2.
Which of the following lists correctly describes the physical and economic characteristics of real estate?
a. Immovable, indestructible, unique, scarce.
b. Depreciable, indestructible, scarce, unique.
c. Unique, immovable, abundant, indestructible.
d. Moveable, indestructible, scarce, unique.
Land is characterized as immovable because an entire parcel of real estate cannot be moved to another site. Land is considered indestructible because, in contrast to buildings, an entire parcel of real estate theoretically cannot be destroyed and/or need to be replaced. Land is considered unique because, at the very least, each parcel of real estate has its own different and distinct place on the planet. Finally, land is considered scarce because entire new parcels of real estate cannot be manufactured. Test-Taking Tip: Because the words "unique" and "indestructible" are in each answer choice, you do not need to spend valuable exam time considering them. B is incorrect. Land does not depreciate. Why not? Because, in contrast to a house or a building, an entire parcel of land does not wear out and need to be replaced. Test-Taking Tip: Make sure you remember this rule for your exam: Land does not depreciate. C is incorrect. Despite there being a lot of land, land is considered scarce as brand-new parcels of land cannot be created through human labor. D is incorrect. Land is not considered moveable. While topsoil or even a building can be moved, an entire parcel of real estate cannot be moved to a new location.
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4.
Ulyanna and Daniel own two contiguous properties situated on the shores of a fast-moving river. Ulyanna's parcel is situated upstream from Daniel's parcel. Over time, the action of the river's water has moved some silt and dirt from the shores of Ursula's property and deposited it downstream on the shores of Daniel's property. Based upon this fact pattern, which of the following lists best describes what has occurred on Daniel's property?
a. Alienation, attachment, alluvium
b. Accession, littoral, standing water
c. Assemblage, plottage, increased value
d. Accession, accretion, alluvium
This series of words best describes what has happened on Daniel's property. As it pertains to real estate, "accession" means to acquire more land, even a small amount of land. "Accretion" is accession that occurs through natural causes. Here, what happened on Daniel's land is accession by accretion because the natural action of the river's water deposited silt on the shores of Daniel's property. Finally, "alluvium" is a technical term for the silt/dirt moved by the river from Ulyanna's shores and deposited on Daniel's shores. A is incorrect. "Alienation" means to separate real estate from its owner. Alienation can occur either through voluntary means (e.g., sale, gift, dedication, etc.) or involuntary means (e.g., foreclosure, tax sale, adverse possession, etc.). Here, Daniel is acquiring property, not losing it. Answer Choice "A" is also incorrect because of the word "attachment." While attachment is property gained through accession, attachment is created through human intervention. For example, if a tenant had rented Daniel's property, constructed a shed on it, and then left the shed after the lease was over, that would have been an example of accession by attachment. Here, Daniel is gaining additional property through the natural action of the river's water (i.e., accretion). B is incorrect. Littoral has to do with rights of owners who live by standing water, like a lake, a pond, or the ocean. There is nothing in the fact pattern to suggest either parcel of property is near a body of standing water. C is incorrect. These terms are used by appraisers to describe the increase in value when an owner combines several contiguous or touching parcels into one large parcel. The act of combining several parcels into one parcel is called "assemblage." The increase in value that should result from the consolidation is called "plottage." (e.g., five separate parcels each have a value of $100,000 totaling $500,000. After assembling them together into one large parcel, the value of the one large parcel is $525,000. The additional $25,000 is plottage.)
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6.
A parcel of residential real estate is held in a life estate. The life tenancy is held by a woman, and she is the measuring life. Her nephew is the remainderman. The life tenant wants to take out a loan using the property as collateral. Which of the following statements is correct?
a. No lender will lend money when the collateral is real estate held in a life estate.
b.The remainderman's signature on the loan documents is irrelevant to the lender's security interest in the realty.
c. Because she is merely a life tenant, the woman holds a nonfreehold estate.
d.Both the life tenant and the remainderman will need to sign the loan documents to protect the lender's security interest in the property.
The life tenant (i.e., the aunt) can take out a loan on the property without the remainderman's signature. However, if only the life tenant life signs the loan documents, then the debt will die with her. In order to protect the lender's security interest in the event of the aunt's death, both the life tenant and the remainderman will need to sign the loan documents. The same would be true if the property were being sold: Both the life tenant and the remainderman would need to sign the deed in order to ensure that the buyer's ownership interest in the property would continue after the life tenant dies. Test-Taking Tip: Remember a life estate is an estate of ownership (aka a "freehold" estate). With a life estate, there is a "present interest" and a "future interest." A simple way to figure out who owns each interest is to ask yourself the following two questions: "Who has the right to possess the property in the present?" Here, the aunt does: She holds a present interest in the property, and, because she is the measuring life, she will hold that interest until she dies. "Who will have the right to possess the property in the future?" Here, the nephew does: He holds a future interest in the property. A is incorrect. Provided that both the life tenant and the remainderman sign the loan documents, the lender's security interest in the real estate will be protected if the life tenant dies during the term of the loan. B is incorrect. If the remainderman does not sign the loan documents, the lender's security interest in the real estate will terminate upon the death of the life tenant. C is incorrect. A nonfreehold estate is a leasehold estate. A life estate, by contrast, is a freehold estate (i.e., an estate of ownership).
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7.
There are four separate, recently-sold parcels of real estate on Main Street. Parcel 1 was owned by a Real Estate Investment Trust and was voluntarily conveyed to the City where the property is situated. Parcel 2 was owned by four unmarried brothers and was voluntarily conveyed to their father. Parcel 3 was owned by two corporations, until one corporation recently sold its ownership interest in the property to the other corporation. Parcel 4 was owned by Mr. and Mrs. Kim, but was recently sold to Amanda Lee, Trustee of the Lee Family Revocable Trust. What do all of these buyers have in common?
a. Concurrent ownership.
b. Ownership in severalty.
c. Fractional, but undivided ownership.
d. Right of survivorship.
Ownership in severalty occurs when there is only one owner of a parcel of real estate. The owner can be, for example, an individual, a corporation, a governmental entity, a trust, or a partnership. As long as it is sole ownership, it is an ownership in severalty (aka "an estate in severalty"). Test-Taking Tip: This is frequently tested because of the word "several" in "severalty." A is incorrect. Concurrent ownership occurs when there are multiple owners of the same parcel of real estate holding title together at the same time. C is incorrect. If there are multiple owners (e.g., one owner owns 90%, a second owner owns 9%, and the third owner owns 1%), ownership is described as "fractional, but undivided." This means that--no matter how small their ownership interest is--each owner has an equal right of possession as to the entire parcel of land. D is incorrect. If two owners hold title with a right of survivorship, and one owner dies, then the survivor acquires the decedent's interest in the property automatically, through operation of law. Depending on the state, common ways to hold title with a right of survivorship include: tenancy by the entirety, joint tenancy, and/or community property with right of survivorship.
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10.
The owner of a large parcel of real estate legally divided it into two smaller parcels. Parcel North was directly to the north of Parcel South. The only road in the area bordered Parcel South. The owner intended to keep Parcel North, and wanted to prevent it from becoming landlocked. In the deed to the buyer of Parcel South, the owner reserved a non-exclusive easement for ingress and egress purposes over the westerly 8 feet of Parcel South. After both parcels were sold to two new owners, the new owner of Parcel South fenced in the entire parcel, making ingress and egress over the westerly 8 feet impossible for the new owner of Parcel North. In a lawsuit between the new owner of Parcel North and the new owner of Parcel South, who will most likely win?
a. The owner of Parcel North. An easement appurtenant cannot unilaterally be terminated by the servient tenement.
b. The owner of Parcel North. An easement in gross cannot unilaterally be terminated by the servient tenement.
c. The owner of Parcel North. Because there is no other access to a road, this is an easement by necessity.
d. The owner of Parcel South. The right to exclude non-owners is a fundamental right of property ownership.
The easement described in the test question is an easement appurtenant. The old owner, who split his large parcel in two, created the easement by reserving it in the deed to the individual who first purchased Parcel South. In an easement appurtenant, there is a dominant tenement (i.e., the parcel that benefits from the easement) and a servient tenement (i.e., the parcel that is burdened by the easement). Here, the parcel that benefits from the easement is Parcel North because the easement allows the owner to cross over the westerly 8 feet of Parcel South to get access to the road. Parcel South is burdened with the easement because people who don't even own the land are allowed to use the westerly 8 feet of Parcel South for ingress and egress purposes. The owner of a parcel of real estate burdened with a servient tenement cannot unilaterally terminate an easement appurtenant. An easement appurtenant "runs with the land" and transfers with the deed. Therefore, by fencing in Parcel South, the new owner of Parcel South will most likely be found to have violated the easement conditions and will lose the lawsuit. B is incorrect. An easement in gross only has one parcel of land (a servient tenement). The classic example of an easement in gross is a public utilities easement. The public utility does not need to own a contiguous parcel in order to have an easement in gross. This test question states that there are two parcels of land, a dominant and a servient tenement. Therefore, this fact pattern does not describe an easement in gross. C is incorrect. A landlocked property is one without access to a street or road. An easement by necessity is created by the courts when a property is landlocked--provided that the owner of the landlocked parcel did not create the problem. Here, when the old owner split the large parcel into two, the old owner carefully reserved an easement over Parcel South, preventing Parcel North from becoming landlocked. Because the old owner reserved an easement in the deed, there was no need to go to court and ask for an easement by necessity. D is incorrect. This answer choice states the general rule, but the owner of Parcel South purchased the property subject to the easement. Because easements appurtenant run with the land, the easement is binding on the new owner of Parcel South. Test-Taking Tip: Pay close attention when you see answer choices that are almost identical like "A" and "B." Frequently, when two choices are so close, this is what the examiners are testing.
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11.
A county government was widening a highway. Prior to construction, the county had to demolish certain dwelling houses and commercial retail properties bordering the old highway. After the legal proceedings were complete, several residential property owners refused to leave their former homes. The sheriff removed several individuals forcibly. In one case, the sheriff was forced to drag an elderly, protesting woman out of a house she had owned for decades. What is the name of the governmental power?
a. Condemnation
b. Police Power
c. Eminent Domain
d. Escheat
As stated in the Fifth Amendment to the U.S. Constitution, governmental entities have the right to "take" private property for public purposes. This power is called eminent domain. Taking private property to widen a highway is a classic example of when the government (e.g., city, county, state, or federal) would exercise its power of eminent domain. However, the Fifth Amendment to the U.S. Constitution does state that government entities exercising this power must pay the private property owners just or fair compensation. A is incorrect. Condemnation is the name for the legal proceeding to determine what just or fair compensation is for each parcel of real estate taken by the government. It is not the name of the government power itself. B is incorrect. The government's police power is the right of the government to establish and enact laws to promote public health, public safety, public welfare, and morals. Two classic examples of police power are zoning and building codes. Test-Taking Tip: When the government exercises its police powers, typically no compensation need be paid to affected property owners. D is incorrect. In our legal system, real estate must be owned by someone. In England, if the owner abandoned a parcel of real estate or died without a will (i.e., intestate) and without heirs, the property "reverted" back to the original owner, the Crown. In the United States, this parcel of real estate would revert back to the state. This governmental power is called "escheat." Test-Taking Tip: In addition to police power, eminent domain, and escheat, the government also has the power to tax real estate. Your memory aid for these four governmental powers over land is PETE: Police Power, Eminent Domain, Taxation, and Escheat. These are four separate powers. Be careful not to let the examiners trick you into lumping several powers into, say, police power.
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16.
Emily Young is selling her 2-bedroom, 1-bathroom condominium. She enters into a written exclusive right-to-sell listing agreement with a local real estate licensee. Which of the following correctly states the agency relationship created by this type of listing agreement?
a. Express agency.
b. General agency.
c. Universal agency.
d. Implied agency.
The test question states that the listing agreement was formalized in writing. An express agency is one that was formalized--before the fact--either verbally or in writing. The traditional rule (in the "Statute of Frauds") states that a listing agreement cannot be enforced in court unless it is in writing and signed by the party to be charged. Test-Taking Tip: Because it is frequently tested, it is worth reviewing the other promises, agreements, and contracts that must be in writing to satisfy the Statute of Frauds. B is incorrect. A general agency usually gives the agent a limited ability to bind the principal (e.g., a property manager has the ability to find and sign qualified tenants on behalf of the property owner). This is typically used in an ongoing business, where the agent has multiple duties to perform. In contrast, the special agent acting under the authority of the exclusive right-to-sell listing agreement typically only has the sole duty of finding a buyer. Special agency is an advisory position, and the agent traditionally lacks the authority to bind the principal (e.g., a listing agent can solicit offers, but lacks the power to accept an offer and bind the seller). C is incorrect. A universal agency gives the agent broad powers, including the authority to bind the principal. A "Power of Attorney" is an example of a document that might set up a universal agency. Test-Taking Tip: The agent created by a Power of Attorney document is called an "attorney-in-fact." This person does not need to be an attorney. D is incorrect. An implied agency is created through the actions of the two parties. Here, the test question states this listing agreement was created before the fact and is in writing, making it an express agency not an implied agency.
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20.
A seller and a real estate licensee enter into a listing agreement for a valuable property that is located in a desirable neighborhood. The listing agreement is a bilateral contract, and includes a specific end date. The licensee agrees that, in the event the seller finds a buyer, the licensee will not receive a commission. What is the name of the listing agreement?
a. Exclusive right-to-sell
b. Exclusive right-to-buy
c. Exclusive agency
d. Open
In an exclusive agency listing agreement, if a buyer is found, the licensee will earn a commission, unless the seller finds the buyer. With the exclusive agency listing agreement, there is only one brokerage firm. Also, the licensee has a limited, clearly-defined period of time in which to find a buyer. Finally, the exclusive agency listing agreement is a bilateral contract. A bilateral contract is the exchange of a promise for a promise. The seller promises to pay the commission if the licensee finds a buyer. The licensee promises to use due diligence to find a buyer. A is incorrect. Under the exclusive right-to-sell listing agreement, the licensee will earn a commission if a buyer is found during the term of the contract. It does not matter who finds the buyer. The exclusive right-to-sell is a bilateral contract. This type of listing agreement provides the maximum protection for the licensee. B is incorrect. This type of contract is by and between a licensee and a buyer. D is incorrect. The open listing agreement is a unilateral contract: A unilateral contract is the exchange of a promise for performance. The seller is promising to pay a commission to the one licensee who performs and finds a buyer. It is not exclusive, meaning there can be multiple licensees from multiple brokerage firms working to find a buyer. If the seller finds a buyer, none of the licensees will earn a commission. Finally, there does not need to be a specific termination date for an open listing.
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22.
An owner of a parcel of vacant land and a prospective buyer enter into a written contract. For a nonrefundable fee, the owner agrees to keep the prospective buyer's offer on a property open--for a mutually-acceptable period of time. If the prospective buyer decides to buy the vacant land, both parties have agreed to a purchase price. If the prospective buyer decides against purchasing the property, the owner will keep the nonrefundable fee received from the prospective buyer at the time the contract was signed. Which term most accurately describes the contractual agreement between these two parties?
a. Bilateral contract.
b. Option contract.
c. Purchase contract.
d. Unenforceable contract.
The agreement described in this fact pattern is an option: An option is a unilateral contract. An option is a contractual agreement between an owner (the "optionor") and a prospective buyer (the "optionee"). The owner agrees not to sell the property to anyone else during the period of time specified in the option. This is a unilateral contract, meaning it is the exchange of a promise for performance. Here, the owner is promising not to sell the property to anyone else until the prospective buyer decides either to buy (i.e., perform) or not buy. Whatever the prospective buyer decides, the owner of the property will keep the nonrefundable option fee. During this option term, if the prospective buyer decides to exercise the option, the seller will sell the property to the prospective buyer at a price both parties have agreed to in the option agreement. Note: Prospective tenants could also enter into an option with owners regarding prospective leasehold property. If the prospective tenant decides not to exercise the option, the owner would keep the nonrefundable option fee. A is incorrect. A bilateral contract is the exchange of a promise for a promise. Here, the prospective buyer is not making a promise, and has the freedom to walk away, if deciding against the purchase of the property. C is incorrect. During an option term, the buyer is deciding whether or not to purchase the property. The owner and the prospective buyer are not yet parties to a purchase contract. If the prospective buyer decides to purchase the property, a bilateral purchase contract will be necessary. D is incorrect. An unenforceable contract prevents the victim of a breach of contract from going to court and suing. Here are some common examples of an unenforceable contract: a verbal contract when a writing is required (Statute of Frauds issue); a contract with an unlawful purpose; a contract past the Statute of Limitations; etc. There is nothing in the fact pattern to suggest that this option contract would be unenforceable in a court of law.
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24.
A 50-year-old surgeon was the sole owner of a parcel of residential real estate. She wanted her eldest son to have this parcel after she died. The mother properly executed a legal deed, designating him as the grantee to the property. "I have put the deed in the top, left-hand drawer of my desk," she told her son. "After I have died, you will find the deed there, and the property will be yours and yours alone." Twenty years later, she passed away. The son found the executed deed in her desk drawer. This fact pattern shows:
a. Lack of capacity.
b. Improper delivery.
c. Concurrent ownership.
d. Invalid deed.
These facts reflect improper delivery of the deed. In order for title to transfer, there must be a valid deed as well as delivery and acceptance of the deed. A deed is delivered when there is intent to convey the property. Here, there was not even an intent to convey the property during the lifetime of the grantor. If the mother did not want to convey her property until after she passed, she should have used a will, a trust, or, perhaps, a deed creating a life estate in herself with a remainder interest in the son. A is incorrect. There is nothing in the fact pattern to suggest a lack of capacity. Issues relating to lack of capacity might have to do with: an unemancipated minor attempting to sign a deed, a mentally-incompetent grantor, or a grantor who executed a deed while drunk or drugged. C is incorrect. Concurrent ownership occurs when multiple people own the same parcel of real estate together. The fact pattern states that the surgeon was the sole owner of the property when she executed the deed, and wanted her son to be the sole owner of the property after she passed. D is incorrect. The test question states that the surgeon properly executed a legal deed.
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27.
What is the name of the lender in a three-party security instrument that hypothecates real estate?
a. Mortgagor
b. Mortgagee
c. Beneficiary
d. Trustor
A three-party security instrument that hypothecates real estate is called a Deed of Trust. The Deed of Trust (aka a "Trust Deed") is one of the documents the borrower signs when getting a loan using real estate as collateral. A Deed of Trust creates a voluntary lien on the real estate of the borrower. The three parties to this legal instrument are the lender (beneficiary), the borrower (trustor) and the trustee (the third party to whom the borrower conveys bare legal title for the lifetime of the loan). Test-Taking Tip: Make sure you memorize the information in your study materials related to Trust Deeds. Even if Deeds of Trust are uncommon in your state, you are very likely to be tested on this subject. Note: During the lifetime of the loan, the trustee under a Trust Deed will hold bare legal title to the property. When the loan is paid in full, the trustee must reconvey bare legal title back to the borrower, and does so using a document called a "Deed of Reconveyance." However, if the borrower defaults on the loan (e.g., stops making loan payments, permits the real estate to fall into disrepair, etc.), the trustee typically administers the foreclosure and conveys the property to the high bidder at the foreclosure sale using a "Trustee's Deed upon Sale." A is incorrect. A mortgagor is the name of the borrower in a two-party security instrument called a Mortgage. B is incorrect. A mortgagee is the name of a lender in a Mortgage. Test-Taking Tip: Like the Trust Deed, the mortgage also creates a voluntary lien on the property. However, in contrast to the Trust Deed, it is only a lien: No portion of title is conveyed by a mortgage. D is incorrect. The trustor is the name of the borrower in a Deed of Trust. Test-Taking Tip: Make sure you spend some study time going through the glossary in your licensing materials. Examiners frequently test knowledge of technical words and terms like "hypothecate" (to pledge real estate without giving up possession).
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31.
In the middle of one of the worst snowstorms in the last 20 years, the heat went out in Lessee's residential apartment unit. Lessee immediately called--and spoke to--Lessor to report the problem. Lessor promised to have the heater fixed, but was vague about when the repair would occur. Lessee followed up with multiple phone calls, texts, and emails. After several days without heat, Lessee abandoned the residential rental unit, and subsequently refused to pay rent for the remaining term of the lease. Lessor sued Lessee for the unpaid rent. Who will most likely win the lawsuit?
a. Lessor. A lease is a contract. Lessee, by failing to pay rent, was in breach.
b. Lessor. The Lessee must maintain necessities such as heat on a leasehold property.
c. Lessee. This is a breach of the Covenant of Quiet Enjoyment.
d. Lessee. This is a breach of the Warranty of Habitability.
The landlord breached the implied Warranty of Habitability. For many jurisdictions across the United States, this promise of a habitable living environment is implied by law in residential leases. It need not be discussed verbally or included in writing in the lease. The basic living and safety standards in this implied warranty include necessities such as heat, plumbing, electrical systems, and water. By not responding in a timely manner to the tenant's repeated calls for help, the landlord was in breach of the implied Warranty of Habitability. Therefore, the tenant's abandonment of the leasehold property--and subsequent refusal to pay rent--would most likely be found by a court to be justified, relieving the tenant from any further obligations under the lease. Note: A failure on the part of the landlord to make a residential rental property habitable is referred to as "constructive eviction." This is not physical or legal eviction, but rather a failure on the part of the landlord that significantly affects the tenant's possession, enjoyment, or use of the leasehold property. A is incorrect. This answer choice states the general rule. But, a breach of the implied Warranty of Habitability may relieve the residential tenant of any further contractual obligations, including payment of rent. B is incorrect. In most jurisdictions, the landlord is responsible for keeping necessities such as heat, plumbing, water, and electrical systems in good repair. C is incorrect. Another promise many jurisdictions imply into residential leases is the Covenant of Quiet Enjoyment, an implied promise that no one claiming superior title will disturb the tenant's possession of the leasehold property. However, there is one important exception to the Covenant of Quiet Enjoyment: If there is an emergency situation on the leasehold property, the landlord has the right to enter the property--unannounced--to repair the emergency. Test-Taking Tip: Note the use of the terms "Lessor/Lessee," rather than "Landlord/Tenant" throughout this test question. Make sure you memorize all the OR/EE terms in your study materials (e.g., Optionor/Optionee, Mortgagor/Mortgagee, Trustor/Trustee, Grantor/Grantee, Vendor/Vendee, Lessor/Lessee, etc.). The examinees will frequently use these somewhat technical terms in test questions rather than the words used in everyday speech.
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35.
James Jordan purchases single-family residences to use as residential rental properties. He currently owns 4 properties in the same approximate geographic area, and is considering the purchase of another single-family residence situated nearby. In order to avoid the cost of an appraisal, Jordan uses the Gross Rent Multiplier (GRM) to help him make an appropriate offer. Jordan knows that the monthly GRM for his 4 current properties is 200. In order to maintain a GRM of 200 for a property with a current monthly rent of $2,500, how much should Jordan's offer be?
a. $400,000.
b. $500,000.
c. $600,000.
d. $700,000.
In order to maintain a Gross Rent Multiplier of 200, Jordan's offer for this additional property should be $500,000. The Gross Rent Multiplier (aka the "Gross Income Multiplier") is a simpler, less accurate alternative to capitalization takes into account the income generated by a parcel of real estate, but not the expenses charged to the property. This alternative to capitalization is most widely used with single-family residences. There are the three mathematical relationships related to the Gross Rent Multiplier you should know for your exam: • Gross Rent Multiplier X Rent = Value (e.g., 200 GRM X $2,500 rent = $500,000 Value) • Value ÷ Rent = Gross Rent Multiplier (e.g., $500,000 Value ÷ $2,500 Rent = 200 GRM) • Value ÷ Gross Rent Multiplier = Rent (e.g., $500,000 Value ÷ 200 GRM = $2,500 Rent) Here, the test question states that the current monthly rent paid for the property is $2,500. Jordan's other properties have a Gross Rent Multiplier of 200. In order to maintain this Gross Rent Multiplier, Jordan would multiply the Gross Rent Multiplier (200) by the Rent ($2,500), and make an offer of $500,000 on the property. A is incorrect. This offer would result in a Gross Rent Multiplier of 160 ($400,000 ÷ $2,500 = 160 GRM). If Jordan's 4 other properties in the neighborhood have a Gross Rent Multiplier of 200, it is unlikely that the seller will accept this low an offer. C and D are incorrect. These offers would result in a Gross Rent Multiplier that would be too high for this particular neighborhood and Jordan's 4 other properties (e.g., $600,000 ÷ $2,500 = 240 and $700,000 ÷ $2,500 = 280).
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37.
Construction on a single-family residence in a new subdivision started on June 1, 1977. Construction was completed on January 1, 1978. The current owner, John Ying, acquired the property via first deed out from the developer. The property has not been remodeled or rebuilt since it was originally constructed. Ying is now selling the property, and is represented by a licensee. All of the following choices related to compliance with federal lead-based paint disclosure rules are incorrect, except:
a. Because construction was completed on January 1, 1978, there are no federal disclosure requirements related to lead-based paint.
b. The licensee is responsible for compliance with federal lead-based paint disclosures.
c. The seller must inform prospective buyers of any lead-based paint he knows is on the property.
d. The seller is responsible for having the property professionally inspected for lead-based paint.
With regard to federal lead-based paint disclosure rules, "target housing" includes residential dwellings built before January 1, 1978. This is the difference that one day can make. If construction started on December 31, 1977, then the residential dwelling is target housing, and lead-based paint warnings must be given to prospective buyers and tenants. If construction started on January 1, 1978, then the dwelling is not target housing, and the lead-based paint disclosure requirements do not apply. However, even if construction of the house commenced on or after January 1, 1978, a seller or landlord with actual knowledge of lead-based paint on the property is under a duty to disclose this to prospective purchasers and tenants. A is incorrect. Answer choice "A" misstates the rule. If construction started on January 1, 1978 then the house would not be considered target housing, and, absent actual knowledge of lead-based paint on the property, there would be no federal lead-based paint disclosure requirements. B is incorrect. The seller or landlord is responsible for compliance with lead-based paint disclosures: Compliance is not waived if there is no licensee involved in the transaction. A licensee, however, if involved with the transaction is responsible for advising the client as to proper disclosure and compliance. D is incorrect. Sellers and licensees are under no obligation to order an inspection to have the house tested for lead-based paint, or to pay for repairs if lead-based paint is discovered. Prospective buyers must be given a 10-day window to have the property inspected for lead-based paint, but even prospective buyers are free to waive testing.
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39.
Seller is selling a condominium. Seller and Buyer agree upon a sale price of $450,000. Seller has prepaid the property taxes for the entire tax year. Buyer will be moving into the property four months prior to the end of the tax year. Seller must pay off an outstanding mortgage lien of $350,000, and a mechanic's lien of $2,500. Seller must also pay the brokerage fee to the licensee who brought the ready, willing, and able buyer to the transaction. In the closing statement prepared by the Settlement Officer, which of the following will be a credit to the Seller?
a. Payoff of the $350,000 mortgage lien.
b.Payoff of the $2,500 mechanic's lien.
c. Brokerage fee.
d. Prepaid property taxes.
The seller will be reimbursed for the prepaid property taxes for those four months of the remaining tax year when the Buyer will own the property. The other answer choices are all considered debits to the seller. Test-Taking Tip: A good way to remember this is that, for the Settlement Officer, a "credit" increases what a party can take from the closing, while a "debit" decreases what a party takes from the closing. In this test question, the prepaid property taxes will be a credit to the seller and a debit to the buyer. However, debits and credits on the closing statement are not always balanced equally between the two parties. Here, for example, the seller must pay off the outstanding mortgage lien, the mechanic's lien, and the brokerage fee, but these are not considered credits to the buyer.
Incorrect answer. Please choose another answer.
41.
A developer purchases unimproved property to build a new subdivision. The land is $3,542.45 per acre. Here is the legal description of the property purchased: "The Northwest Quarter of the Southeast Quarter, of Section 26..." The acreage in Section 26 is typical for the government survey system. How much money did the developer pay--in total--for the property?
a. $106,273.50
b. $141,698.00
c. $212,547.00
d. $566,792.00
In the government survey system (aka "rectangular survey system"), an entire section of land is one square mile. One square mile contains 640 acres. One quarter of a section has 160 acres (640 ÷ 4 = 160). A quarter of a quarter section has 40 acres (160 ÷ 4 = 40). Here, the legal description states that the purchased property is a quarter of a quarter of a section, thus, 40 acres. If the land is $3,542.45 per acre and the land purchased is 40 acres, then the purchase price is $141,698.00 ($3,542.45 X 40 = $141,698.00). A is incorrect. This would be the correct purchase price for a 30 acre parcel. C is incorrect. This would be the correct purchase price for a 60 acre parcel. D is incorrect. This would be the correct price for a 160 acre parcel.
Incorrect answer. Please choose another answer.