Real Estate Exam Review Questions

Practice flashcards covering essential real estate concepts to prepare for the exam.

What two documents are necessary to establish a legally binding mortgage loan?

Promissory note and deed of trust.

What can a seller do with earnest money if a buyer defaults on a sales contract?

Keep the entire amount as compensation.

What are surface rights, air rights, and subsurface rights known as when sold by a property owner?

Severable rights.

What is an easement that automatically transfers upon the sale of either dominant or servient property called?

Easement appurtenant.

What does 'quieting a title' refer to?

Clearing any liens or encumbrances on a property.

What is the highest form of land ownership?

Fee, simple absolute.

If a broker sells land for $750 an acre with a commission rate of 8%, what will be the commission for a triangular parcel with specified dimensions?

$578.51.

What principle suggests a property value may increase when surrounded by higher valued properties?

Principle of progression.

What happens if a buyer accepts deposits and shows property without a real estate license?

Bob's actions are illegal and can lead to legal consequences.

What is the primary reason cities require building permits?

To require a minimum level of construction standards.

What is a true statement regarding the recording of a deed?

Recording a deed establishes ownership rights.

What does eminent domain allow the government to do?

Take possession of the land against the owner's wishes, yet the owner must be compensated.

How is the appraised value of a property determined?

By comparable sales.

What report is prepared to obtain a reasonable list price based on market data?

Comparative Market Analysis.

What does 'merchantable title' or 'marketable title' refer to?

A title free from defects and legal encumbrances.

What appraisal principle describes similar businesses benefiting from proximity?

Competition.

How should rent be prorated if rent is paid at the start of the month and the property is sold mid-month?

Based on the number of days owned by the seller and the buyer.

What invalidates any verbal agreements made prior to a written contract?

Parole Evidence Rule.

What formula is used to determine value through the income approach?

Value equals gross rent multiplier times monthly rent.

What happens to the prices of existing homes when there is an influx of new residents and few homes on the market?

Prices will increase.

What regulation applies when a property owner advertises owner financing?

No, property owners are not regulated by Truth in Lending Act.

When does legal title to real property transfer from the seller to the buyer?

At closing or settlement.

What does the Civil Rights Act of 1866 prohibit?

Racial discrimination in the sale or lease of residential or commercial property.

What type of contract is formed when obligations remain unfulfilled?

Executory contract.

What happens to a servitude granted prior to the sale of property?

It remains valid and continues to be enforceable against new owners.

Are oral leases enforceable in court?

No, because oral leases are unenforceable.

What is it called when a lender calls for the remaining balance of a mortgage loan due?

Acceleration clause.

What is the net building area on a property with specific setbacks?

2,800 square feet.

What describes a real estate mortgage?

It is a security instrument that pledges the property as collateral for a loan.

How are numbers assigned on a range for rural addresses?

From west to east.

How is property tax calculated?

Multiply the assessed value by the tax rate.

What is the broker's commission on a property sale based on square footage?

$3,654.40.

In which financing can negative amortization occur?

Adjustable rate mortgage.

What fluctuates based on market conditions in a variable rate mortgage?

Interest rate.

What is the right of a water company to lay water mains called?

Water easement.

What does the covenant of season guarantee?

Clear title.

What happens if a right is not asserted in a timely manner?

Abandonment.

What is the total collected rent if multiple tenants pay differing amounts?

$1,965.

Which of the following is NOT a function of FNMA (Fannie Mae)?

Regulating mortgage interest rates.

What best describes the economic characteristics of land?

Demand, utility, scarcity, transferability, situs.

What are items attached for business use classified as?

Trade fixtures.

What does a monthly loan payment of a certain amount indicate?

Fully amortized loan.

What is NOT a characteristic of an independent contractor with a broker?

Employee benefits provided.

What's the principal sum if the mortgage payment is given at a specified rate?

$147,399.13.

What covenants are commonly included in general warranty deeds?

Covenants of seisen, quiet enjoyment, and further assurance.

What do we call an individual who is both obligated on the loan and on the title?

Co-borrower.

Must agents disclose environmental hazards to customers?

Yes, the agent must disclose.

What are the essentials for a valid real estate contract?

Offer and acceptance, consideration, and legal purpose.

What must be true for contracts to be valid?

They must be signed by both parties.

What type of agency is created with a listing agreement?

Express agency.

What happens to deed restrictions that violate fair housing regulations?

They are not legal and considered void.

What does the three-day right of rescission apply to?

Refinancing a mortgage.

What law ensures equal opportunity in housing regardless of certain categorizations?

The Federal Fair Housing Law.

What does section 11 represent in a township?

A unit of land measuring one square mile.

What method adds land value and improvements to establish property value?

Cost approach.

What ends the fiduciary relationship between a broker and a seller?

Withdraws the property from the market.

What amount will the seller pay the real estate company based on a property listing?

$2,234.83.

What protected class doesn't fall under the Fair Housing Act?

Felons.

What coverage does E and O insurance provide?

It does not cover negligence of a broker selling property he owns.

How much did Karen's property sell for if her commission was 6%?

$345,000.

What term describes an improvement that crosses a legal property line?

Encroachment.

What is true regarding partnerships in business liabilities?

Partnerships do not provide limited liability protection to all partners.

What penalties do unlicensed individuals face for collecting commissions?

Fines and monetary penalties.

When a licensee's actions lead to fund compensations, what consequences follow?

The licensee's license may be suspended or revoked.

What must a landlord legally do concerning a security deposit?

Return it within a specified timeframe.

What does the Fair Housing Act prohibit?

Discrimination based on race.

What act describes directing individuals based on race to certain properties?

Steering.

What two protected classes were added to the Fair Housing Act in 1988?

Disability and familial status.

Which estate ownership requires the presence of all four unities?

Tenancy by the entirety.