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Lori has agreed to transact real estate business on behalf of Alex with Alex’s authority. Lori is:
An agent is someone who transacts business or manages the tasks of another person (e.g., principal), pursuant to the principal’s authority. A principal is the party that the agent represents and acts on behalf of, such as Alex. Lori is not necessarily a licensed salesperson. She can be an agent and hold another position, such as a broker, that requires an agency relationship.
Ownership of real property for an undetermined length of time is called:
A freehold estate is ownership of real property for an undetermined length of time. A nonfreehold or leasehold estate has a determinable end. An estate is simply an interest in property that provides the right to possess the land.
Another name for an easement is:
An easement, which is a nonpossessory interest in someone else’s land, is also known as a right of way. The property receiving the benefit of the easement is the dominant estate, while the property that is providing the benefit or suffering is the servient estate. An easement in gross is also known as a commercial easement in gross and is typically possessed by governments and utilities for providing services to the public such as electrical lines across another’s property. No easement provides an ownership or possessory interest in the property. It is just a right to use or to restrict use.
Lanie owns a home in the mountains. If the home’s appraised market value is $540,000 and the loan balance is $135,000, what is the loan to value ratio?
To compute the loan to value ratio, which is the ratio of the loan balance to the property value, you divide the loan balance by the market value. $135,000 / $540,000 = .25, so the loan to value ratio is 25%.
In order to purchase a home, Darla needs to take out a mortgage. A mortgage is an example of a(n):
An executory contract is a contract that has terms to be completed at a later date. It is not fully performed until all acts required are completed, such as a mortgage. An executed contract is a fully performed contract. A unilateral contract involves a promise to induce the other party to do some act, such as an open listing contract, where the property owner can cancel the listing at any time prior to an agreed upon deal. An implied contract is formed based upon the actions of the parties that evidence an intent to enter into a contract, such as where a seller permits a broker to show a property before any formal agreement is entered into.
What does “CO” mean?
CO is an abbreviation for certificate of occupancy, which is the municipal document verifying that the premises and parts thereof are approved and safe for occupancy. Building additions usually require a CO. A building inspector performs an inspection before the CO is issued and also checks properties for violations.
Halley owns 25 acres of land in a residential area and wants to develop a real estate complex containing 50 single family homes. What type of mortgage can she obtain that will permit her to pay it off as she sells each home?
A blanket mortgage is a commercial mortgage often used by real estate developers to finance a project. At least two parcels of property are pledged as collateral. The release clause allows the lien to be lifted on particular parcels when a certain amount of the loan balance is paid, such as when a new home is sold and the developer uses the proceeds from the sale to pay off a portion of the Blanket mortgage. PMI is private mortgage insurance, which is not a type of mortgage. It is used when the down payment is less than 20% to insure the top portion of the loan in case of default. An insurance premium is typically added to the monthly mortgage payment. A Pledged Account involves the purchaser placing money in a savings account and using the earned interest to supplement the mortgage payment. With an Open-End mortgage, the mortgagor (purchaser/borrower) is entitled to demand additional loan funds without the need to undergo a new underwriting process.
The City of Glass wants to expand a public park. It needs to obtain the necessary land from private landowners. What government power can be used to obtain the land needed to expand the park?
Eminent domain is the government power permitting it to obtain private property for public use. Condemnation is the actual taking of the property pursuant to the eminent domain power. Municipal forfeiture and public seizure are not formal terms.
Helga purchases an investment property in the city for $750,000. In the first year, the property generated an annual cash flow of $75,000, but she sustains a $25,000 tax loss that she can apply against the income of a very successful car wash that she owns. If Helga is in the 35% tax bracket, what is her after-tax cash flow related to the city property?
$35,000. $75,000 (annual cash flow) + $25,000 (tax loss) = $100,000 x .35 = $35,000. After-tax cash flow is calculated by adding back the tax loss to the income and then multiplying by the tax rate. A tax savings is possible when a tax loss can reduce the taxable income of a separate investment.
What is another name for swamps, marshes and bogs?
Wetlands are protected areas that include swamps, marshes, wet meadows and bogs. They may serve as protection for storm and flood water and help control erosion and pollution. They also serve as sanctuaries for wildlife and the natural landscape.
Which of the following is not a mixed-use property?
An outlet center with clothing and furniture stores are similar commercial uses, so no mixed use exists. A building with a steakhouse on the first floor and offices on the second floor combine two separate uses, restaurant and office space. A shipping warehouse adjoining an office suite center combine a warehouse and office space. A religious prayer facility with residential housing above it combines a religious use with a residential use.
Julie is looking to buy her first home. She locates one and her offer is accepted. Julie applies for a mortgage. She is told that she can deduct her mortgage interest from her income because she has bought a(n) _____________ home.
A qualified home is a primary or main home for mortgage interest deduction purposes.
A qualified home is a primary or main home for mortgage interest deduction purposes.
Paula enters into a contract for the purchase of Jordan’s home. Paula applies for a mortgage. The contract requires her to get a document from her mortgage lender stating that the lender will be loaning her the necessary funds. What is that document called?
A commitment is a document from a mortgage lender stating that the lender will be loaning the purchaser/borrower the necessary funds. The promissory note contains the borrower’s promise to repay the debt and the manner and frequency of payment (e.g., monthly via check). The note also contains the principal balance owned and the interest rate. A letter of approval may refer to a pre-approval letter issued by the lender to show potential sellers that the borrower may be approved for a loan for a particular amount.
Biff is hired by owner Gilligan to oversee a residential property complex, including supervising complex employees and maintenance, but he has limited authority. Biff is the:
A property manager oversees the property on behalf of the owner and is typically required to oversee employees and maintenance and protect the interests of and obtain the optimum financial return for the property owner who employs the manager. A lessee is the tenant of a property pursuant to a lease. A leasing agent is retained by a property owner to locate tenants for the owner’s building. A managing agent has more power than a property manager, including the ability to use their judgment and discretion in matters affecting the property.
Barbali manages a commercial office building. One of the tenants contacts her to complain about a broken door lock. What type of maintenance is necessary to repair the lock?
Corrective maintenance is repairing something that is already malfunctioning (e.g., fixing a broken door lock). Preventative maintenance refers to inspecting equipment pursuant to a schedule and making repairs when necessary. Property maintenance refers to the overall maintenance of a property.
The profit realized from the sale of real estate held for 3 years is:
Capital gains represent the profits on a capital investment, such as real estate. The profit realized from the sale of real estate held for 3 years is long term capital gains. Long term capital gains are profits on assets that are owned for more than 12 months. Short term capital gains are profits on assets that are owned for 12 months or less. Profit on long term capital gains is subject to a reduced tax rate and is not taxed as ordinary gross income, but profit on short term capital gains is taxed as ordinary gross income.
Lev owns a home. Francois is a real estate agent who has visited Lev to try to list Lev’s home for sale, but Lev refuses. Lev nonetheless permits Francois to show 3 prospective purchasers his home. Has an agency been created?
An agency by estoppel, which is an implied agency, was created since Lev, the principal, did not stop Francois, the agent, from representing Lev’s interests. An implied agency is formed based on the words or actions of the agent and principal that evidences an intent to form the agency. An express agency is formed through an oral or written agreement. An agency does not necessarily need to be created through a written agreement. A listing agreement is an example of an express agency.
Which of the following is not true about the 1988 Amendment to the Fair Housing Act adding protected classes to the law?
The 1988 Amendment to the Fair Housing act added protected classes to the law. It added families and persons with mental and physical disabilities to the law. Elderly persons were not added to law. However, senior citizen housing is exempt from the Fair Housing Act if it complies with the exemption requirements. By restricting tenants to people 55 and over, an exemption to the Fair Housing Act could apply.
Trevor owns an apartment building that is 75 years old. He has not performed much maintenance on the building, so the foundation and structural integrity are starting to crumble. As a result, the building’s value has been decreasing. What does that reduction in value refer to?
Depreciation is the loss of value due to a building or property due to any cause, such as deterioration, damage and normal wear and tear. Functional obsolescence means that the property has become inferior to surrounding properties due to technological changes, such as obsolete equipment (e.g., heating system), outdated electrical system or outdated design. External obsolescence refers to changes occurring to land-use in the surrounding area, such as increased traffic, pollution, and zoning changes that affect the permitted use of the property.
Which fiduciary duty requires the agent to act with care with respect to handling funds received on behalf of the principal?
Accountability means financial accountability and is the fiduciary duty that requires the agent to act with care and properly handle funds received on behalf of the principal. Reasonable care, skill and diligence, along with full disclosure of pertinent information, obedience and loyalty are also all a part of a licensee’s fiduciary duty to the principal.
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West Virginia has reciprocity agreements with the following states:
All above information should be confirmed with licensing commission. Further information can be found here: https://rec.wv.gov/Pages/default.aspx