REAL Practice Test: Video 1 Answers (20 Questions) — Questions and Answers
Question 1: When put into the deed, deed restrictions and easements on a property are considered ____.
- a consideration
- an investment in a turnaround
- reservations and exceptions (Correct answer)
- an awful investment
Correct answer: reservations and exceptions
When deed restrictions or easements are included in a deed, they are typically referred to as 'reservations and exceptions.' A reservation is a right retained by the grantor (seller), such as an easement for access. An exception is something withheld from the grant, meaning it's not being conveyed with the rest of the property, thus limiting the grantee's (buyer's) full enjoyment or ownership rights.
Question 2: A contract signed by a minor for the purchase of real estate is generally considered:
- Fully enforceable
- Voidable by the minor (Correct answer)
- Void
- Voidable by the seller
Correct answer: Voidable by the minor
Contracts with minors are voidable at the option of the minor because they lack full legal capacity.
Question 3: Which term describes a contract where one party promises performance in exchange for an act by the other?
- Voidable contract
- Implied contract
- Unilateral contract (Correct answer)
- Bilateral contract
Correct answer: Unilateral contract
A unilateral contract binds one party to perform only if the other completes a specific act.
Question 4: Which of the following would make a contract 'void' rather than 'voidable'?
- An illegal purpose (Correct answer)
- A party who is a minor
- Misrepresentation by one party
- Undue influence
Correct answer: An illegal purpose
A contract for an illegal purpose is void from the start and has no legal effect.
Question 5: Who is in charge of deciding on a property's listing price?
- the owner of the property (Correct answer)
- broker of real estate
- the mortgage company
- the assessor
Correct answer: the owner of the property
The property owner ultimately has the right and responsibility to decide the listing price for their property. While a real estate broker can provide professional advice, market analysis, and recommendations, the final decision on the asking price rests with the seller. The broker acts as an agent, carrying out the seller's instructions.
Question 6: The clause that allows a lender to declare the entire loan balance due upon default is the:
- Acceleration clause (Correct answer)
- Defeasance clause
- Prepayment clause
- Habendum clause
Correct answer: Acceleration clause
An acceleration clause makes the full balance immediately due if the borrower defaults.
Question 7: Which entity is a secondary mortgage market participant that buys loans from lenders?
- FHA
- Fannie Mae (Correct answer)
- HUD
- Regulation Z
Correct answer: Fannie Mae
Fannie Mae purchases mortgages in the secondary market, providing lenders liquidity.
Question 8: The Tax Reform Act of 1986 provided a vehicle for the issuance of multiclass securities. What is the name of this entity?
- Reducing
- Escrow officer
- REMIC (Correct answer)
- 198000
Correct answer: REMIC
The Tax Reform Act of 1986 created the Real Estate Mortgage Investment Conduit (REMIC). A REMIC is a special purpose vehicle that holds commercial and residential mortgages in trust and issues multi-class securities to investors, facilitating the securitization of mortgages.
Question 9: In a deed of trust, the party who holds title on behalf of the lender is the:
- Trustee (Correct answer)
- Grantor
- Beneficiary
- Trustor
Correct answer: Trustee
The trustee holds bare legal title until the loan is repaid in a deed of trust.
Question 10: A kind of mortgage in which the lender provides monthly payments to the borrower, who must be 62 or older to qualify for the FHA program is called?
- Accelerate
- Reverse (Correct answer)
- Deficit
- Opposite
Correct answer: Reverse
A reverse mortgage is a specialized loan product designed for homeowners aged 62 or older, particularly under the FHA program. Instead of the borrower making monthly payments to the lender, the lender makes payments to the borrower. This allows seniors to convert a portion of their home equity into cash without having to sell their home, with the loan typically repaid when the borrower moves out, sells the home, or passes away.
Question 11: Transfer of property to the state when an owner dies without a will and without heirs is called:
- Escheat (Correct answer)
- Eminent domain
- Adverse possession
- Estoppel
Correct answer: Escheat
Escheat returns property to the state when there are no heirs and no will.
Question 12: A transfer of title that occurs by operation of law or natural events, without the owner's consent, is referred to as:
- Voluntary alienation
- Involuntary alienation (Correct answer)
- Conveyance by deed
- Dedication
Correct answer: Involuntary alienation
Involuntary alienation transfers title without the owner's consent, as in foreclosure or escheat.
Question 13: The legal process by which a court oversees the distribution of a deceased person's estate is called:
- Condemnation
- Foreclosure
- Partition
- Probate (Correct answer)
Correct answer: Probate
Probate is the court-supervised process of validating a will and distributing the estate.
Question 14: Which document is typically used to transfer title of property held in a living trust to a beneficiary?
- Sheriff's deed
- Gift deed
- Trustee's deed (Correct answer)
- Tax deed
Correct answer: Trustee's deed
A trustee's deed conveys property out of a trust to the beneficiary or buyer.
Question 15: The actual court proceeding by which the government exercises its power of eminent domain is called:
- Foreclosure
- Reversion
- Condemnation (Correct answer)
- Partition
Correct answer: Condemnation
Condemnation is the legal process used to take property under eminent domain.
Question 16: What type of legal relationship is established when a real estate licensee represents a buyer or seller in a transaction?
- Independent contractor arrangement
- Arm's length transaction
- Third-party brokerage agreement
- Principal-agent relationship (Correct answer)
Correct answer: Principal-agent relationship
An agency relationship in real estate is a principal-agent relationship where the licensee (agent) owes fiduciary duties to the client (principal).
Question 17: A listing agency agreement most commonly terminates when:
- The property is shown to its first prospective buyer
- The listing price is reduced at the seller's request
- The agreed listing period expires or the transaction closes (Correct answer)
- The agent submits the listing to the MLS
Correct answer: The agreed listing period expires or the transaction closes
A listing agreement typically ends upon expiration of its agreed term, completion of the sale, mutual agreement to cancel, or termination by operation of law.
Question 18: A listing agreement between a seller and a real estate broker creates which type of agency?
- Transaction brokerage
- Dual agency
- Buyer's agency
- Seller's agency (Correct answer)
Correct answer: Seller's agency
A listing agreement establishes a seller's agency, meaning the broker is engaged to represent the seller's interests throughout the transaction.
Question 19: Express agency in real estate is best described as an agency relationship:
- Created through the parties' behavior and conduct alone
- Processed and approved within 24 hours of listing
- Where the principal grants the agent unlimited authority
- Clearly established through a written or oral agreement (Correct answer)
Correct answer: Clearly established through a written or oral agreement
Express agency is explicitly created by a written or oral agreement between principal and agent, distinguishing it from implied agency which arises from conduct.
Question 20: Which of the following is NOT one of the fiduciary duties an agent owes to their principal?
- Disclosure
- Confidentiality
- Loyalty
- Profitability (Correct answer)
Correct answer: Profitability
Fiduciary duties include loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care — profitability is not among them.
