National Exam - Practice of Real Estate

Practice of Real Estate

Civil Rights act of 1866

prohibit racial discrimination in all conveying of real and personal property

Practice of Real Estate

in regards to convicted drug dealers...

they are NOT covered under any condition

under the federal fair housing act of 1968 and the amendment in 1988, authorized administrative law judges may now...

admin law judges within HUD may now hold contested case hearings

Practice of Real Estate

Remedies under the new amendment include:

1) a civil penalty, not exceeding $16,000 for the first offense

2) a penalty not exceeding $37,500, if another offense was committed within the past 5 years

3) a penalty not exceeding $65,000 if two or more discriminatory practices have been found in the past 7 years

The ADA provides for enforcement by allowing several remedies for a person who is discriminated against, including

1) a temporary or permanent injunction

2) the court may grant any equitable relief that the court considers appropriate

3) a civil penalty of up to $50K for a first violation and penalty of up to $100K for any subsequent violation

Practice of Real Estate

Truth-in-Lending Act (TILA)

Disclosure/Coverage Requirements

-cost in credit transactions

-customer has 3 day right to rescind

-loans to

under a fee simple absolute, if the owner dies what happens to the property?

the owner's heirs will gain ownership

tenancy in common

-ownership by two or more WITHOUT rights of survivorship

-upon death, share will go to that person's heirs

Joint tenancy

-ownership by 2 or more people WITH rights of survivorship

-four unities required for this ownerhsip: time, title, interest and possession

Tenancy by the Entirety

joint tenancy where the co-owners are husband and wife

what does assemblage refer to?

combining several parcels of land into one

what does plottage refer to?

the increased sum of value and usability from assemblage

condos are owned by what type of mutual ownership

tenants in common

what is an abutting owner?

an owner whose land touches a highway or other public place

what is an alienation clause do?

-gives the lender the right to declare the entire loan balance due immediately if the borrower sells or otherwise transfers the security deposit

-also known as due-on-sale clause

building codes would dictate

-materials and/or performance standards for structural components as well as heights, safety features, sanitation and health requirements, setback and sideline restrictions

-also rules by local govs to regulate construction standards

what is a purchase money mortgage?

a mortgage on property given by a buyer, either to the seller or to a third party in order to secure a portion of the purchase price

Special warranty deed

a warranty in which the grantor warrants title only against defects that may have arisen during his or her period of ownership

Lien vs title theory

lien: mortgage is viewed as a lien on real property

title: lender is viewed as conditional owner of mortgaged land

with an FHA loan, the borrower will finance an up-front premium worth how much?

1.5%

do FHA loans have a prepayment penalty?

no, FHA loans do not have a penalty

-neither does VA loans

with an FHA mortgage insurance premium, one could reduce down payments to as low as _______ %

3.5%

a promissory note is NOT what?

it is not an evidence of title

what are characteristics of a conventional loan?

-neither insured or guaranteed by a public agency

-security rests on the borrower's ability to pay and the collateral pledged

-ratio of loan usually does not exceed 80%

The Department of VA will guarantee a lender up to four times the amount of the veteran's entitlement up to what amount?

$104,250

what is not a characteristic of a FHA loan?

that the FHA provides the money for the mortgage

They do NOT do this

granting a conventional loan requires that the borrower provide the lender with which of the following?

mortgage and promissory note

what does a graduated payment mortgage allow a buyer to do?

a buyer to purchase a home with initial monthly payments lower than the level-payment, amortized mortgage

the process by which a mortgagor regains his or her interest in a property is called...

redemption

the difference between interest rates in financing arrangements such as wraparound mortgages is called

arbitrage

pledging property as security for a loan without losing possession of it is...

hypothecation

A veteran buys a home with a DVA guaranteed loan. 2 years later, the veteran sells the home to a buyer who, with the lender's approval, assumes the veteran's loan. In this situation, the veteran is...

no longer financially responsible if the buyer defaults six months later

depending on geographic location, FHA will insure mortgages on 1-unit dwellings for up to

$729,750

between FHA and VA loans which is gov't insured vs guaranteed?

FHA = gov't insured

VA = gov't guaranteed

bilateral contract

both parties promise to do something, one promise is given in exchange for another

unilateral contract

only one party makes a promise; if the second party complies, the first party is obligated to keep the promise, such as an option or open listing

buyer recourse if seller defaults

-rescind or terminate the contract and recover earnest money

-sue for specific performance

-sue the seller for damanges

seller recourse if buyer defaults

-declare the contract forfeited

-rescind the contract and keep all or part of the deposit as liquidated damanges

-sue for specific performance

-sue for damanges

situations where it is appropriate for a buyer to enter into a relationship with buyer broker

1) a family business relationship or friendship exists, which makes it difficult for broker to be completely loyal to the seller

2) working with former seller clients as buyer customers

3) a buyer prefers to have the agent as her advocate

4) a broker is buying for himself; he must disclose that he is a licensed agent and representing himself and not a seller

a "time is of the essence" contract

must be performed in the time specified. any party who does not perform on time is guilty of breach of contract

a contract that lacks legal object is considered to be..

void

a salesperson for a broker listed an owner's home under an exclusive right to sell listing contract. which of the following statements is correct?

the listing belongs to the broker

which organization is responsible for investigating and prosecuting violations of federal fair housing laws?

Department of Housing and Urban Development

you have been making constant payments of $653 / month on your mortgage.

The balance after your last payment was $80,300. The interest rate on your mortgage is 8%. What will the balance of your mortgage be after your next payment?

Answer = $80,182.33

80,300 x .08 = $6424/year

6424/12 = $535.33/mo

653 - 535.33 = $117.67

80,300 - 117.67 = $80,182.33

using the mortgage factor of 6.65. what is the monthly payment for $121,000 at 7% for 30 yrs

( 121K / 1000 ) x 6.65 = $804.65

using the number from last question, what is the total interest paid over the life of the loan?

$804.65 x 360 = $289,674

$289,674 - 121,000 = $168,674

what is a defining characteristic of conventional mortgages?

their interest rates are set by the lender

a licensee has entered into a written buyer-broker agreement with a client whereby the licensee will be paid if the client buys a property of the type described in the agreement within the agreement period regardless of whether or not the licensee located the property for the buyer. This type of agreement is known as

exclusive-buyer agency

what percentage of income must be based on sales production in order to qualify for independent contractor status?

90%

according to the imputed interest law with installment sales amounts what is NOT covered ?

anything less than $3000 is not covered

strict liability under superfund means that...

the owner is responsible to the injured party without excuse

the benefit to S corporations vs standard coporations is that..

with S corps, profits are not taxed

a broker requires that all budgeted costs for the planning period be justified each time a new budget is developed. This requirement reflects

the concept of zero base budgeting

which of the following is exempted from the Federal fair housing laws?

the rental of rooms in an owner-occupied, 4 family dwelling

tenancy in common is distinguished by which of the following characteristics?

each co-owner's interest may be conveyed separately

what is NOT an example of functional obsolescence?

a roof that leaks (that's physical deterioration)

the ADA requires an employer with a minimum of how many employees must comply with ADA requirements?

15 employees

economic characteristics of land are

scarcity, location and durability

how does a creditor who has obtained a judgment get satisfaction against a debtor who will not pay?

writ of execution

an easement can be terminated by

merger of titles

land description T3N, R4W refers to waht method?

rectangular survey

if conditions for purchase are included in a deed and these conditions are violated, what is the penalty?

return of the property to the original owner

difference between planning and zoning is that zoning...

is a legal implementation while planning is a process

prior appropriation is used in states in which water is..

scarce

what is NOT a consideration in the definition of market value?

buyer and seller must agree to appraised value

an appraise mustbe licensed to handle federally related work on property valued at more than

250K

what is a FALSE statement regarding discount points

they are computed as a percentage of the selling price

a loan which requires the borrower to pay interest only until the maturity date and then pay the entire princiapl is called..

term loan

when a property owner uses his home as collateral for a loan and creates a lien in favor of the lender, title is held by the...

mortgagor

A realty firm has just entered into an agreement to represent a home builder in the sale of a new subdivision. The firm has located several potential buyers and five homes have been sold to purchasers that the firm's agents have contacted. The realty firm has an agency relationship with

the builder

the relationship in which the agent is placed in the position of trust and confidence to the principal is known by the term as

fiduciary

a salesperson lists a property with a contract that allows for subagency and dual agency. The salesperson is...

an agent to the broker and a subagent to the principal

The Department of Housing and Urban Development estimates that most private homes built before 1978 contain potentially dangerous levels of lead. Because of this, some Federal agencies, such as FHA,

require the buyer to acknowledge disclosure of the presence of any known lead paint

Which of the following is the first action to take when mold problems are found?

identify and remedy the cause of the problems

an example of a contract terminated due to inability to perform would be one in which the

seller had contracted for sale of the entire property without the knowledge or consent of the joint tenant

Prospective buyers made an offer on a property. The seller did NOT accept, but made a counteroffer. The prospective buyers signed the counteroffer and the real estate agent delivered their acceptance to the seller. In the interim, the same buyers had found another house that they liked better and made an offer on it, which was accepted. Which of the following is TRUE?

both contracts are valid

The real estate contract for a specific property for use as an unlicensed whiskey sales operation was forced to terminate. The termination was the result of

impossibility of performance

A judgment has been properly recorded. Any subsequent purchasers, whether they have actually examined the record or not, have been given

constructive notice

when someone has living heirs but dies without a will, the estate is distributed according to the...

statute of descent

Under a land contract for deed, who retains fee ownership of the property?

vendor

depreciation is calculated based on the

cost of the building only

At the closing on June 15, the buyer is assuming a mortgage presently on the property, on which the monthly interest charge is currently $600. The seller has made the payment due on June 1. Assuming a VA mortgage, what is the adjustment made at closing?

debit seller 300

credit buyer 300

The escrow officer or closing agent MUST give information regarding the sales price and seller's social security number to

the IRS

According to the Truth-in-Lending Act, if any "trigger terms" are used in an ad, all of the following disclosures MUST appear in the ad EXCEPT the

prepayment penalties and rebates

A charge of violation of Federal Fair Housing laws can be heard by an administrative law judge within the Department of Housing and Urban Development (HUD) or by a Federal district court judge in Federal court. The advantage of a Federal court hearing to the complaining party is that

there is no dollar limit on damages paid

Which of the following may be considered prima facie evidence of discrimination by a broker?

failure to display the equal housing opportunity poster at the broker's place of business

Antitrust laws prohibit competing brokers from all of the following EXCEPT

receiving compensation from both the buyer and the seller

Too much leverage may result in

negative cash flow

A homeowner has negotiated with a neighbor to obtain the permanent right to pass over the northern part of the neighbor's land to gain access to the river. He pays the neighbor $9,000 for the right of access and receives a deed. This is an easement

appurtenant

In every real estate transaction, a legal description of the real estate MUST appear in the transaction documents. What kind of legal description should be used in MOST transactions?

the same one used in prior transfers of the parcel verified by a surveyor

Which of the following BEST illustrates the concept and intent of a buffer zone?

garden apartments located between a single family residential neighborhood and a shopping center

A prospective seller asks a salesperson to recommend a listing price for a property. The salesperson should suggest

a CMA to determine the property's value

In helping a buyer to select a lender, if the buyer believes he has good credit and his income is documentable as a salary and by tax returns, the licensee might recommend a mortgage banker, instead of a mortgage broker, for all of the following reasons EXCEPT

more variety of loan programs available

the real estate licensee who accepts an undisclosed fee for referring a buyer to a specific title company may be in violation of

respa

For Federal income tax purposes, which of the following are costs of homeownership that may be deducted from gross income?

1) mort. loan int.

2) mort. loan origination fees

3) local prop. taxes

A will has been drawn up leaving the family homestead to the owners' granddaughter. Once that has been done, the owners may

make any changes they wish through a codicil or a later will

MOST closed real estate transactions should be reported to the IRS. REQUIRED information includes seller name(s) and social security number(s) and

the sale price

a distinguishing characteristic of owning property by land trust is that

the identity of the legal owner is kept confidential

why was jones vs mayer decision of 1968 importnat?

it upheld the civil rights act of 1866

in most states, foreclosed property is sold through

public auction