c. A deed of trust conditionally conveys real
estate as the collateral to secure the loan. The
parties are the lender (beneficiary), the borrower (grantor or trustor), and the trustee.
2
An offer
Detailed Answer
b. The mere fact of signing an offer is not
enough to bind the parties. The offeror must
be notified that his offer has been accepted.
3
In which of the following types of agency
might you see the termination of the agency
relationship immediately after closing?
Detailed Answer
d. Special agency is typically a single purpose,
short-term agency relationship.
4
The right that a power company acquires in
order to lay a service line across a customer’s
property is called
Detailed Answer
a. If a power company wants to lay a service
line across customer properties and has to
acquire an irrevocable right to do so, that
right would be called an easement in gross.
5
An express agency relationship is most clearly
evidenced by
Detailed Answer
c. Express agency is created by written or oral
agreement. Written agreements reduce the
likelihood of a miscommunication.
6
The closing of the sale of a residential property is occurring on May 23. Homeowner’s
association dues for the year have been paid in
advance and taxes for the year will be paid in
arrears. These items will be prorated at closing. How will this be shown on the HUD-1
settlement statement?
Detailed Answer
a. The buyer owes the seller from closing
through the end of the year for the prepaid
association dues. The seller owes the buyer
estimated property taxes from the first of the
year through closing. The buyer will be
responsible for paying annual taxes at the
end of the year with funds received from the
seller and the additional amount necessary
for the rest of the year.
7
Jane is selling her house. It is located in a
neighborhood of modest three-bedroom
homes ranging in price from $80,000 to
$100,000. Two years ago, she added a fourth
bedroom, third bath, and put a swimming pool
in the backyard. In determining an estimate of
value, the appraiser will apply which principle
of value to this situation?
Detailed Answer
a. Although Jane’s cost to make the additions
was high, the comparable properties in her
area do not justify additional market value.
The appraiser will apply the depreciation
concept of functional obsolescence, which
applies to outmoded or faulty buildings or to
over-improvement or super-adequacy.
8
A broker listed and sold a 50-year-old house
but did not inspect the property to determine if
there were any latent defects. Which of the following statements is true in this situation?
Detailed Answer
c. Neither a listing broker nor a salesperson has
the responsibility to physically inspect property. A broker must disclose only known
information. Inspections are left to those
who are licensed to inspect such as engineers
and real estate inspectors.
9
The lender charges two discount points to the
buyer. How much does this increase the buyer’s
closing costs on his $135,000 home if his LTV is
80%?
Detailed Answer
c. Convert 80% to a decimal and multiply;
$135,000 × 80% = $108,000 loan amount;
$108,000 × 2% = $2,160 cost of points.
10
Domestic use of water by an owner from an
adjoining navigable stream comes under control of which water right?
Detailed Answer
c. Riparian rights control private use of water
in streams and rivers adjacent or flowing
through private property. These rights limit
use of water to household purposes, such as
plumbing fixture operation.