchase, and is therefore the optionee. A buyer is also known as a vendee (particularly in the context of land contracts, but sometimes in other contexts as well).
An agent knows that there have been several thefts at open houses in the last year, and advised the sellers to remove all valuables before a scheduled open house. The morning after the open house, the sellers called to inform the agent that an expensive necklace was missing. Is the agent responsible for the missing necklace.
C. No, because the sellers should have removed the valuables as the agent advised
The agent advised the sellers not to leave valuables in the house. Because the sellers did not act reasonably and follow the agent's instructions, the agent isn't liable for the seller's negligent actions.
Harold and Maude enter into an agreement in which Harold will allow Maude to make an offer on his property in the event he decides to sell. This kind of agreement is a/an:
B. right of first refusal
Giving someone the right to purchase the property, if you decide to sell, is known as a right of first refusal. It is different from an option, which binds the optionor to sell the property if the optionee decides to exercise the option at any point during the designated period.
An independent contractor relationship between a real estate brokerage firm and a licensee requires that:
C. the brokerage and licensee must enter into a written agreement
The Internal Revenue Code will consider a real estate licensee an independent contractor only if the brokerage services are provided under a written contract saying that the licensee is not treated as an employee.
Which of the following is an example of functional obsolescence?
D. Only bathroom can be accessed only through bedroom
A design flaw, such as a bathroom that is accessible only through a bedroom is functional obsolescence. Items that need to be replaced because of wear and tear are physical deterioration, while problems outside the property's boundaries (such as a nearby factory) are external obsolescence.
A contract gives a person the right to purchase property for a particular price within a certain timeframe. This contract is a/an:
B. option
An option is an agreement that gives one party the right to buy or lease property at a set price within a set period of time.
For which of the following is a firm's designated broker accountable?
C. Training and supervision of licensees under his control
The fact that real estate agents are generally treated as independent contractors for tax purposes (as seen in their not having income taxes withheld, or being given constant instruction or supervision) does not absolve the designated broker in charge of a real estate firm from having to properly train and supervise his licensees, and being ultimately responsible for their conduct.
Which of the following would have the greatest negative effect on a property's value?
D. The property is located next to a busy freeway
External obsolescence, such as being located next to a freeway, often has the greatest effect on a property's value.
A tenant farmer had a heart attack, and he had to terminate his lease and retire. However, his last crop was still growing in the field and he wanted the right to come back and harvest it when it was ripe. the crops are considered to be:
D. emblements, which belong to the tenant farmer
The doctrine of emblements applies to crops planted by tenant farmers. If a tenancy is terminated through no fault of the tenant before crops are ready to harvest, the tenant may re-enter the land and harvest the first crop after the tenancy ends.
An owner has a fee simple defeasible title. She enters into a listing agreement with a real estate agent which of the following should be included in the agreement
B. House and deed conditions
If a property is subject to a qualified fee (such as a fee simple defeasible), the listing should make note of what the particular conditions are for the owner to continue to hold title.
Alta Vista, a new subdivision outside city limits, has a deed restriction that does not allow tree houses. a new buyer moves into the subdivision and promptly builds a tree house in the back yard. How may neighbors will it take to enforce the deed restriction and what action should be taken?
C. One neighbor needs to take action through the court system
A private restriction can be enforced in court by any other property owner subject to the same restrictions. However, if residents have failed to enforce a particular restriction in the past, the attempt to enforce it may fail.
While being shown a property in the Oak Leaf subdivision, the buyers asked the agent if there was the possibility of commercial development nearby. The agent pointed out that the adjacent property was zoned for residential uses only. The buyers should verify the agent's statement by:
D. checking the master plan
A master plan or general plan describes a zoning authority's long-term plan for managing growth in a area. It would shed light on whether there were plans to change zoning laws in the future in a particular area.
A property is considered stigmatized, as a violent crime occurred in the house a number of years ago. In this case, a real estate agent should probably:
A. discuss the listing with the designated broker and perhaps an attorney on how to deal with the problem
Washington law generally does not consider the fact that a violent crime occurred on a property to be a material fact that requires disclosure. However, it would be best seek expert advice on whether disclosure to particular buyers under other agency duties might be owed.
In a title-theory state, who is the beneficiary in a deed of trust?
D. Lender
Regardless of what kind of state the parties are in, with a deed of trust, the lender is considered to be the beneficiary.
A single homeowner sells her home. Which of the following federal tax rules apples to her?
B. The homeowner may exclude the payment of capital gains tax if he or she has lived in the home two out of the last five years and the exclusion does not exceed $250,000
Under current federal law, a taxpayer filing singly may exclude the entire gain from sale of a principal residence, up to $250,000. The seller must have owned and used the property as principal residence for at least two of the previous five years.
Patricia establishes a real estate venture, and sells limited partnership in it. All purchasers are residents of the same state where Patricia is licensed and where the partnership will operate. This offering will regulated under:
C. blue-sky laws
A sale of securities that does not fall under federal jurisdiction would be regulated under state laws concerning sales of securities, which are often known as "blue-sky laws"
Peter is an agent for Apex Realty. Julie is also an agent for Apex Realty, and has located a buyer for one of Peter's properties. Peter is appointed as the exclusive agent only for the seller, and Julie is appointed as the exclusive agent only for the buyer. This arrangement may be known as:
B. designated agency
Designated agency is a form of dual agency where a buyer's agent and a seller's agent both work for the same brokerage firm, but each individually represents only one party to the transaction. (This may also be referred to as an in-house transaction.)
Max owned an apple orchard, which he decided to divide into smaller parcels and sell. Once all of the parcels had been sold, though, Max decided he would enter into agreement with the buyers, in which he would continue harvesting apples on the properties and distribute proceeds from the income to the buyers. Concerning the second set of transactions, Max has sold:
B. securities, because the buyers are investors who expect t make a profit off their investment in Max's business.
The property buyers have entered into agreements that represent an ownership interest in an enterprise, without having day-to-day managerial control over it. These would be considered securities .
A brokerage firm would be required t notify a state regulatory agency of all of the following EXCEPT:
C. a new buyer agency agreement
A real estate firm would not need to notify state regulatory authorities each time it enters into a new listing or buyer agency agreement.
In a real estate office, who must be licensed?
A. Anyone who list real estate property for sale
Anyone who provides real estate brokerage services, such as listing properties, must licensed. Personal assistants may be unlicensed, so long as they do not provide real estate brokerage services.
A real estate firm's company procedures manual should include all of the company's best operating procedures. It would NOT include:
C. Discussing commission rates with competing agents
A real estate agents should never discuss commission rates, even in passing with agents from competing firms. This could be considered an invitation to engage in price fixing, and a violation of antitrust laws.
