Real Estate Sales
Midterm Exam
Course Introduction
This course provides a comprehensive overview of the art and science of real estate sales, equipping students with essential knowledge and practical skills required to succeed in the dynamic real estate market. Topics include property listing and marketing strategies, buyer and seller representation, negotiation techniques, legal and ethical considerations, and the use of technology in real estate transactions. Through case studies and role-playing exercises, students will develop effective communication, networking, and client relationship management skills. The course also covers industry regulations, documentation, and best practices, preparing students for licensure exams and a successful career in real estate sales.
Recommended Textbook
Real Estate Principles 11th Edition by Charles J. Jacobus
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26 Chapters
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Chapter 1: Nature and Description of Real Estate
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Sample Questions
Q1) Which of the following is real property?
A) Farm equipment
B) Cotton ready to be harvested
C) Swing set from Wal-Mart set in concrete
D) Lawn mower
Answer: C
Q2) Any damage caused by the removal of the fixtures is the responsibility of the ____________________.
Answer: lessee
Q3) The littoral system is a valid way of describing real estate.
A)True
B)False
Answer: False
Q4) Mineral rights are considered personal property.
A)True
B)False
Answer: False
Q5) Buildings or other improvements do not need to be mentioned in the deed because they are considered to be part of the ____________________.
Answer: land
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Chapter 2: Rights and Interests in Land
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Sample Questions
Q1) Which of the following is a non-freehold estate?
A) Tenancy by the entirety
B) Tenancy for years
C) estate held by a remainderman
D) Estate in reversion
Answer: B
Q2) Concerning the duration of deed restrictions, they ____________________ with the land.
Answer: run
Q3) The greatest estate in real property is a fee simple estate.
A)True
B)False
Answer: True
Q4) A family had a lion as a pet at their home outside the city. When the area became incorporated, the city made him get rid of the lion by their use of police power.
A)True
B)False
Answer: True
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Chapter 3: Forms of Ownership
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Sample Questions
Q1) A corporation, composed of many stockholders, desired to take title to real property. They would most likely take title
A) as a legal life estate.
B) in severalty.
C) as tenants in common.
D) as holders of corporate property.
Answer: B
Q2) Concurrent interests in real property must
A) be recorded.
B) include right of survivorship.
C) include equal interests.
D) include 2 or more people.
Answer: D
Q3) A trust is an arrangement whereby title to real and/or personal property is transferred by its owner (the Trustor)to a beneficiary.
A)True
B)False
Answer: False
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Chapter 4: Transferring Title
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Sample Questions
Q1) In most subdivisions, the developer donates to the public
A) streets and roads.
B) common areas in the subdivision.
C) park lands.
D) school land.
Q2) Which of he following would defeat a claim of adverse possession?
A) A permission to enter
B) Exclusive occupancy
C) Visible possession
D) Continuous possession
Q3) Real property that is willed is known as a ____________________ and the recipient is the ____________________.
Q4) To properly convey title to land and its building, a deed must describe the A) land.
B) buildings.
C) appurtenances.
D) easements.
Q5) 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.
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Chapter 5: Recordation Abstracts and Title Insurance
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Sample Questions
Q1) When an attorney issues a certificate of title, he has based his opinion on an abstract of title.
A)True
B)False
Q2) Almost all states use the tract indexing system.
A)True
B)False
Q3) The Marketable Title Act, as presently used in the United States
A) cuts off inactive claims to rights or interests.
B) offers state-sponsored title insurance.
C) guarantees title insurance.
D) automatically renews title insurance.
Q4) 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.
Q5) A title defect is also known as a title ____________________.
Q6) Title insurance has made titles to land much more ____________________.
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Chapter 6: Contract Law
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Sample Questions
Q1) The term "rescinded" in real estate means
A) rewritten.
B) rejected.
C) reworded.
D) canceled.
Q2) A lawsuit for specific performance is an action in court to force the innocent party to carry out the remainder of the contract.
A)True
B)False
Q3) A real estate contract can be declared void if
A) it is signed and not read.
B) It is signed with a witnessed X.
C) signed by only one party.
D) it is signed by an unmarried minor.
Q4) All of the following are essential elements of a contract EXCEPT
A) competent parties.
B) lawful objective.
C) monetary consideration.
D) meeting of the minds.
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Chapter 7: Real Estate Sales Contracts
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Sample Questions
Q1) Under a conditional land sales contract,
A) legal title is held by the vendee.
B) equitable title is held by the vendee.
C) legal title is held by a trustee.
D) equitable title is held by a trustee.
Q2) A real estate purchase agreement contract used by a multiple listing member may be all of the following EXCEPT
A) receipt for earnest money.
B) contract up to the date of closing.
C) commission agreement between the seller and broker.
D) statement of the buyer's costs.
Q3) In most residential purchase agreements, the purchaser has the right to withdraw from the purchase without forfeiture of the earnest money if he cannot obtain necessary financing.
A)True
B)False
Q4) A _________________________ allows the tenant to buy the property at a preset price for a given period of time.
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Chapter 8: Mortgage and Note
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Sample Questions
Q1) A deed in lieu of foreclosure relieves the lender of foreclosing and waiting out any required redemption period.
A)True
B)False
Q2) If a foreclosed property has sold for less than the loan amount, the difference between the indebtedness and the sale price of the real estate at the foreclosure sale is called the
A) net price.
B) deficit.
C) net market value.
D) deficiency.
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) In ____________________ theory states, the mortgage gives only a lien right to the lender and the borrower retains title.
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Chapter 9: Deed of Trust
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Sample Questions
Q1) When the debt is paid off the lender sends to the trustee the note, the deed of trust and a request for ____________________.
Q2) A deed of trust lien, when paid in full, is released by the recording of a reconveyance deed.
A)True
B)False
Q3) If the borrower defaults, the trustee has the right to sell the property and convey ownership to the purchaser with a ______________________________.
Q4) The funds for a loan secured by a deed of trust are supplied by the beneficiary. A)True
B)False
Q5) 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.
Q6) Under a deed of trust, the lender is known as the ____________________.
Q7) 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) A loan progress chart is used in connection with A) partially amortized loans.
B) term loans.
C) index loans.
D) straight loans.
Q2) The expenses, which a lender incurs while processing a mortgage loan application, are recovered from the borrower as A) discount points.
B) origination fees.
C) mortgage insurance premium.
D) private mortgage insurance.
Q3) Under section 203(b), the FHA lends to the secondary market.
A)True
B)False
Q4) Usually, the borrower of a FHA loan is also responsible for the mortgage insurance premium.
A)True
B)False
Q5) After December 1, 1986, the FHA would no longer allow a ____________________ assumption of an FHA insured loan.
Page 12
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Chapter 11: The Loan and the Consumer
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Sample Questions
Q1) Regulation Z deals with
A) annual percentage rates.
B) escrow fees.
C) truth-in-lending.
D) statue of frauds.
Q2) Penalties for violation of the truth-in-lending laws include
A) a fine of up to $5,000 and/or imprisonment for up to 1 year.
B) penalties up to twice the amount of the finance charge up to a maximum of $1,000.
C) Court costs, attorney fees, and actual damages.
D) all of the above.
Q3) 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
Q4) Truth-in-lending laws were created primarily to protect lenders.
A)True
B)False
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Chapter 12: Sources of Financing
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Sample Questions
Q1) Life insurance companies do no get involved in real estate loans.
A)True
B)False
Q2) Mortgage companies tend to lend their own money and retain the loans in their portfolio.
A)True
B)False
Q3) Which of the following is most likely to specialize in large, commercial participation loans?
A) Mortgage banks
B) Savings and loans
C) Farmers home loan association
D) Life insurance companies
Q4) One may find financing for a single family dwelling at all of the following EXCEPT
A) savings and loans.
B) commercial banks.
C) insurance companies.
D) mortgage bankers.
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Chapter 13: Types of Financing
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Sample Questions
Q1) In order to make adjustable rate mortgage loans more attractive to borrowers, lenders offer
A) lower initial interest rates.
B) gifts such as appliances, trips, etc.
C) lower insurance rates.
D) lower down payments.
Q2) An elderly couple is "house rich, money poor". To obtain money now while still living in their magnificent home, they should look for a A) negative amortization.
B) an adjustable rate mortgage.
C) a reverse annuity mortgage.
D) a graduated payment mortgage.
Q3) When an existing loan at a low interest rate is refinanced by a new loan at an interest rate between the current market rate and the rate of the old loan, the result is a A) combined rate.
B) blended loan.
C) wraparound loan.
D) merged loan.
Q4) The interest rate on an ARM is tied to a(n)____________________ rate.
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Chapter 14: Taxes and Assessments
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Q1) The first step in determining the amount of taxable gain upon the sale of an owner-occupied residence is to calculate the home's ____________________.
Q2) 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
Q3) A municipality is installing new sidewalks in a neighborhood. The cost of this project would most likely be paid for by means of
A) individual contracts with property owners.
B) income taxes.
C) a dedication.
D) a special assessment.
Q4) Plottage is likely to have which of the following results?
A) Raising the tax bill
B) Raising the tax rate
C) Accelerating the lien date
D) Lowering the tax bill
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Chapter 15: Title Closing and Escrow
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Sample Questions
Q1) Escrow accounts are opened for the protection of the interests of the A) general public.
B) seller.
C) buyer and seller.
D) buyer.
Q2) In a closing statement, the amount of interest on an assumed loan is a
A) charge to the seller only.
B) charge to the buyer only.
C) charge to the seller and credit to the buyer.
D) charge to the buyer and credit to the seller.
Q3) Of the following, the final action to be taken to complete a closing is
A) acknowledgement of all instruments.
B) recordation of appropriate instruments.
C) signing of the deed.
D) title search.
Q4) The HUD Settlement Statement required of all federally related real estate lenders is known as the ____________________.
Q5) A settlement statement, also called a ____________________ statement, is given to the buyer and seller to summarize the financial aspects of their transaction.
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Chapter 16: Real Estate Leases
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Sample Questions
Q1) A lessee is in possession of a valid lease when a buyer agrees to assume a veteran's loan and close a sale subject to the lease. The earnest money contract is signed before the lease is due to expire. The lease can
A) be terminated immediately.
B) be changed by the new buyer.
C) not be terminated by the buyer.
D) be terminated at close of escrow.
Q2) Current legal thinking with regard to owner's obligations under a residential rental contract is that
A) if a service is not promised in writing, it will not be forthcoming.
B) the owner is obligated to keep the premises repaired.
C) the owner has an obligation only to collect the rent and pay the utilities.
D) only expressed agreements may be pursued in court.
Q3) The Certified Property Manager (CPM)designation is available from the Organization of Property Managers.
A)True
B)False
Q4) A ____________________ eviction is one whereby a landlord evicts a tenant because of a complaint made by the tenant.
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Chapter 17: Real Estate Appraisal
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Sample Questions
Q1) To apply the market data approach, a real estate appraiser must collect all the following data on each comparable sale EXCEPT
A) date of sale.
B) marketability of title.
C) financing terms.
D) sale price.
Q2) The amount of money required to duplicate a property as of a certain date is called A) reproduction cost.
B) depreciation cost.
C) duplication approach.
D) capital improvement.
Q3) The appraisal method most likely to provide only a rough estimate of the value of a rental property is the cost approach.
A)True
B)False
Q4) The process of combining two or more parcels of land into one larger parcel is called ____________________.
Q5) The property to be appraised is known as the ____________________ property.
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Chapter 18: Licensing Laws and Professional Affiliation
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Q1) Since real estate agents will be handling other people's money, some states will examine licensee's
A) bank account.
B) credit history.
C) age.
D) financial statement.
Q2) Real estate brokers may operate a business as a sole proprietorship under their own name only.
A)True
B)False
Q3) Pat has a license and contractual rights to sell real estate in a typical state. This licensee may be presumed to be all of the following EXCEPT
A) an agent or subagent.
B) a licensee.
C) a broker or salesperson.
D) a REALTOR®.
Q4) The GRI designation is offered by the state real estate commissions.
A)True
B)False
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Chapter 19: The Principal-Broker Relationship: Employment
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Q1) Most brokers are reluctant to accept net listings even when they are permitted to do so.
A)True
B)False
Q2) The problem with net listings is that
A) the seller is assured of receiving the net amount he specifies.
B) the broker receives a higher than average commission.
C) the broker does not have to submit the offer to the seller if the offer is too low.
D) there could be a conflict of interest if dealing with an inexperienced seller.
Q3) A real estate listing
A) is an employment contract between a property owner and a real estate broker.
B) authorizes a real estate broker to sell and convey title to an owner's real property.
C) both a and b.
D) neither a nor b.
Q4) A listing for which the commission is the difference between the sales price and a minimum price set by the seller is called a(n)____________________ listing.
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Page 21
Chapter 20: The Principal-Broker Relationship: Agency
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Sample Questions
Q1) When a broker takes a listing, he is acting under what kind of agency?
A) General
B) Special
C) Ostensible
D) Implied
Q2) A broker listed a property and in one week found a buyer for the property herself. Under these circumstances, the broker
A) may only represent the seller.
B) may have a dual agency.
C) may not represent the buyer.
D) is not required to disclose a dual agency.
Q3) The relationship of a real estate broker to the owner of property listed for sale with the broker is a
A) general agency.
B) universal agency.
C) limited agency.
D) special agency.
Q4) ____________________ agency is the representation of two or more principals in a transaction by the same agent.
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Chapter 21: Fair Housing, Ada, Equal Credit, and Community Reinvestment
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Q1) The 1968 Fair Housing Law provides protection against discrimination for refusing to sell or rent to deal, or ____________________ with any person.
Q2) The Americans with Disabilities Act is a federal law giving individuals the right of access to ____________________ facilities open to the public.
Q3) A protected class is a class of people that by law are protected from ____________________.
Q4) A tester is an individual or organization that responds to advertising and visits real estate offices to test for compliance with fair housing laws.
A)True
B)False
Q5) According to the 1968 Fair Housing Law, the Equal Housing Opportunity logo should appear in all of the following EXCEPT
A) real estate brokerages.
B) real estate classified newspaper advertising.
C) model home sale sites.
D) mortgage lenders' offices.
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Chapter 22: Condominiums, Cooperatives, Puds, and Timeshares
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Q1) Compared to new construction, a condominium ____________________ is often simpler, faster, and more profitable to the developer.
Q2) Those parts of a condominium that are owned by all the unit owners are known as common elements.
A)True
B)False
Q3) Under the right-to-use plan of timesharing, the purchaser is a tenant in common with other users of the unit.
A)True
B)False
Q4) The plan for a condominium development that converts a single parcel of land into individual separate property estates and an estate composed of all common elements may be referred to as an enabling declaration or a master deed.
A)True
B)False
Q5) The sale of timeshares is regulated in about 25 states by state legislation.
A)True
B)False
24
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Chapter 23: Property Insurance
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Q1) To cover personal property and any additions or alterations to the unit not insured by the association's policy, a condominium unit owner's form (HO-6)is available.
A)True
B)False
Q2) An "all-risk" homeowner policy (HO-C)does not include coverage for damage resulting from war or nuclear accident.
A)True
B)False
Q3) A typical homeowner insurance policy does not cover
A) the dwelling.
B) living expenses while damage to the residence is being repaired.
C) personal property within the dwelling.
D) automobiles in the garage on the property.
Q4) In a typical homeowner's policy, section I deals with losses to the insured's property and section II covers liability of the insured and family.
A)True
B)False
Q5) The insured is one who is ____________________ by insurance.
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Chapter 24: Land-Use Control
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Q1) Permission to use a building for a nonconforming use may be accomplished by obtaining a zoning ordinance.
A)True
B)False
Q2) In the case of a contradiction between existing zoning and new deed restrictions, which would prevail?
A) Zoning
B) Deed restrictions
C) Whichever is the more restrictive
D) The least restrictive
Q3) Good land use planning requires a long-range master plan. Which of the following is LEAST essential for any good master plan?
A) Physical and economic surveys of the whole subdivision
B) Long-range continuity provisions
C) Provisions for the eventual transition to commercial development
D) A balance between the economic and social needs of the community
Q4) When a municipality regulates a property to where it has no value or, in some cases, has no remaining economic value it is considered a ____________________.
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Chapter 25: Real Estate and the Economy
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Q1) Higher prices due to buyers bidding against each other causes ____________________ inflation.
Q2) Generally, for every job created by a base industry, there will be created in service industries approximately
A) an equal number of jobs.
B) two jobs.
C) one job for every two persons employed in the base industry.
D) four jobs.
Q3) Under federal tax laws that allow homeowners to deduct mortgage loan interest, what would be the after-tax cost to a homeowner in the 28 percent tax bracket of a home mortgage loan made at a 12 percent rate of interest?
A) 3.36 percent
B) 8.64 percent
C) 9.5 percent
D) 8.0 percent
Q4) When there are higher prices due to greater effort needed to produce the same product today it is called ____________________ inflation.
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Chapter 26: Investing in Real Estate
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Q1) 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
Q2) You are offered a four-unit residential building in which each unit rents for $500 per month. Given a 5 percent vacancy rate, operating expenses of $700 per month, and mortgage payments of $1,500 per month, you can anticipate a monthly A) net spendable income of $200.
B) net spendable income of $300.
C) negative cash flow of $200. D) negative cash flow of $300.
Q3) As a rule of thumb, for the investor to break even, the value of raw land must double every 10 years.
A)True
B)False
Q4) The impact that borrowed funds have on investment return is known as leverage. A)True B)False
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