Simulated Exam

Question 1

A deed used to transfer title states that the conveyance will remain in effect for “so long as the property is not used for the sale of alcoholic beverages”. The buyer would receive what kind of estate:

Answer 1

Fee Simple Defeasible Estate :

RATIONALE
A fee simple defeasible. Think of “defeatable”; the interest could be defeated if the deed restrictions weren’t followed.

Question 2

A valid exercise of the governments police power to restrict an owner’s use and enjoyment of his property would include which of the following?

Answer 2

Building codes

RATIONALE
Deed restrictions are private controls on property, while building codes are governmental controls of property. Adverse possession involves one individual possessing another individual’s property for a prescribed time period in order to gain ownership.

Question 3

The most commonly accepted procedure for the enforcement of deed restrictions is by:

Answer 3

injunction.

RATIONALE
The penalty for a breach of a deed restriction is usually money damages or an injunction. An injunction is a court order forcing a person to do or not do an act, such as violating a private restriction.

Question 4

The air space between the walls, floors, and ceiling areas of a condominium project is called:

Answer 4

Common area

RATIONALE
Cooperative property is the ownership of stock in a company and occupancy rights prescribed under a lease; it involves no ownership of any real estate. Commingling is the mixing of client’s trust funds with outside funds.

Question 5

Title is best defined as:

Answer 5

Ownership of Land

RATIONALE
Title means ownership. A deed is a document that is used to transfer a grantor’s interest in real property. Title insurance will guarantee that you own the property or that you have title, but it is not title itself.

Question 6

Stock in a mutual water company is best described as:

Answer 6

Real property

RATIONALE
Stock rights in a mutual water company are owned by water users who have organized to form a water company. The stock rights are real property.

Question 7

L owned two pieces of property and sold one parcel bordering on the road to C, reserving in the deed an easement for ingress and egress to and from the remaining real property for themself. After 5 years of non-use, L attempted to use the easement, but was prohibited from doing so by C. A court would rule in this case that:

Answer 7

the easement was still valid since it had been created by deed.

RATIONALE
Only an easement acquired by prescription may be lost through non-use.

Question 8

When counseling seller-clients, an agent should do all of the following except:

Answer 8

Prepare a market analysis that shows a high price for the property, because one never can tell what a buyer might pay

RATIONALE
Agents must be careful to study all factors influencing value. For some sellers, time on the market is more critical than price. A market analysis should always reflect the most realistic situation.

Question 9

How do brokers and clients enter into agency relationships?

Answer 9

Express contract

RATIONALE
The agency agreement must be put into words, in writing or spoken to be considered an express agreement.

Question 10

Honey Comb, an actress from Hollywood, hires a real estate agent to list the property that was the subject of the estate of Hanna Has Been. When Ms. Comb signed the listing agreement she did so as the administratrix. How did she get that title?

Answer 10

She was appointed by the court

RATIONALE
In a will, a testator can appoint an executor or executrix; if the will did not mention one, the court must appoint an administrator or administratrix.

Question 11

Goldberg lists his home with PDQ Realty, allowing them to put a sign in the yard, put it in MLS, and advertise it in the local newspaper. During the listing period, Goldberg sells the home to his brother, and is not obligated to pay PDQ any commission. What type of listing did Goldberg have with PDQ?

Answer 11

An exclusive agency listing

RATIONALE
Under an exclusive agency agreement, the seller can still sell the property on his/her own and not owe a commission. Unlike an open listing, only the listing company can put a sign in the yard and advertise it.

Question 12

Replacement of a building best describes:

Answer 12

Building the functional equivalent of the original structure

RATIONALE
Replacing a building with one of functional equivalent of the original structure may not look exactly the same but is almost the same.

Question 13

Which approach to value would be most appropriate when appraising a vacant factory?

Answer 13

Cost approach

RATIONALE
Unusual structures, where comparable properties are not readily available, will be appraised using the cost approach to value.

Question 14

From an investment standpoint, and based on the theory of progression and recession, it is usually the best idea to buy the:

Answer 14

Cheapest house on the block

RATIONALE
The theory of progression and recession says that homes will be pulled toward the average of the neighborhood. Thus the cheapest house will typically move up quicker in value than the more expensive ones.

Question 15

Effective gross income best describes:

Answer 15

Gross income minus a figure for vacancy and collection losses

RATIONALE
Effective gross income is generated by a property plus miscellaneous income minus a figure for vacancy and collection losses.

Question 16

A property’s area is 100 ft. long by 100 ft. wide. The property has a deed restriction that requires 10-ft. setbacks on each side, a 25-ft. setback on the front of the property and a 30-ft rear setback. How much of the property is available for building use?

Answer 16

3,600 sq. ft.

RATIONALE
This question involves a building site of 100-sq. ft. x 100 sq.ft., which would be 10,000 total sq. ft. However, due to the setback lines, side yards etc., there is only a square of 45 x 80 in which to build. (100ft. -10-10 setbacks) x (100 ft -30-25 rear and front setbacks) or 80 x 45= 3,600 sq. ft. which can actually be used for building.

Question 17

For the income approach to appraisal, debt service refers to what?

Answer 17

Mortgage payments

RATIONALE
Anything related to the financing of the investment is debt service and can not be counted as an expense.

Question 18

The deed of trust is considered to be:

Answer 18

Security for the debt

RATIONALE
The deed of trust allows the lender, in case of loan default, to order the trustee to sell the property. Thus, the deed of trust is security for the debt.

Question 19

A buyer applies for a loan that is neither insured nor guaranteed by a government agency. For which type of loan is the borrower applying?

Answer 19

Conventional

RATIONALE
FHA is insured by the federal government, while VA loans are guaranteed by the federal government. A land contract is not a loan, but rather a means of buying property on an “installment plan.”

Question 20

A clause used in a mortgage allowing the lender to call for the full payment of the mortgage because the owner transferred ownership of the property to a third party is known as:

Answer 20

Alienation clause

RATIONALE
The alienation clause sometimes known as the “due on sale” clause causes the mortgage to become due when the property is transferred. The hypothecation clause is a clause that pledges the property for repayment of the debt. There is no such thing as an Appreciation clause in a mortgage.

Question 21

Which of the following classes of individuals is protected under the Equal Credit Opportunity Act, but not under the Federal Fair Housing Act?

Answer 21

Marital status

RATIONALE
While marital status is not a protected class under the Federal Fair Housing Act, it is a protected class under the Equal Credit Opportunity Act. Sex and family status are protected under both Acts. Ancestry is not protected under the Federal Fair Housing Act or under the Equal Credit Opportunity Act.

Question 22

Who is the borrower in the written promise to pay a debt?

Answer 22

Maker

RATIONALE
Under a promissory note the lender is the holder (of the note). The borrower is the maker (of the debt).

Question 23

Insurance policy premiums are prorated from the date the policy is:

Answer 23

Assigned

RATIONALE
If a loan is being assumed, an insurance premium is prorated at the date of the assignment, i.e. the date of closing.

Question 24

Losing title to land by the wearing away action of the water would be:

Answer 24

erosion.

RATIONALE
Erosion is the gradual wearing away of the land by natural forces (air and water). One acquires title to land by accretion. One appeals to the U. S. Supreme Court on a Writ of Certiorari.

Question 25

Who determines the tax rate?

Answer 25

The County Board of Supervisors RATIONALE The tax rate, which is limited to 1% of assessed value plus an amount to cover existing bond debt, is determined by the County Board of Supervisors.

Question 26

Real property acquired through accession would most likely be by:

Answer 26

accretion RATIONALE If you lived next to a river and the edge of your property continues to get larger through the deposit of soil, this newly acquired property is a result of accretion and title to it becomes yours by accession.

Question 27

Title to real estate is transferred when a deed is:

Answer 27

Delivered and accepted RATIONALE While a deed must be signed by the grantor and acknowledged by the grantor in front of a notary, a deed does not have to be recorded. The transfer of title occurs when the deed is handed to the buyer and the buyer accepts.

Question 28

An agent promises a seller that the listing will be advertised every week. The listing only makes it into two ads that month. The agent is guilty of which of the following?

Answer 28

Actual fraud RATIONALE Never promise more than you can give. California law says that this is actual fraud.

Question 29

Who would use the term REALTIST?

Answer 29

A member of the National Association of Real Estate Brokers RATIONALE A REALTIST is a member of the National Association of Real Estate Brokers, a group comprised primarily of minority brokers as a response to discrimination from membership to the NEAR.

Question 30

A contract to sell rural properties requires which of the following?

Answer 30

Legal description RATIONALE The sale of rural property must include a legal description of the property.

Question 31

A contract in which something remains to be done by one or both parties is best described as a/an:

Answer 31

Executory contract RATIONALE A contract in which something remains to be done is an executory contract. Once all the terms are fulfilled by both parties it is executed.

Question 32

What is considered untrue statements made without facts to back them up?

Answer 32

Negligent misrepresentation RATIONALE When an agent makes untrue statements without facts to back them up, the agent may not be aware of the misrepresentation but may still be liable. This is negligent misrepresentation.

Question 33

Which of the following properties could NOT be depreciated on a federal income tax return?

Answer 33

A single family residence in which one resides RATIONALE You can only depreciate income or investment property, not your residence.

Question 34

Which of the following is not an exemption under the Federal Fair Housing Act?

Answer 34

A church selling its church grounds with the help of a broker RATIONALE An exemption exists only if the property is for sale by owner. The sale of church property is exempt only if no broker is involved.

Question 35

A valid exercise of the governments police power to restrict an owner's use and enjoyment of his property would include which of the following?

Answer 35

Building codes RATIONALE Deed restrictions are private controls on property, while building codes are governmental controls of property. Adverse possession involves one individual possessing another individual's property for a prescribed time period in order to gain ownership.

Question 36

Adverse possession is an example of how title to land can be acquired by:

Answer 36

Occupancy RATIONALE In California, there are five ways to acquire title to land: will, accession, succession, transfer, and occupancy. Occupancy is a result of adverse possession.

Question 37

When two or more parties own real property as co-owners with the right of survivorship, what is the tenancy called?

Answer 37

Joint tenancy RATIONALE When parties specify and preserve the unities of possession, interest, time, and title, with the right of survivorship, their tenancy is a joint tenancy.

Question 38

The most commonly accepted procedure for the enforcement of deed restrictions is by:

Answer 38

injunction. RATIONALE The penalty for a breach of a deed restriction is usually money damages or an injunction. An injunction is a court order forcing a person to do or not do an act, such as violating a private restriction.

Question 39

Tom and Sally are not married, but own a rental property together. Because they also have a right of survivorship, they most likely own the property in:

Answer 39

Joint tenancy RATIONALE Joint tenancy. The only other answer with a right of survivorship is B, but tenancy by the entireties requires the couple to be married and living in the home.

Question 40

Ann has lots of real property and dies intestate, leaving no legal heirs. At her death, all real property will pass to the government by the process of:

Answer 40

Escheat RATIONALE This process is known as escheat.

Question 41

Which is not an example of common area in a condominium?

Answer 41

Balcony RATIONALE Owned by all but used by one owner only is known as limited common area. A laundromat, swimming pool, and the land are owned and used by all owners. This is common area. The balcony is limited to only one person's use.

Question 42

S & T Realty had a listing on a property. After the property sold and closed, P&M Realty asserted its rightful claim to the commission. What type of listing did P&M Realty have?

Answer 42

Open RATIONALE Only the procuring broker is entitled to the commission in an open listing, with no broker having an exclusive right. If the seller finds the buyer in an exclusive agency listing, they owe no commission. In an exclusive right to sell listing, the listing broker gets paid the commission, no matter who sells the property. Exclusive is not a recognized type of listing. In a net listing the broker receives whatever is left over after the seller gets their predetermined net amount.

Question 43

From an investment standpoint, and based on the theory of progression and recession, it is usually the best idea to buy the:

Answer 43

Cheapest house on the block RATIONALE The theory of progression and recession says that homes will be pulled toward the average of the neighborhood. Thus the cheapest house will typically move up quicker in value than the more expensive ones.

Question 44

Using the market data approach, how would an appraiser estimate the value of a second bath?

Answer 44

Analyze matched-pair sales in the area RATIONALE What is important is what a buyer would pay for a second bath - this is determined from matched-pairs from the marketplace.

Question 45

What is market price?

Answer 45

The price the property actually sold for RATIONALE Market value is what the property is likely to bring, insurance value deals with the cost of replacement.

Question 46

Which of the following would be the best example of functional obsolescence?

Answer 46

Walking through one bedroom to reach another RATIONALE Functional obsolescence are items that are a result of faulty design or rendered inferior because of advances in construction techniques. It would not include broken or damaged parts of the property or anything off-site.

Question 47

Reproduction cost likely would be used for which of these subject properties?

Answer 47

A home built in 1759, where George Washington often stayed RATIONALE Reproduction cost is used on unique, historical buildings.

Question 48

For the income approach to appraisal, value is a reference to what?

Answer 48

The worth of rights to future income of the investment RATIONALE Net income divided by the rate will yield the value and the worth of the investment.

Question 49

The subject property is next to a sewage treatment plant. What could this situation be causing?

Answer 49

Economic obsolescence RATIONALE Economic obsolescence is a reference to a situation outside of the subject property that may affect the value of the subject property.

Question 50

A lender advertises that there are reasonable monthly terms available for the purchase of a home. Which of the following disclosures is necessary?

Answer 50

No disclosure is necessary RATIONALE A simple statement such as "reasonable monthly terms available" will not necessitate disclosure under the Truth-in-Lending Act. However, a disclosure of a particular item, such as the interest rate or the monthly payments, would require full disclosure of all interest related items.

Question 51

A buyer applies for a loan that is neither insured nor guaranteed by a government agency. For which type of loan is the borrower applying?

Answer 51

Conventional RATIONALE FHA is insured by the federal government, while VA loans are guaranteed by the federal government. A land contract is not a loan, but rather a means of buying property on an "installment plan."

Question 52

Which of the following classes of individuals is protected under the Equal Credit Opportunity Act, but not under the Federal Fair Housing Act?

Answer 52

Marital status RATIONALE While marital status is not a protected class under the Federal Fair Housing Act, it is a protected class under the Equal Credit Opportunity Act. Sex and family status are protected under both Acts. Ancestry is not protected under the Federal Fair Housing Act or under the Equal Credit Opportunity Act.

Question 53

Who is the trustor, and what title (if any) do they hold?

Answer 53

The borrower, who holds equitable title RATIONALE In a trust deed, the trustor is the borrower; they hold equitable title while paying off the loan. The trustor conveys bare legal title to the trustee by way of a trust deed.

Question 54

Real property acquired through accession would most likely be by:

Answer 54

accretion RATIONALE If you lived next to a river and the edge of your property continues to get larger through the deposit of soil, this newly acquired property is a result of accretion and title to it becomes yours by accession.

Question 55

Losing title to land by the wearing away action of the water would be

Answer 55

erosion. RATIONALE Erosion is the gradual wearing away of the land by natural forces (air and water). One acquires title to land by accretion. One appeals to the U. S. Supreme Court on a Writ of Certiorari.

Question 56

What is the purpose of the Assessment roll?

Answer 56

To establish the tax base RATIONALE County tax assessors assess the value of all taxable property in the county every year. The annual assessments are then published in the "Assessment roll." Its purpose is to establish the tax base.

Question 57

Title to real estate is transferred when a deed is:

Answer 57

Delivered and accepted RATIONALE While a deed must be signed by the grantor and acknowledged by the grantor in front of a notary, a deed does not have to be recorded. The transfer of title occurs when the deed is handed to the buyer and the buyer accepts.

Question 58

Real property may be transferred or alienated by all of the following except:

Answer 58

Inheritance RATIONALE Private grant, public grant, and operation of law (foreclosure) are all ways of acquiring title by transfer. Inherited property is acquired by will or succession.

Question 59

Alfred and Allie buy a 10-year old home and have it tested for radon prior to closing. The test results in an average reading of 4.8 pCi/L. Under Federal Law, is the seller required to mitigate the home?

Answer 59

No, unless agreed upon in the contract between buyer and seller RATIONALE There is no federal law regarding radon mitigation. The federal government recommends mitigation on houses that test 4.0 pCi/L or higher. However, the buyer and seller, in their contract, could agree to whatever guideline they wish.

Question 60

Which of the following properties could NOT be depreciated on a federal income tax return?

Answer 60

A single family residence in which one resides RATIONALE You can only depreciate income or investment property, not your residence.

Question 61

Which of the following are considered untrue statements made without facts to back them up?

Answer 61

Negligent misrepresentation RATIONALE When an agent makes untrue statements without facts to back them up, the agent may not be aware of the misrepresentation but may still be liable. This is negligent misrepresentation.

Question 62

Which of the following is not an exemption under the Federal Fair Housing Act?

Answer 62

A church selling its church grounds with the help of a broker RATIONALE An exemption exists only if the property is for sale by owner. The sale of church property is exempt only if no broker is involved.

Question 63

Broker A conveys an offer from their client to Broker B wherein A's client wishes to purchase a 300-acre farm by giving B's client $100,000, 2 year-old tractors and 50 head of Black Angus cattle. What would the consideration offered by A's client be called?

Answer 63

Valuable RATIONALE Contracts must be supported by consideration, which is offered by one party to induce another to enter the contract. "Valuable" consideration is anything of value, money, goods, personal services or exchanged property or often simply the promise to deliver something of value. "Good" consideration consists of "love and affection" and is sufficient to support a gift deed.

Question 64

The basic requirements for an offer include:

Answer 64

Objective intent RATIONALE The intent requirement is concerned with what a person says or does (objective intent) rather than what a person is actually thinking (subjective intent). The rule is based on what a reasonable person could interpret as a serious expression of intent.

Question 65

Which scenario best describes the process of novation?

Answer 65

The buyer and seller agree to substitute a new contract for a previous one RATIONALE A novation is the substitution of a new contract or a new party to the contract for an existing one.

Question 66

The commercial broker listed a store front for rent. A tenant was procured. After the lease was signed, the owner refused to pay the listing broker. In order to get their fee, the broker could:

Answer 66

Lien the property RATIONALE The Commercial Lien Law now permits a broker to lien a piece of commercial property if they are under contract and have earned their fee, but the owner refuses to pay. This is not true of residential property. The broker would have to file suit in civil court to get their fees in a residential dispute.

Question 67

If a non-riparian owner is given permission by the state to take water from a lake or river, they take it by: prescription appropriation percolation accretion

Answer 67

appropriation QUESTION RATIONALE Where excess water is available to non-riparian users, the state appropriates the water and permits these users to take the excess

Question 69

A section of land legally described as the north one-half of the northwest quarter of the southeast quarter of a section of land, contains: 40 acres 10 acres 80 acres 20 acres

Answer 69

20 acres QUESTION RATIONALE The section contains 640 acres. Divide 640 by 2, divide that by 4 and divide that by 4 to obtain the total area of land.

Question 70

The local city council decides to reduce the assessment rate for a major corporation relocating to the area and building a manufacturing plant. Such a reduction is termed: Assignment Ad Valorem Abatement Amortization

Answer 70

abatement QUESTION RATIONALE Ad Valorem means "according to valuation". Abatement usually refers to a decrease in the assessed value of an Ad Valorem tax or in the assessment rate used to compute the Ad Valorem tax. Amortization refers to payment of debt in regular periodic installments of principle and interest. Assignment refers to transfer of any property, real or personal , or any right thereon to another, such as a loan assignment without release of liability.