Pearson VUE Real Estate Exam, National Portion, Practice Exams

A purchase contract says that if the buyer defaults through no fault of the seller or broker, the buyer's deposit is to be divided between the seller and the broker. How is such a forfeiture provision classified?

1. As a penalty void on its face.
2. As a liquidated damages clause. ✓
3. As an option given to the buyer.
4. As an award of nominal damages.

Why: DRE Reference Book ch. 6: CONTRACTS FOR THE SALE OF REAL PROPERTY FREQUENTLY INCLUDE A PROVISION ... THE DEPOSIT MADE BY THE BUYER TOWARD THE PURCHASE SHALL BE DIVIDED BETWEEN THE SELLER AND THE BROKER. SUCH PROVISIONS ... BY THE FORFEITURE OF THE DEPOSIT COME WITHIN THE DEFINITION OF LIQUIDATED DAMAGES CLAUSES.

A homeowners' association may amend its subdivision's restrictions. It votes to let owners run small shops from their garages, a use the city's zoning bars there. Does the amendment make the shops lawful?

1. Yes; the association's vote controls land use in the tract.
2. Yes, since private restrictions take precedence over zoning.
3. No; amendments cannot override zoning or building codes. ✓
4. No, unless every lot owner signs the amendment in writing.

Why: DRE Reference Book ch. 5: SUCH ASSOCIATIONS (TYPICALLY DESCRIBED AS HOMEOWNER’S ASSOCIATIONS) ARE OFTEN GIVEN THE POWER TO AMEND TRACT/SUBDIVISION RESTRICTIONS FROM TIME TO TIME TO CORRESPOND WITH COMMUNITY GROWTH (PROVIDED THE AMENDMENTS ARE NOT INCONSISTENT WITH THE CONDITIONS IMPOSED BY THE LOCAL GOVERNMENT ... AND ARE NOT INCONSISTENT WITH APPLICABLE LAW, INCLUDING ZONING ORDINANCES AND BUILDING CODES. A private amendment cannot authorize a use the zoning ordinance prohibits, however many owners sign it.

A deed conveys land lying in two counties but is recorded in only one of them. What is the risk?

1. No constructive notice arises in the other county. ✓
2. The whole deed is void until recorded in both places.
3. The seller keeps title to the land in the other county.
4. None; recording in either county gives notice to all.

Why: DRE Reference Book ch. 5: IF THE PROPERTY LIES IN MORE THAN ONE COUNTY, THE INSTRUMENT, OR CERTIFIED COPY OF THE RECORD, MUST BE RECORDED IN EACH COUNTY IN WHICH THE PROPERTY IS LOCATED IN ORDER TO IMPART CONSTRUCTIVE NOTICE IN THE RESPECTIVE COUNTIES. Failure to record does not void the deed between the parties.

The Superfund Amendments and Reauthorization Act of 1986 added to CERCLA's definitions the term on which the innocent landowner defense rests. Which term?

1. Bona fide prospective purchaser
2. Brownfield site
3. Act of God
4. Contractual relationship ✓

Why: The notes to 42 U.S.C. 9601 record that Pub. L. 99-499, cited as the Superfund Amendments and Reauthorization Act of 1986, added paragraphs (33) to (36), including (35), "contractual relationship," which lets a buyer who acquired after disposal without reason to know use the third-party defense. Brownfield site and bona fide prospective purchaser were added in 2002 by Pub. L. 107-118, and act of God was in the original 1980 Act.

A federally regulated bank makes a loan secured by a house in a special flood hazard area of a community in the national flood insurance program. What flood coverage must be in place for the term of the loan?

1. The full purchase price of the house plus the land beneath it
2. At least the appraised value of the land and the building
3. None, unless the borrower asks the bank to require it
4. The lesser of the loan balance or the most coverage available ✓

Why: 42 U.S.C. 4012a(b)(1)(A) bars a regulated lender from making, increasing, extending or renewing such a loan unless the building and any personal property securing it are covered for the term of the loan in an amount at least equal to the outstanding principal balance or the maximum limit of coverage available for that type of property, whichever is less. The land is not what the insurance covers.

A neighbor holds a recorded easement to drive over a 12-foot strip along one side of Tara's lot. The easement is not described as exclusive. May Tara use the strip as part of her side yard?

1. No; the neighbor alone may use the strip while it lasts.
2. Yes, and she may also fence it off whenever she chooses.
3. Yes, as long as her use does not interfere with the easement. ✓
4. No, unless the neighbor records his consent to her use.

Why: DRE Reference Book ch. 5: UNLESS THE EASEMENT IS SPECIFICALLY DESCRIBED TO BE “EXCLUSIVE,” ITS CREATION DOES NOT PREVENT THE OWNER OF THE LAND FROM USING THE LAND/PROPERTY AND THE PORTION COVERED BY THE EASEMENT IN A WAY THAT DOES NOT INTERFERE WITH THE USE OF THE EASEMENT. Fencing off the driveway would interfere, so that is not allowed.

A seller agrees to carry back most of the price on the buyer's bare promise to pay later, with no lien or other security. The seller balks, and the buyer sues for specific performance. What is a likely ground for denial?

1. Seller financing cannot be specifically enforced at all.
2. The buyer was required to pay the entire price in cash.
3. The contract is not just and reasonable to the seller. ✓
4. A promise to pay later is never valid consideration.

Why: DRE Reference Book ch. 6: IN ORDER FOR THE PLAINTIFF TO UTILIZE THE EQUITABLE REMEDY OF SPECIFIC PERFORMANCE, HE OR SHE MUST SHOW THAT THE CONTRACT WITH THE DEFENDANT IS JUST AND REASONABLE. THE COURT DENIED SPECIFIC PERFORMANCE IN ONE CASE BECAUSE THE SELLER HAD NOT BEEN GIVEN ADEQUATE SECURITY TO INSURE THE PAYMENT OF THE BALANCE OF THE PRICE. A return promise is still consideration: ANY VALID PROMISE ... IS SUFFICIENT CONSIDERATION FOR ANOTHER PROMISE.

In which ways can a principal-agent relationship be created?

1. Only by a written agreement signed by both the principal and the agent.
2. Only by an agreement or by a court order that appoints the agent to act.
3. By agreement, by ratification, by estoppel, or by the parties' conduct. ✓
4. By agreement or by recording, but never by the parties' conduct alone.

Why: DRE Reference Book ch. 10: THE RELATIONSHIP OF PRINCIPAL AND AGENT CAN BE CREATED BY AGREEMENT BETWEEN THEM, REFERRED TO AS AN ACTUAL AGENCY, BY RATIFICATION OR BY ESTOPPEL, OR AS THE RESULT OF THE CONDUCT OF THE PARTIES AND THE AGENT'S INHERENT RELATIONSHIP WITH THIRD PARTIES (I.E., AN OSTENSIBLE OR IMPLIED AGENCY).

A buyer gets a Loan Estimate before locking her rate. A week later she locks, and the points change. When must the creditor give her a revised Loan Estimate?

1. No later than three business days after the lock. ✓
2. Only at closing, on the final Closing Disclosure.
3. Within ten business days of the original estimate.
4. Never; points are exempt from the revision rules.

Why: 12 CFR 1026.19(e)(3)(iv)(D): where THE POINTS OR LENDER CREDITS CHANGE BECAUSE THE INTEREST RATE WAS NOT LOCKED ... NO LATER THAN THREE BUSINESS DAYS AFTER THE DATE THE INTEREST RATE IS LOCKED, THE CREDITOR SHALL PROVIDE A REVISED VERSION of the Loan Estimate with the revised rate and points.

As CERCLA defines it, what is a brownfield site?

1. A site listed on the National Priorities List for cleanup
2. Property whose reuse may be complicated by possible contamination ✓
3. Farmland rezoned for residential or commercial development
4. Any parcel from which an underground fuel storage tank was removed

Why: 42 U.S.C. 9601(39)(A) defines a brownfield site as real property the expansion, redevelopment or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant. Subparagraph (B) expressly excludes a facility listed or proposed for listing on the National Priorities List.

A homeowner converts his garage into a retail shop in violation of the zoning ordinance. What may the city do?

1. Take title to the lot as a penalty for the zoning violation.
2. Enjoin or abate the violation; his title is not affected. ✓
3. Nothing, since zoning rules bind only new construction work.
4. Void his deed and return the lot to the previous owner.

Why: DRE Reference Book ch. 5: PUBLIC AUTHORITIES MAY ENJOIN OR ABATE IMPROVEMENTS OR ALTERATIONS THAT ARE IN VIOLATION OF A ZONING ORDINANCE, BUT ONLY THE USE OF THE LAND/PROPERTY, NOT THE TITLE, IS AFFECTED.

What is the general rule on the position of a person holding an unexercised option to buy land when the land is taken by condemnation?

1. He holds an interest in the land and shares the award as a co-owner.
2. He has no interest in the land but may be entitled to compensation. ✓
3. He holds no interest in the land and so can receive nothing at all.
4. He may be paid only if he exercises the option before title passes.

Why: DRE Reference Book ch. 6 (Options): option rights DO NOT GIVE THE OPTIONEE ANY INTEREST IN THE LAND. ... HOWEVER, THE HOLDER OF AN UNEXERCISED OPTION DOES, HOWEVER, HAVE AN INTEREST FOR WHICH THE HOLDER MAY BE ENTITLED TO COMPENSATION UPON CONDEMNATION OF THE LAND.

An appraiser estimating the cost new of a house separates its direct costs from its indirect costs. Which of these belongs with the indirect costs?

1. Lumber and labor for framing the walls and the roof.
2. Building permits and interest on the construction loan. ✓
3. Grading the site and bringing utility lines onto it.
4. Landscaping the yard and paving the driveway and walk.

Why: DRE Reference Book ch. 15, Cost Approach: direct expenses are those OF CONSTRUCTION SUCH AS LABOR, MATERIALS AND EQUIPMENT AND ENGINEERING FOR THE BUILDING, SITE PREPARATION, STREET AND UTILITY WORK, LANDSCAPING, ETC.; INDIRECT EXPENSES SUCH AS LEGAL, TITLE, APPRAISAL AND FEASIBILITY STUDY FEES, LICENSES, PERMITS, AD VALOREM TAXES DURING CONSTRUCTION ... FINANCING CHARGES, ACCOUNTING, ETC. Permits and construction loan interest are soft costs; the other choices are all hard costs.

A remodeling company is paid to replace windows in a 1972 house. What does the RRP rule require of the company?

1. EPA firm certification and use of a certified renovator. ✓
2. Only that the owner sign a lead-based paint disclosure form.
3. Nothing, as long as the job will take less than a full week.
4. Only a state contractor's license, with no EPA role at all.

Why: 40 CFR 745.85(a): RENOVATIONS MUST BE PERFORMED BY CERTIFIED FIRMS USING CERTIFIED RENOVATORS; 745.89(a)(1): FIRMS THAT PERFORM RENOVATIONS FOR COMPENSATION MUST ELECTRONICALLY APPLY TO EPA FOR CERTIFICATION, renewed EVERY 5 YEARS.

During a mortgage interview a loan officer asks a young married applicant whether she plans to have children soon. What does ECOA say about this question?

1. It is allowed, if the same question is put to the male applicants.
2. It is allowed, since future children affect the ability to repay.
3. It is barred; the creditor may ask only about current dependents. ✓
4. It is barred only when the applicant is applying for credit alone.

Why: 12 CFR 1002.5(d)(3): A CREDITOR SHALL NOT INQUIRE ABOUT BIRTH CONTROL PRACTICES, INTENTIONS CONCERNING THE BEARING OR REARING OF CHILDREN, OR CAPABILITY TO BEAR CHILDREN. A CREDITOR MAY INQUIRE ABOUT THE NUMBER AND AGES OF AN APPLICANT'S DEPENDENTS, without regard to sex or marital status.

Three tenants in common cannot agree on what to do with a small lot. One wants out, and the lot cannot practically be divided. What court proceeding fits?

1. A quiet title action to fix the shares
2. A declaratory relief action on the deed
3. A suit for specific performance of the deed
4. A partition action and court-ordered sale ✓

Why: Reference Book chapter 6 explains that a co-owner may sue the other co-owners for a severance of their interests, and that if the property cannot practically be divided the court may order a sale and divide the proceeds; this is a partition action. Chapter 5 adds that a tenant in common may be limited to forcing a sale of the whole property this way. A quiet title action settles an adverse claim to title, not a split among co-owners.

A lender inspects a house before making a loan on it. The built-in furnace and water heater are attached and essential to the home's use. What may the lender assume about them?

1. They are part of the security for the loan ✓
2. They are the borrower's personal property
3. They secure the loan only if listed by name
4. They pass only under a separate bill of sale

Why: Reference Book, ch. 4 (fixtures): BUYERS AND LENDERS INSPECTING PROPERTY IN CONTEMPLATION OF PURCHASE OR LOAN ARE JUSTIFIED IN ASSUMING THAT WHATEVER IS ATTACHED TO THE LAND OR BUILDING AND IS ESSENTIAL FOR ITS USE WILL BE PART OF THE CONVEYANCE/SECURITY. As fixtures they are real property, so no list or bill of sale is needed; a bill of sale passes personal property.

If a landlord properly terminates a tenant's lease for the tenant's default, what happens to a subtenant's rights under a sublease from that tenant?

1. They go on until the sublease itself expires.
2. They turn into a direct lease with the landlord.
3. They go on if the subtenant paid its own rent.
4. They end at the same time as the tenant's lease. ✓

Why: DRE Reference Book ch. 9: THE SUBTENANT'S RIGHTS ARE DERIVED ENTIRELY THROUGH THE TENANT ... IF THE LANDLORD TERMINATES THE TENANT'S LEASE FOR DEFAULT, WHETHER IT WAS THE TENANT OR THE SUBTENANT WHO PERFORMED THE ACT OR OMISSION LEADING TO THE DEFAULT, THE SUBTENANT'S RIGHTS IN THE PREMISES WILL BE SIMULTANEOUSLY EXTINGUISHED.

A national bank makes a $1,200,000 loan secured by a large single-family home of typical design in an active market. The bank will keep the loan, and it is not insured, guaranteed or eligible for sale to a government agency or government-sponsored agency. Who must appraise the home?

1. A licensed or certified appraiser.
2. No appraiser; an evaluation will do.
3. A broker giving a price opinion.
4. A state certified appraiser. ✓

Why: 12 CFR part 34, section 34.43(d)(1): ALL FEDERALLY RELATED TRANSACTIONS HAVING A TRANSACTION VALUE OF $1,000,000 OR MORE SHALL REQUIRE AN APPRAISAL PREPARED BY A STATE CERTIFIED APPRAISER (12 U.S.C. 3342(1) is to the same effect). That a home of typical design is otherwise not complex does not let a licensed appraiser take it at this size, the $400,000 residential exemption that allows an evaluation does not reach a $1,200,000 loan, and a price opinion is not an appraisal.

Under an open listing, Broker A's prospect declines to make a deal. Later, Broker B persuades the same prospect to buy on substantially the terms he first rejected. Is Broker A the procuring cause?

1. No; Broker B induced the contract the prospect declined. ✓
2. Yes; Broker A introduced the buyer to the property first.
3. Yes, so the owner must pay both brokers a full commission.
4. Only if Broker A showed the home within the prior month.

Why: DRE Reference Book ch. 10: IF THE OFFEROR PRESENTED BY BROKER A DECIDES NOT TO ENTER INTO A CONTRACT, BUT IS THEREAFTER INDUCED BY BROKER B OR ANOTHER PERSON TO ENTER INTO THE CONTRACT ON SUBSTANTIALLY THE SAME TERMS THAT OFFEROR ORIGINALLY DECLINED, BROKER A IS NOT ENTITLED TO A COMMISSION UNDER THE THEORY THAT BROKER A IS THE PROCURING CAUSE OF THE SALE.

A buyer purchases the SE 1/4 of the NE 1/4 of the SE 1/4 of a standard section. How many acres is that?

1. 10 acres ✓
2. 40 acres
3. 80 acres
4. 160 acres

Why: Reference Book chapter 4 gives a section as 640 acres and a quarter-quarter as 40 acres. A quarter of a quarter-quarter is 640 / 4 / 4 / 4 = 10 acres; the chapter uses this same parcel as its worked example.

A buyer contracts to pay $425,000 for a home that appraises at $410,000. The lender lends 90% of the lesser of price or appraised value, and the buyer pays the rest of the price in cash. What percentage of the price is her down payment, to the nearest tenth of a percent?

1. 10%
2. 13.2% ✓
3. 13.7%
4. 15.2%

Why: Reference Book, ch. 12 (Real Estate Finance) describes loans sized on THE PURCHASE PRICE OR APPRAISED VALUE OF THE SECURITY PROPERTY (WHICHEVER IS LESS), and ch. 26 gives PERCENTAGE = RATE X BASE, so Rate = Part / Base. The loan is 90% x $410,000 = $369,000, so the down payment is $425,000 - $369,000 = $56,000, and $56,000 / $425,000 = 13.2% of the price. Basing the loan on the price gives 10%, dividing by the appraisal gives 13.7%, and dividing by the loan gives 15.2%.

A seller signs a buyer's offer without changes at noon but leaves the signed copy on her desk. At 3 p.m., before any copy reaches the buyer or his agent, the buyer withdraws the offer. Was a binding agreement formed?

1. Yes; the contract was formed when the seller signed at noon.
2. Yes, because the withdrawal was not given to her in writing.
3. No, because an acceptance must also be lodged with escrow.
4. No; her acceptance was never communicated before he withdrew. ✓

Why: DRE Reference Book ch. 6 (Termination of offer; Acceptance): ACCEPTANCE MUST BE EXPRESSED OR COMMUNICATED, and as to revocation, COMMUNICATION OF NOTICE OF REVOCATION. THIS CAN BE DONE ANYTIME BEFORE THE OTHER PARTY HAS COMMUNICATED ACCEPTANCE. A signed copy left on her desk was neither communicated nor put in the course of transmission, so the buyer's withdrawal came first.

A lease has a dual legal nature. Which two relationships does it create between the landlord and the tenant?

1. Privity of estate from the conveyance, and privity of contract. ✓
2. A fiduciary duty on each side, and an agency for rent collection.
3. A lien on the building for the rent, and a license to enter it.
4. Co-ownership of the premises, and a partnership in its income.

Why: DRE Reference Book ch. 9 (Dual Legal Nature of Lease): A LEASE HAS TWO CHARACTERISTICS ... A CONVEYANCE BY THE LANDLORD TO THE TENANT OF AN ESTATE IN REAL PROPERTY ... (WHICH CREATES "PRIVITY OF ESTATE" BETWEEN THE LANDLORD AND TENANT); AND ... A CONTRACT BETWEEN THE LANDLORD AND TENANT ... (WHICH CREATES "PRIVITY OF CONTRACT" BETWEEN THE LANDLORD AND TENANT).

An appraiser must value a fairly new, one-of-a-kind building for which no reliable comparable sales exist. Which cost basis may be very useful as its value base?

1. Historic cost indexed to cost new ✓
2. The county assessor's land value
3. The cost of a typical tract house
4. Its book value after depreciation

Why: Reference Book, ch. 15 (cost new bases): INDEXED HISTORIC COST CAN BE VERY USEFUL IF THE BUILDING IS FAIRLY NEW AND/OR IT IS SO UNIQUE THAT IT IS THE ONLY RELIABLE VALUE BASE. A unique building has no true substitute in the market. An assessor's land figure leaves out the building, a tract house is not comparable, and book value rests on the owner's tax records, which the chapter says the appraiser does not use.

A property's assessed value is $180,000 and the tax rate is 2.4% of assessed value. What is the annual property tax?

1. $432
2. $4,320 ✓
3. $7,500
4. $43,200

Why: Reference Book chapter 26 gives the property tax formula Tax = Assessed Value x Rate (T = A x R). $180,000 times 0.024 is $4,320. Actual rates are set locally and vary by jurisdiction; the figures here test the arithmetic only.

How long must the seller, and any agent, keep a copy of the completed lead disclosure attachment for a sale of target housing?

1. One year.
2. Two years.
3. Three years. ✓
4. Five years.

Why: 40 CFR 745.113(c)(1) requires the seller and any agent to retain a copy of the completed attachment for no less than 3 years from the completion date of the sale; for a lease the 3 years run from the commencement of the leasing period. The retention rule does not limit a buyer's civil suit (745.113(c)(2)).

A seller offers her listing broker a power of attorney to handle the very sale on which the broker will earn a commission. What is generally advised?

1. It is proper if the power is recorded before the listing is signed.
2. Brokers should not hold a power of attorney in that same matter. ✓
3. It is proper so long as the commission is stated as a flat fee.
4. It is proper once the seller's lender gives written approval.

Why: DRE Reference Book ch. 10: REAL ESTATE BROKERS SHOULD NOT BE GIVEN POWERS OF ATTORNEY IN THE SAME MATTER FOR WHICH THE BROKER IS ACTING WITHIN THE COURSE AND SCOPE OF THE REAL ESTATE LICENSE AS A COMPENSATED AGENT. IT IS A LEGAL MAXIM THAT ONE SHOULD NOT EXERCISE A POWER OF ATTORNEY TO ONE'S OWN ECONOMIC ADVANTAGE OR BENEFIT.

Under 42 U.S.C. 9607(b), which of these is a defense for a person who proves the release was caused solely by it?

1. An act of war ✓
2. An act of the defendant's own employee
3. The defendant's lack of negligence
4. The defendant's ignorance of the waste

Why: 42 U.S.C. 9607(b) lists an act of God, an act of war, and an act or omission of a third party other than an employee or agent of the defendant or one in a contractual relationship with it (with due care and precautions), or a combination of these. An employee's act is expressly outside the third-party defense, and lack of fault or knowledge is not itself a listed defense.

A woman is raising her 10-year-old niece while the girl's parents work overseas, and the parents have given her written permission to do so. A landlord refuses to rent to her because of the child. Is she protected on the basis of familial status?

1. No; familial status covers only parents and legal guardians.
2. Yes; a parent's designee with written permission is covered. ✓
3. No, unless a court has first awarded her legal custody.
4. Yes, but only if the niece is younger than 6 years old.

Why: 42 U.S.C. 3602(k): familial status means a minor DOMICILED WITH ... (2) THE DESIGNEE OF SUCH PARENT OR OTHER PERSON HAVING SUCH CUSTODY, WITH THE WRITTEN PERMISSION OF SUCH PARENT OR OTHER PERSON. The aunt is the parents' designee with written permission; custody by court order is not required.

A rectangular tract on an old survey measures 40 rods by 24 rods. How many acres does it contain?

1. 3 acres
2. 4 acres
3. 5 acres
4. 6 acres ✓

Why: Reference Book, ch. 26 (spatial or area measurements): 1 ACRE = 10 SQUARE CHAINS; 160 SQUARE RODS; 4,840 SQUARE YARDS; 43,560 SQUARE FEET, and ONE ROD = 16 1/2 FEET. Working: 40 x 24 = 960 square rods; 960 / 160 = 6 acres. Check in feet: 660 ft x 396 ft = 261,360 sq ft; 261,360 / 43,560 = 6 acres.

A deed grants a farm on condition that it be used as a hostel, with a right of reentry if the use changes. The grantee changes the use. What is the grantor's position?

1. The estate ended automatically when the use changed
2. The grantor may act to end the estate and retake the land ✓
3. The grantor may recover only damages, never the land
4. The condition made the deed void from the very start

Why: Reference Book chapter 4 uses this example: if the grantee changes the use, the grantor can reenter and terminate the estate, which is therefore a fee simple defeasible. Chapter 6 adds that on breach of a condition subsequent the grantor has the power to terminate; unlike a special limitation, the estate does not end by itself.

A couple buying a home ask their salesperson whether to take title as joint tenants or as tenants in common, because they have heard the choice affects their taxes. What should the salesperson do?

1. Recommend joint tenancy as the usual safe choice.
2. Tell them the form of title has no tax effect.
3. Urge them to get competent legal and tax advice. ✓
4. Explain the tax results so they can pick one.

Why: Reference Book, ch. 20 (title and vesting): AS THERE CAN BE SIGNIFICANT LEGAL AND TAX IMPLICATIONS, A REAL ESTATE LICENSEE SHOULD URGE A BUYER TO SEEK COMPETENT ADVICE REGARDING THE MANNER OF TAKING TITLE. Chapter 16 adds that UNLESS A REAL ESTATE BROKER IS ALSO AN INCOME TAX INVESTMENT COUNSELOR, THE BROKER SHOULD NEVER OFFER TAX ADVICE but should refer clients to a tax attorney, CPA or other qualified person. Recommending a vesting, denying any tax effect or explaining the tax results are all advice outside the licensee's competence.

A buyer's agent, whose agreement says nothing about delegation, has a courier carry the buyer's signed offer to the listing office. Is that a proper delegation?

1. No; an agent may never delegate any act without consent.
2. Yes; a purely mechanical act may generally be delegated. ✓
3. No; only another licensee may carry a signed purchase offer.
4. Yes, but only if the listing broker agreed to the courier.

Why: DRE Reference Book ch. 10: UNLESS THE DELEGATION IS SPECIFICALLY FORBIDDEN BY THE PRINCIPAL, THE GENERAL RULE IS THAT AN AGENT MAY DELEGATE CERTAIN OF THE AGENT'S POWERS TO OTHERS. ... THE POWERS WHICH MAY BE DELEGATED BY THE AGENT TO OTHERS ARE GENERALLY LIMITED TO THE FOLLOWING: A. WHEN THE ACT IS PURELY MECHANICAL; ... Carrying a signed document calls for no judgment or discretion.

An owner has a parcel rezoned for commercial use in an area where there is no demand for commercial sites. What effect does the rezoning alone have on value?

1. It raises value to that of the best commercial site
2. It doubles value, since commercial land sells higher
3. It creates no value without demand for that use ✓
4. It lowers value to the residential figure

Why: Reference Book chapter 15 states that zoning by itself does not create value unless there is a demand for the land so zoned. Demand, backed by purchasing power, is one of the four essential elements of value.

A real estate agent turned away a family with children from a unit in a 55-and-over community, relying on the community's written certification under oath that it qualified. It did not. Can the agent be held personally liable for money damages?

1. Yes; the good faith defense protects only the community itself.
2. No, if she had no actual knowledge that it did not qualify. ✓
3. Yes, as a written certification never shields an individual.
4. No, even if she knew the community had fallen below 80 percent.

Why: 24 CFR 100.308(a): A PERSON SHALL NOT BE HELD PERSONALLY LIABLE FOR MONETARY DAMAGES FOR DISCRIMINATING ON THE BASIS OF FAMILIAL STATUS, IF THE PERSON ACTED WITH THE GOOD FAITH BELIEF that the exemption applied, given the written certification in (b)(2); but under (b)(5) A PERSON SHALL NOT BE ENTITLED TO THE GOOD FAITH DEFENSE IF THE PERSON HAS ACTUAL KNOWLEDGE THAT THE HOUSING FACILITY OR COMMUNITY DOES NOT, OR WILL NOT, QUALIFY.

An owner privately tells her property manager not to sign any lease longer than one year, but lets tenants deal with the manager as having normal leasing authority. The manager signs a two-year lease with a tenant who knows nothing of the limit. In most cases:

1. The owner is bound; the limit was never communicated ✓
2. The lease is void, because the manager exceeded authority
3. The lease binds the manager alone as the landlord
4. The lease is cut back to one year automatically

Why: Reference Book chapter 10 explains that apparent authority, or ostensible authority by estoppel, arises when the principal's conduct creates the appearance of authority and a third party reasonably relies on it. Where the principal limits the agent's normal authority and fails to tell the third party, in most cases the third party is not bound by the limitation.

A building has a reproduction cost of $300,000 and is 30% depreciated on the age-life method. Its roof, costing $15,000 new, is 60% worn, and its heating system, costing $10,000 new, is 50% depreciated. Depreciating the roof and heating separately and applying the age-life rate to the rest of the building, what is total physical deterioration?

1. $82,500
2. $90,000
3. $96,500 ✓
4. $104,000

Why: Reference Book chapter 15's store example depreciates the short-lived items separately, then applies the building's age-life percentage to the reproduction cost less those items. Roof: 60% of $15,000 is $9,000; heating: 50% of $10,000 is $5,000; 30% of the remaining $275,000 is $82,500; total $96,500. Taking 30% of the full $300,000 as well double-counts the roof and heating.

Under section 404 of the Clean Water Act, may a state run its own permit program for dredged or fill material?

1. Yes, for waters other than those used for interstate commerce, once the EPA approves. ✓
2. No; only the Army Corps of Engineers may issue these permits for any waters at all.
3. Yes, for every navigable water in the state, as soon as its Governor gives notice.
4. Only for tidal waters and adjacent wetlands, once the Secretary of the Army agrees.

Why: 33 U.S.C. 1344(g)(1): THE GOVERNOR OF ANY STATE DESIRING TO ADMINISTER ITS OWN INDIVIDUAL AND GENERAL PERMIT PROGRAM FOR THE DISCHARGE OF DREDGED OR FILL MATERIAL INTO THE NAVIGABLE WATERS (OTHER THAN THOSE WATERS WHICH ARE PRESENTLY USED, OR ARE SUSCEPTIBLE TO USE ... AS A MEANS TO TRANSPORT INTERSTATE OR FOREIGN COMMERCE ...) ... MAY SUBMIT TO THE ADMINISTRATOR A FULL AND COMPLETE DESCRIPTION OF THE PROGRAM; under (h)(2)(A), if the state has the needed authority, THE ADMINISTRATOR SHALL APPROVE THE PROGRAM, and the Secretary then suspends federal permits for those activities. Tidal waters stay with the Corps.

To close a deal, a seller promises to repave the driveway before closing, never intending to do it. How is the promise classified?

1. Constructive fraud: a breach of duty without intent.
2. A mistake of fact, since the driveway was not repaved.
3. Mere puffing, which the law never treats as a fraud.
4. Actual fraud: a promise made with no intent to perform. ✓

Why: DRE Reference Book ch. 6 lists the acts deemed actual fraud when done by a party to a contract with intent to induce the other to enter it, including A PROMISE MADE WITHOUT ANY INTENTION OF PERFORMING IT.

Under the principle of the four-stage life cycle, which four stages characterize all property?

1. Growth, stability, decline and revitalization. ✓
2. Development, growth, stability and decline.
3. Growth, decline, stability and then conformity.
4. Stability, growth, decline and then gentrification.

Why: DRE Reference Book ch. 15: PRINCIPLE OF FOUR-STAGE LIFE CYCLE ... ALL PROPERTY IS CHARACTERIZED BY FOUR DISTINCT STAGES: GROWTH, STABILITY, DECLINE, AND REVITALIZATION. Neighborhoods tend to follow the pattern, and the process is frequently reversed.

For an FHA-insured mortgage on a newly sited manufactured home and its lot, how must the home be attached to the site?

1. Parked on the lot with its towing hitch kept attached
2. Set on a permanent foundation, hitch and wheels removed ✓
3. Titled as a vehicle with the state motor vehicle office
4. Placed on blocks on leased space in a park for one year

Why: 24 CFR 203.43f(b) and (c): the mortgage must cover the home and site and be ON A PROPERTY CLASSIFIED AND TAXED AS REAL ESTATE, and the home SHALL BE ERECTED ON A SITE-BUILT PERMANENT FOUNDATION and permanently attached by anchoring devices, while THE TOWING HITCH OR RUNNING GEAR, WHICH INCLUDES AXLES, BRAKES, WHEELS AND OTHER PARTS OF THE CHASSIS THAT OPERATE ONLY DURING TRANSPORTATION, SHALL HAVE BEEN REMOVED. Permanent attachment is what makes the home part of the real estate. A kept hitch, a vehicle title or blocks on leased space leave it movable personal property.

At a judicial foreclosure the debt is $265,000 and the allowed fees, costs and sale expenses are $5,000. The sale brings $232,000. Where a deficiency judgment is allowed, what is its amount?

1. $5,000
2. $33,000
3. $38,000 ✓
4. $232,000

Why: DRE Reference Book ch. 12: A DEFICIENCY JUDGMENT IS A PERSONAL JUDGMENT AGAINST A DEBTOR/BORROWER FOR THE DIFFERENCE BETWEEN THE UNPAID BALANCE OF THE SECURED DEBT/LOAN (PLUS INTEREST, AUTHORIZED FEES, COSTS, AND EXPENSES OF SALE) AND THE AMOUNT OF THE ACTUAL PROCEEDS OF THE SALE. ($265,000 + $5,000) - $232,000 = $38,000.

A home's real estate tax for its calendar-year tax period is $3,650, in a year that is not a leap year. The owners sell on March 15. Under the federal rule apportioning the year's tax between seller and buyer, how much is treated as the sellers' tax?

1. $730 ✓
2. $740
3. $760
4. $2,920

Why: 26 U.S.C. 164(d)(1): the part of the tax allocable to the part of the year WHICH ENDS ON THE DAY BEFORE THE DATE OF THE SALE is the seller's, and the part from the date of sale on is the buyer's. IRS Publication 523 computes it the same way: DIVIDE THE NUMBER OF DAYS YOU OWNED THE PROPERTY during the year, NOT COUNTING THE DATE OF SALE, by 365, and multiply by the year's tax. Working: January 1 to March 14 = 31 + 28 + 14 = 73 days; 73 / 365 x $3,650 = $730. $740 wrongly counts the sale date as the sellers'; $760 prorates by months (2.5 / 12); $2,920 is the buyer's 292 days.

An owner signs a contract to sell a lot worth about $400,000 to a buyer for $40,000. She later sues to undo the sale, claiming the buyer defrauded her. What part may the very low price play in her case?

1. It may help show fraud when taken together with other facts. ✓
2. It proves fraud by itself, so the contract is automatically void.
3. It is irrelevant, since courts never look at the size of a price.
4. It voids the contract for want of any consideration at all.

Why: DRE Reference Book ch. 6 (Sufficient Consideration): THERE IS NO REQUIREMENT OF ADEQUACY TO MAKE THE CONTRACT ENFORCEABLE ... ALSO, GROSS INADEQUACY OF CONSIDERATION MAY BE A CIRCUMSTANCE WHICH, TOGETHER WITH OTHER FACTS, WILL TEND TO SHOW FRAUD OR UNDUE INFLUENCE. A low price is still consideration and does not by itself void the deal, but it is evidence the court may weigh.

A Loan Estimate shows $1,200 in lender credits. Nothing happens that would permit a revised estimate, but at closing the creditor provides only $900 in lender credits. How is the $300 shortfall treated?

1. As a permitted change, since credits are only estimates
2. As a seller credit the seller must make up at closing
3. As acceptable, since credits are not charges at all
4. As an increased charge to the consumer for good faith ✓

Why: 12 CFR 1026.19(e)(3)(i), official comment 5: lender credits include SPECIFIC PAYMENTS, SUCH AS A CREDIT, REBATE, OR REIMBURSEMENT, FROM A CREDITOR TO THE CONSUMER, they ARE NEGATIVE CHARGES TO THE CONSUMER, and an actual total that is less than the estimate IS AN INCREASED CHARGE TO THE CONSUMER FOR PURPOSES OF DETERMINING GOOD FAITH. So the cut is not a free change, the seller owes nothing, and treating credits as outside the charges ignores the rule.

A parcel described as the NW 1/4 of the SW 1/4 of a section sells for $2,500 per acre. What is the price?

1. $10,000
2. $100,000 ✓
3. $200,000
4. $400,000

Why: Reference Book chapter 4 says a quarter of a quarter section contains 40 acres. At $2,500 per acre, 40 x $2,500 = $100,000. Using 160 acres, the full quarter section, gives $400,000.

A salesperson tells a buyer the house is in perfect shape. The foundation is cracked. What is the risk?

1. None; such sales talk is always treated as opinion
2. None, unless the buyer had the statement in writing
3. Courts may treat it as a statement of material fact ✓
4. Only a license fine, as buyers cannot rely on it

Why: Reference Book chapter 10 notes a growing tendency of courts to treat sales talk as a representation of material fact, because buyers of limited sophistication rely on it, and records that a statement that a house was in perfect shape was held a representation of material fact. Puffing is no longer a safe harbor.

A gas station's underground tank leaks gasoline into the soil. How does CERCLA's definition of hazardous substance treat petroleum?

1. It includes all petroleum products stored in underground tanks
2. It includes petroleum only when it reaches drinking water
3. It excludes petroleum unless a fraction is specifically listed ✓
4. It excludes petroleum only for tanks installed before 1980

Why: 42 U.S.C. 9601(14) states that the term hazardous substance does not include petroleum, including crude oil or any fraction of it not otherwise specifically listed or designated, nor natural gas. Leaking petroleum tanks are handled under a separate program: the brownfield definition itself refers to the Leaking Underground Storage Tank Trust Fund under the Solid Waste Disposal Act (9601(39)(B)(ix)).

A landlord refuses to rent to a woman who is pregnant, saying the building is meant for adults. Which protection does this engage?

1. None, because no child is yet living with the applicant
2. Sex only, as familial status needs a child under 18 in the home
3. Familial status, which covers a person who is pregnant ✓
4. Handicap, because pregnancy is a physical impairment

Why: 42 U.S.C. 3602(k) defines familial status as one or more individuals under 18 domiciled with a parent or custodian, and provides that the protections against familial status discrimination apply to any person who is pregnant or is securing legal custody of a minor. The refusal is therefore discrimination because of familial status.

In appraisal practice, what does USPAP say must always be done with the word value?

1. It must be qualified, such as market value. ✓
2. It must be stated as a range rather than a figure.
3. It must equal the most recent price paid.
4. It must be based on the owner's original cost.

Why: Reference Book chapter 15 quotes USPAP: "In appraisal practice, value must always be qualified," for example as market value, liquidation value or investment value. A value opinion is not the last price paid or the owner's historic cost, and USPAP does not require a value opinion to be stated as a range.

What is the most common way for a property manager to merchandise rental space today?

1. Placing classified ads in newspapers
2. Posting signs at the rental property
3. Relying on referrals from current tenants
4. Advertising the vacancy on the internet ✓

Why: Reference Book, ch. 22 (merchandising the space): THE MOST COMMON METHOD OF MERCHANDISING RENTAL PROPERTY TODAY IS TO ADVERTISE IT ON THE INTERNET. OTHER METHODS INCLUDE business cards, newspaper ads, signs on the property, brochures and tenant referrals, so those are real but less common channels. When a qualified prospect responds, the manager MUST MAKE EVERY EFFORT TO SECURE THE TENANT, since advertising and vacancy are costly.

A man is in the middle of adoption proceedings for a 7-year-old but does not yet have custody. A landlord turns him away because he "will have a kid." Does the familial status protection reach him?

1. No; it begins only when a child actually lives in the dwelling.
2. No, because it protects only those who are parents by birth.
3. Yes; it covers anyone in the process of securing legal custody. ✓
4. Yes, but only once a court has entered a final adoption order.

Why: 42 U.S.C. 3602(k): THE PROTECTIONS AFFORDED AGAINST DISCRIMINATION ON THE BASIS OF FAMILIAL STATUS SHALL APPLY TO ANY PERSON WHO IS PREGNANT OR IS IN THE PROCESS OF SECURING LEGAL CUSTODY OF ANY INDIVIDUAL WHO HAS NOT ATTAINED THE AGE OF 18 YEARS. He is in that process now, so no final order is needed.

A creditor receives a consumer's mortgage application on a Monday. By when must it deliver or mail the Loan Estimate?

1. No later than the third business day after receipt. ✓
2. No later than seven business days after receipt.
3. Within 30 calendar days of receiving the application.
4. At least three business days before the consummation.

Why: 12 CFR 1026.19(e)(1)(iii)(A): THE CREDITOR SHALL DELIVER OR PLACE IN THE MAIL THE DISCLOSURES ... NOT LATER THAN THE THIRD BUSINESS DAY AFTER THE CREDITOR RECEIVES THE CONSUMER'S APPLICATION. Separately, (B) requires delivery no later than the seventh business day before consummation.

Researching a neighborhood, a salesperson gathers the asking prices of current listings and the bids buyers have made on similar homes. What do these generally indicate about value?

1. Listings suggest the top of the value range, bids the bottom. ✓
2. Bids suggest the top of the value range, listings the bottom.
3. Listings are closer to market value than offers generally are.
4. Both show market value once averaged, so no sales are needed.

Why: DRE Reference Book ch. 15, Sources of Data: LISTING PRICES MAY OFTEN INDICATE THE PROBABLE TOP MARKET VALUE OF A SPECIFIC PROPERTY WHILE BID PRICES MAY NORMALLY INDICATE THE LOWEST PROBABLE VALUE ... A REASONABLE NUMBER OF PROPERTIES FALLING INTO THIS CATEGORY WILL PROVIDE A BRACKET WITHIN WHICH A CURRENT FAIR VALUE MAY BE FOUND. OFFERS ARE LIKELY TO APPROACH MARKET VALUE MORE CLOSELY THAN ARE LISTINGS.

What does the owner of a typical condominium unit own?

1. Shares in a corporation that holds title, and a right to occupy.
2. A separate lot plus membership in an association owning common area.
3. The unit's airspace in fee plus an undivided share of common areas. ✓
4. A right to use a unit for set periods of each year, without an estate.

Why: DRE Reference Book ch. 17: TYPICALLY, AN OWNER OF A CONDOMINIUM OWNS IN FEE SIMPLE THE AIR SPACE IN WHICH THE PARTICULAR UNIT IS SITUATED AND AN UNDIVIDED INTEREST IN COMMON IN CERTAIN OTHER DEFINED PORTIONS OF THE WHOLE PROPERTY INVOLVED. The other options describe a stock cooperative, a planned development and a time-share use.

A savings bank lends a buyer the money to purchase a home. A year later the bank sells that loan to Freddie Mac. In which markets did the two transactions take place?

1. Both in the primary market, as each one funded a home loan
2. The loan in the secondary market, the sale in the primary
3. The loan in the primary market, the sale in the secondary ✓
4. Both in the secondary market, as Freddie Mac is involved

Why: Reference Book chapter 12 describes the primary mortgage market as lenders funding loans directly to borrowers, and the secondary market as the one in which those lenders replenish their funds by selling the loans to investors such as Fannie Mae and Freddie Mac. Chapter 27 draws the same line between the two markets.

A variance lets an owner build closer to her side line than the zone normally permits. Can the same variance let her build taller than any neighbor may?

1. Yes; once it is granted, a variance lifts every limit on the lot.
2. Yes, if the added height is needed to recover her building costs.
3. No, unless her lot is also rezoned to a commercial district.
4. No; it gives the same, not additional, privileges as neighbors. ✓

Why: DRE Reference Book ch. 18: IF GRANTED, THE WAIVER OR “ZONING VARIANCE” PROVIDES THE PROPERTY OWNER WITH THE SAME, BUT NOT ADDITIONAL, DEVELOPMENT PRIVILEGES AS NEIGHBORING PARCELS IN THE SAME ZONE.

What are the two essential elements of a valid sale escrow?

1. A binding contract, and conditional delivery to a neutral third party. ✓
2. A signed listing, and deposit of the full price with a licensed broker.
3. A recorded deed, and a title insurance policy issued to the buyer.
4. Written instructions, and the lender's funding of the buyer's loan.

Why: DRE Reference Book ch. 8 (Essential Elements of an Escrow): THE TWO ESSENTIAL ELEMENTS FOR A VALID SALE ESCROW ARE A BINDING CONTRACT/AGREEMENT BETWEEN BUYER AND SELLER AND THE CONDITIONAL DELIVERY TO A NEUTRAL THIRD PARTY OF SOMETHING OF VALUE.

A city takes an entire leased building by eminent domain in the middle of a five-year lease. Absent other lease terms, what becomes of the tenant's duty to pay rent?

1. It ends; the tenant is released from the lease duties. ✓
2. It continues until the lease term expires in full.
3. It continues, reduced by the share the city pays her.
4. It ends only if the tenant proves the landlord's fault.

Why: DRE Reference Book ch. 9 (Condemnation of Leased Property): IF A LEASED PROPERTY IS CONDEMNED UNDER A PROCEEDING IN EMINENT DOMAIN, THE TENANT IS ORDINARILY RELEASED FROM ALL OF HIS OR HER OBLIGATIONS UNDER THE LEASE AGREEMENT, INCLUDING THE OBLIGATION TO PAY RENT. Only a partial taking that leaves the premises usable keeps the rent due.

A borrower's total debt ratio on a conventional loan comes out slightly above Fannie Mae's benchmark range. How do Fannie Mae's revised underwriting guidelines treat that?

1. As grounds for automatic denial of the application
2. As calling for a separate 28% housing ratio test
3. As one risk factor weighed with others, not a bar ✓
4. As requiring the buyer to add mortgage insurance

Why: Reference Book, ch. 12 (Real Estate Finance): FANNIE MAE AS PART OF REVAMPING THEIR UNDERWRITING GUIDELINES HAS SINCE ABANDONED THE ABOVE DESCRIBED HOUSING RATIOS IN FAVOR OF A TOTAL DEBT RATIO, and that benchmark IS A GUIDELINE ONLY WHICH IS CONSIDERED IN CONJUNCTION WITH OTHER FACTORS AS PART OF A COMPREHENSIVE RISK ASSESSMENT; AN INCREMENTAL INCREASE IN THE RATIO ABOVE 36% TO 38% MAY NOT BE CONSIDERED SIGNIFICANT IN THE OVERALL DECISION. So a slight excess is no automatic denial, the separate 28% housing ratio was abandoned, and mortgage insurance turns on loan-to-value, not the debt ratio.

A deed conveys a duplex to three buyers as tenants in common but does not state their shares. One of them paid half the price. What shares does the deed presume?

1. Shares in proportion to what each one paid.
2. Equal undivided shares of one-third each. ✓
3. Whatever shares a court fixes on partition.
4. Half to her and one quarter to each other.

Why: DRE Reference Book ch. 5: INTERESTS OF SUCH TENANTS IN COMMON MAY BE ANY FRACTION OF THE WHOLE ... IF THE DEED TO COTENANTS DOES NOT RECITE THEIR RESPECTIVE INTERESTS, THE INTERESTS WILL BE PRESUMED TO BE EQUAL. Unequal shares must be stated in the deed.

Buyer and seller sign instructions canceling their escrow but sign nothing about the purchase contract. Later the buyer sues for specific performance. Is the contract necessarily ended?

1. Yes; canceling the escrow always rescinds the contract.
2. Yes, because the escrow holder has returned all of the funds.
3. No; canceling escrow may not rescind the purchase contract. ✓
4. No, but the buyer may now recover only the earnest deposit.

Why: DRE Reference Book ch. 8: CANCELLATION OF ESCROW MAY NOT ALSO CANCEL OR RESCIND A PURCHASE AGREEMENT/CONTRACT ... IF A PURCHASE AGREEMENT/CONTRACT IS NOT CANCELED OR RESCINDED ALONG WITH THE CANCELING OF THE SALE ESCROW, EITHER PRINCIPAL ... MAY RETAIN THE RIGHT TO SPECIFIC PERFORMANCE OF THE AGREEMENT/CONTRACT OR FOR THE RECOVERY OF DAMAGES.

A borrower buys a private flood policy instead of a national flood insurance program policy for a loan that requires flood coverage. Must a regulated lender accept it?

1. No, only a policy issued under the national program qualifies
2. Yes, any policy from any insurer satisfies the requirement
3. No, unless FEMA first approves that particular policy
4. Yes, if it is at least as broad as a standard program policy ✓

Why: 42 U.S.C. 4012a(b)(1)(B) directs regulated lenders to accept private flood insurance that meets the coverage requirement, and 4012a(b)(7) defines private flood insurance as a policy from an insurer licensed or approved in the state that is at least as broad as a standard flood insurance policy, counting deductibles, exclusions and conditions. Not every policy qualifies, and no case-by-case FEMA approval is required.

A broker under an open listing presents an offer from a buyer the owner has never heard of. The owner wants to look into the buyer's finances before accepting. May she?

1. No; she must accept or reject the offer on the day it arrives.
2. Yes; she is entitled to a reasonable time to investigate him. ✓
3. No; judging a buyer's finances is solely the broker's own job.
4. Yes, but only if the listing expressly reserves that right.

Why: DRE Reference Book ch. 10: THE OWNER IS ENTITLED TO A REASONABLE TIME WITHIN WHICH TO INVESTIGATE THE FINANCIAL RESPONSIBILITY OF THE PROPOSED PURCHASER BEFORE ACCEPTING THE PURCHASER AS SUCH.

Two applicants with the same credit history and income apply for the same home loan. Because one is a woman, the lender quotes her a higher interest rate. What does HUD's fair housing rule say?

1. It is lawful as long as both loans are actually approved.
2. It is lawful if the woman accepts the rate in writing.
3. It is unlawful to fix a loan's interest rate because of sex. ✓
4. It is unlawful only if the loan is insured by the FHA.

Why: 24 CFR 100.130(b)(2): unlawful conduct includes FIXING THE AMOUNT, INTEREST RATE, COST, DURATION OR OTHER TERMS OR CONDITIONS FOR A LOAN OR OTHER FINANCIAL ASSISTANCE FOR A DWELLING ... BECAUSE OF RACE, COLOR, RELIGION, SEX, HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN, whoever insures the loan.

A small apartment property earns significant income from laundry machines and parking in addition to rent. Which multiplier is appropriate?

1. A gross rent multiplier, which uses the rent alone.
2. A gross income multiplier, using all gross income. ✓
3. An overall capitalization rate applied to gross rent.
4. A net income multiplier, taken after operating expenses.

Why: Reference Book chapter 15: where income from sources other than rent is considered significant by typical investors, "then analysis of the Gross Income Multiplier (GIM) is appropriate," because it includes all gross income generated by the property. The gross rent multiplier analyzes rents alone.

A home sells for $465,000 at a 5.5% commission. The seller pays $3,850 of other costs, a $251,300 payoff, and a $1,940 credit to the buyer for unpaid taxes. What does the seller net?

1. $182,335 ✓
2. $186,185
3. $186,215
4. $205,352.50

Why: 12 CFR 1026.38(k)(2) places closing costs, the payoff and the prorated unpaid taxes among amounts due FROM the seller. $465,000 - $25,575 commission (Reference Book chapter 26) - $3,850 - $251,300 - $1,940 = $182,335. Treating the tax proration as a credit to the seller gives $186,215, and misplacing the commission rate as 0.55% gives $205,352.50.

An owner's operating statement lists property taxes, hazard insurance, common-area utilities and monthly mortgage payments. Which item is left out of the expenses used to find NOI?

1. The property tax bill.
2. The hazard insurance.
3. The common-area utilities.
4. The loan payments. ✓

Why: Reference Book chapter 15 says principal and interest payments on mortgages must be disregarded by the appraiser as not being allowable expense items. Taxes and insurance are fixed expenses and utilities a variable expense, all deducted from effective gross income to reach NOI.

Do the federal fair housing rules bar a landlord from evicting a tenant because of the race of the tenant's guests?

1. No; the rules protect only the tenants and the applicants.
2. No, as long as the tenant's lease has been breached.
3. Yes, but only if the guests have stayed there overnight.
4. Yes; evicting because of a guest's race is prohibited. ✓

Why: 24 CFR 100.60(b)(5): prohibited actions include EVICTING TENANTS BECAUSE OF THEIR RACE, COLOR, RELIGION, SEX, HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN OR BECAUSE OF THE RACE, COLOR, RELIGION, SEX, HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN OF A TENANT'S GUEST.

What is assessed value?

1. A lender appraiser's valuation of the property securing its loan.
2. The listing broker's estimate of value, used to set the list price.
3. The price agreed between the buyer and the seller at closing.
4. A public authority's valuation of property as the basis for taxes. ✓

Why: Reference Book chapter 27 defines assessed valuation as "a valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property," and the assessor as the official responsible for it. Chapter 16 adds that property taxes are ad valorem, levied according to value.

While a seller is traveling, her listing broker receives a full-price offer and signs the purchase contract as agent for the seller. The listing gives the broker no power of attorney. What is the effect?

1. The seller is bound, since the offer met the list price
2. The seller is bound, as the listing is an exclusive right to sell
3. The contract is binding once the buyer's deposit is received
4. The seller is not bound unless she ratifies it ✓

Why: Reference Book chapter 10 states that a listing, even an exclusive right to sell, conveys no power to sell: it authorizes the broker to find a buyer, not to contract to convey title. A broker is a special agent who must obtain the principal's ratification of agreements with third parties.

A home is worth $380,000. Its first loan was originally $240,000 and now has a balance of $214,000; a home equity line has a $31,000 balance. What is the owner's equity?

1. $109,000
2. $135,000 ✓
3. $166,000
4. $245,000

Why: Reference Book chapter 15 describes equity as the difference between the loan amount and the value. All liens count, at their current balances: $380,000 - $214,000 - $31,000 = $135,000. Using the original loan amount gives $109,000, and leaving out the equity line gives $166,000.

Does a seller's agent who delivers the seller's disclosures to a buyer have a duty to explain their practical or legal effect to that buyer?

1. Yes; any agent who discloses must also explain.
2. No; that duty lies with the buyer's own agent. ✓
3. Yes, but only if the buyer asks in writing for it.
4. No; no agent ever explains disclosures to anyone.

Why: DRE Reference Book ch. 10: THE SELLER AND THE REAL ESTATE BROKERS ACTING AS THE AGENTS OF THE SELLER FOR THE PURPOSES OF MAKING DISCLOSURES ABOUT THE PROPERTY AND ITS CONDITIONS DO NOT HAVE THE DUTY TO 'EXPLAIN' THE PRACTICAL OR LEGAL EFFECT OR IMPACT OF THE DISCLOSURES. ... HOWEVER, THE AGENT OF THE PRINCIPAL TO WHOM THE DISCLOSURES ARE BEING MADE OWES FIDUCIARY DUTIES TO THAT PRINCIPAL WHICH INCLUDE 'EXPLAINING'.

A seller agrees to pay 1.5 points on the buyer's loan. The price is $400,000, the home appraises at $392,500, and the lender lends 80% of the appraised value. What do the points cost the seller?

1. $4,710. ✓
2. $4,800.
3. $5,887.50.
4. $6,000.

Why: DRE Reference Book ch. 27: DISCOUNT POINTS are THE AMOUNT OF MONEY THE BORROWER OR SELLER MUST PAY THE LENDER TO GET A MORTGAGE AT A STATED INTEREST RATE, and A POINT EQUALS ONE PERCENT OF THE LOAN; the LTV ratio applies to the APPRAISED VALUE. Working: $392,500 x 0.80 = $314,000 loan; x 0.015 = $4,710. $4,800 uses 80% of the price; $5,887.50 takes points on the appraised value and $6,000 on the price, not on the loan.

In property law, what does lateral support refer to?

1. The support a building's frame gives to its own roof.
2. The support a neighbor's soil gives to adjoining land. ✓
3. The support the earth below gives to the land surface.
4. The support a party wall gives to only one of two lots.

Why: DRE Reference Book ch. 27 (Glossary), LATERAL SUPPORT: THE SUPPORT WHICH THE SOIL OF AN ADJOINING OWNER GIVES TO A NEIGHBOR’S LAND. It is support from the side, not from beneath; a PARTY WALL is A WALL ERECTED ON THE LINE BETWEEN TWO ADJOINING PROPERTIES ... FOR THE USE OF BOTH PROPERTIES.

A seller refuses to close on the sale of a house, and the buyer wants the house itself rather than money. What remedy fits?

1. Specific performance, because each parcel of land is unique ✓
2. Nominal damages, since the buyer has not paid the price yet
3. Rescission, which forces the seller to convey the property
4. Punitive damages, which are measured by the house's value

Why: Reference Book chapter 6 explains that because every piece of land is unique, the law presumes a breach of an agreement to transfer real property cannot be relieved adequately by money, so equity may order specific performance. Rescission does the opposite: it cancels the contract and restores the parties.