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Section 1 questions
| Question | Answer |
|---|---|
| What are the agent's duties to third parties, customers, or consumers | (DAH) Disclosure: at first substantive contact. Accounting. Honesty and fair dealing |
| Which two fiduciary duties are NOT owed to a transaction broker's client or customer? | loyalty and obedience (OL, the first two) - specific to New Mexico |
| Describe: Reasonable skill and care | actively applying a broker's skill and expertise in a professional manner |
| Common law of agency creates a fiduciary relationship. What are the duties to the principal? | (OLD CAR) Obedience - Loyalty - Disclosure - Confidentiality - Accounting - Reasonable skill and care |
| Capital gains - what's the time period for short term and long term? | Short term is 12 months or less; long term is more than 12 months |
| Investors may defer capital gains by using a [what]? | 1031 tax-deferred exchange. |
| When is the agency relationship disclosure form to be provided to potential buyer or seller. | At first substantive contact. Before the licensee receives any confidential information. |
| Trust funds include what? What is not included in the trust account? | Trust funds include earnest money, rents, and security deposits. NOT commission or referral fees. |
| What are the dollar limits on the gain on sale of principal residence before paying capital gains? | $250,000 if single, $500,000 if married filing jointly; must own and occupy for at least 2 of the last 5 years |
| What are the two types of property? | real and personal |
| List the 5 appurtenances. | 1. improvements, 2. rights, 3. interest, 4. fixtures, 5. privileges |
| define appurtenances | Appurtenances are attached to and run with the land. There are five. 1. improvements, 2. rights, 3. interest, 4. fixtures, 5. privileges |
| Finish this sentence: When property is sold, the land and all appurtenances automatically transfer | via deed |
| True or False. Appurtenances include personal property | false |
| There are 3 land rights. What are they? | Land rights are: 1. Surface rights 2. Subsurface rights 3. Air rights |
| There are 3 forms of real property (real estate) rights. What are they? | 1. land rights, 2. ownership rights, 3. government rights |
| What are the 4 land rights? | surface, air, water, subsurface |
| Define Riparian rights | Right of water use when owning of land abutting flowing water (R=river) |
| Define Littoral rights | Right of water use when owning of land abutting standing water (L=lake) |
| In arid states where water is scarce, Ownership and use of water are determined by the | doctrine of prior appropriation |
| Personal property is transferred by a | bill of sale or purchase agreement (not a deed, like real estate) |
| What fixtures do not transfer with the deed | 1. Emblements - annually cultivated crops. 2. Trade fixtures - installed additions that are a necessary part of the trade or business. |
| True or False. Fixtures transfer with the deed. | False. Be careful of the trick questions. There are two types of fixtures that don't transfer with the deed. |
| Describe Freehold Estate | Estates of ownership. Indefinite duration, lasts until the property is transferred. |
| What are the three types of freehold estates | 1) fee simple absolute, 2) fee simple defeasible / qualified fee, 3) life estate |
| Define Fee Simple Absolute estates | The greatest and maximum form of ownership, lasts indefinitely, transferable and inheritable |
| Describe the characteristics of Fee Simple Defeasible / Qualified Fee estates | As long as a condition that must be met. If the condition is broken, the estate reverts to the grantor or grantor's heirs. Transferable and inheritable, next buyer has to honor the condition. (Hint: defeasible = defeated if not met) |
| Describe the characteristics of Life Estate | A freehold estate that lasts over the lifetime of the owner. Upon death, the estate returns to fee simple absolute and reverts to either the grantor (reverter) or a third party (remainderman). |
| Describe Leasehold Estate | Estates of possession, not ownership. Terminated per terms of the lease or according to state law. Four types: 1) Estate for Years, 2) Periodic Tenancy, 3) Estate at Will, 4) Estate at Sufferance |
| An estate refers to what? | The rights held by someone who has a pocessory interest in real estate. |
| Explain ownership in severalty, including who gets the property upon death. | Property is owned by one individual or entity. One name on the deed. Property goes to heirs upon death. A legal entity can own in severalty. |
| What are the two forms of co-ownership | Joint tenancy and tenants in common |
| Explain Joint tenancy | Right of survivorship. Ownership is assumed by the surviving joint tenants, no questions asked. No probate. It overrides a will. Joint tenancy must be specified on the deed. Ownership shares must be equal. |
| Explain tenants in common | Co-owners DO NOT have the right of survivorship. Interests go to heirs or devisees. Subject to probate. Ownership shares do not have to be equal. (The ON in commON, reversed is NO) |
| Which form of co-ownership has right of suvivorship? | Joint tenancy. (JTROS) |
| Which form of co-ownership is the default? | Tenants in common with equal shares |
| A condominium is created by recording a | declaration. |
| Explain a Cooperative. (Form of ownership) | Owned by a corporation which in turn allows owner (stockholders) occupancy. The corporation owns the real estate. The buyer gets NO DEED, no ownership of unit. The stockholder pays assessments and association fees. |
| A deed guarantees and proves ownership. True or False? | False. A deed does not guarantee ownership. |
| Title passes when the deed is recorded. True or False? | False. Deeds to not have to be recorded for title to transfer. |
| When does title transfer? | Upon acceptance by the grantee. |
| What are the essential elements of a deed? And what is NOT essential | 1. Competent grantor 2. Execution by the grantor 3. Identifiable grantee 4. Legal description of the land 5. Consideration 6. Words of conveyance 7. Delivery to and acceptance by the grantee NOT required: recording |
| What is the most common way for a seller to demonstrate that the title is marketable? | Provide title insurance for the buyer. |
| What does a title search reveal? What does it not reveal? | Reveals the chain of ownership, wills, judicial proceedings, deed restrictions, other encumbrances. Does not reveal: parties in possession, encroachments, unrecorded mechanic's liens, zoning compliance. |
| A buyer and seller have entered into a binding contract for the sale of real estate. During this phase and until closing, the buyer has which type of title? Executory or Equitable? | Equitable Title. (The contract is a Executory Contract, dummy) |
| What are the 4 economic characteristics of real property? | Scarcity, improvements, permanence of investment, and location. |
| What are the 3 physical characteristics of real property? | immobility, indestructibility, and uniqueness |
| Define Encumbrance | An imperfection or cloud on the title. A charge, claim, or liability attached to real property. It's a right or interest that belongs to someone who is not the owner of the property. (a common encumbrance is a lien. easements are also encumbrances) |
| Define a 'specific lien' | it's attached to the property, not the person. The owner of the property is responsible. Examples: mechanics' liens, mortgage liens, tax liens, special assessment liens, condo/townhome association liens |
| Define a "general lien" | It's against a person and everything they own. Affects all of a debtor's property, both real and personal. Examples: judgment lien, inheritance or estate tax lien, IRS lien. |
| True or False: an easement is an encumbrance. | True. An easement is the right to use another owner's land for a particular purpose. |
| Define the two types of easements. | Appurtenant easement: involves two separate properties. Allows owner of one parcel of land to use another owner's land for a specific purpose. Servient - serves the other; dominate benefits. Easement in gross: it's all servient tenement. |
| Define: easement by prescription | occurs when a party uses another person's property continuously without property owner's permission for a STATUTORY PERIOD of time - time period is defined by state law. |
| Do easements have to be in writing? | yes. And should be recorded. They're sometimes created by court order. |
| Difference between an easement and a license? | An easement is the right to use the land. A license is revocable permission granted by the owner. Terminates by the death of the owner or sale of property. Its not transferable. |
| Define encroachment | Unauthorized use of another owner's land. |
| True or false: Title insurance protects against encroachments. | False. a title search does not uncover encroachments. |
| Is a deed restriction an encumbrance? What is it? | Yes. Deed restrictions are privately created controls on land use. (e.g. covenants) |
| How big is a township? | 6 miles by 6 miles; 36 square miles, each of which is called a section. Each section is 640 acres. |
| how many acres in a section? | 640 acres. (1 square mile) |
| how many square feet in an acre | 43,560 |
| What reveals encroachments? | A survey. Not a title search. Watch for trick question. |
| In the government survey system, the grid is formed by what? | A base, a meridian, ranges, and tiers |
| Which form of co-ownership allows for unequal shares of ownership? | tenants in common. But it must be specifically stated in the deed. |
| Which form of co-ownership is the default? | tenants in common. If no form of ownership is stated in the deed, the law presumes tenants in common. |
| What is this called: title granted by the court to a party who possesses the property in an (OCEAN) Open, Continuous, Exclusive, Actual, Notorious/hostile (without owner's consent) manner for statutory period of time | Adverse Possession (look for 'title granted') (if there's implied permission, it's not adverse possession) |
| What is this called: an easement prescribed by the court due to (OCEAN) Open, Continuous, Exclusive, Actual, Notorious/hostile (without owner's consent) use of another's property for statutory period of time | Easement by prescription (look for the words easement, and use of property) (if there's implied permission, it's ot easement by prescription) |
Created by:
amy-o