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Alabama Real Estate Exam Questions and Answers 2024
Special or Specific Agency - ANSWER-The Principal gives the agent authority to do one specific thing-sell property. They enter into a contract that stipulates how the task will be done-multiple listings of the property, commission paid etc. General - ANSWER-Principal and agent enter into a contract giving the agent the authority to conduct several activities-show property to renters, check references and negotiate leases. Designated agency - ANSWER-A dual agent cannot fully represent both parties so the agent designates another agent in their office to respresent either party-usually the buyer. Nonagency - ANSWER-transaction or facilitative-the agent faciliates the transaction by showing properties and assisting with paperwork. Both parties are on their own when it comes to their interests. Listing contract - ANSWER-it is not between the agent and the seller but between the seller and the broker Exclusive Right to Sell - ANSWER-Most advantageous type of listing-gives the broker the sole right to market a property. Regardless of who finds a ready, willing and able buyer, the broker receives a commission. Exclusive Agency - ANSWER-agent markets the property but if the principal sells it then the agent does not receive a commission Open listing-general - ANSWER-gives the right to market the poperty to a number of brokers. The principal can sell it themselves and only the broker that brings a ready, willing and able buyer recieves commission. Net listing - ANSWER-broker receives the difference between the selling price and the price that the owner wants Multiple listings - ANSWER-Multiple listing systems or services are marketing tools. Allows brokers to share listings and commissions. Buyer agency - ANSWER-binds the broker to look out for the buyers best interests. With a dual agency the broker is not able to tell the buyer if the property is overpriced or if another property is better.
Exclusive buyer agency-exclusive right to represent - ANSWER-gives the broker the exclusive right to help a buyer find a property. The broker is paid a commission even if the buyer buys a property during the time period of the agreement without the brokers help. Exclusive Agency Buyer Agency - ANSWER-does not guarantee a commission. The broker is given exclusivity over other agents to find a property for the buyer, but if the buyer finds a property he does not have to pay the broker a fee. Open buyer agency - ANSWER-buyer enters into an agreement with a number of brokers to find a property. only the broker that finds the property that the buyer purchases receives a commission. no commission is paid if the buyer finds his own property. Termination of agency - ANSWER-PERFORMANCE- happy seller and happy buyer at closing expiration of the listing, mutal agreement, RENUNCIATION- resignation of the agent REVOCATION-principal firing agent Real estate settlement procedures act (RESPA) - ANSWER-a federal law requires certain disclosures such as a standard Good Faith Estimate (GFE) that explains key loat terms and escribes a best estimate of closing costs Mandated disclosures - ANSWER-presence of lead paint in homes built before 1978. A seller does not have to test for lead paint, but must disclose the fact if known. if property is in a flood zone as designated by the Federal Emergency Management (FEMA) the need for the buyer to purchase flood disaster insurance, b/c the current owner has received flood disaster insurance from the federal govt other disclosures - ANSWER-some states require disclosures of sex offenders due to Megan's Law Property stigmas - ANSWER-seller and seller's agent need to be honest about anything int he history of the property that could hinder the sale; such as criminal acts or deaths that are associated with the property. Fiduciary responsiblities of agents - ANSWER-loyalty, obedience, disclosure, confidentiality and resoanable care and diligence and accountablility fiduciary notes - ANSWER-disclosure responsibilities are for both buyer-agent and seller-agent. The agent has a fiduciary responsibility to disclose any relationships or fees he has that affect the seller or buyer. The agent must also disclose any known financial issues the buyer might have.
Co-op - ANSWER-owns shares in the underlying corporation and therefore does not get a deed. Pays fees that include maintenance and property taxes. A potential buyer must pass a board interview and review of finances in order to buy into a co-op Planned unit developments (PUD) - ANSWER-combination of residential, commercial and industrial properties in a single project designed and built by a single developer. Single family homes can be a PUD. Property owner owns the land under and around it. Timeshares - ANSWER-person owns a fractional ownership fee simple interest Partnerships (general and limited) - ANSWER-general- must agree to all activites related to a property such as selling, mortgaging and management of the property. Partners pay taxes in relation to the amount of their interest, which is, investment, in the partnership. limited- limits the amount of liability of each partner to the amount of the parner's interest in the partnership. Generally one parner assumes day to day management. Corporations - ANSWER-before the law it is considered an individual entity, and, therefore, has sole ownership, or renancy in severalty, of its property. Liability is generally limited to the amount of the shareholders' investment in the corportation, and management of the property falls to the managers of the corporation. The corportation pays taxes on any profits and sharehoders pay taxes on the distribution of any profits. LLC - ANSWER-under federal law, an LLC may choose to be taxed as a corporation or as a partnership. Members may be equal or not and may have an equal say or not in how its operated. LLc may also have a managing memeber. It may also be a sole proprietorship Joint ventures - ANSWER-two friends or 2 or more business entities may form a joint venture to buy, own, and develop poperty for some purpose. equal liability Syndicates - ANSWER-group of people or business entities that combine to invest in real estate. works on a number of real estate projects. a big investment pool Fee Simple-(fee absolute and indefeasible fee estates) - ANSWER-most complete form of property ownership fee simple qualifed estate - ANSWER-has a stated endpoint-if conditions are not met and a limit on the interest in the porperty. It reverts to a fee absolute if the conditionare
not met and the property is returned to the grantor. Heirs my exercise the right of reversion. Qualified fee conditional - ANSWER-A grantor/seller stipulates in the sale of a property that he buyer and his or her heirs may not use the property for a certain purpose. gives the grantor the right of reentry and reverson right to inspect the property to see if the condition has been violated, and the latter is the court mechanism for reclaiming the property if the condition has been violated Qualified fee determinable - ANSWER-no legal process is needed to revert the property to the grantor if a condtion is violated. The reversion of property to the grantor is automatic Life estates - ANSWER-have an endpoint. ownership and possession of the property last only for the life of the person who is called the life tenant Ordinary life estate - ANSWER-Upon death of a life tenant, the life estate passes to someone else. If the life estate goes tback to the grantor/owner, then it is an ordinary life estate with reversion. If it goes to soem other person such as the children of the holder of the ife estete, it is an ordianry life estate with remainder. The person whi is entitled to the estate is called the remainderman. Life estate pur autre vie - ANSWER-designates someone as having interest in a property for the duration of the life of someone other than the first person leasehold estate - ANSWER-lessee holds a leasehold interest in property leased landlord's interest is called LEASED FEE Estate for years - ANSWER-lessee and the landlord agree to a lease for a term of years with a stated beginning and end dates lease is still enforce even if either party dies nor does selling the property terminate the lease Estate from period to period - ANSWER-"periodic tenancy"-no specific end date but is for a specific period of time such as a week or month automatically renews unless otherwise stated Estate at will - ANSWER-landlord allows tenant to occupy a property without a specified end date may or may not have a written lease ends if either party gives notice (or death)
Priority of liens - ANSWER-general real estate taxes, taxes for special assessments, mortgage and so forth. payments for liens are recorded with the local govt office of public records Deed restrictions - ANSWER-restrictive covenants (CCRs) Private restrictions on what a property owner is allowed to do with his or her property as opposed to public restrictions on what a property owner can do. Both are legally binding. Homeowner's associations cannot enforce restrictive covenants-such as who an owner can rent/sell to A deed restriction runs with the land-goes with the title to property. Laches - ANSWER-failure to enforce or exercise a right that then causes the right to be lost laches doesnt specifically deal with deed restrictions, but a deed restriction can be lost in effect by the failure to enforce it by the person or entity that has the right to enforce it. time limits are set by each state Encroachments - ANSWER-something that intrudes on another person's property such as a tree that grown over and under a fence may be accidental or deliberate Fair Housing Act/Laws - ANSWER-cannot discriminate against race, religion, age, familial status (covers pregnant women and adults in the process of gaining custody of children under 18), handicap etc. Section 100.201 does not include current drug users or alcoholics but does include: mental retardation, hearing and visual impairments, mobility impairments such as CP and MS, cancer-epilespy, chronic mental illness, AIDS, drug addiction from past illegal use of drus, alcoholism Exemptions to Federal Housing Act - ANSWER-Owner-occupied buildings with no more than 4 units Single family homes sold or rented WITHOUT the use of a broker Housing operated by religious organization that limit occupancy to memebers(as long as they dont discriminate against whom they accept as memebers) private clubs over 55 housing Americans with Disabilities Act 1992 - ANSWER-protection against employment, use of common areas, eliminates architectual barriers in new construction. What can you NOT do? - ANSWER-Refuse to rent or sell refuse to negotiate make housing unavailable set different terms
provide different housing services or facilities falsely deny that housing is available for inspection, sale or rental for profit, persuade owner to sell or rent (blockbusting) deny anyone [minority realtors] access to or membership in a facility or service such as MLS What you cannot do in advertising? - ANSWER-cannot make any statement that indicates a limitation on race, color, national origin, religion sex, familial status or handicap. Discriminatory Advertising - ANSWER-Fair Housing Act, Part 109-words used to describe dwelling, landlord, and tenants (white private home, hispanic residence and adult building are evidence of discrimination Penalities for HUD discrimination include - ANSWER-payment of damages, which include humiliation, pain and suffering injunctive or other forms of relief such as making property available payment of a civil penalty to the federal govt payment of reasonable attorney's fees and costs *$11,000 max for first violation, if only one violation in 5yrs then max of $27,500, if 2 or more in 7yrs then it's $55, Police powers - ANSWER-right of govt to regulate the use of private property-purpose is to regulate the conduct of people for the common good, general public welfare, order and safety Zoning board - ANSWER-hears applicants for relief from zoning ordinances provides annual report to the planning board of the variances granted Planning board - ANSWER-adopts the master plan reviews and decides subdivision and site plan applications reviews and decides condition uses applications recommends changes to the official map recommends changes to the zoning code to the governing body after reviewing zoning reports Zoning ordinances - ANSWER-most common form divides a city into geographic areas, and each area is designated for a certain use regulates lot size, setbacks, square footage of buildings, and height. Zoning variances - ANSWER-if a developer is denied a building permit he can seek relief by applying for a variance from the local zoing board of adjustment Area variances - ANSWER-exception froma zoning law that involves yard or lot size, floor area ration or building height.
Planned Unit Development (PUD) - ANSWER-may be zoned for a mix types of land use. A portion is set aside of open space. Cluster zoning-types of land use are clustered, or grouped in certain areas. Plat - ANSWER-map indicating the size and placement of individual lots, streets,power lines and any common buildings or features, such as a clubhouse or wimming pool in a subdivision. Interstate Land Sales - ANSWER-regulated by the Interstate Land Sales Full Disclosure Act, a fed law The act applies to certain categories of subdivsions and is enforced by HUD. Land developers must register with HUD and provide each potential buyer with aproperty report before the contract of sale is signed. The purpose is to protect consumers from fraudulent practices in ILS and leasing. ILS-exemption - ANSWER-subdivisions with fewer than 25 lots being sold in one offering and lots that are more than 20 acres in size and sometimes subdivisions with fewer than 100 lots ILS notes - ANSWER-A buyer may cancel a contract and receive a refund within 7 days of receiving the ILS report. If no report is given prior to signing, as required by law, the contract may be cancelled and all money returned within 2 years of signing ILS fraud - ANSWER-victims can file a complaint with the Office of Real Estate Settlements Procedures Act (RESPA) and Interstate Land Sales. Fines up to $10,000 or be sentenced up to 5yrs or both. HUD can also impose civil penalties, which may not exceed $1000 for each violation or $1million in any one year. Deed - ANSWER-legal document that conveys and is evidence of a person's right to possess property Title - ANSWER-right of possession or wonership Basic requirements for a valid contract - ANSWER-competent parties-legally competent (not mentally ill, under duress or influence of drugs and alcohol)*However tenants in common can sell their half if the other is incompetent or unwilling. mutual agreement-all parties must agree to the terms-called OFFER AND ACCEPTANCE legal purpose-ex. if a person applies for and gets a mortgage on one property but intends to use it to finance another property, the mortgage is void consideration-exchange of benefits (something of value) written agreement-listings must be writing b/c they are agreements of employment and are covered by real estate licensing laws, not the Statue of Frauds
Valid contracts - ANSWER-are enforceable by the courts unenforceable contracts - ANSWER-statue of limitations, laches or estoppel, based on fraud, nondisclosure of material facts Express contract - ANSWER-parties to the contract clearly, or expressly, state and agree to the actions to be taken or taken Implied - ANSWER-an always oral (ex. a seller asks an agent for advice on ways to sell her house, then that agent brings buyers to see the house) Unilateral - ANSWER-One party promises to do something if the other party does something. (ex. an option to buy and open listings) Bilateral - ANSWER-both parties exchange promises ot perform some action Executed - ANSWER-one for which the parties have fulfilled the terms and conditions of the contract. Executory - ANSWER-contract that is still in process. A buyer agency is an executory contract until the title to a property that the buyer wishes to buy is handed over to the buyer at closing. Real Estates Sales Contract - ANSWER-includes: who the parties are, the street address and a legal description of the property, the selling price, the amount of the deposit, the closing date, who the brokers are and how the commission will be paid and by whom, signatures of the parties, and signatures of witnesses Conditions and Contingencies - ANSWER-added by either the seller or buyer A condition is something that must be done or accomplished by one or the other party, or it may state something about the property. A contingency is a statement-a clause-that describes some action that must be met in order for the contract to be valid. *both can be waived by the party that will benefit Additional items in a SALES CONTRACT - ANSWER-time period for the buyer to change their mind, who pays for inspection, who pays closing costs, title searches and insurance, proration of taxes, and inclusion of a "time of the essence" clause. type of deed the buyer will accept, what happens if property is damaged, any warranties by the seller and the right to a walk-through Sales contracts and negotiating the deal - ANSWER-A buyer may sign offers with each one binding until the seller makes a counteroffer. Then the offer no longer exists, and the counteroffer is binding on the seller. If the buyer rejects then it no longer exists.
Covenant of seisin - ANSWER-guarantees that the grantor owns the property and has the right to transfer ownership Covenant of quiet enjoyment - ANSWER-title to the property will not be claimed by a third party Covenat against encumbrances - ANSWER-grantor guarantees that there are no encumbrances such as liens or easements-that are otherwise stated Covenant of further assurance - ANSWER-grantor promises to provide any documents or perform any actions needed to clear up any errors or problems with the deed Special warranty deed - ANSWER-guarantees only the actions of the person conveying the title (NOT the complete history)-used mostly for forclosed properties Requirements for a lease - ANSWER-competent parties mutual agreement legal purpose (rental) consideration (amount of rent) be in writing lease option - ANSWER-gives the tenant the right to purchase the premises Gross lease - ANSWER-tenant agrees to pay the same amount of rent each month and the landlord pays all taxes, liability insurance and maintenance cost. Utilities are negotiated and stated in the lease. Net Lease - ANSWER-typically used for commercial leases tenant pays base rent and some or all of the expenses of the property, not just utilities. Absolute net lease - ANSWER-tenant pays utilities, all repair and maintenance costs and real estate taxes. Percentage lease - ANSWER-base rent and a percentage of the gross sales of their business (used mostly for retail) Ground lease-land lease - ANSWER-rental of a parcel of unimproved land with the intention that the tenant will build on it wihtin the term of the lease-typically multi-year leases. managing property - ANSWER-finding tenant, advertising for tenants negotiating leases collecting rent maintenance
evictions paying the bills Legal description of property - ANSWER-appears on the deed lists only the boundary lines (no structures or physical features) Metes and Bounds - ANSWER-"point of beginning"-compass points (direction) and measurement (distance) Monument description - ANSWER-lists the boundary lines using monuments and landmarks as reference points [downside if the landmarks move/destroyed/change then the description is no longer acurate) Lot and Block system-plat - ANSWER-PLAT-map of lots in a subdivision, each house is listed as lot and block plus physical features (lake/club house/park) are included Rectangular Survey System-government survey system - ANSWER-primary method by which property in the US is surveyed and described. Uses principal meridians and baselines Quadrangle - ANSWER-area enclosed by the intersection of two prime meridians and two baselines 24 miles between two prime meridians and the area of the quadrangle is 576 square miles its subdivided into 16 townships. township is 1 square mile or 640 acres Datum - ANSWER-point, line or surface used to measure air space Appraising property - ANSWER-8 steps: define the problem, conduct an analysis, collect and analyze data, determine highest and best use, estimate value, apply sales/cost or comparable approach to valuing property, reconcile the approaches and write up and deliver report. Value - ANSWER-four characteristics: utility, scarcity, transferablility and effective demand Market value - ANSWER-"most reasonable price" not the sales price and is estimated by an appraiser Value in use - ANSWER-estimates the value of property based on its use or purpose Investment value - ANSWER-value of a property to someone who wishes to use the property for a specific purpose
External obsolescence - ANSWER-incurable-where schools and small shops existed now a old warehouse is there economic age-life - ANSWER-straigh line method- depreciation = (effective age / economic life) x cost Income approach - ANSWER-used to appraise investment properties and estimates value based on the amount of income that a property produces net operating income - ANSWER-NOI-4 steps 1.combines info about income and expenses 2.estimates potential income (PGI)-based on market rent not actual rent collected 3.from the PGI, subtract an allowance for vacancies and nonpayment of rents (EGI)
- propertys operating expenses (both fixed and variable) and reserves for replacement are deducted fromt the EGI capitalization rate - ANSWER-once you have the NOI you can determine the capitalization rate. represents the relationship between the income and value. capitalization rate= NOI / sales price value= NOI / capitalization rate suppose the NOI is 100,000 and the cap rate is 0. value= 100000/0.5= 200000 mortgage - ANSWER-promise to repay a loan for purchase of property. the lender (mortagee) provides financing and the borrower (mortgager) provides the property as security for the loan *mortgage is a lien on the title until it is paid off *mortgager keeps both equitable and legal title until its paid off promissory note - ANSWER-states the amount, terms and conditions under which the mortgage will be paid requirements of mortgages and notes - ANSWER-loan amount, legal description of property, granting clause , habendum clause, covenant of seisin, defeasance clause, proration of property taxes and assessment, insurance clauses, escrow, accleration clause, prepayment clause, requirement to preserve the value of the property over time, requirement to get the approval of the mortgagee before any large-scale renovation is done and copy of the note assignment - ANSWER-another lender buys the mortgage from the original lender assumption - ANSWER-someone else assumes the loan from the original owner (ie. mother sells her house to her son with no liability from the mother)
subject to mortgage - ANSWER-mom sells her home to her son and he assumes the loan but she is still responsible Primary market - ANSWER-writes mortgages; commercial banks, savings and loans, credit unions, mutual savings banks, mortgage companies, and portfolio lenders (offers loans for large-scale projects ie. malls and housing developments) secondary market - ANSWER-buys mortgages; Fannie Mae-(govt sponsored) corporation owned by stockholders Freddie Mac-GSE created by Congress 1970 to expand the amount of money available for housing and thus to provide additional "liquidity, stability and affordability to the U.S. housing market" Ginnie Mae (Government National Mortgage Association)-different in that it is a government-backed corp within the Department of Housing and Urban Development. It does not buy, sell or securitize mortgages but rather guarantees mortgage-backed securities backed by federally insured loans. mortgaged-backed securities (MBS) - ANSWER-secondary market buys mortgages, bundles them and sells them as investments FHA - ANSWER-DOES NOT LEND MONEY-only insures purchaser must: use an FHA-approved lender buying single-family or multifamily (4 units or less)-one of which will be owner occupied has less than 20% down payment must use an FHA-approved appraiser meets the FHA debt-to-income ration (29% mortgage payment exprense to effective income and 41% total fixed payment to effective income) Mortgage insurance premium (PMI) - ANSWER-2.25% of the loan VA-insured - ANSWER-passed after WWII-up to 25% of a home loan or $104,500, can be guaranteed by the VA (cannot cost more than $417,000) Generally, no down payment is required no monthly mortgage insurance payment a limit is placed on the buyers closing costs mortgage is assumable, but must be approved by the VA no prepayment penalty Private Mortgage Insurance - ANSWER-A method of protecting the lender in conventional loans over 80% of the selling price, but not FHA/VA backed loans Conventional Mortgage - ANSWER-A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.
Package mortgage - ANSWER-A mortgage, used in the purchase of new residential property which, in addition to real property, covers certain personal property items and equipment. (Washer, dryer, drapes, refrigerator, stove) Purchase-money mortgage - ANSWER-A mortgage given by the seller to the buyer to cover all or part of the sale price. Seller financing. Shared equity - ANSWER-A loan for which the buyer and another investor (or seller, lender, etc.,) enter into a partnership, with the buyer paying an equity share in a deal in lieu of interest.. Graduated payment mortgage (GPM) - ANSWER-A mortgage that allows borrowers to make smaller payments in the early years of a mortgage with annual increases until the loan is fully amortized. Growing equity mortgage (GEM) - ANSWER-A loan where payments increase each year, thereby allowing the loan to be paid off many years sooner and a substantial amount of interest dollars to be saved. Great for someone who is expecting their salary to increase. Wraparound mortgage - ANSWER-Encompasses existing mortgages but is junior or subordinate to them. The existing mortgages stay on the property and the new mortgage wraps around them. Temporary loan - ANSWER-bridge loan-used when the buyer doesn't have the funds immediately available to close on the sale Blanket mortgage - ANSWER-A mortgage which covers more than one piece of real estate. Often used by a developer in the financing of undeveloped lots. Contains a partial release clause. Construction mortgage - ANSWER-A loan to finance the cost of constructing a building, usually providing that the loan funds will be advanced in installments as the work progresses. Sale-and-leaseback - ANSWER-A transaction in which an owner sells his or her improved property and, as part of the same transaction, signs a long-term lease to remain in possession of the premises. Mortgage rate buydown - ANSWER-not a mortgage but a form of financing usally offered by developers to help buyers purchase their new construction subprime mortgage - ANSWER-a loan granted to individuals with poor credit histories who do not qualify for a conventional mortgage
Real estate settlement procedures act (RESPA) - ANSWER-The law that requires that lenders furnish borrowers with a good-failth estimate of closing costs is the Consumer Credit Protection Act - ANSWER-The first general federal consumer protection legislation; its provisions include the Truth in Lending Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. Law that requires certain information be given boyers applying for an ARM. Community Reinvestment Act - ANSWER-Requires banks to demonstrate their commitment to local communities through low-income lending programs and to provide annual reports to the public. Judicial foreclosure - ANSWER-A lawsuit filed by a lender or other creditor to foreclose on a mortgage or other lien; a court ordered sheriff's sale of the property to repay the debt. Strict foreclosure - ANSWER-a situation in which the lender is entitled to immediate ownership of the property should the borrower default Nonjudicial foreclosure - ANSWER-A process of bringing the property of defaulting borrowers to public sale by the lender or a trustee, outside of the court system. It must follow statutory guidelines, particularly concerning public notices of the sale. Property taxes - ANSWER-are ad valoren taxes Determining property taxes - ANSWER-rate assessed yearly even if its a year that taxes appraisals are not done Assessed value - ANSWER-Value of your property for tax purposes and may or may not be an indicator of market value Appealing property tax assessments - ANSWER-a lawsuit must be filed after denial from the tax review board Special assessment - ANSWER-Tax or levy against only the properties that will benefit from a proposed public improvement like a sewer or paving a street Additional taxes - ANSWER-sellers usually pays a transfer fee or transfer tax to the county at the time of the transfer of title Traditional closing - ANSWER-called settlement-buyers attorney acts as a fiduciary for the absent entities Escrow closing - ANSWER-Deposit of funds and/or documents with neutral third party along with instructions as to how to conduct the closing.
