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Question 1
Legally, property is defined as
A
Freehold estates
B
Things that buyers and sellers own
C
Rights or interests that a person has in the thing owned
D
Only personal property
Question 1 Explanation: 
The definition of property is the rights or interest that a person has in the thing owned
Question 2
Another name for an estate of inheritance is
A
Fee simple defeasible
B
Estate at sufferance
C
Estate in fee
D
Probate estate
Question 3
A person who held a life estate leased the property for 10 years and died before the end of the 10-year term. The new owners ordered the lessee to move out. The lease was
A
Valid for the 10-years
B
Valid until the man died
C
Invalid unless the deceased's executor confirmed it
D
Invalid from the beginning
Question 3 Explanation: 
All interests on a life estate terminates when the person on whose life the estate depends dies.
Question 4
Which of the following would be defined as a fixture in the law?
A
Something that is made part of a chattel real
B
Something referred to by actions but not referred to in the sales contract
C
Something incorporated into the land
D
Something used in an extraordinary way with the land
Question 4 Explanation: 
Something incorporated (Attached or affixed) into the land is defined as a fixture
Question 5
As used in real property law, which of the following defines tenancy?
A
The landlord-tenant relationship
B
The obstinacy of a holdover tenant
C
The mode or method of holding title to real property by a lessee or owner
D
None of these
Question 5 Explanation: 
The term "tenancy" refers ti a mode or method of holding title to real property. It does not refer to leasehold matter as used in this context
Question 6
What is the meaning of quiet title action? 
A
Purchasing property through a dummy transaction
B
An action to quiet a noisy tenant
C
Foreclosure action
D
Court action to remove a cloud on the title.
Question 6 Explanation: 
A quiet title action is a court action that "quiets" or settles a dispute concerning title. It is often used to clear a cloud on a title.
Question 7
Which of the following is a definition of the term encumbrance?
A
The degree, quantity nature, and extent of interest that a person has in real property.
B
The use of property by a debtor to offer a creditor security for a debt
C
Any action taken relative to property
D
Anything that affects or limits the fee simple title to property
Question 7 Explanation: 
An encumbrance is a burden of some type of title (loan, property, taxes etc). It is anything that affects or limits the fee simple title to property. Most real property is subject to some type of encumbrance
Question 8
Which of the following is TRUE concerning promissory notes?
A
They are used security for trust deeds
B
They are recorded at the county recorder's office
C
They are always used when real estate is sold
D
They are the evidence of the debt
Question 8 Explanation: 
The note is evidence of the debt. It contains the promise to pay and is a contract complete onto itself. The deed of trust is a security device used to secure the note.
Question 9
When comparing a straight note with an installment note, the straight note will have
A
Equal annual principal reduction payments.
B
No principal payments during the term of the loan except on the last payment
C
A total effective interest rate greater than if the loan were an installment loan
D
None of the above
Question 9 Explanation: 
A straight note calls for the payment of interest only the entire principal due and payable at the end of the term.
Question 10
When making a loan, amortization tables are used to determine the
A
Interest rate
B
Monthly payment
C
Term of the loan
D
Annual percentage rate
Question 10 Explanation: 
Amortization tables are commonly used to determine the monthly payment of a debt.
Question 11
Which of the following demonstrates police power?
A
The creation of restrictive conditions by the original sub-divider
B
Eminent domain proceedings against property in the path of a proposed freeway
C
Adjudication of conflicting claims between present and former owners of a parcel of real property
D
The enactment of zoning laws limiting the use that may be made of a parcel of real property
E
The enactment of zoning laws is a common example of government's use of police power
Question 12
Which of the following is the legal method that a city uses to implement its general plan?
A
Variances
B
General land use
C
Zoning
D
Conditional use permits
Question 12 Explanation: 
Zoning is a way to implement usage. Zoning is a way to implement the plan to best serve the needs of the general public within a city
Question 13
Which of the following would impair the security of a trust deed recorded on real property?
A
The trust deed is recorded after a declaration of homestead
B
he trust deed is recorded after a work of improvement was commenced and a mechanic's lien is recorded on the work
C
A judgment lien is placed on the property
D
None of the above
Question 14
Which of the following is TRUE about a lis pendens?
A
It can be removed only by a court order.
B
It can be recorded no matter what the type of lawsuit is
C
It may affect the title to real property based on the results of the lawsuit
D
None of the above
Question 14 Explanation: 
A lis pendens is a pending lawsuit concerning the title to property. It clouds the title until the lawsuit is resolved.
Question 15
A title company could make a title search by searching the records of
A
The county clerk's office
B
The county recorder's office
C
The federal land office
D
All of the above
Question 15 Explanation: 
Title companies customarily search many public records before issuing a title policy ensuring that a good title is passing to the buyer. This includes the search of local, state, and federal records.
Question 16
An ALTA policy of title insurance goes beyond the protection afforded by a CLTA policy in guarding against
A
Existing liens and encumbrances as disclosed by the public records
B
A deed or re-conveyance issued by a minor
C
The location of property lines according to formal survey
D
An error in the sequence of recording trust deed loans
Question 16 Explanation: 
An ALTA owner's policy usually protects the matter of property lines and possible encroachments
Question 17
Who is authorized to manage property for the general public?
A
A licensed real estate broker
B
One holding a Certified Property Manager designation
C
An appraiser
D
All of the above
Question 17 Explanation: 
A real estate broker's license of record is required for the firm or person who manages other people's property for compensation or an anticipation of compensation
Question 18
According to the regulations of the real estate commissioner, the broker must have a signed employment agreement with each of their salespersons. According to those regulations, a copy of this agreement must be kept by both parties for
A
One year from date of termination
B
Two years from date of termination
C
Three years from date of termination
D
Three years from date of employment
Question 18 Explanation: 
Both the broker and the salesperson are required to keep a copy of the employment agreement for three years from the date of termination of the employment
Question 19
When a licensee negotiates a loan secured by real property, the licensee must deliver a mortgage loan disclosure statement to the borrower
A
Within three days of the time the borrower signs it
B
When it is signed by the borrower
C
Within 24 hours of the time the borrower signs it
D
When escrow closes
Question 19 Explanation: 
The mortgage loan disclosure statement must be given to the borrower at the time of signing
Question 20
Under the Truth Lending Act, which of the following is NOT allowed?
A
FHA financing is not available
B
VA financing available
C
$10,000 down, 6% interest
D
Easy financing-call us today
Question 21
In which of the following years did the U.S. Supreme Court uphold the right of Congress to prohibit all racial discrimination in the sale, lease, or rental of real estate?
A
1962
B
1968
C
1974
D
1982
Question 21 Explanation: 
In 1968, the U.S Supreme Court ruled in jones v. mayer that there shall be no racial discrimination in the United States in the sale, lease, or rental of real estate
Question 22
A real estate licensee avoids showing property found in integrated areas to minority buyers. This is an example of
A
Redlining
B
Blockbusting
C
Steering
D
Proper conduct
Question 22 Explanation: 
Avoiding showing properties found in integrated areas to minority buyers is an example of the illegal practice of steering
Question 23
Generally, as both the employment rate and the GDP rise,
A
The level of personal income rises
B
New residential developments will increase in number
C
Sales of existing homes will remain level or increase
D
All of the above
Question 23 Explanation: 
Typically as employment increases and production rises, there is more personal income, which typically creates a greater demand for housing.
Question 24
Changes in which of the following would have an impact on real estate in the future?
A
The real estate industry
B
Land-use controls
C
Consumer concerns
D
All of the above
Question 24 Explanation: 
Any change in the real estate industry, including changes in the use of land and the concerns of consumers, will affect the real estate marker either in a positive or negative way.
Question 25
Both buyer and seller have signed a real property conditional sales contract, the effect of which is that
A
All rights and interest of the seller now pass to the buyer
B
An equitable title passes to the buyer
C
The legal title passes to the buyer
D
No title to the real estate passes
Question 25 Explanation: 
a property conditional sales contract is another way to say land contract. In a land contract, only equitable, and not legal, title passes to the buyer at the time of the sale. Legal title passes to the buyer when the terms of the loan contract are met.
Question 26
A buyer defaulted on a real property installment sales contract that had been recorded by the seller. If a quitclaim deed were used to extinguish the cloud on the title, it must be executed by
A
Both buyer and seller
B
Seller only
C
Buyer only
D
None of the above
Question 26 Explanation: 
It is buyer who must sign the quitclaim deed to remove the claim to the title to the property and, in doing so, removes the cloud on title.
Question 27
If an advertisement is placed in a newspaper advertising a house for sale and only the annual percentage rate is stated,
A
Total finance charges must be included
B
The number of payments must be included
C
The amount of the down payment must be included
D
Additional disclosures are not required
Question 27 Explanation: 
It is permissible to advertise just the annual percentage rate with no additional disclosures required under the Truth in Lending Act that regulates consumer credit offerings.
Question 28
The federal right-to-cancel notice must be given to a borrower by the agent if
A
A commercial building is being used for the security for the loan
B
The loan is not secured by the borrower's dwelling and more than $35,000 is being borrowed.
C
The borrower's residence is the security for the loan
D
The money will be used for business expansion
Question 28 Explanation: 
A right-to-cancel notice applies to all consumer credit transactions in which the obligation is secured by a lien on the consumer's principal dwelling.
Question 29
According to the Truth in Lending Act, consumers must be informed of credit terms by the
A
Trustee
B
Broker
C
Lender
D
Escrow company
Question 29 Explanation: 
It is the lender who is responsible for informing the consumer of credit terms
Question 30
A mortgage loan may be insured by
A
The VA
B
The FHA or private mortgage insurer
C
Fannie Mae
D
The beneficiary
Question 30 Explanation: 
Both FHA and private mortgage insurance (PMI) insure loans
Question 31
When a trust deed is sold, the parties often use an escrow in order to
A
Obey the civil code
B
Be a witness for the transaction
C
Make sure that the conditions and terms are met before the closing of the transaction
D
Provide a legal recourse against escrow company for the two parties involved
Question 31 Explanation: 
Putting the sale of a trust deed into the hands of a neutral third party (escrow) is a wise practice to minimize the chances of terms and conditions not being met or being overlooked
Question 32
RESPA's primary purpose is to
A
Regulate all real estate loans
B
Choose lenders that can process applications for loans
C
Regulate home improvements loans
D
Require that disclosures be made by lenders that make loans on one-unit to four-unit dwellings.
Question 32 Explanation: 
RESPA is a federal law requiring that certain disclosures be made to borrowers on one-family to four-family dwelling transactions.
Question 33
If a contract for the purchase of real estate is to be enforceable, the consideration must be sufficient relative to value in order to enforce a suit for
A
Rescission
B
Specific performance
C
Lawful detainer
D
Damages
Question 33 Explanation: 
A specific performance lawsuit is a way to enforce a valid real estate contract. One of the requirements of a valid contract is sufficient consideration
Question 34
The BEST way to create an agency relationship is by
A
Actions
B
Being considerate
C
Written agreement
D
Cooperating with other brokers.
Question 34 Explanation: 
The most common and preferred way to create an agency relationship is by written agreements
Question 35
In which of the following ways could an agency relationship NOT be created?
A
Implied contract
B
Oral contract
C
Written contract
D
Voluntary offer by the agent
Question 35 Explanation: 
Voluntary offer by one party does not create an agency relationship. The other choices are possible ways.
Question 36
A dual agency is legal if
A
All parties are told before the close of escrow
B
The buyer and the seller consent to it
C
The broker and the escrow company agree to it
D
All parties are told after they sign the contracts
Question 36 Explanation: 
A dual agency relationship is legal with the informed consent of all parties to the contract
Question 37
The buyer's earnest money deposit may be
A
A promissory note
B
A postdated check
C
Anything that the seller considers valuable
D
All of the above
Question 38
An exclusive right-to-sell listing agreement is
A
A promise for promise
B
A bilateral contract
C
An employment contract
D
All of the above
Question 39
To be entitled to a commission, a broker must show that he was the procuring cause of the sale under all the following types of listings EXCEPT 
A
Exclusive agency
B
Exclusive authorization and right to sell
C
Open listing
D
Nonexclusive listing
Question 39 Explanation: 
The broker would have to prove procuring cause (The cause of the purchase) to earn a commission
Question 40
When the deposit receipt on the sale of a house states that the property is being sold "as is," it
A
Also requires a real estate transfer disclosure statement
B
Provides that the buyer should beware
C
Means that nothing is warranted
D
Does not require a real estate transfer disclosure statement.
Question 40 Explanation: 
A real property transfer disclosure statement is requited to be given by the seller to the buyer. However, a disclosure is not a warranty of condition.
Question 41
How would the Internal Revenue Service define the marginal tax rate?
A
the tax rate that is used for the next dollar of taxable income earned
B
A 15% tax rate
C
The tax rate used for your state income tax
D
None of the above
Question 42
Which of the following is real property?
A
Growing trees
B
A leasehold interest
C
An easement in gross
D
None of the above
Question 43
A woman who owns an apartment sustained a $4,000 operational loss for the tax year. For income tax purposes, she may
A
deduct only $2,000 of the loss on her income tax return
B
Offset the loss against any capital gains
C
Deduct the full amount from her ordinary income
D
Deduct only one-half of the loss from her ordinary income
Question 43 Explanation: 
It is deductible for income tax purposes.
Question 44
According to tax laws, which of the following is TRUE about depreciation of land?
A
Land has residual value but improvements do not
B
The ACRS method of depreciation can be used when depreciating land
C
Land is considered to be 25% of the total value and is depreciated
D
Land is not depreciated
Question 44 Explanation: 
Because land is not a wasting asset, it is not depreciated for income tax purposes
Question 45
A woman owned a duplex valued at $140,000 with an adjustment basis of $50,000. A man owned a single family residence valued at $135,000. Both properties were owned free and clear. They exchanged their properties, with the man giving the woman $5,000 in cash. For federal income tax purposes,
A
Both will be taxed on the difference between the value and the basis
B
The man has a taxable gain
C
The woman has a recognized gain
D
Neither has a taxable gain
Question 45 Explanation: 
The woman had a recognized gain, which means taxable gain because she acquired a less expensive property instead of exchanging for one that was equal or greater in value than what she sold.
Question 46
In which of the following situations would an IRC Section 1031 exchange not be allowed?
A
The properties are not of a like kind
B
The exchanged properties are both vacant land
C
One of the properties is a leasehold over 30 years
D
All of the above
Question 46 Explanation: 
Internal Revenue Code Section 1031 requires the exchange of like-kind properties. Choices b, c, and d fit the category of "like kind"
Question 47
Which of the following would NOT be subject to property tax?
A
Mobile homes properly installed on a permanent foundation
B
Vacant land located in an unincorporated area of the county
C
Intangible personal property
D
Possessory interests of lessees in tax exempt public property, such as leases on oil and gas properties
Question 48
If the owner of a property thinks that the property has been over assessed by the county assessor, the owner would contact the
A
Bureau of Real Estate
B
Board of supervisors
C
Assessment appeals board
D
County tax collector
Question 49
Which of the following must be given by the seller of a condominium to the buyer?
A
The CC&Rs
B
The bylaws
C
A copy of the most recent financial statement
D
All of the above
Question 50
In a condominium complex, a sidewalk is
A
Part of the common area
B
At least four feet wide
C
Made of asphalt
D
Owned as a fee simple estate
Question 50 Explanation: 
A sidewalk is part of the common area and not the unit itself
Question 51
What does assemblage anticipate?
A
Higher value
B
Lower value
C
Plottage increment
D
None of the above
Question 51 Explanation: 
Plottage increment describes the form of ownership of he large lot by one person.
Question 52
A man bought a lot for $80,000 with a $25,000 cash down payment and a $55,000 loan. The loan did not require interest and did not require any payments for one year. One year later, he sold the property for double its purchase price. Each dollar of her original cash investment is now equal to
A
$2.00
B
$4.20
C
$7.30
D
$9.20
Question 52 Explanation: 
$80,000 x 2 = $160,000.. $160,000 sales price - $55,000 loan = $105,000 current equity. $105,000/$25,000 original down payment = 4.20
Question 53
A small medical building has a quarterly income of $350,000. The expenses amount to 35% of the income. What is the annual net income?
A
$106,000
B
$189,200
C
$490,000
D
$720,800
Question 53 Explanation: 
$350,000 x 4 = $1,400,000 annual income. $1,400,000 annual income x 65% (100%-35%) = $490,000 net income
Question 54
If a three-unit apartment building shows an annual net income of $120,000 and the appropriate capitalization rate is 6%, what is the approximate value of the property?
A
$1,650,000
B
$950,000
C
$1,472,500
D
$2,000,000
Question 54 Explanation: 
$120,000/6% = 2,000,000
Question 55
A woman borrowed 70% of the value of a lot. The loan had an 8% interest rate. The first year's interest on the loan was $3,920. What was the value of the property?
A
$36,000
B
$45,000
C
$48,000
D
$70,000
Question 55 Explanation: 
$3,920 annual interest / % = $49,000 loan amount. $49,000 loan amount / 70% = $70,000
Question 56
Which of the following defines a fee appraiser?
A
A person who is employed by a lending institution to do its appraisal
B
A person who appraises property for its state
C
A person who appraises property for the federal government
D
A person who is self-employed and charges a fee
Question 57
When an appraiser is appraising a property, he or she usually considers all of the following EXCEPT
A
A definition of value
B
The property identification
C
The property rights to be appraised
D
The assessed value
Question 57 Explanation: 
The assessed value to the property by the tax assessor does not influence the appraiser's estimate of value.
Question 58
In estimating the value of a parcel of real property, an appraiser considers the value of which of the following?
A
The bundle of rights
B
Utility
C
Physical land and the improvements thereon
D
All of the above
Question 59
When real property increases in value because of an increase in population, this is classified as
A
Economic value
B
Economic obsolescence
C
An unearned increment
D
None of the above
Question 60
When using the market data method of appraising a single family residence, the unit of comparison is the
A
Gross multiplier
B
Cubic feet
C
Entire property
D
Capitalization rate
Question 61
An appraiser, in appraising a special-purpose property, would probably use the
A
market data approach
B
Cost approach
C
Income approach
D
Land residual approach
Question 61 Explanation: 
The cost approach is used for one-of-a-kind properties, including special purpose properties
Question 62
Normally, a structure used primarily as a warehouse would be valued by the
A
Square foot
B
Square yard
C
Front foot
D
Cubic foot
Question 62 Explanation: 
Industrial property, such as a warehouse, has value based on its volume, therefore, the cubic contents are appraised
Question 63
When gross income is used to derive value in one operation, which of the following describes this occurrence?
A
Fixed factor
B
Gross rent multiplier
C
Comparison
D
Cost
Question 64
An architect often draws a plot plan for the purpose of
A
Showing the details of the foundation construction
B
Guiding building construction
C
Showing exterior sides of the houses
D
Guiding placement of construction and related land improvements
Question 65
Which of the following conditions would NOT cause a building to be declared substandard?
A
There is dampness in the habitable room
B
The electrical wiring does not comply with present code, but it did when it was installed and it is now safe and is working properly
C
There is no heating
D
There is defective weather protection on the outside of the building
Question 66
An escrow's closing statement that refers to "recurring costs" is describing
A
Deed transfer taxes
B
Title insurance
C
Impound items
D
Escrow charges
Question 66 Explanation: 
The term recurring cost refers to those expenses that will have to be paid again within the next year or two. Impound items are monthly payments held by the lender to pay for taxes and insurance.
Question 67
The executrix of an estate is
A
Appointed by the probate court
B
Named in the decedent's will
C
Selected by the devisee
D
Appointed by the decedent's attorney
Question 67 Explanation: 
An executrix is a female person who is named in the will to administer the estate of the deceased person
Question 68
All of the following are items commonly found on a balance sheet EXCEPT
A
Goodwill
B
Equipment used for the business
C
Sales
D
Prepaid expenses
Question 68 Explanation: 
Total amount of sales would be found in the profit and loss section of a financial statement, not in the balance sheet section.
Question 69
Which document authorizes a broker to receive a deposit from a prospective buyer?
A
Listing agreement
B
Deposit receipt
C
Owner-buyer statement
D
Settlement statement
Question 69 Explanation: 
the listing agreement, when signed by the seller, authorizes the broker to act in the seller's behalf. The listing agreement is an employment contract between the owner and the broker, even if the salesperson for the broker takes the listing.
Question 70
A real estate broker is liable to a buyer if he or she
A
Executes a contract in the name of the seller
B
Acts in excess of the authority given her by the seller
C
Turn the buyer's deposit over to the seller and thereafter the contract fails due to no fault of the broker
D
Innocently makes a misrepresentation based upon information received from the seller
Question 70 Explanation: 
If the broker exceeds the authority given by the seller, then the broker becomes liable to the buyer for the excessive acts
Question 71
A note on which only interest is paid during its term and that can be used for leverage is
A
A straight note
B
An amortized note
C
An installment note
D
A level payment note
Question 71 Explanation: 
A straight note calls for payment of interest only, with the principal still due and payable at the end of the term.
Question 72
Personal property can be
A
Hypothecated
B
Alienated
C
Assessed
D
All of the above
Question 73
In a percentage lease, the rental is usually based on a percentage of the
A
Value of this building
B
Monthly gross sales with a minimum rent
C
Annual net sales with a minimum rent
D
Assessed value
Question 73 Explanation: 
Most percentage leases are based on a percentage of the monthly gross sales of a business along with a minimum rent.
Question 74
The interest of a lessee in a real property is known as a
A
Reversion
B
Remainder
C
Freehold
D
Chattel real
Question 75
Which of the following types of loans may have a variable interest rate?
A
Cal-vet
B
FHA-insured
C
VA-guaranteed
D
All of the above
Question 75 Explanation: 
Cal-vet has a variable interest rate
Question 76
Members of the National Association of Real Estate Brokers are called
A
Realtists
B
REALTORS
C
Broker-Realtists
D
United broker
Question 77
Which of the following is required for a valid escrow in the conveyance of title to real property?
A
the services of a licensed real estate broker
B
A binding contract between the buyer and the seller
C
A complete chain of title
D
No conditions in the escrow instructions
Question 77 Explanation: 
The two legal requirements for a valid escrow are a binding contract between the buyer and the seller and the conditional delivery of the transfer deed to a escrow holder
Question 78
The type of legal action that would MOST likely be taken in the event of a default on a land contract is a
A
Lis pendens
B
Writ of execution
C
Foreclosure by trustee's sale
D
Quiet title of action
Question 78 Explanation: 
A quiet title action is a court action used to clear a cloud on title. This action can be used to clear a cloud on a land contract default
Question 79
The party that MOST benefits from a subordination clause in a trust deed and note is the
A
Trustor
B
Beneficiary
C
Holder of the note
D
Trustee
Question 79 Explanation: 
A tustor is a borrower. This clause allows the borrower to obtain a construction loan that a lender requires to be recorded as a first trust deed to protect its position.
Question 80
A township is
A
One square mile
B
Six square miles
C
36 sections
D
Larger than a range
Question 80 Explanation: 
A township is a six-mile square that contains 36 square miles called sections. Notice that the term mile square referts to shape, while the term square mile refers to area
Question 81
What is the opposite of alienation?
A
Subrogation
B
Acquisition
C
Subordination
D
Hypothecation
Question 81 Explanation: 
Acquisition means to acquire or receive something. It is the opposite of alienation, which means to transfer title.
Question 82
Laws that are enacted to protect the health, safety, and welfare of the general public are enforced through
A
Eminent domain
B
Police power
C
The majority vote of the people
D
The Internal Revenue Service
Question 82 Explanation: 
Laws that are enacted to protect the "health, welfare, and safety" of the people are enforced and upheld under police power.
Question 83
Supports that are parallel to the floor and ceiling are called
A
Joists
B
Studs
C
Rafters
D
Beams
Question 83 Explanation: 
Joists are supports that are parallel to the floor and ceiling. Supports that are vertical to the floor and ceiling are called studs
Question 84
In the sale of a business opportunity, which of the following would require the payment of sales tax?
A
Fixtures and/or furniture
B
The value of goodwill
C
Accounts receivable
D
All of the above
Question 84 Explanation: 
In the sale of a business opportunity, sales tax is charged on furniture and fixtures, but not on the other choices.
Question 85
When does a subdivision preliminary public report expire?
A
After one year
B
On issuance of the final public report
C
When a material change occurs
D
All of the above
Question 86
The band-of-investment theory is used to calculate a
A
Discount rate
B
Interest rate
C
Capitalization rate
D
Annual percentage rate
Question 86 Explanation: 
The band-of-investment theory is one method used to calculate a capitalization rate.
Question 87
The main cause of depreciation is
A
Loss of physical life
B
Deferred maintenance
C
Obsolescence
D
Deterioration
Question 88
The instrument used to remove a lien of a trust deed from the records is called a
A
Deed of reconveyance
B
Release
C
Satisfaction
D
Certificate of redemption
Question 88 Explanation: 
A reconveyance deed is issued by a trustee to a trustor. When it is recorded, it removes the lien of the trust deed from the public records
Question 89
Value is MOST closely related to
A
Cost
B
Price
C
Utility
D
Worth
Question 89 Explanation: 
Value is most closely related to the worth of property.
Question 90
Which instrument transfers title from a sovereign to a member of the general public?
A
Government patent
B
Deed
C
Quitclaim
D
Warranty deed
Question 90 Explanation: 
A government patent transfers title from a sovereign to a member of the general public. The term sovereign can be used for a government entity
Question 91
Which of the following lenders is LEAST likely to make a home loan?
A
Banks
B
Savings and loans
C
Mortgage companies
D
Insurance companies
Question 91 Explanation: 
Insurance companies make a large commercial loans and are not in the business of making home loan
Question 92
The pre-payment penalty clause in a deed of trust is a benefit to
A
The trustor
B
The trustee
C
The beneficiary
D
All of the above
Question 92 Explanation: 
The prepayment penalty benefits the beneficiary (lender). It is a lump sum payment of interest to the lender by the borrower for the privilege of being released from the contract, which calls for long-term payments.
Question 93
The mortgagor is the one who
A
Holds the trust deed
B
Sells the property
C
Signs the note
D
Sells the mortgage
Question 93 Explanation: 
The mortgagor is the borrower who signs the note
Question 94
A man sells a $20,000 note secured by a deed of trust to an investor for $16,500. This transaction can be described as
A
Leveraging
B
Usurious
C
illegal
D
Discounting
Question 94 Explanation: 
Discounting a note means it is sold for less than its face amount
Question 95
Loan-to-value ratios refer to loan amounts compared with
A
The original amount due on the note
B
Percentage of assessed value
C
Percentage of sales price
D
Percentage of appraised value
Question 96
The reason a lender charges loan points is to
A
Be competitive in interest rates
B
Equalize interest rates
C
Make adjustments between fixed rate loans and ARMs in its loan portfolio
D
Increase the lender's yield
Question 97
Which of the following comprises the largest area?
A
5,280 feet x 10,560 feet
B
1 mile x 1 mile
C
10% of a township
D
4 sections
Question 97 Explanation: 
Four sections (four square miles) is larger than the other choices.
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Sample Practice Exam

Interactive Practice Questions Designed For North Carolina Test

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Sample Flashcards 

Flashcards & Study Guides With Real NC Test Examples

Repetition is a proven technique for learning harder concepts. Try our flash card simulator to test your knowledge. Mouse over the cards to flip them over and view the definitions.

Bundle of Rights

Bundle of Rights

All real property rights conferred with ownership, including right of use, right of enjoyment, and right of disposal.

Net Lease

Net Lease

Lease for which a tenant pays all taxes,insurance, etc., plus utilities and rent.

Grantor

Grantor

The person who transfers title to real property in a real estate transaction.

Deed of Trust

Deed of Trust

An instrument creating a voluntary lien on real property held by a third party as security for the payment of a note.

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Question 1
Legally, property is defined as
A
Freehold estates
B
Things that buyers and sellers own
C
Rights or interests that a person has in the thing owned
D
Only personal property
Question 1 Explanation: 
The definition of property is the rights or interest that a person has in the thing owned
Question 2
Another name for an estate of inheritance is
A
Fee simple defeasible
B
Estate at sufferance
C
Estate in fee
D
Probate estate
Question 3
A person who held a life estate leased the property for 10 years and died before the end of the 10-year term. The new owners ordered the lessee to move out. The lease was
A
Valid for the 10-years
B
Valid until the man died
C
Invalid unless the deceased's executor confirmed it
D
Invalid from the beginning
Question 3 Explanation: 
All interests on a life estate terminates when the person on whose life the estate depends dies.
Question 4
Which of the following would be defined as a fixture in the law?
A
Something that is made part of a chattel real
B
Something referred to by actions but not referred to in the sales contract
C
Something incorporated into the land
D
Something used in an extraordinary way with the land
Question 4 Explanation: 
Something incorporated (Attached or affixed) into the land is defined as a fixture
Question 5
As used in real property law, which of the following defines tenancy?
A
The landlord-tenant relationship
B
The obstinacy of a holdover tenant
C
The mode or method of holding title to real property by a lessee or owner
D
None of these
Question 5 Explanation: 
The term "tenancy" refers ti a mode or method of holding title to real property. It does not refer to leasehold matter as used in this context
Question 6
What is the meaning of quiet title action? 
A
Purchasing property through a dummy transaction
B
An action to quiet a noisy tenant
C
Foreclosure action
D
Court action to remove a cloud on the title.
Question 6 Explanation: 
A quiet title action is a court action that "quiets" or settles a dispute concerning title. It is often used to clear a cloud on a title.
Question 7
Which of the following is a definition of the term encumbrance?
A
The degree, quantity nature, and extent of interest that a person has in real property.
B
The use of property by a debtor to offer a creditor security for a debt
C
Any action taken relative to property
D
Anything that affects or limits the fee simple title to property
Question 7 Explanation: 
An encumbrance is a burden of some type of title (loan, property, taxes etc). It is anything that affects or limits the fee simple title to property. Most real property is subject to some type of encumbrance
Question 8
Which of the following is TRUE concerning promissory notes?
A
They are used security for trust deeds
B
They are recorded at the county recorder's office
C
They are always used when real estate is sold
D
They are the evidence of the debt
Question 8 Explanation: 
The note is evidence of the debt. It contains the promise to pay and is a contract complete onto itself. The deed of trust is a security device used to secure the note.
Question 9
When comparing a straight note with an installment note, the straight note will have
A
Equal annual principal reduction payments.
B
No principal payments during the term of the loan except on the last payment
C
A total effective interest rate greater than if the loan were an installment loan
D
None of the above
Question 9 Explanation: 
A straight note calls for the payment of interest only the entire principal due and payable at the end of the term.
Question 10
When making a loan, amortization tables are used to determine the
A
Interest rate
B
Monthly payment
C
Term of the loan
D
Annual percentage rate
Question 10 Explanation: 
Amortization tables are commonly used to determine the monthly payment of a debt.
Question 11
Which of the following demonstrates police power?
A
The creation of restrictive conditions by the original sub-divider
B
Eminent domain proceedings against property in the path of a proposed freeway
C
Adjudication of conflicting claims between present and former owners of a parcel of real property
D
The enactment of zoning laws limiting the use that may be made of a parcel of real property
E
The enactment of zoning laws is a common example of government's use of police power
Question 12
Which of the following is the legal method that a city uses to implement its general plan?
A
Variances
B
General land use
C
Zoning
D
Conditional use permits
Question 12 Explanation: 
Zoning is a way to implement usage. Zoning is a way to implement the plan to best serve the needs of the general public within a city
Question 13
Which of the following would impair the security of a trust deed recorded on real property?
A
The trust deed is recorded after a declaration of homestead
B
he trust deed is recorded after a work of improvement was commenced and a mechanic's lien is recorded on the work
C
A judgment lien is placed on the property
D
None of the above
Question 14
Which of the following is TRUE about a lis pendens?
A
It can be removed only by a court order.
B
It can be recorded no matter what the type of lawsuit is
C
It may affect the title to real property based on the results of the lawsuit
D
None of the above
Question 14 Explanation: 
A lis pendens is a pending lawsuit concerning the title to property. It clouds the title until the lawsuit is resolved.
Question 15
A title company could make a title search by searching the records of
A
The county clerk's office
B
The county recorder's office
C
The federal land office
D
All of the above
Question 15 Explanation: 
Title companies customarily search many public records before issuing a title policy ensuring that a good title is passing to the buyer. This includes the search of local, state, and federal records.
Question 16
An ALTA policy of title insurance goes beyond the protection afforded by a CLTA policy in guarding against
A
Existing liens and encumbrances as disclosed by the public records
B
A deed or re-conveyance issued by a minor
C
The location of property lines according to formal survey
D
An error in the sequence of recording trust deed loans
Question 16 Explanation: 
An ALTA owner's policy usually protects the matter of property lines and possible encroachments
Question 17
Who is authorized to manage property for the general public?
A
A licensed real estate broker
B
One holding a Certified Property Manager designation
C
An appraiser
D
All of the above
Question 17 Explanation: 
A real estate broker's license of record is required for the firm or person who manages other people's property for compensation or an anticipation of compensation
Question 18
According to the regulations of the real estate commissioner, the broker must have a signed employment agreement with each of their salespersons. According to those regulations, a copy of this agreement must be kept by both parties for
A
One year from date of termination
B
Two years from date of termination
C
Three years from date of termination
D
Three years from date of employment
Question 18 Explanation: 
Both the broker and the salesperson are required to keep a copy of the employment agreement for three years from the date of termination of the employment
Question 19
When a licensee negotiates a loan secured by real property, the licensee must deliver a mortgage loan disclosure statement to the borrower
A
Within three days of the time the borrower signs it
B
When it is signed by the borrower
C
Within 24 hours of the time the borrower signs it
D
When escrow closes
Question 19 Explanation: 
The mortgage loan disclosure statement must be given to the borrower at the time of signing
Question 20
Under the Truth Lending Act, which of the following is NOT allowed?
A
FHA financing is not available
B
VA financing available
C
$10,000 down, 6% interest
D
Easy financing-call us today
Question 21
In which of the following years did the U.S. Supreme Court uphold the right of Congress to prohibit all racial discrimination in the sale, lease, or rental of real estate?
A
1962
B
1968
C
1974
D
1982
Question 21 Explanation: 
In 1968, the U.S Supreme Court ruled in jones v. mayer that there shall be no racial discrimination in the United States in the sale, lease, or rental of real estate
Question 22
A real estate licensee avoids showing property found in integrated areas to minority buyers. This is an example of
A
Redlining
B
Blockbusting
C
Steering
D
Proper conduct
Question 22 Explanation: 
Avoiding showing properties found in integrated areas to minority buyers is an example of the illegal practice of steering
Question 23
Generally, as both the employment rate and the GDP rise,
A
The level of personal income rises
B
New residential developments will increase in number
C
Sales of existing homes will remain level or increase
D
All of the above
Question 23 Explanation: 
Typically as employment increases and production rises, there is more personal income, which typically creates a greater demand for housing.
Question 24
Changes in which of the following would have an impact on real estate in the future?
A
The real estate industry
B
Land-use controls
C
Consumer concerns
D
All of the above
Question 24 Explanation: 
Any change in the real estate industry, including changes in the use of land and the concerns of consumers, will affect the real estate marker either in a positive or negative way.
Question 25
Both buyer and seller have signed a real property conditional sales contract, the effect of which is that
A
All rights and interest of the seller now pass to the buyer
B
An equitable title passes to the buyer
C
The legal title passes to the buyer
D
No title to the real estate passes
Question 25 Explanation: 
a property conditional sales contract is another way to say land contract. In a land contract, only equitable, and not legal, title passes to the buyer at the time of the sale. Legal title passes to the buyer when the terms of the loan contract are met.
Question 26
A buyer defaulted on a real property installment sales contract that had been recorded by the seller. If a quitclaim deed were used to extinguish the cloud on the title, it must be executed by
A
Both buyer and seller
B
Seller only
C
Buyer only
D
None of the above
Question 26 Explanation: 
It is buyer who must sign the quitclaim deed to remove the claim to the title to the property and, in doing so, removes the cloud on title.
Question 27
If an advertisement is placed in a newspaper advertising a house for sale and only the annual percentage rate is stated,
A
Total finance charges must be included
B
The number of payments must be included
C
The amount of the down payment must be included
D
Additional disclosures are not required
Question 27 Explanation: 
It is permissible to advertise just the annual percentage rate with no additional disclosures required under the Truth in Lending Act that regulates consumer credit offerings.
Question 28
The federal right-to-cancel notice must be given to a borrower by the agent if
A
A commercial building is being used for the security for the loan
B
The loan is not secured by the borrower's dwelling and more than $35,000 is being borrowed.
C
The borrower's residence is the security for the loan
D
The money will be used for business expansion
Question 28 Explanation: 
A right-to-cancel notice applies to all consumer credit transactions in which the obligation is secured by a lien on the consumer's principal dwelling.
Question 29
According to the Truth in Lending Act, consumers must be informed of credit terms by the
A
Trustee
B
Broker
C
Lender
D
Escrow company
Question 29 Explanation: 
It is the lender who is responsible for informing the consumer of credit terms
Question 30
A mortgage loan may be insured by
A
The VA
B
The FHA or private mortgage insurer
C
Fannie Mae
D
The beneficiary
Question 30 Explanation: 
Both FHA and private mortgage insurance (PMI) insure loans
Question 31
When a trust deed is sold, the parties often use an escrow in order to
A
Obey the civil code
B
Be a witness for the transaction
C
Make sure that the conditions and terms are met before the closing of the transaction
D
Provide a legal recourse against escrow company for the two parties involved
Question 31 Explanation: 
Putting the sale of a trust deed into the hands of a neutral third party (escrow) is a wise practice to minimize the chances of terms and conditions not being met or being overlooked
Question 32
RESPA's primary purpose is to
A
Regulate all real estate loans
B
Choose lenders that can process applications for loans
C
Regulate home improvements loans
D
Require that disclosures be made by lenders that make loans on one-unit to four-unit dwellings.
Question 32 Explanation: 
RESPA is a federal law requiring that certain disclosures be made to borrowers on one-family to four-family dwelling transactions.
Question 33
If a contract for the purchase of real estate is to be enforceable, the consideration must be sufficient relative to value in order to enforce a suit for
A
Rescission
B
Specific performance
C
Lawful detainer
D
Damages
Question 33 Explanation: 
A specific performance lawsuit is a way to enforce a valid real estate contract. One of the requirements of a valid contract is sufficient consideration
Question 34
The BEST way to create an agency relationship is by
A
Actions
B
Being considerate
C
Written agreement
D
Cooperating with other brokers.
Question 34 Explanation: 
The most common and preferred way to create an agency relationship is by written agreements
Question 35
In which of the following ways could an agency relationship NOT be created?
A
Implied contract
B
Oral contract
C
Written contract
D
Voluntary offer by the agent
Question 35 Explanation: 
Voluntary offer by one party does not create an agency relationship. The other choices are possible ways.
Question 36
A dual agency is legal if
A
All parties are told before the close of escrow
B
The buyer and the seller consent to it
C
The broker and the escrow company agree to it
D
All parties are told after they sign the contracts
Question 36 Explanation: 
A dual agency relationship is legal with the informed consent of all parties to the contract
Question 37
The buyer's earnest money deposit may be
A
A promissory note
B
A postdated check
C
Anything that the seller considers valuable
D
All of the above
Question 38
An exclusive right-to-sell listing agreement is
A
A promise for promise
B
A bilateral contract
C
An employment contract
D
All of the above
Question 39
To be entitled to a commission, a broker must show that he was the procuring cause of the sale under all the following types of listings EXCEPT 
A
Exclusive agency
B
Exclusive authorization and right to sell
C
Open listing
D
Nonexclusive listing
Question 39 Explanation: 
The broker would have to prove procuring cause (The cause of the purchase) to earn a commission
Question 40
When the deposit receipt on the sale of a house states that the property is being sold "as is," it
A
Also requires a real estate transfer disclosure statement
B
Provides that the buyer should beware
C
Means that nothing is warranted
D
Does not require a real estate transfer disclosure statement.
Question 40 Explanation: 
A real property transfer disclosure statement is requited to be given by the seller to the buyer. However, a disclosure is not a warranty of condition.
Question 41
How would the Internal Revenue Service define the marginal tax rate?
A
the tax rate that is used for the next dollar of taxable income earned
B
A 15% tax rate
C
The tax rate used for your state income tax
D
None of the above
Question 42
Which of the following is real property?
A
Growing trees
B
A leasehold interest
C
An easement in gross
D
None of the above
Question 43
A woman who owns an apartment sustained a $4,000 operational loss for the tax year. For income tax purposes, she may
A
deduct only $2,000 of the loss on her income tax return
B
Offset the loss against any capital gains
C
Deduct the full amount from her ordinary income
D
Deduct only one-half of the loss from her ordinary income
Question 43 Explanation: 
It is deductible for income tax purposes.
Question 44
According to tax laws, which of the following is TRUE about depreciation of land?
A
Land has residual value but improvements do not
B
The ACRS method of depreciation can be used when depreciating land
C
Land is considered to be 25% of the total value and is depreciated
D
Land is not depreciated
Question 44 Explanation: 
Because land is not a wasting asset, it is not depreciated for income tax purposes
Question 45
A woman owned a duplex valued at $140,000 with an adjustment basis of $50,000. A man owned a single family residence valued at $135,000. Both properties were owned free and clear. They exchanged their properties, with the man giving the woman $5,000 in cash. For federal income tax purposes,
A
Both will be taxed on the difference between the value and the basis
B
The man has a taxable gain
C
The woman has a recognized gain
D
Neither has a taxable gain
Question 45 Explanation: 
The woman had a recognized gain, which means taxable gain because she acquired a less expensive property instead of exchanging for one that was equal or greater in value than what she sold.
Question 46
In which of the following situations would an IRC Section 1031 exchange not be allowed?
A
The properties are not of a like kind
B
The exchanged properties are both vacant land
C
One of the properties is a leasehold over 30 years
D
All of the above
Question 46 Explanation: 
Internal Revenue Code Section 1031 requires the exchange of like-kind properties. Choices b, c, and d fit the category of "like kind"
Question 47
Which of the following would NOT be subject to property tax?
A
Mobile homes properly installed on a permanent foundation
B
Vacant land located in an unincorporated area of the county
C
Intangible personal property
D
Possessory interests of lessees in tax exempt public property, such as leases on oil and gas properties
Question 48
If the owner of a property thinks that the property has been over assessed by the county assessor, the owner would contact the
A
Bureau of Real Estate
B
Board of supervisors
C
Assessment appeals board
D
County tax collector
Question 49
Which of the following must be given by the seller of a condominium to the buyer?
A
The CC&Rs
B
The bylaws
C
A copy of the most recent financial statement
D
All of the above
Question 50
In a condominium complex, a sidewalk is
A
Part of the common area
B
At least four feet wide
C
Made of asphalt
D
Owned as a fee simple estate
Question 50 Explanation: 
A sidewalk is part of the common area and not the unit itself
Question 51
What does assemblage anticipate?
A
Higher value
B
Lower value
C
Plottage increment
D
None of the above
Question 51 Explanation: 
Plottage increment describes the form of ownership of he large lot by one person.
Question 52
A man bought a lot for $80,000 with a $25,000 cash down payment and a $55,000 loan. The loan did not require interest and did not require any payments for one year. One year later, he sold the property for double its purchase price. Each dollar of her original cash investment is now equal to
A
$2.00
B
$4.20
C
$7.30
D
$9.20
Question 52 Explanation: 
$80,000 x 2 = $160,000.. $160,000 sales price - $55,000 loan = $105,000 current equity. $105,000/$25,000 original down payment = 4.20
Question 53
A small medical building has a quarterly income of $350,000. The expenses amount to 35% of the income. What is the annual net income?
A
$106,000
B
$189,200
C
$490,000
D
$720,800
Question 53 Explanation: 
$350,000 x 4 = $1,400,000 annual income. $1,400,000 annual income x 65% (100%-35%) = $490,000 net income
Question 54
If a three-unit apartment building shows an annual net income of $120,000 and the appropriate capitalization rate is 6%, what is the approximate value of the property?
A
$1,650,000
B
$950,000
C
$1,472,500
D
$2,000,000
Question 54 Explanation: 
$120,000/6% = 2,000,000
Question 55
A woman borrowed 70% of the value of a lot. The loan had an 8% interest rate. The first year's interest on the loan was $3,920. What was the value of the property?
A
$36,000
B
$45,000
C
$48,000
D
$70,000
Question 55 Explanation: 
$3,920 annual interest / % = $49,000 loan amount. $49,000 loan amount / 70% = $70,000
Question 56
Which of the following defines a fee appraiser?
A
A person who is employed by a lending institution to do its appraisal
B
A person who appraises property for its state
C
A person who appraises property for the federal government
D
A person who is self-employed and charges a fee
Question 57
When an appraiser is appraising a property, he or she usually considers all of the following EXCEPT
A
A definition of value
B
The property identification
C
The property rights to be appraised
D
The assessed value
Question 57 Explanation: 
The assessed value to the property by the tax assessor does not influence the appraiser's estimate of value.
Question 58
In estimating the value of a parcel of real property, an appraiser considers the value of which of the following?
A
The bundle of rights
B
Utility
C
Physical land and the improvements thereon
D
All of the above
Question 59
When real property increases in value because of an increase in population, this is classified as
A
Economic value
B
Economic obsolescence
C
An unearned increment
D
None of the above
Question 60
When using the market data method of appraising a single family residence, the unit of comparison is the
A
Gross multiplier
B
Cubic feet
C
Entire property
D
Capitalization rate
Question 61
An appraiser, in appraising a special-purpose property, would probably use the
A
market data approach
B
Cost approach
C
Income approach
D
Land residual approach
Question 61 Explanation: 
The cost approach is used for one-of-a-kind properties, including special purpose properties
Question 62
Normally, a structure used primarily as a warehouse would be valued by the
A
Square foot
B
Square yard
C
Front foot
D
Cubic foot
Question 62 Explanation: 
Industrial property, such as a warehouse, has value based on its volume, therefore, the cubic contents are appraised
Question 63
When gross income is used to derive value in one operation, which of the following describes this occurrence?
A
Fixed factor
B
Gross rent multiplier
C
Comparison
D
Cost
Question 64
An architect often draws a plot plan for the purpose of
A
Showing the details of the foundation construction
B
Guiding building construction
C
Showing exterior sides of the houses
D
Guiding placement of construction and related land improvements
Question 65
Which of the following conditions would NOT cause a building to be declared substandard?
A
There is dampness in the habitable room
B
The electrical wiring does not comply with present code, but it did when it was installed and it is now safe and is working properly
C
There is no heating
D
There is defective weather protection on the outside of the building
Question 66
An escrow's closing statement that refers to "recurring costs" is describing
A
Deed transfer taxes
B
Title insurance
C
Impound items
D
Escrow charges
Question 66 Explanation: 
The term recurring cost refers to those expenses that will have to be paid again within the next year or two. Impound items are monthly payments held by the lender to pay for taxes and insurance.
Question 67
The executrix of an estate is
A
Appointed by the probate court
B
Named in the decedent's will
C
Selected by the devisee
D
Appointed by the decedent's attorney
Question 67 Explanation: 
An executrix is a female person who is named in the will to administer the estate of the deceased person
Question 68
All of the following are items commonly found on a balance sheet EXCEPT
A
Goodwill
B
Equipment used for the business
C
Sales
D
Prepaid expenses
Question 68 Explanation: 
Total amount of sales would be found in the profit and loss section of a financial statement, not in the balance sheet section.
Question 69
Which document authorizes a broker to receive a deposit from a prospective buyer?
A
Listing agreement
B
Deposit receipt
C
Owner-buyer statement
D
Settlement statement
Question 69 Explanation: 
the listing agreement, when signed by the seller, authorizes the broker to act in the seller's behalf. The listing agreement is an employment contract between the owner and the broker, even if the salesperson for the broker takes the listing.
Question 70
A real estate broker is liable to a buyer if he or she
A
Executes a contract in the name of the seller
B
Acts in excess of the authority given her by the seller
C
Turn the buyer's deposit over to the seller and thereafter the contract fails due to no fault of the broker
D
Innocently makes a misrepresentation based upon information received from the seller
Question 70 Explanation: 
If the broker exceeds the authority given by the seller, then the broker becomes liable to the buyer for the excessive acts
Question 71
A note on which only interest is paid during its term and that can be used for leverage is
A
A straight note
B
An amortized note
C
An installment note
D
A level payment note
Question 71 Explanation: 
A straight note calls for payment of interest only, with the principal still due and payable at the end of the term.
Question 72
Personal property can be
A
Hypothecated
B
Alienated
C
Assessed
D
All of the above
Question 73
In a percentage lease, the rental is usually based on a percentage of the
A
Value of this building
B
Monthly gross sales with a minimum rent
C
Annual net sales with a minimum rent
D
Assessed value
Question 73 Explanation: 
Most percentage leases are based on a percentage of the monthly gross sales of a business along with a minimum rent.
Question 74
The interest of a lessee in a real property is known as a
A
Reversion
B
Remainder
C
Freehold
D
Chattel real
Question 75
Which of the following types of loans may have a variable interest rate?
A
Cal-vet
B
FHA-insured
C
VA-guaranteed
D
All of the above
Question 75 Explanation: 
Cal-vet has a variable interest rate
Question 76
Members of the National Association of Real Estate Brokers are called
A
Realtists
B
REALTORS
C
Broker-Realtists
D
United broker
Question 77
Which of the following is required for a valid escrow in the conveyance of title to real property?
A
the services of a licensed real estate broker
B
A binding contract between the buyer and the seller
C
A complete chain of title
D
No conditions in the escrow instructions
Question 77 Explanation: 
The two legal requirements for a valid escrow are a binding contract between the buyer and the seller and the conditional delivery of the transfer deed to a escrow holder
Question 78
The type of legal action that would MOST likely be taken in the event of a default on a land contract is a
A
Lis pendens
B
Writ of execution
C
Foreclosure by trustee's sale
D
Quiet title of action
Question 78 Explanation: 
A quiet title action is a court action used to clear a cloud on title. This action can be used to clear a cloud on a land contract default
Question 79
The party that MOST benefits from a subordination clause in a trust deed and note is the
A
Trustor
B
Beneficiary
C
Holder of the note
D
Trustee
Question 79 Explanation: 
A tustor is a borrower. This clause allows the borrower to obtain a construction loan that a lender requires to be recorded as a first trust deed to protect its position.
Question 80
A township is
A
One square mile
B
Six square miles
C
36 sections
D
Larger than a range
Question 80 Explanation: 
A township is a six-mile square that contains 36 square miles called sections. Notice that the term mile square referts to shape, while the term square mile refers to area
Question 81
What is the opposite of alienation?
A
Subrogation
B
Acquisition
C
Subordination
D
Hypothecation
Question 81 Explanation: 
Acquisition means to acquire or receive something. It is the opposite of alienation, which means to transfer title.
Question 82
Laws that are enacted to protect the health, safety, and welfare of the general public are enforced through
A
Eminent domain
B
Police power
C
The majority vote of the people
D
The Internal Revenue Service
Question 82 Explanation: 
Laws that are enacted to protect the "health, welfare, and safety" of the people are enforced and upheld under police power.
Question 83
Supports that are parallel to the floor and ceiling are called
A
Joists
B
Studs
C
Rafters
D
Beams
Question 83 Explanation: 
Joists are supports that are parallel to the floor and ceiling. Supports that are vertical to the floor and ceiling are called studs
Question 84
In the sale of a business opportunity, which of the following would require the payment of sales tax?
A
Fixtures and/or furniture
B
The value of goodwill
C
Accounts receivable
D
All of the above
Question 84 Explanation: 
In the sale of a business opportunity, sales tax is charged on furniture and fixtures, but not on the other choices.
Question 85
When does a subdivision preliminary public report expire?
A
After one year
B
On issuance of the final public report
C
When a material change occurs
D
All of the above
Question 86
The band-of-investment theory is used to calculate a
A
Discount rate
B
Interest rate
C
Capitalization rate
D
Annual percentage rate
Question 86 Explanation: 
The band-of-investment theory is one method used to calculate a capitalization rate.
Question 87
The main cause of depreciation is
A
Loss of physical life
B
Deferred maintenance
C
Obsolescence
D
Deterioration
Question 88
The instrument used to remove a lien of a trust deed from the records is called a
A
Deed of reconveyance
B
Release
C
Satisfaction
D
Certificate of redemption
Question 88 Explanation: 
A reconveyance deed is issued by a trustee to a trustor. When it is recorded, it removes the lien of the trust deed from the public records
Question 89
Value is MOST closely related to
A
Cost
B
Price
C
Utility
D
Worth
Question 89 Explanation: 
Value is most closely related to the worth of property.
Question 90
Which instrument transfers title from a sovereign to a member of the general public?
A
Government patent
B
Deed
C
Quitclaim
D
Warranty deed
Question 90 Explanation: 
A government patent transfers title from a sovereign to a member of the general public. The term sovereign can be used for a government entity
Question 91
Which of the following lenders is LEAST likely to make a home loan?
A
Banks
B
Savings and loans
C
Mortgage companies
D
Insurance companies
Question 91 Explanation: 
Insurance companies make a large commercial loans and are not in the business of making home loan
Question 92
The pre-payment penalty clause in a deed of trust is a benefit to
A
The trustor
B
The trustee
C
The beneficiary
D
All of the above
Question 92 Explanation: 
The prepayment penalty benefits the beneficiary (lender). It is a lump sum payment of interest to the lender by the borrower for the privilege of being released from the contract, which calls for long-term payments.
Question 93
The mortgagor is the one who
A
Holds the trust deed
B
Sells the property
C
Signs the note
D
Sells the mortgage
Question 93 Explanation: 
The mortgagor is the borrower who signs the note
Question 94
A man sells a $20,000 note secured by a deed of trust to an investor for $16,500. This transaction can be described as
A
Leveraging
B
Usurious
C
illegal
D
Discounting
Question 94 Explanation: 
Discounting a note means it is sold for less than its face amount
Question 95
Loan-to-value ratios refer to loan amounts compared with
A
The original amount due on the note
B
Percentage of assessed value
C
Percentage of sales price
D
Percentage of appraised value
Question 96
The reason a lender charges loan points is to
A
Be competitive in interest rates
B
Equalize interest rates
C
Make adjustments between fixed rate loans and ARMs in its loan portfolio
D
Increase the lender's yield
Question 97
Which of the following comprises the largest area?
A
5,280 feet x 10,560 feet
B
1 mile x 1 mile
C
10% of a township
D
4 sections
Question 97 Explanation: 
Four sections (four square miles) is larger than the other choices.
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