Arizona Real Estate Practice Questions

"Contiguous" means: - answer-Parcels of land connected or touching each other "Effective gross income" best describes: - answer-Gross income minus a figure for vacancy and collection losses "Gross income" best describes: - answer-Income before expenses "Net income" best describes: - answer-Income after expenses "Quiet Enjoyment" in a lease means: - answer-The lease will not be terminated if the building is sold "The rate" refers to: - answer-The rate of return used by investors 1 section equals - answer-1 square mile 1 square mile equals - answer-640 acres 1 square yard equals - answer-9 sqft 1760 yards equals - answer-1 mile 1974 added what protected classes - answer-sex/gender A "mutual fund" for pooling investor money for investment in real estate: - answer-Real Estate Investment Trust A body of federal and state laws designed to prohibit and regulate deceptive advertising and sales practices are known as ____________ laws. - answer-Consumer protection A borrower applying for a FHA loan would be required to: - answer-Pay a mortgage insurance premium A borrower is required to put 10% down for the purchase of property would be considered - answer-equity A borrower pays off his loan. However, the lender refuses to cancel the mortgage. Which of the following clauses of a mortgage has the lender violated? - answer-Defeasance clause A brief summary of a property's history, listing all recorded documents that may affect the title, is a/an: - answer-Abstract of title A broker closed a transaction on realty and then found out that the buyer was under 18 years of age. The sale was: - answer-voidable A buyer and a seller were separated in negotiations by only five hundred dollars. The listing and sales agent agree to reduce the commission by that amount to make the deal. Each agent gives their clients two hundred and fifty dollars after closing. What unethical practices exist here? - answer-Undisclosed inducement and dividing commissions with non licensees A buyer is obtaining a new loan to purchase property. The buyer is most likely to accept title with which of the following liens remaining unpaid as of close of escrow: - answer-Property taxes for the current year for the property being sold A buyer with badly damaged credit would be most likely to use: - answer-FHA A buyer's agent is paid a percentage of the gross sales price. When negotiating a contract, the agent should: - answer-Negotiate the lowest possible price for the client A buyers initial cost for real estate purchase for determining gain, loss, or depreciation on the sale of an assest - answer-basis A CAP rate is based on what type of income? - answer-Net A closing conducted by a disinterested third party best describes a/an: - answer-Escrow closing A closing with all parties present is a/an: - answer-Roundtable closing A commercial tenant installs a pizza oven in his new restaurant. The pizza oven would be deemed a/an: - answer-chattel A concept preventing the assertion of a right or claim because of an undue delay - answer-Laches A conditional use permit allows: - answer-Help for property owners with special needs A condominium and cooperative would be the same in that: - answer-Both pay annual assessments A contract based on an illegal consideration is: - answer-void A conveyance of title "upon the condition that the land shall not be used for the sale of intoxicating beverages or liquors", which does not automatically terminate creates: - answer-A conditional estate A deed of trust is signed by the: - answer-Trustor A defeasance clause is in a mortgage for the protection of the: - answer-Borrower A defeasance clause would apply to: - answer-Deed of trust A definition of involuntary alienation is: - answer-Title to property can be conveyed by action of the court A devise is an example of________ conveyance - answer-testamentary A factor which does not contribute to the value of real estate is: - answer-Cost A few real estate brokers from different companies were discussing the possibility of establishing an office policy to list for sale all raw land at a 10% commission. Which of the following is true? - answer-The brokers are in violation of the Sherman Anti-Trust laws. A freehold estate which is inheritable, freely transferable, and is the highest estate and the most extensive interest in real property may be referred to as a: - answer-Fee simple absolute A grandfathered water right that may be sold separate from the land is called - answer-type 2 A group of local real estate brokers are having their annual meeting. What topic should be avoided in their conversation? - answer-Discussion of their personal commission schedules A home sold for $275,000 including a 5% transfer tax. What is the actual value of the home? - answer-100%+5%=105% $275,000 divide by 105%= ($261,904 actual value of home) A home sold property for $162,150, which is 15% more than he paid for it. How much did he pay for it? - answer-100%+15%=115% $162,150 divide by 115%= ($141,000 original purchase price) A homeowner sues a real estate agent for 6000. Which court is this heard in - answer-justice court A homestead exemption: - answer-Protects the claimant against personal judgments up to the amount of this exemption A homestead may be terminated for all of the following reasons EXCEPT: - answer-Death of a spouse A land owner needs water. His land contains no available water source. However, the land owner is given the right to cross over his next-door neighbor's property to run a pipeline from a river to his land. Which right grants this permission? - answer-Appropriative rights A lease is written for the months of May, June, July and August. This type of lease would be called an estate: - answer-For Years A legal description must: - answer-Be sufficient to identify the land and its location A legitimate reason for appraising a property as of some date in the past is: - answer-To settle an estate A lender agreed to loan 75% of the value of a property. The current interest paid is $650 monthly at a rate of 8 1/2%. What is the value of the property? - answer-$650 x 12 months=$7,800 $7,800 divide by 8 1/2% = $91,764 $91,764 divide by 75%= ($122,352 actual value of the property) A lender charges $1,600 for discount points. If the loan is $80,000, how many discount points must the lender charge? - answer-$1,600 divide by $80,000 = 0.02 = (2 points) A lender charges 4 discount points, which equals $2,000. What is the loan amount? - answer-$2,000 divide by 4% = ($50,000) A lender is limited in the amount of reserves they may hold in a residential real estate transaction. This is governed by: - answer-RESPA A lender will loan $48,000 at 9% plus 5 points. What is the lender's adjusted rate of interest including the points? - answer-Multiply the 5 points by 1/8% increase in interest. 5 X 1/8% = 5/8%. 5 points will increase the return 5/8%. Add the increase return of 5/8% to the interest of 9%. 9% + 5/8% = (9 5/8%) NOTE: if you were a lender and received a return on your investment of 9% + 5 points, it would be valid to say you receive 9 5/8% with no points (PAR) NOTE: When finding how much the points increase the investors of 9% + 5 points, it would be valid to say you receive 9 5/8% with no points (PAR). A lender would add a margin to an index to accomplish which of the following? - answer-To keep current with the cost of new mortgages A licensed broker employed by a principal may NOT: - answer-Accept or reject offers of purchase A life estate would end by merger. Which of the following best explains merger? - answer-Remainder party buys the life tenant interest A life tenant leases a property for 25 years to a major corporation. The life tenant dies ten years later. What is the status of the lease? - answer-Lease is terminated A listing agent intentionally fails to tell the buyer of a known defect on the property that later harms the buyer. The listing agent could be guilty of: - answer-fraud A listing agent is given confidential information by the seller. The listing agent then gives this information to the selling agent. Which best describes this activity? - answer-It is a breach of fiduciary duties A listing agreement is a mutual agreement between a broker and a principal and is considered: - answer-An authorization to sell A load where payments include principal and interest plus 1/12 of the years property taxes and hazard insurance premiums - answer-budget mortgage A loan was made for $120,000 payment at $700 monthly interest at 9%. What would be the third month's payment, including interest? - answer-$700 month principal payments x 2 month=$1,400 principal paid $120,000-$1,400= $118,600 principal balance left $118,600 x 9%=$10,674 annual interest $10,674 divide by 12 months=$889.50 $889.50+700= ($1,589.50 for the third payment) A man leased a building with permission to install heavy machinery. In order to install said machinery, the lessee has to install a special foundation. The foundation so installed becomes a/an - answer-Improvement to the property A man may take depreciation for income tax purposes on all of the following EXCEPT - answer-land held for future profit A man pays $100,000 for a property. He secured a mortgage for $90,000 at 6% interest. In one year he made an 8% gross profit on the property. What was the return on his equity? - answer-$100,000 invested -$90,000 mortgage =$10,000 which is buyer equity $100,000 investment x 8% profit = $8,000 gross profit 90,000 mortgage x 6% interest = $5,400 interest cost on the $90,000 $8,000 gross profit - $5,400 interest cost = $2,600 net profit $2,600 net profit divide by $10,000 buyer equity = (26% return on the equity) A master plan adopted by a local planning commission may not be concerned with matters of: - answer-Deed restrictions A master planned community would best be described as - answer-two or more platted subdivisions with CC&Rs A mechanic's lien, once filed, is a valid lien on the subject property for how long - answer-6 months A monetary judgment by the court is: - answer-An involuntary lien on the personalty and realty of the subject debtor A mortgage contingency clause would contain all of the following EXCEPT - answer-name of the lender A non-recourse loan would not provide for which of the following: - answer-Deficiency judgement A note that calls for periodic payments of principal only, with a balloon payment at the end of the loan term is called a/an: - answer-Installment note A person leases a property and would like to build a house on the leased land. The tenant's rights would be: - answer-Leasehold A poor floor plan is an example of: - answer-Functional obsolescence A preliminary title report would tell you all of the following except: - answer-Zoning A primary line running east and west that establishes north and south boundary in the rectangular survey system - answer-baseline A principal contracts to have more than one broker represent them using a/an: - answer-Open listing A promissory note is: - answer-Evidence of the debt A property described as T5N, R4E of the GSRB&M is located between _____ and _____ miles north of the base line. - answer-24 and 30 A property is in the process of being foreclosed. Who is responsible for the property taxes? - answer-Trustor A property is valued at $100,000 and is taxed at 45 mills. The assessment rate on the property is 35%. Calculate the yearly taxes. - answer-$1,575.00 A property management agreement would contain all of the following EXCEPT: - answer-Method of reporting on prospective tenants A property management agreement would contain all of the following EXCEPT: - answer-Method of reporting on prospective tenants A property management company is required to keep a copy of all residential rental agreements, upon expiration, for how long? - answer-One year A property manager is asked to install a new spa on the premises. The expense of the new spa would be considered: - answer-Capitalized item A property owner tells his agent that he may represent the property and make other decisions concerning that property. This type of agency is: - answer-General A property was purchased at $165,000 and has depreciated at 4 1/2% for each of the past years. What is the value of the property after four years? - answer-4 1/2% X 4 = 18% 100%-18%=82% 82% X 165,000 = (135,300 value after 4 years) A prospective buyer who has previously always lived in the city is looking at a rural property with a real estate agent. The buyer admits that she doesn't know anything about rural properties. The buyer likes the back yard because it is very large but remarks that a small patch of the yard seems to grow more, and much healthier, grass than any other part of the yard. The agent should recommend a - answer-well and septic inspection A purchase agreement does NOT need which of the following - answer-title taken A purchaser wishes to buy, but the contract for purchase is subject to obtaining financing or cannot be completed until some stated condition is fulfilled. What is the status of such a contract? - answer-executory A real estate broker, in the typical agency relationship with a seller, is a/an: - answer-Special agent A real estate investment business organized as a trust best describes a/an: - answer-REIT A real estate transaction is final when: - answer-Deed signed and delivered A rental property has 6 rental units that rent for $700 each per month. Similar property in the area has been selling for $700,000. What would be the gross re