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SCOTT-S MICHIGAN REAL ESTATE BROKERS TEST PREP
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SCOTT-S MICHIGAN REAL ESTATE BROKERS TEST PREP
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SCOTT'S MICHIGAN REAL ESTATE BROKERS TESTPREP. EXAM QUESTIONS AND CORRECT ANSWER
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A neighbor had encroached on a property but the owner did not complain within the
legally specified time period. The neighbor would obtain rights to the land by:
A » license
B » easement by necessity
C » easement by prescription
D » easement in gross - Answers-(C) An encroachment (fence, tree limb, etc.) that
remains for a lengthy period can become an easement by prescription (continuous,
open, notorious).
(A) License must be given by permission. (B) Easements by necessity are created if a
land is landlocked. (D) Gross easements are non-appurtenant (utility, railroads).
A property that has added value making it a better buy due to the benefit of an
easement is called:
A » appurtenant tenement
B » servient tenement
C » dominant tenement
D » gross easement - Answers-(C) A dominant tenement is the land benefitting from the
use of an easement across the servient tenement (B).
The easement is appurtenant (tied to) the land of the dominant tenement. Gross
easement (D) is a non-appurtenant easement (such as utility, railroads). Appurtenant
tenement (A) is not a real estate term.
In a normal life estate, which of the following could a life tenant NOT do?
A » Sell the property
B » Will it to a niece
C » Rent out a storage barn and make extra profit
D » Renovate a storage barn - Answers-(B) A life estate is non-inheritable; thus the life
tenant could NOT will it to his niece.
A life tenant can (A) sell the property, (C) rent out a storage barn or (D) renovate a
storage barn.
On July 1, a contractor started work. On August 15, the work was completed. The
general contractor was paid but the material vendor was not. On Oct. 1, the material
vendor filed a mechanic's lien. What is the effective date for the mechanic's lien?
A » July 1
B » Aug. 15
C » Oct. 1
,D » A material vendor cannot file a mechanic's lien - Answers-(A) A mechanic`s lien
takes priority based on the date the work was started, which was July 1, not (B) Aug. 15
when the work was completed, or (C) Oct. 1 when the lien was filed. (D) It can be filed
for either work OR materials that are unpaid.
A corporation who purchased a piece of real estate as a co-owner with an individual
would usually take title in which of the following manners?
A » Joint tenancy
B » Tenancy in common
C » Tenancy by the entirety
D » Community property - Answers-(B) A corporation owns property individually in
"severalty."
A person owned a property using it for residential use. The zoning on this lot was then
changed to commercial. The person can continue to use the lot for a residential use as
an example of a:
A » down zoning
B » variance
C » non-conforming use
D » buffer zone - Answers-(C) A non-conforming use is where one used a property
before the zoning change for a certain use and is allowed to continue that same use.
(A) Down zoning is going from a more intensive use to a less intensive use, such as
multi-family to single family. (B) A variance is changing something after the zoning is in
place, such as a change or variance regarding a setback line. (D) A buffer zone
separates two incompatible areas.
A property was down zoned with the courts upholding the down zoning decision. An
owner's property in the affected area is now less valuable due to the down zoning. This
person can receive from the government:
A » the full market value of the property
B » the full value of the property after the down zoning is factored in
C » compensation based on the difference in value before and after the down zoning
D » no compensation - Answers-(D) Down zoning does not require the government to
pay any compensation for any change to value. Eminent Domain is where the
government must pay if land is taken from a private party for the public good.
(A), (B) and (C) are all false in that no compensation is paid based on down zoning.
What is the purpose of an appraisal?
A » This is a scientific inexact way of determining value
B » To give an average value derived from various sources
C » To give a determination of value
D » To give an estimate of value - Answers-(D) An appraisal is used to estimate value
only.
,(A) An appraisal is not an inexact science and does not determine value, only
estimates. (B) An appraiser does not usually average items together to come up with a
value; an appraiser normally does analysis of comparable properties lending more
weight to some than others. (C) Buyers determine value - appraisers estimate value.
In the cost approach to value, which of the following would LEAST affect depreciation?
A » Land value going down
B » Physical deterioration to a building
C » Functional obsolescence on a property
D » Exterior obsolescence where a property is next to a toxic dump site - Answers-(A)
Land value going down does not affect depreciation as land never depreciates.
(B) Physical deterioration, (C) functional obsolescence and (D) exterior obsolescence
are the three items that cause depreciation.
Which of the following would be considered functional obsolescence?
A » A poor lay-out design
B » Termite damage
C » Wear and tear
D » Adverse economic conditions - Answers-Functional obsolescence refers to factors
INSIDE the property lines that lower the value that are not related to physical
deterioration.
(A) Poor design is clearly that. (B) & (C) both relate to physical deterioration. (D) is a
part of economic (outside) obsolescence.
Which approach to value would an appraiser be using when one adds the land value to
the depreciated replacement cost of a property?
A » Market Data
B » Cost
C » Income
D » Gross Rent Multiplier - Answers-(B) The cost approach formula consists of three
steps: take current replacement cost minus depreciation plus land value to determine
current fair market value.
(A) The Market Data approach uses the sale price of comparable properties in
estimating value. (C) The income approach takes the net operating income of a
commercial property divided by a capitalization rate to estimate the value. (D) The gross
rent multiplier is using the income approach to estimate the value of a rental house.
Which of the following would LEAST affect depreciation on a property?
A » Land value decreasing
B » Functional obsolescence
C » Physical deterioration
, D » A property being next door to a toxic waste dump - Answers-(A) Land value
decreasing has nothing to do with depreciation on a property.
Depreciation is caused by (B) functional obsolescence (problems inside the property
lines, such as an outhouse), (C) physical deterioration (peeling paint, sagging floors,
etc.) and (D) external or economic obsolescence (being next to a toxic waste dump,
etc.)
What is it called when a person takes the cost of purchase and then recaptures this
amount?
A » A sinking fund
B » Escrow
C » Profit
D » Depreciation - Answers-(D) Another word for tax depreciation is to recapture the
cost of purchase over a certain time period allowed by IRS regulations.
(A) A sinking fund is created to save money to satisfy a debt. (B) Escrow is an account
held by a neutral third party. (C) Profit is the difference between what a property is sold
for less the costs incurred in acquisition.
Capitalization refers to which valuation approach?
A » Income
B » Market data
C » Cost
D » Gross rent multiplier - Answers-(A) Capitalization is taking the net income divided
by the capitalization rate (rate of return) to get the value of an income property.
(B) Market data is used in residential property and vacant land by analyzing the
comparables. (C) Cost figures rebuilding minus depreciation. (D) GRM is residential
rental.
When a real estate agent is preparing a competitive market analysis (CMA) for a client,
how many comparable properties would make for a good evaluation of value?
A » 1 other
B»2
C » 3-5
D » A minimum of 5 - Answers-(C) 3 - 5 comparable properties is traditionally a good
number to make a reasonable estimation of value.
(A) 1 or (B) 2 is usually not enough. (D) A minimum is 5 is not required.
The direct sales or market data approach is based upon the principle of:
A » competition
B » anticipation
C » substitution
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