Michigan Real Estate Exam (set 9)
Questions and Answers
Calder's Construction Company has built a home in a new subdivision which was sold 6
months after it was built, for $48,500. This amount reflected a loss of 3%. Knowing this,
what was the original asking price on the home? - answer$50,000
To figure this out, take the sale price and divide it by 97% (100%-3% loss=97%). So,
$48,500/97% = $50,000.
A seller was selling an unimproved 1.1-acre lot for $10,000. The seller listed the
property with a broker who was also going to help any buyers in trying to locate suitable
financing. The broker ran an ad in the paper on the property which said, "$3,000 down
will buy." Does the broker have to disclose anything else in the ad? - answerYes,
because the broker mentioned the down payment in the ad, he is also required to
disclose all other financing terms as well.
As a general rule, all advertisements, including those for real estate, that emphasize
payments must also disclose other financing terms. For example, automobile
manufacturers can not just advertise a low monthly lease payment. They must also
disclose the total purchase price the lease is based on, mileage limitations, capital
reduction fees and so forth.
When a mortgage loan has been paid in full, it is important for the borrower to be sure
that - answera satisfaction of mortgage is recorded.
Recording formalizes the owner's "paid in full" status. Without this step, it's not
uncommon for the lender's interest to remain listed which creates complications if the
owner wishes to sell or obtain new financing
The absolute ownership of a unit in a multi-unit building, based on a legal description of
the airspace the unit actually occupies, is a: - answercondominium
A condominium means the person actually OWNS the unit (i.e. the air lot). This is not to
be confused with a cooperative, or co-op, in which the person is actually a tenant with
stock in the company. Community property is a system of property ownership only valid
in certain states, while time sharing is the undivided ownership of real estate for only a
portion of a year.
, Jones, a married man with children, died without leaving a will. His real estate holdings
are valued at over one million dollars. Jones' real estate would - answerbe distributed
according to the laws of descent and distribution.
Each state has provisions for distributing assets based on a priority of relationships--
typically, spouse first, then children, then other relatives. Dying without a will is called
dying "intestate."
A borrower applied for a VA guaranteed first time mortgage for $150,000. However, the
property appraised for $146,000. If the buyer still wished to buy the property, what most
probably will happen? - answerThe VA could allow the borrower to make up the
difference in cash
In this instance, the VA loan permits the applicant to borrow up to 100% of the
property's value, but not more than 100%. Thus, if the seller's price is firm despite the
lower appraisal and the buyer still wishes to move forward, he may do so by making up
the difference in cash, which will still secure 100% of the VA's interest in the property.
The parts of the property that are necessary or convenient to the existence,
maintenance and safety of a condominium and are normally used by all of the condo
residents are known as: - answercommon elements
Each condo owner has an undivided ownership interest in the common elements.
Examples are: the pools, tennis courts, game rooms, parking areas and exterior of the
building.
A borrower obtained a $10,000 term loan with 6 1/2% interest paid yearly. A $1,000
principal reduction was to be paid with each yearly installment. What would be the
amount of the principal and interest payment for the second year? - answer$1,585
Since a $1,000 principal balance was paid in year one, the balance on which the 6.5%
interest would be based for year two is $9,000, or $585. Adding in the additional $1,000,
the principal payment equals $1,585.
The rights of a landowner to use waters of an adjacent lake or ocean are known as: -
answerlittoral rights
Again, while both riparian and littoral rights concern water, littoral rights specifically
apply to nonmoving bodies of water, like lakes and oceans. Zoning and seisin both deal
with land control.
Which of the following is the most important document at closing? - answerThe deed
The deed is the most important document at closing, since it transfers the property to
the purchaser. The deed is usually prepared by the seller's attorney, who might use the
old deed as a template to prepare the new one.
