Practice Questions Flashcards

An agent inadvertently tells a buyer that the neighborhood has 'great schools' without verifying this. If the schools are actually rated poorly, the agent may be liable for:

Answer: Negligent misrepresentation

Negligent misrepresentation occurs when an agent makes a false statement without reasonable basis, even if not intentionally deceptive.

A listing agreement expires before the property sells. The seller then sells directly to a buyer who was introduced by the former broker during the listing period. The broker:

Answer: May be entitled to a commission if a protection clause was in the listing

A safety clause (protection period) in a listing agreement entitles the broker to a commission if the property sells to a buyer the broker introduced during the listing period.

In a mortgage transaction, the document that creates the debt obligation and promises repayment is the:

Answer: Promissory note

The promissory note is the borrower's written promise to repay the loan under stated terms; the mortgage or deed of trust is the security instrument.

Which type of deed provides the greatest protection to the buyer?

Answer: General warranty deed

A general warranty deed contains covenants warranting title against all defects, even those arising before the seller owned the property.

A property manager neglects to make required repairs, causing a tenant to break their lease and vacate. This is known as:

Answer: Constructive eviction

Constructive eviction occurs when the landlord's failure to maintain habitable conditions effectively forces the tenant to leave.

Which government power allows a municipality to enact zoning laws?

Answer: Police power

Police power is the inherent authority of the government to enact laws regulating land use to protect public health, safety, and welfare.

An investor purchases a property for $500,000 and later sells it for $650,000. Ignoring other costs, the gain is subject to which federal tax?

Answer: Capital gains tax

Profit from the sale of investment real property is subject to federal capital gains tax, with the rate depending on the holding period.