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National Real Estate Exam
- Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?: Because the property deed was held by a third-party trustee instead of the lender, the trustee grants a reconveyance deed to Olivia.
- Warren signed a contract with the Samsons for the sale of property he didn't own. What type of contract is this?: A party can't promise to do something impossible in a contract. Doing so makes the contract void.
- Which amendment to CERCLA says that "innocent landowners" aren't re- sponsible for clean-up of hazardous contamination?: The Superfund Amend- ments and Reauthorization Act, or SARA, says that innocent landowners aren't responsible for clean-up of hazardous contamination.
- With the cost approach to value, what is the replacement cost?: The re- placement cost reflects the cost to build a functionally equivalent improvement, as opposed to the reproduction cost, which is the cost to build an exact replica of the subject, with the same materials and deficiencies.
- Antje's clients closed on their property yesterday, but Antje still has some paperwork that she needs to deliver to them as soon as possible. Under which fiduciary duty is Antje acting?: The duty of accounting may continue even after the transaction closes. The agent must account for any documents or money belonging to the client until it is delivered to the appropriate party.
6. When real estate licensee Brian discovered that Arnold was using a 'Choose Your Neighbor' letter to market a property without also listing the property in the MLS, in the local paper, or even putting a for sale sign in the yard, what charge could he bring against Arnold to the National Association of REALTORS?: REALTOR Brian could charge Arnold with violating Article 10 of the Code of Ethics, which prohibits REALTORS from agreeing to discriminate against people belonging to a protected class.
- What is estate at sufferance?: Estate at sufferance is when a tenant remains on the property after the lawful authority has expired (a holdover tenant), after which the landlord may evict.
- Which entity typically enforces the code restrictions and licensing and in- surance requirements for contractors, thereby enforcing the building code?: - While builders and developers self-regulate to some degree, they're not responsible for enforcing the building code. This is the local building department's responsibility. 9. Under which types of agency agreement may a buyer and agent operate?: - Open, exclusive right to represent, and exclusive agency
- What is a survey?: A survey is used to create, verify, or correct a legal descrip- tion. It's a professional on-site measurement of the lot lines and dimensions of a property.
- Melisa's mother gave her house to Melisa, along with a signed copy of the deed granting ownership to Melisa. Years later, Melisa decides to downsize by selling the property. The title company shows that the property
done with a property. It uses phrases such as "so long as," "while," or "during" to describe the required condition.
- You represent the buyer in one transaction and the seller in a different transaction. What type of agency relationship do you have with the buyer?: You have a buyer agency relationship with the buyer in one transaction and a seller agency relationship with the seller in the other transaction.
- What does the Federal Trade Commission consider to be an unfair ad?: Any ad or business practice that causes or is likely to cause injury is considered an unfair ad, according to the FTC's Unfairness Policy Statement.
- As part of the sales contract, Garth, the seller, was supposed to provide a copy of the seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is this?: A voidable contract can be cancelled by one or more parties because it's missing an essential element. In this situation, Melanie, the buyer, has the right to cancel the contract and have her earnest money refunded.
- How are principal meridians and baselines used in the rectangular gov- ernment survey system?: Each legal description in this system originates at the intersection of a principal meridian and a baseline.
- When the lender gathers all kinds of information about the borrower's assets, debts, income, employment history, and pulls their credit report, the buyer is .: This is all part of the application process.
- In which of the following situations would the state be able to use its
power of escheat?: Escheat occurs when a property owner dies without a will in place, and no heirs or creditors can be found.
- Which of these situations might be addressed by limitations or a subject to clause in the deed Jane is using to convey property to Moira?: A great example of deed limitations is the restrictions that may be placed on a property by an owners association. A subject to clause may refer to an easement held by a neighboring property to get to a road or water source.
- Hannah wasn't able to get the financing to open her boutique, so her mother came on as a silent partner and provided additional cash. Hannah and her mother have an agreement that states Hannah's mother can't be held financially or legally liable if there are any problems with the store. What type of contract clause is this?: Indemnifying one of the contract parties releases that party from all liability or loss.
- Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he so rarely used the cabin that he was thinking of selling it. Drew said that he'd buy it from Hank for $80,000, and Hank agreed that was a fair price. It's two months later, and Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable?: The statute of frauds requires that real estate contracts be in writing. Drew's offer was oral, and thus didn't create an enforceable contract.
- Local authorities lack police power over which of the following?: Local authorities have police power over budgeting, zoning, and subdivision development, but they lack police power over federal government construction projects.
broker has become incapacitated, the listing agreement terminates by force of law.
- Which task is NOT the responsibility of an escrow officer?: The escrow officer is responsible for distributing the earnest money as outlined by the parties or the courts in case of dispute but doesn't have the authority to determine how it should be distributed. 34. Physical characteristics of land include its immobility, indestructibility, and .: Nonhomogeneity is a unique characteristic of land. Even within a single subdivision, two identically sized parcels will have their own unique characteristics: views, access, proximity to other amenities, etc.
- Which of the following is the price a lender believes the property will bring at a foreclosure sale?: Lenders won't lend on what they can't recoup. Therefore, a loan will be based on what a lender would hope to recoup, should a foreclosure sale be necessary.
- Jamison, the seller, is closing on his property with Conrad, the buyer. Jami- son paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?: These taxes have already been paid, so are a prepaid item. They'll appear as a buyer debit and seller credit at closing.
- Jeanetta leases an apartment from Quad City Leasing. Jeanetta has filed a complaint with the state real estate licensing division stating that Maris- sa, Quad City's property manager, breached her fiduciary duty of loyalty to Jeanetta. Which of these statements about this situation is true?: Property managers owe fiduciary duties to their clients (the landlord) and the
community as a whole, not to individual residents.
38. The MARIA acronym helps to identify the five tests of a fixture. Which of the following tests refers to how and whether the item is attached to the property?: Method of annexation refers to how and whether the item is attached to the property. This is the M in MARIA.
- Lowell used to own 17 acres of property on the bay. After last year's hurricanes, Lowell now owns 15.5 acres of bayfront property. Which natural process was responsible for Lowell's loss of acreage?: Avulsion is the loss of land by a sudden, large-scale change in water flow. A hurricane would create a sudden large change in water flow.
- Easements are a type of encumbrance that can affect a property. Which of the following is true about easements?: Easements are a type of encumbrance that can affect a property. Which of the following is true about easements?
- Dean and Michael have an oral contract. Dean said he would sell Michael his bike in return for Michael's vinyl album collection. What does the record collection represent?: Consideration, which is an essential element of a contract, is something of value which is given from one party to the other party in exchange for goods or services. 42. Virginia is finally living her dream—she bought a coffeehouse in a charm- ing college town. After she closed on it, her attorney sat down with her to discuss various business licensing and legal requirements she'll have to meet. Virginia was surprised to learn that her five-table establishment is
business transaction so it's a legal purpose, an offer was made and accepted, and a fee has been negotiated and documented. Which essential element of a valid contract has Sondra not yet considered?: The only element Sondra hasn't considered is whether the consent to enter into the contract was voluntarily given. Only real estate contracts have to be in writing, and parties are legally competent to enter into contracts from the age of 18.
- Esmerelda makes regular monthly payments on her loan. In addition to paying interest, she's slowly paying down the principal of the loan. With each payment she makes, more will go towards the principal and less to interest. What type of loan does she have?: Amortized mortgages are paid off in periodic regular payments of interest and principal. Over time, the portion of the payment made toward principal increases as the portion used to pay interest decreases.
- On average, how many years does a home warranty cover structural damage?: Structural damage can take a while to appear, so homeowners will want to file a claim if it's a decade or less.
- Leon and Beth own 1/13 of a timeshare estate. They own weeks 20 and 21, and 40 and 41. These weeks are inheritable. What type of ownership is this?: Timeshare estates are owned as fee simple estates. They convey all rights of ownership and can be sold or passed down to heirs.
- What is the doctrine of estoppel?: The doctrine of estoppel prevents individu- als from making an assertion or claim, even by actions or behavior, and later denying it. 52. Morty, a land surveyor, was called out to survey a property. After doing
some research, he located the legal description for the property in question. Now, if he could just find the point of beginning located at the iron pin on the southerly line of state route 117, 30 feet east of the oak tree next to Bear Creek. What type of legal description is Morty working with?: Point of beginning is common with metes and bounds descriptions.
- Jenson signed a seller's agency agreement with Susan. A few weeks after that, right before closing, a hurricane destroyed the property. What happens to Jenson and Susan's agreement?: Because the property was destroyed, the listing agreement terminates by force of law.
- Which department typically decides which development projects require a permit or approval?: This is the building department's domain.
- Citytown officials know that they have an abandoned factory site that has been identified for cleanup under CERCLA. When city officials tried to trace the ownership of the property, they found several shell corporations but can't seem to determine which individual or corporate entity actually owns the property. What is a likely outcome of this situation?: CERCLA established a trust fund to finance both cleanup and enforcement actions. This fund is sometimes called the Superfund.
- Alluvion describes new deposits of land that are the result of what natural process?: Alluvion, or new deposits of land, is the result of the process of accretion.
- Robert is the general contractor for a home being constructed in a new development. The foundation has been poured, and he's working with the homeowners to make some decisions that weren't identified in the
it's important for prospective buyers to know about the sewer extension is that it could be costly for residents. Localities may charge up to $10,000 for a home to tie into the sewer system—and in many cases, it's required, not optional.
- Moira has delivered a counter-offer to some potential buyers for her prop- erty. Which of these best states the time frame for the buyers' acceptance?: - The buyers must respond by the time and date specified in the counter-offer.
- You represent the buyer, and another licensee from your brokerage repre- sents the seller in the same transaction. What type of agency relationship do you and the other licensee have with your clients?: You and the other licensee from your firm are in a dual-licensee dual agency relationship. The broker is the dual agent and has designated you to represent the buyer and the other licensee to represent the seller.
- Another term for a valuation is .: Another term for a valuation is a formal appraisal. This is a professional appraiser's unbiased opinion of value.
- What is bulk zoning?: Bulk zoning regulates density by mandating setbacks as well as limits on building heights and lot widths. 67. Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. What agency offers guaranteed loans?: The USDA Farm Service Agency offers guaranteed loans to agricultural lenders.
- The MARIA acronym helps to identify the five tests of a fixture. In MARIA, what do the two As stand for?: The two As in MARIA stand for adaptability of the item to the land's use and agreement of the parties. 69. Cambridge Apartments provides an open parking lot for their residents. There is adequate parking and all spaces are available on a "first-come, first-served" basis. Alton has MS and uses a motorized wheelchair. Must Cambridge reserve a parking place specifically for Alton if he requests?: Rea- sonable accommodation requirements preserve Alton's right to a reserved parking space that fits his needs. 70. Which legal description method uses compass headings and directions?- : Metes and bounds uses compass headings and directions. The rectangular system divides land into townships and further divides those into sections.
- What is the mechanism by which asbestos can cause cancer?: Asbestos is a fibrous material found in certain types of tile, insulation, and siding. These fiber particles are then inhaled and can damage the lungs over time.
- Steve is preparing a market analysis for the Joneses and has selected three comparable (competitive) properties. What's the maximum number of adjustments Steve should make to the Joneses' property?: Steve won't adjust the subject property. Only the comparable sales price is adjusted. If it is inferior, adjust upward. If it's superior, adjust downward.
- Related to reasonable accommodation of being allowed to have an assis-
of other delays in the closing date, Jerrica's interest rate as of the day of closing will increase by 1/4 of a percent. What impact does this have on the closing?: Any interest rate change of more than 1/8 of a percent requires a new Closing Disclosure, triggering a new three-day waiting period.
- Which of the following can be defined as what a property is worth?: Value means worth. It is different from cost and price.
- In the sales comparison approach, using comparables that are five and 15 years old when appraising a subject that is 10 years old is an example of what?: Bracketing is a process in which an appraiser determines a probable range of values for a property by comparing a group of comparable sales to the subject. The appraiser attempts to include both superior and inferior units of comparison such as age, transaction price, etc.
- Stu is buying Freddie's property. What must occur for the transfer of title to take place?: Freddie must intend to convey the property to Stu. The seller (grantor) must deliver a marketable title. The grantee isn't required to sign.
- When an area uses its zoning powers, what must be followed?: An area's comprehensive plan outlines future development plans and goals of the area. Zoning decisions should follow this plan.
- Marcus listed his property with Home Sweet Home Realty and one of its listing agents, Ron Savage. About a month later, Ron filed for bankruptcy. Which of these statements about this situation is true?: Bankruptcy of the broker (not the agent) or the principal terminates an agency agreement
by force of law.
- Sylvia, 15, and her neighbor, Marge, 24, agree that Sylvia will babysit Marge's toddler for the summer for $10 an hour. What type of contract is this?: A voidable contract appears to be valid but because of legal principal, one or both parties have the right to rescind the contract. In this case Sylvia can enforce the contract against Marge but Marge cannot enforce against Sylvia.
- In addition to fines, individuals who violate antitrust laws may face impris- onment for up to what length of time?: Individuals who violate state antitrust law may be liable for $100,000 and up to 10 years of imprisonment.
- "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues, which have now been fixed?" What's the agent's best response to Lamar's question?: A home warranty often covers items that weren't inspected. Also, even the systems that WERE inspected are subject to problems or failure.
- Richard is interested in purchasing some rural land and included outbuild- ings. When reviewing the legal description, he sees the name of a principal meridian. What type of legal description is this?: Legal descriptions that use the RGSS usually include the state, name of the principal meridian, township, and range designations with compass directions and section numbers.
- Which of the following scenarios accurately describes the similarities be- tween an open listing and an exclusive agency listing?: In both open listings and exclusive agency listings the seller doesn't have to pay a
down development and begin remedial action. This impacts development time and cost, and can negatively affect the investor's return.
- Which of these statements about the homeowner's rights of redemption is true?: Because of the length of time it takes to process a property after the foreclosure sale, the homeowner's redemption period may have expired before the lender puts the REO on the market.
- Victor buys a property from Yolanda for $200,000. Using a land contract, Victor agrees to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title?: - The seller retains the title in a land contract. When the loan balance is paid in full, the seller gives the buyer title.
- Brandon has a right-to-use timeshare. What can he NOT do with this type of timeshare?: A right-to-use timeshare conveys the right of possession, but it isn't ownership and therefore can't be sold or passed on to another individual.
- When appraisers look past how a property is being used to determine a more optimal function, what are they determining?: Highest and best use looks past the current use (if there is one) to determine if there is another use that provides a higher value.
- When considering loan risk, which two items will lenders consider in equal measure?: The property's value (as underlying collateral) and the borrower's ability to repay the loan will be equal considerations for the lender.
- what does "north for 314 feet" represent?: Metes (measures) are
the direc- tion and distance of a line forming the boundary of the property.
- John and Michelle received a general warranty deed when they purchased their house from Ted. A couple of months after they moved in, their neigh- bor, Bryant, drove his four-wheeler across their property to access the lake front. John discovered that Ted and Bryant agreed to an easement over Ted's property several years earlier. Which general warranty deed covenant does this represent?: The covenant against encumbrances assures the grantee that no encumbrances exist other than those that are publicly recorded or noted in the deed.
- Jordan works as a property manager for several residential property owners. When she receives security deposits from tenants, how long does she have to deposit them into an escrow account?: Trust funds, which include security deposits, must be deposited within the length of time outlined in each state's laws and regulations. This is typically one, two, or three business days from receipt, but may be longer in some cases.
- Which of these is an example of severability?: Severability refers to the concept that a court can strike down one or more contract terms whiile leaving the remainder in place. 105. Damien and Sandy bought a lot with a condemned house. They want to tear it down and build a duplex, so that they can live on one side and rent out the other. Unfortunately, the property is zoned single-family residential. If they can make a case for economic hardship, they may apply for and be
