Oregon RE and National RE Exam Prep Questions 1

Question 1

When the winning bid at the foreclosure sale is less than the borrower’s total debt

Answer 1

When foreclosure sale proceeds aren’t sufficient to repay the full amount of a mortgage loan, the difference between the sale price and the total debt is called a “deficiency.” A short sale or deed in lieu of foreclosure might also result in a deficiency. Many states allow a foreclosing bank to get a personal judgment, called a “deficiency judgment,” against a borrower for the amount of the deficiency

Question 2

how many acres in a section

Answer 2

640

Question 3

What is the definition of escheat?

Answer 3

the reversion of property to the state, or (in feudal law) to a lord, on the owner’s dying without legal heirs.

Question 4

how many square yards in an acre

Answer 4

4840

Question 5

how many square feet in an acre?

Answer 5

43560

Question 6

How many miles in an acre?

Answer 6

0.0015625

Question 7

How many square miles in a section

Answer 7

1

Question 8

how many acres in a township

Answer 8

23040.1

Question 9

How many sections in a township

Answer 9

36

Question 10

allodial system

Answer 10

The allodial system is a legal right or claim of ownership of land applicable in many legal systems throughout the world

Question 11

What is the acreage in the parcel of land described as “SE 1/4 of NW 1/4 and N 1/2 of SW 1/4 of NE 1/4 of Section 24?”

Answer 11

60 acres

Question 12

A parcel of land measuring 220 yards by 220 yards contains

Answer 12

10 acres

Question 13

A parcel of land measuring 220 yards by 220 yards contains

Answer 13

10 acres

Question 14

If a quarter-section of land is divided into four equal parcels, each parcel will contain:

Answer 14

40 acres

Question 15

How many acres are in the following description, “E 1/2 of SW 1/4 of NE 1/4 of Section 23?”

Answer 15

20 acres

Question 16

How many acres are contained in the following legal description, “The N 1/2 of the E 1/2 of the E 1/2 of the NW 1/4 of Section 4 and the W 1/2 of the NW 1/4 of the NE 1/4 of Section 5?”

Answer 16

40 acres
Remember that “and” means that two separate parcels are included and must be added together to determine the whole. You always start with 640 acres and solve by dividing from right to left.

Question 17

A “section” of land, as used in the government survey method, may be described as

Answer 17

1,760 yards x l,760 yards.

Question 18

One section of land is established by

Answer 18

government survey

Question 19

A metes and bounds description must

Answer 19

commence and finish at the same identifiable point.

Question 20

The legal description method that uses angles, terminal points, and established lines is the

Answer 20

metes and bounds description

Question 21

A plat map is used in which type of legal description?

Answer 21

Lot and block

Question 22

The column of townships running north and south is numbered according to its distance from the principal meridian and is referred to as

Answer 22

ranges

Question 23

what is a tract

Answer 23

an identifiable portion of land. Generally, a tract of land is an identifiable portion of land that is easy to portray and discuss. A tract of land has usually been surveyed or has borders that are defined within a deed or other legal instrument. Also known as a subdivision.

Question 24

A township is

Answer 24

approximately 36 square miles

Question 25

The primary survey line running East and West in the Rectangular Survey is a

Answer 25

the base line

Question 26

North and south boundaries of townships are created by

Answer 26

range lines

Question 27

North and south boundaries of townships are created by

Answer 27

the principal meridian

Question 28

What is the definition of ratified?

Answer 28

sign or give formal consent to (a treaty, contract, or agreement), making it officially valid.

Question 29

what is the definition of lis pendens?

Answer 29

a pending legal action, or a formal notice of this.

Question 30

Which of the following are fiduciaries in a real estate transaction?

Answer 30

Escrow agent
Principal Broker

Question 31

what is the definition of fiduciary

Answer 31

involving trust, especially with regard to the relationship between a trustee and a beneficiary.

Question 32

In order for a broker to recover a commission on an open listing, he must prove

Answer 32

that he is duly licensed.

that he found a ready, willing and able buyer.

that he was the procuring cause.

Question 33

A broker representing a client as a property manager is an agent of the

Answer 33

principal broker

Question 34

A real estate agent representing the seller should inform his client about the potential for financial damages from taking a large

Answer 34

purchase money note.

Question 35

A seller of a parcel of real property told the broker that the roof leaked in the house on the property and a statement to that effect was included in the listing agreement. The seller told the broker to inform all prospective buyers of this fact, but the broker sold the property and failed to tell the buyer that the roof leaked. What recourse does the seller have against the broker if the buyer sues the seller and collects for failing to disclose the leaky roof? The seller

Answer 35

can recover damages from the broker

Question 36

Using client funds for personal use is known as

Answer 36

commingling &
conversion.

Question 37

Jack Williams, a property manager, was $1,000 short of the money he needed to pay his office rent. He wrote a check to himself from his property management security deposit trust account with the intention of replacing the money the following day. William’s action is known as

Answer 37

conversion

Question 38

An owner of property entered into a property management agreement with a property manager. Shortly thereafter the owner died. In this case the

Answer 38

agency is immediately terminated

Question 39

How many feet are in a mile?

Answer 39

5280

Question 40

What is tenancy in common?

Answer 40

An undivided ownership in real estate by two or more persons. The interests need not be equal, and upon death of a co-tenant, the interest passes to the deceased co-tenant’s heirs.

Question 41

What is the Statute of Frauds?

Answer 41

Laws requiring certain types of contracts to be in writing. All contracts for the sale of real property must be in writing, and leases for more than one year must be in writing.

Question 42

What is the Statute of Frauds?

Answer 42

Laws requiring certain types of contracts to be in writing. All contracts for the sale of real property must be in writing, and leases for more than one year must be in writing.

Question 43

What is Reproduction Cost?

Answer 43

The cost of reproducing a property at current prices using similar materials.

Question 44

What is a Fiduciary?

Answer 44

One acting in a relationship of trust and confidence. In real estate practice as between a principal (seller or buyer) and a broker. The fiduciary owes the duties of loyalty, accounting, disclosure, care and confidentiality. These duties cannot be breached.

Question 45

The fiduciary owes the duties of

Answer 45

loyalty, accounting, disclosure, care and confidentiality. These duties cannot be breached.

Listen As Dude Casually Cusses

Question 46

What is a Purchase Money Mortgage ?

Answer 46

A mortgage or trust deed given from buyer to seller to secure all or a portion of the purchase price.

Also known as a Trust Deed.

Question 47

What is a Grant Deed?

Answer 47

A limited warranty deed using the word “grant” like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor. The most common deed form used in California. Not used in Oregon

Question 48

What is Statute of Limitations?

Answer 48

Time periods to enforce a claim by court action. After the statutorily defined time period for the type in action has expired, the court will not hear the claim

Question 49

Juan signed a listing agreement with his broker, Rosa. A listing agreement is…

Answer 49

an express contract.

Question 50

Which of the following would NOT terminate a contract?

Answer 50

The illiteracy of the seller or the buyer

Question 51

What are punitive damages?

Answer 51

Punitive damages are awarded in addition to actual damages in certain circumstances.

Question 52

What are liquidated damages?

Answer 52

A Liquidated Damages provision allows for the payment of specified damages should the buyer breach the contract – a way to stipulate damages on the front-end of the transaction to save the parties from spending time and money fighting over damages at the back-end of the transaction

Question 53

What is an exchange agreement?

Answer 53

A written agreement between the exchanger and the Qualified Intermediary (QI) defining the transfer of the relinquished property, the ensuing purchase of the replacement property, and the restrictions on the exchange proceeds during the exchange period.
Having to do with escrow.

Question 54

Where no time for acceptance by the offeree is stipulated in an offer, the offer will lapse after what period of time?

Answer 54

will lapse after a reasonable time.

Question 55

When the time is of the essence clause is in the contract…

Answer 55

punctual performance of the terms is required of the principals to the contract.

Question 56

Broker Jones left Principal Broker Adams and went to work for Principal Broker Brown. What happens to the listings obtained by Jones while licensed with Adams?

Answer 56

They stay with Principal Broker Adams

Question 57

A contract that has no force or effect in law from its inception is

Answer 57

void and unenforceable

Question 58

If a buyer agrees to purchase a house “as is”

Answer 58

the seller or listing broker must reveal all known defects to the buyer or buyer’s broker.

Question 59

Which of the following conditions is necessary for a customer to qualify as “ready, willing, and able?”

Answer 59

The customer must be legally competent to undertake the transaction.

They do not need a commitment from a lender to be ready willing and able.

Question 60

In the context of agency law, the legal difference between an owner representation agreement and a buyer representation agreement is

Answer 60

the client.

Generally, buyer and tenant representation agreements are subject to the same laws and regulations as those applying to owner listings. The only difference is the client and his or her transaction expectations.

Question 61

What is NOT necessary to prove that a misrepresentation was fraudulent?

Answer 61

That the statement was in writing.

Question 62

Who should sign the listing contract when a private corporation wants to sell its real property?

Answer 62

When a private corporation wants to sell its real property, any person authorized by the board of directors should sign the listing contract.

Question 63

A broker entitled to receive a commission regardless of who sells the property has which type of listing?

Answer 63

A broker is entitled to a commission regardless of who sells the property under an exclusive right to sell listing. With the exclusive right to sell listing, the seller employs just one brokerage. The brokerage earns its commission if the property is sold by another brokerage, the seller, or the listing brokerage.

Question 64

A typical listing contract includes what?

Answer 64

1. A description of the property.
2. The seller’s obligation to pay a commission.
3. Terms on which the seller wishes to sell the property.

Description Commission Terms

Dudes Casually Toot

Question 65

How much time does a seller have to accept a buyer’s offer that includes “time is of the essence?”

Answer 65

Until the expiration date the buyer included in the offer.

Question 66

One of the essential requirements for a valid escrow is a binding contract. This may be

Answer 66

an exchange agreement.

an option agreement.

a lease agreement.

Question 67

A contract for sale of a parcel of real estate must be signed by

Answer 67

The buyer and the seller

Question 68

Truth-in-Lending regulations are applicable to

Answer 68

all personal property transactions.

Question 69

Regulation Z of the Federal Reserve Board, the Truth-in-Lending Act, requires lenders to inform borrowers about:

Answer 69

finance charges.

Question 70

What is Hypothecation?

Answer 70

The process of securing a loan by pledging a property without giving up ownership of the property is called hypothecation.

Question 71

A distinctive feature of a promissory note is that

Answer 71

It is a negotiable instrument.

Question 72

What does a tight money market mean for the real estate market?

Answer 72

A buyer’s market and high interest rates.

Question 73

What does “base employment” refer to in the context of real estate demand?

Answer 73

The number of persons employed in base industries in an area

Question 74

Net operating income is equal to

Answer 74

Potential gross income minus vacancy and credit loss minus expenses.

Question 75

What is a lien-theory state?

Answer 75

A state in which a mortgagee has equitable title to a secured property.

States differ in their interpretation of who owns mortgaged property. Those that regard the mortgage as a lien held by the mortgagee (lender) against the property owned by the mortgagor (borrower) are called lien-theory states. Those that regard the mortgage document as a conveyance of ownership from the mortgagor to the mortgagee are called title-theory states.

Question 76

What type of theory state is Oregon?

Answer 76

Title theory

Question 77

The Essential Elements of a Valid Deed

Answer 77

There are a number of elements required to make a deed valid. These essential elements vary in minor ways from state-to-state. In Oregon, the deed must:

• be in writing
• be signed by the grantor
• have an identifiable grantee
• show acceptance of conveyance by the grantee
• have an adequate property description
• contain words of conveyance
• list the consideration
• be delivered to the grantee

Question 78

what is ad valorem?

Answer 78

Ad valorem is a Latin phrase that translates to “according to the value.” The essential characteristic of ad valorem tax is that it is proportional to the value of the underlying asset, unlike a specific tax, where the tax amount remains constant, irrespective of the underlying asset’s value.

Question 79

The owner of a condominium and the lessee of an apartment have many things in common but their legal relationship with the property is different. With respect to their similarities both parties would hold

Answer 79

an estate in real property.

Question 80

What is an estate?

Answer 80

A possessory right or ownership interest in real estate

Question 81

What types of estates are free hold estates?

Answer 81

A life estate

A fee simple estate

Question 82

A conveyance of an estate in fee simple determinable

Answer 82

creates the possibility of an automatic reversion of title

Question 83

Lorraine Cruser owns a parcel of real property. She can change her fee simple title to less than a freehold estate by

Answer 83

a sale/leaseback arrangement.

Question 84

Characteristics of a freehold estate

Answer 84

It must be inheritable.

It must be transferable.

It is of indefinite duration.

Question 85

The most complete form of ownership our law recognizes today is the

Answer 85

fee simple absolute

Question 86

The kind of estate that is the most freely inheritable and transferable is

Answer 86

a fee simple estate.

Question 87

Judy Randolph owned fee simple title to a vacant lot adjacent to a school. She decided to make a gift of the lot to the school. She wanted to have some control over the use of the lot, so her attorney prepared a deed to convey ownership of the lot to the school as long as the lot was used for educational purposes. After completion of the gift, the school will own

Answer 87

a fee simple determinable estate.

Question 88

What would be used to enforce a condition that was created at the time the real property was conveyed?

Answer 88

Reverter clause

Question 89

true or false:

A life estate can never extend beyond the life of the life tenant.

Answer 89

false

Question 90

A life tenant is one who has

Answer 90

A freehold estate

Question 91

Reversion means

Answer 91

land returns to the grantor.

Question 92

what concerning life estates is true?

Answer 92

A life estate is considered to be a freehold estate.

A life estate can be measured by the life of someone other than the holder of the life estate.

Question 93

Is a lease a freehold estate?

Answer 93

No

Question 94

Using client funds for personal use is known as

Answer 94

conversion

Question 95

what is commingling?

Answer 95

Commingling in real estate occurs when a tenant security deposit or funds received from members in an LLC are deposited with the landlord or managing partner’s business or personal funds.

Question 96

what is a title plant?

Answer 96

A title plant is a database of property records, organized by location rather than by property owner. A title plant allows title searches to be completed quickly and efficiently by title companies so that a title can be cleared and title insurance issued. These title plants may be owned by the title company or may be a separate company with a formal information-sharing agreement with title companies – allowing title companies to access, update, and track a shared pool of property information.

Question 97

Tracing the conveyances and encumbrances of real property is known as

Answer 97

a title search

Question 98

A standard title insurance policy ordinarily protects

Answer 98

protects only the party named as the insured party in the written policy.

Question 99

What will terminate a mortgagee’s title insurance policy?

Answer 99

The mortgage debt being paid in full

Question 100

A purchaser’s title insurance policy normally protects the

Answer 100

vendee on a land sales contract

Question 101

A purchaser’s title insurance policy normally protects the

Answer 101

vendee on a land sales contract

Question 102

A standard policy of title insurance does not insure against what in the chain of title?

Answer 102

Mining claims

Question 103

what is true regarding title insurance?

Answer 103

The policy will protect the insured party’s interest forever.

Subsequent owners of the piece of property must obtain their own title insurance if they want it.

Question 104

An extended coverage title insurance policy provides coverage against

Answer 104

Unrecorded easements

Unrecorded liens

Rights of parties in possession

Question 105

An owner’s title insurance policy will NOT provide protection against

Answer 105

governmental regulation

Question 106

A loss to the insured that resulted from a forged document is covered by

Answer 106

an extended coverage title insurance policy.

a standard coverage title insurance policy.

Question 107

A standard title insurance policy insures against

Answer 107

prescriptive easements.

a recorded deed that was forged.

claims of persons in possession of the property at the time the purchaser takes title.

Question 108

An owner’s policy of title insurance continues in force

Answer 108

as long as the insured has a liability

Question 109

An abstract of title

Answer 109

Is a summary of title history and guarantees a valid title

Question 110

Some common exceptions of individuals who do not need to be licensed are:

Answer 110

an individual does not need to have a real estate license if the nonlicensed individual acts in the nonlicensed individual’s official capacity as a receiver, a conservator, a trustee in bankruptcy, a personal representative or a trustee, or a regular salaried employee of the trustee, acting under a trust agreement, deed of trust or will

A person who is a full-time employee of a single owner of real estate, whose activities involve real estate of that employer and are incidental to the employee’s normal non-real estate activities. A common example is the secretary of a property owner who periodically shows a vacant space to a tenant in the owner’s building. (Note: this person cannot be licensed. If the employee has a license, this exemption cannot be used).

A non-licensed regular full-time employee of an employer who buys and sells real estate for their own account. Example: The employer buys and sells property for their own account. The employee assists the employer in these transactions by finding properties to purchase, analyzing the properties and structuring and negotiating transactions. If the employee does have a license, this exemption cannot be used.

When a person is a regular full-time employee of a single non-licensed corporation, partnership, association or single owner and that person only engages in property management activity for that single entity, then this employee may engage in property management activity. The employee may not engage in the sale, exchange, lease option or purchase of the real property of the owner. The employee may manage property for this single owner ranging from one residential unit to multiple apartment complexes. Compensation of all employees in these exemptions must be through regular paychecks, with proper federal and state tax withholdings. In other words, independent contractor status is not allowed nor can commission be paid for such activities on behalf of the employer.

A non-licensed employee of a principal broker or property manager whose activity is limited to negotiating rental or lease agreements, checking tenant credit references, physical maintenance of the real estate, tenant relations, rent collection and supervising premises managers. This employee can be part-time, paid by the hour or be salaried. This person can do almost all property management activity except negotiate and enter into management agreements with an owner, be the trustee of a client trust account, or make financial reports to the owner. If the employee is licensed, this exemption cannot be used.

A person who is acting as an attorney in fact under a duly executed power of attorney from the owner. The power of attorney must authorize the person to supervise or execute any contract for the leasing of real estate. The power of attorney must be recorded in the county in which the property is located.

An attorney at law who is rendering services in the performance of their duties as an attorney for a client. A typical example might be an attorney executing a rental agreement relating to a property for an estate they are in the process of probating.

A person that engages in real estate activity under the order of any court. A common situation in this exemption category may be a court-appointed receiver, who is ordered to manage or liquidate property in a bankrupt estate.

A person who is a general partner for a domestic or foreign limited partnership. The person must be working for a limited partnership properly registered with the Oregon Secretary of State, Corporation Division. The general partner may engage in the sale, acquisition, exchange, lease, transfer or management of the real estate of the limited partnership without a license.

An engineer or architect rendering engineering or architectural services. Note: these persons may be required to have other state licenses that are required for their specific profession.

A person dealing in cemetery lots.

A person preparing land use, environmental impact or other types of land studies.

A hotel keeper or innkeeper.

A salaried employee of the state of Oregon dealing in real estate owned by the city, county or state.

An appraiser. (An appraiser must be licensed to perform appraisals by the Appraiser Certification and Licensure Board.)

Question 111

Tenancy in common is characterized by

Answer 111

Possessory interests - A tenancy in common is created when two or more people have an undivided interest in the property. Each co-tenant has the right to possess the entire property, not just a part or a separate piece of the whole property.

Unity of time - The co-tenants can take title to the property at different times.

Unity of title - The co-tenants can take title to the property under different deeds.

Unity of interest - The interest of each co-tenant does not have to be equal. For example, one co-tenant might have an undivided one-quarter interest in the property and the other an undivided three-quarters interest.

Right of Survivorship - A tenancy in common does not include the right of survivorship. The will of each deceased co-tenant determines who inherits their individual interest. If a co-tenant dies intestate, that co-tenant’s interest will be distributed under the laws of descent and distribution.

Tenants in common can be between two or more persons, related or unrelated. Ownership between co-tenants can be in equal or unequal shares. Each co-tenant’s interest is freely transferable without the permission of any other co-tenant. Each co-tenant can freely encumber their interest and liens can be filed against each co-tenant’s interest independently of the other co-tenants. A judgment, income tax levy, or other personal obligation of a co-tenant can only affect the interest of the debtor co-tenant, not the interests of the other co-tenants. All co-tenants can possess the property, or just one co-tenant can possess the property. However, no co-tenant can exclude another co-tenant from possessing the property.

Question 112

Tenancy by the entirety

Answer 112

only available to persons who are legally married at the time they take title. Not all states recognize this title vesting, but it is recognized in Oregon. In Oregon, when a married couple takes title to property, and both names are on the deed, the couple automatically takes title as tenants by the entirety, unless they specifically state in the deed that they wish to take title as tenants in common or as tenants in partnership.

Module 3: Real Estate Law

Chapter 3-4: Forms of Ownership

Co-Ownership Types Permitted in Oregon

Tenancy by the Entirety

Tenancy by the entirety, also known as tenancy by the entireties, is only available to persons who are legally married at the time they take title. Not all states recognize this title vesting, but it is recognized in Oregon. In Oregon, when a married couple takes title to property, and both names are on the deed, the couple automatically takes title as tenants by the entirety, unless they specifically state in the deed that they wish to take title as tenants in common or as tenants in partnership. Tenancy by the entirety is characterized by the following:

Possessory Interests - Under tenancy by the entirety, spouses are viewed as one, and each co-tenant has the right to possess the entire property, not just a part of a separate piece of the whole property. Although each spouse owns the entire property, Oregon law requires each co-tenant to share equally in the rents and profits from the property.

Unity of Time - The co-tenants must take title to the property at the same time.

Unity of Title - The co-tenants must take title to the property under the same deed.

Unity of Interest - Spouses are seen by the law as one. Therefore, they each own all the property or the “entirety.” They do not each own a one-half interest in the property.

Right of survivorship - Tenancy by the entireties is subject to the surviving spouse’s right of survivorship. As a result, when one spouse dies, the interest of the deceased spouse is extinguished, thereby leaving the surviving spouse vested in severalty. In other words, the interest of the deceased spouse automatically transfers to the surviving spouse; the deceased spouse’s interest cannot be transferred by will. Additionally, the right of survivorship cannot be destroyed, so long as the marriage exists.

Question 113

Joint Tenancy

Answer 113

Some states allow joint tenancy of real property. Joint tenancy is a form of common law co-ownership with survivorship rights. Oregon allows joint tenancy of real property for only personal representatives and trustees.

Oregon does permit joint ownership of personal property, such as automobiles.

Question 114

Community Property

Answer 114

Community property is permitted in just nine states. Oregon is not a community property state. Washington, Idaho, Nevada, and California are included in the nine community property states. As a result, a deed vesting title in spouses as community property would have no force in Oregon.

In states that allow community property, the legal implication is that all property, whether real property or personal (except for gifts or inheritances), acquired by married persons during the course of the marriage is held jointly and completely by each spouse.

Generally speaking, the property that each partner brings into the marriage or receives by gift, bequest, or devise is held in severalty. Property held in severalty in a community property state is known as separate property.

Question 115

Survivorship, The Erickson Doctrine

Answer 115

Even though joint tenancy is not allowed in Oregon, the right of survivorship is possible for unmarried persons. Standard deed forms can be used, so long as the intention of the grantor is clear that the unmarried parties want the right of survivorship.

Question 116

Tenancy in Partnership

Answer 116

a form of ownership to allow a partnership to hold title to real property. A partnership is a form of a business organization owned by two or more individuals. The individuals who comprise the partnership are called partners.

Oregon has adopted the Uniform Partnership Act, which allows a partnership to hold title to real property. Although Oregon has adopted that a partnership can hold title, this does not mean that a lender is required to finance a real estate purchase for a partnership.

Lenders typically do not like to loan to a partnership because the partnership interests can be freely sold, leaving the lender in the situation of holding a mortgage loan with partners other than the original borrower.

Question 117

There are two distinct definitions of a land trust:

Answer 117

a private, nonprofit organization that, as all or part of its mission, actively works to conserve land by undertaking or assisting in land or conservation easement acquisition, or by its stewardship of such land or easements;

or

an agreement whereby one party (the trustee) agrees to hold ownership of a piece of real property for the benefit of another party (the beneficiary).

Question 118

What is the plural form of addendum?

Answer 118

addenda

Question 119

How do you Calculate Acreage?

Answer 119

length x width (to find square footage)

Acreage = Total square feet divided by 43,560 sq. ft. (1 acre)

Question 120

What is a point?

Answer 120

1% of the loan amount

Question 121

The formula for calculating the dollar amount owed as points on a loan is

Answer 121

Loan Amount × Number of Points (percentage) = Dollars Paid in Points

Question 122

There are four basic steps in the proration process:

Answer 122

Determine the annual charge or amount to be prorated.

Calculate the daily rate of the expense by dividing the annual charge to be prorated by 365. The daily charge is referred to as the per diem charge. During a leap year, a 366 day year should be used in this calculation. Note: Sometimes the banker’s year is used in this step. A banker’s year is a 360 day year, used so the year can be divided into 12 equal months of 30 days each. This makes interest calculations simpler and more consistent.

Determine the number of days the seller and the buyer are responsible for with respect to each item to be prorated.

Multiply the per diem rate by the number of days determined in Step 3 to calculate the share of the expense for each party.

Question 123

The formula to calculate depreciation is

Answer 123

Module 6: Finance

Chapter 6-7: Real Estate Mathematics

Depreciation

Depreciation is a loss in value from any cause. The formula to calculate depreciation is Original Value × Percent of Value not Lost = Present Value.

Problem:

The value of a 5-year-old building is estimated to be $450,000. What was the building’s value when new if the building depreciated at the rate of 2% per year?

Solution:

5 Years × 2% = 10% depreciation

100% (New Value) - 10% = 90% of Value NOT Lost

Original Value × % Not Lost = Present Value

_____ × 90% = $450,000

$450,000 / 0.9 = $500,000

The value when new is $500,000

Question 124

Property taxes are calculated based on the propertys assessed value or real market value?

Answer 124

Property taxes are calculated based on the property’s assessed value

Question 125

What is mil or millage rate?

Answer 125

tax rate

Question 126

How does one calculate NOI?

Answer 126

To calculate NOI, subtract all operating expenses incurred on a property from all revenue generated on the property.

Question 127

The formula to calculate value using the income approach to value is:

Answer 127

Annual Net Income / Rate of Return = Investment Value

Question 128

The formula to calculate Annual Net Income is:

Answer 128

Investment (or Value) × Capitalization Rate = Annual Net Income

Question 129

What is prior appropriation(water rights)?

Answer 129

The prior appropriation doctrine determines water rights by priority of beneficial use. This priority of beneficial use means that the first person to use or divert water for a beneficial purpose can acquire individual rights to the water.

In Oregon, as in most prior appropriation states, prior appropriation asserts that the State owns all water within its boundaries. This ownership allows the State to create a system of permits and certificates, as well as to keep good records of water rights claims.

Question 130

What is the rule of capture?

Answer 130

This rule means that the mineral rights holder will own all the oil or gas that can be produced from wells on their owned property, even if the oil and gas originated under the land of a neighboring property owner. This rule of capture tends to encourage the owners of neighboring properties to drill for oil and gas to ensure that each landowner gets their share before it migrates away from their property.

Question 131

What is the time limit for a certified water right in oregon?

Answer 131

A certificated water right remains valid forever, so long as it is used. If the water right is not used for a period of five or more years, it then becomes subject to forfeiture and cancellation.

Question 132

The Water Rights Act of 1909

Answer 132

The passage of Oregon’s first unified water code in 1909 introduced state control over the right to use water. The code dismissed the concept of “riparian rights,” the right to use water because it flowed through an individual’s property, and replaced it with the idea of prior appropriation–first in time is first in right. Water users were required to file an application with the state engineer and include maps and drawings of important water diversion structures. Applicants were also required to prove they were using the water “beneficially” for stock watering, irrigation, or fire control before a permit was issued. By limiting approved usage to defined parameters, monopolization of water resources was prohibited and the barter and sale of water rights was largely eliminated.

Question 133

What is fructus naturales?

Answer 133

Timber, which is a common example of an uncultivated crop

Question 134

What is fructus industriales?

Answer 134

Annual plantings and harvestable crops

In general, annual crops are the personal property of the party who planted them.

Question 135

What is the right of emblement

Answer 135

If the party who planted the crops is a tenant farmer, under most situations, the farmer has the right to cultivate and harvest these crops even if the landlord terminates the rental agreement before the crops are ready to harvest. This is known as the right of emblement. However, if the tenant farmer had a fixed-term lease, and the farmer planted crops that could not possibly be harvested prior to the expiration of the term, there would be no right of emblement and the crops become the personal property of the landlord at the termination of the lease.

When agricultural property is either rented from year-to-year or leased for a specified number of years and is sold, the buyer takes the property subject to the rights of the tenant.

Prior to marketing an agricultural property, licensees should obtain information from the seller regarding any leases, crop lien rights, or rights of emblement.

Question 136

general warranty deed

Answer 136

the most common deed in Oregon given by the seller, and which provides the most protection for the buyer

Question 137

8 elements required to make a deed valid

Answer 137

In Oregon, the deed must:

be in writing

be signed by the grantor

have an identifiable grantee

show acceptance of conveyance by the grantee

have an adequate property description

contain words of conveyance

list the consideration

be delivered to the grantee

Question 138

law requires a lead-based paint inspection contingency for properties built before

Answer 138

1978

Question 139

lead-based paint hazards disclosure has a default disclosure period Of how long?

Answer 139

10 calendar days

Question 140

What is the time period in which earnest money needs to be deposited?

Answer 140

Three banking days

Section 24 of the residential real estate sale agreement form directs the selling firm to hold the earnest money check or promissory note for the buyer until there is a signed agreement and then to deposit it as further instructed, but within three banking days.

Question 141

An option is

Answer 141

a unilateral contract used by a seller to give a buyer the right to buy the seller’s property at a predetermined price during a fixed period. The contract is unilateral because only the seller is making a promise - to sell the property to the buyer - and the buyer’s performance - to buy the property - is optional. If the buyer decides not to buy the property, both parties are released from the contract.

Options are used more in commercial or raw land transactions than in residential real estate.

Question 142

Absent a survey, neither a property owner or licensee should make statements regarding the location of the exact property boundary lines.

True

False

Answer 142

True

Unless a seller or licensee is aware of a survey of the property that can be relied upon (survey pins are clearly verifiable and determinable), no representation should be made regarding the actual property boundaries.

Question 143

How long does the duty of confidentiality last?

Answer 143

Forever

Question 144

Sherman Antitrust Act

Answer 144

outlaws restraint of trade

authorized the federal government to institute proceedings against trusts in order to dissolve them. Any combination “in the form of trust or otherwise that was in restraint of trade or commerce among the several states, or with foreign nations” was declared illegal.

Question 145

Clayton Act

Answer 145

outlaws practices that harm competition

Question 146

Federal Trade Commission Act

Answer 146

outlaws unfair methods of competition

Question 147

RESPA is…

Answer 147

Real Estate Settlement Procedures Act. RESPA seeks to reduce unnecessarily high settlement costs by requiring disclosures to homebuyers and sellers, and by prohibiting abusive practices in the real estate settlement process.

What is the RESPA rule?

RESPA prohibits loan servicers from demanding excessively large escrow accounts and restricts sellers from mandating title insurance companies. A plaintiff has up to one year to bring a lawsuit to enforce violations where kickbacks or other improper behavior occurred during the settlement process.

Question 148

Civil Rights Act of 1866

Answer 148

no discrimination in selling or leasing housing based on race

Question 149

Executive Order 11063

Answer 149

no race discrimination involving FHA- or VA-backed loans

Question 150

Fair Housing Act of 1968 (Title VIII)

Answer 150

no discrimination based on race, color, religion, national origin

Exemptions:

privately owned home where no broker is used and no discriminatory advertising is used

rental of 1-4 unit building where owner is also an occupant; no discriminatory advertising

facilities owned by private clubs; leased non-commercially to members

facilities owned by religious organizations with non-discriminatory membership requirements

Question 151

Jones v. Mayer

Answer 151

no race discrimination, without exception

Question 152

Housing and Community Development Act of 1974

Answer 152

no discrimination based on sex

Question 153

Fair Housing Amendments Act of 1988

Answer 153

no discrimination based on sex or against the handicapped or familial status

Question 154

redlining

Answer 154

not making loans in certain areas for discriminatory reasons

Question 155

blockbusting

Answer 155

inducing sale or rent based on incoming minorities that will lower values

Question 156

steering

Answer 156

channeling buyers to or away from neighborhoods

Question 157

Truth-in-Lending and Regulation Z

Answer 157

Reg Z implements Truth-in-Lending Act & Consumer Credit Protection Act

lender must disclose finance charges and APR prior to closing

borrower has limited right of rescission

lender must follow advertising disclosure requirements

Question 158

National Flood Insurance Act

Answer 158

the Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for the protection of property located in Special Flood Hazard Areas; requires borrowers of “federally-related loans” to obtain flood insurance if property is in designated flood [hazard] area

Question 159

Police power

Answer 159

the right of the government to enact laws to support and protect the health, safety, morals, and general welfare of the public. Most police power relating to real estate is used to limit or restrict the use of property in ways that benefit the public. Some examples of police power in real estate are

zoning and land use restrictions;

environmental laws and regulations;

building code and code enforcement; and

subdivision laws.

Police power is a government’s legal authority to create, regulate, tax, and condemn real property in the interest of the public’s health, safety, and welfare; is granted by state-level enabling acts like zoning, use restrictions, building codes, regulations, and the like.

Question 160

Fannie Mae

Answer 160

The original primary purpose of Fannie was to buy FHA loans from lending institutions to stabilize the mortgage market. At the end of World War II, Congress enacted the GI Bill, including a provision to authorize the Veterans Administration (VA) to guarantee home loans for returning veterans. Fannie, in 1948, was authorized to buy VA loans. In the 1970s, Fannie Mae began to purchase conventional loans, which opened up a new real estate loan market that could be easily resold on the secondary market. Fannie Mae now buys FHA, federal VA, and conventional loans.

Question 161

Ginnie Mae

Answer 161

The Housing and Urban Development Act of 1968 created the Government National Mortgage Association (GNMA), also known by its nickname Ginnie Mae. Ginnie is a division of the United States Department of Housing and Urban Development (HUD) and is wholly owned by the government. It acts as a secondary market for loans that carry a greater risk for the lender. These higher risk loans are low interest and subsidized loans geared toward the high-risk or low-income borrowers.

Question 162

Freddie Mac

Answer 162

The Federal Home Loan Mortgage Corporation (FHLMC) was created by the Emergency Home Finance Act of 1970. It is frequently known by its nickname Freddie Mac. The original purpose of Freddie was to provide a secondary market for savings and loan associations that were members of the Federal Home Loan Bank System. The thrift institutions experienced hard times during the late 1960s and found themselves with virtually no funds to make new mortgages. Freddie Mac was formed as a secondary lender to purchase loans from the thrifts so cash could be pumped back into the thrifts, making funds available for more real estate loans. Today, Freddie Mac buys federal VA, FHA, and conventional loans from a variety of primary lenders. However, the vast majority of loans purchased originate out of savings and loan institutions (thrifts).

Question 163

Maggie Mae

Answer 163

The Mortgage Guaranty Insurance Corporation (MGIC), also known by its nickname of Maggie Mae, was the first and is the largest insurer of conventional mortgage loans. Maggie also provides a secondary market for primary lenders. Conventional mortgages are consigned to Maggie Mae for sale to investors.

Question 164

Farmer Mac

Answer 164

The Agricultural Credit Act of 1987 created the Federal Agricultural Mortgage Corporation, also known as Farmer Mac. The purpose of this secondary organization is to provide security for agricultural loans. In general, Farmer Mac underwrites a pool of loans that are then sold to investors. These loans are subject to federal guarantee in a way similar to the residential loans underwritten by Ginnie Mae.

Farmer Mac is an important part of the agricultural credit markets and was created to increase access to and reduce the cost of capital for the benefit of American agriculture and rural communities. Farmer Mac is a secondary market for agricultural credit and provides financial solutions to a broad spectrum of the agricultural community, including agricultural lenders, agribusinesses, and other institutions that can benefit from access to flexible, low-cost financing and risk management tools.

Question 165

What is a freehold estate?

Answer 165

Freehold estates are estates of indefinite duration that can exist for a lifetime or forever. Some types of freehold estates are classified as “estates of inheritance,” where the estate continues beyond the life of the holder and descends to their living heirs upon death as specified by the will or by law.

Question 166

What is PITI

Answer 166

Principal Interest Tax Insurance

Question 167

An earnest money agreement is…

Answer 167

a legally enforceable contract immediately upon the seller’s acceptance and communication of acceptance to the buyer.

Question 168

May a buyer revoke their offer and receive their earnest money back prior to acceptance of the offer by the seller?

Answer 168

Yes, The buyer may revoke his offer anytime before the seller’s acceptance is communicated to him and may obtain the return of his deposit.

Question 169

The absence of what would render an earnest money agreement unenforceable

Answer 169

Legal purpose

Question 170

Equitable title is transferred to a buyer upon the execution of what document?

Answer 170

Land sale contract

Question 171

A valid contract of sale has been executed by both seller and buyer. Until closing the buyer has

Answer 171

Equitable title

Question 172

Where do you find the “time is of the essence” clause?

Answer 172

The earnest money agreement

Question 173

In a transaction involving a real estate licensee as an agent, the earnest money check should be made payable to the

Answer 173

Principal broker

Question 174

What best describes earnest money?

Answer 174

The money deposited by the purchaser at the time of signing the earnest money or sales contract

Question 175

A provision in an offer to purchase that requires the completion of a certain act before the contract is binding is known as a

Answer 175

Contingency

Question 176

A provision in a contract to buy real estate stated, ‘This contract shall be terminated if the buyer doesn’t sell his home at 24 Highland Drive within thirty days.’ This provision is an example of a

Answer 176

Covenant

Question 177

The purchase agreement specifies that the broker and the seller may keep the earnest money if the buyer defaults. This stipulation is known as

Answer 177

Liquidated damages

Question 178

Unless the agreement stipulates to the contrary, as soon as the purchaser receives legal title or possession as an owner of the property, the risk of loss or damage falls on the

Answer 178

Purchaser

Question 179

When engaged in the ongoing electronic exchange of information with a client or customer, the following information must be included in the first exchange:

Answer 179

• That the individual sending the information is a real estate licensee.
• The first and last name of the licensee.
• The telephone numbers or other contact information of the licensee.
• The licensed name or registered business name of the principal broker.
• The franchise name of the brokerage in which the licensee is licensed.

Question 180

branch office registration is necessary to use a

Answer 180

model unit, available for sale, in a subdivision for promotion of interest in the development.

Question 181

An Oregon principal real estate broker wants to place a booth in the local shopping mall to display information on listings. The booth will be regularly staffed by licensees. Which is true of this situation?

Answer 181

The booth needs to be registered as a branch office.

Question 182

A broker associated with a principal real estate broker was asked by a property owner to prepare a CMA for the owner’s residence. Under Oregon law, what about a CMA are true?

Answer 182

A fee may be charged for providing a CMA.

The analysis may not be contingent upon reporting a pre-determined value

Question 183

Does an individual need a license to Receive a commission for selling a mobile home located on a rental space in a mobile home facility?

Answer 183

Yes

Question 184

True or false

A real estate broker associated with a principal broker may still act as his own landlord and rent or lease his own real estate to a tenant.

Answer 184

True

Question 185

True or false

bert Mosher owns Mosher Real Estate Mart, Inc., a registered business name that conducts professional real estate activity in Oregon. bert is required to hold and active principal brokers license

Answer 185

false

Question 186

With their principal broker’s permission and supervision, a real estate broker could close a transaction

true or false

Answer 186

true

Question 187

After a broker’s agency relationship with an Oregon principal broker is terminated, the broker’s license, if it is not reissued, revoked or suspended, will become an inactive license within

Answer 187

30 calendar days

Question 188

At the time the seller accepts the buyer’s offer, the question of the disposition of forfeited earnest money is a matter for negotiation between

Answer 188

the principal broker and seller.

Question 189

True or false

A principal broker may have trust accounts and separate bookkeeping systems for each office & place rental collections on properties owned into a personal account.

Answer 189

True

Question 190

What must be deposited in a clients’ trust account or neutral escrow?

Answer 190

Earnest money deposits

Collected rents to be prorated at closing

Sales proceeds yet to be disbursed

Earnest money deposits, collected rents to be prorated at closing and sales proceeds yet to be disbursed are all examples of monies that must be deposited in a clients’ trust account or neutral escrow.

Question 191

A principal broker can place clients’ trust funds into an interest-bearing account only if

Answer 191

the interest earned on the account is not credited to the principal broker.

all parties who have an interest in the funds give their written permission.

Question 192

True or false

A real estate property manager can

have trust accounts and separate bookkeeping systems for each office.

place rental collections from personal properties into a personal account.

Answer 192

False

Question 193

A property manager, with the required written consent of all parties having an interest in the clients’ trust funds, may place the funds in

Answer 193

a federally insured, interest-bearing bank account

Question 194

how often must a clients trust account be reconciled?

Answer 194

Every month

Question 195

What it true concerning requirements of an Oregon principal broker’s clients’ trust Accounts?

Answer 195

The bank at which the clients’ trust account is open must be notified that the account is maintained for money belonging to clients.

A branch office may maintain a separate clients’ trust account as long as a separate bookkeeping system is maintained for the branch office.

The Real Estate Agency must be notified of the bank, account number and name of account of all of the clients’ trust accounts.

Question 196

What must be done by the principal broker when establishing a clients’ trust account?

Answer 196

Notify the Real Estate Agency of the name of the bank, account number and name of the account

Supply a notice to the bank that the account is maintained only for clients’ funds

Question 197

Oregon law requires that principal brokers keep adequate records of all professional real estate activity for not less than __________ after the date of the transaction.

Answer 197

6 years

Question 198

For six years, a principal real estate broker must retain all

Answer 198

listing agreements and earnest money receipts.

clients’ trust account records and ledgers.

vouchers, bills, or obligations paid for the account of a client from the trust account.

Question 199

Which of the following statements about listing agreements is true?

Answer 199

A copy of the listing agreement must be kept with the principal broker.

Each listing agreement shall state a definite expiration date.

The seller should always be given a true legible copy of the listing.

The term of a listing agreement is negotiated with the seller and is NOT limited in duration to 180 days.

Question 200

Oregon real estate license law restricts brokers associated with principal brokers from

Answer 200

bringing a lawsuit against a seller for payment of a commission.

directly accepting a finder’s fee from a principal broker with whom the broker is not licensed.

Question 201

A real estate broker associated with a principal broker is not allowed to accept a commission directly from

Answer 201

The seller

The buyer

The escrow agent

the broker can only accept Commission from a principal broker

Question 202

Can a broker legally pay a finder’s fee to an unlicensed person?

Answer 202

No

Question 203

Jaquine, a principal broker, authorizes an associated real estate broker to personally guarantee a profit from land purchased and held one year before it is resold. What is the effect if the real estate broker acts on this authorization?

Answer 203

Both the principal broker and the real estate broker are subject to disciplinary action for the guarantee.

Real estate licensees should not guarantee a profit; both the principal broker and the real estate broker are subject to disciplinary action for the guarantee.

Question 204

The Oregon Real Estate Commissioner can revoke a real estate license for

Answer 204

acting in the dual capacity of agent and undisclosed principal in any transaction.

acting for more than one party in a transaction without the knowledge and written permission of all parties for whom the agent is acting.

failure to deliver promptly a completed copy of any purchase agreement or offer to buy or sell real estate to the purchaser and to the seller.

The Oregon Real Estate Commissioner can revoke a real estate license for all of these above reasons.

Question 205

A real estate broker associated with a principal broker received from a cooperating broker an offer to purchase a property with earnest money in the form of a certified check made out to the brokerage firm. What should the real estate broker do with the check?

Answer 205

Give the check to their own principal broker as soon as possible

Question 206

A licensee can be guilty of misrepresentation by

Answer 206

direct acts or statements.

acts of omission, such as failure to disclose vital information.

Question 207

True or false guys

A real estate broker associated with a principal broker may legally

accept a finder’s fee directly from another real estate broker.

pay a finder’s fee to a neighbor for referring a buyer.

Answer 207

False

A real estate broker associated with a principal broker may neither accept a finder’s fee directly from another real estate broker nor pay a finder’s fee to a neighbor for referring a buyer. Brokers are prohibited from directly receiving any fee from any real estate activity from any person other than the principal broker under whom that broker is licensed. Likewise, Brokers are prohibited from sharing any portion of commission monies received with any unlicensed person for any purpose. Any fee sharing agreement with a licensed individual is implemented with the authority of and paid by the principal broker.

Question 208

The Real Estate Commissioner may discipline an Oregon real estate licensee whenever the licensee

Answer 208

promises there will be future profits on the resale of real property.

acts as an agent for both parties in a transaction without the knowledge and written permission of all parties for whom the licensee is acting.

Question 209

In Oregon, non-disclosure of a disclosed limited agency by a broker could result in

Answer 209

the broker losing his license.

contract rescission.

Question 210

If an Oregon real estate broker associated with a principal broker makes an intentional misrepresentation to a client, the broker and principal broker may

Answer 210

have their licenses suspended or revoked.

Question 211

If an active Oregon real estate broker associated with a principal broker sells property they own as an individual,

Answer 211

If an active Oregon real estate broker associated with a principal broker sells property they own as an individual, the law requires the licensee to reveal his license status to the purchaser before the offer is accepted.

Question 212

A licensee would be in violation of ORS 696, the Real Estate License Law, for failing to inform a prospective purchaser that the

Answer 212

property is not zoned for the current use, and the licensee knew of the zoning problem.

Making a material misrepresentation to a prospective buyer, but the buyer did not purchase the property.

Question 213

Shortly after the close of escrow, Jones, the seller, learned that the buyers, Mr. and Mrs. Brown, were the stepfather and mother of Jones’ real estate broker. Jones also learned that the Browns were acting on behalf of the broker, and that an escrow for resale of the same property had been opened at a $25,000 higher sales price before Jones’ escrow was closed. Jones filed a complaint with the Real Estate Agency. What is true regarding this situation?

Answer 213

The seller could sue the broker in civil court for the amount of the profit realized on the resale of the property and the broker is subject to disciplinary action by the Commissioner.

Question 214

The Commissioner may revoke or suspend a real estate broker’s license for

Answer 214

Inducing a seller to break a listing contract with another principal broker to substitute a new listing contract with the broker’s principal broker

Violating Oregon’s discrimination statutes

Failure to deliver a completed copy of an offer to purchase to the purchaser and seller within a reasonable amount of time

Question 215

True or false

The listing real estate broker is responsible for the delivery of the signed closing statement to the buyer and the seller

Answer 215

true

Question 216

What about two or more real estate property managers who are in business together is correct?

Answer 216

The managers may have equal supervisory control over the property management activity of the firm.

The managers must establish office policies.

Question 217

Can mes Wilson, a principal broker licensed in Oregon, legally enter into a cooperative transaction with John Weber, even though he knows that Weber’s broker license has been suspended or revoked?

Answer 217

No

Question 218

.

In the event the Real Estate Agency revokes a principal real estate broker’s license, the licenses of the brokers associated with the principal broker are automatically

Answer 218

Suspended

Question 219

Oregon’s agency disclosure law applies to what types of property?

Answer 219

residential property.

commercial property.

industrial property.

Question 220

In Oregon, a disclosed limited agency representation means

Answer 220

both the buyer and the seller are represented by one or more licensees associated with the same principal real estate broker(s).

Question 221

True or false

A seller who gives a property condition disclosure to a purchaser must disclose a proposed school going in across the street.

Answer 221

True

Question 222

If a seller does not provide the buyer with a property condition disclosure the buyer may cancel the transaction

Answer 222

at any time prior to closing of the transaction.

Question 223

A buyer properly revokes their offer after receiving the property condition disclosure and requests the return of their earnest money. The broker

Answer 223

Must promptly return the earnest money

Question 224

A buyer was given a property condition disclosure after they made an offer on a home. How many days must the buyer be given to revoke the offer and have the earnest money they deposited returned?

Answer 224

Five business days if no waiver was signed

Question 225

Is A licensee representing a seller is responsible to explain to the seller what the seller’s duties are under the law?

Answer 225

Yes

Question 226

A principal broker who is going to be absent from the business may authorize another principal broker to control the business in the principal broker’s absence for a maximum of

Answer 226

90 days

Question 227

If a real estate property manager licensed as a sole practitioner wants to be absent from their office for a long period, the property manager:

Answer 227

may authorize another property manager or principal broker to control and supervise the office for no more than 90 consecutive days.

Question 228

If a principal broker wants to authorize another licensee in his office to supervise in the principal broker’s absence, the principal broker must include what in his notice to the Real Estate Agency according to the Oregon Administrative Rules?

Answer 228

the dates of the principal broker’s absence

Have the authorized licensee sign the notice accepting the supervisory responsibilities

Question 229

True or false

an Oregon real estate broker may Manage the principal broker’s office for an indefinite amount of time

Answer 229

False

Question 230

A licensed real estate property manager may authorize:

Answer 230

a principal real estate broker to supervise the manager’s licensed activity in the manager’s absence.

another licensed real estate property manager to supervise his property management activity in his absence.

a normal real estate broker ( not principal) or unlicensed employee may not supervise the manager’s licensed activity in the manager’s absence.

Question 231

An Oregon principal real estate broker may act as an escrow agent without obtaining an escrow license

Answer 231

only under two conditions: the parties are not charged a separate fee for the service, and the transaction was handled by the principal broker.

Question 232

A proposal to auction real estate:

Answer 232

must be reduced to a written, signed agreement.

should include the terms of the sale including minimum starting bid.

includes terms set by the seller prior to the auction.

Question 233

When a real estate broker asks a principal real estate broker to terminate their business relationship, the principal real estate broker must

Answer 233

send an acknowledgment of transfer to the receiving principal broker without delay.

Question 234

All advertisements relating to property listed for sale by a principal real estate broker must

Answer 234

be done in the principal broker’s registered name.

Question 235

A principal broker must include their license status in advertisements for the

Answer 235

selling of a personally owned home.

Question 236

True or false

A broker must Include the brokerage name on all advertising.

Answer 236

True

Question 237

true or false

An Oregon real estate broker associated with a principal real estate broker would be in violation of the Real Estate License Law and Administrative Rules if they sold their own real property without the supervision of their principal broker.

Or if they did not reveal to the other party that they are a real estate licensee when selling their own real property.

Answer 237

True

Question 238

Who may register the business name of a real estate business?

Answer 238

The principal broker

Question 239

Real Estate Agency regulations require that every listing agreement

Answer 239

state a definite expiration date.

Question 240

Oregon administrative rules concerning listing agreements require

Answer 240

a licensee to give a copy of the listing to the seller at the time of securing the listing.

Question 241

A copy of the offer should be given to the prospective buyer

Answer 241

as soon as the prospective buyer signs the offer.

as soon as the offer is accepted by the seller.

Question 242

False or true?

The sale agreement must specify when and whether evidence of title will be furnished to the purchaser.

A written record of the date and time an offer was presented to a seller must be maintained by the licensee.

Answer 242

True

Question 243

True or false

a broker associated with a principal broker who obtained an offer to purchase with $10,000 earnest money, but did not indicate in the offer the type of earnest money received from the purchaser would be in violation of the Administrative Rules and Regulations of the Real Estate Agency

Answer 243

True

Question 244

A principal real estate broker accepted a $6,000 check as earnest money on a Saturday evening. There was no statement in the sales agreement that the check was to be held by the principal broker until the seller’s acceptance or rejection of the offer. In this case, what is the deadline for the principal broker to deposit the money into escrow or the principal broker’s clients’ trust account according to Oregon administrative rules?

Answer 244

By the close of business on the next Wednesday

Question 245

A real estate broker received a check from a buyer as an earnest money deposit on a listing held by their principal broker. There was no statement in the sales agreement directing the principal broker to hold the check until the seller either accepted or rejected the offer.

The principal broker must deposit the check in a neutral escrow account or into the clients’ trust account within what time period according to Oregon administrative rule?

Answer 245

Prior to the close of business of the third banking day after the day the check is received

Question 246

The Real Estate Agency’s administrative rules require a property manager to

Answer 246

account for all checks, including voided checks, used to disburse funds from their clients’ trust account.

if sufficient funds are available, withdraw earned management fees from appropriate clients’ trust account at least once a month.

Question 248

The Real Estate Commissioner may suspend or revoke the license of any real estate marketing organization or reprimand any licensee, or may deny the issuance or renewal of a license to an applicant who has

Answer 248

(1)Knowingly or negligently pursued a course of material misrepresentation in matters related to real estate marketing activity, whether or not damage or injury resulted, or knowingly or negligently made any material misrepresentation or material false promise in a matter related to real estate marketing activity if the material misrepresentation or material false promise created a reasonable probability of damage or injury, whether or not damage or injury actually resulted.

(2)Failed, within a reasonable time, to account for or to remit any moneys or to surrender to the rightful owner any documents or other valuable property coming into the possession of the real estate marketing organization that belongs to others.

(3)Disregarded or violated any provision of this section, ORS 696.603 (License requirement) or 696.606 (Real estate marketing organization license) or any rule adopted pursuant thereto.

(4)Guaranteed, authorized or permitted any person to guarantee future profits that may result from the resale of real property.

(5)Failed or refused upon demand to produce or to supply true copies of any document, book or record in the possession or control of the real estate marketing organization for inspection by the commissioner or the commissioner’s authorized representative.

(6)Failed to register and maintain the current and accurate names of, and information regarding, each real estate marketing employee of the real estate marketing organization.

(7)Procured or attempted to procure a real estate marketing license by fraud, misrepresentation or deceit or by making any material misstatement of fact in an application for a real estate marketing license.

(8)Failed to exercise supervision over the activities of real estate marketing employees. For the purposes of this subsection, “supervision” means that management by an organization that is reasonably designed and implemented to result in compliance by the employees of the organization with this section, ORS 696.603 (License requirement) or 696.606 (Real estate marketing organization license) or any rule adopted pursuant thereto.

(9)Engaged in any act or conduct, whether of the same or of a different character specified in this subsection, that constitutes or demonstrates bad faith, incompetence, untrustworthiness or dishonest, fraudulent or improper dealings.

(10)Failed to meet or maintain the deposit requirements of ORS 696.606 (Real estate marketing organization license) (3) or (4).

(11)Failed to pay in full any final judgment on claims adjudged by the commissioner or by a court of competent jurisdiction.

(12)Violated ORS 646.608 (Additional unlawful business, trade practices). [1995 c.217 §6]

Question 249

Every 2 years to renew a license, broker, principal broker, or property manager, the licensee must pay a renewal fee and meet continuing education requirements.

The continuing education requirements are

Answer 249

• 30 hours of continuing education are required during the two years preceding license renewal;
• At least 3 of the 30 hours must be in a course on recent changes in real estate rule and law, called the Law and Rule Required Course (LARRC);
• A licensee renewing a license for the first time must take a Real Estate Board-approved 27-hour course on Broker Advanced Practices or Property Manager Advanced Practices, depending on their license type, and a 3-hour course on recent changes in real estate rule and law (LARRC);
• Continuing education courses, along with course objectives, must come from the Real Estate Board approved topics;
• Continuing education must be provided by an OREA approved Certified Continuing Education Provider to be eligible;
• The Certified Continuing Education Provider must ensure that persons who teach continuing education courses meet certain instructor qualification requirements; and
• As part of the license renewal process, licensees will self-certify that they have met the continuing education requirement for the applicable renewal cycle.
• While courses might be delivered by approved providers, it is still the licensee’s responsibility to see that the provider’s courses meet timing requirements and that provider can prove the licensee’s time in the course to the Agency. This means that online courses must have timers and live lecture courses must have a method in place to verify time spent in attendance. A provider’s certificate of completion issued when the provider cannot prove time spent in the course will not be counted if discovered during an agency audit

Question 250

Specifically excluded from eligible continuing education are courses about these topics:

Answer 250

• Real estate broker or property manager pre-licensing courses.
• Examination preparation classes.
• Sales meetings.
• Motivational classes or seminars.
• Time management classes or seminars.
• Sales and marketing classes or seminars.
• Psychology classes or seminars.
• Trade association orientation courses.
• Courses in standardized computer software programs not specifically related to one of the eligible topics.
• Courses with content that is specific to another state or jurisdiction.

Question 251

When an Oregon real estate licensee buys or sells a property, the licensee must

Answer 251

make written disclosure to all parties to the transaction that they are licensed. This disclosure is usually made in the real estate sale agreement but could be a separate document. This disclosure rule applies to active and inactive licensees, and their principal broker must supervise personal transactions. This rule applies only to properties located within Oregon.

Note: A licensee can be represented by another firm when buying or selling property for their own benefit. However, while being represented by another firm, except for advertising, the licensee must still be supervised by their principal broker.

Question 252

Oregon law (ORS 696.585) allows the Agency to impose civil penalties against a licensee found guilty of violating real estate law. These civil penalties are in addition to, not in lieu of, other enforcement provision available to the Agency. The Agency can impose the following penalties:

Answer 252

• Any person who violates any provision of ORS 696.505 to 696.590, or any lawful rule or final order of the Real Estate Commissioner or any final judgment made by any court upon application of the commissioner, may be required to forfeit and pay to the General Fund of the State Treasury, a civil penalty in an amount determined by the commissioner of not more than $3,000 for each offense. Each violation shall be deemed a separate offense.
• In addition to the civil penalty set forth in subsection (1) of this section, any person who violates any provision of ORS 696.505 to 696.590, any lawful rule or final order of the commissioner or any final judgment made by a court upon application to the commissioner, may be required to forfeit and pay to the General Fund of the State Treasury, a civil penalty in an amount determined by the commissioner but not to exceed the amount by which such person profited in any transaction that violates any such provision, rule, order or judgment.

Question 253

In carrying out its primary duty to protect the public, the Agency frequently investigates licensee conduct. These investigations may result in any of the following possible actions or consequences based on the concept of progressive discipline:

Answer 253

• No Action Necessary - Most audits conducted by the REA result in no action necessary because there are no grounds for further action.
• The Nondisciplinary Education Letter - The commissioner determines there is no basis to pursue disciplinary action against the licensee. The purpose of the letter is to educate the licensee.
• The Reprimand - A reprimand is the next level of progressive discipline. The reprimand is the maximum disciplinary action the commissioner may issue against a licensee if the act or conduct that constitutes a grounds for discipline under ORS 696.302 did not result in significant damage, exhibit incompetence or exhibit dishonesty or fraudulent conduct, or repeat conduct that is substantially similar to conduct for which the licensee was disciplined previously.
• Suspension or Revocation of License - The commissioner may suspend or revoke a license of a licensee who has committed an act that constitutes grounds for discipline under ORS 696.301 and such act also resulted in significant damage, exhibited incompetence or exhibited dishonesty or fraudulent conduct or was repeat conduct that is substantially similar to conduct for which the licensee was disciplined.

The goal of this progressive discipline is to correct a licensee’s inappropriate behavior, deter the licensee from repeating the behavior, and to educate the licensee about how to comply withapplicable statutes and rules.

A full discussion of the complaint, investigation, and resolution process is beyond the scope of this course. The materials presented herein are selected highlights of how the REA tends to handle the audit and investigative process.

The consequences for a violation of Oregon License Law or Oregon Real Estate Law could be any of the following:

• Civil penalties;
• Criminal action;
• Civil liability; and
• Income tax liability.

Question 254

Personal assistants will be either licensed or unlicensed and are hired by licensees to help them be more productive. Only a principal broker can hire a licensed personal assistant (PA), but an unlicensed PA can be hired by either a broker or principal broker. Compensation for the unlicensed PA cannot be a share of the licensee’s commission; rather it must be a fixed amount that is not subject to the closing of a sale. Compensation for the licensed PA can be a share of the licensee’s commissions and subject to the closing of a sale or a fixed amount.

If the unlicensed PA does engage in professional real estate activity

Answer 254

then both the licensee’s principal broker and the employing licensee are liable

Question 255

The broker must do the following to ensure compliance with agency duties

Answer 255

Deliver to each real estate consumer, at initial contact, a copy of the initial agency disclosure pamphlet, along with an explanation of the relationship disclosures contained therein.

Fill out standard form transactional documents as per the terms dictated by the client and deliver a copy at the time of signature of those documents; receipt any trust funds as to the amount and form of those funds and deliver them immediately to the principal broker.

Submit all transactional paperwork to the principal broker for review and approval as soon as reasonably possible, but not later than dictated by company policy or law. Inherent in this is the responsibility of the broker to ensure that all necessary documentation has been diligently prepared and fully executed by all parties. It is important to note that any activity performed in the effort to procure business, such as a comparative market analysis, is also subject to principal broker review.

Unless the parties to the transaction agree in writing to delegate the closing function to an escrow agent licensed in Oregon, an attorney, or another real estate broker engaged in the transaction, a principal broker must promptly close any real estate transaction in which the broker is the listing broker. A real estate broker associated with a principal broker can also close a real estate transaction, as long as that licensee is authorized in writing by their principal broker, and the closing is supervised by the principal broker. The authorization must be in writing, signed by the principal broker and then kept in the transaction file.

When hiring an unlicensed assistant, pay the assistant a salary that is in no manner based on a percentage of commissions. The broker must make sure that the assistant performs only duties allowed a non-licensee. Both the broker and principal broker are liable for the assistant’s compliance with rules relating to permitted duties of an unlicensed person.

Complete the necessary educational requirements for license renewal and keep a copy of course completion certificates or other proof of completion for three years from the renewal date. Further, it is the duty of the licensee to ensure the renewal of the license prior to the expiration date and that all courses are time-monitored and comply with all other renewal requirements. If renewal has not been accomplished prior to the expiration date of the license, the licensee must cease all real estate activity until the renewal is completed. A broker must immediately notify the principal broker of expired license status.

When terminating a relationship with one principal broker to join another, the broker must cease all real estate activity until the broker’s license has been transferred to the receiving principal broker. Also, any listings or pending sales are the property of the sending principal broker or the brokerage being absented, and all real estate activity by the broker on those transactions must cease.

A broker can never supervise or control the activities of another licensee.

Personal transactions of a licensee, inclusive of offering and negotiating for the sale, exchange, lease option and purchase of real estate are subject to the normal license law requirements, including principal broker supervision and retention of any earnest monies. A broker is not required by law to list with their principal broker and is not required by law to have that principal broker represent them as a buyer’s representative in purchases if the principal broker, in writing, allows the broker to engage the services of another principal broker. However, whether or not the principal broker acts as agent for the licensee in personal transactions, the principal broker remains responsible under license law for supervising all personal transactions. In addition, the broker must disclose their status as a real estate licensee in any advertising, as well as in the first written document of agreement in any transaction. If the real estate licensee is oninactive status, there is no principal broker supervision necessary and the licensee must follow the license law requirements, including depositing all funds into a neutral escrow and maintaining a complete transaction file for six years. The rental or leasing of personal property is exempt from the above.

Brokers are prohibited from directly receiving any fee from any real estate activity from any person other than the principal broker under whom that broker is licensed. Inactive licensees can never engage in or receive any fee for real estate activity.

Brokers are prohibited from sharing any portion of commission monies received with any unlicensed person for any purpose. Any fee-sharing agreement with a licensed individual is implemented with the authority of and paid by the principal broker.

Brokers can never proceed against a client for payment of commission or fees owed. All such matters are to be remedied by the principal broker.

A broker must always disclose to all parties any material fact concerning a transaction. As detailed in previous modules of this course, a broker must never misrepresent facts, whether by direct acts or statements or by acts of omission.

Regardless of whether there is an existing agreement to buy or sell property, all written offers must be tendered promptly to the seller. A broker must never manipulate offers by not following this procedure.

A licensee can never engage in the unauthorized practice of law or expertise in any other area by giving advice or stating opinions beyond those permitted a licensee under licensing and administrative laws.

A licensee must notify the Oregon REA of any adverse ruling in any court action or arbitration or mediation within 20 days of the ruling if the ruling involved a real property transaction in which the licensee is a seller or buyer of real property, or as a licensee representing a client in a transaction, and/or any criminal charge against the licensee concerning the licensee’s professional real estate activity. Also, a licensee must immediately notify their principal broker of any client dispute.

Question 256

The REA requires the principal broker to maintain the following real estate records for six years following termination:

Answer 256

Module 5: Brokerage

Chapter 5-6: Financial Records and Recordkeeping Systems

Recordkeeping Requirements

The REA requires the principal broker to maintain the following real estate records for six years following termination:

• All financial records required relating to trust funds, including but not limited to account records, bank statements, check registers, journals, beneficiary ledgers, principal broker signed and dated reconciliations, deposit slips, canceled checks, and the like.
• All written agreements creating an agent relationship between broker and buyer or seller.
• All written acknowledgment of any agency relationships between broker and buyer or seller.
• The written agreements for the listing, sale, purchase, rental, lease, lease option or exchange of real property generated by a real estate broker. The agreement must contain the signatures of the parties.
• Records regarding receipt of trust funds or other documents including:
  
  • Earnest money deposits from buyers - retain real estate purchase contract and receipt for deposit form.
  • Rents and security deposits from tenants - retain collection receipts (receipt book stubs).
  • Other Receipts - retain collection receipts.
• Records regarding depositing trust funds - retain bank deposit receipts.
• Records forwarding buyer’s checks to escrow - retain a copy of the check signed and dated by the buyer showing receipt of check.
• Records regarding disbursing trust funds - retain canceled checks and, where applicable, all paperwork supporting disbursement of funds.
• All records for each offer or transaction that involves the actual sale, purchase, lease option or exchange of real estate.
• Records regarding collecting management fees from the trust fund bank account - retain property management agreements between the broker and property owners; canceled checks.

Question 257

The principal broker must also maintain and have available to the REA, when requested, the following:

Answer 257

All principal broker - salesperson contracts

• Written authorizations from principal broker granting Oregon REA authority to review documents or trust fund accounts.
• Listing contracts
• Accepted offer deal files - Copies of all real estate purchase contracts and receipt for deposit, signed by the offeror and the offeree, which have resulted in a transaction. This file should contain all documentation relating to the transaction: offer, counteroffers, inspection reports, seller’s disclosure/disclaimer statement, broker escrow instructions, agency disclosure and acknowledgment documentation, closing statements, etc.
• Unaccepted offer file - Copies of all real estate purchase contracts and receipt for deposit, signed by the offeror but NOT signed by the offeree.

A principal real estate broker is required to review each document or agreement generated by their brokers within seven business days after it has been accepted, rejected, or withdrawn by a client. At the time of review, the principal broker is to initial and date the document, thereby confirming that the review took place in the required period. Although Oregon Administrative Rules do not specifically define which documents should be reviewed, as a rule, any document that affects the rights or obligations of a party to the transaction should be reviewed.

All active records of professional real estate activity are to be maintained at the main office of the principal broker, or at a branch office if the records were created in the branch office and the principal broker or branch office manager conducts real estate business from that branch office.

After two years, a principal broker may store inactive records in a single location other than the licensed business address. Inactive records are records of transactions completed or terminated at least two years before transfer to off-site storage and any other records that originated or were created before transfer to the off-site storage. These inactive records may only be transferred to an off-site location if:

• the principal broker notifies the REA, in writing, of the intended removal of the inactive records from the principal broker’s licensed place of business;
• if the principal broker notifies the REA of the new location (address) for such records; and
• if the principal broker gives written authorization to the REA to inspect the inactive records at the new location and the name of the person to contact to gain access at the location.

The brokerage is also required to provide an IRS Form 1099 for each independent contractor that reports all commission monies received. For income tax purposes, these 1099s should be delivered to the contractors and to the IRS. Copies of these 1099s and other tax information related to the brokerage should be kept for six years, which is the period the brokerage is subject to an audit.

Question 258

The internet also provides the ability to transmit, display, and distribute information about others’ properties on the advertising licensee’s website or other electronic means. The transmission of data on the advertising licensee’s website or other electronic means is permitted under the following circumstances:

Answer 258

• The advertising licensee must have authorization from the listing principal broker, either express written permission or automatically authorized under the rules of an MLS reciprocity agreement.
• The advertising licensee must not alter any informational part of the listing that the listing licensee includes.
• The advertising licensee must disclose the name and telephone number of the listing principal broker or brokerage, along with the name and telephone number of the listing broker, and include a statement that the same information is available on the listing broker’s website.
• The advertising licensee may not use any meta tags or other coding or programming to misdirect internet traffic from another licensee’s site to their own.

Question 259

Over the years there have been a lot of heated discussions about ethics of image modification in the context of real estate photography and internet advertising. Here’s the consensus:

Answer 259

1. Real estate photographers typically work for the listing agent and in some cases will be asked to modify photographs of properties for sale.
2. Listing agents everywhere have a legal responsibility to not “materially misrepresent” a property. That’s a meaningful expression to lawyers since it keeps popping up every time this subject is talked about.
3. Modifying or removing temporary objects like garbage cans, cars, overcast skies etc is customary and generally not considered materially misrepresenting the property.
4. Removing permanent objects like power lines, telephone poles, neighboring homes etc. are customarily considered materially misrepresenting the property because they hide undesirable permanent property features.
5. Landscaping seems to be an area where not everyone agrees. Landscaping seems to be in between permanent and temporary. Many people believe that fixing defects in the grass or landscaping is OK whereas others believe it is not OK. When there is some question about if a feature is permanent or temporary it’s safest to treat it as a permanent feature.

Question 260

In nearly all housing, including private housing, public housing, and housing that receives federal funding, the Fair Housing Act prohibits the making, printing and publishing of advertisements that indicate a preference, limitation or discrimination because of

Answer 260

race, color, religion, sex (including gender identity and sexual orientation), disability, familial status, or national origin. The prohibition applies to publishers, such as newspapers and directories, as well as to persons and entities who place real estate advertisements in newspapers and on websites. It also applies where the advertisement itself violates the Act, even if the property being advertised may be exempt from the provisions of the Act. Other federal civil rights laws may also prohibit discriminatory advertising practices.

Examples of advertising that may violate the Act include phrases such as “no children,” which indicates discrimination on the basis of familial status, or “no wheelchairs,” which indicates disability discrimination.