Real Estate Law
Exam Practice Tests
Course Introduction
Real Estate Law provides an in-depth examination of the legal principles and practices governing real property transactions. The course covers topics including property ownership, land use regulations, real estate contracts, financing, transfers of title, leasing, zoning, environmental laws, and the rights and responsibilities of buyers, sellers, landlords, and tenants. Through analysis of case law, statutes, and practical scenarios, students gain a comprehensive understanding of the legal framework affecting real estate professionals and are equipped to recognize legal issues in residential and commercial real estate contexts.
Recommended Textbook
Real Estate Finance 9th Edition by John P. Wiedemer
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16 Chapters
189 Verified Questions
189 Flashcards
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Page 2
Chapter 1: History and Background
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14 Verified Questions
14 Flashcards
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Sample Questions
Q1) The need to have a borrower sign both a mortgage and a promissory note is necessary as these two documents are:
A) Both collateral instruments
B) Considered interlinked documents
C) Must both be recorded to have a perfected interest
D) None of the above
Answer: B
Q2) A word that has the legal meaning of a borrower remaining in possession of property pledged as security for a loan is
A) Possession
B) Collateral
C) Security
D) Hypothecate
Answer: D
Q3) Of the following, the more precise description of a share of stock is
A) An indication of an obligation
B) A form of unsecured debt
C) An evidence of ownership
D) A kind of security
Answer: C
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Chapter 2: Money and Interest Rates
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11 Verified Questions
11 Flashcards
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Sample Questions
Q1) Categories of demand for money are all of the following EXCEPT
A) Government requirements
B) Consumer loans
C) Mortgage loans
D) Deposits in saving associations
Answer: D
Q2) Monetary policies in this country are under the control of the
A) Office of Thrift Supervision
B) Secretary of the Treasury
C) Federal Reserve Bank Board
D) Federal Deposit Insurance Corporation
Answer: C
Q3) Usury can best be described as
A) Interest rates set by the federal government
B) Rates charged by unscrupulous lenders
C) Interest paid or received that exceeds state laws
D) Interest limitations based on religious beliefs
Answer: B
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Chapter 3: Mortgage Money: Regulated Lenders
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) The secondary market for mortgage loans can best be described as the -
A) Operations of Fannie Mae/Freddie Mac
B) Market for trading second mortgages
C) Purchase and /or sale of mortgage loans after origination
D) Market for trading in Ginnie Mae contracts
Answer: C
Q2) The deposit insurance fund controlled by the FDIC protects
A) Consumer deposits in insured banks
B) Banks against loss in loan accounts
C) Loans to consumers by regulated lenders
D) Regulated lenders against loss in operations
Answer: A
Q3) Federal legislation in 1998 restored the right to membership in credit unions to A) Anyone solicited by credit unions
B) Those with a common bond plus those working for companies with less than 3,000 employees
C) All members of AARP
D) Anyone not challenged by a commercial bank
Answer: B
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Page 5
Chapter 4: Other Primary Market Lenders
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Sample Questions
Q1) The Farm Credit System consists primarily of
A) a Cooperative, borrower-owned network of farm lending banks
B) the Rural Development Service of the Department of Agriculture and related agencies
C) only the Federal Land Bank Associations
D) the government agency that underwrites all qualifying farms loans.
Q2) The fee a mortgage lender charges for assembling a loan package and determining acceptance or rejection of an applicant is all a loan ________________.
A) Underwriting Fee
B) Servicing Fee
C) Assembling Fee
D) Origination Fee
Q3) The continued acceptance and growth of Real Estate Investment Trust has been enhanced by
A) the sale of REIT stock in the financial markets
B) the collapse of Foreign Investment in real estate
C) improved management
D) greater publicity
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Chapter 5: Mortgage Money: the Secondary Market
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Sample Questions
Q1) State and municipal housing authorities are able to offer lower cost home loans because
A) the money loaned is raised through the sale of tax-exempt bonds.
B) tax money is used to subsidize the home buyer's costs.
C) administrative costs are paid for by the government agencies involved.
D) all issues are of such large scale that costs are lower.
Q2) As used in mortgage lending, yield means
A) the flexibility allowed in a mortgage loan.
B) to give priority to another.
C) the return of interest plus discount.
D) the interest earned on the loan.
Q3) To purchase loans for portfolio means to
A) loans that can be easily carried about
B) purchasing loans primarily for resale
C) holding loans as an investment to earn a return
D) purchasing loans that meet certain income tax requirements
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Chapter 6: The Mortgage Documents
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Sample Questions
Q1) Which of the following type of liens is the generally thought to be the most favorable towards lienholders right to foreclose?
A) Mortgage
B) Homeowners Associations
C) Deed of Trust
D) Mechanics lien
Q2) The instrument that provides the security for a promissory note is the:
A) Mortgage or Deed of Trust
B) Warranty Deed
C) Property Assignment
D) Contract for Deed
Q3) Which of the following is a three-party instrument?
A) Construction Mortgage
B) Third Mortgage
C) Deed of Trust
D) Promissory Note
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Chapter 7: Mortgage Repayment Plans
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Sample Questions
Q1) A note allowing monthly repayment amounts less than are necessary to fully amortize a loan during its term is called a
A) Growing Equity Mortgage
B) Graduated payment note
C) Balloon payment note
D) Buy-down note
Q2) A buy-down mortgage is distinguished by which of the following?
A) Any mortgage with lower initial monthly payments
B) A mortgage with less-than-market interest rate
C) Payment by seller of a portion of the interest cost at closing to reduce monthly payments in the early years of repayment
D) A second mortgage that reduces, or "buys down, the first mortgage.
Q3) Which of the following is the most important distinguishing feature of an adjustable rate mortgage?
A) The payment amount is fixed for the life of the loan.
B) The lender has the right to change the interest rate during the term of the loan.
C) The term of the loan may be extended.
D) The borrower has the right to reject a change in the payment amount.
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Chapter 8: Federal Government Underwriting Programs
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Sample Questions
Q1) Which of the following cash required to close rules apply to an FHA mortgage?
A) Cash required may be added to loan amount
B) 3.5% cash required may be cover by down payment plus closing costs
C) 3.5% cash must be paid as down payment
D) Only required down payment must be in cash
Q2) FHA loans originated on or after December 15, 1989 are restricted to which of the following assumption policies?
A) Freely assumable but seller remains liable
B) Cannot be assumed for first five years of mortgage obligation
C) New buyer must be approved by FHA prior to title transfer
D) No assumptions are permitted
Q3) When a VA loan has been properly assumed, a veteran has a right to a release of liability upon meeting all of the following requirements EXCEPT
A) loan must be currently paid
B) property must be sold to another veteran
C) purchaser must be qualified to buy
D) purchaser must agree to assume the loan
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Chapter 9: Borrower Quali cation
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Sample Questions
Q1) The Act that prohibits certain types of discrimination in the granting of credit is the:
A) Fair Credit Reporting Act
B) Equal Credit Opportunity Act
C) Real Estate Settlements Procedures Ace
D) Fair Housing Act
Q2) The Federal Credit Reporting Acts primary provisions are to:
A) make available to the mortgagor procedures for disputing accurate information on their credit report.
B) create a rule that all credit report users provide a copy of the credit reports to the borrower.
C) provide satisfactory procedures to ensure the confidentiality and accuracy of consumer credit information.
D) allow practical procedures to deny credit to credit-worthy borrowers.
Q3) The source of repayment of a home loan is expected to come from:
A) income derived from the property itself
B) additional borrowing
C) the personal income of the borrower
D) other rental income
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Chapter 10: Property Analysis
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Sample Questions
Q1) The underlying theories that support evaluation of a property are called:
A) Approaches to value
B) Qualification for designations
C) Principles of appraisal
D) Whatever local practices prevail
Q2) Which FHA software technology allows a approved FHA seller/servicer to find a FHA approved appraiser?
A) Desktop Underwriter
B) FHA Connection
C) Loan Prospector
D) Uniform Appraisal Dataset
Q3) The principle of appraising that considers the amount of value that may be added by an improvement is
A) Substitution
B) Anticipation
C) Conformity
D) Contribution
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12
Chapter 11: Commercial Loans: Construction and Land Loans
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12 Verified Questions
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Sample Questions
Q1) Which of the following is not one of the more common risks of investing in commercial real estate contemplated by the mortgagee and mortgagor?
A) Financial risk
B) Liquidity risk
C) Regulatory risk
D) Management risk
Q2) A construction loan can include all of the following conditions EXCEPT:
A) disbursement only after certain construction has been completed
B) a release of that portion of the collateral on which disbursement of funds has been made
C) a method of assuring the lender that money disbursed to a borrower/builder is used to pay a project's bills
D) a requirement for periodic inspection to assure the lender that all plans and specifications are being met
Q3) The major difficulty in obtaining a raw land purchase loan is:
A) the land is hard for the lender to inspect
B) the value is difficult to determine
C) it is not certain that its value will increase
D) it produces no income while expenses like taxes and insurance continue
Page 13
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Chapter 12: Commercial Building and Farm Loans
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Sample Questions
Q1) In the financing of special purpose buildings, if a manufacturer agrees to accept contingent responsibility for repayment of a loan made to a dealership, one way this can be accomplished is for the manufacturer to:
A) agree to endorse the note
B) agree to buy out the dealer
C) re-write the sales agreement
D) all of the above
Q2) While they require very specialized information, farm loans are based on the same three legs as all mortgage loans, which are:
A) a creditworthy borrower, adequate collateral, good crops
B) both crops and livestock, a creditworthy borrower, adequate income
C) income sufficient to repay the loan, assured good weather, a creditworthy borrower
D) creditworthy borrower, adequate collateral, income sufficient to repay the loan
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14
Chapter 13: Other Financing Practices
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Sample Questions
Q1) While the Securities and Exchange Commission does not directly regulate real estate sales, it can become involved under which of the following circumstances?
A) Whenever any sale of land is across state lines
B) If it suspects mishandling of an escrow account
C) If paper is sold for development without a specific commitment for conveyance of property
D) A sale where payment is made by installment notes
Q2) If a builder holds an unsubordinated leasehold interest in land, it means that a building constructed on the land
A) would pass to the landowner if the land rent is not paid
B) would pass to the mortgagee if the land rent is not paid
C) the builder would only forfeit ownership if the mortgage loan is not paid
D) would remain in possession of the builder as long as the land rent if paid
Q3) Which of the following is NOT an acceptable procedure for proving title to land?
A) An attorney's opinion based on research of an abstract
B) An accurate survey made by a state-licensed surveyor
C) Purchase of title insurance
D) A Torrens registration system
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Chapter 14: Technology Advances in Mortgage Lending
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11 Flashcards
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Sample Questions
Q1) Even though greatly diminished in market share subprime loans offer all of the following EXCEPT
A) a higher profit margin if carefully made
B) a market that has been shunned before high tech analysis allowed better selection for carefully documented loans
C) greater depth of loan analysis has eliminated all risks
D) an expansion of the loan market beyond higher quality "A" rated borrowers
Q2) Which of the following is NOT a loan classification with Freddie Mac's "Loan Prospector"?
A) Rejected
B) Accepted
C) Refer
D) Caution
Q3) The advantage of a web site offering mortgage loans is:
A) an individual can obtain a mortgage loan without paying for or dealing with an agent or loan officer
B) the availability of loans is very limited
C) the cost is generally higher than with regular channels
D) it is a time consuming procedure as careful analysis is needed.
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Page 16
Chapter 15: Environmental Issues
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10 Flashcards
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Sample Questions
Q1) Which of the following statements is FALSE in regard to asbestos in a building?
A) Ingestion of microscopic fibers can cause asbestosis, a noncancerous disease
B) The real danger lies in loose, or "soft," asbestos not that occurring in hard form
C) In all cases where asbestos is found, the EPA recommends immediate removal
D) The EPA will accept an in-place management program rather than require removal of all asbestos
Q2) Insofar as real estate transaction are concerned, all of the following are true about environmental issues EXCEPT
A) most commercial transactions require an environmental site assessment before an agreement can be reached
B) almost all commercial lenders require a site assessment before committing to a loan
C) it is illegal to convey property that harbors hazardous materials.
D) usage of the land may be restricted if certain environmental conditions are present
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Chapter 16: Settlement Procedures
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Sample Questions
Q1) Which of the following is a prohibited practice as defined by RESPA requirements?
A) A listing broker splits the real estate commission with a selling broker
B) A lender refuses to accept an insurance company for coverage even though requested by the borrower
C) A seller requires the use of a specific title company as a condition of the sale
D) A selling broker provides the buyer/borrower with assistance in obtaining a loan in return for a fee
Q2) A mortgagee's title policy protects which of the following against an adverse claim of title?
A) Borrower
B) Trustee
C) Real Estate agent
D) Lender
Q3) The primary purpose of the Truth-in-Lending Act is to
A) require full disclosure of the amount of the promissory note
B) provide meaningful information to borrowers on the cost of consumer credit
C) discourage excessive loan costs for consumers
D) establish limits on the total charges a lender can assess for a loan
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