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Flashcards in Quick Quiz 4 Deck (35)
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1

A selling agent who is the exclusive agent for the buyer can do all of these things EXCEPT
A) act as the seller's agent since the seller is the one paying the commission.
B) withhold negative information about the buyer.
C) personally submit the buyer's offer to the seller.
D) submit his client's offer to the seller and seller's agent with the seller's approval.

A) act as the seller's agent since the seller is the one paying the commission.
An agent who is the "exclusive agent for the buyer" cannot also act as the seller's agent. If the buyer's agent also acts as the seller's agent, there is a dual agency (if disclosed) or a divided agency (if not disclosed) and the agent cannot then be the "exclusive agent for the buyer." The buyer's agent can withhold negative information about his client, the buyer, as long as it is not a material fact that the seller might reasonably take into consideration in deciding to accept an offer.

2

Berg sells Mann a property, using a conditional sales contract. The contract is recorded and a deposit is made. Mann continues to live on the property but stops making payments and avoids Berg. He then abandons the property one night. In this situation
A) the sale has no effect on the title.
B) marketability of title is not affected.
C) there is a cloud on the title.
D) the new buyer would not be concerned with Mann.

C) there is a cloud on the title.
The recording of the contract or taking possession of the property gives constructive notice and therefore creates a cloud on the title under the circumstances outlined. Unless the vendee could be found and persuaded to deliver a valid quitclaim deed to the vendor, a successful quiet title court action would be necessary to make the title marketable. FYI, a conditional sales contract is also known as a land contract, contract of sale, and real property sales contract.

3

The principle of substitution applies to
A) use.
B) structural design.
C) all of these.
D) income.

C) all of these.
The principle of substitution states that when several similar commodities, goods, or services are available, the one with the lowest price attracts the greatest demand and widest distribution. The substitution of one property for another may be in terms of use, structural design, or earnings.

4

What is included in an FHA loan?
A) Secondary financing
B) Mortgage life insurance
C) Schedule of payments
D) Prepayment penalty

C) Schedule of payments
The borrower would need to know the schedule of payments for the loan. FHA loans do not have prepayment penalties. Secondary financing is not normally permitted at the origination of the first loan. Mortgage life insurance is not a requirement of an FHA-insured loan (although mutual mortgage insurance is a requirement to protect the lender against default of the borrower).

5

Which element is NOT necessary in the formation of a contract?
A) Performance
B) Offer
C) Consideration
D) Acceptance

A) Performance
Offer, acceptance, and consideration are essential in the creation of a contract. Performance is the desired result and not an essential in the formation of a contract.

6

An investment property is appraised at $400,000 based on a net income of $36,000 and a 9% capitalization rate. The value of the property based on a 12% capitalization rate would be
A) $300,000.
B) $250,000.
C) $450,000.
D) $423,000.

A) $300,000.
R × V = I
0.12 × V = $36,000
V = $36,000 ÷ 0.12 = $300,000

7

"Soil pipe" relates to
A) irrigation pipes.
B) hot water lines.
C) gas lines.
D) sewer pipes.

D) sewer pipes.

8

In November, a storm caused damage in Able's house due to a leaky tile roof. In April, Able listed the house with Broker Baker. Broker Baker showed the house to Smith, but did not mention the leaky roof, although Able had mentioned it. After close of escrow, Smith sustained damage to the interior of the house due to this leaky roof. Under these circumstances, buyer Smith
A) had no recourse since escrow had closed.
B) could take legal action against Able, and if successful, Able could most likely recover the loss from Broker Baker.
C) could take legal action against Broker Baker but not against Able.
D) had no recourse under the doctrine of caveat emptor.

B) could take legal action against Able, and if successful, Able could most likely recover the loss from Broker Baker.
Since a principal is responsible for all acts of the agent, Able could be sued by Smith. Since Able informed broker Baker of the defect, however, he or she could recover any loss from the broker.

9

Which would NOT be covered by a CLTA policy but would be covered by an ALTA policy?
A) Mistakes in liens and documents of record
B) Capacity of the grantee of a deed of reconveyance
C) Discrepancies found in documents of record
D) Property lines accurately established by a survey

D) Property lines accurately established by a survey

10

With respect to easements appurtenant, which statement is correct?
A) If the grantor conveys title to property, the easement passes automatically with the land.
B) All encumbrances are liens but all liens are not encumbrances.
C) An easement always gives the rights of ingress and egress.
D) The dominant tenement is the land burdened and benefited by the easement.

A) If the grantor conveys title to property, the easement passes automatically with the land.
Easements pass automatically upon transfer of the dominant tenement. The first statement is incorrect, as the dominant tenement is benefited, not burdened, by the easement. The second statement is incorrect, as an easement can include, besides rights-of-way, the right of receiving air, light, or heat; the right of using a wall as a party wall; or the right of flooding land, among other things. The third statement is incorrect, as an easement is an encumbrance but not a lien.

11

Mr. and Mrs. Jenkins own a home worth $533,000 on which there is a $519,000 loan. Mrs. Jenkins alone filed a Declaration of Homestead. If there were a judgment lien filed against them
A) the exemption would be for $10,000 since Mrs. Jenkins filed it without her husband's signature.
B) the homestead is invalid since only Mrs. Jenkins filed it.
C) the home would not be sold because there is insufficient equity over and above the exemption and the secured lien to satisfy the creditor.
D) the home could be sold to satisfy the judgment.

C) the home would not be sold because there is insufficient equity over and above the exemption and the secured lien to satisfy the creditor.
The property is held by the husband and wife. She may file a homestead exemption of $75,000. The property would not be sold because the $519,000 loan and the $75,000 exemption exceed the $533,000 market value of the property.

12

With regard to local building codes (for example in Los Angeles) versus the Federal Uniform Building Code, which would prevail?
A) Local building codes always take precedence over the Federal Uniform Building Code.
B) The Federal Uniform Building Code applies only to general codes while local codes are more specific.
C) Federal codes always take precedence.
D) Whichever has the higher standards of health and safety will prevail.

D) Whichever has the higher standards of health and safety will prevail.
Generally, conflicts of law are decided with the health, safety, and general welfare of the people as the highest standard.

13

Which approach to a value estimate tends to set the upper limit of value?
A) Market comparison
B) Replacement cost
C) Income
D) Comparative sales

B) Replacement cost

14

A buyer assumes an FHA mortgage with the lender's approval and pays the seller's equity in cash. The lender charges the buyer a $30 fee. This fee is known as
A) a novation.
B) an assumption fee.
C) an origination fee.
D) points.

B) an assumption fee.
An assumption fee is the lender's charge for changing over and processing new records for a new owner who is assuming an existing loan.

15

The trustor under a trust deed is the party who
A) receives the note.
B) lends the money.
C) signs the note as maker.
D) holds the property in trust.

C) signs the note as maker.
The trustor is the one who receives the money or the extension of credit. The trustor signs the note as a promise to repay and gives the lender security by signing the trust deed conveying the legal title to the trustee.

16

Middleton is a 15-year-old emancipated minor who hired a broker to sell her property. Middleton gave this broker her emancipation documents. After the broker procured a buyer, to whom should the broker deliver these documents?
A) The buyer
B) The buyer's lender
C) The escrow company
D) The title insurer

C) The escrow company
An emancipated minor has the legal capacity of an adult to, for example, enter into contracts and to buy, sell, lease, encumber, exchange, or transfer any interest in real or personal property. An escrow company would need to ascertain that the seller had capacity to act.

17

A primary source of funds for residential financing is the
A) Federal Housing Administration.
B) Federal Home Loan Bank.
C) Federal Savings and Loan Insurance Corporation.
D) Federal Savings and Loan Association.
Explanation

D) Federal Savings and Loan Association.
Explanation
Of the four listed, the Federal Savings and Loan Association is the only one operating in the primary loan market. Today, more residential loans are made by commercial banks than S&Ls.

18

A specified charge against real property that is used as security is defined as
A) a lien.
B) subdivision restrictions.
C) zoning and planning.
D) an easement.

A) a lien.
A lien makes specific property security for the debt.

19

In the capitalization of net income, the most difficult item for an appraiser to establish is the
A) selection of a capitalization rate.
B) determination of gross income.
C) determination of net income.
D) effective gross income.

C) determination of net income.
Net income is more difficult to determine than gross income or effective gross income because it involves attaining information on both fixed and variable expenses. Capitalization rates are often based on comparative data readily available to an appraiser.

20

Which is NOT included in the total finance charge under the Truth-in-Lending Act?
A) Appraisal and credit report fees
B) Premium for mortgage guaranty or similar insurance
C) Points paid by the buyer on a FHA/VA loan
D) Finder's fee and similar charge

A) Appraisal and credit report fees
Fees for appraisals and credit reports are not included in the finance charge. Regulation Z (another name for the Truth-in-Lending Act) lists among those charges included in the finance charges buyer's points, finder's fees, and premiums for mortgage guaranty or similar insurance.

21

An owner of land wants to subdivide his property. What is the minimum number of parcels he would have to create in his new subdivision in order to fall under the Subdivided Lands Law?

FIVE+

22

In which situation would a package mortgage be used?
A) When including the obligations of a first and second trust deed under one instrument
B) When covering more than one parcel of land in a subdivision
C) When encumbering real property and using personal property as additional collateral
D) When securing additional financing from the lender at a later date without rewriting the mortgage

C) When encumbering real property and using personal property as additional collateral
A package mortgage covers both real and personal property. Including the obligations of a first and second trust deed under one instrument is an all-inclusive deed of trust. Covering more than one parcel of land in a subdivision is a blanket encumbrance and securing additional financing from the lender at a later date without rewriting the mortgage is an open-end mortgage.

23

In the sale of real property, all of these statements concerning financing are true EXCEPT
A) a mortgage is a lien on real property; an execution of a mortgage does not transfer title.
B) an owner who borrows and executes a trust deed is a trustor.
C) selling a note for less than its face value is known as discounting.
D) a promissory note is security for the trust deed.

D) a promissory note is security for the trust deed.
The statement is completely reversed. The trust deed is the security for the promissory note and incidental to the debt. The other three statements are true.

24

A plot plan
A) is used as a guide to the placement of structures and related improvements on the lot.
B) shows contour of the land.
C) is used as an exact guide for construction of improvements.
D) shows exterior of structures to be built.

A) is used as a guide to the placement of structures and related improvements on the lot.
A plot plan shows the layout of improvements on a property site (a plot). The plot plan usually includes location, dimensions, parking areas, landscaping, and the like.

25

A comprehensive method of estimating a building cost including labor, material, overhead, and profit is considered in which method?
A) Unit-in-place
B) Comparative cubic or square foot measurements
C) Quantity survey
D) All of these

C) Quantity survey
All building cost estimates should include both direct construction costs and indirect costs. Direct costs are those for material and labor, generally including the contractor's overhead and profit. However, the most comprehensive method of cost estimating is the quantity survey method.

26

To find the details of the subfloor, such as size and dimensions of concrete piers, footings, and other detailed construction measurements, a real estate licensee would examine the
A) floor plan.
B) elevation plan.
C) foundation plan.
D) plot plan.

C) foundation plan.
A foundation plan will show all the details of the subfloor, such as the size and dimensions of concrete piers footings and other detailed construction measurements. A floor plan is a drawing made to scale showing floor dimensions, room sizes, placement of windows, doors, and partitions, and so forth. A plot plan is a drawing made to scale that reveals lot dimensions, placement of improvements, walks and driveways, and so forth. An elevation plan is a sketch that shows exteriors of a building as it will appear when completed.

27

A listing agent gave part of his commission to the buyer. He
A) is guilty of committing a civilly wrong act.
B) must disclose this to the seller.
C) may be disciplined by the real estate commissioner.
D) is guilty of criminal action.

B) must disclose this to the seller.

28

In the purchase of a residence, the buyer conditioned the sale upon the seller's providing the buyer with a certified inspection report from a licensed pest control operator showing the property to be free of wood-destroying organisms. The seller contracted the Apex Termite Control Company who, upon inspection, reported termite damage and estimated the repairs would cost $500. The seller then had Apex repair the damage and the seller made payment directly to the contractor for the work that had been done. With respect to the report of work accomplished, which statement is TRUE?
A) The escrow officer would ensure the buyer has received a copy of the report since escrow cannot close until this has been accomplished.
B) Either the broker or the seller would be responsible for delivering a copy to the buyer.
C) The Apex Termite Company would be required to deliver a copy to the buyer.
D) No report need be made to the buyer since the seller had the work done and paid for it, and the residence is now free of termites.

B) Either the broker or the seller would be responsible for delivering a copy to the buyer.
Either the seller or broker must ensure that the buyer receives a copy of the report showing that the repairs were accomplished and that the property is free of termites.

29

A listing agreement in which the owner promises to pay a commission under all circumstances of sale, except if he or she sells the property himself, is known as
A) an exclusive-agency listing.
B) an exclusive-right-to-sell listing.
C) none of these.
D) a net listing.

A) an exclusive-agency listing.

30

Which statement regarding a tax-free exchange is TRUE?
A) To be eligible, a property must be held for income or investment or for use in trade or business.
B) Each party must trade for like property of equal value with a smaller mortgage and receive boot.
C) A party to the exchange can deduct a loss on the exchange.
D) A rented house cannot be exchanged for an office building.

A) To be eligible, a property must be held for income or investment or for use in trade or business.
To be eligible for a Section 1031 exchange, a property must be held for income or investment or be property held for productive use in trade or business. "Each party must trade for like property of equal value with a smaller mortgage and receive boot" is incorrect as boot would not be received in the trade for property of equal value with a smaller mortgage. "A party to the exchange can deduct a loss on the exchange" is incorrect as the loss is not attributable at time of exchange. "A rented house cannot be exchanged for an office building" is incorrect as rental property can be exchanged for an office building.