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Quiz Session - Attempts With Random Questions

National Real Estate Licensing Exam Questions

Page 7 of 35

121.

Consideration in a contract can include all except which of the following?

  • Duress

  • Love

  • Affection

  • Friendship

Correct answer: Duress

Duress is not a consideration that can be included in a contract. Duress is when an individual is forced into doing something against his will. In fact, duress is a reason to invalidate a contract, if it is discovered that one party was forced to agree to the terms of the contract under duress.

Love, affection, and friendship are all forms of “good” consideration, as they are items that may be considered valuable to the individual receiving them. One can only offer his own “good” consideration. For instance, someone cannot sell another individual’s love to someone.

122.

An official plat of a subdivision contains all except which of the following when it is recorded at the county courthouse?

  • Lot and block number descriptions

  • Property designation

  • Township, county, and state

  • Name and address of surveyor

Correct answer: Lot and block number descriptions

The lot and block number descriptions are not added to a subdivision plat until after the plat has been recorded at the county courthouse.

When the subdivision plat is presented to the county courthouse for recording, it should contain the property designation; the name and address of surveyor; the township, county, and state; the name of owner; and the date of the survey.

123.

Which of the following do not generally qualify for property tax exemptions?

  • Medical labs

  • Primary residences

  • Properties owned by religious institutions

  • Government-owned properties

Correct answer: Medical labs

Medical labs do not generally qualify for property tax exemptions unless they are owned by non-profit institutions. 

Primary residences that include a head of the family who has been residing in the home for a specified duration typically get reduced property taxes. Government-owned properties and non-profit religious institutions are also exempt from property taxes.

124.

Organization X owns the land that Organization Y has built medical buildings on. What is this arrangement known as?

  • Ground lease

  • Common property

  • Cooperative

  • Restrictive covenant

Correct answer: Ground lease

Organization Y has a ground lease with Organization X. A ground lease is when an individual or entity leases land from a landowner. The most common circumstances for a ground lease are when (1) the lessor who farms or mines the land without owning the land or (2) when lessee builds on the land but does not buy the land.

Common property is incorrect because it refers to property that is shared by others, such as recreational facilities or elevators. Cooperative is incorrect because it is when real estate is owned by a cooperative corporation and individuals own shares to the real estate, instead of an actual unit. Restrictive covenant is incorrect because it is when a group of neighbors all agree to do or not to do something in order to benefit the entire neighborhood.

125.

If cash is received during the purchase of a replacement property, the cash is referred to as which of the following?

  • Boot

  • Income

  • Purse

  • Gain

Correct answer: Boot

The cash, or any unlike property, received during the purchase of a replacement property is referred to as boot. The receiver of the boot must pay taxes up to the amount of the boot received but not more than the gain on the sale of the real property.

The other choices are incorrect because the cash or unlike property received during the purchase of a replacement property is referred to as boot, not income, gain, or purse.

126.

Emily purchased a building for $750,000. If the building has a useful life of 20 years, what is the value of the building after 2 years?

  • $675,000

  • $712,500

  • $637,500

  • $600,000

Correct answer: $675,000

The building’s value after 2 years is $675,000.

A 20-year life yields 5% depreciation per year (100%/20 = 5%). Two years’ depreciation would be 10% (5% + 5% = 10%). Therefore, in two years the building will be worth 90% of its original value: 0.90 x $750,000 = $675,000.

127.

Which of the following statements about VA-guaranteed home loans is not true?

  • The VA will guarantee loans up to $750,000

  • A VA loan may be assumed by a veteran, qualified non-veteran, or by a qualified unremarried surviving spouse

  • In order for National Guard Members and reservists to be eligible for a VA-guaranteed loan, they must have at least six years of service

  • Only VA-approved appraisers may appraise homes being financed by VA-insured loans

Correct answer: The VA will guarantee loans up to $750,000

It is not true that the VA will guarantee loans up to $750,000. The VA sets no limit on home loan amounts. However, for loans greater than $144,000, the VA will only guarantee a maximum of 25% of the county loan limit. 

The other choices are true.

128.

John owned a house and he hired Jane as his exclusive broker to sell it. Jane showed the house to Sally, who decided not to buy it. Two months after the listing agreement expired, however, Sally bought the house from John directly. Why did Jane win her lawsuit against John to collect her full commission?

  • Broker protection clause

  • Statute of limitations

  • Addendum

  • Amendment

Correct answer: Broker protection clause

A broker protection clause states that the property owner must still pay the listing broker a commission if the owner transfers the listed property to a party to whom the broker introduced the property during the term of the listing agreement. While the duration of broker protection clauses is subject to negotiation, typical length of the protection period ranges from ninety to one hundred and eighty days after the agreement’s expiration.

Statute of limitations is incorrect, because it pertains to the period of time within which certain actions can be brought before a court. Addendum is incorrect, because an addendum is an addition to a contract that incorporates additional terms into the agreement in addition to the main and typically boilerplate provisions. Amendment is incorrect.

129.

Under Section 1031 of the Internal Revenue Code, how long does a seller of real estate have to close on a replacement property?

  • 180 days from the closing on the old property

  • 90 days from the closing on the old property

  • 45 days from the closing on the old property

  • 30 days from the closing on the old property

Correct answer: 180 days from the closing on the old property

Section 1031 provides the seller of real estate with 180 days from the closing on the old property to close on a replacement property. Section 1031 of the Internal Revenue Code allows for taxes to be deferred on the gain from the sale of real estate.

The seller has 45 days from closing of the old property to identify a new replacement property. The other choices are incorrect because the seller has 180 days to close on a new replacement property, not 30 days or 90 days.

130.

A salesperson is showing homes to a middle-class couple with children and the couple asks the salesperson to show them a home in the 900-block area. The salesperson informs the couple that the 900-block area is an exclusive neighborhood for wealthy couples with no children and persuades the couple to look at homes in a different neighborhood. This illegal practice is known as which of the following?

  • Steering

  • Blockbusting

  • Redlining

  • Gatekeeping

Correct answer: Steering

This is an example of steering, as steering occurs when a broker or a salesperson only shows or refuses to show homes located in particular areas due to race, color, religion, sex, national origin, familial status, or handicap.

Blockbusting is incorrect because is occurs when brokers or salespersons try to profit from deliberately causing fear or panic in order to get homeowners to sell their homes at a reduced value so the broker or salesperson may resell them at a higher price. Redlining is incorrect because it is the discriminatory denial of loans or insurance to otherwise qualified people in a specific area based on discriminatory motive. Gatekeeping is incorrect because it is not a term used to describe illegal practices in real estate.

131.

The public records for a particular piece of real estate are not clear as to who actually owns property rights. This circumstance presents which of the following?

  • A cloud on title

  • A clear title

  • A special title

  • An ungoverned title

Correct answer: A cloud on title

A cloud on title occurs when public records are not clear as to who actually owns property rights to a particular piece of property. A cloud on title is also referred to as a title defect. Before an owner can provide a clear title, the owner will need to take the necessary steps to prove true ownership by clearing clouds on title.

The other choices are incorrect because an unclear title presents a cloud on title, not a clear title, a special title, or an ungoverned title.

132.

J&J Investors, LLC. own two warehouses on Maple Avenue. What is the depreciation period for these warehouses?

  • 39 years

  • 27-1/2 years

  • 10 years

  • 17-1/2 years

Correct answer: 39 years

Owners of income property, except apartment complex owners, may depreciate their property for 39 years. The depreciation of income property provides a tax deduction for the owner, which is considered very favorable.

Apartment complex owners may depreciate their income property for 27-1/2 years. The other choices are incorrect because they are not the depreciation terms for income properties.

133.

A contract for exchange is often used for its tax deferment potential under Section 1031 of the Internal Revenue Code. The tax deferment can be realized in which of the following situations?

  • When business or investment real estate is exchanged

  • When personal residences are exchanged

  • When “boot” is received for unlike real estate

  • When any type of real estate is exchanged

Correct answer: When business or investment real estate is exchanged

The tax deferment under Section 1031 of the Internal Revenue Code can be realized when business or investment real estate is exchanged.

The tax deferment cannot be used when personal residences are exchanged or when “boot” is received for unlike real estate. When “boot” is received for the exchange of business or investment real estate, the party receiving the “boot” must pay taxes on it because it is a gain. However, the payment of "boot" does not disqualify the exchange, it just requires the seller to pay taxes on the "boot" portion of the transaction.

134.

A millage rate of 37.5 mills is the same as which of the following?

  • $37.50 per $1,000

  • $37.50 per $100

  • $37.50 per $10,000

  • $37.50 per $1,000,000

Correct answer: $37.50 per $1,000

Property taxes are expressed as mills, which is a thousandth of a dollar. A dollar is equal to 1,000 mills. If the tax rate is 37.5 mills, the annual tax rate is $37.50 per one thousand dollars of value.

The other choices are incorrect because 37.5 mills is the same as $37.50 per $1,000, not $37.50 per $100, $10,000, or $1,000,000.

135.

Andrew represents Sally in the sale of her house. Sally wants to sell her house as quickly as possible and for the highest price. To accomplish this goal, Andrew lists the house at $300,000 - 10% below market value. By doing so, he plans to attract many buyers and then he anticipates a bidding war will ensue, after which, Sally will end up with a buyer at above market value. Here’s what happened: Andrew offered $275,000 and then, as a final offer, offered $295,000. Jewel’s first offer was 15% below market value and then her final offer came in at 5% above market value. What was Jewel’s first offer?

  • $280,500

  • $346,500

  • $330,000

  • $315,000

Correct answer: $280,500

Jewel’s first offer was $280,500. Market value is $330,000 ($300,000 x 1.1) and her offer was 15% below that ($330,000 x .85).

136.

Brandon did not have the necessary funds to pay his property taxes. However, he has continued to pay his monthly mortgage payments and is not delinquent on his mortgage. Which statement is true?

  • The taxing government can put a lien on Brandon’s property and eventually foreclose on it

  • The taxing government can request payment from Brandon’s mortgage company

  • The taxing government has no recourse unless Brandon becomes delinquent on his mortgage

  • The taxing government can request Brandon’s mortgage company to foreclose on the property

Correct answer: The taxing government can put a lien on Brandon’s property and eventually foreclose on it

It is true that the taxing government can put a lien on Brandon’s property and eventually foreclose on it if Brandon does not pay his property taxes. A tax lien has the highest priority in a foreclosure; this means the taxing government will receive their funds before any lending institution or other lien holder.

The other choices are false because the taxing government can place a lien and foreclose on the property even if the individual’s mortgage is current.

137.

When investing in real estate, the investor takes a chance of not making a gain on the investment and potentially losing some of the initial investment. What compensates the investor for this chance?

  • Risk premium

  • Liquidity premium

  • Market premium

  • Management premium

Correct answer: Risk premium

A risk premium is what compensates the investor for the chance of not making a gain on the investment and potentially losing some of the initial investment.

Market premium is incorrect because it is not a term used when considering the rate of return on real estate investments. Management premium is incorrect because it is what compensates the investor for the burden of monitoring and making decisions regarding the real estate investment. Liquidity premium is incorrect because it is what compensates the investor for the difficulty and time required to sell the real estate investment.

138.

Which of the following best describes real property?

  • Land and anything that is permanently affixed to it

  • Land and structures

  • Land

  • Land and anything growing on it

Correct answer: Land and anything that is permanently affixed to it

Real property is best defined as land and anything that is permanently affixed to it. 

Real estate includes the land, anything that is growing on the land, structures that have been built on the land, and any fixtures that have been affixed to the land itself or the structures that have been built.

139.

When listing a new home, Justin pulls a list of homes that have recently sold in the neighborhood with similar characteristics in order to determine what the sellers should list their house for. This process best describes which of the following?

  • Comparative Market Analysis (CMA)

  • Economic Value Evaluation (EVE)

  • Automated Valuation Model (AVM)

  • Comparative Residential Market Analysis (RMA)

Correct answer: Comparative Market Analysis (CMA)

This process best describes a Comparative Market Analysis (CMA) because a CMA provides a reasonable indication of what a property is valued at based on recent sales in the same neighborhood.

Economic Value Evaluation (EVE) is incorrect because it is not an appraisal analysis/model used. Automated Valuation Model (AVM) is incorrect because it provides an estimated value of real property by using property data and applying statistical techniques to comparable sales. Comparative Residential Market Analysis (RMA) is incorrect because it provides a snapshot of the current real estate market.

140.

If the taxing district must raise $600,000 from real estate property taxes and the total assessed value of all property in the district is $10,000,000, what would the property tax rate be expressed in mills?

  • 60

  • 6%

  • .6

  • 6

Correct answer: 60

If the taxing district must raise $600,000 from real estate property taxes and the total assessed value of all property in the district is $10,000,000, the property tax rate is 60 mills. A mill is one one-thousandth of a dollar ($.001), and means that an owner pays one dollar for every thousand dollars of assessed value.

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