REE 3043 MIDTERM

The most crucial test used to determine whether an item is a fixture is the

intent of the parties.

Which theory of water rights relies on the notion of "first-come, first-served"?

Prior appropriation doctrine

Real estate refers to

land and structures attached to it.

If one lives in the western United States, which of the following will typically govern the rights of a property owner to use water of a non-navigable stream that runs through his or her property?

Prior Appropriation Theory

Which of the following items would not be considered a fixture?

A grandfather clock

An item that was at one time personal property but has become "attached" and is now considered to be real property is known as a(n)

fixture.

The issue of whether removal of the item would cause damage to the remaining real estate is addressed in

Attachment test of fixture status.

Fred leases a building from Barney, which he uses for a restaurant. To increase business, Fred installs an antique bar in the center of the restaurant. One year later, Fred removes the bar and relocates to a larger building. What are Barney's rights?

Fred must restore the building as near as possible to its original condition.

The seller of a property is typically known as the

grantor.

Rights to real estate apply to the surface of the earth, the space above it, and the

space below it. Rights to the space above the surface of a parcel are called

air rights

The owner of the property being encroached upon has the right to force the removal of the encroachment, but if that owner fails to force removal, the other party may claim the legal right to continue encroaching by:

adverse possession.

Which of the following statements about easements is INCORRECT?

Easements are temporary in nature and do not pass to subsequent owners.

Restrictions and limitations on real estate imposed by both private and public entities are collectively known as

encumbrances.

To claim a property under adverse possession, which is not a requirement under the law?

One possessor must hold the claim for the entire statutory period.

Suppose you are considering buying an existing home in a fully developed neighborhood and discover that the next-door neighbor's privacy fence is actually located on the property you are considering buying. In this situation, which of the following terms best describes this fence?

Encroachment

The people protected by mechanic's liens include all of the following EXCEPT suppliers of materials architects and engineers on construction projects.

lenders.

The lender in a mortgage arrangement is known as the

mortgagee.

A legal right to use the property owned by someone else in a specified manner is known as an

easement.

An easement is a right given to a person by a landowner to

use the land in a specific manner.

Suppose Jane buys a property subject to an easement that gives the next-door neighbor the legal right to drive across a portion of her property. Which of thefollowing statements are consistent with the nature of easements?

There is absolutely no way to terminate this type of easement without
incurring legal liability.

An area zoned for a four-to-one floor area ratio would permit the development of

an eight story building covering one fourth of the site.

The value of a property established for the purpose of computing property taxes is which value?

Assessed

Which of the following statements represents the heart of the "takings" issue?

How far can regulations go before the affected property owner is entitled to compensation?

To determine the tax bill on an individual property, one

multiplies the market value by the assessment rate.

The property tax that it is levied as a percentage of value is which of the Following?

Ad valorem

Intensity of use is also known as

developmental density.

A tax rate of 20 mills indicates a tax of

$20 per $1,000 of assessed value.

If properties are reassessed only upon sale, which of the following statements is true when property values are rising?

Owners of older properties pay less tax relative to market value.

Which of the following is not an example of how governments attempt to control the intensity of use or developmental density of properties in a community?

Assessment ratio

By which of the following do government entities have the authority to regulate how a private property owner can use his or her property?

Power of eminent domain

A general warranty deed assures the grantee that the grantor will execute any

future documents needed to perfect the grantor's title when which covenant is included?

Covenant of further assurances

The primary difference between a special warranty deed and a general warranty deed is that

in a special warranty deed, the promises made by the grantor only apply to events that occurred during the grantor's ownership of the property.

Which of the following is true of title insurance?

The insured is charged a premium only once.

Which of the following elements are NOT required for a deed to be valid?

Signature of the grantee

Which of the following does not have any bearing on the validity of the deed?

Amount of the consideration (as long as some consideration is included

A legal document used to transfer ownership rights to real estate from one party to another is a

Deed.

The covenant in a warranty deed whereby the grantor guarantees that he or she owns the property and has the right to convey the property is known as the covenant of

seisin.

A deed that transfers any interest which a grantor may or may not have in a

property without promising that the grantor actually has such an interest is called a(n)

quitclaim deed.

Traditionally, there are five covenants and warrantees in a warranty deed. Which of the following is NOT one of the five?

Covenant of quitclaim

Which of the following parties to a transaction is most interested in having a title insurance policy for the property?

Lender

Like all contracts, when a lease is delivered and accepted it becomes ______.

Valid

A tenancy at will

may be terminated by either party at any time with proper notice.

The purpose of the security deposit in a lease agreement is to

protect the lessor.

When the lessee pays the operating expenses, the insurance premiums and the real estate taxes, the lease is a

net-net-net lease

A tenancy for a stated period

expires at the end of the stated term.

A graduated rent lease has scheduled payments of $10,000 per year for the first two years, with 6 percent increases for the remaining three years. What will the lease payment be for the fourth year?

$11,236

The covenant of quiet enjoyment provides the tenant with

the right of exclusive possession of the property during the period of the

lease.

As a tenant, you want to turn over all the rights and responsibilities of your

unexpired lease to a new tenant. By doing so, you are _______ your leasehold interest.

assigning

Which of the following would you not expect to find among the elements of a lease?

Names of the grantor and grantee

Ed's Furs pays rental payments of $1,200 per month plus 1.5 percent of gross sales over $18,000. What will Ed's payment be when sales are $26,000 per Month?

$1,320

In the legal relationship known as "agency," the is authorized by the _____ to transact business on his or her behalf.

agent, principal

The contract that defines the relationship between the property owner and the real estate broker is the

listing agreement.

Which of the following arrangements does not qualify as an agency relationship in real estate transactions?

A seller has a relative unlock a property so a prospective buyer can
examine it.

.In the typical agency relationship between sellers and brokers, brokers are the

________ of sellers, and must protect their clients' best interest at all times.

fiduciary

The process of evaluating a prospective buyer's ability to purchase a listed property is called

Qualifying.

In an agency relationship between a seller and a broker, the broker is a(n)________ of the seller and must protect the seller's best interests at all times.

Fiduciary

The illegal practice of encouraging owners to sell their properties for lower prices when minorities begin moving into a neighborhood is known as

Blockbusting

Which of the following statements about an open listing is NOT correct?

The listing broker is always entitled to the stated commission.

Which of the following terms refers to the illegal practice of showing minority buyers only those properties that are located in areas dominated by minorities?

Steering

The listing is the written agreement between

a property owner and a real estate broker

The risk of having to sell an asset at a lower than market price if you must sell it quickly, is present in real estate is known as

liquidity risk

Uncertainty arising from the possibility of defaulting on borrowed funds used to finance an investment is known as

financial risk.

Uncertainty arising from changing economic conditions that affect an investments ability to generate returns is known as

business risk.

Suppose an investor buys a property today for $70,000. If it increases in value by 10% each year, what will it be worth at the end of three years?

$93,170

Which of the following terms is defined as the possibility of loss resulting from

not being able to convert an asset into cash quickly should the need arise?

Liquidity risk

The value of money to be received in the future is_________ the value of the same amount of money in hand today.

lower than

In a financial decision making framework, which of the following terms can be defined as uncertainty about the rate of return an investment will provide over the holding period?

Risk

Which of the following is not a characteristic of risk?

The shorter the expected holding period, the greater the risk.

John Jones is buying a house for $100,000. John can get a loan for 95% of the purchase price at 8% with monthly payments for a 25-year term. What would his payments be if he borrows under these terms?

$733.23

Suppose an investor expects to sell a property two years from now for $84,700. If the investor requires a 10% rate of return, how much is that property worth to the investor today?

$70,000

In a fully amortizing, fixed-rate loan, the amount of each periodic payment

attributable to principal is

increasing at an increasing rate.

Bill and nine of his friends each contributed $10,000 to form a real investment group. The group then purchased a small retail center for $350,000 using an interest-only loan for $250,000 at 10% annual interest. At the end of one year, the building was sold for $410,000. What is the rate of return on Bill's investment?

35%

When a mortgage loan with level periodic payments has been completely repaid by the maturity date, it is said to be

fully amortized.

Loans made for a stated term on which interest payments are due periodically but whose principal is not repaid until the end of the term are called

interest-only term loans.

Which of the following statements does not apply to employing the amortization method of repaying a mortgage loan? The amount of the

payment applied to principal repayment decreases each period.