1
Q
- The primary difference between single agency and limited consensual dual agency is
a. the ability to provide advice and engage in negotiations.
b. fee splitting arrangements.
c. whether the buyer or the seller pays the commission.
d. whether the client is the buyer or the seller.
A
- a. The answer is the ability to provide advice and engage in negotiations. In single agency, the licensee has a client to whom she owes fiduciary obligations of advice and negotiation assistance. In limited consensual dual agency, the agent is not allowed to provide advice or negotiation assistance, because that would favor one party over another.
2
Q
- Which of the following is NOT a seller-required disclosure in Alabama?
a. Presence of lead-based paint in a residence built before 1978
b. Prior owner committed suicide in the property
c. Termite infestation that has weakened most floor and roof supports
d. Type of agency relationships offered by the real estate company
A
- b. The answer is prior owner committed suicide in the property. A suicide is a stigma on the property, but stigma does not have to be disclosed by the seller in Alabama. The other choices are all required disclosures. If the buyer has his own agent and is the client of that agent, and if the buyer’s agent knows of the suicide, the buyer’s agent must disclose to the client. The seller’s agent is under no such obligation to the buyer.
3
Q
- In Alabama, who is responsible for the real estate activities carried on in a real estate office?
a. The qualifying broker
b. The associate broker
c. The salesperson
d. The personal assistant
A
- a. The answer is the qualifying broker. Qualifying brokers are responsible for the real estate activities performed by the salespeople and associate brokers who are affiliated with them.
4
Q
- A prospective homebuyer signs a brokerage agreement under which the real estate professional will help this client find a three-bedroom house in the $185,000 to $200,000 price range. A seller comes into the real estate professional’s office and signs a listing agreement in which the real estate professional will act as the seller’s agent to sell a two-bedroom condominium for $170,000. Based on these facts, which statement is TRUE?
a. The buyer is the real estate professional’s client; the seller is the real estate professional’s customer.
b. The buyer is the real estate professional’s customer; the seller is the real estate professional’s client.
c. While both the buyer and the seller are clients, the real estate professional owes the fiduciary duties of an agent only to the seller.
d. Because both the buyer and the seller are the real estate professional’s clients, the real estate professional owes the fiduciary duties of an agent to both.
A
- d. The answer is because both the buyer and the seller are the real estate professional’s clients, the real estate professional owes the fiduciary duties of an agent to both. Both the buyer and the seller are the real estate professional’s clients. The real estate professional thus owes each of them fiduciary duties.
5
Q
- A real estate professional who represents the seller is showing a house to a prospective buyer-customer. The real estate professional knows that the house has water problems in the basement. Which of the following is TRUE?
a. Withholding the information properly protects the confidence of the seller.
b. Withholding the information prevents the buyer from making an informed decision.
c. Disclosing the information could create a fiduciary relationship with the buyer.
d. Disclosing the information violates the real estate professional’s fiduciary duty to the seller.
A
- b. The answer is withholding the information prevents the buyer from making an informed decision. The duty of disclosure includes relevant information or material facts that the real estate professional knows or should have known, regardless of whether those facts are favorable or unfavorable to the principal’s position.
6
Q
- The licensee represents the seller. The licensee receives a written offer that is 50% below the asking price. How should the agent respond?
a. Send the offer back to the other agent telling the buyer to offer more
b. Promptly present the offer to the seller
c. Call the seller and advise the seller to ignore the offer
d. Refuse to present such an insulting offer
A
- b. The answer is promptly present the offer to the seller. The seller must make the decision to accept or reject the offer.
7
Q
- The duties that an agent owes to a client are established by
a. the Real Estate Consumer Agency Disclosure Act.
b. common law.
c. the agent’s broker.
d. the agent’s client.
A
- a. The answer is the Real Estate Consumer Agency Disclosure Act. The Real Estate Consumer Agency Disclosure Act, better known in Alabama as RECAD, became law October 1, 1996. The Alabama agency law establishes the duties that an agent owes to a client, whether buyer, seller, tenant, or landlord.
8
Q
- What duties are owed to real estate customers in Alabama?
a. Good faith, loyalty, and fidelity
b. Promote the best interests of the customer
c. Honesty, good faith, reasonable skill and care, and accounting
d. None of these
A
- c. The answer is honesty, good faith, reasonable skill and care, and accounting. The other listed duties are owed to clients, who are represented by the agent in a fiduciary capacity.
9
Q
- A real estate professional shows properties listed for sale with her company to a prospective buyer. The buyer has refused buyer representation. The buyer is the real estate professional’s
a. customer.
b. client.
c. principal.
d. fiduciary.
A
- a. The answer is customer. The third party or nonrepresented consumer for whom some level of service is provided is a customer and is entitled to fairness and honesty.
10
Q
- A buyer’s agent is aware that a murder was committed in a home and that home is reputed to have paranormal activity. Must this information be disclosed to a client?
a. Yes, known stigmas must be disclosed by all Alabama licensees.
b. No, this does not affect health or safety, so there is no need to disclose.
c. No, there is no scientific proof supporting the existence of ghosts.
d. Yes, known stigmas must be disclosed by a buyer’s agent to a client.
A
- d. The answer is yes, known stigmas must be disclosed by a buyer’s agent to a client. That is because the buyer’s agent has a fiduciary responsibility to the client and must disclose all information that could affect the buyer’s purchase decision.
11
Q
- Your client wishes to purchase a beach house for his large extended family. You find one that is only 900 square feet, but it is located on a double lot. You estimate construction costs to expand the house to 3,000 square feet. Should you recommend that your client make an offer that will result in acquisition costs and expansion costs significantly less than the completed value of the house?
a. No, because a larger commission will be earned if he buys a home that is already the size he wants
b. Yes, assuming your construction costs are accurate
c. Yes, assuming there are no restrictive covenants limiting the size of houses
d. No, because he might not be able to obtain permits for the expansion
A
- d. The answer is no, because he might not be able to obtain permits for the expansion. You need more information before making a recommendation. Because this is a beach house, relevant authorities will have to approve the expansion and the site work necessary for the expansion. Without that approval, your client might not be able to enlarge the house, at any price.
12
Q
- A salesperson presents on offer on behalf of her client, who is also her son. The offer is 10% below the salesperson’s estimate of the fair market value of the property. What disclosures, if any, must be made in the offer?
a. The son is related to the salesperson
b. The offer is a below-market offer
c. The son is related to the salesperson and the offer is a below-market offer
d. None of these
A
- a. The answer is the son is related to the salesperson. Licensees must disclose their own status as a licensee when buying or selling real estate and must also disclose their relationship to a buyer or seller who is a family member.
13
Q
- A person passes the real estate license exam but has no desire to immediately begin selling real estate. Which of the following is most likely TRUE?
a. The temporary license will be issued on active status.
b. The original license will be issued on inactive status.
c. The licensee must find a broker willing to accept the license.
d. The temporary license will be issued on inactive status.
A
- d. The answer is the temporary license will be issued on inactive status. This allows the licensee to maintain the license, be exempt from continuing education responsibilities, and have the option to activate the license fairly quickly if desired.
14
Q
- A real estate professional who is the agent of the buyer should do which of the following?
a. Advise the buyer if the listing price of the seller’s house is unrealistic
b. Disclose to the seller that the buyer is a member of a protected class
c. Disclose to the seller the maximum price the buyer is willing to pay
d. Present to the seller only offers that are acceptable
A
- a. The answer is advise the buyer if the listing price of the seller’s house is unrealistic. As part of the fiduciary duties owed a principal, an agent for the buyer should disclose to the buyer if the property is overpriced.
15
Q
- A German citizen is a resident alien lawfully residing in Alabama. She wishes to obtain a real estate license. Which of the following is TRUE?
a. She must meet the same requirements as an Alabama citizen.
b. In addition to all other licensing requirements, she must have been a resident alien for at least 24 of the last 60 months.
c. In addition to all other requirements, she must pay an additional fee for a German background check.
d. She must be a citizen of the United States to apply for a real estate license.
A
- a. The answer is she must meet the same requirements as an Alabama citizen. Resident aliens lawfully residing in the state are treated the same as citizens for purposes of obtaining a real estate license, except they are required to provide proof of legal residency.
16
Q
- What is the purpose of the agency disclosure form?
a. To inform the consumer what type of representation the licensee is providing the consumer
b. To force the consumer to pay a fee
c. To disclose material adverse facts about the property
d. To obtain payment of a fee, indicating agency representation
A
- The answer is to inform the consumer what type of representation the licensee is providing the consumer
17
Q
- A buyer’s agent wishes to make a full-price offer for a property. Rumor is that there is high interest in the property, and multiple offers will probably be presented in the very near future. The agent does not want to become involved in a bidding war. How can she increase the likelihood that her offer will be accepted?
a. Insist that the listing agent present the offer to the seller immediately
b. Include a very short expiration date on the offer, such as 24 hours
c. Show the property as pending under contract on the MLS
d. Include a “sudden death” clause in the offer
A
- b. The answer is include a very short expiration date on her offer, such as 24 hours. All written offers must be presented to the seller as soon as received. If a buyer wants to get a signed contract before someone else submits a better offer, then the buyer wants to motivate the seller to sign the offer as quickly as possible. Putting a short deadline of 24 hours is one way to speed the seller’s decision making. Only the listing agent can make changes on MLS, and there is no such thing as a “sudden death” clause in real estate transactions.
18
Q
- A real estate professional is selling a home to a buyer and told her that the foundation was “solid as a rock” when he knew for a fact that it was slowly sinking into the landfill on which it was built. Now that the sale is completed, which of the following is LEAST likely to happen to the real estate professional?
a. Revocation of his license for failure to disclose a material fact
b. Being charged with intentional misrepresentation
c. Suit to recover money damages experienced by the buyer due to basement leakage
d. Successful defense against all charges based on loyalty to his client-seller
A
- d. The answer is successful defense against all charges based on loyalty to his client-seller. The duty of disclosure includes relevant information or material facts that the real estate professional knows or should have known, regardless of whether those facts are favorable or unfavorable to the principal’s position.
19
Q
- An associate broker lists her brother’s home for sale. Approximately twice a year, the rainfall is sufficient to overload the gutters. Water sheets off the roof, saturates the ground, and pools in the basement to a depth of approximately two inches. When a buyer asks about water problems, the broker responds that there are none. The parties sign a purchase contract, which contains language saying the property is sold “as-is.” What liability does the associate broker have?
a. Civil or criminal fraud
b. No liability, because Alabama is a caveat emptor state for used properties
c. Disciplinary action by AREC for misrepresentation when selling for self or for family members
d. No liability, because the broker owed her brother the duty of confidentiality
A
- c. The answer is disciplinary action by AREC for misrepresentation when selling for self or family members. If the same question involved a non-family member as the seller, there would be no liability because of the “as-is” clause. Because it was a family member, there is liability.
20
Q
- Which of the following listing agreements permit owners of a listed property to sell the property on their own without having to pay the listing broker a commission?
a. Exclusive-agency listing only
b. Open listing and exclusive-agency listing
c. Open listing only
d. Exclusive-right-to-sell listing and exclusive-agency listing
A
- b. The answer is open listing and exclusive-agency listing. In an exclusive-agency listing, one brokerage is authorized to act as the exclusive agent of the principal. However, the seller retains the right to sell the property without obligation to the brokerage. In an open listing, the seller retains the right to employ any number of brokers to sell the property. In an open listing, the seller is obligated to pay the listing broker a commission only if the listing broker is the procuring cause of the sale. In an exclusive- right-to-sell listing, if the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property.
21
Q
- Copies of signed contracts must be provide to clients and customers
a. within 48 hours.
b. at the time they are signed.
c. as soon as convenient.
d. within five business days.
A
- b. The answer is at the time they are signed. There is no specific deadline, but the agent cannot wait until it is convenient.
22
Q
- A buyer saw a house on March 10. She makes a written offer on the property on March 15. The offer was presented on March 16 and accepted by the seller on March 18. When should the agent give the buyer a signed copy of the contract?
a. March 10
b. March 15
c. March 16
d. March 18
A
- d. The answer is March 18. The buyer should be given a copy of the signed contract as soon as possible after acceptance by the seller on March 18. In Alabama, upon execution of any instrument in connection with a real estate transaction, licensees must deliver legible copies of the original document to each party at the time the contract is signed, as well as any other document signed at that time. The licensee should give the buyer a copy of the offer on March 15 and the accepted offer (contract) on March 18.
23
Q
- The licensee represents the seller. The licensee receives a written offer that is 50% below the asking price. How should the agent respond?
a. Send the offer back to the other agent telling the buyer to offer more
b. Promptly present the offer to the seller
c. Call the seller and advise the seller to ignore the offer
d. Refuse to present such an insulting offer
A
- b. The answer is promptly present the offer to the seller. The seller must make the decision to accept or reject the offer.
24
Q
- Laura makes an offer on a house, and the seller accepts the offer. At this point, Laura has what type of title to the property?
a. Voidable
b. Legal
c. Possessionary
d. Equitable
A
- d. The answer is equitable. On formation of the contract between both parties, the contract is now an executory contract with the buyer having equitable title. Voidable is a term used to describe a contract that is able to be voided because of duress, fraud, misrepresentation, or because one party to the contract is a minor, In the executory stage the seller holds legal title and possession until closing, unless a different time of possession is negotiated.
25
69. Which element is necessary for a legally enforceable contract for the sale of real estate?
a. Parties at least 19 years old, or 18 years old and married
b. Contract prepared by an Alabama-licensed attorney
c. Legal description of property being sold
d. Signed and notarized property condition addendum
69. a. The answer is parties at least 19 years old, or 18 years old and married. This is the age of legal capacity in Alabama. Under current law, contracts do not have to be prepared by an attorney. A street address of the property is sufficient for a sales contract, but not for a deed. Alabama does not require any type of property condition or disclosure addendum.
26
70. A buyer’s agent is aware that a murder was committed in a home and that home is reputed to have paranormal activity. Must this information be disclosed to a client?
a. Yes, known stigmas must be disclosed by all Alabama licensees.
b. No, this does not affect health or safety, so there is no need to disclose.
c. No, there is no scientific proof supporting the existence of ghosts.
d. Yes, known stigmas must be disclosed by a buyer’s agent to a client.
70. d. The answer is yes, known stigmas must be disclosed by a buyer’s agent to a client. That is because the buyer’s agent has a fiduciary responsibility to the client and must disclose all information that could affect the buyer’s purchase decision.
27
71. A seller wishes to list his property for $100,000 with a 6% commission. The listing agent believes the market value is $130,000, but the seller wants a quick sale. They agree to wait 48 hours before placing the property on MLS at $100,000. During that time, if the agent can put the property under contract with a qualified buyer for a sum in excess of $100,000, then the agent’s commission will be the excess over $110,000 rather than 6% of the sales price. Is this a reasonable solution to the situation?
a. No, the agent might make less money under this arrangement.
b. Yes, because it motivates the agent to find a buyer very quickly.
c. No, because listings cannot be intentionally withheld from MLS.
d. No, this arrangement is illegal.
71. d. The answer is no, this arrangement is illegal. This is a net listing, which are illegal.
28
103. If an owner takes his property off the market for a definite period in exchange for some consideration but grants an individual the right to purchase the property within that period for a stated price, this is called
a. an option.
b. a contract of sale.
c. a right of first refusal.
d. an installment agreement.
103. a. The answer is an option. An option is granted when an owner (optionor) gives the potential purchaser (optionee) the right to purchase the property at a fixed price within a certain period of time.
29
113. Breach of contract is refusal or failure to comply with the terms of a contract. If the seller breaches the purchase contract, the buyer may do all of the following EXCEPT
a. sue the seller for specific performance.
b. rescind the contract and recover the earnest money.
c. sue the seller for damages.
d. sue the broker for nonperformance.
113. d. The answer is sue the broker for nonperformance. The broker is not a party to a real estate sales contract and could not be sued for nonperformance in the event of a seller's breach.
30
121. A broker does not have to prove that she was the procuring cause in order to collect a commission if her seller sells the property without her help because she has an
a. option listing.
b. open listing.
c. exclusive right to sell listing.
d. exclusive agency listing.
121. c. The answer is exclusive right to sell listing. In an exclusive right to sell listing, the listing broker receives a commission no matter who sells the listed property during the term of the listing. Brokers may have to prove they were the procuring cause in some open listing and exclusive agency listing situations, but procuring cause is of no significance in exclusive right to sell listing situations.
31
124. Which of the following is NOT a type of listing contract?
a. Open
b. Exclusive agency
c. Exclusive right to sell
d. MLS
124. d. The answer is MLS. A clause permitting the property to be entered in the multiple listing system (MLS) may be included in an exclusive listing agreement with the seller's consent.
32
131. A real estate professional is selling a home to a buyer and told her that the foundation was "solid as a rock" when he knew for a fact that it was slowly sinking into the landfill on which it was built. Now that the sale is completed, which of the following is LEAST likely to happen to the real estate professional?
a. Revocation of his license for failure to disclose a material fact
b. Being charged with intentional misrepresentation
c. Suit to recover money damages experienced by the buyer due to basement leakage
d. Successful defense against all charges based on loyalty to his client-seller
131. d. The answer is successful defense against all charges based on loyalty to his client-seller. The duty of disclosure includes relevant information or material facts that the real estate professional knows or should have known, regardless of whether those facts are favorable or unfavorable to the principal's position.
33
133. An associate broker lists her brother’s home for sale. Approximately twice a year, the rainfall is sufficient to overload the gutters. Water sheets off the roof, saturates the ground, and pools in the basement to a depth of approximately two inches. When a buyer asks about water problems, the broker responds that there are none. The parties sign a purchase contract, which contains language saying the property is sold “as-is.” What liability does the associate broker have?
a. Civil or criminal fraud
b. No liability, because Alabama is a caveat emptor state for used properties
c. Disciplinary action by AREC for misrepresentation when selling for self or for family members
d. No liability, because the broker owed her brother the duty of confidentiality
133. c. The answer is disciplinary action by AREC for misrepresentation when selling for self or family members. If the same question involved a non-family member as the seller, there would be no liability because of the “as-is” clause. Because it was a family member, there is liability.
34
135. Penelope has made an offer to the seller who has countered and given Penelope 24 hours to accept the counter. In this case the original offer is considered to be
a. terminated.
b. executory.
c. voidable.
d. void.
135. a. The answer is terminated. A counter offer terminates the original offer and creates a new offer. Since there is not a contract the terms are executory. An offer is not a contract and cannot be considered voidable or void.
35
6. A 40-acre tract was sold for $2,200 per acre. The seller realized a 14.5% profit from the sale. What was the original cost of the tract?
a. $75,240
b. $100,760
c. $102,924
d. $76,856
6. d. The answer is $76,856. 40 acres × $2,200 per acre = $88,000 sales price, and $88,000 ÷ 114.5% (100% sales price + 14.5% profit) = $76,855.90 original cost, rounded to $76,856.
36
9. A broker's office policy is that the sales associate's share of a commission is 65%. What is the sales associate's compensation if the sales price of a property is $195,000 and the broker is entitled to a 5.5% commission?
a. $697.13
b. $8,872.50
c. $69,712.50
d. $6,971.25
9. d. The answer is $6,971.25. Two steps: (1) Find the gross commission by multiplying the sales price by the brokerage rate ($195,000 × 5.5% = $10,725). (2) Find the salesperson's 65% of the gross commission ($10,725 × 65% = $6,971.25).
37
44. A home mortgage loan closed on July 1 for $165,000 at 4.5% interest amortized over 30 years at $836.03 per month. Using a 360-day year, what would the interest portion of the payment be on a payment made August 1?
a. $618.75
b. $725.60
c. $51.85
d. $700.00
44. a. The answer is $618.75. Two steps: (1) Find annual interest based on the interest rate and principal balance ($165,000 × 4.5% = $7,425). (2) Find one month's interest by dividing the annual interest by 12 ($7,425 ÷ 12 = $618.75).
38
60. If a residence is valued at $87,500 and its assessment ratio is 50% of market value, what are the annual taxes if the tax rate is $7.80 per $100 of assessed valuation?
a. $3,187.75
b. $5,608.96
c. $3,412.50
d. $6,825.00
60. c. The answer is $3,412.50. $87,500 residence value × 50% = $43,750 assessed value; $43,750 assessed value ÷ $100 = 437.5; 437.5 × $7.80 = $3,412.50 annual taxes.
39
62. A real estate transaction has a closing date of November 15. The seller, who is responsible for costs up to and including the date of settlement, has already paid the property taxes of $5,116 for the calendar year. On the closing statement, the buyer will be
a. debited $976.50.
b. debited $639.50.
c. credited $639.50.
d. credited $976.50.
62. b. The answer is debited $639.50. The buyer will be debited (charged) enough money on the closing statement to reimburse the seller for the unused portion of prepaid taxes. Three steps: (1) Find the monthly amount of the real estate taxes ($5,116 ÷ 12 = $426.33). (2) Find how many months lie between the settlement and the end of the year (15 days, or ½ month, in November and a full month in December = 1.5 months). (3) Find the taxes on 1½ months ($426.33 × 1.5 = $639.50).
40
79. Susan and Curtis are applying for a home loan. Susan has an annual gross income of $102,000 and Curtis earns $72,000 a year. They have monthly car payments of $875, monthly credit card payments of $620, and their monthly grocery expenses come to $1,200. If the lender uses debt ratios of 28% and 36% to qualify them, what is the maximum monthly housing expense they will qualify for?
a. $4,060
b. $5,220
c. $3,725
d. $2,525
79. c. The answer is $3,725. $102,000 + $72,000 = $174,000 ÷ 12 = $14,500/month $14,500 × 28% (0.28) = $4,060 $14,500 × 36% (0.36) = $5,220 – $1,495 other recurring debt = $3,725
41
89. After paying closing expenses of $550 and a 6% commission, the seller received a check for $149,850. What was the sale price of the property?
a. $160,000
b. $155,424
c. $159,424
d. $150,400
89. a. The answer is $160,000. 100% – 6% = 94% $149,850 + $550 = $150,400 needed before commission. $150,400 ÷ 94% = $160,000.
42
93. If the Washingtons received a semiannual tax bill of $984.38, property in the jurisdiction is assessed at one-fourth the market value, and the tax rate is $4.50 per $100, what is the estimated market value of their property?
a. $43,750
b. $195,000
c. $175,000
d. $53,750
93. c. The answer is $175,000. Tax rate = $4.50 ÷ 100 = 0.045 $984.38 × 2 = $1,968.76 annual taxes. $1,968.76 ÷ 0.045 = $43,750 assessed value $43,750 ÷ 25% = $175,000.
43
109. Twenty years ago, a family purchased a vacant lot for $26,500. They made no improvements during the time they owned the property. Recently, they sold the lot for $62,275. What was their percentage of gross profit?
a. 42.6%
b. 58.2%
c. 135%
d. 235%
109. d. The answer is 235%. $62,275 sales price ÷ $26,500 original sales price two years ago = 2.35 or 235% gross profit.
44
114. A buyer bought a house for $125,000. The house, which had originally sold for $118,250, appraised for $122,500. Based on these facts, if the buyer applies for an 80% mortgage, what will be the amount of the loan?
a. $94,600
b. $98,000
c. $100,000
d. $106,750
114. b. The answer is $98,000. A lender's loan-to-value (LTV) ratio uses either the appraisal or the sales price for the value. The amount a property sold for at a previous transaction is irrelevant. In this case, the appraisal is less than the current selling price. If the loan is 80% of the value and the appraisal is used as the value, use this calculation to find the loan amount: $122,500 × 80% = $98,000.
45
122. If the mortgage loan is 80% of the appraised value of a house and the interest rate of 6% amounts to $460 for the first month, what is the appraised value of the house?
a. $115,000.
b. $92,000.
c. $73,600.
d. $55,200.
122. a. The answer is $115,000. Three steps: (1) Find a year's interest by multiplying the first month's interest by 12 ($460 × 12 = $5,520). (2) Find the principal of the loan by dividing the annual interest by the interest rate ($5,520 ÷ 6% = $92,000). (3) Find the appraised value by dividing the loan amount by 80% because the principal (the loan) is 80% of the appraised value ($92,000 ÷ 80% = $115,000).
46
123. A house was listed for sale at $184,900. The seller received $171,000 after paying the broker a 5% commission. What was the selling price of the property?
a. $180,000.00
b. $176,423.68
c. $178,957.00
d. $189,345.79
123. a. The answer is $180,000.00. $171,000 net ÷ 95% (100% – 5% commission) = $180,000 sales price.
47
129. What is the value of an apartment building with a $90,000 net operating income and an 8% cap rate?
a. $1,000,000
b. $1,500,000
c. $1,720,000
d. $1,125,000
129. d. The answer is $1,125,000. $90,000 ÷ 0.08 (8%) = $1,125,000
48
3. The uniqueness of land and its inability to be substituted is called
a. scarcity.
b. nonhomogenity.
c. permanence of investment.
d. nonheterogenity.
3. b. The answer is nonhomogenity. Nonhomogenity is another term for uniqueness because two parcels of land are never exactly alike.
49
4. Which of the following techniques would an appraiser use in the cost approach to value?
a. Owner's original cost of the building
b. Sales prices of similar buildings in the area
c. Assessed value of the building
d. Estimated replacement cost of the building
4. d. The answer is estimated replacement cost of the building. The cost approach is used to estimate the replacement or reproduction cost of the building. Estimated replacement or reproduction cost less accrued depreciation plus estimated land value equals the estimated value by the cost approach. The owner's original purchase cost is not used in any approach to value since the process is determining current value. The sales of similar buildings is used in the sales comparison approach. Assessed value is used only by taxing authorities, never in determining market value.
50
10. In which of the following situations could a quitclaim deed NOT be used?
a. To convey title
b. To release a nominal real estate interest
c. To warrant that a title is valid
d. To remove a cloud on title
10. c. The answer is to warrant that a title is valid. The quitclaim deed carries no covenants or warranties. It is used to convey less than a fee simple estate or to cure a cloud on the title.
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19. What is the term for a deed that contains no express warranties?
a. A bargain and sale deed
b. A quitclaim deed
c. A warranty deed
d. A deed of trust
19. b. The answer is a quitclaim deed. A quitclaim deed provides the grantee with the least protection of any deed, as it carries no covenants or warranties. The bargain and sale deed contains no express warranties against encumbrances but does imply that the grantor holds title and possession. A warranty deed fully warrants good clear title to a property. A deed of trust is used to create a lien for a loan.
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22. According to a broker's comparative market analysis (CMA), a property is worth $225,000. The homeowner bought the property for $190,000 and added $50,000 in improvements, for a total of $240,000. The property sold for $222,500. Which amount represents the property's market value?
a. $225,000
b. $190,000
c. $222,500
d. $240,000
22. a. The answer is $225,000. A CMA provides an estimate of market value based on an analysis of comparable sales. Market price is the amount for which a property actually sells.
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26. An appraiser using the income approach to estimate the value of a property uses which of the following applications?
a. Capitalization
b. Depreciation
c. Appreciation
d. Equalization
26. a. The answer is capitalization. Capitalization is a method of estimating today the future value of an income stream. Depreciation is the loss of value for any reason. Appreciation is an increase of value. Equalization is used by tax assessors and is a process of adjusting the assessed rate in a taxing district to achieve more conformity with other tax districts.
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27. A farmer owns the W½ of the NW¼ of the NW¼ of a section. The adjoining property can be purchased for $2,300 per acre. Owning all of the NW¼ of the section would cost the farmer
a. $600,000.
b. $322,000.
c. $120,000.
d. $480,000.
27. b. The answer is $322,000. If a person wishes to own the entire quarter (160 acres) of a 640-acre section in which that person already owns 20 acres (½ × ¼ × ¼ = 1/32 and 640 × 1/32 = 20), then the portion of the section still to be acquired is 140 acres (160 acres – 20 = 140). At a cost per acre of $2,300, the adjoining property will cost $322,000 (140 × $2,300 = $322,000).
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28. In a situation where a homeowner conveys property to her uncle with a deed, and then the uncle records the dead, when did title to the property actually transfer or pass to the uncle?
a. Upon delivery and acceptance of the contract
b. Upon recording of the deed
c. Upon delivery and acceptance of the deed
d. Upon the delivery of consideration
28. c. The answer is upon delivery and acceptance of the deed. Title is transferred upon delivery and acceptance of the deed. At that moment, the deed is binding between the parties. When the uncle later records the deed, he is then protected against claims of third parties. Contracts do not transfer title. A valid deed must contain a clause acknowledging that the grantor has received consideration, but the consideration in itself does not transfer the title to the property.
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36. Which of the following is the BEST way to ensure that there are no encroachments and verify the boundaries of a parcel of land?
a. Get a spot survey
b. Write a legal description
c. Find the monuments
d. Verify the benchmarks
36. a. The answer is get a spot survey. A spot survey shows the location of all improvements on a property and whether they extend over the property lines.
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43. How many acres are in a property that is measured with the following legal description: the S½ of the SE¼ of the NW¼ of the NE¼ of Section 7?
a. 2.5 acres
b. 10 acres
c. 20 acres
d. 5 acres
43. d. The answer is 5 acres. To calculate acres in a survey system legal description, multiply all the denominators and divide that number into 640 acres. In this problem, multiply all denominators: 2 × 4 × 4 × 4 = 128, then divide 640 by 128: 640 (acres in a section) ÷ 128 = 5 acres.
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66. Which of the following parcels of land is the smallest?
a. Two sections
b. Two square miles
c. 1,280 acres
d. 5% of a township
66. d. The answer is 5% of a township. 5% of a township is 1,152 acres. A township is 36 sections of 640 acres each, so the total acreage in a township is 36 × 640 or 23,040 acres, and 23,040 acres × 0.05 = 1,152 acres. Two sections (two square miles) are 1,280 acres (640 × 2 = 1,280).
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68. The primary survey line running north and south in any area described by the rectangular survey system is its
a. township line.
b. base line.
c. range line.
d. principal meridian.
68. d. The answer is principal meridian. The principal meridians run north and south in a rectangular survey system, and the base lines run east and west.
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73. Which statement is TRUE regarding a special warranty deed?
a. The grantor is making additional warranties beyond those given in a warranty deed.
b. The grantor retains an interest in the ownership.
c. The grantor is warranting that no encumbrances exist against the property.
d. The grantor's warranties are limited to the time the grantor owned the property.
73. d. The answer is the grantor's warranties are limited to the time the grantor owned the property. A special warranty deed contains two basic warranties: that the grantor received title and that the property was not encumbered during the time the grantor held title, except as noted in the deed.
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74. The term improvements, when referring to real estate, includes
a. shrubbery.
b. trees.
c. lawns.
d. sidewalks.
74. d. The answer is sidewalks. An improvement is an artificial thing attached to the land. A sidewalk is a man-made addition.
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75. What is the size of a lot that is 1/4 of a mile wide by 1/4 of a mile long?
a. 120 acres
b. 10 acres
c. 80 acres
d. 40 acres
75. d. The answer is 40 acres. 1,320 ft (1/4 (0.25) of 5,280 ft {one mile}) x 1,320 ft = 1,742,400 sq. ft. ÷ 43,560 (sq. ft. in an acre) = 40 acres
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84. Which of the following terms identifies the physical characteristic of real estate that means every parcel of land is different?
a. Immobility
b. Indestructibility
c. Uniqueness
d. Scarcity
84. c. The answer is uniqueness. Uniqueness is the concept that no two parcels of property are exactly the same or in the same location. An individual parcel has no substitute because each is unique. Immobility means that the geographic location of a parcel of land can never be changed. Indestructibility means that land is durable and cannot be destroyed. Scarcity is an economic characteristic of land, meaning that when the supply of land is limited the price of the land increases.
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99. The type of deed in which the granting clause states "grant, bargain, and sell" is a
a. special warranty deed.
b. general warranty deed.
c. reconveyance deed.
d. bargain and sale deed.
99. d. The answer is bargain and sale deed. A bargain and sale deed contains no express warranties but implies that the grantor holds title and possession. The granting clause usually contains the phrase "grant, bargain, and sell."
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100. When grantors do NOT wish to convey certain property rights, they
a. must note the exceptions in a separate document.
b. may not do so because the deed conveys the entire premises.
c. may note the exceptions in the deed of conveyance.
d. must convey the entire premises and have the grantee reconvey the rights to be retained by the grantor.
100. c. The answer is may note the exceptions in the deed of conveyance. If the grantors convey less than their complete interest, the wording in the granting clause must indicate this limitation. Mineral rights, water rights, and easements are frequently retained by grantors.
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102. Which of the following statements about the covenant of quiet enjoyment is TRUE?
a. The grantor ensures that the title will be good against the title claims of third parties.
b. The grantor guarantees that if the title fails in the future, he or she will compensate the grantee.
c. The grantor warrants that he or she is the owner and has the right to convey title to the property.
d. The grantor promises to obtain and deliver any instrument needed to make the title good.
102. a. The answer is the grantor ensures that the title will be good against the title claims of third parties. Quiet enjoyment means freedom from any claims to the title by third parties, persons other than grantor and grantee. The other guarantees and promises are warranted through the covenants of warranty forever, seisin, and further assurance. A general warranty deed provides all of these covenants.
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104. The type of deed in which the granting clause states "remise, release, alienate, and convey" is a
a. bargain and sale deed.
b. quitclaim deed.
c. special warranty deed.
d. sheriff's deed.
104. c. The answer is special warranty deed. In a special warranty deed, the grantors defend the title against themselves. The words usually contained in the granting clause are "remise, release, alienate, and convey."
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106. A man has defaulted in the payment of several of his debts, and the court has ordered his property sold to satisfy his obligations. A title search revealed several outstanding liens against the property to be sold. Which of the following liens has highest priority?
a. Outstanding first mortgage lien dated and recorded one year ago
b. Real estate tax lien for the current year
c. Judgment lien rendered and recorded last month
d. Mechanic's lien for work started two months before the mortgage was recorded
106. b. The answer is real estate tax lien for the current year. Tax liens usually have priority over previously recorded liens.
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112. The date and time a document was recorded in the public records helps to establish which of the following?
a. Abstract of title
b. Alienation clause
c. Marketable title
d. Priority of mortgages and liens
112. d. The answer is priority of mortgages and liens. The priority of mortgages and other liens normally is determined by the order in which they were recorded. Time of recordation is an important consideration in establishing the priority of claims in the event of a sale. An abstract of title is a document prepared to report the results of a title search. An alienation clause is used in a mortgage or deed of trust to allow the full amount due to be called if the buyer is in default. Marketable title is established with an abstract or title commitment.
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117. A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exceptions, is called
a. a chain of title.
b. an abstract of title.
c. a certificate of title.
d. a title insurance policy.
117. d. The answer is a title insurance policy. Although a certificate of title is used as evidence of ownership, it is not perfect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.
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118. Which of the following is a lien on real estate?
a. Easement
b. Recorded mortgage
c. Encroachment
d. Restrictive covenant
118. b. The answer is recorded mortgage. A recorded mortgage is a lien on real estate. Easements, encroachments, and restrictive covenants are all encumbrances, not liens.
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125. Which of the following is defined as the historical records of all owners and encumbrances of a specific parcel of real estate?
a. Title search
b. Chain of title
c. Title commitment
d. Abstract of title
125. b. The answer is chain of title. A chain of title is the historical record of a property's ownership and encumbrances. Each owner is linked to the next so that a chain is formed. A title search is the process of examining the chain of title for defects or errors. A title commitment lists current encumbrances and any defects found in the title upon completing the search. An abstract of title is a historical summary report of what the title search found in the public record; only when coupled with a title opinion can the buyer know if there are title issues.
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126. What is the length of a rectangular lot that is 275 feet deep and contains 1\3 of an acre?
a. 105.6'
b. 106.5'
c. 290.04'
d. 158.4'
126. a. The answer is 105.6'. 43,560 ÷ 3 = 14,520 × 2 = 29,040 sq. ft. 29,040 ÷ 275' = 105.60 ft OR 2 ÷ 3 = 0.6667 43,560 × 0.6667 = 29,041.45 sq. ft. 29,041.45 ÷ 275' = 105.6052 ft
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128. A man owned two acres of land. He sold one acre to a neighbor and reserved for himself an appurtenant easement over his neighbor's land for ingress and egress. The man's land
a. is the servient tenement.
b. is the dominant tenement.
c. can be cleared of the easement when the man sells the withheld acre to a third party.
d. is subject to an easement in gross.
128. b. The answer is is the dominant tenement. The man's parcel benefits from the easement and is the dominant tenement. The neighbor's tract, over which the easement runs, is the servient tenement.
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136. A property owner contracted to have a swimming pool installed on her property. When the pool was completed, she refused to pay for the improvement, and the contractor filed a lien for nonpayment. This lien was MOST likely a
a. general lien.
b. special lien.
c. voluntary lien.
d. specific lien.
136. d. The answer is specific lien. The lien filed by the contractor would be a mechanic's lien and would be a specific, involuntary lien on the property.
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139. A section
a. contains 460 acres.
b. has a perimeter of 5,280 square feet.
c. can be any number from 1 to 50.
d. is one square mile.
139. d. The answer is is one square mile. Each township contains 36 sections, and each section is one square mile. Each side of a section is one mile long (5,280 feet), making the perimeter 5,280 ft × 4 sides, or 21,120 feet.
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140. A standard rectangular survey system section contains
a. 36 townships.
b. 640 acres.
c. 160 government lots.
d. 160 acres.
140. b. The answer is 640 acres. Each township contains 36 sections, and each section is one square mile, or 640 acres.
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10. In which of the following situations could a quitclaim deed NOT be used?
a. To convey title
b. To release a nominal real estate interest
c. To warrant that a title is valid
d. To remove a cloud on title
10. c. The answer is to warrant that a title is valid. The quitclaim deed carries no covenants or warranties. It is used to convey less than a fee simple estate or to cure a cloud on the title.
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12. General real estate taxes are also called
a. special assessments.
b. ad valorem taxes.
c. appropriation funds.
d. general, voluntary liens.
12. b. The answer is ad valorem taxes. General real estate taxes are based on the value of the property being taxed and are called ad valorem (according to value) taxes. They are specific, involuntary liens.
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19. What is the term for a deed that contains no express warranties?
a. A bargain and sale deed
b. A quitclaim deed
c. A warranty deed
d. A deed of trust
19. b. The answer is a quitclaim deed. A quitclaim deed provides the grantee with the least protection of any deed, as it carries no covenants or warranties. The bargain and sale deed contains no express warranties against encumbrances but does imply that the grantor holds title and possession. A warranty deed fully warrants good clear title to a property. A deed of trust is used to create a lien for a loan.
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21. Which of the following is the year-lengths of the different adverse possession time periods in Alabama?
a. 10, 5
b. 20, 10
c. 20, 10, 5
d. 20, 10, 3
21. d. The answer is 20, 10, 3. The relevant adverse possession time periods are 20 years for what we commonly call squatting, 10 years for persons with color of title or in the case of a boundary line dispute, and 3 years after receipt of a tax deed if the tax sale was initially void.
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28. In a situation where a homeowner conveys property to her uncle with a deed, and then the uncle records the dead, when did title to the property actually transfer or pass to the uncle?
a. Upon delivery and acceptance of the contract
b. Upon recording of the deed
c. Upon delivery and acceptance of the deed
d. Upon the delivery of consideration
28. c. The answer is upon delivery and acceptance of the deed. Title is transferred upon delivery and acceptance of the deed. At that moment, the deed is binding between the parties. When the uncle later records the deed, he is then protected against claims of third parties. Contracts do not transfer title. A valid deed must contain a clause acknowledging that the grantor has received consideration, but the consideration in itself does not transfer the title to the property.
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35. Gretchen is a widow with no children who owns property that she devises by her will to her favorite niece. After Gretchen dies, when will full title and possession of the property pass to her niece?
a. Immediately upon the widow's death
b. After the widow's will has been probated
c. After the niece has paid all inheritance taxes
d. When the niece executes a new deed to the property
35. b. The answer is after the widow's will has been probated. While legally the ownership of the property passes to the niece upon the widow's death, full title and possession of the property requires probate. Probate is a legal proceeding verifying the validity of a will and accounting for the decedent's assets.
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37. An involuntary encumbrance to secure payment to a general contractor is a lien on
a. all property of the debtor in the county where filed.
b. the property improved by the general contractor’s services.
c. all property of the debtor in his or her home county.
d. only the homestead exemption of the debtor.
37. b. The answer is the property improved by the general contractor’s services. The theory is that the general contractor’s labor improved the value of specific property, so the contractor is entitled to a lien on that particular property. It is an involuntary encumbrance, meaning it arises by operation of the law, not because of any agreement of the parties to grant an encumbrance.
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38. All of the following are subject to real property ownership rights EXCEPT
a. buildings located on the land.
b. air space above the land.
c. easements running with the land.
d. navigable rivers running through the land.
38. d. The answer is navigable rivers running through the land. Navigable rivers are considered public highways with the state holding title to the submerged land.
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39. A homestead exemption protects against judgments
a. resulting from unpaid taxes.
b. from foreclosure of a mortgage.
c. of unsecured creditors.
d. that result from the costs of improvements.
39. c. The answer is of unsecured creditors. A portion of the area or value of the property occupied as the family home is exempt from unsecured debts, but not debt secured by the property.
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45. Rachel and June own a property together. Rachel dies and June now owns the property with Rachel's heirs. In this situation, Rachel and June owned the property
a. as joint tenants.
b. as tenants in common.
c. as shareholders in their own corporation.
d. by entirety.
45. b. The answer is as tenants in common. Under tenancy in common, when a co-tenant dies, the tenant's undivided interest passes according to the will. In this case, either the deceased owner died intestate and the state law of decent gave her interest to her heirs or she willed her undivided interest in the property to her heirs. In a joint tenancy, if one of the women died, the other would enjoy the right of survivorship and own the property in severalty. If the two original owners had formed a corporation to own the property, the death of one would not affect title to the property, which would belong to the corporation. Only married couples are allowed to own property as tenants by the entirety and the question did not state the women were married.
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49. The rights of ownership of real property include all of the following EXCEPT
a. disposition.
b. compatibility.
c. exclusion.
d. control.
49. b. The answer is compatibility. The bundle of legal rights includes possession, control, enjoyment, exclusion, and deposition, but not compatibility.
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51. Which of the following is an example of involuntary alienation?
a. Having a piece of land sold for delinquent taxes
b. Selling a property to pay off debts
c. Giving a piece of land to the zoo
d. Letting another person plant crops on an unused portion of a piece of land
51. a. The answer is having a piece of land sold for delinquent taxes. Title to property transferred without the owner's consent, known as involuntary alienation, is usually carried out by operation of law and can include having the property sold to satisfy delinquent taxes.
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52. A condominium community has a swimming pool, tennis courts, and a biking trail. These facilities are MOST likely owned by the
a. condominium board.
b. corporation in which the unit owners hold stock.
c. unit owners in the form of percentage undivided interests.
d. unit owners in the form of proportional divided interests.
52. c. The answer is unit owners in the form of percentage undivided interests. Common areas, including amenities such as swimming, biking, and tennis areas, are owned by the unit owners in undivided percentage interests as tenants in common.
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53. Which of the following statements about general lien and a specific lien is TRUE?
a. A specific lien is held by one person, while a general lien is held by at least two people.
b. A general lien cannot be enforced in court, while a specific lien can be enforced.
c. A general lien affects all of a debtor's property, while a specific lien affects only a certain piece of property.
d. A specific lien covers real estate, while a general lien covers personal property.
53. c. The answer is a general lien affects all of a debtor's property, while a specific lien affects only a certain piece of property. A general lien affects all of a debtor's property, both real and personal. A specific lien affects only a particular piece of real or personal property. Both general and specific liens may be enforced in court.
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55. A father conveyed the family home to his daughter by will as a pur autre vie estate for the life of her mother. If the daughter should die before the mother, who gains possession of the property?
a. Remainderman
b. Mother
c. Father's other children
d. Daughter's heirs
55. d. The answer is daughter's heirs. A life estate based on the lifetime of a person other than the life tenant is called an estate pur autre vie. The daughter is the life tenant, but the measuring life is the mother's. The daughter's heirs will inherit the daughter's life estate, but it will end when the mother dies.
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59. All of the following are requirements for acquiring ownership of property by adverse possession EXCEPT
a. the person in possession must compensate the owner.
b. occupancy of the property must be without the owner's consent.
c. occupancy must be continuous and over a specified period of time.
d. the person in possession must occupy the property openly rather than secretly.
59. a. The answer is the person in possession must compensate the owner. The law recognizes that the use of land is an important function of its ownership, and to claim adverse possession, the possession by the claimant must usually be all of the following: open, notorious, continuous, hostile, and adverse. There is no requirement of compensation; however, some states require that the adverse possessor pay the property taxes.
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61. Which of the following is NOT a test to identify a fixture?
a. Intent of the parties
b. Method of attachment of the item
c. Size of the item
d. Adaptation of the item to the real estate
61. c. The answer is size of the item. The overall test to identify a fixture is intent, which is determined by method of attachment, adaptation, or agreement.
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65. A woman held fee simple title to a vacant lot adjacent to a business. She was persuaded to make the lot available to the business. She had her attorney prepare a deed that conveyed ownership of the lot to the business "so long as it is used for commercial purposes." After the completion of the gift, the business will own a
a. life estate.
b. tenancy for years.
c. periodic tenancy.
d. determinable fee estate.
65. d. The answer is determinable fee estate. The words "so long as" create a fee simple determinable that limits use of the property for commercial purposes. The former owner retains the possibility of reverter.
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73. Which statement is TRUE regarding a special warranty deed?
a. The grantor is making additional warranties beyond those given in a warranty deed.
b. The grantor retains an interest in the ownership.
c. The grantor is warranting that no encumbrances exist against the property.
d. The grantor's warranties are limited to the time the grantor owned the property.
73. d. The answer is the grantor's warranties are limited to the time the grantor owned the property. A special warranty deed contains two basic warranties: that the grantor received title and that the property was not encumbered during the time the grantor held title, except as noted in the deed.
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74. The term improvements, when referring to real estate, includes
a. shrubbery.
b. trees.
c. lawns.
d. sidewalks.
74. d. The answer is sidewalks. An improvement is an artificial thing attached to the land. A sidewalk is a man-made addition.
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76. A bill of sale is used to transfer the ownership of
a. real property.
b. fixtures.
c. appurtenances.
d. personal property.
76. d. The answer is personal property. Personal property is conveyed by a bill of sale, while real property is conveyed by deed.
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82. A person wants to ensure that the ownership of real property can be willed to her children. Which form of ownership would the person want?
a. Conventional life estate
b. Joint tenancy
c. Fee simple estate
d. License
82. c. The answer is fee simple estate. A fee simple estate is of unlimited duration and passes to the owner's heirs.
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83. A suit to quiet title refers to
a. a title insurance company's search of the title.
b. a mortgagor relinquishing title after foreclosure.
c. the removal of a cloud on the title by court action.
d. the deposit of a title with an escrow agent.
83. c. The answer is the removal of a cloud on the title by court action. If there is a gap in the ownership chain, then this cloud on the title makes it necessary to establish ownership by court action. This is called a suit to quiet title.
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88. Olivia conveys property to Nicholas with a deed. Nicholas then recorded the deed. When did title to the property actually transfer to Nicholas?
a. Upon delivery and acceptance of the contract
b. Upon delivery and acceptance of the deed
c. Upon recording of the deed
d. Upon the delivery of consideration
88. b. The answer is upon delivery and acceptance of the deed. Title is transferred upon delivery and acceptance of the deed. At that moment, the deed is binding between the parties. When the nephew later records the deed, he is then protected against claims of third parties. Contracts do not transfer title. A valid deed must contain a clause acknowledging that the grantor has received consideration, but the consideration in itself does not transfer the title to the property.
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94. All of the following are generally exempt from paying real estate taxes EXCEPT
a. municipal government.
b. charitable hospital.
c. private not-for-profit school.
d. for-profit assisted living facility.
94. d. The answer is for-profit assisted living facility. Most state laws exempt property from real estate taxation if used for tax-exempt purposes. A for-profit entity would generally not qualify for this exemption.
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99. The type of deed in which the granting clause states "grant, bargain, and sell" is a
a. special warranty deed.
b. general warranty deed.
c. reconveyance deed.
d. bargain and sale deed.
99. d. The answer is bargain and sale deed. A bargain and sale deed contains no express warranties but implies that the grantor holds title and possession. The granting clause usually contains the phrase "grant, bargain, and sell."
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100. When grantors do NOT wish to convey certain property rights, they
a. must note the exceptions in a separate document.
b. may not do so because the deed conveys the entire premises.
c. may note the exceptions in the deed of conveyance.
d. must convey the entire premises and have the grantee reconvey the rights to be retained by the grantor.
100. c. The answer is may note the exceptions in the deed of conveyance. If the grantors convey less than their complete interest, the wording in the granting clause must indicate this limitation. Mineral rights, water rights, and easements are frequently retained by grantors.
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102. Which of the following statements about the covenant of quiet enjoyment is TRUE?
a. The grantor ensures that the title will be good against the title claims of third parties.
b. The grantor guarantees that if the title fails in the future, he or she will compensate the grantee.
c. The grantor warrants that he or she is the owner and has the right to convey title to the property.
d. The grantor promises to obtain and deliver any instrument needed to make the title good.
102. a. The answer is the grantor ensures that the title will be good against the title claims of third parties. Quiet enjoyment means freedom from any claims to the title by third parties, persons other than grantor and grantee. The other guarantees and promises are warranted through the covenants of warranty forever, seisin, and further assurance. A general warranty deed provides all of these covenants.
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104. The type of deed in which the granting clause states "remise, release, alienate, and convey" is a
a. bargain and sale deed.
b. quitclaim deed.
c. special warranty deed.
d. sheriff's deed.
104. c. The answer is special warranty deed. In a special warranty deed, the grantors defend the title against themselves. The words usually contained in the granting clause are "remise, release, alienate, and convey."
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106. A man has defaulted in the payment of several of his debts, and the court has ordered his property sold to satisfy his obligations. A title search revealed several outstanding liens against the property to be sold. Which of the following liens has highest priority?
a. Outstanding first mortgage lien dated and recorded one year ago
b. Real estate tax lien for the current year
c. Judgment lien rendered and recorded last month
d. Mechanic's lien for work started two months before the mortgage was recorded
106. b. The answer is real estate tax lien for the current year. Tax liens usually have priority over previously recorded liens.
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107. When a mortgage loan has been paid in full, it is important for the borrower to be sure that
a. the paid note is placed in a safe deposit box.
b. they obtain a deed of partial reconveyance.
c. a satisfaction of mortgage is recorded.
d. the paid mortgage is returned to the lender.
107. c. The answer is a satisfaction of mortgage is recorded. Satisfaction of mortgage needs to be recorded in the public record to show that a mortgage debt is no longer a lien on the property.
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111. A woman bought acreage but never saw it and did not use it; although, she regularly paid the real estate taxes on it. Without her knowledge, a man moved his mobile home onto the property, drilled a well for water, and lived there for many years. The man may have become the owner of the acreage if he complied with state laws regarding
a. intestate succession.
b. adverse possession.
c. the statute of frauds.
d. the statute of limitations.
111. b. The answer is adverse possession. If possession by the man in his mobile home has been open, notorious, continuous, hostile, and adverse, there must be proof of such for a statutorily prescribed period. State law may also require that the occupant pay property taxes, which is one warning sign to an absentee owner that should warrant investigation.
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112. The date and time a document was recorded in the public records helps to establish which of the following?
a. Abstract of title
b. Alienation clause
c. Marketable title
d. Priority of mortgages and liens
112. d. The answer is priority of mortgages and liens. The priority of mortgages and other liens normally is determined by the order in which they were recorded. Time of recordation is an important consideration in establishing the priority of claims in the event of a sale. An abstract of title is a document prepared to report the results of a title search. An alienation clause is used in a mortgage or deed of trust to allow the full amount due to be called if the buyer is in default. Marketable title is established with an abstract or title commitment.
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115. Which of the following is TRUE of condominium ownership?
a. The individual units cannot be mortgaged.
b. The corporation pays the real estate taxes.
c. The ownership cannot be willed.
d. An owner's interest in the limited common elements cannot be sold separately.
115. d. The answer is an owner's interest in the limited common elements cannot be sold separately. Although an individual unit owner owns the common elements as a tenant in common, state laws usually provide that unit owners do not have the same right to partition as other tenants in common.
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117. A document that protects against hidden risks such as forgeries and loss due to defects in the title, subject to specific exceptions, is called
a. a chain of title.
b. an abstract of title.
c. a certificate of title.
d. a title insurance policy.
117. d. The answer is a title insurance policy. Although a certificate of title is used as evidence of ownership, it is not perfect against unrecorded liens or hidden defects. A title insurance policy protects the policyholder from title defects.
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118. Which of the following is a lien on real estate?
a. Easement
b. Recorded mortgage
c. Encroachment
d. Restrictive covenant
118. b. The answer is recorded mortgage. A recorded mortgage is a lien on real estate. Easements, encroachments, and restrictive covenants are all encumbrances, not liens.
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119. Arun and Ben are joint tenants. Ben sells his interest to George. What is the relationship of Arun and George?
a. They are tenants in common.
b. They are joint tenants.
c. There is no relationship because Ben cannot sell to George.
d. Arun owns a two-thirds interest and George owns a one-third interest.
119. a. The answer is they are tenants in common. When joint tenants sell their interest in the jointly held property, the unities of time and title are destroyed. The new owner, George, becomes a tenant in common with Arun.
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125. Which of the following is defined as the historical records of all owners and encumbrances of a specific parcel of real estate?
a. Title search
b. Chain of title
c. Title commitment
d. Abstract of title
125. b. The answer is chain of title. A chain of title is the historical record of a property's ownership and encumbrances. Each owner is linked to the next so that a chain is formed. A title search is the process of examining the chain of title for defects or errors. A title commitment lists current encumbrances and any defects found in the title upon completing the search. An abstract of title is a historical summary report of what the title search found in the public record; only when coupled with a title opinion can the buyer know if there are title issues.
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128. A man owned two acres of land. He sold one acre to a neighbor and reserved for himself an appurtenant easement over his neighbor's land for ingress and egress. The man's land
a. is the servient tenement.
b. is the dominant tenement.
c. can be cleared of the easement when the man sells the withheld acre to a third party.
d. is subject to an easement in gross.
128. b. The answer is is the dominant tenement. The man's parcel benefits from the easement and is the dominant tenement. The neighbor's tract, over which the easement runs, is the servient tenement.
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132. A person who acquired ownership that can be inherited, with the provision that the land must always be used for recreational purposes, has which of the following?
a. Fee simple estate
b. Fee estate subject to condition subsequent
c. Restricted estate
d. Estate that cannot be sold
132. b. The answer is fee estate subject to condition subsequent. A fee simple defeasible is a qualified estate, and one type is subject to a condition subsequent. This means that the new owner must not perform some action or activity.
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136. A property owner contracted to have a swimming pool installed on her property. When the pool was completed, she refused to pay for the improvement, and the contractor filed a lien for nonpayment. This lien was MOST likely a
a. general lien.
b. special lien.
c. voluntary lien.
d. specific lien.
136. d. The answer is specific lien. The lien filed by the contractor would be a mechanic's lien and would be a specific, involuntary lien on the property.
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138. Claire has just made the final payment to her lender for her home's mortgage. However, a lien on her property will remain until the lender records a(n)
a. satisfaction of mortgage.
b. reconveyance of mortgage.
c. alienation of mortgage.
d. reversion of mortgage.
138. a. The answer is satisfaction of mortgage. A satisfaction of mortgage, also known as a release or discharge, is executed by the lender when a note has been fully paid. This document returns to the borrower all ownership interest in the real estate originally conveyed to the lender. This release must be recorded in the public record to show that the debt has been removed from the property.
