Quick Quiz 2 Flashcards Preview

CA Real Estate > Quick Quiz 2 > Flashcards

Flashcards in Quick Quiz 2 Deck (57)
Loading flashcards...
1

A residential property is reassessed

every time the property is sold.
A residential property will always be reassessed when the property is sold. A property damaged or destroyed by fire can be restored to original condition without a reassessment.

2

Annual percentage rate is defined as
A) direct loan costs only.
B) direct and indirect costs plus taxes and closing costs.
C) all loan costs, direct or indirect, expressed as a percentage rate.
D) relative amount of credit costs expressed as a dollar total.

C) all loan costs, direct or indirect, expressed as a percentage rate.
The annual percentage rate represents the relationship of the total finance charge to the total amount financed. The total finance charge includes the total of all costs paid directly or indirectly by the borrower. However, there are certain costs that are exempt including, but not limited to, appraisal fees and credit reports.

3

Usefulness of the cost approach is limited when appraising
A) a new structure on an appropriate site.
B) in an unusually active real estate market.
C) an older property with many functional deficiencies.
D) for construction.

C) an older property with many functional deficiencies.
The usefulness of the cost approach method of appraisal is limited when appraising an older property with many functional deficiencies because of the difficulty in determining all of the accrued depreciation. Appraising a new structure or for construction would probably have little, if any, functional deficiencies. In an unusually active real estate market the comparison approach would be the most significant approach to use, but the cost approach could still be useful.

4

A man purchased a lot for $100,000 cash. In order to construct a building valued at $500,000, he took out a loan of $400,000 at 11% per annum and put down $100,000 in cash. For income tax purposes, what amount could he depreciate over the life of the building?
A) $600,000
B) $400,000
C) $100,000
D) $500,000

D) $500,000
$500,000 building cost is the depreciable asset regardless of the amount financed.

5

What essential element is necessary between a broker and a principal when dealing with the title, right, or interest in real property?
A) Establishment of the rights of commission between the parties by law
B) Broker's right to accept a deposit
C) Broker's right to draw up a purchase offer
D) Written contract of employment

D) Written contract of employment
The statute of frauds (Civil Code Section 1624) requires that a contract employing an agent to purchase or sell real estate, or to lease real estate for a longer period than one year, must be in writing to be enforceable.

6

The Real Estate Settlement Procedures Act lists services a lender may charge for as settlement-connected costs. Accordingly, as appropriate, the buyer and seller may be charged for all of these EXCEPT
A) appraisals.
B) uniform disclosure/settlement statements.
C) loan documents.
D) credit reports.

B) uniform disclosure/settlement statements.
Under RESPA, a lender cannot charge a fee for any services performed in connection with the dissemination of information required under this law. This would include the truth-in-lending statement and the uniform disclosure/settlement statement.

7

f the Federal Reserve Board wanted to create a tight money market, it would
A) raise discount rates and buy bonds.
B) lower discount rates and sell bonds.
C) lower discount rates.
D) raise discount rates.

D) raise discount rates.
The Federal Reserve Board could create a tight money market by restricting the flow of money and credit. It could use one or a combination of any of these three methods: (1) Raise the reserve requirement of its member banks (not in any of the choices); (2) Sell U.S. government bonds through its Federal Open Market Committee; (3) Raise the discount rate on short term loans made to its member banks.

8

In the sales comparison approach, the adjusted sales price of the comparable property is
A) indicated by agreement between the buyer and the seller.
B) the only indication of the market value.
C) a direct relationship to market value.
D) an estimate of value of the comparable property with similar prominent characteristics to the subject property.

D) an estimate of value of the comparable property with similar prominent characteristics to the subject property.
Sales prices of "comps" are adjusted to reflect what the comparable property might have sold for had it been more nearly identical to the subject property-or had similar prominent characteristics to the subject property.

9

The Jacksons bought a residence with a first trust deed loan from a savings and loan. The Londons bought a residence with a first trust deed loan from a bank. The Londons refinanced, obtaining a first trust deed loan from a savings and loan, to get money for a business opportunity. Which statement is correct?
A) The Jacksons do not have the right of rescission, the Londons do.
B) Both have the right of rescission.
C) The Londons do not have the right of rescission, the Jacksons do.
D) Neither has the right of rescission.

D) Neither has the right of rescission.
The Truth in Lending Act applies only to refinance loans and for personal, family, or household purposes, never for business loans regardless of what collateral is put up. Therefore, the Londons have no right of rescission.

10

The legal term laches is best described as
A) a writ of attachment.
B) inexcusable delay in asserting a legal right.
C) a court with no jurisdiction.
D) a deficiency judgment.

B) inexcusable delay in asserting a legal right.
Laches means delay or negligence in asserting one's legal rights. Such a delay can make a contract unenforceable.

11

Joint tenancy and community property interests have what in common?
A) Survivorship
B) Equal interests
C) Same conveyance
D) Both involve the husband and wife

B) Equal interests
In order to create a joint tenancy and community property, there must always be equal interest. In community property, the interests are equal but without the right of survivorship, unless it is specifically indicated as "community property with right of survivorship." A joint tenancy may or may not involve a husband and wife.

12

According to the Government Code, a person discriminated against when buying a home may

- purchase the home if it is still available.
- be awarded punitive and actual damages.
- purchase a similar home from the owner if one is available.
Government Code Section 12987 provides that a person who has been discriminated against in the sale or rental of housing accommodations may be entitled to the sale or rental of the home if it is still available, or to the sale or rental of a like housing accommodation if one is available. Punitive damages of up to $1,000 may be awarded, as well as actual damages.

13

In the absence of a special agreement to the contrary, a trust deed normally having highest priority is one that was
A) a construction mortgage.
B) recorded first.
C) executed first.
D) executed and delivered first.

B) recorded first.
Generally, recording establishes the priority of a trust deed. "First to record is first in right." An exception would result from the existence of a subordination clause. Other exceptions may exist in relation to mechanics' liens and judgment liens.

14

An escrow company received two termite reports in which the estimates of cost of the work differed. Under these circumstances
A) the most expensive report should be used.
B) the seller and broker must decide which report to use.
C) the least expensive report should be used.
D) the seller and broker should present both reports to the buyer.

D) the seller and broker should present both reports to the buyer.
The results of a pest control inspection report, including the cost of corrective work, would be material facts to a buyer and must be disclosed. If two or more inspections are made, all reports must be disclosed.

15

What is the difference between real property taxes and assessment bonds?
A) Special assessments are levied by special improvement districts only.
B) Special assessments are used for local improvements.
C) Assessments are subordinate to real estate taxes.
D) Assessments have superiority over property taxes.

B) Special assessments are used for local improvements.
Property taxes are charged in relation to the value of the property being taxed. Special assessments are imposed on real property for a specific local purpose, which requires approval of 2/3 of the voters. Taxes and assessments are said to be on parity, meaning they have equal footing. Neither is subordinate to the other.

16

Riparian rights refer to

rivers and streams.
Riparian rights refer to flowing water as in rivers or streams or in other watercourses (waters flowing in a fixed or defined channel).

17

Rights associated with tidal or standing waters like lakes, oceans, and bays are called

littoral rights.

18

A real estate licensee negotiated the sale of a farm for a seller. The agent's commission can be paid in which form?
A) Assignment of funds from buyer to seller
B) Check or cash
C) Assignment of existing note
D) Any of these

D) Any of these
Under normal circumstances, a commission is paid by check. However, as long as the principal and the broker agree, the commission may be paid in any of the forms listed.

19

Which is a freehold estate?
A) Estate for years
B) Estate in fee
C) Estate at sufferance
D) Estate at will

B) Estate in fee
Freehold estates are either (1) fee simple estates or (2) life estates. The wrong answer choices here are all less-than-freehold estates: (1) Estates for years (2) Periodic tenancies (3) Estates at will (4) Estates at sufferance.

20

When referring to real estate finance, the term impounds most nearly means
A) penalty.
B) moratorium.
C) reserves.
D) attachment.

C) reserves.
In real estate finance, the term impounds means reserves, which is a trust-type account established by lenders for the accumulation of a borrower’s funds to meet periodic payment of taxes and insurance as they become due.

21

A due-on-sale clause, whether it is enforceable or not, contained in a mortgage or trust deed is a type of
A) acceleration clause.
B) defeasible clause.
C) legally enforceable clause.
D) executed clause.

A) acceleration clause.
A "due-on-sale" clause, also called an alienation clause, is a form of an acceleration clause found in some mortgages or trust deeds authorizing the lender to call the loan when the property is conveyed. This clause eliminates the new buyer's assuming the mortgage unless the mortgagee permits the assumption, in which case the mortgagee could increase the interest rate and/or charge an assumption fee.

22

In a real estate office, worker's compensation should be carried on

Legally, employees need to be covered by worker's compensation. As the law is not clear on the relationship between a broker and a salesperson, the broker would be prudent to cover their salespersons also.

23

A brother and sister owned property in joint tenancy. All his other affairs were separate. The brother died penniless, leaving many unsecured debts. The creditor could
A) obtain no satisfaction since the property is owned by the sister.
B) place a lien against the sister's property.
C) attach the property that was owned in joint tenancy.
D) appeal to the probate court, which would be able to pay creditors out of the sale of the sister's proper

A) obtain no satisfaction since the property is owned by the sister.
Upon the death of one joint tenant, the interest passes to the survivor free and clear of claims by the creditors. Since the brother's creditors did not institute court action to sell the property and satisfy their lien prior to his death, they have no right to the title now held in severalty by the sister.

24

When property tax increases and all other items remain the same, an income property

decreases in value by more than the amount of the taxes.
The property will decrease in value by more than the amount of the taxes based on the reduced annual net income (assume a $500 tax increase and a 10% capitalization rate; loss of value would be $5,000).

25

A 17-year-old divorced woman wants to list her part of what had been community property with a broker. With regard to the listing, the broker
A) may not take the listing because the divorced woman is a minor.
B) should wait for court approval.
C) may take the listing when she becomes 18 years old.
D) can proceed with the listing request.

D) can proceed with the listing request.
Since the divorced woman is emancipated she need not seek court approval. If she is divorced, it doesn't matter whether she is a minor because she is emancipated. Her age is also immaterial because she is emancipated. Therefore, indicating the broker can proceed with the listing request is correct. Once a person has been married the person is emancipated and continues to be even if later divorced. On the exam, a "single person" is someone who has never been married.

26

James, an 11-year-old minor, owned a farm and asked his father to contract a broker to sell the farm. The father listed the property with a broker. The farm was sold and the deed was signed. James later changed his mind and wanted the farm. This transaction was
A) valid because the father was acting for his son.
B) void because the father arranged the sale through a broker.
C) void because James was a minor.
D) rescinded simply because James changed his mind.

C) void because James was a minor.
Since the grantor was a minor, the deed is void at inception.

27

What binds buyer and seller in a contract?
A) Title insurance
B) Acknowledgment
C) Recording
D) Offer, acceptance, and communication

D) Offer, acceptance, and communication
Mutual consent (offer and acceptance) is one of the four essential elements of a valid contract. The other three requirements are capacity of the parties, consideration, and lawful object.

28

What would contribute to the functional obsolescence of a building?
A) Declining neighborhood
B) Adverse zoning across the street from the property
C) Massive cornices on a building
D) Rotten mud sills

C) Massive cornices on a building
Functional obsolescence is inherent within the building and arises from poor or outdated architecture. A declining neighborhood and adverse zoning across the street from the property are economic obsolescence. Rotten mud sills are physical deterioration.

29

At 10:00 AM a broker receives an offer that meets full price and all terms of the listing. At noon, before he or she could submit the first offer, he or she receives a second offer on the same property for less money but all cash. The broker decides to submit the first offer and, if it is rejected, to submit the second offer. Which statement is TRUE?
A) This is proper since one should submit offers in the order received.
B) This is improper since the broker owes a fiduciary relationship to both buyers.
C) This is proper since the second offer was for less than the listed price.
D) The broker could be disciplined by the real estate commissioner.

D) The broker could be disciplined by the real estate commissioner.
All offers should be submitted. For withholding material facts, a broker could be disciplined by the real estate commissioner. While it is correct in that the action is improper, the listing broker owes fiduciary duties to the seller, not to the buyer.

30

Police power is a governmental right and would result in
A) deed restrictions in a subdivision.
B) judgments.
C) zoning standards.
D) the taking of private property for the construction of a highway.

C) zoning standards.
The government's police power is the basis for zoning ordinances.