Arizona Real Estate Exam

Front 1

When the capitalization rate used for appraising income producing property is lowered, the value of the property:

Back 1

increases

Front 2

A federal law that requires a lender to inform the borrower of the true cost of obtaining credit is called the:

Back 2

Truth-in-lending Act

Front 3

M has given J power of attorney to act as attorney-in-fact to sell M's property. In this situation, which of the following statements is CORRECT?
-The power of attorney empowers J to sign a deed conveying title to M's property even if the power of attorney does not contain this specific statement.
-The power of attorney must be in writing if it grants J the power to sign a sales contract on behalf of M.
-If M dies, J may enter into a valid contract of sale on behalf of M's estate.
-Any contract J enters into under the power of attorney should be signed "J, attorney-in-fact for M."

Back 3

The power of attorney must be in writing if it grants J the power to sign a sales contract on behalf of M.

Front 4

Which of the following clauses is MOST likely to be included in a blanket loan?
-Release
-Take-out
-Escalation
-Reappraisal

Back 4

Release

Front 5

A lender would MOST likely rely on which of the following approaches to value when underwriting a mortgage on an apartment complex?
-Direct sales comparison (market data)
-Income
-Replacement
-Investment

Back 5

Income

Front 6

Which of the following loans is LEAST likely to be classified as a second mortgage?
-Equity
-Wraparound
-Construction
-Seller-assisted

Back 6

Construction

Front 7

A property management agreement normally includes a:
-list of the property's current tenants
-statement of the owner's supervisory responsibilities
-statement of the manager's qualifications
-description of the manager's fiscal responsibilities

Back 7

description of the manager's fiscal responsibilities

Front 8

It would be appropriate for a broker to assist a buyer in obtaining financing by:
-completing the loan application for the buyer
-preparing the mortgage and note for the lender
-explaining various loan programs to the buyer
-preparing the required RESPA forms for settlement

Back 8

explaining various loan programs to the buyer

Front 9

A restrictive covenant is BEST defined as which of the following forms of property control?
-An easement
-Adverse possession
-Governmental limitations on ownership
-Contractual limitations on ownership

Back 9

Contractual limitations on ownership

Front 10

When value estimates are derived from cost, direct sales comparison (market data) and income approaches, and the results are relatively close in dollar amounts, an appraiser should do which of the following to obtain a final value estimate?
-Reconcile the three estimates.
-Average the three estimates.
-Use the highest estimate.
-Eliminate the least appropriate approach and average the remaining dollar amounts.

Back 10

Reconcile the three estimates

Front 11

A licensee is commingling trust funds by depositing:
-earnest monies received from a client's properties in the agency's business account
-earnest monies and rents received from a client's various properties in the same escrow/trust account
-rents received from the licensee's own properties in a personal account
-tenants' security deposits received from various clients' properties in the same
escrow/trust account

Back 11

earnest monies received from a client's properties in the agency's business account

Front 12

Which of the following leases would BEST protect the interests of a lessee from a lessor desire to terminate the lease?
-Tenancy at will
-Tenancy for years
-Tenancy at sufferance
-Tenancy from month to month

Back 12

Tenancy for years

Front 13

G buys property from T who agrees to finance part of the purchase price for fifteen years and to convey title after the final payment is made. This arrangement is an example of a(n):
-option
-wraparound mortgage
-conventional mortgage
-contract for deed (land contract)

Back 13

contract for deed (land contract)

Front 14

A property owner sells a house to a buyer and agrees to finance $10,000 of the purchase price on an installment note. The $10,000 on the closing statement will be entered as a:
-credit to the buyer and a credit to the seller
-credit to the buyer and a debit to the seller
-debit to the buyer and a debit to the seller
-debit to the buyer and a credit to the seller

Back 14

credit to the buyer and a debit to the seller

Front 15

A state housing finance corporation makes mortgage loans available to qualified borrowers at an annual percentage rate of 8.5% with a 10% down payment. If a broker makes reference to
this source of financing when advertising real property for sale, which of the following statements will require full disclosure in advertising under the Truth-in-Lending Act?
-Financing available through the state housing finance corporation
-Financing available with 10% down payment
-Financing available at low interest rates
-Liberal financing available

Back 15

Financing available with 10% down payment

Front 16

When the parties to a contract stipulate that a specified sum must be paid by any party who breaches the contract, the sum is called:
punitive damages
liquidated damages
compensatory damages
actual damages

Back 16

liquidated damages

Front 17

When land is held in fee simple absolute and a sole owner dies leaving no will, the owner's title passes in accordance with the:
-right of survivorship
-law of testate distribution
-law of intestate descent and distribution
-state's restrictions

Back 17

law of intestate descent and distribution

Front 18

In the absence of a formal appraisal report, which of the following choices is the MOST appropriate for setting a listing price in a new, rapidly selling neighborhood?
-The price that willing buyers have recently paid for similar structures since this price reflects the market
-The cost of reproducing the structure plus the original lot value since this cost figure is reasonably up-to-date
-The price that is an average of the cost of reproducing the structure and the recent sales prices since the average would reflect both estimates
-The price that is an average of the listed prices of the most recently sold similar properties since this reflects the attitudes of most recent sellers

Back 18

The price that willing buyers have recently paid for similar structures since this price reflects the market

Front 19

A house 34 feet by 42 feet was built 10 years ago on a lot now valued at $3,500. The house would have a current value equal to a reproduction cost of $21 per square foot if it were not for depreciation. The depreciation of the house is due to its flat roof, which must be resurfaced at a cost of $.75 per square foot. To the nearest thousand, the current value of the property is:
-$27,000
-$29,000
-$32,000
-$35,000

Back 19

$32,000

Front 20

In a real estate sale, the purpose of the title commitment is to:
-pay for losses the mortgagee might incur related to the sale
-indicate that the title insurance company will insure the title
-ensure that the sale will be closed according to the sales contract
-correct any defects found in the abstract of title

Back 20

indicate that the title insurance company will insure the title

Front 21

Which of the following statements about a mortgaged property is CORRECT?
-The mortgagor may sell the property.
-A lien is created in favor of the mortgagor.
-The mortgagee retains the usual rights of ownership.
-The mortgagee has title to the property in a lien-theory state.

Back 21

The mortgagor may sell the property.

Front 22

The primary function of the Federal National Mortgage Association (FNMA) is to:
-establish current mortgage risk in terms of the general United States economic situation
-buy mortgages in a secondary mortgage market
-coordinate all mortgage activity related to programs for lower-income families
-assure fair and legal practice in the mortgage field

Back 22

buy mortgages in a secondary mortgage market

Front 23

Which of the following factors would be included in a description of replacement cost?
-Similar utility, current material and design
-Similar utility, replica material and design
-Different utility, current material and design
-Different utility, replica of material and design

Back 23

Similar utility, current material and design

Front 24

If a rural subdivision loses the benefit of fire protection from a nearby city, which of the following forms of depreciation BEST describes the loss of value?
-Physical deterioration
-Functional obsolescence
-External (economic) obsolescence
-Regression

Back 24

External (economic) obsolescence

Front 25

If a property owner gives an interested party a properly executed option with December 31 as the fixed expiration date and then dies before that date, which of the following statements about the option is CORRECT?
-It remains enforceable.
-It immediately becomes void.
-It remains in effect only if the property owner dies intestate.
-It remains valid but must be exercised within a statutory period.

Back 25

It remains enforceable.

Front 26

A salesperson is on a 50/50 split with an agency and sells a 300-acre farm at $1,200 per acre. The commission schedule calls for 5% on the first $200,000, 31/2% on the next $50,000 and 2% on the balance. The realty company must pay the listing agent 10% of the gross commission. The net amount the salesperson will receive is:
-$4,900.00
-$6,277.50
-$6,975.00
-$12,555.75

Back 26

$6,277.50

Front 27

Which of the following statements about a real estate sales contract is CORRECT?
-The contract conveys legal title to property when it has been signed by both parties.
-The contract binds both parties to complete the sale within a given period of time.
-Both parties have the right of specific performance.
-The broker may keep the earnest money if the buyer defaults.

Back 27

The contract binds both parties to complete the sale within a given period of time.

Front 28

Which of the following phrases is LEAST likely to be found in a brochure marketing a time-share project?
-Prepaid vacation
-Interval ownership
-Floating-use period
-Escalation plan

Back 28

Escalation plan

Front 29

While observing market conditions, a property manager should be aware that an increased demand for rental property is MOST likely caused by a(n):
-increase in availability of mortgage funds
-increase in disposable income
-decrease in mortgage rates
-increase in mortgage rates

Back 29

increase in mortgage rates

Front 30

A net lease affords the lessee the:
-right to depreciate the building
-deduction on interest paid on the mortgage
-deduction for real estate taxes
-right to sell the property

Back 30

deduction for real estate taxes

Front 31

Which of the following statements about a valid option contract is CORRECT?
-The optionee may not assign the option contract.
-It allows the optionor to sell to another party at a higher price.
-The optionee must purchase the property before expiration of the option.
-If the option is not exercised, the optionor retains the option consideration.

Back 31

If the option is not exercised, the optionor retains the option consideration.

Front 32

Under the Truth-in-Lending Act (Regulation Z), which of the following items MUST be noted in a disclosure statement?
-The mortgagee's title insurance fees
-The mortgage recording fees
-Any mortgage prepayment penalties
-Any attorney's fee for mortgage preparation

Back 32

Any mortgage prepayment penalties

Front 33

R and J are purchasing a duplex together. They ask the broker how to ensure that, in the event of the death of either of them, the decedent's ownership interest will automatically pass to the surviving person. The broker's BEST response is to tell the buyers which of the following information?
-They may consider putting quitclaim deeds in escrow and should discuss the details with the settlement agent.
-They may consider taking ownership by joint tenancy and should discuss the details with an attorney.
-They may consider taking ownership by tenancy in common and should discuss the details with an attorney.
-The type of ownership they want is available only to married couples.

Back 33

They may consider taking ownership by joint tenancy and should discuss the details with an attorney.

Front 34

A tenant has a five-year lease on a property that is being taken by eminent domain. If three years of the lease remain when the property is taken, which of the following statements is CORRECT?
-The lessee must relinquish the terms of the lease without compensation.
-The lessee must be compensated for interruption of the lease.
-The lessor must provide the lessee with substitute space for the remaining years.
-The lease cannot be interrupted.

Back 34

The lessee must be compensated for interruption of the lease.

Front 35

The highest and best use of a property is described as the use that will:
-effect the most favorable tax position
-bring the highest gross income
-bring the greatest return to the property
-cover the greatest area on the site

Back 35

bring the greatest return to the property

Front 36

A broker would be obligated to inform all of the following individuals of the fiduciary responsibilities of the broker's firm under the law of agency EXCEPT:
-sub-agent brokers
-buyers' lenders
-the broker's sales staff
-buyers' brokers

Back 36

buyers' lenders

Front 37

In a city with rent control restrictions, if a property is improved beyond its current level, the landlord may increase the monthly rent by 1.75% of the cost of the improvement. If a landlord spends $6,400 for improvements and increases the monthly rent from $840 to $960, by how much is the landlord exceeding the rent control restrictions?
$ 8
$ 32
$ 72
$112

Back 37

$8

Front 38

The right to pay off a debt and reclaim property after mortgage default is called:
-redemption
-reversion
-recapture
-remainder

Back 38

redemption

Front 39

Under the cost approach, an appraiser has calculated the current replacement cost new of a structure that is fifteen years old. The next factor an appraiser will consider in completing this approach is:
land value
capitalization rate
net operating income
accrued depreciation

Back 39

accrued depreciation

Front 40

At a closing that involves the financing of real estate, the mortgagor MUST:
-execute a purchase agreement
-assign the note to a third party
-secure the deed by signing a mortgage
-secure the note by signing a mortgage

Back 40

secure the note by signing a mortgage

Front 41

A clause in a lease that would give a tenant the contractual right to purchase the leased property at a specific price is known as a(n):
-assignment
-lease option
-compliance clause
-reversionary right

Back 41

lease option

Front 42

At 3:00 p.m., Salesperson K receives an offer on one of K's listings from another salesperson. K immediately calls the sellers and arranges to meet with them at 6:00. At 4:30, a salesperson from a cooperating broker brings another offer to K. At 5:00, the office secretary informs K that a third salesperson will be showing the house at 5:30. In this situation, Salesperson K should:
-present only the offer that K thinks is the best
-present only the offer that was made first
-present both offers at the same time
-advise the seller that K will wait to present the offers until the third salesperson reports any possible interest

Back 42

present both offers at the same time

Front 43

Real estate taxes for a property are based on an assessed value of $25,000 and the tax rate is .085. Taxes for the current year are due and payable on December 31. A sale of the property closes on June 15. On the basis of the thirty-day method, the approximate proration is a:
-credit to the buyer of $974
-credit to the seller of $1,151
-debit to the buyer of $884
-debit to the seller of $1,240

Back 43

credit to the buyer of $974

Front 44

The potential gross income of a warehouse is $36,000 per year, and the vacancy allowance is 2%. The taxes are $2,000 per year, and annual maintenance costs are $3,600. Annual reserves for replacement are $1,800, debt service is $13,500, and depreciation is $3,500. If the capitalization rate is 12%, what is the estimated value of the warehouse?
$134,333
$203,167
$218,167
$232,333

Back 44

$232,333

Front 45

Under conditions of climbing inflation, a property manager would be reluctant to negotiate which of the following types of leases?
-Price index
-Graduated rent
-Fixed rent
-Revaluation

Back 45

Fixed rent

Front 46

A lis pendens filed in a foreclosure is a notice of a(n):
-mortgagee in possession
-deficiency judgement
-writ of entry
-impending action

Back 46

impending action

Front 47

An individual who sells shares in a limited partnership organized to buy and sell real estate interstate MUST have which of the following licenses?
-Real estate
-Auctioneer
-Securities
-Insurance

Back 47

Securities

Front 48

A clause in a mortgage that allows a lender to declare the loan balance due on default of the mortgage payment is a(n):
-habendum clause
-escalator clause
-alienation clause
-acceleration clause

Back 48

acceleration clause

Front 49

V received a tax bill for $870.54, half of which is payable on June 1, and the other half on October 1. V does not pay the tax and is charged a penalty of 1 percent a month for delinquent taxes. If V makes one payment in full on October 15, how much tax will have to be paid?
$883.60
$887.95
$892.30
$896.65

Back 49

$892.30

Front 50

A will that has been written entirely in the testator's hand is known as a:
-formal will
-holographic will
-nuncupative will
-living will

Back 50

holographic will

Front 51

The sale of a condominium unit is considered the sale of a security if the:
-buyer is a nonresident
-sale involves a mandatory rental pool
-condominium is located in a resort area
-condominium association is a corporation

Back 51

sale involves a mandatory rental pool

Front 52

Which of the following statements is CORRECT about a sale-leaseback?
-The buyer becomes the landlord.
-The buyer may receive a tax deduction for lease payments.
-The seller remains the owner.
-The seller may receive a tax deduction for future interest payments.

Back 52

The buyer becomes the landlord.

Front 53

Water and mineral rights to real property are insured by what type of insurance?
-Riparian
-Homeowners
-Flood
-Title

Back 53

Title

Front 54

Broker K is preparing a closing statement on the sale of a house for $77,000. K is holding a $1,000 earnest money deposit and the balance of the buyer's down payment is $16,000. The balance of the purchase price will be financed by a new mortgage and the buyer is paying 2 points as a loan origination fee. The seller's broker will receive a 7% commission and the buyer will pay $1,750 in miscellaneous closing expenses. Real estate taxes for the current calendar year total $1,050 and are due and payable on the last day of December. If the closing takes place on June 30, how much cash will the buyer owe at closing?
$18,425
$18,765
$19,575
$23,715

Back 54

$18,425