National Real Estate Exam

1. Efforts to increase homeownership include all the following EXCEPT
A) requiring lower down payments.
B) penalizing first-time homebuyers for using funds from IRA's.
C) requiring loan applicants to have better credit.
D) lowering closing costs for first

C) requiring loan applicants to have better credit.

The real cost of owning a home includes certain costs/expenses that many people
overlook. Which of the following is NOT such a cost/expense of home ownership?
A) Income lost on cash invested in the home
B) Interest paid on borrowed capital
C) Maintenance

D) Personal property taxes

Margie listed her real estate for sale at $100,000. If her cost was 80 percent of the listing
price, what will her percentage of profit be when her real estate is sold for the listing
price?
A) 10 percent
B) 15 percent
C) 20 percent
D) 25 percent

D) 25 percent

Most homeowner's insurance policies contain which of the following clauses?
A) A property improvement clause
B) A coinsurance clause
C) A co-ownership clause
D) A property devaluation clause

B) A coinsurance clause

That portion of the value of owners' property that exceeds the amount of their mortgage
debt is called
A) equality.
B) escrow.
C) surplus.
D) equity.

D) equity.

Homeowners may deduct all of the following expenses when preparing their income
tax return EXCEPT
A) real estate taxes.
B) mortgage interest on a first home.
C) mortgage interest on a second home.
D) mortgage interest on a third home.

D) mortgage interest on a third home.

If a homeowner's insurance policy provides coverage for less than 80 percent of the full
replacement cost of the dwelling, then the loss of the residence will be settled for
A) the market value of the property less the land value.
B) the lowest repair bid

C) either the actual cash value or the prorated repair cost.

The Levines sold their vacation home for $188,000. If they made a profit of 10 percent,
what was the original cost of their property?
A) $169, 200
B) $179,000
C) $179,200
D) $170,900

D) $170,900

The selling price of a property is $96,000. This can be financed if the buyer can put 10
percent down and pay a loan origination fee of 1.5 percent. How much cash must the
buyer produce to complete this transaction?
A) $10,080
B) $10,896
C) $11,040
D) $11

B) $10,896

Federal income tax law excludes gain realized on the sale of a primary residence for
individuals filing separately and for couples filing jointly. The amount of this exclusion
is (separately/jointly):
A) $100,000/$200,000
B) $125,000/$250,000
C) $250,000/

C) $250,000/$500,000

Damage from which of the following is NOT covered in a basic homeowner's policy?
A) Fire and lightning
B) Explosion
C) Windstorm and hail
D) Flood

D) Flood

Federal income tax regulations allow homeowners to reduce their taxable income by
amounts paid for
A) repairs and maintenance.
B) hazard insurance premiums.
C) real estate taxes.
D) principal and interest.

C) real estate taxes.

When Homeowner Harry's sold his residence recently, he found that he had more than
$20,000 in equity. This equity did NOT come from
A) the use of an interest-only mortgage payment plan.
B) the principal portion of his PITI monthly mortgage payments.
C) in

A) the use of an interest-only mortgage payment plan.

The buyer of a $125,000 home has paid $2,000 as earnest money and has a loan
commitment for 70 percent of the purchase price. The balance of the cash the buyer
needs to complete the transaction is
A) $3,500.
B) $35,500.
C) $37,000.
D) $37,500.

B) $35,500.

Which of the following type of development combines office space, stores, and
residential units in a single, vertical community known as a
A) planed unit development
B) manufactured housing park
C) mixed -use development
D) time-share community

C) mixed -use development

Three years ago Dr. and Mrs. Henderson moved from the house they had owned for 20
years, but did not sell it. They decided to travel and bought a mobile home to live in.
They now sell the house. How much of their capital gain on the house will be taxable?

D) None of it, if it is less than $500,000

The purchaser of a property in a planned unit development will usually NOT receive
A) an interest in the unit owners' association.
B) a direct ownership interest in the common areas.
C) title to the land on which the unit is built.
D) a share in the contr

B) a direct ownership interest in the common areas.

The phrase "bundle of legal rights" is properly included in
A) the definition of real property.
B) a legal description.
C) real estate transactions.
D) leases for less than one year.

A) the definition of real property.

All of the following are included in the right to control one's property EXCEPT
A) The right to sell the property to a neighbor
B) The right to exclude the utilities' meter reader
C) The right to erect "no trespassing" signs
D) The right to enjoy profits

B) The right to exclude the utilities' meter reader

According to law, a trade fixture is usually treated as
A) a fixture.
B) an easement.
C) personalty.
D) a license.

C) personalty.

Kandace is interested in a house that fits most of her needs, but it is located in a busy
area where she is not sure she wants to live. Her concern about the property's location is
called
A) physical deterioration.
B) area preference.
C) permanence of inv

B) area preference.

Which of the following is considered personal property?
A) Wood-burning fireplace
B) Awnings
C) Bathtubs
D) Patio furniture

D) Patio furniture

All of the following are properly described by the word "improvement" EXCEPT
A) Streets
B) A sanitary sewer system
C) Trade fixtures
D) The foundation of a building

C) Trade fixtures

Real property can become personal property by
A) severance.
B) purchase.
C) hypothecation.
D) attachment.

A) severance.

All of the following are physical characteristics of land EXCEPT
A) Indestructibility
B) Uniqueness
C) Immobility
D) Scarcity

D) Scarcity

A broker showed an owner-occupied property that had window screens, custom
venetian blinds, and a wall bed to a buyer whose offer was then accepted by the owner.
Before the close of escrow, the seller may remove
A) all of the identified items because they

D) none of the identified items.

Land is considered to be
A) indestructible.
B) a wasting asset.
C) immune to the forces of supply and demand.
D) subject to personal property rights.

A) indestructible.

A rancher owns a parcel of land on which oil is discovered. If the rancher has not
previously conveyed the oil rights, who owns the oil?
A) The rancher
B) The tenant to whom the property has been leased
C) The state government
D) The federal government

A) The rancher

The type of housing which can become permanent if affixed to the land is called
A) on-site built
B) semi-detached single family
C) manufactured
D) multi-family

C) manufactured

All of the following are treated as personal property EXCEPT
A) Chattels
B) Trade fixtures
C) Emblements
D) Fructus naturales

D) Fructus naturales

Fixtures are
A) treated as real property.
B) considered to be chattels.
C) removable by a tenant before the expiration of the lease.
D) removable by a tenant after the expiration of the lease.

A) treated as real property.

After the construction of a building in the air rights above a railroad right-of-way, the
trains can
A) operate as usual.
B) no longer use the tracks under the building.
C) use the tracks under the building only if they cause no problem for the building's

A) operate as usual.

All of the following are economic characteristics of land EXCEPT
A) scarcity.
B) permanence of investment.
C) uniqueness.
D) area preference.

C) uniqueness.

Generally, personal property can be distinguished from real property by its
A) greater variety.
B) mobility.
C) cost.
D) multiplicity of use.

B) mobility.

An important characteristic of land is that it may be modified or improved at some point
in time. Depending on its type, an improvement may increase the value of real estate
greatly. All of the following are considered to be improvements EXCEPT
A) Sewers

B) Crops

Tonya leases store space to Klem for a restaurant, and Klem installs his ovens, booths,
counters, and other equipment. When would these items become real property?
A) After they are installed
B) After Klem defaults on his rental payments
C) After the leas

D) If Klem does not remove them at lease expiration

Rights or privileges which are connected with real property, are
A) improvements
B) appurtenances
C) not conveyed with the real estate
D) restricted to air and water rights

B) appurtenances

The term improvements, when referring to real estate, would include
A) shrubbery.
B) trees.
C) sidewalks.
D) lawns.

C) sidewalks.

Which of the following is NOT a test to identify a fixture?
A) Intent of the parties
B) Size of the item
C) Method of attachment of the item
D) Adaptation of the item to the real estate

B) Size of the item

The owner of a house wants to fence the yard for her dog. When the fence is erected, the
fencing materials are converted to real estate by
A) severance.
B) annexation.
C) immobility.
D) indestructibility.

B) annexation.

The uniqueness of land and its inability to be substituted is known as
A) Nonhomogenity
B) Scarcity
C) Permanence of investment
D) Nonheterogenity

A) Nonhomogenity

The rights of ownership of real property include all of the following EXCEPT the right
of
A) disposition.
B) exclusion.
C) control.
D) compatibility.

D) compatibility.

A bill of sale is used to transfer the ownership of
A) real property.
B) fixtures.
C) personal property.
D) appurtenances.

C) personal property.

A real estate broker's responsibility to keep the principal informed of all of the facts that
could affect a transaction is the duty of
A) care.
B) disclosure.
C) obedience.
D) accounting.

B) disclosure.

Which of the following would be considered dual agency?
A) A broker's acting for both the buyer and the seller in the same transaction
B) Two brokerage companies' cooperating with each other
C) A broker's representing more than one principal
D) A broker's

A) A broker's acting for both the buyer and the seller in the same transaction

The relationship of a broker to his or her client is that of a(n)
A) trustee.
B) subagent.
C) fiduciary.
D) attorney in fact.

C) fiduciary.

A real estate broker acting as the agent of the seller
A) must promote and safeguard the seller's best interest
B) can disclose the seller's minimum price.
C) should present to the seller only the highest offer for the property.
D) can accept an offer on

A) must promote and safeguard the seller's best interest

In designated agency all of the following apply EXCEPT
A) the broker could be a dual agent
B) the same agent may represent both the buyer and the seller at the same time
C) the broker can choose an agent in the office to represent the seller
D) the broker

B) the same agent may represent both the buyer and the seller at the same time

A broker is permitted to represent both the seller and the buyer in the same transaction
when
A) the principals are not aware of such action.
B) the broker is a subagent rather than the agent of the seller.
C) commissions are collected from both parties.

D) both parties have been informed and agree to the dual representation.

Which of the following would be considered lawful practice in real estate brokerage?
A) Deceitful or dishonest practices
B) Exaggerated statements about the property
C) Omitted statements of material fact
D) Misstatements about the property

B) Exaggerated statements about the property

As an agent for the seller, a real estate broker can
A) guarantee a prospective buyer that the seller will accept an offer at the listed price
and terms
B) solicit an offer to purchase the property from a prospective buyer.
C) advise a prospective buyer a

B) solicit an offer to purchase the property from a prospective buyer.

A seller has listed her home with a broker for $190,000. The listing broker tells a
prospective buyer to submit a low offer because the seller is desperate to sell. The buyer
offers $185,000 and the seller accepts it. In this situation,
A) the broker has

A) the broker has violated his agency relationship with the seller.

When Broker Hearn was told by his principal not to advertise her property in a certain
newspaper, which was out of the area, Hearn complied because he
A) had never advertised in that newspaper anyway.
B) must obey the lawful instructions of his principal.

B) must obey the lawful instructions of his principal.

It is the duty of an agent to disclose to the principal every material step taken in the
transaction of the principal's business. This is because the
A) commission can be adjusted up or down according to the agent's efforts.
B) agent has fiduciary obligat

B) agent has fiduciary obligations to the principal.

Upon discovering a latent defect in a property, the Broker Alice should discuss the
problem with seller Juan and then
A) tell him that the defect must be repaired.
B) arrange for the repairs herself.
C) inform any prospective buyers of the defect.
D) cont

C) inform any prospective buyers of the defect.

The type of agency practiced in which there is only ever one client is
A) designated agency
B) disclosed dual agency
C) exclusive buyer agency
D) single agency

D) single agency

A salesperson who is employed by a broker told a prospective buyer that the house she
was looking at is "the best house in the area." Because of this statement,
A) the salesperson was guilty of fraud.
B) the broker was guilty of fraud because the employin

C) the salesperson was practicing puffing.

Which of the following best defines the law of agency?
A) The selling of another's property by a properly licensed brokerage company
B) The rules of law that apply to the responsibilities of a person who acts as agent for
another
C) The principles that go

B) The rules of law that apply to the responsibilities of a person who acts as agent for
another

A broker who is the agent of the buyer should do which of the following?
A) Disclose to the seller that the buyer is a minority person
B) Disclose to the seller the maximum price the buyer is willing to pay
C) Present to the seller only offers that are ac

D) Advise the buyer if the listing price of the seller's house is unrealistic

A salesperson sells buyer Fred property listed by another brokerage firm in the Multiple
Listing System. The salesperson has been working with Fred for many months but does
not have an agency contract with him. This salesperson has fiduciary obligations t

A) the seller.

Broker Joan shows properties listed for sale with her company to prospect Karl. Karl
has refused buyer representation. Karl is Joan's
A) client.
B) principal.
C) customer.
D) fiduciary.

C) customer.

Mr. Mole's house has been listed for sale for more than one year and he is very anxious
to move into a retirement community. Salesperson Rachel, who is a subagent of the
seller, tells a prospective buyer to make a low offer because she is sure that the se

A) She acted appropriately to get the seller's property sold.

A salesperson who represents the seller is showing a house to a prospective buyercustomer.
The salesperson knows that the house has water problems in its basement.
Which of the following is true?
A) Withholding the information properly protects the confid

C) Withholding the information prevents the buyer from making an informed decision.

Broker Sven, in the course of selling a home to customer Nancy, 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 settled, which of the follo

B) Successful defense against all charges based on loyalty to his client-seller

Broker LaRue's newest salesperson, Shandra, lists a unit in a condominium building for
sale. In this transaction Shandra
A) has a direct contractual relationship with the owners of the unit.
B) acts on behalf of LaRue, her broker.
C) acts on behalf of the

B) acts on behalf of LaRue, her broker.

A broker who represents a seller under an exclusive-agency listing receives two offers
for the property at the same time, one from one of his salespeople and one from the
salesperson of a cooperating broker. What should the broker do?
A) Submit the offer

D) Submit both offers at the same time

Two salespeople working for the same broker obtained offers on a property listed with
their firm. The first offer was obtained early in the day. A second offer for a higher
purchase price was obtained later in the afternoon. The broker presented the first

C) The broker has no authority to withhold any offers from the seller.

A broker has an exclusive-right-to-sell listing on a building. The owner is out of town
when the broker gets an offer from a buyer to purchase the building providing the seller
agrees to take a purchase money mortgage. The buyer must have a commitment fro

D) the broker must obtain the signature of the seller to effect a contract.

A property manager is hired to manage a property while the owner is overseas for two
years. The property manage is a (n)
A) general agent
B) special agent
C) universal agent
D) attorney-in-fact

A) general agent

The amount of commission that is paid to salesperson Sharise is determined by
A) state law.
B) the local real estate board.
C) mutual agreement with her broker.
D) mutual agreement with the client.

C) mutual agreement with her broker.

Broker Janna was accused of violating antitrust laws. Of the following, she was most
likely accused of
A) not having an equal housing opportunity sign in her office window.
B) undisclosed dual agencies.
C) price fixing.
D) dealing in unlicensed exchange s

C) price fixing.

Real estate broker Todd was responsible for a chain of events that resulted in the sale of
one of his client's properties. This is referred to as
A) pro forma.
B) procuring cause.
C) private offering.
D) proffered offer.

B) procuring cause.

Salesperson Norman wants to be classified as a qualified real estate agent�the
equivalent of holding independent contractor status. All of the following are
requirements for him to meet EXCEPT
A) Receive substantially all of his income from the brokerage

B) Be free from supervision by his broker and office manager

A parcel of vacant land 80 feet wide and 200 feet deep was sold for $200 per front foot.
How much money would a salesperson receive for her 60 percent share in the 10
percent commission?
A) $640
B) $960
C) $1,600
D) $2,400

B) $960

A real estate salesperson, classified by the IRS as an independent contractor, receives
A) a monthly salary or hourly wage.
B) company-provided health insurance.
C) company-provided automobile.
D) negotiated commissions on transactions.

D) negotiated commissions on transactions.

In a typical agency relationship between broker and client, the broker's commission is
determined by
A) state law.
B) the local real estate board.
C) mutual agreement.
D) minimums based on the property type.

C) mutual agreement.

Salesperson Nellie finally concluded some extremely difficult negotiations that resulted
in the sale of a listed parcel of land. For all of her extra efforts, she can legally receive a
performance bonus from
A) the seller.
B) the buyer.
C) no one.
D) her

D) her broker.

Wella is a salesperson working for Broker Vincent. Wella sells a $150,000 home listed
with another brokerage. The listing commission is 6.5 percent of the selling price. Of
this amount, 5 percent is payable to the referral network that referred the buyer,

B) $3,217.50

All of the following are required of a broker when seeking to collect a commission for
brokering the sale of a property EXCEPT
A) Having a valid real estate broker's license
B) Having been procuring cause in the transaction or having an exclusive-right-to

D) Complying with a set commission rate set by a trade organization

A broker lists a property for sale at $100,000 with a 5 percent commission, and he later
obtains an oral offer from a prospective buyer to purchase the property. The seller
indicates to the broker that the offer would be acceptable if it were submitted in

C) no commission.

All of the following are prohibited under the antitrust laws EXCEPT
A) Competing property management companies' agreeing to standardized management
fees
B) Competing brokers' allocating markets based on the value of homes
C) Real estate companies' agreein

D) A broker's setting a company commission schedule

Landowner Shelley subdivides her acreage and offers the lots for sale. Broker Ernie tells
her that he can sell the lots. After Ernie sells some of the lots, the landowner refuses to
pay him a commission. The broker can
A) report the landowner to the real

D) do nothing.

There is a spectacular house that salesperson Rameses from Aida Realty has been trying
for several weeks to list for sale. The owners have been interviewing salespeople from
different firms. They tell Aida's Ramses that Botchko Properties will charge a 2

D) Aida Realty provides excellent services to market their sellers' properties.

Broker Smith is helping a buyer and seller fill out a sales contract, but is not
representing either party. Broker Smith is a(n)
A) transactional broker
B) designated broker
C) traditional broker
D) unlicensed broker

A) transactional broker

The listing and the selling broker agree to split a 7 percent commission 50-50on a
$196,900 sale. The listing broker gives the listing salesperson 30 percent of his
commission, and the selling broker gives the selling salesperson 35 percent of his
commiss

D) $2,412.03

Unless some other written agreement has been made, broker Hugo will usually receive
his brokerage commission when
A) the purchaser takes possession of the property.
B) the seller lists the property with the broker.
C) the transaction is closed.
D) an offe

C) the transaction is closed.

Fee- for-services" means
A) offering real estate services in a piecemeal fashion
B) allowing non-licensees to conduct real estate transactions
C) working only with for-sale-by-owners
D) providing consumers all the same services for a discounted price

A) offering real estate services in a piecemeal fashion

Each of two brokerage companies claimed full commission for the sale of a property
that was listed by both of the firms under open listing agreements. The broker who is
entitled to the commission is the one who
A) listed the property.
B) advertised the pr

D) was the procuring cause of the sale.

The National Do-Not-Call Registry provides that
A) licensees may never contact consumers without written authorization
B) consumers with whom a licensee has had a business relationship can be contacted
for up to 12 months after the purchase
C) licensees m

D) consumers who have made an inquiry to a licensee may be contacted up to 3
months later

All of the following reasons are valid bases for terminating a listing agreement
EXCEPT
A) Sale of the property
B) Death of the salesperson
C) Agreement of the parties
D) Destruction of the premises

B) Death of the salesperson

By executing a listing agreement with a seller, a real estate broker becomes
A) a procuring cause.
B) obligated to open a special trust account.
C) the agent of the seller.
D) responsible for sharing commissions.

C) the agent of the seller.

The provision in a listing agreement that gives additional authority to the broker and
obligates the broker to distribute the listing to other brokers is a(n)
A) joint listing clause.
B) multiple listing clause.
C) net listing clause.
D) open listing clau

B) multiple listing clause.

A building sold for $157,000. The broker charged a 6 percent commission and divided it
as follows: 10 percent to the salesperson who took the listing, one-half of the balance to
the salesperson who made the sale, and the remainder to the broker. What was

B) $942

Last month broker Wanda took a listing on a property. She now learns that her client
has been declared incompetent by the court. Her listing now is
A) binding as the broker was acting in good faith.
B) still valid.
C) the basis for commission if the broke

D) terminated

The type of listing agreement that provides for payment of a commission to the broker
even though the owner makes the sale without the broker's aid is called an
A) exclusive-right-to-sell listing.
B) open listing.
C) exclusive-agency listing.
D) option li

A) exclusive-right-to-sell listing.

Some property owners list their property for sale with a broker. During the listing
negotiations, they tell the broker that they want $138,000 for the property, and anything
above that amount the broker can keep as a commission. A listing with this type o

B) net listing.

Under which of the following listing agreements can owners of listed property sell the
property on their own without having to pay the listing broker a commission?
A) Exclusive-right-to-sell listing
B) Exclusive-agency listing
C) Open listing
D) Both b an

D) Both b and c

A property owner signed a 90-day listing agreement with a broker. The owner was
killed in an accident before the listing expired. Now the listing is
A) binding on the owner's spouse for the remainder of the 90 days.
B) still in effect as the owner's inten

D) terminated automatically because of the death of the principal.

A listing contract in which payment of the commission is contingent on the broker's
being able to produce a buyer before the property is sold by the owner or another broker
is called a(n)
A) open listing.
B) net listing.
C) exclusive-right-to-sell listing

A) open listing.

A broker who has done a proper CMA, discusses the probable market value of the
property with the seller, and the seller wants an unrealistic price on the property all of
the following are true EXCEPT
A) Suggest the seller have a formal appraisal done.
B)

C) Must take the listing at the proposed seller's price

All of the following are typically found in a listing agreement EXCEPT?
A) The price the seller is asking for the property
B) The date the broker will schedule an open house
C) The commission rate to be paid to the listing broker
D) The responsibilities o

B) The date the broker will schedule an open house

The type of listing agreement that provides the least protection for the listing broker is
the
A) exclusive-right-to-sell listing.
B) exclusive-agency listing.
C) open listing.
D) net listing.

C) open listing.

If a seller needs to net $50,000 after the sale, how much must the real estate sell for if
the selling costs include a 7 percent commission and $1,200 in other expenses?
A) $54,700
B) $54,963
C) $55,054
D) $55,633

C) $55,054

Under an exclusive buyer agency agreement the real estate broker would be entitled to a
commission EXCEPT
A) if the broker sells the buyer a listing from another firm.
B) if the property is a FSBO.
C) if the buyer finds a suitable property without the bro

C) if the buyer finds a suitable property without the broker.

Under an exclusive-agency listing, the listing broker would be entitled to a commission
EXCEPT if
A) the broker sells the property herself.
B) the property is sold through another broker.
C) the property is sold through the multiple-listing service.
D) th

D) the seller sells the property to a neighbor across the street who has her property
listed with another broker.

All of the following are types of listing contracts EXCEPT?
A) Open
B) Exclusive-agency
C) Exclusive-right-to-sell
D) MLS

D) MLS

A buyer has signed an agreement with a broker to compensate the broker even if the
buyer purchases the property from a relative. This is called a (n)
A) open buyer agency agreement
B) exclusive-agency buyer agency agreement
C) exclusive buyer agency agree

C) exclusive buyer agency agreement

The seller wants to net $65,000 on the sale of his house after paying the broker a fee of
6 percent. How much must the gross selling price be?
A) $69,149
B) $68,093
C) $67,035
D) $66,091

A) $69,149

A broker enters into a listing agreement with a seller under which the seller will receive
$22,000 from the sale of a lot and the broker will receive any sale proceeds over this
amount. This type of listing is a(n)
A) gross listing.
B) legal and ethical w

D) net listing.

In some states the following type of listing is prohibited:
A) Exclusive-right-to-sell
B) Net listing
C) Buyer agency agreement
D) Open listing

B) Net listing

An owner who is interested in selling his house is usually concerned about how much
money he can get when it sells. A competitive market analysis may help the seller
determine a realistic listing price. Which of the following is true?
A) A competitive mar

D) A competitive market analysis contains a compilation of facts about similar
properties that have recently sold.

The salesperson received $2,800 commission on her 35 percent share of the total
commission on the sale of a property that sold for $160,000. What was the commission
rate?
A) 10 percent
B) 5 percent
C) 7 percent
D) 4.5 percent

B) 5 percent

A broker hires sales associates with an agreement to split company commissions thus:
the broker�45 percent; the listing salesperson�30 percent; the selling
salesperson�the rest. If the broker's share is $2,430, the property sold for $90,000, and
the listi

C) $1,350

All of the following are types of Buyer Agency Agreements EXCEPT
A) an exclusive buyer agency agreement.
B) an exclusive agency buyer agency agreement.
C) an open buyer agency agreement.
D) a net buyer agency agreement

D) a net buyer agency agreement

Before the Buyer signs a buyer agency agreement- a licensee must do all of the
following EXCEPT
A) explain forms of agency available.
B) obtain financial information from the buyer.
C) inform the buyer of the charges or compensation for services.
D) descr

B) obtain financial information from the buyer.

A statutory right that a family has in its residence is called
A) entirety.
B) survivorship.
C) curtesy.
D) homestead.

D) homestead.

A person who has complete control of a parcel of real estate is said to own a
A) leasehold estate.
B) fee simple estate.
C) life estate.
D) defeasible fee estate.

B) fee simple estate.

A portion of Walter's building was inadvertently built on George's land. This caused an
A) accretion.
B) avulsion.
C) encroachment.
D) easement.

C) encroachment.

Many states determine the order of water rights according to which users of the water
hold recorded beneficial use permits. This allocation of water rights is controlled by
A) accretion.
B) riparian theory.
C) littoral theory.
D) the doctrine of prior app

D) the doctrine of prior appropriation.

The purchase of a ticket for a professional sporting event gives the bearer
A) an easement right to park his car.
B) a license to enter and claim a seat for the duration of the game.
C) an easement in gross interest in the professional sporting team.
D) a

B) a license to enter and claim a seat for the duration of the game.

Which of the following has an indeterminable duration?
A) Freehold estate
B) Less-than-freehold estate
C) Estate for years
D) License

A) Freehold estate

If the owner of the dominant tenement becomes the owner of the servient tenement and
merges the two properties,
A) the easement becomes dormant.
B) the easement is unaffected.
C) the easement is terminated.
D) the properties retain their former status.

C) the easement is terminated.

A decedent left a will giving his neighbor the right to use a well on the decedent's land
as long as the neighbor lived. The neighbor's interest in the property is properly called
a(n)
A) license.
B) easement in gross.
C) easement appurtenant.
D) life est

B) easement in gross.

Homeowner Gurney acquired ownership of land that was deposited by a river running
through his property by
A) reliction.
B) succession.
C) avulsion.
D) accretion.

D) accretion.

A life estate conveys to the life tenant
A) a leasehold for life.
B) a reversionary interest.
C) a legal life estate.
D) ownership for life.

D) ownership for life.

Janeen held fee simple title to a vacant lot adjacent to Mercy Hospital. She was
persuaded to make the lot available to Mercy. She had her attorney prepare a deed that
conveyed ownership of the lot to the hospital "...so long as it is used for medical
pur

C) determinable fee estate.

The type of real estate ownership that is most all-inclusive is a
A) fee simple estate.
B) life estate.
C) conditional fee estate.
D) reversionary interest.

A) fee simple estate.

The water rights of an owner of property located along the banks of a river are called
A) littoral rights.
B) prior appropriation rights.
C) riparian rights.
D) hereditaments.

C) riparian rights.

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) The daughter's heirs
B) The remainderman
C) The mother
D

A) The daughter's heirs

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

D) Navigable rivers running through the land

Joanne and Samuel are next-door neighbors. Samuel tells Joanne that she can store her
camper in his yard for a few weeks until he needs the space. Samuel does not charge
Joanne rent for the use of his yard. Samuel has given Joanne a(n)
A) easement appurte

D) license.

Your neighbors use your driveway to reach their garage which is on their property.
Your attorney explains that ownership of the neighbors' real estate includes an easement
appurtenant giving them the right to do this. Your property is the
A) leasehold int

C) servient tenement.

Creditors suing homeowner Harry who enjoys the homestead exemption provided by
state law
A) can have the court sell Harry's residence and apply the full proceeds of sale to his
outstanding debts.
B) have no right to sell the debtor's residence.
C) may req

C) may request a court-ordered sale and have the proceeds in excess of the statutory
exemption and exempted liens applied to the debts.

Quint owned two acres of land. He sold one acre to Farley and reserved for himself an
appurtenant easement over Farley's land for ingress and egress. Quint's land
A) is the sevient tenement.
B) is the dominant tenement.
C) can be cleared of the easement w

B) is the dominant tenement.

Gina owns 50 acres of land with 500 feet of frontage on a desirable recreational lake.
She wishes to subdivide the parcel into salable lots, but she wants to retain control over
the lake frontage while allowing lot owners to have access to the lake. Which

B) An appurtenant easement

A homestead exemption protects against judgments
A) of unsecured creditors.
B) that result from unpaid taxes.
C) that result from foreclosure of a mortgage.
D) that result from the costs of improvements.

A) of unsecured creditors.

The main purpose of police power is to
A) demonstrate the authority of the state.
B) ensure the health, safety, and welfare of the community.
C) set limits on the amount and kinds of businesses in a given area.
D) protect residential neighborhoods from en

B) ensure the health, safety, and welfare of the community.

The owner of a secluded area adjacent to the Atlantic Ocean noticed that people from
town walked along the shore in front of his property. The owner learned that the local
citizens had been walking along this beach for several years. He went to court to t

B) unsuccessful because the owner's property extends only to the high-water mark and
the public may use the land beyond this point.

A tax lien on the property can hinder the sale of a property because it is
A) a monetary charge that the purchaser must satisfy
B) an appurtenance that does not affect the title
C) an encroachment
D) an encumbrance

D) an encumbrance

Which of the following is an example of a legal life estate?
A) A homestead estate
B) An estate conveyed by one party to a second party for the life of the second party
C) An estate created by a will
D) An estate conveyed to a second party subject to a co

A) A homestead estate

For land to be taken by the government under its right of eminent domain, which of the
following must apply?
A) The taking must be for a public purpose.
B) There must be a statutory dedication.
C) This must be an adverse action.
D) There must be construct

A) The taking must be for a public purpose.

Herta conveys a life estate to her grandson and stipulates that upon her death the estate
will pass to her son-in-law. The son-in-law has a(n)
A) reversionary interest
B) remainder interest
C) estate for years.
D) legal life estate.

B) remainder interest

Lonnie conveys the ownership of his house to his mother and stipulates that upon her
death he will recapture ownership. The interest Lonnie has in the property is a
A) remainder interest
B) curtesy estate.
C) legal life estate.
D) reversionary interest

D) reversionary interest

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) A fee simple estate
B) A fee estate subject to condition subsequent
C) A restricted estat

B) A fee estate subject to condition subsequent

The process by which government can acquire ownership of private land for public use
is
A) escheat.
B) condemnation.
C) eminent domain
D) doctrine of public acquisition.

B) condemnation.

A developer grants a local power company the right to install necessary transmission
lines. This right is an example of a(an)
A) license.
B) easement in gross.
C) easement by prescription.
D) conditional use permit.

B) easement in gross.

A person wants to ensure that the ownership of real property can be willed to her
children. Which of the following forms of ownership would the person want?
A) A conventional life estate
B) A fee simple estate
C) A joint tenancy
D) A license

B) A fee simple estate

An owner divides a parcel into several lots, one of which is completely surrounded by
other lots and has no street access. Which of the following is true?
A) The municipality must construct a street to create access.
B) The owner must create an easement b

D) An easement by necessity should be created for the landlocked parcel.

The road to John's hunting cabin is windy and long, and the shorter, more direct route, is
across Sam's land. John has never seen Sam and hopes to eventually gain an easement
by
A) necessity
B) perscription
C) condemnation
D) license

B) perscription

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) Write a legal description
B) Get a spot survey
C) Find the monuments
D) Verify the benchmarks

B) Get a spot survey

Shelly and Nadine bought a store building and took title as joint tenants. Nadine died
testate. Shelly now owns the store
A) as a joint tenant with rights of survivorship.
B) in severalty.
C) as a tenant in common with Nadine's heirs.
D) in trust.

B) in severalty.

The difference between time-share use and a time-share estate is
A) the amount of time sold to the buyer.
B) one limits use to certain months, the other provides a rotation system for use.
C) time-share use sells only right of occupancy, not a fee-simple

C) time-share use sells only right of occupancy, not a fee-simple estate.

Which of the following would be considered community property?
A) Gift of property to a wife during her marriage
B) A motor home bought during the marriage
C) Property inherited by a husband during marriage
D) Rental property owned by either husband or wi

B) A motor home bought during the marriage

A trust is a legal arrangement in which title to property is held for the benefit of a third
party by a(n)
A) beneficiary.
B) trustor.
C) trustee.
D) attorney in fact.

C) trustee.

Enid lives in an apartment building. The land and structures are owned by a corporation,
with one mortgage loan securing the entire property. Like the other residents, she owns
stock in the corporation and has a lease to her apartment. This type of owners

D) cooperative.

Victor and Norman are co-owners in fee simple of a small office building. Norman dies
intestate and leaves nothing to be distributed to his heirs. Victor is neither related to
Norman nor his creditor. Which of the following would explain why Victor acquir

C) Joint tenancy

An ownership interest that is based on annual occupancy intervals is a
A) leasehold.
B) time-share.
C) condominium.
D) cooperative.

B) time-share.

Jamal, Morton, and Herb are joint tenants in a parcel of land. Herb conveys his interest
to his long-time friend Walid. After the conveyance, Jamal and Morton
A) become tenants in common.
B) continue to be joint tenants with Herb.
C) become joint tenants

D) remain joint tenants owning a two-thirds interest.

Kyle and Ursula owned a combination apartment building-restaurant. They shared their
profits and losses on the venture equally, but they did not have any written partnership
agreement. One day, Ursula died of a heart attack. If, after her death, Kyle cont

B) they were tenants in common.

Which of the following is not a form of co-ownership?
A) Tenancy in common
B) Ownership in severalty
C) Tenancy by the entirety
D) Community property

B) Ownership in severalty

In receiving a gift of a parcel of real estate, one of the two new owners was given an
undivided 60 percent interest and the other received an undivided 40 percent. They now
hold their interests as
A) cooperative owners.
B) joint tenants.
C) community pro

D) tenants in common.

Under the community property laws of the state in which the couple live, all of the
following apply John and Mary Duncan EXCEPT
A) Each may also own separate property.
B) Mary may not convey community property without John's consent.
C) John may also own

C) John may also own community property with a person other than Mary.

To create joint tenancy in the ownership of real estate, there must be unities of
A) grantees, ownership, claim of right, and possession.
B) title, interest, encumbrance, and survivorship.
C) possession, time, interest, and title.
D) ownership, possession

C) possession, time, interest, and title.

A person who owns one unit in a multiunit structure together with a specified undivided
interest in the common elements would own a
A) cooperative.
B) share in a real estate investment trust.
C) condominium.
D) time-share interest.

C) condominium.

All of the following are true in defining a corporation as a legal entity, EXCEPT
A) Stockholders have a direct ownership interest in the real estate.
B) It is managed by a Board of Directors.
C) It continues to exist until formally dissolved.
D) Profits

A) Stockholders have a direct ownership interest in the real estate.

A joint tenancy with right of survivorship may be created
A) automatically if the property is distributed to the surviving children.
B) by presumption if another form of ownership is not described.
C) by deed or will.
D) automatically if a deed is signed

C) by deed or will.

The owner of a condominium unit learns that a neighbor has failed to pay his real estate
taxes. If this neighbor does not pay the taxes
A) a lien can be filed against the condominium, including all of the units.
B) a lien can be filed against the neighbor

B) a lien can be filed against the neighbor's unit and his percentage of the common
elements.

For a property to be held in tenancy by the entirety which of the following is required?
A) The cotenants must be husband and wife.
B) The property in question must be Torrens property.
C) Upon the death of a cotenant, the decedent's interest must pass to

A) The cotenants must be husband and wife.

Which of the following about a condominium is INCORRECT?
A) A declaration must be filed before any units may be sold.
B) Each unit owner has a fractional undivided interest in the common elements.
C) Each owner receives a separate real estate tax statemen

D) Each owner has a proprietary lease with the association for his or her own unit.

Because Mr. and Mrs. Jennings no longer need their large house, they decide to sell it
and move into a cooperative apartment building. In a cooperative they will
A) become stockholders in a corporation.
B) own their individual apartment.
C) own the common

A) become stockholders in a corporation.

In a limited partnership
A) the number of investors is limited to 10.
B) all the partners participate in running the business.
C) the general partners run the business.
D) investors may participate with only a small amount of capital but with unlimited
li

C) the general partners run the business.

Abel and Baker are joint tenants. Baker sells his interest to Charlie. What is the
relationship of Abel and Charlie?
A) They are joint tenants.
B) They are tenants in common.
C) There is no relationship because Baker cannot sell to Charlie.
D) Abel owns a

B) They are tenants in common.

Tenancy with survivorship means
A) the tenancy interest will be inherited.
B) the tenancy interest will pass to the surviving tenants upon the death of one.
C) the tenant's heirs are survivors.
D) this is not a legal tenancy.

B) the tenancy interest will pass to the surviving tenants upon the death of one.

When two or more persons join to make and operate a real estate investment, the
arrangement is called a
A) subdivision.
B) time share.
C) syndicate.
D) group investment.

C) syndicate.

Which of the following is true of condominium ownership?
A) It cannot be mortgaged.
B) The corporation pays the real estate taxes.
C) The ownership cannot be willed.
D) The limited common elements cannot be sold separately.

C) The ownership cannot be willed.

How does a cooperative obtain the funds necessary to cover ongoing operating expenses
and mortgage payments?
A) By charging rent
B) By selling common elements
C) By collecting regular assessments from shareholders
D) By charging special assessments

C) By collecting regular assessments from shareholders

A trust that is established after the death of the owner is called a
A) trust by will.
B) testamentary trust.
C) beneficial trust.
D) living trust.

B) testamentary trust.

In a land trust all of the following are true EXCEPT
A) The beneficial interest can be transferred by assignment.
B) The beneficiary is usually the trustor.
C) Public records list all the beneficiaries.
D) The property can be pledged as security for a loa

C) Public records list all the beneficiaries.

How many acres are in a lot that is 1/4 of a mile wide by 1/4 of a mile long?
A) 10
B) 120
C) 40
D) 80

C) 40

The numbering of sections in a township begins in the section in the
A) northeast corner and then runs easterly.
B) northwest corner and then runs easterly.
C) northeast corner and then runs westerly.
D) northwest corner and then runs westerly.

C) northeast corner and then runs westerly.

The following legal description contains how many acres: the South 1/2 of the SE 1/4 of
the NW 1/4 of the NE 1/4 of Section 7?
A) 2.5
B) 5
C) 10
D) 20

B) 5

A township contains
A) 6 square miles.
B) 640 acres.
C) 23,040 square feet.
D) 36 sections.

D) 36 sections.

Strips of land six miles wide that run north and south are called
A) tiers.
B) ranges.
C) latitudes.
D) longitudes.

B) ranges.

A metes-and-bounds legal description
A) can be made only in areas excluded from the rectangular survey system.
B) is not acceptable in court in most jurisdictions.
C) must commence and finish at the same identifiable point.
D) is used to complete areas om

C) must commence and finish at the same identifiable point.

How many lots, each measuring 72.5 feet wide by 100 feet deep, could be made from a
two-acre parcel of land?
A) 6
B) 7
C) 12
D) 14
8. A parcel of land described

C) 12

A parcel of land described as "the NW 1/4 and the SW 1/4 of Section 6, T4N, R8W of
the Third Principal Meridian" was sold for $2,500 per acre. The listing broker will
receive a 5 percent commission on the total sales price. How much will the broker
receiv

A) $5,000

The section of land reserved for school purposes in the rectangular survey system is
section
A) 12.
B) 16.
C) 20.
D) 36.

B) 16.

The system of legal description that defines a parcel of land by tracing its perimeter is
the
A) geodetic survey.
B) rectangular survey.
C) lot and block system.
D) metes and bounds system.

D) metes and bounds system.

How many linear feet of fence are needed along one side of 1.5 miles of roadway?
A) 7,920
B) 8,250
C) 13,430
D) 16,450

A) 7,920

The primary survey line running east and west in the rectangular survey system is the
A) township line.
B) base line.
C) range line.
D) principal meridian.

B) base line.

Which of the following parcels of land is the smallest?
A) 2 sections
B) 5 percent of a township
C) 2 square miles
D) 1,280 acres

B) 5 percent of a township

Beginning at the SE corner of the NE 1/4 of the section, then due west 5,280 feet more
or less to the SW corner of the NW 1/4, then north along the west line of the section
2,640 feet, more or less, to the NW corner of said NW 1/4, then in a straight lin

B) 160 acres

A section
A) is 1 mile square.
B) contains 460 acres.
C) has a perimeter of 5,280 square feet.
D) can be any numbered anywhere from 1 to 50.

A) is 1 mile square.

A lot with a depth of 80 feet and an area of 4,800 square feet was sold for $350 per front
foot. What was the total sales price?
A) $21,000
B) $28,000
C) $31,800
D) $35,000

A) $21,000

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.

D) principal meridian.

A recorded subdivision plat is used in the
A) geodetic survey system.
B) rectangular survey system.
C) lot and block system.
D) metes and bounds system.

C) lot and block system.

In parts of the country where there are many lakes and rivers, the rectangular survey
system designations will often include
A) hyphenated sections.
B) meander-line sections.
C) mean water-line sections.
D) fractional sections.

D) fractional sections.

A standard rectangular survey system section contains
A) 36 townships.
B) 160 government lots.
C) 160 acres.
D) 640 acres.

D) 640 acres.

The method of describing land that uses degrees, feet, and monuments is known as the
A) angular system.
B) metes-and-bounds system.
C) rectangular-survey system.
D) lot-and-block system.

B) metes-and-bounds system.

How many acres are in a parcel described as, "The NW 1/4 of the SE 1/4 and the S 1/2
of the SW 1/4 of the NE 1/4 of Section 4"?
A) 40 acres
B) 50 acres
C) 60 acres
D) 80 acres

C) 60 acres

The owner has a large parcel of land surveyed into lots and streets and files a
subdivision plat. Each lot can be legally described by use of which of the following?
A) Street address
B) Government survey
C) Metes and bounds
D) Lot and block

D) Lot and block

A farmer owned Section #17 and sold the south one-half. He then fenced in the northern
one-half. How many linear feet of fencing did he use if he had two 6 foot wide gates?
A) 27,720
B) 15,828
C) 18,530
D) 14,250

B) 15,828

When properly recorded in the county where the real estate of the defendant is located, a
judgment becomes a(n)
A) voluntary lien.
B) involuntary lien.
C) specific lien.
D) statutory lien

B) involuntary lien.

When a company furnishes materials for the construction of a house and is subsequently
not paid, it may file a(n)
A) deficiency judgment.
B) lis pendens.
C) estoppel certificate.
D) mechanic's lien.

D) mechanic's lien.

When a lien against a parcel of real estate may result from a lawsuit currently before the
court, one examining the public records would look for
A) the chain of title.
B) a lis pendens.
C) a suit to quiet title.
D) a judgment lien.

B) a lis pendens.

A mechanic's lien would be properly classified as a(n)
A) equitable lien.
B) voluntary lien.
C) general lien.
D) specific lien.

D) specific lien.

The current market value of a property is $35,000. For tax purposes, it is assessed at 40
percent of market value. The tax rate is $4 per $100 of assessed value. What is the
amount of the tax due?
A) $560
B) $625
C) $705
D) $740

A) $560

Under which of the following types of liens can both the real property and the personal
property of the debtor be sold to pay the debt?
A) Real estate tax lien
B) Mechanic's lien
C) Judgment lien
D) Assessment lien

C) Judgment lien

Which of the following is a voluntary lien?
A) Mortgage lien
B) Estate tax lien
C) Real estate tax lien
D) Judgment lien

A) Mortgage lien

Priority of mechanic's liens is based on
A) federal law.
B) state law.
C) common law.
D) case law.

B) state law.

John is involved in a lawsuit. He owns a rental home which is free of any mortgage.
What can a creditor obtain to prevent John from selling the rental home before the
lawsuit is settled?
A) a judgment
B) a foreclosure notice
C) a. seizure notice
D) a writ

D) a writ of attachment

The adoption of a budget is the first step in arriving at a (n)
A) equalization factor
B) tax rate
C) tax levy
D) tax bill

B) tax rate

The current market value of a property is $255,000, and it is assessed at 35 percent of its
current market value with an equalization factor of 1.25. What is the amount of real
estate tax due if the tax rate is $3.50 per $100 of assessed value?
A) $2,756.

D) $4,880.26

Special assessments initiated by a public agency
A) general liens.
B) voluntary liens.
C) equitable liens.
D) statutory liens.

D) statutory liens.

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 lie

C) specific lien.

Gordon has defaulted in the payment of several of his debts, and the court has ordered
his property sold to satisfy them. A title search revealed several outstanding liens
against the property. Which of the following liens has highest priority?
A) An outs

B) A real estate tax lien for the current year

After real estate has been sold by the state or county to satisfy a delinquent tax lien, the
defaulted owner usually has a right to
A) have the sale canceled by paying the back taxes and penalties.
B) pay his or her creditors directly and have their liens

C) redeem the property within the time specified by law.

Normally, the priority of general liens is determined by
A) the order in which they are filed or recorded.
B) the order in which the cause of action arose.
C) the size of the claim.
D) the court.

A) the order in which they are filed or recorded.

Which of the following is a lien on real estate?
A) An easement
B) A recorded mortgage
C) An encroachment
D) A restrictive covenant

B) A recorded mortgage

All of the following are generally exempt from paying real estate taxes EXCEPT
A) cities
B) for-profit assisted living facilities
C) hospitals
D) schools.

B) for-profit assisted living facilities

The current value of a property is $140,000. The property is assessed at 40 percent of its
current value, with an equalization factor of 1.5 applied to the assessed value. If the tax
rate is $4 per $100 of assessed value, what is the amount of tax due on

B) $3,360

What is the difference between a general lien and a specific lien?
A) A general lien cannot be enforced in court, while a specific lien can be enforced.
B) A specific lien is held by one person, while a general lien is held by at least two
persons.
C) A g

C) A general lien affects all of a debtor's property, while a specific lien affects only a
certain piece of property.

If the market value of a property is $184,500 and the assessment ratio is 35 percent,
what are the monthly taxes if the tax rate is 30 mills?
A) $1,937.25
B) $179.37
C) $161.44
D) $1,614.38

C) $161.44

Taxes levied on a property owner to pay for installation of sidewalks or sewers are
called
A) ad valorem taxes.
B) general property taxes.
C) special excise taxes.
D) special assessments.

D) special assessments.

General real estate taxes are also known as
A) special assessments
B) ad valorem taxes
C) appropriation funds
D) general, voluntary liens

B) ad valorem taxes

When real estate taxes on a parcel are $2,400 a year, the assessment rate is 20 percent,
and the tax rate 120 mills, what is the value of the property?
A) $200,000
B) $80,000
C) $40,000
D) $100,000

D) $100,000

The monthly taxes on a property are $400. If the tax rate is $4 per $100 of assessed
value, what is the assessed value?
A) $480,000
B) $100,000
C) $120,000
D) $192,000

C) $120,000

A void contract is one that
A) was not in writing.
B) was never legally enforceable.
C) was rescindable by agreement.
D) was voidable by only one of the parties.

B) was never legally enforceable.

The legal proceeding or legal action brought by either the buyer or the seller under a
purchase contract to enforce the terms of the contract is known as
A) an injunction.
B) a lis pendens.
C) an attachment.
D) specific performance.

D) specific performance.

The essential elements of a contract include all of the following EXCEPT
A) offer and acceptance.
B) signatures of the parties
C) competent parties.
D) consideration.

B) signatures of the parties

If, upon the receipt of an offer to purchase his property subject to certain conditions, the
seller makes a counteroffer, the prospective buyer is
A) bound by his original offer.
B) bound to accept the counteroffer.
C) bound by whichever offer is lower.
D

D) relieved of his original offer.

The amount of earnest money deposit is determined by
A) real estate licensing statutes.
B) agreement between the parties.
C) listing broker's office policy on such matters.
D) meeting the acceptable minimum of 5 percent of the purchase price.

B) agreement between the parties.

If the buyer defaulted some time ago on a written contract to purchase a seller's real
estate, the seller can still sue for damages if he is not prohibited from doing so by the
A) statute of frauds.
B) law of agency.
C) statute of limitations.
D) broker-a

C) statute of limitations.

Which of the following best describes a voidable contract?
A) A contract that has no legal effect and never had any
B) An oral contract with no witnesses to the agreement
C) A contract that may be either enforced or declared void by one of the parties
D)

C) A contract that may be either enforced or declared void by one of the parties

Which of the following gives the best evidence of the buyer's intention to carry out the
terms of the real estate purchase contract?
A) The "subject to" clause
B) The agreement to seek mortgage financing
C) The earnest money deposit
D) The provision that

C) The earnest money deposit

What action returns a contract's parties to their position before the contract, including
return of any deposit?
A) Cancellation
B) Rescission
C) Substitution
D) Subordination

B) Rescission

All of the following are essential to the formation of a contract EXCEPT
A) Offer
B) Acceptance
C) Consideration
D) Performance

D) Performance

An option
A) requires the optionee to complete the purchase.
B) gives the optionee an easement on the property.
C) binds the optionor for a specified time.
D) makes the seller liable for a commission.

C) binds the optionor for a specified time.

When a prospective buyer makes a written purchase offer that the seller accepts, then
the
A) buyer may take possession of the real estate.
B) seller grants the buyer possessory rights.
C) buyer receives legal title to the property.
D) buyer receives equit

D) buyer receives equitable title to the property.

A bilateral contract is one in which
A) only one of the parties is obligated to act.
B) the promise of one party is given in exchange for the promise of the other party.
C) something is to be done by one party only.
D) a restriction is placed in the contr

B) the promise of one party is given in exchange for the promise of the other party.

At the time a buyer was negotiating the purchase of a lot on which to build a new home,
the seller represented that the soil was firm enough to support the construction of a
building when, in fact, the seller knew it was not. This contract is
A) void.
B)

B) voidable by the buyer because of fraud.

Broker Kenneth arrives to present a purchase offer to Dorita, an invalid, and finds her
son and his wife also present. In the presence of Broker Kenneth, both individuals
persistently urge Dorita to accept the offer, even though it is much lower than the

B) she was under duress from her son and daughter-in-law, and therefore, the contract
is voidable.

The law that requires real estate contracts to be in writing to be enforceable is the
A) law of descent and distribution.
B) statute of frauds.
C) parole evidence rule.
D) statute of limitations.

B) statute of frauds.

If an owner takes his property off the market for a definite period of time in exchange
for some consideration, but he grants an individual the right to purchase the property
within that period for a stated price, this is called a(n)
A) option.
B) contrac

A) option.

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

D) sue the broker for nonperformance.

To assign a contract for the sale of real estate means to
A) record the contract with the county recorder's office.
B) permit another broker to act as agent for the principal.
C) transfer one's rights under the contract.
D) allow the seller and the buyer

C) transfer one's rights under the contract.

The broker receives an earnest money deposit with a written offer to purchase that
includes a ten-day acceptance clause. On the fifth day, before the offer is accepted, the
buyer notifies the broker that she is withdrawing the offer and demands the return

B) the buyer has the right to revoke the offer at any time until it is accepted and
recover the earnest money.

All of the following are correct about contingencies EXCEPT
A) They create a contract that is unenforceable
B) They must specify what is required to satisfy the contingency
C) They must identify who will pay for any costs involved
D) Common contingencies

A) They create a contract that is unenforceable

On Monday the seller offers to sell his vacant lot to the buyer for $12,000. On Tuesday,
the buyer counteroffers to buy for $10,500. On Friday the buyer withdraws the
counteroffer and accepts the original offer of $12,000. Under these conditions
A) there

B) there is not a valid agreement because the buyer's counteroffer was a rejection of
the seller's offer and, once it was rejected, it cannot be accepted later.

Broker Peder listed the Kleins' property for sale under an exclusive-right-to-sell
agreement. Today, Toby, one of Peder's salespeople, obtained a signed offer to purchase
the property along with a certified check for 5 percent of the purchase price as ear

D) Give the money to Peder for deposit in the brokerage trust account.

A broker took a listing and later discovered that the client had been declared legally
incompetent before signing the listing. The listing is now
A) binding because the broker was acting as the owner's agent in good faith.
B) of no value to the broker bec

B) of no value to the broker because it is void.

Money that serves to compensate a seller in the event of a buyer default is known as
A) actual damages
B) liquidated damages
C) escrow funds
D) earnest money

B) liquidated damages

In order for a contract to be valid, the offeree must accept the offer before
A) the payment of any money.
B) the offer expires.
C) the close of the 10th business day following the offer.
D) the offeror makes a similar offer to a third party.

B) the offer expires.

The mixing of trust funds with a broker's personal funds is
A) conversion
B) commingling
C) legal in most states
D) permitted in offices with fewer than three agents

B) commingling

A lease agreement is signed by a lessee who is 16 years of age. Which of the following
is true?
A) A 16-year-old person cannot sign a lease.
B) The lease agreement is voidable.
C) The lease agreement is valid provided the security deposit is increased.
D)

B) The lease agreement is voidable.

The title to real estate passes when a valid deed is
A) signed and recorded.
B) delivered and accepted.
C) filed and microfilmed.
D) executed and mailed.

B) delivered and accepted.

The primary purpose of a deed is to
A) prove ownership.
B) transfer title rights.
C) give constructive notice.
D) prevent adverse possession.

B) transfer title rights.

A special warranty deed differs from a general warranty deed in that the grantor's
covenant in the special warranty deed
A) applies only to a definite limited time.
B) covers the time back to the original title.
C) is implied and is not written in full.
D

A) applies only to a definite limited time.

The severalty owner of a parcel of land sells it to a buyer. The buyer insists that the
owner's wife join in signing the deed. The purpose of obtaining the wife's signature is to
A) waive any marital or homestead rights.
B) defeat any curtesy rights.
C) p

A) waive any marital or homestead rights.

A third party holds title to property on behalf of someone else through the use of a
A) devise.
B) quitclaim deed.
C) bequest.
D) deed in trust.

D) deed in trust.

In a real estate transaction, transfer taxes that are due are charged
A) to the buyer unless this is forbidden by statute or regulation.
B) according to local custom unless the parties are from different jurisdictions.
C) to the parties as agreed in the c

C) to the parties as agreed in the contract of sale.

Real estate that is inherited from a person who died testate is referred to as a
A) legacy.
B) bequest.
C) devise.
D) demise.

C) devise.

Which of the following documents is signed by the owner of the real estate?
A) A gift deed
B) A trustee's deed
C) A reconveyance deed
D) A tax deed

A) A gift deed

Which of the following deeds contains no express warranties?
A) A bargain and sale deed
B) A quitclaim deed
C) A warranty deed
D) A grant deed

B) A quitclaim deed

All of the following are required for a deed to be valid EXCEPT
A) Date
B) Legal description
C) Name of the grantee
D) Signature of the grantee

D) Signature of the grantee

The reversion of real estate to the state because of the lack of heirs or other persons
legally entitled to own the property is called
A) eminent domain.
B) escheat.
C) attachment.
D) estoppel.

B) escheat.

What is the basic purpose of acknowledgment before a notary public in signing a deed?
A) To make the deed eligible for recording
B) To assure that the title is valid
C) To show the genuineness of the grantor's signature
D) To prove that the property has n

C) To show the genuineness of the grantor's signature

Pierre owns a one-quarter undivided interest in a parcel of land, and he wants his
interest transferred to his sister Estelle. As a general rule, which of the following
actions will transfer Pierre's undivided interest out of his name?
A) Redemption from

C) Delivery of a deed

A valid will devises a decedent's real estate after payment of all debts, claims,
inheritance taxes, and expenses through the
A) administrator of the estate.
B) law of testate succession.
C) granting clause established in the will.
D) court action known a

D) court action known as probate.

When the grantor does not wish to convey certain property rights, he or she
A) must note the exceptions in a separate document.
B) may not do so, as the deed conveys the entire premises.
C) may note the exceptions in the deed of conveyance.
D) must convey

C) may note the exceptions in the deed of conveyance.

Francine bought acreage in a distant county, never went to see it, and did not use it,
although she regularly paid the real estate taxes on it. Without Francine's knowledge
LaVerne moved her mobile home onto the property, drilled a well for water, and liv

B) adverse possession.

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 remove a cloud on title
D) To warrant that a title is valid

D) To warrant that a title is valid

Under the terms of a trust established by a will, the trustee is required to sell the real
estate the trust holds. The deed that will be delivered at settlement of such a sale is a
A) deed of release.
B) warranty deed.
C) trustee's deed.
D) trustor's deed

C) trustee's deed.

Grantee is to a deed as devisee is to a
A) trust.
B) will.
C) estate.
D) leasehold.

B) will.

All of the following are requirements for acquiring ownership of property by adverse
possession EXCEPT
A) Occupancy of the property must be without the owner's consent.
B) Occupancy must be continuous and over a specified period of time.
C) The person in

C) The person in possession must compensate the owner.

A deed must be signed by the
A) grantor.
B) grantee.
C) grantor and grantee.
D) grantee and two witnesses.

A) grantor.

Normally a deed will be considered valid even if
A) it is signed by the attorney-in-fact of the seller.
B) the grantor is not a legal entity.
C) the grantor is a minor.
D) the grantor did not deliver the deed.

A) it is signed by the attorney-in-fact of the seller.

In order for a deed to be valid
A) the grantor must be legally competent.
B) the signature of the grantor must be witnessed.
C) the deed must be recorded.
D) the grantee must sign the deed.

A) the grantor must be legally competent.

The seller conveyed a quitclaim deed to the buyer. Upon receipt of the deed, the buyer
may be certain that
A) the seller owned the property.
B) there are no encumbrances against the property.
C) the buyer now owns the property subject to certain claims of

D) all of the seller's interests in the property belong to the buyer.

The type of deed in which the grantor defends the title back to its beginning is a
A) trustee's deed.
B) quitclaim deed.
C) special warranty deed.
D) general warranty deed.

D) general warranty deed.

Which of the following 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

D) The grantor's warranties are limited to the time the grantor owned the property.

What will happen to real estate when its deceased owner did not write a will and has no
heirs?
A) The ownership will pass by devise.
B) The ownership will escheat.
C) The courts will seize the ownership.
D) The ownership will revert to the previous owner.

B) The ownership will escheat.

A person owned a parcel of land. Subsequent to the owner's death the probate court
determined the distribution of the land in accordance with the state's statutes. This
process is known as
A) escheat.
B) probate.
C) condemnation
D) adverse possession

B) probate.

Which of the following is an involuntary alienation of property?
A) Quitclaim
B) Inheritance
C) Condemnation
D) Gift

C) Condemnation

The type of deed in which the granting clause states "grant, bargain, and sell" is a
A) special warranty deed.
B) bargain and sale deed.
C) general warranty deed.
D) reconveyance deed.

B) bargain and sale deed.

The type of deed in which the granting clause states "remise, release, alienate, and
convey" is a
A) special warranty deed.
B) bargain and sale deed.
C) quitclaim deed.
D) sheriff's deed.

A) special warranty deed.

Which of the following is a voluntary alienation of the property?
A) adverse possession
B) condemnation
C) foreclosure
D) owner selling the property

D) owner selling the property

Which of the following is an example of involuntary alienation?
A) Selling a property to pay off debts
B) Giving a piece of land to the zoo
C) Having a piece of land sold for delinquent taxes
D) Letting another person plant crops on an unused portion of a

C) Having a piece of land sold for delinquent taxes

The clause in the deed that conveys the rights and privileges of ownership is called the
A) habendum clause.
B) appurtenance clause.
C) granting clause.
D) acknowledgment.

C) granting clause.

A deed states that the grantors are conveying all their rights and interests to the grantees
to have and to hold. This is communicated in the
A) acknowledgment clause.
B) restriction clause.
C) covenant of seizen.
D) habendum clause.

D) habendum clause.

Which of the following is acceptable evidence of marketable title?
A) A trust deed
B) A warranty deed
C) A title insurance policy
D) An affidavit

C) A title insurance policy

When a claim is settled by a title insurance company, the company acquires all rights
and claims of the insured against any other person who is responsible for the loss. This
is known as
A) caveat emptor.
B) surety bonding.
C) subordination.
D) subrogatio

D) subrogation.

Which of the following would be used to clear a defect from the title records?
A) A lis pendens
B) An estoppel certificate
C) A suit to quiet title
D) A writ of attachment

C) A suit to quiet title

The part of the title insurance policy that sets forth all of the encumbrances and defects
that will NOT be insured against is called the
A) schedule of defects.
B) citation clause.
C) nonexclusionary clause.
D) exclusions

D) exclusions

An abstract of title does NOT provide evidence of title unless it is accompanied by a
A) copy of the title insurance policy.
B) letter of insurance coverage.
C) letter of warranty.
D) certificate of title.

D) certificate of title.

All of the following liens need to be recorded to be valid EXCEPT
A) Mortgage lien
B) Real estate tax lien
C) Judgment lien
D) Mechanic's lien

B) Real estate tax lien

When Ursula purchased her home, the title insurance policy she received did NOT
include which of following ?
A) A legal description of the insured real estate
B) A record of all of the previous owners of the property
C) A list of defects not covered
D) Th

B) A record of all of the previous owners of the property

A written summary of the history of all conveyances and legal proceedings affecting a
specific parcel of real estate is called a(n)
A) affidavit of title.
B) certificate of title.
C) abstract of title.
D) title insurance policy.

C) abstract of title.

All of the following are a form of notice of rights or interests in real property EXCEPT
A) Constructive notice
B) Inquiry notice
C) Actual notice
D) Delinquency notice

D) Delinquency notice

The history of all owners of a specific parcel of real estate is the property's
A) chain of title.
B) certificate of title.
C) title insurance policy.
D) abstract of title.

A) chain of title.

All of the following would be considered evidence of marketable title EXCEPT
A) An abstract of title with a legal opinion
B) A title commitment or title insurance policy
C) A certificate of title by a real estate broker
D) A. certificate of title by a rea

C) A certificate of title by a real estate broker

The recordation of a warranty deed
A) gives actual notice of the grantee's rights
B) gives constructive notice of an individual's interest
C) prevents claims of parties in possession.
D) provides defense against adverse possession.

B) gives constructive notice of an individual's interest

Documents affecting real estate are recorded or filed in the county in which the property
is located to
A) enable interested parties to know where to look to discover the various interests of
other parties to the transaction.
B) give actual notice of the

A) enable interested parties to know where to look to discover the various interests of
other parties to the transaction.

All of the following would be acceptable as evidence of marketable title EXCEPT
A) A Torrens certificate
B) A title insurance policy
C) An abstract and legal opinion
D) A property owner's warranty deed

D) A property owner's warranty deed

Under the Torrens system,
A) title passes when the grantee's application for registration has been approved and
the real estate has been registered.
B) the Torrens official performs exactly the same functions as the recorder of deeds.
C) the original deed

A) title passes when the grantee's application for registration has been approved and
the real estate has been registered.

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(n)
A) chain of title.
B) abstract of title.
C) certificate of title.
D) title insurance policy.

D) title insurance policy.

The body of law that governs personal property transactions (but does not apply to real
estate) and involves use of security agreements, financing statements, and bulk transfers
is the
A) American Land Title Association.
B) Uniform Commercial Code.
C) Par

B) Uniform Commercial Code.

The type of title insurance that will protect the owner and heirs is called a (n)
A) lender's policy
B) owner's policy
C) leasehold policy
D) certificate of sale policy

B) owner's policy

A buyer took delivery of the deed to his new house but neither recorded the deed nor
took possession of the property. Under these circumstances
A) the transfer of the property from the seller is ineffective.
B) the buyer's interest is not fully protected

B) the buyer's interest is not fully protected against third parties.

The mortgagee received a title insurance policy on the property a buyer is pledging as
security for the mortgage loan. Which of the following is true?
A) The policy is issued for the benefit of the buyer.
B) The policy guarantees that the buyer's equity w

C) The amount of coverage is commensurate with the loan amount.

All of the following are true regarding public records EXCEPT
A) They give notice of encumbrances.
B) They establish priority of liens.
C) They guarantee marketable title.
D) They provide constructive notice about interests in the property.

C) They guarantee marketable title.

The best reason for a buyer to obtain title insurance is
A) that the mortgage lender requires it.
B) to ensure that the seller can deliver marketable title.
C) to ensure that the abstractor has prepared a complete summary of title.
D) to pay future liens

B) to ensure that the seller can deliver marketable title.

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 deposit of a title with an escrow agent.
D) the removal of a cloud on the title by court action.

D) the removal of a cloud on the title by court action.

Which of the following is true about title insurance?
A) It ensures against future losses
B) It protects the insured from events before the policy was issued
C) It covers changes in land used brought about by zoning ordinances
D) It includes defects known

B) It protects the insured from events before the policy was issued

Under an installment contract, the title to the property is held by the
A) vendor.
B) vendee.
C) trustor.
D) trustee.

A) vendor.

Charging more interest than is legally allowed is known as
A) escheat.
B) usury.
C) a deficiency.
D) an estoppel.

B) usury.

A mortgagor is the one who
A) gives a mortgage.
B) holds a mortgage.
C) provides mortgage funds.
D) forecloses on a mortgage.

A) gives a mortgage.

A promissory note
A) may not be executed in connection with a real estate loan.
B) is an agreement to perform or not to perform certain acts.
C) makes the borrower personally liable for the debt.
D) is a guarantee by a government agency.

C) makes the borrower personally liable for the debt.

A land contract provides for the
A) sale of unimproved land only.
B) sale of real property under an option agreement.
C) conveyance of legal title at a future date.
D) immediate transfer of reversionary rights.

C) conveyance of legal title at a future date.

The fee charged by a mortgage broker to arrange a loan is a(n)
A) prepayment penalty.
B) advance interest payment.
C) loan origination fee.
D) prepayment of mortgage insurance

C) loan origination fee.

If the amount realized at a sheriff's sale as part of a mortgage foreclosure is more than
the amount of the indebtedness and expenses, then the excess belongs to
A) the mortgagor.
B) the mortgagee.
C) the sheriff's office.
D) the county.

A) the mortgagor.

LaShawn has just made the final payment on her home mortgage to her lender. There
will still be a lien on her property until the lender records a(n)
A) satisfaction of mortgage.
B) reconveyance of mortgage.
C) alienation of mortgage.
D) reversion of mortg

A) satisfaction of mortgage.

An existing mortgage loan can have its lien priority lowered through the use of a
A) hypothecation agreement.
B) satisfaction of mortgage.
C) subordination agreement.
D) reconveyance of mortgage.

C) subordination agreement.

The right a mortgagor has to regain the property by paying the debt after a foreclosure
sale is called
A) acceleration.
B) redemption.
C) reversion.
D) recapture.

B) redemption.

The clause in a trust deed or mortgage that permits the lender to declare the entire
unpaid balance immediately due and payable upon default is the
A) judgment clause.
B) escalator clause.
C) forfeiture clause.
D) acceleration clause.

D) acceleration clause.

A building was sold for $115,000. Earnest money in the amount of $15,000 was
deposited in escrow, and the buyer obtained a new loan for the balance of the purchase
price. The lender charged 2 discount points on the loan. What was the total amount of
cash

C) $17,000

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) he or she obtains a deed of partial reconveyance.
C) the paid mortgage is returned to the lender.
D) a satisf

D) a satisfaction of mortgage is recorded.

In what way does a deed of trust differ from a mortgage?
A) In the number of parties involved in the loan
B) In the obligation of the borrower to repay the funds
C) In the redemption rights allowed after foreclosure
D) In the time period permitted to cure

A) In the number of parties involved in the loan

A person who assumes an existing mortgage loan is
A) not personally liable for the repayment of the debt.
B) not in danger of losing the property by default.
C) personally responsible for paying the principal balance.
D) generally released from liability,

C) personally responsible for paying the principal balance.

All the following clauses in a loan agreement enable the lender to demand the entire
remaining debt be paid immediately EXCEPT a(an)
A) due-on-sale clause.
B) defeasance clause.
C) acceleration clause.
D) alienation clause.

B) defeasance clause.

The mortgagee foreclosed on a property after the borrower defaulted on the loan
payments. At the foreclosure sale, however, the house sold for only $129,000. The
unpaid balance of the loan at the time of the sale was $140,000. What must the lender
do to r

D) Seek a deficiency judgment

The clause in a mortgage instrument that would prevent the assumption of the mortgage
by a new purchaser is a
A) due-on-sale clause.
B) power of sale clause.
C) defeasance clause.
D) certificate of sale clause.

A) due-on-sale clause.

The defeasance clause in a mortgage requires the mortgagee to execute a(n)
A) assignment of mortgage.
B) satisfaction of mortgage.
C) subordination agreement.
D) partial release agreement.

B) satisfaction of mortgage.

The seller agrees to sell the house to the buyer for $100,000. The buyer was unable to
qualify for a mortgage loan for this amount so the seller and buyer enter into a contract
for deed. The interest the buyer has in the property under a contract for deed

B) equitable title.

A "friendly foreclosure" enables a mortgagor to prevent the mortgagee from taking the
property by statutory means. This can be accomplished by use of a(n)
A) deed in lieu of foreclosure.
B) reconveyance deed.
C) assumption.
D) escrow deed.

C) assumption.

Mortgage lenders want assurance that future real estate taxes will be paid. The most
common way to do this is to require the borrower to
A) obtain title insurance.
B) sign a note.
C) pay into an impound account.
D) submit paid tax receipts

C) pay into an impound account.

The pledging of property as security for payment of a loan without surrendering
possession is
A) disintermediation.
B) equity.
C) hypothecation.
D) subordination.

C) hypothecation.

When real estate is sold under an installment land contract and the buyer takes
possession of the property, the legal title
A) is subject to a purchase money mortgage.
B) must be transferred to a land trust.
C) is kept by the seller until the purchase pri

C) is kept by the seller until the purchase price is paid according to the contract.

An agreement executed by the seller, buyer, and lender on an existing mortgage to be
assumed that will release the seller from any future liability is called a
A) novation
B) equitable title
C) defeasance clause
D) deed of trust

A) novation

If a buyer obtains a $50,000 mortgage with 4 points, how much will the lender charge at
closing?
A) $6,000
B) $200
C) $2,000
D) $40,000

C) $2,000

In absence of an agreement to the contrary, the mortgage having priority will be the one
A) for the highest amount.
B) which was recorded first.
C) which was signed first.
D) that is a construction loan

B) which was recorded first.

The purpose of a mortgage is to
A) provide security for a loan.
B) convey title of the property to a lender.
C) restrict the borrower's use of the property.
D) create a lien on the property.

A) provide security for a loan.

If a property sold at a mortgage foreclosure does not bring an amount sufficient to
satisfy the outstanding mortgage debt, the mortgagor may be responsible for
A) a default judgment.
B) a deficiency judgment.
C) liquidated damages.
D) punitive damages.

B) a deficiency judgment.

If a house sold for $80,000 and the buyer obtained a loan for $72,000, how much money
would the buyer pay if the lender charged 3 points?
A) $2400
B) $2328
C) $2160
D) $240

C) $2160

Kahlid has been making periodic payments of principal and interest on a loan, but the
final payment will be larger than the others. This is a (n)
A) balloon payment loan
B) fully amortized loan
C) FHA loan
D) straight loan.

A) balloon payment loan

The amount of a loan expressed as a percentage of the value of the real estate offered as
collateral is the
A) amortization ratio.
B) loan-to-value ratio.
C) debt-to-equity ratio.
D) capital-use ratio.

B) loan-to-value ratio.

If the quarterly interest at 10 1
2 percent is $3,150, the principal amount of the loan is
A) $30,000.
B) $60,000.
C) $90,000.
D) $120,000.

D) $120,000.

Fannie Mae
A) makes FHA loans.
B) buys FHA loans.
C) services FHA loans.
D) insures FHA loans.

B) buys FHA loans.

The grantor becomes the lessee and the grantee becomes the lessor under which of the
following financing arrangements?
A) Partial sale
B) Wraparound mortgage
C) Sale and leaseback
D) Assumption of mortgage

C) Sale and leaseback

Members of which of the following pairs of terms are synonymous?
A) Interim financing and construction loan
B) Construction loan and passthrough loan
C) Pass-through loan and takeout loan
D) Takeout loan and construction loan

A) Interim financing and construction loan

The type of real estate loan that allows the lender to increase the outstanding balance of
a loan up to the original sum in the note while advancing additional funds is the
A) wraparound mortgage.
B) open-end mortgage.
C) growing-equity mortgage.
D) gradu

B) open-end mortgage.

Sandra's son starts college soon. She has lived in her home for 10 years. What financing
option would be preferable for Sandra to obtain funds to pay for her son's schooling?
A) participation financing
B) open end loan
C) wraparound loan
D) home equity lo

D) home equity loan

All of the following loans to individuals are affected by the Truth in Lending Law under
Regulation Z EXCEPT
A) Household use
B) Business use
C) Room additions
D) Swimming pools

B) Business use

An FHA-insured mortgage loan would be obtained from which of the following?
A) The Federal Housing Administration
B) The Department of Housing and Urban Development
C) Any FHA-approved lending institution
D) Any FHA-approved insuring institution

C) Any FHA-approved lending institution

Fannie Mae, Ginnie Mae, and Freddie Mac all
A) originate residential mortgage loans.
B) purchase existing mortgage loans.
C) insure residential mortgage loans.
D) guarantee existing mortgage loans.

B) purchase existing mortgage loans.

A mortgage broker generally offers which of the following services?
A) Handling the escrow procedures
B) Bringing the borrower and the lender together
C) Providing credit qualification and evaluation reports
D) Granting real estate loans using investor fu

B) Bringing the borrower and the lender together

An eligible veteran made a purchase offer of $180,000 on a home he wants to finance
with a VA-guaranteed loan. Four weeks after the offer was accepted, a certificate of
reasonable value (CRV) for $177,000 was issued for the property. In this situation, th

D) Insist that the lender loan up to the allowable maximum of the certificate of
eligibility

A borrower obtained a $7,000 second mortgage loan for 5 years at 6 percent interest per
annum. Monthly payments of principal and interest were $50. The final payment
included the remaining outstanding principal balance. What type of loan is this?
A) A ful

C) A partially amortized loan

Which of the following is true about VA guaranteed mortgages?
A) discount points must be paid by the seller
B) .the borrower may have a prepayment penalty clause in the loan
C) funding fee amounts are negotiable
D) the borrower must apply for a certificat

D) the borrower must apply for a certificate of eligibility.

The principal distinction between the primary mortgage market and the secondary
mortgage market is in the
A) insuring versus the guaranteeing of mortgage loans.
B) origination versus the purchase of mortgage loans.
C) use of mortgages versus the use of de

B) origination versus the purchase of mortgage loans.

A real estate loan payable in periodic installments that are sufficient to pay the principal
in full during the term of the loan is called a
A) conventional loan.
B) straight loan.
C) partially amortized loan.
D) fully amortized loan.

D) fully amortized loan.

An extension of credit from a seller to a buyer to allow the buyer to complete the
transaction is called a
A) growing equity mortgage.
B) purchase money mortgage.
C) package mortgage.
D) blanket mortgage.

B) purchase money mortgage.

When compared with a 30-year payment period, taking out a loan with a 20-year
payment period would result in
A) slower equity buildup.
B) greater impound requirements.
C) lower monthly payments.
D) higher monthly payments.

D) higher monthly payments.

If the interest rate on an FHA-insured mortgage loan is 5 1/2 percent and the monthly
payment is $1,012 the principal sum would be
A) $22,080
B) $220,800
C) $184,000
D) $667,920

B) $220,800

PMI is the acronym for Private Mortgage Insurance often used by borrowers whose
LTV (loan-to-value) ratio is less than 20 percent. Lenders must cease charging PMI
when the LTV reaches
A) 22 percent.
B) 27 percent.
C) 29 percent.
D) 35 percent.

A) 22 percent.

Subdivider Jonathan had a mortgage loan on his entire housing subdivision. When he
sold a lot to a buyer, he was able to deliver title to that lot free of the mortgage lien by
obtaining a partial release. What type of loan did the developer have?
A) Blank

A) Blanket mortgage

Which of the following would be considered a trigger item under Regulation Z?
A) "low monthly payments"
B) "FHA financing available"
C) "A steal at only $175,000!"
D) " Only $10,000 down

D) " Only $10,000 down

Freddie Mac
A) operates mostly in the primary mortgage market.
B) operates mostly in the secondary mortgage market
C) guarantees payment of Freddie Mac mortgages.
D) buys mostly FHA loans

B) operates mostly in the secondary mortgage market

A lender will take certain factors into consideration when deciding whether to grant a
borrower a mortgage loan. Which of the following is a violation of the Equal Credit
Opportunity Act (ECOA)?
A) The marital status of the borrower
B) The creditworthines

A) The marital status of the borrower

If the amount of a loan is $13,500 and the interest rate is 6 percent what is the amount of
the semiannual interest payment?
A) $596.55
B) $405.00
C) $810.00
D) $202.50

B) $405.00

The type of mortgage loan that uses both real and personal property as security is a
A) blanket loan.
B) package loan
C) purchase money mortgage.
D) wraparound loan

B) package loan

The availability of funds for real estate mortgage loans is affected by the Federal
Reserve System through which of the following?
A) Discount rates
B) Federal National Mortgage Association
C) Federal Housing Administration
D) Resolution Trust Corporation

A) Discount rates

John is selling his property for $225,000. He has a loan balance of $50,000. He has
agreed to provide financing to the purchasers in the amount of $200,000 and will
continue to make payments on the original loan. This type of loan is called a
A) package l

B) wraparound loan

A lender's interest in a mortgage loan is protected by obtaining additional security from
A) private mortgage insurance.
B) title insurance.
C) the borrower's note.
D) impound accounts.

A) private mortgage insurance.

A common feature of an adjustable rate mortgage (ARM) is
A) the interest rate is fixed for a maximum of five years
B) there is negative amortization if rates decrease
C) a rate cap on the amount the rate may increase
D) automatic conversion to a fixed-rat

C) a rate cap on the amount the rate may increase

A type of long-term financing which has become popular because initial payments are
lower due to no principal being paid, is called a (n)
A) amortized loan
B) balloon loan
C) package loan
D) interest-only loan

B) balloon loan

Last month's loan payment included $412.50 interest on a $60,000 loan balance. What is
the annual rate of interest?
A) 7 1/2 percent
B) 7 3/4 percent
C) 8 1/4 percent
D) 8 1/2 percent

D) 8 1/2 percent