Real Estate Principles and Practices

Assigning a lower-density use zone to an area that previously allowed higher density and that may reduce property values is known as ______.


1. Bulk Zoning
2. Density-Reduction Zoning
3. Downzoning
4. Reduction Zoning

3. Downzoning

Keeping an area dry and keeping the air circulating can

Help prevent mold

Kris made an offer on Lincoln's townhouse. However, Kris offered no earnest money. If Lincoln accepted her offer, would it be binding?

  Yes, because the offer to buy is the consideration.

What type of agency exists when a buyer's agent is also the listing agent for the same property


1. Buyer agency
2. Dual agency
3. Seller agency
4. Single agency

Dual Agency

Who’s responsible for conducting the closing meeting?


1. The Broker
2. The Buyer
3. The Closing Agent
4. The Seller

The Closing Agent

**When banks have lots of funds available for lending, what tends to happen to interest rates?**


1. Rates Decrease
2. Rates fluctuate
3. Rates increase
4. Rates stay the same

Rates Decrease

Mary, who's suffering from Alzheimer’s disease, signs a contract to buy Edgar’s home. Before the deal closes, it’s determined that Mary lacks legal capacity to enter into a contract. Which party is permitted to void the contract?


1. Nobody
2. Only the Buyer, Mary
3. Only the seller, Edgar
4. The seller or the sellers agent

Only the Buyer, Mary

Why do licensees help buyers estimate the closing costs?


1. Helps buyers determine what they can afford
2. Doing so provides information to the lender
3. It gives buyers a comparison between this estimate and the closing costs on the closing statement
4. it gives sellers a foundation for the contract negotiations

Helps buyers determine what they can afford 

A clause that allows the parties to agree that they won’t litigate if there are any contract disputes is a/n _________.


1. Arbitration Clause
2. Choice of law Clause
3. Indemnification Clause
4. Severability Clause

Arbitration Clause

The duty of confidentiality survives agency unless the former client is found guilty of fraud or ______.


1. it will help another client
2.  the former client has moved out-of-state.
3. the information is known from other sources.
4. The transaction has closed

the information is known from other sources.

Under which of the following conditions is it unacceptable to disclose confidential information?


1. When disclosure is necessary to defend yourself against an accusation of wrongful conduct
2. When the information is made public from a source other than you
3. When you are disclosing the information after your agency relationship with the client has ended
4. When your client gives you written permission to disclose the information

When you are disclosing the information after your agency relationship with the client has ended

Which of the following is a benefit of a policies and procedures manual as a way to reduce risk?


1. It helps people to vary their processes
2. it reduces training time.
3. It regulates peoples actions
4. Its good documentation in case of a lawsuit

It regulates peoples actions

If Rina wants to pay off her mortgage early, what might she consider before doing so?


1. Whether she can take out a second mortgage
2. Whether shed rather rent
3. Whether shell incur a pre payment penalty
4. Whether she would save money in interest

Whether she will incur a pre payment penalty

A set of guidelines for the ethical conduct of real estate licensees is called a ______.


1. Code of ethics
2. Contract
3. Option
4. Rule Book

Code of ethics

The tax is $0.115 per $100 of mortgage debt or obligation secured. A property that sold for $500,000, of which $400,000 was financed, would have a mortgage recording tax amount of ______.


1. 280
2. 320
3. 460
4. 570

460

In a life estate, all of the following apply during the term except ______.


1. Control
2. ownership
3. possession
4. Transferability

Transferability

What do you call the person who or entity that oversees trust or escrow money?


1. Escrow Agent
2. Escrow master
3. Mortgage agent
4. Special agent

Escrow Agent

Jill needs to pay the web developer who created a new website for her brokerage, but her checking account is low, so she floats herself a loan from earnest money kept in the brokerage’s escrow account and deposits it in her account for a few days before paying the developer. Which answer correctly identifies the violation(s) Jill has committed?

Commingling and Conversion

Supply and demand determine the competitive environment. Which of the following is a true statement?


1. When there are more homes on the market, buyers can't be picky.
2.  When there are more homes on the market, buyers hold the negotiating power.
3. When there are more homes on the market, it drives prices upward.
4. When there are more homes on the market, sellers can demand more for their property.

When there are more homes on the market, buyers hold the negotiating power.

A month-to-month lease agreement is considered to be this type of leasehold estate, in which the interest is automatically renewed at the end of each period specified in the lease.


1. Estate at Sufferance
2. Estate at Will
3. Estate for months
4. Periodic Estate

Periodic Estate

Co-ownership without inheritance rights is what kind of real property ownership?


1. Joint Tenancy
2. Tenancy at Will
3. Tenancy in Common
4. Tenancy in Severalty

Joint Tenancy

Which of the following is a private agreement that impacts the use of the land?


1. Assessment
2. Deed Restriction
3. Encroachment
4. Encumbrance

Deed Restriction

What's the typical useful life of an underground storage tank?


1. 15 Years
2. 50 Years
3. One Year
4. Two Years

15 Years

In which of the following situations would an agent be representing a customer in a real estate purchase?


1. Anytime
2. Never
3. When the agent has his broker’s permission
4. When the agent has his broker’s written and signed permission

Never, a real estate agent represents clients not customers.

Which of the following is an example of the duty of obedience?


1. Advising a client on what to do
2. Carrying out a clients instructions
3. Keeping a client’s confidential information confidential
4. Never questioning a client opinion

Carrying out a clients instructions

Keenan signed a lease agreement that contains a right of first refusal. What does this clause do for Keenan and his landlord?

 It gives Keenan the option to buy the property he's leasing before the property is sold to someone else.

Bart and Claire are under contract for Claire to buy Bart's house, but her financing fell through. They decide to cancel the contract just as if it never happened. Which termination method does this describe?


1. Reformation
2. Release
3. Rescission
4. Restraint

Rescission, A rescission is a definitive end of the parties’ commitments under an agreement—one in which the parties are returned to their pre-contract status.

Frank took out a mortgage from First National Bank in order to purchase a new home. In a lien theory state, who or what retains the title to the property?


1. Fannie Mae, which buys the loan from First National Bank
2. First National Bank, the lender
3. Frank, the borrower
4. The Trustee to this transaction

Frank, the borrower

When preparing the sales contract, when is it acceptable for a licensee who is not an attorney to offer legal advice to the client?

Never

When a lender charges a borrower more than the highest allowable interest rate, it is called ______

Usury

Chance and Lucky have an option agreement between them in which no consideration is provided. Is this enforceable?


1. No
2. Only for option periods of less than six months in length
3. Only if the sales price is clearly stated
4. Yes, as long as the option is executed by the required deadline

No

Jillian has a loan-to-value ratio of 90/10. This means ______.


1.  Her loan is 10% of the value of the real estate used as collateral and she's obtaining a second mortgage for 90%.
2. Her loan is 90% of the value of the real estate used as collateral and she's putting 10% down.
3. She's putting 10% down and pulling 90% from her IRA.
4. The property is only worth 90% of the amount loaned.

Her loan is 90% of the value of the real estate used as collateral and she's putting 10% down.

Which of these may be covered by a builder-backed home warranty?


1. Custom Exterior Paint
2. Owner-Installed Landscaping
3. Ugly Carpeting
4. Workmanship

Workmanship

What do buyers provide to the seller as an indication that they are serious and intend to go through with the purchase?


1.  A copy of the signed agency agreement
2. A promissory note
3. Earnest money
4. Their Word

Earnest Money

Buyer Josephine had just signed a contract on a house when she discovered that seller’s agent Franklin knew that this house was 3500 square feet, but he listed it at 3900 square feet. Which essential contract element has been compromised?


1. Consent
2. Consideration
3. Legal Purpose
4. Offer and Acceptance

Consent

A home sells for $225,000. Per the listing agreement, the total commission is 7% of the sales price. The listing brokerage will split the full commission with the buyer's broker 50/50. Kiko the seller's listing agent has a 70/30 split arrangement with her brokerage, with Kiko receiving the "70". After sharing the commision with the buyer's broker and her commission split with her brokerage, how much will Kiko receive?

5,512.50

Which of the following is a residential dwelling with shared walls where the owner also typically owns the land which the home sits?


1. Apartment
2. Condominium
3. Single-family detached home
4. Townhome

Townhome

Thanks to this act, sites containing hazardous substances are identified, and responsible parties must clean them up.

  Comprehensive Environmental Response Compensation and Liability Act CERCLA

One of your seller clients, Jake, expresses concern about having to complete a property condition disclosure statement. You ease his fear by correctly advising him that ______.


1. By disclosing known defects, he will protect himself from liability lawsuits down the road
2. He doesn't need to be completely honest while completing the statement
3. He doesn't need to share the statement with prospective buyers
4. No one will see the disclosure statement

  By disclosing known defects, he will protect himself from liability lawsuits down the road

Marvin purchased the right to use a resort unit for two weeks every year, although he doesn’t own the property itself. What kind of timeshare is this?


1. Divided timeshare
2. Right-to-use timeshare
3. Timeshare estate
4. Timeshare in perpetuity

Right to use timeshare

How large is an acre

43560 Square feet

Violators of the Sherman Antitrust Act may be subject to fines. For what amount may corporations and individuals be liable?


1. Up to $100,000 for corporations and $1,000 for individuals
2. Up to $100 million for corporations and $1 million for individuals
3. Up to $10 million for corporations and $1 million for individuals
4. Up to $1 million for corporations and $100,000 for individuals

Up to $100 million for corporations and $1 million for individuals

Under what name must sole proprietors conduct business?


1. They must use a business name, which may not be their own name.
2. They must use their own name in combination with a nickname.
3. They must use their own name only
4. They must use their own name or their own name in combination with a registered business name.

They must use their own name or their own name in combination with a registered business name.

The Johnsons are shopping for a mortgage loan and are attracted to the below-market interest rate offered for the first year of an adjustable rate mortgage. What's this type of rate called?


1. Bait and Switch
2. Balloon Payment
3. Fixed Rate
4. Teaser Rate

Teaser Rate

Which of the following is a drawback to leasing commercial space?


1. Credit ratings are not as crucial.
2. Leasing is less affordable.
3. Monthly rent is a tax deduction as a business expense.
4. Rental rates can include annual increases based on market conditions.

Rental rates can include annual increases based on market conditions.

Which one of these describes a deed?


1. Abstract if title
2. Ownership Document
3. Promissory Note
4. Recording Fee

Ownership Document

Which of the following best describes the concept of appreciation?


1. When a property's value increases as a result of capital improvements.
2. When losses are deducted from a property's value for tax purposes.
3. When the value of a property decreases over time.
4. When the value of a property increases over time.

When the value of a property increases over time.

What’s the acronym for the legislation that eliminates illegal referral fees among settlement service providers?


1. ARRA
2. ECOA
3. RESPA
4. TILA

RESPA, Real Estate Settlement Procedures Act of 1974. federal law that provides home buyers and sellers with basic mortgage protections. Originally, RESPA mandated the disclosure of mortgage costs, eliminated kickbacks and limited the use of escrow accounts

What's the term for an addition to a sales agreement form that can be added before it is signed without changing any of the other terms that have already been agreed upon?


1. Addendum
2. Amendment

Addendum, An addendum is unlike an amendment, which, when added, changes the original terms of the contract. An addendum is A plus B. With an amendment, A becomes B. When something is added to a sales agreement form before it is signed and becomes an executed contract, that is an addendum. It is added to the original form, to become a part of the whole contract.

What is the amount a lender charges a borrower for using the lenders money?

Interest

Sherman owes $225,000 on his home. It’s currently worth $240,000. How much equity does Sherman have in his home?

15,000

Disclosing which of the following facts would be considered a fair housing violation?


1. The current owner has HIV.
2. The kitchen was remodeled 5 years ago
3. The property has been treated for pests
4. The roof was replaced last year

The current owner has HIV.

Which of the following is an example of a deed restriction?


1. Eminent Domain
2. EPA wetland conservation guidelines
3. Fence Height
4. Zoning Regulation

Fence Height

Which of the following best describes market price?


1. The amount at which the seller chooses to list the property on the open market.
2. The amount it would take to replicate if it were rebuilt
3. The amount that a buyer has paid and a seller has accepted for a property.
4. The amount that an appraiser estimates a property to be worth on the fair market.

The amount that a buyer has paid and a seller has accepted for a property.

What’s a contract clause?


1. A contract attachment that’s exercised based on a specific action taking place
2. A modification to a contract after it’s signed
3. A modification to a contract before it’s signed
4. A section of a contract covering a specific topic

A section of a contract covering a specific topic

Carolyn represents John in the sale of his home. Which listing agreement clause would authorize and obligate her to distribute the listing to other brokers?


1. Broadcast Clause
2. Broker Extension Clause
3. Marketability Clause
4. Multiple Listing Clause

Multiple Listing Clause

What are the two categories of comparison when evaluating comparables to a subject property in the market comparison approach?


1. Broad and Specific
2. Components and Measures
3. Elements and Units
4. General and Detailed

Elements and Units. There are two categories of comparison: elements, which look at physical and locational characteristics, and units, which look at the numbers.

Which of the following is a reason that wetlands are protected?


1. To be developed at a later date
2. To grow commercial crops
3. To open them for commercial fishing
4. To stabilize soil and help control erosion

To Stabilize soil and help control erosion

Dual agent Barbara Park can only disclose Seller Carrie's reason for moving if:


1. Buyer Blake directly asks for it
2. Carrie gives her written permission to do so
3. Carrie tells her it's okay to do so.
4. She thinks it'll help Carrie's bargaining position.

Carrie gives her written permission to do so.

One of a seller's agent's duties is to ______.


1. Keep the buyer informed
2. Market and sell the property
3. Negotiate for the buyer
4. Represent the buyer while making sure that none of the seller's advantages are lost

Market and sell the property

Which of the following statements about agents and the duty of obedience is true?


1. An agent can ignore a client’s instructions if they negatively affect the agent’s commission.
2. An agent should carry out the client’s instructions as long as they are within the law.
3. An agent should never question a client’s instructions.
4. The duty of obedience extends beyond the termination of the agency agreement.

  An agent should carry out the client’s instructions as long as they are within the law.

Which one of the following terms is defined as the transfer of property given to another without consideration?


1. Adverse possession
2. Dedication
3. Deed of gift
4. Foreclosure

Deed of gift

A real estate licensee must conduct marketing campaigns in a way that ______.


1. Focuses on those characteristics of a buyer that fit most closely with the existing neighborhood norm
2. Makes the property available to all buyers without limits or restrictions
3. Satisfies the client's instructions, even if those instructions are not legal
4. Satisfies the neighbors who must live near the new homeowner

Makes the property available to all buyers without limits or restrictions

When a prospective homebuyer isn't represented, what doesn't she have?


1. An agency agreement
2. A sellers agreement
3. Responsibility to pay the sellers commission
4. The legal right to purchase

An agency agreement

When does express agency exist?


1. When agency is implied
2. When a written or spoken agreement is in place
3. When the parties act as if they are in an agency relationship
4. When the parties are in a hurry

When a written or spoken agreement is in place

What must you disclose to be in full compliance with an agent's fiduciary duty to disclose?


1. Confidential information
2. Conflicts of interest
3. Conflicts of interest, material facts, and adverse material facts
4. Material facts and adverse material facts

Conflicts of interest, material facts, and adverse material facts

Bob and Mary are financing $80,500 for a new home. Their lender will approve an interest rate of 6.5% if Bob and Mary pay three-and-a-half discount points at closing. How much is this?

2,817.50

What’s a vendee’s lien?


1. A constructive notice that a claim against a property exists
2. A lien against real property for the earnest money deposit paid on a contract of purchase
3. A lien placed by a seller to repossess the property sold until the buyer makes all payments for the full purchase price
4. An encumbrance on property of a defendant in a pending lawsuit for money damages

A lien against real property for the earnest money deposit paid on a contract of purchase

Which of these is NOT a form of ownership for real estate?


1. Joint Tenancy
2. Riparian Rights
3. Severalty
4. Tenancy in common

Riparian Rights

The components that make up a borrower's mortgage payment can best be remembered using which acronym?


1. CIIA
2. DUST
3. OLD CAR
4. PITI

PITI, Principle, Interest, Taxes, Insurance

What does OLD CAR stand for

The fiduciary rights of a real estate agent

Obedience

Loyalty

Disclosure

Confidentiality

Accounting

Reasonable Skill and Care

What does DUST stand for

Dust is an acronym for the elements of value in real estate

Demand

Utility

Scarcity

Transferability

How can a seller correct inaccuracies in a property condition disclosure statement?

By drafting an addendum or amendment

Benji is a buyer’s agent, and he'll receive a split of the commission paid from the sale of Harriet’s listing. The property sold for $425,000. The total commission paid from the sale is 6%, split evenly between the buyer and seller brokerages. Benji has an agreement with his broker that he earns 80% of the commission received. How much will Benji be paid from this sale?

10,200

In most transactions involving a buyer or seller, real estate agents have limited authority to act on behalf of their clients. Therefore, which type of agency relationship are they in?


1. Designated
2. General
3. Special
4. Universal

Special

Jay's new loan to purchase a property includes the seller's existing mortgage. What type of loan is this?


1. Blanket
2. Package
3. Unsecured
4. Wraparound

Wraparound

When people are treated differently because they were born in another country or are from a specific part of the world, this is discrimination based on _______.


1. Color
2. Familial Status
3. National Origin
4. Race

National Origin

The power of the state to claim property when the owner dies without a will and without locatable heirs or creditors is also known as ______.


1. Eminent Domain
2. Escheat
3. Life Estate
4. Taking

Escheat

What's a covenant between a lessor and lessee?


1. An addendum to a contract added after it's signed
2. An agreement or promise made between the parties
3. A provision for which neither party to a contract is willing to compromise
4. A rent escalation

An agreement or promise made between the parties

Seller Randy signed a listing agreement with Barbara, who worked very hard to find him a buyer. Randy’s cousin decided to purchase the house during the listing period. Is Barbara owed a commission?


1. No, because sellers don’t have to pay a commission if a relative purchases the property.
2. Yes, because Randy is not a licensee.
3. Yes, because she worked hard for Randy.
4. Yes, if she has an exclusive right-to-sell agreement.

Yes, if she has an exclusive right-to-sell agreement.

Carson is purchasing a $600,000 property by obtaining an 80/20 loan. How much is Carson financing?

480,000

Which of the following occurs when a property owner dies without having a will in place, and no heirs or creditors can be found?


1. Eminent Domain
2. Encroachment
3. Escheat
4. Estoppel

Escheat

Your seller clients, the Bishops, must make $255,000 off the sale of their home. They are more concerned about getting the right price to make that happen than the amount of commission they’ll pay, and they say you can keep any amount above the $255,000 they need to make. What type of listing is this?

Net Listing

Which of these is an example of a rectangular survey system description?


1. 123 Roanoke Street Any Town, ST 98765
2. “Beginning at the iron pin 30 paces from the center of the brook that runs across the road Southwesterly from the dwelling …”
3. Lot 6 of Block 3 of the East Subdivision plat as recorded in Map Book 18, Page 11 at the Recorder of Deeds
4. S ½ SE ¼ NW ¼ Section 2, Township Clarkson

S ½ SE ¼ NW ¼ Section 2, Township Clarkson

What's the name of a fee a lender charges for processing a loan?


1. A buydown
2. A loan origination fee
3. A loan servicing fee
4. An Appraisal Fee

A loan origination fee

What's an encumbrance?

Claim on property that limits the owner’s use or rights, or decreases the property value. An encumbrance in real estate is any claim or lien on the property held by another person or entity that limits the owner’s use or rights, or decreases the property value.

Max built his shed just over his property line, so part of the structure actually sits on his neighbor's property. The shed is considered a(n):


1. Easement
2. Encroachment
3. Setback
4. Shared Structure

Encroachment. EncROACHment, roaches invade property like a structure.

Risks to computer systems can be reduced by avoiding public networks, ______ sites, and suspicious sites.


1. All
2. Encrypted
3. Secure
4. Unsecure

Unsecure

In order for a deed to be valid, which two elements are required?


1. Habendum clause and habeus corpus clause
2. Signature of the grantee and habendum clause
3. Signature of the grantor and consideration
4. Signatures of the grantee and grantor

Signature of the grantor and consideration. Only the grantor's signature is required, not the grantee's. Consideration is also a required element.

______ can be defined as everything that's not real property.

Personal Property

Cracks, holes, or rotten areas on a soffit are common ______ issues.


1. Chimney
2. Foundation
3. Roof
4. Window

Roof

What duties does a buyer agent have to the seller?


1. To advocate and negotiate on behalf of both parties
2. To disclose the agent's relationship with the buyer
3. To obtain the highest price possible
4. To provide comparables to support the buyer's offering price

To disclose the agent's relationship with the buyer.

The only duty the buyer's agent has to the seller (besides honesty, fairness, and disclosure of material facts) is to disclose the agency relationship with the seller.

The lender will require flood insurance if the home is ______.

Located in a flood plain

How does the building department ensure that a builder who has obtained a permit builds according to code?


1. The builder is required to submit to weekly inspections performed by peer in the industry.
2. The builder signs an affidavit to that effect.
3. The builder submits a monthly progress report.
4. The building department sends inspectors to inspect the work.

The building department sends inspectors to inspect the work.

What type of listing agreement provides the most protection for the listing agent’s commission?

Exclusive Right to Sell

Fiona and her husband, Ed, have just entered into their first-ever agency agreement with their new agent, Ken. The couple is a little nervous, but they like the idea that they have something in writing that explains both their agent’s responsibilities and what they're expected to do as part of the relationship agreement. Life is good. What type of agency exists between Ken and his clients?


1. Implied agency
2. Oral express agency
3. Undocumented Agency
4. Written express agency

Written express agency

A landlord discovers that his married tenants are expecting their first child. He wouldn't have rented to the couple had he known they were going to have children, so he serves them with an eviction notice and tells them they must be out in 30 days. The landlord is guilty of ______.


1. Familial status discrimination
2. Racial discrimination
3. Religious discrimination
4. Sex discrimination

Familial status discrimination

Archie signed a contract to buy Pam’s home. The deal eventually closed, but Pam failed to hand over the home’s keys to Archie. A week passed, and Archie filed a lawsuit in an attempt to force Pam to give him the keys. This is an example of ______.


1. Accepting liquidated damages
2. Accepting partial performance
3. Suing for damages
4. Suing for specific performance

Suing for specific performance

Lenders require that borrowers purchase and maintain adequate _____, which is usually bundled into their monthly PITI payment


1. Hazard and flood insurance
2. Legal counsel
3. Personal property insurance
4. Pest and hazard inspections

Hazard and flood insurance

What responsibilities does a real estate professional have regarding property taxes?


1. Assist with paying property taxes at closing
2. Determine whether property taxes have been correctly assessed
3. Testify at property tax hearings
4. Understand how property taxes are calculated and disclose to buyers what their property taxes will be based on true taxes, not assessed value nor taxes after exemptions are taken

Understand how property taxes are calculated and disclose to buyers what their property taxes will be based on true taxes, not assessed value nor taxes after exemptions are taken