PrepAgent Exam Questions With 100%
Correct Answers 2024/2025
For the past 30 years, the Ls have operated a neighborhood grocery store. Last week the city council
passed a zoning ordinance that prohibits packaged food sales in the area where the Ls' grocery store
is located. The store is now an example of a/an:
A) nonconforming use.
B) variance of the zoning laws.
C) violation of eminent domain.
D) illegal enterprise.
A) nonconforming use.
Explanation:
This is an example of "grandfathering" that's common when new zoning rules are put into place.
Basically it means that businesses and buildings that were in compliance before the new code was
established may continue to operate or exist under their present owners. However, if the Ls want to
sell their business, it must be to an enterprise that meets the new requirement.
The Rose family owns a home in a semi-rural area, which is about five years old. Recently announced
plans for a new regional airport will place their home directly in line with a main runway ending 1 mile
before their home. If the airport is constructed, will this diminish the value of the Rose Home?
A) No, because value would increase due to the location close to the airport.
B) Yes, because of economic obsolescence
C) Yes, because of functional obsolescence.
D) No, because noise from aircraft passing overhead is not recognized as affecting property values.
B) Yes, because of economic obsolescence
Explanation:
Economic obsolescence occurs when factors unrelated to the property itself and outside of the
owner's control diminish its value. A quick way to judge whether or not a property has become
economically obsolete is to analyze whether, under the new circumstances, the location would still be
chosen as a home site and, if yes, at what value compared with the current property.
After the buyer's offer was accepted by the seller, the broker cashed the buyer's deposit check and
put the money in his office safe pending the close of escrow. The seller demanded the deposit money
but the broker refused to give it to him. Assuming only the above facts:
A) The broker needs to look out for the best interest of the seller at all times, even if that means
performing acts against the sellers will.
B) This conduct would probably subject the broker to disciplinary action by the real estate
commissioner
C) The broker had legal justification to refuse to give the deposit money to the seller
D) The broker had legal justification to hold only one-half of the deposit; he must give the their half to
the seller
B) This conduct would probably subject the broker to disciplinary action by the real estate
commissioner
Explanation:
If a broker refused to give a deposit to a seller when the seller demanded it, this conduct would
subject the broker to disciplinary action by the Real Estate Commissioner. You must remember; the
deposit belongs to the seller.
,The primary purpose of Truth in Lending is to:
A) Disclose the true costs of obtaining credit.
B) Control the true costs to close a transaction.
C) Disclose the true costs of only an FHA loan.
D) Control interest rates on behalf of the consumer.
A) Disclose the true costs of obtaining credit.
Explanation:
Truth in Lending, otherwise known as Regulation Z, is intended to do away with deceptive financing
tactics, especially those involving hidden costs--for example, advertising a $250 car lease as zero-
down and then tacking a $1,200 upfront payment at the time of contract disguised as an "incidental"
acquisition fee.
A mortgage company makes a number of loans to be assembled into one package and sold to
permanent investors. This process is an example of interim financing to the mortgage company and is
called:
A) package financing.
B) blanket financing.
C) warehousing.
D) discounting.
C) warehousing.
Explanation:
Warehousing refers to the process whereby banks and other lenders make mortgage loans to
consumers for the purpose of quickly selling those loans on the secondary market.
Freehold estate includes:
A) estates for years
B) leasehold estates
C) periodic tenancy
D) life estates
D) life estates
Explanation:
The distinctive characteristic of the freehold estate is that they endure for an interminable duration.
The total collection of rights which may be claimed by private ownership is best described as:
A) The bundle of rights.
B) Freehold.
C) The fee simple system.
D) An estate.
A) The bundle of rights.
Explanation:
The bundle of rights containt all the rights one obtains with the ownership of real property, which
include the right to enter, use, lease, sell, give away the real estate or the right not to do any of these
things.
In order to be valid all exclusive listings must include:
,A) an automatic renewal clause.
B) a definite date of expiration.
C) a forfiture clause
D) permission for the listing broker to appoint subagents.
B) a definite date of expiration.
Explanation:
Listing agreements must have specific "from-to" dates attached. Moreover, they may not be
automatically renewed, but must be renegotiated. (Usually that's just a routine extension, but a new
agreement, nonetheless.)
The recording of an instrument gives:
A) Constructive notice
B) Actual notice
C) Legal notice
D) Documented notice
A) Constructive notice
Explanation:
Constructive Notice attaches once a document is recorded. Once recorded, subsequent buyers will be
deemed to have received "Constructive Notice" regarding the document and its effect on the
property in question. This could also be taken by taken possession. Actual Notice is when an individual
has first-hand knowledge of something. [For example, if a buyer has knowledge that someone has
taken possession of the property that is for sale.]
Insurance companies not willing to deal directly with borrowers, usually pay a loan servicing and
preparation fee and make real estate mortgage loans to purchase indirectly through:
A) Mortgage Companies
B) Savings and loan associations
C) FHA or VA
D) Freddie Mac
A) Mortgage Companies
Explanation:
Insurance Companies usually make loans through mortgage companies. These "loan correspondents"
negotiate and service their loans.
What is the voluntary relinquishment of rights of ownership or another interest?
A) Abandonment
B) Accession
C) Novation
D) Affirmation
A) Abandonment
Explanation:
Abandonment is the voluntary relinquishment of rights of ownership or another interest (such as an
easement) by failure to use the property, coupled with an intent to abandon (give up the interest).
, Any relationship in which one party (agent) acts for or represents another (principal) under the
authority of the latter
TENANCY
NOVATION
BENEFICIARY
AGENCY
AGENCY
An instrument by which one transfers personal property
TRUST DEED
GRANT DEED
LISTING CONTRACT
BILL OF SALE
BILL OF SALE
A loss in value to property (depreciation) caused by a negative influence near the property.
Concerned with location rather than physical characteristics of the property.
LOCAL OBSOLESCENCE
ECONOMIC OBSOLESCENCE
FUNCTIONAL OBSOLESCENCE
PHYSICAL OBSOLESCENCE
ECONOMIC OBSOLESCENCE
Explanation:
Economic obsolescence is a form of depreciation caused by factors that are not on the property, in
the property or even within the property lines. It can be caused by factors like the neighborhood
experiencing a rise in crime. It can also be caused by economic factors, such as problems experienced
by job market. Recession or a national economic depression that reduces property value can also be
categorized as economic obsolescence.
Regulations that control the use of land within a jurisdiction
BUILDING CODES
ESCHEAT
ZONING
EMINENT DOMAIN
ZONING
An increase in value to real property due to positive changes or the elimination of negative elements.
PROGRESSION
APPRECIATION
DEPRECIATION
REGRESSION
APPRECIATION
A territorial division of land established by federal survey, being six miles square and containing thirty-
six sections, each one mile square
Correct Answers 2024/2025
For the past 30 years, the Ls have operated a neighborhood grocery store. Last week the city council
passed a zoning ordinance that prohibits packaged food sales in the area where the Ls' grocery store
is located. The store is now an example of a/an:
A) nonconforming use.
B) variance of the zoning laws.
C) violation of eminent domain.
D) illegal enterprise.
A) nonconforming use.
Explanation:
This is an example of "grandfathering" that's common when new zoning rules are put into place.
Basically it means that businesses and buildings that were in compliance before the new code was
established may continue to operate or exist under their present owners. However, if the Ls want to
sell their business, it must be to an enterprise that meets the new requirement.
The Rose family owns a home in a semi-rural area, which is about five years old. Recently announced
plans for a new regional airport will place their home directly in line with a main runway ending 1 mile
before their home. If the airport is constructed, will this diminish the value of the Rose Home?
A) No, because value would increase due to the location close to the airport.
B) Yes, because of economic obsolescence
C) Yes, because of functional obsolescence.
D) No, because noise from aircraft passing overhead is not recognized as affecting property values.
B) Yes, because of economic obsolescence
Explanation:
Economic obsolescence occurs when factors unrelated to the property itself and outside of the
owner's control diminish its value. A quick way to judge whether or not a property has become
economically obsolete is to analyze whether, under the new circumstances, the location would still be
chosen as a home site and, if yes, at what value compared with the current property.
After the buyer's offer was accepted by the seller, the broker cashed the buyer's deposit check and
put the money in his office safe pending the close of escrow. The seller demanded the deposit money
but the broker refused to give it to him. Assuming only the above facts:
A) The broker needs to look out for the best interest of the seller at all times, even if that means
performing acts against the sellers will.
B) This conduct would probably subject the broker to disciplinary action by the real estate
commissioner
C) The broker had legal justification to refuse to give the deposit money to the seller
D) The broker had legal justification to hold only one-half of the deposit; he must give the their half to
the seller
B) This conduct would probably subject the broker to disciplinary action by the real estate
commissioner
Explanation:
If a broker refused to give a deposit to a seller when the seller demanded it, this conduct would
subject the broker to disciplinary action by the Real Estate Commissioner. You must remember; the
deposit belongs to the seller.
,The primary purpose of Truth in Lending is to:
A) Disclose the true costs of obtaining credit.
B) Control the true costs to close a transaction.
C) Disclose the true costs of only an FHA loan.
D) Control interest rates on behalf of the consumer.
A) Disclose the true costs of obtaining credit.
Explanation:
Truth in Lending, otherwise known as Regulation Z, is intended to do away with deceptive financing
tactics, especially those involving hidden costs--for example, advertising a $250 car lease as zero-
down and then tacking a $1,200 upfront payment at the time of contract disguised as an "incidental"
acquisition fee.
A mortgage company makes a number of loans to be assembled into one package and sold to
permanent investors. This process is an example of interim financing to the mortgage company and is
called:
A) package financing.
B) blanket financing.
C) warehousing.
D) discounting.
C) warehousing.
Explanation:
Warehousing refers to the process whereby banks and other lenders make mortgage loans to
consumers for the purpose of quickly selling those loans on the secondary market.
Freehold estate includes:
A) estates for years
B) leasehold estates
C) periodic tenancy
D) life estates
D) life estates
Explanation:
The distinctive characteristic of the freehold estate is that they endure for an interminable duration.
The total collection of rights which may be claimed by private ownership is best described as:
A) The bundle of rights.
B) Freehold.
C) The fee simple system.
D) An estate.
A) The bundle of rights.
Explanation:
The bundle of rights containt all the rights one obtains with the ownership of real property, which
include the right to enter, use, lease, sell, give away the real estate or the right not to do any of these
things.
In order to be valid all exclusive listings must include:
,A) an automatic renewal clause.
B) a definite date of expiration.
C) a forfiture clause
D) permission for the listing broker to appoint subagents.
B) a definite date of expiration.
Explanation:
Listing agreements must have specific "from-to" dates attached. Moreover, they may not be
automatically renewed, but must be renegotiated. (Usually that's just a routine extension, but a new
agreement, nonetheless.)
The recording of an instrument gives:
A) Constructive notice
B) Actual notice
C) Legal notice
D) Documented notice
A) Constructive notice
Explanation:
Constructive Notice attaches once a document is recorded. Once recorded, subsequent buyers will be
deemed to have received "Constructive Notice" regarding the document and its effect on the
property in question. This could also be taken by taken possession. Actual Notice is when an individual
has first-hand knowledge of something. [For example, if a buyer has knowledge that someone has
taken possession of the property that is for sale.]
Insurance companies not willing to deal directly with borrowers, usually pay a loan servicing and
preparation fee and make real estate mortgage loans to purchase indirectly through:
A) Mortgage Companies
B) Savings and loan associations
C) FHA or VA
D) Freddie Mac
A) Mortgage Companies
Explanation:
Insurance Companies usually make loans through mortgage companies. These "loan correspondents"
negotiate and service their loans.
What is the voluntary relinquishment of rights of ownership or another interest?
A) Abandonment
B) Accession
C) Novation
D) Affirmation
A) Abandonment
Explanation:
Abandonment is the voluntary relinquishment of rights of ownership or another interest (such as an
easement) by failure to use the property, coupled with an intent to abandon (give up the interest).
, Any relationship in which one party (agent) acts for or represents another (principal) under the
authority of the latter
TENANCY
NOVATION
BENEFICIARY
AGENCY
AGENCY
An instrument by which one transfers personal property
TRUST DEED
GRANT DEED
LISTING CONTRACT
BILL OF SALE
BILL OF SALE
A loss in value to property (depreciation) caused by a negative influence near the property.
Concerned with location rather than physical characteristics of the property.
LOCAL OBSOLESCENCE
ECONOMIC OBSOLESCENCE
FUNCTIONAL OBSOLESCENCE
PHYSICAL OBSOLESCENCE
ECONOMIC OBSOLESCENCE
Explanation:
Economic obsolescence is a form of depreciation caused by factors that are not on the property, in
the property or even within the property lines. It can be caused by factors like the neighborhood
experiencing a rise in crime. It can also be caused by economic factors, such as problems experienced
by job market. Recession or a national economic depression that reduces property value can also be
categorized as economic obsolescence.
Regulations that control the use of land within a jurisdiction
BUILDING CODES
ESCHEAT
ZONING
EMINENT DOMAIN
ZONING
An increase in value to real property due to positive changes or the elimination of negative elements.
PROGRESSION
APPRECIATION
DEPRECIATION
REGRESSION
APPRECIATION
A territorial division of land established by federal survey, being six miles square and containing thirty-
six sections, each one mile square
