Custom Quiz Transfer

Question 1

By which means can a person gain title to real property?
A) Littoral rights
B) Appurtenance
C) Accession
D) Riparian rights

Answer 1

C) Accession
Title to real property can be acquired by accession-the addition to property through the efforts of man or by natural forces. Riparian and littoral rights are water rights, which are appurtenances to real property.

Question 2

For federal income tax purposes a property owner can deduct all of these expenses in computing annual net income EXCEPT
A) interest paid on a mortgage.
B) the manager's salary.
C) depreciation.
D) a wooden fence.

Answer 2

D) a wooden fence.

Question 3

A property is deeded to "John Jones, et ux." The Latin phrase et ux means
A) amount over and above.
B) and wife.
C) and others.
D) without recourse.

Answer 3

B) and wife.

Question 4

All of these statements are correct concerning probate sales of real property EXCEPT
A) the representative of the estate may enter into an exclusive listing with the broker with the approval of the court.
B) an offer can be accepted by the representative of the estate with the approval of the court.
C) commissions for brokers negotiating sales are determined by the probate code according to prearranged schedules based on selling price.
D) the first bid in a probate sale must not be less than 90% of the court’s appraisal.

Answer 4

C) commissions for brokers negotiating sales are determined by the probate code according to prearranged schedules based on selling price.
The probate code does not have a prearranged commission schedule. Commissions are set at the discretion of the court. The representative of the estate may, with the court’s approval, give a broker an exclusive listing, not to exceed 90 days; an offer must be at least 90% of the court’s appraisal. The court may then approve the sale and set the commission.

Question 5

Able died leaving no heirs but had willed Blackacre Ranch to Baker. Talbot was in possession of Blackacre under an existing lease that had two years to run. During the probate of Able’s estate, the court found the will to be invalid. Under these circumstances, title to Blackacre would
A) pass to Baker since it was Able’s intent.
B) pass to Talbot since he is in possession.
C) pass through an action by one or more of the heirs for declaratory relief.
D) pass by statutory provisions by a court of proper jurisdiction.

Answer 5

D) pass by statutory provisions by a court of proper jurisdiction.

Question 6

What best defines adjusted basis of a property for income tax purposes?
A) Acquisition cost plus capital improvements plus depreciation
B) Acquisition cost
C) Acquisition cost plus capital improvements
D) Acquisition cost plus capital improvements minus depreciation

Answer 6

D) Acquisition cost plus capital improvements minus depreciation

Question 7

A person who has been judicially declared incompetent and who was bequeathed three properties by his brother
A) can accept title to real property given to him in a will.
B) can accept title only if it is placed with a trustee.
C) cannot receive title to real property but can receive title to personal property.
D) cannot receive title to real property because of his incompetency.

Answer 7

A) can accept title to real property given to him in a will.

Question 8

Escrow companies normally base their prorations on a year of
A) 350 days.
B) 355 days.
C) 360 days.
D) 365 days.

Answer 8

C) 360 days.

Question 9

A buyer of a business opportunity would obtain a Certificate of Clearance from the
A) State Board of Equalization.
B) Franchise Tax Board.
C) County Tax Assessor.
D) Secretary of State.

Answer 9

A) State Board of Equalization.

The Board will issue the Certificate of Clearance if the seller of a business has paid his sales tax in full.

Question 10

When standard coverage is extended by the coverage of an ALTA policy, the insurer is liable for all of these EXCEPT
A) liens of record.
B) unrecorded mechanics' liens.
C) unrecorded easements.
D) zoning restrictions.

Answer 10

D) zoning restrictions.

Question 11

Mr. Newton owned a six-unit dental building and lot valued at $225,000. The adjusted cost basis was $185,000 and the property was mortgaged for $137,000. He exchanged with the owner of a store building valued at $198,000 with a $125,000 mortgage. Newton also received $25,000 cash boot. What is Newton's actual and taxable gain?
A) $78,000-$54,000
B) $73,000-$43,000
C) $50,000-$37,000
D) $50,000-$13,000

Answer 11

C) $50,000-$37,000
(1) Newton’s Dental Building Store Building
$225.000 Market value $198,000
–137,000 Mortgage –125,000
$ 88,000 Equity $ 73,000
Cash 25,000
(2) Newton “gets” $198,000 Property (like-kind)
\+ 12,000 Mortgage relief
\+ 25,000 Cash 37,000 Boot*
$235,000 Total
(3) Less his basis
in dental bldg. –185,000
50,000 realized (actual gain)
*(4) Of which 37,000 is recognized (taxable now)*
(5) Leaving $ 13,000 Deferred gain

Question 12

Who is normally in the weakest position against loss of property due to a claim by an outsider?
A) Holder of an unrecorded quitclaim deed who does not occupy the property
B) Holder of a certificate of title
C) Holder of a recorded deed who rents the property
D) Holder of an unrecorded deed who occupies the property

Answer 12

A) Holder of an unrecorded quitclaim deed who does not occupy the property
An unrecorded deed is considered void as against a subsequent good-faith purchaser who is without notice and who does record or take possession. The two methods of giving constructive notice of a claim of interest are (1) recording and (2) occupying the property. A holder of an unrecorded quitclaim deed who does not occupy the property has done neither. For a holder of a certificate of title, the certificate is indicative that the named holder is the owner of the record.

Question 13

Green paid $77,000 for a home in a real estate transaction. The lender would lend 80% of the $75,000 value. If the buyer was charged 3% of the selling price for closing costs and made a $1,200 cash down payment, what additional amount of money would the buyer need in order to complete the transaction?
A) None of these
B) $13,490
C) $15,800
D) $18,110

Answer 13

D) $18,110
Total cost to buyer
Purchasing price = $77,000
Closing costs (3% × $77,000) + 2,310 = $79,310
Less proceeds to offset costs
Loan (0.80 × $75,000) = $60,000
Down payment
\+ 1,200
–61,200
To complete transaction
$18,110

Question 14

When transferring fee simple title to real property that has been financed by a first deed of trust, you must first
A) receive permission from the beneficiary.
B) do none of these.
C) have the grantor sign the deed.
D) pay the beneficiary in full.

Answer 14

C) have the grantor sign the deed.
To transfer fee simple title, encumbered or unencumbered, the grantor must sign the deed. If this is done in violation of a due-on-sale clause, the beneficiary (lender) may call the loan, but cannot prevent the transfer.

Question 15

Seizure of property for payment of money before judgment is known as a(n)
A) lis pendens.
B) attachment.
C) condemnation.
D) writ of execution.

Answer 15

B) attachment.
An attachment is a legal seizure prior to a court action. The instrument employed is a writ of attachment. A lis pendens effectively puts a “hold” on property, but it is not a seizure.

Question 16

A deed is void at its inception if
A) the grantee takes title under an assumed name.
B) the grantee is a minor.
C) the grantor is legally incompetent.
D) none of these are true.

Answer 16

C) the grantor is legally incompetent.

Question 17

The trustee will deliver to the trustor a
A) grant deed.
B) quitclaim deed.
C) reconveyance deed.
D) trustee's deed.

Answer 17

C) reconveyance deed.

Question 18

A deed made and delivered, but not recorded, is
A) invalid as between the parties.
B) valid as between the parties and valid as to subsequent recorded interests.
C) invalid as between the parties and valid as to third parties with constructive notice.
D) valid as between the parties and invalid as to subsequent recorded interests without notice.

Answer 18

D) valid as between the parties and invalid as to subsequent recorded interests without notice.

Question 19

Which item would most likely be short rated in escrow?
A) Insurance
B) Interest
C) Real estate taxes
D) Trust deed

Answer 19

A) Insurance

Question 20

The requisites of a grant deed differ from those of a land contract in which way?
A) Signature of principals
B) Warranties to purchaser
C) All of these
D) Designation of price

Answer 20

C) All of these
A grant deed carries a warranty to the purchaser; a land contract does not. The grant deed requires the signature of the grantor only; a land contract requires the signature of the vendor and the vendee. A grant deed does not require a designation of the price; a land contract does.

Question 21

A man owns property free and clear valued at $320,000 with a book value of $220,000. If he exchanges for another property, also free and clear valued at $365,000, and pays no boot, the book value on the second property will be
A) Cannot be computed with the facts given
B) $220,000.
C) $585,000.
D) $365,000.

Answer 21

B) $220,000.
A tax-free exchange is accomplished by transferring the old cost basis to the newly acquired property. Since the taxpayer paid no boot, his book value on the second property would remain $220,000.

Question 22

Carson acquired title to several properties before his arrest. While in prison, he wanted to convey one property to his son and sell another. How would being in prison affect his ability to convey?
A) He can dispose of his property as he pleases.
B) He must first get permission from the California Adult Authority.
C) It would be hard to acquire title insurance.
D) His conveyance must be approved by an officer of the Department of Corrections.

Answer 22

A) He can dispose of his property as he pleases.

Question 23

A home sold for $337,000 with a fair market value of $335,000. The seller took a purchase money second trust deed for $325,000 and sold it “without recourse” at a discount of $323,500. The buyer defaulted before the first payment was made. The holder of the second trust deed can
A) look to the seller since the note was usurious.
B) look to the seller since “without recourse” has no effect.
C) foreclose for $323,500.
D) foreclose for $325,000.

Answer 23

D) foreclose for $325,000.

Question 24

An ALTA extended coverage policy of title insurance would
A) cover easements created during the term of the policy.
B) be limited to stated conditions and title as of the date of issuance.
C) cover encroachments after the date of issuance.
D) protect a lessee who moved onto the property after the date of issuance of title insurance.

Answer 24

B) be limited to stated conditions and title as of the date of issuance.

Question 25

Smith buys an apartment building for $100,000. He keeps it for 10 years and sells it for $100,000. He had depreciated the improvements $40,000 over his period of ownership. As to his income tax position
A) he has to pay capital gains on the amount of the depreciation.
B) his gain may be deferred.
C) he has no recognized gain.
D) his gain is taxable as ordinary income.

Answer 25

A) he has to pay capital gains on the amount of the depreciation.

Question 26

What is an example of “boot” received for income tax purposes?
A) Increase in depreciation taken
B) Decrease in depreciation
C) All of these
D) Net debt relief in a tax-deferred exchange

Answer 26

D) Net debt relief in a tax-deferred exchange
“Boot” is something that is not of a like-kind received in a tax-deferred exchange. It includes cash or equivalent, such as a note and trust deed, other personal property, and net debt relief (mortgage relief). It is unrelated to depreciation.

Question 27

All of these are required for acquiring title by adverse possession EXCEPT
A) confrontation with the owner.
B) it must be under a claim of right or color of title.
C) open and notorious use.
D) hostile to the true owner’s title.

Answer 27

A) confrontation with the owner.

Question 28

Smith sold a house under an installment sales agreement. The main advantage of this method is the ability to
A) declare the gain in the year of sale.
B) prorate the gain over the term of the installment contract.
C) postpone declaring the gain until the debt is fully repaid.
D) choose which years in which to declare the gain.

Answer 28

B) prorate the gain over the term of the installment contract.

Question 29

A standard policy of title insurance insures against
A) lack of capacity of persons having to do with title.
B) unrecorded easements.
C) eminent domain.
D) defects in the title known to the purchaser but not to the title company as of the date of the policy.

Answer 29

A) lack of capacity of persons having to do with title.

Question 30

During escrow, if an unresolved dispute should arise between the seller and buyer preventing the close of escrow, the escrow holder may legally
A) act as a neutral arbitrator.
B) rescind the transaction and return all monies to both parties.
C) enter court action with buyer and seller in an action of interpleader.
D) sue for specific performance.

Answer 30

C) enter court action with buyer and seller in an action of interpleader.

Question 31

Who would provide a quitclaim deed to quiet a title?
A) Trustor
B) None of these
C) Grantee
D) Grantor

Answer 31

D) Grantor

Question 32

In the absence of court approval, a minor or incompetent can
A) encumber real property through a power of attorney.
B) receive a deed to a property through gift or inheritance.
C) do all of these.
D) convey property through a guardian.

Answer 32

B) receive a deed to a property through gift or inheritance.

Question 33

A buyer purchased a property using a recorded conditional sales contract and later defaulted on the payments. If a quitclaim deed was used to clear the cloud on title, it would be executed by
A) the seller.
B) both buyer and seller.
C) none of these.
D) the buyer.

Answer 33

D) the buyer.

Question 34

An escrow can be terminated by
A) incapacity or death of either party.
B) mutual consent of the parties.
C) revocation by the broker.
D) an attorney-in-fact acting for one of the principals.

Answer 34

B) mutual consent of the parties.

Question 35

There are different types of title insurance. The major differences between the owner’s title insurance policy and the lender’s title insurance policy include
A) a lender’s insurance covers the interests of the mortgagee.
B) a lender’s insurance covers the interest of the seller but owner’s insurance covers the title.
C) a lender’s insurance extends coverage on easements and possession that is difficult to ascertain at time of purchase.
D) an owner’s insurance covers the water and mining rights that the owner can claim.

Answer 35

A) a lender’s insurance covers the interests of the mortgagee.
A lender’s insurance policy (an ALTA policy) insures the interests of that lender, or mortgagee. An owner’s policy (a CLTA policy) insures the owner against risks of record and some off-record hazards such as forgery and lack of capacity. Only the ALTA policy extends coverage to water and mining rights. An ALTA policy does extend coverage to off-record easements and rights of parties in possession, but not because the information is difficult to ascertain.

Question 36

The county maintains an assessment roll that includes the assessed value of property. The purpose of this assessment roll is
A) establishment of the tax amount.
B) setting of the tax rate.
C) establishment of the assessment for the tax base.
D) equalizing of assessments.

Answer 36

C) establishment of the assessment for the tax base.

Question 37

A summary and digest of all transfers, conveyances, legal proceedings, and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which impair title, is a definition of a(n)
A) certificate of title.
B) boilerplate form.
C) abstract of title.
D) chain of title.

Answer 37

C) abstract of title.