CLIFF BOOK - TEST 4

Question 0

Which of the following best describes riparian rights?

(A) the right of an owner to use lake water adjacent to her property; (B) the ownership by a landowner of the land underneath a navigable river adjacent to his land; (C) the ownership by a land owner of the land up to the high-water mark of a navigable river adjacent to his property; (D) the right of a landowner to use the water under his land.

Answer 0

(C) the ownership by a land owner of the land up to the high-water mark of a navigable river adjacent to his property

Riparian rights have to do with flowing water (rivers and streams), and the rights of the adjacent landowner depend on whether or not the river or stream is navigable.

Question 1

When a person’s land is rezoned to a use that reduces the value of the land by 25%, the owner:

(A) is entitled to proportional compensation; (B) is entitled to no compensation; (C) has a claim under eminent domain law; (D) can claim compensatory damages.

Answer 1

(B) is entitled to no compensation

Normally, a person is entitled to compensation only when all the reasonable use of the property has been denied.

Question 2

Renewal of a subdivision approval by the Real Estate Commissioner is available if all the lots have not been sold within:

(A) two years; (B) three years; (C) four years; (D) five years.

Answer 2

(D) five years

This is statutory and part of the Subdivided Lands Law.

Question 3

A tenant in an apartment house attaches some bookcases to the wall. What is the presumption?

(A) that the bookcases are now a fixture and belong to the landlord; (B) that the bookcases are personal property and can be removed by the tenant; (C) that the bookcases are now real estate and can be removed only with the landlord’s permission (D) there is no presumption; their removal will have to be negotiated.

Answer 3

(B) that the bookcases are personal property and can be removed by the tenant

In general, the view is that the bookcases belong to the tenant.

Question 4

A subdivider plans on turning over the streets in a subdivision to the local town. This is most correctly called a:

(A) grant; (B) conveyance; (C) devise; (D) dedication.

Answer 4

(D) dedication

Although all the terms imply some form of transfer of ownership of proprety, the correct term for this type of conveyance in connection with a subdivision is DEDICATION.

Question 5

A person who has a time-share:

(A) will always have an estate interest; (B) will always have a use interest; (C) will always have a use interest but never an estate interest; (D) can have an estate interest or a use interest but never both.

Answer 5

(B) will always have a use interest

It is the nature of timeshare ownership to permit use of the property for a period of time. The estate or ownership interest varies.

Question 6

A broker negotiating a sale on behalf of a buyer when the buyer has not given him permission to do so is:

(A) operating under implied authority; (B) operating under apparent authority; (C) operating under actual authority; (D) simply being overly ambitious.

Answer 6

(B) operating under apparent authority

Apparent authority gives the false impression that an agency relationship exists.

Question 7

Broker B is appointed by Broker A to help him sell a house. Broker A has permission from the seller to do this. Which of the following is true?

(A) Broker B is a subagent of Broker A; (B) Broker B is a subagent of the seller; (C) Broker B is an agent of Broker A; (D) Broker B is an agent of the seller.

Answer 7

(B) Broker B is a subagent of the seller

The key here is that the seller (the principal) gave permission. If no permission had been given, Broker B would have been an agent of Broker A.

Question 8

A broker who seeks a profit from a listing he has beyond his normal commission is violating the fiduciary principle of:

(A) loyalty; (B) confidentiality; (C) disclosure; (D) care.

Answer 8

(A) loyalty

The principle of loyalty says that the broker must put his principal’s interest above all others, even his own.

Question 9

In appraising a three-unit dwelling and wanting to analyze its income in the appraisal, what approach would you use?

(A) income capitalization; (B) gross rent multiplier approach; (C) sales comparison approach; (D) cost approach.

Answer 9

(B) gross rent multiplier approach

The income approach is used for large-scale income producing properties like shopping malls. Choices C and D do not take income into account.

Question 10

A loan that does not qualify to be purchased by the federal secondary mortgage market is generally referred to as what type of loan?

(A) unconventional; (B) non-conventional; (C) subprime; (D) subsidized.

Answer 10

(C) subprime

Subprime is the term used for these loans.

Question 11

Which of the following does not belong in the group?

(A) Real Estate Settlement and Procedure Act; (B) Consumer Credit Act; (C) Truth in Lending Law; (D) Regulation Z.

Answer 11

(A) Real Estate Settlement and Procedure Act

Although RESPA deals with consumer protection in the credit process, choices B, C, and D are all names for essentially the same law.

Question 12

Which of the following is not a requirement to be a holder in due course of a negotiable instrument? The instrument must have been taken:

(A) directly from the maker of the note; (B) for value; (C) in good faith; (D) without notice of it being overdue or any other defence.

Answer 12

(A) directly from the maker of the note

Choices B, C, and D are the statutory requirements to be a holder in due course.

Question 13

In a case where a borrower pays 2 discount points on a mortgage loan, which of the following is true?

(A) The nominal rate and the APR will be the same; (B) The nominal rate will be lower than the APR; (C) The nominal rate will be higher than the APR; (D) The nominal rate will be higher than the APR but only in an adjustable-rate mortgage.

Answer 13

(B) The nominal rate will be lower than the APR

Discount points are prepaid interest and will result in a lower nominal rate and higher APR.

Question 14

Borrower A must pay 2.5 points to secure a mortgage at the rate he wants. The value of the property is $390,000 and the LTV is 80%. How much does he owe the bank in points?

(A) 9,750; (B) $7,800; (C) $6,240; (D) $5,600.

Answer 14

(B) $7,800

What the hell is the matter with you?

Question 15

A testator wants to make a small change in her will. The way to do this is by adding a(n):

(A) codicil; (B) amendment; (C) condition subsequent; (D) revision.

Answer 15

(A) codicil

Choices B and D could be viewed as generic terms for any type of change in a document, but the proper term for a change in a will without writing a new will is a codicil. Choice C refers to deeds.

Question 16

In an escrow, closing title insurance is ordered by whom?

(A) the escrow agent; (B) the buyer; (C) the seller; (D) the real estate broker.

Answer 16

(A) the escrow agent

Choice A is clearly the correct answer even though a real estate broker may act as an escrow agent.

Question 17

Real estate taxes of $1,200 are due on a property on January 1 for the previous six months. Sale of the property closes on November 1. What is the proration?

(A) the buyer gets a credit of $800; the seller gets a debit of $400; (B) the buyer gets a debit of $400; the seller gets a credit of $800; (C) the buyer gets a credit of $400; the seller gets a debit of $800; (D) the buyer gets a debit of $800; the seller gets a credit of $800.

Answer 17

(C) the buyer gets a credit of $400; the seller gets a debit of $800

The buyer will be paying the taxes in arrears but not living in the house for the entire six months, so the seller will owe the buyer for the portion of time the seller is in the house. The buyer gets a credit and the seller gets a debit.

$1,200 / 6 months = $200 per month

$200 per month x 4 months (Time period seller was in the house for which the buyer paid the taxes) = $800 credit to the buyer.

Because the buyer paid for the taxes the seller “used,” the seller is charged a debit for the same amount.

Question 18

The standard title insurance policy assumes that:

(A) the property owner can inspect the property before he buys it; (B) the property has no title defects; (C) the property has a mortgage loan on the property; (D) none of the above.

Answer 18

(A) the property owner can inspect the property before he buys it

The standard policy assumes that the owner by inspection of the property will discover obvious defects or other claims, such as easements against the title.

Question 19

Which of the following types of property is not exempt from taxation?

(A) a church; (B) household furniture; (C) stocks; (D) a water treatment plant owned by Town A within the jurisdiction of Town B and built on the site of a former factory.

Answer 19

(D) a water treatment plant owned by Town A within the jurisdiction of Town B and built on the site of a former factory

Generally, municipally owned property is exempt, but under special circumstances it is taxable if it’s in another jurisdiction.

Question 20

Assuming that the tax collector takes the maximum legally allowed amount of time to sell a property for unpaid taxes, how long could the owner have to redeem it by paying the back taxes and penalties?

(A) three years; (B) five years; (C) seven years; (D) ten years.

Answer 20

(C) seven years

The owner has five years to redeem the property, during which time the tax collector cannot sell it, and the tax collector has two years to sell it, during which time it can still be redeemed.

Question 21

Marital status is a protected class in the:

(A) Federal Fair Housing Act of 1968; (B) Unruh Civil Rights Act; (C) Fair Employments and Housing Act; (D) 1866 Civil Rights Act.

Answer 21

(C) Fair Employments and Housing Act

The other laws do not include marital status as a protected class.

Question 22

A broker must maintain transaction records:

(A) for three years from the date of listing or three years from the date of closing, whichever is longer; (B) for three years from the date of closing; (C) for three years from the date of listing; (D) until the broker closes the brokerage.

Answer 22

(A) for three years from the date of listing or three years from the date of closing, whichever is longer

Note that, technically, choices B and C could be correct but Choice A is the most complete and, therefore, the best answer.

Question 23

Under the regulations for operating a prepaid rental listing service license, what must a prospective tenant be provided with?

(A) at least three available rentals within five days of paying the fee; (B) at least five available rentals within three days of paying the fee; (C) at least ten available rentals within the first month of paying the fee; (D) There is no minimum requirement.

Answer 23

(A) at least three available rentals within five days of paying the fee

This is statutory.

Question 24

For purposes of disclosure, a material fact is best described as one that involves:

(A) the physical structure of the structure; (B) factors involving the land on which the structure is built; (C) publicly known issues affecting the neighborhood; (D) facts that would affect the desirability or value of the property.

Answer 24

(D) facts that would affect the desirability or value of the property

You could correctly argue that the other three answer choices are material facts, but they are too limited because a material fact is anything that would affect the desirability of the property and, therefore, the buyer’s decision.

Question 25

Which of the following activities could be performed without a real estate license?

(A) collecting rents for several owners of apartment buildings; (B) conducting a preliminary interview with a prospective home-selling client; (C) accompanying the appraiser on her inspection of the property that is being sold; (D) negotiating a mortgage loan.

Answer 25

(C) accompanying the appraiser on her inspection of the property that is being sold

This is statutory

Question 26

When a salesperson changes her affiliation with a broker, how many days do she and the new broker have to notify the state?

(A) two; (B) three; (C) five; (D) seven.

Answer 26

(C) five

This is statutory.

Question 27

The seller’s broker invites the cooperating broker who sold the property to join her on a visit to inspect the property. The cooperating broker indicates that he doesn’t need to inspect the property, because the seller’s broker is already performing that task. The cooperating broker:

(A) is correct; (B) is wrong; (C) is correct if the house is anything except a one-family house; (D) must inspect the property but need not report his findings to anyone but the seller’s broker.

Answer 27

(B) is wrong

The cooperating broker must inspect the property and complete the inspection disclosure form that is given to the buyer.

Question 28

According to the lead-based paint disclosure law, how many days must a buyer be given to have the house tested for lead-based paint hazard?

(A) five; (B) ten; (C) 15; (D) 20.

Answer 28

(B) ten

This is statutory.

Question 29

Mold disclosure is best covered by using:

(A) the Real Estate Transfer Disclosure Statement; (B) the Natural Hazard Disclosure Statement; (C) the environmental condition assessment report; (D) a mold disclosure form.

Answer 29

(D) a mold disclosure form

Although this is not mandatory, it is recommended and it is the best way to disclose the condition. I made up choice C. It should be noted that mold, as a possible environmental hazard, should most likely be noted on the property disclosure transfer form.

Question 30

After a property purchase agreement is signed, a survey is done and a mistake is discovered in the size of the lot. A survey is done noting that the property is smaller than originally described. Because the purchaser wants to go ahead with the purchase, he would likely seek a(n):

(A) assignment; (B) rescission; (C) reformation; (D) release.

Answer 30

(C) reformation

In contract terminology, the term reformation means to correct some error in a contract.

Question 31

An offer to purchase property made by a person under the influence of alcohol is best described as:

(A) voidable; (B) void; (C) unenforceable; (D) valid.

Answer 31

(A) voidable

The contract may appear to be unenforceable or void, but, technically, when the person is sober, he can affirm the contract and go ahead with the deal or he can decide to void it.

Question 32

A listing agreement is generally:

(A) express and executed; (B) express and executory; (C) express and unilateral; (D) implied and executory.

Answer 32

(B) express and executory

The terms of the agreement have not been completed fulfilled, so it is executory; because it is in writing, it is express. The word GENERALLY is there because, although a listing agreement could be implied, collecting the commission would be unenforceable.

Question 33

Automatic renewal of a lease may be voidable if the:

(A) renewal clause is not printed in the correct size type; (B) renewal clause is not located in the correct place in the lease; (C) lease is for a year and was not in writing; (D) all of the above.

Answer 33

(D) all of the above

All of these are statutory provisions

Question 34

A homeowner in a mobile home park has defaulted on his bills, such as rent and utilities, a number of times. Each time he manages to pay the bills within the prescribed time period after the notice of termination. What is that time period?

(A) three days; (B) seven days; (C) 21 days; (D) 30 days.

Answer 34

(D) 30 days

This is statutory.

Question 35

The offer of pledging of real property to secure a loan is called a(n):

(A) promissory note; (B) hypothecation; (C) negotiable instrument; (D) due on sale clause.

Answer 35

(B) hypothecation

This is definitional.