Real Estate Agent License Practice Test

Real property given to heirs in a will is called devised real property. The deceased person is the devisor; and the heir inheriting ownership is the devisee. Personal property given in a will is called bequest. Legacy refers to intangible property, such as reputation or public faith that is inherited by the descendants or heirs of a deceased person.

Riparian theory (the right to use river water adjacent to one's property) is the most common theory of water allocation in sections of the U.S. where water is abundant. However, in states where water is scarcer, a form of prior appropriation applies. Also known as first in time is first in right, the doctrine grants water rights to divert a specific amount of water from a specific source to irrigate a specific piece of property. Those rights are then assigned a priority based on when the right was first used or applied for. In periods of peak demand, the person or entity whose claim is the oldest is given the first right to the water. Littoral rights are the rights to use lake water.

A covenant is a promise by the land owner to do or not do some action on the property or to the property. A covenant that runs with the land may also be called a "covenant appurtenant", which means it imposes duties and restrictions upon the land regardless of the owner. (Covenants that impose duties and restrictions upon a particular owner are called "covenants in gross".) Since covenants appurtenant affect title to real property, and are essentially binding promises that land owners make, they must be in writing to satisfy the Statute of Frauds. Also, because these covenants bind successive owners, the original parties to the agreement must have intended that successors be bound by the agreement.

Because Norman's estate is measured by his own life, Norman owns a traditional life estate. When Norman dies, Craig will have the remainder of the estate, so Craig has a remainder interest. Life estates pur autre vie are life estates that are measured by the life of someone other than the estate holder.

With joint tenancy, there is an inherent right of survivorship. All tenants must hold an equal interest (i.e., two tenants, each owns one -half; three tenants, each owns one -third, and so on). When a tenant in a joint tenancy dies, each of the surviving tenants inherits a portion of the deceased tenant's share. In the case of only one surviving tenant, the surviving tenant inherits the deceased tenant's entire share, and ends up with ownership in severalty.

Severalty ownership is ownership by a single person. There is only one person or entity's name on the deed. There is no right of survivorship with a severalty ownership, because a person with right of survivorship must be named on the deed. For a survivor of a severalty owner to obtain title upon the death of the severalty owner, the severalty owner must devise the property to the survivor in a will.

The doctrine of escheat ensures that property is not left in limbo without recognized ownership. Unattended property can be a health hazard and a nuisance to members of the community. The doctrine of escheat originated from common law, and remains applicable in modern times because it protects the health and welfare of the community. Most states have state land departments that take title to these properties and arrange for land auctions.

Appurtenant easements run with the land, and they remain regardless of who owns the property. An encroachment is a use of a portion of property without the owner's permission. Encroachments are not easements; and can be terminated. Gross easements are easements that are held by a person or entity, such as a utility easement. These easements are tied to the entity that owns them, not to the property; and they do not run with the land.

Agricultural zoning areas typically provide for bigger lot sizes than other uses, and are situated on the outskirts of certain communities, because of the unpleasant odors that can occur on farm property. Also, in a farming community, crop dusting is vital to the success of the farming industry, so the agricultural areas must be situated in such a way that crop dusting aircraft can easily and freely maneuver without the worry of city obstacles, such as buildings.

Judgment liens are rendered by a court; and all procedures for rendering and administering a judgment lien are defined by statute. Thus, they are statutory liens. Judgment liens are secured by the collective assets (including bank accounts) of the person against whom the lien is held; so the lien is a general lien. With a judgment, there is no promissory note signed by the judgment debtor, there is merely a court order to pay the amount due. Thus the lien is involuntary.

Payment of consideration is not necessary for an agency to exist. Agency is simply a promise to protect the best interests of the principal. A broker-client agency promise differs from a contractual promise because there is no consideration given in exchange for the promise of agency. There is instead a conditional promise of payment to the broker upon the occurrence of the sale of the real estate.

The contractual relationship created by a listing agreement is between the broker and the seller, whereby the seller agrees to pay the broker a listing commission upon successful sale and close of escrow for the seller's property. Although the seller may never come into personal contact with the broker, it is the broker who is the seller's agent.

The entire agreement clause is often placed at or towards the end of the contract. Any information that is exchanged verbally or prior to the contract being signed is irrelevant. It is not part of the arrangement. Any previous negotiations in which the parties to the contract had considered different terms will be deemed superseded by the final writing. An entire agreement clause in any contract means that: (1) failure of any party to initial any page of the contract does not affect the validity of the terms specified on that page; and (2) any modification to the listing contract must be in writing and signed by both the seller and the broker.

The death of either party to a buyer agency agreement will terminate the contract automatically. The parties to a buyer agency agreement are the broker and buyer. Remember that the salesperson is not a party to the buyer agency agreement. If the salesperson dies, the buyer agency agreement remains valid and active.

Liquidated damages are monetary damages for breach of contract, where the parties agreed at the time of contracting on a reasonable figure for compensation to be paid in the event of a breach. The dollar amount of the liquidated damages must be reasonable in light of the anticipated or actual harm caused by the breach. If the parties agree on a figure, but that figure is found to be unreasonable, then in the interest of public policy, the clause will not be enforced.

With a quit-claim deed, the grantor is "quitting" his/her claim. A quit-claim deed tells the grantee "Whatever interest I have, I am conveying to you." (I'm not promising how much interest I am conveying; nor am I warranting that I have any interest at all, but...whatever I have is yours.)

The acceleration clause can be invoked upon default. This means that, if the loan payment is due on the first of the month and not paid, the borrower is in default, and the lender is contractually permitted to call the entire balance due. As a general rule however, lenders do not invoke the acceleration clause with a simple default. Most lenders will send at least three late notices and allow the payments to get as much as 90 days in arrears before invoking the acceleration clause and instituting foreclosure proceedings. When the acceleration clause is invoked, it cannot generally be reversed. The borrower must pay the entire balance or face foreclosure.

The owner has no obligation to list the building with the property manager if the owner decides to sell the building. However, most property management agreements include a clause that the owner will refer all rental inquires to the property manager, and reimburse the property manager for out of pocket expenses.. The owner must carry a liability policy or policies on the building; and hold the property manager harmless for damages or injuries that occur in the course of property management activities.

Generally, even without a specific covenant, quiet enjoyment is implied in any lease arrangement. This covenant protects tenants from title disputes between the owner and anyone claiming superior title. The covenant of quiet enjoyment does not obligate the owner to repair leased premises. An obligation to repair or maintain the premises must be specifically written in the lease.

The market approach is used most often with existing (real estate that has been used or lived in) residential real estate. In a typical appraisal of an existing single family residence, the appraiser will estimate the market value using the market approach; and validate his findings using the cost approach. In the case of retail property or income -generating property, the income approach is used as the main approach. Churches, museums and special purpose buildings are generally appraised using the cost approach.

When determining value of an investment (rental) property, the investor will need a high occupancy rate, because higher occupancy rates generate greater cash flow. Higher vacancy rates mean less cash flow. 

About 20 percent of the nation's commercial and public buildings are contaminated with asbestos; and real estate agents should use due care to find out if a listed building contains asbestos. If asbestos is present in a building that is the subject of a purchase contract transaction, the buyer's agent must disclose the presence of the asbestos to the buyer. Asbestos is harmful only if it is disturbed.

The HUD -1 Settlement Statement is a standard form in used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan. A final HUD -1 statement must be given to buyers one day prior to the signing of the documents. The HUD -1 settlement statement also contains a good faith estimate (GFE) which specifies the estimated loan costs.

RESPA regulates all federally-related real estate activities. Because all of the activities listed as options are associated with federal lending institutions, all of these activities are considered to be "federally related". Thus, RESPA regulates all of the activities listed and much more. NOTE: A Federal Lending Institution is any banking institution which subscribes to the Federal Deposit Insurance Corporation (FDIC).