Real Estate Uniform Final — 52 Missed Questions Repair

Government Power regarding real estate involve (PETE)

A. Police, Eminent Domain, Taxation, Escheat PETE = Police power, Eminent domain, Taxation, and Escheat—the four classic governmental powers affecting real estate. Memory: PETE = Police, Eminent, Taxation, Escheat.

Monuments that have been established as permanent reference throughout the USA are called

A. Benchmarks Benchmarks are permanent surveying reference points used for location/elevation measurements. Memory: BENCHmark = fixed mark.

What type of lease has a base rent and a percentage of the gross income?

C. Percentage A percentage lease combines base rent with a percentage of the tenant’s gross sales/income. Memory: Percentage = base + %.

A newspaper advertisement states, “One-bedroom apartment immediately available. Good neighborhood. Only able-bodied individuals should apply.” Which of these is TRUE?

A. The ad is not permitted under HUD’s advertising guidelines because it discriminates on the basis of disability. Disability is a protected class, so an ad limiting applicants to able-bodied people is discriminatory. Memory: Able-bodied only = disability red flag.

An example of conversion is

B. Using funds designated as earnest money for an employee’s salary Conversion is unauthorized use of client/trust funds for someone else’s purposes. Memory: Commingling mixes; conversion USES.

The purpose and use of broker trust accounts

B. A Separate checking account used for all funds received from or on behalf of a client that will be applied to the transaction. Examples: Earnest Money and Security Deposits A trust account is separate from operating/personal accounts and holds client funds such as earnest money and deposits. Memory: TRUST = client money separate.

All of the following would affect demand EXCEPT

D. monetary policy. The exam treats population, demographics, and wage levels as demand drivers; monetary policy is the exception in this item. Memory: Demand = people + profile + paycheck.

When the supply of a commodity decreases while demand remains the same, price tends to

A. rise. If supply decreases while demand stays constant, price tends to rise. Memory: Supply ↓ = price ↑.

Which of these is an example of an economic characteristic of land?

D. Scarcity Scarcity is an economic characteristic of land; immobility, indestructibility, and uniqueness are physical characteristics. Memory: Scarcity = economic.

Another word for uniqueness is

B. nonhomogeneity. Nonhomogeneity means uniqueness—no two parcels are exactly alike. Memory: NON-homogeneous = not the same.

Method of annexation, adaptation, and agreement of the parties are the legal tests for deter- mining whether an item is

B. real property or personal property. Annexation, adaptation, and agreement/intention help determine whether an item is real or personal property. Memory: Attach + Adapt + Agree.

A farmer has posted a number of “No Trespassing” and “No Hunting” signs on the property. Which “stick” in the bundle of rights gives the farmer this authority?

A. Exclusion The right of exclusion lets an owner keep others off the property. Memory: EXclusion = EXit.

A neighborhood has a large Asian population. When a Chinese couple came to a broker to look for a home to buy, he suggested they look at listings only in this neighborhood. The broker violated the Fair Housing Act because his actions constitute

D. steering. Steering is directing buyers toward or away from areas because of a protected characteristic. Memory: Steering = where buyers go.

An occupancy requirement is exempt from familial status protection under the Fair Housing Act if the housing is intended to be occupied by

B. persons 62 years of age or older. The exam’s clean exemption here is housing intended for persons age 62 or older. Memory: 62+ = all older; 55+ = 80% rule.

A real estate professional said to a homeowner, “I hear they’re moving in. There goes the neighborhood! Better put your house on the market before values drop!” This is an example of what illegal practice?

B. Blockbusting Blockbusting induces owners to sell by suggesting a protected group’s arrival will hurt values or the neighborhood. Memory: Blockbusting = scare owners to sell.

The electric company has the right to extend its wires over 50 parcels of land. What right does the electric company have?

D. Easement in gross An easement in gross benefits a person/company rather than another parcel; utilities are classic examples. Memory: Utility = in gross.

The type of easement that is a right-of-way for a utility company’s power lines is a(n)

A. easement in gross. A utility right-of-way is an easement in gross because it benefits the utility itself. Memory: Utilities travel in gross.

Shareholders in a cooperative receive shares of stock that entitle them to a

C. proprietary lease. Co-op residents own corporate shares and receive a proprietary lease to occupy a unit. Memory: Co-op = stock + proprietary lease.

The type of deed that imposes the least liability on the grantor is a

C. quitclaim deed. A quitclaim deed conveys whatever interest the grantor has, if any, with the least grantor liability/protection to grantee. Memory: QUITclaim = no promises.

Title is NOT considered transferred until the deed is

B. delivered to and accepted by the grantee. Title by deed transfers when the deed is delivered by the grantor and accepted by the grantee. Memory: Deed = Deliver + Accept.

In front of witnesses, a woman says to a man, “I never made a will, but I want you to have my property when I die.” If the man becomes the owner of the property, it is because the state recognizes what kind of will?

C. Nuncupative A nuncupative will is an oral will where recognized by law. Memory: NUNC = spoken will.

A modification to the original will is called

D. a codicil. Real Estate Pre-License Final Exam - Page 10 of 21 A codicil is a formal modification or supplement to an existing will. Memory: CODICIL = change to a will.

P signed a deed transferring ownership of P’s house to Q. To provide evidence that P’s signature was genuine, P executed a declaration before a notary. This declaration is known as an

B. acknowledgment. An acknowledgment is a declaration before an authorized official that a signature is genuine and voluntary. Memory: Notary + deed signature = acknowledgment.

Eminent domain and escheat are two examples of

D. involuntary alienation. Eminent domain and escheat transfer ownership without a voluntary conveyance, so they are involuntary alienation. Memory: Government transfer = involuntary.

In the states in which it has been adopted, the Marketable Title Act

C. limits the time beyond which title records must be searched. The Marketable Title Act limits how far back title records must be searched where adopted. Memory: Marketable Title Act = limits look-back.

A broker represents a woman but is currently working with a man to find a home. Assuming that no statute has replaced the traditional common law, which of these correctly identifies the parties in this relationship?

D. The broker is the woman’s agent; the man is the broker’s customer. The represented woman is the broker’s client/principal; the man merely being assisted is the customer. Memory: Client = represented; customer = worked with.

The agent’s obligation to use skill and expertise on behalf of the principal arises under which of these common-law duties?

A. Care Care requires skill, competence, and diligence on the principal’s behalf. Memory: CARE = competent and careful.

A broker is showing a house to a prospective buyer. He points out the rustic charm of the sagging front porch and refers to a weed-choked backyard as a delightful garden. The broker is engaging in

C. puffing. Puffing is exaggerated opinion/sales talk rather than a false material fact. Memory: Puffing = opinion.

A house built over a ditch covered with decaying timber or a house with ceilings that are improperly attached to the support beams are examples of

C. latent defects. Latent defects are hidden defects not readily observable in an ordinary inspection. Memory: LATENT = lies hidden.

The broker was hired to represent the seller, to market the property, and to solicit offers to purchase. The broker is called a

B. special agent. A broker hired for a specific transaction, such as a property sale, is a special agent. Memory: SPECIAL = specific transaction.

The seller’s agent is aware that a new landfill has been approved for development on the adjacent property but does not disclose this information to a buyer. This could be an example of

C. fraudulent misrepresentation. Knowingly withholding a material fact such as an approved landfill can be fraudulent misrepresentation. Memory: Know + hide material fact = fraud.

A key element of an agent’s fiduciary responsibility of loyalty is to

B. avoid conflicts of interest. Loyalty requires putting the principal’s interests first and avoiding conflicts of interest. Memory: LOYALTY = client first.

A seller tells his agent in confidence that he must sell fast and may accept less than the list price. The agent tells a buyer the seller will accept up to $5,000 less than the list price. Which is TRUE?

C. Disclosure was improper and possibly illegal, regardless of the agent’s motive. A seller’s private willingness to accept less is confidential and must not be disclosed without authorization. Memory: Bottom line = locked confidential.

A broker tells a buyer, “This home has the most beautiful river view.” In fact, the view includes the river and the back of a shopping center. Which is TRUE?

D. The broker is merely puffing. Calling a view 'the most beautiful' is subjective opinion and therefore puffing. Memory: Beauty words = puffing.

A seller listed a property with a broker under an exclusive agency listing agreement. If the seller finds a buyer, the seller will owe the broker

A. no commission. Real Estate Pre-License Final Exam - Page 14 of 21 In an exclusive agency listing, the seller can personally find a buyer and owe no commission to the broker. Memory: Exclusive AGENCY: owner can ACT alone.

Which of these is an example of a unilateral contract?

C. Option An option is unilateral: the optionor must keep the offer open, while the optionee is not obligated to buy. Memory: OPTION = one-sided promise until exercised.

A seller accepted all of the terms that the buyer offered, making only one small change in the amount of the earnest money. At the moment, these agreements constitute

B. a counteroffer. Changing any term of an offer creates a counteroffer rather than an acceptance. Memory: Change one term = counteroffer.

A woman is buying a man’s house and wants to take over the mortgage. The lender releases the man from the obligation, substituting the woman as the party liable for the debt. This new agreement is called

B. a novation. Novation substitutes a new party/obligation and releases the original party with consent. Memory: NOVATION = new party, old party released.

A buyer and a seller sign a contract to purchase. The seller backs out, and the buyer sues for specific performance. What is the buyer seeking in this lawsuit?

D. Transfer of the property Specific performance asks a court to compel the promised act—here, transfer the real property. Memory: Specific performance = perform the specific deal.

While suffering from a mental illness that caused delusions, hallucinations, and loss of mem- ory, a person signed a contract to purchase real estate. Which statement regarding the contract to purchase is TRUE?

A. The contract is voidable. Real Estate Pre-License Final Exam - Page 16 of 21 Under this exam’s framework, a contract made while a person lacks sufficient mental capacity is voidable. Memory: Capacity problem = VOIDABLE.

A basic form homeowners insurance policy provides property coverage against

B. fire, lightning, and smoke damage. The exam identifies fire, lightning, and smoke as basic homeowners property coverage; flood typically requires separate coverage. Memory: Basic = fire/lightning/smoke.

What is the term that refers to a lender charging an interest rate that is higher than that permitted by law?

B. Usury Usury means charging an interest rate above the legal maximum. Memory: USURY = unlawful interest.

A package loan includes

A. real and personal property. A package loan finances real property together with personal property. Memory: PACKAGE = real + personal.

To qualify for most conventional loans, the borrower’s monthly housing expenses and total other monthly obligations cannot exceed what percent of the total gross monthly income?

B. 36% This item tests the back-end conventional ratio: total monthly obligations versus gross monthly income, keyed at 36%. Memory: 28 housing; 36 housing + debts.

Regulation Z generally applies to

A. a credit transaction secured by a residence. Regulation Z/Truth in Lending generally applies to consumer credit secured by a residence and requires standardized disclosures. Memory: Reg Z = consumer credit + residence.

In 1967, a man served for six months on active duty in Vietnam. In 1998, he was killed in a skiing accident. His widow wishes to use the man’s life insurance money to make a down payment on a condominium and believes she is entitled to a VA-guaranteed loan. Is she correct?

C. No, the man’s death was not service-related. For this exam item, the widow is not eligible on these facts because the veteran’s death was not service-related. Memory: VA survivor: check how veteran died.

A woman is purchasing a fully furnished condominium unit. In this situation, the woman would be MOST likely to use a

A. package loan. A fully furnished condominium combines real estate with personal property, matching a package loan. Memory: Furnished = PACKAGE.

A developer received a loan that covers five parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan arrangement is called a

B. blanket loan. A blanket loan secures one loan with multiple parcels and may allow partial releases as parcels are sold/paid down. Memory: BLANKET covers many parcels.

An appraiser’s role is to

D. estimate value. An appraiser estimates/develops an opinion of value; the appraiser does not set price. Memory: Appraiser estimates; market sets price.

The characteristics of value include Real Estate Pre-License Final Exam - Page 20 of 21

A. demand, utility, scarcity, and transferability. The characteristics of value are Demand, Utility, Scarcity, and Transferability (DUST). Memory: DUST = Demand, Utility, Scarcity, Transferability.

A house sits on the corner of a busy intersection. Two of the corners are occupied by gas stations, and directly across from the house is a fast food restaurant. The house’s owners have been told that the property would be worth more if the lot were vacant. This is an example of

B. highest and best use. Highest and best use is the permissible/possible/feasible use producing the greatest value; the clue says the site is worth more vacant. Memory: Worth more vacant = highest & best use.

The principle of value that is the interaction of supply and demand is called

B. competition. Competition is the appraisal principle reflecting interaction of supply and demand as market participants respond to opportunities. Memory: Competition = supply meets demand.