NATIONAL REAL ESTATE CE SHOP
NATIONAL FINAL REAL ESTATE EXAM
QUESTIONS AND ANSWERS
Which document is used to give a buyer an overview of the title history and information
about what is or isn't covered in an insurance policy? - Answer-Title insurance
companies issue a preliminary report with the current title history and any liens or
encumbrances. It outlines what the insurance company will or won't cover on its
forthcoming insurance policy if the title is found to be acceptable.
When is a lead disclosure required? - Answer-A lead disclosure is required for
residential properties built before 1978 because paint manufacturers used lead in paint
before it was banned that year.
Which of the following is a potential disadvantage for a buyer who enters into a lease
with an option to buy contract? - Answer-Depending upon the contract's terms, a
potential disadvantage for a buyer who enters into a lease with an option to buy is that
he could lose any funds credited to the purchase price if he breaches the terms of the
lease.
Joe gave land to a school, but still wanted to have some control over its use, so a deed
was prepared that gave the school title as long as the land is used for educational
purposes. What type of interest does the school have? - Answer-A fee simple
determinable has limitations as to what can or can't be done with a property. It uses
phrases such as "so long as," "while," or "during" to describe the required condition.
You represent the buyer in one transaction and the seller in a different transaction.
What type of agency relationship do you have with the buyer? - Answer-You have a
buyer agency relationship with the buyer in one transaction and a seller agency
relationship with the seller in the other transaction.
What does the Federal Trade Commission consider to be an unfair ad? - Answer-Any
ad or business practice that causes or is likely to cause injury is considered an unfair
ad, according to the FTC's Unfairness Policy Statement.
As part of the sales contract, Garth, the seller, was supposed to provide a copy of the
seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is
this? - Answer-A voidable contract can be cancelled by one or more parties because it's
missing an essential element. In this situation, Melanie, the buyer, has the right to
cancel the contract and have her earnest money refunded.
,How are principal meridians and baselines used in the rectangular government survey
system? - Answer-Each legal description in this system originates at the intersection of
a principal meridian and a baseline.
When the lender gathers all kinds of information about the borrower's assets, debts,
income, employment history, and pulls their credit report, the buyer is
___________________. - Answer-This is all part of the application process.
In which of the following situations would the state be able to use its power of escheat?
- Answer-Escheat occurs when a property owner dies without a will in place, and no
heirs or creditors can be found.
Which of these situations might be addressed by limitations or a subject to clause in the
deed Jane is using to convey property to Moira? - Answer-A great example of deed
limitations is the restrictions that may be placed on a property by an owners association.
A subject to clause may refer to an easement held by a neighboring property to get to a
road or water source.
Hannah wasn't able to get the financing to open her boutique, so her mother came on
as a silent partner and provided additional cash. Hannah and her mother have an
agreement that states Hannah's mother can't be held financially or legally liable if there
are any problems with the store. What type of contract clause is this? - Answer-
Indemnifying one of the contract parties releases that party from all liability or loss.
Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he so
rarely used the cabin that he was thinking of selling it. Drew said that he'd buy it from
Hank for $80,000, and Hank agreed that was a fair price. It's two months later, and
Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable? -
Answer-The statute of frauds requires that real estate contracts be in writing. Drew's
offer was oral, and thus didn't create an enforceable contract.
Local authorities lack police power over which of the following? - Answer-Local
authorities have police power over budgeting, zoning, and subdivision development, but
they lack police power over federal government construction projects.
Darren and Natalie are first-time buyers who have decided to purchase a newly built
townhouse. Their agent Jenner tells them that they're required to purchase a third-party
home warranty. Which of the following conditions must be true? - Answer-All loans that
are either FHA-insured or VA-guaranteed require a home warranty to protect both the
buyer and the home's value.
What are the two types of physical depreciation? - Answer-Two types of physical
depreciation are curable and incurable depreciation.
Travis has made the final payment on his loan according to the loan terms. What must
the note holder do to acknowledge that the debt has been repaid? - Answer-When the
,note has been paid off, the holder must sign the note, mark it as paid in full, and return it
to the maker. The satisfaction of mortgage is recorded with the county land office,
removing the associated lien from the property.
What factors affect an adjustable rate mortgage? - Answer-Rate, index, and margin
Casey signed a contract form offering a purchase price of $309,000 on Karen's home,
and gave his agent a $5,000 earnest money deposit. Karen's out of town, though, and
her agent can't reach her. At this point what does Casey have? - Answer-Until the terms
are negotiated and the contract signed by both parties, acceptance hasn't occurred and
the sales contract is considered an offer.
Candace and Phil Tolson listed their home for sale with Trent Richards, the broker for
Richards Homes. Sadly, Trent became incapacitated due to a car accident. What's the
status of the listing agreement? - Answer-Because the broker has become
incapacitated, the listing agreement terminates by force of law.
Which task is NOT the responsibility of an escrow officer? - Answer-The escrow officer
is responsible for distributing the earnest money as outlined by the parties or the courts
in case of dispute but doesn't have the authority to determine how it should be
distributed.
Physical characteristics of land include its immobility, indestructibility, and ______. -
Answer-Nonhomogeneity is a unique characteristic of land. Even within a single
subdivision, two identically sized parcels will have their own unique characteristics:
views, access, proximity to other amenities, etc.
Which of the following is the price a lender believes the property will bring at a
foreclosure sale? - Answer-Lenders won't lend on what they can't recoup. Therefore, a
loan will be based on what a lender would hope to recoup, should a foreclosure sale be
necessary.
Jamison, the seller, is closing on his property with Conrad, the buyer. Jamison paid the
current year's property taxes already. Is this a prepaid or accrued expense, and how will
it be represented on the settlement statement? - Answer-These taxes have already
been paid, so are a prepaid item. They'll appear as a buyer debit and seller credit at
closing.
Jeanetta leases an apartment from Quad City Leasing. Jeanetta has filed a complaint
with the state real estate licensing division stating that Marissa, Quad City's property
manager, breached her fiduciary duty of loyalty to Jeanetta. Which of these statements
about this situation is true? - Answer-Property managers owe fiduciary duties to their
clients (the landlord) and the community as a whole, not to individual residents.
The MARIA acronym helps to identify the five tests of a fixture. Which of the following
tests refers to how and whether the item is attached to the property? - Answer-Method
, of annexation refers to how and whether the item is attached to the property. This is the
M in MARIA.
Lowell used to own 17 acres of property on the bay. After last year's hurricanes, Lowell
now owns 15.5 acres of bayfront property. Which natural process was responsible for
Lowell's loss of acreage? - Answer-Avulsion is the loss of land by a sudden, large-scale
change in water flow. A hurricane would create a sudden large change in water flow.
Easements are a type of encumbrance that can affect a property. Which of the following
is true about easements? - Answer-Easements are a type of encumbrance that can
affect a property. Which of the following is true about easements?
Dean and Michael have an oral contract. Dean said he would sell Michael his bike in
return for Michael's vinyl album collection. What does the record collection represent? -
Answer-Consideration, which is an essential element of a contract, is something of
value which is given from one party to the other party in exchange for goods or services.
Virginia is finally living her dream—she bought a coffeehouse in a charming college
town. After she closed on it, her attorney sat down with her to discuss various business
licensing and legal requirements she'll have to meet. Virginia was surprised to learn that
her five-table establishment is affected by the Americans with Disabilities Act. What
must be true about the coffeehouse? - Answer-If a business in a constructed building
that serves the public, then it falls under the ADA.
What does "Beginning at the corner of State Route 61 and Hallowell Road" represent? -
Answer-Bounds are physical features that define the boundaries of the property.
Combined with directions and distances (metes), these form the basis of a metes and
bounds legal description.
When property changes hands, the deed is recorded. There's a fee for recording, so
why would anyone choose to pay this fee? - Answer-Recording and possession give the
public constructive notice that ownership has changed hands. It also protects the buyer
from others' claims on the property.
Elaina and Allen just purchased a home using a deed of trust. Which of the following is
most likely true about their home loan? - Answer-When a deed of trust secures a loan, a
trustee holds the title until the loan is paid. Because the right to sell in the event of a
default is part of the deed of trust's language, a non-judicial foreclosure may be used.
Turns out that there are hazardous materials that need to be cleaned up first. Latrell
took the prior owners to court, and the court ruled that Latrell is responsible for the costs
of cleanup. What kind of liability is this? - Answer-In strict liability, the owner is
responsible for cleanup, regardless of who created the initial problem.
Sondra thinks the new business contract she's signed with her business partner is valid.
Both parties are legally competent, the purpose is a business transaction so it's a legal
NATIONAL FINAL REAL ESTATE EXAM
QUESTIONS AND ANSWERS
Which document is used to give a buyer an overview of the title history and information
about what is or isn't covered in an insurance policy? - Answer-Title insurance
companies issue a preliminary report with the current title history and any liens or
encumbrances. It outlines what the insurance company will or won't cover on its
forthcoming insurance policy if the title is found to be acceptable.
When is a lead disclosure required? - Answer-A lead disclosure is required for
residential properties built before 1978 because paint manufacturers used lead in paint
before it was banned that year.
Which of the following is a potential disadvantage for a buyer who enters into a lease
with an option to buy contract? - Answer-Depending upon the contract's terms, a
potential disadvantage for a buyer who enters into a lease with an option to buy is that
he could lose any funds credited to the purchase price if he breaches the terms of the
lease.
Joe gave land to a school, but still wanted to have some control over its use, so a deed
was prepared that gave the school title as long as the land is used for educational
purposes. What type of interest does the school have? - Answer-A fee simple
determinable has limitations as to what can or can't be done with a property. It uses
phrases such as "so long as," "while," or "during" to describe the required condition.
You represent the buyer in one transaction and the seller in a different transaction.
What type of agency relationship do you have with the buyer? - Answer-You have a
buyer agency relationship with the buyer in one transaction and a seller agency
relationship with the seller in the other transaction.
What does the Federal Trade Commission consider to be an unfair ad? - Answer-Any
ad or business practice that causes or is likely to cause injury is considered an unfair
ad, according to the FTC's Unfairness Policy Statement.
As part of the sales contract, Garth, the seller, was supposed to provide a copy of the
seller's disclosure to the buyer, Melanie, but he failed to do so. What type of contract is
this? - Answer-A voidable contract can be cancelled by one or more parties because it's
missing an essential element. In this situation, Melanie, the buyer, has the right to
cancel the contract and have her earnest money refunded.
,How are principal meridians and baselines used in the rectangular government survey
system? - Answer-Each legal description in this system originates at the intersection of
a principal meridian and a baseline.
When the lender gathers all kinds of information about the borrower's assets, debts,
income, employment history, and pulls their credit report, the buyer is
___________________. - Answer-This is all part of the application process.
In which of the following situations would the state be able to use its power of escheat?
- Answer-Escheat occurs when a property owner dies without a will in place, and no
heirs or creditors can be found.
Which of these situations might be addressed by limitations or a subject to clause in the
deed Jane is using to convey property to Moira? - Answer-A great example of deed
limitations is the restrictions that may be placed on a property by an owners association.
A subject to clause may refer to an easement held by a neighboring property to get to a
road or water source.
Hannah wasn't able to get the financing to open her boutique, so her mother came on
as a silent partner and provided additional cash. Hannah and her mother have an
agreement that states Hannah's mother can't be held financially or legally liable if there
are any problems with the store. What type of contract clause is this? - Answer-
Indemnifying one of the contract parties releases that party from all liability or loss.
Drew and Hank were camping at Hank's riverfront cabin. Hank told Drew that he so
rarely used the cabin that he was thinking of selling it. Drew said that he'd buy it from
Hank for $80,000, and Hank agreed that was a fair price. It's two months later, and
Hank is upset that Drew now says he won't buy it. Why isn't this contract enforceable? -
Answer-The statute of frauds requires that real estate contracts be in writing. Drew's
offer was oral, and thus didn't create an enforceable contract.
Local authorities lack police power over which of the following? - Answer-Local
authorities have police power over budgeting, zoning, and subdivision development, but
they lack police power over federal government construction projects.
Darren and Natalie are first-time buyers who have decided to purchase a newly built
townhouse. Their agent Jenner tells them that they're required to purchase a third-party
home warranty. Which of the following conditions must be true? - Answer-All loans that
are either FHA-insured or VA-guaranteed require a home warranty to protect both the
buyer and the home's value.
What are the two types of physical depreciation? - Answer-Two types of physical
depreciation are curable and incurable depreciation.
Travis has made the final payment on his loan according to the loan terms. What must
the note holder do to acknowledge that the debt has been repaid? - Answer-When the
,note has been paid off, the holder must sign the note, mark it as paid in full, and return it
to the maker. The satisfaction of mortgage is recorded with the county land office,
removing the associated lien from the property.
What factors affect an adjustable rate mortgage? - Answer-Rate, index, and margin
Casey signed a contract form offering a purchase price of $309,000 on Karen's home,
and gave his agent a $5,000 earnest money deposit. Karen's out of town, though, and
her agent can't reach her. At this point what does Casey have? - Answer-Until the terms
are negotiated and the contract signed by both parties, acceptance hasn't occurred and
the sales contract is considered an offer.
Candace and Phil Tolson listed their home for sale with Trent Richards, the broker for
Richards Homes. Sadly, Trent became incapacitated due to a car accident. What's the
status of the listing agreement? - Answer-Because the broker has become
incapacitated, the listing agreement terminates by force of law.
Which task is NOT the responsibility of an escrow officer? - Answer-The escrow officer
is responsible for distributing the earnest money as outlined by the parties or the courts
in case of dispute but doesn't have the authority to determine how it should be
distributed.
Physical characteristics of land include its immobility, indestructibility, and ______. -
Answer-Nonhomogeneity is a unique characteristic of land. Even within a single
subdivision, two identically sized parcels will have their own unique characteristics:
views, access, proximity to other amenities, etc.
Which of the following is the price a lender believes the property will bring at a
foreclosure sale? - Answer-Lenders won't lend on what they can't recoup. Therefore, a
loan will be based on what a lender would hope to recoup, should a foreclosure sale be
necessary.
Jamison, the seller, is closing on his property with Conrad, the buyer. Jamison paid the
current year's property taxes already. Is this a prepaid or accrued expense, and how will
it be represented on the settlement statement? - Answer-These taxes have already
been paid, so are a prepaid item. They'll appear as a buyer debit and seller credit at
closing.
Jeanetta leases an apartment from Quad City Leasing. Jeanetta has filed a complaint
with the state real estate licensing division stating that Marissa, Quad City's property
manager, breached her fiduciary duty of loyalty to Jeanetta. Which of these statements
about this situation is true? - Answer-Property managers owe fiduciary duties to their
clients (the landlord) and the community as a whole, not to individual residents.
The MARIA acronym helps to identify the five tests of a fixture. Which of the following
tests refers to how and whether the item is attached to the property? - Answer-Method
, of annexation refers to how and whether the item is attached to the property. This is the
M in MARIA.
Lowell used to own 17 acres of property on the bay. After last year's hurricanes, Lowell
now owns 15.5 acres of bayfront property. Which natural process was responsible for
Lowell's loss of acreage? - Answer-Avulsion is the loss of land by a sudden, large-scale
change in water flow. A hurricane would create a sudden large change in water flow.
Easements are a type of encumbrance that can affect a property. Which of the following
is true about easements? - Answer-Easements are a type of encumbrance that can
affect a property. Which of the following is true about easements?
Dean and Michael have an oral contract. Dean said he would sell Michael his bike in
return for Michael's vinyl album collection. What does the record collection represent? -
Answer-Consideration, which is an essential element of a contract, is something of
value which is given from one party to the other party in exchange for goods or services.
Virginia is finally living her dream—she bought a coffeehouse in a charming college
town. After she closed on it, her attorney sat down with her to discuss various business
licensing and legal requirements she'll have to meet. Virginia was surprised to learn that
her five-table establishment is affected by the Americans with Disabilities Act. What
must be true about the coffeehouse? - Answer-If a business in a constructed building
that serves the public, then it falls under the ADA.
What does "Beginning at the corner of State Route 61 and Hallowell Road" represent? -
Answer-Bounds are physical features that define the boundaries of the property.
Combined with directions and distances (metes), these form the basis of a metes and
bounds legal description.
When property changes hands, the deed is recorded. There's a fee for recording, so
why would anyone choose to pay this fee? - Answer-Recording and possession give the
public constructive notice that ownership has changed hands. It also protects the buyer
from others' claims on the property.
Elaina and Allen just purchased a home using a deed of trust. Which of the following is
most likely true about their home loan? - Answer-When a deed of trust secures a loan, a
trustee holds the title until the loan is paid. Because the right to sell in the event of a
default is part of the deed of trust's language, a non-judicial foreclosure may be used.
Turns out that there are hazardous materials that need to be cleaned up first. Latrell
took the prior owners to court, and the court ruled that Latrell is responsible for the costs
of cleanup. What kind of liability is this? - Answer-In strict liability, the owner is
responsible for cleanup, regardless of who created the initial problem.
Sondra thinks the new business contract she's signed with her business partner is valid.
Both parties are legally competent, the purpose is a business transaction so it's a legal
