A person who advises a real estate client who is making a purchase to use or invest in real estate is called a(n)
C. counselor
All of the following factors will tend to affect demand for real estate EXCEPT
D. transfer taxes
When the population of a town suddenly increases, which of the following is MOST likely to occur?
C. real estate prices will increase
Property management, appraisal, financing, and development are all
A. separate professions within the real estate industry
The idea that no 2 parcels of land are exactly alike is called
B. uniqueness
All of the following factors can affect the supply of real estate EXCEPT
C. demographics
A property owner who does not want to deal with the everyday tasks of managing a rental property can hire a(n)
B. property manager
When the supply of a certain commodity decreases while demand remains the same, the price of that commodity will tend to
D. increase
All of the following are examples of government policies that can affect the real estate market EXCEPT
D. a shortage of skilled labor or building materials
Land, mineral, and air rights in the land are included in the definition of
B. real property
Which of the following is an example of an economic characteristic of land?
C. scarcity
Another word for uniqueness is
A. nonhomogeneity
All of the following are included in the bundle of rights EXCEPT
D. expansion
The right to dispose of real property by will or deed is contained in the
D. bundle of rights
Growing trees, fences, and buildings would all be considered
D. real estate
The most important economic characteristic of land is
A. location
The developer added sewer lines and utilities and built 2 streets. What are these items called?
A. improvements
The new owner received the land, a garage, and the right to drive on his neighbor's driveway. This right is an example of a(n)
B. appurtenance
A tenant farmer built a chicken coop and a tool shed. These buildings belong to the
C. tenant
Method of annexation, adaptation, and agreement are the legal tests for determining whether an item is
A. real property or personal property
After suffering through a tornado and then flooding from the river, the buildings were gone. The land was still there. This is an example of
C. indestructibility
The seller asked the real estate agent to draw up several documents relating to seller financing. Under these circumstances, the agent should
C. refer the seller to an attorney
A man particularly liked the ornate brass lighting fixtures in a woman's house and immediately made an offer, which the woman accepted. On moving day, the man discovered that the woman had replaced all the ornate brass fixtures with plain steel ones. Which of the following is MOST likely a correct assumption?
C. Man: "Lighting fixtures are normally considered to be real property."
A farmer has posted a number of "No Trespassing" and "No Hunting" signs on his property. Which stick in the bundle of rights gives the farmer this authority?
B. exclusion
A right or privilege tied to real property, although not necessarily part of the property, is called a(n)
A. appurtenance
An important characteristic of personal property is that it is
D. movable
Mobile home, rather than manufactured housing, is the term used for a factory-built home that was built before
C. 1976
To determine whether an item is a fixture, the MOST important test is whether the
A. person who installed it intended for it to be permanent
A woman planted a rose bush on her property and plans to dig it up and take it with her when her house is sold. The sales contract explicitly excludes the rose bush from the sale. This provision is necessary because the rose bush is considered to be
C. real estate
The P in the acronym PITI stands for
B. principal
Which of the following may be deducted from a homebuyer's gross income for income tax purposes?
D. loan discount points
A man's homeowners' insurance policy contains a coinsurance provision;the house is insured for replacement cost. If the man's home burns, which of the following statements is TRUE?
D. the man may make a claim for the full cost of the repair without deduction for depreciation
A couple purchased their home 7 years ago for $250,000. Now, they are being transferred to a new city and must sell their home, currently valued at $350,000. They are 52 and 53 years old, respectively, and they are concerned about paying capital gains on their apparent profit of $100,000. Which of the following statements is important to them?
D. no taxes are due because they have lived there for the required time period and the gain is under the allowed amount
A high-rise building that includes office space, stores, and residential units is an example of a
A. mixed-use development
A single man is 57 years old. He has lived in the same house for the past 4 years. When the sale of his house closes next week, how will taxes be determined on any gain from the sale of the home?
D. the gain is excluded from taxation if it is less than $250,000
All of the following are examples of items that a monthly condominium assessment would cover EXCEPT
C. real estate taxes on individual units
A woman's house is constructed so that the flow of her home is built several inches above the 100-year flood mark. If the woman applies for a federally related mortgage loan, how will her mortgage lender apply flood insurance rules?
C. it may exempt the woman's house from the flood insurance requirement
A prospective buyer wants to purchase a house. His gross monthly income is $6,500. He wants to estimate how much he can reasonably afford to pay for a monthly PITI payment. What is the maximum monthly PITI payment that he can afford based on the past rule for this calculation?
A. $1,820
$6,500 x 28% = $1,820
All of the following expenses may be deducted from a homeowner's gross income for income tax purposes EXCEPT
A. interest paid on overdue real estate taxes
A married couple is planning to purchase a house. She earns $45,000, and he earns $37,500 per year. Their college loan payments total $350 per month, and a car payment is $375 per month. Using the old rules for calculating maximum monthly debt payment and PITI, what is the maximum amount of PITI they estimate they can afford?
D. $1,750
Step 1. Calculate their total monthly income
$45,000 + $37,500 = $82,500 (annual income of the couple)
$82,500 ÷ 12 = $6,875 (monthly income of the couple)
Step 2. Apply the old rule for maximum total debt payments, including PITI
$6,875 x 36% = $2,475
Step 3. Subtract the debt payments to determine the estimated maximum PITI
$2,475 - $350 - $375 = $1,750
Which of the following property coverage is included in both basic form and broad form homeowners insurance policies?
B. lighting damage
A broad form homeowners' insurance policy generally covers all of the following EXCEPT
B. flooding
The reason that homeowners buy homeowners' insurance is to
B. be reimbursed for financial losses suffered because of events, such as fire or theft
Which of the following is a characteristic of penalty-free IRA withdrawals for 1st-time homebuyers?
B. the withdrawn amount must be spent entirely within 120 days on a down payment
People buy homes for all of the following reasons EXCEPT
D. home ownership usually gives residents more leisure time than renting provides
Retirement communities are often developed as
D. planned unit developments
In addition to examining the financial ability of applicants to handle loan payments, lenders also assign a key role in the loan decision to
D. credit scores
The decision to rent or buy a home is affected by all of the following factors EXCEPT
D. convenience of shopping
A characteristic of both planned unit developments and condominium is
C. an association that collects fees from owners and maintains common areas
To insure against losses due to visitor injuries within the owner's unit, condominium owners typically obtain a policy that includes
C. liability insurance
A database of consumer claim history that makes it possible for insurance companies to access prior claim information is called the
D. Comprehensive Loss Underwriting Exchange (CLUE)
Why should agents note whether a property for sale is located on a flood plain?
B. property value is negatively affected
A large tree on a man's property died and slowly rotted. Eventually, a large branch fell off from its own weight and damaged the back porch roof. What type of homeowners' insurance policy would cover this damage?
B. broad form insurance
How is flood insurance coverage determined?
B. it covers either the property value or mortgage loan amount (up to a limit)
An individual who is authorized and consents to represent the interests of another person is a(n)
C. agent
A broker represents a woman but is currently working with a man to find a home. Assuming that no statute has replaced the traditional common law, which of the following correctly identifies the parties in this relationship?
D. the broker is the woman's agent; the man is the broker's customer
The agent's obligation to use skill and expertise on behalf of the principal arises under which of the following common-law duties?
B. care
An agent representing the seller has a duty to disclose to the principal all of the following EXCEPT
D. the agent's advertising budget
A broker has an agency agreement to represent a seller in the sale of a house. The agreement's expiration date is June 10. On May 5, the home is struck by lightning and burns. The seller, overwhelmed by grief, dies. Based on these facts, which of the following is TRUE?
B. the agency agreement was terminated by the fire, although the seller's death also would have done so
A person who is designated by the principal in a broad range of matters related to a particular transaction or activity is a
C. general agent
A real estate broker signed an agency agreement with a seller. The asking price for the seller's house was $499,000. A few days later, the broker met a prospective buyer who was interested in buying a home in the $480,000 to $510,000 price range. The broker agreed to help the buyer locate such a property and to represent him in negotiating a favorable purchase price. Based on these facts, which of the following statements is TRUE?
C. the broker has created a potential undisclosed dual agency problem and should disclose the relationships to both parties before showing the seller's home to the buyer
A broker is showing a house to a prospective buyer. He points out the rustic charm of the sagging front porch and refers to a weed-choked backyard as a delightful garden. The broker is engaging in which of the following?
C. puffing
A house built over a ditch covered with decaying timber, or a house with ceilings that are improperly attached to the support beams are examples of
C. latent defects
The seller's agent has certain duties to the client principal. All of the following are duties of the principal EXCEPT
B. suggesting marketing strategies to the agent
Every state has mandatory agency disclosure laws that stipulate
C. when, how, and to whom licensees must reveal for whom they provide client-based services
Who is the agent's principal?
D. whoever hired the agent
The broker was hired to represent the seller, to market the property, and no solicit offers to purchased. The broker is called a
B. special agent
A house was the scene of a drug arrest and a violent murder last year. When it was listed on the market, many people considered it to be a
B. stigmatized property
All of the following will terminate an agency relationship EXCEPT
B. an offer made on the property
What is a seller's agent required to disclose to prospective buyers about the material defects in the property?
D. all information about material defects that the agent knows or should know
Which of the following statements could be negligent misrepresentation?
D. "The uneven floors just mean that the building dates to colonial times."
The seller's agent is aware of, but does not disclosed to a buyer that a new landfill has been approved for development on the adjacent property. This could be an example of
A. fraudulent misrepresentation
A key element of an agent's fiduciary responsibilities of loyalty is to
A. avoid conflicts of interest
When a broker places trust funds of others into the company's operating account and then withdraws funds for the firm's use, what illegal practice has taken place?
