Real Estate for Business Majors
Exam Questions
Course Introduction
This course provides business majors with a comprehensive overview of the real estate industry, focusing on its principles, practices, and significance in the broader economic landscape. Students will learn about property types, markets, valuation methods, investment analysis, financing strategies, and legal considerations influencing real estate decisions. The curriculum emphasizes practical applications, industry trends, and the integration of real estate strategies in corporate financial planning and entrepreneurship, equipping students with the knowledge to make informed property decisions in business contexts.
Recommended Textbook
Real Estate Principles 11th Edition by Charles J. Jacobus
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Page 2
Chapter 1: Nature and Description of Real Estate
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Q1) In the term "metes and bounds", metes can best be described as an indication of meters.
A)True
B)False
Answer: False
Q2) Mineral rights are considered personal property.
A)True
B)False
Answer: False
Q3) The number of feet of wire required to enclose 1/4 of 1/4 of a section of land with two strands of wire is
A) 5,280 feet.
B) 10,560 feet.
C) 21,120 feet.
D) 34,848 feet.
Answer: B
Q4) Mineral rights can be conveyed separately but riparian rights cannot be conveyed ____________________.
Answer: separately
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Chapter 2: Rights and Interests in Land
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Q1) An easement may be created by a written document granting the right to another.
A)True
B)False
Answer: True
Q2) Government rights limit private rights in real property by the use of appropriation.
A)True
B)False
Answer: False
Q3) A woman who lived in a retirement home and had no relatives, told her friend that she wanted her to have all of her property after she died, however she never made a will. Upon her death, her estate would
A) pass to the friend, since that was her wish.
B) pass to the retirement home where she lived.
C) escheat to the state.
D) pass to an entity determined by the probate court.
Answer: C
Q4) Concerning the duration of deed restrictions, they ____________________ with the land.
Answer: run
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Chapter 3: Forms of Ownership
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Sample Questions
Q1) In several states, a land trust allows an owner to create a trust wherein he is both the trustor and the trustee.
A)True
B)False
Answer: False
Q2) Community property could include
A) property acquired by one spouse before marriage.
B) gifts made to one spouse or the other.
C) property inherited by one spouse or the other.
D) property acquired before marriage and maintained with community funds.
Answer: D
Q3) In community property states, property not held as community property is designated as separate property.
A)True
B)False
Answer: True
Q4) In regard to a partnership, ____________________ refers to the possibility that it may be difficult to sell one's partnership interest on short notice in order to raise cash. Answer: illiquidity
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Chapter 4: Transferring Title
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Q1) A person owns property in severalty. He dies testate so the property
A) is acquired by the surviving joint tenant.
B) is probated and distributed according to the will.
C) escheats to the state.
D) is distributed equally among his relatives.
Q2) In a _________________________ deed, the grantor warrants the property's title only against defects occurring during the grantor's ownership and not against defects existing before that time.
Q3) The actual passage of title occurs when the deed is
A) acknowledged and recorded.
B) signed and acknowledged.
C) delivered and accepted.
D) executed by the grantor.
Q4) A ____________________ will is a will that is entirely handwritten, with no typed or preprinted words.
Q5) A landowner can break an adverse claim by all of the following EXCEPT
A) forcibly removing the adverse occupant.
B) giving the adverse occupant permission to stay.
C) preventing the trespassers from entering.
D) observing the adverse occupant.
Page 6
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Chapter 5: Recordation Abstracts and Title Insurance
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Q1) ____________________ notice is knowledge that one has actually gained based on what one has seen, heard, read, or observed.
Q2) Title that is free from reasonable doubt as to who is the owner and his ability to convey the property, is called
A) marketable title.
B) cloudy title.
C) naked title.
D) colorful title.
Q3) What is an abstract of title?
A) Title insurance
B) A history of all recorded activity affecting a parcel of real estate
C) A judgement on real property
D) A patent
Q4) A lender wanting title insurance coverage on a property it is taking as collateral would ask for
A) an owner's title policy.
B) a mortgagee's title policy.
C) a mortgagor's title policy.
D) a buyer's policy.
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Chapter 6: Contract Law
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Sample Questions
Q1) The statute of limitations concerns time limits for filing a lawsuit.
A)True
B)False
Q2) A contract that results not from a written or oral agreement but from the actions of the parties involved is called an expressed contract.
A)True
B)False
Q3) A promise not to act by one or more of the parties to a contract is known as ____________________.
Q4) A real estate broker could most likely be held liable to a buyer if the broker
A) makes a misrepresentation to the buyer based on false information given to him by the seller.
B) signs an agreement with the buyer on behalf of the seller under the power of attorney granted by the seller.
C) acts in excess of the authority given to him by the seller under a listing agreement.
D) retains the buyer's check at the seller's request after an offer has been accepted by the seller and acceptance has been communicated to the buyer.
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Chapter 7: Real Estate Sales Contracts
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Sample Questions
Q1) The federal government has authorized electronic signatures and documents.
A)True
B)False
Q2) If two or more parties want to express their mutual intention to buy, sell, lease, develop, or invest, and wish to do so without creating any firm, legal obligation, they may use a ______________________________.
Q3) A valid enforceable sales agreement must
A) contain the grantor and grantee's signatures.
B) be accompanied by an earnest money deposit.
C) be written and delivered.
D) be written and mailed.
Q4) The seller decided that he didn't want to sell his house a few days before closing. He can
A) simply not show up to sign the deed.
B) return the earnest money deposit and declare the contract void.
C) be sued by the buyer for specific performance and damages.
D) can refuse to pay the broker a commission.
Q5) A rider is any addition annexed to a document and made a part of the document by reference is also known as a(n)____________________ or a(n)____________________.
Page 9
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Chapter 8: Mortgage and Note
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Q1) A promissory note
A) describes the property being hypothecated.
B) is the primary evidence of a loan.
C) is an agreement not to do a certain thing.
D) is not negotiable when secured by a mortgage.
Q2) The covenant of _________________________ requires the borrower to keep the mortgaged property in good condition.
Q3) Barry purchased Bob's home without accepting obligation for the existing loan. Barry is said to be buying the house
A) subject to the loan.
B) with an assumption of the loan.
C) with an assumption by substitution of the loan.
D) by contract for equitable title.
Q4) The parties to a mortgage are called
A) mortgagor and grantor.
B) mortgagee and beneficiary.
C) beneficiary and trustee.
D) mortgagor and mortgagee.
Q5) A(n)____________________ foreclosure does not go to court and is not heard by a judge.
10
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Chapter 9: Deed of Trust
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Q1) When a debt secured by a deed of trust is paid off, naked legal title reverts to the borrower from the
A) mortgagee.
B) trustor.
C) beneficiary.
D) trustee.
Q2) A trustor's relationship to a beneficiary is most nearly the same as a
A) grantor to a grantee.
B) beneficiary to a trustee.
C) buyer to a seller.
D) mortgagor to a mortgagee.
Q3) When a property is financed by means of a deed of trust, to whom are the payments made?
A) Beneficiary
B) Trustor
C) Trustee
D) Grantee
Q4) The right to collect rents in the event of default is called a(n)____________________ of ____________________ clause.
Q5) The trustee in a deed of trust is a neutral ____________________ party.
Page 11
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Chapter 10: Lending Practices
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Sample Questions
Q1) The buyer normally pays the discount points when a conventional loan is taken out to purchase a residence.
A)True B)False
Q2) A home sells for $150,000 but is appraised by a lender for $145,000. The lender will typically apply the loan-to-value ratio to the larger of the two numbers.
A)True B)False
Q3) The word point means 1% of the _________________________.
Q4) On a $64,000 home, which of the following would require the largest cash down payment?
A) FHA-insured loan
B) 80% loan-to-value conventional loan
C) 90% loan-to-value conventional
D) 100% DVA loan
Q5) Interest paid on a real estate mortgage loan is normally paid annually and in advance.
A)True B)False
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Chapter 11: The Loan and the Consumer
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Sample Questions
Q1) In analyzing a mortgage loan application, a lender considers job stability, income adequacy and sales price.
A)True
B)False
Q2) The federal Equal Credit Opportunity Act prohibits discrimination based on age, sex, marital status and ____________________.
Q3) The Truth in Lending Act covers credit extended for a loan secured by a car valued at $30,000.
A)True
B)False
Q4) According to regulation Z, which of the following would be allowed without further disclosure in an advertisement to sell a residence?
A) Easy 11% mortgage assumption
B) Take over an 11% loan
C) Assume an 11% annual percentage rate mortgage
D) Assumable 11% loan
Q5) ____________________ loans have risk-based pricing and rates are not quoted.
Q6) When considering loan applications, lenders like to see good ____________________ records.
Page 13
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Chapter 12: Sources of Financing
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Q1) Lenders who could be described as investing a major portion of their assets in long-term real estate loans, preferring not to service their own loans, and favoring large commercial properties would be
A) commercial banks.
B) savings and loans.
C) mutual savings banks.
D) life insurance companies.
Q2) GNMA buys loans from primary market loan originators.
A)True
B)False
Q3) Which of the following sources provides the most home mortgage money in the United States?
A) Mutual savings banks
B) Commercial banks
C) Credit unions
D) Mortgage companies
Q4) Usury laws are established by the federal statutes.
A)True
B)False
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Chapter 13: Types of Financing
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Q1) With a ____________________ mortgage, the lender makes monthly payments to the homeowner.
Q2) The benefit of an ARM is that ARMs carry an initial interest rate that is lower than the interest rate on a fixed-rate mortgage of similar maturity.
A)True
B)False
Q3) When considering a ARM loan, the lender must explain to the borrower, in writing, the A) worst-case scenario.
B) best-case scenario.
C) average-case scenario.
D) respective credit report.
Q4) All of the following may be used for setting ARM interest rates EXCEPT A) one-year U.S. Treasury securities.
B) six-month Treasury bills.
C) cost of funds to thrift institutions.
D) Gross National Product is not used to set ARM interest rates.
Q5) A loan where items classed as personal property are included with the real estate is called a(n)____________________ mortgage.
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Chapter 14: Taxes and Assessments
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Q1) A charge or hold by the government against a property to ensure the payment of taxes is called a ____________________.
Q2) Tax rates may be expressed as
A) a millage rate.
B) dollars of tax per hundred dollars of valuation.
C) dollars of tax per thousand dollars of valuation.
D) any of the above.
Q3) Taxes become a lien
A) in advance.
B) only when delinquent.
C) in arrears.
D) when an assessment appeal is filed.
Q4) A fee or tax on deeds and other documents payable at the time of recordation is known as a special assessment fee.
A)True
B)False
Q5) For income tax purposes, a single taxpayer can exclude up to ____________________ of gain from the sale of the taxpayer's principal residence.
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Chapter 15: Title Closing and Escrow
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Sample
Questions
Q1) A buyer agreed to put down $5,000 as earnest money toward a house he was buying for $97,000. The offer was based upon receipt of an 80% loan from a bank. The attorney's fees were $2,000 and all other buyer costs amounted to $1,500. How much money will the buyer need to pay at settlement?
A) $14,400
B) $17,900
C) $17,700
D) $22,900
Q2) A settlement meeting may take place in the offices of
A) the real estate agent.
B) an attorney.
C) a title company.
D) any of the above.
Q3) A couple buys a house complete with furnishings. They assume and agree to pay the existing mortgage. All of the following documents should be used in closing EXCEPT
A) note and mortgage.
B) assumption papers.
C) bill of sale.
D) closing instructions.
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Page 17
Chapter 16: Real Estate Leases
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Q1) When a tenant is behind on his rent, the law permits the landlord to remove the tenant's belongings until the rent is paid.
A)True
B)False
Q2) A couple's one year lease has expired, but they continued living on the premises. If they now pay rent on a monthly basis, this type of tenancy is A) by the entireties.
B) at will.
C) periodic.
D) at sufferance.
Q3) A lease for six months is classified as A) a periodic estate.
B) an estate at sufferance.
C) an estate at will.
D) an estate for years.
Q4) Under a net lease, the tenant pays a rate based on the net mortgage payment. A)True
B)False
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Page 18
Chapter 17: Real Estate Appraisal
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Q1) Which of the following operating expense ratios indicate one dollar of total operating expenses for every two dollars of effective gross income?
A) 33.3%
B) 50%
C) 200%
D) 25%
Q2) Functional obsolescence results from factors outside the property.
A)True
B)False
Q3) The term "scheduled gross" refers to projected gross income if fully leased.
A)True
B)False
Q4) ____________________ cost is the cost at today's prices of constructing an exact replica of the subject improvements using the same or very similar materials.
Q5) In appraising an historically significant Victorian era residence using the cost approach, the will probably appraise it on the basis of its reproduction cost.
A)True
B)False
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Page 19
Chapter 18: Licensing Laws and Professional Affiliation
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Q1) A ____________________ license is required of a real estate broker in order to conduct negotiations within another state.
Q2) For a corporation to be granted a license as a real estate broker, all officers must be licensed as real estate brokers.
A)True
B)False
Q3) The basic intent for real estate license laws and regulations was to
A) help brokers settle their disputes.
B) protect the public.
C) protect the broker
D) control the real estate market.
Q4) A duly qualified person who has passed the real estate license exam and joined a brokerage firm is most properly referred to as a licensee.
A)True
B)False
Q5) The broker in charge of an office is called the ____________________ broker.
Q6) The term REALTOR® applies to any licensed real estate salesperson.
A)True
B)False
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Chapter 19: The Principal-Broker Relationship: Employment
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Q1) A written, exclusive right to sell listing is most likely to specify that the commission has been earned upon procurement of a full price offer or upon acceptance of an offer by the seller.
A)True
B)False
Q2) The broker/manager receives 45% of the commissions on all sales made through her office. What would she receive on monthly sales totaling $252,000 at an average 3.7% commission (rounded to the nearest dollar)?
A) $9,324
B) $4,196
C) $7,527
D) $3,765
Q3) A broker who is the primary cause of a transaction is known as the ____________________ cause.
Q4) Under the terms of a multiple listing agreement, if a broker other than the listing broker sells the property, the seller may be responsible for paying two commissions.
A)True
B)False
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21
Chapter 20: The Principal-Broker Relationship: Agency
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Q1) A couple makes an appointment with a broker to look at homes. He has not met them previously. They decide to make an offer on one of his listings and they all return to the real estate office to write up the offer. The broker should A) keep quiet and hope it is a good offer.
B) tell the buyer about the dual agency after writing the offer.
C) tell the buyer about the dual agency before writing the offer.
D) write the offer.
Q2) When a listing is taken, the seller would be referred to as A) the customer.
B) a fiduciary.
C) the client.
D) the agent.
Q3) A broker who intentionally misleads a prospect by making an incorrect statement known to be not true is subject to license ____________________.
Q4) Two sellers lead a buyer to believe that broker Charlotte is their agent without notifying Charlotte of the fact. This is an example of express agency.
A)True
B)False
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Page 22
Chapter
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Q1) A licensed real estate agent is offered a listing by an owner who will not sell to any person of a certain national origin.The agent should report the owner to the real estate department.
A)True
B)False
Q2) A woman owned a duplex and lived in half and rented out the other half. She put a "For Rent" sign in the front yard. The first applicant was a black man whom she turned down stating that she didn't rent to men. Under the Fair Housing laws, she
A) is within her rights since she didn't use any discriminatory advertising.
B) is in violation of the Fair Housing laws since she may not discriminate even if only verbally.
C) is guilty of steering.
D) can expect a warning from HUD because she turned down a black.
Q3) The CRA statement should contain all of the following EXCEPT
A) a map of the lender's definition of its community.
B) a list of credit services it offers.
C) a copy of the public notice in its lobby.
D) the names of all lending institutions in the area.
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Chapter 22: Condominiums, Cooperatives, Puds, and Timeshares
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Q1) A corporation that owns or leases the land and building and, in turn, leases space to its shareholders is characteristic of a
A) condominium.
B) cooperative.
C) joint venture.
D) time share.
Q2) The concept of timesharing started in the U.S.and is limited to use in this country.
A)True
B)False
Q3) Of the two principal forms of timeshare formats, the largest percent of the market is comprised of the right-to-use format.
A)True
B)False
Q4) The purchaser of a condominium unit surrenders some personal freedoms to community rule but exchanges freedom of choice for freedom from responsibility.
A)True
B)False
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Chapter 23: Property Insurance
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Q1) Policies that cover a large number of named perils are known as ____________________ form policies (HO-2).
Q2) A property damage or public liability policy
A) can be cancelled at any time by the insured.
B) cannot be cancelled by the insured.
C) can be cancelled at any time by the insurer.
D) can be cancelled only after 30 day's notice by either party.
Q3) Fire insurance is the foundation of property damage policies.
A)True
B)False
Q4) Section II of a homeowner insurance policy provides liability protection for the named insured but not the members of the named insured's family who lives with the insured.
A)True
B)False
Q5) An insurance endorsement is also known as
A) a rider.
B) an attachment.
C) an assignment.
D) both a and b.
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Chapter 24: Land-Use Control
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Q1) A licensed agent must be diligent to determine the existing zoning and building regulations for the property that he wishes to sell. Which of the flowing would cause the fewest problems to the agent and his buyer?
A) A home, which lies two feet outside the offset line, described on the deed.
B) A conforming business that produces such noise and odors as to be an annoyance to a nearby neighborhood.
C) A garage that was build by the seller without a building permit and slightly on his neighbor's lot.
D) A multi-family apartment building that is a non-conforming use.
Q2) The authority of government to control land use is derived from the right of A) escheat.
B) eminent domain.
C) property taxation.
D) police power.
Q3) The basic authority for zoning laws is derived from a state's A) powers of eminent domain.
B) right of taxation.
C) both a and b.
D) neither a nor b.
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Page 26
Chapter 25: Real Estate and the Economy
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Q1) Through the Federal Reserve Banks, the Federal Reserve Board can create money but cannot destroy money.
A)True
B)False
Q2) The Texagum manufacturing Company, which was the largest employer in the city of Westview, recently closed its plant in that city. This will probably result in A) declining real estate values.
B) A slow-down in the construction of new homes.
C) A decline in the population of Westview.
D) All of the above.
Q3) The real estate brokerage industry is an example of a A) base industry.
B) secondary industry.
C) export industry.
D) primary industry.
Q4) The Federal Reserve Board influences the national economy by adjusting interest rates.
A)True B)False
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Chapter 26: Investing in Real Estate
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Q1) Mortgage balance reduction is
A) an out-of-pocket expense.
B) a deduction for tax purposes.
C) tax-exempted.
D) quite large at the beginning of the loan period.
Q2) In contrast to straight-line depreciation, ____________________ depreciation is any method that allows depreciation at a rate faster than straight-line.
Q3) The cash-on-cash ratio for a property that has a cash flow of $16,900 and could be purchased with a down payment of $130,000 would be 7.69%.
A)True
B)False
Q4) Which of the following is necessary in order to calculate cash flow?
A) Monthly appreciation
B) Mortgage balance
C) Monthly rents
D) Economic rents
Q5) In the various phases in the life cycle of improved real estate investments, ____________________ come between tenancy stage and the maturity stage.
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