- The __ is the most active in the regulation of real estate licensees.
d) state government - Which of the following is necessary for a deed of conveyance to be valid?
b) The deed must be in writing - The primary distinction between the legal concepts of real estate and real property is that
a) real property includes ownership of a bundle of rights. - An applicant for a salesperson license must
c) have a finger printing and background check prior to receiving a license. - TRELA makes provisions for
c) a prerequisite of a minimum of 15 classroom hours counted toward license renewal every two years. - A(n) __ is a freehold estate that is limited to the duration of the life of the owner.
b) life estate - What distinguishes a lien from other types of encumbrance?
a) It involves a monetary claim against the value of a property. - What type of conventional life estate ends with the death of the life estate owner?
b) Ordinary life estate - When speaking of real estate market dynamics, the amount of available properties that becomes occupied over a period of time is called
b) absorption. - What is the primary danger of allowing an encroachment?
c) Over time, the encroachment may become an easement by prescription that damages the property’s market value. - What statement is TRUE of payment that is made from the real estate recovery fund on account of a licensee’s acts?
d) The license is suspended immediately, but will be reissued upon reimbursement of the fund, with interest. - A salesperson listed a home and then transferred his license to another broker. Which of the following is true?
d) The listing will stay with the original broker. - A licensee is required to keep the Commission updated with
a) her current email address. - When an owner leases her property, she temporarily relinquishes the right to
c) occupy the property. - Which education requirement can a person leave out when applying for a salesperson license?
a) Evidence of a degree in some form of postsecondary education. - Which of the following is an expense which would be listed on the HUD-1 Uniform Settlement Statement?
b) Title insurance fees - Listing, marketing, facilitating transactions and managing information summarizes the critical skills in which of the following?
d) Real estate brokerage - Which of the following happens when a leased property is sold?
a) The buyer acquires title subject to the lease. - Which of the following is a valid distinction between a corporation and a proprietorship?
a) A corporation has perpetual existence; a proprietorship terminates upon the owner’s death. - What type of property is abstract, having no physical existence in itself, other than as evidence of one’s ownership interest?
a) Intangible - In an economic system, supply is defined as
b) the quantity of a product or service available for sale, lease, or trade at any given time. - Which is NOT included in the ownership bundle of rights?
d) Taxation - Which of the following items are paid in arrears?
c) Taxes and interest - Which of the following laws or rulings extended discrimination to include gender, handicapped status, and family status?
c) The Fair Housing Amendments Act of 1988. - What type of seller financing allows the seller to receive a junior mortgage from the buyer to use to make the payments on the original first mortgage?
b) Wraparound mortgage - All of the following are ways of specializing in the real estate brokerage business except?
b) By area - Who are the essential parties involved in an estate in trust?
d) Trustor, trustee, and beneficiary. - The purpose of a covenant clause in a deed of conveyance is to
a) state the grantor’s assurance or warrant to the grantee that a certain condition or fact concerning the property is true. - The most commonly used deed is the
a) general warranty deed. - Who owns the property in a time-share estate?
b) The property is owned by tenants in common or by a freehold owner who leases on a time-share basis. - A broker has her license suspended for violating state license law. In such a case, the licenses of her three salespeople are
b) inactive. - A property owner is precluded by deed restriction from developing a thirty foot boat dock. The limitation prompts the owner to sell to another party. The new owner
b) takes title subject to the same restriction. - In the state of Texas, what circumstances would restrict the government from using eminent domain?
b) If the result of the property being taken will confer a private benefit on a particular private party. - A county or municipal authority usually grants a certificate of occupancy for new construction only after
c) the construction complies with building codes. - If a parcel does not have a lot and block number and is too irregular to be described as a fraction of a section, the legal description
b) will include a metes and bounds description. - How many acres are there in the S 1/2 of the NW 1/4 of Section 3?
c) 80 acres - If the monthly rent of a property is $3,000, and the gross rent multiplier (GRM) is 80, what is the value of the property?
b) $240,000 - The principal shortcoming of the gross rent multiplier approach to estimating value is that
a) numerous expenses are not taken into account. - If net income on a property is $20,000 and the cap rate is 5%, the value of the property using the income capitalization method is
b) $400,000.00 - What calculation is used to figure a property’s ROI (return on investment)?
c) Net operating income divided by price - The steps in the income capitalization approach are
c) estimate net income, and apply a capitalization rate to it. - An appraiser would use which approach to determine the value of an apartment building?
c) Income capitalization approach - The roof of a property cost $10,000. The economic life of the roof is 20 years. Assuming the straight- line method of depreciation, what is the depreciated value of the roof after 3 years?
d) $1,500 - A tax certificate
b) entitles its holder to apply for a tax deed after a certain period. - A unique characteristic of a special assessment tax is that
a) it only applies to properties which will benefit from the public improvement. - A local government authority may establish a __ tax district which is designated for a specific benefit or service and expires once the cost of the project has been paid for.
a) special - A millage rate is derived by
a) dividing the tax requirement by the tax base. - The approval process for development of multiple properties in an area includes submission of
b) a plat of subdivision. - A datum is a reference point used for legal descriptions of
b) the standard rectangular survey description. - The legal description of a tract of land in a subdivision that has been recorded is usually with
a) the lot and block number and unit number, if any. - In the state of Texas, a homestead is defined as
b) a parcel of real property containing the owner’s family home. - The principle which holds that there is, theoretically, a single use for a property that produces the greatest income and return is known as
b) highest and best use. - Which of the following is true of a loan with negative amortization?
b) Payments are not sufficient to retire the loan. - A builder is required to secure a loan with mortgages on three properties. This is an example of
b) a blanket mortgage loan. - If a loan has ___, the loan balance increases over the term of the loan.
a) negative amortization - A graduated payment loan is a mortgage loan where
c) the loan payments gradually increase. - License regulators, empowered by state law to oversee brokerage practices, may
a) take punitive actions against fraud or misrepresentation. - The principal role of the Veteran’s Administration in the mortgage lending market is to
a) guarantee loans made by approved lenders. - Which of the following phrases could a licensee use to advertise without violating Fair Housing laws?
b) “No Section 8” - The taxes for the year 2011 were $600.00, and were to be paid in arrears. The closing took place on June 15, 2011. Using a calendar year with the seller paying for closing day, how much was the tax proration, and how did it appear on a full settlement statement?
c) Debit the buyer $272.88 and credit the seller the same amount. - A house sold for $165,000, and the total commission received by the broker was $12,375.00. What was the rate of commission?
b) 7.50% - Under the Fair Housing Act, discrimination based on which of the following is prohibited?
d) None of the above. - Cash flow is a measure of how much pre-tax or after-tax cash an investment property generates. To derive cash flow it is therefore necessary to exclude
a) cost recovery expense. - Capital gain tax is figured by multiplying one’s tax bracket times
b) the difference between net sale proceeds and adjusted basis. - A distinguishing feature of a deed condition is that
a) it gives the grantor the right to re-possess the property if the grantee violates the condition. - Testing for fair housing compliance
c) Both A and B. - In mortgage lending, which action is acceptable:
c) Refusing to make a mortgage loan because of the applicant’s credit score. - Real estate taxes can be imposed by taxing entities at which level of government?
d) All of the above. - What taxes are based on the assessed value of property?
b) Ad valorem. - A buydown is a financing arrangement where
a) the lender lowers the interest rate on a loan in exchange for a prepayment of principal.
What is the name of the sworn statement in which the seller assures the title company (and the buyer) that there are no liens, unpaid bills for repairs or improvements, or undisclosed defects in the title?
affidavits as to debts and liens
Tax incentives that cover the cost of energy-efficient improvements, EEMs, and Energy Star-qualified homes are examples of:
green initiatives
Which of the following borrowers would be MOST likely to use a graduated-payment mortgage?
young borrower starting their career, anticipating an income raise in the next several years
Which type of loan is exempt from RESPA?
loans on vacant land
Which TILA regulation requires a disclosure statement where lenders must make certain loan facts known to borrowers?
Regulation Z
The most common formal organization of a syndicate is that of a(n):
LLC
Which of the following BEST describes why RESPA was passed?
to ensure meaningful disclosure of closing costs in a real estate transaction
Property manager William hires an HVAC specialist to repair a broken air conditioner in an apartment.
This is an example of:
corrective maintenance
Which of the following is TRUE?
A Texas real estate license does NOT allow agents and brokers to act as appraisers or home mortgage originators
A handwritten will created solely by the maker (and not witnessed) is called a:
holographic will
Ashley just bought a house. To purchase the house, she got a loan for $400,000 with 3 discount points. How much did she pay for the discount points?
One discount point costs 1% of the loan amount; therefore, one discount point cost $4,000 in Ashley’s case. Ashley paid $12,000 for 3 discount points.
What is the difference between actual and constructive notice?
Constructive notice is the assumption that a diligent individual can search the public record to gain knowledge; actual notice is direct or first-hand knowledge.
The investment strategy of taking on debt in order to realize a greater return is known as:
Leverage
What is an easement by prescription?
An easement by prescription is granted after the dominant estate has used the property in a hostile, continuous, and open manner for a statutorily prescribed number of years. This type of easement is also called a prescriptive easement.
A new $350,000 home is being built in a neighborhood of mostly $200,000 homes. Although the home has many updates and is in better condition than the surrounding houses, its value is significantly less than the price.
Which value principle of appraisal explains this?
principle of regression, which states that a subject property situated in the midst of lower-value homes will experience a downward pull on its own value.
What is investment gain?
Investment gain has to do with the increase in a property’s value due to active and purposeful development of a property.
How many feet are in a mile?
5,280 feet
What is a quitclaim deed?
A quitclaim deed provides the grantee with the least protection of any deed, while putting the least liability on the grantor. It carries no covenants nor warranties and conveys only such interest that the grantor may have when the deed is delivered.
Alexis owns a fried chicken restaurant, Tender Times. When her area is rezoned from commercial to residential, Alexis is allowed to continue operating Tender Times in the same location.
What is this an example of?
While the use of the property originally conformed to zoning, that was no longer the case once the rezoning took place. So the present (commercial) use would be considered a nonconforming use, which is where a once-permissible-but-no-longer-permitted use is grandfathered in.
Who is the representative of the title insurance company who reviews the title insurance commitment, prepares the Closing Disclosure, and conducts the closing?
closing agent
Which of these scenarios would be most likely to result in the granting of a conditional-use permit?
A person wanting to build or establish a bed & breakfast in an area zoned for residential use could seek a conditional-use permit from the zoning board as it could be judged as marginally out of compliance with existing zoning.
When does the Interstate Land Sales Full Disclosure Act require the seller to give the report to a lot purchaser?
before a purchase agreement is signed.
Elmer wants to install lowered light switches in his apartment so that he can reach them from his wheelchair. The landlord agrees but says that Elmer must install them at his own expense. Elmer argues that the landlord must pay for them.
Who is right?
The landlord, has every right to make Elmer pay for the modifications.
What is a habendum clause?
A habendum clause defines or limits the ownership interest of the grantee.
Emanuel wants to purchase a resort property on the beach, but he needs to make some renter revenue to help pay for both his primary residence and his resort property.
What factor should Emanuel NOT be prioritizing?
decorating the resort property with personal, familial items to make his family feel welcome
43,560 sq. ft. could also be expressed as:
one acre
Using the cost approach formula, find a property’s value using the following information:
The subject property is 20 years old and has 30 remaining years of economic life.
The cost of reproduction of the subject property is $375,000.
The subject property’s land value is $140,625.
Here are the steps to solving this problem, using the cost approach formula (Reproduction cost – Depreciation + Land value = Property value): Calculate depreciation percentage: 20 ÷ (20+30) = 0.4. Calculate depreciation amount: $375,000 x 0.4 = $150,000. Calculate property value: Property reproduction cost ($375,000) – Depreciation amount ($150,000) + Land value ($140,625) = $365,625.
Nara moved out of her apartment over a month ago, but hasn’t received her security deposit back.
Which of the following would be a LEGAL reason that her deposit had not been returned?
A landlord is not obligated to return the security deposit if the tenant has not provided a forwarding address.
Which would NOT be accounted for as an operating expense?
Pent rent is paid by the tenant and would be considered “incoming cash.”
Which of the following has a long lease term and is often used in the development of commercial property?
Ground lease
The Interstate Land Sales Full Disclosure Act is applicable to developers involved in the interstate sale or leasing of:
100 or more lots
Tyrone signed a lease on a residential property. His lease lasts nine months.
Which of the following is TRUE?
Lease agreements for less than one year are NOT required to be in writing.
What does the acronym REIT stand for?
A real estate investment trust (REIT) is a registered company that owns and operates commercial real estate.
Grayson is worried that, because she is an elderly person, she will not get pre-approval on her loan.
Analyze Grayson’s worry.
Pre-approval follows pre-qualification and is a more thorough examination of the borrower’s financial status (but ONLY their financial status). Grayson shouldn’t worry that her age will work against her.
Reconciliation for an appraiser involves:
combine the data from each of the approaches. This is called a reconciliation.
Jeremiah is looking to sell his home, so he researches property market values in his area for properties that are similar to his own home. These market values typically reflect:
Market value is the price for which a property will theoretically sell under typical market conditions.
The state needs to acquire someone’s private land in order to build a six-lane highway. The government MUST:
The government MUST provide just compensation in exchange for the property.
Alec puts his property up for sale of his own free will. He goes through with the sale, and an opera singer now owns his property. This transaction is an example of:
Voluntary alienation is the method by which property is transferred from the current owner to another party either by sale or gift.
A tenant operates a small retail store in a shopping center. The landlord pays all operating expenses; the tenant pays a base rent of $1,500 per month, plus 15% of monthly gross profits over $15,000.
The tenant has a:
percentage lease
What’s the term that refers to the permission granted that allows a property to deviate from a specific provision of a zoning ordinance, and is usually based on features such as building height, lot square footage, or setback requirements?
variance
A property is under contract for $175,000 with a 10% down payment. Find the cost of points for 2.5 discount points and a 1-point origination fee. (Hint: Don’t forget that the down payment will impact the amount of the loan principal.)
To find the cost of the points, we need to find the loan principal, which is $175,000 minus the down payment amount. Find the down payment amount by multiplying the purchase price by 10%: 0.1 x $175,000 = $17,500. Then, subtract the down payment amount from the purchase price: $175,000 – $17,500 = $157,500. Knowing that, we can find the cost of the points: 0.035 x $157,500 = $5,512.50.
What is the cost approach?
estimating the value of a property by determining the current cost of reconstructing the property with improvements, minus the cost of depreciation, plus the value of the land itself.
Karissa is buying a gulf front property and deposits the necessary funds to complete the sale into escrow. The seller’s title has not yet been declared acceptable, and Karissa is nervous she could lose her money. Evaluate Karissa’s fear.
When a buyer closes in escrow, money won’t be paid to the seller until the seller’s title is acceptable. The seller is assured of getting the purchase price because the buyer’s check must clear before title passes. Neither party needs to be present when title is passed.
In the typical real estate transaction, the appraiser will be chosen by whom?
lender
John is moving into a privately owned apartment complex and asks the landlord to accommodate his wheelchair. John says he needs concrete ramps to be installed around the property. The landlord says he can’t afford to install ramps but is worried that he is discriminating.
What is TRUE?
There is nothing in any applicable laws that support this idea. Although the landlord doesn’t legally have to install the ramps because they are cost-prohibitive, John can install them at his own expense.
Expenses that are owed by the seller, but will later be paid by the buyer, are considered:
Accrued items
A tenant has recently signed a lease for a new commercial property. According to the lease terms, the tenant pays a monthly rent, and the landlord covers maintenance and all other property expenses.
This lease is a:
gross lease
What entity consists of 11 district banks that are regulated by the Federal Housing Finance Agency?
Federal Home Loan Bank (FHLB) system consists of 11 district banks.
With amortized loans, the borrower is:
the borrower is paying interest and principal with each payment until the loan is paid off.
Kayla’s neighbor has had a shed on her property for 11 years. Kayla ends up losing that portion of her land to her neighbor because of adverse possession. Which of the following is TRUE?
This is an example of involuntary alienation
What are tranches?
Tranche comes from the French word for “slice” or “portion.” When mortgage-backed securities are sold to investors at different risk levels and classes, those classes are known as tranches.
A developer plans to build an apartment building on a lot. The lot is 525,000 sq. ft. City regulations dictate that there can be density no greater than 20 occupants per acre. Approximately how many occupants can this lot house?
The lot can house approximately 241 occupants. 525,000 sq. ft. ÷ 43,560 = 12.052 acres 12.052 acres x 20 = 241 (rounded)
What is a ground lease?
lease of bare, undeveloped land
What government agency allows single-family properties to be depreciated over the course of 27.5 years?
The Internal Revenue Service
What is meant by preventative maintenance?
periodic, routine inspections to catch minor issues before they worsen and to keep equipment and property in good working order
Lulu lives in Aceable County, which has assessed her house to be worth around $250,000. Aceable County’s property tax rate is 2%. How much will Lulu owe in taxes by the end of the year?
Lulu will owe $5,000 in taxes by the end of the year. $250,000 x 0.02 = $5,000
Which of these is a point of differentiation between Ginnie Mae and Fannie Mae, Freddie Mac, and Farmer Mac?
Unlike the others, Ginnie Mae is NOT a private government-sponsored enterprise, but rather a wholly-owned government corporation.
Anne leases a property that is subject to the rules and restrictive covenants of an HOA that prohibit tenants from parking in the street. Anne parks in the street, anyway.
Anne’s landlord has the right to charge her for these HOA fees and prohibit her from parking in the street because:
Standard lease agreements used in the real estate industry address use and occupancy. If the property is subject to the rules or restrictive covenants of an HOA, the tenant would be required to observe them. Any violations paid by the landlord would be reimbursable by the tenant.
Jayden researches a property he’s interested in buying. He uses the assessed value for all tax calculations, market comparisons, notes, etc., because assessed value is the same as market value – why complicate things by using two values? Evaluate if Jayden was correct in doing this and why/why not.
There is no causal relationship between the two values. They are determined by looking at different factors, and while they may generally be close to each other, each has no direct bearing on the other
The Texas Law of Descent and Distribution applies to real estate located in Texas and owned as separate property by a deceased owner who died:
intestate (without a will).