CA DRE Exam Terminology Prep Questions with correct Answers

1031 tax-deferred exchange - ANSWER-Section 1031 of the Internal Revenue Code allows the owner of real property to sell that property and then reinvest in a "like-kind" property and defer paying any capital gains taxes; strict IRS rules regulate this type of exchange 1031 tax-deferred exchange - ANSWER-Ex. Real estate investors can take advantage of the ________________ to defer capital gains taxes when selling a property, provided the money is rolled into another "like" purchase Abutting - ANSWER-Land parcels that share a common border Abutting - ANSWER-Ex. Many neighbors find that fences make __________ properties more tolerable. acceleration clause - ANSWER-Allows a lender to demand immediate and full payment of all debt owed if a buyer defaults or fails to meet certain conditions that apply to the loan Accession - ANSWER-The addition of value to property through labor or the addition of new materials, including an increase in land through natural processes Accession - ANSWER-Ex. Jonathan's property borders a bay. The bay receded, and Jonathan gained an extra 10 feet of property to his land through _________; also, Chris built a fence on his neighbor's property with no agreement allowing Chris to remove the fence. The neighbor now owns the fence. accessory use - ANSWER-An incidental or subordinate use to the primary use of the property accessory use - ANSWER-Ex. Andy's military bunker in his back yard constituted an ___________ of the property. Accounting - ANSWER-One of the fiduciary duties, accounting means an agent is accountable for any funds or properties entrusted to the agent. This is a duty that survives termination of an agency agreement Accounting - ANSWER-Ex. Cameron accepted an earnest money deposit from his buyer. His duty of ___________ means that he must safeguard the funds and handle them according to the agreement with his client and the policies of his firm. Accretion - ANSWER-The gradual growth in the size of a land parcel due to water-deposited sand, silt, or gravel Accretion - ANSWER-Ex. Jillian's property grew through _________ when the creek flow created a long sandbar. accrued items - ANSWER-Expenses that have been incurred but aren't due yet, e.g. property taxes Acknowledgment - ANSWER-A requirement for deed transfer; a public official must acknowledge, usually by a notary public, the grantor's signature Acre - ANSWER-A unit of land that is equal to 43,560 square feet active fraud - ANSWER-Intentional misstatement of a material fact; action taken by one party to deceive a second party in an attempt to consummate a contract or transaction active fraud - ANSWER-Ex. "Sure, the foundation is perfectly safe!" Lisa said, even though she knew full well that there was a crack the size of Toledo in it. act of waste - ANSWER-Abuse of a property by a person who holds possession through a life estate act of waste - ANSWER-Ex. Minerva inherited a life estate to a historic mansion and turned it into an illegal video gaming parlor. Also, Charles, who is in possession of real property as a life estate, failed to maintain the property. actual notice - ANSWER-Express notice given directly to a person or actual knowledge that is known actual notice - ANSWER-Ex. Karen told her neighbors she would be moving. adjustable rate mortgage (ARM) - ANSWER-A mortgage with a rate that adjusts based on changes in a market index adjusted basis - ANSWER-The final basis for taxing purposes, computed by taking acquisition costs plus capital improvements and less certain deductions such as depreciation adjusted basis - ANSWER-Ex. When Mark computed the ¬¬__________ in his property, he had to subtract $10,000 in depreciation he had taken over the years. Adjustment - ANSWER-In appraisals or CMAs, the dollar value or percentage added to or subtracted from the sales price of a comparable to arrive at an indicated value for the subject; in closings, the credits and debits made to a settlement statement for accrued or prepaid expenses adjustment date - ANSWER-The date on which the interest rate changes on an adjustable rate mortgage adjustment date - ANSWER-Ex. Karey made sure to refinance before her ________. Rates had dropped and she could get a better rate than the one she'd face once her ARM adjusted. adjustment (loan) - ANSWER-Ex. When the document preparation fees were more than anticipated, both sides received an _______ at closing. administrative law - ANSWER-Law related to the legal process; enacted by administrative agencies, which are governmental bodies of the city, county, state, or federal government administrative law - ANSWER-Ex. __________ dictated that Gerald file a petition prior to having his case heard by the courts. Administrative Procedure Act - ANSWER-Helps to ensure that no governmental entity acts without an opportunity for public input by requiring public disclosure and discourse before rulemaking Administrative Procedure - ANSWER-Ex. The _________________ Act was partially enacted in response to FDR's New Deal, in an effort to prevent the federal government from having too much power. ad valorem - ANSWER-Related to the concept of property taxes. A Latin term that means "according to value." ad valorem - ANSWER-Ex._________ is a method of charging a tax according to the value of the property instead of by a fixed rate. adverse material fact - ANSWER-A fact that might cause the buyer to change his mind about purchasing the property adverse material fact - ANSWER-Ex. When Chet learned that a railway was being built behind the property, he withdrew his offer. That was an ________________ he couldn't live with. adverse possession - ANSWER-A person actually and visibly possesses someone else's real property for a statutory length of time and then claims it as his or her own; openly hostile to another's ownership claim adverse possession - ANSWER-Ex. Ralph had been using Kimo's land for nearly two decades before they realized the land actually belong to Kimo. Ralph was able to claim the land through ___________. aesthetic zoning - ANSWER-Specifies style or architecture of buildings in an area in order to preserve charm, feel, etc. aesthetic zoning - ANSWER-Ex. ________________ required that all homes in Ocean City be either Victorian or Tudor in design, and no taller than three stories. affidavit of title - ANSWER-A sworn statement assuring that no title defects have occurred since the date of the last title search affidavit of title - ANSWER-Ex. An __________ is often a part of a bring down, a title search performed after closing and before any new documents are filed. affiliated business arrangement (AfBA) - ANSWER-A shared ownership among settlement service providers (such as a real estate firm and a mortgage brokerage) that must be disclosed to clients whenever more than 1% is owned by the other company, if both service providers are used by the same client in the same transaction. affiliated business arrangement (AfBA) - ANSWER-Ex. Before Clarisse could refer her clients to her mortgage broker (who was partially owned by Clarisse's brokerage, RESPA requires her to disclose the ______________________. agency coupled with interest - ANSWER-A situation in which the agent has a financial stake in the transaction beyond the anticipated commission agency coupled with interest - ANSWER-Ex. Jose's listing agreement with his seller clients involved agency coupled with interest because he had loaned them $2,000 to forestall their foreclosure and expected to be paid back after the sale went through. air rights - ANSWER-Rights to use the airspace above the land may be sold or leased independently of the land itself air rights - ANSWER-Ex. Jerry leased the airspace above his home to a firm that needed unimpeded airspace for wireless communications. alienation clause - ANSWER-A provision in a mortgage that requires the loan to be paid in full by the mortgagor if a transfer of ownership takes place. This is also called a due-on-sale clause. alienation clause - ANSWER-Ex. An ____________ protects a lender by preventing a borrower from assigning debt without the lender's approval. Alienation may be either voluntary or involuntary. Alluvion - ANSWER-The material that creates an increase of soil and thus land parcel size due to accretion Alluvion - ANSWER-Ex. Water flowing from a creek bordering Jillian's property created a sandbar, and she was able to use the _________—the new land mass that formed—as her own property. Amendment - ANSWER-A change to an existing contract Amendment - ANSWER-Ex. Bill decided not to include the washer and dryer since the buyers were asking for the moon in the inspection. He wrote up an ___________ to their original agreement, which they reluctantly signed. Americans with Disabilities Act of 1990 (ADA) - ANSWER-A federal anti-discrimination law to protect persons with disabilities from discrimination in public accommodations and commercial facilities Americans with Disabilities Act of 1990 (ADA) - ANSWER-Ex. John's brokerage firm was required to provide reasonable accommodations in the office building where Terry, who uses a wheelchair, works. Amortization - ANSWER-The paying off of a debt with regular installments over a fixed repayment schedule Amortization - ANSWER-Ex. A 30-year fixed rate loan provides _________ for the debt—in 30 years it is fully paid off. amortization schedule/chart - ANSWER-A table that shows how much of each payment will apply toward principal and how much toward interest for the loan term; also shows decrease in loan balance until paid off amortization schedule/chart - ANSWER-Ex. If borrowers want to see how much of their payment is going toward principal, they can check their mortgage statement, or an ________________. Amperage - ANSWER-Amount of current or electricity flowing through electrical wires anchor tenant - ANSWER-A large commercial tenant that draws in traffic to a mall or shopping center Annexation - ANSWER-An attachment of personal property to real property, thereby making it a fixture (also known as an attachment) Annexation - ANSWER-Ex. When Mrs. Goldman planted the rosebushes in her yard, the resultant ________ meant that the rosebushes were now made part of the property. annual percentage rate (APR) - ANSWER-A rate derived to reflect the true cost of financing that allows consumers to compare loan products; includes financing fees, so it will always be higher than the actual interest rate on a loan annual percentage rate (APR) - ANSWER-Ex. An interest rate of 6% may sound better than one of 6.25%, but it's important to also compare ________________ figures to see the true cost of financing. antitrust, antitrust law - ANSWER-Laws relating to the promotion of fair competition in the marketplace antitrust, antitrust law - ANSWER-Ex. ________ violations include price-fixing, tie-in arrangements, market allocation, and group boycotting. Appraisal - ANSWER-An estimate of value as of a specific date and for a specific use Appraisal - ANSWER-Ex. The ___________ on Myra's property was for its use as a bed-and-breakfast today. appraisal contingency - ANSWER-Contract clause that, if the property doesn't appraise at or above the sales price, the buyer is allowed to terminate appraisal contingency - ANSWER-Ex. If the appraised value is close to the sales price, often the parties can reach agreement. If not, and an _____________ is in place, the buyer can use the fact that the property didn't appraise to terminate and receive a refund of earnest money deposited. appraised value - ANSWER-An estimate of value as of a specific date, and for a specific use appraised value - ANSWER-Ex. Barbara refinanced her property two years ago. At that time, the __________ was $450,000. If she puts it on the market today, she can't use the __________ as list price, because it's no longer valid. Appraiser - ANSWER-One who performs an appraisal Appreciation - ANSWER-Increase in property value Appreciation - ANSWER-Ex. Due to _________, Kerry's investment property had doubled in value over the eight years she had held it. Appurtenances - ANSWER-Automatic rights inherent in property ownership. Also known collectively as bundle of rights. Appurtenances - ANSWER-Ex. Jason loved being a property owner. He decided not to sell off the water rights that came with his property and to others. He kept all of his bundle of sticks together. Asbestos - ANSWER-A fibrous mineral found in rocks and soil, previously used in construction materials for its insulating and fire-retardant strength and currently classified by the EPA as a hazardous material. Asbestos - ANSWER-Ex. Many homes built before 1973 likely contain ___________. These might be in insulation, ceiling or floor tiles, or in exterior shingles. Asbestosis - ANSWER-A chronic lung disease caused by breathing asbestos fibers assemblage - ANSWER- The process of combining separate adjacent parcels of land into one piece - ANSWER- Ex. Through the princple of assemblage, by purchasing several adjoining parcels, the combined parcel was worth far more. - ANSWER- Assessed value - ANSWER-The dollar amount to which the local tax rate is multiplied to determine property tax owed Assessed - ANSWER-Ex. Although the appraised value of Myra's bed and breakfast was $600,000, her tax ________ value was only $475,000. assessment - ANSWER-This definition could have two meanings: 1. Related to tax purposes - See Assessed Value. 2. The allocation of an individual's share of expenses for the maintenance and repairs of common areas such as those related to condominium ownership. Asset - ANSWER-Items of value owned by an individual; often used when qualifying for financing Assets - ANSWER-Ex. Liquid _____ include checking and savings accounts. Other _____ include real property, automobiles, and accounts receivable. assignment (rentals) - ANSWER-The substitution of tenants, putting the responsibility for the lease contract in the new tenant's hands. Requires written permission of landlord. assignment (rentals) - ANSWER-Ex. Daniel is moving out of state, and assigns his lease to Benjamin. Benjamin becomes responsible for the lease.