National Education - keynv.com

National Education This course workbook should be used in preparation for the National portion of the Nevada

Real Estate exam. The text contains information necessary to pass the 80 multiple choice

question test offered by the NV testing service. The coursework is arranged in a workbook

format for ease of learning. Students are encouraged to correlate the information to a

national reference textbook when necessary.

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Key Realty School (ED3320120) National Page 2

National Table of Contents

Subject Pages

Realty & Personal Property (Realty) 4

Lesson One Vocabulary and Class Notes 5 - 9

Quiz – 1 10

Quiz – 1 Answers & Explanations 206

Lesson Two Vocabulary and Class Notes 11 - 14

Quiz - 2 15

Quiz - 2 Answers & Explanations 207

Lesson Three Vocabulary and Class Notes 16 - 20

Quiz - 3 21


Lesson Four Vocabulary and Class Notes 22 – 25

Quiz - 4 26


Realty Coursework Test 28 - 40

Coursework Test Answers & Explanations 229 - 231

Realty Practice Test 41 - 51

Realty Practice Test Answers & Explanations 242 - 245

Realty Match Maker Exams (Answers on pg 241) 52 - 55

Agency & Federal Laws (Agency) 56

Lesson One Vocabulary and Class Notes 57 - 59 Quiz – 1 60



Quiz - 2 65



Quiz - 3 68


Lesson Four Vocabulary and Class Notes 69 - 72

Quiz - 4 73


Agency Coursework Test 75 - 88


Agency Practice Test 89 - 100

Agency Practice Test Answers & Explanations 246 - 250

Agency Match Maker Exams (Answers on pg 241) 101 - 104


Finance & Appraisal (Finance) 105

Lesson One Vocabulary and Class Notes 106 - 109 Quiz – 1 110



Quiz - 2 114



Quiz - 3 118


Lesson Four Vocabulary and Class Notes 119 - 121

Practice Math Questions and Answers 122 - 124

Quiz - 4 125


Finance Coursework Test 127 - 139


Finance Practice Test 140 - 149

Finance Practice Test Answers & Explanations 251

Finance Match Maker Exams (Answers on pg 241) 150 - 153

National Mock Review Exams 155 - 191

National Mock Review Exam Answers 218 - 219

National Mock Review Exam #15 Answers & Explanations 238 - 240

Sample National NV Testing Center Exam 192 - 204

Sample National NV Testing Center Exam Answers & Explanations 220 - 223

Content outline of the National 80 Question Test 223 - 228

National Match Maker Answers 241

Additional Real Estate Math Questions 254

Additional Real Estate Math Questions Answers and Explanations 259 - 260

Glossary of Frequently Used Real Estate Terms 261 - 297

Nevada State Law Coursework begins after National This workbook consists of two parts, National and State. Both parts have their own page numbers. The State

workbook follows the National workbook.


Realty & Personal Property

Preparation:

Listen to Realty & Personal Property Audio Files

If you are studying with a textbook, use the textbook to

review the recommended chapters for this subject

Study: Review this section of the workbook as a summation

of the most important topics within the subject


Class Notes for Lesson One

TWO (2) DIFFERENT TYPES OF PROPERTY

1) PERSONAL PROPERTY

By definition – anything that is NOT realty (Land)

Also known as chattel

Transferred by a bill of sale

Emblement

2) REALTY

By definition – land, real estate and real property

Transferred by a deed

LAND - From the core of the earth upward in the shape of a cone

including subsurface, surface and airspace into infinity.

Including Fructus naturales (what grows naturally)

REAL ESTATE – Land including:

Improvements or fixtures

Tangible or corporeal appurtenances

Fructus industriales (crops planted by humans)

Emblements (fruit from the annual crops)

REAL PROPERTY – Land and real estate including:

Intangible or incorporeal appurtenances known as

Bundle of Rights

Possession

Control

Enjoyment

Exclude

Disposal

PURPOSE OF DEEDS

Transfer must be in writing to be valid

Recorded to give constructive notice to the world, but not required

Transfer of deed takes place only if the grantee accepts the deed

DIFFERENT TYPES OF DEEDS

GENERAL WARRANTY DEED

Used in most states outside of the far West

Considered the best deed

Warrants seisen (grantor is the owner)

Warrants against encumbrances unless stated

Warrants enjoyment now and forever

QUITCLAIM DEED

Usually only transfers one’s interest onto or off of ownership of realty

Considered least protective deed


DEED OF TRUST/TRUST DEED

Used in the Far West U.S.

Transfers title only to trustee

Buyer retains ownership right of occupancy and bundle of rights

SHERIFF’S DEED

Deed given by the court to effect the sale of property following a foreclosure in

certain states or the outcome of a court hearing

ALL OTHER DEEDS

Less than general warranty deed

More warranties than a quitclaim deed

The word before or after deed gives the promise the deed warrants

Should have title insurance

TITLE INSURANCE

Insurance policy protecting insured from financial loss caused by defect in title to real property

CLTA (California Land Title Association) – protects the grantee

ALTA (American Land Title Association) – protects the mortgagee or beneficiary

TERMS OF TITLE

PATENT: Original conveyance of title from the government to an individual

ROOT OF TITLE: Beginning of ownership of realty by an individual

ABSTRACT: Lists all the activity of title since the root of title

CHAIN TITLE: Lists all grantors and grantees of the realty since the patent

CLOUD ON TITLE: Any claim that may impair title

GAP IN TITLE: An incomplete history in the chain of title

QUIET TITLE: A court order closing a gap or cloud in the chain of title

EQUITABLE TITLE: Land contract – Vendee

LEGAL TITLE: In the deed

DEDICATION OF TITLE: Private citizen giving realty to the government

VACATION OF TITLE: Government giving realty back to the private citizen

MARKETABLE TITLE: Clear title that is reasonably secure from defects or litigation.


ITEMS INCLUDED IN A DEED TO BE VALID

GRANTOR

Person transferring realty, not necessarily the seller

GRANTEE

Person receiving realty, not necessarily the buyer

GRANTING CLAUSE

Defines extent of estate granted, whether it be fee simple or some lesser interest

HOW TITLE WAS TAKEN

States how grantee on deed holds title i.e. joint tenants, tenancy in common, etc.

CONSIDERATION

Money or other valuable things

EXCEPTIONS/RESTRICTIONS

Defines any exceptions or restrictions on deed such as mortgage, lien, easement, etc.

LEGAL ADDRESS/DESCRIPTION

Actual location of property described by:

Lots and blocks or

Rectangular (Governmental) Survey System

Metes and bounds

GRANTOR’S SIGNATURE

RIGHTS & TERMS OF REALTY

RIPARIAN RIGHTS

Applies to river or stream rights

Own to middle of river if you can’t navigate river

LITTORAL RIGHTS

Applies to lake or ocean rights

Own to high water mark

PRIOR APPROPRIATION

Government to administer the right of water within that state

ESTOVERS

Right of tenant to use wood of owner in a lease situation for needs only

EMBLEMENTS

Regarded as personal property

The fruit of the crop

WASTE

Lessor or life estate holder fails to keep realty in the same condition they received

SEVERANCE

Turning realty into Personal Property

ALLODIAL LAND SYSTEM

The basis of real property law whereby individuals can hold clear title to real property

and have full ownership of rights – however, you must use it or lose it

ADVERSE POSSESSION

Acquisition of property by continuous, actual, open, and notorious use of the land of

another without their permission for a specific period of time


TACKING

Combining successive periods of continuous use or occupation of real property to

establish adverse possession or a prescriptive easement

LICENSE

Privilege to be on someone’s property

Can be canceled by licensor (owner) at anytime

Privilege attaches to the person, not the realty

ENCROACHMENT

Illegal physical extension on another’s property, such as a wall or fence

ENCUMBRANCES

Anything that affects value of realty including a lien

FIXTURE

An object that was once personal property and has been attached to realty in a

permanent way

TRADE FIXTURE

A business related article installed by a tenant under terms of a lease and removable by

tenant before lease expires, failure to do so, gives lessor ownership, called accession

TANGIBLE/CORPOREAL

Visible value of realty, something you can touch e.g. a house

INTANGIBLE/INCORPOREAL

Invisible value of realty, more of a right; something you can’t touch e.g. water or sun

rights

DATUM

A horizontal plane from which heights above or below sea level are measured with

original datum in New York City harbor

BENCHMARK

Permanent metal plates throughout cities in U.S. to derive elevation heights

INCHOATE

A dormant spouse’s right in realty while both are alive in a non-community property

state

ALLUVIUM

Addition of soil and rock

RELECTION

An addition of land by receding water

SURVEY

The process by which boundaries are determined for a plot of land, including easements

and encroachments.


After Lesson One

Take the quiz for Realty & Personal Property Lesson One

Learn from the statements made in the quiz

Watch for keywords in quizzes and test


Realty – Quiz 1

1. T F A sheriff’s deed is better than a trustee’s deed in realty

2. T F Deeds are used primarily to transfer realty

3. T F A sheriff’s deed could be used in Nevada to transfer realty

4. T F A sheriff’s deed could be used in the Midwest on a foreclosure of realty.

5. T F The name preceding the word “deed” gives the promises the deed warrants in realty

6. T F Seisen is one of the covenants the grantor gives in a general warranty deed

7. T F Quitclaim deeds usually don’t transfer title in realty

8. T F It would be better to have a general warranty deed than title insurance in realty

9. T F Realty deeds have to be recorded in order to be valid

10. T F A grantee should sign all deeds in realty

11. T F Delivery of a realty deed is considered to be complete when it is accepted

12. T F A bill of sale is only used in commercial transactions

13. T F Alienation means transferring realty

14. T F ALTA title insurance protects the lender

15. T F Realty is recorded to give constructive notice of ownership to the world

16. T F A river right may be known as a riparian right in realty

17. T F An owners stream rights may be known as a littoral right in realty

18. T F The government administering rights to water is known as prior appropriation in realty

19. T F Realty is land only

20. T F Personalty can also be chattel

21. T F Another word for fixture is improvement

22. T F Converting realty into personalty is called severance

23. T F Realty includes the bundle of rights

24. T F Ownership allows air rights in realty

25. T F Transferring of personalty is done by a deed

26. T F Light bulbs are considered personalty when attached in a fixture

27. T F Allodial is the method of acquiring land in the United States

28. T F A tenant’s right to use wood is called estovers

29. T F A tenant who sells the wood of an owner is committing waste

30. T F The bundle of rights gives the owner of the realty the right to lease

31. T F An item in a home that is movable may be realty under certain conditions

32. T F Appurtenances transfer with the realty

33. T F A quitclaim deed is the least protective deed in realty

34. T F A general warranty deed is considered the best deed in realty

35. T F Adverse possession could be a way to acquire realty

Answers and Explanations on National page 206


Class Notes for Lesson Two

FREEHOLD ESTATES – two (2) kinds of freehold rights in realty

1. FEE SIMPLE – two (2) types – can will it

a. ABSOLUTE

i. The highest, best form of ownership – can do everything except government

restrictions

b. DETERMINABLE 1. Condition Subsequent

2. Condition Precedent

Characterized by the phrase “so long as”

Continues until an event should or should not occur

If the event occurs contrary to stated, the estate is lost

Sometimes referred to as Base, Qualified, or Defeasible

Can do everything except government and social restrictions

2. LIFE ESTATES – two (2) types – cannot will

a. ORDINARY – four (4) groups – all four (4) ordinary life estates cancel the life estates owner’s

rights and leases upon death of grantee or other named party:

i. REVERSIONARY INTEREST

1. Grantor or heirs get realty back when grantee dies

ii. PUR AUTRE VIE REVERSIONARY INTEREST

1. Grantor or heirs get realty back if party named other than grantee dies

iii. REMAINDER INTEREST

1. When the grantee dies, the third party named receives a fee absolute or

defeasible estate

iv. PUR AUTRE VIE REMAINDER INTEREST

1. When the person other than the grantee dies, the third party named other than

the grantor gets a fee absolute or defeasible estate

b. LEGAL – three (3) groups:

i. DOWER

1. Wife’s right to realty in a non-community property state

ii. CURTESY

1. Husband’s right to realty in a non-community property state

iii. HOMESTEAD

1. An owner of realty who is an owner occupant is protected from

involuntary debts in some states


RESTRICTIONS ON REALTY

Two (2) types of restrictions:

1) GOVERNMENT RESTRICTIONS (P.E.T.E.)

POLICE POWERS

ESCHEAT

TAXATION

EMINENT DOMAIN

P for POLICE POWERS

Zoning ordinances

Agricultural, residential, commercial and industrial

ASSESSMENTS

Used to pay for improvements

Charged by amount of front footage of property owned

by the individuals next to the improvement

AMENDMENT

Property rezoned for greater use e.g. residential to commercial

DOWN ZONING

Property rezoned to a lesser use e.g. commercial to residential

BUFFER ZONE

Between zones, like a park or a wall

NON-CONFORMING USE

Right to continue use after change in zoning

Grandfather clause – creates an exemption from application of a new

law due to previously existing circumstances

CONDITIONAL USE PERMIT

Allows a person to use property which is inconsistent with zoning in

the area

VARIANCE

An exception or exemption for undue hardship on the current zoning

SPOT ZONE

Allowing a parcel of realty to be used for a different purpose, however,

once use is gone it reverts to original zoning

E for ESCHEAT

Realty reverts to the state if a person dies intestate and has no heirs

T for TAXATION

Process of imposing monetary contribution on realty for

support of the government and the people

E for EMINENT DOMAIN


• Constitutionally granted power to consider taking realty for

public use

• Just compensation must be given to owner and must be for

public good

• Two (2) types:

1) ACTUAL CONDEMNATION - Actual taking of private

person’s realty

2) INVERSE CONDEMNATION - Realty owner forcing the government to

take property left because of government action

2) SOCIAL RESTRICTIONS

• CC&R’s (Conditions, Covenants, and Restrictions) e.g. Homeowner’s

Association’s rules on realty

• If government & social restrictions are different, the more severe

applies

SEVEN (7) WAYS TO TAKE TITLE OF REALTY:

1) SEVERALTY

• One person

2) JOINT TENANTS

• Must be equal interest (2 or more)

• May or may not be married

• Right of survivorship (CANNOT WILL)

• Possession, Interest, Title, and Time (PITT); has to occur simultaneously

• Can convey title without other owner’s permission

• If only one joint tenant sells, new owner becomes tenant in common with remaining joint

tenants

3) TENANTS IN COMMON

• May be unequal interest (2 or more)

• May or may not be married

• No right of survivorship (CAN WILL)

• PITT can occur at any time

• Can convey title without other owner’s permission

4) TENANTS IN THE ENTIRETY

• Must be married

• Right of survivorship (CANNOT WILL)

• Cannot partition or convey real property without both signatures

5) COMMUNITY PROPERTY

• Equal percentages after marriage

• Must be married

• No right of survivorship (CAN WILL THEIR PORTION)

• Realty acquired before marriage can be kept separate as long as there is no commingling of

funds

• Upon death of one spouse, survivor is entitled to their half of realty

acquired during marriage

• Can have separate realty during marriage by gift, will or inheritance


6) TRUST

• Sole or co-owners

• Upon death or incompetence, trustee takes over

• Upon death, title to the realty passes without probate and trustee takes over

• Revocable living trust is revocable during the life of the grantor

7) LEGAL ENTITY

FOUR (4) WAYS OF TAKING TITLE ON REALTY AS A BUSINESS

1) GENERAL PARTNERSHIP

• Liable personally and as a group (must be two or more)

2) LIMITED PARTNERSHIP

• One or more general partners

• General partners completely liable

• Limited partners only liable up to original investment

3) CORPORATION

• Title taken in severalty under the name of the corporation

• Percent of ownership determined by shares of stock

• Stockholders liability usually limited to investment

• Subject to double taxation

• It is possible to have a corporation of only one person

4) LIMITED LIABILITY COMPANY (LLC)

• Limited liability within the organization

OTHER FORMS OF OWNERSHIP INTEREST IN REALTY

• COOPERATIVE

• Title held in form of shares of stock in the corporation

• Owners of the realty are each stockholders

• Each has a proprietary lease

• Taxes are against the corporation (NO DEED)

• CONDOMINIUM

• Owner of the realty holds two titles: one for air space inside the condo and one for the

common areas of development with other condo owners

• Each party responsible for their units taxes, etc. (DEED)

• TIMESHARE

• Own one unit for one week out of one year

• One can own their unit in a leasehold estate or a fee simple

After Lesson Two Take the quiz for Realty & Personal Property Lesson Two




Realty - Quiz 2

1. T F Master plan communities are designed to circumvent local law.

2. T F Certain cities use buffer zones between residential and commercial areas in realty.

3. T F Deed restrictions can define ownership rights in realty.

4. T F Variances are known as exceptions in realty.

5. T F CC&R'S are government restrictions on realty.

6. T F Down zoning applies to realty that is zoned for a lesser use.

7. T F When realty is used under old zoning ordinances, it’s called a non-conforming use

8. T F Spot zoning of realty is for a special use such as a church.

9. T F Escheat is a private right in realty.

10. T F Interest in realty may be taken at different times in joint tenants.

11. T F An amendment to the zoning regulations increases the value of the realty.

12. T F Failure to remove trade fixtures, which gives the lessor ownership, is called allodial

13. T F Fee simple is the best freehold estate in realty.

14. T F Fee determinable estates are hard to sell.

15. T F A dower right would be better than a leasehold estate in realty.

16. T F A life estate holder can never be an owner occupant.

17. T F A remainder person in a life estate would receive a fee simple estate to the realty

18. T F A life estate holder would not take title.

19. T F A woman could take title to her realty without her husband on the title.

20. T F A corporation takes title to their realty in severalty.

21. T F A single woman can take title to her realty in severalty.

22. T F A single man can take title to his realty in severalty.

23. T F The percentage of ownership to realty is proven by how title was taken.

24. T F Joint tenants must have equal percentages in the realty.

25. T F Tenancy by the entireties must have equal percentages in the realty.

26. T F People who take title under community property must have equal percentages.

27. T F Tenants in common may have equal percentages in the realty.

28. T F A general partnership in realty must have all parties equally liable.

29. T F A life estate owner may lease for 50 years.

30. T F In realty, zoning laws are set by each state.

31. T F In realty, the right to will gives an individual a fee estate.

32. T F A life estate owner may lease for 40 years.

33. T F Joint tenants must allow equal partners the first chance to buy.

34. T F In realty, the right of survivorship is present in tenants at common.

35. T F In community property, when either spouse dies, the remaining spouse acquires.



Class Notes for Lesson Three

FIVE (5) WAYS TO OBTAIN REALTY

1) CASH • Given deed on closing—should always obtain CLTA (California Land Title

Association)

2) MORTGAGE • Non-negotiable security instrument on realty

• LIEN THEORY

• Used in the Midwest, East & Southern States

• Law considers that a mortgage creates a lien against real property

pledged in the mortgage to secure payment of a debt

• NOTE

• Negotiable instrument on realty

• Typically FHA, VA, or conventional conforming or non-conforming

loans

• MORTGAGOR

• Becomes borrower payer, the one getting a loan on their realty

from a lender

• MORTGAGEE

• Becomes payee, the one giving a loan on the borrower’s realty

• CLAUSES IN A MORTGAGE

• Acceleration

• In the event of realty default, whole amount of principal and

interest may be declared due and payable

• Alienation

• Balance of realty debt becomes immediately due and

payable if property sold or transferred

• Foreclosure

• Legal procedure whereby realty used as security for debt is

sold to satisfy debt

• Prepayment

• Terms upon which mortgagor may pay entire or stated

amount of mortgage principal at some time prior to due date

with or without penalty

• Insurance

• Indemnification on your realty against loss from specific

hazard or peril

• Impound

• Establishing an account for purpose of paying annual tax

and insurance bills

• Defeasance Clause

• States when payments are completed, mortgagee removes

lien by a satisfaction piece.


• Foreclosure (Court Action)

• Allows the mortgagee to foreclose with a sheriff’s deed

• Equitable Right of Redemption

• A definite period in which mortgagor can make up late

payments on their realty

• Statutory Redemption Period

• Original mortgagor may reclaim realty if full back

payments are made within so many days after foreclosure (each state is

different)

3) DEED OF TRUST/TRUST DEED • Security instrument on realty

• TITLE THEORY

• Used in the Far West States

• Law considers that a trust deed conveys title of realty to a trustee

until the note is paid off

• NOTE


• Typically FHA, VA, or conventional conforming or non-conforming loans

• TRUSTOR

• Becomes borrower and payer, the one getting a loan on realty

• BENEFICIARY

• Becomes payee, the one giving a loan on realty

• TRUSTEE

• Impartial holder of title on a trust deed (title only)

• TRUSTEE’S DEED

• A deed issued after a foreclosure

• DEED OF RECONVEYANCE

• A deed issued by the trustee

• States loan is paid in full

• Gives all rights and privileges back to trustor

• EQUITABLE RIGHT OF REDEMPTION

• Period in which trustor can make up late payments on note

• CLAUSES IN A TRUST DEED

• Acceleration

• In the event of default, whole amount of principal and

interest may be declared to be due and payable at once

• Alienation

• Balance of debt becomes immediately due and payable if

property sold without permission of the note holder

• Foreclosure

• Legal procedure whereby property used as security for debt

is sold to satisfy debt in event of default

• Prepayment

• Terms upon which mortgagor may pay entire or stated

amount of mortgage principal at some time prior to due date

• Insurance

• Indemnification against loss from specific hazard or peril


• Impound

• Establishing account for purpose of paying annual tax and

insurance bills without having to come up with lump sum

4) VENDOR/OWNER WILL CARRY (OWC)

• Real estate purchased without a lender originated loan or cash

• The following terms are synonymous and are the security instrument:

• Land contract

• Installment contract

• Contract for deed

NOTE or PMA

• Purchase money agreement


• Owner carries loan, no lender

• VENDOR

• MUST be the seller

• Retains legal title only

• VENDEE

• MUST be the Buyer

• Has equitable title and bundle of rights

• CLAUSES IN A PURCHASE MONEY AGREEMENT (PMA)

• Defeasance Clause

Notification clause in a PMA (Purchase Money Agreement)

States when payments are completed, vendor removes lien

Removed by a satisfaction piece

If vendee defaults, vendor asks for foreclosure through court

• Equitable Right of Redemption

• Period in which vendee can make up late payments on PMA

• Acceleration

• In the event of default, whole amount of principal and interest may be

declared to be due and payable at once

• Alienation

• Balance of debt becomes immediately due and payable if property sold

• Foreclosure

• Legal procedure whereby property used as security for

debt is sold to satisfy debt in event of default

• Prepayment

• Terms upon which Vendee may pay entire or stated

amount of PMA principal at some time prior to due date

• Insurance

• Indemnification against loss from specific hazard or peril

• Impound

• Establishing account for purpose of paying annual tax and

insurance bills without having to come up with lump sum

5) BY WILL • DEVISE

• Giving of realty in valid will


• DEVISOR • The deceased person giving realty in valid will

• DEVISEE

• The name of a person receiving realty in valid will

• TESTATE

• The name of a person who dies leaving a valid will

• INTESTATE

• The name of a person who dies without leaving a valid will

• TESTATOR

• The name of a male person who makes a valid will

• TESTATRIX

• The name of a female person who makes a valid will

• NUNCUPATIVE WILL

• Oral will or “death bed will” - usually not valid

• HOLOGRAPHIC WILL

• Will made without witnesses - usually not valid

• VALID WILL

• Will made with witnesses; witnesses are known to have given an

attestation

• ADMINISTRATOR

• Male appointed by court to carry out affairs of testator/testatrix

• ADMINISTRATRIX

• Female appointed by court to carry out affairs of testator/testatrix

• EXECUTOR

• Male named in the will to carry out instructions of will

• EXECUTRIX

• Female named in the will to carry out instructions of will

• BEQUEST/LEGACY

• Gift of personal property in valid will

• LEGATOR

• Person giving personal property in valid will

• LEGATEE

• Person receiving personal property in valid will

• CODICIL

• Any change in a valid will before death

• HEIR

• Person acquiring personal property or realty when ancestor dies

intestate

• LAW OF DESCENT AND DISTRIBUTION

• Chain of inheritance established by each state when an ancestor

dies intestate

• DISTRIBUTOR

• Person giving personal property or realty under the

law of descent and distribution

• DISTRIBUTEE

• Person receiving personal property or realty under

the law of descent and distribution


After Lesson 3 Take the quiz for Realty & Personal Property Lesson Three




Realty - Quiz 3

1. T F Alienation is legalese for “due-on-sale.”

2. T F A Mortgage is a security instrument in realty.

3. T F A Deed of Trust is a security instrument in realty.

4. T F A Mortgage is synonymous with a note in realty.

5. T F A Deed of Trust is a negotiable instrument in realty.

6. T F A Deed of Trust is synonymous with a note in realty.

7. T F A Mortgage is a negotiable instrument in realty.

8. T F Legal title and equitable title are basically the same in realty.

9. T F A deed of re-conveyance tells the world the mortgage has been paid in full.

10. T F A dower right does not exist in Nevada in realty.

11. T F A trustee can sell the realty if the buyer is not making payments to the mortgagee.

12. T F Nevada is a lien theory state of realty.

13. T F All states have statutory redemption periods on realty.

14. T F The clause that mandates the beneficiary release the lien is called the defeasance clause.

15. T F In realty, mortgagor is synonymous with vendee, they both make payments to a lender.

16. T F In realty, mortgagee is synonymous with vendee, they both receive payments from buyer.

17. T F In realty, trustor is synonymous with vendor, in that they both make payments to a lender.

18. T F In realty, trustee is synonymous with vendor, they both receive payments from a buyer.

19. T F A vendee is also a grantee.

20. T F A mortgagor has a freehold estate.

21. T F The mortgagee may be the vendor.

22. T F A will can be used to convey realty.

23. T F The changing of a will is known as a codicil in realty.

24. T F A proprietary lease and ownership of stock would occur in a cooperative.

25. T F Title of realty must be taken two ways in a condo.

26. T F A lender can acquire realty from the owner in the form of deed in lieu of foreclosure.

27. T F An acceleration clause allows the mortgagee to collect the entire balance at any time.

28. T F Foreclosure is a legal process occurring when one fails to pay their loan payment on realty.

29. T F There is always a prepayment clause in a note secured by realty.

30. T F Impounded payments will be credited to the buyer when the seller closes escrow.

31. T F Trustor and mortgagor are synonymous in realty, they both make payments to a lender.

32. T F There is no note issued in a Purchase Money Agreement.

33. T F There is no foreclosure clause if the owner will carry the loan on realty.

34. T F A nuncupative will is an oral will usually issued on the deathbed and is usually valid.

35. T F An heir is any person who receives realty from a will.



Class Notes for Lesson 4

FOUR (4) TYPES OF LEASEHOLD/LESS THAN FREEHOLD ESTATES

1) ESTATE FOR YEARS

• A lease for a definite period of time - days, weeks, months or years

• No notice required when lease expires

• All people upon the disposition of realty must honor the remaining lease

period unless the owner had a life estate

2) ESTATE FOR PERIOD TO PERIOD • Lease with an indefinite end date but must specify from what period to what period

• Both lessor and lessee must give an identical period of notice to terminate

• All people upon the disposition of realty must honor the remaining lease

period unless the owner had a life estate

3) ESTATE AT WILL • Lessor consents to tenants staying

• Terminates by notice or death of either lessor or lessee

4) ESTATE AT SUFFERANCE • Created when tenant previous owner wrongfully holds over after expiration of leasehold or

freehold estate without landlord’s consent

• Must involve court to determines rights if tenant previous owner refuses to leave

peacefully

THREE (3) WAYS OF TRANSFERRING TENANT OCCUPANCY RIGHTS

1) SUBLET

• May have to have the permission of the owner

• Original lessee becomes sublessor, person who the realty is sublet to is sublessee

• Original lessee gives up lease but must retake it at a later date

• Lessee remains liable

• Also called a Sandwich Lease

• Sublettee must pay sublettor/lessee who must pay lessor

2) ASSIGN

• May have to have the permission of the owner

• Original lessee gives up all rights to assignee

• If they fail to fulfill original obligation, original lessee/assignor may be liable

3) NOVATION • Must have permission of owner

• Complete substitution of original lessee

• Original lessee is no longer responsible

THREE (3) WAYS OF PAYING TENANT OCCUPANCY RIGHTS

1) GROSS

• Tenant pays a fixed monthly rent e.g. apartment lease

2) PERCENTAGE

• Tenant pays a percentage of gross sales over a period of time plus fixed

monthly rent e.g. shopping mall


3) TRIPLE NET • Tenant pays their share of taxes, insurance and fixed monthly rent e.g.

professional tenant

OTHER TERMS OF A LEASE

• SALE/LEASE BACK

• Seller sells then leases the realty back

• ESCALATION CLAUSE

• Allows an increase in rent by a certain index on the realty

• CONSTRUCTIVE EVICTION

• Allows a lease to be broken by the lessee because the realty cannot be

safely occupied

• ACTUAL EVICTION

• Lessor involves court to force a lessee to be removed from the realty

• DEMISE

• To lease realty

PROPERTY MANAGEMENT

• OBJECTIVES

• Preserve and enhance realty value

• Generate money from realty

• Accomplish owner of realty’s objectives

• COMPENSATION PLANS

• Percentage of monthly billed invoices

• Percentage of collected billed invoices

• Set monthly dollar amount which may or may not include

fringe benefits

• DUTIES OF PROPERTY MANAGER

• The property manager has the responsibility of maintaining financial reports including

operating budget, cash flow, profit and loss statement, and budget comparison

statement.

• The three types of maintenance are:

a. Preventive – routine activities such as painting and servicing systems.

b. Corrective – repairs

c. Routine – day to day activities

• Selection of a quality tenant that can meet their financial obligations will help ensure a

lower turnover rate, lower expenses, and an increased profit for the owner

• The lease agreement should spell out the terms of rental payment, time and place,

penalties for late payment and damages for nonpayment. All terms and records must

comply with state and local laws.

EASEMENTS

• Right of one to use the land of another

• Two (2) types of easements:

• GROSS EASEMENT

• Personal interest or right to use land of another

• Not inheritable or assignable

• Example: a utility company

• APPURTENANT EASEMENT

• Remains with the land it is attached to


• The dominant tenement is the one using the land of another

• The servient tenement is the one allowing the use of their land and

is responsible for all costs of the land including taxes

• Passes to all grantees and is inheritable

• Two (2) types:

• EASEMENT OF NECESSITY

• Necessity of ingress (getting into) and egress

(getting out of) e.g. landlocked piece of land

• EASEMENT BY PRESCRIPTION

• Continuous use of land

• Set by each state - require a definite period of time

• Example: children crossing one’s property on their

way to school

THREE (3) WAYS TO LEGALLY REFERENCE REALTY

1) RECTANGULAR (GOVERNMENT) SURVEY SYSTEM

• Method of land description based on a checkerboard of townships

BASELINES

• Main east and west lines, also called tier or township lines

RANGE LINES

• Imaginary lines 6 miles east and west of the meridian running

north and south

PRINCIPAL MERIDIANS

• Main north and south lines, also called range lines

TOWNSHIP LINES

• Imaginary lines 6 miles north and south of the baseline running

east and west

• TOWNSHIP

• a six mile square area containing 36 sections

• SECTION

1 square mile containing 640 square acres. Sections are numbered from the northeast

corner of a township and run east to west in a six mile area, drop down and then west

to east another six mile till they reach to section 36 in the southeast corner

• GOVERNMENT LOT

• Fractional sections of land measuring less than a quarter section

• CORRECTION LINES

• Usually on the north end of a check to compensate for the

curvature of the earth’s surface

• SECTION 16

• Typically reserved for schools

• ACRE

• One acre is 43,560 square feet

• MILE

• One mile is 5,280 lineal feet

• SECTION

• 640 acres in a section


2) METES AND BOUNDS • Method of land description identifying property by distances and direction

METES - describes distances

BOUNDS - describes direction

• Begins at a point of beginning (POB), follows the perimeter, returns to the POB

• Used extensively in original 13 eastern states and Texas

3) LOT AND BLOCK SYSTEM • LOT - an individual parcel of land intended to be conveyed in its entirety

• BLOCK - a group of contiguous lots bounded by streets in a city block

• PLAT MAP - An aerial view showing a lot of realty in relation to others in

the subdivision

• TOPOGRAPHICAL MAP - An aerial view showing elevation of the realty

LEGAL TERMS TO BE FAMILIAR WITH

• LIENS

• A claim of money one has against the property of another

• All liens are encumbrances but not all encumbrances are liens

• MECHANIC’S LIEN

• Applied by persons making repairs or doing work on the property

• Specific to the realty for owner failing to pay the debt

• Lien takes affect from the day the work began not when finished

• LACHES

• Loss of legal rights due to failure to assert them on a timely basis

After Lesson Four

Take the quiz for Realty & Personal Property Lesson Four




Realty - Quiz 4

1. T F A dedication can transfer realty.

2. T F Root of title means since the dedication of realty.

3. T F A gap in the title of realty could occur because of a person changing their name.

4. T F A cloud on the title of realty could occur because of liens on the realty.

5. T F Recording of realty gives actual notice.

6. T F Good consideration is money.

7. T F The right to own air space in realty would be more than a leasehold estate.

8. T F When the government gives up the right to ownership of realty, it is called dedication.

9. T F CLTA title insurance protects the lender.

10. T F Legal title is defined in the deed.

11. T F Emblements are considered chattel.

12. T F House keys are considered personal property.

13. T F There is only CLTA title insurance.

14. T F In joint tenants, an individual can incur debt on their interest in the realty.

15. T F In a limited partnership, liability is restricted to the limited partner.

16. T F There are only two ways a group of three individuals may take title to realty.

17. T F There is only one way to take title if an individual wanted to will their 40% interest.

18. T F A married person may will the realty if title was taken as community property.

19. T F A fee determinable estate is an undesirable estate in realty.

20. T F A deed will clarify the interest a husband and wife have in the realty.

21. T F One of Tom’s girlfriends is married, Tom still holds title with her as joint tenants.

22. T F A girlfriend of Tom, who is married, could take title to realty in severalty.

23. T F A girlfriend of Tom, who is married, could take title to realty with Tom as joint tenants.

24. T F A life estate is an undesirable leasehold estate in realty.

25. T F A realty that has been sold after foreclosure in Nevada may receive a Sheriffs deed.

26. T F An executor is a person appointed by the court to handle the affairs of a will.

27. T F A legator is a person who receives realty in a valid will.

28. T F Insurance is required to be carried on all types of real estate transactions.

29. T F A statutory redemption period is required by law on all types of real estate loans.

30. T F A beneficiary is the same as a mortgagee, they both receive payments from a buyer.

31. T F There are no impounded amounts when realty is purchased with cash.

32. T F Government restrictions on realty regulate taxation, escheat, zoning, and condemnation.

33. T F The person buying realty is known as a vendee.

34. T F Tacking may be done by several different people so long as it is concurrent.

35. T F You cannot measure the elevation of Las Vegas by a datum.



Realty Testing

Preparation:

• Review all vocabulary from each Subject covered

• Be sure you understand each of the terms and the proper use of the word

• Write each term out if necessary

• Review all your own notations

• Be sure you understand each lesson and the information in them

• Make notes on the outline, in your own manner to better understand the terms

• Review Realty audio portion

• Listen to the Subject several times including the vocabulary portion

• Review lessons you don’t feel comfortable with

• Review each of the quizzes

• Pay specific attention to the questions you got wrong

• Try to figure out why you got it wrong and correct your thought process

• After you have finished the exam, you should grade it then review your answers

• Make notations of questions you got wrong

Try to figure out why you marked it wrong


Realty Coursework Test

DEEDS AND PROPERTY TRANSFERS

1. A Deed of Reconveyance in realty must be executed by the:

a. beneficiary b. trustor

c. trustee d. sheriff

2. When a closed real estate transaction involved a lender, note and trust deed, the lender is the:

a. grantee b. beneficiary

c. trustor d. trustee

3. If realty is sold to the highest bidder at a trustee's sale, the trustor has:

a. one year to redeem b. three months to reinstate

c. no recourse d. 21 days to pay off the loan balance

4. If a mortgage is in default and the mortgagee wishes to foreclose on the realty, the mortgagee would:

a. notify the trustee of the default

b. file an attachment

c. notify the mortgagor of the default, wait three months and publish a notice of sale

d. file an action in court

5. A Reconveyance Deed in realty would be used with:

a. mortgage b. contract of sale

c. trustee's sale d. trust deed

6. If a first trust deed and note encumber the realty, the:

a. beneficiary has possession of the property

b. trustor gives up possession of the property

c. trustee has possession of the property

d. trustor has possession of the property

7. The holder of “naked legal title” in realty best describes the position of:

a. trustee b. trustor

c. mortgagor d. beneficiary

8. A deed that gives the greatest warranty is a:

a. Bargain and Sale Deed b. Quitclaim deed

c. General Warranty Deed d. None of the above


9. In order for a deed to be valid, which of the following is NOT required?

a. grantor signature b. legal description

c. grantee signature d. identifiable grantee

10. Scott delivered a deed to Nadine, but it was invalid because:

a. the deed did not include an address b. taxes still owed were not stated

c. the grantor was competent d. the grantee's signature was missing

11. A bill of sale can best be described as which of the following?

a. a written and legal instrument by which property is conveyed from one person to another

b. a legal document that transfers all interest to the purchaser

c. a written document that shows ownership of realty

d. a written and legal instrument by which an individual’s right in personal property is transferred

12. A deed is unique because it shows the end of ownership by one individual and the beginning of ownership

of another. For this written instrument to be considered valid which of the following does NOT have to occur?

a. consideration b. delivery

c. recording d. signature

13. Billy Joe bought 150 acres of land in Iowa because of the great Okoboji soils. He had farmed a crop of corn

for two months prior to the end of his tenancy. Does Billy Joe still have the right to harvest this crop?

a. the crop is known as fructus industriales and thus may be harvested

b. his crop of corn is known as an emblement, thus he may have a right to harvest the crop

c. the corn was part of the realty thus all rights including agriculture are transferred

d. because of the emblement right there is always a right to any plant life form

14. A general warranty deed is known as the best deed because it is seisened. The other great feature(s) is/are:

a. the covenant of quiet enjoyment b. the covenant against encumbrances

c. a, b, and d d. the covenant of further assurance

15. The best description of severance is:

a. attaching a tangible object to realty b. the combining of realty and personalty

c. turning personalty into realty d. turning realty into personalty

16. Could an irrigation channel be considered an improvement?

a. Yes, anything done to the property is always an improvement

b. No, an improvement can only be personalty added to realty

c. Yes, the channel intends to enhance the value of the property

d. No, the channel is not valuable to any future interests


17. The continuous occupancy of land openly and notoriously without the owner’s permission by more than one

individual over time is known as:

a. acquisition b. adverse possession

c. accession d. tacking

18. An example of a corporeal appurtenance is:

a. a privilege that will transfer with realty c. a right that passes with realty

b. any tangible value that passes with realty d. any improvement to realty that transfers with the realty

19. Realty, by definition, includes land, real estate and real property. What can transfer the interest of the land?

a. a sale b. a transferring deed

c. a quitclaim deed d. a covenant deed

20. A deed must be signed for it to be valid. Who must sign?

a. only the grantor b. only the grantee

c. both the grantee and grantor d. neither the grantee nor the grantor

REALTY AND PERSONAL PROPERTY

21. Each parcel of realty is considered to be:

a. homogeneous b. easily substituted

c. both a and b d. neither a nor b

22. Realty includes:

I. trees II. tree stumps in the ground

III. tree stumps laying on the ground IV. tree branches on the tree

a. I only b. I, II & III

c. I, II, & IV d. all of the above

23. Appurtenances may include:

I. air rights II. water benefits

III. sun rights IV. easements

a. I only b. I & II only

c. I, II & IV only d. all of the above

24. Realty is:

I. land II. attachments

III. non-moveable IV. anything incidental to the land

a. I & II only b. I, II & IV

c. all of the above d. none of the above


25. The term “REALTOR®” is a registered trademark of:

a. NAR b. NARE

c. NABR d. NRA

26. Disputes may be settled between REALTORS® by:

a. filing a civil suit b. seek arbitration

c. file suit to protect your rights d. file for litigation

27. Art Brown leased a single family home for six months. He installed new awnings on the house. Which of

the following would be true?

a. Art must remove the awnings before the rental period is over

b. the awnings are considered fixtures

c. because the awnings are permanent, they are considered personalty

d. both a and c

28. The definition of which of the following includes the "bundle of legal rights"?

a. land b. real property

c. the U.S. Trade Agreement d. real estate

29. Permanent, man-made additions to realty are called:

a. chattels b. improvements

c. fixtures d. both b and c

30. John Abel buys a parcel of land in Las Vegas, however, the state owns the mineral rights to the land.

Which of the following does John own?

a. air rights b. mineral rights

c. surface rights d. both a and c

31. Emblements could be:

a. fructus naturales b. chattels only

c. fructus industriales d. improvements

32. A non-navigable river would give a property owner adjacent to the river:

a. littoral rights b. riparian rights

c. rapacious rights d. all of the above

33. A lessor's right to lease is included under which of the following in the "bundle of legal rights":

a. exclude b. enjoy

c. possess d. dispose


34. Personal Property could be:

I. personalty II. movable

III. chattel IV. something tangible

a. I & II only b. I, II & III only

c. II & III only d. all of the above

35. Realty could be:

I. an estate II. corporeal

III. incorporeal III. an intangible asset

a. I only b. I & III only

c. I, III & IV d. all of the above

36. Ann Aristocrat purchased a parcel of realty so she could sun bathe in the back yard. Two years after

purchasing the realty, Ann discovers a 50-story apartment complex is planned for the vacant lot next to her

realty. The possibility that the complex may block Ann's sunbathing activities forces her to file suit to protect

her rights. Which right(s) is Ann protecting?

I. real property rights II. air rights

III. sun rights IV. estovers right

a. I only b. IV only

c. I, II & IV only d. I, II & III

37. Dickson Jones built a tool shed on his realty. The shed is:

I. a fixture II. tangible property

III. incorporeal property IV. an improvement

a. I only b. I & IV

c. I, II & IV d. all of the above

38. Russell owns a single-family residence in a nice neighborhood. His realty includes:

I. the large rock in his back yard II. the hanging lamp in his living room

III. the smog over his home IV. his backyard fence

a. II only b. II & IV only

c. I, II & IV only d. I, III & IV only

39. The land system used in the U.S. is called:

a. accreditation b. allodial

c. feudal d. alluvium


40. Permanent, man-made additions to realty are called:

a. fixtures b. improvements

c. chattels d. both a and b

41. The giver of a lease is called a:

a. rentee b. strawman

c. lessee d. lessor

42. A tenant leasing a home may hold a(n):

a. conventional life estate b. freehold estate

c. estate for years d. fee determinable estate

43. If the description of real estate uses the term “Point of Beginning,” you could assume it was the:

a. government lot system b. government rectangular system

c. metes and bounds system d. platting system

44. The term “subdivision” is usually associated with the:

a. government lot system b. metes and bounds system

c. lot and blocks d. government survey system

45. Personalty ownership is usually evidenced by a(n):

a. option b. deed

c. chattel d. bill of sale

46. Which of the following may neither own nor convey title to realty:

a. a group of lawyers b. a foreign alien

c. a person using an alias d. a fictitious person

47. A common shopping center lease is called a(n):

a. percentage lease b. open lease

c. gross lease d. net lease

ESTATES AND OWNERSHIP

48. An estate in land could be:

I. less than a freehold II. a freehold

III. a base fee IV. a fee determinable


c. I, II, III & IV d. none of the above


49. Equal ownership must be found in:

I. joint tenancy II. community property

III. tenancy In common IV. tenancy by the entirety

a. I only b. I, II & IV

c. I, II & III only d. all of the above

50. Married individuals may take title:

I. in joint tenancy II. as tenants in common

III. in tenancy by the entirety IV. as community property

a. I & II only b. I & IV only


51. If a decedent's property reverts to the state, the decedent died:

a. testee b. testate

c. intestee d. intestate

52. Molly conveys 40 acres to Bob and his heirs so long as Bob holds Sunday school on the realty each week.

Bob has a:

I. freehold estate fee simple II. leasehold estate

III. life estate only IV. fee determinable freehold estate

a. I only b. I & IV only

c. I, II & IV only d. II only

53. Which of the following is a leasehold estate?

a. freehold estate b. estate of fee

c. less than a freehold estate d. life estate

54. Which of the following is a freehold estate?

a. estate for years b. estate at sufferance

c. determinable d. leasehold estate

55. The estate with the highest quantum of rights is a:

I. fee II. fee simple

III. fee simple absolute IV. fee life

a. I only b. II & III only

c. IV only d. III only


56. A fee simple estate automatically ended upon the happening of an event other than death. This estate was:

a. a fee simple absolute b. a pur autre vie estate

c. an estate for years d. a fee simple determinable

57. Larry purchased the highest interest in realty. He has a(n):

a. estate determinable b. estate for 99 years

c. fee simple absolute d. a one in a lifetime estate

58. Dower refers to:

a. less than a freehold estate b. a marital right

c. a lease estate d. all of the above

59. Jeff conveys to Bill, his father, a life estate. Jeff’s interest is:

a. reversion b. pur autre vie

c. remainder d. re-entry

60. After Bill dies, Jeff will own the property in:

a. severalty b. joint tenancy

c. partnership d. none of the above

61. An important requirement of tenancy in common is:

a. must have “PITT” b. right of survivorship

c. undivided interest d. all of the above

62. In a community property state when a spouse dies:

a. all property is divided between the surviving spouse and the heirs of the deceased spouse

b. only personalty is divided

c. property acquired before marriage must be kept separate

d. during the marriage, all property acquired will be considered obtained mutually

63. In order for Bill and Betty to take title in joint tenancy, they must also:

a. take possession, interest and title at almost the same time

b. take possession and title at the same time

c. take possession, interest and title at the same time

d. take title, time and interest at the same time

64. If A, E & F are joint tenants and A sells her interest to G, then:

I. G would be a tenant in common with E and F II. G, E and F would be tenants in common

III. G, E and F would hold community property IV. E and F are still joint tenants

a. I only b. I & IV only

c. III only d. I, II & IV


65. In a state that recognizes legal freehold rights, the rights of married individuals owning realty would be:

a. consummated b. curtsey

c. dower d. inchoate

66. A last will and testament that is written, dated and signed but NOT witnessed, could be:

a. holographic b. holoplace

c. cupative d. nuncupative

67. A valid will requires which of the following:

a. undue influence b. witnesses

c. a testator under the age of 18 d. none of the above

68. When a decedent's estate reverts to the state via escheat, the decedent died:

a. testate b. a testator

c. intestate d. a testatrix

69. A female person who writes her own valid will is called a(n):

a. executrix b. administratrix

c. intestatrix d. testatrix

70. A living person who is giving away personal property in a will could be known as a:

I. testator II. bequestor

III. testatrix IV. legator

a. II only b. IV only

c. II & IV only d. I & III only

71. Orville died leaving his home to his granddaughter, Mary. Mary is a:

a. testatrix b. desiree

c. devisee d. bequestee

72. Realty held by two or more persons with the right of survivorship describes a:

a. tenancy in common b. partnership

c. joint tenancy d. corporate partnership

73. A tenancy by the entirety has which of the following characteristics:

a. owned by married individuals b. both a and c

c. entire realty of a corporation d. neither a nor c


LAND USE AND ENCUMBRANCES

74. Fred was told by the Department of Transportation that he would have to move out of his home that he

owned and had lived in for thirty years because the new beltway was going to be built on his realty. Fred held

title to the realty in joint tenancy with his wife of forty years. The DOT told Fred to move out immediately due

to eminent domain. Fred refused because:

I. he held the realty in joint tenancy with his wife

II. he held a leasehold estate

III Fred had not been justly compensated

IV. condemnation may only occur when land goes from public to private

a. III only b. III & IV only

c. I, III & IV only d. I only

75. Phil openly used Keith's land that was adjacent to Phil's land during the period of time prescribed by law to

establish adverse possession. Phil was not given Keith's land because:

I. Keith owned a freehold estate

II. Keith was serving in the military overseas during the period to establish adverse possession

III. Keith was in jail during the adverse possession period

IV. Keith was mentally incompetent during the adverse possession period

a. I only b. III only

c. IV only d. III & IV only

76. The procedure, usually a court proceeding, to remove the cloud from a title other than a quitclaim deed is

called:

a. loud title b. lis pendens

c. dead title d. quieting title

77. When title is recorded, it:

I. gives notice

II. makes title good by having it acknowledged

III. gives superior title

IV. gives a presumption of validity

a. I only b. I, II & III only

c. I, II & IV only d. I, III & IV only

78. The information contained on a title insurance policy besides the name of the insured includes:

I. estate of interest II. exceptions

III. conditions of policy IV. legal description


b. II, III & IV d. all of the above


79. If you have clear title you have:

a. evidence of title b. marketable title

c. best title d. excellent title

80. A mortgagee’s interest in realty is released when a:

a. quitclaim deed is recorded b. defeasance clause is recorded

c. trustee’s deed is recorded d. satisfaction piece is recorded

81. When property reverts to the state, it is called:

a. equity b. eminent domain

c. reversion d. escheat

82. The governmental power to levy taxes originates from:

a. escheat b. police power

c. eminent domain d. none of the above

83. An easement by necessity is:

a. both b and c

b. allowed by law, such as ingress and egress

c. acquired by continuous uninterrupted use of the realty for a specified period of time

d. neither b nor c

84. An easement for electrical lines is an example of a(n):

a. easement by necessity b. gross easement

c. prescriptive easement d. all of the above

85. Liens that take precedence over all other liens are:

I. Mortgage liens II. Tax liens III. IRS liens


c. II only d. neither I nor II

86. A life estate may become:

a. an estate in reversion b. both a and c

c. an estate in remainder d. neither a nor c

87. Which of the following is the tenant NOT required to pay in a net lease?

a. utilities b. repairs

c. mortgage d. taxes


88. Which of the following is NOT contained in a deed?

a. habendum clause b. a granting clause

c. acknowledgment d. a defeasance clause

89. To accurately ascertain the exact metes and bounds of real property, you should:

a. obtain a survey b. obtain a search

c. obtain an abstract of title d. obtain title insurance

90. Which of the following terms does NOT refer to a governmental restriction on realty?

a. eminent domain b. title closure

c. police power d. taxation power

91. A tax levied on realty owners to install sidewalks is called:

a. excise tax b. ad valorem tax

c. special assessment d. special charges

92. Transfer of title occurs when:

I. the deed is signed II. the deed is delivered

III. the deed is recorded

a. I only b. I & II only

c. III only d. I, II & III

93. What organization was formed to protect lenders from grantors with bad title?

a. the allodial land system b. the legal lot and block system

c. the American Land Title Association d. Title Law Association

94. A recorded contract for deed that has not been removed from the records is considered:

a. an abstract on the title b. a gap in the title

c. a cloud on the title d. a lien

95. An example of a freehold estate is:

a. an individual’s legal right to possess by means of ownership

b. an individual legal right to possess realty without ownership

c. both A and B

d. neither A nor B

96. Molly bought 150 acres of land in Michigan. She thought a park would be nice to have on part of the

property so she built the park and then gave it to the government. The term that describes her gift is:

a. a vacation b. a dictation

c. a dedication d. answer not given


97. Which of the following is true of a freehold estate?

a. the termination date is known b. it has the potential to be endless

c. it cannot be a fee simple d. there must be a predictable duration

98. If an owner of realty who lives in Nevada and in the house, files a homestead, the owner is:

a. protected from voluntary debts b. exempt from filing taxes

c. protected from unsecured debts d. protected from liens

99. In a land contract, the buyer is known as the:

a. vendor b. trustee

c. optionor d. vendee

100. Mary Sue leased a house from Doris. Mary Sue had a lease for years. Her lease ended on May 31, 1999.

Mary Sue was very ill and could not vacate the house and Doris allowed her to stay until she was better. Mary

Sue had a(n):

a. estate at will

b. estate at sufferance

c. renewed estate for years

d. no right to stay and must leave immediately

Answers and Explanations on National Page 229


Realty Practice Exam

1. Which of the following tests would NOT be applied in determining whether an article of personal property

has become a fixture or remains as personal property?

a. How much did the article cost

b. How is the article attached

c. Is the article adapted to the building or land

d. What is the intention of the person installing the article in the building

2. An estate in fee simple determinable is an example of a:

a. Freehold estate

b. Non-defeasible fee

c. Non-freehold estate

d. Leasehold estate

3. If a widow inherits an estate by will, which grants her the right of use and possession of a parcel of land for

the rest of her life with the provision that the estate will go to her children in fee simple upon her death,

she has received:

a. An inheritable freehold estate

b. A life estate in remainder

c. A life estate in reversion

d. A fee simple absolute

4. The highest and best form of estate in real property is which of the following:

a. Leasehold for years

b. Defeasible fee

c. Life estate in reversion

d. Fee simple absolute

5. A life estate created by the exercise of the right of dower is a:

a. Ordinary life estate

b. Estate pur autre vie

c. Legal life estate

d. Community property

6. Estate for years, periodic estate, estate at will, and estate at sufferance:

a. Are freehold estates

b. Create a legal relationship of landlord and tenant between the parties

c. Are estates that provide title but not possession to the owner

d. Are estates in remainder or reversion

7. Title to real property held in the name of one person only is owned:

a. In severalty

b. As tenancy in common

c. As tenancy by entirety

d. As joint tenancy


8. Which of the following types of ownership requires the four unities of interest, title, time, and possession?

a. Cooperative

b. Tenancy in common

c. Joint tenancy


9. Which of the following includes the right of survivorship?

a. Cooperative

b. Tenancy in common

c. Joint tenancy


10. A person buys a residential unit in a high-rise building and receives a deed conveying to her a fee simple

estate. She also will receive a tax bill for her ownership. She purchased a:

a. Condominium

b. Cooperative

c. Corporation

d. Real estate investment trust

11. Before a new condominium can be sold in Nevada, the buyer must receive a copy of the:

a. Disclosure statement

b. Declaration

c. Bylaws

d. All of the above

12. In the cooperative form of ownership:

a. Ownership is evidenced by shares of stock in a corporation holding title to the building

b. Each owner owns a fee simple interest in the land on which the building is located

c. All owners pay real property taxes on their individual units

d. Each owner holds a freehold interest in the land

13. In Nevada a joint tenant may do all of the following with his or her interest EXCEPT:

a. Sell his or her interest in the property

b. Pledge his or her interest as security for a mortgaged loan

c. Pass his or her interest by will

d. Gift his or her interest prior to death

14. Ownership as tenants by the entirety includes which of the following:

a. The right of one owner to convey title to his or her share of ownership without the participation of

the other owner

b. The right of survivorship

c. Ownership of an unequal interest in the property with another

d. Conversion to ownership as joint tenants if the owners are divorced

15. Which of the following is characteristic of a leasehold estate?

a. It is an estate of unlimited duration

b. The holder of a leasehold estate has title to the property

c. It is a freehold estate

d. The holder of a leasehold estate has possession of the property


16. All of the following statements regarding an estate for years are correct EXCEPT:

a. The duration of the estate must be definite

b. The duration of the estate must be at least one year

c. The estate automatically terminates without notice

d. The contract creating the estate for years may be required to be in writing for enforceability

17. Which is an estate that automatically renews itself for consecutive periods?

a. Estate at will

b. Life estate

c. Periodic estate

d. Estate for years

18. After termination of a lease, the tenant continues in possession of the property without the property owner's

permission. The tenant's status is:

a. Tenant at will

b. Lessor

c. Trespasser

d. Hold over tenant

19. All of the following are considered part of real property EXCEPT:

a. Trees

b. Fences

c. Growing crops

d. Garage

20. Easements are generally created in all of the following methods EXCEPT:

a. Express grant

b. Prescription

c. Assignment

d. Implied grant

21. All of the following statements about easements are true EXCEPT:

a. An easement provides a non-possessory interest in land

b. A servient tenement is the land burdened by an easement

c. A dominant tenement is the land benefited by an easement

d. An easement appurtenant is terminated by transfer of the benefitted tenement

22. Easements may be created in all of the following ways EXCEPT:

a. Condemnation

b. Dedication

c. Prescription

d. Assessment

23. An easement may be terminated by all of the following EXCEPT:

a. Merger

b. Death

c. Grant or deed of release

d. Abandonment


24. A property owner gives another person permission to fish in a lake on the property. The permission is a

temporary privilege and exists in the form of which of the following:

a. License

b. Easement

c. Lease

d. Appurtenance

25. The creation of an easement by condemnation results from the exercise of which of the following:

a. Prescription

b. Eminent domain

c. Dedication

d. Implication

26. Liens, easements, encroachments, and restrictive covenants are all examples of:

a. Emblements

b. Estovers

c. Estates

d. Encumbrances

27. All of the following are examples of specific liens EXCEPT:

a. Mortgage

b. Mechanic's lien

c. Income tax lien

d. Trust deed

28. Creditor A, whose lien is secured by Owner's property, obtained a judgment against Owner on July 10;

Banker B lent money to Owner and took back a mortgage on August 1; Creditor C obtained a judgment for

failure to pay child support on August 20. Which of the above-listed liens will be paid first at foreclosure?

a. Creditor A

b. Banker B

c. Creditor C

d. They will all be paid on a pro rata basis

29. If a property has liens for inheritance tax, income tax, estate tax, and property tax, which will receive

priority in payment at foreclosure:

a. Inheritance tax

b. Income tax

c. Estate tax

d. Property tax

30. To enforce restrictive covenants in a subdivision, a land owner will bring legal action for:

a. Trespass

b. Nuisance

c. Injunction

d. Eviction

31. The doctrine of merger in easements means:

a. The dominant tenement is larger and more valuable than the servient tenement

b. The servient tenement must allow the dominant tenement complete access

c. The easement will be terminated when the dominant tenement and the servient tenement are owned

by the same person

d. The easement is an easement in gross and is utilized by all of the government agencies in the

jurisdiction for delivering utility services


32. The right to take sand, soil, and gravel from the land of another is called:

a. License

b. Profit

c. Easement

d. Lien

33. All of the following is true about a profit EXCEPT:

a. It is assignable prior to death

b. It is inheritable

c. It is transferable prior to death

d. It is terminated at death

34. Permission to use the land of another for a specific purpose is called a:

a. Lien

b. License

c. Profit

d. Easement

35. All of the following are inherent ownership rights in real estate EXCEPT:

a. Air rights

b. Mineral rights

c. Percolating water rights

d. Right of eminent domain

36. An act of taking land by the government is called:

a. Condemnation

b. Eminent domain

c. Escheat

d. Taxation

37. Escheat occurs when:

a. A person dies testate with no living heirs

b. A person dies intestate with no living heirs

c. A person dies in an accident and has no living heirs

d. A person dies intestate and has never been married

38. The government's right to protect the health and welfare of the public is called:

a. Public policy

b. Police power

c. Public domain

d. Police justice

39. Michael J., a Nevada resident and property owner, died intestate and left no traceable heirs. Michael's

property will:

a. Be disposed of according to U.S. Laws of Descent and Distribution

b. Escheat to the state

c. Escheat to the county in which the property is located

d. Be claimed by adverse possession


40. A construction lien is best described as:

a. A general lien

b. A specific lien

c. An open encumbrance

d. A voluntary lien

41. A landowner whose land borders a river has the right to use water from the river. This right is called a/an:

a. Littoral right

b. Riparian right

c. Encroachment

d. Water reversion

42. The theory of water rights that provides that each owner of property bordering a river has the right to a

reasonable amount of water and must use a proportionately smaller amount of water in years of low

water is called:

a. Prior appropriation

b. Equal share

c. Riparian

d. Subjacent

43. Voluntary alienation may occur by which of the following:

a. Condemnation

b. Will

c. Escheat

d. Adverse possession

44. Voluntary alienation during life may occur only in which of the following:

a. Will

b. Foreclosure sale

c. Deed delivery

d. Devise

45. When a person dies testate, the real property:

a. Escheats and is sold at an auction by the state

b. Goes to his next of kin

c. Passes by devise

d. Transfers by intestate succession

46. Which of the following is not a requirement of a valid deed?

a. Must be in writing

b. Must be signed by the grantor

c. Must include an adequate legal description of the property being conveyed

d. Must be acknowledged by the grantor

47. The type of notice provided by recording is which of the following:

a. Actual

b. Reasonable

c. Protective

d. Constructive


48. Of the following types of deeds, which provides the grantee with the greatest assurance of title?

a. Special warranty

b. Deed of confirmation

c. Sheriff's deed

d. General warranty

49. Which of the following covenants assures the grantee that the grantor has the legal capacity to transfer title?

a. Covenant of quiet enjoyment

b. Covenant of right to convey

c. Covenant of seisin

d. Covenant for further assurances

50. A deed in which the wording in the granting clause is "remise and release" is which of the following:

a. Quitclaim deed

b. Special warranty

c. Grant deed

d. Bargain and sale deed

51. A declaration made by a person to an official stating that a deed has been freely and voluntarily signed is

called an:

a. Acknowledgment

b. Authorization

c. Authentication

d. Execution

52. The grantor is not certain that the property she is selling is completely unencumbered, but she is willing to

guarantee the title against defects arising for any action by, through, or under the grantor. The form of deed she

would most likely select to make this transfer would be a:

a. General warranty deed

b. Quitclaim deed

c. Bargain and sale deed

d. Special warranty deed

53. The type of deed used to remove the trust deed when the debt is satisfied is:

a. Deed of surrender

b. Grant deed

c. Deed of reconveyance

d. Special warranty deed

54. A deed passes title upon:

a. Delivery and acceptance

b. Execution

c. Recordation

d. Acknowledgment


55. A claim of title for adverse possession that begins with a father for four years and continues with his son

through the prescribed time period for such possession is called

a. poaching

b. assigning

c. tacking

d. taxing

56. The type of deed that guarantees the title against defects that were created only during the grantor's

ownership is which of the following:

a. Bargain and sale deed

b. Special warranty deed

c. General warranty deed

d. Quitclaim deed

57. An ALTA title insurance policy protects:

a. Owner

b. Lending institution

c. Seller

d. Grantee

58. The successive conveyances of a title are called:

a. Releases

b. Remises

c. Links in the chain of title

d. Abstracts of title

59. Which of the following is a system of title recording?

a. Abstract continuation

b. Records of liens

c. Records of acknowledgement

d. Torrens

60. A title insurance policy may be written to protect all of the following EXCEPT:

a. Owner

b. Licensee

c. Lessee

d. Mortgagee

61. A title insurance policy protects the insured against loss caused by:

a. Defects in the title existing at the time the insured acquired title

b. Defects in the title created during the insured's ownership

c. Defects in title created in the past 40 years

d. Defects in title created by the assumed mortgage

62. All of the following are examples of involuntary alienation EXCEPT:

a. Devise

b. Lien foreclosure sale

c. Eminent domain

d. Execution by judgment creditor


63. A description as follows describes how many acres: "The NE ¼ of the NE ¼ of Section 12":

a. 40 acres

b. 160 acres

c. 320 acres

d. 640 acres

64. In Nevada, written instruments documenting the conveyance of real property

are recorded:

a. In the county where real property is located

b. In the state

c. In the city

d. In the deeds office

65. A transaction in which a lessee transfers the remainder of a lease term without reversion is a (n):

a. Assignment

b. Option to renew

c. Sandwich lease

d. Sublease

66. Which of the following leaseholds has the characteristic of a definite termination date agreed upon by the

parties?

a. Periodic estate

b. Estate for years

c. Estate at will

d. Estate at sufferance

67. An estate at sufferance is:

a. The owner of a freehold estate

b. A trespasser

c. A holdover tenant

d. A lessor in possession

68. When a lease terminates with no right to renew and the tenant fails to vacate, the tenant is holding a(n):

a. Estate for years

b. Estate at will

c. Estate at sufferance

d. Periodic estate

69. According to the Statute of Frauds, an oral lease for five years is:

a. Enforceable

b. Unenforceable

c. Assignable

d. Renewable

70. A lease with a term from January 1 to July 1 of the same year is a (n):

a. Estate for years

b. Estate at will

c. Estate at sufferance

d. Periodic estate


71. The right of the lessee to uninterrupted use of the leased premise is called:

a. Conveyance

b. Quiet enjoyment

c. Quiet commencement

d. Letting the premises

72. If cost of maintenance is increasing and rents are increasing, a fixed lease arrangement for a long term is

advantageous to:

a. The tenant

b. The landlord

c. Both landlord and tenant

d. Neither landlord nor tenant

73. Mr. A buys a building owned by Mrs. X. Mrs. X has leased the building to ABC Company for 7 years. Mr.

A must:

a. Renegotiate the lease with ABC

b. Evict ABC to get possession

c. Share the space with ABC

d. Honor the lease agreement

74. A lease from period to period will not be terminated by:

a. Mutual agreement of the lessor and lessee

b. Eviction by the court

c. Death of the lessor

d. Abandonment by lessee and acceptance by lessor

75. When a tenant under a valid lease, gives up possession of the leased premises to the landlord prior to

expiration of the lease, it is called:

a. Novation

b. Abatement

c. Abandonment

d. Renunciation

76. A lease that provides for an adjustment in rent to cover the lessor's operating expenses is called:

a. Escalated

b. Accelerated

c. Sufferance

d. Gross lease

77. Under a residential lease, if the lessor does not provide habitable premises, the lessee can claim:

a. Eviction

b. Constructive eviction

c. Habitability damages

d. Mitigation of damages

78. A lease with a fixed low base rent plus an additional amount based upon gross receipts of the lessee is a(n):

a. Percentage lease

b. Gross lease

c. Net lease

d. Escalated lease


79. A lease is also known as:

a. Freehold estate

b. Less-than-freehold estate

c. Lessor

d. Rent

80. Under a lease, reversionary interest is owned by the:

a. Lessor

b. Lessee

c. Tenant for years

d. Life tenant



Match Maker 1-1 1. ____ Deed A. Protects Grantee

2. ____ Quitclaim B. Best Estate

3. ____ Estate C. Alienator of Realty

4. ____ Bill of Sale D. U.S. Rule

5. ____ General Warranty E. Ends Upon a Death

6. ____ Chattel F. Air

7. ____ CLTA G. Enjoyment

8. ____ ALTA H. Vendee

9. ____ Grantor I. Land and Casino

10. ____ Grantee J. Transfer Realty

11. ____ Fee Absolute K. Grantor/Grantee/Grantor

12. ____ Life L. What You See

13. ____ Patent M. Personalty

14. ____ Land N. Least Protective

15. ____ Real Estate O. Judge Jabba

16. ____ Real Property P. All Activity of the Realty

17. ____ Constructive Notice Q. For How Long

18. ____ Actual Notice R. Protects Lender

19. ____ Legal Transfer S. So Long As

20. ____ Quiet Title T. Transfer Personalty

21. ____ Equitable Title U. Receiver of Realty

22. ____ Abstract V. Owner of Realty

23. ____ Chain of Title W. Best Deed

24. ____ Determinable Estate X. Recording

25. ____ Freehold Y. Acceptance

*Matching worksheets are designed to assist with building vocabulary. The first number in the title sequence represents the subject and

the second number represents the lesson of the subject. Subject 1 represents Realty / Subject 2 represents Agency / Subject 3 represents

Finance / Subject 4 represents Nevada Law

Answers on National Page 241


Match Maker 1-2

1. ____ Allodial A. Sea

2. ____ License B. Husband’s Right

3. ____ Tacking C. Decrease Use

4. ____ Trade Fixture D. Private to Public

5. ____ Riparian E. Zoning

6. ____ Littoral F. Protects Grantee

7. ____ Emblement G. Both Must Agree

8. ____ Estovers H. Increase Use

9. ____ CLTA I. Exception

10. ____ Dower J. A Wall

11. ____ Curtsey K. Annual Crop

12. ____ Pur Autre Vie L. Intestate

13. ____ Amendment M. Accession

14. ____ Down Zoning N. Wood

15. ____ Variance O. After Marriage

16. ____ Escheat P. Combining Occupancy or Use

17. ____ Buffer Zone Q. Wife’s Right

18. ____ Police Powers R. Government’s Right

19. ____ Actual Condemnation S. Life of Another

20. ____ Eminent Domain T. Land System

21. ____ Severalty U. Four Unities

22. ____ Joint Tenants V. Before Marriage

23. ____ Tenant in Common W. Privilege

24. ____ Separate Property X. Stream

25. ____ Community Property Y. Corporation

26. ____ Entireties Z. May Have Equal Interest




Answers on National page 241


Match Maker 1-3

1. ____ Mortgagor A. Transfer Realty in a Will

2. ____ Grantee B. Non Cupative

3. ____ Trustor C. Lease

4. ____ Beneficiary D. Receiver of Personalty in Will

5. ____ Deed E. Security Instrument

6. ____ Demise F. Violent

7. ____ Remise G. Government/Private Sector

8. ____ Devise H. Length of Time Determines

9. ____ Mortgage I. Human

10. ____ Vacation J. Involuntary Debts

11. ____ Condemnation K. Good Owner

12. ____ Oral Will L. Owner of a Mortgage

13. ____ Administrator M. Purchase $$$$

14. ____ Accession N. Owner of a Trust Deed

15. ____ Adverse Possessor O. Realty Lender

16. ____ Vendor P. Accretion

17. ____ PMA Q. Female

18. ____ Executrix R. Transfer Realty

19. ____ Homestead S. Quit Claim

20. ____ Title T. Private/Public

21. ____ Statutory U. Male

22. ____ Codicil V. Naked Legal Title

23. ____ Legatee W. Equitable

24. ____ Avulsion X. Joint Tenants

Y. State Law

Z. Change in a Will






Match Maker 1-4

1. ____ Encumbrance A. 640 Acres

2. ____ Section B. The Big Oak Tree

3. ____ Mile C. Opposite of E/W Direction

4. ____ Acre D. Earths Curvature

5. ____ Topo E. Only a Suit Filed

6. ____ Cooperative F. Specific Lien

7. ____ Condo G. Entireties

8. ____ General Partnership H. Complete Liability

9. ____ Selling Shares of Stock I. Datum

10. ____ Corporation J. Proprietary Lease

11. ____ Must Be Married K. 43,560 Square Feet

12. ____ Mechanics Lien L. Enforce or Lose Your Rights

13. ____ Les Pendens M. End or Beginning

14. ____ Judgment N. 160 Acres

15. ____ Laches O. Sheriff’s Office Enforces

16. ____ POB P. Security Instrument

17. ____ Government Lot Q. 5280 Feet

18. ____ Meridian R. Effects Value

19. ____ SE ¼ Sec 1 S. SEC

20. ____ Metes and Bounds T. Personalty

21. ____ Writ of Execution U. Negotiable Instrument

22. ____ Chattel V. Elevation Map

23. ____ Deed of Trust W. Court Decision

24. ____ FHA note X. Severalty






Agency & Federal Laws

Preparation:

Listen to Agency & Federal Laws Audio Files

If you are studying with a textbook, use the

textbook to review the recommended chapters for this subject

Study: Review this section of the workbook as a summation of the

most important topics within the subject


Class Notes for Lesson One AGENT

• Someone who represents the interests of another

SALESPERSON OR BROKER/SALESPERSON

• An agent to the broker they work under

• May be special or general agent of broker depending on their employment contract

• May be called buyer’s or seller’s agent representative

TYPES OF AGENTS

• PRIMARY AGENT

• Broker to client

• Salesperson or Broker/Salesperson to Broker

• SECONDARY AGENT

• Salesperson or Broker/Salesperson to Client

LICENSEE

• ONLY in Nevada

• Sales person or broker/salesperson represents their employing broker’s client

• In Nevada, Broker may assign different licensees in same office to represent

different clients

SUBAGENT

• Someone who represents a broker’s client 1 of 2 ways OUTSIDE Nevada

1) SUBAGENT BROKER • A broker from another firm who represents the listing brokers client

2) SUBAGENT SALESPERSON or BROKER/SALESPERSON • A salesperson or broker/salesperson relationship to their broker’s

client

Ask yourself this question: Can you, the real estate agent, do a transaction with the client directly? If the

answer is YES, you are the broker in all 50 states. If the answer is NO, you are a subagent in all states outside

Nevada. In Nevada, you are the licensee of the client.

BROKER

• An agent to their client or principal

• The broker is responsible for the supervision of all who act on behalf of the brokerage

• All Brokers are one from each of the following groups:

• A listing or a buyer’s agent

• A single or a dual agent

• A special, general or universal agent

• LISTING AGENT

• Represents Sellers

• BUYER’S AGENT

• Represents Buyers

• SINGLE AGENT

• Represents only buyer or seller in a transaction, never both in same transaction


• DUAL AGENT

• Nationally

• Broker represents buyer and seller in same transaction with written consent

• Nevada

• Only if licensee appointed by broker represents buyer and seller on a signed

form called consent to act by all parties confirmed in writing

• National and Nevada

Limited fiduciary - cannot discuss motivation of either party or price

and terms

• SPECIAL AGENT

• Agent does one act or series of acts on behalf of client e.g. listing & buying

• GENERAL AGENT

• Agent authorized to do many things for client e.g. property management

• UNIVERSAL AGENT

• Agent authorized to do everything, usually has unlimited power of attorney, makes

agent attorney in or at fact

TWO (2) TYPES OF RELATIONSHIPS

• THIRD PARTY/CUSTOMER (responsibility only)

• Any licensed agent who talks real estate with a seller, buyer, exchanger, exchangee,

lessor, lessee

• Third party or customer owed FHD:

F • FAIR

H • HONEST

D • DISCLOSURE OF ALL MATERIAL FACTS

• CLIENT/PRINCIPAL (responsibility and representation)

• Any licensed agent who signs an agency or duties owed with a seller, buyer, exchanger,

exchangee, lessor, lessee

• Client/Principal owed fiduciary:

• CARE

• CONFIDENTIALITY

• OBEDIENCE

• ACCOUNTING

• LOYALTY

• DILIGENCE

• DISCLOSURE

AGENCY

AGENCY

• Mutual consensual agreement between client and broker

• In Nevada called Duties Owed

TWO (2) TYPES OF AGENCY

1) Expressed

• Written or verbal and definitive by nature e.g. listing agreement

• Ratification

• Client agrees to be bound by agent’s acts

• Agency Coupled with an Interest

• Only agency which cannot be broken

• Agent has an interest in the listed realty outside of ownership


2) Implied

• Actions create agency e.g. leave brokerage for sale sign up after listing

agreement expires

• Ostensible

• You lead someone to believe you are their agent

• Estoppel

• Third party believes agent represents client and client does not deny

• Necessity

• Broken window at clients home, client gone, agent gets fixed,

client reimburses

After Lesson One

Take the quiz for Agency & Federal Laws Lesson One




Agency - Quiz 1

1. T F A lessee may be a principal to an agent.

2. T F A person who is being represented in an agency relationship is called a client.

3. T F Agency is governed by ethical and legal rules.

4. T F In most states a real estate agent can represent a buyer or a seller.

5. T F Agency means that the agent makes all the decisions for the person they represent.

6. T F Both the agent and the person represented have duties to each other in an agency.

7. T F Agency can be created by actions alone.

8. T F Fiduciary describes a person as well as a set of duties.

9. T F Loyalty is an absolute requirement of agency.

10. T F A client receives responsibilities and representation from their agent.

11. T F Agency is the representation of one person by another.

12. T F Agency is the only way a salesperson can help a buyer find a home.

13. T F Real estate salespersons owe primary fiduciary to their broker.

14. T F Agency relationships must be created by written contract.

15. T F Fiduciary requirements are always present in an agency relationship.

16. T F Bob is a salesperson practicing dual agency when representing both buyer and seller.

17. T F Agents and principals in an agency relationship have responsibilities to third parties.

18. T F A real estate firm can collect a commission without representing either party.

19. T F An agent representing a seller and then in the purchase of another home is a dual agent.

20. T F A salesperson could be a special agent of the client.

21. T F Dual agency can be legal only if all parties are told of it.

22. T F Dual agency is always a greater risk for the brokerage, the buyer, and the seller.

23. T F Care is the most important duty in agency.

24. T F A dual agent can have complete fiduciary to the seller.

25. T F Agency must be created by a written contract.

26. T F Loyalty is the least likely to be compromised in a dual agency.

27. T F Working for both the buyer and the seller is single agency.

28. T F One should do dual agency if all parties agree orally.

29. T F Negotiation would be provided to a client.

30. T F A universal agent could be a broker-salesperson.

31. T F A sub-agent of a listing agent works for the buyer.

32. T F A sub-agent of a listing agent has no disclosure requirements to the buyer.

33. T F In dual agency both parties have total agency representation.

34. T F A listing broker must offer sub-agency.

35. T F A listing agent should discuss the role of buyer's brokers with their clients.



Class Notes for Lesson Two FOUR (4) DIFFERENT LISTING CONTRACTS

• Listing contracts are personal contracts between seller and broker

1) EXCLUSIVE RIGHT TO SELL • One broker

• Broker receives a commission no matter who sells

• Must sell during listed period may close anytime

2) EXCLUSIVE AGENCY • One broker

• Broker receives a commission unless owner sells


3) OPEN LISTING • Many brokers as seller wants

• Only the broker who was procuring cause receives a commission

unless owner sells


4) NET LISTING • Broker receives any and all monies over a set selling price of seller

• Usually illegal

• Legal in Nevada

SEVEN (7) WAYS TO TERMINATE LISTING AGREEMENTS

1) Agreement

2) Bankruptcy of either Broker/Seller

3) Death of the either Broker/Seller

4) Insanity of either Broker/Seller

5) Broker loses license

6) May terminate if realty is materially destroyed

7) The realty sells

SHERMAN ANTITRUST ACT

• No set commission fees for brokerages on listings

PROCURING CAUSE

• An agent may get a real estate commission without actually selling the realty, providing they were the

reason the buyer bought the realty

PROTECTION CLAUSE

• If realty gets sold to someone who saw it during listing period, but buys it after listing expires the

listing agent may get paid after listing ends if they notified seller prior to end of the listing of

prospective buyers

• Usually the number of days re negotiable

PUFFING

• An opinion, not made as a representation of fact

• Puffing is legal

PAROL EVIDENCE RULE

• Only written contract is valid, anything orally must be in written contract or not

Valid


REALTORS® and MLS

• MLS listing service provided by board of REALTORS®

• The sharing of all things that occur regarding the realty to all members

• REALTORS® should never litigate only mediate

OPTIONS

• A seller (optionor) gives a buyer (optionee) the right to buy the realty within a certain time frame

• The buyer usually pays a fee for this right, however, does not have to complete the transaction

• The seller cannot force it

• Unilateral contract

INSTALLMENT CONTRACT/LAND CONTRACT/CONTRACT FOR DEED

• VENDOR

• Seller

• Retains legal title of realty until vendee pays money owed on realty

• VENDEE

• Buyer

• Takes possession of realty upon signing land contract and makes periodic

payments over a length of time

• During that time the vendee has equitable title.

OFFERS

• OFFEROR

• Anyone who makes an offer

• Brings about M&M’s (meeting of the minds)

• OFFEREE

• Anyone who receives an offer

• COUNTER OFFER

• Original offer void

• Switches position of original offeror & offeree

• Original offeror is now offeree and original offeree is now offeror

FRAUD

• An intentional misstatement of fact

MISREPRESENTATION

• Unintentional misstatement of fact

VICARIOUS LIABILITY

• The responsibility of one for the actions of another, if they have knowledge of the negligent act

SCOPE OF WORK

• A licensed agent should not attempt to provide services outside of their field of competence

• A licensed agent is not qualified to craft or add provisions to contracts that are complex and

problematic that may lead to litigation

• A licensed agent is not permitted to market to any consumer listed on the National Do Not Call

Registry which is a list of phone numbers wherein the consumer limits the amount of marketing calls

EARNEST MONEY

• Not a requirement for a realty contract to be valid - usually provided by buyer to show good faith


MEETING OF THE MINDS

• M&M’s

• Parties involved in a realty contract agree and put it in writing

• Commission is earned when communicated to everyone, equitable title passes

• Equitable title of realty to the buyer

COE

• Close of escrow, commission is paid on the sale of the realty

TIME IS OF THE ESSENCE

• Certain things must be done for realty contract to be completed, doesn’t mean right now. You, the

professional, get it done in time

LATENT DEFECTS

• Owner is aware of defect on the realty, but agent and buyer cannot see with the naked eye

• Illegal

• Owner must disclose

PATENT DEFECTS

• Everyone can see a defect on the realty

CAVEAT EMPTOR

• Buyer Beware

• No longer applies, all material facts on the realty must be disclosed

E&O’s

• Errors and omissions insurance for the real estate agents

• Usually will not cover acts of discrimination

AUCTIONS

• Auctioneers are only taking offers at an auction for realty

• Only time an auction would be final is when it is an absolute auction

IRREVOCABLE OFFER

• No such thing

• All offers on realty can be revoked until there is a meeting of the minds (M&M’s)

COMMISSIONS (make sure you know this)

• Mutually agreed upon by client and broker

• Usually paid a percentage of sales/lease price

• Paid only to licensed broker

• Commission due if client backs out or contract canceled due to fraud on client's part

• Broker can only share commission with own salespeople and other licensed

brokers and clients in Nevada

• Salespeople can never share a commission between themselves

• Commission splits between salespeople and broker is separate agreement

between the two

• Commission not paid from broker to salespeople is normally a civil matter

• Commissions legally earned as broker, but not paid by client is a civil matter

• The salesperson cannot sue the client for commission because agreement is


between broker and client

• If the broker does not sue the salesperson cannot collect.

• Bonuses must be paid through the broker

• All offers must be presented, oral and written

• All ads must include the brokerage name

• All monies must be given to broker by the next business day

• The broker must do something with the money one business day after M&M’s

After Lesson Two

Take the quiz for Agency & Federal Laws Lesson Two




Agency - Quiz 2

1. T F A real estate agent must be a broker.

2. T F A real estate agent can represent a customer.

3. T F Under most real estate transactions, the agent is a special agent.

4. T F A listing is considered an expressed agency.

5. T F Most real estate listings are considered exclusive agency listings.

6. T F Misrepresentation by an agent on behalf of a client can be a breach of the agents' duty

7. T F There are four general types of listing agreements.

8. T F Compensation in a real estate transaction could be a boat.

9. T F Compensation, in certain cases, can be paid directly to the broker-salesperson.

10. T F One dollar could be an earnest money deposit.

11. T F An I.O.U. could be an earnest money deposit.

12. T F An optionee could be a future vendee.

13. T F A dual agent could be a broker-salesperson.

14. T F Net listings are illegal in most states.

15. T F The agent delegates power.

16. T F The principal and agent relationship is always consensual.

17. T F Brokers can use subagents at their discretion.

18. T F Customers never have representation from their brokerage.

19. T F An agency begins when a buyer looks at a home with a broker.

20. T F Representation starts with the signing of a listing contract.

21. T F Compensation determines agency.

22. T F Bankruptcy may terminate an agency.

23. T F Death may terminate an agency.

24. T F Death of a broker will terminate an agency.

25. T F Death of the listing agent will terminate the agency.

26. T F Destruction of the realty must terminate an agency.

27. T F Condemnation of the realty will terminate an agency.

28. T F Agreement may terminate an agency.

29. T F There is one agency that can never be terminated without agreement.

30. T F Responsibility starts with the signing of a disclosure statement.

31. T F Fiduciary guarantees the broker will perform.

32. T F Care means using skill in performing a task.

33. T F Obedience means obeying all instructions from a principal.

34. T F Disclosure means the agent should be aware of all material facts in the agency.

35. T F Accounting means the salesperson must account for all funds in the transaction.



Class Notes for Lesson Three STATUS OF CONTRACTS

• A contract is VOID if there is:

• An act of Government

• An act of God

• No offer

• No acceptance

• Not legal

• No consideration (money or love)

• A contract is VOIDABLE if:

• One is infant

• One is intoxicated

• One is incarcerated

• One is insane

• One has committed fraud

• One has committed menace

• One has committed duress

• One has committed undue influence

• If voidable

• The infant ALWAYS has the option of terminating the contract

• The adult can do nothing

• A contract will be UNENFORCEABLE if:

• A lease for more than 1 year is not in writing

• Any buying of real estate is not in writing

• Any selling of real estate is not in writing

• All deeds are not in writing

• All leases for one year or less may be oral or written to be enforceable

• A contract is VALID or BINDING if it is:

• Two or more parties are accountable in a court of law, if dispute arises

CLASSIFICATION OF CONTRACTS

• All contracts must have one of each of these three (3) sets of components:

1) EXPRESS/IMPLIED • EXPRESS

• Oral or written, but definitive

• IMPLIED

• Actions/conduct

2) BILATERAL/UNILATERAL • BILATERAL

• Two or more parties agree to do or not to do

something


• UNILATERAL

• One party has to wait for the other party to perform

e.g. an option

3) EXECUTORY/EXECUTED • EXECUTORY

• Something remains to be done

• EXECUTED

• Everything is done e.g. COE

TERMINATING A SALES CONTRACT

• Agreement after M&Ms

• Disagreement after M&Ms creates breach

• Four (4) results of breach:

• RESCISSION [NO COURT]

• Both parties void/cancel the contract in such a way as to treat it as if

it never existed

• LIQUIDATED DAMAGES [NO COURT]

• When both parties agree on the dollar amount to terminate the

contract

• DAMAGES [COURT]

• The judge decides the dollar amount of damage

• SPECIFIC PERFORMANCE [COURT]

• The judge decides who gets the realty

• Assignment

• Novation - complete substitution

• Completion

• Doesn’t matter who dies when there is a sales contract, it continues unless there was a contingency

After Lesson Three

Take the quiz for Agency & Federal Laws Lesson Three




Agency - Quiz 3

1. T F Fraud is an intentional misrepresentation of fact.

2. T F Puffing is legal.

3. T F “Time is of the essence” means right now.

4. T F Parol evidence rule requires what you say, to be in the contract, in order to be valid.

5. T F A valid contract transfers the realty.

6. T F A procuring clause is very important in an open listing.

7. T F An MLS listing is the best listing to have.

8. T F Most listings should have a definite start and end date.

9. T F The board of REALTORS® requires all listings to be exclusive-right-to-sell.

10. T F A minor may enter into a contract.

11. T F A valid contract must be in writing.

12. T F The offeror must be the buyer.

13. T F An optionor could be the buyer.

14. T F A vendee must have been the buyer.

15. T F Statute of Frauds applies to all real estate contracts.

16. T F A contract with a minor is void.

17. T F An oral contract is usually unenforceable.

18. T F A contract with an adult is always valid.

19. T F A contract between an adult and a minor may be valid.

20. T F An intoxicated person may not enter into a contract.

21. T F A contract that states the terms is an expressed contract.

22. T F An implied contract must contain certain words in order to be valid.

23. T F A listing agreement in real estate is an excellent example of an executory agreement.

24. T F Waiting for a performance in a contract is an example of a unilateral contract.

25. T F Meeting of the minds can only occur if it is communicated to the offeree.

26. T F Consideration means money, services or love.

27. T F Assignment in a contract means complete substitution.

28. T F A person signing a contract while intoxicated will render the contract void.

29. T F Statute of Frauds applies to the length of time a contract may be valid.

30. T F Agents can never buy property for themselves and get a commission.

31. T F A breach in a real estate contract can be corrected by the parties to the contract.

32. T F A person who breaches a real estate contract may win in a court of law.

33. T F If a real estate contract is breached, damages are determined by a court of law.

34. T F When there is a breach of contract, a seller could be successful in a suit for performance.

35. T F Equitable title passes as soon as there is a meeting of the minds in real estate.



Class Notes for Lesson Four

FEDERAL REGULATIONS REGARDING REAL ESTATE

CIVIL RIGHTS ACT of 1866

• Prohibits any type of discrimination in realty based on race

CIVIL RIGHTS ACT of 1964

• Prohibits discrimination in housing with Federal funds involved

JONES vs. MAYER

• Civil Rights Act of 1866 upheld in Federal Court

FAIR HOUSING LAW of 1968 [residential only]

• Prohibits discrimination in housing based on race, color, religion or national origin

• The following acts are prohibited under this law

• BLOCKBUSTING

• Inducing people to sell their realty by using a fear tactic

• STEERING

• Channeling people to certain areas for realty

• REDLINING

• Lending institutions denying loans because of the location of the

realty

• THREE (3) SITUATIONS EXEMPT FROM THE LAW OF 1968

Providing you don’t use a broker

Providing you never discriminate because of race

Providing you don’t use discriminatory ads

1) Providing the owner owns three or less homes, has not sold one in the last twenty four months, and is

not selling the one they’re living in now.

2) The rental of rooms in an owner occupied multiple dwelling for duplex, tri-plex or four-plex

3) The sale, rental, or occupancy of dwellings owned and operated by religious organizations

FEDERAL FAIR HOUSING LAW of 1974

• Those dealing in real estate must display a fair housing poster which gives prima

facie evidence that they do not discriminate and prohibits discrimination in

housing based on sex (gender)

FEDERAL FAIR HOUSING LAW of 1988

• Bars discrimination based on handicap and familial status

• Handicap includes any mental or physical impairment including cancer, AIDS

alcoholism, speech, hearing or sight impairment

• Familial status includes the presence of any children under the age of 18, you are

pregnant, you have an adopted child under 18 or you’re in the process of adopting

a child

• Exemptions from familial status protection:

• All housing occupied or intended to be occupied by residents 62 years

or older

• In housing designed for older persons with at least 80% of all units occupied has at least one

person age 55 or older


COMPLIANCE RULES

Apply in all discrimination instances

Have one year to file a complaint with HUD and they will investigate

If charge of discrimination is issued a remedy may be sought by an administrative hearing

conducted by an Administrative Law Judge

The penalties for violation change often, please see Hud.gov for the current penalty schedule.

One penalty for the first offense

A larger penalty if prior offense within 5 years

The largest penalty for two or more offenses within 7 years

If the parties elect, a civil suit may be filed in federal district court at any time within 2 years of the

discriminatory act

AMERICAN with DISABILITIES ACT of 1992

• Eliminated discrimination against individuals with disabilities

• TITLE I

• Employers with 15 or more employees cannot discriminate against qualified

applicants with disabilities

• TITLE II

• All government buildings and public transportation must be accessible for

people with disabilities

TITLE III

After 1/26/92 all private businesses must be accessible to handicap people

TITLE IV

All telephone companies must provide hearing and speech impaired telecommunications 24

hours a day

LEAD BASED PAINT of 1992

Any structure built before 1978 must address the hazards of lead based paint

COLORED GAMING DISTRICT OVERLAY of 1997 (WITHIN NEVADA)

Sellers of new homes must provide the buyer with a colored gaming district overlay of proposed

gaming establishments

Must be updated every 6 months

Applies to counties with a population over 700,000

EQUAL CREDIT OPPORTUNITY ACT (ECOA)

Lenders cannot discriminate against credit applicants because of race, color, religion, national origin,

handicap, sex, age, familial status, marital status or dependence on public assistance

If you are refused credit, you must be given a reason in writing within 30 days

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) of 1974

Enacted to ensure all parties in a real estate transaction that they are aware of

the settlement costs in the purchase of one-to-four family homes

Must be given a booklet called “Settlement Costs and You”

Must be given a good-faith estimate of settlement costs upon application or within three (3) business

days

Must give a uniform settlement statement (also called a closing disclosure) designed to detail all

financing particulars of the transaction

Prohibits kickbacks to lenders or any other agency for unearned fees

Applies only to residential first mortgages


TRUTH IN LENDING LAW (REGULATION Z)

Part of Consumer Protection Act

States that borrowers and customers in need of consumer credit are given meaningful information

with respect to the cost of credit

Lenders must provide understandable credit information including APR, loan fees, finder’s fees,

charges, points, interest, etc.

Any type of information such as monthly payments or interest rates that are advertised by real estate

agents will trigger a complete disclosure

Does apply to personal uses under $25,000

Three day right to rescind

TAX REVISION of 1997

• RESIDENTIAL OWNER OCCUPIED REALTY

• There will be no capital gains tax if you have owned and occupied the

home as a principal residence for at least two of the previous five years before the sale. You

can exclude up to $250,000 of the gain if single and $500,000 if married

• Basis is the purchase price of the realty

• Improvements are added to the basis

• INVESTMENT REALTY

• Straight Line Depreciation - on investment realty only

Residential investment over 27.5 years

Commercial investment over 39 years

Cannot depreciate land

1031 EXCHANGE

• Realty is exchanged for like real property

• Delays any capital gains tax

• ACCOMODATOR/INTERMEDIARY

• The person who handles the exchange

• BOOT

• Money or anything else that is not like-kind which is given to make up the

difference in value or equity between exchanged realty

• If the realty exchanged is not equal in value to the money received, the

person who receives the additional money has to pay capital gains tax on

the boot

• STARKER EXCHANGE

• Also called a delayed exchange

• Realty is not exchanged simultaneously

• A deadline of 45 days exists for the naming of realty to be purchased

• A deadline of 180 days for the closing of escrow on the realty from the date of

original closing

TRANSFER TAX

• Paid anytime realty is transferred

• Paid to the county in Nevada


After Lesson Four Take the quiz for Agency & Federal Laws Lesson Four




Agency - Quiz 4

1. T F Listing brokers must offer cooperation and compensation to buyer's brokers.

2. T F A disclosed dual agent represents a buyer and seller.

3. T F Whoever compensates the salesperson is their client.

4. T F Offices that practice single agency never take listings.

5. T F A salesperson could be a general agent of the client.

6. T F A subagent represents a broker's client.

7. T F A buyer’s broker represents the listing broker's client.

8. T F A universal agent has power of attorney.

9. T F Estoppel agency occurs only during a written contract agreement.

10. T F Laws of agency define the rights and duties of principals and subagents.

11. T F In Nevada, a licensee may be the agent of the seller.

12. T F A sub-agent is an agent to the broker's client.

13. T F Loyalty means the agent places all interest of the principal above others.

14. T F Confidentiality means the agent can never disclose material facts w/o principal's okay.

15. T F Diligence means the agent informs the principal of all facts relating to the realty.

16. T F A latent defect may be failure to disclose a building code violation.

17. T F A salesperson could be the listing agent.

18. T F Real estate agents owe fiduciary to anyone they meet.

19. T F A broker receives compensation whenever there is a client relationship.

20. T F All listings belong to the brokerage.

21. T F All sales belong to the brokerage.

22. T F An agent may represent someone.

23. T F A broker may represent someone.

24. T F A salesperson may represent someone.

25. T F Legal title in real estate always passes in a sale when the buyer takes possession.

26. T F Contingencies must be met in order to have a valid real estate contract.

27. T F A casino could be sold under a land contract.

28. T F Earnest money must be present in a valid contract.

29. T F A real estate agent could be a sub-agent.

30. T F An implied contract in real estate is illegal.

31. T F An act of God renders a contract voidable.

32. T F Fraud renders a contract voidable.

33. T F An intoxicated person renders a contract void.

34. T F A contract can be terminated by novation.

35. T F A contract can be terminated by assignment.



Agency Testing

Preparation:

• Review all vocabulary from each segment covered






• Review Agency audio files






• After you have finished the exam, you should grade it, then review your answers




Agency Coursework Test BROKERAGE

1. Listing agreements usually give a broker the authority to:

a. convey title to the property

b. guarantee the buyer that the seller will convey clear title to the realty

c. locate a buyer and accept the buyer’s offer on behalf of the seller

d. locate a buyer, fill out an offer and present the offer to the seller

2. The Code of Ethics of the National Association of REALTORS® suggests an excellent set of standards for

real estate brokers and salespersons. Which of the following is NOT contained in that code?

a. A REALTOR® should not engage in the unauthorized practice of law

b. A REALTOR® should protect the public against fraud and unethical practices in real estate transactions

c. A REALTOR® should not accept compensation from more than one party to a transaction without the

disclosure to all parties

d. Disputes with other REALTORS® should be settled through litigation

3. Which of the following would NOT terminate a listing agreement with a broker?

a. Client files for bankruptcy protection

b. The country is experiencing an economic depression

c. The listed property is destroyed by fire or earthquake

d. The broker was unable to find a buyer before the expiration of the listing agreement

4. A broker earns the commission when:

a. a contract of sale has been signed by both parties and communicated

b. escrow has been opened

c. the deed has been signed and delivered by the seller

d. the deed has been recorded and escrow closed

5. Functions of a real estate broker include:

a. soliciting and securing listings b. assisting buyer and arranging financing


6. A real estate brokerage firm may be formed as a:

a. corporation b. Real Estate Investment Trust


7. A real estate brokerage is primarily concerned with

a. enhancing the market value and marketability of listed realty

b. obtaining below market prices for buyer clients

c. recruiting a large sales force willing to work for minimum commission splits

d. bringing parties together and consummating real estate transactions in return for a fee or commission


8. Which of the following business forms for a real estate brokerage would require more than one owner?

a. partnership b. corporation

c. Both a and b d. Neither a nor b

9. A brokerage locates prospective buyers as a result of:

I. referrals from satisfied buyers II. referrals from satisfied sellers

III. referrals from other brokers IV. advertising



10. A broker must withhold income taxes and FICA taxes from salespersons that are hired as:

a. employees b. independent contractors

c. Both a and b d. Neither a nor b

11. The term "procuring cause" would be important:

a. in a dispute over commission on an open listing b. when securing a listing agreement

c. in the sale of government land d. in a lawsuit against a licensee involving fraud

12. Billboard advertising regarding a brokerage's expertise in condominium sales would be:

a. a blind ad b. institutional advertising

c. specific advertising d. none of the above

13. Real estate brokers advertise in order to:

a. attract prospective buyers b. attract prospective sellers

c. promote goodwill & confidence in the broker's firm d. all of the above

14. Slim is a salesperson for Broker Bob. Slim may receive a commission from:

I. Broker Bob II. an executor

III. A seller IV. both buyers and sellers

a. I only b. I & II

c. I, II, & III d. IV only

15. Jim Smith is a salesperson for Broker Babs. Smith may do which of the following:

I. Receive a commission from a cooperating broker after successfully completing a sale

II. Work as an independent contractor for Broker Babs

III. Place an ad in the newspaper providing he gives Broker Babs' phone number

IV. Do consulting work in real estate with Broker Bab's knowledge

a. I & II only b. I, III & IV

c. II & IV only d. all of the above


16. Homeowner Rice had an open listing with Brokers Babbitt, Bruce, Barney & Bace. Bruce showed the

home twice. Babbitt showed the home four times and Bace showed the home three times in one week. Barney

showed the home once and Barney's buyer decided to go directly to Rice to save the commission and get a better

deal. Rice said no because:

a. Commission or not, the home is the same price

b. Rice had to pay expenses to all four REALTORS® for their time

c. Barney was the procuring cause and Barney was entitled to compensation under the open listing

d. Barney must write the offer in order to be the procuring cause

17. Broker Bill just received $10,000 earnest money on a sale of property that he listed. Broker Bill should put

the money into:

a. a checking account b. a 15% money market fund

c. a trust account d. a savings account

18. In the above question, if Broker Bill had taken the earnest money and placed a wager on the Bulls to win the

1995 NBA championship he would have been:

a. commingling b. smart because the Bulls are sure to win

c. guilty of conversion d. guilty because CD's are the only place you can put earnest

money

19. The following are usually contained in an exclusive listing agreement:

I. commission rate II. agent's responsibilities

III. start date IV. ending date

a. I, III & IV b. I, II & IV

c. I, II & III d. all of the above

20. The best type of listing for a REALTOR® belonging to the MLS is:

a. exclusive-right-to-sell b. exclusive listing

c. open listing d. option listing

21. Broker Bob listed a property for $60,000 for homeowner, Foot. Bob receives a call from Taylor, gets an

offer from Taylor and Foot accepts. Broker Bob’s responsibilities to Taylor are:

I. Honesty

II. Fiduciary

III. Fair

IV. Disclose all facts including that his fiduciary responsibilities lies with Foot.

a. I & II b. I & III

c. I ,III & IV d. all of the above


22. What should a broker do when he becomes a dual agent?

a. Notify the seller only b. Notify the buyer only

c. Disclose the dual agency to both parties d. Decline to represent either party

and get their consent

23. When a salesman receives deposit money, he should:

a. use it now to pay his eventual commission at the close of escrow

b. give it to his brokerage

c. deposit it in his personal checking account for safe keeping

d. give it to the seller as soon as possible because "time is of the essence"

24. Broker Buff receives a call from Billy Bob in Kentucky. Billy Bob tells Buff that he is sending a

prospective buyer to him in Las Vegas. Buff and Billy Bob are old fraternity brothers. Buff finds a home and

sends Billy Bob $150 and a thank you note. This is:

a. strictly illegal b. illegal only if Buff is not a REALTOR®

c. strictly legal d. legal if Billy Bob is a salesperson for ABC

Realty

25. Broker Ted gave his daughter a new car for Christmas. Broker Ted also had a listing from James Major.

The price of Major’s property was at the market value of $240,000. Broker Ted's son-in-law asked him to make

an offer on Major's property for $250,000. Major accepted the offer and Ted's son-in-law became the happy

new property owner.

a. Legal because Ted did not have to explain the buyer's relationship as long as the offer was over market

value

b. Illegal without explaining the buyer's relationship to Ted

c. Legal because a broker must only divulge wife, son and daughter relationships

d. Illegal because relatives cannot buy broker's listings without going through a strawman

26. Broker Jackson lists a home for $80,000 even though he knows the market value is $55,000. Seller Sue

receives an FHA offer for $75,000 and accepts. The deal does not go through because FHA appraises the

property at $55,000.

I. Because Broker Jackson’s fiduciary responsibilities started when he met Sue, he therefore had to list the

home at what Sue said.

II. Broker Jackson should have listed it with a co-worker to insure an accurate FHA appraisal.

III. As a broker, Jackson must convince Sue to list for $55,000 or he cannot list the home.


c. II & III d. none of the above

27. All of the following would be included in a listing agreement EXCEPT

a. commission basis b. legal description of property

c. an agreement not to sell the property to a d. expiration date of the listing agreement

member of a minority group


AGENCY

28. In an agency relationship, the person employing the agent is the:

a. broker b. customer

c. principal d. salesperson

29. The position of trust established by an agency relationship is best described as a/an:

a. gratuitous relationship b. trustor relationship

c. fiduciary relationship d. employment relationship

30. A broker secured a listing on rural property and the homeowner informed the broker that the well was dry.

It would be unlawful for the broker to:

a. tell prospective buyers the home has the best view in the county

b. fail to tell prospective buyers the well is dry

c. refrain from showing the property on hot days

d. fail to submit verbal offers

31. A special agent could be described as:

I. having power of authority

II. having authority to represent the principal in all matters

III. having authority to represent the principal in a specific transaction or a series of specific transactions

IV. having authority to sell all of the principal’s property in four different states

a. I only b. II & III only

c. III only d. III & IV only

32. Which of the following acts would be a violation of a broker's fiduciary relationship?

I. Broker charges no commission

II. Broker charges a 45% commission

III. Broker charges a 3% commission

IV. Broker receives a 1989 Porsche for his commission

a. II & IV b. II, III & IV

c. I & IV d. none of the above

33. Providing they have a signed listing agreement with the broker, a listing broker could owe fiduciary

representations to which of the following:

I. seller II. Executor

III. administrator IV. State of Nevada

a. I only b. IV only

c. none of the above d. all of the above


34. If Broker Tom lists sellers Tompkin's property for over $100,000, which of the following is/are true?

I. Broker Tom may present an offer for over $125,000

II. Broker Tom may bind Tompkin to a listing agreement

III. Broker Tom may advertise Tompkin's house for an open house with or without Thompkin's

permission

IV. Broker Tom may present offers for $60,000

a. II only b. II & III only


35. A broker’s representation in an agency relationship include:

I. Care II. Accounting

III. Loyalty IV. Disclosure

a. I & II b. I & III

c. II, III & IV d. all of the above

36. In a Buyer's Agreement, the buyer's broker owes a fiduciary duty to:

a. Seller only b. Buyer only

c. Seller and Buyer d. Neither Seller nor Buyer

37. Which of the following is NOT required of an agent under his representation to his principal in real estate

sales?

a. Loyalty b. Accountability

c. All of the above d. Broker Cooperation

38. When a real estate broker is retained to perform one specific act for a principal, it is known as:

a. a special warranty b. general warranty

c. special agency d. general agency

CONTRACTS

39. During the executory period of a real property land contract, legal title to the property is held by the:

a. vendor b. vendee

c. trustee d. mortgagee

40. An exclusive right to sell contract, at the time it is signed, is an:

a. executory bilateral contract b. executed bilateral contract

c. executory unilateral contract d. executed unilateral contract


41. The Statute of Frauds specifies:

a. the length of time allowed to file a lawsuit for a particular claim

b. the elements and penalties for fraudulent conduct

c. which contracts must be in writing to be enforceable in a court of law

d. the definition of actual and constructive fraud

42. When an existing contract is replaced by a new contract, this is called a:

a. rescission b. novation

c. hypothecation d. subordination

43. A contract giving another the right to buy property at a specified price within a certain period of time is a/an:

a. escrow agreement b. exclusive listing agreement

c. option d. first right of refusal

44. Which of the following is NOT an essential element of a valid contract?

a. consideration b. mutual consent

c. lawful purpose d. in writing

45. Under general contract law, an offer must be accepted:

a. within 5 days b. within 10 days

c. in writing, delivered personally or by mail d. in the manner specified in the offer

46. Smith has listed her home for sale with Broker Bill at a price of $100,000 cash. Lily makes a full price cash

offer which is presented by Bill and promptly rejected by Smith. Under these circumstances:

a. Lily could sue Smith for specific performance b. Bill could sue Smith for the commission

c. Both a and b d. Neither a and b

47. Kaupman offers to buy Vendeman's home for $100,000 to be paid in cash on or before July 15. Vendeman

immediately signs the acceptance after changing the contract to read that payment is to be made on or before

July 14, as she has to leave on an extended trip on July 15 and wants to have the transaction completed before

that time. Under these facts:

a. Vendeman has made a counteroffer

b. Kaupman is obligated to close on or before July 15, not July 14

c. both a and b

d. neither a nor b

48. Upon the signing of a real property sales contract:

a. the legal title passes to the purchaser b. equitable interest passes to the purchaser

c. legal title to the real estate passes d. all rights and interests of the seller pass

to the purchaser


49. An option:

a. requires the optionee to complete the purchase

b. keeps an offer open for a specified period of time

c. gives a buyer a lien on the property

d. results in a commission to the broker if the optionee does not exercise the option

50. Consideration in a contract may be:

a. money b. services

c. promises d. any of the above plus love

51. Based on the Statute of Frauds, which of the following contracts would NOT be required to be in writing?

a. an option to purchase real estate

b. an agreement by its terms that is not to be performed within one year

c. a general partnership agreement

d. a land sales contract

52. The term “Time is of the essence” means:

a. right now b. no later than tomorrow

c. by no means no later than a week d. performance within the stated period

53. Broker Tom takes a land contract offer to owner Bailey. Bailey counters the offer to buyer Sal. Sal

counters Bailey's offer. Bailey accepts and Broker Tom confirms to Sal. At COE, Bailey will be?

a. vendor b. offeror

c. offeree d. vendee

54. In the questions above, Sal could have been the following on and before COE:

I. Vendor II. Offeror

III. Offeree IV. Vendee

a. II only b. II & III only

c. IV only d. II, III & IV

55. Broker Betty received an offer on some property from buyer, Jane Battle. Betty took the offer to the owner,

Lace, who signed and accepted it. Betty then returned to Battle and confirmed the agreement. Battle was killed

in a plane crash that evening. The offer and acceptance is:

a. cancelled due to the death of Battle

b. In force because Battle died after the contract was confirmed

c. the time lapse was still outstanding

d. mutual consent was not completed due to the untimely death of Battle

56. Jerome and Pete decided not to pursue the completion of their real estate transaction. They decided to

return each other to their original position (or as close as possible) prior to the contract. They terminated their

contract by:

a. cancellation b. revision

c. rescission d. anticipatory breach


57. When there is a breach of contract and the parties cannot agree on damages, after appearing in court, one of

two things may happen, specific performance or:

a. liquidated damages b. damages

c. rescission d. revision

58. A seller wishing to be relieved of all financial obligations in the future on the sale of his property would

take:

a. a novation b. an assignment

c. a second d. a wraparound

59. Baker told Smith that if he painted his barn he would pay him $4,000. This is an example of what kind of

contract?

a. void b. unilateral

c. bilateral d. executed

60. Adams threatened Merle to sign the contract or else. This is:

a. duress b. undue influence

c. menace d. fraud

61. Evans just signed the O & A to sell his home to Bobby Joe. Broker Bob then showed Bobby Joe, Evans'

intentions. At that time, there is a(n):

I. executed contract II. unilateral contract

III. bilateral IV. Executory

a. I & II b. II & IV

c. I, II & III d. IV

62. Which of the following statements is/are true:

I. Oral leases for a year or less can be valid

II. Contracts involving the sale of land must be in writing

III Fraud is forbidden in real estate contracts

IV. Opinions/puffing is legal

a. I & II b. I, II & III

c. I, III & IV d. all of the above

63. Ace offers, orally, to sell Abel his building for $600,000. Abel accepts and communicates acceptance back

to Ace. This is a(n):

a. valid contract b. voidable contract

c. void contract d. unenforceable


64. Doris sells her real property to Paul. Doris and Paul both die the next day. Which of the following

statements is/are true?

a. Death cancels the contract b. Doris's death cancels the contract

c. Paul’s heirs inherit the property d. This is an unenforceable contract

65. Holly makes an offer to purchase property in the amount of $46,000. Tom accepts her written offer and

signs and communicates. Later, Holly discovers that she made a mistake. She really meant to offer $47,800.

Which of the following statements is most correct?

a. No contract exists because there was no meeting of the minds

b. No contract exists because there was no mutual mistake

c. No contract exists because there was a unilateral mistake

d. A contract exists

66. Bob and Kathy enter into a contract in which Kathy promises orally that she will pay the first year's dues in

a country club if Bob buys her property. A written agreement is signed for the sale of the property but this

provision is left out. Which of the following statements is/are true?

I. Bob cannot recover because of the Statute of Frauds

II. Bob cannot recover because of the Parol Evidence Rule

III. Bob does not have to purchase the property

a. I only b. II only

c. I & III only d. II or III only

67. Greg is an auctioneer who accepted Lisa's bid of $40,000 on a tract of land. Lisa's bid was the highest.

Later, Greg refuses to sell the property at that price. Which of the following statements is/are true?

I. Lisa is entitled to specific performance II. Lisa may sue for damages

III. Greg can refuse the bid


c. I & II only d. III only

68. Dick sends Louie a letter that states "I will sell you my house for $65,000." Simultaneously, Louie sends a

letter stating "I will purchase your house for $65,000." Which of the following statements is/are true?

a. A contract exists because the terms are identical and there has been a meeting of the minds

b. Louie has sent a counteroffer

c. Dick and Louie have sent cross offers and no contract exists

d. Objectively, a contract exists and subjectively intent is not essential in this case

69. Randy and Ruth enter into a written contract in which Randy agrees to purchase Ruth's house subject to

"finding acceptable financing." Which of the following statements is/are true?

a. Acceptable financing is the prevailing market rate of interest

b. The contract is void because Randy suffers no detriment because his promise is illusory

c. Acceptable financing means financing which would be acceptable to a reasonable man

d. Ruth can enforce this contract if she finances the house herself at the market interest rate


70. Under common law, the acceptance of a unilateral contract takes place:

a. when a written contract is signed

b. at the completion of the requested act

c. when the completion of the act is communicated to the offeree

d. when the offeree communicates a promise to do the requested act

71. Doright agrees to lend Loser $10,000 at 9% interest. After the contract is signed, the state legislature passes

a usury ceiling of 10%. Previously, the ceiling had been 8%. Which of the following statements is/are true?

a. The contract is void because it was illegal at the time it was made

b. A contract to pay debt must be in writing in order to be enforced

c. Usury laws are unconstitutional and, thus have no effect on the contract

d. This contract has now become validated by the legislative action

72. Martin sends Fred an offer to sell his land. Martin writes, "This offer will be irrevocable for

10 days." Two days later, Martin revokes the offer. Which of the following statements is/are true?

a. Martin is in breach of his contract

b. Fred may still accept the offer until the ten days are up

c. Fred is entitled to damages of $10,000

d. Martin may revoke the offer

73. Which of the following statements is/are true about a counteroffer?

I. It reverses the legal position of the offeror and the offeree

II. It terminates the original offer.

III. If the counter offer is rejected, the original offer may be accepted

a. II only b. III only

c. I & II only d. I & III only

74. John offers $400 for two acres of vacant land valued at $2,000. Harry, who lives out of state, accepts the

offer but later learns the land was worth $3,000. Harry refuses to sell. Which of the following statements is/are

true?

I. The $400 offer was legally sufficient consideration

II. John is entitled to sue for specific performance

III. The $400 offer was not adequate consideration


c. I & II only d. all of the above


75. A note scribbled on the back of an envelope stated the following: "As per our conversation, I agree to sell

you my two acres of land in Carroll County for $10,000 cash. The legal description of the property is attached."

A legal description of the property was attached to the envelope. Harry Hentschel, who was the owner of the

property, had signed the envelope and attached legal description. If Tony Palaigos signs the envelope,

indicating his acceptance, and communicates his acceptance to Harry, who, if anybody, has enforceable legal

rights under this memorandum:

a. Tony Palaigos b. Harry Hentschel

c. Both Tony Palaigos and Harry Hentschel d. Neither Tony Palaigos nor Harry Hentschel

76. Nancy, a minor, offers Sam a commission of 10% if he will sell ten acres of land she inherited from her

mother. Sam is able to sell the property for $100,000, which is above market value. Nancy cancels the entire

transaction and refuses to pay Sam a commission. Which of the following statements is true?

a. Nancy must pay Sam $10,000

b. Nancy must pay Sam the reasonable value of his services

c. Nancy has entered into a void contract

d. Nancy has entered into a voidable contract

77. Assuming the contract is silent on the issue of death, which of the following will terminate an executory real

estate sales contract?

I. death of the purchaser II. death of the seller

III. death of the broker


c. III only d. none of the above

78. A contract entered into between a minor and an adult would be:

a. bilateral b. void

c. voidable d. valid

79. For which of the following reasons may a contract be terminated?

a. complete performance b. operation of law

c. impossibility of performance d. all of the above

80. When a contract for the sale of real property has been signed and communicated, the purchaser:

a. has equitable interest b. has legal title to the property

c. has the right to possess the property d. has nothing until he receives a deed

81. A contract signed voluntarily by an intoxicated person is:

a. valid b. voidable

c. unenforceable d. void

82. A contract which is created solely by the actions of the parties involved, is a(n):

a. unilateral contract b. expressed contract

c. implied contract d. verbal contract


83. Which of the following would NOT terminate an offer to sell real property:

a. a revocation of the offer b. death of the sales agent

c. lapse of a required time d. rejection of the offer by the offeree

84. Which of the following is/are examples of a contingency that could appear in a real estate contract?

a. procurement of financing b. completion of engineer's report

c. obtaining a building permit d. all of the above

85. In a contract transferring real estate:

a. Only the seller must sign b. Only the buyer is required to sign

c. Both a and b d. Neither a or c

86. Which of the following is true?

a. A salesperson is the primary agent to the client b. A broker is the primary agent to the client

c. The state can only act as the primary agent d. The primary agency description can only

take place in dual agency

87. A salesperson must be an agent to the broker they work under and:

a. may be a special or general agent of the broker depending on their contract

b. can be called either buyers or sellers agent only

c. may be called sellers agent only

d. may be a primary agent to the client

88. In a given transaction involving a brokerage company, the broker must be:

a. the one who receives the compensation b. a primary subagent

c. a single or dual agent d. a secondary agent

89. The best example of a general agent is:

a. when an agent is given specific instructions in a signed contract such as a listing agent

b. when a specific act is delegated to a specific agent

c. the agent holds a broad range of powers delegated by the principal such as property management

d. an agent that does a series of real estate transactions for the client such as numerous listings

90. Any real estate licensee, before the duties owed has been signed, owes a third party:

a. confidentiality b. honesty

c. loyalty d. both a and c

91. Even before a duties owed is signed, a real estate agent owes responsibility and:

a. all elements of fiduciary b. must disclose all material facts

c. commission to the broker d. all of the above


92. Expressed agency occurs when:

a. it is an absolute necessity b. the client believes you are their agent

c. a written or verbal agreement is formed d. their actions create agency

93. The only agency that can never be broken is:

a. expressed agency b. agency coupled with an interest

c. agency because of necessity d. implied agency

94. There are four different types of listing contracts, all except which listing could have an end date?

a. open listing b. MLS listing

c. exclusive listing d. net listing

95. The following action is illegal on a given listing:

a. puffing b. a set commission fees for all brokers

c. an opinion d. a protection clause

96. A vendee is someone who:

a. is the seller b. holds equitable title

c. makes periodic payments d. could be a future buyer

97. Which of the following statements occur when a counter offer is made?

a. positions of the original vendor and vendee switch b. the position of the grantor remains

c. the offeree makes the counter offer d. the original offer is now void

98. In certain cases, it is illegal for the owner to be aware of a defect on the realty and not disclose it to the

potential buyer. This is known as:

a. owner defect b. a hidden defect

c. either patent or latent defect d. a patent defect

99. A contract becomes voidable if:

a. one is under duress b. it is not unenforceable

c. it is not legal d. there is no consideration

100. When the judge decides who gets the realty in which there was a dispute, it is known as:

a. rescission b. damages c. specific performance d. all of the above



Agency Practice Test

1. Mutual assent to a real estate contract is indicated by

a. attestation

b. offer and acceptance

c. acknowledgment

d. seals

2. An example of an executory oral contract that is enforceable is

a. a lease for six months starting in six months

b. a sale of a lot for less than $500

c. a lease for two weeks starting in 12 months

d. a sale of drapes for $600

3. A contract of adhesion is a contract that

a. is impossible to perform

b. has no offeror

c. is offered as “take it or leave it”

d. cannot be breached

4. After an offer is accepted, the seller finds out that the broker was the undisclosed agent for the buyer, as well as

the agent for the seller. What are the seller’s rights?

a. The seller can withdraw without obligation to broker or buyer

b. The seller can withdraw but is subject to liquidated damages

c. The seller can withdraw only with concurrence of the buyer

d. The seller is subject to specific performance if refusing to sell

5. J sold a house to K for cash. The purchase agreement was oral. Although the sale was completed, K wants the

return of the purchase price. The sale

a. is voidable

b. was void because it violated the statute of frauds

c. is complete, so J can keep the money and K has the house

d. subjects J to criminal penalties

6. A remedy that puts the parties back in the positions they were in before entering into a contract is

a. specific performance

b. waiver

c. rescission

d. accord and satisfaction

7. By agreement, one party to a contract was discharged and another party took her place. This is an act called

a. rescission

b. reformation

c. novation



8. Which of the following is regarded as a customer of a broker?

a. a property owner under an open sale listing

b. a property owner under an exclusive sale listing

c. a buyer under an exclusive buyer listing contract

d. a buyer who is not represented by an agent

9. In an assignment of a contract,

a. the old party is relieved of all contractual obligation

b. the assignor remains primarily liable for the contract

c. the assignee assumes contractual liability

d. a new agreement is substituted for the old agreement

10. An anticipatory breach of contract is

a. a statement by a party that they will not perform

b. a request for extension of time

c. failure to perform by the date set for completion

d. a request for contract reformation

11. Under the Uniform Vendor and Purchaser Act, the buyer is responsible for property loss

a. after purchase contract is entered

b. only after title passes to the buyer

c. when taking possession

d. only if the buyer caused the loss

12. M and N agreed that M would buy N’s lot for $68,000, with the settlement scheduled for next Thursday. What

type of contract was made?

a. Bilateral, express, and executory

b. Implied, express, and executed

c. Unilateral, express, and executory

d. Bilateral, implied, and executed

13. M agreed to buy N’s lot, which was represented by N as being zoned for a duplex. After closing,

M found that the lot had single-family zoning and was not suitable for M’s needs. M should seek the

remedy of


b. liquidated damages

c. reformation

d. rescission

14. A seller’s agent owes the buyer the duty of

a. loyalty and obedience

b. confidentiality and accounting

c. fairness and honesty

d. disclosure and due care


15. A deed given to a buyer left out a paragraph. Because of this error, the buyer received 20 acres less than bargained

for. When the buyer discovers the error, what remedy should be sought?

a. Punitive damages

b. Injunction

c. Waiver

d. Reformation

16. L promised to give M a condominium for her birthday. L had a change of mind and refused to do so. Based on

these facts, in a lawsuit brought by M, the primary concern of the court is

a. the legality of the promise

b. consideration for the promise

c. mutuality of the agreement

d. competency of the parties

17. A real estate broker who has a sale listing is normally

a. a buyer’s agent

b. a special agent

c. a general agent

d. a universal agent

18. An agent indicated he was acting as a principal. A third party suffered damages because of the agent’s

Action. The person liable for the loss is

a. only the agent, because the agency was not revealed

b. only the principal, because the principal bears ultimate responsibility

c. both the agent and the principal

d. either the agent or the principal

19. In most sales, the buyer’s agent is NOT paid a commission by the buyer because

a. commissions are never paid by buyers

b. the buyer’s agent receives a commission split from the seller’s agent

c. the buyer’s listing requires the sellers to pay the buyer’s broker fee

d. the broker acts as a dual agent

20. A contract of adhesion is a contract that

a. is impossible to perform

b. has no offeror

c. is offered as “take it or leave it”

d. cannot be breached

21. After an offer is accepted, the seller finds out that the broker was the undisclosed agent for the buyer, as well as

the agent for the seller. What are the seller’s rights?

a. The seller can withdraw without obligation to broker or buyer

b. The seller can withdraw but is subject to liquidated damages

c. The seller can withdraw only with concurrence of the buyer

d. The seller is subject to specific performance if refusing to sell


22. Generally, in the absence of agreement to the contrary, a licensed real estate broker, David, has earned a

commission when:

a. The property is listed.

b. The purchaser hands the broker an earnest money deposit.

c. A purchaser is found who is ready, willing and able to buy the property on the seller's terms.

d. Title to the property is transferred at closing.

23. Your mother-in-law, Becky. who is not licensed to sell real estate, finds a prospect to buy a house listed with your

brokerage firm. Before she introduces the prospect to you, she insists that you agree in writing to give her a 3%

finder's fee. Which of the following is true?

a. Legally, you may not agree to pay her a finder's fee.

b. You may agree to pay her a finder's fee.

c. You must tell her that withholding the name of the prospect is illegal because it is a restraint of trade.

d. You may not, under most licensing laws, pay her a finder's fee, but you are permitted to buy her an expensive ring

24. A homeowner, Bob, wishes to list a house with you for $40,000. On the previous day, a prospect came into your

office and indicated that he wanted to buy a similar house for $60,000. You tell the homeowner that instead of

listing the house you will be happy to take an option and sell the house to the prospect for $60,000. Which of the

following is true?

a. Because of your status as a licensed broker, you had the duty to reveal the true value of the house. You earn no

commission.

b. You may agree to pay him a finder's fee.

c. You are entitled to a $20,000 profit which you made.

d. You are entitled to a reasonable commission on the sale of the house, and thus you may keep only 7% of the sale

price. The rest you must turn over to the original homeowner.

25. John Smith comes to your brokerage office and agrees to pay you a fee of 5% if you locate and negotiate the

purchase of a warehouse for him, which meets his specifications and does not exceed $100,000. At this time, you

have David Knox's warehouse listed for $100,000, which meets these exact specifications. If you sell this property

you are entitled to a 7% commission. Without disclosing this dual relationship, you bring the two parties together

and close the deal. Which of the following is true?

a. John Smith owes you $5,000.

b. David Knox owes you $7,000.

c. Both owe you one-half of a 7% commission.

d. Neither owe

26. Jake Arnold, a broker, is showing Mr. and Mrs. Fee several residential properties. You pass a lovely house which

has a sign "For Sale By Owner." Because the Fees express enthusiasm over the appearance of the house, you stop

and meet the owner. You introduce yourself as a real estate broker, and the owner agrees to let the Fees see the

house; however, the owner refuses to employ you. You are able to get the Fees and the homeowner to agree to a

contract for the sales of the house. Which of the following is true?

a. The homeowner owes you reasonable commission for your professional services as a broker.

b. The Fees owe you a commission since they knew the house was not listed and yet they still benefitted from your

services.

c. The homeowner owes you one-half of a 7% commission.

d. You are not entitled to a commission since you can show no employment, either expressly or by implication.


27. You have an open listing contract on Mr. Thomas' house. You are showing Mr. Adams houses in a neighborhood

in which Mr. Thomas' house is located. As you drive by Mr. Thomas' house, you tell Mr. Adams that you have an

open listing on the house and ask him if he is interested in seeing the house. Even though Mr. Thomas is not at

home, you show the house to Mr. Adams. The next day, Mr. Adams contacts Mr. Thomas and the parties agree on

a sales price, which is lower than the listed price because of the savings on not having to pay a real estate

commission. Mr. Adams does not tell Mr. Thomas that you are involved. Which of the following is true?

a. Mr. Thomas owes you a commission

b. Mr. Adams owes you a commission

c. Both parties owe you a commission

d. Answer not given

28. A contract based upon which of the following would NOT be capable of being voided by the injured party:

a. Error

b. Undue influence

c. Fraud

d. Menace

29. A latent defect is best described as:

a. Defect that the prudent buyer can see

b. An old defect

c. A defect that is hidden from view

d. A breach of contract by the seller

30. Which of the following persons CANNOT be held to a contract?

a. A minor

b. An unmarried woman

c. An elderly person

d. A widow or widower

31. The difference between an option and a purchase agreement is:

a. The option gives the right to buy; the purchase contract, if accepted by The seller, is a binding contract to buy

b. The option need not be in writing, but the purchase contract must be in writing

c. The option is always in favor of the optionee, while the purchase contract favors the grantee

d. The option is a bilateral contract, while the purchase agreement is a unilateral contract

32. If an optionee fails to exercise his option within the stated time:

a. He may sue the optionor for the consideration

b. He may automatically renew the option if he puts down another consideration

c. He forfeits the consideration

d. The purchase is automatically confirmed

33. The most important part of an offer and acceptance of a contract is:

a. The good intent of both grantee and grantor in fulfilling the contract

b. The "meeting of the minds" on the subject matter of the contract

c. The capability of each party entering into the contract

d. The legality of the contract


34. Rescission of a contract most nearly means:

a. All goes back to the way it was before the contract

b. Ratification of the contract

c. Affirmation of the contract

d. Execution of the contract

35. "Meeting of the minds" refers to:

a. The consummation of the contract

b. The consideration

c. The offer and acceptance

d. The closing of the transaction

36. The term contractual ability refers to:

a. The contract containing all of the covenants needed to make it legal

b. The attorney having the ability to draw the contract

c. The capability of two people to enter into a written agreement

d. The legality of the contract

37. All of the following are essential to a valid contract, EXCEPT:

a. Consideration

b. Duress

c. Offer and acceptance

d. Legality of object

38. If the purchaser assigns her interest in the property while the contract is still pending, realizing a profit:

a. The seller receives the profit

b. It cancels the contract

c. The broker receives the profits

d. The original purchaser receives the profit

39. A contract between a competent and an incompetent party can be voided by:

a. The incompetent

b. The competent

c. No one; can't be voided

d. Agreement of the parties only

40. A unilateral contract:

a. Embodies a promise on the part of both parties

b. Binds only one party to the contract terms

c. Is voidable by the maker

d. Has been executed by all parties

41. The substitution of a new contract for an existing contract is:

a. Execution

b. Breach of contract

c. Specific performance

d. Novation


42. Upon the default of a contract, all of the following are remedies to the injured party, EXCEPT:

a. Specific performance

b. Retention of the earnest deposit as liquidated damages

c. Execution of the contract

d. Rescission of the contract

43. A purchase contract has been accepted by the property owner, but, the sale will not close for sixty days. This is

an example of:

a. An executory contract

b. An executed contract

c. A unilateral contract

d. A land contract

44. A listing contract can best be defined as:

a. A unilateral contract

b. A bilateral contract

c. An executed contract

d. A dual contract

45. Tom Smith sold his home but did not reveal to the agent or the buyer the air conditioner has not worked for two

years. This is an example of:

a. Misrepresentation

b. A mistake

c. A patent defect

d. Fraud

46. A real estate agent shows prospective buyers a cabin on Moose Lake. When the prospective buyers ask if they can

fish on the lake, the agent responds by pointing to a boat on the lake in which a person is casting a fishing line.

After the sale closes, the buyers learn that the lake is contaminated and fishing is not permitted. The agent:

a. Is not guilty of misrepresentation

b. Is guilty of misrepresentation

c. Used undue influence by pointing out the boat

d. Used duress

47. The homeowner paid off a 30-year mortgage in 15 years. The mortgage contract is:

a. A dual contract

b. An executory contract

c. An executed contract

d. A unilateral contract

48. These three parties are typically involved in a real estate transaction:

a. Principal, client, and agent

b. Customer, client, and agent

c. Customer, client, and seller

d. Principal, client, and buyer


49. The three components of a special agency include:

a. Limited time, limited purpose, and limited authority

b. Limited time, general authority, and limited purpose

c. Agent representation, limited purpose, and ratification

d. Limited purpose, limited authority, and power of attorney

50. Most states require the real estate licensee to disclose the type of relationship they have with buyers and sellers.

Disclosure should be made:

a. Before the sale is finalized

b. Prior to writing a contract

c. Written notice sent to the party by registered mail

d. At the earliest practicable opportunity during/following the 1st substantial contact with the party involved

51. The agent owes the customer all of the following EXCEPT:

a. Disclosure of the agency with the principal

b. The reason the seller is moving

c. Good service

d. Providing information

52. An agent who acts for two principals with adverse interests in the same transaction is referred to as a:

a. Double agent

b. Subagent

c. Single agent

d. Dual agent

53. The purchaser who has no representation is known as the:

a. Principal

b. Customer

c. Client

d. Subagent

54. This party hires an agent to act on his or her behalf:

a. Customer

b. Subagent

c. Client

d. Dual agent

55. A remedy that puts the parties back in the positions they were in before entering into a contract is


b. waiver

c. rescission



56. A broker meets a prospect and before showing a property explains that she is an agent of the seller. The agent's

obligations to the buyer include all of the following EXCEPT:

a. Full disclosure of the property condition

b. Presentation of a contract in a fair and timely manner

c. Disclosure of any previous offers and the amount offered

d. Showing various properties that fit the buyer's needs

57. A broker has been given written consent by the buyer and seller to represent both. Under the law of confidentially

the broker cannot disclose certain facts. However, the broker may disclose:

a. That the buyer is willing to pay more than the purchase price offered

b. The motivating factors of the buyer and seller

c. That the property is scheduled to be rezoned

d. That the seller is willing to accept less than the asking price

58. Any offer of sub-agency must be given by:

a. Client and broker

b. Customer and broker

c. Client and customer

d. Subagent and broker

59. In a dual agency, the agent's responsibilities, along with confidentiality, include all of the following EXCEPT:

a. The agent will not work to the advantage of one client

b. To use diligence and care in performing her duties

c. Will consider the best interests of the clients

d. Must consider the seller's interests first

60. All of the following are true of the facilitator concept EXCEPT:

a. No agency relationship has been formed

b. The practitioner acts as a intermediary

c. The practitioner is responsible to the seller

d. The practitioner has no fiduciary responsibility to buyer or seller

61. All of the following are true EXCEPT:

a. A buyer agent can be compensated by the seller

b. Compensation does not necessarily determine agency

c. A subagent can only represent the buyer

d. An agent represents both buyer and seller in a dual agency

62. The real estate agent is generally hired to perform one act, such as selling the principal's home. This agency is

referred to as:

a. A special agency

b. A universal agency

c. A general agency

d. An implied agency


63. A real estate salesperson must:

a. Always be under the employment of a broker

b. Never refuse to accept a listing

c. Hold a national real estate license

d. Belong to a multiple listing service

64. An exclusive-right-to-sell listing contract:

a. Gives the broker a commission based on an agreed price the seller wishes to net, with the broker receiving the

excess over the agreed amount

b. Makes the brokerage firm the exclusive agent for a stipulated period of time

c. Allows the owner the right to sell the property without paying a commission to the listing broker

d. Will automatically be renewed if it expires before the property is sold

65. Under the terms and conditions of an open listing:

a. The owner may sell the property but must pay a commission to the listing broker

b. The listing is given to any number of brokers the seller wishes to hire, with a commission going only to the selling

firm

c. One broker is given the listing, but it is "open" for other brokers to sell

d. Upon the sale, the commission is split between all the brokers who were given the listing

66. It is mandatory that an exclusive listing contract:

a. Have a termination date

b. Be signed by the purchasers

c. Have an automatic renewal clause

d. Be processed through a multiple listing service

67. Under the rules of a multiple listing service:

a. Only the firm that has the listing may show the property

b. All members of the MLS cooperate in selling the property

c. All the firms belonging to the MLS may place their signs on the property

d. Properties are advertised only in the MLS book

68. The term REALTOR is a coined word:

a. Available for use only by members of the multiple listing service

b. Used only by members of the National Associations of REALTORS

c. Used by all licensed real estate agents

d. Issued for the use of real estate brokers, but not salespersons

69. A real estate broker is:

a. Appointed by the property owner to act for and in his stead in the sale of the owner's property

b. Not responsible for the salesperson's actions

c. Responsible to sell the property within the listed time frame

d. Always employed as a general agent to the property owner


70. The most desirable type of listing for a real estate broker is a:

a. Open listing

b. Net listing

c. Exclusive-right-to-sell listing

d. Exclusive listing

71. An owner gives an open listing to firms X and Y. Firm X sells the property to a buyer to whom firm Y had

previously shown the property. The commission was:

a. Earned by firm X

b. Earned by firm Y

c. Split evenly between X and Y

d. Arbitrated by the Board of REALTORS

72. If an owner sells her own home on which you have an exclusive agency:

a. You receive no commission

b. You receive a full commission

c. You receive half commission

d. You receive 40 percent

73. By agreement, one party to a contract was discharged and another party took her place. This is an act called

a. rescission

b. reformation

c. novation


74. Mr. Jennings lists his house with Ms. Walls, a real estate salesperson employed by the A-1 Real Estate

Company. The agency exists:

a. Between Jennings and Walls

b. Between Jennings and the A-1 Real Estate Company

c. Between A-1 Realty, the multiple listing service, and Jennings

d. For the duration of the listing time between the salesperson and the principal

75. The least protection a broker has is with a:

a. Exclusive agency

b. Open listing

c. Exclusive right to sell

d. Multiple listing

76. The brokerage firm receives the excess over and above a specified sales price in a:

a. Net listing

b. Gross listing

c. Open listing

d. Exclusive listing


77. Broker X has an exclusive agency listing on a property that she learns has been sold by broker Y. Broker Y

receives a full commission. Broker X should:

a. Request half commission from broker Y

b. Request full commission from broker Y

c. Request full commission from the owner

d. Realize that no commission is due to her

78. A listing may be canceled for all of the following reason(s) EXCEPT:

a. The owner of the property dies

b. The broker files bankruptcy

c. The property is destroyed by fire

d. Owner changes his mind

79. Sally Wells obtains two listings: one is an open listing from owner A, and the other is an exclusive agency listing

from owner B. After one week A and B, who had previously visited about their properties, decided to exchange their real

estate. Sally Wells will obtain:

a. A commission for A and B

b. A commission from A

c. A commission from B

d. No commission since the owners exchanged their properties

80. What happens when a principal sells his home under an exclusive-right-to-sell listing?

a. The broker receives no commission

b. The broker receives a commission on the gross sales price

c. The broker receives half the commission ordinarily due him

d. Legal action will need to be instigated if the broker is to receive a commission



Match Maker 2-1

1. _____ Broker A. In Writing or Else….

2. _____ Agent B. 3rd

Party

3. _____ Dual Agent C. Property Management

4. _____ Agency D. Duties Owed

5. _____ Buyer’s Agent E. Now

6. _____ Special Agent F. Implication

7. _____ General Agent G. Opinion Only

8. _____ Universal Agent H. Principal

9. _____ Single Agent I. Do One Thing

10. _____ Listing Agent J. One Year

11. _____ Ostensible K. Represents One

12. _____ Expressed L. Client Comes First

13. _____ Customer M. Fiduciary

14. _____ Client N. 5 Years of All Records

15. _____ Responsibility O. Salesperson or Broker

16. _____ Representation P. Result of Result

17. _____ Confidentiality Q. Buyer

18. _____ Obedience R. All Legal Commands

19. _____ Accounting S. Listing Agent

20. _____ Loyalty T. 90 Days or …

21. _____ Diligence U. Oral or Written

22. _____ Disclosure V. Mutual/Consensual

23. _____ Procuring Cause W. F.H.D.

24. _____ Protection Clause X. Brokerage

25. _____ Puffing Y. Power of Attorney

26. _____ Parol Evidence Rule Z. Person Liable






Match Maker 2-2

1. _____ Net A. Broker Gets Paid

2. _____ Open B. A Service

3. _____ Exclusive Agency C. Lessee

4. _____ Right to Sell D. Unintentional

5. _____ Listing E. Listing Terminates

6. _____ Sherman Antitrust F. Opinion

7. _____ Puffing G. Brokerage Gets $$

8. _____ Death of Seller H. Naked Legal Title

9. _____ Realtor I. Void

10. _____ MLS J. Owner Sells No $$

11. _____ Optionor K. Makes Offer

12. _____ Option L. Lessor

13. _____ Optionee M. Intentional

14. _____ Vendor N. Not Required

15. _____ Vendee O. Set $$ for Seller

16. _____ Counter Offer P. Be Professional/Get It Done

17. _____ Fraud Q. 2 Brokers

18. _____ Misrepresentation R. Good Faith $$

19. _____ Offeror S. Personal Contract

20. _____ Earnest Money T. Can See

21. _____ E + O Insurance U. Buyer Beware

22. _____ Patent Defect V. No Set $$ Between Brokers

23. _____ COE W. A Future Right

24. _____ Time is of the Essence X. Equitable Title

25. _____ Irrevocable Offer Y. Not Legal

26. _____ Caveat Emptor Z. No Such Thing

*Matching worksheets are designed to assist with building vocabulary. The first number in the title sequence represents the

subject and the second number represents the lesson of the subject. Subject 1 represents Realty / Subject 2 represents

Agency / Subject 3 represents Finance / Subject 4 represents Nevada Law



Match Maker 2-3 1. ____ Void A. By Law Equitable Interest

2. ____ Expressed B. Licensee of Brokerage

3. ____ Voidable C. Not All Things Done

4. ____ Bilateral D. Broker

5. ____ Unenforceable E. $$ By Judge Jabba

6. ____ Valid F. Flood

7. ____ Unilateral G. Seller

8. ____ Executory H. Oral/Written

9. ____ Rescission I. COE

10. ____ Executed J. Naked Legal Title Only

11. ____ Damages K. Jail

12. ____ Offeror L. Judge Gives Realty

13. ____ Specific Performance M. Voidable

14. ____ Offeree N. 50 People Disagree/Agree

15. ____ Vendor O. Equitable Title

16. ____ Optionor P. Mutual/Consensual

17. ____ Vendee Q. Oral Sale of Real Estate

18. ____ Drunk R. Void

19. ____ Illegal S. Option

20. ____ Agency T. Writes Offer

21. ____ Ostensible U. Agree/ Disagree

22. ____ Agent V. Actions

23. ____ Salesperson W. Creates M & M's

24. ____ Breach X. Agree/Disagree/Agree






Match Maker 2-4

1. _______1866 A. No kickbacks

2. _______1968 B. Steering

3. _______1974 C. Creating a fear

4. _______1978 D. Lead paint

5. _______1988 F. 88 years of age

6. _______ECOA H. Illegal cooperation among brokers

7. _______RESPA I. Color

8. _______Blockbusting L. Race only

9. _______Channeling O. Only Catholics

10. _______Ethics P. Conduct

11. _______Collusion Q. Gender

12. _______Discrimination R. Children

13. _______Employee S. What to do/How to do

14. _______Property Management T. Seller

15. _______M & M’s V. Truth-in-Lending

16. _______Optionor W. upheld 1866

17. _______Closing Costs on loan X. RESPA

18. _______Credit Terms Y. Agreement

19. _______Jones/Mayer Z. Owner/broker relationship



Finance / Subject 4 represents Nevada Law Some letters may not be used in this match maker.



Finance & Appraisal

Preparation:

Listen to Finance & Appraisal Audio Files

If you are studying with a textbook, use the

textbook to review the recommended chapters for this subject

Study: Review this section of the workbook as a summation of the

most important topics within the subject


Class Notes for Lesson 1

URBAN PATTERNS

• CONCENTRIC

• Growth develops out from the business center

• SECTOR ROADS

• Growth develops faster along established routes usually 6 to 7 lane roads

within city

• AXIAL ROADS

• Growth develops along major transportation outlets

• Interstates

• Freeways

• MULTIPLE NUCLEI

• Growth eventually develops along more than one private business center

• GOVERNMENT

• Growth develops next to government investments

EMPLOYMENT

• Cities grow because of different types of employment:

• PRIMARY

• The employment that brings purchasing power to the area

• SECONDARY

• People taking care of the primary people’s needs in the area

INDUSTRIAL PARKS

• Usually built to enhance growth within 1-2 miles of a town

• BENEFITS

• INDUSTRY

• Site ready

• Helps attract industry to community

• COMMUNITY

• Efficient extension of services

• Good zoning relationships

• Diversify economic base

• More payroll, etc.

• DETRIMENTS TO COMMUNITY

• Traffic

• Expansion problems

• Suitability to community

PHYSICAL CHARACTERISTICS OF LAND

• Immobile

• Durable

• Heterogeneous or non-homogeneous (unique) NOT FUNGIBLE

UNIMPROVED LAND

• No improvements or fixtures


IMPROVED LAND

• Added infrastructure

LOCATION OR SITUS

• The most important requirement when purchasing realty

LINKAGE

• Second most important requirement for individuals, most important in your life

• School, church, close to work

ECONOMIC GOOD OF REAL ESTATE

D • Demand

U • Utility

S • Scarcity - fixed amount of REALTY with adequate infrastructure

T • Transferability

ENVIRONMENTAL CONCERNS IN REALTY

• It is the agent/appraiser’s job to point these out to people so that the following are

checked out:

• Asbestos

• Lead Based Paint

• Urea formaldehyde

• Radon Gas

• Underground storage tanks

APPRAISAL

• APPRAISER

• Educated person who gives an educated opinion on the realty for a specific;

location at a specific time for a specific reason

The Financial Institution’s Reform, Recovery, and Enforcement Act (FIRREA) requires

that any appraisal in a federally related transaction be performed by a person who is certified

or licensed by the state.

• ARMS LENGTH TRANSACTION ON REALTY

• Educated people

• No pressure on buyer and seller

• Adequate time on the market

• Paid in U.S. dollars or equivalence

TWO (2) TYPES OF VALUE

• OBJECTIVE VALUE

• Appraiser objectively looks at a parcel of realty to give its value

• SUBJECTIVE VALUE

• Buyer usually pays more for the realty than it’s worth because of feelings

THREE (3) TYPES OF REALTYS WORTH

• COST

• Monetary amount to build something

• PRICE

• Monetary amount paid


• VALUE

• Monetary amount an appraiser says it’s worth

APPRAISAL STEPS

• Define problem

• List all data needed for appraisal

• Collect specific data in area and general data overall

• Classify data

• RECONCILIATION

• Weighing the 3 approaches to value (a correlation)

• Three (3) approaches are market, cost and income

• Finalize data

• Lenders normally require an appraisal

PRINCIPLES OF VALUE

• HIGHEST AND BEST USE

• Most profitable use - first principle of value appraiser must use on all

appraisals

• SUPPLY & DEMAND

• Value will increase if demand is high and supply is low

• If 10 homes are identical, they will be the least expensive when all

of the homes are available, and the most expensive when there is only one home left

• CONFORMITY

• Get maximum value if land use conforms. Subdivisions have

CC&R’s to ensure future value

• ANTICIPATION

• Values will increase with a future benefit. Values will decrease with

a future detriment

• INCREASING AND DECREASING RETURNS

• When doing improvements, there reaches a point of no increase in

monetary return

• REGRESSION/PROGRESSION

• Great homes go down in value because of lesser homes in the area

• Lesser homes go up in value because of great homes in the area

• CONTRIBUTION

• Value of any component that’s added - varies according to value it

contributes to property

• CHANGE

• Nothing remains the same in realty

• PLOTTAGE

• The end result of adding contiguous parcels together for a value

greater than individually

• The process of adding is assemblage

• The process of separating is sub-dividing


After Lesson One

Take the quiz for Finance & Appraisal Lesson One




Finance - Quiz 1

1. T F Asbestos was used in insulation.

2. T F Asbestos may be found around water pipes.

3. T F Lead base paint can be found in most homes before 1978.

4. T F Children are the most susceptible to lead.

5. T F Radon may be a cause of lung cancer.

6. T F Urea-formaldehyde may be a cause of cancer.

7. T F Underground storage tanks may cause groundwater contamination.

8. T F All real properties are homogeneous.

9. T F Real estate is valuable because of the acronym D.U.S.T.

10. T F The physical description of land includes durability.

11. T F Market value is the same as market price.

12. T F Value and worth are the same.

13. T F Value and cost are the same.

14. T F Cost and price are the same.

15. T F Appraisers go by arm’s length transactions.

16. T F The most important part of an appraisal is the reconciliation.

17. T F The first thing a real estate appraiser must do is identify the problem.

18. T F Subjective value should enter into the value of an appraiser.

19. T F An appraisal is a certification of value.

20. T F Situs is an important part in determining value.

21. T F An appraisal uses a support system to reflect value.

22. T F An appraisal is an educated opinion of value.

23. T F Lenders, investors, government agencies, public utilities and individuals use appraisals.

24. T F After 1/1/93 all federal related appraisals must be done by a state certified appraiser.

25. T F Principle of anticipation means future benefits.

26. T F Principle of change means nothing stays the same.

27. T F Principle of conformity means similar is best.

28. T F Principle of competition means the opposite of the principal of supply and demand.

29. T F Principle of conformity ensures future value.

30. T F A sector road is very important to the community.

31. T F Principle of plottage means that consolidating must mean higher value.

32. T F Principle of regression means value is reflective of all the realty in the area.

33. T F Principle of progression means value is reflective of all the realty in the area

34. T F Principle of increasing returns means everything adds value.

35. T F Principle of highest and best use means most money right now.



Class Notes for Lesson Two

APPROACHES TO VALUE

• Three (3) approaches to value:

• Market or Sales Comparison Approach

• Cost Approach

• Income Approach

• All 3 of these are done on every appraisal and the outcome is the reconciliation by the appraiser

MARKET APPROACH TO VALUE OR SALES COMPARISON APPROACH

• Used for older owner occupied homes or unimproved land

• Compare similar realty and make adjustments if needed on comparable properties

L • LOCATION

• Same subdivision or 12 block area

A • AMENITIES

• Square footage, swimming pool, etc.

T • TIME OF SALE

• Within 6 months of COE

T • TERMS/CONDITIONS OF SOLD PROPERTIES

• Cash, Owner will carry, or Lender loans

• Real estate agent does similar job:

• CMA

• Comparable or Competitive Market Analysis

• FMP

• Fair Market Price

COST APPROACH TO VALUE

• Used for new homes and singular usage buildings such as post offices, schools, museums, etc.

• Steps (italicized items and figures provide example):

• Acronym “LSD”:

L for land

S for substitution

D for depreciation

L - Estimate value of land separate of all improvements

4 acres at $100,000 per acre +$400,000

S - Substitute new building (replacement method)

• 3 kinds of finding replacement

• Square foot cost of similar buildings

• Quantity (survey) - same as above plus labor

• Index - adjust for inflation

10,000 sq.ft. x $100 per sq.ft. +$1,000,000

D - Estimate economic depreciation (loss of improvement value)

• Physical (it’s broken)

• Curable - economical repairs


Broken window -$50,000

• Incurable - repairs not economically feasible

Broken slab -$200,000

• Functional Obsolescence (outdated or poor design)

• Curable - design change

Outdated fixtures -$50,000

• Incurable - not economically feasible

1 restroom in 6,000 sq.ft. building -$200,000

• Locational, External or Economically

• Incurable (never curable) - always outside

of the property

Zoning, flight patterns over property -$200,000

Total Depreciation: -$700,000

Substitute new building: +$1,000,000

• Deduct depreciation from replacement cost +$300,000

• Add back the land value +$400,000

Total Value: $700,000

INCOME APPROACH TO VALUE

• Used for multi-family, office, warehouse and other income producing buildings

• The property is valued according to the income it generates

• Steps

• Estimate potential annual gross income

• 20 units $500 each x 12 months

• Allow for vacancy and rent losses (bad debts)

• usually 7%

• Add any other miscellaneous income

• e.g. kiosks

• This equals effective gross annual income

• Deduct expenses from effective gross income

• usually 40%

• 7% Fixed - taxes

• 26% Operating - management

• 7% Capital - money set aside

• NOI

• Net Operating Income

• CR

• Capitalization Rate (return on investment)

• GRM

• Gross Rent Multiplier gives informal value of property

for 1-4 units

• Divide sales price by monthly income

e.g. $80,000/$850 = 94 (100 or less is good)

• GIM

• Gross income multiplier 5 or more units


After Lesson Two

Take the quiz for Finance & Appraisal Lesson Two




Finance - Quiz 2

1. T F Another name for market data in realty appraisals is sales comparison approach.

2. T F Adjustments in real estate appraisals may be made for type of ownership.

3. T F The physical description of land includes immobility.

4. T F Homes are usually appraised by the market data method.

5. T F Adjustments in real estate appraisals are always made to the subject property.

6. T F A CMA is what a real estate agent does to determine price in a real estate listing.

7. T F A CMA is the same as a real estate appraisal.

8. T F Land can be appraised in real estate by a market data approach.

9. T F Adjustments in realty should be made for location, amenities, time and terms.

10. T F Forty vacant homes usually imply a huge demand.

11. T F Market data approach appraisals in realty are based on substitution.

12. T F Cost approach appraisals in realty are based on substitution.

13. T F The first thing in a cost approach appraisal in realty is to separate the land.

14. T F Reproduction in realty means constructing something of similar value in appraising.

15. T F A square foot method is one way to determine value in realty using the cost approach.

16. T F Economic depreciation is the loss of value in realty due to the surrounding area.

17. T F The cost approach appraisal in realty deals with an economic depreciation.

18. T F In realty, depreciation is always curable.

19. T F In realty, depreciation is always incurable.

20. T F The GRM of a $100,000 sold home and $1,000 a month rent = 100.

21. T F Depreciation in realty can occur over the economic life of a building.

22. T F For an appraisal, functional obsolescence is always incurable in realty.

23. T F For an appraisal, external obsolescence is always incurable in realty.

24. T F Physical deterioration is always curable in realty.

25. T F Land can never be depreciated in realty.

26. T F A broken window is physical curable in realty.

27. T F Rezoning is locational incurable in realty.

28. T F Lack of an elevator in a three-story building would usually be physical incurable in realty.

29. T F An airport runway change to go over the realty would be obsolete incurable in realty.

30. T F Taxes would be an operating expense.

31. T F Cost approach in realty would be used to do an apartment complex.

32. T F Income approach in realty could be used to do a single family home.

33. T F A cap rate in realty is similar to an interest rate return on money.

34. T F Depreciation in realty is done on a straight-line approach.

35. T F Depreciation in realty can be a tax write-off.



Class Notes for Lesson Three MORTGAGE BROKER & RETAIL MORTGAGE BANKER

• Don’t make the loan - acts as an intermediary between borrower and wholesale broker who funds the

loan

WHOLESALE MORTGAGE BANKER

• Funds loan with own funds and then usually sells to secondary mortgage

CONFORMING

• Loans that meet FHA/VA conforming conventional guidelines

NON-CONFORMING

• Loans that do not meet FHA/VA or conforming conventional guidelines

INTEREST RATES

• All lenders set their own interest rates

FHA LENDING PROGRAM

• FHA insures the lender 100% by the government requiring insurance called MIP

• MIP - Mortgage Insurance Protection

• Low down with guidelines on qualifying

• This is what helps people get into housing when they don’t have much money

• Owner occupied, no prepayment penalty

• Must have acceptable FHA approval and appraisal

• Ratios 41%/29%, work history 2 years

• FHA guidelines set regionally

VA LENDING PROGRAM

• A percentage guaranteed by VA

• Guidelines on qualifying, however, is possible to get home with no $ down

• Funding fee that guarantees the lender if no pay

• Paid by veteran so VA can guarantee a percentage of the loan

• Veteran must have DD214 and Certificate of Eligibility

• Owner occupied and no prepayment penalty

• Must be veteran or minimum 6 years as a reservist

• Must have CRV appraisal (Certificate of Reasonable Value)

• No maximum on a loan, however lender usually will not loan more than 4 times

entitlement

• Ratio 41%

CONVENTIONAL LENDING PROGRAM

• Neither guaranteed or insured by the government

• Based on the borrower’s ability to repay

• PMI (Private Mortgage Insurance) usually charged if less than 20% down

• Ratios 36%/28% conforming

HODGEPODE OF MORTGAGE LENDING TERMS

• A lender will require hazard insurance when the loan is secured by the property.

• The integrated disclosure rule combines previous disclosures into two new forms, the loan estimate

and the closing disclosure. (TILA-RESPA)

• The Consumer Financial Protection Bureau (CFPB) created the loan estimate and closing disclosure to


make costs more understandable for the consumer

• The Loan Estimate (LE) can replace the Truth in Lending Statement and the Good Faith Estimate

• The closing disclosure states the final loan terms and closing costs

SOURCES OF SECONDARY REAL ESTATE FINANCING

• Are lenders who use conforming loans can sell them to:

• FNMA (FEDERAL NATIONAL MORTGAGE ASSOCIATION)

• Known as FANNIE MAE

• Private

• Buys FHA, VA and conventional loans

• Acts in tandem with GNMA

• GNMA (GOVERNMENT NATIONAL MORTGAGE ASSOCIATION)

• Known as GINNIE MAE

• Government

• Buys only FHA and VA government loans

• Acts in tandem with FNMA

• FHLMC (FEDERAL HOME LOAN MORTGAGE CORPORATION)

• Known as FREDDIE MAC

• Government

• Buys FHA, VA and conventional loans

HOUSING LOANS

• Mortgage bankers bundle the loans and sell to the secondary market - warehousing

After Lesson Three

Take the quiz for Finance & Appraisal Lesson Three




Flow of Origination

Real Estate Agent brings borrower to Loan Officer to take application

Loan Processor orders all documentation

Loan Processor reviews documents for accuracy and completeness as they return

Processor takes accumulated data and prepares formal application and documentation for review by underwriter

Loan Officer takes initial 1003 application and orders credit report

Borrowers come in to review and sign formal application

File gets packaged and sent to the underwriter

Underwriter reviews file

Underwriter approves file with conditions

Buyer buys property

Mortgage company orders an appraisal

Title of property reviewed

Closing date set up with escrow company

Closing papers are drawn and sent to escrow company

Buyers come in to sign documents

Escrow sends package to mortgage company who reviews closed loan package for accuracy and funds

Borrower passes preliminary qualifying

Following day all documents are recorded

Later same day, after recordation, buyer gets keys


Finance - Quiz 3

1. T F People who intend to occupy the realty they are buying must receive an FHA loan.

2. T F People who do not intend to occupy the realty they are buying may receive a VA loan.

3. T F People who intend to occupy the realty they are buying may receive a conventional loan.

4. T F In realty, GRM = purchase price / gross monthly rent.

5. T F In realty, GRM is used as an informal version of the income approach.

6. T F FHA interest rates are determined by HUD.

7. T F FHA interest rates are determined by FHA.

8. T F VA interest rates are determined by VA.

9. T F Conventional interest rates are determined by FHLMC.

10. T F The annual percentage rate is not the true rate of interest

11. T F GNMA buys conventional conforming loans.

12. T F Mortgage brokers have more control than mortgage bankers.

13. T F Non-conforming FHA loans are regulated by the government.

14. T F Wholesale mortgage bankers must sell the loans they make to the secondary market.

15. T F A DD-214 and certificate of eligibility are the same.

16. T F All FHA loans can be assumed without qualifying.

17. T F All VA loans can be assumed without qualifying.

18. T F In today’s market, initial FHA loans may not have a secondary loan.

19. T F Conventional conforming loans meet the same guidelines as an FHA loan.

20. T F Each state determines the maximum allowable FHA loan.

21. T F Non-conforming conventional loans may be sold to FNMA.

22. T F Nevada uses a Deed of Trust in realty.

23. T F Nevada uses a mortgage in realty.

24. T F A CRV and an FHA appraisal are interchangeable.

25. T F A beneficiary holds the title to the realty.

26. T F A veteran cannot get a conventional loan.

27. T F A non-veteran must get a conventional loan.

28. T F A person who receives an FHA loan cannot make more than a certain amount of money.

29. T F An acceleration clause helps the lender foreclose on realty.

30. T F Lenders on realty can charge whatever interest rate they want in most states.

31. T F A CRV and a conventional appraisal are interchangeable.

32. T F An FHA and a conventional appraisal are interchangeable.

33. T F The government guarantees an FHA loan.

34. T F An FHA appraisal is called a certificate of reasonable value.

35. T F The government insures VA loans.



Class Notes for Lesson 4 MORTGAGE PAYMENT PLANS

• BUDGET OR PITI – (1)

• Payment of principal, interest, taxes and insurance monthly

• AMORTIZED

• Constant payment including interest and principal until paid off

• PARTIALLY AMORTIZED

• Same as amortized however before the payoff date a lump sum is due

• Lump sum know as a balloon payment

• STRAIGHT NOTE

• Interest only for a period of time and then repay the principal

• WRAPAROUND

• Buyer creates new financing wrapped around existing mortgage

• AITD - All Inclusive Trust Deed - buyer creates new financing wrapped

around existing trust deed

• RECOURSE

• Lender can foreclose on property for settlement of the loan and hold

borrower liable for any deficiency

• NON-RECOURSE LOANS

• Lender can foreclose on property for settlement of the loan and cannot

hold borrower liable for any deficiency

EQUITY

• Difference between amount owed on loan and present value

DISINTERMEDIATION

• Outflow of funds from savings institutions

• Gets rid of middle man

POINTS

• 1 point is equal to 1% of loan

• Permanent buy down - buyer qualifies at a lower rate

• e.g. Interest rate is 8%. Someone pays 3 points to buy down to 7.5%. Qualify at 7.5% and is

fixed for the length of the loan

2/1 BUY DOWN

• Temporary buy down

• e.g. Interest rate is 8%. 1st year buyer pays 6%. Seller pays 2%. 2nd year buyer pays 7%.

Seller pays 1%. Year 3 through 30 buyer pays 8%, seller pays 0%. Buyer qualifies at 6%. Seller

contributes to this buy down fee at COE

OTHER CONVENTIONAL LOAN PLANS

• BLANKET

• Combining 2 or more pieces of realty on one loan

• PACKAGE

• Combine realty and personal property on loan


• CONSTRUCTION

• Short term loan during building period and then an end or take out loan

such as FHA/VA or Conventional loans

• GRADUATED PAYMENT MORTGAGE

• Lower payments at the beginning of the loan

CLAUSES IN FINANCIAL INSTRUMENTS

• SUBORDINATION

• Reversing lien positions

• SUBROGATION

• Substituting judgment creditor

U.S. TREASURY

• Warehouse of money

FEDERAL RESERVE SYSTEM

• Loans money to banks and control economy by setting reserve requirements banks are required to

keep on hand and/or raise or lower the discount rate banks have to pay the Federal Government to

acquire money

PRIME RATE

• Companies with AAA rating pay to banks

SOURCES OF PRIMARY REAL ESTATE FINANCING

• COMMERCIAL BANKS

• Offer short term business loans and deposits insured to $100,000

• MUTUAL SAVINGS BANKS

• Have no stockholders and operate for the benefit of their depositors

• LIFE INSURANCE COMPANIES

• Offer commercial and farm mortgages

• CREDIT UNIONS

• Loans for any reasonable use for its members

• PENSION FUNDS

• Investments as they see fit

• FEDERAL LAND BANKS

• Farm land and buildings


CLOSING DISCLOSURE OR UNIFORM SETTLEMENT STATEMENT

Same thing

SC

Seller Credit

Receives money

SD

Seller Debit

Owes money

BC

Buyer Credit

Receives money

BD

Buyer Debit

Item

Credit to

Buyer

Debit to

Buyer

Credit to

Seller

Debit to

Seller

Prorated

Principal amount of new mortgage •

Payoff of existing mortgage •

Unpaid principal balance if assumed mortgage • •

Accrued interest on existing assumed mortgage • • •

Tenant’s security deposit • •

Purchase money mortgage • •

Unpaid water and other utility bills • •

Buyer’s earnest money •

Selling price of property • •

Fuel oil on hand (valued at current market price) • • •

Prepaid insurance and tax reserve for mortgage

assumed by buyer

• • •

Refund to seller of prepaid water charges and

similar utility expenses

• • •

Prepaid general real estate taxes • • •

Credits and Debits


Practice Math Questions 1. A buyer borrowed $10,000 on a three month straight note. The interest paid was $550. What was the annual

interest rate?

a. 7% b. 9%

c. 21% d. 22%

2. A bank has a policy of making loans for 80% of the first $20,000 of appraised value of a property, 90% of

the next $20,000, and 95% of any amount remaining. If a qualified buyer wants to finance a property appraised

at $115,000, which of the following amounts will the buyer be able to receive as a loan from this bank?

a. $79,600 b. $98,800

c. $102,400 d. $105,250

3. Which of the following terms on a mortgage loan of $60,000 would reduce the principal balance due by the

largest amount each month?

a. 9% amortized over a period of 30 years b. 12% amortized over a period of 20 yrs

c. 13% amortized over a period of 15 years d. 14% amortized over a period of 20 yrs

4. In the assessment of property taxes, an owner pays 32 mills per $1,000 of value; the value was $140,000?

a. 448 b. 4480

c. 4.48 d. 44.8

5. A high-rise office building has an effective gross income of $330,000 semi-annual. Annual expenses are

28% of the effective gross income. What is the approximate annual dollar amount of the net income?

a. $238,200 b. $475,200

c. $950,400 d. $660,000

6. A person bought three lots for $22,000 net each and divided them into four lots of equal frontage. The lots

were then sold for $20,000 each. What was the approximate percentage of gross profit?

a. 7% b. 9%

c. 12% d. 21%

7. A property sold for $170,000. The buyer’s mortgage required a down payment of 15% of the purchase price.

The buyer must also pay a 1% loan origination fee and $1,000 in closing costs. How much will the buyer owe at

closing? Round up to the nearest dollar?

a. $21,850 b. $22,500

c. $24,775 d. $27,945


8. A husband earns $26,000 and his wife earns $22,300 each year. The couple’s bank currently allows

residential loans for an amount equal to twice the annual income. Disregarding minimum percentage down

payment requirements, what is the minimum cash down payment that the couple will need to have on a

$105,000 home?

a. $8,400 b. $23,000

c. $60,400 d. $74,860

9. A savings and loan agrees that the value of a real property is the $100,000 a buyer has agreed to pay. If the

lender will give the buyer a mortgage with an 70% loan-to-value ratio and charges the buyer three points, the

total amount of cash that the buyer needs to provide is:

a. $2,400 b. $3,800

c. $20,000 d. $32,100

10. A commercial lot that measures 100’ by 160’ sold for $30,000. A similar lot is located in the same area and

measures 100’ x 200’. What is the most likely selling price of this lot?

a. $18,000 b. $25,000

c. $30,000 d. $37,500

11. An FHA insured loan has four discount points. As a consequence, what would be the dollar amount that the

FHA lender would charge for those discounts points on a loan of $81,540?

a. $652.32 b. $815.40

c. $3,261.60 d. $3,362.50



Practice Math Answers

1. d. 22% $550 -:- 3 = $183.33 monthly interest payment

$183.33 X 12 = $2,200.00 annual interest

$2,200.00 -:- $10,000 = .22 or 22%

2. d. $105,250 $20,000 X 80% = $16,000 loan on first $20,000

$20,000 X 90% = $18,000 loan on second $20,000

$115,000 - $20,000 - $20,000 = $75,000 remaining

$75,000 X 95% = $71,250 loan on remaining

$16,000 + $18,000 + $71,250 = $105,250

3. c. 13% amortized over a period of 15 years

a. 9% amortized over a period of 30 years $60,000 X 9% = $5,400 X 30 = $162,000

b. 12% amortized over a period of 20 years $60,000 X 12% = $7,200 X 20 = $144,000

c. 13% amortized over a period of 15 years $60,000 X 13% = $7,800 X 15 = $117,000

d. 14% amortized over a period of 20 years $60,000 X 14% = $8,400 X 20 = $168,000

The answer has the least amount of interest paid, thus highest principal paid.

4. b. $4,480 $140,000 X .032 = $4,480

5. b. $475,200 $330,000 X 2 = $660,000 is annual effective gross income

$660,000 X 28% = $184,800 expenses

$660,000 - $184,800 = $475,200 net income

6. d. 21% $22,000 X 3 = $66,000

$20,000 X 4 = $80,000

$80,000 - $66,000 = $14,000 profit

$14,000 -:- $66,000 (cost) = 21%

7. d. $27,945 $170,000 X 15% = $25,500 down payment

$170,000 - $25,500 = $144,500 loan amount

$144,500 X 1% = $1,445 loan origination fee

$25,500 + $1,445 + $1,000 = $27,945

8. a. $8,400 $26,000 + $22,300 = $48,300 X 2 = $96,600 maximum loan amount

$105,000 - $96,600 = $8,400 minimum down payment

9. d. $32,100 $100,000 X 70% = $70,000 loan amount.

1 point = 1% of loan amount so 1 point = $700 X 3 = $2,100

$100,000 - $70,000 = $30,000 down payment

$30,000 + $2,100 = $32,100 cash that needs to be provided

10. d. $37,500 100 X 160 = 16,000 sq ft

16,000 sq ft -:- $30,000 = $1.88 per square foot

100 X 200 = 20,000 sq ft

20,000 sq ft X $1.88 per sq ft = $37,500

11. c. $3,261.60 1 point is 1% of loan amount so 1 point is $815.40

$815.40 X 4 = $3,261.60


Finance - Quiz 4

1. T F Principle of contribution means all components contribute to its value.

2. T F Principle of supply and demand means the numbers game of availability's.

3. T F The process of separating parcels is assemblage.

4. T F An appraiser doesn’t rely on foreclosed realty in deciding value.

5. T F Land is fungible.

6. T F Linkage may add value to realty.

7. T F Assessed value is the value obtained from a Comparative Market Analysis (CMA).

8. T F Arm’s length transaction is important in real estate transactions.

9. T F Axial theory is important to the general layout of a community.

10. T F Primary employment helps a city diversify its cultural needs.

11. T F Industrial parks only bring benefits.

12. T F Situs and location are synonymous.

13. T F Normally, better design brings more money.

14. T F Principle of value does not consider the past in realty.

15. T F Correlation in realty means reconciliation in appraising.

16. T F NOI/CR=WORTH in realty.

17. T F All real estate sales require an appraisal.

18. T F Out dated fixtures are physical curable in realty.

19. T F The rate of return on money is called capitalization in realty.

20. T F Income approach in realty is based on present worth of future income.

21. T F Room function could be functional obsolete incurable in realty.

22. T F Roof repair could be physical incurable in realty.

23. T F A home next to a factory would be functional incurable in realty.

24. T F Home maintenance is normally physical curable in realty.

25. T F FHA loans made before 12/15/89 are assumable with qualifying.

26. T F To qualify for a VA loan, you must have been a veteran.

27. T F All conventional loans with less than 20% down are required to have PMI.

28. T F A 5-plex must have a conventional non-conforming loan.

29. T F FMNA and GNMA act in a tandem plan.

30. T F Prepayment penalties are allowed on realty secured with a conventional loan.

31. T F A wholesale mortgage banker loans money from their resources.

32. T F FHA is the only lender requiring MIP.

33. T F The VA is the only lender requiring PMI.

34. T F PMI is on conventional loans only.

35. T F Freddie Mac buys all types of conventional non-conforming loans.



Finance Testing

Preparation:

• Review all vocabulary from each segment covered






• Review Finance audio program






• After you have finished the exam, you should grade it, then review your answers




Finance Coursework Test APPRAISAL

1. The characteristics required which provide value to owner occupied real property include all of the following

EXCEPT:

a. effective demand b. scarcity

c. depreciation d. transferability

2. In appraisal, the term most similar to worth is:

a. insured value b. mortgage value

c. depreciated value d. market value

3. An appraisal is:

a. a sophisticated guess b. an educated opinion

c. a certification of value d. a determination of value

4. The definition of market value would NOT include which of the following statements?

a. Both buyer and seller must be well informed

b. Market value is the average price property will bring

c. Both buyer and seller must act without undue pressure

d. Payment may be made in cash or its equivalent

5. Fuzzy visited four similar homes in the same area and chose the home with the lowest asking price to purchase.

His decision was probably based on the:

a. principle of highest and best use b. principle of supply and demand

c. principle of contribution d. principle of conformity

6. Sammy, a builder, developed a subdivision in which the homes were very popular. The last lot in the subdivision

sold for a much higher price than the first lot This is an example of:

a. highest/best use b. substitution

c. conformity d. supply and demand

7. In preparing an appraisal for a single-purpose building, such as a post office, the most reliable approach in

determining value would be

a. cost approach b. market data approach

c. income approach d. supply and demand

8. Which of the following would NOT be an example of economic obsolescence?

I. termite damage

II. negligent care of the realty

III. a zoning ordinance allowing decreases in the minimum lot size

IV. poor architectural design

a. III only b. I, II & IV

c. II & III d. I, II & III


9. Economic obsolescence would NOT result from:

I. adverse zoning changes

II. a city's leading industries relocating out of the area

III. a land use not consistent with the surrounding area

IV. outdated bathrooms

a. I & II b. II & III

c. IV only d. III only

10. Depreciation usually applies to:

a. only the building b. only the land

c. both the land and the building d. net income of the building

11. In using the market data approach, the principle factors for which adjustments must be made are:

I. location II. date of sale

III. terms and conditions of sale IV. physical features


c. I, II & III d. I, II, III & IV

12. In appraising a single-family home, the most reliable method is:

a. cost approach b. market data approach

c. gross rent multiplier d. income approach

13. Which of the following figures would be calculated by deducting the vacancy and rent loss from the annual

potential gross income?

a. replacement cost b. annual net income

c. annual operating expense d. effective gross income

14. The gross rent multiplier in realty is used in the

a. market approach b. cost approach

c. income approach for office buildings d. income approach for single family homes

15. If a home sold for $60,000 with a monthly rental income of $500, what would be the gross rent multiplier?

a. 120 b. 300

c. 1200 d. 3000

16. Employment that attracts income from outside the boundaries of a community is known as:

a. datum b. leverage

c. primary d. secondary


17. In determining the effective gross income of a 20-unit apartment building, an appraiser would determine the

gross income from rents and deduct:

a. gross expenses b. net expenses

c. spendable income d. losses from vacancies and collections

18. What is the correct order of steps the appraiser would take to estimate the value of realty using the income

approach?

I. determine gross income II. determine operating expenses

III. determine effective gross income IV. determine net income

a. I, III, II, IV b. I, II, III, IV

c. III, II, I, IV d. IV, I, III, II

19. The loss in value in realty due to a change in the flight path of airplanes at a local airport would be an example

of:

a. physical deterioration b. functional obsolescence

c. economic obsolescence d. economic curable

20. Old plumbing fixtures are an example of:

a. curable physical deterioration b. curable functional obsolescence

c. incurable physical deterioration d. incurable functional obsolescence

21. The closing of a neighborhood elementary school resulting in the loss of value is an example of:

a. economic obsolescence b. functional obsolescence

c. physical curable d. physical incurable

22. Using the income approach with a net income of $42,000 and a capitalization rate of 12%, in order to determine

the value of the realty, the appraiser would:

a. multiply by the cap rate b. multiply by the net income

c. divide by the cap rate d. divide by the net income

23. A developer bought a deteriorated apartment building and replaced it with an office building. This is an example

of:

a. highest and best use b. conformity

c. change d. increasing & decreasing returns

24. The careful selection of a cap rate will consider which of the following factors?

I. return on investment

II. return of investment

III. available earnings from other safe forms of investment

IV. the risks inherent in investing in the subject property

a. I, III & IV b. all of the above

c. I & II d. I & III


25. In preparing an appraisal using the market data approach, the appraiser will make adjustments according to:

I. time, age and upkeep II. terms of the sale

III. comparable property IV. the subject property

a. I & III b. I, II & IV

c. II & IV d. I, II & III

26. Appraisers, A, B, C, and D, used the cap approach. A used a cap rate of 12%. B used 11%. C used 12.5% and

D used 13%. If they all used the same net income factor, which appraiser would calculate the highest value?

a. A b. B

c. C d. D

27. Which of the following statements is NOT correct with regard to realty?

a. The appraisal represents an informed opinion as to the current value of a property

b. The appraiser should be informed of the purpose of the appraisal

c. The eventual sale price of a property may be more or less than the appraisal value

d. The market price of a property is the amount for which it was appraised

28. Which of the following are considered in estimating the total depreciation on an improved realty?

I. curable physical deterioration II. functional obsolescence

III. economic incurable IV. incurable physical deterioration

a. I, II, III b. II, III & IV

c. II & III d. all of the above

29. Which of the following effects on an appraisal prepared under the income approach will an increase in the safe

investment rate have?

I. higher cap rate II. no change in cap rate

III. decrease in estimated value of property

a. I & III b. II & III

c. III only d. I only

30. In using the income approach to appraisal, which of the following would NOT be considered by the appraiser?

a. Net income currently produced by the property

b. Tax shelters to investors who purchase the property

c. The rate of return demanded by investors

d. The remaining economic life

31. In developing an appraisal, the use of the gross rent multiplier will provide:

a. an accurate estimate of the current value b. a rough estimate of the current value

c. a precise estimate of the future value d. a rough estimate of future value


32. Which of the following is NOT a characteristic of a real estate appraisal?

a. Value is estimated as of a specific time

b. The legal rights incidental to ownership are included in the estimate of value

c. The true value of the property is certified in the appraisal

d. The appraised value may differ from the actual market price

33. In the definition of market value, which of the following are considered?

I. Assume that the buyer and seller are sufficiently informed

II. Allow a reasonable time for market exposure

III. Relate to the price a property should bring in the open market

IV. Consider the price it sold for 10 months ago

a. all of the above b. I, II & IV

c. I, II, III d. I, III & IV

34. Using the market data approach, you would find three other properties that have sold in the last five months for

cash and are similar to the property you are appraising. You would then make adjustments for:

I. condition of the property III. terms

II. amenities IV. relationship to comparable properties rather than the subject

property

a. I, II & IV b. all of the above

c. I, II & III d. I & II

35. Which of the following factors would not be pertinent in estimating the cost to replace a single-family dwelling?

a. floor plan b. rental income

c. square footage d. amenities

36. Which of the following best describes market value?

a. market price b. willing buyer/seller

c. cost d. offered price

37. Functional obsolescence causing loss in value would be:

a. physical deterioration b. adverse zoning

c. out-dated design d. maintenance

38. Economic depreciation would be considered:

a. curable b. incurable

c. wear and tear d. inherent

39. In using the term "theoretical life" when determining depreciation, an appraiser refers to:

a. actual life b. chronological life

c. remaining economic life d. none of the above


40. When two or more contiguous lots are joined together to increase their value, the resulting increase in value is

called:

a. regression b. plottage

c. assemblage d. usage

41. In appraising, the term "value" most nearly means:

a. worth b. utility

c. price d. cost

42. Today, which of the following has the least effect on the value of property:

a. utility b. scarcity

c. demand d. original cost

43. Past expenditures for improvements on a residential lot is:

a. cost b. price

c. value d. equity

44. When establishing the value of land for urban commercial use, the most important factor to consider is:

a. location b. size of parcel

c. topography d. depth of the parcel

45. When establishing the value of land for industrial use, which of the following would be the least important factor

to consider:

a. topography b. fertility

c. location d. subsoil

46. Which of the following would NOT be used as a deduction in calculating net income when appraising income

property?

a. interest on mortgage loans b. vacancy allowance

c. reserve for replacements d. management costs

47. When comparing the capitalization rates on two commercial properties, one for a post office and one for a

hardware store, the rate on the post office property in relation to the hardware store property would be:

a. higher b. lower

c. the same d. impossible to establish

48. Using net income of $36,000 and a 9% capitalization rate, the value of a commercial property is calculated to be

$400,000. If a 12% capitalization rate is used the value of the property would be:

a. $250,000 b. $300,000

c. $450,000 d. $423,000


49. A small apartment complex generates net income of $15,000. If it were sold using an 8% capitalization rate to

determine the selling price, it would be listed at:

a. $167,000 b. $187,500

c. $120,000 d. none of the above

50. The cost and value of property would most likely be equal if:

a. the improvements are new

b. the type of property is scarce

c. the improvements represent the highest and best use of the land

d. both a and c are the case

51. When using the replacement cost approach to appraise a single-family residence, the square footage would be

determined by measuring the:

a. inside of the livable rooms and adding them together b. outside of the house and garage

c. inside of the house as a whole d. outside of the house but not the garage

52. Which of the following would be considered functional obsolescence?

a. lack of air conditioning b. over supply

c. insufficient parking available d. private restrictions

53. Which of the following would NOT be considered obsolescence?

a. outdated fixtures b. small bedrooms

c. wear and tear d. misplaced improvements

54. The theory of urban development that states that land uses tend to develop outward from the central business

district along major transportation lines is known as:

a. sector theory b. concentric theory

c. axial theory d. multiple nuclei theory

55. The discovery that high voltage electric lines which are located in your backyard cause cancer would be an

example of:

a. functional obsolescence b. external depreciation

c. physical deterioration d. none of the above

56. As part of the appraisal process, the appraiser should:

a. determine highest and best use b. gather general data regarding the

neighborhood

c. gather specific data d. all of the above

57. Mary bought a vacant lot and had her dream house built on the lot. The cost of Mary's dream house was

$120,000, but houses in the neighborhood were valued on an average of $75,000. The value of Mary’s home will

probably be affected by the principle of:

a. change b. progression

c. plottage d. regression


58. Referring to the facts in the questions above, the value of the other homes in Mary's neighborhood will probably

be affected by:

a. progression b. change

c. plottage d. regression

59. Reconciliation refers to:

a. depreciation

b. determining the value of land

c. the process to determine highest and best use

d. analyzing the result of all the approaches used to determine value and estimating the final value

60. In order to determine value using the income approach certain figures must be obtained by an appraiser. Which

of the following are NOT required?

a. annual net operating income b. capitalization rate

c. accrued depredation d. annual gross income

61. If the annual net income from Ann's property is $24,000 and the value has been determined at $300,000, what is

the capitalization rate?

a. 12.5% b. 8%

c. 15% d. 10.5%

62. Capitalization is the process in which annual net income is used to:

a. estimate value b. determine depredation

c. determine tax benefits d. all of the above

63. The market value of a parcel of property is:

a. a measure of part expenditures on the property

b. an estimate of the present worth of future benefits

c. the same as the market price

d. what the seller wants for the property

64. In the appraising of a home built in 1913, the most inaccurate approach would be the cost approach because:

a. estimating material costs would be difficult

b. it would be difficult to obtain 1913 building codes

c. depreciation would be difficult to determine

d. labor rates would be difficult to estimate

65. Which approach should an appraiser give the most weight when preparing an appraisal report for a loan on an old

residential home now used as an attorney's office?

a. income approach b. replacement cost approach

c. sales comparison approach d. gross rent multiplier


66. Under the income approach, the capitalization rate represents:

a. the rate at which property value will increase

b. the maximum rate of return on investments allowed by law

c. the rate of capital needed to operate the property

d. the rate of return the property will earn

FINANCE

67. The annual net income from Joe's office building is $20,000. If Joe requires a 9% return on his investment, the

value of his building is:

a. $1,800 b. $222,222

c. $180,000 d. $22,222

68. All federal banks are regulated by:

a. FNMA b. GNMA

c. FHLMC d. FRS

69. FHA mortgage insurance:

a. If the borrower dies, it pays off the outstanding loan

b. It insures the lender against losses resulting from a default by the borrower

c. a and b

d. neither a nor b

70. In order to tighten the money supply, the Federal Reserve System would take which of the following actions:

a. raise the reserve requirements b. raise the discount rates

c. a and b d. neither a nor b

71. Under FHA regulations, discount points may not be paid in excess of:

a. 1% b. 2%

c. 6% d. there is no limit

72. If the purchase price of a home exceeds the CRV, the veteran:

a. can finance the difference with a second trust deed

b. may pay the difference in cash from their own resources

c. can require the seller to lower the sales price to the CRV

d. all of the above

73. The clause that allows the lender to demand full payment after the borrower has missed one payment is:

a. alienation b. acceleration

c. reversion d. forfeiture

74. If a transaction is financed through a trust deed, the lender is the:

a. trustee b. mortgagee

c. beneficiary d. vendee


75. In a mortgage or trust deed the due-on-sale clause usually allows the lender to do all of the following EXCEPT:

a. review credit of the original borrower b. review credit of a new buyer

c. prohibit assumption d. prohibit assignment

76. To determine the effective gross income of a property, an investor would subtract which of the following from

gross income:

a. vacancy allowance b. bad checks

c. taxes d. a and b

77. FNMA was created primarily for:

a. buying FHA title 1 loans

b. making FHA title 1 loans

c. buying VA and FHA loans to stabilize the mortgage market

d. advance funds for low housing builders

78. Regarding real estate financing, each of the following statements are true EXCEPT:

a. The mortgage is generally considered a lien

b. Creation of a mortgage does not transfer title

c. A property owner by whom the mortgage is executed is called the mortgagor

d. A promissory note is security for a mortgage

79. A promissory note is:

a. evidence of debt

b. a negotiable instrument

c. a document in which the debtor promises to repay the loan amount

d. all of the above

80. Billie Bob lives in a state where the mortgagor holds title to the property. This state is a(n):

a. title theory state b. lien theory state

c. defeasance state d. none of the above

81. Under a promissory note secured by a mortgage, the mortgagor is the:

a. broker b. lender

c. borrower d. seller

82. Which of the following statements describes a conventional loan?

I. It is neither insured nor guaranteed by a government agency

II. The security rests on the borrower and their ability to repay and the collateral pledged

III. A conventional appraisal is needed for verification of value

IV. The ratio of loan amount to value of the property usually does not exceed 80% without

private mortgage insurance

a. I only b. I, II & III

c. all of the above d. I, II & IV


83. The FHA:

a. loans money directly to the borrower b. guarantees the lender against loss

c. insures the top 20% of the loan d. insures the lender against loss

84. Which of the following statements describes a FHA loan?

I. A mortgage insurance premium is charged.

II. The lender is insured against loss.

III. The maximum mortgage debt is determined by a formula.

IV. The maximum interest rate is set by each lender.

a. II only b. I, II & III

c. I, II & IV d. I, II, III & IV

85. Which of the following statements describes a VA loan?

I. The loan is guaranteed 100%

II. Only an eligible veteran or eligible dependents of veterans may qualify for a loan

III. The loan is insured

IV. Little or no down payment is required

a. IV only b. I, II & IV

c. II, III & IV d. I & IV

86. A mortgage covering more than one parcel of real property is a(n):

a. junior mortgage b. blanket mortgage

c. package mortgage d. none of the above

87. A mortgage that covers both real and personal property is a:

a. purchase-money b. blanket mortgage

c. package d. wraparound

88. A graduated-payment mortgage:

a. contains an interest provision related to a selected index

b. granted for a three to five year term

c. allows a buyer to purchase a home with initial payments lower than the level payment of an amortized

mortgage

d. allows the mortgagor to borrow money during the loan

89. Sources of funds for mortgages include:

I. savings and loans II. pension funds

III. commercial banks IV. private parties

a. I only b. I & II



90. The government agency in the secondary market created to administer special 203K loans is:

a. FHA b. GNMA

c. FNMA d. FDIC

91. The tandem plan involves:

a. VA/FHA b. FNMA/FHLC

c. FNMA/GNMA d. FHA/FNMA

92. The lending officer when processing a real estate loan application is least interested in the:

a. loan agreement b. credit rating

c. outstanding liabilities d. borrower's needs

93. For a FHA loan, the borrower is required to:

I. provide mortgage insurance to protect the lender

II. meet FHA credit standards

III. find an approved lender willing to make the loan

a. I only b. I & II

c. I & III d. I, II & III

94. A mortgage on four lots with a partial release clause is a(n):

a. wraparound b. blanket

c. package d. open-end

95. If a lender sues the borrower and obtains a judgment, the court will order to sell the property in:

a. judicial foreclosure b. prepayment penalty clause

c. escalation clause d. due-on-sale clause

96. Thomas owes Liddy $70,000 for the home she sold him three years ago. Thomas defaulted on the loan and the

court ordered sale brings $65,000. Which of the following statements may be true?

I. Liddy can recover up to 80% of the loss from Thomas

II. Liddy may be entitled to recover a $5,000 judgment from Thomas

III. Liddy may have to file for the $70,000


c. I & III d. I, II & III

97. The financing instrument that describes all the terms of the borrower’s promise to pay is:

a. the mortgage b. the bill of sale

c. the note d. the trust deed


98. An investor purchased property with a small down payment financing the balance. Within a year the investor

sold the property at a substantial profit without additional investment into the property. This is an example of:

a. debt reduction b. appreciation

c. leverage d. inflation

99. Mr. Jones purchased an apartment building for $225,000. The building was appraised at $250,000 and had an

assessed value of $200,000. He paid $50,000 down and financed the balance of the purchase price. Mr. Jones' cost

basis in the building for income tax purposes is:

a. $200,000 b. $225,000

c. $250,000 d. $175,000

100. Which of the following is an inherently poor characteristic of a second trust deed from the viewpoint of a

lender?

a. precludes the right to a deficiency judgment

b. affords no provision for immediate notification of commencement of foreclosure proceedings in connection with

a first trust deed

c. risk of junior lien holder is higher than the first lien holder

d. interest rate is lower than or same as that of a first trust deed



Finance and Appraisal Practice Test

1. Which of the following below is not a physical characteristic of land?

a. Immobile

b. Durable

c. Age

d. Non – fungible

2. Which of the following statements does not fit in with principals of value?

a. An appraiser

b. Conformity

c. Supply and demand

d. Anticipation

3. A person that funds a loan with their own funds and then usually sells the loan to the secondary mortgage market

most closely describes:

a. Wholesale mortgage banker

b. Wholesale mortgage broker

c. In house mortgage lender

d. In house mortgage banker

4. The term that most closely identifies where the U.S. stores all of its money is:

a. Federal Reserve System

b. Internal Revenue System

c. Commercial banks

d. Treasury

5. On a closing statement, certain items are a credit or a debit to the buyer and the seller. If the home being

purchased by the buyer is a rental property, the tenant’s security deposit is:

a. Pro-rated

b. Credit to buyer/ Debit to seller

c. Debit to buyer/ Credit to seller

d. None of the above

6. There are twenty homes in a neighborhood for sale at the same time. There are twelve model A's available, seven

model B's available, and one model C. Which model will be the least expensive?

a. Model A and model C

b. Model A

c. Model C

d. Model B

7. The growth theory that mostly describes growth developing out from the business center is

a. Sector growth

b. Industrial growth

c. Concentric growth

d. Primary growth

8. Which of the following terms least likely represents a detriment to a community?

a. Traffic

b. Suitability

c. Industry

d. Expansion problems


9. Demand and transferability most closely describes:

a. Economic good of realty

b. Economic concerns in realty

c. Reconciliation of realty


10. An appraiser uses three approaches to find the value of a certain home or business. Which approach would most

likely be used if location and amenities were the two greatest factors in the approach?

a. Fair market price approach

b. Comparable market price approach

c. Market comparison approach

d. All of the above

11. The following steps are taken when a buyer needs financing from a lender. Place the steps in the order in which

they happen:

I. Mortgage Company orders appraisal III. Title is reviewed

II. Underwriter reviews file IV. Buyer buys property

a. III, IV, I, II

b. II, IV, I, III

c. IV, III, I, II

d. I, II, III, IV

12. How many square feet are in an acre?

a. 45,630

b. 36,540

c. 43,650

d. 43,560

13. Which statement below is the closest description of FNMA?

a. Is not overseen by the government and purchases FHA, VA, and non-conventional loans, also known as

Fannie Mae.

b. Was a private financier of FHA and VA loans that acts in tandem with GNMA.

c. Is overseen by the government and purchases FHA, VA, and nonconforming loans.

d. Is also known as Fannie Mac, they are a private financier of FHA, VA, and conventional loans that act in

tandem with GNMA.

14. When a lender can foreclose on property for settlement of the loan and hold the borrower liable for any unpaid

balance, this is referred to as:

a. Recourse

b. Regression

c. Conformtion

d. Reconciliation

15. Which of the following is not an approach an appraiser uses?

a. Sales comparison approach

b. Cost approach

c. Fair market price approach

d. Income approach

16. Which of the following is true in regards to an FHA lending program?

a. Insures the lender 100% by the government requiring private mortgage insurance.

b. This program helps people buy houses other people don't want.

c. The guidelines for FHA programs are set by each state.

d. All are false.


17. A conventional loan plan that combines realty and personal property is called:

a. A pension loan

b. A construction loan

c. A wrap-around loan

d. A package loan

18. Which of the following is FALSE regarding an assignment of a contract?

a. The assignee is primarily liable on the contract

b. All of the assignor’s interests are transferred to the assignee

c. All contracts are assignable

d. The assignee assumes the duties of the assignor

19. Which of the following best describes an alienation clause?

a. A lender who receives a pledge from a borrower to repay a loan.

b. A provision in a mortgage, trust deed, promissory note or contract for deed that, upon the occurrence of a

specified event, gives the lender the right to call all sums due and payable in advance of the fixed

payment date.

c. An agreement where the holder of a prior superior mortgage agrees to subordinate or give up his or her

priority position to an existing or anticipated future lien.

d. AKA “Due on Sale” clause that says if you disobey any other clauses we can call it due and payable

according to state law.

20. Which of the following best describes subrogation?

a. The substitution of a third person in place of a creditor to whose rights the third person succeeds in the

relation to the debt.

b. An agreement where the holder of a prior superior mortgage agrees to subordinate or give up his or her

priority position to an existing or anticipated future lien.

c. A provision in a mortgage, trust deed, promissory note or contract for deed.

d. Answer not given

21. Which of the following statements is true of a mortgage broker?

a. Can only lend money after an underwriter’s approval

b. Does not make the loan

c. Acts as an intermediary between borrower and wholesale broker

d. All statements are true

22. A jumbo loan or an interest only loan is known as:

a. Non-conventional conforming

b. Conventional non-conforming

c. Either a or b

d. Neither a or b

23. According to a closing statement, the selling price of the property is:

a. A debit to the buyer

b. A credit to the buyer

c. A debit to the seller

d. b and c

24. Which of the following is not an environmental concern in realty?

a. Radon gas

b. Asbestos

c. Freon

d. Underground storage tank


25. The term linkage has to do with

a. Assemblage of parcels

b. Added infrastructure to land

c. The aspect of work and school in relation to home

d. Subjecting value to a unit of land

26. Plottage most likely is:

a. A large parcel of land that is being appraised.

b. The process of adding two units of land

c. A parcel of land zoned for industrial

d. The end result of assemblage when the value is greater than before assemblage.

27. The depreciation that occurs surrounding a primary employer that went out of business most likely is:

a. Locational obsolete

b. Physical obsolescence incurable

c. Economically incurable

d. Functionally incurable

28. Which guidelines and qualifications of a VA loan listed below are false?

a. Veteran must have a DD-214 and Certificate of Eligibility

b. Property being purchased by a reservist of 4 years must have a Certificate of Reasonable Value appraisal

to qualify.

c. Veteran must be a veteran

d. May be able to finance 100% of the loan.

29. PITI stands for:

a. Price, insurance, taxes, and impound

b. Price, interest, taxes, and impound

c. Principal, interest, taxes, and impound


30. The difference between the amount owed on a loan and the present value best describes:

a. Amortized budget

b. Recourse amount

c. Equity amount

d. Prime rate

31. Which of the sources of financing below is not a primary source?

a. Mutual Saving Bank

b. Life Insurance Company

c. Credit Union

d. All of the above are primary sources

32. Which appraisal approach is used mostly for an office, or a warehouse?

a. Income approach

b. Cost approach

c. Debt ratio approach

d. Gross income approach

33. Stacey, a licensee, is showing a home to Frank and Dora. Frank and Dora absolutely fell in love with the kitchen,

with its large cabinets and spacious cooking area. This made them overlook any location concerns they might

have. It is fair to say that Frank and Dora:

a. Have given this property objective value.

b. Must reconcile their principles of value.

c. Are using anticipation to measure the value.

d. Have given this property subjective value.


34. Which of the following best defines a trustee?

a. The seller of realty.

b. Pertaining to a trust deed, when the trustor pays off the note on a trust deed, the trustee issues a deed of

reconveyance.

c. The seller under contract for deed. In some cases, the vendor may not be the owner, he or she might be

the holder of an option.

d. The borrower, having all or part of title to property, pledges that property as security for a debt.

35. Which of the following best defines a vendor?


b. One who holds property in trust for another as a fiduciary and is charged with the duty to protect,

preserve and enhance the value and the highest and best use of the trust property.

c. The seller under contract for deed. In some cases, the vendor may not be the owner, he or she might be



36. Which of the following best defines a Mortgagor?


b. One who holds property in trust for another as a fiduciary and is charged with the duty to protect,

preserve and enhance the value and the highest and best use of the trust property.

c. The buyer under contract for deed. In some cases, the vendor may not be the owner, he or she might be



37. Which of the following best defines a Vendee?


b. The seller under contract for deed. In some cases, the vendor may not be the owner, he or she might be


c. The purchaser of realty; the buyer. The buyer under contract for deed.


38. Reconciliation is best described as:

a. Market, cost and income approach

b. A value of a unit of land after anticipation

c. The principle that great homes go down in value because of lesser homes in the area.

d. A correlation of market, cost and income approaches to value

39. A constant payment including interest, principal and taxes is best described as:

a. Non-recourse loan

b. Budget loan

c. Partially amortized loan


40 Which government entity below loans money to banks and controls the economy by setting reserve requirements

banks are required to have:

a. Treasury

b. Federal Reserve

c. Ginnie Mae



41 Which of the following best describes a beneficiary?

a. The seller under contract for deed. In some cases, the vendor may not be the owner, he or she might be


b. The lender in a deed of trust and the title is held by the trustee

c. The person, buyer or seller, who has the most to benefit from a transaction

d. A person who receives benefits from the gifts or acts of another, as in one designated to receive the

proceeds from a will, insurance policy or trust.

42. According to a closing statement, unpaid water and other utility bills is:

a. Credit to the buyer, debit to the seller

b. Debit to the seller

c. Prorated


43. A second mortgage taken on real property:

a. has precedence over the first mortgage

b. is usually subordinate to any previously issued mortgage on the property

c. has priority if it was executed earlier than the first mortgage

d. is equal to a performance bond

44. The advantage of a deed of trust is:

a. the title is held in trust and the foreclosure procedure is quicker

b. no second mortgage can be made on the property

c. there is no advantage

d. it allows all creditors to file claims

45. Who signs the note that goes along with the mortgage?

a. mortgagor

b. mortgagee

c. mortgagor and assignee

d. mortgagee and assignee

46. Which lien is attached to a specific property?

a. judgment lien

b. general lien

c. federal income tax lien

d. property tax lien

47. Interstates and freeways are known as:

a. Sector roads

b. Axial roads

c. Concentric roads

d. Government roads

48. Which lending program below may require a buyer to pay private mortgage insurance if they are borrowing more

than 80% of the value?

a. VA loan

b. FHA loan

c. Conventional loan


49. The repayment of principal and interest within a specified time is characteristic of a (n):

a. delinquent loan

b. amortized loan

c. accelerated loan

d. equalized loan


50. The clause in a mortgage that allows the mortgagee to declare the entire sum upon default by the mortgagor is:

a. the escalator clause

b. the acceleration clause

c. the forfeiture clause

d. the termination clause

51. The type of mortgage that encompasses more than one property is:

a. a package mortgage

b. a wraparound mortgage

c. a blanket mortgage

d. a net mortgage

52. An act performed by a creditor to receive payment on a real estate loan is called:

a. redemption

b. escrow

c. foreclosure

d. assignment

53. Money for FHA financing is provided by:

a. HUD

b. the FDIC

c. a qualified lending institution

d. the Federal Housing Administration

54. The Federal Housing Administration

a. guarantees loans

b. builds houses

c. purchases land

d. answer not given

55. In order to make financing for homes available, the most common source of secondary mortgage money is:

a. the seller taking a second mortgage

b. the Federal National Mortgage Association

c. insurance companies

d. Federal Housing Administration

56. Which of the following is a requirement of a VA loan?

a. The veteran must qualify

b. needs to be federally insured

c. only a single family home

d. must have a CVR appraisal

57. In securing a residential loan:

a. PMI is always required on conventional loans

b. no down payment can be made on a VA loan

c. a down payment is not required when obtaining an FHA loan

d. there must be a 10% down payment

58. Which of the following fact is true concerning VA loans?

a. a VA loan on a four-plex cannot exceed 15 years

b. a buyer must pay the difference between the amount the VA appraises the home and the purchase price

c. a VA loan can be assumed by a non-veteran

d. a VA loan can only be assumed by a veteran


59. Which of the following is true regarding a property that has been financed with a VA loan?

a. the loan may be assumed with qualifying

b. the present owner can transfer the loan to a new home

c. the loan is not assumable after 12/15/89

d. only another veteran that uses his eligibility can assume the loan

60. In securing a loan on a home:

a. escrow accounts are mandatory

b. through FHA, the buyer must have an average income

c. through a VA loan, the buyer must be owner-occupant

d. the VA loan has no guarantee limit

61. Which of the following is not a principal of value?

a. Progression

b. Regression

c. Change

d. Answer not given

62. The maximum amount guaranteed by HUD on any VA loan is:

a. Answer not given

b. 25% of the purchase price

c. 50% of the purchase price

d. $60,000

63. The Department of Veterans Affairs;

a. insures loans

b. makes loans

c. sells loans

d. answer not given

64. The former private corporation that bought federally insured or guaranteed mortgages for resale is:

a. FNMA

b. PMI

c. MGIC

d. FDIC

65. When a purchaser of real estate assumes the seller's existing loan:

a. she buys out the lender's equity

b. she becomes responsible for the repayment of the debt along with the original borrower

c. the original borrower is relieved of responsibility

d. the new owner is responsible for the debt

66. Conventional loans are:

a. never insured

b. always insured by PMI

c. not insured by the federal government

d. never guaranteed

67. The substitution of a new contract for an existing agreement is known as:

a. novation

b. satisfaction

c. release

d. assignment


68. In an FHA loan, discount points may be paid by:

a. the buyer

b. the seller

c. only the buyer

d. anyone

69. A loan covering real and personal property is:

a. FHA

b. A wraparound

c. VA

d. Answer not given

70. The mortgage broker who brings the lender and borrower together receives a fee for this service, which is referred

to as:

a. a finder's fee

b. a service fee

c. an insured fee

d. a participation fee

71. Which of the following government regulations entitles borrowers to review their credit report?

a. Truth-in-lending

b. Fair Credit Reporting

c. Equal Credit Opportunity

d. Real Estate Settlement Procedures

72. The Mortgage Guarantee Insurance Corporation insures which of the following types of loans?

a. FHA

b. VA

c. Conventional

d. Land contract

73. Two or more loans into one is called:

a. wrap

b. package

c. combination

d. answer not given

74. The primary lender may sell the loan to the secondary mortgage market. The secondary market consists of:

a. banks

b. FHA

c. VA

d. Answer not given

75. The secondary mortgage market can best be described as:

a. lenders of FHA loans carry back second mortgages

b. primary lenders retain the mortgages in their portfolio

c. the property owner carries back a second mortgage

d. after loans are originated, they are bundled and sold

76. The primary purpose of the Federal Home Loan Mortgage Corporation (FHLMC) called Freddie Mac, is to

a. buy mortgages and pool them to sell in the market place

b. originate loans

c. service loans

d. insure loans made by qualified lenders


77. To charge interest in excess of the amount allowable by law is:

a. truth-in-lending

b. discount points

c. rent

d. usury

78. The buyer of the $83,000 home could finance?

a. CRV

b. MIP

c. points

d. Answer not given

79. This loan allows for financing both the purchase and the cost of rehabilitating the property:

a. FHA 234 loan

b. FHA 203B loan

c. FHA 203K plan

d. VA loan

80. When monthly payments made on a loan are amortized over a period of years:

a. the debt is liquidated all at once

b. the payments include both principal and interest

c. there must be a balloon payment

d. principal is paid first



Match Maker 3-1

1. ____ Reconciliation A. Most Money

2. ____ 260% B. Move every 5 years

3. ____ Rule of 72 C. Land

4. ____ Axial Road D. Rehab

5. ____ Supply E. Apartment Complex

6. ____ Demand F. Interchangeable

7. ____ Highest Best Use G. If exact buy less expensive

8. ____ Smallest House H. Open retail

9. ____ Increasing Return I. Directional Flow

10. ____ Decreasing Return J. R.E. Agent

11. ____ Substitution K. New Home

12. ____ Change L. Arm’s Length

13. ____ Comparison M. No New Employment

14. ____ Price N. No No No

15. ____ Value O. New for Old

16. ____ Cost P. Speculator

17. ____ Adequate Time Q. $ to Build

18. ____ Sales Comparison R. 3 Approaches

19. ____ Cost Approach S. Yes Yes Yes

20. ____ Income Approach T. 20 Years

21. ____ Double Sector Road U. Don’t Rehab

22. ____ Fungible V. R.E. Appraiser

23. ____ 12/15 yrs W. Double your $

24. ____ 5/7 yrs X. Progression Regression

25. ____ Subjective Y. New Employment

26. ____ Objective Z. Freeway






Match Maker 3-2

1. ____ GRM A. Economic

2. ____ Fixed Expense B. Physical Incurable

3. ____ Real Estate C. 500,000 to Build

4. ____ Land D. Obsolete Curable

5. ____ 1031 E. Sales Comparison

6. ____ Owner Occupied F. Get $ Back

7. ____ No Elevator G. Adjust Comp

8. ____ Crime Area H. Not Liquid

9. ____ Broken Window I. Over CR

10. ____ Re-routing Air Traffic J. Income Approach

11. ____ Dated Fixtures K. Make $

12. ____ Post Office L. 250,000/500,000

13. ____ Broken Foundation M. R.E. Agent

14. ____ Curable N. Cost Approach

15. ____ Incurable O. Good Schools

16. ____ Shopping Center P. HVAC

17. ____ Land 40 acres Q. Dust

18. ____ Subject has Latt R. Incurable

19. ____ Pool S. Taxes

20. ____ NOI T. Amenities

21. ____ Scarcity U. Obsolete Incurable

22. ____ Subjective V. No Tax Write Off

23. ____ Objective W. R.E. Appraiser

24. ____ Price X. Can’t get $ back

25. ____ Cost Y. Delay Taxes

26. ____ Value Z. Physical Curable






Match Maker 3-3

1. ____ FHA A. Core of the Earth

2. ____ VA B. Warehouse

3. ____ Conventional Non-Conforming C. Scarcity

4. ____ Market Approach D. Appraisal

5. ____ Income Approach E. Arm’s Length

6. ____ Cost Approach F. Older People

7. ____ Hypothecate G. Partially Amortized

8. ____ RAM H. Budget Loan

9. ____ 6 Months I. Owner Occupied

10. ____ Economic Good of Land J. Adequate Time

11. ____ Physical Description of Land K. Term/Interest Only

12. ____ Real Estate L. No Fixed Payment

13. ____ FNMA M. Low Down Payment

14. ____ FHLMC N. Personalty/Realty Loan

15. ____ GNMA O. Combining Loans

16. ____ Conforming P. Paid on the Loan

17. ____ Balloon Q. Fixed $$ Over Time

18. ____ PITI R. Pledge

19. ____ Straight S. Speculator

20. ____ ARM T. Was Private

21. ____ Amortized U. FHA/VA Only

22. ____ Package V. 6-Year Reservist

23. ____ Blanket W. No Tandem

24. ____ Points X. Curable/Incurable

25. ____ Arm’s Length Y. Jumbo Loan

26. ____ Appraisal Z. Land






Match Maker 3-4

1. _______Balloon A. VA

2. _______Blanket B. Improving the real estate

3. _______Budget C. Charge

4. _______CAP D. Real estate agent

5. _______Carry back E. $$ Expected when rented

6. _______CRV F. Consistent size & shape

7. _______Change G. Adjoining land

8. _______Comparables H. Improvement

9. _______CMA I. Repairs are a negative

10. _______Comparative Sales J. Final & larger payment

11. _______Conformity K. Cost Approach

12. _______Construction Loan L. Residential

13. _______CPI M. Post Office

14. _______Contiguous N. More than one loan

15. _______Contribution O. Person who owes money

16. _______Conforming Loan P. FHA

17. _______Cost Approach Q. Time life of improvements

18. _______Curable R. Seller carries

19. _______Debit S. Decline in $$/outside factors

20. _______Debtor T. Realty doesn’t remain constant

21. _______Decreasing Returns U. measures inflation

22. _______HUD V. PITI

23. _______Depreciation W. Cost-effective repair

24. _______Economic Life X. Market data

25. _______Economic Obsolescence Y. Maximum rise of interest rate

26. _______Economic Rent Z. Closed *Matching worksheets are designed to assist with building vocabulary. The first number in the title sequence represents the subject and





National

Mock

Reviews

This section of the pre-licensing course contains a number of practice tests

designed to test your knowledge of what you have learned so far. Take these

practice tests and use the results as a guide to your weak areas.


NATIONAL MOCK REVIEW #1

“ABLE ACES”

1. ___Accretion A. 43,560 square feet

2. ___Avulsion B. Land increase gradually

3. ___Assent C. Condo

4. ___Adverse possession D. Educated opinion

5. ___Administrator E. Person assigning

6. ___Accession F. Consent

7. ___Alluvium G. Broker

8. ___Acre H. Individual ownership of realty

9. ___Assessments I. Summary of realty since beginning

10. ___Appurtenance J. Trade fixture

11. ___Allodial K. Formal declaration by notary

12. ___Acknowledgement L. Landlord’s legal notice

13. ___Axial M. Male appointed by judge for a will

14. ___Abstract N. Taxes

15. ___Actual notice O. Rights that pass with the land

16. ___Assign P. Transfer rights; however, remain liable

17. ___Alienation Q. Interest rates rise or fall

18. ___Air lot R. Mutual consent

19. ___Acceleration S. Violent land increase by soil

20. ___Appraisal T. Transfer realty

21. ___Auction U. Addition to document

22. ___Assemblage V. Agreement

23. ___Assignor W. Soil

24. ___Ad valorem X. Open and notorious occupancy

25. ___Agency Y. Plottage

26. ___Agent Z. What you see

27. ___Accord

28. ___Actual eviction

29. ___Adjustable rate

30. ___Addendum

***NOTE: MORE NUMBERS THAN LETTERS




“BAD BOYS” AND “DIRTY DOGS”

1. ___Baselines A. Trustee to original trustor

2. ___Bill of sale B. Personalty

3. ___Building codes C. Wife’s right

4. ___Budget mortgage D. Personalty left in a will

5. ___Beneficiary E. Lender takes realty

6. ___Bequest F. Opposite of amendment

7. ___Balloon G. Lender with trust deed

8. ___Bilateral H. 1 point, 1 percent

9. ___Breach I. Both promise

10. ___Blockbusting J. Minimum construction standards

11. ___Deed of Reconveyance K. Security instrument

12. ___Deed L. Lenders call it alienation clause

13. ___Dedication M. Voluntary by private to government

14. ___Datum N. Creating fear

15. ___Dower O. To lease

16. ___Downzoning P. Will realty

17. ___Demise Q. PITI

18. ___Dual agency R. Money out of savings and loans

19. ___Due on sale clause S. Partially amortized

20. ___Duress T. Dry land exposed

21. ___Disintermediation U. Disagreement after M&M’s

22. ___Discount points V. Loss of value due to any cause

23. ___Devise W. Voidable

24. ___Dereliction X. Limited fiduciary

25. ___Depreciation Y. Official transfer of deed

26. ___Delivery and acceptance Z. Satisfaction piece

27. ___Determinable estate

28. ___Defeasance clause

29. ___Deed of trust

30. ___Deed in lieu of foreclosure

**NOTE: MORE NUMBERS THAN LETTERS




“CLASSY CATS”

1. ___Condo A. Husband

2. ___Contract B. 3rd

party

3. ___Covenant C. Veteran needs to buy

4. ___Counteroffer D. Joint tenant

5. ___Commingle E. Stock and proprietary lease

6. ___Conversion F. 66 feet

7. ___Codicil G. Love

8. ___Constructive notice H. Public records

9. ___Constructive eviction I. Increasing return

10. ___Condominium J. Air lot

11. ___Consideration K. Principal

12. ___Common Law L. Promise

13. ___Chain M. Mix money

14. ___CC&R’s N. Uninhabitable house

15. ___Caveat emptor O. Always broker to broker

16. ___CE P. Customary in the area

17. ___Chain of title Q. Use money

18. ___Contract for deed R. Original offer void

19. ___Cooperative S. Mutual agreement

20. ___Cooperating broker T. Owner agrees to abide by the rules

21. ___Co-ownership U. Stock

22. ___Corporation V. Buyer beware

23. ___Cloud of title W. Veteran appraisal

24. ___Community property X. Grantor-grantee-grantor

25. ___CRV Y. Split commission between brokers

26. ___Commission Z. Vendor/vendee

27. ___Customer

28. ___Client

29. ___Curtsey

30. ___Curable





“EASY EELS”

1. ___EMD A. What the realty rent should be

2. ___Easement B. Divorced person can get credit

3. ___Easement Appurtenant C. Government considers taking realty

4. ___Easement by Necessity D. Gets paid even if owner sells

5. ___Easement by Prescription E. Repay loan without loss of realty

6. ___Easement in Gross F. Lease increase over time

7. ___Estate at Sufferance G. Owner may sell without penalty

8. ___Economic obsolescence H. Affects value, not necessarily a lien

9. ___Economic rent I. Male in a will

10. ___Estovers J. Female in a will

11. ___Eminent Domain K. Use of land over time

12. ___Emblement L. Impartial 3rd

party

13. ___Encroachment M. Not all items done in a contract

14. ___Employment contract N. Value minus debt

15. ___Encumbrance O. Incurable

16. ___E&O P. Unauthorized and illegal extension

17. ___Equity redemption Q. Good faith money in a purchase

18. ___Equity R. Insurance for errors and omission

19. ___Escalator clause S. Utility company

20. ___Escrow T. No will, no heirs

21. ___Escheat U. Landlocked realty is a “no”

22. ___Equitable title V. Close of escrow

23. ___Equal Credit Opportunity W. Transfers with the land

24. ___Exclusive right to sell X. Employee

25. ___Eviction Y. Right to use the land of another

26. ___Executory Z. Annual crop

27. ___Executed

28. ___Executor

29. ___Executrix

30. ___Exclusive agency





“FRIENDLY FRANKS” AND “GOOD GIRLS”

1. ___Fraud A. Freddie Mac

2. ___Foreclosure B. VA

3. ___FHLMC C. Seisin

4. ___Freehold D. Improvement

5. ___Front foot E. Dated fixtures

6. ___Flat fee broker F. Person signing a deed

7. ___Funding fee G. Interchangeable

8. ___Fungible H. Condition subsequent

9. ___Functional obsolete curable I. Person receiving deed

10. ___Functional obsolete incurable J. Best freehold

11. ___Familial status K. GNMA

12. ___Fannie Mae L. 1988

13. ___FHA M. Estate with ownership

14. ___Fee simple N. Right of lender when “no pay”

15. ___Fee determinable O. Lack of elevator

16. ___Fiduciary P. Fixed commission for broker

17. ___Father estate Q. Utility company

18. ___Fixity R. Gross rent over sales price

19. ___Fixture S. Representation

20. ___General partnership T. Voidable

21. ___Gross easement U. Small down payment

22. ___Gap in title V. Love

23. ___Ginnie Mae W. IRS

24. ___General lien X. Name Change from grantee to grantor

25. ___Grantee Y. FNMA

26. ___Grantor Z. Special assessment

27. ___GRM

28. ___GIM

29. ___General Warranty Deed

30. ___Good consideration





“HAPPY HARRYS”, “INSTANT IZZYS”

AND “JUMPING JACKS”

1. ___Habendum clause A. Living trust

2. ___Holdover tenant B. Estate at sufferance

3. ___Homestead C. Land contract

4. ___Homeowner’s association D. Group of investors for single purpose

5. ___HUD E. 1988

6. ___Hypothecate F. Law of descent

7. ___Heirs G. Most money

8. ___Highest & best use H. Incorporeal

9. ___Holographic Will I. No attestation

10. ___Handicap J. Pledge

11. ___Irrevocable offer K. CC&R’s

12. ___Insurance L. Subordinate to first mortgage

13. ___Immobility M. Conduct and actions

14. ___Implied N. Court decision

15. ___Impound account O. Equal percentages of ownership

16. ___Illiquidity P. Legal life estate

17. ___Intestate Q. Reserves of taxes and insurance

18. ___Intoxicated R. Insures 100% of FHA loan

19. ___Inverse Condemnation S. Have and hold “not needed” in deed

20. ___Intangible T. Law says no such thing

21. ___Involuntary lien U. Little money

22. ___Inter vivos V. Characteristic of land

23. ___Installment contract W. Voidable

24. ___Index lease X. Economic indicator for increase in rent

25. ___Inchoate Y. Owner sues government

26. ___Joint tenant Z. No will

27. ___Joint venture

28. ___Junior mortgage

29. ___Judicial foreclosure

30. ___Judgment

***NOTE: MORE NUMBERS THAN LETTERS Answers on National page 218



“LOONY LARRIES”

1. ___Land A. Privilege

2. ___Land contract B. No court in a breach

3. ___Land lease C. Commercial realty

4. ___Landlord D. Money

5. ___Legal title E. Individual giving possessory right

6. ___Lease F. Formal address

7. ___Legacy G. Individual water right next to a sea

8. ___Leverage H. Lessor and lessee

9. ___License I. Deceased giving personalty

10. ___Lien theory J. Most important thing in real estate

11. ___Life estate K. 99 years max

12. ___Liener L. Personalty

13. ___Lincoln/Land Trust M. Possessory right of realty with deed

14. ___Loan servicing N. Mortgage banker

15. ___Littoral O. Vendor

16. ___LLC P. Fiduciary

17. ___Liquidated damages Q. Pur Autre Vie

18. ___Loyalty R. Individual receiving possessory right

19. ___Lot-block system S. Little down payment, big return

20. ___Location T. Conceal names

21. ___Laches U. Non-fungible

22. ___Limited partner V. Limited money obligation

23. ___Lifetime cap W. Mortgage

24. ___Lien X. ARM

25. ___Licensee Y. Use your rights or lose them

26. ___Lessee Z. Lessor

27. ___Lessor

28. ___Letter of intent

29. ___Land trust

30. ___Legator





“MARYS MOTHERS” AND “NILLY NANCYS”

1. ___Mortgagee A. Not interchangeable

2. ___Mortgagor B. Acknowledgement

3. ___MLS C. Exchange info between REALTORS®

4. ___Mutual agreement D. Cha-ching!!!

5. ___Mutual rescission E. Saleable

6. ___Metes F. VA loan

7. ___Mortgage G. Land is different

8. ___Mile H. M&M’s

9. ___Mill I. Grandfathered

10. ___Mechanic’s lien J. Security agreement

11. ___Market approach K. 1760 yards

12. ___Menace L. .001

13. ___Meeting of the minds M. Forget with no harm/no money

14. ___Market value N. Opposite of east and west

15. ___Meridian O. Base rent plus

16. ___Marketable title P. Usually illegal

17. ___Multiple nuclei Q. Owner with loan on a mortgage

18. ___Net lease R. Pending lawsuit

19. ___NOI S. Older, owner-occupied

20. ___Non-conforming use T. Lender on realty with a mortgage

21. ___Notice of lis pendens U. Trustee

22. ___Nuncupative will V. A threat

23. ___Novation W. Complete substitution

24. ___Naked title X. Worth

25. ___Note Y. Only on a specific piece of realty

26. ___Notary public Z. Income approach

27. ___Non-recourse

28. ___Net listing

29. ___Non-homogeneous

30. ___Non-fungible





“ORLANDOS OVARIES” AND

“PAULINES PERILS”

1. ___Objective value A. Use

2. ___Obedience B. Liability for all

3. ___Obligor C. Non-conforming conventional loan

4. ___Obligee D. Balloon

5. ___Offeror acknowledges E. Owes money

6. ___Offeree F. Receives offer

7. ___Option G. 3rd party believes there is an agency

8. ___Oral will H. Realty and personalty loan

9. ___Ostensible I. Owner

10. ___Optionor J. Joint tenants may do this in a dispute

11. ___Optionee K. In writing only

12. ___Puffing L. Nuncupative

13. ___PMA M. You can see

14. ___Prorating N. Unilateral contract

15. ___Property management O. Shopping mall

16. ___Patent defect P. Fiduciary

17. ___Police powers Q. Intestate or testate

18. ___Promissory note R. An opinion

19. ___Probate court S. M&M’s

20. ___Prescriptive easement T. General agent

21. ___Prepayment penalty maybe U. Person to receive money

22. ___Primary market V. Debit seller/credit buyer

23. ___Percentage lease W. Insurance company

24. ___Payment cap on a loan X. ARM

25. ___Partnership Y. Mortgage broker

26. ___Package mortgage Z. Vendee

27. ___Participation loan

28. ___Partition

29. ___Parol evidence

30. ___Partially amortized ***NOTE: MORE NUMBERS THAN LETTERS




“PAULINES PERILS”, “QUINCY QUACKS”

AND “ROVING RABBITS”

1. ___PITI A. Broken concrete slab

2. ___Physical curable B. Hypothecate

3. ___Perc test C. Month to month

4. ___Pledge D. Selling timeshares in some states

5. ___Periodic leasehold E. Cooperative

6. ___Perjury F. Lawnmower

7. ___Personal property G. Open listing

8. ___Physical characteristic of land H. Assemblage

9. ___Physical incurable I. Judge has a right to do

10. ___POB J. Immobile

11. ___Point K. Enabling acts of the government

12. ___Plottage L. Conventional loan insurance

13. ___Police power M. 1% of loan

14. ___Power of attorney N. 6 miles wide

15. ___Principal O. Attorney of or at fact

16. ___Price fixing P. Septic test for soil drainage

17. ___PMI Q. Illegal for brokers

18. ___Procuring cause R. Lots and blocks

19. ___Patent S. Client

20. ___Property report T. Mortgage foreclosure

21. ___Proprietary lease U. Broken window

22. ___Prior appropriation V. Budget loan

23. ___Quiet title W. Metes and bounds

24. ___Quitclaim deed X. Pooling investor’s money

25. ___Range Y. Lie

26. ___Restriction Z. Transfer interest only

27. ___Real estate legal description

28. ___REIT

29. ___Reversionary interest

30. ___Referee’s deed




“ROVING RABBITS” AND “SILLY SALLYS”

1. ___Rod A. Defeasance clause

2. ___Risk B. Loss of money in an investment

3. ___Riparian C. Exact

4. ___RESPA D. Possessory right of realty with a deed

5. ___Ratification E. CC&R’s

6. ___Restrictive covenants F. APR

7. ___Reverse mortgage G. RAM

8. ___Reversion right H. Life estate reverts back

9. ___Regulation Z I. Stream rights

10. ___Rider J. 3 business days and fair estimate

11. ___Right of survivorship K. 640 acres

12. ___Range lines L. 16.5 feet

13. ___Remainder right M. Before marriage

14. ___Remise N. Joint tenant

15. ___Redlining O. Trust deed

16. ___Reproduction P. FNMA

17. ___Reconciliation Q. Lenders

18. ___Replacement R. Trustee is grantor

19. ___Government rectangular system S. Meridians

20. ___Reconveyance deed T. Front footage

21. ___Real property U. Similar

22. ___Special assessment V. Sell and lease back the realty

23. ___Sale and leaseback W. To give up a claim as quit-claim

24. ___Securities license X. Future fee estate

25. ___Section Y. An addition to a contract

26. ___Security instrument Z. Investment contract involving stock

27. ___Satisfaction of mortgage

28. ___Spot zone

29. ___Secondary market

30. ___Separate property





“SILLY SALLYS”

1. ___Sublet A. Taking a less lien position

2. ___Supply and demand B. Owner remains liable on existing loan

3. ___Statute C. After equitable redemption

4. ___Statute of frauds D. Severalty

5. ___Statute of limitation E. Interest only payment

6. ___Statutory redemption F. Listing only

7. ___Subordinate G. Legislature laws

8. ___Severance H. Mortgage bankers

9. ___Sublessor I. Catholics only

10. ___Sublessee J. Closing Disclosure

11. ___Subject property K. Opposite of comps

12. ___Section L. Court ordered

13. ___Sale/lease back M. Location

14. ___Subject to N. Commissions fixed

15. ___Starker exchange O. Transfer a portion of the lease

16. ___Subagent P. Time restraint

17. ___Syndicate Q. A principle of value

18. ___Specific performance R. Only the 123 E. Main St. property

19. ___Steering S. Unenforceable contract

20. ___Straight loan T. Pays original lessee

21. ___Sherman Antitrust Act U. You pay taxes on the realty

22. ___Sheriff’s Deed V. Group for investment in realty

23. ___Situs W. Limited liability

24. ___Sole ownership X. Court

25. ___Special lien Y. Represent broker’s client

26. ___Special agency Z. Original lessee

27. ___Servient estate

28. ___Settlement statement

29. ___Servicing the loan

30. ___S. Corporation





“TERRIBLE TONYS”

1. ___Tacking A. End construction loan

2. ___Timesharing B. Possessor of realty without ownership

3. ___Time is of the essence C. Three parties

4. ___Title D. Man

5. ___Tax deferred exchange E. Borrower/beneficiary

6. ___Tax basis F. Money that is safe

7. ___Tenant G. Professional office rental

8. ___Tenant in common H. Interval use

9. ___Tenants in the entirety I. 1031

10. ___Title insurance J. Customer

11. ___Third party K. Unequal interest

12. ___Testate L. Concurrent ownership or use of realty

13. ___Testator M. % of ownership of realty

14. ___Testatrix N. Insurance against title defects

15. ___Title theory O. Foreclosure on a trust deed

16. ___Take out loans P. Regulation Z

17. ___Trustee’s deed Q. Time limits

18. ___Trustor R. Registrar

19. ___Trustee S. Price actually paid on realty

20. ___Truth-in-lending law T. 6 X 6 miles

21. ___Tax Revision of 1997 U. $900 a month house payment

22. ___Trust account V. Woman

23. ___Trade fixture W. Shared wall in realty

24. ___Trust deed X. Impartial 3rd

party on trust deed

25. ___Transfer tax Y. Accession

26. ___Torrens system Z. Will

27. ___Township

28. ___Triple net lease

29. ___Trigger terms

30. ___Townhouse





“UNCLE ULCERS”, “VIVIAN VICES”

“WILLY WANDAS” AND “ZANY ZEBRAS”

1. ___Undue influence A. Exemption

2. ___Unilateral B. No legality

3. ___Universal agent C. Insane

4. ___Unenforceable D. Taking title

5. ___Unimproved land E. Can’t create in a life estate

6. ___Usury F. AITD

7. ___Valuable summary G. Surrender your rights

8. ___Variable rate H. Power of attorney

9. ___Variance I. Owner created loan

10. ___Vendee J. Percolating water

11. ___Vendor K. Oral lease 2 years

12. ___Vesting L. Equitable interest

13. ___Valid contract M. Riparian

14. ___Void N. Rise or fall in the interest

15. ___Voidable O. Sheriff’s office

16. ___Voluntary lien P. Mortgage

17. ___Waive Q. Voidable

18. ___Warranty R. Higher interest rate than allowed

19. ___Warranty deed S. Testate

20. ___Waste T. Lease over a year

21. ___Wholesale mortgage banker U. Legal title

22. ___Water table V. Health, welfare and safety

23. ___Wraparound mortgage W. Best deed

24. ___Wraparound trust deed X. No buildings

25. ___Writ of Execution Y. Promise for performance

26. ___Writ of Attachment Z. Binding by law

27. ___Will

28. ___Written contract

29. ___Water right

30. ___Zoning




1. Mr. Davis hauls his heavy farm equipment across the land of Mr. Augustine each day for 20 years without

the permission of Mr. Augustine. Davis may have a(n):

a. Encroachment b. License

c. Easement appurtenant d. Easement in gross

2. A bilateral contract is one in which the:

I. Acceptance is presumed if the contract is beneficial to the offeree.

II. Promise of one party is given in exchange for the promise of the other party.

III. Promise of one party is given in exchange for the performance of an act by the other party.


c. II and III d. III only

3. The basic reason for choosing among a warranty, special warranty, and quitclaim deed is to:

a. Avoid the need for a habendum clause

b. Verify the kind of estate the grantee will receive

c. Explain any restrictions or limitations on the title

d. Define the covenants by which the grantor is bound

4. Which of the following statements regarding liens is/are true?

I. A judgment is an example of a specific lien.

II. A lien is always the result of a debt.

III. A mechanic's lien takes effect on the date on which the contractor completes the work.

IV. Because a lien is an encumbrance on the title, the satisfaction of lien should always be

recorded to remove this cloud on title.

a. II only b. II and III

c. II and IV d. all of the above

5. Pete Montoya has signed an offer to purchase and has given an earnest money check to the seller's broker.

Montoya:

I. Can withdraw his offer any time before the seller signs and accepts it.

II. Cannot withdraw his offer if the seller tells the broker the seller will accept and sign it.

III. Cannot withdraw his offer after he knows the seller has actually signed it.


c. I and II d. I and III

6. Carl Moore made an offer to purchase property from Sal Gregois, who made a counteroffer. Moore is:

a. Bound to accept the counteroffer b. Bound by his original offer.

c. Bound by the agent's decision d. Relieved of his original offer.


7. If Nelson gives land to Melbin for the life of Melbin and at Melbin's death, the land is to go to Larson.

Melbin's interest or estate is called a:

a. Reversion b. Curtsey

c. Base fee d. Life estate

8. A farmer is unable to pay the taxes on his farm. The delinquent taxes would be considered a(n):

a. Lien b. Attachment

c. Easement c. Appurtenant

9. Johnson and Clark occupy adjacent homes on separate tracts of land. Johnson's rights will terminate at his

death. Clark's rights continue for four years as long as he pays the monthly rent. Which of the following

statements is/are true?

I. At Johnson's death, his heirs will probably own the house.

II. Neither Clark or Johnson owns a fee simple estate.

III. Clark does not own real estate.

IV. Clark's heirs will own his house after Clark's death.


c. I and IV d. I, III, and IV

10. Joint tenancy between two parties becomes a tenancy in common when:

a. one joint tenant dies.

b. one joint tenant sells and conveys his or her interest to a third party.

c. one joint tenant sells and conveys his or her interest to the other.

d. one joint tenant wills his or her interest to his or her heirs or devises.

11. A difference between a dominant and servient tenement is that a dominant tenement owner:

a. Acquired their right under a prescriptive easement only.

b. Cannot terminate the easement right.

c. Does not pay the real estate taxes on the servient tenement.

d. Pays the real estate taxes on the servient tenement.

12. Which of the following is NOT an example of real property?

a. Aunt Mary's strawberry bush, which she calls "fructus naturales"

b. Percolating water

c. Un-excavated clay

d. The clay bricks Jack will use to build his patio wall

13. Ann and her brother Bob inherited, under their mother's will, title to their house in joint tenancy. Ann

married and had title to her share put in joint tenancy with her husband. Her brother Bob is now:

a. A joint tenant with Ann and her husband.

b. Sole owner of the property.

c. A tenant in common, owning an undivided 1/3 interest.

d. A tenant in common, owning an undivided 1/2 interest.


14. Bob Larson receives possession of property under a deed that states that he shall own the property as long as

the present building standing on the property is not torn down. The type of estate Larson holds is which of the

following?

a. Life estate b. Non-destructible estate

c. Fee simple estate d. Determinable fee estate

15. In a real estate sales transaction, to "accept an offer" usually means that the seller:

a. Might approve the buyer's terms b. Accepts delivery of the written offer

c. Signs a receipt for the written offer d. Is legally bound to be a party to the transaction

16. Jenkins' roof overhang has protruded onto a neighbor's adjacent lot for 24 years. A new owner of the lot,

after a survey has been ordered, discovers this. In this case, the new neighbor can:

a. Do nothing because Jenkins has acquired a prescriptive easement after 20 years.

b. Do nothing because Jenkins has acquired title to that portion of the land by adverse possession.

c. Have a court order Jenkins to remove the overhang.

d. Grant Jenkins an easement in gross.

17. John Adams listed his house with only one licensed broker, but reserved the right to sell the property

himself without owing a commission. This relationship is called:

a. A net listing b. An open listing

c. An exclusive agency listing d. An exclusive-right-to-sell listing

18. A recorded restriction is best described as:

a. A limitation on use b. A condition

c. A lien d. A lien and an encumbrance

19. Virginia owned a life estate measured by her own life in a residence. She leased the property for six years

using a standard lease contract; she dies one year after she leased the property. The lease was:

a. Valid as long as Virginia was alive.

b. Invalid because Virginia, as an owner of a life estate, cannot lease the property.

c. Valid for six years


20. Tenancy in common is distinguished by which of the following characteristics?

a. Right of survivorship

b. Ownership interest must be equal

c. A co-owner cannot will his or her interest in a property

d. Each co-owner's interest may be conveyed separately

21. The debtor in a mortgage is called the:

a. Vendor b. Mortgagee

c. Vendee d. Mortgagor


22. Ann Hastings and Adam Sykes have entered into a one-year contract wherein Sykes has agreed to provide

complete lawn care and snow removal services for Hastings. After the first snowstorm of the year, however,

Sykes decides he wants to move south, even though the contract has six months left. Al Bannert wants to

provide the services Sykes has provided and the parties agree that Hastings and Bannert will enter into a new

contract and the contract between Hastings and Sykes will be canceled. This is an example of a(n):

a. Assignment b. Novation

c. Unenforceable agreement d. Rejection

23. Bob Lowrey transferred his rights under a contract to Joe Biggs. The old contract was canceled and a new

contract substituted with Biggs taking over the contract in place or Lowrey, who is no longer liable. This is an

example of:

a. Laches b. Assignment

c. Lis pendens d. Novation

24. Sloten Plumbing installed a new furnace and filed a lien for nonpayment immediately upon completion.

This was most likely a:

a. Voluntary lien b. General lien

c. Novation d. Specific lien

25. Jim Miranda, the buyer, defaulted on his sales contract with Bob Gilliam, the seller. Gilliam may:

I. Declare the contract forfeited II. Cancel

III. Sue for specific performance IV. Sue Miranda for damages

a. II only b. II and IV

c. II, III, and IV d. all of the above

26. Which of the following would be considered a special agent?

I. Cooper, who is employed to purchase any real estate properties for Allen for the next four years.

II. Smith, employed to sell a single-family home for Bishop

III. Quinn, who is employed to sell any real estate investments of Harper for the next four years.

IV. Carmen, who is employed to sell an apartment building for Cornell


c. II and IV d. All of the above

27. When broker Bennet sold a property to Rondell, the sales contract contained the following statement:

“Buyer to accept property in an ‘as is condition.’” Both the seller and Bennet knew that the plumbing was in a

major state of disrepair but did not tell Rondell. Would an action for damages against Bennet, based on fraud,

be successful?

a. No The contract specifically stated the property was being sold "as is".

b. No. The "as is" provision in the contract is evidence of the meeting of the minds.

c. Yes. "as is" only refers to exterior defects.

d. Yes. The duty to disclose a material fact cannot be avoided by an “as is” provision.


28. The maximum commission a broker may charge for the sale of a single-family home is:

a. Determined by the real estate commission.

b. Determined by the professional organization of real estate brokers of which the broker is a

member.

c. Determined by the local multiple listing service.

d. Determined by the broker's contract with the principal.

29. Real estate agents may NOT legally represent all parties in the same transaction if:

I. They have failed to obtain the consent to act from all parties to the dual agency

II. They attempt to collect a commission from all parties without the express consent of all

parties.

III. They have failed to inform all parties they are acting as a dual agent.

IV. They act with the prior mutual knowledge and consent of all parties.

a. II only b. I and II

c. I, II and III d. I, II, and IV

30. Broker Smith shows a prospect a home that is listed for sale. The prospect later buys this house through

Smith. If this house was not listed with Smith's agency, what type of commission can Smith expect to receive?

a. The part of the commission to which the selling broker is entitled according to the agreement with the listing

broker

b. All of the commission, as Smith is the selling broker

c. One-half of the commission; the other half goes to the listing broker

d. The part of the commission to which the selling broker is entitled according to the multiple listing service

organization agreement

31. A licensed real estate broker who engages the services of a licensed salesperson on the basis that the broker

can direct what the salesperson can do but not how it is to be done, has:

a. Engaged an independent contractor b. Discriminated illegally

c. Practiced steering d. Established an employer-employee relationship

32. A broker's license can be revoked if he/she:

a. Advertises property for sale without including the salesperson's name in the ad.

b. Allows his or her licensed salesperson to operate a real estate brokerage business without the broker's

participation or control.

c. Pay a commission that exceed the customary rate.

d. Has not completed a refresher course before renewing his or her driver’s license.

33. What is the listing broker's legal responsibility to a prospective purchaser?

a. The broker must not use fraud or deceit.

b. The broker must help the buyer get the lowest price possible.

c. The broker is only a middleman and neither the buyer nor the seller can charge him or her with

avoiding a legal duty.

d. There is none at all.


34. The relationship of the broker to the listing owner who hired him or her is that of a(n):

a. Attorney-in-fact b. Strawman

c. Trustee d. Fiduciary

35. Broker Able listed a home for sale under an exclusive-right-to-sell listing. Broker Baker cooperated with

Able in a co-brokerage. The house was sold and the commission split between Able and Baker, which of the

following is/are true?

I. The selling broker, Baker, is an agent of the listing broker.

II. The listing broker, Able, is an agent of the seller.

III. Both brokers are sub-agents of the seller.

IV. A broker who is not the seller's agent cannot receive any part of the commission.



36. Brokers are required to deposit earnest money in a checking (non-interest-bearing) account principally

because:

a. Interest is credited only on stated dates.

b. They would have to prorate the interest on all deposits.

c. Checking accounts are payable on demand.

d. Savings accounts are insured for less than checking accounts.

37. How must a licensed broker handle earnest money deposits?

a. The broker should deliver the money to his or her principal.

b. When the seller directs, the broker should keep the earnest money in his or her safe attached to the sales

contract until the sale is closed.

c. The broker should deposit the money in his or her special account as soon as it is received.

d. The broker should deposit the money in his or her special account by the next business day

following acceptance of the contract.

38. Mr. Rocanzo listed his property independently with four different brokers, all of whom contacted the

eventual purchaser. Mr. Rocanzo should pay a commission to the broker who:

a. Seemed most efficient b. Actually negotiated the sale

c. Was in his employ the longest d. Will accept the lowest commission

39. A broker sold Ron Johnson's home for $82,000. The broker charged Johnson a 7% commission and will

pay 30% of that amount to the listing salesperson and 35% to the selling salesperson. What amount of

commission will the selling salesperson receive from the Johnson sale?

a. $1,722 b. $4,018

c. $2,009 d. $1,406


40. Rick Herndon receives a monthly salary of $600 plus 3% commission on all his listings that sell and 3.5%

on all his sales. None of the listings Herndon took sold last month, but he received $4,100 in salary and

commission for the month. What was the value of the property Herndon sold?

a. $100,000 b. $117,142

c. $116,666 d. $136,666

41. The illegal practice of lenders refusing to make real estate loans in areas of a city designated as minority

areas is known as:

a. Blockbusting b. Steering

c. Accretion d. Redlining

42. A property manager:

a. Markets the property b. Monitors operating expenses

c. Collects rents d. All of the above

43. The Fair Housing Law of 1968 provides that it is unlawful to discriminate on the basis of:

I. Race II. Religion

III. Age IV. Sex

a. II only b. I, II, and III

c. I and II d. I, II, and IV

44. The practice of making a profit by inducing owners to sell because of the prospective entry into the

neighborhood of minorities is called:

a. Blockbusting b. Redlining

c. Steering d. Channeling

45. The Federal Fair Housing Laws prohibits:

I. Refusing to sell to a family because of its religion.

II. Refusing to rent to a family because of its race.

III. Refusing to rent to a woman because of her sex.

IV. Refusing to rent to a woman because she cannot afford the rent.

a. II only b. I, II, and III

c. II and III d. All of the above

46. Real Estate lenders are required to give the borrower a good faith estimate of closing costs by:

a. The Civil Rights Act of 1866 b. RESPA

c. Regulation Z d. Federal Fair Housing Laws


47. Which of the following would be covered by the Federal Fair Housing Act?

I. The rental of units in an owner-occupied duplex.

II. The sale of a single-family home by a person who owns two homes.

III. The rental units in an owner-occupied five-family building.

IV. The sale of a single-family home by a person who owns the home.

a. II only b. III only


48. The Bruer house is valued at $90,000. Property in the Bruer neighborhood is assessed at 70% of its value

and the local tax rate if $2.90 per $100. What is the amount of Bruer's monthly taxes?

a. $ 152.25 b. $ 182.70

c. $ 1,522.50 d. $ 1,827.00

49. Clarendon, a salesperson with Wonder Realty, has taken a four-month exclusive-right-to-sell listing on a

house owned by Darwin. Prior to expiration of the listing, Clarendon decides to leave the state and inactivate

her license. Which of the following correctly describes the status of the listing?

a. The listing automatically terminates when Clarendon leaves the state and inactivates her license.

b. Darwin may terminate the listing once Clarendon has left the state.

c. Wonder Realty will have to negotiate with Darwin in order to retain the listing.

d. The listing will continue as a valid contract between Darwin and Wonder Realty.

50. Broker Clark was employed by seller Case to sell Case's house under an exclusive-right-to-sell listing

contract. The listing was dated May 15 and was to expire on November 15 with a commission rate of 7%. Case

was declared insane on June 3. Clark presented an offer to purchase to Case on June 10 from a buyer located by

Case. The offer to purchase was accepted by Case on June 12. Which of the following most accurately

describes the status of Clark's right to a commission?

a. Clark is not entitled to a commission because Case located the buyer.

b. Clark is entitled to a commission because Case accepted an offer to purchase.

c. Clark is not entitled to a commission because Case's being declared insane terminated the listing contract.


51. Salesperson Barker and Dotson worked for Nettle Realty and had obtained nine listings between them when

Broker Nettle died. Upon Nettle's death, Barker took his listings and joined another real estate brokerage firm.

Dotson continued to list properties. Which of the following statements correctly describes this situation?

a. Barker may join another real estate brokerage firm and take his listings with him because he was licensed and

had personally obtained the listings.

b. Dotson may continue to list properties because Nettles Realty is still licensed.

c. Barker and Dotson should have stopped selling and listing completely because no employment contract

between a broker and salesperson is valid after the broker's death.



52. Broker James and Seller Karns have just signed a listing contract for the sale of Ram's house. Which of the

following statements correctly describes their situation?

I. A fiduciary relationship now exists between James and Karns.

II. The listing contract constitutes a conveyance.

III. James is the agent and Karns is the principal.

IV. James has become a special agent for Karns.

a. I only b. I and III

c. I and II d. I, III, and IV

53. Salesman Torrence is acting as agent for Seller Bixon. Torrence may not:

I. Refuse to submit offers below the listed price.

II. Disclose Bixon's financial condition.

III. Accept a commission from a buyer without informing Bixon.

IV. Place a buyer's earnest money in his trust account.

a. I and II b. I, II, and III

c. I and III d. all of the above

54. Depreciation generally applies to:

I. Land II. Buildings

III. Land and Buildings IV. Wasting Assets

a. II only b. II and IV

c. I, II, and IV d. all of the above

55. Paint peeling off the interior of a building would NOT be considered:

a. Deferred maintenance b. Obsolescence

c. Deterioration d. Depreciation

56. Which of the following correctly describes the relationship of risk and value?

I. As the risk increases, the value increases

II. As the risk decreases, the value increases

III. As the risk increases, the value decreases

IV. As the risk decreases, the value decreases


c. I, II, and III d. I and IV

57. Jan Orlis bought a condominium a year ago for $54,000. Property in her neighborhood is said to be

increasing in value at a rate of 14% annually. If this is true, what is the current market value of Orlis’ real

estate?

a. $58,500 b. $60,650

c. $61,560 d. $75,600


58. Ed Anderson leases 24 apartments in his building for a total monthly rental of $7,200. If this figure

represents a 12% annual return on Anderson's investment, what was the original cost of the property?

a. $600,000 b. $660,000

c. $690,000 d. $720,000

59. An investor finds that the cost of installing an air conditioning system in an office building is greater than is

justified by the rental increase that might result from the improvement to the property. The investor's decision is

most reflective of the principle of:

a. Supply and demand b. Competition

c. Increasing and decreasing returns d. Contribution

60. A four-bedroom house with a one-car garage would be an example of:

a. Physical deterioration b. Functional obsolescence

c. Economic obsolescence d. All of the above

61. Which of the following types of depreciation would be curable?

a. Peeling paint on the exterior of a house b. A leaky basement

c. Outdated bathroom fixtures d. all of the above

62. Which of the following types of depreciation would be incurable?

a. A leaky roof b. A worn-out water heater

c. A zoning variance of the neighbor's property d. Warped doors for commercial use

63. Ben Erdahl owns an apartment building that gives him a gross income of $40,000 a year. His annual

expenses are $10,000 a year. The value of Erdahl's real estate if he needs a 12% return on his investment is:

a. $83,333 b. $250,000

c. $333,333 d. $833,333

64. The rent on a house is $400 a month or $4,800 a year and the house recently sold for $52,000. The gross

rent multiplier on the house was:

a. 130 b. 10.8

c. 20.8 d. 108

65. The rate of return an investor will require in order to invest in real estate is called a:

a. Gross rent multiplier b. Gross income Multiplier

c. Capitalization rate d. All of the above

66. In the cost approach, an appraiser makes use of which of the following?

a. Sales prices of similar properties

b. The owner's original cost of construction only

c. An estimate of the building's replacement cost

d. Multiplying the net income by the capitalization rate


67. An appraisal of a church probably would be based on the:

a. Market data approach b. Cost approach

c. Income approach d. Capitalization approach

68. Which of the following is NOT a step in the appraisal process?

a. List the data needed and their sources b. State the problem

c. Reconcile data d. None of the above

69. The theory of urban development that holds that land uses tend to develop along major transportation

arteries outward from the central business district is called the:

a. Concentric theory b. Axial theory

c. Sector theory d. Multiple nuclei theory

70. The location of an industrial park would generally provide which of the following benefits to the

community?

I. Compatibility in land-use relationships

II. Stimulation of economy through new construction activity

III. Economic base is diversified

IV. Municipal service is more efficiently extended

a. I only b. I, II, and III


71. Which of the following are the potential limitations of an industrial park?

I. Expansion problems due to lack of additional land

II. Possibility of traffic congestion

III. Lack of suitability to all types of industry

IV. Unanticipated production restrictions


c. I, II, and III d. All of the above

72. The three approaches to value are:

I. Cost II. Market data

III. Capitalization IV. Income

a. I, II, and III b. II, III, and IV

c. I, II, and IV d. I, III, and IV

73. A loss in value resulting from a four-bedroom house having only one bathroom would be an example of:

a. Economic obsolescence b. Physical deterioration

c. Functional obsolescence d. A violation of the building code


74. Which of the following statements is/are correct?

I. A poor floor plan would be classified as physical deterioration.

II. Closing of the neighborhood elementary school would be classified as functional obsolescence.

III. Economic obsolescence is caused by factors within the property.

IV. Functional obsolescence is caused by factors outside the property.

a. I and II b. I and II

c. III and IV d. None of the above

75. Replacement cost would be used in which of the following approaches to value?

a. Market data b. Cost

c. Income d. All of the above


I. Locational obsolescence may be curable or incurable.

II. The subject property is the property being appraised.

III. Physical deterioration may be incurable only

IV. The market data approach is generally the most reliable approach in appraising a single-family

home.

a. I and III b. I and IV

c. II and III d. II and IV


I. Zoning is a social factor to be considered in a neighborhood analysis.

II. As the risk decreases, the value of a property increases.

III. Reconciliation is one of the final steps in an appraisal process.

IV. Pride of ownership is an amenity.

a. I and II b. II and III

c. I, II and III d. II, III and IV

78. Bracket purchased Peck's home with a FHA-insured loan. At closing, seller Peck was charged the five

discount points for the loan. This money will be paid to:

a. The broker b. The lending institution

c. The Federal Housing Administration d. Bracket

79. Within the field of real estate finance, what does the secondary mortgage market refer to?

a. Transferability of junior liens

b. Placing of junior liens

c. Transferring of mortgages among mortgagors

d. Transferability of mortgages among mortgagees


80. On an FHA loan, the buyer would be required to:

I. Pay a 20% down payment

II. Find an approved lender willing to make the loan.

III. Buy a house that meets minimum FHA credit standards.

IV. Buy mortgage insurance to protect the lender.

a. II only b. I, II and III

c. I, II and III d. II, III and IV

81. Which of the following statements regarding points is/are true?

I. Points must be charged to the seller II. One point equals 1% of the loan

III. Points must be charged to the buyer IV. One point equals ¼% of the loan.

a. II only b. I and II

c. II and III d. III and IV

82. Ken Tenace lent money to Rona Beman and in return, took a mortgage as security for the debt. Tenace

immediately recorded the mortgage. Thereafter, Rudy Ames lent money to Beman, took a mortgage, and

recorded it. Beman later defaulted and a court determined that Ames's interest had priority over Tenace's

interest. Under these circumstances, chances are that:

a. Tenace knew Ames was going to make a loan prior to making his own loan.

b. Ames's loan was larger than Tenace's loan.

c. Tenace had signed a subordination agreement in favor of Ames.

d. Ames had signed a satisfaction.

83. A mortgage that contains an interest rate provision related to a selected index is called a:

a. Package mortgage b. Open-end mortgage

c. Graduated payment mortgage d. Adjustable rate mortgage

84. Regulation Z does not cover which of the following?

I. Vendee purchases II. Business loans

III. Loans of under $25,000 to individuals IV. Commercial loans


c. I, II and III d. I, II, and IV

85. A mortgage is all of the following EXCEPT a(n):

a. Encumbrance b. Lien on real property

c. Recordable legal document d. Example of involuntary alienation

86. Which of the following is NOT an advantage of a FHA-insured loan?

a. Low down payment

b. The buyer is protected with FHA insurance

c. Enables cash-short buyers to enter the real estate market

d. Protects lender with FHA insurance


87. Dupre is a veteran wishing to receive a loan to buy a $70,000 home. The home has been appraised by the

VA at $68,000. Which of the following statements most accurately describes Dupre's situation?

a. Dupre may buy the home with a VA loan only if he is able to lower the purchase price to $68,000.

b. Dupre may buy the home with a VA loan if the seller agrees to hold a second mortgage for $2,000.

c. Dupre may buy the home with a VA loan if he makes a down payment of $2,000.


88. Sources of funds for a FHA mortgage include which of the following?

I. HUD II. Commercial banks

III. FHA IV. Savings & loan association

a. I only b. II and IV


89. Which of the following statements correctly describes FHA mortgages?

I. FHA guarantees lenders against loss on loans made on real property.

II. Interest rates are set by HUD.

III. The borrower pays up to 5% of the loan for an insurance premium.

IV. The ratio of loan to value cannot exceed 95% on the first $25,000 of appraised value.

a. I only b. I and II

c. I, II and IV d. None of the above

90. Which of the following statements correctly describes the FHA mortgage program?

I. FHA regulations prohibit charging discount points to the buyer.

II. Discount points are a percentage of the sales price.

III. One discount point is equal to one percent of the loan balance.

IV. Mortgaged property must be appraised by an approved FHA appraiser.


c. I and IV d. III and IV

91. Which of the following statements correctly describes FNMA?

I. FNMA is a warehousing agency.

II. FNMA and FHLMC participate in a tandem plan.

III. FNMA is designed to administer special assistance programs.

IV. FNMA is a publicly owned corporation.


c. I, II and III d. all of the above

92. If the Federal Reserve System wishes to slow down economic activity it will:

a. Lower the discount rate b. Lower the reserve requirement

c. Raise the discount rate d. Sell securities in the open market


93. Which of the following statement(s) correctly describe Regulation Z?

I. It requires disclosure of cost in credit transactions.

II. Personal property credit transactions over $25,000 are not covered.

III. The finance charge must be stated in the form of an annual percentage rate.

IV. Right to rescind does not apply to loans to finance the purchase of a house.


c. I, II and III d. all of the above

94. Which of the following statements correctly describes the money market?

I. Money may be viewed as a storehouse of purchasing power.

II. The U.S. Treasury is our nation’s fiscal manager.

III. The Federal Reserve System regulates savings and loan associations.

IV. The Federal Reserve System is responsible for supervising the daily monetary operations of the federal

government.



95. Which of the following statements correctly describes conventional mortgages?

I. Payment of debt is based solely on the borrower's ability to pay.

II. They are guaranteed by VA.

III. They are insured by FHA.

IV. They are privately insured.


c. I, II, and III d. all of the above

96. Which of the following types of deeds contains no expressed or implied warranties?

a. Warranty deed b. Special warranty deed

c. Quitclaim deed d. Bargain and sale deed

97. An estate in real property often described as being "a potentially perpetual estate" is a(n):

I. Estate for years II. Fee simple estate

III. Base fee estate IV. Life estate


c. III and IV d. all of the above

98. A freehold estate is an:

a. Estate for years b. Estate for fee

c. Estate from year to year d. None of the above


99. Realty may be transferred by:

I. Will II. Descent

III. Eminent domain IV. Gift


c. I, II, and IV d. All of the above

100. A claim based on adverse possession of a property must be:

a. Notorious b. Open

c. Hostile d. All of the above

101. Which of the following statements concerning encumbrances are true?

I. All encumbrances are liens

II. All liens are encumbrances

III. Restrictions beneficial to the grantee are encumbrances

a. I and II b. I and III

c. II and III d. All of the above

102. A person who received realty by will is called a:

a. Testator b. Devise

c. Hypothecate d. Devisee

103. The allodial system of private ownership of realty includes which of the following:

I. Disposition II. Possession

III. Control IV. Enjoyment


c. II, III, and IV d. All of the above

104. An estate in land refers to which of the following measures of interests in land?

a. Extent b. Degree

c. Nature d. All of the above

105. The highest type of interest a person may hold in realty is a:

a. Life estate b. Fee simple

c. Legal life estate d. Base Fee

106. All private ownership rights in realty are subject to which of the following?

I. Taxation II. Escheat

III. Police power IV. Eminent domain


c. I and IV d. All of the above


107. A determinable fee estate in realty is sometimes referred to as a:

I. Conditional fee II. Qualified fee

III. Defeasible fee IV. Base fee


c. II and IV d. All of the above

108. A determinable fee estate:

I. May be inherited

II. Will be extinguished upon the occurrence of a designated event.

III. May be based on a certain event.

IV. May be based on something one must do.



109. Roger James tore out an old octopus furnace and installed a new furnace with central air conditioning in

his home. This newly installed real property becomes a:

a. Trade fixture b. Chattel fixture

c. Fixture d. Physical trade fixture

110. The life tenant does not have to do which of the following?

I. Sell the property II. Make reasonable repairs to the property

III. Convey the property IV. Pay real estate taxes on the property

a. II only b. I and III


111. In a life estate,

I. Ownership rights may be passed on to the holder's heirs.

II. The life tenant may not commit any acts that would permanently injure the property.

III. There may be a reversionary interest.

IV. There may be a remainder interest.


c. I, II, and III d. II, III, and IV

112. Which of the following would NOT be a life estate?

a. Estate for years b. Dower

c. Homestead d. Curtsey


113. Which of the following liens would apply only to a specific property?

I. Mortgage liens II. State inheritance taxes

III. Real estate taxes IV. Mechanics' liens


c. I, II, and III d. I, III, and IV

114. An easement created when there is no access to a street is an:

a. Easement by prescription b. Easement by necessity

c. Easement in gross d. Easement appurtenant

115. Jones built a fence that extended onto Meyer's land. This is an example of a(n):

a. License b. Easement by necessity

c. Encroachment d. Easement in gross

116. Al James, a plumber, is selling his home in which he has installed washerless faucets. His home is then

sold and after the contract has been executed, he decides to replace the faucets with standard faucets. Which of

the following is true?

a. The plumber may remove the faucets at any time.

b. Standard faucets are a good replacement.

c. James can be held liable for removing the faucets because they are fixtures that were in place before the

contract was signed.

d. This question should be decided by the broker who took the listing.

117. Which of the following covenants would be contained in a warranty deed?

I. Further assurance II. Quiet enjoyment

III. Warranty forever IV. Seisin



118. The covenant in a deed that states the grantor is the owner and has the right to convey title is called the:

a. Covenant of further assurance b. Covenant of warranty forever

c. Covenant of seisin d. Covenant against encumbrances

119. Title generally passes to the grantee when an executed deed is:

a. Authenticated b. Recorded

c. Delivered d. Signed

120. The right of a tenant to use timber on leased property to support their minimum needs is called:

a. Estovers b. An inchoate tight

c. Laches d. Partition


121. Which of the following would make a contract unenforceable?

a. Legal object b. Good consideration

c. Lack of performance d. Incompetent principal

122. An enforceable contract may contain which of the following as consideration?

a. Money b. Love

c. Affection d. All of the above

123. A contract in which both parties have fulfilled their promises is a(n):

a. Executory contract b. Bilateral contract promises exchanged

c. Expressed contract d. Executed contract

124. An option prior to being exercised is an example of a(n):

a. Executory contract b. Unilateral contract

c. Bilateral contract d. Executed contract

125. A contract that has no legal effect because it does not contain all essential requirements of a contract is:

a. Valid b. Void

c. Voidable d. Unenforceable

126. A contract canceled by operation of law could be voided by a(n):

a. Expiration of the statute of limitations b. Minor

c. Fraud d. All of the above

127. A contract in which the intentions of the parties is shown by conduct is a(n):

a. Expressed contract b. Implied contract

c. Bilateral contract d. Executory contract

128. The giver of an option is called the:

a. Vendor b. Optionor

c. Vendee d. Optionee

129. Police power controls include which of the following?

I. City plan specifications II. Building codes

III. Zoning IV. Deed restrictions

a. II b. II and III



130. Jackson Tire Company has a manufacturing plant located in an area that recently has been zoned

residential. The company is allowed to operate under the new zoning ordinance. If the plant is destroyed by fire

or torn down, Mr. Jackson may:

a. Appeal for an exculpatory provision.

b. Not construct another tire plant in the neighborhood without being granted a zoning variance.

c. Not construct another tire plant in the neighborhood under any conditions.

d. Reconstruct the tire company in the same neighborhood.

131. Caruso has his property listed with Adones Realty. On June 23, there is a fire causing considerable

damage to the property. On June 25, Caruso rescinds the listing. On June 29, the broker is deemed

incompetent. Two days later the listing expires. On what date was the listing terminated?

a. June 23 b. June 25

c. June 29 d. On the expiration date included in the listing agreement

132. Jane Hargen listed a property under a valid written listing agreement. After the sale was completed, the

owner refused to pay the broker's fee. Which of the following can Hargen do?

a. She can probably take the seller to court and sue for the commission.

b. She is entitled to a lien on the seller's property for the amount of the commission.

c. She can go to court and stop the transaction until she is paid.

d. She can collect the commission from the buyer.

133. Jan Green lists her property for sale with Dale Rowan, a broker. In the listing contract it is stipulated that

Green will receive $62,000 “net,” with all proceeds over $62,000 being the broker's commission. This type of

listing would be a(n):

a. Open listing b. Exclusive agency listing

c. Exclusive-right-to-sell listing d. Net listing

134. A broker sold Joe Packard's home for $73,000. The broker charged Packard a 6% and will pay 25% of

that amount to the listing salesperson and 30% to the selling salesperson. What amount of commission will the

listing salesperson receive from the Packard sale?

a. $ 4,380 b. $ 1,314

c. $ 1,095 d. $ 1,029

135. Ed Morgan listed his property with broker John Farnum. In the listing contract, Farnum is authorized to

act as the sole agent of Morgan and is entitled to a commission regardless of who sells the property. This type of

listing would be a(n):

a. Open listing b. Exclusive agency listing

c. Exclusive-right-to-sell listing d. None of the above


136. The listing broker owes a fiduciary duty to the:

I. Selling broker II. Seller

III. Listing salesperson IV. Buyer



137. Broker Joe Quigley was employed by Bill sparks to sell his home. Which of the following would correctly

describe Quigley's relationship to sparks?

I. Quigley had become Spark's agent. II. Quigley owes fiduciary duty to sparks.

III. Quigley is a special agent. IV. Quigley is a general agent.


c. I, II, and III d. I, II, and IV

138. According to the law of agency, a real estate broker owes the principal the duty of:

I. Exercising reasonable care

II. Acting in good faith.

III. Conforming with the principal's instructions

IV. Offering legal advice



139. The principal to whom the broker owes fiduciary duty in a real estate transaction may be the:

a. Lessor b. Buyer

c. Seller d. All of the above

140. Jan Wright, a broker, had exclusive-right-to-sell listings on 20 residential properties. She died. Her

daughter, Nora, took over the business as the new broker. With respect to these 20 listings, Nora must now:

a. File a court action to cause the transfer of the listings to her.

b. Advise the owners that Jan's death will have no effect on the listings as far as the owners are concerned.

c. Negotiate new listing agreements from each property owner.

d. Notify each property owner that, because she has inherited the business, all commissions originally due Jan

are now due Nora.

141. An owner gives an exclusive-right-to-sell listing to broker Gibbs for a four-month period. During the

exclusive period, the owner gives an open listing to broker Brock, who produces a buyer. What is the owner's

liability for payment of a commission?

a. Only one commission must be paid, which both brokers must share a 50/50 basis.

b. The owner is liable for payment of a commission to both broker Gibbs and broker Brock.

c. The owner is liable to broker Gibbs for the payment of a commission.

d. The owner is liable to broker Brock for the payment of a commission.


142. Al Poquette is entitled to a commission for selling Jean Daniel's home, provided he:

I. Acted in good faith II. Is a licensed broker

III. Is employed by Daniel IV. Was the procuring cause of sale.



143. A salesperson:

a. May receive a commission directly from a principal.

b. Can carry out activities in his or her own name.

c. Is responsible only to the broker under who he or she is licensed.

d. May place a blind ad.

144. An arrangement in which brokers pool their listings and commissions are divided between the listing

broker and the selling broker is a(n):

a. Open listing b. Multiple Listing

c. Exclusive agency listing d. Exclusive-right-to-sell listing

145. A broker brings a seller an offer-to-purchase contract for the listed price of $72,500 with the stipulation

that the seller must furnish a title insurance policy to prove marketable title. The seller refuses the offer. The

broker:

a. Can collect full commission b. Can collect one-half commission

c. Can collect nothing d. Can collect one-half of the first month's mortgage

payment

146. Seller Joe Needy lists his home for $40,000 and the broker tells the prospective buyer to submit a low offer

because the seller is desperate. The buyer offers $38,000 and the seller accepts. In this situation:

a. The broker was unethical but because no one was hurt, it is not improper.

b. The broker violated the agency relationship.

c. The broker's action was proper in obtaining a quick offer.

d. Any broker is authorized to encourage bidders.

147. John is leasing an apartment and upon his death his lease is terminated. The type of leasehold estate he has

is:

a. Estate for years b. Estate for period to period

c. Estate at will d. Estate at sufferance

148. A tenant in a triple net lease pays their share of which of the following?

I. Principal II. Interest

III. Taxes IV. Insurance


c. III and IV d. All of the above


149. Mary Sue owns a piece of realty that measures 4½ acres. Attached to the property is an additional lot

measuring 100 feet deep and 60 feet across which the house sits on. How many square feet does Mary Sue own

all together?

a. 202,020 square feet b. 202,202 square feet

c. 202,425 square feet d. 196,020 square feet

150. Rita has $86,576 left on her 8½% mortgage. Her monthly payment is set at $852.56 for principal and

interest (she pays her own taxes and insurance). How much of her next payment will go to reduce the principal?

a. $116.76 b. $239.31

c. $613.25 d. $735.80



Sample National NV Testing Center Exam

1. A borrower pays off his loan. However, the lender refuses to cancel the mortgage. What mortgage clause has the

lender violated?

a. conveyance

b. defeasance

c. habendum

d. notary

2. A grantor wishes to convey title to a grantee in a deed that creates the least protection for the grantee. The grantor

should give the grantee a

a. bargain and sale deed

b. quitclaim deed

c. general warranty deed

4. special warranty deed

3. Of the following liens, which generally would be given the highest priority?

a. a judgment issued last year

b. a mortgage recorded four years ago

c. a special assessment

d. a mechanic’s lien for work begun two months ago

4. During a phone call, a salesperson discusses showing a property to a prospect. Three days later, the agent shows

the property; at that time the customer reveals her financial abilities and motivation. Three days after that, the agent

prepares her offer and asks the buyer to sign an agency disclosure statement stating the agent represents the seller.

When should the agent have disclosed this fact?

a. before preparing the offer

b. before showing the house

c. on the phone

d. only if the buyer requests one

5. A contract in which the intentions of the parties are shown by their conduct is a(n) ______ contract.

a. bilateral

b. executory

c. express

d. implied

6. You are about to buy a house built prior to 1978. What disclosure would the seller agent give to you?

a. Closing Disclosure

b. lead-based paint disclosure form

c. Miranda warning

d. Truth-in-Lending statement


7. A “debit” is money

a. due the party

b. for the lender

c. owed

d. a seller pays a broker

8. A buyer has obtained a mortgage in which the LTV is 95% of the first $40,000 of the sale price and 90% of the

remainder of the sale price. What are the buyer’s costs on a $185,000 sale if the lender charges a 2% loan origination

fee and 2 points?

a. $3,370

b. $6,740

c. $8,425

d. $10,110

9. Replacement of a building best describes building

a. an exact replica of the building

b. the functional equivalent of the original structure

c. something inferior to the original structure

d. something superior to the original structure

10. A salesperson is asked to list a property with a tenant living in the home. A buyer’s agent calls and asks to show

the property later that same afternoon. The listing agent calls the tenant and informs her that there will be a showing

today. The tenant informs the salesperson that there is a sick child in the house and asks the agent to reschedule. The

salesperson insists on allowing the showing and agrees to tell the showing agent not to go into the sick child’s

bedroom. Which statement is TRUE?

a. the salesperson has not violated any laws

b. the salesperson works for the property owner, not the tenant

c. the tenant is entitled to have reasonable notice before showings

d. this listing is not available for showings

11. Which of the following clauses gives a lender the right to declare the entire debt due and payable if the

mortgaged property is either assumed without lender approval or sold on contract without lender approval?

a. acceleration clause

b. equitable redemption

c. defeasance clause

d. alienation clause

12. Plants and trees cultivated for harvest best describes

a. emblements

b. fructus industriales

c. fructus naturales

d. trade fixtures


13. Bill has an annual income of $67,500 and his wife, Jane has a monthly income of $3,200. If a lender is using a

28% ratio, what is the maximum monthly payment Bill and Jane can afford?

a. $1,987

b. $2,147

c. $2,471

d. $2,741

14. Pledging a property as security on a loan without giving up possession of the property is known as

a. acceleration

b. alienation

c. defeasance

d. hypothecation

15. Specific performance is

a. an agreement by all parties to a contract

b. an executed contract in which all elements of the contract have been specifically fulfilled

c. a legal remedy available to the buyer to enforce the terms of the contract

d. the right of the parties to cancel a contract, provided legal notice is given

16. Executor Fred calls Agent Tom to list a vacant tract of land, instructing him to list the land for $700,000. Several

weeks later, Agent Tom becomes aware of a developer who would pay as much as $1,000,000 for the property. Tom

thereupon submits a full-price offer to the owner and purchases the property. Tom then resells the property to the

developer and pockets a $300,000 profit. Which statement is TRUE?

a. Tom did not violate the law – it is not illegal for licensees to purchase listed property

b. Tom violated the law by failing to waive the commission on property purchased for his own use

c. Tom violated the law by not providing notice of information that would affect Fred

d. Tom was in compliance with the law, since Fred had established the listing price and received the full amount

17. All of the following agency relationships could be used to describe a cooperating broker in a real estate

transaction EXCEPT

a. a subagent

b. an exclusive buyer’s broker

c. a selling broker

d. a non-exclusive buyer’s broker

18. A government’s ability to place time limits on nonconforming uses would be

a. amortization provision

b. conditional use

c. special use exception

d. variance

19. A partial release clause generally is found in a

a. construction mortgage

b. package mortgage c. blanket mortgage

d. wraparound mortgage


20. What is an involuntary specific lien?

a. easement

b. IRS taxes

c. mechanic’s lien

d. mortgage

21. Cindy Agent wishes to leave her company, ABC Real Estate, owned by Bob Broker. She currently has three

sales pending and four active listings. What will happen to these?

a. The active listings and all sales pending belong to Bob

b. The active listings and all sales pending belong to Cindy

c. The active listings belong to Bob, and Cindy will be paid for pending sales as per her contract with the office

d. The active listings belong to Cindy, and she will be paid for pending sales as per her contract with the office

22. You bought a home one year ago for $115,900. Property in your neighborhood is said to be increasing in value

at a rate of 8 percent annually. If this is true, what is the current value of your real estate?

a. $125,172

b. $134,444

c. $144,063

d. none of the above

23. The law that requires certain types of contracts to be in writing in order to be enforceable would be the statute of

a. capacity

b. frauds

c. limitations

d. possibilities

24. John has an open listing on his home with Company X. Paul has an exclusive right to sell listing with the same

company. Their contracts have a 30-day protection period. Both listings expire on March 31st. On April 15

th, Paul

and John view each other’s properties for the first time, and decide to swap homes. How much commission is

Company X due?

a. commission from just John

b. commission from just Paul

c. commission from both Paul and John

d. none

25. A grantor wishes to convey title to a grantee in a deed that creates the least protection for the grantee. The

grantor should give the grantee a

a. bargain deed

b. general warranty

c. limited warranty

d. quitclaim deed


26. The owner of a life estate in real property

a. does not pay property taxes

b. is entitled to possession

c. is not responsible for repairs

d. may not receive income from the property

27. Which gives a government the right to take private property for public use provided the owner is given just

compensation?

a. appropriation

b. condemnation

c. eminent domain

d. escheat

28. The amount of money owed on a note or promise to pay is called

a. a covenant

b. debt

c. dedication

d. a deed

29. Just one day prior to a foreclosure sale, the homeowner pays the bank all past due payments, late charges,

attorney fees, etc. The homeowner saves the property under the right called

a. anticipatory repudiation

b. defeasance clause

c. equitable right of redemption

d. statutory right of redemption

30. Which person would NOT be protected under the familial status definition according to the federal fair housing

law?

a. a 19 year old girl living with her mother

b. a 17 year old boy living with his father

c. a 14 year old girl living with a person who is seeking legal custody of her

d. a 21 year old woman who is pregnant

31. Extinguishing a debt by equal payments of regular intervals over a specified period of time is called

a. amortization

b. appraisal

c. equity

d. investments

32. Complaints based on Title VIII should be filed with the

a. local board

b. National Association of REALTORS

c. National Civil Rights Commission

d. Office of Equal Opportunity


33. A person discriminated against under the Civil Rights Act of 1866 must file a lawsuit in what court?

a. common pleas

b. federal district court

c. municipal

d. small claims

34. When a broker received an unexpected bill, he deposited a client’s earnest money check into his personal account

to cover the expense. This best describes

a. commingling

b. conversion

c. a legitimate loan

d. a promissory note

35. An agent is showing a house to a customer. The agent tells the buyer that the seller is desperate for an offer.

Which duty has the agent breached?

a. accountability

b. disclosure

c. loyalty

d. obedience

36. Cody is a first time buyer making an offer on a property that will include the appliances. The seller accepts the

offer and includes a document that will protect the owner if the furnace breaks. Which kind of protection did Cody

receive?

a. general warranty deed

b. home warranty

c. mortgage warranty

d. title free guarantee

37. Property accumulated by husband and wife by the efforts of either, which is equally divisible at time of divorce

or dissolution, is called

a. chattel

b. community property

c. condominium

d. cooperative

38. Which court has jurisdiction over estates of the deceased?

a. family court

b. federal district court

c. mayor’s court

d. probate court

39. What document is evidence of the relationship between property owner and property manager?

a. buyer-broker contract

b. lease

c. listing agreement

d. property management agreement


40. What term does the law use to describe a holdover tenant?

a. estate for years

b. periodic tenancy

c. tenancy at sufferance

d. tenancy at will

41. Something of value given to another as an inducement for entering into a contract is termed

a. chattel

b. commingling

c. consideration

d. cooperation

42. What is NOT an example of real property?

a. a bathtub

b. drapes

c. a shed

d. a sump pump

43. How long does a claimant have to file a complaint with the HUD Office of Equal Opportunity based on Title

VIII?

a. 180 days

b. one year

c. two years

d. three years

44. Exposure indicator is

a. the amount of radiation or pollutant present in a given environment that represents a potential health threat to

living organisms.

b. a characteristic of the environment measured to provide evidence of the occurrence or magnitude of a response

indicator’s exposure to chemical or biological stress.

c. the concentration of a chemical or other pollutant representing a health threat in a given environment.

d. identifying the pathways by which toxicants may reach individuals, estimating how much of a chemical an

individual is likely to be exposed to and estimating the number likely to be exposed.

45. Which best describes the servient tenement in an easement appurtenant?

a. land owned by a landlord

b. land owned by a tenant

c. property benefited from the easement

d. property burdened by the easement

46. The square footage of a two-story building that is 54’ X 40’ is

a. 1,030 sq. ft.

b. 2,160 sq. ft.

c. 2,160 sq. ft., plus the garage d. 4,320 sq. ft.


47. The subject property has five bedrooms but only one bathroom. What could this situation be causing?

a. curable defect

b. economic obsolescence

c. functional obsolescence

d. an ideal situation

48. A real property transfer fee of 1 mill on the sale of real estate at a total consideration of $63,500 equals

a. $6.30

b. $63.50

c. $635.00

d. $6,350.00

49. Where must a copy of the trust document be filed by a real estate investment trust?

a. at the clerk of courts

b. with the Department of Defense

c. with the Secretary of State’s office

d. with a state Torrens registrar

50. In the sale of a 100’ X 150’ property at $1.50 per square foot, how much does the owner realize from the

transaction if the broker’s commission is 6%?

a. $21,000

b. $21,150

c. $21,195

d. $21,500

51. An agency agreement that allows the sellers to procure the buyer and forgo paying the broker a commission best

describes a(n)

a. exclusive agency

b. net listing

c. non-exclusive right to sell

d. open listing

52. The seller instructs the listing agent not to reveal a multiple offer situation. Another agent at the same brokerage,

while on floor duty, takes a fax off the machine. The floor agent recognizes the fax as an offer on the seller’s listing.

The agent on the floor calls a buyer and advises the buyer to make an offer on the listing because it may not be

available if the seller accepts this offer. Can the broker be held liable for the actions of the floor agent?

a. no duty has been breached

b. no, the buyer’s agent didn’t know not to tell

c. no, the seller has no right to instruct an agent not to tell

d. yes, the broker has a duty to protect the confidential information

53. The leasehold estate that can be terminated by either party and CANNOT be assigned is

a. joint tenancy

b. periodic tenancy c. tenancy at sufferance

d. tenancy at will


54. The transfer of rights under a contract without the release from obligation is known as

a. assignment

b. novation

c. recession

d. succession

55. Local ordinance requires a 20-foot rear and front setback. The ordinance also requires a 10-foot side set back. If

the lot measures 100’ X 200’, which is the total allowable square footage of a single story building?

a. 4,800 square feet

b. 12,800 square feet

c. 16,200 square feet

d. 20,000 square feet

56. What type of agency relationship exists when a broker manages real property for the owner?

a. general

b. limited

c. major

d. special

57. Roberta wishes to build her garage two feet from her side lot line. City code calls for all side setbacks to be at

least five feet. In order to legally proceed, Roberta needs to get

a. a nonconforming use permit

b. spot zoning approval

c. a variance

d. a waiver

58. Which law is being violated when agents from different firms discuss and agree upon commission rates?

a. RESPA

b. Sherman Antitrust Act

c. Statute of Frauds

d. Truth-in-Lending Act

59. What is NOT a governmental restriction on the use of real property?

a. adverse possession

b. eminent domain

c. escheat

d. police power

60. Alice tenders $500 deposit money to Bill’s listing agent. What must Bill do with the deposit money?

a. deposit it in the broker’s trust account

b. deposit it in the broker’s management account

c. do whatever the contract says to do with the deposit money

d. give it directly to the seller


61. The law requiring buyers and sellers to be given an itemization of all costs and expenses of the buying and selling

of a home is

a. the Equal Credit Opportunity Act

b. the Fair Credit Reporting Act

c. RESPA

d. the Truth-in-Lending Act

62. A broker informs a homeowner that a member of a minority group may be moving into the neighborhood. The

broker sees that the homeowner is very upset, and offers to buy his house at a low price. The broker is guilty of

a. blockbusting

b. redlining

c. steering

d. none of the above

63. Tommy Gee encounters an owner of a property who has no equity in the home because of a sharp decline in

market values. The owner asks Tommy to market the property at market value but asks Tommy if he could negotiate

with the bank and orchestrate a short sale. Who should Tommy recommend the owner consult with before making a

decision?

a. accountant/attorney

b. listing broker

c. potential buyer

d. property stager

64. A contract in which the intentions of the parties are shown by their conduct is

a. an express contract

b. an implied contract

c. a bilateral contract

d. an executory contract

65. A property sold for $350,000. If the conveyance fee is $2.00 dollars per thousand, how much is the transfer tax?

a. $350

b. $700

c. $3,500

d. $7,000

66. A swollen, rushing river sweeps away an outcropping of land with several trees on it. The term that MOST

accurately identifies this kind of property loss is

a. erosion

b. avulsion

c. accretion

d. disenfranchisement


67. Pollution discharged into the atmosphere from smokestacks, other vents, and surface areas of commercial or

industrial facilities is called

a. emission

b. emission cap

c. emission factor

d. emission inventory

68. A property sale will close on April 30, 2010; taxes are $1,575 per year and are paid through the last half of 2009.

Calculate the seller’s share of taxes using a 365-day year.

a. $517.81

b. $1,035.62

c. $1,057.20

d. $1,575.00

69. According to the Lead Based Paint Hazard Reduction Act, what can happen to a licensee if she fails to give a

buyer the lead based paint pamphlet and disclosures?

a. $10,000 fine

b. one year in jail

c. ordered to pay three times the compensatory damages in a lawsuit

d. all of the above

70. Federal fair housing laws prohibit housing discrimination against all of the following groups of people EXCEPT

a. women

b. college students

c. ethnic minorities

d. families with minor children

71. A drunken man signed an offer to purchase. The status of the contract is

a. unenforceable

b. valid

c. void

d. voidable

72. A prospective buyer who has previously always lived in the city is looking at a rural property with a real estate

agent. The buyer admits that she doesn’t know anything about rural properties. The buyer likes the backyard because

it is very large but remarks that a small patch of the yard seems to grow more, and much healthier, grass than any

other part of the yard. The agent should recommend a

a. mold inspection

b. pest inspection

c. radon test

d. well and septic inspection


73. Brokers who violate the Sherman Antitrust Act may be punished by a maximum prison term of

a. one year

b. two years

c. ten years

d. five years

74. The three most important aspects of a house are

a. cost, value, and marketability

b. location, location, and location

c. marketability, uniqueness, and scarcity

d. size, style, and function

75. The seller lists her house with New Age Realty. The next day, the seller goes to work and mentions listing her

house. A co-worker expresses interest in the listing. What kind of listing would make the broker entitled to a

commission if the co-worker makes an offer acceptable to the seller?

a. exclusive agency

b. exclusive right to sell

c. net listing

d. open listing

76. Salesperson Bethany hasn’t had a deal in two months. While doing floor duty, the phone rings and a buyer asks

about one of the broker’s listings. The buyer wants to make an offer on the listing but needs to sell his house in order

to buy the listing. The buyer asks Bethany if she could reduce the commission on his house by two percent so he will

have enough funds to close this sale. Salesperson Bethany should

a. ask agents with listings in the same area to reduce their commissions

b. refuse to take the listing

c. take the listing at the reduced commission

d. talk with the broker about the situation

77. Which is NOT real property?

a. a built-in dishwasher

b. drapes

c. an in-ground swimming pool

d. a sump pump

78. First time homebuyers may make penalty-free withdrawals from their tax-deferred IRAs up to

a. $5,000

b. $10,000

c. $20,000

d. $50,000

79. The owner of an undivided interest in land with no rights of survivorship owns it as

a. absolute ownership

b. joint tenancy c. severalty

d. tenancy in common


80. A school playground must be replaced. It is 60 yards long, 320 feet wide, and the blacktop will be 6 inches thick.

Rounding your answer to the nearest dollar, if blacktop costs $115 per cubic yard, what is the cost to replace the

playground?

a. $96,666

b. $116,762

c. $122,667

d. $146,726

Answers with Explanations on National page 220


Answer Sheets

For

National Tests and Quizzes


Realty (Subject 1)

Quiz 1

Explanations

1. F Sheriff’s deeds and trustee’s deed of equal rights. A deed is a deed.

2. T Deeds are used to transfer realty, bill of sale is used to transfer personalty.

3. T Sheriff’s deed is given by court to effect the sale of property.

4. T A sheriff’s deed could be used anywhere.

5. T The word before or after deeds gives promise the deed warrants.

6. T Warrant of seisen is one of the five covenants in a general warranty deed.

7. T Quitclaim deeds usually transfer one’s interest on to or off of ownership of realty.

8. F General warranty deeds only give promises for time Grantor owned property, where title

insurance protects against any loss caused by defect in title.

9. F Deeds are recorded to give constructive notice to the world, but is not required.

10. F Grantor is only signature required to validate a deed.

11. T Transfer of deed only takes place once deed is accepted by grantee.

12. F Bill of sale is used to transfer personalty.

13. T Alienation means transferring.

14. T ALTA protects the lender where CLTA protects Grantee.

15. T Recording of deed is to give constructive notice to the world but not required.

16. T Riparian rights apply to rivers or streams.

17. F Littoral rights apply to lakes or oceans.

18. T Prior appropriation is government administering rights to water.

19. F Realty is land, real estate and real property.

20. T Chattel is also known as personal property.

21. T Improvements are known as fixtures.

22. T Real property to personal property is called severance.

23. T Bundle of rights is included in realty ownership.

24. T From center of core of earth in cone shape to infinity including subsurface surface and air

defines land.

25. F Transferring of personalty is done with bill of sale.

26. F Fixture must be attached in permanent way.

27. F Allodial land system applies to ability to hold clear title to real property and ownership with

requirement that you must use your land or lose it.

28. T Estover is the right to use the land of another to sustain life.

29. T Under bundle of rights comes the ability to create waste by owner.

30. T Bundle of rights include control.

31. T It is not required that an item be immoveable to be realty.

32. T All appurtenances, whether tangible or incorporeal transfer with realty.

33. T A quitclaim deed is the least protective as it gives no promises.

34. T General warranty deed, with its five covenants is considered the best deed.

35. T If someone can prove they continuously, actually, notoriously, openly and exclusively occupied

someone else’s property for statutory required period they may receive title under adverse

possession.


Realty (Subject 1)

Quiz 2

Explanations

1. F Master plan communities are designed to provide a guide to improve the community

2. T Buffer zones separate two different zones.

3. T Restrictions and conditions define ownership rights in realty.

4. T Variances are exemptions or exceptions.

5. F CC&R’s are homeowner associations’ restrictions on realty within a subdivision.

6. T Down zoning decreases value.

7. T Non-conforming use is the right to continue use after a change in zoning.

8. T Spot zoning is allowing a parcel of realty to be used for a different purpose.

9. F Escheat is when realty reverts to state if a person dies intestate and has no heirs.

10. F Four unities of possession, interest, time and title are required under joint tenancy.

11. F An amendment to zoning increases use.

12. F Failure to remove trade fixtures gives lessor ownership is called accession.

13. T Fee simple is the best freehold estate in realty.

14. F Saying fee simple determinable estates are hard to sell is a subjective view.

15. T Dower right gives wife rights to property, where leasehold gives bundle of rights less ownership.

16. F Life estate owner may be an owner occupant.

17. F A remainder person may receive a fee simple, defeasible, or subsequent estate.

18. F A life estate holder does take title for the duration of their life.

19. T In some states, women are allowed to take title without their husband’s knowledge.

20. T When a corporation takes title, it is under severalty.

21. T Severalty means one person or legal entity.

22. T Severalty means taking title as one person or legal entity.

23. T How a person takes title determines how much their percentage of ownership is.

24. T A requirement under joint tenancy is equal interest.

25. T A requirement under tenants by the entirety is equal interest.

26. T Community property has the requirement of equal interest.

27. T Tenants in common are not required to have equal interest.

28. T Under a general partnership all parties are equally liable.

29. T Life estate owners may lease property with the provision that upon their death the tenants must

vacate.

30. F Zoning laws are a police power under government restrictions.

31. T Fee simple means owner may will property.

32. T Life estate owners may lease property with the provision that upon their death the tenants must

vacate.

33. F Joint tenants may allow any of the seven ways of taking title upon the sale of their property.

34. F Tenants in common do NOT have right of survivorship.

35. F Community property does not include right of survivorship


Realty (Subject 1)

Quiz 3

Explanations

1. T Alienation clause in a mortgage states that full balance of realty debt becomes due and payable

upon sale of the property.

2. T A mortgage is a nonnegotiable security instrument.

3. T A deed of trust is a security instrument in realty.

4. F A note is negotiable where a mortgage in nonnegotiable.

5. F Deed of trust is a nonnegotiable instrument in realty.

6. F A deed of trust is a nonnegotiable instrument where a note is negotiable.

7. F A mortgage is a nonnegotiable instrument.

8. F Equitable title gives the bundle of rights less ownership and occurs only in vendor and vendee.

9. F A deed of reconveyance is issued on a trustee’s deed.

10. T Nevada is a community property state where dower rights are not necessary.

11. F A trustee and mortgagee do not coexist in a loan, they are used in different states.

12. F Nevada is a title theory state.

13. F Not all states give the right to statutory redemption.

14. F Defeasance clause states, when payments are completed mortgagee removes lien by a

satisfaction piece.

15. F A vendee makes payments to the vendor.

16. F Vendee makes payments to vendor.

17. F Vendor receives payments from vendee.

18. F Vendee occurs at COE and the owner is vendor.

19. F A vendee occurs at COE.

20. T A mortgagor is the borrower payer of a loan on their realty to a mortgagee

21. F Mortgagee was a former lender, where the vendor is the owner receiving payments from vendee

22. T A will can name someone to receive but a deed can only transfer.

23. T A codicil is a change in a will.

24. T Proprietary lease and ownership of stock occur in a cooperative.

25. T Title must be taken two ways in a condo.

26. T Deed in lieu of foreclosure is given to the mortgagee/beneficiary or vendor.

27. F Acceleration clause allows in the event of default the whole amount of principal and interest

payable according to law

28. T Upon default of a loan foreclosure could occur.

29. F Prepayment clauses are optional.

30. F Impounded payments are debit to mortgagor, trustor or vendee.

31. F Trustor is used in a title theory state where a mortgagor is used in a lien theory state.

32. F Purchase money agreement is called a note.

33. F There is a foreclosure clause in a vendor/vendee relationship.

34. F A non-cupative will is usually not valid.

35. F A devisee is named as a recipient in a will.


Realty (Subject 1)

Quiz 4

Explanations

1. T A dedication still needs a deed.

2. F Root of title is beginning of ownership of realty by an individual.

3. T Name changes can cause a gap in title.

4. T A cloud on title could occur because of liens.

5. F Recording of realty gives constructive notice to the world.

6. F Good consideration is love or affection.

7. T Right to own air space in realty would be more than a leasehold estate.

8. F When the government gives up the right to ownership in realty its called vacation.

9. F CLTA title insurance protects the grantee.

10. T Legal title is defined in the deed.

11. T Emblements are personal property also known as chattel.

12. F House keys fall under adaptability of the item, they look like personal property but are realty.

13. F There is CLTA title insurance protecting the buyer and ALTA to protect the lender.

14. T An individual can incur debt on their interest in realty under joint tenants.

15. F Under limited partnership, limited partners are only liable up to original investment.

16. T Under tenants in common and joint tenants there may be two or more people.

17. T Under tenants in common a person does not have to have equal interest and CAN will their

interest.

18. T Under community property a person may will their interest in realty.

19. F Saying a fee determinable estate is undesirable is a subjective view.

20. T Understanding that the deed will determine ones interest in the property.

21. T Under joint tenants you may or may not be married.

22 T If the girlfriend takes title by herself , she may take it in severalty.

23. T Joint tenants may or may not be married.

24. F To say a life estate is undesirable is a subjective view. Also a life estate is ownership.

25. T A sheriffs deed is issued by order of the court.

26. F An administrator is appointed by court to handle the affairs of a will.

27. F A devisee is named in a will as a recipient of Real Property.

28. F Insurance is optional in real estate transactions.

29. F Statutory redemption is not required, it varies by state.

30. F A mortgagor makes payments to the mortgagee.

31. T There is no impound when property is purchased with cash.

32. F Government restrictions regulate police powers, escheat, taxation and eminent domain.

33. F The person buying realty is the Buyer.

34. F Tacking must be done by two or more people consecutively to acquire title under adverse

possession.

35. F Elevation is measured by a datum or benchmark.


Agency (Subject 2)

Quiz 1

Explanations

1. T A principal may be a buyer, seller, lessor, lessee exchanger or exchangee.

2. T Once a representation is formed by contract a customer becomes a client/principal.

3. T Once agency relationship is formed there are ethical & legal rules that must be followed.

4. T In most states a real estate agent can represent a buyer or a seller.

5. F Client or principal is “boss” in agency relationships, an agent must follow all LEGAL commands.

6. T Both parties in an agency relationship have duties owed to one another.

7. T Implied agency is created by ACTIONS.

8. T Fiduciary responsibility is an ethical/legal responsibility of agent to client.

9. T Loyalty- Client comes first, is a requirement of agency.

10. T Duties owed to a client principal are responsibility and representation.

11. T By definition agency is the representation of one person by another.

12. F Agency is between broker/brokerage and client/principal

13. T Licensees owe fiduciary responsibility to the client.

14. F Open listing may be oral, not all types of listings have to be written.

15. T Whenever agency is formed, fiduciary responsibility is owed.

16. F Brokerages can form agency relationships.

17. T Agents and principals, have responsibility to be fair honest and disclose all material facts to third

parties.

18. T Representation is not required for compensation of an agent.

19. F Dual agency is if buyer & seller are represented by same company in same transaction.

20. F Only brokerages can be special agent to a client.

21. F Notification of dual agency must be in writing and agreed to.

22. T Because of agency laws and responsibility, dual agency relationship is of greater risk to the

brokerage.

23. F Care or skill is not the most important duty in an agency relationship.

24. F The disclosure of all material facts would not be an option under dual agency.

25. F Agency may be oral or written, Expressed.

26. F Loyalty - client comes first, may be compromised under dual agency because both parties are

clients.

27. F Working for both buyer and seller in a single transaction is dual agency.

28. F Dual agency must be agreed upon by both parties IN WRITING.

29. T Negotiation may be a responsibility of the agent.

30. F Agent MUST be brokerage in agency.

31. F Subagent works on behalf of brokerages.

32. F Agency agreements have contract requirements.

33. F Loyalty is not an option in dual agency.

34. F Subagency is not a requirement.

35. T Duties of agent should be discussed prior to signing contract.


Agency (Subject 2)

Quiz 2

Explanations

1. F A real estate agent may be a salesperson or broker salesperson or broker.

2. F. Brokerages represent clients.

3. T. Agents are usually hired to sell a client’s home, OR represent a buyer, as a special agent.

4. T. Since listings are oral or written and not implied by an agents actions listings are an expressed

agency.

5. F. Most real estate listings may be exclusive right to sell and exclusive agency listings.

6. T. Misrepresentation by an agent is a breach of agent’s duty.

7. T. Net, oral, exclusive right to sell, and exclusive agency are all listings.

8. T. Compensation could be anything of value, decided by an agent and client.

9. F. Compensation must be to brokerage.

10. T. Earnest money is not required and can be given in any amount if requested.

11. T. Earnest money is not required.

12. T. In an option agreement financing MAY be taken in any format.

13. F. Dual agent must be brokerage.

14. T. Net listings ARE illegal in most states.

15. F. Client/ principal is boss.

16. T. Principal agent relationship is ALWAYS consensual.

17. F. Sub-agency IS illegal in some states.

18. T. Only clients have representation.

19. F. Agency begins usually when signed agreement.

20. F. Representation starts when agreed upon by brokerage and client.

21. F. Client and brokerage always determine agency.

22. T. Bankruptcy of the principal will terminate the agency.

23. T. Death of either party may terminate an agency.

24. T. Upon BROKER’s death agency between broker and client is terminated.

25. T. Upon death of Broker agency is terminated.

26. F. In some circumstances, land is more valuable than the building that sits on it.

27. T. Condemnation automatically terminates a listing.

28. T. Agreement by all parties may terminate a listing.

29. T. Coupled with an interest, listings may not be terminated without agreement.

30. F. Responsibility begins when agent and customer begin talking real estate.

31. F. Fiduciary means brokerage has ethical and legal requirements.

32. T. Care is skill in performing a task.

33. F. Obedience is of all LEGAL requests.

34. F. Disclosure is of all material facts and relevant facts of the real estate.

35. F. Accounting means brokerage must account for all funds received in transaction.


Agency (Subject 2)

Quiz 3

Explanations

1. T. Fraud is an intentional lie or non-disclosure.

2. T. Puffing is opinion of licensee and is legal.

3. F. Time is of the essence is to be professional and get it done.

4. T. Parol evidence rule means promises must be in writing to be valid..

5. F. Deed transfers realty.

6. T. Procuring cause may secure compensation of a brokerage.

7. F. Exclusive right to sell is considered the best listing.

8. T. Most listings have STATED end dates.

9. F. REALTORS are not required to do exclusive right to sell listings only.

10. T. Minor MAY enter into a voidable contract.

11. F. Leasing contracts for less than a year do NOT have to be in writing.

12. F. When an offeree counter offers they become the offeror.

13. F. Optionor is always owner of the real property.

14. T. Vendee is ALWAYS the buyer at COE

15. T. Statute of frauds relate to all contracts.

16. F. Contracts entered into with a minor are voidable by MINOR.

17. F. Oral lease contracts for less than one year are enforceable.

18. F. Fraud, duress, undue influence...etc may cause contracts to be voidable.

19. F. Contract between adult and child is voidable.

20. F. Intoxicated persons’ contract is voidable.

21. T. When terms are expressed in a contract, contract is expressed.

22. F. Implied contracts are created through actions.

23. T. Listings are executory until the ready, willing and able buyer is found. They are then executed.

24. T. One person waiting on the performance from another in a contract is a unilateral contract.

25. F. Meeting of the minds occurs when offeror and offeree both have knowledge that the offer was

accepted.

26. T. Consideration could be money services or love.

27. F. Novation is a complete substitution.

28. F. An intoxicated person renders a contract voidable.

29. F. Statute of frauds determines amount of time fraudulent contracts may be voided.

30. F. Agents may purchase property for themselves and be compensated.

31. T. Breach in a real estate contract CAN be corrected by the parties of the contract.

32. T. Person who breaches the contract may win in court.

33. T. Damages of breached contract are determined by court decision.

34. T. Seller could be successful in suit for performance if there is a breach.

35. F. Equitable title passes when there is a vendor/ vendee at COE.


Agency (Subject 2)

Quiz 4

Explanations

1. F. Cooperation is NOT required to buyer’s brokerages.

2. T. Dual agent represents buyer and seller in the same transaction.

3. F. Compensation does not determine agency.

4. F. Single brokerages may specialize in buyers or seller representation.

5. F. Brokerages may be general or special agent to the parties.

6. T. Subagents represent brokerages clients.

7. F. Buyers brokerages represent buyer but does not have fiduciary responsibility to listing broker’s

client as a customer.

8. T. Universal agents have power of attorney with their client.

9. F. Estoppel agency occurs when consumer had opportunity to stop agent from believing agency was

formed.

10. F. Laws of agency determine right and duties of agents and their principal/client.

11. T. A licensee may be the agent of buyer or seller. (licensee is a broker, broker salesperson, or

salesperson...broker in this case)

12. F. Subagent is licensee representative of the brokerage.

13. T. Loyalty means client comes first.

14. F. Confidentiality is for as long as the parties agree.

15. T. Diligence is an agent’s responsibility to inform principal of all facts relating to the realty. Not to

be confused with “due diligence” which is a completely separate term.

16. T. Latent defects are NOT able to be seen. Ex. Easements, encumbrances...etc

17. F. Brokerage is the agent.

18. F. Fiduciary responsibility is to clients.

19. F. Compensation is agreed upon case by case by brokerage and client/ customer.

20. T. Listing are taken by brokerage.

21. T. Sales belong to brokerage.

22. T. Brokerage may represent buyer, seller, lessor, lessee, exchanger, exchangee.

23. T. Brokerage may represent any buyer, seller, lessor, lessee, exchanger, exchangee.

24. T. Salesperson represents brokerage.

25. F. Legal title passes with a deed.

26. F. Contingencies are not required.

27. T. Any property may be sold under a land contract.

28. F. Earnest money is not required in contracts.

29. T. A real estate agent may be a subagent.

30. F. Implied contracts are not illegal.

31. F. Act of God renders a contract void.

32. T. Fraud renders a contract voidable.

33. F. An intoxicated person renders a contract voidable.

34. T. Contacts may be terminated by novation.

35. F. Contacts may not be terminated by assignment. There may be a novation of the parties.


Finance (Subject 3)

Quiz 1

Explanations

1. T Asbestos was used in insulation.

2. T Asbestos may be found around water pipes.

3. T Lead base paint can be found in most homes before 1978.

4. T Children are the most susceptible to lead.

5. T Radon may be a cause of lung cancer.

6. T Urea-formaldehyde may be a cause of cancer.

7. T Underground storage tanks may cause groundwater contamination.

8. F All real properties are non-homogeneous.

9. T Real estate is valuable because of the acronym D.U.S.T.

10. F The physical characteristic of land includes durability.

11. F Market value is NOT the same as market price.

12. T Value and worth are the same.

13. F Value and cost are NOT the same.

14. F Cost and price are NOT the same.

15. T Appraisers go by arm’s length transactions.

16. T The most important part of an appraisal is the reconciliation.

17. T The first thing a real estate appraiser must do is identify the problem.

18. F Objective value should enter into the value of an appraiser.

19. F An appraisal is an educated opinion of value.

20. T Situs is an important part in determining value.

21. T An appraisal uses a support system to reflect value.

22. T An appraisal is an educated opinion of value.

23. T Lenders, investors, government agencies, public utilities and individuals use appraisals.

24. T After 1/1/93 all federal related appraisals must be done by a state certified appraiser.

25. T Principle of anticipation means future benefits.

26. T Principle of change means nothing stays the same.

27. T Principle of conformity means similar is best.

28. F Principle of competition means the same as the principal of supply and demand.

29. T Principle of conformity ensures future value.

30. T A sector road is very important to the community.

31. T Principle of plottage means that consolidating must mean higher value.

32. T Principle of regression means value is reflective of all the realty in the area.

33. T Principle of progression means value is reflective of all the realty in the area.

34. T Principle of increasing returns means everything adds value.

35. F Principle of highest and best use means most money right now and future.


Finance (Subject 3)

Quiz 2

Explanations

1. T. Market data and sales comparison approach are synonymous.

2. T. If someone owns a home under a life estate, for example, adjustments may be made to the appraisal.

3. F. A physical CHARACTERISTIC of land includes its immobility.

4. T. Market data is used for appraisals

5. F. Adjustments in a real estate appraisal are ALWAYS made to the comparable homes.

6. T. CMA is used by a real estate agent to determine price.

7. F. A CMA is done by a real estate agent and appraisals are done by an appraiser.

8. T. Market data approach can be used to appraise land.

9. T. L.A.T.T. are elements used to make adjustments to realty during appraisal.

10. F. Forty vacant homes imply a supply cycle.

11. T. Substitution is used in the market date approach and cost approach.

12. T. Cost approach appraisals are based upon substitution.

13. T. The first step in the cost approach is to separate the land.

14. F. Replacement in realty means constructing something of similar value in appraising.

15. T. A square foot method is one way to determine value in realty using the cost approach.

16. T. Economic depreciation is the loss of value in realty due to the surrounding area.

17. T. The cost approach appraisal in realty deals with an economic depreciation.

18. F. Economic depreciation is ALWAYS incurable.

19. F. Functional obsolescence could be curable.

20. T. Sales price divided by monthly rent equals gross rent multiplier.

21. T. Depreciation occurs over the economic life of a building.

22. F. Functional obsolescence could be curable in realty.

23. T. Economic is always incurable.

24. F. Physical deterioration could be incurable.

25. T. Land is NOT depreciable.

26. T. A broken window can be replaced, therefore could be curable.

27. T. Locational depreciation is always incurable.

28. F. Lack of an elevator is functional incurable.

29. F. Airport runway change to go over realty is economic incurable.

30. F. Electric bill would be an operating expense.

31. F. Apartment complex is income approach.

32. T. Income approach could be used to do a single family home.

33. T. Cap rate in realty is similar to interest rate return on money.

34. T. Depreciation in realty is done on a straight line approach.

35. T. Depreciation in realty can be a tax write off.


Finance (Subject 3)

Quiz 3

Explanations

1. F. Owner occupied home loans do NOT have to have a FHA loan.

2. F. VA loan homes MUST be owner occupied.

3. T. A requirement of a conventional conforming loan is that it MUST be owner occupied.

4. T. Purchase price divided by monthly rent equals GRM.

5. T. In realty GRM is used as an informal version of the income approach.

6. F. Interest rate are set by lender.

7. F. Interest rates are set by lender.



10. F. The APR is the true rate of interest, adjusting the nominal rate stated in the note for loan costs.

11. F. GNMA buys only GOVERNMENT loans.

12. F. Mortgage brokers are middle men therefore have less power than the mortgage BANKER.

13. F. FHA loans are conforming loans.

14. F. Wholesale mortgage bankers MAY sell their loans to the secondary market.

15. F. DD-214 and CE are both requirements of VA and NOT the same forms.

16. F. Qualification is REQUIRED to assume a FHA loan..

17. F Qualification is REQUIRED to assume a VA loan.

18. F. FHA loans MAY have a secondary loan.

19. F. Requirements for FHA and conventional loans are different.

20. F. FHA loan maximums are set regionally.

21. F. FNMA only conforming loans.

22. T. Nevada uses a Deed of Trust.

23. F. Mortgages are NOT used in Nevada.

24. F. Types of appraisals are specific to loan and are NOT interchangeable.

25. F. Impartial third party holds title to realty.

26. F. Veterans are not required to get a certain loan.

27. F. Non veterans are NOT restricted to a specific loan.

28. F. Qualification for FHA loans are set by ratios.

29. T. Acceleration clauses help lenders to foreclose.

30. T. Lenders can set their own rates.

31. F. Appraisals are specific to each loan and are not interchangeable.

32. F. Appraisals are specific to each loan and are not interchangeable.

33. F. HUD insures FHA loans.

34. F. Certificate of reasonable value is used by VA.

35. F. VA loans are partially guaranteed.


Finance (Subject 3)

Quiz 4

Explanations

1. T Principle of contribution means all components contribute to its value.

2. T Principle of supply and demand means the numbers game of availability's.

3. F The process of separating parcels is subdividing.

4. T An appraiser doesn’t rely on foreclosed realty in deciding value.

5. F Land is non-fungible.

6. T Linkage may add value to realty.

7. F Assessed value is the value obtained from the County Assessor.

8. T Arm’s length transaction is important in real estate transactions.

9. T Axial theory is important to the general layout of a community.

10. T Primary employment helps a city diversify its cultural needs.

11. F Industrial parks bring benefits and detriments.

12. T Situs and location are synonymous.

13. T Normally, better design brings more money.

14. F Principle of value does consider the past in realty.

15. T Correlation in realty means reconciliation in appraising.

16. T NOI/CR=WORTH in realty.

17. F Some real estate sales require an appraisal.

18. F Out dated fixtures are obsolete in realty.

19. T The rate of return on money is called capitalization in realty.

20. T Income approach in realty is based on present worth of future income.

21. T Room function could be functional obsolete incurable in realty.

22. T Roof repair could be physical incurable in realty.

23. F A home next to a factory would be location incurable in realty.

24. T Home maintenance is normally physical curable in realty.

25. F FHA loans made before 12/15/89 are assumable without qualifying.

26. F To qualify for a VA loan, you must have been a veteran or their spouse.

27. F Some conventional loans with less than 20% down are required to have PMI.

28. T A 5-plex must have a conventional non-conforming.

29. T FNMA and GNMA act in a tandem plan.

30. T Prepayment penalties are allowed on realty secured with a non-conforming loan.

31. T A wholesale mortgage banker loans money from their resources.

32. F FHA is a loan program.

33. F VA is a loan program.

34. T PMI is on conventional loans only.

35. F Freddie Mac buys all types of conventional loans.


National Mock Review Answer Sheets

#1 #2 #3 #4 #5 #6 #7 #8 #9 #10

1 B J Q T S U T V

2 S B S Y N B O Q P U

3 F J L W A P K C E P

4 X Q R U M K Z H U B

5 M G M K Z R M M S C

6 J D Q S P J H F Y

7 W S B F L J N F

8 A I H O G G S K L J

9 U N A E I A L G A

10 O N O E W Y I W

11 H A G C L T Q S M

12 K P Z Y V R H

13 M F P U V T D Z K

14 I T X J M N X V O

15 Z C V H H Q G N T S

16 P F C R S U E M Q

17 T O X E Z B L

18 C X Z N W P O G

19 L E F D Y F Z Q

20 D W Y L H J I A D

21 R D T Q Y R C E

22 Y H U X A V Y

23 E P B K C X W O I

24 N T D W X D U X Z

25 R V W I F B N

26 G Y O M F O R B H

27 V B V R D E W R

28 L Z K I L C P J X

29 Q K A J C G K

30 U E I G V N I A D T


National Mock Review Answer Sheets

#11 #12 #13 #14

1 L O L Q

2 B Q H Y

3 I G Q H

4 J S M K

5 P I X

6 E C S R

7 G A B

8 H K N

9 F Z A

10 Y T N L

11 N K J U

12 Z D

13 X D Z

14 W B V B

15 Q C

16 C Y A P

17 V O G

18 U X E

19 S I X W

20 R E P E

21 D N

22 T L F L

23 V M Y I

24 Z D C F

25 K R O

26 O F R

27 A U T S

28 J G T

29 P H U M

30 M W W V


Sample National NV Testing Center Exam Answers and Explanations

1. B. A defeasance clause states that when the loan is paid, the mortgage is void. The bank’s failure to cancel the

mortgage of record is a violation of this clause. The habendum clause is the “to have and to hold” clause found in a deed.

The conveyance clause states that the property is being conveyed in a deed, not a mortgage. The notarial clause is signed

by the notary, stating the mortgage was signed freely and voluntarily by the borrower.

2. B. The general warranty and special warranty deed contain express warranties. A bargain and sale deed has an implied

warranty. A quitclaim deed contains no warranty.

3. C. Special assessments and real estate taxes take priority over all other liens, regardless of the date of recording.

4. B. An agent’s duty is to be fair and honest. The agent should have disclosed that he represents the seller before the

buyer had a chance to disclose information about financial abilities. The listing agent must now, acting out of the duty of

loyalty, use the information against the buyer in negotiations.

5. D. When no words are needed (like when eating a meal at a restaurant), an agreement is still created that could be

binding.

6. B. Federal regulations require that for any house built prior to 1978, a homeowner must disclose any known lead-based

paint hazard. The seller is not required to give Truth-in-Lending statements or the closing disclosure. A Miranda warning

is given by the police (upon arrest), outlining the person’s rights to remain silent, an attorney, etc.

7. C. Money that is owed must show up on a balance sheet as a debit. Money to be received must show up on a balance

sheet as a credit.

8. B. There are several steps in calculating the answer to this question. First, determine the amount by which the first

$40,000 is reduced; $40,000 X 0.05 = $2,000 (100% - 95% = 5% not covered). Next, determine the remainder of the loan;

$185,000 - $40,000 = $145,000. Now, calculate the amount by which the remaining $145,000 is reduced; $145,000 X 0.10

= $14,500 (100% - 90% = 10% not covered). Next, determine the amount to apply toward the loan origination fee and

discount points; $185,000 - $2,000 - $14,500 = $168,500. Now, calculate the origination fee; $168,500 X 0.02 = $3,370.

Next, calculate the points charged; $168,500 X 0.02 = $3,370. Finally, add the origination fee and points together to

calculate the buyer’s total cost; $3,370 + $3,370 = $6,740.

9. B. Replacing a building with a structure that has the functional equivalent of the original may not result in the exact

same building; however it would be able to serve the same purpose.

10. C. Every state has a rule that deals with landlords and tenants. The law recognizes the owner’s right to show the

property, but the law then requires that reasonable notice be given to the tenant.

11. D. An acceleration clause states that if the borrower defaults, the lender has the right to declare the entire debt due and

payable. The defeasance clause requires the lender to execute a satisfaction of mortgage when the note is fully paid.

Equitable redemption refers to the right of borrowers to redeem this interest in their property prior to a public foreclosures

sale.

12. B. Fructus industriales would be crops or emblements. Fructus naturales would be a naturally occurring plant (like the

tree that grows after a squirrel buries an acorn). Emblements are tenant’s crops. Trade fixtures are equipment a tenant

installs for their business.

13. C. This is a two-part problem. First, calculate the combined monthly income. We know Jane earns $3,200 a month.

If Bill earns $67,500 a year, he makes $5,625 a month ($67,500 /12 = $5,625). Add $5,625 and $3,200 to get a monthly

earning of $8,825. Use the loan amount formula: Allowable Payment Amount = Income X Ratio or Allowable Payment

Amount = $8,825 X28% = $2,471. The maximum monthly payment Bill and Jane could afford is $2,471.

14. D. An alienation clause in a note or deed of trust provides that, on the sale of the property, the lender has the choice of

declaring the entire loan balance due immediately or permitting the buyer to assume the loan at current market interest

rates. A defeasance clause in a mortgage document states that, when the note has been fully paid, the mortgagee is required

to execute a release of lien or satisfaction of mortgage. An acceleration clause assists the lender in foreclosure by allowing

the lender the right to accelerate the maturity of the debt. Hypothecation is the pledging of title to property to be sold if a

debt is not paid.

15. C. When one party has the right to cancel the contract, the contract is voidable. When the terms of the contract have

been specifically fulfilled, the contract is said to be executed. The action of a court of law to make a seller specifically

perform the obligations called for in the contract is called specific performance.

16. C. Tom had a duty to inform Fred of the true value of the property. This would be known as self-dealing.

17. A. The listing broker would be the only agent of the seller, and none of the cooperating brokers could legally represent

the seller, because the offering of subagency to outside brokers is against public policy.

18. A. Special use exceptions and conditional uses are the same thing. They don’t comply with zoning limitations but

benefit the public. A variance is when a landowner gets permission from the government to deviate from a zoning

limitation. An amortization provision would give the government the right to limit a person’s nonconforming use.


19. C. A blanket mortgage covers more than one property or lot; it is typically used to finance the development of a

subdivision.

20. C. The IRS lien is a general involuntary lien against all items owned by an individual (including, but not limited to,

real estate). The mechanic’s lien is an involuntary specific lien against property worked on by a contractor. The mortgage

is a voluntary specific lien given freely by the landowner to the buyer. The easement is not a lien, although it is an

encumbrance on the property.

21. C. Unless stated otherwise in her agreement with the office, all listings belong to the office. Handling of pending sales

(ones that have sold and not yet closed) should be covered in Cindy’s employment agreement.

22. A. $115,900 X 8% (0.08) = $9,272 annual increase in value $115900 + $9,272 = $125,172 current market value.

23. B. The statute of frauds says that certain contracts have to be in writing in order to be enforceable.

24. D. No commission is due Company X. Protection periods will protect an agency only in regard to purchasers who

have viewed the property during the listing period.

25. D. A bargain or sale deed only promises that the grantor is the one with the authority to convey title. A limited

warranty deed limits the warranties for the period of ownership. A general warranty deed promises to defend all claims of

title. The quitclaim deed makes no warranties. The grantor is the seller so if he wants to offer the least protection to the

grantee, he will use a quitclaim deed.

26. B. The owner in a life estate enjoys all of the benefits inherent in home ownership. The life estate comes with a future

interest holder who will take title when the measuring life ends.

27. C. Escheat is the power of the government to take property when one dies intestate and without heirs. Condemnation

and appropriation describe the act of taking property. The power of the government to take private land for public use is

called eminent domain.

28. B. Dedication is the transfer of real property by a private owner to a public agency. Covenants are expressed promises

in a deed or contract. A deed is used to transfer legal title from grantor to grantee. The amount of money owed on a note or

promise to pay is called debt.

29. C. Statutory redemption occurs after the sale has been finalized, and is recognized only in those states that have

extended the right of redemption to include the period after the sale. Equitable redemption occurs prior to the sale, when

the homeowner avoids foreclosure by paying all past-due payments and other monetary obligations. Anticipatory

repudiation is a breach of contract before it begins. A defeasance clause in a mortgage states that once the loan is paid in

full, that mortgage is canceled.

30. A. Under certain circumstances the familial status category protects individuals who have not reached the age of 18.

31. A. Equity is defined as the amount of value of the property over and above a debt. The appraisal is an opinion of

value, and investments are how we get money to make money. Paying debt in equal payments of regular intervals over a

specified period of time is called amortization.

32. D. A complaint should be filed with the Office of Equal Opportunity with the Department of Housing and Urban

Development.

33. B. The federal district court is the only court of jurisdiction over the Civil Rights Act of 1866.

34. B. Commingling is the broker mixing his funds with other peoples’ funds. In this instance, the broker is using

someone else’s money. This would be conversion, which is a crime.

35. C. An agent must have the client’s permission to reveal such a motivation to a customer.

36. B. A general warranty deed is an instrument of conveyance. A title free guarantee is a type of title insurance. There

is no such thing as a mortgage warranty. A home warranty would cover the appliances, heating and cooling, plumbing, and

other mechanical systems of a home.

37. B. Condominium is the system of ownership of fee simple title to designated areas of air space, plus a percentage of

ownership of common elements in the property. While a husband and wife can hold a condominium together, community

property describes property accumulated (by efforts of either spouse) during the marriage; thus, it is equally divisible at the

time of divorce or dissolution. Chattels are personal property that is not real property (e.g., trade fixtures). A cooperative is

a building owned by a corporation where the residents are shareholders in the corporation and receive proprietary leases on

individual units and rights to use common areas.

38. D. Federal district court is where federal cases are taken. Mayor’s court is where one goes when in violation of an

ordinance. Family court deals with custody issues. Probate is the court with jurisdiction over estates.

39. D. A listing agreement is between seller and broker. A buyer-broker contract is between buyer and broker. A lease is

between landlord and tenant. A property management agreement is between property owner and property manager.

40. C. When a tenant is no longer entitled to possession of the estate, the landlord must use the eviction process.

41. C. Commingling refers to the mixing of broker funds held in trust with client funds. Chattel is tangible personal

property other than real property. The essential elements of a contract include consideration, the correct answer.

Cooperation is when the client does what the broker suggests to help a property sell.


42. B. Drapes are usually not considered real property because they are not attached or part of the structure – they are

considered personal property. However, in some instances (e.g., drapes custom made to fit an unusual window), they can

be considered real property.

43. B. Filing a lawsuit based on the Federal Fair Housing Act must be done within two years. A complaint would be filed

with the HUD Office of Equal Opportunity within one year.

44. B. Exposure is the amount of radiation or pollutant present in a given environment that represents a potential health

threat to living organisms. Exposure assessment is identifying the pathways by which toxicants may reach individuals,

estimating how much of a chemical an individual is likely to be exposed to and estimating the number likely to be exposed.

Exposure concentration is the concentration of a chemical or other pollutant representing a health threat in a given

environment. Exposure indicator is a characteristic of the environment measured to provide evidence of the occurrence or

magnitude of a response indicator’s exposure to a chemical or biological stress.

45. D. Appurtenant easements involve two parcels of land. One piece of land benefits from the easement and the other is

burdened by the easement. Think of the dominant tenement as the dominating parcel. Think of the servient tenement as

serving the dominant tenement.

46. D. 54’ X 40’ X 2 (there are two floors) = 4,320 square feet

47. C. When something inherent in the subject property causes the loss of value, the property suffers from functional

obsolescence.

48. B. 1 mill equals 1/1000; $63,500 divided by 1,000 equals $63.50 in tax

49. C. In order to transact business as a REIT, the trustee files a copy of the trust document with the Secretary of State’s

office, not the court house.

50. B. To determine the square footage of property, multiply the base by the height. In this example, 100’ X 150’ =

15,000 square feet. The owner is selling the property for $1.50 per square foot, so multiply 15,000 by $1.50 to come up

with a sale price of $22,500. The broker takes a 6% commission, or $1,350; $22,500.00 (sale price) minus the broker’s

commission of $1,350 leaves the seller a net profit of $21,150.

51. A. When the seller has the ability to bring the buyer, yet hires one broker to market the property, the listing agreement

is an exclusive agency agreement.

52. D. A broker is expected by law to create and adhere to a policy designed to protect clients’ confidential information. If

the broker had a policy of allowing only non-licensed employees to distribute incoming faxes, this would have been

avoided.

53. D. Tenancy at will cannot be assigned; it is based on the wishes of the parties.

54. A. Assignment is without release, while novation is with release. Succession describes an order of events. Recession

is an economic condition.

55. B. From the 100’ frontage, subtract the 10’ per side setback (100’ – 20’ = 80’). From the 200’ depth, subtract the 20’

rear and front setback (200’ – 40’ = 160’). 80 feet of frontage X 160 feet of depth = 12,800 square feet allowed by local

ordinance.

56. A. When an agent is authorized to do a variety of things in one area on behalf of the principal, the relationship is a

general agency relationship. An agent’s type depends on his scope of authority.

57. C. A variance will provide permanent permission to deviate from the setback rules.

58. B. Discussing commission rates with other licensees is regarded as price fixing under the Sherman Antitrust Act.

Statute of Frauds is a law that requires some contracts to be in writing in order to be enforceable. RESPA is the law that

requires disclosure of transactions costs. The Truth-in-Lending Act is the law that requires the disclosure of loan costs.

59. A. Police power, eminent domain, and escheat are all powers of the government. Adverse possession would be a

power of law. Adverse possession is acquiring title to someone else’s real property by taking possession of it without the

owner’s consent. This requires open, notorious, hostile, adverse, exclusive, and continuous use.

60. C. Absent a clause to the contrary, deposit money must be deposited into a broker’s trust account. However, if the

contract says to do something else with the deposit money, then the terms of the contract must be followed.

61. C. The Real Estate Settlement Procedures Act requires that a thorough listing of the debits and credits due a buyer and

seller be issued at the time of closing. Truth-in-Lending applies only to the borrower; it provides the borrower a disclosure

of the costs of getting a loan. The Equal Credit Opportunity Act prohibits discrimination in granting credit to people. The

Fair Credit Reporting Act regulates the collection, dissemination, and use of consumer information, including consumer

credit information.

62. A. Blockbusting is the attempt to get a homeowner to sell property by suggesting an influx of minorities into the

neighborhood. Steering is directing buyers to certain neighborhoods because of race, religion, color, gender, etc. Redlining

is a banker or insurance company discriminating based on a person’s race, religion, etc.

63. A. The listing broker can give advice only on marketing the property. A property stager would be needed only if the

property was not ready for marketing. A potential buyer would not be helpful at this point since the owner has not gotten


short sale approval from the bank. If the owners sell on a short sale there may be tax consequences to deal with, this is why

the owner should consult an accountant/attorney.

64. B. A contract in which the parties show their intentions by conduct is an implied contract; intention is shown by words

in an expressed contract. Promises are exchanged in a bilateral contract. Something remains to be performed in an

executory contract.

65. B. First, divide the property’s sale price by 1,000: $350,000 / 1,000 = 350. Multiplying 350 by $2.00 results in a

conveyance fee of $700.

66. B. Avulsion is the sudden tearing away of land by action of nature while erosion is the gradual wearing away of land

by natural forces of water and wind.

67. A. Emission inventory is a listing, by source, of the amount of air pollutants discharged into the atmosphere of a

community. It is used to establish emission standards. Emission factor is the relationship between the amount of pollution

produced and the amount of raw material processed. An emission cap is a limit designed to prevent projected growth in

emissions from existing and future stationary sources from eroding any mandated reductions. Emission is pollution

discharged into the atmosphere from smokestacks, other vents, and surface areas of commercial or industrial facilities.

68. A. First, figure out how many days have passed in 2010; January, 31; February, 28; March, 31; April, 30. The total is

31 + 28 + 31 + 30 = 120 days. 120 days / 365 days in a year = 32.8767% of the year. 32.8767% of $1,575 is: $1,575 X

0.328767 = $517.808. Rounded to the nearest cent, the seller’s share of taxes is $517.81.

69. D. The EPA has the power to apply all of these sanctions.

70. B. Sex, race, and familial status are protected classes under federal fair housing laws.

71. D. An unenforceable contract is one where the law will not enforce the agreement when a court cannot determine what

the agreement was. A void contract is automatic because the contract was illegal, or impossible. A valid contract is one

that the law would enforce. A voidable contract can be disaffirmed by the party who lacked the capacity to enter into the

contract.

72. D. The lush grass just in one spot of the yard should be a red flag to the real estate agent. If the septic tank leaks or is

overfull, it causes fertile spots on the lawn. The agent cannot determine why the grass is much greener, which is why he

should recommend a well and septic inspection.

73. C. The Sherman Antitrust Act also provides for a maximum $1,000,000 fine

74. B. Where the property is located alone can contribute value to the property regardless of size, style, or function.

75. B. Only the exclusive right to sell listing agreement entitles a broker to a commission, no matter who brings the buyer.

76. D. Only a broker can decide to reduce the rate of commission that he charges. The salesperson does not have the

authority to take the listing at the reduced rate unless the broker allowed it.

77. B. While drapes are personal property and need to be specifically written into the contract, the hardware on which the

drapes are hung is a fixture. The dishwasher is built in, the sump pump is attached through a hole in the floor, and the

swimming pool is in the ground. Therefore, all these are affixed and are real property.

78. B. The withdrawals must be used for down payments on their homes.

79. D. Severalty is ownership by one person or entity. Joint tenancy is co-ownership with the right of survivorship, while

tenancy in common is co-ownership without the right of survivorship. Absolute ownership describes title, not co-

ownership.

80. C. This is a three part calculation. First, convert the measurements to the same unit: 60 yards = 180 feet (60X3) and 6

inches = 0.50 feet (6/12). Next, multiply these numbers together to get the cubic feet: 180 X 320 X 0.50 = 28,800 cubic

feet. Since the price for blacktop is priced per cubic yard, you will then need to convert the cubic feet to cubic yards by

dividing by 27: 28,800/27 = 1,066.6666 cubic yards. Finally, multiply the cubic yards by the price per cubic yard to get

the total cost to replace the playground: 1,066.6666 X $115 = $122,666.65. Rounded, it will cost $122,667 to replace the

playground.

National Content Outline for Salesperson and Broker

This outline examines that 80 question National portion of the Nevada licensing exam wherein the breakdown provides a

resource reference within the course materials as to where each item can be further reviewed. Some courses options include

the Modern Real Estate Practice reference textbook (MREP) for additional reference, some course options do not. All

course options include the National Workbook wherein every items is defined within the workbook.

l. Real Property Characteristics, Legal Descriptions, and Property Use (Sales 8; Broker 8)


A. Real Property vs. personal property

1. Fixtures – National Workbook pg 5, Trade Fixtures – National Workbook pg 8, Emblements –

National Workbook pgs 5, 7, (MREP pgs 22, 23, 24, 27)

2. Attachment – National Workbook pg 8, Severance – National Workbook pg 7, Bill of sale – National

Workbook pg 5, (MREP pgs 21, 22, 23)

B. Characteristics of Real Property

1. Economic Characteristics – National Wkbook pg 75, (MREP pgs 24, 25, 27)

2. Physical Characteristics – National Wkbook pg 74, (MREP pgs 25, 26, 27)

C. Legal Descriptions

1. Methods Used to Describe Real Property – National Workbook pgs 24, 25, (MREP pgs 85-92, 96)

2. Survey- National Workbook pg 8, (MREP pgs 93, 94, 96)

D. Public and Private Land Use Controls – Encumbrances

1. Public Controls – Governmental Powers

a. Police Power, Eminent Domain, Taxation, Escheat – National Workbook pgs 12, 13, (MREP

pgs 60, 61, 62)

b. Zoning Ordinances – National Workbook pg 12, (MREP pgs 391-394, 399)

2. Private Controls, restrictions, and Encroachments

a. Covenants, Conditions, and Restrictions – National Workbook pg 13, (MREP pgs 397, 400)

b. Easements – National Workbook pgs 23, 24, (MREP pgs 56-59)

c. Licenses – National Workbook pgs 7, 8, Encroachments – National Workbook pg 8, (MREP

pg 59)

ll. Forms of ownership, Transfer, and Recording of Title (Sales 7; Broker 7)

A. Ownership, estates, rights, and interests

1. Forms of ownership – National Workbook pgs 13, 14, (MREP pgs 68-79)

2. Freehold estate – National Workbook pg 11, (MREP pgs 52, 62)

a. Fee simple absolute – National Workbook pg 11, (MREP pgs 53, 62)

b. Fee simple defeasible, determinable, and condition subsequent – National Workbook pg 11,

(MREP pgs 53, 54, 62)

c. Life estate – National Workbook pg 11, (MREP pgs 54, 55)

d. Bundle of rights – National Workbook pg 5, (MREP pgs 17, 18)

3. Leasehold estates and types of leases (MREP pgs 53, 350)

a. Estate for years and from period to period – National Workbook pg 22, (MREP 351, 362)

b. Estate at will and estate at sufferance – National Workbook pg 22, (MREP pgs 352, 353, 362)

c. Gross, net, and percentage leases – National Workbook pgs 22, 23, (MREP pgs 357, 362, 471)

4. Liens and lien priority – National Workbook pgs 16, 25, (MREP pgs 222-231)

5. Surface and subsurface rights – National Workbook pg 5, (MREP pgs 18, 19, 94, 96)

B. Deed, title, transfer of title, and recording of title

1. Elements of a valid deed – National Workbook pgs 6, 7, (MREP pgs 102-105)

2. Types of deeds – National Workbook pgs 5, 6, (MREP pgs 106, 109, 115)

3. Title transfer

a. Voluntary alienation- National Workbook pgs 5, 6, (MREP pgs 102, 115)

b. Involuntary alienation- National Workbook pgs 12, 13, 16, 17, (MREP pgs 110, 111, 115)

4. Recording the title

a. Constructive notice – National Workbook pg 5, (MREP pg 121), actual notice (MREP pg 126)

b. Title abstract and chain of title – National Workbook pg 6, (MREP pgs 122, 126)

c. Marketable title- National Workbook pg 6, (MREP pgs 123, 126) and cloud on title – National

Workbook pg 6, (MREP pgs 59, 108, 122, 126)

d. Attorney title opinion – National Workbook pg 6, (MREP pg 124) quiet title lawsuit (MREP pgs

122, 126) and title insurance (MREP pgs 124-126)

III. Property value and Appraisal (Sales 7; Broker 7)

A. Concept of Value

1. Market value vs. market price – National Workbook pg 75, (MREP pgs 300, 311)

2. Characteristics of value – National Workbook pg 75, (MREP pgs 300, 310)

3. Principles of value – National Workbook pg 76, (MREP pgs 301-303, 310, 311)


B. Appraisal process

1. Purpose and steps to an appraisal – National Workbook pg 76, (MREP pgs 2, 11, 292-300)

2. Federal oversight of the appraisal process – National Workbook pg 75, (MREP pgs 290, 291)

C. Methods of estimating value and Broker price opinions (BPO)

1. Sales comparison approach- National Workbook pg 79, (market data) (MREP pgs 303-305, 311)

2. Cost approach – National Workbook pg 80, (MREP pgs 304-307, 311)

a. Improvements and depreciation- National Workbook pg 80, (MREP pgs 304, 305)

b. Physical deterioration, functional, and economic obsolescence – National Workbook pg 80,

(MREP pgs 306, 307)

c. Reproduction or replacement costs – National Workbook pg 80, (MREP pgs 257, 306)

3. Income approach – National Workbook pg 81, (MREP pgs 307, 308, 311)

4. Gross rent and gross income multipliers – National Workbook pg 81, (MREP pg 309)

5. Comparative Market Analysis (CMA) – National Workbook pg 79, (MREP pg 291)

6. Broker Price Opinion (BPO) (MREP pg 292)

7. Assessed value and tax implications – National Workbook pgs 12, 55, (MREP pgs 225-228, 231)

IV. Real Estate Contracts and Agency (Sales 16; Broker 16)

A. Types of contracts

1. Express vs. implied – National Workbook pg 50, (MREP pgs 202, 215)

2. Unilateral vs. bilateral – National Workbook pgs 50, 51, (MREP pgs 203, 215)

B. Required elements of a valid contract – National Workbook pg 50, (MREP pgs 204, 205, 215)

C. Contract performance

1. Executed vs. executor – National Workbook pg 51, (MREP pgs 203, 215)

2. Valid vs. void – National Workbook pg 50, (MREP pgs 205, 215)

3. Voidable vs. unenforceable – National Workbook pg 50, (MREP pgs 205, 206, 215)

4. Breach of contract, rescission, and termination – National Workbook pg 51, (MREP pgs 207, 208)

5. Liquidated – National Workbook pg 51, (MREP pg 211) punitive, or compensatory damages (MREP pgs

207, 215)

6. Statute of Frauds – National Workbook pg 50, (MREP pgs 350, 361)

7. Time is of the essence – National Workbook pg 47, (MREP pg 206)

D. Sales contract

1. Offer and counteroffer – National Workbook pg 46, (MREP pgs 209, 210)

2. Earnest money and liquidated damages – National Workbook pg 46, 51, (MREP pgs 210, 211, 216)

3. Equitable title – National Workbook pg 46, (MREP pg 211)

4. Contingencies (MREP pgs 212, 213, 216)

5. Disputes and breach of contract – National Workbook pg 51, (MREP pg 207)

6. Option contract and installment sales contract – National Workbook pg 46, (MREP pgs 214, 216)

E. Types of agency – National Workbook pgs 41-43, (MREP pgs 158, 159) and licensee-client relationships

(MREP pgs 152-154, 169)

F. Creation – National Workbook pgs 43, 45, (MREP pgs 154, 155) and termination of agency (MREP pg 165)

G. Licensee obligations to parties of a transaction – National Workbook pg 42, (MREP pgs 156-159)

V. Real Estate Practice (Sales 18; Broker 18)

A. Responsibility of broker

1. Practicing within scope of expertise – National Workbook pg 49

2. Unauthorized practice of law – National Workbook pg 49

3. Privacy and Do Not Contact – National Workbook pg 49, (MREP pgs 144, 145)

B. Brokerage agreements between the broker and principal (seller, buyer, landlord, or tenant)

1. Seller representation – Types of listings

a. Exclusive right-to-sell and exclusive agency listing – National Workbook pg 45,

(MREP pgs 176, 177)

b. Non-exclusive or open listing – National Workbook pg 45, (MREP pg 177)

c. Net listing (conflict of interest) – National Workbook pg 45, (MREP pg 177)

d. Multiple listing service (MLS) – National Work book pg 46, (MREP pg 177)

2. Buyer representation – National Workbook pgs 41, 42, 47, (MREP pgs 162, 163, 170, 189-194, 196)

3. Property management agreement – National Workbook pg 23, (MREP pgs 370, 384)


a. Accounting for funds – National Workbook pg 23, (MREP pgs 372, 373)

a. Property maintenance – National Workbook pg 23, (MREP pgs 377, 378)

b. Leasing property – National Workbook pg 23, (MREP pgs 374-376)

c. Collecting rents and security deposit – National Workbook pg 23, (MREP pgs 375, 376)

4. Termination of agreements – National Workbook pg 45, (MREP pgs 165, 178, 179)

5. Services, fees, and compensation – National Workbook pg 47, (MREP pgs 155, 156, 371)

C. Fair Housing

1. Equal opportunity in housing (MREP pgs 32, 44)

2. Protected classes – National Workbook pg 53, (MREP pgs 34-37)

3. Fair housing laws – National Workbook pgs 53, 54, (MREP pgs 32-39, 381)

4. Illegal practices, enforcement, and penalties – National Workbook pgs 53, 54, (MREP pgs 34, 39-44)

5. Prohibited advertising – National Workbook pg 53, (MREP pg 40)

6. Housing and Urban Development (HUD) – National Workbook pg 54, (MREP pgs 34-36, 40, 46)

7. American with Disabilities (ADA) – National Workbook pg 54, (MREP pgs 38, 39)

D. Risk management (MREP pgs 381, 385)

1. Supervision – National Workbook pg 41, (MREP pgs 134, 135)

2. Compliance (MREP pgs 379-381, 385)

3. Vicarious liability – National Workbook pg 46

4. Antitrust laws – National Workbook pg 45, (MREP pgs 140-142)

5. Fraud and misrepresentation – National Workbook pg 46, (MREP pgs 166, 170)

6. Types of insurance

a. Errors and Omissions – National Workbook pg 47, (MREP pg 156)

b. General liability (MREP 256-259, 382, 383)

VI. Property Disclosures and Environmental Issues (Sales 6; Broker 5)

A. Property conditions and environmental issues

1. Hazardous substances

a. Lead- based paint – National Workbook pg 54, (MREP pgs 406, 407, 419)

b. Asbestos (MREP pgs 404, 405, 419), radon (MREP pgs 409, 419), and mold (MREP

pgs 411, 412, 420) – National pg 75, State Workbook pgs 34, 35

c. Groundwater contamination and underground storage tanks – State Workbook pg 35, (MREP pgs 413,

420)

d. Waste disposal sites and brown fields – State Workbook pg 35, (MREP pgs 414, 415,420)

e. Flood plain and flood insurance – State Workbook pg 36, (MREP pgs 246, 257, 382)

2. Clean Air and Water acts – State Workbook pg36, (MREP pgs 409-416)

3. Environmental Protection Agency (EPA) – State Workbook pg 36, (MREP pg 416)

a. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

– State Workbook pg 36, (MREP pgs 416, 420)

b. Superfund Amendment and Reauthorization Act (SARA) – State Workbook pg 36,

(MREP pgs 416, 417)

c. Environmental site assessments and impact statements – State Workbook pg 36,

(MREP pgs 418, 419)

d. Wetlands protection

B. Disclosure obligations and liabilities – State Workbook pg 36, (MREP pgs 417-419)

VII. Financing and Settlement (Sales 10; Broker 9)

A. Financing concepts and components

1. Methods of financing

a. Mortgage financing – conventional and non-conventional loans – National

Workbook pg 83, (MREP pgs 271, 273, 277)

b. Seller financing – land contract/contract for deed – National Workbook pgs 18, 46, (MREP pgs 214,

215)

2. Lien theory vs. title theory and deed of trust – National Workbook pgs 16, 17, (MREP pgs 108, 243-247)

3. Sources of financing (primary and secondary mortgage markets, and seller financing) – National

Workbook pg 85, (MREP pgs 267-270)

4. Types of loans and loan programs – National workbook pg 87, (MREP pgs 248-252)


5. Mortgage clauses – National workbook pgs 16, 17, (MREP pgs 245-247)

B. Lender Requirements

1. FHA requirements – National Workbook pg 83, (MREP pgs 273-277, 285)

2. VA requirements – National Workbook pg 83, (MREP pgs 274-277, 285)

3. Buyer qualification and loan to value (LTV) – National Workbook pg 83, (MREP pgs 237, 238, 270, 284)

4. Hazard and flood insurance (MREP pgs 246, 256-259, 382, 383)

5. Private mortgage insurance (PMI) and mortgage insurance premium (MIP) – National Workbook pg 83,

(MREP pgs 272, 273)

C. Federal Financing Regulations and Regulatory Bodies

1. Truth-in-lending and Regulation Z – National Workbook pg 55, (MREP pgs 280, 285)

2. TILA-RESPA Integrated Disclosures – National Workbook pgs 54,55, (MREP pgs 323-325)

a. Consumer Financial Protection Bureau (CFPB) – National Workbook pgs 54,55, (MREP pgs 324, 325,

335, 345)

b. Loan estimate (LE) – National Workbook pgs 54, 55, (MREP pgs 324, 325, 345)

c. Closing disclosure (CD) – National Workbook pgs 54, 55, (MREP pgs 329-334, 345)

3. Real Estate Settlement Procedures Act (RESPA)

a. Referrals – National Workbook pgs 54, 55, (MREP pgs 323, 335, 345)

b. Rebates

4. Equal Credit Opportunity Act (ECOA) – National Workbook pg 54, (MREP pgs 188, 281, 285, 372,

380, 385)

5. Mortgage fraud and predatory lending

D. Settlement and closing the transaction – National Workbook pg 89, (MREP pgs 319-322, 336-344)

VIII. Real Estate Math Calculations (Sales 8; Broker 10)

A. Property area calculations

1. Square footage (MREP pgs 252, 253)

2. Acreage total (MREP pg 96)

B. Property valuation

1. Comparative Market Analysis (MREP pg 291)

2. Net Operating Income (NOI) – National Workbook pg 81, (MREP pgs 307, 308, 470)

3. Capitalization Rate – National Workbook pg 81, (MREP pgs 307, 308, 470)

4. Gross rent multiplier – Broker only – National Workbook pg 81, (MREP pg 309)

5. Gross income multiplier – Broker only – National Workbook pg 81, (MREP pg 309)

6. Equity in property

7. Establishing a listing price (MREP pg 179)

8. Assessed value and property taxes (MREP pgs 226, 227)

C. Division/compensation (MREP pgs 465, 466)

D. Loan financing costs

1. Interest (MREP pgs 240, 467, 468, 475)

2. Loan to Value (LTV) (MREP pgs 270, 467)

3. Amortization (MREP pgs 250, 251, 468)

4. Discount points (MREP pgs 341, 342, 468)

5. Prepayment penalties (MREP pg 242)

6. Fees (MREP pgs 187, 371, 465)

E. Settlement and closing costs

1. Purchase price and down payment (MREP pgs 330-334)

2. Monthly mortgage calculations – principal, interest, taxes, and insurance (PITI)

(MREP pgs 237, 238, 468)

3. Net to the seller (MREP pgs 187, 466, 467)

4. Cost to buyer (MREP pgs 330-334, 343)

5. Prorated items – National Workbook pg 89, (MREP pgs 340-344, 474, 479)

6. Debits and credits – National Workbook pg 89, (MREP pgs 340, 474, 475)

7. Transfer tax and recording fee – National Workbook pg 56, (MREP pgs 109, 336, 337, 344)

F. Investment

1. Return on investment – National Workbook pg 81, (MREP pgs 470, 471)

2. Appreciation (MREP pg 427)


3. Depreciation – National Workbook pg 80, (MREP pgs 305, 306)

4. Tax implications on investment (MREP pgs 430-433)

G. Property management calculations

1. Property management and budget calculations (MREP pgs 372-375)

2. Tenancy and rental calculations (MREP 376)


Realty (Segment 1) Coursework Test Explanations

1. C. As the trustee holds title reconveyance must be executed by trustee.

2. B. Lender is called the beneficiary.

3. C. Trustor would have no recourse

4. D. Mortgagee has to file an action in court to proceed to foreclosure.

5. D. Trustee executes deed of reconveyance in a trust deed transaction when note is paid in full

6. D. Trustor has possession, trustee has the title

7. A. In a trustor / trustee situation, trustee holds naked legal title.

8. C. The best deed is the General Warranty as it gives the most promises of the grantor

9. C. Grantee's signature is not required, grantor signature is.

10. A. Deed's must include legal address.

11. D. A bill of sale transfers personal property.

12. C. The recording of a deed gives constructive notice but is not required.

13. B. Because the crop is personal property, known as emblement, he may harvest

14. C. General warranty deeds include covenants against encumbrances, of quiet enjoyment and of

further assurance.

15. D. When property goes from realty to personalty it's called severance.

16. C. Anything that enhances value may be considered an improvement.

17. D Combining occupancy to gain adverse possession is called tacking

18. D. Corporeal appurtenances are improvements that transfer with reality.

19. C. Although quitclaim deeds are considered least protective, they can transfer the interest of the

land.

20. A. Only the grantor's signature is required for a deed to be valid.

21. D. Realty is non-homogenous and not easily substituted because its non-fungible

22. C. Tree stumps laying on the ground are not attached and are not consider reality.

23. D. appurtenances may include air, sun rights or water benefits, and easements.

24. C. Realty is considered land, anything not moveable and attached or incidental to the land.

25. A. REALTOR is a registered trademark of the national association of REALTORS.

26. B. Arbitration is sought when there's a dispute between Realtors. Rule is arbitrate 1st if all parties

agree

27. B. The awnings would be fixtures because they are personalty attached in a permanent way and

they stay with the house.

28. B. All real property includes bundle of legal rights.

29. D. Permanent man made additions to reality can be considered improvements or fixtures.

30. D. Air and surface rights could be owned by John.

31. C. emblement could be fructus industriales, depending on how often were harvested

32. B. Riparian rights include rivers and streams.

33. D. Leasing the property is consider disposing.

34. D. Personal property includes chattel, personalty, something that is moveable and something

tangible.

35. D. Realty includes all of those.

36. D. Estovers deals with the right to use the wood of another to sustain life and is not a right

37. C. A tool shed is corporeal, fixtures & an improvement

38. D. The hanging lamp would be considered personal property


39. B. Allodial land system says occupy and use your land or lose it.

40. D. Permanent man made additions could be considered fixtures or improvements.

41. D. The person giving the lease is the lessor.

42. C estate for years is a type of leasehold estate.

43. C. Metes and bounds uses "point of beginning" in description.

44. C. Subdividers use lot and block description.

45. D. Bill of sale is used for personalty.

46. D fictitious persons neither own nor convey title.

47. A percentage leases in which lessor is entitled to a portion of lessees profit are commonly used

48. C. Estates in land include base fee, less than freehold, freehold and fee determinable

49. B. Tenants in common may not have to have equal percentages

50. D. Married individuals may take title as joint tenants, tenants in common, tenants in the entirety or

common property.

51. D. When decedent has no valid will, they are considered intestate.

52. B. Ownership with a condition is considered fee determinable freehold.

53. C. Leasehold estates are considered less than freehold.

54. C. Freehold estates that are determinable have a condition present.

55. D. Fee simple absolute has the highest quantum of rights.

56. D. Fee simple determinable estate is based on a event happening or not happening.

57. C. Fee simple absolute is the highest interest in realty.

58. B. Dower refers to wife's right.

59. A. Because no third person is named interest goes back to Jeff in a reversionary interest.

60. A. Jeff owning the property by himself is called severalty.

61. C. Percentages do not tend to be equal in a tenancy in common.

62. D. In a community property state all property acquired during marriage is considered mutual.

63. C. Joint tenancy requires PITT

64. B. E and F are still considered joint tenants and G would be tenant in common with them.

65. D. Rights would be considered inchoate until either spouse dies

66. A. Holographic wills are signed but not witnessed

67. B. A valid will requires witnesses.

68. C. A person who dies intestate with no heir, property goes escheat.

69. D. Testatrix is female writer of a valid will

70. C. Living person giving personal property is bequestor / legator.

71. C. A receiver of realty in a will is a devisee

72. C. Joint tenants must be two or more people and includes right of survivorship.

73. A. Tenancy in the entirety must be married.

74. A. Eminent domain must include just compensation

75. D. If owner is in jail or incompetent adverse possession is not able to be obtained.

76. D. Judge Quiets title to remove a cloud.

77. A. Recording title give constructive notice.

78. D. Title insurance policies must include a state of interest, exception legal description, and

description of policy.

79. B. Good title is synonymous with marketable title.

80. D. Satisfaction piece is issued to release mortgagees.

81. D. Persons who die intestate with no heirs property goes escheat


82. D. The power to levy taxes doesn’t come under police power nor eminent domain. Police power

regulates regulations.

83. B. Easement by necessity is allowed by law.

84. B Gross easement is used by utility companies.

85. C. Tax liens take precedence over all other liens..

86. B. Life estates can be reversionary or remainder.

87. C. Tenant is not required to pay mortgage in a net lease.

88. D. Deficiency clause is not contained in a deed, it’s in a mortgage.

89. A. Obtaining a survey determines the exact metes and bounds in realty.

90. B. Title disclosures don’t refer to a government description.

91. C. Taxes to install sidewalks are special easements.

92. B. Transfer of title occurs when title is signed and delivered.

93. C. ALTA protects lenders from grantors with bad title.

94. C. A recorded contact for deed not removed is a cloud.

95. A. The legal right to possess by ownership is a free hold estate.

96. C. Dedication is from private to public.

97. B. Ownership through a free hold estate is indefinite.

98. C. Homestead protects from unsecured debts.

99. D. *.Vendee at COE

100. A. Legal right to stay beyond the original agreement would be best in writing


Agency (Subject 2) Coursework Test Explanations

1. D. Broker has the responsibility to find a ready, willing, able buyer and complete paper

work.

2. D. Disputes should be settled through arbitration.

3. B. Economic depression doesn’t terminate listing.

4. A. Broker earns commission at meeting of the mind.

5. C. Functions of real estate broker include listing, securing listing, assisting buyer, and

arranging buyer financing

6. A. Real estate brokerage may be formed as a corporation, sole proprietor, LLC or

partnership.

7. D. Compensation real estate transaction for a fee is primary concern for brokerage.

8. A. Partnership may have two or more people. Key here is the word would

9. D. All of the above helps brokerages

10. A. Income and FICA taxes are withheld from employees.

11. A. Only brokerage that was procuring cause gets commission in an open listing.

12. B. Institutional advertising include a brokerage’s expertise.

13. D. Brokerages advertise for buyers, sellers and promotes the firms goodwill

14. A. Commission may only be received from Slim‘s broker.

15. C. Salesperson may work as independent contractor and do consulting work under Broker

Babs.

16. C. Only the brokerage who was procuring cause gets compensation in an open listing.

17. C. Earnest money must be in a trust account or as agreed by all parties.

18. C. Using money of another constitutes conversion.

19. D. Exclusive listing includes commission, usually start rate, duties, and ending date.

20. A. Exclusive right to sale is considered best listing for the brokerage.

21. C. Brokers responsibilities include FHD.

22. C. Disclosure is required as a dual agent to all parties and get consent

23. B. Deposit money must be turned over to the brokerage.

24. A. Referral fee may only be paid to brokerages.

25. B. Disclosure must be made to all parties.

26. D. Owner has the right to know the fair market price.

27. C. Obedience is of all legal requirements. Can’t discriminate.

28. C. Person employing a brokerage is a principal.

29. C. Position of trust may be described as a fiduciary relationship.

30. B. All defects must be disclosed including the well is dry.

31. C. Special agent acts in a specific transaction or series of transactions.

32. D. Commission is agreed upon between principal and brokerage.

33. D. Fiduciary representation is to anyone the brokerage is authorized to act on behalf of.

34. C. Client must agree to an open house and would be best in writing. All of the others a

brokerage must do.

35. D. Agency representation includes care, loyalty, accounting, and disclosures.

36. B. Buyers agreement provides fiduciary duty to buyer.

37. D. Broker cooperation is not required of an agent to his principal.

38. C. Performing one act is a special agency.


39. A. Vendor has legal title in a land contract until the vendee pays in full

40. A. Exclusive right to sell contract is bilateral and executory until COE

41. C. Statue of frauds says what contracts must be in writing in order to go to court

42. B. Complete substitution is novation.

43. C. An option gives a right within specific period of time.

44. D. All contracts don’t have to be in writing. Example lease for a year

45. D. Offers should include amount of time for consideration.

46. B. Broker found a ready, willing, and able buyer therefore earning commission. To collect,

the broker may have to sue

47. A. Any change to original offer is a counter offer.

48. B. Upon signing a contract equitable interest is passed to buyer.

49. B. An option gives the right to purchase realty within a specific time.

50. D. Consideration could be money promises, services and love

51. B contracts for less than a year do not have to be in writing such as a lease

52 D. Time is of the essence means be professional and get it done.

53. A Owner is future vendor.

54. D Buyer cannot be vendor.

55. B death does not cancel a contract.

56. C when situation returns to original state it’s called rescission.

57. B. Court decisions can be for specific performance or damages.

58. A. A novation is the complete substitution of a contractual obligation that is legal

59. B. Because Baker is bound, but smith is not, contract is unilateral.

60. C Menace is to threaten

61. B because there has not been COE contract is executory & unilateral because Bobby Joe

hasn’t agreed yet.

62. C. Leases can be used for land or any realty and still not have to be in writing for agreement

for less than a year. Contracts for land must be in writing to be enforceable

63. D offers must be in writing to be enforceable if a dispute arises.

64. C. Death does not terminate a contract, Paul’s heirs may complete

65. D. When it was communicated back to holly that offer was accepted. It was meeting of the

minds therefore a valid contract when Tom & Holly agree in writing.

66. B. Promises must be in writing to be enforceable, per parole evidence rule

67.*D. Greg is only taking offers and therefore can reject unless it was absolute auction

68. C contract does not exist until meeting of the minds.

69. B promise is illusionary because it states " acceptable financing" determinable only by him.

No contracts should have TBD

70. B unilateral contracts are based upon completion of an act, making it a contract.

71. A contracts must be legal to be valid.

72. D there is no such thing as a irrevocable offer.

73. C. Original offer becomes void after counteroffer is presented and original offeror is now

offeree & vice versa

74. C. Money valuables and services are consideration. Consideration is not based upon a

specific amount.

75. C. As agreement is signed by both parties and includes legal description, both parties have

enforceable rights.


76. D. Minors contracts’ are always voidable by minor.

77. D death does not terminate a contract.

78. C contracts entered into by a minor are voidable.

79. D. contract is always terminated by completion, if contract with minor it may be

terminated, if there was a tornado that destroyed the property.

80. A upon meeting of the minds buyer has equitable interest.

81. B intoxicated persons may void a contract.

82. C implied contracts are created by actions.

83. B. Death of salespeople does not terminate a valid contract.

84. D. All are valid contingencies

85. D contracts don’t transfer, deeds do

86. B Broker is always primary agent.

87. A Salesperson may be special or general agent to broker, as stated in brokerage contract.

88. A Brokerage/ broker always receives the compensation.

89. C. General agents do more than one thing. E.G., residential commercial and property

management.

90. B Even before duties owed is signed real estate agent must be fair honest and disclose all

material facts

91. B Agent owes fiduciary responsibility before duties owed is signed.

92. C. Expressed relationships occur after written or verbal agreement.

93. B Agency coupled with an interest cannot be broken, as broker has financial interest in

property.

94. B MLS listing is not a type of listing.

95. B. Set commission rates are illegal. Sherman Anti-trust law

96. B Vendee holds equitable title.

97. C The note evidences the debt. The mortgage is the lien

98. C Defects can be either patent or latent, depending on whether or not they can be seen.

99. A Duress may render a contract voidable.

100. C. Court decision stating who receives realty is specific performance.


Finance (Subject 3) Coursework Test Explanations

1. C. Depreciation is the decrease in value of owner occupied realty.

2. D. Appraisers determine the market value.

3. B. Appraisers are educated people giving educated opinions.

4. B. Price is determined by real estate agent through CMA.

5. B. When supply is high always buy lowest price on identical properties

6 .D. When supply is low and demand is high prices increase

7. A. Cost approach is used with singular use buildings because they will have to be torn down

or major renovation

8. B. Economic obsolescence deals with location, zoning is based on properties location

9. C. Economic obsolescence is locational and does not deal with interior.

10. A. Only improvements to land can be depreciated, land itself is not depreciable.

11. D. LATT, location amenities, time of sale, and terms of sale are adjustments made in

market data approach.

12. B. Single family residences are appraised using market data approach.

13. D . Deducting vacancy and rent loss are steps in effective gross income formula.

14. D . Income approach for single family homes is calculated by gross rent multiplier.

15. A .60,000 divided by 500

16. C. Primary income is calculated outside the boundaries of a community.

17. D. Deducting loss from vacancy and collections are used in effective gross income formula.

18. A . Determining gross income then effective gross income followed by operating expenses

and net income are steps in estimating value.

19. C. Economic obsolescence is locational.

20. B. Old plumbing fixtures could be updated and are therefore curable functional

obsolescence.

21. A. Elementary school closing causes loss in value based upon location of home nearby.

22. C. Net income divided by cap rate equals value.

23. A. Highest and best use means makes most money.

24. B. The rate of return on, of and above investment and the risks are factors in determining

cap rate.

25. D. Location, amenities time of sale and term of sale are all used in market data appraisal.

26. B. Lower cap rate equals higher value..

27. D. Market price is what someone was willing to pay. All of the others an appraiser uses

28. D. All are used

29. A. Higher cap rate, lower value.

30. B. Tax shelters are not considered in an appraisal.

31. B. Gross rate multiplier gives value of realty now.

32. C. Appraisal is an educated opinion, not a certification.

33. C. Comparable homes should be from last six months.

34. B. Appraiser uses term of sale, amenities, conditions and other comparable properties

35. B. Rent may not be considered building a home for cost.

36. B. Educated buyer/ seller gives market value.

37. C. Functional obsolescence could do with design.

38. B. Economical or locational depreciation is incurable.


39. C. Theoretical life means remaining economical life.

40. B. When assemblage causes increase in value it becomes plottage.

41. A. Value and worth are synonymous terms.

42. D. Original cost has less of an effect than the others.

43. A. Improvements are calculated as costs.

44. A. In commercial use location is most important.

45. B Fertility is important in growing crops

46. A. Interest deduction is not part of net income formula.

47. B. Because a post office is singular it is worth less.

48. B 36,000 divided by 12%

49. B 15,000 divided by 8%

50. D. Cost and value would be equal in most cases, if scarcity demand and utility represent

highest and best use.

51. B. Square footage is calculated based on perimeter measurement.

52. A. Lack of air conditioning is considered functional obsolescence.

53. C. Wear and tear are normal therefore are not considered obsolete but physical curable

54. B. Statement represents concentric growth.

55. B. External depreciation deals with exterior defects that you can’t control.

56. D. Appraisals include all stated facts.

57. D. Having the best home in the neighborhood is example of regression.

58. A. Having lowest price home in neighborhood is example of progression.

59. D. Reconciliation is the correlation of the approaches.

60. C This is tax write-off and has nothing to do with current value

61. B 24,000 divided by 300,000

62. A. Cap rate is used to determine value..

63. B. Market value represents current worth of future benefits.

64. C. Accurate measurement of depreciation from all forms is difficult in older properties.

65. A Income approach tells you current value

66. D. Cap rate is used to determine rate of return

67. B $20,000 divided by 9%

68. D. All banks are regulated by the federal reserve system.

69. B. FHA is insured by HUD against default by borrower for the lenders benefit

70. C. To tighten money supply FRS would raise reserve requirements and discount rates.

71. D. There is no limit to discount points under FHA.

72. B. Purchaser must pay any amount above CRV in the sales price on a VA loan.

73. B. Acceleration clause states borrower forced to pay full balance of loan upon default.

74. C. Lender is beneficiary in trust deed financing.

75. A. Lender may not review credit of original borrower in a due on sale clause.

76. D. Vacancy and bad checks are deducted in determining gross income.

77. C. FNMA buys FHA, VA and Conventional Conforming loans.

78. D. A promissory note is a promise to pay a sum of money to another

79. D. Promissory note is evidence of debt, a negotiable instrument and a promise to repay loan

amount.

80. B. Mortgages are used in lien theory states.

81. C. Mortgagor is borrower/owner with lien


82. C. All statements describe conventional loans.

83. D. HUD insures against loss in FHA loans.

84. D. All statements describe a FHA loan.

85. A. VA requires little or no down payment.

86. B. Mortgage covering 2 or more properties is a blanket loan.

87. C. Realty and personalty combined in a loan is a package loan.

88. C. Graduated payments increase over life of loan.

89. D. Sources of mortgages are savings and loans. Pension funds, commercial banks and

private parties.

90. C. FNMA can do 203K loans.

91. C. FNMA and GNMA participate in tandem plan.

92. D. Borrower needs are not important in processing loan applications.

93. D. Borrower is required to find a lender willing to make the FHA loan and the other two.

94. B. Mortgage covering 2 or more lots is a blanket loan.

95. A. Judicial foreclosure results from lender suing borrower in court.

96. B. Liddy may be entitled to deficiency judgement.

97. C. The note states the loan amount and terms of the loan.

98. B Appreciation is simply selling above what you paid

99. B What you pay is the only issue for IRS

100. C. Senior lien holder gets paid before junior lien holder therefore junior is at higher risk.


National Mock Exam #15 Explanations

1. C. Mr. Davis may be the dominant tenement allowing him the use of Mr. Augustine’s land (servient

tenement).

2. B. A bilateral contract is two binding promises from the offer and acceptance.

3. D. Different deeds include different warranties.

4. C. A lien is always tied to an unpaid debt. When the debt is paid, the encumbrance should be removed from

title.

5. D. An offeror may withdraw the offer any time prior to acceptance.

6. D. A counter offer is a novation.

7. D. Melbin would be the life tenant. Upon his death, title would go to Larson, a remainder interest.

8. A. Property taxes are a statutory lien on the property.

9. B. Johnson is a life tenant or an estate at will. Clark is a tenant with no ownership rights.

10. B. When any unity of a joint tenancy is broken, the ownership changes to a tenant in common.

11. C. The dominant tenement is the parcel that benefits from the easement.

12. D. The bricks are not attached.

13. D. When any one unity of a joint tenancy is broken, the relationship changes to a tenant in common.

14. D. A determinable fee estate includes a condition on title.

15. D. There is now a meeting of the minds.

16. A. If the overhang has been in place for the prescribed period of time, an easement by prescription may be

created.

17. C. The owner may sell the property and not owe the broker a commission with an exclusive agency listing.

18. A. A restriction may limit the use an owner has on his own property.

19. A. A lease will terminate upon a life tenant’s death.

20. D. A tenancy in common will include the right to partition for each owner.

21. D. The mortgagor is the borrower.

22. B. A novation is a new deal.

23. D. This is a novation of the parties.

24. D. A mechanics lien is a specific lien.

25. D. These are all remedies for default.

26. C. A special agent is authorized to do a single act or transaction.

27. D. The seller and agent intentionally withheld a material fact. This is fraud.

28. D. All commissions are negotiable.

29. C. The agent needs written consent from all parties.

30. A. The listing brokerage would cooperate with the selling brokerage.

31. A. The independent contractor would pay their own income tax.

32. B. Brokers are to supervise the activities of their agents.

33. A. The broker must use honest dealings.

34. D. The broker is the agent of the seller.

35. B. Baker was the agent for the buyer.

36. C. The earnest money may need to be returned to the client should the deal terminate.

37. D. The broker has one business day from acceptance of the offer to deposit the earnest money.

38. B. The broker that is the procuring cause of the sale will earn commission.

39. C. $82,000 x 7% = $5740 x 35% =

40. A. $4100 - $600 = $3500/35% =

41. D. Redlining is the illegal practice of a lender denying loans for certain areas.

42. D. A property manager manages real estate for another.

43. C. Age and sex were added later.

44. A. Also known as panic selling.

45. B. These are all protected classes.

46. B. RESPA governs closing costs.

47. B. The law exempts up to a four unit owner occupied dwelling.

48. A. $90,000 x 70% = $63,000/100 = $630 x $2.90 = $1827/12 =

49. D. Agency is with the brokerage.

50. C. The agency will terminate because the client was declared insane.

51. C. The current listing terminated by the death of the broker.


52. D. A deed conveys real property.

53. D. All of the choices would breach the agent’s fiduciary duties to the client.

54. B. Land cannot be depreciated.

55. B. Peeling paint would be physical.

56. B. The lower the risk the higher the value. The higher the risk the lower the value.

57. C. $54,000 x 14% = $7560 + $54,000 =

58. D. $7200 x 12 = $86,400/12% =

59. C. The cost is more than economically feasible and would cause a decreasing return.

60. B. This is a poor design.

61. D. All are cost effective to fix or curable.

62. C. Zoning is an external problem and incurable.

63. B. $40,000 - $10,000 = $30,000/12% =

64. A. $52,000/$400 =

65. C. The capitalization rate is the expected rate of return by an investor.

66. C. The appraiser would estimate the reproduction or replacement cost of the building.

67. B. The cost approach is primarily used for new or special use buildings. School, church

68. D. These are all steps to the appraisal process.

69. B. Growth develops along major transportation outlets.

70. D. Industry causes benefits and detriments to a community.

71. D. Industry brings benefits and detriments to a community.

72. C. Capitalization is the rate of return on an investment.

73. C. One bathroom is a poor design. Functional.

74. D. External is outside factors and functional is poor design.

75. B. The appraiser would estimate the replacement cost of the building.

76. D. Locational is always incurable. Physical may be curable.

77. D. All three are part of the valuation process.

78. B. Each discount point is 1% of loan amount.

79. D. The secondary market is a market for the purchase and sale of existing mortgages.

80. D. The FHA down payment can be as low as 3.5%.

81. A. Each point is 1% of loan amount.

82. C. A subordination agreement changes the priority of lien holders.

83. D. The loan includes a fluctuating interest rate.

84. D. Regulation Z governs residential.

85. D. A mortgage is a voluntary lien.

86. B. The insurance is to protect the lender not the borrower.

87. C. The lender will only finance the value, not the asking price.

88. B. The loan is from an approved lender that meets FHA regulations.

89. D. FHA insures loans and rates are set by the lender.

90. D. Anyone can pay discount points. A point = 1% x loan amount.

91. A. FNMA is part of the secondary market.

92. C. When the discount rate rises, interest rates of all types will increase.

93. D. All are covered by Regulation Z.

94. C. The Federal Reserve creates a good economic environment, but does not supervise the federal

government.

95. A. Conventional loans are based on the amount of risk a borrower will bring.

96. C. The quit claim deed contains no warranties.

97. B. An estate for years is a lease. A life estate will end upon the death of the life tenant. The base fee has a

condition on ownership.

98. B. Both are ownership.

99. D. All will transfer ownership.

100. D. Adverse possession will also include continuous use of another’s land.

101. C. Not all encumbrances are liens.

102. D. A devisee receives real property by will.

103. D. The allodial system is land owned free and clear, but subject to government restrictions.

104. D. All are included plus quantity a person has in real property.

105. B. Fee simple is the highest form of ownership.


106. D. Private ownership is subject to government restrictions.

107. D. All are alternatives.

108. D. A determinable fee estate has a condition on ownership.

109. C. The new furnace is part of the real property.

110. B. The life tenant may choose to convey the property.

111. D. The future ownership interest is predetermined.

112. A. An estate for years is a lease.

113. D. Inheritance taxes are a general lien.

114. B. The owner has the right to ingress and egress.

115. C. An encroachment is an illegal intrusion on the land of another.

116. C. The property should be in the condition that it was in when the contract was signed.

117. D. Also included is the covenant of quiet enjoyment.

118. C. The grantor is the owner and has the right to convey title.

119. D. The grantor must sign the deed.

120. A. Estovers is the right of the tenant to use the wood of an owner.

121. D. The principal must be competent to have a valid contract.

122. D. All are forms of consideration, including goods and services.

123. D. The contract is complete.

124. B. The contract has only one promise at this point.

125. B. A void contract has no legal effect.

126. D. All may void a contract.

127. B. Implied contracts are by actions.

128. B. The optionor is usually the owner.

129. C. Deed restrictions are private restrictions.

130. B. The company was previously standing on nonconforming use.

131. A. A listing may terminate if the property is materially destroyed.

132. A. Commissions earned by the broker but not paid by the client is a civil matter.

133. D. The broker will receive an amount over a set price as commission.

134. C. 473,000 x 6% = $4380 x 25% =

135. C. The listing broker will earn commission no matter who sells the property.

136. A. The seller is the client with a listing.

137. C. Quigley is Spark’s agent.

138. C. An agent should not give legal advice.

139. D. All may be clients.

140. C. New agencies must be established with Nora.

141. B. The owner owes both a commission. Brock was the procuring cause and Gibbs has an exclusive right to

sell listing.

142. D. All may be a cause for earned commission.

143. C. A salesperson represents their employing broker.

144. B. The MLS offers cooperation between brokerages.

145. C. There is no offer and acceptance.

146. B. The broker owes his client loyalty.

147. C. An estate at will, will terminate by death.

148. C. The tenant will pay taxes, insurance, utilities and repairs.

149. A. 4.5 acres x 43,560 square feet = 196,020 + 6000 =

150. B. $86,576 x 8.5% = $7358.96/12 = $613.24

$852.56 - $613.24 =


National Match Maker Answer Key

1/1 1/2 1/3 1/4 2/1 2/2 2/3 2/4 3/1 3/2 3/3 3/4

1 J T L R Z O F L R P M J 2 N W I A O Q H I T S V N 3 Q P N Q S J K Q W H Y V 4 T M O K V A N D Z V Z Y 5 W X R V Q S Q R M Y B R 6 M A C J I V A F Y L X A 7 A K S I C F S A A U R T 8 R N A H Y E C C X A F Z 9 C F E S K Y X B D Z D D 10 U Q G X X B I P U R S X 11 B B T G F L E H O D A F 12 E S B F U W W O B N C B 13 D H U E B C L S G B T U 14 F C P W H H T Z J F W G 15 I I H L W X J Y V X U H 16 G L V M M I G T Q J I L 17 X J M D J M O X L E G M 18 L E Q C R D M V C G H W 19 Y D J N N K R W C T K C 20 O R X B L R P K I L O 21 H Y Y O E N V E Q Q I 22 P U Z T D T D I O N P 23 K Z D P P G B F K O K 24 S V F U T P U P M P Q 25 V O G Z H C J S 26 G A U N W E E 27 S


REALTY Practice Exam Answers and Explanations

1 A cost of an object has no consideration when determining real or personal property

2 A there are two kinds of Freehold estates Fee simple and Life estate. Fee simple estates include

“fee simple absolute” and “fee simple determinable”

3 B the remainder of the estate goes to her children. It could not be a reversion because it would go

back to whoever willed it to her; since her children are not dead they could not have willed it to her

4 D highest and best ownership can do everything but must comply with government restrictions

5 C dower and curtsey rights are for non-community property states

6 B all are leasehold estates

7 A severalty – think “sever” not several

8 C P.I.T.T. has to occur simultaneously in Joint Tenants

9 C right of survivorship means cannot will others on title

10 A co-operatives do not involve deeds but shares of stock in a corporation

11 D all must be disclosed to buyer

12 A co-operatives do not involve deeds but shares of stock in a corporation that owns the building.

Owners get a proprietary lease for their apartment

13 C in joint tenancy an owner may sell their share and the new owner becomes a tenant in common

with the other owners, but a joint tenant cannot will their portion, it gets divided amongst the other

owners

14 B owners must be married, cannot partition or convey realty without both signatures

15 D a leasehold estate is less than freehold where the Lessor (owner) has ownership but the lessee

has possession (from owner’s bundle of rights)

16 B an estate for years may be less than one year

17 C automatically renews period for equal period terminated by either party w/1 period notice

18 D tenant is a hold over tenant

19 C crops are emblements and thus personal property


20 C existing easements may be assigned from one owner to the next not created by assignment

21 D appurtenant easement remains with the land it is attached to

22 D an assessment is an imposed charge or tax

23 B an easement is a right with land ownership and will transfer with the land

24 A license is a temporary privilege

25 B eminent domain is the right used by government to acquire privately held land for betterment of

the community

26 D encumbrances affect the deed

27 C specific liens are attached to a particular property because of their relationship to it. An income

tax lien would be against all of the person’s property

28 A liens are prioritized by date of recording, although state property tax takes priority

29 D Property tax is against the specific property and takes precedent

30 B injunction (the legal action) for nuisance

31 C when one party owns both parcels there is no longer a need for an easement

32 B easements allow usage of land a profit is a right to take the soil, mineral, or products of the land

33 D a profit (profit a prendre) is an interest in the land created by grant or prescription

34 B a license is a privilege not a right

35 D eminent domain is a government right

36 A eminent domain is the right - condemnation is the act of taking the land

37 B no will, no heirs, state takes property through escheat

38 B the purpose of police power is to protect the public

39 B no will, no heirs, state takes property through escheat

40 B a lien against a specific property is a specific lien

41 B riparian rights involve rivers and streams


42 A think appropriated prior to the fact

43 B alienation is the transfer of property; a will is the only voluntary method on the list

44 C will and devise you’re already dead, foreclosure is not voluntary

45 C testate involves a will - devise is to give real property through a will

46 D grantee must acknowledge the deed

47 D recording makes the document of public record, giving constructive notice to the world

48 D general warranty deeds has grantee promising validity of title all the way back to the root

49 C in covenant of seisin grantor warrants that he owns the estate he intends to convey

50 A the quit claim deed provides no warranties

51 A acknowledgment is to verify the signature is genuine and of their own free will

52 D special warranty deed offers assurances for the period the property was owned by the person

issuing the deed

53 C trustee reconveys the property back to trustor through deed of reconveyance

54 A grantee must accept the properly executed deed

55 C adding consecutive time periods together to meet the required prescribed period

56 B special warranty deeds the grantor promises the deed is valid for the time she has owned it

57 B this insurance protects the lender when the property is used as collateral

58 C each link represents a transfer

59 D a legal system for the registration of land

60 B licensees should not need title insurance

61 A insures title against defects up to the time the title is acquired in this transaction.

62 A devise is to give land in a will, wills are voluntary although the death may not have been

63 A section = 640 acres 1/4 section = 160 acres 1/4 of quarter section = 40 acres


64 A deeds are recorded in the county in which the property is located to give constructive notice to

the world

65 A lessee transfers entire interest in lease without reversion - assignment with reversion sublet

66 B estate for years has a specified end date and no other termination notice is necessary

67 C a holdover tenant has few rights and is a tenant at sufferance

68 C estate at sufferance

69 B all leases over one year must be in writing to be enforceable

70 A an estate for years has a predefined end date and does not have to be a year or more long

71 B the right of an owner or lessor in possession of the land, a lease gives legal possession of the

land

72 A a fixed lease has set rates which cannot be raised, thus if expenses increase dramatically a fixed

lease is beneficial

73 D leases transfer with ownership

74 C a period to period lease requires that all people upon disposition of the realty honor the

remaining lease period unless the owner had an estate for life.

75 C a tenant, who vacates leased property, no longer intending to perform under the terms of the

lease, is abandoning the property

76 A escalator clause in a lease provides for increases due to increased costs of lessor

77 B constructive eviction is when the lessee makes the living conditions uninhabitable, thereby

forcing the tenant to leave (eviction)

78 A usually retail (malls) tenants can be located in higher or lower traffic areas therefore lessor has

some input to sales

79 B a lease does not provide ownership

80 A at the end of a lease the property reverts back to the lessor


AGENCY Practice Test Answers and Explanations

1 B This indicates a meeting of the minds

2 A A lease for one year or less that can be fully performed within one year can be oral

3 C In a cases of ambiguity, contracts of adhesion are interpreted against the party drafting it

4 A Because of the undisclosed agency, the seller can withdraw without obligation, and the broker

could be subject to disciplinary action. The seller would also be entitled to the return of any

commission paid.

5 C It is a completed transaction

6 C Waiver, however, leaves them as they are

7 C This is a substitution of parties to a contract or of contracts

8 D The others are clients with agency duties

9 C The assignor remains secondarily liable

10 A This is a renunciation of the agreement and can be treated as a breach even if performance is

not yet due

11 C or when title passes

12 A Mutual promise that was expressed but not yet performed

13 D Contract based on a mutual mistake of fact

14 C The others are fiduciary duties owed to the principal

15 D To reflect the actual agreement

16 B If there was no consideration for the promise, it is not enforceable

17 B A special agent with the powers designated

18 D Cannot hold both liable if a secret agency; must decide who to go against

19 B Most sales are cooperative, where the buyer’s broker sells the listing of a seller’s agent


20 C In a case of ambiguity, contracts of adhesion are interpreted against the party drafting it.

21 A Because of the undisclosed agency, the seller can withdraw without obligation, and the broker

could be subject to disciplinary action. The seller would also be entitled to the return of any

commission paid.

22 C David has earned commission when he has produced a ready, willing and able buyer. This

would make him the procuring cause of the sale.

23 A Becky is not licensed to sell real estate and may not be paid a finder’s fee.

24 A the broker must disclose the true market value of the property.

25 D the agent must disclose and obtain written consent from both parties to do a dual agency.

26 D compensation must be disclosed for an implied agency.

27 A assuming you had “procuring cause” language in the contract

28 A undue influence, fraud, or menace would create a voidable contract

29 C a patent defect is obvious to most people, age plays no part in the type of defect

30 A a contract is voidable if one is infant

31 A the option contract is a unilateral contract. The sales contract is a bilateral contract

32 C the optionee has an agreed upon deadline within the sales contract

33 B meeting of the minds is synonymous with offer and acceptance

34 A rescission will restore the parties to their original positions prior to entering into the sales

contract

35 C offer and acceptance is interchangeable with meeting of the minds

36 A a valid contract must include offer and acceptance, capacity, legality and consideration

37 B duress makes a contract voidable

38 D assuming the contract was assignable

39 A a voidable contract can be voided by the party found to be infant, intoxicated,

incarcerated, insane or victimized by fraud, menace, duress, or undue influence


40 B in a unilateral contract one party commits to fulfill a promise based upon the possible future

actions of another i.e. option

41 D execution means all items were done i.e. COE - Breach is a disagreement after M&M’s -

specific performance is a court ordered judgment on a contract dispute

42 C rescission - liquidated damages and specific performance are all remedies to a breach of

contract. Execution would be the outcome if no breach occurred

43 A something remains to be done

44 B both parties, seller and agent, have made promises to each other

45 D deliberate misstatement or omission of the facts, in this case a latent defect, is fraud

46 B the agents (educated) actions led the buyer (innocent) to believe the lake was fishable. The

buyer acted upon this information. The agent’s ignorance makes it misrepresentation rather

than fraud.

47 C complete

48 B principal and client are synonymous - seller could be either client or customer

49 C special agents owe the fiduciary of agency / are limited in purpose / and as in any expressed

agency ratification binds the client to the agents actions

50 D the agent should disclose the relationship by the first substantial contact

51 B the agent owes the customer Fairness - Honesty - Disclosure of all MATERIAL facts

52 D i.e. one agent represents both buyer and seller in a sale

53 B customers are owed responsibility only (FHD) by agents of the other party

54 C a client or principal is represented by an agent

55 C waiver, however, leaves them as they are.

56 C the agent of the seller would be prohibited from discussing other offers on the property

because of their fiduciary to the seller

57 C re-zoning of property is a material fact, failure to disclose would be fraud

58 A the client must give the broker consent to conduct a subagency


59 D a dual agent must represent both clients equally

60 C assists both parties equally without agency relationships

61 C a sub-agent can represent either buyer or seller

62 A a special agent performs specific functions for a client

63 A to be active as a real estate salesperson one must work under a broker

64 B under exclusive-right-to-sell brokerage gets paid no matter who sells property

65 B under open listings as many brokers as seller wants, whoever sells gets commission

66 A automatic renewals are not allowed, listing contract is between seller and broker buyer does

not sign

67 B the MLS offers cooperation with other brokerages

68 B broker must belong to NAR and salesperson must belong to NAR to use the name REALTOR

69 A thus the broker is the agent for the seller

70 C listing broker gets commission regardless of who sells property

71 B assuming there was “procuring cause” language in the listing agreement

72 A on an exclusive agency listing the seller may sell their own property without having to

compensate the listing agent

73 C This is a substitution of parties to a contract or of contracts.

74 B all listing agreements are between the seller and broker

75 B the open listing allows anyone to sell the property and only they get commission

76 A a net listing creates a conflict of interest between the seller’s net and the agent’s commission

77 C broker x had agreement with owner/seller - assuming compensation was mentioned in listing

owner had a responsibility of compensation to broker x

78 D this would be a breach


79 D both owners listing agreements allowed them to sell/transfer their properties themselves

outside the financial constraints of the listing agreement

80 B the brokerage will earn commission no matter who sells the property


Answer key for Finance and Appraisal Practice Questions Version 1

1 c age has nothing to do with the characteristic of land

2 a an appraiser uses the principles of value, b - c - d are three of them

3 a a banker will fund the loan and a broker makes the match between borrower and lender

4 d The US Treasury is a warehouse of money

5 b seller debit (seller owes money) buyer credit (buyer receives money)

6 b supply and demand

7 c concentric growth develops around a business center

8 c industry is considered a benefit to a community through efficient extension of services - good zoning relationships

(industrial parks) - diverse economic base - more payroll, etc. The other three answers are detriments to a

community that industry can bring

9 a acronym D.U.S.T. for economic good of real estate

10 c Market or Sales comparison approach - Appraisers do not concern themselves with price

11 c this is the sequence of events through the financing process

12 d there are 43,560 square feet in one acre

13 b Federal National Mortgage Association (FANNIE MAE)

14 a the borrower can be held liable for the deficiency

15 c Appraisers concern themselves with value not price

16 d FHA guidelines are set regionally - requires MIP not PMI

17 d real and personal property are sold as a package

18 c Contracts for personal services and contracts that prohibit assignment cannot be assigned

19 d when the property is sold, the debt is paid from the proceeds

20 a the 3rd

party will be paid before the creditor

21 d a mortgage broker makes the match between the borrower and the lender

22 b these are nonconforming loans

23 a buyer debit (owes money)

24 c control of Freon is a concern for people who service air conditioning units

25 c second most important requirement for individuals, Location # 1

26 d plottage occurs when value increases due to assemblage


27 c the situation is not within the control of the property owner

28 b must be a veteran or a reservist with 6 years minimum

29 d In a Budget payment plan: Principal - Interest - Taxes - Insurance

30 c equity the value of a property after the deductions of charges against it

31 d as well as commercial banks - pension funds - federal land banks

32 a income producing buildings are valued according to the income they generate

33 d subjective value is based upon feelings

34 b title is held in trust with a trust deed

35 a above

36 d the mortgagor is the borrower and the mortgagee is the lender

37 c the vendee is the buyer in a contract for deed

38 d each approach is weighed for its usefulness in the valuation of a particular property

39 d a partially amortized loan requires constant payments and a lump sum (balloon payment). Non-recourse has to do

with lenders ability to collect after foreclosure. A budget PAYMENT plan includes principal and interest payments

on the loan and payment into an escrow account for taxes and insurance

40 b Treasury is a warehouse of money - Ginnie buys FHA and VA loans on secondary market

41 b the trustor is the borrower, the trustee the 3rd

party and the beneficiary the lender

42 a buyer receives - seller owes

43 b typically the second mortgage would record after the first mortgage

44 a the foreclosure proceedings do not need court approval

45 a the mortgagor is the borrower

46 d property taxes are specific to a certain property, the other liens are general

47 b Sector roads are generally considered “surface streets” Concentric is the type of growth which occurs around a

business center

48 c VA has a funding fee - FHA uses MIP - private mortgage insurance would be Conventional

49 b there is a constant payment of principal and interest until the debt is repaid

50 b upon default, the mortgagee will call the balance of the note due

51 c a blanket mortgage encumbers more than one property

52 c the creditor will foreclose a property to satisfy the debt

53 c initially loans are issued by primary lending institution insured by FHA


54 d the FHA insures lenders

55 b Fannie Mae buys loans from primary lenders to free up their money to issue more loans

56 a veteran must qualify - must have CRV appraisal - must be owner occupied may be 1 - 4 units

57 b VA loans can be made for 100% of the property - FHA generally requires a small down payment

58 c The VA has limits on its 100% funding program and the buyer would have to pay 25% of the price of the home

over that limit PLUS any difference between appraised value (CRV) and purchase price - non-veterans can assume VA

loans, it just reduces the Veterans eligibility for the next loan.

59 a after 12/15/89 to assume the loan, the borrower must qualify

60 c the borrower must be an owner occupant

61 d a - b - c are all principles of value

62 a the VA guarantees a percentage of VA loans through funding fees

63 d the VA guarantees a percentage of VA loans

64 a FNMA -FANNIE MAE is a private corporation that buys loans on the secondary market -

65 d new owner becomes personally liable for the terms and conditions of the loan, including payments

66 c Conventional loans if insured are insured through Private Mortgage Insurance

67 a a novation is a new deal

68 d anyone may pay the points

69 d loan is called a package loan

70 b the broker makes the match between borrower and lender

71 c the ECOA entitles the borrower to a credit report that was considered during the application process

72 c MGIC issues PMI

73 d a wraparound loan is when a buyer creates new financing wrapped around existing loan - package loan involves

realty and personalty

74 d secondary real estate financing market consists of FNMA - GNMA - FHLMC

75 d primary lenders sell the loans to the secondary market

76 a Freddie Mac sells bonds, secured by mortgages, in the open market

77 d each state determines if there will be a usury law

78 b MIP premium can be paid in full at COE or funded in loan

79 c FHA 203 K is for rehabilitation of housing

80 b the payments are a constant payment of both principal and interest


Additional Real Estate Math Questions

1. If a house depreciates at the rate of 2.5 percent per year for 10 years and has a present value of $12,500, what was

the original value of the house:

a. $14,000

b. $16,666

c. $17,000

d. $18,000

2. An $11,000 house is assessed at 30 percent of its original cost. The school tax on the property is 12 mills. What

was the approximate yearly tax:

a. $40

b. $396

c. $400

d. $600

3. A house is appraised for $25,000 and shows an assessed value of $20,000. If taxes are $300 yearly, what would

the tax be on a house appraising at $45,000 with an assessed value of $40,000:

a. $150

b. $500

c. $600

d. $700

4. After an offer is accepted, but before closing, a broker notices evidence of a termite infestation. The broker should

a. remain silent as the contract has been entered into

b. inform the buyer only

c. inform the seller only

d. inform the buyer and the seller

5. Mutual assent to a real estate contract is indicated by

a. attestation

b. offer and acceptance

c. acknowledgment

d. seals

6. Shelly Ford pays her taxes of $660 for the calendar year. She sells her property and closes on June 15. What is the

prepaid portion due back to her?

a. $302.50

b. $330.00

c. $357.50

d. $412.50

7. An apartment house has 10 units renting at $275 a month and 12 units at $250 a month. Expenses are $6,789

annually. The vacancy factor is 15 percent annually. If you desire to make a 10 percent return on your investment,

approximately what should you pay for the property?

a. $62,100

b. $518,610

c. $585,000

d. $612,100


8. Carol Reed purchases a $62,000 property on which she obtains an 80 percent loan. She pays 4 discount points, and

the attorney's fees and miscellaneous costs amount to $2,500. How much money should she bring to the closing?

a. $1,984

b. $12,400

c. $14,900

d. $16,884

9. What was the selling price of a property if Jerry Brown paid $350 for taxes due, has a $12,500 mortgage, paid a 6

percent broker commission, and netted $7,000 on the sale?

a. $13,621.00

b. $15,500.00

c. $21,041.00

d. $21,117.02

10. A real estate agent neglected to tell a buyer that the water supply for the house was contaminated. This is an

example of

a. puffing

b. negative fraud

c. misrepresentation

d. menace

11. Mr. Leonard owns a lot measuring 80 feet X 120 feet. The city puts in a new street in front and to the side of his

house and assesses him 6 cents a square foot based on the area of this lot. His costs are:

a. $48.00

b. $57.60

c. $480.00

d. $576.00

12. If the transfer taxes are payable at the rate of 55 cents per $500 or part thereof, compute the grantor's cost on a

$49,750 sale:

a. $27.36

b. $53.90

c. $54.55

d. $55.00

13. M agreed to buy N’s lot, which was represented by N as being zoned for a duplex. After closing,

M found that the lot had single-family zoning and was not suitable for M’s needs. M should seek the

remedy of


b. liquidated damages

c. reformation

d. rescission

14. Find the annual percentage rate of net return of an $88,000 investment if the weekly gross income is $225 and the

monthly expenses are $370:

a. 7%

b. 8.25%

c. 10%

d. 12.5%


15. A building worth $430,000 rents for $1,500 a month. What is the rate of capitalization?

a. 4%

b. 8%

c. 9%

d. 23.75%

16. An office building earns $850,000 a year; expenses run 35 percent of that amount. If the property is capitalized at

12 percent, what is its approximate value?

a. $297,500

b. $552,500

c. $4,604,000

d. $6,630,000

17. An example of an executory oral contract that is enforceable is

a. a lease for six months starting in six months

b. a sale of a lot for less than $500

c. a lease for two weeks starting in 12 months

d. a sale of drapes for $600

18. An agent indicated he was acting as a principal. A third party suffered damages because of the agent’s

Action. The person liable for the loss is

a. only the agent, because the agency was not revealed

b. only the principal, because the principal bears ultimate responsibility

c. both the agent and the principal

d. either the agent or the principal

19. Ms. Randall's $85,000 condominium is assessed at 35 percent of value. The tax rate is $2.70 per $100 of value. If

the tax increases $.35 per $100, her new tax will be:

a. $699.13

b. $750.00

c. $907.38

d. $9,073.80

20. An office manager was paid $1,000 per month plus 0.0025% of all office sales. In November, she received $2,780.

This amount was based on monthly sales of

a. $556,000

b. $712,000

c. $912,000

d. $1,112,000

21. What investment is necessary for a yield of $500 per month at 6% interest?

a. $8,333.33

b. $60,000

c. $100,000

d. $120,000


22. A 30-acre rectangular parcel has 660 ft on the street side. What is the depth of the parcel in feet?

a. 738.42

b. 963.7

c. 1,240

d. 1980

23. A list price was set to leave the owner with $90,000 after a 6% commission was deducted from the sales price.

What was the list price?

a. $95,400

b. $95,745

c. $95,905

d. $96,000

24. Which is the correct formula to determine the interest rate?

a. interest earned \ principal = interest rate

b. interest earned x principal x time = interest rate

c. interest earned \ time = interest rate

d. interest earned x time = interest rate

25. The next monthly interest payment on a loan balance of $17,835 is $132.28. The interest rate on the loan is

a. 6.78%

b. 7.4%

c. 8.9%

d. 13.48%

26. On a 70-by-70 ft rectangular lot, the side yard building setbacks are 10 ft. The front yard setback is 25 ft and the

rear setback is 20 ft. What is the maximum square footage possible for a one-story structure?

a. 1,000

b. 1,200

c. 1,250

d. 4,900

27. A woman purchased four lots at $12,000 each and divided them into six lots that were sold for $9,600 each. What

was the woman’s percentage of profit based on her cost?

a. 6%

b. 12%

c. 20%

d. 24%

28. A man purchased a property for $175,000. The man wishes to sell the property. If the total selling costs will equal

11% of the sales price, how much will the property have to appreciate in value for the man to break even?

a. $19,612

b. $20,311

c. $21,629

d. $23,730


29. A mill is expressed as

a. $0.001.

b. $0.01.

c. $0.1.

d. $1.0.

30. A house purchased four years ago for $50,000 has increased invalue by 10% each year since purchase. The house

is now worth

a. $66,550

b. $70,000

c. $73,205

d. $90,000


Additional Real Estate Math Questions Answers and Explanations

1 b 2.5% x 10 yrs = 25% depreciation. House is worth 75% of it’s original value. $12,500 / 75% = $16,666

2 a $11,000 x 30% = $3300 x 12 mills (.012) = $39.6 ($40)

3 c Taxes are based upon assessed value since the second house is assessed at 2 times the first house, taxes can be

assumed to be double

4 d Duty of disclosure to the principal, as well as fair and honest dealings with all parties.

5 b This indicates a meeting of the minds.

6 c Prepaid for banker year 6 months 15 days remaining

$660/12months = $55/month x 6 months = $330

$55/30days = $1.833/day x 15 days = $27.50

Total $357.50

7 b 10 units @ $275/month = $2750/month x 12 month = $33,000/year

12 units @ $250/month = $3000/month x 12 month = $36,000/year

Total Income = $69,000/year

$69,000 - 15% vacancy = $58,650

$58,650 - $6,789 expenses = $51,861 / 10% return = $518,610

8 d Down payment = $62,000 sale price x 20% = $12,400

Loan amount $62,000 sale price less $12,400 = $49,600

Discount points = $49,600 loan x 4% =$1,984

Miscellaneous closing costs = $2500

$12,400 + $1984 + $2500 = Total due at COE $16,884

9 d Paid off mortgage = $12,500

Paid off taxes due = $ 350

Profit on sale after broker commission = $ 7,000

Subtotal after commission = $19,850 = 94% of selling price

$19,850 / 94% = $21,117 selling price

10 b Failure to disclose a significant problem

11 d 80 ft x 120 ft = 9600 square feet x $.06 / square foot = $576

12 d $49,750 / $500 = 99.5 which is 99 whole and 1 part or 100 times

100 x $.55 = $55

13 d Contract based on mutual mistake of fact.

14 b weekly gross income $225 x 52 wks = $11,700

monthly expenses $370 x 12 months = $4,440

Net income = $7,260

$7260/$88,000 = 8.25% return

15 a $1,500 / month x 12 months = $18,000/$430,000 = 4%

16 c $850,000 - 35% = $552,500 net income

Net income / capitalization rate = value

$552,500/12% = $4,604,000


17 a A lease for one year or less that can be fully performed within one year can be oral.

18 d Cannot hold both liable if a secret agency; must decide who to go against.

19 c $85,000 x 35% = $29,750 taxes assessed at 35%

$29,750/$100 = $297.50 tax rate is per $100 assessed value

$2.70 + $.35 = $3.05 charged

$297.50 x $3.05 = $907.38

20 b $2,780 - $1,000 (salary) =

$1,780 attributable to sales.

$1,780 \ 0.0025 = $712,000 total office sales

21 c $500 per month = $6,000 per year

$6,000 \ 0.06 = $100,000 = $100,000 investment yielding $6,000 per year at 6%

22 d Known dimension = 660 ft. Total area is 30 acres, or 30 x 43,560 = 1,306,800 sq.ft. To find one dimension of a

rectangle when total area and other dimensions are known, divide the known dimension into the total

area.

23 b $90,000 is left after 6% of the sale is taken out, so 94% of the list price is $90,000

$90,000 \ 0.94 = $95,744.68

24 a The rate is the part divided by the whole. Part \ whole = rate

25 c Monthly interest of $132.28 x 12 = yearly interest of $1,587.36. Interest earned (part) \ principal (whole) = rate

26 c Building maximum width is 50 ft because there are 10-ft setbacks on each side. Maximum depth is 25 ft because

front yard and rear yard setbacks total 45 ft (70 ft – 45 ft). Multiply width (50ft) by depth (25 ft) to find

square footage

27 c Four lots at $12,000 each = $48,000 cost. 6 lots at $9,600 each = $57,600 selling price. $57,600 - $48,000 =

$9,600 profit. To find percentage, divide the net by the cost: $9,600 (net0 \ $48,000 (cost) = 0.2, or 20%

28 c To break even, the sales price must be $175,000 plus 11% of the sales price, so $175,000 = 89% of the sales price.

$175,000 (part) \ 0.89 (rate) = $196,629. Sales price is $196,629. But the question asks for appreciation, so

$196,629 - $175,000 = $21,629.

29 a A mill is a tenth of a cent, and a cent is 0.01.

30 c The house has appreciated in value by 10% each year. $50,000 + 10% = $55,000 value at end of 1st year.

$55,000 + 10% = $60,500 value at end of 2nd year. $60,500 + 10% = $66,550 value at end of 3rd year.

$66,550 + 10% = $73,205 value at end of 4th year.


Glossary of Frequently Used Real Estate Terms

This glossary represents frequently used academic real estate related terms. It does not encompass every real estate related

term. These definitions are designed to summarize the term’s most widely accepted meaning.

Abstract of Title: A summary of the condition of title to real property based on an examination of public records;

includes a digest of the deeds or other transfers, encumbrances, and other instruments reflecting ownership of title or

matters which may impair the title.

Acceleration Clause: Clause in trust deed or mortgage giving lender right to call all sums to be immediately due and

payable upon the happening of a certain event.

Acceptance: The expression of intent of a person receiving an offer to be bound by the terms of the offer. Acceptance

must be communicated to the person making the offer (offeror, such as a buyer). The communication need not be in

writing – it may be a mere nod of the head – but if the offer is in writing and pertains to real property, the acceptance also

must be in writing.

Accession: Gaining title when property is added to a property by another or a natural action.

Accounting: The fiduciary duty of an agent to maintain and preserve the property and money of the principal. The agent

must keep accurate records of funds and documents received.

Accretion: An addition to land from natural causes as, for example, from gradual action of the ocean or river waters.

Acknowledge: To recognize as genuine or valid; A formal declaration made before a duly authorized officer, usually a

notary public, by a person who has signed a document; also, the document itself. An acknowledgment is designed to

prevent forged and fraudulently induced documents from taking effect.

Acre: A measure of land equaling 160 square rods, or 4,840 square yards, or 43,560 square feet, or a tract about 208.71

feet square.

Actual Damages: Those damages that a court of law will recognize and that are a direct result of a wrong.

Actual Fraud: An act meant to deceive another, such as making a promise without intending to keep it, suppressing the

truth, or making a false statement.

Actual Notice: Having actual knowledge of a fact, as compared with implied or inferred notice.

Ad Valorem: A Latin phrase meaning, “according to value.” Usually used in connection with real estate taxation.

Addendum: Additional material attached to and made part of a document. If there is space insufficient to write all the

details of a transaction on the sales contract form, the parties will attach an addendum or supplement to the document. The

sales contract should incorporate the addendum by referring to it as part of the agreement. The addendum should refer to

the sales contract and be dated and signed or initialed by all the parties.


Adjustable rate: A broad term for a loan (mortgage or deed of trust) with rates and terms that can change. Both the

Comptroller of the Currency, which regulates national banks, and the Office of Thrift Supervision, which governs federal

savings and loan associations, have issued guidelines allowing the issuance of real estate loans having provisions to

increase or decrease the rate of interest at certain time intervals within a certain range.

Advance fee: A fee paid before any services are rendered. Specifically, it is a practice of some brokers to obtain a

nonrefundable fee from the seller in advance to cover the advertising of properties or businesses for sale while giving no

guarantee that a buyer will be found, which is often held to be improper conduct. Brokers must keep accurate records of

expenditures.

Adverse Possession: Claiming based on the open and notorious possession and occupancy, usually under an evident

claim or right, in denial or opposition to the title of another claimant.

Affidavit: A written statement sworn to or affirmed before an officer who is authorized to administer an oath or

affirmation.

Agency: A relationship created when one person, the principal, delegates to another, the agent, the right to act on his or her

behalf in business transactions and to exercise some degree of discretion while so acting. An agency gives rise to a

fiduciary or statutory relationship and imposes on the agent, as the representative of the principal, certain duties,

obligations, and high standards of good faith and loyalty.

Agent: One authorized to represent and to act on behalf of another person (called the principal). A real estate broker is

the agent of the client (seller or buyer) to whom he or she owes a fiduciary or statutory obligation.

Agreeing: To consent to as a course of action.

Air Rights: The rights in real property to use the air space above the surface of the land.

Alienation: The transferring of property to another; the transfer of property and possession of lands, or other things, from

one person to another.

Alienation Clause: A clause in a note or trust deed permitting the payee or beneficiary to declare the entire unpaid balance

immediately due and payable upon a subsequent transfer of the property. Also referred to as a due-on-sale clause.

Allodial Tenure: A real property ownership system that can be complete ownership, except for rights held by the

government.

Alluvion: Soil deposited by accretion. Increase of earth on a shore or bank of a river.

Amended: to change or modify for the better, improve, amend the situation, to alter especially in phraseology, to alter

formally by modification, deletion, or addition

Americans with Disabilities Act (ADA): A federal law that became effective in 1992. ADA is designed to eliminate

discrimination against individuals with disabilities by mandating equal access to jobs, public accommodations, government

services, public transportation and telecommunications.

Amortization: The liquidation of a financial obligation on an equal installment basis; also, recovery over a period of cost

or value.

Annexation: The addition to property by adding or attaching other property to it, such as a fixture; the addition of

unincorporated territory in a county to a city or town.

Annual Percentage Rate (APR): The actual cost of credit as determined under the Federal Truth in Lending Act.

Anticipatory Repudiation: When one party to a contract informs the other before the time set for performance that he or

she does not intend to perform as agreed.

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Appraisals: The process of developing and communicating an opinion about a property’s value. An appraisal is usually

required when real property is sold, financed, condemned, taxed, insured or partitioned. Note that an appraisal is an

estimate, not a determination, of value. An appraisal may be in the form of a lengthy written report, a completed preprinted

form, a simple letter or even an oral report.

Appraisers: Qualified person to estimate the value of real property for a specific location at a specific time for a specific

reason.

Appreciation: A temporary or permanent increase in the worth or value of property due to economic causes; the opposite

of depreciation.

Appropriative Rights: Water rights allocated by government permit, according to an appropriation system. It is not

necessary to own property beside the body of water in order to apply for an appropriation permit.

Appurtenance: Something annexed to another thing that may be transferred with it. your real property is burdened with

an easement, water rights, or improvements that a person may use.

Arbitration: The non-judicial submission of a controversy to selected third parties for their determination in a manner

provided by agreement or by law. Disputes between listing Realtors and cooperating Realtors are often settled by

arbitration, with both parties agreeing to comply with the final decision of the arbitrator.

Area Variance: Entitles landowners to use land in a way that is typically not allowed by the dimensional or physical

requirements of the zoning law.

Arm’s Length Transaction: A transaction in which there is no pre-existing family business relationship (as in a short

sale).

Asbestos: A fibrous insulation and construction material that causes serious lung problems.

As Is: Words in a contract intended to signify that no guarantees whatsoever are given regarding the subject property and

that it is being purchased exactly as it is found. An “as-is” indicator is intended to be a disclaimer of warranties or

representations. The recent trend in the courts to favor consumers tends to prevent sellers from using as-is wording in a

contract to shield themselves from possible fraud charges brought on by neglecting to disclose known material defects in

the property.

Assemblage: The combining of two or more adjoining lots into one large tract. This is usually done to increase the value

of the individual lots because a larger building capable of producing a larger net return may be erected on the larger parcel.

The resulting added value is called plottage value.

Assessed Value: Value placed on property as a basis for taxation.

Assign: To appoint to a post or a duty. An assignment is the transfer of the right, title and interest in the property of one

person to another. There are assignments of, among other things, mortgages, sales contracts, contracts for deed, leases and

options.

Assignee: In any assignment, the assignee becomes primarily liable, and the assignor remains secondarily liable as surety,

unless there is a novation agreement relieving the assignor from liability. The assignee acquires the same title, right and

interest in the particular contract that the assignor had.

Assignment: The transfer of the right, title and interest in the property of one person, the assignor, to another, the assignee.

Association: A group of people gathered together for a business purpose, sometimes treated as a corporation under tax

law.

Attachment Lien: A lien on real property obtained prior to judgment in an action for money; obtained by levy of a writ of

attachment.


Attorney Fees: Monies an attorney charges for his or her legal services. Unless provided for by statute or in a contract,

attorney fees usually cannot be recovered by an aggrieved party.

Attorney: One who is legally appointed to transact business on another's behalf

Auction: A form of selling land or personal property whereby oral offers are taken and the property is sold to the highest

bidder. Real estate auctions are generally used in mortgage foreclosure sales, tax sales and with hard-to-sell properties.

Authorization: The act of authorizing

Avulsion: The sudden tearing away or removal of land by action of water flowing over or through it.

Balloon Payment: Where the final installment payment on a note is greater than the preceding installment payments and it

pays the note in full, such final installment is termed a balloon payment.

Bargain and Sale Deed: Any deed that recites a consideration and purports to convey the real estate.

Beneficiaries: A person who received benefits from the gifts or acts of another, as in the case of one designated to receive

the proceeds from a will, insurance policy, or trust; the real owner, as opposed to the trustee, who holds only legal title.

With a trust, the trustee holds the legal title, but the beneficiary enjoys the benefits of ownership.

Bilateral Contract: A contract in which a promise is given by both parties; distinguished from a unilateral contract, which

calls for an act by one party in exchange for a promise by the other.

Bill of Sale: A written instrument given to pass title of personal property from vendor to the vendee.

Biweekly Payment Plan: A loan that calls for 26 half-month payments a year, resulting in an earlier loan retirement date

and lower total interest costs than with a typical fully amortized loan with regular monthly payments.

Binding: Purchaser’s good faith and intention to complete the transaction. A binder is an agreement formed by the receipt

of an earnest money deposit for the purchase of real property as evidence of the purchaser’s good faith and intention to

complete the transaction.

Blanket Mortgage: A single mortgage that covers more than one parcel of real estate; A blanket mortgage is often used to

secure construction financing for a subdivision or condominium projects.

Blind Advertisement: An advertisement placed by a licensee that does not include the broker’s name.

Blockbusting: The practice on the part of unscrupulous speculators or real estate agents of inducing panic selling of homes

below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial make-

up is changing, or appears to be on the verge of changing. It is an actionable wrong.

Breach: The breaking of a law, or failure of duty, either by omission or commission.

Broker: One who acts as an intermediary between parties to a transaction. A real estate broker is a properly licensed party

who, for a valuable consideration or promise of consideration, serves as a special agent to others to facilitate the sale or

lease of real property.

Broker Price Opinion (BPO): A broker’s written opinion of the value of a particular property, often in the form of a

competitive market analysis. Depending on state law, the broker may charge a separate fee for a BPO, provided it is not

used in connection with originating a federally related loan and is not labeled as an appraisal.

Broker Protection Clause: Provides the broker is still entitled to commission if the property sells during a certain time

period under certain circumstances.

Brokerage: A real estate broker’s business.

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Brokers: One who acts as an intermediary between parties to a transaction. A real estate broker is a properly licensed

party who, for a valuable consideration or promise of consideration, serves as a special agent to others to facilitate the sale

or lease of real property. Brokers represent their principals and accept the fiduciary responsibility of exercising care, skill

and integrity in carrying out their instructions.

Budget Mortgage: A mortgage with payments set up to cover more than interest and principal reductions. In addition to

monthly amortized principal and interest payments, the monthly payments may include an amount equal to 1/12 of the

year’s property taxes, a pro rata share of the fire insurance premium and any other similar charges that if not paid, could

result in a foreclosure.

Building Permits: A written governmental permission for the construction of a new building or other improvement, the

demolition or substantial repair of an existing structure or the installation of factory-built housing. The proposed

construction must conform to local zoning and building codes and usually must be inspected and approved upon

completion.

Bundle of Rights: Beneficial interests or rights attached to the ownership of real property.

Business Broker: A business broker is a properly licensed individual, who, for a valuable consideration or promise of

consideration, serves as an agent to others to facilitate the sale or lease of a business.

Buyer: Party which acquires, or agrees to acquire, ownership (in case of goods), or benefit or usage (in case of services),

in exchange for money or other consideration under a contract of sale.

Buyer Agency Agreement: A contract between a broker and a buyer that grants the broker the right to represent the buyer

in the purchase or lease of property and that makes the buyer responsible for paying commission to the broker.

Buyer’s Agent: An agent representing the buyer rather than the seller.

Buyer’s Market: The conditions which exist when a buyer is in a more commanding position as to the price and terms of

sale, primarily because real property offered for sale is in plentiful supply compared to demand.

Bylaws: As related to condominiums, the regulations, rules or laws adopted by a condominium owners’ association or

corporation for the condominium’s management and operation. Bylaws cover such matters as the manner and selection of

the board of directors and the duties and obligations of the corporation members. These self-imposed rules are a form of

private law.

Cancellation: The act or an instance of canceling. A cancellation clause is a clause that may be included in a commercial

or industrial lease granting the lessor or the lessee the right to terminate the lease term upon the happening of certain stated

events or occurrences by the payment from one party to the other of definite amounts of money as consideration.

Capacity: Specific ability of an entity (person or organization) or resource, measured in quantity and level of quality, over

an extended period. The legal ability of an entity (person or organization) to perform an act such as creating a binding

contract.

Capital Gain: Income from a sale of an asset rather than from the general business activity. Capital gains are generally

taxed at a lower rate than ordinary income.

CC&Rs: Abbreviation for covenants, conditions, and restrictions.

Certificate of Eligibility (COE): Certificate issued by the government evidencing an individual’s eligibility to obtain a

Veterans Administration (VA) loan.

Certificate of Reasonable Value (CRV): The federal Veterans Administration appraisal commitment of property value.

Certificate of Title: A certification as to the ownership of land and the condition of title, based on an examination of the

public records.

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Chain of Title: A history of conveyances and encumbrances affecting the title from the time the original patent was

granted, or as far back as records are available.

Chattel: Goods or every species of property movable or immovable that are not real property.

Civil Rights Act of 1866: The first federal fair housing act (applied to race only).

Civil Rights Act of 1968: Federal fair housing act that expanded the Civil Rights Act of 1866.

Client: The person who employs an agent to perform a service for a fee; also called a principal. The client is owed the

duty of care and diligence, fiduciary duties in common-law states and statutory duties where the common law has been

abrogated. In traditional real estate brokerage, the client is the seller, and the buyer is the prospect or customer. In modern

practice, more and more buyers are seeking representation as a client. Dual agency occurs when a broker represents the

seller and the buyer as clients.

Closing: Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The

process includes the signing and transfer of documents and distribution of funds.

Closing Statement: Statement furnished by an escrow holder to the principals at the time of closing an escrow, setting

forth the charges and costs.

Cloud on the Title: Any conditions revealed by a title search that affect the title to property; usually relatively

unimportant items, but which cannot be removed without a quitclaim deed or court action.

Code of Ethics: A set of rules and principles expressing a standard of accepted conduct for members of a professional

group.

Commercial Property: Property zoned and used for business purposes, such as a store, restaurant or office building; as

distinguished from residential, industrial, or agricultural property.

Commingling: Unauthorized mixing of funds of a customer or client with one’s own personal funds.

Commission: Payment, remuneration; The compensation paid to a real estate broker (usually by the seller) for services

rendered in connection with the sale or exchange of real property. To collect a commission, the broker must be licensed in

the state, have a written employment agreement (listing) with the seller and sell the property and/or execute a valid contract

of sale for the property.

Common Areas: Land or improvements in a residential or commercial development designated for the use and benefit of

all residents, property owners, and tenants.

Example: Common areas include such amenities as corridors. elevators, parks, playgrounds and parking lots.

Comparables: Sales which have similar characteristics as the subject property and are used for analysis in the appraisal

process. Commonly called comparables, they are recent selling prices of properties similarly situated in a similar market.

Comparative Market Analysis (CMA): A method of determining the approximate market value of a home by comparing

the subject property to similar homes that have sold, are presently for sale, or did not sell in a given area.

Compensation: Payment, remuneration; The compensation paid to a real estate broker (usually by the seller) for services

rendered in connection with the sale or exchange of real property. To collect a commission, the broker must be licensed in

the state, have a written employment agreement (listing) with the seller and sell the property and/or execute a valid contract

of sale for the property.

Compensatory Damages: Damages to reimburse an injured party for the actual loss suffered.


Competency: Legally qualified.

Compliance: the act or process of complying to a desire, demand, proposal, or regimen or to coercion; conformity in

fulfilling official requirements

Concealment: Occurs when a licensee fails to disclose information that is material to a decision to a party to whom the

licensee has such a duty.

Condemnation: The act of taking private property for public use. Also a declaration that a structure is unfit for use.

Conditional Approval: A situation where a lender approves a loan under certain stated conditions.

Conditional Use Permit: Permitting a use of a parcel of property in contravention of zoning upon a finding that the

permitted use is essential or desirable to the public convenience or welfare and is in harmony with the objectives of the

master plan.

Conditions: Contingencies, qualifications or occurrences upon which an estate or property right would be gained or lost.

Conditions may be either precedent or subsequent.

Condominium: A system of individual fee ownership of units in a multi-family structure, combined with joint ownership

of common areas of the structure and the land.

Confidential: Private, secret, containing information whose unauthorized disclosure could be prejudicial to the national

interest.

Confidential information: containing information whose unauthorized disclosure could be prejudicial to the national

interest

Confirmation: The process of supporting a statement by evidence; A confirmation of sale is a court approval of the sale of

property by an executor, administrator, guardian, conservator or commissioner in a foreclosure sale.

Conforming Loan: A standardized conventional loan written on uniform documents that meets the purchase requirements

of Fannie Mae and Freddie Mac.

Conformity: Holds that the maximum of value is realized when a reasonable degree of homogeneity of improvement is

present.

Consent: To give assent or approval.

Consideration: The inducement for entering into a contract; consists of either a benefit to the promisor, or a loss or

detriment to the promise. Anything of value given to induce entering into a contract. It may be money, person services, or,

in some cases, even love and affection.

Constructive Fraud: A breach of duty, as by a person in a fiduciary capacity, without an actual fraudulent intent, which

gains an advantage to the person at fault by misleading another to the other’s prejudice. Any act of omission declared by

law to be fraudulent, without respect to actual fraud.

Constructive Notice: Notice given by the public records.

Contingent: Dependent on or conditioned by something else; happening by chance or unforeseen causes; A contingency is

a provision in a contract that requires the completion of a certain act or the happening of a particular event before that

contract is binding.

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Contract: A legally enforceable agreement between competent parties who agree to perform or refrain from performing

certain acts for a consideration. In essence, a contract is an enforceable promise. In real estate, there are many different

types of contracts, including contracts for sale, options, mortgages, leases, contracts for deed, escrow agreements and loan

commitments.

Contractors: One who contracts or covenants, either with a public body or private parties, to construct works or erect

buildings at a certain price. A contractor is ordinarily understood to be the person who undertakes to supply labor and

materials for specific improvements under a contract with an owner or principal.

Contractual Capacity: The legal ability to enter into a contract.

Contribution, Principle of: Holds that maximum real property values are achieved when the improvements on the site

produce the highest (net) return commensurate with the investment.

Conventional: Conforms to accepted standards. A conventional loan is a loan made with real estate as security and not

involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan. The mortgagee can be an

institutional lender or a private party.

Conveying: The transfer of title or an interest in real property by means of a written instrument such as a deed or an

assignment of lease.

Cooperating Agent: An agent who works with a listing agent to sell property in a real estate transaction; the selling agent

who finds a buyer for the listed property.

Cooperative: A building owned by a corporation, where the residents are shareholders in the corporation; each

shareholder receives a proprietary lease on an individual unit and the right to use the common areas.

Co-Ownership: A form of concurrent property ownership in which two or more persons own an undivided interest in the

same property. When title to one parcel of real estate is vested in (or owned by) two or more persons or other entities, such

persons or entities are said to be co-owners of the property.

Corporation: A legal entity created under state law, consisting of an association of one or more individuals but regarded

under the law as having an existence and personality separate from such individuals.

Cost Approach: One of three methods in the appraisal process. An analysis in which a value estimate of a property is

derived by estimating the replacement cost of the improvements, deducting therefrom the estimated accrued depreciation,

then adding the market value of the land.

Cost of Money: The interest rate that people or businesses must pay to use another’s money for their own purposes.

Counteroffers: A return offer made by one who has rejected an offer; A new offer made in response to an offer received

from an offeror. A counteroffer has the effect of rejecting the original offer, which cannot thereafter be accepted unless

revived by the offeror’s repeating it.

County Treasurer: An officer entrusted with the receipt, care, and disbursement of funds; a governmental officer charged

with receiving, keeping, and disbursing public revenues

Covenant: Agreements written into deeds and other instruments promising performance or nonperformance of certain acts

or stipulating certain uses or non-uses of the property.

Credit: A bookkeeping entry on the right side of an account, recording the reduction or elimination of an asset or an

expense, or the creation of or addition to a liability or item of equity or revenue.

Credit Report: A report detailing the credit history of a person or business, used to determine creditworthiness. The

financial status of commercial or industrial tenants can be checked by consulting a Dun & Bradstreet reference book, a

credit reporting agency or a local chamber of commerce or better business bureau.


Cubic Feet: Length X width X depth = cubic feet. Divide cubic feet by 27 to find cubic yards.

Customer: One that purchases a commodity or service

Damages: A compensation recoverable in a lawsuit by a complainant who sustained an injury, either to their person or

property, through an act or default of another. Example: A buyer forfeited his earnest money to the owner of the property

as damages for failing to purchase as agreed.

Dangling Commission: Compensation that licensees may accept from a broker with whom they are no longer associated,

assuming they were licensed with that broker at the time the commission was earned and the right to any commission under

such circumstances is spelled out in the licensee’s agreement with the broker.

Days on Market (DOM): The time period between listing a property and either selling or removing it from the market.

DD 214: A Certificate of Release or Discharge from Active Duty, or DD-214, issued by the Department of Defense. The

DD 214 identifies the character of service and reason for discharge (honorable, dishonorable, etc.).

Debt Service: The amount needed to make a periodic payment of principal and interest on an amortized loan.

Debt to Income Ratio: The relationship of a borrower’s total monthly debt to gross monthly income, expressed as a

percentage (total debt \ income = ratio %). Debt obligations include housing and long term debts with more than 10

payments remaining.

Declaration: The legal document that the developer of a condominium must generally file and record in order to create a

condominium under state law. The declaration usually contains a precise description of the land on which the project is

located; whether it is fee or leased; a description of the apartments, common elements and limited common elements; a

statement indicating the use of the building or buildings and apartments, including restrictive uses; and a statement of other

detailed legal requirements, such as service of process and provision for amendment of the declaration.

Deed: An instrument by which a property owner(grantor) conveys and transfers to a grantee an ownership interest in real

property.

Deed in Lieu of Foreclosure: Mortgagor gives a quit claim deed to mortgagee. There could be a problem as to junior

liens.

Deed of Trust: A legal document in which title to property is transferred to a third-party trustee as security for an

obligation owed by the trustor (borrower) to the beneficiary (lender). Also called a trust deed. A deed of trust is similar to

a mortgage – the main difference is that it involves three parties. When a borrower repays the note secured by a deed of

trust, the trustee must reconvey title back to the borrower by way of a deed of reconveyance, which is also called a release

deed.

Deed Restriction: This is a limitation in the deed to a property that dictates certain uses that may or may not be made of

the property.

Default: The nonperformance of a duty or obligation that is part of a contract. A default is normally a breach of contract,

and the non-defaulting party can seek legal remedies to recover any loss. Defaults in long-term leases or contracts for deed

other than nonpayment might be failure to renew insurance policies, failure to pay real estate taxes, damage to the property

and so forth.

Defeasance Clause: The clause in a mortgage that gives the mortgagor the right to redeem his/her property upon the

payment of his obligations to the mortgagee.

Defeasible Fee: Sometimes called a base fee or qualified fee. A fee simple absolute interest in land that is capable of

being defeated or terminated upon the happening of a specified event.

Delinquent: The past due status of a financial obligation such as a promissory note.


Delivery: Giving possession of a document, such as a deed, by one party (the grantor) to the other (the grantee) with the

intent to convey title.

Deposit: Money offered by a prospective buyer as an indication of good faith in entering into a contract to purchase;

earnest money; security for the buyer’s performance of a contract. An earnest money deposit is not necessary to create a

valid purchase contract because the mutual promises of the parties to buy and to sell are sufficient consideration to enforce

the contract.

Depreciation: Loss of value in real property brought about by age, physical deterioration or functional or economic

obsolescence. Broadly, a loss in value from any cause.

Designated Agency: A licensee appointed by a broker as the legal agent of a client.

Developer: One who attempts to put land to its most profitable use through the construction of improvements, such as

commercial condominiums or subdivision projects. The developer organizes and supervises the entire project, usually from

the acquisition of land all the way through construction and final sales, and sometimes continuing with the maintenance of

the project.

Devise: A gift of real property by will.

Direct Capitalization Rate: A rate of return, stated as a percent, used to derive a value opinion from the anticipated net

operating income a property could generate. It is used for direct capitalization in the income approach.

Disability: A physical or mental impairment that substantially limits one or more major life activities, such as walking,

seeing, learning and working. Disability includes a record of such impairment or the fact of being regarded as having such

impairment.

Disclose: To reveal, make known. A recognized “risk reduction tool” for real estate brokers. You must disclose major

physical defects in a house you are selling such as a leaky roof.

Disclosure: To reveal, make known. A recognized “risk reduction tool” for real estate brokers. You must disclose major

physical defects in a house you are selling such as a leaky roof.

Discount Point: The amount of money the borrower or seller must pay the lender to get a mortgage at a stated rate. This

amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the

note would pay the original lender for it under market conditions. A point equals one percent of the loan.

Discrimination: The act of making a distinction against or in favor of a person on the basis of the group or class to which

the person belongs; the failure to treat people equally under the law. The civil Rights Act of 1866 prohibits any

discrimination based on race. In 1968, this act was upheld by the United States Supreme Court in Jones v. Alfred H. Mayer

company, when the court ruled that the 1866 federal law “prohibits all racial discrimination, private and public, in the sale

and rental of property.”

Disintermediation: The process of individuals investing their funds directly instead of placing their savings with banks,

savings and loan associations and similar institutions for investment by such institutions. This has a direct influence on the

scarcity of mortgage money, in that diverted savings rarely find their way into mortgages.

Disparate Impact: A legal doctrine used in federal discrimination cases to show a violation even when the defendant’s

actions have no apparent relationship to a protected class. In a disparate impact case, an intent to discriminate is not

necessary. The doctrine prohibits a neutral restriction that has a statistically greater effect on a protected class than on other

classes.

Doctrine of Emblements: A rule that allows a tenant farmer to re-enter the land to harvest crops that were planted by the

tenant farmer even after the land has been sold to a new owner.


Doctrine of Part Performance: A legal doctrine that allows a court to enforce an oral agreement that should have been in

writing, when one party has taken irrevocable steps to perform his or her side of the bargain, and failure to enforce the

contract would result in an unjust benefit for the other party.

Dominant Tenant: A person with easement rights on another’s property; either the owner of a dominant tenement, or

someone who has an easement in gross.

Dominant Tenement: Estate benefited by an easement right of use.

Double Net Lease: A lease in which the tenant pays two of the expenses associated with property ownership, in addition

to paying the rent.

Dower: The legal right or interest recognized in some states that a wife acquires in the property her husband held or

acquired any time during their marriage. During the husband’s life, the dower is an expectant, or inchoate, interest that

does not actually become a legal estate until the husband’s death.

Down Payment: The amount of cash a purchaser will pay at the time of purchase. Even though down payment usually

includes the earnest money deposit, the terms are not synonymous. Earnest money is applied toward the total amount of

cash down payment due at the closing.

Due Diligence: A fair, proper and due degree of care and activity. An expressed or implied requirement in certain real

estate contracts stating that a person use good-faith efforts to perform obligations under a contract. A buyer who makes an

offer contingent on obtaining financing must use due diligence in seeking such financing.

Dual Agents: When an agent (or agency in some states) represents both principals to a transaction, a dual agency exists.

In many states, it is unethical and illegal for a broker to represent both buyer and seller in a real estate transaction without

written consent. Most license laws provide that a real estate license will be revoked or suspended if a licensee engages in a

dual agency without such consent.

Duties: A moral or legal obligation. Conduct, service or functions that arise from one’s position.

Duty: A moral or legal obligation. Conduct, service or functions that arise from one’s position.

Earnest Money: Down payment made by a purchaser of real estate as evidence of good faith.

Earnest Money Receipt: The cash deposit paid by the prospective buyer of real property as evidence of good-faith

intention to complete the transaction. The amount of earnest money deposited rarely exceeds 10 percent of the purchase

price, and its primary purpose is to serve as a source of payment of damages should the buyer default.

Easement: Created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one

party has in land of another.

Easement Appurtenant: An easement that benefits a particular piece of property, the dominant tenement.

Easement by Prescription: An easement acquired by prescription.

Easement in Gross: An easement that benefits a person instead of a piece of land; there’s a dominant tenant, but no

dominant tenement.

Economic Base: An appraisal term to describe a means of measuring the economic activity of a community that enables it

to attract income from outside its borders; the study of the relationship between basic and non-basic employment patterns as

a means of predicting population, income and other variables having an effect on real estate and land use.

Economic Life: The estimated period over which an improved property may be profitably utilized so that it will yield a

return over and above the economic rent attributable to the land itself; the period during which an improvement has value in

excess of its salvage value.


Effective Age: The number of years of age that is indicated by the condition of the structure, not its actual chronological

age.

Effective Date of Value: The specific day the conclusion of value applies.

Emblement: Crops produced annually, by labor and industry, as distinguished from crops that grow naturally on the land.

Eminent Domain: The right of the government to acquire property for necessary public or quasi-public use by

condemnation; the owner must be fairly compensated. The right of the government to do this and the right of the private

citizen to get paid is spelled out in the 5th

Amendment to the United States Constitution.

Employees: One who works under the supervision and control of another. For purposes of state licensing law, the real

estate salesperson is employed by the broker.

Encapsulation: The process of applying a sealant to asbestos-containing material, which penetrates the material’s surface,

preventing the release of the dangerous fibers into the air.

Encroachment: The building of a structure or construction of any improvements, partly or wholly on the property of

another. A form of trespass.

Encumbrances: Any claim, lien, charge or liability attached to and binding on real property that may lessen its value or

burden, obstruct or impair the use of a property but not necessarily prevent transfer of title.

Enforceability: The ability to carry out effectively

Entitlement: To be owned something under the law. That portion of a VA guaranteed loan that protects a lender if the

veteran defaults.

Environmental Protection Agency (EPA): A federal agency created in 1970 by bringing together various federal

pollution control activities that had been scattered among a number of federal departments and agencies. The EPA is

involved with environmental problems of air and water pollution, solid-waste management, pesticides, radiation and noise.

Equal Credit Opportunity Act (ECOA): Federal legislation passed in 1974 to ensure that the financial institutions and

other firms engaged in the extension of credit exercise their responsibility to make credit available with fairness and

impartiality and without discrimination on the basis of race, color, religion, national origin, sex or marital status, age,

receipt of income from public assistance programs, and ensure good-faith exercise of any right under the Consumer Credit

Protection Act.

Equitable Right of Redemption: The right which the mortgagor has of redeeming his or her property for a limited period

of time after a foreclosure sale.

Equitable Title: Title of the purchaser under a contract of sale.

Equity: The interest or value which an owner has in real estate over and above the liens against it; branch of remedial

justice by and through which relief is afforded to suitors in courts of equity.

Erosion: The wearing away of land by the action of water, wind or glacial ice.

Escalation Clause: A clause in a contract or lease providing for the upward or downward adjustment of payments.

Escape Clause: A contract provision relieving a party of liability for failure to perform, as where a stated contingency

does not occur.

Escheat: The reverting of property to the State when heirs capable of inheriting are lacking.


Escrow Closing: A settlement procedure conducted by a disinterested third party, often an escrow agent, where the seller

and buyer are not present.

Escrows: The process by which money and/or documents are held by a disinterested third person until satisfaction of the

terms and conditions of the escrow instructions has been achieved. Once these terms have been satisfied, delivery and

transfer of the escrowed funds and documents takes place. Although in some states a real estate broker is authorized to

handle escrow functions, the common practice is to employ the services of a licensed escrow company, title company or

lending institution.

Estate: The degree, quantity, nature and extent of ownership interest that a person has in real property. One’s legal

interest or rights, not the physical quantity of land. To be an estate, an interest must be one that is possessory and whose

ownership is measured in terms of duration. A freehold estate (a fee simple or a life estate) is an interest in land for an

uncertain duration. All other interests are less than freehold and include leasehold interests, such as an estate for years or an

estate at will.

Estate for Years: An interest in lands by virtue of a contract for the possession of them for a definite and limited period of

time. A lease with a definite termination date may be said to be an estate for years.

Estoppel: A doctrine which bars one from asserting rights which are inconsistent with a previous position or

representation.

Ethics: A system of moral principles, rules and standards of conduct. High ethical standards are more important in real

estate than in certain other transactions where the clients may be more familiar with the services performed. Good ethics is

concerned with fidelity, integrity and competency.

Eviction, Actual: Physically forcing someone off of property (or preventing them from re-entering), or using the legal

process to make someone leave.

Eviction, Constructive: Conduct by the landlord that so materially disturbs or impairs a tenant’s enjoyment of the leased

premises that the tenant is effectively forced to move out and terminate the lease without liability for further rent.

Eviction, Retaliatory: When a landlord evicts a tenant in retaliation for requesting repairs, filing a complaint against the

landlord, or organizing or participating in a tenants’ rights group.

Eviction, Self-help: When a landlord uses physical force, a lockout, or a utility shutoff to remove a tenant, instead of

going through the legal process.

Evidence of Title: Proof of ownership of property. Common examples of such evidence are a certificate of title, title

insurance policy or, with Torrens-registered property, a Torrens certificate of title. A person who contracts to sell property

must furnish the buyer with a marketable title to the property

Exchange: A transaction in which all or part of the consideration for the purchase of real property is the transfer of

property of “like kind” (i.e., real estate for real estate). The original attraction of an exchange was in those cases where it

was difficult to produce a cash buyer. Later, however, the exchange became a popular device for deferring capital gains

taxes.

Exclusive Agents: A written listing agreement giving a sole agent the right to sell a property for a specified time, but

reserving to the owner the right to sell the property himself without owing a commission. The exclusive agent is entitled to

a commission if he or she personally sells the property or if it is sold by anyone other than the seller.

Exclusive Buyer Agency Agreement: A contract between a buyer and broker in which the broker earns commission only

if he is the broker who finds the property the buyer eventually purchases.

Exclusive Right to Sell Listing: A written agreement between owner and agent giving agent the right to collect a

commission if the property is sold by anyone during the term of his agreement.


Execute: To carry out fully : put completely into effect. The act of making a document legally valid, such as formalizing a

contract by signing, or acknowledging and delivering a deed. In some cases, execution of a document may refer solely to

the act of signing; in other cases it may refer to complete performance of the document’s terms.

Executed: The act of making a document legally valid, such as formalizing a contract by signing, or acknowledging and

delivering a deed.

Executor: A person named in a will to carry out its provisions as to the disposition of the estate of a person deceased.

Executory Contract: A contract in which one or both parties have not yet completed performance of their contractual

obligations.

Expert: Having, involving, or displaying special skill or knowledge derived from training or experience

Express Contract: An agreement that’s been expressed in words, either written or spoken.

Expressly: In an express manner: explicitly <expressly rejected the proposal

Facilitating: To make easier : help bring about as in assisting a buyer and seller in reaching agreement in a real estate

transaction.

FHA: A federal agency established to encourage improvement in housing standards and conditions, to provide an adequate

home-financing system through the insurance of housing mortgages and credit and to exert a stabilizing influence on the

mortgage market.

Fair Housing Law: Title VIII of the Civil Rights Act of 1968.

Fair Market Value: An outdated appraisal term for the most probable price in terms of money that a property, if offered

for sale for a reasonable period of time in a competitive market, would bring to a seller who is willing but not compelled to

sell, from a buyer who is willing but not compelled to buy, both parties being fully informed of all purposes to which the

property is best adapted and ways it is capable of being used. The accepted term today is market value.

Familial Status: As defined in the Fair Housing Act, a situation in which one or more individuals under age 18 live with a

parent or legal guardian or another person given written permission from a parent. Specifically covered are pregnant

women or a person in the process of securing legal custody.

Federal Fair Housing: Law that makes discrimination based on race, color, sex, familial status, handicap, religion or

national origin illegal in connection with the sale or rental of most dwellings.

Fee Simple Absolute: The highest type of estate or interest a person may have in property. In modern usage, it expressly

establishes the title to real property in the owner, without limitation or end. The owner may dispose of it by sale or trade or

will as he or she chooses.

Fee Simple Determinable: A defeasible fee that terminates automatically if certain conditions occur. The grantor (or his

or her heirs) has a possibility of reverter.

FHA-Insurance: An undertaking by FHA to insure the lender against loss arising from a default by borrow.

Fiduciary: A relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or

manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a

client or by a broker (and salesperson) to a principal. The fiduciary owes complete allegiance to the client.

Fiduciary Deed: A deed executed by a person in a position of trust, held by law to high standards of good faith and

loyalty.


Financial: Relating to finance or financiers; financing is that part of the purchase price for a property exclusive of the

down payment.

First Substantive Contact: An event triggering agency disclosure (e.g., prior to entering into a listing agreement, prior to

showing a property, at an open house when a buyer displays serious interest, etc.).

Fixed Expenses: Those recurring expenses that have to be paid regardless of whether the property is occupied, for

example, real property taxes, hazard insurance and debt service. These expenses contrast with operating expenses

necessary to maintain the production of income from the operation of a property.

Fixed rate: Having the same rate of interest for the life of the loan.

Fixtures: An article (such as a stove, bookcase or track lighting) that was once personal property but has been so affixed to

real estate that is has become real property.

Flood Zone: Geographic areas that the FEMA has defined according to varying levels of flood risk.

Foreclosure: A legal procedure whereby property used for security for a debt is sold to satisfy the debt in the event of

default of payment of the mortgage note or default of other terms of a mortgage document.

Fraud: Any form of deceit, trickery, breach of confidence or misrepresentation by which one party attempts to gain some

unfair or dishonest advantage over another. Unlike negligence, fraud is a deceitful practice or material misstatement of a

material fact, known to be false, and done with intent to deceive, or with reckless indifference as to its truth, and relied on

by the injured party to his or her damage.

Fraudulent: characterized by, based on, or done by fraud : deceitful

Freehold Estate: An estate of indeterminable duration, e.g., fee simple or life estate.

Frontage: A term used to describe or identify that part of a parcel of land or an improvement on the land which faces a

street. The term is also used to refer to the lineal extent of the land or improvement that is parallel to and facing the street,

e.g., a 75-foot frontage.

Fructus Naturales: Naturally growing plants and trees.

Functional Obsolescence: A loss of value due to adverse factors built into the structure which affects the utility of the

structure.

Fungal: Of, relating to, or having the characteristics of fungi

General Agent: One authorized by a principal to perform any and all acts associated with the continued operation of a

particular job or a certain business of the principal. The essential feature of a general agency is the continuity of service,

such as that provided by a property manager of a large condominium project. Most real estate brokers are treated as special

agents.

General Lien: A lien on all the property of a debtor.

General Partnership: A form of business organization in which two or more co-owners carry on a business for profit. All

the owners are general partners and share a full liability for the debts and obligations of the partnership.

General Warranty Deed: The warranty deed where the seller guarantees that the title is marketable.

Genuine Assent: Consent given freely to create a binding contract. If offer or acceptance is given as a result of fraud,

undue influence, duress, or mistake, then the contract is voidable by the victimized party.

http://www.merriam-webster.com/dictionary/finance

http://www.merriam-webster.com/dictionary/fraud

http://www.merriam-webster.com/dictionary/deceitful


Good Consideration: A consideration founded on love and affection for kindred by blood or marriage, which may be

found in a gift deed. However, a good consideration is not sufficient to support a contract.

Good Faith: Bona fide; an act is done in good faith if it is in fact done honestly, whether negligently or not. The recording

laws are designed to protect a “good-faith” purchaser. Most antidiscrimination laws require a broker to transmit all good-

faith offers to lease or buy. Many states add a requirement of good faith for a person to acquire title to someone else’s real

property by adverse possession.

Government Survey System: A method of specifying the location of parcels of land using prime meridians, base lines,

standard parallels, guide meridians, townships, and sections.

Graduated Lease: Lease which provides for a varying rental rate, often based upon future determination; sometimes rent

is based upon result of periodical appraisals; used largely in long-term leases.

Grantee: The purchaser; a person to whom a grant is made.

Grantor: Seller of property; one who signs a deed.

Gross Lease: A lease of property under which the lessee pays a fixed rent and the lessor pays the taxes, insurance and

other charges regularly incurred through ownership; also called a fixed or flat lease.

Gross Living Area: Residential space that is finished, heated, and above grade. Garages, finished basements, and storage

areas do not count in GLA.

Gross Rent Multiplier: A figure which, times the gross income of a property, produces an estimate of value of the

property.

Habendum Clause: That clause in a deed which states, “to have and to hold to said grantee, his heirs, successors, and

assigns, forever.”

Heirs: Recipients of an inheritance from a deceased owner. A person who inherits under a will or a person who succeeds

to property by the state laws of descent if the decedent dies without a will (intestate). State probate codes (laws of descent

and distribution) set up the method of determining heirs for distributing an intestate decedent’s real property.

Highest and Best Use: An appraisal phrase meaning that use which at the time of an appraisal is most likely to produce

the greatest net return to the land and/or buildings over a given period of time; that use which will produce the greatest

amount of amenities or profit. This is the starting point for appraisal.

Holder in Due Course: One who has taken a note, check or bill of exchange in due course:

1. Appears good on its face;

2. Before it was overdue;

3. In good faith and for value;

4. Without knowledge that it has been previously dishonored without notice of any defect at the time it was negotiated to

him.

Holdover Tenant: Tenant who remains in possession of leased property after the expiration of the lease term.

Home Equity Loan: A mortgage loan (usually in a subordinate position) that allows the borrower to obtain multiple

advances of the loan proceeds at the borrower’s discretion, up to an amount that represents a specific percentage of the

borrower’s equity in a property.

Home Inspection: A visit to and review of particular premises. A purchaser should always inspect the property before

closing. Because possession of property gives constructive notice of any claims of ownership, an inspection is an important

step in discovering any possible claims by others. An inspection might also reveal any encroachments or unrecorded

easements.


Homeowner’s Association: A nonprofit association of homeowners organized pursuant to a declaration of restrictions or

protective covenants for a subdivision, PUD or condominium. Like other nonprofit associations, a homeowner’s

association has members, not shareholders.

Homeowner’s Insurance: A combined property and liability insurance policy designed for residential use. A variety of

packaged policies are designed for owners of single-family dwellings, for tenants and for condominium owners.

Home Warranty: A contract between a homeowner and a home warranty company that provides for discounted repair and

replacement service on a home’s major components.

Homestead: A home upon which the owner or owners have recorded a Declaration of Homestead. As provided by

Statutes in some states, it protects home against judgments up to specified amounts.

Housing Expense Ratio: The relationship of a borrower’s total monthly housing expense to gross monthly income,

expressed as a percentage (total housing expense\ income = ratio%).

HVAC: Heating, ventilation, and air conditioning.

Hypothecation: To give a thing as security without the necessity of giving up possession of it.

Implied Agency: An actual agency that arises by deduction or inference from other facts and circumstances, including the

words and conduct of the parties (i.e., implied in fact through behavior).

Implied Contract: An unwritten contract inferred from the actions of the parties. Such an agreement is created by neither

words nor writing; it is inferred from the conduct of the parties. Also, a contract in which the terms are understood and

agreed to, but not fully stated in the document.

Incentive Zoning: A system by which developers receive zoning incentives on the condition that they provide specific

physical, social, or cultural benefits to the community.

Incidental Authority: The authority to do everything reasonably necessary to carry out the principal’s express orders.

Income Approach: One of the three methods in the appraisal process; an analysis in which the estimated net income from

the subject residence is used as a basis for estimating value by dividing the net by a capitalization rate.

Independent Contractor: A person who acts for another but who sells final results and whose methods of achieving those

results are not subject to the control of another.

Index: A statistical report that is generally a reliable indicator of the approximate change in the cost of money; often used

to adjust the interest rate of adjustable rate mortgages.

Inflation: An increase in the cost of goods or services, or too many people wanting too few goods.

In-House Transaction: A sale in which the listing broker is the only broker in the transaction; there is no outside broker

involved as in a cooperative sale. Either the listing salesperson finds the buyer, or another salesperson working for the

listing broker finds the buyer.

Injunction: A writ or order issued under the seal of a court to restrain one or more parties to a suit or proceeding from

doing an act which is deemed to be inequitable or unjust in regard to the rights of some other party or parties in the suit or

proceeding.

Inquiry Notice: Legal notice that is presumed by law when factors exist that would make a reasonable person inquire

further.


Interest: The sum paid or accrued in return for the use of money. Usually stated in terms of an annual rate, although the

parties may not always call this payment interest, because it may be disguised in the form of points or mortgage

prepayment penalties. Interest on a promissory note is usually charged and due in arrears at the end of each payment

period.

Intermediation: The process of pooling and supplying funds for investment by financial institutions called intermediaries.

The process is dependent on individual savers placing their funds with these institutions and foregoing opportunities to

directly invest in the investments selected.

Interval Ownership: A popular system of timeshare ownership in which the owner acquires title to a specific unit for a

certain week (or weeks) of each year.

Intestate: Without a will; a person who died without leaving a will.

Invalidity: Lack of validity or cogency

Involuntary Alienation: Involuntary transfer such as foreclosure for eminent domain.

Involuntary Lien: A lien imposed against property without consent of an owner. Example: taxes, special assessments,

federal income tax liens, etc.

Irrevocable: An agreement that cannot be withdrawn or revoked. Most state licensing laws require a nonresident broker

to file an irrevocable consent agreeing to be bound to the outcome of lawsuits brought against the broker.

IRS: An agency that issues its own regulations interpreting the body of statutes codifying the federal tax laws.

IRV Formula: A simple calculation for finding the net operating income (I), the capitalization rate (R), or the value (V) of

an investment property. When any two factors are known, the third can be determined.

Joint Tenancy: Joint ownership by two or more persons with right of survivorship; all joint tenants own equal interest and

have equal rights in the property and are formed at the same time by the same instrument.

Judgment Lien: A legal claim on all of the property of a judgment debtor in the county where recorded, which enables the

judgment creditor to have the property sold for payment of the amount of the judgment.

Judicial Foreclosure: A method of foreclosing on real property by means of a court supervised sale. In a judicial

foreclosure, there is an appraisal, after which the court determines an upset price below which no bids to purchase will be

accepted.

Just Compensation: An amount of compensation to be received by a party for the taking of his or her property under the

power of eminent domain. Under both federal and state constitutions, private property may not be taken for public use

without just compensation having first been determined by the court.

Laches: Delay or negligence in asserting one’s legal rights.

Land: The solid material of the earth and anything affixed permanently to it, including buildings, trees, minerals, water

flowing on the land or beneath it, and air space above it.

Land Contract: A contract ordinarily used in connection with the sale of property in cases where the seller does not wish

to convey title until all or a certain part of the purchase price is paid by the buyer; often used when property is sold on small

down payment.

Land Lease: A lease under which the tenant leases the land from the owner, but the tenant owns the building.

Landlord: The lessor or the owner of leased premises. The landlord retains a reversionary interest in the property, so that

when the lease ends the property will revert to the landlord.


Latent Defect: Defects that are not visible or apparent; hidden defects.

Lawful and Possible Objective: Allowed or permitted by law; one of the requisites of a valid contract.

Lead: A bluish-white metal added to both exterior and interior paint as a drying agent and for pigmentation before 1978.

Also, once used for pipes in plumbing systems in homes and businesses; can cause health issues, especially for children.

Lead-Based Paint Disclosure: The law requires disclosure of any lead tests and/or the possibility of the presence of lead-

based paint. A notice concerning the risks of lead poisoning that must be given to purchasers of housing constructed prior

to 1978.

Lease: An agreement, written or unwritten, transferring the right to exclusive possession and use of real estate for a

definite period of time. To create a valid lease, the lessor must retain a reversionary right; that is, the lessor (landlord) must

grant the right of possession to the lessee (tenant) but retain the right to retake possession after the lease term has expired.

Lease Purchase: An agreement in which part of the rent payment is applied toward a set purchase price. title is

transferred from lessor to lessee when the lessor receives the prearranged total price.

Lease with Option to Buy: A lease clause that gives the tenant the right to purchase the property under specified

conditions. It usually runs with the land, so that if the lease is assigned, the option to purchase is likewise assigned.

Usually it does not extend beyond the term of the lease.

Leased Fee Estate: The owner’s interest in a leased estate, which is reversionary in that possession reverts to the landlord

(lessor) when the lease ends.

Leasehold: A less than freehold estate that a tenant possesses in real property. Leasehold estates are generally classified

as estates in personal property.

Leases: An agreement, written or unwritten, transferring the right to exclusive possession and use of real estate for a

definite period of time. To create a valid lease, the lessor must retain a reversionary right; that is, the lessor (landlord) must

grant the right of possession to the lessee (tenant) but retain the right to retake possession after the lease term has expired.

Legal Counsel: One who is legally appointed to transact business on another's behalf

Legal Description: A description recognized by law; a description by which property can be definitely located by reference

to government surveys metes and bounds or approved recorded maps.

Legal Title: The interest in property held by the rightful owner. The seller’s interest in property under a land contract.

Lender: To let out (money) for temporary use on the condition of repayment with interest

Lessee: The person to whom property is rented or leased

Lessor: One that conveys property by lease; The person who rents or leases property to another. In residential leasing, he

or she is often referred to as a landlord.

Liable: Legal responsibility for an act.

License: A personal privilege to enter upon or do some act on the land of another; also, authorization to engage in a

business, an activity, or profession.

Licensee: A person who has a valid real estate license. A real estate licensee can generally be a salesperson or broker,

active or inactive, or an individual, corporation or partnership.

Lien: A charge that one person has on the property of another as security for a debt or obligation. A lien always arises

from a debt and can be created by agreement of the parties(i.e. mortgage) or by a operation of law(i.e. tax lien).


Lien Theory: A mortgage theory that a mortgage creates only a lien.

Life Estate: An estate or interest in real property which is held for the duration of the life of some certain person.

Life Estate Pur Autre Vie: A life estate “for the life of another,” where the measuring life is someone other than the life

tenant.

Life Tenant: A person possessing a life estate.

Limitation: An act or instance of limiting

Limited Liability Company: An alternative business entity with the with the combined characteristics and benefits of

both limited partnership and S corporation.

Limited Common Areas: That special class of common elements in a condominium project that is reserved for the use of

one or more apartment(s) to the exclusion of other apartments. This would include assigned parking stalls, storage units or

any comon areas and facilities available for use by one or more, but less than all, unit owners.

Limited Partnership: A partnership composed of one or more general partners and one or more limited partners. The

contribution and liability of the latter are limited.

Limited Warranty Deed: A deed that contains warranties covering the time period the grantor holds title.

Liquidated Damages: An amount predetermined by the parties to an agreement as the total amount of compensation an

injured party should receive if the other party breaches a specified part of the contract. Often in building contracts the

parties anticipate the possibility of a breach (for example, a delay in completion by a set date) and specify in the contract

the amount of the damages to be paid in the event of the breach. To be enforceable, the liquidated damages clause must set

forth an amount that bears a reasonable relationship to the actual damages as estimated by the parties; otherwise, the court

will treat the amount as a penalty for failure to perform.

Lis Pendens: A recorded notice stating that there is a lawsuit pending that may affect title to the defendant’s real estate.

Listing Agreement: A written agency contract between a seller and a real estate broker, stipulating that the broker will be

paid a commission for finding (or attempting to find) a buyer for the seller’s property.

Listing Broker: To assist in the selling of his or her property for which the owner agrees to pay certain identified

compensation

Listed Property: Property which has been listed for sale; A written employment agreement in place between a property

owner and a real estate broker authorizing the broker to find a buyer or a tenant for certain real property.

Listing Brokers: To assist in the selling of his or her property for which the owner agrees to pay certain identified

compensation

Litigation: Ultimate legal method for settling controversies or disputes between and among persons, organizations, and the

State. In litigation process, a case (called suit or lawsuit) is brought before a court of law suitably empowered (having the

jurisdiction) to hear the case, by the parties involved (the litigants) for resolution (the judgment).

Littoral Rights: Water rights of landowners whose land touches a commercial lake, sea or ocean.

Loan: Money lent at interest. A loan commitment is a written pledge by a lender to lend a certain amount of money to a

qualified borrower on a particular piece of real estate for a specified time under specific terms. It may be a conditional or

qualified commitment, or it may be a firm commitment.

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Loan Estimate: The disclosure of loan terms, annual percentage rate and other credit costs, and estimated settlement costs

that lenders must present to borrowers within three business days of a completed loan application in order to satisfy

provisions of the Truth in Lending Ace and the Real Estate Settlement Procedures Act.

Loan-to-Value Ratio (LTV): The percentage of a property’s value that a lender can or may loan to a borrower. For

example, if the ratio is 80% this means that a lender may loan 80% of the property’s appraised value to a borrower.

Lot: A plot of ground.

Lot and Block System: The type of legal description used for platted property. The description states only the property’s

lot number and block number in a particular subdivision. To find out the exact location of the property’s boundaries you

consult the plat map for that subdivision at the county recorder’s office.

Loyalty: A fiduciary duty that requires a real estate licensee to put the principal’s interests above all others’ interests,

including her own.

Maintenance Fee: A charge or lien levied against property owners to maintain their real estate in operation and productive

use, especially in condominiums. In condominium living, the amount of the maintenance fee is usually determined by the

board of directors upon review of the budgets.

Maliciously: Having or showing a desire to cause harm to someone : given to, marked by, or arising from MALICE

Market Value: Under guidelines published by federal lending institutions (Fannie Mae, Freddie Mac), the most probable

price a property should bring in a competitive and open marked under all conditions requisite to a fair sale.

Marketable Title: Title which a reasonable purchaser, informed as to the facts and their legal importance and acting with

reasonable care, would be willing and ought to accept.

Matched Pair Analysis: Process of determining the value of specific property characteristics or features by comparing

pairs of similar properties.

Material: Having real importance or great consequences. Any fact that is relevant to a person making a decision. Agents

must disclose all material facts to their clients. Agents must also disclose to buyers material facts about the condition of the

property, such as known structural defects, building code violations and hidden dangerous conditions.

Materialman: Someone who supplies materials for a construction project.

Material Breach: A breach of contract important enough so that is excuses the nonbreaching party from performing his or

her contractual obligations.

Material Fact: A fact is material if it is one which the agent should realize would be likely to affect the judgment of the

principal in giving his consent to the agent to enter into the particular transaction on the specified terms.

Measuring Life: A person whose life determines the length of a life estate.

Mechanic’s Lien: A lien created by statute which exists against real property in favor of persons who have performed

work or furnished materials for the improvement of the real estate.

Mediation: An alternative process of dispute resolution in which an independent third party works with two disputing

parties to help them resolve their differences. If successful, the mediation should be reduced to an enforceable written

agreement. If mediation is not successful, the next step often is binding arbitration.

Meeting of the Minds: When all parties freely agree to the terms of a contract, without fraud, undue influence, duress,

menace, or mistake. Mutual consent is achieved through offer and acceptance; it is a “meeting of the minds.”

http://www.merriam-webster.com/dictionary/malice


Methamphetamine: An amine C10H15N used medically in the form of its crystalline hydrochloride especially in the

treatment of obesity and often used illicitly as a stimulant

Metes and Bounds System: A term used in describing the boundary lines of land, setting forth all the boundary lines

together with their terminal points and angles.

Millage: A rate of taxation for real property calculated as $1 per $1,000 (or .001) of assessed value.

Mineral, Oil, and Gas Rights: The right to minerals, oil and gas in the ground and the implied easement to enter to mine

or drill.

MIP: An annual premium amounting to one-half percent of the loan balance each year paid by the borrower.

Misconduct: Intentional wrongdoing

Misleading: To lead in a wrong direction or into a mistaken action or belief often by deliberate deceit

Misrepresent: A false statement or concealment of a material fact made with the intention of inducing some action by

another party. A court will grant relief in the form of damages or rescission if the misrepresented fact is material to the

transaction.

Mitigation: When the non-breaching party takes action to minimize the losses resulting from a breach of contract.

Mold: The cornice; wood molding applied to cover the junction of roof boards and outside wall. On the interior, the

picture mold is placed where a wall joins a ceiling.

Mortgage: A written instrument that creates a lien upon real property as a security for the payment of a specified debt.

Mortgage Broker: A broker who charges borrowers for loans arranged.

Mortgage Insurance Premium (MIP): Most of the popular FHA programs require the borrower to pay two mortgage

insurance premiums. One is an upfront MIP paid at closing that amounts to 2.25 percent of the loan amount. The MIP is

reduced for first time and central cities buyers who complete a homebuyer education program. The other charge is an

annual premium amounting to one-half percent of the loan balance each year.

Mortgagee: One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation, a lender.

Mortgagor: One who gives a mortgage on his property to secure a loan or assure performance of an obligation; a

borrower.

Multiple Listing Service: A Multiple Listing Service, or MLS, is a marketing database set up by a group of cooperating

real estate brokers. Its’ purpose is to provide accurate and structured data about properties for sale. It also is a mechanism

for listing brokers to offer compensation to buyer brokers who bring a buyer for their listed property.

Mutual: Shared in common

National Association of Realtors: Formerly known as the National Association of Real Estate Boards (NAREB), NAR is

the largest and most prestigious real estate organization in the world.

Negative Amortization: Loan payments that do not cover the interest due so that the loan principal increases.

Negligence: The failure to use ordinary or reasonable care under the circumstances


Negotiate: To confer with another so as to arrive at the settlement of some matter. A real estate sale illustrates the

negotiation process: The first offer received for property often is considered merely an intention to deal. Thereafter follows

a series of counteroffers leading up to the consummation of the transaction. Usually, however, negotiation takes place only

if the broker’s efforts have proceeded to the point where the prospect is considered a likely purchaser.

Negotiable Instrument: A promissory note or check or certificate of deposit or draft (bill of exchange) which under the

Negotiable Instruments Law (now contained in the Commercial Code), entitles an endorsee to greater rights than an

assignee, under certain prescribed conditions.

Negotiated: The completed transaction of business aimed at reaching a meeting of the minds among the parties. A real

estate sale illustrates the negotiation process: The first offer received for property often is considered merely an intention to

deal. Thereafter follows a series of counteroffers leading up to the consummation of the transaction. Usually, however,

negotiation takes place only if the broker’s efforts have proceeded to the point where the prospect is considered a likely

purchaser.

Neighborhood: Contiguous areas showing common characteristics of population and homogeneity of land use.

Net Lease: A lease requiring a lessee to pay certain charges against the property such as taxes, insurance and maintenance

costs in addition to rental payments.

Net Listing: A listing which provides that the agent may retain as compensation for his services all sums received over

and above a net price to the owner.

Net Operating Income (NOI): The balance remaining after deducting from gross receipts all fixed expenses, operating

expenses, replacement reserves and allowance for vacancy and bad debts, but before deducting any debt service or

depreciation.

Net to Seller: An estimate of the money a seller should receive from a real estate transaction based on a certain selling

price after all costs and expenses have been paid.

Nonconforming Loan: Loan that does not meet Fannie Mae/Freddie Mac standards and, thus, cannot be sold on the

secondary market.

Nonconforming Use: A property use that doesn’t conform to current zoning requirements, but is allowed because the

property was being used in that way before the present zoning ordinance was enacted.

Nonjudicial Foreclosure: The process of selling real property under a power of sale in a mortgage or deed of trust that is

in default. One disadvantage is that the lender cannot obtain a deficiency judgment.

Notice of Foreclosure: The notification given by a lender to a borrower who has failed to repay a debt according to the

terms of the loan, accelerating the due date of the debt to the present and requiring the borrower to repay the entire

outstanding balance of the loan at once.

Nonresident: Not residing in a particular place.

Notice of Default: A notice to a defaulting party announcing that a default has occurred. The defaulting party is usually

provided a grace period during which to cure the default. Notices of default are frequently provided for in contracts for

deed and mortgages and are sometimes required by operation of law.

Novation: The substitution of a new obligation in place of an existing one.

Obedience: A fiduciary duty that requires a licensee to follow the (legal) instructions of the principal, obey the parameters

of the agency relationship, and not stray beyond the scope of authority.


Obligation: Something (as a formal contract, a promise, or the demands of conscience or custom) that obligates one to a

course of action: a debt security (as a mortgage or corporate bond): a commitment (as by a government) to pay a particular

sum of money; also: an amount owed under such an obligation

Occupancy Standard: The establishment of the maximum number of occupants allowable in a given rental dwelling,

intended to help promote an adequate and safely occupied inventory of housing.

Offeree: One to whom an offer is made.

Offeror: One who makes an offer.

Offers: To present for acceptance or rejection; A promise by one party to act or perform in a specified manner, provided

the other party acts or performs in the manner requested. An offer demonstrates an intention to enter into a contract, as

opposed to merely inviting offers from others, as with a listing contract. The sales contract transmits to the seller a

prospective buyer’s offer to purchase the seller’s property.

Open Listing: An authorization given by a property owner to a real estate agent wherein said agent is given the non-

exclusive rights to secure a purchaser; open listings may be given to any number of agents without liability to compensate

any except the one who first secures a buyer ready, willing and able to meet the terms of the listing, or secures the

acceptance by the seller of a satisfactory offer.

Option: A right given for a consideration to purchase or lease a property upon specified terms within a specified time.

Optionee: The person who is given an option by the owner of property.

Order of Eviction: A court ordered directive to a public officer (often the sheriff or marshal) to seize the property to

regain possession for the owner.

Origination: The process of making or initiating a new loan.

Originaton Fee: The finance fee charged by a lender for making a mortgage. An origination fee covers initial costs, such

as preparation of documents and credit, inspection, and appraisal fees. It is generally computed as a percentage of the face

amount on the loan.

Overage Rent: Added rent; in retail store leases, the lessee often sets a minimum base rent, with a percentage of the

volume of business the store does over a certain amount constituting additional rent. This overage should be treated as

excess income by the lessee.

Owner-occupied: Property owner who physically occupies the property; the opposite of an absentee landlord or owner.

An owner/occupant can usually get preferred mortgage rates over an investor/owner.

Owner’s Policy: A title insurance policy, the proceeds of which are payable to the property owner. The coverage is

usually less extensive than the lender’s policy. If there is a lender’s policy, the owner can obtain a combined owner/lender

policy for minimal added expense.

Ownership in Severalty: Ownership by a single individual.

Package Mortgage: A type of mortgage used in home financing covering real property, improvements, and movable

equipment/appliances.

Parcel: A lot or piece of real estate, particularly a specified part of a larger tract.

Parol Evidence: Evidence concerning negotiations or oral agreements that were not included in a written contract, often

altering or contradicting the terms of the written contract.


Partial Performance: A potential remedy to breach of contract where the injured party agrees to accept less than the full

terms of the original contract.

Partnership: An association of two or more persons who carry on a business for profit as co-owners. Under this act, a

partnership can hold title to real property in the name of the partnership, holding by tenancy in partnership. Before the act,

many partnerships vested the title to property in a trustee of a land trust so as to avoid problems with the spouses of the

partners claiming a marital interest in the partnership property.

Patent Defect: A visible, apparent defect that can be seen in a reasonably thorough inspection of property.

Payment Cap: With regard to an adjustable rate mortgage, this limits the amount of increase in the borrower’s monthly

principal and interest at the payment adjustment date, if the principal and interest increase called for by the interest rate

increase exceeds the payment cap percentage. This limitation is often at the borrower’s option and may result in negative

amortization.

Percentage Lease: Lease on the property, the rental for which is determined by amount of business done by the lessee;

usually a percentage of gross receipts from the business with provision for a minimum rental.

Periodic Tenancy: Tenancy for specified periods, such as month to month, which can be terminated at any time by either

party on proper notice.

Permits: Official government documents that acknowledge work a person wants to do on a property and allow it to be

done.

Personal Property: Things that are tangible and movable; property that is not classified as real property, such as chattels.

Title to personal property is transferred by way of a bill of sale, as contrasted with a deed for real property. A tree is real

property while it is rooted in the ground, but when severed it is transformed into personal property.

Pertinent: Having a clear decisive relevance to the matter in hand

Pitch: The slope of a roof measured as the vertical distance in inches (rise) divided by the horizontal distance in feet

(span).

PITI: Abbreviation for principal, interest, taxes and insurance, as commonly found in an all-inclusive mortgage payment.

Plat: A detailed survey map of a subdivision, recorded in the county where the land is located. Subdivided property is

often called platted property.

Platform Framing: A technique of framing where a platform is built over the basement or crawl space, and then studs are

extended up to the next level, where another platform is built; finally, studs are extended to the roof line.

Platted Property: Land that has been subdivided into blocks and lots.

Plottage: An increase in value, over the cost of acquiring the separate parcels, by successful assemblage, usually due to a

change in use.

Points: Each point is one percent of the loan. They are charged by lenders to make the loan more attractive. For buyers

they are treated as prepaid interest.

Police Power: The right of the State to enact laws and regulations and enforce them for the order, safety, health, morals,

and general welfare of the public.

Portfolio Loan: A loan originated and maintained by the lending institution and not sold in the secondary mortgage

market. The lender is not restricted by the qualification requirements set by the secondary mortgage market. These loans

eventually are sold after becoming “seasoned”.


Possession: The act of either actually or constructively possessing or occupying property. Possession imparts constructive

notice that the party in possession may have certain rights. Therefore, when someone is in possession of property under a

claim of ownership and a buyer purchases the property from the owner of record, the purchaser for value is not protected

under the recording laws, in that possession imparts constructive notice in much the same way as does the recording of a

deed.

Power and Authority: Power is the ability, whether personal or social, to get things done — either to enforce one’s own

will or to enforce the collective will of some group over others. Authority, however, is where power is granted by consent;

and when an individual or committee is said to have authority, the reason that justifies this authority is known as

legitimacy.

Power of Sale Clause: As used in a will, authorizes the executor to sell estate property without the necessity of publishing

a notice of sale.

Practicable: Capable of being put into practice or of being done or accomplished

Pre-Approval: An act or instance of approving prior to

Predatory Lending: Loan tactics that take advantage of ill-informed consumers through excessively high fees,

misrepresented loan terms, or frequent refinancing that does not benefit the borrower.

Prepaid Expenses: Prorations of prepaid items of expense which are credited to the seller in the closing escrow statement.

Prepayment Clause: Provision made for loan payments to be larger than those specified in the note.

Prepayment Penalty: Penalty for the payment of a mortgage or trust deed note before it actually becomes due if the note

does not provide for prepayment.

Prequalified Loan: A pending loan in which a loan officer opines that, based on a preliminary interview and a credit

report, the borrower will be able to meet the loan requirements – assuming the borrower is telling the truth about his or her

financial situation and income status.

Price: The quantity of one thing that is exchanged for another. The amount of money paid for an item; the consideration;

the purchase price. There is a distinction between market price and market value.

Price Fixing: The practice of conspiring to establish fixed fees or prices for services rendered or goods sold. In recent

years. the setting of attorney fees by local bar associations and commission percentages and management fees by local

realty associations has been successfully attached as price fixing and thus a violation of the Sherman Antitrust Act.

Primary Money Market: A market where loans are made directly to borrowers by a lender who retains the loan in his

portfolio rather than sell it to an investor.

Prime Rate: The minimum interest rate charged by a commercial bank on short-term loans to its largest and strongest

clients (those with the highest credit standings). Prime rate is often used as a base rate for other business and personal

loans. Prime rates are determined in part by the rates banks have to pay for the money they lend to their prime rate

borrowers.

Principal Meridian: The prime meridian intersecting the reference marker of a survey that is used as a reference line for

numbering ranges.

Principals: One of the main parties to a transaction. For example, the buyer and seller are principals in the purchase of

real property. Do not confuse principal and principle. Principles are rules like codes of behavior or ethics.

Private Mortgage Insurance (PMI): A policy of Private Mortgage Insurance usually required for a conventional loan

where the down payment is less than 20 percent.

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Private Restriction: A restriction imposed on property by a previous owner or the subdivision developer; a restrictive

covenant or a condition in a deed.

Probate: A judicial proceeding in which the validity of a will is established and the executor is authorized to distribute the

estate property; or, when there is no valid will, an administrator is appointed to distribute the estate to the heirs.

Procuring Cause: That cause originating from series of events that, without break in continuity, results in the prime object

of an agent’s employment producing a final buyer.

Professionals: Characterized by or conforming to the technical or ethical standards of a profession

Progression, Principle of: The worth of a lesser valued residence tends to be enhanced by association with many higher

valued residences in the same area.

Promissory Note: An unconditional written promise of one person to pay a certain sum of money to another, or order, or

bearer, at a future specified time. The words or order or or bearer are important to make the instrument negotiable, because

these words enable the instrument to be endorsed and transferred.

Promotional: The act of furthering the growth or development of something; especially: the furtherance of the acceptance

and sale of merchandise through advertising, publicity, or discounting.

Property Management: That aspect of the real estate profession devoted to the leasing, managing, marketing and overall

maintenance of the property of others. The property manager strives to maintain the investment and income in the property

and to maintain the physical features of the building.

Property Manager: A person hired by a property owner to administer, market, and maintain rental property.

Proprietary Lease: A written lease in a cooperative apartment building, between the owner/corporation and the

tenant/stockholder, in which the tenant is given the right to occupy a particular unit. It differs from the typical landlord-

tenant lease in that the tenant is also a stockholder in the corporation that owns the building.

Prorations: To divide or distribute proportionately expenses such as rent, insurance and the like and are paid in advance.

Some expenses, however, such as real property taxes and interest on a mortgage, are paid in arrears. Upon closing a real

estate transaction, these various expenses are prorated between the buyer and the seller to ensure that each is responsible for

the operating expenses of the property during his or her ownership.

Provision: A measure taken beforehand to deal with a need or contingency

Puffing: Superlative statements about a property that shouldn’t be considered assertions of fact. “The best buy in town,” or

“It’s a fabulous location” are examples of puffing.

Purchase Agreement: A contract for the purchase and sale of real property in which the buyer agrees to purchase for a

certain price and the seller agrees to convey title by way of a deed or an assignment of lease.

Qualifying: To invest with legal capacity. Meet the required standard. Qualification is the process of reviewing a

prospective borrower’s credit and payment capacity before approving a loan.

Quantity Survey Method: A highly technical process in arriving at cost estimate of new construction. It involves a

detailed estimate of the quantities of raw material lumber, plaster, brick, cement, etc. used, as well as the current price of

the material and installation costs.

Quitclaim Deed: A deed to relinquish any interest in property which the grantor may have, without claiming to have an

interest.

Radon: A colorless, odorless, naturally occurring hazardous gas. Measured using a Spectrometer.

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Range: A strip of land six miles wide determined by a government survey, running in a north-south direction.

Real Estate: Real property; land and things affixed to land or appurtenant to land.

Real Estate Investment Trust (REIT): A special arrangement under Federal and State law whereby investors may pool

funds for investments in real estate and mortgages and yet escape corporation taxes.

Real Estate Owned (REO): A term used by lenders to describe real property involuntarily acquired by them through

foreclosure. Lenders often use brokers to market their REO properties.

Real Estate Settlement Procedures Act (RESPA): A federal disclosure law effective June 20, 1975 requiring new

procedures and forms for settlements (closing costs) involving federally related loans.

Real Property: The earth’s surface, the air above and the ground below, as well as all appurtenances to the land including

buildings, structures, fixtures, fences and improvements erected upon or affixed to the same. This excludes growing crops.

The term real property includes the interests, benefits and rights inherent in the ownership of real estate.

Realtors: A registered trade name that may be used only by members of the state and local real estate boards affiliated

with the National Association of Realtors.

Reasonable Accommodation: Any change or modification in the environment or the way things are customarily

accomplished (e.g., rules, services, policies) that enables a qualified individual with a disability to enjoy equal

opportunities.

Rebate: A reduction or kickback of a stipulated charge. A property manager may not accept any commission, rebate or

profit on expenditures made in behalf of an owner without the owner’s knowledge and consent.

Reconciliation: The act of bringing into harmony or agreement, such as reconciling an account, i.e., making it compatible

or consistent.

Recording: The process of placing a document on file with a designated public official known as the County Recorder.

He designates the fact that a document has been given to him by placing his stamp upon it indicating the time of day and

the date when it was officially placed on file. Documents filed with the Recorder are considered to be placed on open

notice to the general public of that county.

Redlining: A lending policy of denying real estate loans on properties in older, changing urban areas, usually with larger

minority populations, because of alleged higher lending risks without due consideration being given by the lending

institution to the creditworthiness of the individual loan applicant.

Referral: The act of recommending or referring; a sales lead. A client who has been obtained through the efforts or

recommendation of another person.

Referral Fee: A fee paid to someone for producing either a buyer to purchase or a seller to list property; also called a

finder’s fee. A finder is a person who finds, interests, introduces or brings together parties in a deal, even though the finder

has no part in negotiating the terms of the transaction.

Refund: To return (money) in restitution, repayment, or balancing of accounts

Regression: A principle of appraisal stating that, between dissimilar properties, the worth of the better property is

adversely affected by the presence of the lesser-quality property. Thus in a neighborhood where the homes average in the

$50,000 range, a better-built structure, which in another neighborhood would be worth at least $60,000, would tend to be

valued closer to $50,000.

Regulation Z: The Federal Reserve Board’s regulation that implements the Truth in Lending Act.

Reject: To refuse to accept, consider, submit to, take for some purpose, or use


Reliction: The addition to land by the permanent recession of water.

Remainder: A right to future possession after the expiration of a life estate.

Remainderman: The person who has an estate in remainder.

Remediation: The process of implementing a plan to clean up a site that has been identified as containing hazardous

substances. The Phase III audit is the stage in which a remediation plan is developed and executed.

Renunciation: When someone who has been granted something or has accepted something later gives it up or rejects it; as

when an agent withdraws from the agency relationship.

Represent: The action or fact of one person standing for another so as to have the rights and obligations of the person

Representation: The action or fact of one person standing for another so as to have the rights and obligations of the person

Reproduction Costs: The cost of replacing the subject improvement with one that is the exact replica, having the same

quality of workmanship, design and layout.

Rescission: An action to cancel or annul the effect of executing a contract or other document, based on fraud, mistake, etc.

Reserves: In a common interest subdivision, an accumulation of funds collected from owners for future replacement and

major maintenance of the common area and facilities. With regard to mortgage loans, an accumulation of funds, collected

by the lender from the borrower as part of each monthly mortgage payment; an amount allocated to pay property taxes and

insurance when they are due.

Resident Manager: A salaried agent of the owner employed to manage a single building. Generally, a resident manager

need not be licensed under the state real estate license laws, if he or she merely acts as custodian or caretaker.

Residential: Restricted to or occupied by residences.

Residential Lead-Based Paint Hazard Reduction Act: The Residential Lead-Based Paint Hazard Reduction Act and

enabling regulations require affirmative action on the part of the sellers, landlords and real estate agents and renovators

disturbing more than two square feet of old paint in houses built before 1978, to ensure that lead-based paint hazards are

addressed in the sale and leasing of homes and apartments constructed prior to 1978.

Residual Income: Deferred commissions; that is, commissions that are earned but payment of which is put off for a stated

period.

Respondents: One who answers in various legal proceedings (as in equity cases)

Responsibility: Something for which one is responsible; moral, legal or mental accountability.

Restitution: Restoring something to a person that he or she was unjustly deprived of.

Restrictive Covenant: A promise to do or not do an act relating to real property; usually an owner’s promise to not use

property in a particular way. may or may not run with the land.

Retainer: Fee paid to a person or firm to secure the privilege of obtaining its services as and when required.

Return on Investment (ROI): The gain/profit an investor experiences from an investment relative to its cost to acquire.

Reverse Mortgage: Allows qualified homeowners age 62 or older to convert equity in the home into a lump sum, a

monthly cash stream, or a line of credit; becomes due when the last surviving borrower dies, sells the home, or ceases to

live in the home for 12 consecutive months.


Reversion: The right to future possession or enjoyment by the person, or his heirs, creating the preceding estate.

Reversioner: The person who has a future estate interest in reversion.

Revocation: The act of terminating, canceling or annulling, as when a seller revokes a broker’s agency by canceling the

listing. A broker or salesperson’s license can be revoked for cause. It is important to distinguish between the power of an

agent to revoke and the right to revoke an agency contract. Unless the agency is coupled with an interest, the principal

always has the power to revoke; but if the principal has no justifiable grounds to revoke, the principal may be liable for

money damages.

Revoked: To annul by recalling or taking back; revocation is the act of terminating, canceling or annulling, as when a

seller revokes a broker’s agency by canceling the listing. A broker or salesperson’s license can be revoked for cause.

Right of Preemption: A right to have the first chance to buy or lease property if the owner decides to put it up for sale or

make it available. Also called a right of first refusal.

Right of Rescission: The right of a consumer to rescind any credit transaction involving his or her principal residence as

collateral (except first mortgages), lasting up to midnight of the third business day after the transaction.

Right of Survivorship: Right to acquire the interests of a deceased joint owner; distinguishing feature of a joint tenancy.

Riparian Rights: The right of a landowner to flowing water on, under, or adjacent to his land.

Roundtable Closing: A settlement procedure conducted with all parties present.

Rule of Capture: A legal principle that grants a landowner the right to all oil and gas produced from wells on his or her

land, even if it migrated from underneath land belonging to someone else.

Runs with the Land: Binding or benefiting the successive owners of a piece of property, rather than terminating when a

particular owner transfers his or her interest. Usually said in reference to an easement or a restrictive covenant.

Sale-and-Leaseback: A situation where the owner of a piece of property wishes to sell the property and retain occupancy

by leasing it from the buyer.

Sales Comparison Approach: An appraisal method that estimates the value of real property by performing a market

analysis of the area where the subject property is located. Data are collected and adjustments made for the differences in the

properties.

Salespersons: A person who has a valid real estate license. A real estate licensee can generally be a salesperson or broker,

active or inactive, or an individual, corporation or partnership.

Satisfaction of Lien: The payment of a debt or obligation such as a judgment. The time when the vendee pays in full

under a contract for deed and the vendor transfers legal title is referred to as satisfaction or fulfillment.

Scarcity: In appraisal terminology, a lack of supply of some type of real property, the supply of which cannot readily be

increased. Scarcity results in increased value when demand exceeds supply.

Secondary Financing: A loan secured by a second mortgage or trust deed on real property. These can be third, fourth,

fifth, sixth – on and on ad infinitum.

Secondary Market: Buying and selling existing mortgage and trust deed loans. The primary market is the one in which

lenders loan money to borrowers; the secondary market is the one in which the lenders sell their loans to the large

secondary marketing agencies (FNMA, FHLMC, and GNMA) or to other investors.

Section: Section of land is established by government survey and contains 640 acres.


Section 203(b) FHA Loan: A program of home mortgage insurance offered by the Federal Housing Administration. This

is one of the original programs, dating back to 1934, and its requirements have provided guidelines for many of the

succeeding programs.

Security Deposit: A deposit of money or other thing of value made to assure performance of an obligation; frequently

required of lessees or tenants.

Seizin: The possession of land under a claim of a freehold estate (also spelled seisen).

Self-Dealing: When a real estate agent buys the principal’s property him or herself (or sells it to a relative, friend, or

associate, or to a business he or she has an interest in), without disclosing that fact to the principal, and in violation of his or

her fiduciary duties to the principal.

Seller: One that offers for sell. One who lists their home with a real estate broker is known as the seller.

Seller’s Agent: A licensee representing the interests of the seller of a property.

Seller’s Market: The market condition which exists when a seller is in a more commanding position as to price and terms

because demand exceeds supply.

Septic: A sewage settling tank in which part of the sewage is converted into gas and liquids before the remaining waste is

discharged by gravity into a leaching bed underground.

Servient Tenant: The owner of a servient tenant, that is, someone whose property is burdened by an easement.

Servient Tenement: The property that is burdened by an easement. It must “serve” the dominant tenement.

Setback Ordinance: An ordinance prohibiting the erection of a building or structure between the curb and the setback

line.

Severable: When one provision in a law or a contract can be held unenforceable, without making the entire law or contact

unenforceable.

Severance: Termination of a joint tenancy, turning it into a tenancy in common.

Sheriff’s Deed: Deed given by court order in connection with sale of property to satisfy a judgment.

Sheriff’s Sale: A foreclosure sale held after a judicial foreclosure. Sometimes called an execution sale.

Short Sale: Where a lender accepts less than what is owed in the loan.

Site Valuation: The value of land with the enhancements necessary to make it ready for building, such as water, sewer,

electricity, etc.

Situs: The preference by people for a certain location. The place where something exists or originates; the place where

something (as a right) is held to be located in law.

Sole Proprietorship: A method of owning a business in which one person owns the entire business and reports all profits

and losses directly on his or her personal income tax return, as contrasted with corporate, joint or partnership ownership.

Solicit: To make petition to: entreat: to approach with a request or plea

Special Agent: One authorized by a principal to perform a particular act or transaction, without contemplation of

continuity of service as with a general agent. The real estate broker is ordinarily a special agent appointed by the seller to

find a ready, willing and able buyer for a particular property. An attorney-in-fact under a limited power of attorney is a

special agent.


Special Assessment: Legal charge against real estate by a public authority to pay cost of public improvements such as:

street lights, sidewalks, street improvements, etc.

Specific Lien: Liens which attach to only a certain specific parcel of land or piece of property.

Specific Performance: An action to compel performance of an agreement, e.g., sale of land.

Spot Zoning: A change in the local zoning ordinance permitting a particular use inconsistent with the zoning classification

of the area; the reclassification of a small area of land in such a manner as to disturb the tenor of the surrounding

neighborhood, such as a change to permit one multiunit structure in an area zoned for single-family residential use; also

called a variance.

Square Foot Method: A method of estimating a building’s construction, reproduction or replacement costs whereby the

structure’s square-foot floor area is multiplied by an appropriate construction cost per square foot.

Stable Monthly Income: Income that can reasonably be expected to continue in the future.

Statute of Frauds: State law which provides that certain contracts must be in writing in order to be enforceable at law.

Example: real property lease for more than one year; agent’s authorization to sell real estate.

Statutory Right of Redemption: Allows a mortgagor (debtor) to redeem property for a set timeframe after a foreclosure

sale, regardless of the timing of other events. Time frames vary by state; not available in all states.

Steering: Channeling prospective buyers or tenants to particular neighborhoods based on their race, religion, national

origin, or ancestry.

Straight Note: A promissory note evidencing a loan in which payments of interest only are made periodically during the

term of the note, with the principal payment due in one lump sum upon maturity. A straight note is usually a non-amortized

note made for a short term, such as three to five years, and is renewable at the end of the term.

Straw Buyer: One who purchases property for another so as to conceal the identity of the real purchaser; a dummy

purchaser; a nominee; a front.

Subagent: An agent of a person who is already acting as an agent for a principal. The original agent can delegate authority

to a subagent where such delegation is either expressly authorized or customary in the trade. For example, it is customary

for listing brokers to delegate certain functions of a ministerial nature to subagents, such as to show property and solicit

buyers.

Subject Property: A reference to the real property under discussion, or the real property under appraisal.

Subordination Clause: Clause in a junior or a second lien permitting retention of priority for prior liens. A subordination

clause may also be used in a first deed of trust permitting it to be subordinated to subsequent liens as, for example, the liens

of construction loans.

Subprime Loan: A loan made to persons with lower credit ratings than acceptable in regular loans, based on the fact that

lenders can negotiate the interest rate and discount in their efforts to make substantial profits. The risk is greater and

requires careful underwriting to be successful.

Substantial Performance: When a promisor doesn’t perform all of his or her contractual obligations, but does enough so

that the promise is required to fulfill his or her side of the bargain.

Substitution, Principle of: Affirms that the maximum value of a property tends to be set by the cost of acquiring an

equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution.


Subsurface Rights: An easement permitting the use of below-ground space for such purposes as power lines, sewers,

tunnels; also called a subsurface easement.

Suit to Quiet Title: A lawsuit to determine who has title to a piece of property, or to remove a cloud from the title.

Supply and Demand: Affirms that price or value varies directly, but not necessarily proportionally with demand, and

inversely, but not necessarily proportionately with supply.

Surety Bond: A surety bond is purchased by an employer to cover his or her employees who are entrusted with sums of

money or are responsible for valuable assets. Such bonded persons are required by the bonding or insurance company to

carry out their duties and responsibilities effectively and honestly. Property managers and escrow companies often are

required to post a fidelity bond.

Survey: The process by which a parcel of land is measured and its area is ascertained.

Syndication: A descriptive term for a group of two or more people united for the purpose of making and operating an

investment. A syndication may operate in the form of a REIT, corporation, general partnership, limited partnership or even

as tenancy in common.

Tacking: When successive periods of use or possession by more than one person are added together to make up the five

years required for prescription or adverse possession.

Tax Depreciation: The expensing of the cost of business or investment property over a set number of years, determined

by the IRS to be an asset’s useful life (27 ½ years for residential property; 39 years for non-residential property).

Tenancy at Sufferance: A tenant who holds over beyond the expiration of the tenancy without landlord’s permission.

Tenancy at Will: When a tenant is in possession with the owner’s permission, but there’s no definite lease term; as when a

landlord allows a holdover tenant to remain on the premises until another tenant is found.

Tenancy by Entirety: A form of co-ownership of property by husband and wife (in states that don’t use a community

property system).

Tenancy in Common: Ownership by two or more persons who hold undivided interest, without right of survivorship;

interests need not be equal.

Tenant: One who exclusively holds or possesses property, such as a life tenant or a tenant for years; commonly used to

refer to a lessee under a lease. A tenant’s occupancy, although exclusive, is always subordinate to the rights of the owner.

Tenant refers to an occupant, not necessarily a renter.

Tendering Performance: An unconditional offer by one of parties to a contract to perform his or her part of the

agreement; made when the offeror believes the other party is breaching, it establishes the offeror’s right to sue if the other

party doesn’t accept it.

Terminate: To bring to an end; to form the conclusion of.

Terminated: To bring to an end; to form the conclusion of. Termination of listing is the cancellation of a broker-principal

employment contract. If a listing contains no specific termination date, it is terminated after a reasonable time. The seller

can revoke this type of listing at any time before the broker produces a ready, willing and able buyer on the listing terms.

Termite: Any of numerous pale-colored soft-bodied social insects that live in colonies consisting usually of winged

sexual forms, wingless sterile workers, and soldiers, feed on wood, and include some which are very destructive to wooden

structures and trees

Testate: Having made a will; as an adjective, “a person died testate.”


Tester: A person working with a fair housing organization, who pretends to be interested in buying or renting property

from someone suspected of unlawful discrimination.

Time is of the Essence: A clause in a contract that requires strict compliance with the stated time limitations (within

which a contracting party may perform).

Timeshare: A modern approach to communal ownership and use of real estate that permits multiple purchasers to buy

undivided interests in real property (usually in a resort condominium or hotel) with a right to use the facility for a fixed or

variable time period.

Title: The right to or ownership of land.

Title Insurance: A comprehensive indemnity contract under which a title insurance company warrants to make good a

loss arising through defects in title to real estate or any liens or encumbrances thereon.

Title Report: A report which discloses condition of the title, made by a title company preliminary to issuance of title

insurance (Preliminary Title Report).

Title Search: An inspection of the public record to determine all rights and encumbrances affecting title to a property.

Title Theory: Mortgage arrangement whereby title to mortgaged real property vests in the lender.

Township: A division by government survey that is six miles long, six miles wide and containing 36 sections, each one

mile square.

Trade Fixtures: Articles of personal property annexed to real property, but which are necessary to the carrying on of a

trade and are removable by the owner of the fixtures.

Transaction: Agreement, contract, exchange, understanding, or transfer of cash or property that occurs between two or

more parties and establishes a legal obligation. Also called booking or reservation.

Transactional Broker: A non-agency relationship allowed in states that have designed a category of service where the

agent represents neither the buyer nor seller in the transaction, treating both as customers. Requires legislative change to be

legal.

Transfer Tax: State tax imposed on the transfer or conveyance of realty or any realty interest by means of deed, lease,

sublease, assignment, contract for deed or similar instrument.

TRID Rule: The TILA-RESPA Integrated Disclosure rule, issued by the Consumer Financial Protection Bureau to create

standardized, consumer-friendly disclosure documents, including the Loan Estimate and the Closing Disclosure.

Trigger Term: A word or phrase that describes a loan, including the down payment, terms, and monthly payment. If an

ad uses a trigger phrase, disclosures are needed to tell everything about the loan.

Triple Net Lease: A net-net-net lease where, in addition to the stipulated rent, the lessee assumes payment of all expenses

associated with the operation of the property. This includes both fixed expenses, such as taxes and insurance, and all

operating expenses, including costs of maintenance and repair.

Trust: An arrangement whereby legal title to property is transferred by the grantor (or trustor) to a person called a trustee,

to be held and managed by that person for the benefit of another, called a beneficiary.

Trust Funds: Funds entrusted to the agent by the principal or others; also called earnest money. The trust fund for a

brokerage firm account must designate the principal broker as trustee, and must provide for withdrawal of the funds upon

demand.

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Trustee: One who holds property in trust for another as a fiduciary and is charged with the duty to protect, preserve and

enhance the value and the highest and best use of the trust property. One who holds property in trust for another to secure

the performance of an obligation.

Trustor: One who deeds his property to a trustee to be held as security until he has performed his obligation to a lender

under terms of a deed of trust.

Truth in Lending Act (TILA): The name given to the federal statutes and regulations (Regulation Z) which are designed

primarily to insure that prospective borrowers and purchasers on credit receive credit cost information before entering into a

transaction.

Underground Storage Tank (UST): As defined by the EPA, a tank and any underground piping connected to the tank

having 10 percent or more of its volume beneath the surface of the ground. These tanks were made of steel to store

petroleum and other hazardous materials.

Underwater: (Upside Down) A property owner owes more on their loan than their property’s worth.

Underwriter: A person working for a lender who reviews a loan application and makes a recommendation to the loan

committee.

Underwriting: The technical analysis by a lender to determine if a borrower should receive a loan.

Undisclosed Dual Agency: A situation where one licensee represents both buyer and seller in a single transaction without

the informed consent of both parties; very often may be practiced unintentionally, possibly by implying to one party that he

is represented when, in fact, there is no agency agreement.

Undivided Interest: Nature of each owner’s interest in property when owned as tenants in common or in joint tenancy.

Unenforceable Contract: A contract that was valid when made but either cannot be proved or will not be enforced by a

court. An unenforceable contract is not merely one that is void or illegal. A contract may be unenforceable because it is

not in writing, as may be required under the state statutes of frauds, or because the statute of limitations period has elapsed.

Unethical: Lacking in moral principles; failing to conform to an accepted code of behavior. Real estate agents can lose

their licenses for not abiding by a code of conduct as set forth in most state licensing laws.

Uniform Commercial Code (UCC): Establishes a unified and comprehensive scheme for regulation of security

transactions in personal property, superseding the existing statutes on chattel mortgages, conditional sales, trust receipts,

assignment of accounts receivable and others in this field.

Uniform Residential Appraisal Report (URAR): An appraisal form, Federal Home Loan Mortgage Corporation Form

70/Federal National Mortgage Association Form 1004, dated October 1986.

Uniform Standards of Professional Appraisal Practice (USPAP): A set of ten standards developed in 1987, now

updated annually, by an ad hoc committee composed of representatives of several appraisal associations in response to

congressional criticism that the appraisal industry lacked uniform standards.

Unilateral Contract: A contract where one party makes a promise in exchange for an action on the part of the other

contracting party; distinguished from a bilateral contract.

Unit-in-Place Method: The cost of erecting a building by estimating the cost of each component part, i.e. foundations,

floors, walls, windows, ceilings, roofs, etc. (including labor and overhead).


Units: A part of the property intended for any type of independent use and with an exit to a public street or corridor.

“Unit” commonly refers to the individual apartment units in a condominium, exclusive of the common areas. A unit

normally consists of the walls and partitions, which are not load-bearing, within a condominium’s perimeter walls; the

inner decorated or furnished surfaces of all walls, floors and ceilings, doors, windows, or panels along the perimeters; and

all original fixtures.

Unity of Interest: When each co-owner has an equal interest (equal share of ownership) in a piece of property.

Unity of Possession: When each co-owner is equally entitled to possession of the entire property, because the ownership

interests are undivided.

Unity of Time: When each co-owner acquired title at the same time.

Unity of Title: When each co-owner acquired title through the same instrument (deed, will, or court order).

Universal Agent: A general agent; one authorized to act on behalf of another. For example, an attorney-in-fact under a

general power of attorney.

Urea-Formaldehyde: A potentially toxic chemical used in manufacturing building materials such as particleboard,

plywood paneling, carpeting, and insulation.

Use Variance: Permission obtained from governmental zoning authorities to build a structure or conduct a use that is

expressly prohibited by the current zoning laws; an exception from the zoning laws.

Usury: On a loan, claiming a rate of interest greater than that permitted by law.

VA: Veterans Administration

VA-Guaranty: An undertaking by the federal government to guarantee the lender, subject to limitations, against loss

arising from a default by the borrower under a GI loan.

Valid: Executed with the proper legal authority and formalities; legally sufficient or effective, such as a valid contract – a

contract that must in all respects comply with the provisions of contract law. A valid contract should be executed with

proper formalities, should satisfy legal requirements, should have sufficient legal force to stand against attack and should be

for a legal purpose.

Value: The power of a good or service to command other goods in exchange for the present worth to typical users and

investors of future benefits arising out of ownership of a property; the amount of money deemed to be the equivalent in

worth of the subject property.

Variable Expense: Operating expense necessary to the property, but dependent on the property’s occupancy level.

Variance: A departure from the general rule; an exception

Vendee: A purchaser; buyer under a contract of sale (land contract).

Vendor: A seller; one who disposes of a thing in consideration of money. Used in a land contract.

Void: Was valid when made but either cannot be proved or will not be enforced by a court. An unenforceable contract is

not merely one that is void or illegal. A contract may be unenforceable because it is not in writing, as may be required

under the state statutes of frauds, or because the statute of limitations period has elapsed.

Void Contract: An agreement that isn’t an enforceable contract because it lacks a required element or is defensive in some

other respect.

Voidable Contract: That which is capable of being adjudged void, but is not void unless action is taken to make it so.


Voluntary Alienation: When an owner voluntarily transfers an interest to someone else.

Voluntary Lien: Any lien placed on property with consent of, or as a result of, the voluntary act of the owner.

Warranty Deed: A deed used to convey real property which contains warranties of title and quiet possession, and the

grantor thus agrees to defend the premises against the lawful claims of third persons. It is commonly used in many states,

but in others, the grant deed has supplanted it due to the practice of securing title insurance policies which have reduced the

importance of express and implied warranty in deeds.

Waste: The destruction, removal, material alteration of, or injury to premises by a tenant for life or years.

Wetlands: Land areas where groundwater is at or near the surface of the ground for enough of each year so as to produce a

wetland plant community, such as swamps, floodplains and marshes.

Willfully: Done deliberately; intentional

Zoning: Act of city or county authorities specifying type of use to which property may be put in specific areas.

Zoning Ordinance: Local laws that divide a city or county into different areas or zones. These zones determine how land

can be used, subdivided, or improved along with the specific requirements for compliance.


End of the National Workbook Content