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50 Cards in this Set
- Front
- Back
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The type of lease that is for an indefinite amount of time and may be cancelled by the landlord or tenant at any time is known as:
A) a life estate. B) an estate at will. C) an estate from period to period. D) a fee simple estate. |
The correct answer is "B - an estate at will. " An estate at will is an interest in a leased property that continues indefinitely, and may be terminated by either party. It is governed by the interested parties' WILLS, or intentions. Don't confuse this with fee simple, which is the highest degree of ownership; a life estate, which expires over time; or an estate from period to period, which goes from week to week, month to month, or year to year.
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A situation in which the tenant's lease has expired and the tenant is no longer paying rent, but is living on the property is known as:
A) an estate for years. B) estate at will. C) estate from period to period. D) estate at sufferance. |
The correct answer is "D - estate at sufferance. " In an estate at sufferance, the tenancy is by a lessee who lawfully occupies the landlord's property, but then continues to occupy the property improperly after his rights have expired. Think of it this way: The landlord and the estate are SUFFERING because rent is not being paid. The other types of estates mentioned here are actual lease agreements, but this is a situation of one party being unwilling to abide by the terms of any agreements previously reached.
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A mortgage clause which states that, should the borrower sell the property, the entire balance of her mortgage would be due immediately, is known as:
A) the due-on-sale clause. B) the acceleration clause. C) the satisfaction clause. D) estoppel certificate. |
The correct answer is "A - the due-on-sale clause. " The due-on-sale clause is also known as an alienation clause or resale clause, and says that the balance must be paid in full if the property is sold. Don't confuse this term with an acceleration clause, which makes the whole debt due if the borrower defaults; a satisfaction, in which the debt is paid in full on a mortgage; or an estoppel certificate, which is not a clause at all but a document in a mortgage.
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Which of the following is the best way to ensure that there are no encroachments and verify the boundaries of a parcel of land?
A) Write a legal description. B) Get a spot survey. C) Find the monuments. D) Verify the benchmark. |
The correct answer is "B - Get a spot survey. " In fact, spot surveys are often the only way to discover encroachments, since they are accidental by nature.
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A homeowner that always maintains his house has just discovered that he has termite infestation. This is an example of:
A) incurable physical obsolescence. B) possible curable economic obsolescence. C) possible curable physical obsolescence. D) incurable internal obsolescence. |
The correct answer is "C - possible curable physical obsolescence. " Defects are "curable" when the cost of the repair is less than the economic benefit of a sound, problem-free home. In this case, since the home has been well-maintained, the infestation is probably localized and can be remedied with standard treatment.
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When a tenant sublets all or any part of the premises rented under a written lease:
A) The tenant assigns all right title and interest in the rented property to the new lessee. B) The sublessee becomes primarily responsible to the landlord for the payment of rent and maintenance of the property. C) The original lease is automatically canceled and the sublessee takes possession of the property on a month-to-month basis. D) The original lease is unaffected unless it contains a provision that prohibits such subletting. |
The correct answer is "D - The original lease is unaffected unless it contains a provision that prohibits such subletting. " It's important for tenants to remember that subleasing doesn't transfer responsibility for lease payments, damage and other terms of the lease.
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If the buyer defaulted some time ago on a written contract to purchase a seller's real estate, the seller can still sue for damages if he is not prohibited from doing so by the:
A) statute of frauds. B) law of agency. C) statute of limitations. D) broker attorney accord. |
The correct answer is "C - statute of limitations. " Virtually all avenues of legal recourse, including suits for breaking a contract, have "statutes of limitation"--or time limits for instituting action.
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The recorded history of matters that affect the title to a specific parcel of real property is called a(n):
A) chain of title. B) certificate of title. C) title insurance policy. D) abstract of title. |
The correct answer is "D - abstract of title. " Abstracts give an at-a-glance history of all the recorded documents associated with a property, including changes in title, liens, mortgages taken out and paid off, transfers through death and so forth.
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The rights of ownership of real property do NOT include the right of:
A) disposition. B) exclusivity. C) control. D) compatibility. |
The correct answer is "D - compatibility. " Compatibility, within the context of real property, applies to the transaction process but not the property itself. That is, buyers and sellers have reached compatibility when they mutually agree to all terms of an agreement. Once the transaction is complete, it's no longer an issue.
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A metes and bounds legal description must:
A) cover an area larger than 10 acres. B) be used in areas not covered by the rectangular survey system. C) commence and finish at the same identifiable point. D) always use north as the basis for directions. |
The correct answer is "C - commence and finish at the same identifiable point. " "Metes and bounds" is the surveying system originally initiated in the thirteen colonies and uses natural features, such as streams, trees and adjoining properties to define a parcel of land.
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Which of the following is an example of involuntary alienation?
A) selling a property to pay off debts B) giving a piece of land to the zoo C) having a piece of land sold for delinquent taxes D) letting another person plant crops on an unused portion of a piece of land |
The correct answer is "C - having a piece of land sold for delinquent taxes " In legal terms "alienation" means transferring, which can be voluntary--as in the case of a sale--or "involuntary," which means the property is taken from the owner without his consent. In addition to enforcing liens, involuntary alienation can also occur through eminent domain, adverse possession and other circumstances.
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A tenant's lease has expired, but the tenant did not vacate the premises or negotiate a renewal lease. The landlord has declared that he does not want the tenant to remain in the building. This type of occupancy is referred to as an estate:
A) for years. B) from year to year. C) at will. D) at sufferance. |
The correct answer is "D - at sufferance. " "Estate at sufferance" describes the situation where a tenant initially occupies a property legally, but continues to stay beyond the term of his or her lease. Failing to sign a new lease or make other mutually agreeable arrangements, the landlord has no choice but to follow eviction procedures through the courts.
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When a mortgage loan has been paid in full, it is important for the borrower to be sure that:
A) The paid note is placed in a safe deposit box. B) He or she obtains a deed of partial reconveyance. C) The paid mortgage is returned to the lender. D) A satisfaction of mortgage is recorded. |
The correct answer is "D - A satisfaction of mortgage is recorded. " Recording formalizes the owner's "paid in full" status. Without this step, it's not uncommon for the lender's interest to remain listed which creates complications if the owner wishes to sell or obtain new financing.
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An extension of credit from a seller to a buyer to allow the buyer to complete the transaction is called a:
A) growing equity mortgage. B) purchase money mortgage. C) package mortgage. D) blanket mortgage. |
The correct answer is "B - purchase money mortgage. " Whether for the entire amount of the loan or a purchase money second, owner financing is preferred by many buyers because it minimizes costs and avoids qualifying.
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The successful property manager does NOT:
A) screen the tenants' ability to pay. B) study rental rates in the area. C) consider the type of business the tenant has. D) appease the tenants by repairing their equipment. |
The correct answer is "D - appease the tenants by repairing their equipment. " Property managers represent the owner's interests, not the tenants. Thus, although they should certainly make residents feel welcome, repairing their personal property takes "customer service" too far.
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A lease agreement is signed by a lessee who is 17 years of age. Which of the following is true?
A) A 17-year-old person cannot sign a lease. B) The lease agreement is voidable. C) The lease agreement is valid provided the security deposit is increased. D) The lease agreement is void. |
The correct answer is "B - The lease agreement is voidable. " Although minors may sign contracts, they are not legally enforceable.
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A seller has listed her home with a broker for $90,000, and the broker tells a prospective buyer to submit a low offer because the seller is desperate to sell. The buyer offers $85,000 and the seller accepts it. In this situation:
A) The broker has violated his agency relationship with the seller. B) The broker was unethical, but the seller did get to sell her property. C) The broker acted properly to obtain a quick offer on the property. D) Any broker is authorized to encourage such bids for the property. |
The correct answer is "A - The broker has violated his agency relationship with the seller. " Licensees have a fiduciary responsibility to act in the best interests of their clients. By disclosing the owner's sense of urgency and suggesting a lower price, the broker was acting as an "advocate" for the opposite side in this transaction. Moreover, an implied conflict of interest can be inferred because the action creates a perception that the broker may have been looking out for his or her best interests (a quick commission), which increases the level of malpractice.
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When the supply of a commodity decreases:
A) prices and demand tend to rise. B) prices and demand tend to drop. C) demand tends to rise and prices are not affected D) demand tends to drop and prices drop |
The correct answer is "A - prices and demand tend to rise. " With a decreased supply, the demand usually rises because the current supply cannot meet the current needs, and prices increase.
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Which of the following deeds contains no expressed or implied warranties?
A) a bargain and sale deed B) a quitclaim deed C) a warranty deed D) a grant deed |
The correct answer is "B - a quitclaim deed " Quit claim deeds are usually made to resolve minor errors or weak claims in a title. The person signing gives up any claim he or she may have, but an executed quit claim carries with it no guarantees.
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A property owner lists his property for sale with a broker. During the negotiations, the owner told the broker that the owner wanted $138,000 for the property, and anything above that amount the broker could keep as his commission. The listing with this type of provision is known as the:
A) gross listing. B) net listing. C) open listing. D) non exclusive listing. |
The correct answer is "B - net listing. " Net listing agreements are illegal in many states, and frowned upon in the others. That's because of the potential for unfair advantage and conflict of interest they create. For example, let's say a seller believes his home is worth $138,000 and is happy with that amount. However, the broker thinks he can get $175,000 and does. That means that, instead of a more typical $9,500 or so in commissions, the broker realizes $37,000. Of course, it can also work the other way. The homeowner may have been right and the home sells for only $138,000--leaving the broker with a commission of $0 for his costs and efforts.
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After the construction of a building over a railroad right of way, the trains can:
A) operate as usual. B) no longer use the tracks under the building. C) use the tracks under the building only if they cause no problem for the building's occupants. D) use the tracks under the building as long as they first obtain the building owner's permission. |
The correct answer is "A - operate as usual. " The right-of-way can be viewed as a pre-existing easement. The building must accommodate itself to the railroad, not the other way around.
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Most homeowner's insurance policies contain which of the following clauses?
A) a property improvement clause B) a coinsurance clause C) a co-ownership clause D) a property devaluation clause |
The correct answer is "B - a coinsurance clause " Although often used to describe "an insurance policy on an insurance policy" to spread risk among multiple insurers, when applied to a homeowner's policy, the co-insurance clause stipulates that the homeowner maintain coverage equal to at least 80% of his home's replacement cost.
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Which of the following would NOT affect supply?
A) population B) construction costs C) government controls D) the labor force |
The correct answer is "A - population " Population has no bearing on supply. Factors that tend to affect the "supply" of the real estate market's supply and demand balance include the labor force, construction and material costs, government controls and financial policies.
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If a broker deposits the buyer's earnest money in a trust account, at what time is the seller entitled to receive it?
A) when the offer is presented to the seller B) at the time of settlement C) before the settlement takes place D) when the seller accepts the offer made by the buyer |
The correct answer is "B - at the time of settlement " Until the transaction actually closes, earnest money is deemed part of the purchase price but doesn't yet belong to the seller. For example, it may be returned to the buyer if the deal falls through because a condition of the purchase failed to materialize. Alternatively, it may be turned over to the seller as compensation if the buyer backs out of the transaction without just cause.
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The type of real estate loan that allows the lender to increase the outstanding balance of a loan up to the original sum in the note while advancing additional funds is the:
A) wraparound mortgage. B) open-end mortgage. C) growing equity mortgage. D) graduated payment mortgage. |
The correct answer is "B - open-end mortgage. " An "Open End Mortgage" is an expandable loan in which the borrower is given a limit up to which he or she may borrow, with each incremental advance to be secured by the same mortgage.
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The owner of a condominium unit learns that a neighbor has failed to pay his real estate taxes. If this neighbor does not pay the taxes:
A) A lien can be filed against the condominium, including all of the units. B) A lien can be filed against the neighbor's unit and his percentage of the common elements. C) A lien can be filed only against the common areas at the condominium. D) The taxing authority can order the condominium to be dissolved. |
The correct answer is "B - A lien can be filed against the neighbor's unit and his percentage of the common elements. " Although commonly confused, there are important distinctions between condominiums and co-ops. In a condominium, for example, each resident owns his or her unit individually. Thus the development as a whole cannot be held liable for the liabilities of an individual resident.
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The remnant of an estate that the grantor holds after he's granted a life estate to another person, if the estate will return to the grantor, is called:
A) reverse leverage. B) reversionary factor. C) reversion. D) remainder estate. |
The correct answer is "C - reversion. " Reversion is the estate remaining in the grantor (original owner), or the estate of the testator (giver of a will), who has conveyed a lesser estate from the original. A future estate in real property created by operation of law when a grantor conveys a lesser estate than he/she has. For example, if Rich grants Merle a life estate in a property, when Merle dies the property in this case would come back to Rich in "Reversion".
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The finance fee charged by the lender to make the loan is a(n):
A) prepayment penalty. B) advance interest payment. C) loan origination fee. D) prepayment of mortgage insurance. |
The correct answer is "C - loan origination fee. " Even though typically financed, LOFs represent immediate revenue lenders receive to help offset the comparatively low-interest, long-term loan terms most mortgages represent.
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The clause in a trust deed or mortgage that permits the lender to declare the entire unpaid balance immediately due and payable upon default is the:
A) judgment clause. B) escalator clause. C) forfeiture clause. D) acceleration clause. |
The correct answer is "D - acceleration clause. " This clause protects the lender's interest and is usually a preliminary step in the foreclosure process. Borrowers still have opportunities to re-establish monthly payments, however, and should understand their options.
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The income approach to value would be most important in the appraisal of a(n):
A) condominium. B) office building. C) single family residence. D) vacant residential lot. |
The correct answer is "B - office building. " The income approach is commonly used to establish a quick, preliminary value for a commercial property. It's a simple calculation that compares monthly income from rent with anticipated carrying costs. It's important to remember, this is only a preliminary valuation and that many other factors go into determining a property's true value.
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The term depreciation refers to the:
A) value of real estate after the expiration of its useful life. B) loss of value in real estate from any cause. C) costs incurred to renovate or modernize a building. D) capitalized value of lost rental income. |
The correct answer is "B - loss of value in real estate from any cause. " Although most commonly used to "depreciate" the value of a commercial or income property over its "useful life" for tax purposes, it's important to remember "depreciation" is actually much broader and applies to any factor from functional obsolescence to new highway construction that diminishes a property's value.
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Many states determine the order of water rights according to which users of the water hold a recorded beneficial use permit. This allocation of water rights is determined by:
A) accretion. B) riparian theory. C) littoral theory. D) the doctrine of prior appropriation. |
The correct answer is "D - the doctrine of prior appropriation. " Don't be confused. While all three of the other choices do or can involve water in some way, only answer "D" speaks to the key term in the question: "order of rights." Accretion is soil accumulated as a result of water motion; Littoral relates usually to the part of a shore line of a large body of water, and Riparian relates to rights next to or adjacent to a body of water (used primarily in the east).
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The right to control one's property includes all of the following EXCEPT :
A) the right to invite people on the property for a political fundraiser. B) the right to exclude the utilities meter reader. C) the right to erect "no trespassing" signs. D) the right to enjoy pride of ownership. |
The correct answer is "B - the right to exclude the utilities meter reader. " You may see this question in other ways, or with other answer choices. Just remember that any outside provider of services, whether Internet, Cable, Telephone, Water etc. will always have rights to property, even those with "No Trespassing" signs, if they provide their service to that property.
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Which of the following types of ownership CANNOT be created by operation of law, but must be created by the parties' expressed intent?
A) community property B) tenancy in common C) condominium ownership D) tenancy by the entireties |
The correct answer is "D - tenancy by the entireties " Tenancy by the entireties is a form of ownership that husbands and wives can choose or create by deciding to do so and declaring it as such in contracts and deeds. Tenancy in common is put in motion by state law. Community Property is a law of ownership that exists in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and some other states. Tenancy by the Entireties is an estate that is recognized in some states between husband and wife, who have equal right of possession and enjoyment during their joint lives and with the right of survivorship--that is when one dies, the property goes to the surviving tenant. (In many states, if couples do not specify "Joint Tenancy," this form of ownership will be automatically assumed.) Tenancy in Common is a type of joint ownership by parties NOT married, that allows a person to sell his share or leave it in a will without the consent of the other owners. If a person dies without a will, his share goes to his heirs, not to the other owners.
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Which of the following is/are considered to be personal property?
A) wood-burning fireplace B) furnace C) bathtubs D) patio furniture |
The correct answer is "D - patio furniture " Another way to distinguish among these answers and terms is by remembering the following: In general, when you see this type of question, look for the item that isn't "nailed down." Patio furniture is obviously a removable part of the property, rather than a fixture to the property--so it is personal property.
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The word "improvement" would refer to all of the following EXCEPT:
A) streets. B) a sanitary sewer system. C) trade fixtures. D) the foundation. |
The correct answer is "C - trade fixtures. " A trade fixture is actually the property of a tenant, and as such, is not considered a permanent improvement to the property, since the fixture is removed upon the tenant's vacating the property.
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All of the following are physical characteristics of land EXCEPT:
A) indestructibility. B) uniqueness. C) immobility. D) scarcity. |
The correct answer is "D - scarcity. " Another way to distinguish among these answers and terms is by remembering the following: Scarcity is an economic characteristic of land, not a physical characteristic. Just remember that when land is scarce the price is usually affected upwards, which is an economic characteristic.
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Certain items on the premises that are installed by the tenant and are related to the tenant's business are called:
A) fixtures. B) emblements. C) trade fixtures. D) easements. |
The correct answer is "C - trade fixtures. " Be careful. You need to watch for the word "trade" in the answer, because the question includes the key phrases "tenant" and "business." Trade fixtures are those installed for the person's business--for example, freezers or large signs--and usually this applies to commercial tenants.
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Personal property includes all of the following EXCEPT:
A) chattels. B) fructus industriales. C) emblements. D) fixtures. |
The correct answer is "D - fixtures. " Another way to distinguish among these answers and terms is by remembering the following: Emblements are crops, which are considered personal property. A fixture is something that was once considered personal property, but has become affixed, thereby making it "real property."
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A person who has complete control over a parcel of real estate is said to own a:
A) leasehold estate. B) fee simple estate. C) life estate. D) defeasible fee estate. |
The correct answer is "B - fee simple estate. " Fee Simple is also known as "Fee Simple Absolute" and is the highest degree of ownership. All the other answers have conditions or time limits. Leaseholds have time periods, Life Estates obviously don't last forever, and Defeasible Fee Estates have a trigger or condition that happens based on some future event. Accordingly, all three of these don't give the owner "complete control" like Fee Simple does.
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Which of the following types of real estate investment structures is under the control of the California commission of corporations rather than the real estate commissioner?
A) Limited partnerships. B) Blind pools. C) Real estate investment trusts (or REITS) D) All of the above |
The correct answer is "D - All of the above " Corporations, syndications and so forth, whether they invest in real estate or auto dealerships, are organizations serving investors rather than the public and, therefore, are not part of the DRE's or commissioners oversight responsibilities.
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Sara Straun is a newly licensed broker and has just opened her own office. How long must she keep transaction records?
A) One year. B) Two years. C) Three years. D) Five years. |
The correct answer is "C - Three years. " Those records must include not only closing documents, but trust fund information, all listings, all deposit clips and cancelled checks and all other documents executed by Sara in connection with her real estate practice.
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How should Sara handle the trust account portion of her record-keeping.
A) In columnar form, with separate records for each beneficiary in each transaction. B) By retaining all banking records for trust accounts. C) By retaining banking records organized by fiscal year. D) In the same form as her other business accounts for consistency. |
The correct answer is "A - In columnar form, with separate records for each beneficiary in each transaction. " Banking records are not sufficient for maintaining trust fund records. The DRE has a specific, columnar form that must be followed with required fields of information that include the date funds were received, the form of the trust funds, the amount received, a description of the property, the person from whom the funds were received and other detailed information relevant to the transaction.
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Sara's previous firm was headed by her friend, Phyllis Morris, who operated under the fictitious name of Palm Coast Realty. Although she correctly registered the name when she opened the office, she was recently sited for improperly operating under a fictitious name. Why might that be?
A) Since the name was correctly registered when she opened the office, the citation was in error. B) Her broker's license may have expired and the fictitious name with it. C) The right to use fictitious names must be renewed separately from the license renewal. D) Another company, Palm Coast Fashion was using the "Palm Coast" name first and lodged a complaint against Phyllis which she ignored. |
The correct answer is "B - Her broker's license may have expired and the fictitious name with it. " Even if a license is renewed one day after expiration, any fictitious name associated with it will not renew unless the broker includes it on the back of the new license. It's a common oversight, so licensees should check with the DRE periodically to make sure their licenses bear any fictitious dba names.
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What actions are required of agents regarding "material facts?"
A) They are deemed confidential between the agent and client and should be protected. B) They should generally be disclosed to the public although in some instances they may be considered minor or confidential and need not be disclosed. C) Must always be disclosed. D) Should be disclosed to serious buyers. |
The correct answer is "C - Must always be disclosed. " Material facts -- those dealing with a property's physical structure or the ability of parties to perform as promised -- must always be disclosed when the agent knows or should have known about them.
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Fawn Hathaway is a broker who has just been made an officer of her large, multi-office real estate firm. Her increase in pay came with an increase in responsibility and one of her salespeople has recently been the subject of a civil rights investigation. What, if any, potential liability does Fawn face in this matter?
A) None, unless the salesperson committed the violation under her direction. B) None, unless the salesperson committed the violation under her direct supervision. C) She can be reprimanded by the DRE, but not disciplined. D) She is subject to DRE discipline. |
The correct answer is "D - She is subject to DRE discipline. " While promotions and increased responsibilities are something most people welcome, brokers must also be mindful of the fact that they are directly responsible for the actions of those working in their offices. Failure to properly supervise exposes a broker not only to disciplinary action, but the possibility of a civil lawsuit.
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Caroline Martin assures real estate salesperson, Abby Benton, that the home she's selling has hardwood floors throughout. This appears to be true, since it is exposed in all rooms but two of the bedrooms which have wall-to-wall carpeting. Alison passes these assurances on to buyers who later discover that neither of the bedrooms has hardwood. What, if anything, is Abby guilty of.
A) She's not guilty of anything since she relied on the owner's assurance. B) She's guilty of omission. C) She's guilty of misrepresentation. D) She's guilty of fraud. |
The correct answer is "C - She's guilty of misrepresentation. " Alison is guilty of misrepresentation because she made a false assertion based on facts she should have verified. She could have avoided the violation by lifting a corner of the carpet to inspect the flooring or making a written disclosure to the buyers such as, although the seller believes hardwood is under the carpet, she does not know and cannot guarantee that to be true.
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Madison owns a smaller, older home she wants to sell to move into a more contemporary property that's just come on the market. Although she doesn't know it and hasn't experienced any problems, the pipes in her plumbing system are seriously corroded and will soon need to be replaced. What are the disclosure responsibilities of her and her agent?
A) They should indicate problems may exist. B) They should answer "unknown" to any questions about plumbing. C) They should indicate that there are known plumbing problems. D) They should note the fact that it's an older system and potential buyers should have it professionally examined. |
The correct answer is "B - They should answer "unknown" to any questions about plumbing. " Since plumbing systems are hidden and neither an owner nor a licensee can not be reasonably expected to know of potential problems without some outward sign of failure, it's appropriate for Madison and her agent to indicate that there are no known problems.
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For which of the following actions is a broker NOT liable to have his or her license suspended or revoked?
A) Having been declared mentally incompetent by a recognized agency or authority. B) Helping a third party cheat on a licensing examination. C) Placing a "For Sale" sign on a neighbor's property he or she has been told is going on the market before obtaining the owner's consent. D) Accepting earnest money from a buyer and depositing it directly into a trust account. |
The correct answer is "D - Accepting earnest money from a buyer and depositing it directly into a trust account. " Placing earnest money directly into a trust account is not only legal, it is required.
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As long as it is specified as part of his or her duties, is it legal for an unlicensed salaried assistant to solicit listings for the broker?
A) Yes, if it is part of a written job description. B) No, soliciting listings is the exclusive responsibility of the broker. C) Yes, because she is being paid a salary, not commissions. D) No, active participation in real estate transactions requires a license. |
The correct answer is "D - No, active participation in real estate transactions requires a license. " Tasks such as answering phones or making copies are considered support and don't require any licensing or course work. However, activities such as soliciting listings or providing information about a property are part of the transaction process and may be handled only by licensed real estate professionals.
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