TREC License Exam - National Flashcards

Question

A real estate agent acting a single agent owes either fiduciary or statutory agency duties to any of the following except a) a seller b) a landlord c) a customer d) a buyer

Answer 1

c) a customer In single agency, the agent represents only one party in any single transaction. The agent owes fiduciary or statutory agency duties exclusively to one principal, who may be a seller, buyer, landlord, or tenant. The customer is the other party not represented by the agent in the transaction

Answer 2

b) unsolicited email messages the CAN-SPAM Act established guidelines for unsolicited commercial email messages, including an option for the receiver to opt-out from receiving future emails. The federal Junk Fax Prevention Act of 2005 permits someone to send a fax based on a prior business relationship, with an opt-out process to prevent future unsolicited advertising faxes.

Answer 3

a) $3,600 $180,000 loan x 2% (.02) = $3,600 (discount point fee) A point is equal to 1% of the total loan amount 1% (.01) x $180,000 x 2 (2 points) = $3,600

Answer 4

c) physical deterioration Physical deterioration is the loss of value based on the physical wear and tear on the property. It can be either curable or incurable deterioration. External and economic obsolescence are a reduction in a property's value caused by factors of the property itself. Function obsolescence is a loss in value due to such factors as outmoded or unacceptable features of the property itself

Answer 5

b) the grantor A deed must be signed by all grantors named in the deed. The grantee must be named but does not sign the deed. Some states may require witnesses to sign a deed in order for it to be recorded, but the grantee does not sign

Answer 6

c) a cap on the amount the rate may increase Rate caps limit the amount the interest rate may change. Most ARMs have two types of rate caps: Periodic and for the life of the loan. An ARM does not include an automatic conversion to a fixed-rate loan. A borrower who wants to convert to a fixed-rate loan will usually work with a lender to refinance the loan

Answer 7

d) the man may file a complain alleging discrimination on the basis of familial status The salesperson, and by implication, the broker and the property owner/principals have violated the prohibition against familial status discrimination. Anyone in charge of one or more children under age 18 who is denied access because of the children is the victim of discrimination based on familial status. Restrictive covenants do not take precedence over fair housing laws.

Answer 8

c) usury Usury is charging more interest on a loan than permitted by law. Escheat is the reversion of property to a state or county in cases where a property owner dies intestate with no eligible heirs. A deficiency occurs when the foreclosure sale of a property produces less than the amount to pay for the foreclosure process and the outstanding debt on the property. Usury rates are set at the state, not federal, level.

Answer 9

b) $123,595.70 $82,000 + $32,500 + $444 = $114,944 100% - 7% = 93% $114,944 / 93% (0.93) = $123,595.70

Answer 10

c) a designated agent A designated agent or representative is a person authorized by a real estate brokerage to act as the agent of a specific principal. The designated agent has s fiduciary relationship toward the principal, and the brokerage is a dual agent in the transaction. In single agency, a brokerage represents only the buyer or the seller in a transaction. Universal agency empowers an agent to do anything the principal could do personally.

Answer 11

a) may be oral According to the statute of frauds, in general, oral leases for one year or less are enforceable. Such oral leases are valid. It is always better practice to gave the landlord and tenant sign a written agreement to provide concrete evidence of the terms and conditions of the lease

Answer 12

b) liability Casualty insurance covers losses such as theft, burglary, and vandalism. Workers' compensation covers injuries to worker on the job. Fire and hazard covers direct loss due to damage

Answer 13

a) 20,661 The price of Lot B is $30,000 per acre, the same as Lot A. An acre is 43,560 square feet. Lot B is 150' x 200' = 30,000 sq. ft. As 30,000 is less than the 43,540 square feet in an acre, divide 30,000 by 43,540: 30,000 / 43,560 = .6887 acres. The price is $30,000 x .6887 = $20,661

Answer 14

d) the principal broker withholding taxes from the salesperson's compensation A broker does not withhold federal taxes or Social Security from an independent contractor's commission. A principal broker is required to make those withholdings for all employees. An independent contractor situation must include the other three requirements to meet the conditions for independent contractor status established by the IRS

Answer 15

d) using a good-faith effort to carry out the terms of a contract Buyers are expected to use due diligence to verify the property will meet their needs, is zoned property, and is in an acceptable condition. The seller is expected to use due diligence to make sure the title being passed is marketable

Answer 16

c) $66.67 The buyer will owe interest for the portion of the month she owns the home Total amount due / total days x days owed The buyer will own the home for 4 days in February (Feb 28 - 24 = 4) $75,000 x 8% (.08) = $6,000 interest for the year $6,000 / 360 x 4 = $66.67

Answer 17

c) the mortgagor The borrower who receives a loan and in return gives a note and mortgage to the lender is the mortgagor. The lender is called the mortgagee. An optionor is an owner who gives an optionee-a prospective purchaser or leasee-the right to buy or lease the owner's property at a fixed price within certain period of time

Answer 18

d) violates his duty of disclosing material facts to the seller The agent has a fiduciary duty to keep the seller - his client - informed of all facts that could affect the transaction. The agent's relationship with eh buyer and interest in the property may affect his ability to properly represent his seller's interest and his eagerness to have the property sold. The agent does not have an express agency contract with the buyer at this point. He may accidentally create an implied agency by acting in the buyer's interest. The action does not in itself terminate the contract with the seller

Answer 19

b) latent defects A latent defect is a hidden structural defect that is not easily discovered during a property inspection. A material fact is any fact relevant to a person making a decision to buy a property. An observable defect is one that can be seen. Fraudulent defects are those that are concealed or hidden by fraud or misrepresentation.

Answer 20

b) has possession during the term of the contract In a land (installment) contract, the buyer has possession of the property during the term of the contract. The buyer holds equitable title, while the seller holds legal title to the property. The buyer pays interest and principals on the loan, and in most cases, real estate taxes on the property during the term of the contract.

Answer 21

a) the transaction is closed Although a commission is usually earned when the buyer has been procured, it is usually payable when the sale is closed unless another arrangement for payment has been agreed to in writing

Answer 22

b) a bilateral contract A bilateral contract is one in which both parties make a promise to the other. A unilateral contract is a one-sided contract in which one party makes a promise to induce a second party to do something. A void contract lacks one or all of the essential elements of a contract. An option contract is a unilateral contract in which only one party makes a promise to perform - in this case, to hold open the right for a buyer to purchase a property in the future

Answer 23

b) a reverse mortgage A reverse mortgage allow people 62 and older to borrow money against the equity they have built in their homes. The equity diminishes as the loan amount increases. Reverse mortgages have a fixed rate of interest and are not adjustable. Ina shared-appreciation mortgage, the lender, in exchange for a favorable interest rate, participates in the profits the borrower receives upon selling the property. A package mortgage secures both real and personal property, typically used in a resort purchase where the unit is fully furnished.

Answer 24

d) a valid contract When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void or unenforceable real estate contracts lack an essential element and do not exist in the eyes of the court for enforcement.

Answer 25

b) the broker has a fiduciary obligation of loyalty to the seller Loyalty to the client-seller requires confidentiality-not revealing confidential information; it involves obedience - not publishing a price different from the one set by the client; and it requires disclosure. Dual agents have duties of confidentiality to both of the parties they represent.

Answer 26

a) valid Anytime a buyer and seller agree in writing with notice and acceptance, a valid contract is formed. If the offer is missing an essential element, it is void and unenforceable. Duress, fraud, misrepresentation, and minors always make contracts voidable

Answer 27

a) make sure buildings are structurally safe Building codes are used to make sure buildings are structurally sound and safe. A restrictive covenant is a restriction established by a private entity, not a public government. Building codes do not affect a deed's restrictive covenant. Zoning ordinances regulate the types of new construction but are not enforced through building codes

Answer 28

a) specific performance | An action in court to have the defaulting party perform on the contract is called a suit for specific performance

Answer 29

b) tenancy at sufferance Tenancy (estate) at sufferance occurs when a tenant who lawfully possessed real property continues in possession of the premises without the landlord's consent after the lease rights expire, typically from an estate for years. An estate from period to period automatically renews unless notice is given. A tenancy at will permits a tenant to possess property with the landlord's consent for an unspecified term. An estate for years is a leasehold estate that continues for a definite period, whether that period is days, weeks, months, or years and has a definite expiration date.

Answer 30

a) verify that the deed was signed without duress An acknowledgement is a formal declaration before notary public or another authorized public officer that the person who signs a deed does so voluntarily and that the signature is genuine. The primary purpose of acknowledgement is to verify that the document was executed without duress, which would make the deed voidable. The secondary purpose is to ensure the identity of the party signing the document, which is only the grantor.

Answer 31

c) a mechanic's lien A mechanic's lien may be filed by a contractor when an owner refuses to pay for work on an improvement. The lien is a specific, involuntary lien on the property. A general lien applies to both person and real property.

Answer 32

c) an executory bilateral purchase contract When the buyer informs the seller that he is going to purchase the property, the option is exercised, and an executory bilateral purchase contract exists.

Answer 33

c) a fidelity bond The owner may require the manager to purchase a fidelity bond, which covers theft or embezzlement, along with mismanagement. Errors and omissions covers items left out of or incorrect in contracts and lease documents. Workers' compensation is used to cover injuries on the job. A license bond is used in a profession such as contracting to obtain a license.

Answer 34

b) it provides no exceptions that would permit racial discrimination Unlike other exemptions permitted under the federal Fair Housing Act of 1968, the Civil Rights Act of 1866 allows no exceptions due to race. Recipients of public assistance are not protected classes under any fair housing law but are protected under the Equal Credit Opportunity Act. Senior housing protections are in the Fair Housing Act of 1866. No fair housing laws contain a "choose your neighbor" provision.

Answer 35

d) the most probable price it should bring An appraisal estimates the market value - the price a property would most probably bring. The amount of money actually paid for a property is the market price, which may or may not equal the market value. An estimate of a property's future benefits may be used by an appraiser as part of the income approach to value. The value of a property without improvements consists of the value of the land itself.

Answer 36

b) analyzing/weighing the findings obtained by the different approaches to value to arrive at a final estimate of value The three approaches to value typically produce three different values. An in-depth analysis of these values is required to determine the most valid, logical, and reliable approach to be used to provide the final value estimate. Determining depreciation-a loss of value due to any cause - is part of the process of the cost approach. The highest and best use of a property is the single most profitable use for that property. Determining highest and best use is only one of the factors considered is an appraisal prior to choosing an approach to value and reconciliation.

Answer 37

b) estimating value The appraiser does not make or determine value. After the appraiser completes the analysis and considers all the data, an estimate of value will be provided. An appraisal is an official estimate of value.

Answer 38

d) helps the buyer determine what price to offer After consulting the property disclosure to learn about potential problems, the age of appliances, and systems, the buyer is in a better position to make an offer based on the condition of the property.

Answer 39

a) the tenant is entitled to make the necessary alterations The Fair Housing Amendments Act of 1998 provides that people with disabilities must be permitted to make reasonable modifications to the premises at their own expense. The Act does not require the landlord to make all apartments accessible to people with disabilities.

Answer 40

a) a life insurance company Life insurance companies make mortgage loans on large projects but rarely, if ever, on individual home purchases. Mutual savings banks, credit unions, and commercial banks are all sources of mortgages for individual residences.

Answer 41

b) a latent defect, and the listing brokerage firm is not liable for not discovering the false floor over the damage The basement damage is a hidden structural defect known to the seller but not known to the brokerage firm or those working for the firm or to a purchaser. Real estate professionals are not liable for discovery and disclosure of latent defects not disclosed by the purchaser. Patent defects are property defects that are easily visible when inspecting a property.

Answer 42

c) the amount borrowed A discount point is 1% of the loan amount and is charged to the borrower at closing. Discount points are nto based on the selling price or downpayment

Answer 43

a) executory During an point in the executory contract (time period between signed offer to title transfer), the buyer has equitable title (also called the owner in equity). An executory purchase contract can be liquidated damages or specific performance. In an option contract, only one party is bound and there is no equity of title.

Answer 44

d) the dominant tenement The landowner's parcel benefits from the easement and is the dominant tenement. The neighbor's tract, over which the easement runs, is the servient tenement. The landowner's easement remains with the property when it is sold. An easement in gross is a company's right to use another's property, such as an easement for a utility company to run power lines over another's property.

Answer 45

``` c) the buyer has the right to revoke the offer at any time until it is accepted and recover the earnest money The offeror (the buyer) may revoke the offer at any time before the offer is accepted, even if the person making the offer agreed to keep the offer open for a set period of time. At that point, the earnest money deposit should be refunded to the buyer. ```

Answer 46

d) an equitable title The sales contract, land contract, or trust deed would give the buyer an equitable title. Legal title is transferred from the seller to the buyer via deed at closing of a sales contract and upon last payment to the seller from the buyer in a land contract.

Answer 47

c) a deed in lieu of foreclosure A deed in lieu of foreclosure is an alternative to foreclosure and is carried out by mutual agreement between the lender and the borrower rather than by a lawsuit. A reconveyance deed is used by a trustee under a deed of trust to return title to the trustor. In an assumption, a buyer purchases a property by assuming the seller's debt and becoming personally obligated for the payment of the entire debt. A subordination agreement agreement moves a first mortgage lien to a secondary position by mutual agreement of the two lenders.

Answer 48

a) a patio To compute the square footage of a single-family home, the external dimensions of the building are measured. A garage, porch, patio, or unfinished areas are not used when computing the square footage of a property. Unfinished areas are included in another section of an appraisal report.

Answer 49

d) the unauthorized practice of law Advising buyers on how they should take title to property is not part of the duties of a real estate agent; buyers should be advised to consult their attorney on such matters. State law, rather than federal law, defines the responsibilities of a real estate agent.

Answer 50

c) $91,600 The LTV will be based on the relationship of the loan to either the appraisal or the purchase price, whichever is less. In this case, the appraisal is less. Therefore, the loan will be 80% of $114,500, which equals $91,600 $114,500 x 80% (0.80) = $91,600

Answer 51

c) the contract is void due to impossibility of performance An essential element of a contract is the lawful objective or purpose; if this is no longer part of the contract, then the contract is void. In this case, the seller did not commit fraud and no contract requires the price to to be renegotiated if it becomes void.

Answer 52

Each section is 1 square mile. Each township is 6 square miles and contains 36 square miles, so a township contains 36 sections. Each section is 1 square mile, or 640 acres. The 36 square miles of a township are 23,040 acres

Answer 53

b) a fiduciary The principal is the party to whom the agent gives advice and counsel. The agent's fiduciary relationship of trust and confidence with the principal means the broker owes the principal certain specific duties. A trustee holds property for another as a fiduciary, but an agent does not hold the principal's property. A subagent, though working in the principal's interest, is an agent of the brokerage firm/principal broker who is already acting as agent for the principal. An attorney-in-fact is a competent third party authorized by the principal's place through a written and recorded power of attorney

Answer 54

b) Yes, because their debt to income ratios are within criteria set by Fannie Mae A conforming loan is one that qualifies under the debt to income ratios set by Fannie Mae. The borrower's total housing expense must be no more than 28% of gross monthly income, and the borrower's total debt expense including housing must be no more than 36% of gross monthly income. To find the total housing expense ratio, divide the total housing expense ($1,770) by the monthly gross income ($8,000) 1,700 / 8,000 = 22% To find the debt expense, divide that expense ($2,800) by the monthly gross income ($8,000) 2,800 / 8,000 = 35% In this situation, if their credit score and history are considered good by the lender, the couple would qualify for a conforming conventional loan.

Answer 55

c) the seller The seller must determine the listing price of the seller's property. It is the responsibility of the broker to advise and assist the seller in making that decision. A broker or salesperson may use a competitive market analysis to help the seller determine a reasonable listing price.

Answer 56

b) enforceable When neither party can sue the other to force performance, the contract is said to be unenforceable. When a contract meets all of the essential elements and is enforceable, it is a valid contract. Duress, fraud, misrepresentation, and minors always make contracts voidable. Void real estate contracts lack an essential elements and are unenforceable.

Answer 57

$18,111 $120,900 x 90% (0.90) = $108,810 purchase price $108,810 x 80% (0.80) LTV = $87,048 loan amount ( debits)108,810 + 350 (title expense) - (credits) $87,048 (mortgage) - $5,000 (earnest money) - $250 (attorney's fees) - $749 (other expenses) = $18,111

Answer 58

c) a fee simple absolute estate A fee simple absolute estate is the highest interest in real estate recognized by law. Fee simple ownership is absolute ownership in which the holder is entitled to all rights to the property. A life estate is a freehold estate that lasts as long s the life tenant. A qualified fee estate is limited by specific conditions created by agreement or by law. A reversionary interest is that interest in property that exists when ownership of a life estate reverts back to the original owner at the end of the life estate.

Answer 59

a) is part of a body of law established by tradition and court decisions The law of agency is law from judgments and decrees, as opposed to law established by legislatures or other governing bodies. In many states, statutes have been enacted to further define agency representation with laws and regulations that set forth the responsibilities of real estate licensees to clients and customers.

Answer 60

b) supply and demand Under the concept of supply and demand, if demand increases and supply remains the same, the supply becomes more valuable. Fewer rental properties will produce higher rents. The principle of substitution says the maximum value of a property ends to be how much it would cost to purchase an equally desirable substitute property. The principle of contribution is used to determine improvements will increase or decrease the value of the real property. Conformity is the appraisal principle that holds that the greater the similarly among properties in an area, the better the properties will hold their value.

Answer 61

a) the term loan will have a smaller monthly payment with a larger balloon Term loan payments are interest-only, so they will be smaller than a partially amortized loan in which the payment pays both interest and principals.

Answer 62

c) a broker's price opinion (BPO) A BPO is a broker's opinion of the value of a particular property, often in the form of a competitive market analysis. The BPO may not be labeled an appraisal, which may only be conducted by a state-licensed or certified appraiser. the sales comparison approach is used in both the BPO an an appraisal. The cost approach is used when conducting an appraisal.

Answer 63

a) $9,619,500 1.25 acres x 43,560 (square feet per acre) = 54,450 (total square feet) 54,450 / 150 ft (the depth of the lot) = 363 front feed x $26,500 per front foot = $9,619,500 (the selling price). The term front foot refers to a unit on frontage of a lot, usually the street frontage or water frontage. When two dimensions are given for a tract and not labeled, the first dimension is the frontage. Each front foot extends the depth of the lot.

Answer 64

b) each mortgage payment amount is the same In a fully amortized loan, there will be no balloon payment because the periodic payments fully repay the loan by the end of the term period. Each mortgage payment reduces the principal by a slightly different (increasing) amount, but each mortgage payment (principal and interest) is the same.

Answer 65

``` $101,430 5 x $500 x 12 (months) = $30,000 5 x $550 x 12 (months) = $33,000 5 x $600 x 12 (months) = $36,000 30,000 + 33,000 + 36,000 = $99,000 PGI 99,000 x 3% (vacancy = $2,970 (expected loss due to vacancy) 99,000 -02,970 = $96,030 $450 (additional income) x 12 (months) = $5,400 $96,030 + $5,400 = $101,430 ```

Answer 66

c) a satisfaction of mortgage A defeasance clause requires the lender to execute a satisfaction, also known as a release or discharge, when the note has been fully paid. Satisfaction of the mortgage returns to the borrower all interest in the real estate originally conveyed to the lender. A mortgagee may assign a note to a third party, such as investor or another mortgage company (the assignee). hen the debt is paid in full, the assignee is required to execute the satisfaction of the mortgage.

Answer 67

b) amount of income Lenders may reject applicants who have insufficient income for the loans they are requesting or for their lack of ability to repay the loans. Lenders may not discriminate against potential borrowers on the basis of race, color, religion, national origin, sex, marital status, age, or dependence on public assistance.

Answer 68

a) balloon When the term of the loan is over and the payments made have not paid off the debt, the last payment is a balloon payment. The loan is called a balloon loan. Acceleration occurs when a lender calls for full payment of a loan before its term has ended. The adjustment in an adjustable-rate mortgage establishes how often the rate may be changed. A variable payment is one that may change over time depending on the mortgage payment.

Answer 69

d) 8,500 square feet. length x width 50 x 170

Answer 70

d) the granting clause The granting clause states the grantor's intention to convey the property at the present time. An exception and reservations, or limitations affecting the title. The covenant of seisin is the grantor's promise of ownership and ability to convey title in a general warranty deed. The acknowledgement is a formal declaration under oath that the person signing the deed does so voluntarily and that the signature is genuine. The signature is not required to make a deed valid but is often required to record the deed.

Answer 71

a) in severalty A corporation is legally treated as a single person and may own property in severalty. A corporation, though not human, is an artificial person in the eyes of the law. A corporation is not a partnership or a trust. It does not own property with the right of survivorship established through a joint tenancy.

Answer 72

d) mutual rescission When both parties to a contract are returned to their original position, it is known as mutual rescission. Liquidated damages and specific performance are types of purchase contracts chosen as a remedy for default by one of the parties. Mutual performance is when both parties complete the contract.

Answer 73

c) a transaction broker In some states, a broke may be an agent of neither party to a transaction , but help both the buyer and the seller with necessary paperwork and formalities in a transaction. The broker acts as a transaction broker or facilitator but not as an agent of either party.

Answer 74

c) keep all information received confidential Real estate professionals owe consumers disclosure, accounting, and honest. Confidentially is owed to parties the agent or facilitator represents.

Answer 75

b) it is the maximum estate in land and lasts forever Fee simple absolute estates, which have the larges (maximum) bundle of rights, are typically transferred from one owner to another when title is passed so they continue on forever. A deed condition would create a fee simple defeasible or qualified estate

Answer 76

d) all owners may convey title via a will to their heirs The owner of a life estate may not transfer his ownership after death since his ownership is limited to a lifetime. All freehold estates are created in the deed, and since the holder then owns the property, he is obligated to pay the expenses and taxes. All owners may lease the property; a life tenant's lease would last only as long s the life estate lasts.

Answer 77

b) the grantor Either the grantor, or someone acting under the grantor's authority, must execute (sign) every deed, and the grantor must have the legal capacity to do so. The grantee is not required to sign the deed. A devisee is the recipient of real property under a will and is not required to sign a deed.

Answer 78

a) purchase a number of mortgage loans already funded and assemble them into packages to form marketable securities for investors. In the secondary mortgage market, loans are brought and sold only after they have been funded by lenders in the primary mortgage market. The secondary market activity enables lenders to sell mortgage loans to raise capital for new loans.

Answer 79

b) a variance A variance permits a landowner to use the property in a manner that is strictly prohibited by the existing zoning. A nonconforming-use permit would only apply to a use that existed prior to the zoning ordinances. A variance does not require ownership of air rights. Special-use permits are tied to how the property is used, such as a school or daycare.

Answer 80

c) a CMA contains a compilation of facts about similar properties that have recently sold A CMA is a comparison of the prices of properties recently sold, properties currently on the market, and properties that did not sell. It is an analysis of the market activity among comparable properties designed to arrive at a fair market value for the subject property. Any real estate broker or salesperson may prepare a CMA. The CMA is not an appraisal, which may only be prepared by a state-licensed or certified real estate appraisal.

Answer 81

b) Poorly maintained properties in the neighborhood External depreciation is caused by factors not on the subject property, such as poorly maintained properties in the neighborhood. A leaky roof is an example of physical deterioration. A poorly designed floor plan is an example of functional obsolescence. Convenient access to schools and recreationally facilities are examples of good features that may add to the desirability of a neighborhood.

Answer 82

a) $661,244 $550 x 12 x 3 = $$19,800; $600 x 12 x 3 = $21,600; $650 x 12 x 3 = $23,400; Total annual income from units = $64,800 $64,800 + 2,400 = $67,200 potential gross income $64,800 x 0.04 = $2,688 (Vacancy) $67,200 - $2,688 = $64,512 $64,512 - $5000 = $59,512 (Net operating income) $59,512 / 0.09 (cap rate) = $661,244

Answer 83

d) depreciation Depreciation is one of the calculations used in the cost approach and not in the income approach. The capitalization rate and the annual net operating income (NOI) are factors used in the income approach to determine a property's value (NOI / Rate = Value). Estimating the annual gross income of a property is the first step in the income approach to value.

Answer 84

$20,000 $100,000 (listing price) x .80 (cost) = $80,000 $100,000 -0$80,000 = $20,000 (profit)

Answer 85

b) a percentage lease When a business tenant pays rent that varies with the tenant's gross business receipts, the arrangement is called a percentage lease. In such a situation, the landlord shares in the tenant's business risk because of the possibility of receiving no more than the minimum fixed amount. In a fixed lease, the tenant pays a fixed monthly amount, and the landlord pays the expenses of ownership. Index leases increase or decrease the rent amount paid based upon a pre-agreed-to-index-typically, the lease is tied to the consumer price index. With a net lease, the tenant pays a base rent plus certain costs in the operation of the property, such as utilities, property taxes, and assessments. The landlord ma pay some property expenses.

Answer 86

$6,174,000 width x length x heigh: 250 x 350 x 12 = $1,050,000. $1,050,000 x $0.98 = $1,029,000 x 6 = $6,174,000

Answer 87

c) includes a restriction that 80% of the units be occupied by people 55 or older The Fair Housing Act allows for two exemptions to familial status protection in housing for seniors. One permissible exemption is if 80% of the units are occupied by people age 55 or older. The other exemption is for housing intended for persons over the age of 62. Owner-occupied buildings with four or more units are subject to the federal Fair Housing Act. All senior housing must be HUD certified.

Answer 88

c) Equal Credit Opportunity Act (ECOA) Age is a protected category only under the ECOA. ADA, FHA, and VA do not have laws in regard tot he age of applicants since the issue is covered under ECOA and applies to FHA and VA loans.

Answer 89

a) supply and demand factors The number of properties and vacancies determine rent values. If the supply is low and demand is high, rents go up. If the supply is high and demand is low, rents go down. HUD, tenants unions, and apartment owners associations do not play a major factor in determining rents.

Answer 90

d) actual eviction A tenant's breach of a lease can result in a court action known as actual or judicial eviction. Constructive eviction occurs when a tenant abandons a property because the landlord has breached the lease. Eminent domain is the government's power to take land for public use. Partial eviction refers to an eviction where a landlord deprives a tenant from the use of a portion of the leased premises.

Answer 91

c) measure the profitability of the property The rate of return is calculated to measure the profitability of the property and is the capitalization rate. The vacancy rate would be used as part of this formula. Absorption rate and future income would not.

Answer 92

$204,600 $220,000 x .07 (brokerage rate) = $15,400 9Commission) $220,000 - $15,400 = $204,600

Answer 93

c) blockbusting Such statements, made by a person in real estate brokerage, constitute blockbusting and usually are attempts to get listings by frightening owners into selling. Blockbusting is a violation of the federal Fair Housing Act. Steering is the channeling of homebuyers to a particular neighborhood to maintain or change the character of the neighborhood. Redlining is the illegal practice of refusing to make a mortgage loan or restricting the number of loan sin a particular area. Fraudulent advertising involves providing untrue statements promises in the advertising of a property

Answer 94

a) price tends to drop According to the principle of supply and demand, if demand is constant and supply increases, sellers of the commodity compete with each other by lowering prices. Prices tend to rise if the demand for the commodity increases while the supply remains the same.

Answer 95

a) brings the borrower and the lender together A mortgage broker is an intermediary who brings borrowers and lenders together. A mortgage broker locates potential borrowers, processes preliminary loan applications, and submits the applications to lenders for final approval. Mortgage brokers do not provide loans, handle escrow funds, or check borrowers' creditworthiness for loans

Answer 96

d) a material defect and disclose it to the buyer A real estate agent may be guilty of negligent nondisclosure by failing to exercise adequate care to discover a material defect and disclose it to the buyer

Answer 97

a) rescission A rescission occurs when one party cancels or terminates the contract as if it had never been made. Cancellation terminate the contract without a return to the original position. Substitution is an appraisal principle of value. Subordination is used as a placeholder and indicates a mortgage or other interest will not move in front of a newer recording.

Answer 98

a) an exclusive right-to-sell listing In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An open listing clause states that any number of brokers may work simultaneously to sell the property, with the commission going to the broker who secures a buyer able to purchase the property. An exclusive agency listing provides that the brokerage firm or a co-op broker will receive a commission if the property sells, but the owner reserves the right to sell the property without owing a commission if the owner sells the property on his own. An option listing permits the broker to retain an option to purchase the property for the broker's own account.

Answer 99

b) terminated and countered The counteroffer effectively terminates the original offer and creates a new offer. Therefore, the original offer is not valid, accepted, or binding.

Answer 100

c) no commission The broker only earns a commission with the procuring of a ready, willing, and able buyer who purchases the property on the seller's terms. There is no standard rate of commission for a locality, as commission rates are determined by individual agreements between a broker and client.

Answer 101

a) time-share The owner holds an interest in property for a stated time each year, sharing the property according to a specified time plan. The owner's interest is a time-share. The owner of a condominium or a cooperative has a right of possession for as long as the ownership is not transferred. An individual does not own property through a trust, as a trust holds title to the real estate.

Answer 102

c) after a newly constructed building has been inspected and found satisfactory by the municipal inspector. The certificate of occupancy, granted by an inspector from the jurisdiction, is necessary before a newly constructed building can be used. The certificate can only be issued after construction has been completed. The certificate is not used in determining a variance or a conditional-use permit.

Answer 103

a) consequential loss, use, and occupancy Casualty insurance covers losses such as theft, burglary, and vandalism. Liability covers medical expenses for someone injured on the premises. Fire and hazard covers direct loss due to damage.

Answer 104

a) a satisfaction of mortgage A satisfaction of mortgage, also known as a release or discharge, is executed by the lender when a note has been fully paid. This document returns to the borrower all ownership interest in the real estate originally conveyed to the lender. This release must be recorded in the public record to show that the debt has been removed from the property.

Answer 105

$50,000 640 / 4 / 4 / 2 = 20 acres 20 x $2,500 = $50,000

Answer 106

a) uniqueness Uniqueness is the concept that no two parcels of property are exactly the same or in the same location. An individual parcel has no substitute because each is unique. Immobility means the geographic location of a parcel of land can never be changed. Indestructibility means that land is durable and cannot be destroyed. Scarcity is an economic characteristic of land, meaning that when the supply of land is limited, the price of the land increases.

Answer 107

a) tenants in common Under tenancy in common, when a co-tenant dies, the tenant's undivided interest passes according to the will. In this case, either the deceased owner died intestate and the state law of decent gave her interest to her heirs, or she willed her undivided interest in the property to her heirs. In a joint tenancy, if one of the women died, the other would enjoy the right of survivorship and own the property in severalty. If the two original owners had formed a corporation to own the property, the death of one would not affect title to the property, which would belong to the corporation. Only married couples are allowed to own property as tenants by the entirety, and the question did not state the woman were married.

Answer 108

c) an estimate of the building's replacement cost The building's replacement cost is an essential component of the cost approach, along with depreciation and land value. The owner's original cost of construction is not considered in the cost approach. The sales prices of similar properties are considered in the sales comparison approach. The property's assessed value is not used to determine its fair market value.

Answer 109

d) a deficiency judgment A deficiency judgment entitles the mortgagee to a personal judgment against the borrower for the unpaid balance when a foreclosure sale does not produce enough cash to pay the loan balance in full after deducting expenses and accrued unpaid interest. It may also be obtained against any endorsers or guarantors of the note and against any owners of the mortgaged property who assumed the debt by written agreement. The mortgagee is not entitled to any damages. A default judgment is a judgment in favor of a plaintiff when a defendant does not appear in court.

Answer 110

c) the number of children Three children under five in a two-bedroom apartment would not be considered unless local zoning ordinances state differently. Typically under fair housing law, children less than two years of age are not counted as occupants. Standard leasing practice is to fully check the tenant's background, past lease history, and work and personal references.

Answer 111

c) a specific lien A mechanic's lien is a specific lien, as it affects a specific property and only that particular property. It is an involuntary lien placed on a property without the owner's consent. A general lien is the right of a creditor to have all of an owner's property—real and personal—sold to satisfy a debt. An equitable lien arises out of a written contract that shows the intention of the parties to charge a particular property as a security for a debt or obligation.

Answer 112

a) a fully amortized loan The payment in an amortized loan partially pays off both principal and interest. The mortgagor pays a constant amount, usually monthly. At the end of the term, the full amount of the principal and interest due is reduced to zero. In a straight loan and interest-only loans, the borrower makes periodic payments of interest only, followed by a lump sum balloon payment of full principal balance at the end of the loan term. In a partially amortized loan, the periodic payments are not enough to pay the principal balance, so a final payment (a balloon payment) is larger than the other payments to satisfy the debt.

Answer 113

b) the brokerage firm Only a principal or employing broker for the brokerage firm may enter into brokerage agreements. The broker's salespeople have authority only to assist in negotiating the agreements. The salesperson is merely the subagent of the broker, but only the broker is the agent of the client and a party to the representation agreement. The salesperson is not a party to it.

Answer 114

c) implied agency The homeowner and the broker did not have an oral or written agency contract, but the broker's actions implied to prospective buyers that the broker was acting as the homeowner's agent. Express agency occurs when two parties enter into an oral or written formal agency agreement. Universal agency empowers the agent to do anything the principal could do personally, such as authorized by a power of attorney. General agency allows the agent to act for the principal in a wide range of matters, as authorized, for example, in a property management contract

Answer 115

a) availability of employees. | The marketing plan does not consider the hiring or availability of employees

Answer 116

b) binds the optionor for a specified time An option obligates an owner (the optionor) to sell at a fixed price within a certain period of time but does not obligate the optionee (the proposed buyer) to exercise the option. The option gives the optionee no rights to the property and does not require the optionee to complete the purchase. The seller is only liable for a commission to a broker when the option is exercised—that is, when the buyer actually purchases the property from the seller.

Answer 117

c) an open listing In an open listing, the seller retains the right to employ any number of brokers to sell the property. The brokers can act simultaneously, and the seller is obligated to pay a commission only to that broker who successfully procures a ready, willing, and able buyer. A net listing clause would permit a broker to receive as commission all excess monies over and above the minimum sales price agreed to in the listing agreement. Net listings are not only discouraged, but illegal in many states. In an exclusive right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property. An exclusive agency listing provides that the brokerage firm and co-op broker will be paid unless the seller sells the property on her own.

Answer 118

b) a reversionary interest Until the mother dies, the son holds a reversionary interest. Upon death of the life tenant—the mother—the holder of the reversionary interest will return to having a fee simple absolute estate. A qualified fee estate is held as long as the owner maintains the deed condition. A homestead is protection for a primary property against certain creditors. A remainder interest belongs to a person named as a remainderman, the person—other than the creator of the estate—to whom the life estate will pass when the estate ends.

Answer 119

b) may be liable for misrepresentation since she should have known about the lack of city water services The listing broker may be liable since she should have confirmed whether or not the house had city water service. Real estate professionals may, for the most part, rely on the statements of buyers and sellers unless they have reason to believe the statements are not truthful. A real estate commission only investigates complaints against real estate licensees. A court may find the seller liable for misrepresentation.

Answer 120

d) 75% | $131,250 / $175,000 = 75% (0.75)

Answer 121

c) the brokerage The principal broker and the salesperson are responsible for properly disclosing any defects in the property to the buyer. By providing the disclosure form in a timely manner, the salesperson is protecting the liability of his broker.

Answer 122

c) avoiding the risk Filling in a swimming pool is an example of avoiding the risk. Managing or controlling the risk would be hiring lifeguards or increasing the property's liabilities insurance. Transferring the risk would happen if the owner could transfer all risk and liability to another party.

Answer 123

b) may be liable for misrepresentation since she should have known about the lack of city water services The listing broker may be liable since she should have confirmed whether or not the house had city water service. Real estate professionals may, for the most part, rely on the statements of buyers and sellers unless they have reason to believe the statements are not truthful. A real estate commission only investigates complaints against real estate licensees. A court may find the seller liable for misrepresentation.

Answer 124

75% | $131,250 / $175,000 = .075 (75%)

Answer 125

c) the brokerage The principal broker and the salesperson are responsible for properly disclosing any defects in the property to the buyer. By providing the disclosure form in a timely manner, the salesperson is protecting the liability of his broker.

Answer 126

c) avoiding the risk Filling in a swimming pool is an example of avoiding the risk. Managing or controlling the risk would be hiring lifeguards or increasing the property's liabilities insurance. Transferring the risk would happen if the owner could transfer all risk and liability to another party.

Answer 127

d) constructive eviction When a landlord fails to maintain a property according to the lease agreement, a tenant may abandon the property. This action is known as constructive eviction. Constructive eviction terminates the lease when the landlord breaches any clause of the lease agreement. The tenant must prove that the premises have become unusable because of the conscious neglect of the landlord. Actual eviction is a legal process in which a landlord takes over possession of a property when a tenant breaches a lease.

Answer 128

b) the space requirements and financial history When qualifying a potential tenant, a property manager must consider many factors. The space requirements and financial history are the most important criteria. Asking the number of children may have fair housing implications.

Answer 129

a) actual eviction by filing a suit for possession If the tenant breaches the lease, the landlord would start eviction procedures known as actual or judicial eviction. Specific performance would be part of a purchase contract as a remedy for default of the seller or buyer. Constructive eviction occurs when the landlord is in default and allows the tenant to break the lease and move.

Answer 130

a) five bedroom home with one bathroom Obsolescence is a loss of value. Functional obsolescence results from outmoded or unacceptable physical features in a property. A five-bedroom home with only one bath is an example of functional obsolescence. Chipping paint and other deferred maintenance are examples of physical deterioration, which may be repaired or cured by repainting or other maintenance. Unattractive curb appeal and a decrease in the area's population are examples of external obsolescence—items which will not be easily cured by spending more on the property itself

Answer 131

a) a general agent A general agent may represent a principal in a broad range of matters related to a particular business or activity. A property manager is usually considered a general agent. A special agent may represent a principal in one specific act or business transaction under detailed instructions, such as when an agent represents a seller under a listing agreement. A universal agent is a person empowered through a general power of attorney to do anything the principal could do personally. The power of attorney makes the agent an attorney-in-fact.

Answer 132

d) by a deed or will Joint tenancy, like all ownership, is not implied by law or through any action. All tenancy is created when the deed in conveyed to the grantee. To create joint tenancy, the deed must specifically identify the parties as joint tenants. When a deed does not indicate the form of tenancy and two or more people acquire title to property, the new owners are presumed to be tenants in common. Joint tenancy is the right to survivorship, so when an owner dies, the interest transfers directly to the surviving co-tenants, not heirs. Signature by spouses does not create joint tenancy.

Answer 133

d) the loss of value in real estate from any cause The term depreciation refers to the loss of value in real estate from any cause, either on or off the property, or a combination of the two.

Answer 134

b) equitable title The buyer in a contract for deed holds equitable title to the property. Equitable title gives the borrower the rights of possession and use of the property, while the seller retains the legal title during the contract term. If the buyer defaults, the seller can evict the buyer and keep any money the buyer has already paid, which is considered rent.

Answer 135

$42.51 $82,000 x 9.25% (0.0925) = $7,585 annual interest $7,585 / 12 = $632.08 Monthly Interest $674.59 (monthly payment) - $632.08 = $42.51

Answer 136

$19,685 Loan amount: $89,500 x 80% (0.80) = $71,600 Determine the down payment: $89,500 - $71,600 = $17,900 Determine the Discount Point: $71,600 x 1 % (.01) = $716 Origination Fee: $716 $17,900 + $716 + $716 + $350 = $19,682

Answer 137

c) a patent defect A patent defect is easily visible when inspecting a property. A latent defect is a hidden defect that is not easily visible during an inspection and may be known to a seller but not disclosed to an agent or buyer. A small crack at a window is usually not a structural defect in a property and does not indicate an environmental danger.

Answer 138

60 acres To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres 1/4 and 1/4; 4 x 4 = 16; 640 / 16 = 40 acres 1/2 and 1/4 and 1/4; 2 x 4 x 4 = 32; 640 / 32 = 20 40 + 20 = 60 acres

Answer 139

$33,040.50 $99,500 x 6% (0.06) = $33,040.50 commission Debits: $5,970 + $250 (attorney fees) + $99.50 (transfer tax) + $50,140 (existing mortgage) + $10,000 money mortgage) = $66,459.50 Credits: $99,500 (selling price) $99,500 - $ 66,500 = $33,040.50

Answer 140

d) carry errors and omissions (E&O) insurance The primary purpose of E&O insurance is protection against catastrophic, business-threatening lawsuits, not to supplement income or to help buyers pay for problems they encounter after closing. A surety company assumes liability for nonperformance when it issues a surety bond, which is not an issue in this situation.

Answer 141

a) obsolescence To have value, a property must have monetary worth based on the desirability of the property. Obsolescence is not a desirable trait and, therefore, takes away from the desirability of the property and the demand for the property. Demand, transferability, scarcity, and utility are all characteristics of a property's value (remembered by the acronym DUST). Demand is the need or desire for ownership supported by the financial means to satisfy the need. Transferability refers to the relative ease with which ownership rights are transferred from one owner to another. Scarcity means that there is a limited supply of property. Utility refers to the property's usefulness for its intended purposes.

Answer 142

d) external obsolescence Factors outside the property boundary lines that affect a property's value are examples of external obsolescence. Rising mortgage interest rates is an example of external obsolescence. Functional obsolescence occurs when a property has outmoded—or has physical or design features no longer considered desirable by purchasers. Physical deterioration of a property may be curable or incurable; a curable item is economically feasible and would result in value equal to or exceeding the cost of repairs. An item is incurable if its correction would not be economically feasible or create a comparable value to the building.

Answer 143

c) terminated automatically because of the death of the principal A listing contract may be terminated if either party dies or becomes incapacitated. Neither the dead owner's intention nor the 90-day listing period keeps the listing in effect.

Answer 144

``` b) debt service Debt service (mortgage payments of principal and interest) is not included in calculating net operating income. Management fees, real estate taxes, cost of utilities, insurance, and other costs to maintain the property are all considered in determining a property's operating expenses. ```

Answer 145

b) become shareholders of a corporation In a cooperative, a corporation holds title to the land and building and offers shares of stock to inhabitants of the cooperative's units. Owners in a cooperative occupy their units through proprietary leases, and their interests are treated as personal property. If the couple were to move to a condominium complex, they would own and finance their individual unit. Condominium ownership provides fee simple title to each individual unit, while a cooperative is ownership in the corporation, which owns the property.

Answer 146

$3.50 $65,000 (value) x 45% (0.45) = $29,250 Assessed value $511.88 (semiannual tax bill) x 2 = $1,023.75 annual taxes $1,023.75 / $29,250 = .035 .035 x $100 (tax rate) = $3.50

Answer 147

b) rent control | Rent control is established by state or local governments to restrict the rent that can be charged.

Answer 148

c) the existing lease agreements must be honored by the new owner The security deposits would transfer to the new owner since the funds belong to the tenants. The terms of the leases would have to be followed, and there is no free rent when ownership changes.

Answer 149

a) minimize the possibility of liability in a real estate transaction The purpose of E&O insurance is to minimize exposure to liability in the event the broker is facing a catastrophic, business-threatening lawsuit.

Answer 150

d) cost approach The cost approach requires a separate estimated value for the land. Estimated replacement or reproduction cost less accrued depreciation plus estimated land value equals the estimated value by the cost approach. Neither the income approach nor the sales comparison approach calculates the value of land separately from the value of a property's improvements.

Answer 151

a) an estate from period to period has no expiration date An estate from period to period, or periodic tenancy, does not have a specific expiration date, as it automatically renews until notice is given by the tenant or landlord. An estate (tenancy) for years has specific beginning and ending dates. Neither estate is a life estate. Each can be terminated. Both an estate for years and an estate from period to period must be in writing to be enforceable.

Answer 152

c) using honest and sincere intentions All parties to a contract are to use their best good-faith effort to fulfill the contract. Putting a principal's interest above an agent's is loyalty. Following lawful instructions of a principal is obedience, and using professional skills is considered to be skill and care for all consumers, including a principal.

Answer 153

d) a net lease With a net lease, the tenant pays a base rent plus certain costs in the operation of the property, such as utilities, property taxes, and assessments. The landlord may pay some property expenses. In a gross/fixed lease, the tenant pays basic rent, and the landlord pays the expenses of ownership. In a percentage lease, the tenant pays basic rent plus a percentage of gross sales and may pay some property expenses. A sublease is the leasing of premises by a tenant to a third party for part of the tenant's remaining term.

Answer 154

a) an existing residence The sales comparison approach arrives at an estimate of value by comparing the existing residence with recently sold comparable properties. This approach is normally considered the most reliable in appraising single-family homes to the large number of current sales. To find an estimate of value for an apartment building, retail location, or hotel, an appraiser would normally rely on the income approach to value for each of these income-producing properties.

Answer 155

d) economic base The economic base measures the ability of a community to attract business and income. Life cycle refers to the expected useful lifetime of equipment or property. Market value is the most probable price a property would bring in an arm's-length transaction under normal conditions on the open market. A zoning plan determines the types of improvements permitted on specific properties in a community.

Answer 156

b) a shopping center The income approach would be used to estimate the value of income-producing properties such as shopping centers and office buildings. The sales comparison approach or the cost approach may be used to determine the value of other types of properties.

Answer 157

d) verify the property will meet the buyer's needs Depending on what the contract terms are, the buyer may be using the due diligence period to remove contingencies and determine if the zoning is correct, all of which are incorporated in verifying the property meets the buyer's needs. The seller's property disclosure should be given to the buyer at time of acceptance of the offer.

Answer 158

a) master plan Local governments establish development goals by creating a master plan, which is also known as a comprehensive plan. Restrictive covenants are private limitations on the use of property established by a developer or owner and binding on future owners. Governments pass environmental regulations to help maintain clean air and water. Building codes are ordinances that specify construction standards that must be met when constructing or repairing buildings

Answer 159

d) the mortgaee The lender is the mortgagee. The borrower who receives a loan and in return gives a note and mortgage to the lender is the mortgagor. An optionor is an owner who gives an optionee—a prospective purchaser or lessee—the right to buy or lease the owner's property at a fixed price within a certain period of time.

Answer 160

c) a payment of money or commissions The payment of money or commissions does not create an agency relationship. A written contract or actions of the parties create agency. In real estate, a listing contract, buyer agency contract, or property management contract creates an agency relationship between the broker and the principal to the contract.

Answer 161

b) are not bound to buy The sellers' counteroffer is regarded in law as a new offer. They have rejected or terminated the buyers' original offer by changing something in it and thereby releasing the buyers from the original offer. At this point, the sellers can keep both their draperies and their house, and the buyers are not bound by any agreement to buy the property.

Answer 162

c) disclosure It is the real estate professional's duty to keep the consumer informed of all facts or information that could affect a transaction. The broker also owes the principal care and accounting. The broker must act with reasonable care while acting on behalf of the consumer.

Answer 163

d) ad valorem taxes General real estate property taxes are based on the value of the property being taxed and are known as ad valorem taxes. They are specific, involuntary liens. Special assessments are taxes levied on real estate to fund public improvements beneficial to the property. Real estate property taxes are not appropriation funds taken from local or state revenues. Real estate property taxes are specific, involuntary liens. Voluntary liens, such as mortgages, are placed on real property with the consent of the owner.

Answer 164

b) the neighbor is the broker's client, and the buyer is the broker's customer The listing contract with the neighbor establishes an agency relationship with the neighbor, who becomes the client of the broker. Without representation, the buyer remains a customer of the broker—a nonrepresented consumer who is entitled to fairness and honesty. The broker owes fiduciary duties only to the neighbor, her client. The broker may offer buyer representation to the buyer at a later date if the broker's company policy permits dual agency in a situation in which the buyer may want to purchase one of the company's own listings.

Answer 165

$2,412.03 $196,900 (sale price) x .07 (7%) = $13,783 (total commission) $13,783 / 2 = $6,891.50 (each broker's commission) $6,891.50 x .35 (35%) = $2,412.03 (salesperson's commission)

Answer 166

$790 | $79,000 (100% loan) x 1% (.01) = $790

Answer 167

c) the interest Interest is the sum paid or accrued in return for the use of a lender's money. Interest on a promissory note is usually due in arrears at the end of each payment period. The rate of return is the return on the investment in a property. An owner's equity is the amount of money remaining once current liens, including the mortgage, are subtracted from the current value of the property. The principal is the balance owed on the original loan amount.

Answer 168

NOI (Net operating income) / Capitalization rate = Value

Answer 169

b) the tenant would be entitled to recover damages from the landlord A tenant suffering financial losses (damages) because of the landlord's negligence could enter an action against (sue) the landlord for those damages. A tenant has the right to sue and recover damages against the landlord when the landlord breaches a clause of the lease agreement or the premises become unusable for the purposes stated in the lease.

Answer 170

b) do nothing because the agreement will terminate automatically at the end of the current term A tenant for a specified time period (one who holds a lease for years) does not have to give notice because the lease ends by contractual agreement. The landlord does not have to give the tenant notice in such a case. The tenant's signing a lease for the new apartment does not affect the existing lease, which expires in two weeks.

Answer 171

``` $123,595.70 $82,000 = X - $32,500 - $444 - 0.07X $82,000 + $32,500 + $444 = 0.93X $114,944 = 0.93X $114,944 / 0.93 = X X = $123,595.70 ```

Answer 172

c) a payment of money or commissions The payment of money or commissions does not create an agency relationship. A written contract or actions of the parties create agency. In real estate, a listing contract, buyer agency contract, or property management contract creates an agency relationship between the broker and the principal to the contract.

Answer 173

90% | $360,000 / $400,000 = .90 (90%)

Answer 174

Amount of the loan / appraised value of the property

Answer 175

c) the income generated by the property The appraiser is most concerned with the income generated by the property in estimating the value of the property. Accrued depreciation is a factor used in the cost approach. The sales prices of comparable properties are used in the sales comparison approach, but finding comparable properties for commercial properties is often difficult. Debt service (mortgage payments) is not considered an operating expense deducted from annual operating expenses to determine the net operating income of a commercial property.

Answer 176

$2,160 $72,000 (loan amount) x .01 (1%) = $720 $720 x 3 (3 discount points) = $2,160

Answer 177

a) place a security deposit check into the management's trust account All security deposits should be placed in trust accounts. Property managers typically use the rental account to pay property bills, including the management commission, which are then moved to the management operations account. Property managers may only be paid from the operations account, never the trust account. A security deposit check would never be placed in an owner's business account.

Answer 178

d) the date the broker will schedule an open house All listing and buyer representation contracts tend to require similar information: type of listing agreement, broker's authority and responsibilities, names of all parties to the contract, brokerage firm, list price, real and personal property, description of property, commission, termination of the contract, et cetera. They are not required to provide the dates of open houses.

Answer 179

1.25% (.125)

Answer 180

a) capitalization Capitalization is a method of estimating today the future value of an income stream. Depreciation is the loss of value for any reason. Appreciation is an increase in value. Equalization is used by tax assessors and is a process of adjusting the assessed rate in a taxing district to achieve more conformity with other tax districts.

Answer 181

b) Truth in Lending Act The Truth in Lending Act requires that trigger terms about mortgage financing in any kind of advertising must also include additional disclosures. The Fair Housing Act prohibits discrimination against protected classes in residential real estate advertising and practice. The Real Estate Settlement Procedures Act deals with closings and settlement and does not apply to advertisement. The Equal Credit Opportunity Act prohibits lenders and others who grant or arrange credit to consumers from discriminating against protected credit applicants.

Answer 182

c) easy to detect by smell CO is difficult for the human nose to detect because it is odorless and colorless. Many states now required CO detectors be installed in residential property. CO is a natural result of incomplete combustion when burning wood, oil, or natural gas. CO can be quickly absorbed by the body, causing lack of oxygen and resulting in dizziness, nausea, and even death.

Answer 183

c) joint tenancy A joint tenancy can only be created by an intentional act and requires the four unities—equal possession, interest, and title, which must all occur at the same time (PITT)—to be present. Severalty ownership is the sole possession of a property by one owner without a need for any unity of interests with other parties. Tenants in common have undivided fractional interests in a property, and their fractional interests may be different. Community property is one of the ways married couples may own property together.

Answer 184

c) the court Actual or judicial eviction gives the landlord the right to regain possession through a legal process when a tenant breaches a lease or improperly retains leased premises. The court will issue a judgment for possession to the landlord. The landlord must seek an order of eviction from a court. A sheriff or another law enforcement officer may be called upon to force the tenant from the premises as ordered by the court. The landlord must follow the state eviction law and may not write automatic eviction into a lease.

Answer 185

b) a definite contract termination date If brokers fail to specify a specific listing contract termination date in a listing, they may be subject to suspension or revocation of their real estate license in many states. In some states, automatic extension clauses that extend a listing past its expiration date are illegal. A listing may contain a broker protection clause which provides that within a specified period of time, a property owner will pay the listing broker a commission if the owner transfers the property to someone the broker originally introduced to the seller. Many listing and buyer representation contracts do contain a multiple listing clause permitting the broker to share the listing with other brokers through the MLS, but states do not usually require such a clause. These same requirements hold true for buyer representation contracts

Answer 186

a) leasehold interest A leasehold interest is an estate of possession with limited duration. A person renting an apartment holds a leasehold interest. A license is a personal right that can be revoked and is not considered an interest in property. A freehold interest, unlike a leasehold interest, is ownership for an indeterminate period of time. An easement is the right to use the land of another person for a particular purpose, but it does not give the holder any ownership interest in the land.

Answer 187

c) rental income and market price The GRM times the rental income will determine the property's market value or anticipated sales price. Comparable and adjustments are used in the sales comparison approach. Market value is what the GRM is determining, not market price, which is the actual sale price. Capitalization and net operating income are used in the income approach.

Answer 188

GRM x rental income = property's market value or anticipated sales price

Answer 189

``` b) the ad should not mention St. John's church Reference to a nearby church implies religious preference and violates HUD advertising regulations designed to enforce the federal Fair Housing Act. The ad does not have to state that the property is available to families with children or to any protected class as long as the ad does not appear to discriminate against a particular protected class. ```

Answer 190

a) the physical location of the property Refusing to make a residential loan in a particular area is known as redlining, literally drawing a line around particular areas and refusing to make loans in those areas. Redlining is considered a form of discrimination. Asking applicants for citizenship documentation or immigration status does not violate the Fair Housing Act. A lending institution may refuse to make a residential real estate loan based on the economic situation of an applicant or the condition of the property itself.

Answer 191

12.5% $80,000 (original purchase price) + $10,000 = $90,000 (total sales price) $90,000 / $80,000 = 112.5% 112.5% - 100% = 12.5% $10,000 (increase from original price) / $80,000 = 12.5%

Answer 192

c) how title is held In a purchase money mortgage, the seller conveys title to the buyer at closing; then the seller is the lender on the mortgage. In a contract for deed, the seller does not convey title until the final payment. The buyer takes possession in both loan types and the deed type makes no difference.

Answer 193

$18,111 $120,900 (list price) x 90% (0.90) = $108,810 purchase price $108,810 x 80% LTV = $87,048 Loan amount Debits: $108,810 Purchase price + $350 title expense = $110,159 Credits: $87,048 (mortgage) + $5,000 (earnest money) + $250 (attorney fees) + $749 (other expenses) = $92,048 $110,159 - $92,048 = $18,111

Answer 194

b) the master plan of the local government A master plan (or comprehensive plan) created by a local government usually covers land use, housing needs, community facilities, utilities, and energy conservation. Before the actual subdividing can begin, a developer must go through the process of land planning. The resulting land development plan must comply with the municipality's master plan. While other considerations may be important to the developer, they must comply with the master plan.

Answer 195

c) encourage buyers to consult professional experts to determine the condition of the property Some risk-reduction recommendations include becoming familiar with local environmental hazards and what the law requires, conducting a careful visual inspection of the property, discussing any red flags with the seller and further investigating, having the seller complete a seller property disclosure form without the assistance of the licensee, and encouraging buyers to consult professional experts to determine the condition of the property.

Answer 196

$245,350 $425 x 12 = $5,100 Fixed Rent $9,321 - $5,100 = $4,221 percentage rent paid $4,221 - 6% (.06) = $70,350 sales amount rent was paid on $175,000 + $70,350 = $245,350

Answer 197

b) voidable Duress, fraud, misrepresentation, and minors always make contracts voidable. The seller either misrepresented the property or committed fraud, which means the contract is voidable by the buyer. The buyer may choose to move forward and continue the sale or terminate the contact. If the buyer terminates, the seller would have to return the earnest money.

Answer 198

d) metes and bounds A metes-and-bounds description traces a parcel's perimeter by starting at a point of beginning (POB) and always ending back at the POB so the described tract is completely enclosed. The rectangular survey system divides land into rectangles and describes those rectangles with principal meridians and base lines. The lot and block system uses lot and block numbers in a plat map to describe property and is often used in urban areas. A street address is not a legal description.

Answer 199

b) income, total housing expense, and debt expenses In addition to reviewing a borrower's credit score, loan underwriters and automated underwriting programs use a formula allowing a maximum percentage of the buyer's gross monthly income for the monthly cost of buying and maintaining a home (for example, 28%). That cost includes mortgage principal and interest, plus amounts for taxes and property insurance. In addition, the formula sets a maximum percentage of the buyer's gross monthly income allowed for long-term debts such as car payments, credit cards, student loans, and other mortgages (for example, 36%).

Answer 200

c) corrective Corrective maintenance is repairing problems. Preventive maintenance is inspecting and repairing, if needed, before a problem arises. Routine is maintenance such as changing furnace filters that is needed for continued operations. New construction would be starting new, not repairing a current problem.

Answer 201

b) a novation In a novation, a new contract is used to replace the original contract. Subordination is used in recording to keep liens in place. An assignment is the transfer of contract duties but not liabilities. An option is a contract that exchanges a promise for performance.

Answer 202

a) investing profits generated by the property for the owner The property manager does not invest the owner's profit. Supervising maintenance and remodels, showing and selecting tenants, and collecting rent are all property manager duties.

Answer 203

c) condominium When a person owns a unit in fee simple and a percentage of the rest of the development in common with the other unit owners, he holds ownership to a condominium. In a cooperative, a person does not own in fee simple but holds a proprietary lease on a unit and shares of stock in the cooperative corporation. A time-share is a real property interest with the right to use the facilities for a specified period of time (usually a week). In a land trust, title to real estate is conveyed to a trustee, while a beneficiary retains management and control of the property.

Answer 204

d) has possession during the term of the contract In a land (installment) contract, the buyer has possession of the property during the term of the contract. The buyer holds equitable title, while the seller holds legal title to the property. The buyer pays interest and principal on the loan, and in most cases, real estate taxes on the property during the term of the contract.

Answer 205

c) an existing residence The sales comparison approach arrives at an estimate of value by comparing the existing residence with recently sold comparable properties. This approach is normally considered the most reliable in appraising single-family homes to the large number of current sales. To find an estimate of value for an apartment building, retail location, or hotel, an appraiser would normally rely on the income approach to value for each of these income-producing properties.

Answer 206

a) submit both offers at the same time An agent for the seller has a duty to disclose all offers, unless directed by the seller to not present an offer after one has been accepted. The broker may not prioritize offers made at the same time by salespeople from competing companies. The broker must submit both low and high offers on the property no matter when the offers are received.

Answer 207

a) full consent | Full consent means a contract was entered into without duress, menace, misrepresentation, or fraud

Answer 208

c) a percolation test A percolation test determines how quickly the ground will absorb water and would be conducted to determine if a septic tank could be installed on the lot. A septic tank can be installed only if the soil has the ability to absorb and drain water. Hydroponic refers to a method of growing plants in water rather than in soil and is not related to septic tank installation.

Answer 209

a) the four friends will each receive a separate deed for their share All concurrent ownership is created by one deed, which will establish either joint tenancy or tenants in common. Additionally, joint tenancy requires that four unities must be present: possession, interest, title, and time.

Answer 210

c) seller only An option contract is a unilateral contract in which the seller agrees to sell the property at a set price in the future if the buyer decides to buy.

Answer 211

c) value Change, contribution, and substitution all affect value—the most probable price a property will bring. Change relates to the reality that nothing is constant and variations in various aspects of a property will affect its value. Contribution means that the value of any part of property is measured by how it affects the value of the whole property. Substitution says that the maximum value of a property tends to be determined by how much it would cost to purchase an equally desirable substitute property. Depreciation is a loss of value for any reason. Under the principle of supply and demand, when supply increases, the value decreases and when demand increases, the value increases.

Answer 212

a) a lease Lease contracts give a tenant the owner's right of possession in exchange for rent. A bill of sale, deed, and dedication are not contracts.

Answer 213

a) price fixing Antitrust laws prohibit competing brokers from setting a standard commission rate, a practice known as price-fixing. Practicing undisclosed dual agency would violate agency law. Not posting the required fair housing sign in her office violates fair housing law. Blockbusting is violating fair housing laws, not antitrust laws.

Answer 214

c) no, because it would be discriminatory advertising Senior housing requires at least 80% of the occupants be over 55 and the building be HUD certified as senior housing. The owner of the fourplex would not be allowed to discriminate against families with children.

Answer 215

$500,750 $55,575 - $5,500 = $50,075 $50,075 / .10 (10%) = $500,750

Answer 216

a) lease terms requiring the tenant to pay a larger security deposit to cover the costs of returning the unit to its original condition Federal fair housing laws prohibit discrimination against a disabled person. A landlord may not require a larger security deposit from a disabled tenant. Disabled people have the right to reasonably modify the space at their expense. The landlord has the right to approve the modifications and may insist that the changes be made by qualified contractors. The landlord may also require the tenant to place money in an escrow account to restore the space to its original condition when the tenant moves out. Putting all the terms into writing will protect all parties.

Answer 217

$53,350 $55,000 x 0.10 = $550 $550 x 3 = $1,650 $55,000 - $1,650 = $53,350

Answer 218

a) work specific hours each day as assigned by the broker A broker who hires a salesperson as an employee may expect the salesperson to follow rules governing such activities as working hours, office hours, and attendance at meetings. A broker is required to withhold federal income taxes and Social Security taxes from the payroll of any employee. A salesperson hired as an employee or as an independent contractor must advertise properties in the name of the brokerage firm and deposit earnest money into the broker's designated escrow account.

Answer 219

d) offering comment as to the correctness of a deed

Answer 220

d) 3 months A real estate licensee may call a consumer for up to 3 months after the consumer makes an inquiry or submits an application. A licensee may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment.

Answer 221

d) an index The interest charged in an adjustable-rate mortgage varies with an outside economic indicator called an index. This index is beyond the control of either the borrower or the lender. The discount rate is the interest rate set by the Federal Reserve that member banks are charged when they borrow money. The mortgage factor is the number multiplied by the thousands of an amount borrowed to arrive at a monthly principal and interest payment. The Federal Reserve System requires that each member bank keep a certain number of assets on hand as reserve funds, which are unavailable for loans or any other use.

Answer 222

a) tenants in common Tenants in common hold property with undivided fractional interests, and the shares do not have to be equal. In a joint tenancy, each owner holds equal shares and interests to the property. Community property consists of personal or real property acquired by either party in a marriage and belonging to both parties to the marriage. In a cooperative, owners own shares in a corporation, partnership, or trust which owns a property, with each owner holding a proprietary lease and the right to occupy the unit.

Answer 223

b) HUD requires all residential buildings be tested for asbestos-containing materials The federal government does not require asbestos testing in residential buildings. Asbestos was commonly used as insulation prior to 1978. Asbestos is harmful only if it is disturbed or exposed as can occur during remodeling or renovations. Tiny airborne particles when inhaled can cause a variety of respiratory diseases. Federal government regulations establish guidelines for owners of public and commercial buildings to test for asbestos-containing materials. The removal process, though, requires state-licensed technicians and specially sealed environments.

Answer 224

d) the leases will be unaffected When the property is sold, the current leases remain valid, binding, in effect, and cannot be changed until the end of the lease term.

Answer 225

b) the number of parties involved in the loan A deed of trust is a three-party instrument that conveys naked title to a third party, the trustee, who holds the title on behalf of the lender, also known as the beneficiary. The borrower is the trustor. A mortgage is a two-part instrument between the mortgagor and the mortgagee.

Answer 226

b) a trade fixture The iron oven is a trade fixture used for a specific business purpose. It is personal property even though it is attached to the rented space. The owner must remove the oven on or before the last day of the lease. A fixture is an item permanently attached to the property and is considered real property. If the restaurant owner assembles and builds an oven in the space that cannot easily be removed, its removal may cause severe damage to the space. If not removed, the oven becomes a permanent fixture—real property—belonging to the landlord.

Answer 227

c) a license A license is a personal right to enter the land of another for a specific purpose and can be terminated or revoked at any time. Typically, these are not in writing and are not considered to be encumbrances since the owner may take the license. Easements are irrevocable written—usually in a deed—rights of use in another property.

Answer 228

b) a metes and bounds This is the only legal description that uses a starting point. The rectangular survey system and the government survey system, divides land into rectangles and describes those rectangles with principal meridians and base lines. The lot and block system uses lot and block numbers referred to in a plat map and is often used in subdivisions.

Answer 229

d) by filing a quiet title suit A quiet title suit removes all clouds on title and then allows the seller to convey the property to the buyer. The disadvantage is it may take months to go through the court system. Title insurance does not cover defects found before closing. Paying cash for the property or using a quitclaim deed would not clear title.

Answer 230

a) avoid unpleasant surprises for the buyer The use of seller disclosure statements is an attempt to reduce unpleasant surprises for the buyer. Seller disclosures are neither warranties nor guarantees; the seller can only disclose that of which the seller is aware. Buyers should rely on their own inspections.

Answer 231

c) explain to the owner that his instruction violates federal law and that the broker cannot comply with it The situation places the broker in the position of either violating the fiduciary duty of obedience or violating the federal Fair Housing Act. To avoid breaking the law, the broker must end the agency agreement if the owner insists on the discriminatory instruction. The broker may not advertise the property exclusively in foreign-language newspapers, and a legal document signed by the owner does not exempt the broker from following fair housing laws.

Answer 232

b) voidable Duress, fraud, misrepresentation, and contracts entered into by minors create voidable contracts. Such contracts are neither valid nor enforceable. A void contract has no legal force and is not enforceable due to its lack of an essential element, such as one made for an illegal purpose. An executory contract is a valid contract that has been signed but not fully fulfilled.

Answer 233

b) a surety bond Casualty insurance covers losses such as theft, burglary, and vandalism. Liability covers medical expenses for someone injured on the premises. Workers' compensation covers injuries to workers on the job.

Answer 234

d) the payment cap The payment cap sets the maximum amount a borrower will have to pay for a mortgage payment in the term of an ARM. The periodic rate cap limits the amount an ARM's interest rate may change over a specific period of time, usually a year. The life-of-the-loan rate cap limits the amount the interest rate may increase over the entire life of an ARM. The margin is the premium added to the index rate to adjust an ARM's current interest rate.

Answer 235

d) transfer one's rights under the contract An assignment is a transfer of the interest of one person to another. In an assignment, rights are assigned to a third party, but the original party remains primarily liable unless specifically released. Assignment of a contract does not change the broker/agent relationship.

Answer 236

a) after his will has been probated The niece is regarded as the owner immediately upon the testator's death, but she will not receive possession (as a devisee) until probate proceedings are complete

Answer 237

d) the cost approach to value One of the components of the cost approach is the calculation of depreciation caused by wear and tear, functionality of items, or outside influences. The calculation is not used in the sales comparison or income approaches to value. A gross rent multiplier is used in the income approach to value for one to four residential rental properties.

Answer 238

b) a nonconforming use A nonconforming use is the legal use that existed prior to current zoning ordinances but no longer conforms to current zoning laws. The grocery store operated prior to current zoning ordinances and is legally permitted to operate as a nonconforming use. A variance is permission for a use expressly prohibited by zoning ordinances.

Answer 239

c) of quiet enjoyment The covenant of quiet enjoyment is a promise by the lessor that the lessee may take possession of the premises and that the landlord will not interfere in the tenant's possession or use of the property. The covenants of seisin, of warranty forever, and against encumbrances are provisions in a general warranty deed conveying title to real property, not covenants contained in a lease. A covenant of seisin warrants that the grantor/owner of a property owns the property and has the right to convey title to it. A covenant against encumbrances warrants that the property is free from liens or encumbrances except for any specifically stated in a deed. A covenant of warranty forever promises to compensate a grantee for any loss sustained if the title to property fails at any time in the future.

Answer 240

c) a net lease In a net lease, the tenant agrees to pay rent along with some of the property expenses. In a percentage or retail lease, the tenant pays a base rent plus a percent of sales. A gross lease is when the tenant only pays rent.

Answer 241

d) if the holder of the qualified fee estate breaks the deed condition The holder of a reversionary interest retains the right to repossess a property if a deed condition is not met or broken. If the condition is broken, the holder of the reversionary interest can go to court to try and obtain ownership of the property. If a remainderman dies, the remainder interest in a life estate passes to the heirs. The holder of a reversionary interest does not have the right to change the conditions of a qualified fee estate. A holder of a qualified fee estate may sell the property so long as the conditions or limitations of the qualified fee estate continue.

Answer 242

c) a purchase money mortgage A purchase money mortgage is when the seller transfers legal to the buyer at closing but takes back a note for all or part of the purchase price. A contract for deed is not a mortgage loan but a contract where the seller agrees to take payments from the buyer/borrower and once the last payment is made the buyer will receive legal title. A package mortgage is a loan secured by personal items as well as real property. A blanket mortgage is a loan made on several properties or a number of lots in which a developer secures a partial release of the mortgage lien for each property or lot sold.

Answer 243

d) the federal Fair Housing Act Fair housing does not require confidentially be maintained. The common law of agency, state agency laws, and the privacy act all require real estate professionals to maintain confidentiality of transactions.

Answer 244

b) the contract is binding on both parties An executory purchase contract is one in which both parties have reached mutual agreement and are both bound to complete the contract. A deed conveys legal title in the executory phase of a contract; the buyer has equitable title while the seller retains legal title.

Answer 245

d) accounting The fiduciary duty of accounting requires real estate professionals to be accountable for money and the property of others that come into their possession in the performance of the agent's duties. The duty of care requires that agents use their skill and experience to the client's benefit. The duty of disclosure includes keeping the client informed of all relevant facts related to the transaction. The duty of loyalty means the agent must place the client's interests above all others, including the agent's own self-interest.

Answer 246

``` 12.5% $80,000 (purchase price) + $10,000 (the increase) = $90,000 (total sales price) $90,000 / $80,000 = 112.5% 112.5% - 100% = 12.5% $10,000 / $80,000 = 12.5% ```

Answer 247

b) E&O policies vary little from provider to provider

Answer 248

d) an option An option is granted when an owner (optionor) gives the potential purchaser (optionee) the right to purchase the property at a fixed price within a certain period of time. A contract of sale occurs when a seller and a buyer come to an agreement on the sale of a property. A right of first refusal is an agreement in which the holder of the right has the first opportunity to either purchase or lease real property once the owner offers the property for sale or lease. An installment agreement, also known as a contract for deed, is an agreement in which the seller becomes the lender and the buyer takes possession of the property, retaining equitable title to the property until the final payment to the seller is made.

Answer 249

b) a property owner's land is sold for delinquent taxes Involuntary alienation occurs when title to property is transferred without the owner's consent. Involuntary transfers of property are usually carried out by an operation of law and can include having the property sold to satisfy delinquent taxes. Voluntary alienation is the legal term for a voluntary transfer of title when an owner sells property or gives the property to another. The property owner who grants a neighbor access and use of a well has granted a license to the neighbor, which is the revocable right to use the land for a specific purpose for a limited time period.

Answer 250

a) misrepresenting the schools and puffing about the location and floor plan Puffing is making statements people know may not be true, which "the best home on the block with the nicest floor plan" fits. Saying the property also has the best schools is misrepresentation, since the statement was not qualified (i.e., schools with highest scores, best athletic department, etc.)

Answer 251

d) pay tax funds into an escrow account An escrow account, or impound account, is a reserve fund into which a borrower deposits funds to cover the amount of unpaid real estate taxes and insurance premiums. The lender will make tax and insurance payments on the borrower's behalf. A borrower signs a promissory note obligating the borrower to repay the loan. Title insurance protects the borrower from covered defects in the chain of title.

Answer 252

c) the purchase contract The purchase contract establishes the amount of earnest money, if any, and the time and place the funds will be deposited. If there is no mention of the time and place, state real estate trust account laws are to be followed.

Answer 253

d) a fidelity bond The owner may require the manager to purchase a fidelity bond, which covers theft or embezzlement, along with mismanagement. Errors and omissions covers items left out of or incorrect in contracts and lease documents. Workers' compensation is used to cover injuries on the job. A license bond is used in a profession such as contracting to obtain a license.

Answer 254

b) physical deterioration Physical deterioration is the loss of value based on the physical wear and tear on the property. It can be either curable or incurable deterioration. External and economic obsolescence are a reduction in a property's value caused by factors of the property itself. Functional obsolescence is a loss in value due to such factors as outmoded or unacceptable features of the property itself.

Answer 255

d) a sale-and-leaseback clause A sale-and-leaseback clause is an arrangement whereby an owner sells the property and then leases it back for a specified period and rental payments. The clause may be part of a lease agreement, but it is not required. Provisions regarding use and possession of the premises and the term period of the lease are required for a valid and enforceable lease.

Answer 256

d) fraud Fraud is lying or covering up a known fact. Mistake of law or fact would be when a party does not have knowledge of a situation or material fact. Novations are new contracts.

Answer 257

d) a certificate of occupancy must be issued A certificate of occupancy grants permission to occupy a completed building structure after it has been inspected. A building inspector may inspect the plumbing during the actual building process before completion. A building permit is issued before construction begins. A conditional-use permit does not relate to actual building construction but permits use of a property for a use related to, but not permitted by, zoning ordinances.

Answer 258

d) paid in advance Rent is paid in advance by the tenant. Rent will always be prorated between the seller and new buyer, with the seller owing the buyer for the portion of the month the buyer owns the property but does not have possession, which belongs to the tenant who paid rent.

Answer 259

c) ownership in severalty Ownership in severalty occurs when a property is owned by one individual or corporation. In a tenancy in common, each co-tenant owns an undivided fractional interest in a property. Tenancy by the entirety is a form of joint ownership by a married couple that allows the surviving spouse to acquire full ownership of the property upon the death of one of the spouses. Community property consists of personal and real property acquired by either spouse in a marriage and belonging to both parties to the marriage.

Answer 260

b) not suitable for year-round use An area suitable for year-round use is considered a finished area. The area of the house that is entirely above grade or ground level is above grade. The area of a house that is wholly or partially below grade is below grade.

Answer 261

c) partially amortized loan A partially amortized loan is a loan with a partial balloon payment. Principal is still owed at the end of the term, because periodic payments are not enough to fully amortize the loan and the final payment is larger than the others. A straight or interest-only is a loan in which the borrower makes periodic payments of interest only, followed by a lump sum balloon payment of the full principal at the end of the term. In a fully amortized loan, the borrower pays both principal and interest in equal periodic payments over the life of the loan. An accelerated loan is a loan paid off early in which the borrower pays the full balance owed at a time of default, sale of the property, or to redeem the property prior to foreclosure.

Answer 262

d) functional obsolescence Outmoded plumbing is an example of an outdated design feature that lessens the value of a property. The loss of value may be curable if the cost of replacing the plumbing would be offset by the anticipated increased value of the property. The plumbing is not a physical deterioration resulting from deferred maintenance. External depreciation refers to a condition that is not part of the property itself.

Answer 263

$6,650 7% (total commission) - 2% (listing agent commission) - 1.5% (selling agent commission) = 3.5% to broker $190,000 x 3.5% = $6,650

Answer 264

c) a real estate property tax lien A real estate property tax lien is always on a specific piece of real estate; it happens without permission of the property owner, so it is involuntary. Income tax liens, estate tax liens, and judgment liens are general, as they are levied against both personal and real property owned by a debtor but do not take priority over other liens.

Answer 265

d) repair damage to the property caused by the tenant A security deposit is held by the landlord during the term of a lease to pay for damage to the property or to pay rent if the tenant defaults on the rent. The deposit is not required for the validity of a lease. Normally a security deposit does not pay for the last month's rent. A lease should identify any advance payments as a security deposit or as an advance payment for the last month's rent.

Answer 266

a) no later than 3 business days after the loan application is received by the lender

Answer 267

c) add the value of the bedroom to the sales price of each comparable Adjustments are made only to comparable properties—never the subject. If the comparable is better than the subject or has a feature that is present in a comparable but not in the subject, the value of the amenity is subtracted from the sales price of the comparable. If the subject is better than the comparable, the value of the amenity is added.

Answer 268

a) no, it is called commingling, and it is illegal Security deposits must be placed in a trust account specifically for security deposits and never put in the same account with personal funds, which is commingling. Conversion would be using the funds of one property owner to pay the bills of another property owner. Both comingling and conversion are illegal.

Answer 269

a) they must be worded loosely to allow reasonable satisfaction Contingencies create a voidable contract; if the contingencies are rejected or not satisfied, the contract is void. A loosely worded contingency that is not specific and detailed may create an unenforceable contract.

Answer 270

d) classified as environmental hazards Asbestos, radon, and urea-formaldehyde are all environmental hazards. Hazardous substances are materials such as paint, cleaners, and chemicals used in the property. Radon is radioactive, but asbestos and urea-formaldehyde are not. None of the listed hazards are organic; an example of an organic substance would be mold.

Answer 271

d) the buyer's interest is not fully protected against third parties Properly recording a deed in the public record serves as constructive notice of the buyer's rights or interests in the property. If a buyer does not record the deed, a third party may make a claim on the property. Not recording the deed does not affect the validity of the transfer or of the deed to the property, as recording is not an essential element to create a valid deed.

Answer 272

$108,864 Year 1: $98,250 / 95% (100%-5%)(.95) = $103,421 Year 2: $103,421 / 95% (.95) = $108,864

Answer 273

a) a broker independently setting a company commission schedule All the other actions are violations of antitrust laws. Real estate brokers must independently determine commission rates or fees for their firms only. Commission decisions must be based on a broker's business judgment and revenue requirements and without input from other competing brokers.

Answer 274

c) I am not sure, but I think a full price offer should be accepted The listing agent is obligated to keep what the seller may accept confidential. However, the seller should be willing to accept a full-price offer that meets the terms of the listing contract.

Answer 275

d) have a survey conducted To determine the exact boundaries of a property, a survey is recommended. Some lenders require a survey to confirm the legal description of the property. The owners and the neighbors may not know the exact boundaries of the property.

Answer 276

b) the mortgagee The lender is the mortgagee. The borrower who receives a loan and in return gives a note and mortgage to the lender is the mortgagor. An optionor is an owner who gives an optionee—a prospective purchaser or lessee—the right to buy or lease the owner's property at a fixed price within a certain period of time.

Answer 277

b) the salesperson is responsible for direct payment of all income taxes and Social Security payments from each paycheck A broker is responsible for withholding federal income taxes and Social Security payments from an employee's paycheck. The broker may require that the employee attend sales meeting and may include the employee in the firm's benefits, including a health insurance plan. A salesperson employed as an independent contractor is responsible for direct payment of all federal taxes and any required state taxes.

Answer 278

c) must obey the lawful instructions of her principal The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. The seller has a right to advertise in a newspaper of her choice, provided any advertisement does not violate fair housing laws.

Answer 279

d) a license A license is a personal revocable right to use another's property with permission of the owner. The permission is personal, nontransferable, and can be revoked at any time. A conditional-use permit is granted by a city or municipality to a property owner to allow a special nonconforming use of property in a residential district. Riparian rights give to owners of land along the course of a river, stream, or similar body of water the rights to use the water according to state or local laws. An easement by necessity is created by a court when an owner sells a parcel of land that has no access to a street except over the seller's remaining land.

Answer 280

b) do nothing An oral agreement does not constitute a valid agency contract entitling the broker to a commission. Unless the broker has been employed by the seller under a valid written agency contract, the broker is not entitled to a commission. The broker has no grounds for a lien or for a suit. Real estate licensing authorities do not regulate or arbitrate commission disputes between a broker and a prospective client.

Answer 281

b) no opt-out method is required for emails sent by a third-party The CAN-SPAM Act requires an opt-out method for all unsolicited commercial emails. When a licensee uses a third party person or service to send unsolicited emails, the licensee must monitor the emails to ensure that they comply with the Act and have an opt-out in the email. All the other statements are true regarding the CAN-SPAM Act.

Answer 282

c) a disclosure statement must be included with all sales contracts and leases involving residential properties built prior to 1978 Although no remediation of the property is required, a lead-based paint warning disclosure statement must be completed and signed by the parties and a copy included with any sales contract or lease for a residential property built before 1978. In the disclosure statement, buyers and renters acknowledge receiving a HUD booklet about protecting their families from lead-based paint hazards. The pamphlet "Protect Your Family From Lead in the Home" must be provided to lessees as well as to buyers. The length of time given the buyer to inspect the property is listed in the lead-based paint disclosure provided by the seller.

Answer 283

a) companies disclose their relationships with one another to the consumer RESPA permits such arrangements as long as the consumer is clearly informed of the relationship among the affiliated companies and told that he may use other service providers for the same services. The companies may not require a consumer to use the services of any affiliated company. The companies may not pay one another referral fees.

Answer 284

a) an easement An easement is a right of use or passage. An easement is not an estate in land, as it does not create any right of ownership. An easement is not an exercise of the police power of the state. An easement is not an encroachment, which is an illegal extension of a structure onto another's property.

Answer 285

d) the broker may, as a matter of office policy, legally set the minimum commission rate acceptable for the firm. Antitrust violations occur only if price-fixing exists among competing firms. Brokers have the right to set commissions within their own firm. The broker's policy is not an antitrust violation. Salespeople who wish to continue with that broker can be required to comply with the policy.

Answer 286

c) a custom built-in bookcase The key word is built-in; since the bookcase is attached, it is real property. Chairs, emblements, and trade fixtures are all examples of personal property

Answer 287

a) liquidated damages When parties agree that a certain amount of money will compensate the nonbreaching party in the event one party defaults on a contract, that money is called liquidated damages. Earnest money typically serves as liquidated damages in a purchase contract in case the buyer defaults. Actual damages refer to monies awarded by a court to a plaintiff for a wrong committed against the plaintiff. Rescission is the mutual agreement of the parties to return to their original state. Consideration is an essential element of a contract—something of value offered by one party and accepted by the other.

Answer 288

c) a buffer zone Buffer zones, such as parks and hiking trails, are used by municipalities to screen residential areas from nonresidential zones. A variance is permission to build a structure or conduct a use expressly prohibited by zoning ordinances. A utility easement is an interest in land permitting the land to be used for utilities such as electrical, gas, or water lines. A nonconforming use exists before zoning ordinances that currently prohibit such use.

Answer 289

a) income approach The income approach is the most appropriate approach for income-producing properties such as an office building, even if the building was once a residence. The gross rent multiplier is not an approach to value; it is a process of estimating the market value of income-producing residential property. The sales comparison approach and the replacement cost approach may be used by an appraiser to assist in determining an estimated value, but these approaches are not as useful or precise as the income approach to that property. Their findings will be weighed less than those of the income approach in the appraiser's final reconciliation.

Answer 290

a) a proprietary lease to the unit In a cooperative, each tenant-owner receives shares in the cooperative and a proprietary lease to the owner's unit for the life of the cooperative. Cooperative owners do not own real estate and do not have fee simple interest in their units. Cooperative owners pay their portion of taxes assessed on the cooperative. A right of first refusal refers to the right of a person to have the first opportunity to lease or purchase real property. Cooperative owners own their shares as personal property.

Answer 291

d) an easement in gross An easement in gross is a company's right to use another's land. A license is a personal privilege to enter the land of another for a specific purpose. A license can be terminated or canceled. An easement by prescription is acquired when a person makes continuous and visible use of another's land for a certain period of time without the owner's permission. A conditional-use permit is granted by a municipality to a property owner to allow a special nonconforming use of property in a residential district.

Answer 292

b) it give the buyer full knowledge of all issues with the property The seller's property disclosure does not act as an inspection and gives the buyer full knowledge of the seller's representation of the issues asked on the form. The seller's property disclosure form provides all of the benefits shown for the buyer. It may also provide a more concrete basis for litigation if the buyer can determine that a seller filled out the form incorrectly or failed to disclose a defect the seller knew was material to the transaction.

Answer 293

$25,810 4 x $450 x 12 = $21,600 regular income $464 x 12 = $5,568 additional income $21,600 + 5,568 = $27,1668 potential gross income $21,600 x .05 (5% vacancy rate) = $1,358.40 $27,168 - $1,358.40 = $25,805.90

Answer 294

C) The neighbor is not obligated to pay the broker a commission. The broker procured a buyer for the property on the basis of an oral agreement with her neighbor, the seller. State real estate commissions generally require a commission agreement to be in writing and signed by both parties—the broker and the client. The broker in this case has no written contract for her services with either the seller or the buyer and is not entitled to a commission from either, even if she is the procuring cause of the sale.

Answer 295

D) acts on behalf of the brokerage firm. Salespersons or associate brokers act as an agent of their broker. Only the broker has a direct agency relationship with the owners of the unit but not with the condominium association. Under the terms of most listing agreements, the broker, and in turn the salesperson, is entitled to a share of the commission even if the broker or salesperson does not personally find a buyer for the unit.

Answer 296

$1,218.10 Since the taxes were paid in advance, the buyer will owe the seller for the time the buyer owns the house: June 24-December 30, since this is a 360 day year Total owed / Total days x days owed = Amount due $2,345 / 360 x 187 (days from June 24 - Dec 30) = $1,218.10

Answer 297

A) an easement by prescription.

Answer 298

A) the order in which they are filed or recorded. The general rule for priority of liens is "first come, first served." Property taxes and special assessments are exceptions to the general rule, as they usually take priority over other liens. The priority of liens does not arise out of the size of a claim. Courts do not determine the priority of liens.

Answer 299

C) the buyer is retired so does not have a regular paycheck. The Equal Credit Opportunity Act prohibits discrimination in granting credit on the basis of age (in particular, because the borrower is retired), marital status, national origin, or dependence on public assistance. A credit score, appraised value, and total debt are used as part of a loan application evaluation process.

Answer 300

C) Conduct at least a visual examination of the property To avoid liability on the basis of negligence, a licensee should conduct at least a visual examination of the property, focusing on those property conditions, features, and potential defects that licensees in that market area are ordinarily expected and trained to recognize and understand. Such an inspection does not extend to defects or conditions that are considered to be latent or hidden and which cannot be seen by the naked eye, such a damaged sewer line.

Answer 301

$1,176.77 $295,000 x 0.80 = $236,000 loan amount $236,000 x 0.07 = $16,520 yearly interest Buyer owes 26 days in January (31-5) and none for February as the March payment will pay the interest in arrears for February Total amount due / total days x days owed: $16,520 / 360 x 26 = $1,176.77

Answer 302

total amount due / total days x days owed = interest owed

Answer 303

C) the income generated by the property. The appraiser is most concerned with the income generated by the property in estimating the value of the property. Accrued depreciation is a factor used in the cost approach. The sales prices of comparable properties are used in the sales comparison approach, but finding comparable properties for commercial properties is often difficult. Debt service (mortgage payments) is not considered an operating expense deducted from annual operating expenses to determine the net operating income of a commercial property.

Answer 304

D) a remainder interest. The owner's death will end the life estate conveyed to her grandson, which will then mean the holder of the remainder interest, the son-in-law, will have fee simple absolute ownership of the property. An estate for years is a leasehold estate that continues for any definite period of time. A legal life estate is a freehold estate created out of a provision.

Answer 305

D) provide security for a loan A mortgage is a financing instrument by which real estate is used as security, or collateral, for a debt. A restrictive covenant may limit a borrower's use of a property. While a mortgage does create a lien on the property, the lien is removed when the lender records satisfaction of the mortgage in the public record.

Answer 306

A) would not be allowed to rebuild the plant in that location under any circumstances. Under a nonconforming use, if an improvement is destroyed or torn down, then rebuilding an improvement to its former use is usually prohibited. A variance usually applies only to building a new structure or improvement that does not conform to zoning ordinances or laws.

Answer 307

B) the buyer didn’t read or understand the contract. Part of due diligence on the part of a buyer or seller is to fully read and understand all legal documents they are signing or consult an attorney or other advisor for help. Duress, fraud, misrepresentation, and minors always make contracts voidable

Answer 308

D) the principal broker.

Answer 309

C) “Only $10,000 down.” Specific credit terms, such as a down payment, monthly payment, dollar amount of the finance charge, or term of the loan are referred to as trigger items. If such items are included in any advertisement, the advertisement must include additional information required by the regulation.

Answer 310

C) Follow up with a written memorandum Verbal representations of material facts or of agreements outside the contract must be confirmed in writing, by letter, or in the body of the contract, which is rare.

Answer 311

A) Make a positive adjustment to the sales price of the foreclosed home A foreclosed home usually will sell for less than fair market value. The appraiser will make a positive, upward adjustment to the sales price of the foreclosed home to compensate for the sale at less than market value. In the sales comparison approach, adjustments are made to the sales prices of comparable properties, never to the subject property.

Answer 312

C) the amount of cash flow. Cash flow is the money left after a property pays for itself; a tenant would not be given this knowledge. Length of the lease, what alternations are allowed, and if there are expansion options would all be negotiated prior to signing a lease.

Answer 313

D) ownership for life. A conventional life estate is a freehold estate that lasts as long as the life of the life tenant. A conventional life estate occurs by a voluntary agreement of two parties. A legal life estate arises out of law, such as a spouse's dowry rights when the other spouse dies. A periodic tenancy is a less-than-freehold estate that creates the right of possession of a property from year to year. A reversionary interest exists when the creator of a life estate reserves for himself a fee simple estate once a life estate ends.

Answer 314

A) conformity. The principle of conformity regression states the larger, more lavish home with a pool would tend to be valued in the same range as the modest homes on narrow lots existing in the same neighborhood. Under the principle of progression, the value of a modest, less expensive home will increase if it is located among larger, fancier, more expensive properties. Substitution states a property that offers the same attributes for the least amount will sell first. Contribution determines the value improvements bring to a property.

Answer 315

A) Poorly maintained properties in the neighborhood External depreciation is caused by factors not on the subject property, such as poorly maintained properties in the neighborhood. A leaky roof is an example of physical deterioration. A poorly designed floor plan is an example of functional obsolescence. Convenient access to schools and recreational facilities are examples of good features that may add to the desirability of a neighborhood.

Answer 316

B) a retail store in a residential neighborhood. A variance is permission obtained from zoning authorities to use a structure or building in a way that is prohibited by current zoning laws. Fences built beyond six feet high, building into setbacks, or over height limits are all examples of variances. A retail store in a residential neighborhood is a nonconforming use. A nonconforming use is a use of real property originally allowed but no longer conforming to current zoning laws.

Answer 317

B) a bilateral personal service contract.

Answer 318

C) the base line. The base lines run east and west in a rectangular survey system, while the principal meridians run north and south. Township lines run east and west; range lines run north and south. Sections are created through the intersection of these line

Answer 319

A) may be found guilty of improper supervision A principal broker is responsible for supervising all licensees in the firm. E&O insurance would not cover this type of issue. Civil fines are created in civil court, not through a hearing at a real estate commission.

Answer 320

B) modern home construction reduces the potential for radon gas accumulation. Radon is a colorless, odorless, and tasteless radioactive gas. The risk of radon increases as it builds up in an enclosed space because of inadequate ventilation. Modern, energy-efficient homes and buildings with practically airtight walls and windows may increase the potential for radon gas accumulation. Once radon accumulates in a basement or crawl space, efficient heating and ventilation systems can rapidly spread the gas throughout the building. Rain, colder weather, and high winds can cause an increase in the accumulation of radon within a structure. Radon is mitigated by ventilating outside the home.

Answer 321

A) commingling.

Answer 322

``` C) a tenancy at will. A tenancy (estate) at will gives the tenant the right to possess property with the landlord's consent for an unspecified or indefinite term and does not automatically renew. A periodic tenancy runs for an indefinite period, has no expiration date, and automatically renews. An estate at sufferance arises after a tenant's rights to possession expire, and the tenant continues to possess the property without the landlord's consent. A holdover tenancy is created when a tenant with an estate for years holds on to a property after the lease has expired and no new lease agreement has been made. ```

Answer 323

C) The original tenant Unless a novation has occurred by a new lease contract being signed between the landlord and the assignee, the original tenant is primarily responsible for rental payments to the landlord. The assignee is secondarily responsible if it was agreed upon to pay the rent and may even make rental payments directly to the landlord. However, the original tenant remains primarily responsible for rental payments.

Answer 324

C) joint tenancy requires all ownership rights be acquired at the same time. Joint tenancy, which offers the right of survivorship, requires PITT—possession, equal interests, and title all occur at the same time. Tenants in common owners have equal rights of possession but may have unequal rights of ownership. All owners, regardless of how ownership is taken, share one deed, which conveys legal title.

Answer 325

$472.45 Tax Rate = 95 / 1000 = .095 Assessed value = $52,350 x 0.38 (38%) = $19,893 $19,893 (Assessed value) x

Answer 326

Assessed value x Tax rate = annual taxes

Answer 327

D) estimate present value. Capitalization converts the net operating income into an indication of value in the income approach to determine the current or present market value. An appraiser estimates the return on investment an investor would demand for the property being appraised. An appraiser will determine replacement costs, reproduction costs, and depreciation for a property when using the cost approach to value. The effective gross income is estimated by deducting an appropriate amount for vacancy and rent loss in an income-producing property.

Answer 328

$168,695.65 Depreciation is 2% per year for four years = 8% Depreciation Original cost at 100% - 8% = 92% $155,200 current value / .92 (92%) = $168,695.65 Original cost

Answer 329

B) has AIDS. People with AIDS are protected under the disability provision of the Fair Housing Act. Fair housing laws do not prohibit discrimination in housing because of a person's marital status. Owners may refuse to sell or rent to people who have a history of dangerous behavior or drug convictions, as fair housing laws do not protect such behavior.

Answer 330

D) obsolescence. To have value, a property must have monetary worth based on the desirability of the property. Obsolescence is not a desirable trait and, therefore, takes away from the desirability of the property and the demand for the property. Demand, transferability, scarcity, and utility are all characteristics of a property's value (remembered by the acronym DUST). Demand is the need or desire for ownership supported by the financial means to satisfy the need. Transferability refers to the relative ease with which ownership rights are transferred from one owner to another. Scarcity means that there is a limited supply of property. Utility refers to the property's usefulness for its intended purposes.

Answer 331

DUST (demand, transferability, scarcity, and utility)

Answer 332

A) lenders, title companies, and real estate brokers. RESPA requirements apply to lenders primarily. RESPA also requires real estate brokers and title companies that package services for consumers to inform consumers of the relationship between the companies and to inform consumers that they are free to choose other companies for services.

Answer 333

D) restrictive covenants. Restrictive covenants are private controls of land use, not public controls. Building heights, lot sizes, and types of structure may be regulated by a municipality under its police powers.

Answer 334

B) A general lien affects all of a debtor's property, while a specific lien affects only a certain piece of property. A general lien affects all of a debtor's property, both real and personal. A specific lien affects only a particular piece of real or personal property. Both general and specific liens may be enforced in court.

Answer 335

B) Straight loan

Answer 336

A) Income approach The income approach will have the most weight in the analysis of income-producing property. The sales comparison approach will have the most weight in the analysis of single-family residential property. The cost approach may be used as one approach to appraising income property, but the income approach will be given the most weight by the appraiser. The gross rent multiplier method is used in the income approach but to determine the value of residential income property.

Answer 337

D) Assignment There would be two landlord-tenant relationships in an assignment, which is when the landlord allows the original tenant to lease to another. The original tenant is still liable for the rent if the new tenant does not pay. A lease option and lease purchase would be only one landlord tenant relationship.

Answer 338

C) The landlord may evict the tenant. A tenant who remains in possession of the premises after an estate for years has expired is called a holdover tenant. If the landlord accepts a rental payment from the holdover tenant, acceptance of the payment will usually create a periodic tenancy. However, a landlord can evict the holdover tenant and not accept any additional payments.

Answer 339

$197.50 The seller owes July, August, and 19 days of September for a total of 79 days Total due / Today days x Days owed: $450 / 180 x 79 =$197.50

Answer 340

B) the property owner may sell the property to another person. Additionally, the property owner can will or lease the property to another person. Property owned in severalty is owned by one person. The owner may be an individual or a corporation and has sole discretion to transfer the use or ownership of the property to another person. Spouses may own separate property in severalty.

Answer 341

B) cap rate. | An appraiser uses the cap rate to compute the value, but it is not used to determine the return on investment.

Answer 342

B) The owner of the property has AIDS. All of the other events may stigmatize a property and may or may not allow disclosure to a prospective buyer under state laws. Under federal fair housing laws, people with AIDS are considered handicapped and members of a protected class. The fact that an occupant of a property has AIDS does not require disclosure to a prospective buyer.

Answer 343

A) compensatory damages for repair of the defect.

Answer 344

C) Regression Larger lavish homes in a modest neighborhood will be drawn down in value by the modest, less lavish homes. Regression is the opposite of progression. Under progression, the value of a modest home would be higher if it were located among larger, fancier homes. The principle of substitution states value is determined by what the buyer can find to buy that is similar or equal to the property under consideration. The principle of contribution is used to determine the value of adding improvements to the property.

Answer 345

D) financing.

Answer 346

C) a discount point. Discount points are used to increase the lender's yield on its investment. The yield is the profit the lender makes on a loan, the spread between the cost of acquiring the funds lent to the borrower, and the interest rate charged to the borrower. Interest is the sum paid or accrued in return for the use of a lender's money. The principal is the balanced owed on the original loan amount.

TREC License Exam - National Flashcards

(376 cards)