Broker Property Law

Created by tikihouse2003 

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After attempting to locate the owner or any rightful heirs, the state may acquire ownership of abandoned property through

a) eminent domain
b) adverse possession
c) escheat
d) estoppel

c) Escheat

The government requires a developer to provide off street parking for tenants. The developer will suffer a loss because he may not use the parking area to build additional units as he intended. This is an example of

a) eminent domain
b) inverse condemnation
c) police powers
d) escheat

c) Police powers There is no inverse condemnation because the regulation does not deprive the owner of all economic value from his property, he may develop all but the parking area. It is not eminent domain because the govt. is not taking any property. Is is not escheat because the govt. is not taking ownership. It is a valid condition an approval for a building permit so it is and exercise of police power

Building codes:

a) could be based on national standards
b) are enforced locally
c) involve a certificate of occupancy
d) all of the above


Building codes often include national and local or state-wide standards. They are issued and enforced by local authorities, and a certificate of occupancy must be issued to document conformity

A lease where the tenant pays taxes and maintenance costs is:

a) net lease
b) percentage lease
c) ground lease
d) gross lease

In a net lease the tenant (lessee) agrees to pay a fixed rental amount along with a pro rate share of the landlord's building costss, including taxes, insurance, utilities and repairs. In a gross lease, the tenant pays a fixed amount and the owner pays his own building expenses. In a percentage lease, the tenant pays a fixed percent of the income earned through the rental space

To be a professional property manager of a large apartment complex, one would need to know about all of the following EXCEPT:

a) property maintenance
b) property insurance
c) human relations
d) appraisal techniques

D) Appraisal techniques

A clause in a deed stating that title would revert to the grantor if the grantee operated a dance hall on the property would be a

a) invalid deed restriction
b) valid public control
c) valid deed restriction
d) enforceable only through zoning laws

C) Valid condition in the deed contained in the granting clause. The grantee would receive a qualified fee (fee simple defensible). The grantor retains a "possibility of a reverter"

Zoning appeals boards are intended to satisfy:

a) equal protection
b) due process
c) takings clause
d) master plans

B (public controls based on police power) in order to satisfy due process, most communities have established zoning appeals boards to hear complaints from individual property owners about local zoning ordinances

The transfer of title from the government to an individual is called:

a) public grant
b) dedication
c) foreclosure
d) accession

A) Public grant

To qualify for a tax free exchange, properties MUST:

a) have the same income
b) have different incomes
c) be of like kind
d) have deeds in corporate names

C. be of like kind
The only way to qualify for a tax free exchange is that the properties exchanged must be of like kind. You could not exchange a rental property for your personal residence. You could exchange rental property for another investment property

Assemblage most often occurs where:

a. demand is high
b. demand is low
c. the whole is more valuable than the parts
d. both a and c

regardless of whether demand is high or low, assemblage is usually done when the combined property will be more valuable than the sum of the individual parcels

A property has a deed restriction that prohibits raising livestock. However, local zoning permits livestock on the property in question. May the property owner raise livestock?

a. no, because the owner must follow the deed restriction over the zoning ordinance
b. no, because the deed restriction existed before the zoning ordinance
c. yes, because private agreements cannot overrule a zoning ordinance
d. yes because estoppel will prevent enforcement of the deed restrictions

Deed restrictions may always be more restrictive, but never less restrictive than zoning laws. Therefore, the owner must follow a more restrictive (but legal) deed restriction. Being more restrictive is not equivalent to overruling a zoning ordinance- a more restrictive requirement remains consistant

A homeowner who uses a residence only as a home is allowed which of the following deductions for tax purposes?

a. depreciation
b. principal payments
c. interest payments
d. cost of improvements

A homeowner may deduct interest paid on a home mortgage loan from his/ her own personal property income tax calculation. Depreciation and cost of improvements may only be deducted if the property is income producing property (rental)

If a broker employs a property manager, an agency relationship is created. This agency is considered:

a. specific
b. general
c. managerial
d. universal

A property manager is a textbook example of general agency ie a person empowered to do a number of things for the principal

Zelda wants to move into a subdivision with her giraffe. Which of the following would best determine whether or not she could move into a home and keep her giraffe on the property?

a. the Constitution
b. zoning ordinances
c. deed restrictions
d. both b and c

Zoning ordinances determine property uses permitted including the types of animals which may be kept. Deed restrictions could impose similar limitations. Therefore, Zelda must check her zoning ordinances and deed restrictions if any

Condemnation is the exercise of

a. eviction
b. estoppel
c. eminent domain
d. escheat

Eminent domain is the power, condemnation is the exercise of that power where a landowner refuses to tender his deed to the state

Deed restrictions are usually imposed by

a. owners
b. zoning
c. neighborhoods
d. governments

restrictive covenants (deed restrictions) are imposed in deeds by the owners (which includes developers)

The donation of real estate for public use is:

a. reverse condemnation
b. eminent domain
c. dedication
d. escheat

c dedication

Which of the following must be true of an industrial park?

a. it is surrounded by a buffer
b. it is zoned industrial
c. it is leased from a developer
d. both a and b

An industrial park must be zoned industrial to be subdivided and marketed. The other answers may be true but b must be true

The purpose of a zoning ordinance is:

a. to promote public welfare
b. to promote building conformity
c. to control competition
d. to promote property values

The purpose of zoning is to promote the health, welfare, and safety of the public. Building conformity is a result of building codes, not zoning. The correct answer is a restatement of the police power

Private restrictions on the use of land may be created by:

a. deed only
b. written agreement
c. general restrictions on a subdivision's regulation
d. all of the above

Private restrictions on the use of land may be created by any of the instruments cited above. These are restrictions that are placed on the property by the owner

A new residential development requires that all single-family houses have brick fronts. This requirement is most likely an example of:

a. local building codes
b. municipal regulations
c. a covenant
d. a zoning ordinance

A convenant (promise to keep) is a form of a deed restriction. This type os restriction would be imposed by a developer, not a local government through zoning powers. The restriction described is most likely an aesthetic consideration

Which zoning decision is most likely to be stricken on appeal?

a. spot zoning
b. down zoning
c. special use zoning
d. not enough information to tell

Spot zoning rarely survives a legal challenge because it is difficult to fairly implement and often results in arbitrary and discriminatory selection

Paul Property Owner makes significant improvements to a lot he has been holding for seven years. Which of the following is most likely to be true regarding Paul's improvements?

a. Paul's land will increase in value
b. Paul's land will decrease in value
c. Paul is developing a subdivision
d. either a or b

Improvements may have a positive or negative affect on the economic value of the land and the area surrounding it depending in the type of development or improvement

In a typical agreement, the property manager would be authorized to do all of the following except:
a. enter in to a 2 year lease verbally
b. hire and fire new employees
c. collect rents every month
d. furnish owner with a monthly statement of income and expenditures

An oral lease for over one years is unenforceable because it violate the statue of frauds. In the best interest of the owner, the property manager would not be permitted to take and oral lease regardless of the time

If the owner of real estate dies and leaves no will and has no heirs, the property will revert to the government through a process known as:
a. eminent domain
b. reversion
c. escheat
d. inverse condemnation

Escheat is one of the ownership rights withheld by the govt. the other rights withheld are taxation, eminent domain and police powers. Eminent domain is the power to take property. Inverse condemnation is a defacto taking due to excessive regulation

Desmond owns a 30 acre tract of land along a major river that he plans to build a river front community on. However, just before he applies for his building permit, Desmond learns that the zoning has changed to prohibit residential development. Desmond will likely
a. receive compensation is he sues on the theory of inverse condemnation
b. receive no compensation because the regulation is not pervasive
c. receive just compensation following condemnation
d receive compensation only of the zoning change is for public purpose

Desmond's property is not being taken by the govt. However short of a physical taking, a property could be so over regulated that its owner loses all economic value. Inverse condemnation presents a high standard to meet. On these facts there is no indication that the property is useless, only the development prohibited is residential

The legal process of removing a tenant from property is
a. eviction
b. ejection
c. quitting
d. constructive notice

Eviction os the legal process to remove a tenant in possession. Ejection is an action by an owner to regain possession from someone who is in possession illegally. Quitting means departing. Constructive notice of ownership can be proved by recording a deed

A restrictive covenant would most likely be enforced by
a. a neighbor
b. a zoning official
c. a police officer
d. a judge

Restrictive covenants (deed restrictions) are enforced through injunctions issued by the courts at the request of others (such as a neighbor)

Deed restrictions usually affect
a. the current owner
b. current and subsequent owners
c. subsequent owners only
d. all property owners within local govt. boundaries

Valid deed restrictions affect both current and subsequent owners

Which of the following could be an enforceable deed restriction?
a. exterior design
b. building size
c. limitations on the size of trees
d. all of the above

A deed restriction on the use of property placed on the property by the owner. It could control and restrict the use of the property for any reasons given. It cannot be a restriction in violation of the law such as fair housing

The difference between an easement and a deed restriction turns on:
a. one can "run with the land" and the other cannot controls use and the other controls access
c. one is created in a deed and the other is not
d. both require a writing

Both easements and deed restrictions can run with the land. However, as an easement allows access to property while a deed restriction limits an owner's use of property. Easements can be created in deeds (by express grant, for example) and deed restrictions are by definition created in deeds. While a deed restriction must be written, an easement may be created by implication

John wants to build a house on his lot. The house will sit 20' from the front line. The city ordinance calls for a minimum setback of 25'. May John build his house in the manner described?
a. no, unless John receives a zoning variance
b. yes, so long as John obtains spot zoning
c. yes, so long as John receives a special use permit
d. either or a or c

Conditional use permits/special use permits and variances are similar in function but different in availability. Generally variances can issue to remedy case specific hardships while conditional use permits are used where no hardship exists and the change will benefit the community as a whole. On the face of the question, there appears to be no benefit to the neighborhood as a whole for this individual homeowner's addition

Building codes are enforced by
a. federal authorities
b. state agencies
c. zoning board
d. building permits

Building codes are enforced by issuing building permits requiring periodic inspections at certain phases of construction. A final inspection is required before one may receive a certificate of occupancy. Building codes are locally enforced (generally by building departments)

When the owner of real property obtains a new mortgage to pay-off an old mortgage it is known as
a. refinancing
b. foreclosure
c. assumption
d. subordination

This is refinancing. If effect the owner is selling the property to himself. He obtains a new loan on his own property and uses the money to pay off his old loan. This is very common during periods of falling interest rates.

A gas station located in an area that is currently zoned residential, is destroyed in a windstorm. Which of the following is most likely?
a. just compensation clause
b. right to privacy
c. rational relationships
d. none of the above

Constitutional limitations on the police power are contained in the due process, equal protection, and takings clauses of the Constitution. There is no such thing as the "just compensation clause" The right to privacy has nothing to do with real property. Due process consists of substantive and procedural due process. substantive due process requires that land regulations be rationally related to a legitimate state objective. Therefore government power in this situation is limited by "rational relationships"

Merging adjacent properties is know as
a. annexation
b. abutment
c. marshaling
d. assemblage

The government derives its right to control private land use from the US Constitution. Many state constitutions echo the same rights. these rights are known as Police Powers. While this power is delegated to local authorities, it stems (derives) from the constitution

A property management contract is between the property manager and:
a. his or her employees
b. the owner of the property
c. the tenants
d. all of the above

A contract to manage property would be between the manager and the owner of the property

A person who owns a fee simple estate could be which of the following controls?
a. zoning and building codes
b. subdivision restrictions
c. escheat
d. all of the above

All of these are restrictions on private property. Zoning, building codes, and escheat are rights of the government. Restrictive covenants and subdivisions restrictions are usually private in nature. Even though you own property in fee simple you are subject to all of the restrictions listed

Which of the following is not a government right in privately owned property?
a. escheat
b. taxation
c. encumbrances
d. none of the above

Escheat and taxation are governmental rights in privately owned real property. An encumbrance is any lien, easement or restriction on the use of real property which may diminish its value. Although unpaid taxes result in a lien, which is an encumbrance, an encumbrance is not a right in and of itself that the state has in private property

A buffer zone would most likely separate:
a. office space from retail space
b. light industrial fro heavy industrial
c. open space from residential
d. residential from commercial

A buffer zone is used to separate two otherwise incompatible land uses. Of the choices, residential and commercial are the most incompatible and therefore the best answer

Deed restrictions are imposed by:
a. developers
b. zoning ordinances
c. neighborhood associations
d. all of the above

Deed restrictions are imposed by the owner of the property. Of the choices given, the developer is the only property owner listed. Neighborhood associations can create rules to enforce deed restrictions but these rules must be consistent with the deed restrictions

An area where in which the zoning regulates the specific balance of shopping, business and recreational facilities is an example of:
a. urban renewal
b. mixed zoning
c. PUD
d. commercial condition zoning

Planned Unit Development (PUD) are mixed use developments that use zoning ordinances to achieve desired balance

An owner has been using a parcel of land for heavy industry since 1973. Subsequently, the property is zoned for commercial use. The owner's continued industrial use of the property is a/an
a. violation of the existing zoning
b. deviation from the master plan
c. example of zoning variance
d. an illegal non-conforming use

This is an example of non-comforming use. The use of the property at one time conformed to the zoning code. However, the zoning has been changed and the continued use for industrial purposes is in violation of current zoning. However since the use existed before the zoning changed, it may continue. Had the use arisen after the zoning change it would be an illegal non-conforming use. Master plans contain general standards of present and future development. We do not know if the change deviated from the master plan

The state decides to widen a highway. It will be necessary to use six feet of private property on each side. The state's power to take this property derives from:
a. the police power
b. zoning power
c. condemnation proceedings
d. non of the above

When the state takes property for the good of the public, it does so through the POWER of Eminent Domain. This is separate from the police power. Like all governmental powers, eminent domain is derived from the Constitution. The process through which the state takes property from one who refuses to give it up is condemnation proceeding.

Which of the following does NOT reflect current real estate market conditions?
a. building permits
b. deed recordings
c. mortgage recordings
d. divorce filings

An increase or decrease in building permits, deed recordings, and mortgage recordings would indicate an increase or decrease in real estate sales. Divorce filings would have no effect on value

Ms Jones wants to build a porch on the back of her house. The new construction will extend beyond the rear setback restriction. She is most likely to receive permission to build the porch through a:
a. spot zoning permit
b. zoning variance
c. conditional use permit
d. none of the above

Conditional use permits and variances are similar in function but different in availability. Generally, variances are usually issued to remedy case specific hardships while conditional use permits are used where no hardship exists and the change will benefit the community. On the face of the question, there appears to be no benefit to the neighborhood as a whole for this individual homeowner's addition. Spot zoning is avoided because it rarely survives legal challenge

Condemnation requires that:
a. the public benefit
b. the owner be paid
c. no other property is available
d. all of the above

The government must prove all elements to succeed in condemnation suit

Regulations designed to control density and over-crowding are examples of:
a. buffer zoning
b. a master plan
c. spot zoning
d. bulk zoning

Bulk zoning is used to control building density by imposing restrictions on setback lines, building height, and percentage of open areas

A gas station was built in 1938. The area surrounding it was zoned residential in 1960. The gas station is an example of:
a. a non-conforming use
b. planned unit development
c. down zoning
d. gentrification

The gas station would be classed as a non-conforming use since it does not conform to present zoning ordinance. However, because the use existed before the zoning change it is a legal non-conforming use

Which of the following is not and enforceable deed restriction?
a. exterior design
b. building size
c. landscaping set back
d. all of the above are enforceable

All of the listed restrictions are common and enforceable

The developer of a subdivision requires that if a single family house has a garage, the garage must be attached. This is most likely an example of:
a. local building codes
b. a zoning ordinance
c. a covenant
d. all of the above

A negative (or restrictive) covenant is a private restriction on land that may appear in a deed. this type of restriction would be imposed by a developer, not a local government through zoning powers

The State of Order plans to condemn several pieces of property in the inner city to build a sports complex, displacing many poor families. The State then plans to lease the assembled property to three private concerns who will operate the complex. Is this use of eminent domain constant with the constitution?
a. yes, but only if the lots are vacant
b. yes, if just compensation is paid to the land-owners
c. no, because there is no public purpose
d. no, because condemned property cannot benefit private individual

The state has the power to so this through its power of eminent domain. The construction of a sports complex could be considered in the public good because it would create taxes and offer employment

Zoning ordinances are established by:
a. the Federal Govt.
b. state govts.
c. city, town, and municipalities
d. all of the above

counties and towns establish zoning ordinances. In some cases these decisions may be directed by either State or Federal regulations

Valid restrictive covenants;
a. restrict what an owner can do with his land
b. run with the land
c. may appear in a lease
d. all of the above

All of the listed statements are true of valid deed restrictions. To "run with the land" means that the restrictions remain with the property as it passes fro owner to owner

Property management agreements usually represent:
a. general agency
b. special agency
c. dual agency
d. universal agency

Property management agreements usually represent general agency agreements

The right of a city government to take title to a private property for public improvements is subject to all of the following except:
a. the ownership interest held by the current owner
b. public purpose
c. economically profitable uses of the land by the owner
d. both a and c

The exercise of eminent domain requires just compensation for and the public use of property taken. The ownership interest of the current owner and whether the use is economically viable is irrelevant.

A broker acting as a property manager could be:
a. an employee of the owner
b. a fiduciary
c. the principal in the agreement
d. both a and b

A property manager is often controlled by an agency agreement between the property owner (principal) and the broker property manager (agent). The agency relationship makes the property manager a fiduciary of the client ( a position of trust and confidence carrying specified duties) Depending on the terms of the contract and the nature of the relationship, the broker could be an employee or independent contractor of the property owner as well.

Which of the following may be itemized as a personal deduction when paying federal income taxes?
a. the amount of interest paid on a home mortgage
b. the amount of principle paid on a home mortgage
c. the cost of installing a fence around the residence
d. the cost of homeowners insurance

When you itemize deductions on your income tax returns, you may not deduct the cost of home improvements or insurance premiums. Only the interest portion of your mortgage payments is deductable

Restrictive (negative) covenants cannot:
a. be based on aesthetic considerations alone
b. restrict the owner's lawful use of the land
c. be enforced over a zoning ordinance unless they are less restrictive than the zoning ordinance
d. be too broad

Private restrictions found in restrictive (negative) covenants in a deed must not be too broad or violate the law in order to be enforceable. Deed restrictions may be based on aesthetic considerations alone and do restrict the owner's lawful use of his land. However deed restrictions may never be enforces over zoning ordinances unless they are more restrictive

In terms of management, PUD's most clearly resemble:
a. leasing
b. cooperative ownership
c. condominium ownership
d. time-share ownership

Like a condominium. PUD's have associations that manage the common areas and enforce the covenants, conditions, and restrictions of the development

In a residential subdivision, the developer established a central playground that uses four feet of the backyard of each owner. Brynes wants to put an organic garden in his backyard. However, a swing set that sits within the central playground sits on Brynes' backyard. Byrnes plans on moving the swing set to make room for his garden. His neighbor, Yates objects. What can Yates do?
a. nothing so long as Byrnes owns the property
b. ask the court for help
c. nothing if the statutory period for adverse possession has run
d. seek a lis pendens

Because it was imposed by the developer, this is most likely to be a deed restriction. Deed restrictions are enforced by private individuals through court ordered injunctions. The injunction orders owners to stop the offending action. Byrnes still enjoys the right to possess the land included in the playground but his use was limited by the developer. A lis pendens is notice that a piece of property is subject to pending lawsuit, Adverse possession is not applicable because the restriction was voluntarily created

Which of the following is not a private limitation on title?
a. liens
b. deed restrictions
c. eminent domain
d. encroachments

All listed choices except eminent domain are private limitations on title because they are man-made ie they arise because of actions or omissions of one or more of the parties, whereas eminent domain actions arise pursuant to the application of the law

Which of the following is an example of the police power of government?
a. escheat
b. eminent domain
c. taxation
d. building codes

The rights that government withholds from private ownership are escheat, eminent domain, taxation and police powers. However escheat, eminent domain and taxation are powers unto themselves not derived from any other power. Of the listed choices, only zoning and building code restrictions are derived from the police powers of government

One of the principal reasons for zoning is to:
a. restrict business activities
b. effectively plan
c. affect property values
d. generate revenue through taxes

Zoning ordinances are the tools city planners use to implement the master plan. A master plan, through zoning, enables effective planning and consistency for a variety of uses.

All of the following are limitations on ownership of property, except:
a. zoning
b. police powers
c. building codes
d. seisin

Government rights in land include taxation, eminent domain, police power, and escheat which are limitations on ownership of private property. Zoning and building codes are both examples of police power. Seisin is, by definition, ownership

All of the following are examples of down zoning except:
a. from a single family dwellings to multi-use apartments
b. from agricultural use to single family dwellings
c. from single family dwellings to a conservation area
d. both a and b

Down zoning occurs when the zoning regulations are changed from a higher, more active use, to a lower less active use.

The police power includes all of the following except:
a. zoning and building codes
b. condominium covenants rules and regulations
c. government land use regulations
d. real estate licensing laws

The police power empowers governments to enact zoning and building codes, land use regulations and real estate licensing laws. Condominium covenants, rules and restrictions are private concerns

A homeowner can claim deductions on his federal tax return for which of the following items relates to his personal residence?
a. Principal payments on the mortgage loan
b. interest payments on the mortgage loan
c. repairs and maintenance on the house
d. improvements made to the property

Of the items listed, the homeowner may deduct only the interest paid on his or her mortgage

As a property manager, your duties would most likely include all of the following except:
a. rent collection
b. hiring and firing of maintenance personnel
c. showing units to prospective renters
d. providing legal assistance to the property owner

Licensees who are not licensed attorneys and provide legal advice risk prosecution for practicing law without a license

The governments' right to control private land is limited by:
a. just compensation clause
b. right to privacy
c. rational relationships
d. none of the above

Constitutional limitations on the police power are contained in the the due process, equal protection, and takings clauses of the Constitution. There is not such thing as the "just compensation clause" The right to privacy has nothing to do with real property. Due process consists of substantive and procedural due process. Substantive due process requires for instance that land regulations by rationally related to a legitimate state objective or within the scope of the police powers. Therefore govt is limited by rational relationships

Which of the following is not true about title search?
a. it is an examination of public records
b. the purpose is to determine defects in the chain of title
c. the title searcher goes back at least 100 years old
d. it is usually performed by a title company or title abstractor

The title search only goes back 40 years

The act of recording a deed in the public office designated for that purpose, results in which of the following?
a. title will pass to the new owner on the date of the recording
b. provides constructive notice.
c. provides actual notice
d. both b and c

the act of recording provided constructive notice to the world, regardless of whether anyone looks (actual notice.) The act of recording alone does not create actual notice. Recording the deed has no effect on whether title transfer

All of the following statements are true about valid restrictive covenants except:
a. the covenant runs with the land
b. the covenant may be removed without legal notice
c. the covenant does not need a termination date
d. the covenant may be at variance with Fair Housing laws

The federal fair housing law and state laws make it illegal to restrict the sale or lease of property based on a person's race, color, religion, national origin, sex, handicap, or familial status. Any restrictive covenants in deed at variance with Fair Housing laws would be unenforceable

Each closed real estate transaction requires a report to be filed with the IRS on form 1099. Required information includes the seller's name, social security number and:
a. buyers name and social security number
b. the selling price of the property
c. the name of the mortgage lender
d. the legal description of the property

The selling price of the property is included in the 1099. This is the amount of income the seller received. At tax reporting time, this sale is subject to adjustments when calculating the actual tax due

Title passes from the grantor to the grantee after the deed is:
a. signed
b. acknowledged
c. delivered
d. recorded

Legal title to real property conveys (passes) to a purchaser (grantee) when the deed is delivered by the seller (grantor) and accepted by the grantee. Acceptance is legally presumed in absence of evidence to the contrary

All of the following are examples of insurable title defects except:
a. forged documents
b. undisclosed heirs
c. mental incompetence
d. unrecorded easements

All of the listed items, except unrecorded easements are common insured title defects. Unrecorded easements and other rights of parties in possession are generally excluded along with facts that an accurate survey would reveal, taxes, and assessments not yet due or payable and zoning and other government restrictions

To transfer title to property by deed, which of the following is required?
a. the deed must be recorded in the public record
b the deed must be signed by the buyer
c. the deed must be signed by the grantor
d. both b and c

The only item on the list of answer options that is required of a valid dee is the signature of the GRANTOR

A deed delivered in escrow is given to:
a. a neutral third party
b. the mortgagee
c. the buyer's attorney
d. the seller's attorney

A neutral third party is the textbook definition of an escrow agent

A restrictive covenant in a deed could:
a. prohibit resale of the property
b. override zoning regulations
c. prevent the resale of the property to people with children
d. prevent the use of the property as a bar

A restrictive covenant must be legal. Restraints on alienation (resale) are illegal. A restraint on sales to people with children is a violation of Fair Housing. A deed restriction could be more restrictive than zoning laws but cannot be less restrictive than zoning laws. Restricting a special use is not uncommon

The covenant in a deed where the grantor guarantees that she owns the property and has the right to sell it is known as:
a. seisin
b. against encumbrances
c. warranty forever
d. quiet enjoyment

A covenant of seisin is an assurance by the grantor to the grantee that the grantor has the degree of ownership that the grantor claims she can convey

Tax assessment of real property according to value is known as
a. appraisal
b. ad valorem
c. replacement cost
d. accretion

The question states a text book definition of ad valorem

Which of the following is not true about title insurance?
a. the policy will include a list of exclusions
b. it serves many of the same functions as homeowner's insurance
c. it will insure the owner against losses arising from title defects
d. it will generally include exclusions for unrecorded easements

Title insurance (insures against encumbrances) and homeowner's insurance insures against damage to the home are two different things

Who pays excise taxes
a. grantor
b. grantee
c. broker
d. both a and b

An excise tax is a tax assessed for a service. For the grantor, excise taxes may include transfer taxes paid at settlement. For the grantee, excise taxes may include recordation taxes

In order to examine a recorded deed, which of the following is necessary?
a. written permission of the owner
b. an inquiry notice
c. a court order
d. none of the above

Deeds are part of the public record and any person may go to those records and review them

If a seller deposits a deed with an escrow agent but the seller dies before it is delivered to the purchaser, the transfer of title becomes effective on the date the deed was deposited into escrow due to the:
a. parties consent
b. law of contracts
c. parole evidence rule
d. doctrine of relation back

The question states the definition of the relation back rule

When the grantor of a deed swears that he is conveying title of his own free will, his action is referred to as:
a. execution
b. acknowledgement
c. novation
d. authentication

Swearing that he passes title (in a deed) of his own free will is usually done before a notary public or some other official and is called acknowledgement

Which of the following best describes the process of taxing real estate according to its value?
a. ad valorem
b. assessment
c. appraisal
d. special assessment

Ad valorem means according to value which describes the general method of arriving at the real estate tax

Title to real property is conveyed by deed when:
a. signed by the grantor
b. recorded by the grantee
c. delivered and accepted
d. signed by the grantee

Once a deed has been delivered and accepted, title passes and the deed then becomes evidence of the fact that title was conveyed

The covenant in a deed where the grantor guarantees that no one has any other interest in the property that will disturb the grantee's possession is known as:
a. the covenant of further assurances
b. the covenant against encumbrances
c. the covenant of quiet enjoyment
d. the covenant of seisin

Further assurances means that the grantor will execute any other documents necessary to perfect the title. Encumbrances means there are no outstanding debts, except those stated in the deed. Seisin means ownership

If a deed transferring legal title from one party to another is NOT recorded in the public record, which of the following statements is correct:
a. the deed is valid
b. the grantor gives up all right to the property conveyed
c. both a and b
d. the transfer is not valid

Recording the deed is NOT essential for the validity of the deed. It is the wise and prudent thing done by most people. In transferring title, the grantor gives up his rights

Jill agrees to sell Jason a three bedroom ranch. Per the sales agreement, Jill deposited the deed to the ranch in escrow. Subsequently, Jill dies. The ranch will most likely:
a. pass to Jill's heirs provided she left a valid will
b. pass to the state because the escrow terminates
c. pass to Jason, provided he satisfies the terms of the sales agreement
d. pass to Jason if he is an heir of Jill's

The doctrine of relation back establishes that the death of the grantor does not terminate the escrow and authorizes the escrow agent to deliver the deed as instructed. Provided Jason satisfies the terms of the sales contract. Jill's death does not affect the transaction

The purpose of a recording act is to:
a. ensure title is marketable
b. raise revenue
c. create a local public record
d. protect property owners

Recording acts create local public records that are available for public inspection. This ensures public notice of all recorded information. Choice four is too narrow (creditors are also protected by recording statutes) as compared with choice three

Fees charges for the privilege of buying or selling property in a particular jurisdiction are known as:
a. excise taxes
b. al valorem taxes
c. special assessments
d. none of the above

The question states the textbook definition of excise taxes (grantor's tax)

All of the following usually perform title searches except:
a. an examiner
b. an abstractor
c. a real estate person
d. the same company that issues title on the property

One who performs a title search is known as a title examiner or abstractor. to promote its own interests, the same company that issues title usually conducts the title search. Real estate persons generally do not perform title searches

Deed restrictions usually apply to:
a. current owners
b. subsequent owners
c. all property owners in a neighborhood
d. both 1 and 2

Deed restrictions run with the land and therefore apply to the current owner and any other person who later occupies the property. While other homes in a neighborhood may have similar deed restrictions (developments) each deed restriction applies only to the owner

Which of the following clauses is least likely to be included in a mortgage?
a. acceleration
b. habendum
c. alienation
d. defeasance

A habendum clause is found in a deed, not a mortgage. It is the clause that begins with "To have and to hold" and describes how the property will be held by the new owner. All other items listed are generally included in the mortgage

On Sept. 12, 1991, a residential property had the following liens filed against it: a 1st mortgage, a mechanic's lien and a special assessment. On May 20, 1992 a 2nd mechanic lien was filed against the property. Which lien has priority?
a. mortgage
b. 1st mechanic's lien
c. special assessment
d. 2nd mechanic's lien

The special assessment would have priority over all the other liens. Special are a form of real property tax and property taxes have priority over other liens

Which of the following deed creates the most liability for a seller?
a. special warranty deed
b. universal warranty deed
c. general warranty deed
d. quitclaim deed

The general warranty deed is the most complete of all deeds. It carries all the warranties of title. A quitclaim deed is the least complete in that it warrants nothing. A special warranty deed warrants only against defects arising during the tenure of the grantor's ownership and not against previous defects of title.

Bill and Sue want to purchase a house that is occupied by their grandparents. they want to take title in such a way that will result in the least amount of income tax liability for themselves. How should the real estate agent advise them?
a. take title as tenants in common with their grandparents
b. acquire title as joint tenants with each other
c. take title as tenants in common but with equal interest
d. refer them to a tax advisor or attorney


A condensed history of the documents affecting real property is:
a. an abstract of title
b. the chain of title
c. an affidavit of title
d. an abstract of judgements

The condensed history is the abstract. A chain of title is similar but not as complete. An affidavit of title is the swearing that there have been no encumbrances incurred since the title search

Escrow may be used in which of the following situations?
a. when property is purchased and secured by a deed of trust
b. in an exchange of property
c. with a contract for sale
d. all of the above

Escrow is the holding of money, documents, etc. by a third party until the conditions of a contract have been satisfied by the principle parties. Escrow is commonly used in most real estate transactions including the closing of a mortgage loans and property exchanges

A court order to remove a cloud from the title is called an action or suit:
a. for specific performance
b. for title insurance
c. to quiet title
of legal injunction

A court action for the removal of a defect, cloud or claim against the title of a property is called a suit to quiet title

A house sold for $109,000 with the buyer making a 20% downpayment. The grantor's tax is based on the:
a. down payment
b. loan amount
c. selling price
d. none of the above

The grantor's tax is based in the selling price of the property

What should Sally Salesperson do with an earnest money deposit check she received from a buyer?
a. deposit it in her escrow account
b. give it to her broker
c. attach the check to the contract and file it
d. give it to the seller

The deposit should be given to the broker as soon as the buyer's offer is accepted by the seller and a contract exists. Remember a salesperson doe not have an escrow account- only the broker does

All of the following would be considered involuntary alienation except:
a. foreclosure
b. eminent domain
c. devise
d. adverse possession

Alienation means to transfer property. A devise is a gift of real property through a will which is a voluntary act. Foreclosure, when the lender takes over property, and eminent domain when the government takes over property is involuntary. Adverse possession can only occur without the true owner's permission

Pete purchased a house from Tony. He did not record his deed, but took immediate possession. Tony died a few months later and according to the terms of his will, the property will go to his nephew, Bob. Bob knew his friend angela was interested in buying a house. They inspected the property and angela agreed to but it from Bob. Angela recorded her deed. Who owns the property?
a. Angela because she recorded the deed
b. Bob because Tony died testate
c. Pete because he purchased it from Tony
d. Pete due to the relation of back doctrine

A deed does not need to be recorded to effect a transfer of title. Bob and Angela inspected the property thereby having actual notice that Pete was in possession which should have been questioned. Legally the property belongs to Pete. Back doctrine is when the grantor dies while the property is in escrow

In a foreclosure sale, what kind of deed does the mortgagor receive?
a. sheriff's deed
b. executor's deed
c. quitclaim deed
d. none of the above

The mortgagor is the person in default. The new buyer, at a foreclosure sale receives a sheriff's deed (or special warranty deed)

Bill sells real property to Betty through an escrow closing. Bill relinquishes control of the deed, but Betty does not receive it. what most likely happened to the deed?
a. it was stolen
b. Bill placed it in a safe deposit box
c. Bill gave it to his wife to hold
d. Bill delivered it to an escrow agent

Note the question states this is an escrow closing. In an escrow closing, the deed is placed in escrow, where the grantor relinquishes his control of the deed. the escrow agent delivers the deed to the grantee upon the completion of stated conditions agreed to by the parties (usually stated by the sales contract)

If a deed is delivered in escrow, it is given to:
a. the buyers attorney
b. the sellers attorney
c. a neutral third party
d. the mortgage

The trustee (holder of escrow) is a neutral third party to the contract

Which of the following is NOT a cloud on title?
a. a valid first mortgage
b. a recorded contract for deed under which the buyer's rights have been judicially terminated
c. a recorded option contract whose option period has expired
d. a recorded mortgage that has been paid in full but a satisfied has never been recorded

The question is intended to turn on the distinction between "cloud on title," "title defect," and "marketable title." It uses the phrase cloud on title as an indication of potential but uncertain defect that may be cleared. A valid first mortgage is certain to be a title defect (encumbrance) that prevents marketable title. However, it is not a cloud because there is no ambiguity, it is certain to establish a defect and prevent marketable title.

Which of the following provides compensation for defects?
a. homeowner's insurance
b. private mortgage insurance (PMI)
c. title insurance
c. B and C

Title insurance reimburses the title holder for certain losses incurred due to defects in the title. Homeowners' insurance reimburses the homeowner for damage to the house or property.

A house sold for $140,00 and the buyer made a downpayment of 20%. Assuming a rate of $1.00 per $1,00 the grantor's tax will be
a. $28.00 based on the down payment
b. $112,000 based on the loan amount
c. $140,000 based on the sales price
d. none of the above

Grantor's tax is charged on the basis of the selling price of the property, not the loan amount

Larry sells David some property. The deed from Larry to David contains the following covenants: seisin, quiet enjoyment, against encumbrances and further assurances. Following the transfer, David discovers utility poles on the property, which lead to a nearby transformer. Larry failed to list the utility poles in the deed. Larry's failure to identify these encumbrances violates:
a. the covenant of quiet enjoyment
b. the covenant against encumbrances
c. the covenant against grantor's acts
d. none of the above

A covenant against encumbrances is the grantor's guarantee that there are no encumbrances against the property except those specifically disclosed. The utility poles are indeed an encumbrance. However, the covenant against encumbrances is not breached by merely failing to list an open and visible encumbrance. Open and visible encumbrances provide actual notice to purchasers and therefore do not need to be listed in the deed

It would not be considered commingling of funds if:
a. the broker holds an ernest money deposit check at the request of the offeror, until acceptance by the offeree.
b. the broker holds an EMD check at the request of the offeror, after acceptance by the offeree
c. the broker holds an EMD in his personal account until the offer is accepted or rejected
d. the broker holds the EMD in his brokerage operating account because the deal is going to be all cash

Holding a check at the request of the offeror until acceptance by the offeree is a normal practice and not commingling. Once the offer is accepted, the money must be immediately placed in the escrow account. The broker never puts money, belonging to others in his personal or brokerage account

Which of the following in not prorate between buyer and seller at closing?
a. recording fees
b. real estate taxes
c. rents
d. homeowner's insurance premiums

Recording fees are not prorated. Each party pays their own. If insurance premiums have been paid in advance by the seller they would be prorates if the buyer is assuming the insurance policy. However, this is not as common as it once was

A quitclaim deed may be used to:
a.transfer ownership of a fee simple estate
b. transfer interest in a life estate
c. terminate an easement
d. any of the above

A quitclaim deed can be used to transfer any interest in real property from one party to another. It is normally used for the transfer of an interest that is less than fee simple

Bob imposes a deed restriction on his property that prohibits the sale of his home to anyone from France. Bob's deed restriction is:
a. voidable
b. void
c. enforceable
d. irrelevant

Illegal covenants are void (not voidable- no action need be taken) and unenforceable. Discrimination based on national origin is illegal based on fair housing laws. Therefore Bob's deed restriction is void and unenforceable.

A title insurance policy reimburses the title holder for:
a. loss of property through foreclosure
b. loss as a result of a superior claim
c. damage caused by fire
d. flood damage

Title insurance reimburses the policy holder for specified losses caused by title defects the arose before the effective date of the policy.

Recording a document creates:
a. constructive notice
b. actual notice
c. record notice
d. both a and b

Recording a document provides constructive notice of its existence, as mandated by the recording acts. Inspecting recorded documents creates actual notice.

Smith is interested in purchasing a parcel of land but wants to first examine any recorded documents relating to the parcel. Smith must have authorization from:
a. the current owner
b. the civil court having jurisdiction
c. a magistrate
d. no one

All recorded documents pertaining to land are public information. Therefore, no permission is required to gain access

In the event of any conflict, which clause would best state the extent of ownership?
a. premises
b. testimonium
c. habendum
d. all of the above

While both premises and habendum clauses could state the event of ownership being transferred, the premises clause controls in the event of a conflict.

When a property sells, who pays to record the satisfaction or release of the existing deed of trust?
a. buyer
b. seller
c. lender
d. broker

The buyer pays to have his new deed recorded. The seller pays to have his existing deed of trust released

All of the following persons may act as escrow agents except:
a. brokers
b. neutral third persons
c. salespersons
d. attorneys

Brokers and attorneys can and do act as escrow agents. Both may be neutral third parties which is the basic requirement for an escrow agent. However most states do not allow sales persons to be escrow agents, although they may accept money and documents for escrow on behalf of their employing broker

A real estate broker wishes to deposit an ernest money check into his business operating account until settlement so the purchaser can earn a higher rate of interest on her funds. Should he do this?
a. yes, if the purchaser receives a comparison of available interest rates
b. yes, if the broker promises to insure such funds will be available at closing
c. no, these funds must be kept in a separate escrow account
d. no the broker cannot guarantee a higher interest rate

All funds held for others must be deposited into a separate escrow account, not in the business acount

Quincy sold Ralph a piece of property and transferred title to Ralph by quitclaim deed. Later a court determined that Quincy do not own the property. Which is true?
a. Ralph owns the property because court action was after title transferred
b. Ralph has no interest in the property
c. Ralph has a good claim against Quincy for misrepresentation
d. both b and c

With a quitclaim deed the grantor is conveying only the interest he has, if any, without guarantees. Because Quincy has no interest, he had nothing to sell and Ralph has no interest in the property. On these facts, Ralph has no basis for a suit because Quincy, through the quitclaim deed, never asserted ha had any interest at all

A written instrument or something of value given to a disinterested third party to hold, but which is to be turned over to a party upon satisfaction of specified conditions is an example of:
a. a bond
b. a deed of trust
c. an escrow
d. an assignment

The question describes an escrow closing. In an escrow closing (used by some states) documents (deeds, mortgages, etc.) and funds are held by a third party (not the buyer or seller) until closing is complete. Upon completing closing,(as specified by the purchase agreement), the escrow agent turns over the deed and funds to the proper parties

A property owner obtains a building permit to add a bedroom to her house. Her neighbors notice that the addition will result in a violation of the setback restrictions in the owner's deed. which of the following is the best course of action for any affected neighbors?
a. sue for damages due to the violation
b. nothing because the county sanctioned the addition by issuing a building permit
c. seek an injunction forcing the owner to tear it down
d. ask the county to revoke the building permit

The setback restrictions described are deed restrictions, not zoning restrictions. The neighbors would sue for an injunction against the owner, either preventing the addition from being built or requiring that it be removed. Building permits do not override valid deed restrictions

A deed in which the grantor covenants only against claims that arise during the time that the grantor owned the property is referred to as a:
a. quitclaim deed
b. bargin and sale deed
c. general warranty deed
d. special (limited) warranty deed

In a special warranty deed, the grantor warrants only against title defects and claims which occurred during the time the grantor held title to the property, but not before that time. Bargain and sale deed and quitclaim deeds offer no warranty to the grantee regarding the status of title. General warranty deeds warrant against title defects and claims which occurred both before and during the time the grantor held title

Which of he following deed clauses is most likely to state the names of the parties?
a. premises
b. habendum
c. testimonium
d. none of the above

The premises clause contains the words of conveyance and often states the names of the parties.

One house in a large neighborhood stands out because it is not well maintained compared to the others. Which concept best explains this single home's impact on the surrounding community?
a. the poorly maintained home's value may rise due to immobility
b.the value of all other homes in the neighborhood will decrease due to immobility
c. the poorly maintained home's value would increase if it were assembled with another lot
d. the value of other homes in the neighborhood would decrease due to situs

A poorly maintained home in a large and well maintained community may actually increase in value due to the concept of immobility-it's value is directly affected by its external surroundings. One home is not likely to decrease property values for all other homes in a large community

Bobby purchases a lot for his dream home. A description of his lot states, " Starting from the tulip tree at the northeast corner of the Smith farm, proceed directly due west to the banks of Jeremy's Run, proceed south to the two Oak trees, proceed east to two large boulders, proceed north to the tulip tree" This method of land description is:
a. Metes and bounds
b. Rectangular
c. Prior Recorded Documents
d. Monument

Monument system relies on naturally occurring physical features of the land physical features of the land, such as those presented in the question.

Large blocks of land located in a rural area of a Midwestern state would most likely be described by:
a. government rectangular survey
b, lot,block and subdivision
c. metes and bounds
d. reference to other documents

the government survey method, or rectangular survey, is used in more that 30 states, mostly in the mid-west

The unity that exists in both a tenancy in common and joint tenancy is:
a. time
b. title
c. possession
d. none of the above

The "right" of possession is common to both forms of ownership. For joint tenancy to exist, each owner must acquire title from the same source, at the same time,and each owner must have the same percentage of interest. With a tenancy in common, there may be different interests and different sources

Which type of legal description will most accurately describe an irregular shaped parcel of land?
a. lot and block
b. metes and bounds
c. recorded plat of subdivision
d. government survey

Metes and bounds (and arguably monument, which is not a choice) is best suited to describe irregularly shaped parcels of land because one can easily navigate any shape from the point of beginning (POB)

Residential property may be composed of:
a. single family homes
b. single family homes and cooperatives
c. commercial buildings that may have the landlord's private apartment
d.a cattle ranch with a bedroom in the barn

Residential property is primarily composed of single family homes but can also include smaller multi- family units such as condominiums and cooperatives

Which of the following is not personal property?
a. a lease
b. a mortgage that secures personal property
c. partnership interests
d. an easement

Leases, mortgages on personal property and partnership interests are all personal property. Of the listed choices only easements are not personal property

Mary purchased the right to use an apartment weeks every year. this is an example of:
a. time share ownership
b. ownership as a tenant in common
c. cooperative ownership
d. a limited partnership

Time sharing (interval ownership) involves ownership only for a particular time period

Once created and properly recorded, may a subdivision plat be altered?
a. no, because all descriptions will retain the historical reference to the original subdivision
b. yes, so long as new plat are created and recorded that reflect the changes to the original plat
c. no because a change would render all prior descriptions based o the original invalid
d.yes, so long as permission is obtained from the local zoning board

Subdivisions may e further subdivided or altered after the initial plat is recorded. This requires creating and recording new plats. If this occurs, the legal description may need to refer to all plats reflecting the history of the description of the parcel at issue

Sam dies leaving a valid will. Sam leaves his children the family farm after the death of his wife, Jane. Several years after Sam's death, Jane sells her interest to Larry. Which of the following is true?
a. Larry has no interest but may cancel the contract due to Jane's fraud
b. Larry has no interest because Jane did not get the children's permission to sell farm
c. Larry has a life estate per autre vie
d. none of the above

Jane has a life estate and the children are remainderman. Jane may only sell the type of interest she has. Thus when she sells the property, the buyer's interest is the same as Jane's life estate measured by Jane's life, also known as lfe estate per autre vie

The right or privilege that one has to use the property of another is
a. a license
b. a lease
c. and easement
d. all of the above

An easement, lease, and license create a right to use someone else's property. However, an easement creates a more permanent and secure interest than either a license or a lease

A condominium could be which of the following
a. multi-story building
b. townhouse community
c. industrial office park
d. any of the above

Condominium type ownership can be created anywhere for any type of property

Three people own a piece of property as tenants in common. Two of the owners want to sell the property but the third party does not. The two owners that want to sell:
a. cannot sell because all three must agree
b. may file suit for partition
c. may seek detachment
d. may severe the third parties interest

Both joint tenants and tenants in common may file suit for partition, which is a request to a court to divide property owned concurrently. If, the court could order the sale of the property and divide the proceeds

Which of the following is an example of a tenancy at sufferance?
a. a farmer who refuses to give up possession of property when his lease expires in order to harvest his growing crops
b. a person who leases a store and renews her lease on a month to month basis
c. a tenant who installed trade fixtures, but did not remove them when the leases expired
d.a tenant that uses the premises in violation of her lease

A tenant in sufferance is a person who remains in possession of leased property after his or her lease expires. while a farmer retains title to his crops, he has no rights to the leased premises. A tenant that violate the conditions of her lease before it expires still has lawful possession unless she is evicted

Which of the following is not an improvement of land?
a. building
b. sidewalk
c. corn crop
d. flower bed

Improvements refer to the development of land through the construction of valuable additions. Crops are not improvements, as they do not improve the value of the land (as emblements or fructus industriales, they are owned by the farmer

Physical characteristics of the land include all but which of the following:
a. heterogeneity
b. indestructibility
c. immobility
d. fixity

Fixity or investment permanence is an economic characteristic of land. Heterogeneity (uniqueness), indestructibility, and immobility are physical characteristics of land

The most predictable element of severance is:
b. intent
c. agreement
d. adaptation

Always avoid doubt by reducing an agreement to writing. The written agreement is the best way to ensure questionable items like fixtures transfer

A land description that reads "T4S,R3E" is most likely based on the:
a. monument method
b. government survey method
c. metes and bounds method
d. recorded plat method

The rectangular or government survey method uses range lines, which are north south lines in a township. Townships are located by their distance north or south of the base line and east or west of the primary meridian. Government survey descriptions read "Township 4 South, Range 3 East" or "T4S.R3S"

Which statement about encumbrances is correct?
a. an encumbrance could increase real property value
b. a lease is an example of an encumbrance
c. encumbrance can only be created by an owner of real property
d. both a and c

an encumbrance is anything that affects the title to real property and diminishes its value. there are some positive encumbrances, but if there is an encumbrance on the property is diminishes the owner's rights. Encumbrances can be created by either individual or government action. Finally a lease is an example of an encumbrance

An adequate metes and bounds description will have all of the following except:
a. a definite point of beginning
b.four sides
c. closure
d. linear measurements and compass directions

Property does not need to be shaped like a square. It an be any shape with ore or less than four sides

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