AMPE REAL ESTATE - Dearborn · PDF file... d/b/a Dearborn Real Estate Education ... Real Property or ... explain the factors which influence and affect supply and demand in the real

NINETEENTH EDITIONFillmore W. Galaty | Wellington J. Allaway | Robert C. Kyle

MODERNREAL ESTATEPRACT ICE

STUDY GUIDE FOR

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PRACT ICEREAL ESTATEMODERN

NINTEENTH EDITIONFillmore W. Galaty | Wellington J. Allaway | Robert C. Kyle

STUDY GUIDE FOR

MREP_19E_Study_Guide.indb 1 6/5/2014 11:05:02 AM

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This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

President: Dr. Andrew TemteChief Learning Officer: Dr. Tim SmabyExecutive Director, Real Estate Education: Melissa Kleeman-MoyDevelopment Editor: Julia Marti

STUDY GUIDE FOR MODERN REAL ESTATE PRACTICE, NINETEENTH EDITION©2014 Kaplan, Inc.Published by DF Institute, Inc., d/b/a Dearborn Real Estate Education332 Front St. S., Suite 501La Crosse, WI 54601

All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.

Printed in the United States of America

ISBN: 978-1-4754-2179-8 / 1-4754-2179-6PPN: 1510-0219


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iii

Introduction ixHow to Use This Study Guide xi

U N I T 1

Introduction to the Real Estate Business 1Matching 2True or False 2Multiple Choice 3Fill-in-the-Blank 4Answer Key 5

U N I T 2

Real Property and the Law 7Matching 8True or False 9Multiple Choice 10Activity: Real Property or Personal Property? 12Answer Key 13

U N I T 3

Fair Housing 17Matching 18True or False 19Multiple Choice 20Answer Key 24

U N I T 4

Interests in Real Estate 27Matching A 28Matching B 29True or False 30Multiple Choice 31Fill-in-the-Blank 33Activity: Compound Interests in Spindley Acres 34Answer Key 35

Contents


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iv Contents

U N I T 5

Forms of Real Estate Ownership 39Matching A 40Matching B 41True or False 42Multiple Choice 43Activity: Types of Ownership 46Answer Key 47

U N I T 6

Land Description 51Matching 52True or False 53Multiple Choice 53Answer Key 56

U N I T 7

Transfer of Title 59Matching A 60Matching B 60True or False 61Multiple Choice 62Activity: Deed Characteristics 64Answer Key 65

U N I T 8

Title Records 69Matching 70True or False 70Multiple Choice 71Fill-in-the-Blank 72Activity: Tracing the Chain of Title 73Answer Key 74

U N I T 9

Real Estate Brokerage 77Matching 78True or False 79Multiple Choice 80Math Practice 82Activity: Who’s Who? 83Activity: State License Requirements 83Answer Key 84


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vContents

U N I T 10

Real Estate Agency 87Matching A 88Matching B 89True or False 89Multiple Choice 90Fill-in-the-Blank 93Answer Key 94

U N I T 11

Client Representation Agreements 97Matching 98True or False 99Multiple Choice 99Math Practice 101Activity: Listing Contracts 102Activity: Listing Worksheet 103Answer Key 105

U N I T 12

Real Estate Contracts 109Matching A 110Matching B 110True or False 111Multiple Choice 112Activity: Sales Contract 115Answer Key 116

U N I T 13

Real Estate Taxes and Other Liens 119Matching A 120Matching B 120True or False 121Multiple Choice 122Fill-in-the-Blank 123Activity: Lien Characteristics 124Answer Key 125

U N I T 14

Real Estate Financing 129Matching A 130Matching B 131True or False 132Multiple Choice 133Math Practice 136Answer Key 138


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vi Contents

U N I T 15

Government Involvement in Real Estate Financing 141Matching A 142Matching B 142True or False 143Multiple Choice 144Answer Key 147

U N I T 16

Real Estate Appraisal 151Matching A 152Matching B 153True or False 154Multiple Choice 155Activity: Pennytree Lane Appraisals 158Answer Key 159

U N I T 17

Closing the Real Estate Transaction 163Matching 164True or False 164Multiple Choice 165Fill-in-the-Blank 167Activity: Closing Statement 168Answer Key 170

U N I T 18

Leases 173Matching 174True or False 175Multiple Choice 176Fill-in-the-Blank 179Activity: Types of Commercial Leases 180Answer Key 181

U N I T 19

Property Management 185Matching 186True or False 187Multiple Choice 188Activity: Types of Maintenance 190Answer Key 191


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viiContents

U N I T 20

Land-Use Controls and Property Development 195Matching A 196Matching B 197True or False 198Multiple Choice 199Fill-in-the-Blank 201Activity: City Zoning 202Answer Key 203

U N I T 21

Environmental Issues and the Real Estate Transaction 207Matching 208True or False 209Multiple Choice 210Answer Key 212

U N I T 22

Investing in Real Estate 215Matching 216True or False 216Multiple Choice 217Fill-in-the-Blank 218Activity: Advantages or Disadvantages of Real Estate Investing 218Answer Key 219


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ix

Most students find their real estate principles class to be a challenging, rewarding, and traumatic experience, all at the same time. For some, mastering the jargon of the real estate industry can be as demanding as learning a foreign language. Students who have not attended classes or studied for exams for several years may find it difficult to get back into the habit—particularly when there are other demands on their time, and homework becomes another responsibility, among many. Because we are aware of the particular challenges facing today’s real estate student, this Study Guide was written with your needs in mind.

ABOUT THIS BOOK

This Study Guide was developed as a companion to Modern Real Estate Practice 19th Edition. However, it can also be used in conjunction with these textbooks (a chapter/unit correlation table is located on the inside front cover):

■■ Mastering Real Estate Principles ■■ Real Estate Fundamentals ■■ Modern Real Estate Practice (state-specific) ■■ Practice & Law (state-specific)

The Study Guide is designed to reinforce and elaborate on the basic information provided in your main textbook. Specifically, it is designed to help you master these three fundamental goals, which are vital to academic success:

1. Recognize important terms and concepts 2. Evaluate your understanding of basic real estate issues 3. Apply learned principles to real-world practice

These goals form the basis of the Study Guide learning objectives, which are to ■■ define and explain fundamental concepts and vocabulary terms of the real

estate industry; ■■ identify and discuss the characteristics of various legal and financial rela-

tionships; and ■■ perform and apply basic financial and property-related calculations.

While the real estate examination is exclusively a multiple-choice format, this Study Guide uses several different learning strategies. These styles of self-testing have proven to be effective in helping students move from memorizing factual information, to retaining the material. By working through the components of each unit, you will reinforce your real estate knowledge, as well as improve your test-taking skills.

Introduction


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x Introduction

ACKNOWLEDGEMENTS

We would like to thank Karen Stefano for her work as the contributing editor for this study guide. Karen Stefano is the co-author of Before Hitting Send: Power Writing Skills for Real Estate Agents, a how-to business writing and marketing guide targeting the unique needs of real estate professionals. She has published articles in Arizona REALTOR® Magazine, New Jersey REALTOR®, Georgia REALTOR® Magazine, California Lawyer, and elsewhere.

Karen is a JD/MBA with more than 20 years of complex litigation experience. She is also a licensed real estate broker. She received her BA from the University of California, Berkeley in 1985, a JD from the University of California, Davis in 1990, and an MBA with an emphasis in corporate finance from the University of San Diego in 2004.


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xi

Each unit consists of three primary sections: unit-specific learning objectives, a number of questions in varying formats, and an answer key.

LEARNING OBJECTIVES

Each unit begins with a series of learning objectives that are identical to the ones found in Modern Real Estate Practice 19th Edition. If you are familiar with the mate-rial in the learning objectives, then you are ready to move forward in that unit of the Study Guide.

QUESTIONS

Each unit includes some or all of these types of questions or problems:

Matching

Each unit lists the key terms found in Modern Real Estate Practice, 19th Edition. Test yourself to see how many of the key terms and other important real estate terms you can match to the correct definition. Note that some key terms might not be used.

True or False

You are presented with a series of statements based on material in the main text. It is important to read each statement closely and to clearly understand what you have read. Sometimes, just one word changes the statement from being true to false.

Multiple Choice

This section prepares you for the format and structure of the licensing exam. It may help to recognize that each multiple-choice question is actually four true or false statements. The questions consist of three false statements (answers) and one true statement.

Fill-in-the-Blank

This section format re-emphasizes key terms and concepts. Insert the term that best completes the sentence from the list provided. Note that some key terms will not be used.

How to Use This Study Guide


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xii How to Use This Study Guide

Math Practice

Before starting to work a math problem, carefully read the entire question. Sepa-rate the irrelevant facts or numbers from the information needed to perform the calculations. For example, if a question asks you to calculate a broker’s commission on a sale, you can disregard information about the asking price or mortgage. You should be able to answer a question based only on the facts given; make sure that you know exactly what you are being asked to do.

Activity

Each activity is different; follow the instructions included with each activity to complete it.

ANSWER KEY

Each unit includes an answer key so that you can immediately check your com-prehension of that unit’s principles. Many entries in the answer key include ratio-nales, which are brief explanations of the answers. Multiple choice and true or false questions have page references to the source material in Modern Real Estate Practice 19th Edition.


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Introduction to the Real Estate Business

■■ LEARNING OBJECTIVES Before you start these activities, you should be able to

■■ list and describe the various careers available in the real estate industry; ■■ discuss the role of primary professional organizations, including the services

and designations they offer the real estate practitioner and the ethical codes they establish;

■■ list and describe the different classifications and characteristics real property;

■■ explain the factors which influence and affect supply and demand in the real estate market; and

■■ define the following key terms:

associate licenseebrokercode of ethics

marketreal estate licenseesales associate

salespersonsupply and demand

1U N I T


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2 Study Guide for Modern Real Estate Practice, Nineteenth Edition

MATCHING

Write the letter of the matching term on the appropriate line.

a. home inspection

b. salesperson (sales associate)

c. appraisal

d. market

e. brokerage

f. immobility

g. REALTOR®

h. uniqueness

i. condominium

j. property management

1. ___ A place where goods are bought and sold and a price for goods established

2. ___ The principle of real estate which states that even if two parcels may appear identical, they are never exactly alike

3. ___ Person who performs real estate activities while employed by, or associated with, a licensed real estate broker

4. ___ An owner of this type of housing owns an individual unit and also shares ownership of common facilities

5. ___ Maintaining and administering another's property for a fee

6. ___ Process of using established methods and good judgment to estimate the value of a property

7. ___ The bringing together of parties interested in making a real estate transaction

8. ___ The property of real estate that refers to the fact that property cannot be relocated elsewhere

9. ___ Report based on visual survey of property structure, systems, and site conditions

10. ___ Person who adheres to the Code of Ethics of the National Association of REALTORS® (NAR)

TRUE OR FALSE

Circle the correct answer.

1. T F The six classes of real estate mentioned in the main textbook are residential, commercial, rental, agricultural, mixed-use, and special purpose.

2. T F The real estate market is generally slow to adjust to the changing forces of supply and demand.

3. T F The supply of labor and the cost of construction generally have a direct effect on the demand for real estate in a market.

4. T F Real estate professionals generally tend to specialize in one activity or class of real estate.

5. T F Warehouses, factories, and power plants are examples of commercial property.

6. T F Members of the National Association of Real Estate Brokers are called REALTORS®.

7. T F In general, the most widely recognized real estate activity is brokerage.

8. T F Finding funds to put together real estate transactions is called appraising.

9. T F Market trends in supply and demand can be overturned by a natural disaster, such as a hurricane or earthquake.

10. T F Demand for real estate usually drops when jobs are scarce.


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3Unit 1 Introduction to the Real Estate Business

MULTIPLE CHOICE

Circle the correct answer.

1. Office buildings and retail space are examples of a. commercial real estate. b. special-use real estate. c. residential property. d. industrial property.

2. A person who advises a real estate client who is making a purchase to use or invest in real estate is called a. an educator. b. a mortgage broker. c. a counselor. d. a subdivider.

3. All of these factors will tend to affect demand for real estate EXCEPT a. transfer taxes. b. employment levels. c. wage rates. d. demographics.

4. When the population of a town suddenly increases, which of these is MOST likely to occur? a. Rental rates will fall due to increased

competition b. Demand for housing will decrease c. New housing starts will decrease d. Real estate prices will increase

5. Property management, appraisal, financing, and development are all a. specializations directly linked to state and

federal government financial policies. b. separate professions within the real estate

industry. c. real estate brokerage professions. d. demographic factors that affect demand for

real property in a commercial market.

6. The idea that no two parcels of land are exactly alike is called a. immobility. b. subdivision. c. uniqueness. d. location.

7. All of these factors can affect the supply of real estate EXCEPT a. demographics. b. labor force. c. construction costs. d. government controls.

8. A property owner who does not want to deal with the everyday tasks of managing a rental property can hire a. a property manager. b. an appraiser. c. a home inspector. d. a developer.

9. When the supply of a certain commodity decreases while demand remains the same, the price of that commodity will tend to a. remain the same. b. increase. c. decrease by 10%. d. decrease by 20%.

10. All of these are examples of government policies that can affect the real estate market EXCEPT a. the Federal Reserve Board’s discount rate. b. a shortage of skilled labor or building

materials. c. land-use controls, such as zoning. d. federal environmental regulations.


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4 Study Guide for Modern Real Estate Practice, Nineteenth Edition

FILL-IN-THE-BLANK

Select the word or words that best complete these statements:

appraiser

code of ethics

continuing education

demographic

go down

go up

industrial

licensing

market

remain the same

residential

salesperson (sales associate)

subdivision

valuation

1. A person who conducts activities on behalf of a broker is called a(n) ___________________________.

2. Appraisers must have detailed knowledge of the methods of property ___________________________.

3. Real estate professionals keep their skills and knowledge current by obtaining ___________________________.

4. A single-family home is a type of ___________________________ property.

5. If the supply of single-family homes goes up and a major local employer lays off a large number of workers, the price of real estate tends to ___________________________.

6. The splitting of a single piece of property into smaller parcels is called ___________________________.

7. Niche marketing refers to the targeted marketing of specific ____________ ______________ populations.

8. A ___________________________ is a written system of standards for ethical conduct.

9. A community implements land-use restrictions so that less vacant land is available for residential development. At the same time, demand for hous-ing increases due to higher population. Prices for real estate will tend to ___________________________.

10. The function of a(n) ___________________________ is to provide a set-ting in which supply and demand can establish the value of real property.


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5

ANSWER KEY

MATCHING

1. d2. h3. b4. i5. j6. c7. e8. f9. a

10. g

TRUE OR FALSE

1. False. The six classes of real estate mentioned in the text are residential, commercial, mixed-use, industrial, agricultural, and special-purpose. Rental is not a class of real estate. p. 6

2. True. Because of real estate’s uniqueness and immobility, the market generally adjusts slowly to the forces of supply and demand; develop-ment and construction are lengthy processes. p. 9

3. False. Supply of labor and the cost of con-struction generally have a direct effect on the supply of real estate in a market. p. 9

4. True. The real estate industry is complex, much more than brokers bringing together buyers and sellers, landlords and tenants. Other specialties include appraisal, property manage-ment, financing, education, and home inspec-tion. p. 2–3

5. False. Warehouses, factories, and power plants are examples of industrial property. p. 6

6. False. Members of the National Associa-tion of Real Estate Brokers are called Realtists. REALTORS® are members of the National Association of REALTORS®. p. 5

7. True. Although many people think that real estate is comprised of only brokers and sales-people, many other specialties exist, including financing, appraising, education, and property management. p. 2

8. False. Finding funds involves financing; esti-mating the value of property is appraising. p. 3

9. True. Even when supply and demand can be forecast with some accuracy, natural disasters, such as hurricanes and earthquakes, can disrupt market trends; the market also can be affected by sudden changes in financial markets or plant relocations. p. 9

10. True. When job opportunities are scarce or wage levels are low, demand for real estate usu-ally drops; in fact, the market may be drastically affected by a single major employer moving in or shutting down. p. 9

MULTIPLE CHOICE

1. a. Office buildings and retail space are examples of commercial real estate. Special use includes churches and dormitories; industrial includes warehouses and factories. p. 6

2. c. A real estate counselor provides clients with competent independent advice based on sound professional judgment. An educator pro-vides education; a mortgage broker searches for financing; and a subdivider splits larger proper-ties into smaller ones. p. 4

3. a. Transfer taxes affect the supply; employ-ment levels, wage rates, and demographics affect demand. p. 10

4. d. With a sudden influx of people, rental rates will increase; demand for housing will increase; and more new homes will be started to satisfy demand. p. 10

5. b. Property management, appraisal, financing, and development are not linked to the govern-ment; they are all linked to real estate business. p. 2–3

6. c. No matter how identical they may appear, no two parcels of real estate are ever exactly alike; each occupies its own unique geographic location. p. 8

7. a. Demographics affect the demand for real estate. The labor force, construction costs, and government controls affect the supply of real estate. p. 9

8. a. A property manager handles the day-to-day tasks of managing property for an owner. An appraiser estimates value; a home inspector


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looks for problems with the property; and the developer improves the property. p. 3

9. b. When consumers continue to demand a product for which there is limited supply, the price generally increases. p. 8

10. b. A shortage of skilled labor will affect the supply of real estate, and this labor shortage is not generally associated with governmental policies. p. 9

FILL-IN-THE-BLANK

1. A person who conducts activities on behalf of a broker is called a salesperson or sales associate.

2. Appraisers must have detailed knowledge of the methods of property valuation.

3. Real estate professionals keep their skills and knowledge current by obtaining continuing education.

4. A single-family home is a type of residential property.

5. If the supply of single-family homes goes up and a major local employer lays off a large number of workers, the price of real estate tends to go down.

6. The splitting of a single piece of property into smaller parcels is called subdivision.

7. Niche marketing refers to the targeted market-ing of specific demographic populations.

8. A code of ethics is a written system of standards for ethical conduct.

9. A community implements land-use restrictions so that less vacant land is available for residen-tial development. At the same time, demand for housing increases due to higher population. Prices for real estate will tend to go up.

10. The function of a market is to provide a setting in which supply and demand can establish the value of real property.


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For comments or queries about this product, please email us at [email protected].

332 Front Street South, Suite 501, La Crosse, WI 54601www.dearborn.com, 800.972.2220

NINETEENTH EDITION

MODERNREAL ESTATEPRACT ICE

STUDY GUIDE FOR

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Review and recall the key concepts and terms presented in Modern Real Estate Practice, Nineteenth Edition. With hundreds of questions and activities, this Study Guide will thoroughly prepare you to pass your license course and exam.

FEATURES:

• New and revised questions, answers, and rationales reflect current real estate policy and law so you can test your knowledge of key concepts covered in the license course and on the exam.

• Answer rationales refer to the page in Modern Real Estate Practice, Nineteenth Edition, where the topic is covered.

• Learning objectives at the beginning of each chapter let you check your comprehension of each chapter before you begin your Study Guide review.

• Dedicated Website Gives Students More!

Visit www.modernrealestatepractice.com to find additional study tools and support for the 19th edition of this classic real estate text.

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Documents

AMPE REAL ESTATE - Dearborn · PDF file... d/b/a Dearborn Real Estate Education ... Real Property or ... explain the factors which influence and affect supply and demand in the real