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Real Estate Economics
questions missed on exam cram
tx allied schools exam cram
Terms in this set (28)
Which of the following is considered personal property?
a. Mineral rights
b. Leasehold estates
c. All improvements to land
d. Trees growing in a natural forest
A - Mineral rights, improvements to land, and trees growing in a forest are real property. A leasehold estate, also known as a less-than-freehold estate, is personal property of the tenant.
Which of the following is a less-than-freehold estate?
a. Life estate
b. Estate of inheritance
c. Estate for years
d. Estate in remainder
C - An estate for years is one of the four types of LESS-THAN-freehold estates. They are: (1) estate for years
(2) estate from period to period
(3) estate at will
(4) estate at sufferance.
Choices (a), (b), and (d) are FREEHOLD estates.
Which is the best definition of encumbrance?
a. The degree, quantity, and extent of interest that a person has in real property
b. A non-possessory interest in real property that is held by someone who is not the owner
c. The use of property as security for a debt
d. Any action regarding property, other than acquiring or transferring title
B - An encumbrance is an interest in real property that is held by someone who is not the owner.
Private restrictions on land can be created by deed:
b. or written agreement.
c. or zoning ordinance.
d. both (b) and (c)
B - Private restrictions are created in the deed at the time of sale or in the general plan of a subdivision by the developer.
Gary owns a ranch. Gary gave Sam, who owns no property, a non-revocable right to cross his property to fish in a stream. Sam has a(n):
a. easement in gross.
c. easement appurtenant.
d. easement by prescription.
A - Since an unlocated easement is valid, it is possible to have an easement that is not appurtenant to any particular land. These easements are known as easements in gross.
A deed to transfer real property must be __________ to be binding on a buyer and a seller.
b. delivered and accepted
d. all of the above
B - Property is acquired by transfer when, by an act of the parties or law, title is conveyed, or transferred, from one person to another by means of a written document. A deed is binding when it is delivered and accepted.
Effective delivery of a deed depends on:
a. the intention of the grantor.
b. recording the deed.
c. knowledge of the deed's existence by the grantee.
d. acknowledgement of the grantor's signature before a Notary Public.
A - It must be the intention of the grantor that the deed is delivered and title be transferred during his or her lifetime.
A written contract takes precedence over oral agreements. This principle is expressed by the:
a. Statute of Limitations.
b. Statute of Frauds.
c. parol evidence rule.
d. rule of previous evidence.
C - The parol evidence rule extends this meaning and prohibits introducing any kind of outside evidence to vary or add to the terms of deeds, contracts, or other writings once executed.
An exclusive right to sell listing agreement is a(n):
a. bilateral contract.
b. promise for a promise.
c. employment contract.
d. all of the above.
D - An exclusive right to sell listing agreement is a bilateral employment contract between an owner of real property and an agent who is authorized to obtain a buyer.
An enforceable listing contract for the sale of real property must be:
a. in writing.
d. all of the above.
A - The listing agreement is a written contract by which a principal, or seller, employs a broker to sell real estate.
Broker Winters signed an exclusive agency listing to sell Baker's $365,000 house. Winters diligently advertised the sale of the house. One week before the listing was to expire; the house was sold through Baker's own efforts to a friend. Under current rules and regulations, Winters is most likely to receive:
a. no commission.
b. half of the commission.
c. the costs of advertising the house.
d. all of the commission.
A - An exclusive agency listing is an exclusive contract where the seller must pay the listing broker a commission if any broker sells the property. However, the seller has the right to sell the property without a broker, and pay no commission.
Seller Paul gives an option to buyer Green to purchase Paul's ranch. This option most clearly constitutes a(n):
a. voluntary lien on Paul's ranch.
b. offer to enter into a contract.
c. fiduciary agreement.
d. contract to keep an offer open.
D - An option is a contract to keep open for a determined time—an offer to purchase or lease real property.
Seller Kris listed a vacant lot with a broker at $111,400. Buyer Brown submitted an offer of $111,000 that was to expire in three days. The next day, Kris made a counteroffer of $111,200. When Brown did not respond within the three-day period, Kris signed an acceptance of Brown's $111,000 original offer and instructed the broker to deliver it to Brown. Brown told the broker that he had decided not to purchase the property, but Kris insisted they had a deal. Based on these circumstances, which contract do they have?
B - In a real estate transaction, a counteroffer is the rejection of an original purchase offer and the submission of a new and different offer. If a seller rejects the offer and submits a counteroffer, the original offer automatically terminates.
8. Which system of land description employs meridians and baselines?
a. Metes and bounds
b. Rectangular survey system
c. Subdivision system
d. Lot, block, and tract system
B - The rectangular survey system is also known as the U.S. Government Section and Township Survey or the Public Land Survey System. It uses imaginary lines (meridians and baselines) to form a grid to locate land.
9. On the sale of a principle residence, which expenses are deductible?
b. Property taxes
c. Both (a) and (b)
d. Neither (a) nor (b)
C - Both interest and property taxes are deductible on the sale of a principle residence.
8. The original purpose of the Federal National Mortgage Association (Fannie Mae) was:
a. buying and selling FHA-insured and VA-guaranteed loans in the secondary market.
b. buying and selling conventional loans in the secondary market.
c. buying FHA and VA loans in the primary market.
d. selling FHA and VA loans in the primary market.
A - The Federal National Mortgage Association (Fannie Mae) was originally created for the purpose of increasing the amount of housing credit available in the economy by purchasing FHA-insured and VA-guaranteed loans.
Life insurance companies usually do not deal directly with mortgagors or trustors. They make real estate mortgage loans through:
a. the FHA or VA.
b. mortgage companies.
c. savings and loan associations.
d. all of the above.
B - Usually loans are made through loan correspondents (mortgage companies) who negotiate and service the loans.
What is the largest single resource for residential mortgage credit?
a. Commercial banks
b. Credit unions
c. Life insurance companies
D - Thrifts are the largest single resource for residential mortgage credit. (S&L)
The relationship between a thing desired and a potential purchaser is one definition of:
a. economic function.
b. economic necessity.
c. effective public demand.
D - Value or worth is the present and future anticipated enjoyment or profit from the ownership of property. It is the relationship between the thing desired and the purchaser.
Which of the following would be the most effective method in appraising single-family residences?
a. The income approach
b. The market data approach
c. A competitive market analysis
d. The cost approach
B - The market data or sales comparison approach is given the most weight and used primarily for appraising single-family residences.
In the appraisal of real property, the term unearned increment refers to a(n):
a. increase in value due to population increase.
b. decrease in value due to social forces rather than personal effort.
c. decrease of property taxes.
A - Unearned increment refers to the increase in the value of a property due to a population influx. This increases the amount of goods and services available and leads to additional infrastructure and overall growth.
Which of the following appraisal approaches is based on the principle of substitution?
a. Replacement cost
b. Reproduction cost
c. Market comparison
C - The market comparison approach uses the principle of substitution to compare similar properties.
Functional obsolescence would not include:
a. eccentric design.
b. items of surplus utility.
c. lack of air conditioning.
d. proximity to nuisances.
D - Poor architectural design and style can contribute to functional obsolescence modern facilities, modern facilities, out-of-date equipment, changes in styles of construction, or changes in utility demand. For instance, a four-bedroom house with only one bathroom might be considered functionally obsolete because most homes today have at least two bathrooms with many having one bath for each bedroom. It may or may not be curable.
To calculate a gross rent multiplier accurately, what does the appraiser need from comparable properties?
a. Net income and selling price
b. Original cost and the annual income
c. Annual rent and the selling price
d. Net income and the capitalization rate
C - The GRM compares properties to see if they are priced right or are above or below market value. If you know that most rental properties are selling for around eight times the gross annual multiplier (eight times gross), simply divide the listed price by the gross income to arrive at the multiplier.
The gross rent multiplier is defined as:
a. sales value divided by gross rent.
b. gross rent divided by sales value.
c. assessed value divided by gross rent.
d. gross rent divided by market value.
A - Divide the list price by the gross annual income.
Which type of business ownership is always taxed as a separate entity and files its own income tax return?
a. Sole proprietorship
d. Limited liability company
C - In a sole proprietorship and partnership, all income, expenses, gains, and losses are reported on the owners personal income tax returns. The LLC may choose how the business will be taxed—as a separate entity (like a corporation) or as a partnership-like entity in which profits are passed through to partners and taxed on their personal income tax returns. Corporations are taxed as a separate entity.
Which statement regarding real estate signs is incorrect?
a. A homeowners' association can prohibit private owners from displaying real estate signs on their own property.
b. A city, county or state may ban all signs on publicly owned property.
c. A city, county, or state cannot completely ban signs on privately owned property.
d. A city, county, or state may impose reasonable restrictions on the time, place, and manner of displaying signs regardless of whether it is on privately or publicly owned property.
A - A city, county, or state may ban all signs on publicly owned property. A city, county, or state cannot completely ban signs on privately owned property. A city, county, or state may impose reasonable restrictions on the time, place, and manner of displaying signs regardless of whether it is on privately or publicly owned property.
Real estate investors can defer federal income tax liability through:
a. installment sales.
b. tax-deferred exchanges.
c. both (a) and (b).
d. neither (a) nor (b).
C - Some tax advantages from real estate investment are installment sales and tax-deferred exchanges.
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