Real Estate Salesperson

185
89Government condemnation
PLEASE PRINT LEGIBLY
COURSE DATE ________________________
REGISTRATION FORM
ALL OF THE FOLLOWING INFORMATION IS REQUIRED.
YOU WILL NOT RECEIVE CREDIT IF THE INFORMATION BELOW IS NOT COMPLETED.
NAME: (As It Appears On Your Driver’s License)

LAST: FIRST: MIDDLE:
Street Address: City:
State: ZIP Code: Last 4 Digits of Social Security #:
BIRTHDATE: EMAIL ADDRESS:
Home Phone: ( ) Cell Phone: ( )
PAYMENT INFORMATION
Did you already pay for this class? ❑ Yes -----How?❑ CASH ❑ CHECK ❑ CREDIT CARD
Is this your first time attending with us? ❑ Yes ❑ No
IF YOU HAVE NOT PAID FOR THIS CLASS, PLEASE SPECIFY YOUR METHOD OF PAYMENT:
❑CASH Supervisor Initials Required:___________ ❑ CHECK # ___________________

(Payable to M.I.R.E)
❑ CREDIT CARD # ____________________________________________
Exp: ________________________ 3 or 4-Digit Security Code ________________
How did you hear about us? Please check which applies.
❑ Friend ❑ Our Flyer ❑ YellowPages.com❑ Google ❑ Yahoo❑ MSN
❑T.V. ❑Other: (please specify) ______________________________________
Percentage of Students who successfully completed the school program in the previous calendar year was 94.5%.
Course Contract assembly. Payments and registrations can only be accepted at the Southfield
office address: 24655 Southfield Road, Suite 101, Southfield, MI 48075 or can
be submitted online.
ATTENDANCE AND MAKE-UP POLICY COURSE MATERIAL - Provided by the school, material may or may not be
Full course attendance is required. Absent students must make arrangements included in the course tuition. The student is advised to bring a note pad,
with the school to make up for missing hours. Students may attend another calculator and highlighter.
class to make up time at no extra charge within 60 days after course starting
date. A student who does not make up time by the deadline is considered DIPLOMA - Graduates will receive a diploma / certificate as a completion award.
dropped and full attendance and tuition is due if s/he decides to attend again. You are required to maintain you certificate and present it to the Department
A student is allowed to re-take a 40 Hour Salesperson course within 12 months upon request. A charge will apply for reissuing duplicate certificates.
of graduation at no charge (must pay for new books and material). Students Students should be advised to keep copies of transcripts and certificates of
are allowed to re-take a course for 60% of the tuition cost (must also pay for completion or diplomas. In the event of the school closure, the school is
updated course material) as long as they come back within 3 years from the obligated to send all students transcripts to the Michigan Department of
original class start date. For 6 – hour continuing education, students who need Licensing & Regulatory Affairs where students may request copies of their
to come back and make up time will be charged a $25.00 make up fee. If a transcripts for a closed school.
student elects to retake a course, then it is mandatory that updated books must
be purchased. Online and home study distance learning students must take ENROLLMENT AND SCHEDULE - Varies, based on the type of course.
the course for the necessary accredited time and pass all quizzes. Tuition must be paid upon registration in order to be considered registered for
a course. No course credit will be issued to students who have not paid course
CANCELLATION POLICY - We reserve the right to cancel any class (with or tuition, such as in the event of bounced checks or paid refunds. Although
without reason) any time prior to class date. Cancellation notice can only be registration and tuition are accepted on the day the class starts (tuition paid at
given to students who have already registered and paid. Students who have not the door* is usually higher than prepaid tuition), we encourage students to
registered and pre-paid and still wish to attend certain courses and "pay at the register and pay at least 10 business days in advance.
door"* should contact the school before showing up for class to ascertain that
the class WILL be held. Tuition rates paid "at the door" may be higher than the ENTRANCE REQUIREMENT - No age limit, however, the applicant for a Real
pre-paid rates. No charge to re-schedule. Course dates, times and prices are Estate license must be 18 years old.
subject to change at any time.
GRADES - Certain courses, such as appraisal, require a mandatory test at the
CONDUCT - School officials maintain the right to dismiss a student for end of the class. The student must receive a passing grade in order to graduate.
inappropriate behavior. No food is allowed during class session. Students that Courses taken and or passed are not transferable to other education or training
show indication of sickness such as sneezing, coughing, etc. will not be centers.
admitted into class (and / or) will be asked to leave and will be making up class HOLIDAYS - The school will not hold classes on New Year's Day, Memorial
time missed with no additional fee. Day, Independence Day, Labor Day, Thanksgiving Day, Easter and Christmas
Day.
COURSE DATES - Morning and evening courses are available (Check the HEALTH & WELLNESS: Student hereby releases and forever discharges and
school advertising brochure/course catalog). holds harmless company and its agents from any and all liability, claims and
demands of whatever kind or nature, either in law or in equity, which arise or
PERFORMANCE OBJECTIVE - Student agrees to abide by State rules and may hereafter arise from participation in activities associated with the school.
regulations and must attend the course in full in order to graduate. Certain You understand that this release discharges company from any liability or claim
courses may legally require passing an examination for completion. that you may have against the school with respect to COVID-19, Flu, or other
illness. The school has the right to dismiss students that display cold symptoms
REFUND POLICY - Cancellation request must be in writing. A refund will be or other sickness that may be contagious to other attendees.
granted if the cancellation request is received at least 3 business days before PASSING REQUIREMENT - Full attendance of course hours is required along
class start date and the school will deduct a $25.00 fee. Furthermore, any with a passing grade (if required). Students who miss course hours must make
books received in advance must be returned undamaged otherwise the cost of up all hours as a requirement for graduation.
the books will be deducted as well. No refunds will be granted after the start PLACEMENT ASSISTANCE – Free placement assistance (if available) can be
date of the course. A student who does not complete the course within one provided upon student request. No real estate brokers and/or other recruiting
year from starting date will be considered “dropped” and if s/he wishes to re- professionals are allowed during the course in the classroom.
attend the course after the passage of one year, the student must pay the PREREQUISITE- There are no specific educational prerequisites to attend the
course tuition. courses.
PROGRAM GOAL - To teach students the basic concepts of various
Distance learning courses (online): Once an online course has been occupations as stated in the course outline of each specific course manual.
activated, no refunds will be provided. RECORDING MACHINES - Not allowed during class session.
RE-ENTRANCE - Students who decide to re-attend the 40 Hour Salesperson
Distance learning courses (home study): Once the student register course may do so 12 months after initial class start date at no charge (course
and receive the course material, no refunds will be issued. books and material have to be purchased)
TESTING FEE - The student is responsible for his/her own testing fees. The
TUITION - Varies, based on the type of course. Tuition must be paid upon Institute will not be responsible to reimburse students who miss their testing
registration in order to be considered registered for a course. Full payment is dates, go to the wrong location on the testing date, or not graduate in time for
required prior to class start date. Registration is accepted at any time with the test.
payment before class starts or at the door* (tuition paid at the door is usually VISITORS - Students may not bring any visitors to class unless they pay full
higher than prepaid tuition). We prefer registration with payment 10 business tuition. Children are not allowed in classroom at any time. No pets are allowed
days in advance. There is a $25.00 charge for returned checks** and for credit with the exception of service animals.
card disputes. Vouchers received from other entities such as the UAW and
other employment agencies will be accepted but no course certification will be * “at the door” tuition refers to tuition paid on the class starting date. ** A
issued unless actual payment is received to cover the voucher. student who has had a “returned check” must pay the non-prepaid tuition rate
in addition to the $25 charge. I have read & agree to the terms of the school
COMPLAINT PROCESS- In the event that a student is dissatisfied with the course contract, and I have understood its contents. I have received a copy of
quality of course material and/or instruction, the student can file a complaint the school course contract for my records.
with the Department of Licensing and Regulatory affairs by calling 517- 241-
7000 or writing to: Department of Licensing and Regulatory Affairs Bureau of
Student Name: ____________________________________________
Professional Licensing Investigations & Inspections Division P.O. Box 30018
Lansing, MI 48909
Course Name: ____________________________________________
ACCREDITATION ALLOWANCE - Students must attend the number of
Course Dates: From: ________________ To: __________________
classroom hours required by law. No credit will be transferred to other programs
or institutions.
Tuition Paid: _______________Today’s Date: ___________________
COURSE LOCATION AND FACILITY – Classroom courses are offered at
Signature: ________________________________________________
various locations are held in rented meeting rooms that are used for public
Course Contract
ATTENDANCE AND MAKE-UP POLICY

Full course attendance is required. Absent students must make arrangements with the school to make up for
missing hours. Students may attend another class to make up time at no extra charge within 60 days after course
starting date. A student who does not make up time by the deadline is considered dropped and full attendance
and tuition is due if s/he decides to attend again. A student is allowed to re-take a 40 Hour Salesperson course
within 12 months of graduation at no charge (must pay for new books and material). Students are allowed to re-
take a course for 60% of the tuition cost (must also pay for updated course material) as long as they come back
within 3 years from the original class start date. For 6 – hour continuing education, students who need to come
back and make up time will be charged a $25.00 make up fee. If a student elects to retake a course, then it is
mandatory that updated books must be purchased. Online and home study distance learning students must take
the course for the necessary accredited time and pass all quizzes.
CANCELLATION POLICY - We reserve the right to cancel any class (with or without reason) any time prior to class
date. Cancellation notice can only be given to students who have already registered and paid. Students who have
not registered and pre-paid and still wish to attend certain courses and "pay at the door"* should contact the school
before showing up for class to ascertain that the class WILL be held. Tuition rates paid "at the door" may be higher
than the pre-paid rates. No charge to re-schedule. Course dates, times and prices are subject to change at any
time.
CONDUCT - School officials maintain the right to dismiss a student for inappropriate behavior. No food is allowed
during class session. Students that show indication of sickness such as sneezing, coughing, etc. will not be
admitted into class (and / or) will be asked to leave, and will be making up class time missed with no additional
fee.
COURSE DATES - Morning and evening courses are available (Check the school advertising brochure/course
catalog).
PERFORMANCE OBJECTIVE - Student agrees to abide by State rules and regulations and must attend the
course in full in order to graduate. Certain courses may legally require passing an examination for completion.
REFUND POLICY - Cancellation request must be in writing. A refund will be granted if the cancellation request is
received at least 3 business days before class start date and the school will deduct a $25.00 fee. Furthermore,
any books received in advance must be returned undamaged otherwise the cost of the books will be deducted as
well. No refunds will be granted after the start date of the course. A student who does not complete the course
within one year from starting date will be considered “dropped” and if s/he wishes to re-attend the course after the
passage of one year, the student must pay the course tuition.
Distance learning courses (online): Once an online course has been activated, no refunds will be
provided.
Distance learning courses (home study): Once the student register and receive the course material, no
refunds will be issued.
TUITION - Varies, based on the type of course. Tuition must be paid upon registration in order to be considered
registered for a course. Full payment is required prior to class start date. Registration is accepted at any time with
payment before class starts or at the door* (tuition paid at the door is usually higher than prepaid tuition). We
prefer registration with payment 10 business days in advance. There is a $25.00 charge for returned checks**
and for credit card disputes. Vouchers received from other entities such as the UAW and other employment
agencies will be accepted but no course certification will be issued unless actual payment is received to cover the
voucher.
COMPLAINT PROCESS- In the event that a student is dissatisfied with the quality of course material and/or
instruction, the student can file a complaint with the Department of Licensing and Regulatory affairs by calling
517- 241-7000 or writing to: Department of Licensing and Regulatory Affairs Bureau of Professional Licensing
Investigations & Inspections Division P.O. Box 30018 Lansing, MI 48909
EXAM INFORMATION
ACCREDITATION ALLOWANCE - Students must attend the number of classroom hours required by law. No credit
will be transferred to other programs or institutions.
COURSE LOCATION AND FACILITY – Classroom courses are offered at various locations are held in rented
meeting rooms that are used for public assembly. Payments and registrations can only be accepted at the
Southfield office address: 24655 Southfield Road, Suite 101, Southfield, MI 48075 or can be submitted online.
COURSE MATERIAL - Provided by the school, material may or may not be included in the course tuition. The
student is advised to bring a note pad, calculator and highlighter.
DIPLOMA - Graduates will receive a diploma / certificate as a completion award. You are required to maintain you
certificate and present it to the Department upon request. A charge will apply for reissuing duplicate certificates.
Students should be advised to keep copies of transcripts and certificates of completion or diplomas. In the event of
the school closure, the school is obligated to send all students transcripts to the Michigan Department of Licensing
& Regulatory Affairs where students may request copies of their transcripts for a closed school.
ENROLLMENT AND SCHEDULE - Varies, based on the type of course. Tuition must be paid upon registration in
order to be considered registered for a course. No course credit will be issued to students who have not paid
course tuition, such as in the event of bounced checks or paid refunds. Although registration and tuition are
accepted on the day the class starts (tuition paid at the door* is usually higher than prepaid tuition), we encourage
students to register and pay at least 10 business days in advance.
ENTRANCE REQUIREMENT - No age limit, however, the applicant for a Real Estate license must be 18 years old.
GRADES - Certain courses, such as appraisal, require a mandatory test at the end of the class. The student must
receive a passing grade in order to graduate. Courses taken and or passed are not transferable to other education
or training centers.
HOLIDAYS - The school will not hold classes on New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Easter and Christmas Day.
PASSING REQUIREMENT - Full attendance of course hours is required along with a passing grade (if required).
Students who miss course hours must make up all hours as a requirement for graduation.
HEALTH & WELLNESS: Student hereby releases and forever discharges and holds harmless company and its
agents from any and all liability, claims and demands of whatever kind or nature, either in law or in equity, which
arise or may hereafter arise from participation in activities associated with the school. You understand that this
release discharges company from any liability or claim that you may have against the school with respect to COVID-
19, Flu, or other illness. The school has the right to dismiss students that display cold symptoms or other sickness
that may be contagious to other attendees.
PLACEMENT ASSISTANCE – Free placement assistance (if available) can be provided upon student request.
No real estate brokers and/or other recruiting professionals are allowed during the course in the classroom.
PREREQUISITE- There are no specific educational prerequisites to attend the courses.

PROGRAM GOAL - To teach students the basic concepts of various occupations as stated in the course outline of
each specific course manual.
RECORDING MACHINES - Not allowed during class session.
TESTING FEE - The student is responsible for his/her own testing fees. The Institute will not be responsible to
reimburse students who miss their testing dates, go to the wrong location on the testing date, or not graduate in
time for the test.
VISITORS - Students may not bring any visitors to class unless they pay full tuition. Children are not allowed in
classroom at any time. No pets are allowed with the exception of service animals.
* “at the door” tuition refers to tuition paid on the class starting date.
** A student who has had a “returned check” must pay the non-prepaid tuition rate in addition to the $25 charge.
EXAM INFORMATION
***VERY IMPORTANT***
INFORMATION ON REAL ESTATE SALESPERSON

LICENSE APPLICATIONS ON-LINE
STEPS TO OBTAIN A MICHIGAN REAL ESTATE SALESPERSON LICENSE
1) COMPLETE YOUR REAL ESTATE FUNDAMENTALS (PRELICENSURE) COURSE: Your school

will submit your certificate of completion to the State of Michigan. Always keep a copy of completion
certificates for your records. You must apply for licensure within 36 months of completing your pre-
licensure course.
2) COMPLETE AND SUBMIT YOUR REAL ESTATE SALESPERSON LICENSE APPLICATION:
* Log into the site miplusgo.com to apply for licensure. Click the big green button to access
MIPlus.
* Upon accessing MIPlus, you need to create a new account/ User ID and Password. The User
ID can be anything you choose. Choose something you will easily remember and then write it
down. The Password must be exactly 8 characters and be a combination letters and numbers.
The password cannot be the same as the User ID.
*You are not required to name a broker when applying for the salesperson’s license on MIPlus
or when you apply to PSI to sit for the exam. However, you will need a broker to be issued a
license.
- If you do not have a broker at the time you apply for the salesperson license, leave the
broker section blank.
- Later, when you have secured an employing broker, you and your employing broker
will complete and submit/fax the Employing Broker Notification form (the paper
application/form BCS/LRE-052). You will not be able to re-access your MIPlus
application once you have submitted your license application payment and received your
receipt.
** Important: You must have secured an employing broker within one year of applying for the
license in order to receive a license using this application and fee. After the employing broker
information is received, PSI will mail you the photo pocket license and the Department will mail
your employing broker the paper wall license and paper pocket card.
* Your license application will remain in a “pending” status with the State of Michigan until
broker sponsorship is confirmed.
* During your electronic application process, if you answered “yes” to specific questions, you
are required to submit additional forms (Request for Conviction History, Request for Disciplinary
Action, Stipulation Form or Consent to Service of Process); this will be noted on your ePayment
Receipt upon completion of the MIPlus application process. Please read it carefully and follow
the directions accordingly. Your application will not be processed until the additional forms (if
required) are received by the State.
EXAM INFORMATION
3) RECEIVE AUTHORIZATION TO TEST:

If no additional documentation is required, and your application is approved, you will receive an email
from the State of Michigan notifying you of your authorization to register for the exam (please allow
anywhere from 30 minutes to 3 business days for this step). The email will include your exclusive
6-digit candidate ID “MIRE” (Michigan Real Estate) number and complete examination registration
instructions. Again, if additional documents are required due to your “yes” responses, the application
will be in a pending status (you will not receive the email) until the documents are received and the
application is approved. No email is sent to you regarding these deficiencies. Again, if additional
documents are required due to your “yes” responses, the application will be in a pending status (you
will not receive the email) until the documents are received and the application is approved.* No
email is sent to you regarding these deficiencies. If 30 minutes to 3 business days have passed, call
517-241-0199
NOTE: (1) You must complete all licensure requirements within one year of applying on MIPlus.
(2) Exam scores are valid for one year.
4) AFTER YOU HAVE SCHEDULED THROUGH MIPlus AND YOU’VE RECEIVED YOUR 6-DIGIT
CANDIDATE ID NUMBER, CONTACT PSIExams.com TO SCHEDULE EXAM:
Once the State of Michigan has authorized your eligibility, you are responsible for contacting PSI to
schedule an appointment to take the examination. You may schedule for an examination via the
Internet 24 hours a day, or by using a touch-tone phone. If space is available in the examination site of
your choice, you may schedule an examination 1 day prior to the examination date of your choice, up
to 7:00 p.m. ET. Please be prepared to offer alternate examination appointment choices.
* Using the contact information contained in your email, provide PSI with your 6-digit candidate
ID number, then schedule and pay for your exam. This 6-digit number is used only for the
purpose of scheduling your exam; it is not your license number. Your license application will
remain in a “pending” status with the State of Michigan until broker sponsorship is confirmed
and you have taken and passed the exam.
* Psiexams.com
5) TAKE AND PASS EXAM:

If broker sponsorship is confirmed at least 48 business hours prior to your exam date, you will
receive the photo pocket license at the PSI Examination Site upon successful completion of
your exam. Subsequent Notification of Broker Sponsorship: If your MIPlus application named a
broker before you took the exam, but the broker did not confirm sponsorship prior to your exam,
your broker can still use MIPlus to sponsor you. If you didn’t name an employing broker prior to
passing the exam, the receipt of your photo pocket license and subsequent paper licenses will
be delayed awaiting the submission of a completed Employing Broker Notification form.
Again please note that you must pass the exam within one year of applying for the license or
the fee paid on ICOLA expires.
6) LICENSURE: Typically, exam information will be imported into your MIPlus record within 48
business hours after successful completion of the exam. Once your exam score is received by the
Department and broker sponsorship is confirmed, the State-issued paper wall license and pocket card
will be mailed to your employing broker’s main office.
Listing of Examination Sites
Dearborn Examination Center

3200 Greenfield Road, Suite 253
Dearborn, MI 48120
Holt-Lansing Examination Center

4202 Charlar Drive, Suite 1
Holt, Michigan 48842
Southfield–Crossroads Examination Center

Crossroads Building
16250 Northland Drive, Suite 361
Southfield, MI 48075
Southfield-Lahser Road Examination Center

26400 Lahser Road, Suite 150
Southfield, Michigan 48033
Grand Rapids Examination Center

4595 Broadmoor Ave SE, Suite 201
Grand Rapids, MI 49512
Gaylord Examination Center

440 W. Main St., Suite D
Gaylord, MI 49735
Marquette Examination Center

Mid Towne Office Complex
1229 W. Washington
Marquette, MI 49855
1
Introduction Page 1
Property Ownership Page 5
Land Use Controls and Regulations Page 22
Valuation and Market Analysis Page 32
Financing Page 40
Principles of Agency Page 63
Property Disclosures Page 72
Contracts Page 77
Leasing & Property Management Page 83
Transfer of Title Page 87
Practice of Real Estate Page 97
Real Estate Calculations Page 105
Michigan State Laws and Rules

Duties and Powers of the Department Page 110
Licensing Requirements Page 115
Statutory Requirements Governing Activities Page 120
Contractual Relationships Page 129
Additional State Topics/Land Division Act Page 131
Landlord Tenant Relationship Act Page 134
Michigan Condominium Act Page 136
MSHDA Page 137
Uniform State Anti-Trust Act Page 138
Right to Farm Act Page 139
Dodd Frank Act Page 140
Glossary Page 144
Index Page 161
Review
Multiple Choice Questions Page 166

Answers to Multiple Choice Questions Page 218
Key Points for the Exam Page 228
1
INTRODUCTION
INTRODUCTION
INTRODUCTION
QUESTIONS AND ANSWERS
Question 1: What is Real Estate? What does it mean to obtain a Real Estate license?
Answer: Real Estate is Land, what's attached to it permanently, the air space above it and the
subsurface underneath such as water, oil and gas, other minerals, etc.
A license enables you to collect compensation for:
1. Negotiating for the sale or purchase of property.
2. Managing property, including locating tenants for empty space and rent
collection.
3. Negotiate for construction and development of property.
4. The sale of businesses including the name, goodwill, and equipment

associated with the sale of the business.
Question 2: Who issues the license?
Answer: The Department of Licensing & Regulatory Affairs (The Department i.e. LARA) will
issue a license after verifying that you have met licensing requirements such as attending class,
passing the state test, filing the proper application for license with the fee.
Question 3: Do I work alone or does someone else supervise me?
Answer: You will probably be an independent contractor and set your working hours on your
own but you need an employing broker to provide you supervision.
Question 4: Is there a difference between a salesperson and a Broker and are there any other levels
of licensing available in the Real Estate industry?
Answer: The state gives two different types of tests--one for a salesperson and another for a
Broker.
1. A Broker is a person who has had enough experience and education and who has
passed the Broker's test to become a Real Estate Broker. This person does not need
“supervision” by another broker. S/he can operate his/her own practice and hire
salespeople to work for him/her. ALL DECISIONS AND POLICY ARE MADE BY THE
BROKER.
2. A salesperson must be employed by a Broker who will supervise his/her activities.
3. As far as negotiating transactions, both Salespersons and Brokers can conduct the
same activity. However, the Broker has more responsibilities as far as record keeping,
closings, and an overall supervision of the operation. If another Broker employs a
Broker, the broker must obtain an "Associate Broker" license.
21
INTRODUCTION
Question 5: How do I exactly work and get paid?
Answer:
1. All business is conducted in the name of the Broker.
2. After conducting a service, compensation is paid to the Broker who will then pay the
salesperson a portion of that compensation. This is known as the “split”.
3. The commission split may vary from one Broker to another based on what the Broker
provides for the salesperson such as an office, clerical help, advertising, etc.
4. Although a salesperson usually works as an independent contractor, sometimes s/he

may be hired as an employee.
Example: An owner calls you to help her sell property. You visit the property, analyze its value
and ask her to sign an employment contract (listing agreement) in order to officially employ your
company to sell. When property is sold, owner pays Broker directly, then Broker pays you a
portion of the money (unless, of course, you were on salary or wages which is less common
than being on a commission split). The bottom line is that the Broker and nobody else can pay
the salesperson.
Note: Earning a commission – If a listing agreement indicates that the broker earns a
commission if s/he provides a buyer willing, able and ready to buy, then a broker who
procures a “mirror offer” i.e. full price and terms has earned a commission.
Question 6: How does cooperation with other Brokers take place?
Answer: After a property has been listed, your company may be contacted by a competing real
estate company indicating they have a buyer for your listing and asking if your company will
cooperate and split fees with them. (There is no need to ask if a company cooperates as long
as both are members in the same Multiple Listing Service where Brokers invite cooperation
through a computerized network.) If your company cooperates and the competing company
brings a buyer and the deal is closed, your company is paid by the seller and in turn will pay a
commission split to the selling company.
Example: As a salesperson with Sunshine Realty you list a house and try to sell it. The sales
associates in your company also try to no avail. Eventually a salesperson from Green Valley
Realty calls you and says that they have a buyer who would like to look at your listing. Your
company decides to cooperate with the competition. Assuming a 50/50 split between your
company and the competing company, a 50/50 split between you and your Broker, and
providing that the seller has agreed to pay an $8,000 commission to your company, your Broker
(listing broker) will receive an $8,000 commission from the seller and immediately pay $4,000
out of it to Green Valley Realty (selling broker). The Broker in Green Valley Realty who is also
on a 50/50 split with his salesperson (selling salesperson) will retain $2,000 and pay the
salesperson $2,000. Your Broker will retain $2,000 and pay you (listing salesperson) $2,000.
Should this property have been sold by you, your Broker would have kept the $8,000
commission and given you $4,000 out of it ($2,000 for listing the house and $2,000 for selling it)
and your Broker would have kept $4,000. If this house is sold by another salesperson working
for your Broker, then your Broker would keep $4,000 and pay you $2,000 for listing the house
and pay the other salesperson $2,000 for selling it. Remember that all commissions charged to
the clients, as well as commission splits, are negotiable and not set by anyone other than the
parties involved.
Note: Although a broker is not required by law to cooperate, s/he could be disciplined by the
Department if s/he indicated or implied to the seller that s/he in fact would, and later refused.
2
INTRODUCTION
Question 7: What if the house does not sell?
Answer: There are no guarantees given and the listing agreement usually promises a fee if a
buyer has been procured. But, if a buyer is not found before expiration of listing agreement, no
fee is paid. For this reason, and in the interest of expediting the sale, it is a good idea for the
listing broker to cooperate.
Question 8: What is the reason for establishing licensing rules? What law regulates the real estate
industry in Michigan?
Answer: Real estate professionals are regulated for “consumer protection”. The law that sets
all rights and obligations of licensees is the “Michigan Occupational Code”. It provides for the
following:
1. Establishes the powers and duties of the Department of Licensing & Regulatory
Affairs (the Department) and creates a Board for each occupation.
2. Provides for certain rules, fees, and fines.

Example of consumer protection:
1. All listing agreements must have an anti-discrimination clause and a
definite expiration date
2. Brokers must keep buyer’s deposit in a separate trust account.
3. Signed offers must be promptly presented to seller.
4. Agents must recommend title insurance to the buyer, etc.
Question 9: How long is the license good for and are there any temporary or permanent licenses?
Answer: Licenses expire on October 31st of a 3-year renewal cycle. No permanent licenses
are issued. A TEMPORARY LICENSE may be issued at the sole discretion of the Department
such as in the case of a license transfer.
However, keep in mind, this October 31st requirement is only temporary. The State of Michigan
recently moved over to MIPlus; they’re incorporating a new system where you will be required
to complete 6 hours of continuing education 1 year from the issue date of your license. You
must complete 6 hours every year and pay them a fee on or before each 3 year anniversary of
your issue date.
For example, if John Smith received his license on 05/09/2021, he will have until 05/09/2022 to
do 6 hours, then another 6 hours by 05/09/2023, and another 6 hours by 05/09/2024 before he
has to pay the State of Michigan. Then, that cycle repeats.
3
DESCRIPTION OF EXAMINATION
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PROPERTY OWNERSHIP
Property Ownership (Salesperson 6% | Broker 7%)
A. Real versus personal property; conveyances

B. Land characteristics and legal descriptions
1. Types of legal descriptions; Metes and bounds, Lot and block, government survey
2. Measuring structures
3. Livable, rentable, and usable area
4. Land Measurement
5. Mineral, air, and water rights
C. Encumbrances and effects on property ownership
1. Liens
2. Easements and licenses
3. Encroachments
4. Other potential encumbrances of title
D. Types of ownership
1. Tenants in common
2. Joint tenancy
3. Common- interest ownership Timeshares
4. Condominiums Co-ops
5. Ownership in severalty/sole ownership Life Estate ownership
6. Property ownership held in trust (BROKER ONLY)
________________________________________________________________________________
1. CLASSES OF PROPERTY
A - REAL VERSUS PERSONAL PROPERTY
1. REAL PROPERTY:
A. Land
B. Improvements on the land
C. Plants and trees
D. Air space above
E. Subsurface rights
F. Water-related rights
G. Anything attached permanently
to the land
Seller may sell all rights or reserve
a portion such as reserving mineral rights.
2. PERSONAL PROPERTY [CHATTEL]
A. Movable goods on real property such as furniture, free standing appliances, etc.
1B- DEFINING FIXTURES
FIXTURES: Items that were once personal property (chattel) but are now attached to land
permanently and are considered Real Estate.
Example: Mobile home located on land is chattel, but once installed on permanent
foundation after removing wheels it becomes a fixture and may be sold with real estate
license.
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PROPERTY OWNERSHIP
Trade Fixtures: Personal property used in the operation of a business such as a cooler, cash
register, shelving, etc. are not to be confused with the word ‘fixture’ which is real estate.
SEVERANCE: The act of detaching a fixture from real estate turning it once again to chattel.
HOW TO DETERMINE IF AN ITEM IS CHATTEL OR A FIXTURE
1. METHOD OF ATTACHMENT AND RELATION:

A. Items attached by cement and/or nails and removal will damage property.
Example: A freestanding bookshelf = Chattel

A built-in bookshelf = Fixture
B. Item fits as part of the house although removed at times such as the door keys, storm
doors and windows.
PLANTINGS:
A. ANNUAL PLANTINGS (CROPS, EMBLEMENTS): Are personal property. They

require annual cultivation, such as corn and wheat.
B. PERENNIAL PLANTINGS: Are real estate. They continue to grow not

requiring annual planting, such as trees and shrubs.
2. AGREEMENT BETWEEN THE PARTIES:
A. Seller allows personal item to be included with sale such as appliances.
B. Purchaser agrees that an item, although attached, may be excluded from sale, such
as a chandelier.
3. INTENTION OF THE PARTIES:
A. Item attached with screws and nails for a purpose other than improving property.
B. Example is trade fixtures (such as shelving in a grocery store, equipment, etc.) are
personal property although sometimes attached to Real Estate.
ONCE AN ITEM IS DETERMINED TO BE A “FIXTURE”, IT IS AUTOMATIACLLY
INCLUDED IN THE SALE OF THE REAL ESTATE UNLESS SPECIFICALLY
EXCLUDED IN WRITING.
B- TYPES AND USAGE OF LEGAL PROPERTY DESCRIPTIONS
LEGAL DESCRIPTION: A description of real property that gives the exact location and boundary
anywhere in the world.
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PROPERTY OWNERSHIP
METHODS OF LEGAL DESCRIPTION

1. METES AND BOUNDS (Measures BOUNDARIES)
A. Property is described through a series of distances and angular measurements.
B. The description always starts at a point called “point of beginning” (P.O.B.) and always ends
at the same POB, traveling certain distances at certain directions such as east west, southeast,
etc.
C. As evidence of boundary, the Surveyor establishes a “monument” as physical evidence of

property lines and corners. Monuments may include wood stakes, metal rods, concrete blocks,
existing trees and fences, water streams, etc.
D. Example: Beginning at the intersection of the west line of Southfield Rd. and the south line of
Ten Mile Rd. then south on the west line of Southfield Rd. 650 feet; then west 20 degrees south
350 feet more or less to the center thread of Swartz Creek then southeasterly along the
centerline of the said Creek 450 feet more or less to its intersection with the north line of
Queens Rd. then east 280 feet to Southfield Rd. then north 720 feet to the point of beginning.
E. Angular measurements are given in terms of so many degrees. Every degree consists of 60
minutes and every minute consists of 60 seconds.
2. LOT- BLOCK – SUBDIVISION METHOD - Regulated under the Michigan land division Act
This description identifies properties by reference to a subdivision plat filed by the developer with the
county register of deeds office.
CREATION OF A SUBDIVISION
A. A developer locates some raw land that may be suitable for subdividing into smaller
lots to be sold independently.
B. An area of land is designated as a block, and the area making up the block is divided
into lots.
C. A detailed plan is submitted to the local authority such as the planning commission
for approval. Zoning ordinances must also be checked and complied with. Such plan
contains:
1. Existing and proposed features affecting the lots as well as land use which
should match the legal use allowed by the government.
2. Drainage, sewer, utilities and easements.
3. Building locations.
4. Roads and drives.
5. Lot sizes that are established with the help of surveyors.
6. Plat map showing location and boundaries of individual properties.
7. Upon government approval, the plat is filed at the county register of deeds
(notarized) office showing certain areas that are set aside for streets as
dedicated, i.e. belonging to the government. Undedicated streets are private and
will not be maintained by the County Road Commission.
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PROPERTY OWNERSHIP
3. THE GOVERNMENT RECTANGULAR SURVEY SYSTEM

A. BASE LINES: Imaginary lines running East-West every 24 miles. In Michigan we use ONE
PRINCIPAL BASE LINE ONLY (coincides with 8 Mile Road in Detroit).
B. MERIDIAN LINES: Imaginary lines running North-South every 24 miles and intersects with
the BASE lines forming a parcel of land that is 24 miles by 24 miles called a CHECK. In
Michigan we use ONE PRINCIPAL MERIDIAN LINE ONLY starting from the Sault Ste. Marie
and running perpendicular to the Base Line.
C. RANGE LINES: Imaginary lines running every 6 miles parallel to the Principal Meridian.
D. TOWNSHIP LINES: Imaginary lines running every 6 miles parallel to the Principal Base line.
E. TOWNSHIP: A parcel of land, 6 miles by 6 miles in size, resulting from intersection of Range
lines and Township lines. Each township contains 36 square miles or SECTIONS.
F. SECTION: 640 ACRES: Numbered in a township from 1 to 36.
G. ACRE: 43,560 SQUARE FEET
H. RANGE: A line of townships running North-South
I. TIER: A line of townships running East-West
J. Townships are identified by their location against the Base and Meridian lines.
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PROPERTY OWNERSHIP
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PROPERTY OWNERSHIP
Example 1: A parcel of land 242ft by 450ft was sold for $50,000. What was the price per
acre?
Solution:
Step 1: 242ft X 450ft = 108,900 sq. ft.
Step 2: 108,900 sq. ft ÷ 43,560 (acre) = 2.5 acres
Step 3: $50,000 ÷ 2.5 acres = $20,000/acre
Example 2: A company has 20,000 square feet of land. They need 4 times as much space for a
new project. What is the minimum amount of acreage they need to complete the project?
A. 1 acres
B. 2 acres
C. 3 acres
D. 4 acres
Solution:
20,000 sq. ft. X 4 = 80,000 sq. ft.
80,000 sq. ft. ÷ 43,560 sq. ft. = 1.8 acres
They need at least 2 acres (B)
REVIEW QUESTIONS
Q – 1 How many acres are there in a parcel 400ft by 871.20ft? How many half Acres?
Q – 2 A parcel sold for $65,500 and it measures 450’ by 644’. What is the price per acre?
Q –3 How many acres in the NW¼ OF SE¼ OF SW¼ OF SECTION 23?
Q –4 How many acres in the N½ OF SE¼ OF SE¼ OF SE¼ OF SECTION 7?
Q –5 Bob bought ¼ of a section and divided it into parcels 20 acres each. How many parcels did he
get?
ANSWERS
1. 400 x 871.20 = 348,480 Square Feet

348,480 ÷ 43,560 = 8 Acres
To find half acres, multiply 8 acres X 2 = 16 half acres
2. 450 x 644 = 289,800 Square Feet

289,800sqft÷ 43,560 = 6.65 Acres
$65,500 ÷ 6.65 = 9,849.62 = $9,850 Per Acre
3. 640 ÷ 4 ÷ 4 ÷ 4 = 10 Acres
4. 640 ÷ 4 ÷ 4 ÷ 4 ÷ 2 = 5 Acres
5. 640 ÷ 4 = 160 Acres

160 ÷ 20 = 8 Parcels
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PROPERTY OWNERSHIP
MEASURING STRUCTURES
1. Gross Living Area (GLA): The area of a structure measured using exterior dimensions. Also referred
to as “Livable Area”.
a. Finished space that has access to electricity, plumbing, air conditioning and heating.
b. Area below grade is not counted in the total square feet of the structure, only above grade is
measured.
c. No garages or decks are included.
2. Usable Area – Used in commercial leasing
a. The specific area the tenant will occupy in order to do business. Includes all office space plus
any storage or private restrooms. No exclusions for columns or recessed entries.
b. If a tenant occupies a full-floor, the usable square feet extend to everything inside the
boundaries of the building floor, minus stairwells and elevator shafts. This can include non-
usable areas like janitorial closets, or mechanical and electrical rooms. It also includes private
bathrooms and floor common areas, like kitchenettes, hallways, and reception areas that are
specific to that floor's use.
3. Rentable Area – Used in commercial leasing
The usable square feet of the office space plus a pro-rata share of building common areas.
Calculated based on the tenant’s percentage of space occupied in comparison to the entire
building.
GLA / Livable Area
40’ x 30’ = 1,200 sq.ft.
Patio not included
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PROPERTY OWNERSHIP
MINERAL, AIR AND WATER RIGHTS
Real Estate is Land, what’s attached to it permanently, the air space above it and the
subsurface underneath such as water, oil and gas, other minerals, etc.
1- When real estate is sold, the sale usually

includes the surface, improvements, the
subsurface including oil, gas, and other mineral
rights all the way down to the center of the
earth. The sale includes the air space all the
way up to infinity.
2- The owner may sell/lease all or a portion of the

real estate. For example, the owner may sell or
lease the subsurface rights while retaining the
surface and air rights and vice versa.
3- RIPARIAN RIGHTS:
A. Rights enjoyed by land owners

whose land is located next to rivers, streams or inland lakes.
B. Owners have the right of reasonable use of water and own the property all the way
to the middle of the stream or center of the lake that they are situated on.
4- LITTORAL RIGHTS:
A. Rights of an owner whose land borders large navigable rivers, lakes or oceans.
B. Owners own the land adjacent to water up to the high-water mark (shoreline).
EROSION: The gradual wearing away of land due to the natural movement of
water.
ACCRETION: The increase in land resulting from the deposit of soil by natural
action of water.
RELICTION: Land is exposed when water permanently recedes.
C- ENCUMBRANCES AND EFFECTS ON PROPERTY OWNERSHIP
ENCUMBRANCES: Liens, mortgages, taxes, leases, easements, judgments, deed restrictions,

possibly encroachments, etc. attached to property that may become a burden and which may diminish
its value. Encumbrances “run with the land”, i.e. unless cleared before the sale, it continues to affect the
property and must be honored by the new owner
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PROPERTY OWNERSHIP
LIENS (TYPES AND PRIORITY)
LIEN: A charge against property that provides security for a debt or obligation.
TYPES OF LIENS
1. STATUTORY LIEN: Provided by law such as property tax lien, income tax lien, etc.
2. EQUITABLE LIEN: Usually placed as a result of a civil dispute such as compensation for
slander, harassment, non-payment of bills, etc.
APPLICABILITY OF LIENS
1. SPECIFIC LIEN: Applies against certain property only, usually the parcel that is the subject
of the lien such as:
A. Mechanic’s Lien [Construction Lien]: A person who furnishes materials and/or

effort to improve land and is not paid by the landowner may place a lien on the property.
A construction lien must be recorded not later than 90 days after the work is finished.
Unless the creditor takes legal action in court to start foreclosure on the lien, the lien will
be automatically discharged.
B. Real Estate Tax Liens: When taxes on real estate are not paid, it becomes a lien
and is attached to the property. The government can take the property and sell it to
satisfy the lien.
C. Special Assessments: Cost due for improvements performed by the local

government such as installing city sewers or water, paving the street, etc. Assessments
have nothing to do with the true cash value of property. Spreading the cost of the
improvements among the benefiting properties assesses it.
D. Mortgage lien: Applied when a borrower receives a loan and signs a mortgage
contract against property.
2. GENERAL LIEN (BLANKET LIEN): Applies to a group of properties that an individual owns,
usually results from the owner’s personal liability.
Federal / State Income Tax Liens: This includes inheritance taxes and income taxes
that have not been paid therefore it may become a lien on the real estate.
EASEMENTS AND LICENSES
APPURTENANCES: Rights, privileges and improvements conveyed when ownership of the property is
transferred, unless otherwise specified.
EASEMENT: (also referred to as the “right of way”) A right given to a person or entity to use the
property of another. May consist of the right to install and maintain sewers, electric and telephone
lines, or the right of passage [ingress (entrance) and egress (exit)]. Easements are of a permanent
nature and is said to “run with the land”.
LICENSE: Permission, of a personal and temporary nature, granted to enter someone's land for a
particular purpose such as a license to fish or hunt. This right does not run with the land.
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PROPERTY OWNERSHIP
TWO MAJOR TYPES OF EASEMENTS
A. EASEMENT APPURTENANT:
1. Usually benefits a neighboring property, for example, an easement for Ingress and Egress
2. Passes with and is appurtenant to the land
3. Two estates or tenements involved:
A. DOMINANT ESTATE (TENEMENT): The property that benefits from the easement.
DOMINANT TENANT: The owner of the dominant estate.
B. SERVIENT ESTATE (TENEMENT): The property that is subject to the easement

and encumbered by it.
SERVIENT TENANT: The owner of the servient estate.
PARTY DRIVEWAY: Two owners of adjoining lots share all or part of the same driveway to get to
their houses.
PARTY WALL: A single wall is located on the lot line that separates two parcels.
Barber shop Book store
“RUNS WITH THE LAND” - Easement appurtenant remains as an encumbrance on land after sale,
gift, or inheritance, even without mention of such an easement.
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PROPERTY OWNERSHIP
B. EASEMENT IN GROSS:
1. Benefits a person or entity.
2. Conveys a right to use the land of another.
3. Involves a servient estate but no dominant estate, i.e. not a neighboring parcel.
4. PERSONAL EASEMENT (given to a person): Does not “run with the land”. It may not be
assigned to another person. Terminates upon the sale of the servient estate or death of the
easement holder.
5. COMMERCIAL EASEMENT (i.e., given to a company): “Runs with the land”, it can be
assigned. Does not terminate upon the sale of the servient estate.
Example: Granting of rights to erect billboards, utility easements for electric and gas.
MAINTENANCE OF EASEMENT:
A. Negotiated at the time easement is obtained.
B. The general rule is that the party benefiting from the easement will maintain it.
Example: Utility Company will fix a gas leak inside your property, while neighbors
sharing a party driveway or wall will both maintain it.
EASEMENTS ARE GIVEN BY MEANS OF:
A. A GRANT: A written document that specifically grants an easement to another person
B. EASEMENT BY RESERVATION: A person may transfer ownership in property but withhold

the right to use a certain portion of that property.
C. EASEMENT BY NECESSITY: Court-ordered easement for the benefit of a “landlocked”

parcel over an adjacent property providing access.
D. GOVERNMENT CONDEMNATION: Easement is obtained by the government under the

power of eminent domain, for public use.
E. EASEMENT BY PRESCRIPTION (adverse easement):
1. Obtained as a result of trespass situation by one party on another’s land

2. Continues for the statutory period (15 years in Michigan)
3. Trespass must be open, continuous and notorious
4. Claimant to file “quieting title suit” to claim easement and has burden of proof
TERMINATION OF AN EASEMENT
A. MERGER of Dominant and Servient Estates.
B. RELEASE by Dominant tenant.
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PROPERTY OWNERSHIP
C. NECESSITY NO LONGER EXISTS (only when easement was obtained by necessity).
D. LACK OF USE (abandonment or prolonged non-use). The mere non-use may not
terminate an easement.
ENCROACHMENTS
ENCROACHMENT:
A. A trespass of a building, garage, fence, etc., over the property line of another. It may be
detected by a survey.
B. An owner of property trespassed over may force the removal of encroachment with a court
order.
C. If encroachment stays for the statutory period, it may affect the marketability of the property.
ADVERSE POSSESSION: A person occupies another person’s land for the statutory period of time, (in
Michigan, 15 years or more) and then seeks a court order (file “Quieting Title Suit”) to receive title to
property. The following conditions must be met:
A. Possession must have been exclusive and continuous, throughout the whole period.
B. Must not be authorized by the owner, i.e. hostile and notorious.
C. Open and Apparent Possession.
D- TYPES OF OWNERSHIP
TYPES OF ESTATES
1. FREEHOLD ESTATE: Interest in real property for a lifetime or more. It is of an indeterminable

length. It can be obtained through inheritance or deed.
2. NON-FREEHOLD ESTATE (Leasehold estate): Interest in property for less than a lifetime and
considered to be personal interest. It is obtained by receiving a lease on property.
1. FREEHOLD ESTATES:
1. FEE-SIMPLE ESTATES:
A. Also known as FEE-SIMPLE ABSOLUTE.

B. The highest type of interest in real estate recognized by law.
C. An estate of inheritance can run indefinitely.
D. Upon the death of the owner, it passes to the heirs as provided in the owner’s
will or according to state law if there is no will.
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PROPERTY OWNERSHIP
2. DEFEASIBLE FEE ESTATES (Qualified Fee Estate):
A. Title may be divested upon occurrence or non-occurrence of a specified event

that is stated as a condition placed in the deed. Such condition will “run with the
land”. If the grantee is not abiding by the restrictions set forth by the grantor, the
property may revert to the grantor.
B. It consists of FEE SIMPLE DETERMINABLE or FEE SIMPLE

CONDITIONAL.
1. FEE SIMPLE DETERMINABLE: Given for a special purpose and has

a special limitation or condition that the owner must do.
Example: Property granted to a college “as long as” it is used for

educational purposes. If the use is violated, title automatically
reverts to the grantor.
2. FEE SIMPLE CONDITIONAL: Terminates upon the violation of a

certain activity that the owner must not perform. Such activity is specified
when property is granted, grantor reserves a “right of re-entry”. The
estate does not terminate until the grantor goes to court to assert his
right.
Example: Property is conveyed on condition there is no

consumption of alcohol. If condition is violated, the former owner
has the right to get property back.
3. LIFE ESTATES:
A. Granted to a person (life tenant) for a lifetime.
B. Not an estate of inheritance.
C. Consists of two basic types: Ordinary and Pur Autre Vie.
1. ORDINARY LIFE ESTATE: Duration of ownership ends upon the

death of the life tenant and the property reverts back to the original
person who granted it or his/her heirs, or other specified entity.
Example: Tom grants property to his sister Sharon for her

lifetime. When Sharon dies, the property reverts to Tom, his heirs,
or other specified entity.
2. PUR AUTRE VIE ESTATE: Granted for the life of a third party other
than the person that granted the estate and the present life tenant.
Example: Tom grants property to his sister Sharon for the life of
their mother because Sharon cares for the mother at the property.
When their mother dies, the house must go back to Tom.
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PROPERTY OWNERSHIP
D. The person giving the life estate can specify either of the following estates,
which controls the recipient of the estate after the death of the life tenant.
1. ESTATE IN REMAINDER: The deed or will that creates the life estate
names a third party or entity to which title will pass upon the death of the
life tenant. The third party is said to own a “remainder interest” or estate.
This person or entity is called the REMAINDERMAN.
2. ESTATE IN REVERSION: Property reverts back to the original person

who granted it to the life tenant and who holds a REVERSIONARY
INTEREST.
INTER VIVOS: During one’s life.
E. LEGAL LIFE ESTATES
1. DOWER RIGHTS:
A. Wife’s life estate in her husband’s real property conveyed to her

upon his death.
B. In order for a wife to bar her dower, she must join husband in
conveying property upon sale despite the fact that husband owns
property alone.
C. Michigan abolished Dower rights effective April 6, 2017. The
elimination of dower is NOT retroactive. Couples married prior to
April 7th when the bill was passed, will still be grandfathered in
under the old Dower Rights.
2. CURTESY: Husband’s life estate in his wife’s property conveyed to him

upon her death.
3. HOMESTEAD: Protects the holder’s principal residence from being

sold by creditors to satisfy outstanding debts.
FORMS OF OWNERSHIP
1. SEVERALTY (ESTATE IN SEVERALTY): Ownership by one individual or an entity such as a

corporation.
2. CONCURRENT ESTATE: Held by more than one person
I. TENANTS BY THE ENTIRETIES:
A. Property is deeded to a married couple.
B. Each owns the entire property.
C. Right of Survivorship: If either spouse dies, the survivor automatically becomes the
owner of the property in severalty. No need for a will or probate court. Tenants by the
entireties could also be joint tenancy with survivorship.
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PROPERTY OWNERSHIP
D. For property to be sold, refinanced, leased, willed, both husband and wife must sign
all the instruments.
E. Requires the following:
a- Unity of Possession: Undivided and equal possession of the entire property.

b- Unity of Time: Both spouses must receive title at the same time.
c- Unity of Title: Both spouses must receive title using the same instrument (deed).
II. JOINT TENANCY:
A. Property is deeded to two or more owners with the right of survivorship.

Example: John and Bob are Joint Tenants. John dies. What happens to property? It
goes to Bob.
B. Unity of Possession
C. Unity of Interest: Tenants share equal interest, i.e. if there are three tenants, they
must each have one-third.
D. Unity of Time
E. Unity of Title
III. TENANTS IN COMMON:
A. Owners may have an equal or an unequal interest; each owns a proportionate share
of the property as an undivided interest. Ownership interest is stated on the deed. If the
deed does not state a percentage of ownership, each of the grantees is presumed to
receive an equal interest.
B. UNITY OF POSSESSION: Parties share an undivided possession of property and are

entitled to its full use and enjoyment.
Example: Tenant (A) owns 20% of property while (B) owns the remaining 80%.
(A) has the same right to occupy and use property that (B) has.
C. No right of survivorship; when one tenant dies, his/her interest passes to the heirs.
D. Tenants may take ownership, all at one time, or at different times.
E. Each tenant may dispose of any part of his/her interest without affecting the interest
of others.
F. PARTITION SUIT: Originated by one or more co-tenants asking the court to order the
splitting of interest to end the tenancy when a voluntary agreement cannot be reached.
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PROPERTY OWNERSHIP
LEASEHOLDS – See Leasing and Property Management
COMMON INTEREST OWNERSHIP PROPERTIES
CONDOMINIUM OWNERSHIP:
A system of ownership reflected in owning one unit in a multi-unit structure, combined with the
ownership of common elements.
A. TYPES AND FORMS OF CONDOMINIUMS:
1. Offices in an office building.

2. Apartment buildings including high-rises.
3. Townhouses.
4. Shopping Centers.
5. Mini-storage warehouses
6. Home sites, etc.
B. COMMON ELEMENTS:
1. Portions of the multi-unit structure that are owned by unit owners together as tenants in
common.
2. Examples are swimming pool, clubhouse, yards, structural portions of the complex, etc.
C. OWNERSHIP OF CONDOMINIUMS:
Each condominium unit is owned as a separate parcel and is owned in fee simple. Each co-
owner has a deed to his/her unit.
.
D. CONDOMINIUM ASSOCIATION (OWNERS’ ASSOCIATION):
1. Consists of the co-owners of the condominium units.

2. Operates the condominium development according to the BYLAWS.
3. Governed by a BOARD OF DIRECTORS.
4. Responsible for maintenance, cleaning, and sanitation of the common elements and
structural portions of the property.
5. Maintains fire and extended-coverage insurance as well as liability insurance for the
common areas and the structural portions of property.
E. CONDOMINIUM FEE (ASSOCIATION FEE):
1. An expense assessed in proportion to the cost necessary to operate the Condominium

Association such as maintenance and insurance of common elements. It is billed to every
individual unit owner.
2. Although may be tax deductible for a condominium unit used as an investment or in line of
business, it is not tax deductible if unit is used as principal residence.
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PROPERTY OWNERSHIP
F. FINANCING OF CONDOMINIUMS:
1. Not different from any single-family home or other property.

2. Upon default, the owner is subject to losing his/her unit in a foreclosure action by the
lender. The other owners located in the same project are not affected.
3. Owners are entitled to tax deductions.
G. TAXES ON CONDOMINIUMS:
1. Paid ad valorem.
2. Taxes on common elements are prorated and billed to each individual co-owner.
H. INSURANCE:
Although fire and extended-coverage and liability insurance is provided for the common
elements and the structural portions of the property by the association, insurance on the
contents and interior of the units must be provided for by each individual unit owner.
I. AIR SPACE:
Condominium owner is technically considered to own the air space between floors, walls,
and ceilings. The floors, walls, and ceilings are typically common elements.
J. TIME-SHARED OWNERSHIP:
1. Multiple purchasers buy interests in the same parcel

2. Each owner is entitled to use the unit for a certain period throughout the year
3. Maintenance and other common expenses are prorated among the unit owners.
COOPERATIVES:
Land and improvements owned by a corporation which leases units back to the shareholders.
A. PROPRIETARY LEASE:
Given by the corporation to shareholders in the cooperative to be able to use the property in
part or full. The shareholders are called the COOPERATORS.
B. OWNERSHIP OF COOPERATIVES:
1. The real estate is owned by a corporation, which has title to the complex
2. The leaseholders own stock in the corporation, which is personal property and not
real estate
3. Leaseholders control the cooperative development through their stock ownership in
the corporation.
BUNDLE OF RIGHTS
The right to own real estate as a Freehold estate including legal rights such as possession, enjoyment,
lease, sell, will, mortgage, etc.
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LAND USE CONTROLS AND REGULATIONS
Property ownership held in a trust
Trust Ownership
A trust is a legal fiduciary arrangement involving three parties, the trustor/grantor who transfers
property upon the second party, the trustee who controls and manages the property for the benefit of
the third party, the beneficiary.
A popular type is the “living trust” which is used for estate planning where an individual grants title to be
held during the grantor’s lifetime (inter vivos) and it is common for the grantor to be both a trustee and
a lifetime beneficiary while naming other contingent beneficiaries upon the grantor’s death.
In other words, the written legal document places someone’s assets into a trust for his own benefit
during his lifetime and then transfers the assets to designated beneficiaries upon his death by an
appointed trustee which could be a relative or a child who can jump right in and start acting to manage
the trust without waiting for a decision from probate court, saving the beneficiaries time, money and
public scrutiny as opposed to filing a will with probate court.
Land use controls and regulations (Salesperson 5% | Broker 5%)
A. Government rights in land

1. Property taxes and special assessments
2. Eminent domain, condemnation, escheat
B. Government controls
1. Zoning and master plans
2. Building codes
3. Regulation of special land types
a) Flood zones
b) Wet lands
4. Regulation of environmental hazards
a) Types of hazards
b) Abatement and mitigation
c) Restrictions on contaminated property
C. Private controls
1. Deed conditions or restrictions
2. Covenants, conditions, and restrictions (CC&Rs)
3. Homeowners association regulations
A. GOVERNMENT RIGHTS IN LAND
PROPERTY TAXES AND SPECIAL ASSESSMENTS

1. TAXATION: The right of the government to charge property owners an amount in proportion to
property value (advalorem). Such funds are used for public purpose. The government has the right to
take property from owners who do not pay tax and sell it to collect (a two-year delinquency is required
under Michigan law).
2. AD VALOREM (LATIN WORD):According to value. The method used to calculate property
taxes.
3. ASSESSMENT RATE: The ratio between the assessed value of property and its “true cash
value”. IN MICHIGAN the assessment rate is (50%) of the true cash value of property.
4. ASSESSED VALUATION: Generally, the same as state equalized value (SEV) unless an
equalization factor has been applied by the county in which the property is located or the State. When the
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assessed value is multiplied by two it will give an approximate market value of the property. The
assessor is constitutionally required to set the assessed value at 50% of the “true cash value” of the
property which is based on the property “fair market value”.
According to the Michigan Supreme Court, “true cash value” as used in MCL 207.526(u) refers to the
property’s “fair market value”, namely the price that a willing buyer and a willing seller would arrive at
through arm’s-length negotiation.
5. MILLAGE RATE (TAX RATE): ONE MILL = ONE TENTH OF A CENT per dollar of assessed
value.
Example 1: 50 Mills = 50 ÷ 1000 = .05 = 5% = $5per hundred.
Short cut: If the millage is 54, simply place the decimal point between the 5 and the 4 which
gives you 5.4%, likewise 67 mills = 6.7%, 18 mills is 1.8% and so on.
6. STATE EQUALIZED VALUE [SEV]
One half of the property “True Cash Value”.
7. True Cash Value: The property “fair market value” as estimated or “appraised” by the assessor.
8. TAXABLE VALUE: Is the value used for determining the property owner’s tax liability In Michigan. It
is derived from the Assessed Value of the property. Multiplying the taxable value by the local
millage rate will determine your tax liability. Taxable value increases are capped and limited to the
yearly increases of the Consumer Price Index (CPI) or 5%, whichever is lower. Once property is sold
the Taxable Value must be uncapped and adjusted to equal the SEV.
9. PRINCIPAL RESIDENCE EXEMPTION (PRE): Provides an 18 mill discount for a property that is
filed with the local assessor’s office as a principal residence where the owner actually lives there.
10. PERSONAL PROPERTY TAX: Paid on personal property such as Trade Fixtures and Equipment
owned by businesses.
11. SPECIAL ASSESSMENTS: Charges assessed for improvements provided by the local
government that benefit the property such as installing utilities or paving the road.
12. TAX CALCULATION: TAX PAID = TAXABLE (ASSESSED) VALUE X MILLAGE RATE%.
Example 2: Property True Cash Value is $80,000 located in Michigan where the tax rate is six
dollars per hundred. How much in tax is paid?
ASSESSED VALUE = $80,000 X 50 % = $40,000

TAX = $40,000 X 6 % = $2,400 TAXES PAID
Example 3: Property is assessed at $80,000 for tax purposes with 62 mills, taxes?
$80,000 X 6.2% = $4,960 OR 62 ÷ 1000 = 0.062 X $80,000 = $4,960
Example 4: John has a property with an assessed value of $150,000 and wishes to vote on a
millage increase of 1.5 mills for the city to build a library. How much will his taxes increase?
1.5 ÷ 1000 = 0.0015 X $150,000 = $225.00
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FOR CALCULATION PURPOSE
1- True Cash Value is the same as Fair Market Value

2- Assessed Value in Michigan is the same as SEV and is 50% of True Cash Value i.e. Fair
Market Value
3- If you are given an assessed value then there is no need to take a portion of it, just multiple
by the millage
Ex: Property true cash value is $180,000. Assessment rate is 50% with 45 mills. How much property tax
is due?
Answer
$180,000 X 50% = $90,000 Assessed Value
EX: Property Fair Market Value is $180,000 and assessed at 60% (not 50% as they do in Michigan).
How much tax is due if the millage is 35mills?
Answer: $180,000 x 60% = $108,000
$108,000 x 3.5% = $3,780
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REVIEW
Q – 1: Property True Cash Value at $73,250 (In Michigan) and tax rate is $2.80 per hundred of
assessed value. What is tax due?
Q –2: What is the tax rate if tax due was $1,912.50 and assessed value was $42,500?
Q –3: How much tax is due if fair market value is $143,100, property assessed at 60% and millage is
42?
Q –4: What is assessed value if tax paid is $7,234 and tax rate is 35 mills?
ANSWERS
1. $73,250 ÷ 2 = $36,625 assessed value
? = $1025.50
$36,625 2.8% $36,625 X 2.8% = $1,025.50
2. $1912.50
$42,500 = 4.5% $1912.50 ÷ $42,500 = 4.5% OR 45 mills
3. $143,100 x 60% = $85,860 Assessed value, $85,860 X 4.2% = $3,606.12
? = $3,606.12
$85,860 4.2%
4. $7,234
? = $206,685.71 3.5% $7,234 ÷ 3.5% = $206,685.71
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EMINENT DOMAIN, CONDEMNATION, ESCHEAT
EMINENT DOMAIN: The government’s right to take private property for public use provided that
taking is necessary and after payment of just compensation.
CONDEMNATION: Action through which Eminent Domain is accomplished when an owner does not
voluntarily agree to relinquish ownership.
INVERSE CONDEMNATION: Legal concept that entitles property owner to compensation because
property is damaged by public use. Example: the city widens the road, condemning a large part of
hotel parking, and even though the city offers to pay for the land, the owner claims that he hotel lost
most of its business and must be compensated by the government.
If the buyer is interested in purchasing property that may be currently subject to eminent domain,
licensee must recommend that the buyer seek legal advice.
ESCHEAT: Property reverts to the State when owner dies intestate [without a will] and has no heirs.
POLICE POWER: Vested in government to make laws and regulations for the health, safety and
welfare of the public. Examples are planning, zoning, building codes, health codes, and environmental
protection laws and in some states rent control. This power is delegated by state to local municipalities.
B. GOVERNMENT CONTROLS
ZONING AND MASTER PLANS
PLANNING: An act of local governments aimed at controlling the growth of the local community. Many
factors are considered such as the density of the population, the need for housing, recreation,
commercial, retail establishments, etc.
MASTER PLAN: Used by planners to guide them into allocating various zoning districts.
ZONING: The Act of local governments to determine the use of certain properties such as residential,
commercial, industrial, and agricultural. In addition to land use, zoning may control the size of the
improvements, the architectural layout, height of the building, etc.
ZONING ORDINANCE: The execution of police power of a local government (municipality), in

controlling zoning and use of property.
BUFFER ZONE: Used to separate two different-use districts trying to minimize the effects of “economic
obsolescence” such as placing a park between an industrial and a residential district.
SETBACK ORDINANCE (Building line, setback line): Distance from lot edge to where building is
erected.
NON-CONFORMING USE: Is a use of property that is not in compliance with the present zoning
allocation in an area but is allowed to continue because it was established at a time when the use was
legal and conforming. The non-conforming use may apply to a structure that currently does not comply
with new building codes but used to be in compliance when it was built.
GRANDFATHER CLAUSE: A provision in the law that allows the continuation of a non-conforming use
when such use had preceded a zoning change.
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Example: Property is allowed to be used as a home even though it is located on a busy highway in
a commercial district because it was already used for residential purpose before zoning changed.
ZONING VARIANCE: Permission granted by the local zoning board or authority to deviate from current
zoning requirements.
Example: Property owner applies for a variance to build 30ft from the lot line instead of the 50ft
setback required under the zoning law.
BUILDING CODES
BUILDING CODES: The State of Michigan has adopted the Michigan Residential Code which applies
to the construction and remodeling of residential properties statewide. Other codes apply for
commercial construction as well.
BUILDING PERMIT: Before starting new construction or an addition to existing building, the builder or
homeowner must receive a building permit from the local building department which requires
submission of plans and specifications. The local building inspector will monitor the construction to
assure that it complies with building codes.
ENVIRONMENTAL IMPACT REPORTS
Environmental Impact Report : A report that results from a study of the factors/effects which a land
development or construction project would have on the environment in the area including population,
traffic, schools, fire protection, endangered species, archeological artifacts, and community beauty. The
report is required by the local government as a condition to approve a proposed project.
REGULATION OF SPECIAL LAND TYPES
Floodplain: Property bordering a river and may be subject to flooding. Flood insurance may be
required by the lender.
Flood Zone: Flood zones are geographic areas that the Federal Emergency Management Agency
(FEMA) has defined according to varying levels of flood risk. These zones are depicted on a
community's Flood Insurance Rate Map (FIRM) or Flood Hazard Boundary Map.
Wetland: Areas where water covers the soil or is present either at or near the surface all year or for
varying periods of time during the year, including during the growing season, supporting vegetation and
aquatic life. A permit is required to dredge, excavate, drain water, construct on wetlands.
REGULATION OF ENVIRONMENTAL HAZARDS
ABATEMENT, MITIGATION
AND CLEANUP REQUIREMENTS
1- Abatement is a measure taken to reduce, control, minimize or eliminate pollution from a given
environment.
2- Real Estate may be subject to several environmental hazards (7C).
3- Abatement must be performed by professional contractors especially when state and federal laws
require certain procedures to be followed by licensed abatement contractors.
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RESTRICTIONS ON SALE OR DEVELOPMENT

OF CONTAMINATED PROPERTY
1- Purchasing contaminated property carries tremendous financial liability for the new owner.
2- Highly advisable to perform an environmental audit (environmental site assessment) on the property to
determine if contamination exists and if so, to what level?
3- The licensee should strongly recommend the necessary environmental audits and has a duty to disclose all
“known” contamination because the contamination is considered to be a “material fact”, i.e. a defect.
4- A potential purchaser who discovers contamination with property may do the following:
A- Decide not to buy the property

B- Require the seller to perform cleanup
C- Offer a lower price.
TYPES OF HAZARDS AND POTENTIAL

FOR AGENT ORSELLER LIABILITY
POSSIBLE HAZARDS FOUND IN PROPERTY
I. ASBESTOS:
A. Used widely to manufacture heat resistant material and insulation before the mid-1970s.It is
fire resistant.
B. Evidence that it may cause lung cancer when spread in the air and inhaled by humans.
C. Products containing asbestos should only be handled by a licensed asbestos removal
contractor.
In most cases, asbestos must be removed entirely; however, in some instances asbestos
abatement may be accomplished through encasement or encapsulation.
II. LEAD-BASED PAINT:
A. Paint that contains a high level of lead. Manufacturing was prohibited in 1978.
B. Exists in millions of homes built prior to 1978 (also known as “Target Homes”)
C. Extremely toxic when swallowed, absorbed through skin, or inhaled as dust. Affects brain,
blood and kidneys, especially in children.
D. Special disclosure required for sale and rental of property as well as (EPA) Informational
pamphlet: “Protect Your Family from Lead in Your Home” when dealing with property built prior to
1978.
E. In the event of a purchase, buyers are given a 10-day period to inspect the property (in
addition to the EPA disclosure) before the purchase agreement becomes totally binding.
F. Seller, landlord and agent are all required to disclose any known information regarding the
existence of lead paint in a home or apartment before a purchase agreement or lease is signed.
G. Abatement: Is the removal of all the components that contains lead paint. (Encapsulation
may be used in some instances). A full abatement includes the interior and exterior of the home,
possibly including the soil surrounding the home. Only licensed professionals are allowed to do
lead assessment and abatement on Target Homes.
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III. RADON:
A. Colorless, odorless radioactive gas resulting from decay of natural radioactive
substances.
B. Travels inside the ground and may become trapped inside buildings especially in
basement level in buildings that lack ventilation.
C. Known to cause health problems such as lung cancer.
D. Penetrates many common materials like paper, leather, low density plastic (like
plastic bags, etc.) most paints, and building materials like gypsum board (sheetrock),
concrete block, mortar, sheathing paper (tarpaper), wood paneling, and most insulations.
Radon is also soluble in water
E. Seller’s disclosure statement requires disclose
F. Radon mitigation: process used to reduce radon gas concentrations in the breathing
zones of occupied buildings or radon from water supplies. Mitigation of radon in the air is
accomplished through ventilation, either collected below a concrete floor slab or membrane
on the ground, or by increasing the air changes per hour in the building. Treatment systems
using aeration or activated charcoal are available to remove radon from domestic water
supplies
IV. UNDERGROUND STORAGE TANKS:

A. Used to provide buildings with heating oil, also for gas stations and various
commercial industrial, and farming facilities.
B. Leakage causes contamination, cleaning required.
C. Contamination may result from neighboring property that may have leakage.
D. Property may need “Environmental Audit” before sale or any approval of commercial
lending.
V. UREA FORMALDEHYDE:
A. Used for insulation in the1970s.
B. Releases poisonous gases into the building when not sealed properly.
VI. WATER QUALITY:

A. Underground water may be polluted with toxic material or bacteria.
B. A sample should be sent in to the local health department or private agency for
evaluation.
C. If contaminated, property may need a new well, or may have to be connected to the
municipality water service or may have to use other means to provide good water such
as water purifiers and softeners.
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VII. MOLD
A. Results from the growth of “spores” which are unicellular reproductive bodies
released by plants.
B. Mold spores need air, humidity and organic matter to live and grow.
C. Properties who may have had water leakage problems may have an excessive
growth of mold especially in areas that are humid and have poor ventilation such as the
attic or the basement.
D. Mold encourages bacterial growth and approximately 10% of people are allergic to it.
E. Some studies indicate that certain types of mold can be toxic.
VIII. CARBON MONOXIDE

A. Odorless, colorless gas that occurs as a result of burning fuel such as gas, wood, or
oil when combustion is incomplete.
B. Once absorbed by blood through breathing, it will stop the red cells in the human body
from absorbing oxygen which may ultimately result in poisoning and possibly death
C. PRIVATE CONTROLS
DEED CONDITIONS OR RESTRICTIONS
1. DEED RESTRICTION (Restrictive Covenant): A provision in the deed aimed at controlling the
present and the future use of land. Initially placed by the seller (grantor) to restrict the buyer’s use
(grantee). Also referred to as CC &R’s (Covenants, Conditions & Restrictions)
Example: Restrictions may not allow a privacy fence, a shed in the backyard, may not allow certain
architectural styles, building size, height, landscaping, etc.
2. Deed restrictions may be more restrictive than a zoning ordinance. In case of a dispute, the more
restrictive of the two will prevail.
Example: A zoning ordinance allows the construction of 1 – 4-unit residential property but the deed
restriction states that only residential single family can be constructed on the lot. The deed restriction
must be followed because it is more restrictive than the zoning ordinance.
3. Covenants are usually placed by land developer to restrict the use and occupancy of the property as
means of controlling and maintaining the desirable quality and character of the subdivision.
A. Restrictions must be reasonable and not against public policy or law such as a racial or
religious covenant, which would have no validity under law.
B. Upon violation, a court injunction may be obtained by a neighbor or neighborhood

association to stop the violators.
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VALUATION AND MARKET ANALYSIS
HOMEOWNERS ASSOCIATION (HOA) REGULATIONS
1. Established in communities such as condominiums and subdivisions.
2. Provides for regulations aimed at preserving and maintaining property values and neighborhood
relations. For example, rules that control number of pets, speed, noise, size of buildings, type of
construction, etc.
3. May require association fees to be paid. Non-payment may result in lien against property.
Valuation and market analysis (Salesperson 6 % | Broker 6%)
A. Appraisals
1. Purpose and use of appraisals for valuation
2. General steps in appraisal process
3. Situations requiring appraisal by certified appraiser
B. Estimating Value
1. Effect of economic principles and property characteristics
2. Sales or market comparison approach
3. Cost approach
4. Income analysis approach
C. Competitive/Comparative Market Analysis
1. Selecting comparables
2. Adjusting comparables
A. APPRAISALS
1- An appraisal report is a written opinion that is provided by a licensed appraiser. It is not a

guarantee or determination as to what the selling price will be on the open market.
2- Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA)
requires real estate appraisals to be used in connection with federally related transactions in
accordance with the Uniform Standards of Professional Appraisal Practice (USPAP).
3- Lenders rely on appraisal reports to decide the safest amount of loan that they can give.
4- In addition to lender requirements, if a licensee is called upon to provide a market analysis on a

property that s/he feels is not qualified to analyze, services of a licensed appraiser may be
required.
B. ESTIMATING VALUE
MARKET VALUE (FAIR MARKET VALUE): What a willing buyer will most probably pay a willing seller
if neither one of them is under any pressure to buy or to sell, both have reasonable knowledge of the
property, and property is on the market for a reasonable length of time. Market Value is usually
provided as an opinion from a licensed appraiser.
MARKET PRICE: Actual selling price of property at a certain point in time. It may be higher, lower, or
the same as the appraisal price.
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ARM’S LENGTH TRANSACTION: A transaction that occurs in a competitive market that leads to a fair
sale involving a willing buyer and seller, both acting with knowledge of the property under no duress
and with no other intervening factors such as selling to a relative or friend.
PRINCIPLES OF VALUE
1. CONFORMITY: Property achieves highest value by being located in harmony with other surrounding
property. For example, a home should be located in a single-family subdivision, not next to an industrial
park.
2. REGRESSION: A larger and more expensive dwelling may lose value if it is located near smaller
low-priced dwellings.
3. CONTRIBUTION: Value added by one component or part of property as measured to the whole. For
example, how would an extra vacant lot added to a restaurant building as parking affect its value, or
how would an added garage affect the value of a home?
4. SUBSTITUTION: A theory used to evaluate property that considers the cost of obtaining another
comparable property. A buyer will not pay a higher price than what it would cost to purchase another
similar property in the same real estate market area.
5. HIGHEST AND BEST USE: The use of land that produces the highest value, if it is legal,
economical, and physically possible.
For example, a feasibility study determines “highest and best use” on a vacant lot zoned
commercial located off the expressway exit to be a service station accompanied by a coffee shop.
The study considers available zoning, market value, cost of improvements, anticipated revenue, etc.
6. ANTICIPATION
The expectation of future benefits derived from property. For income property, it is the anticipated future
income that Investors rely on to evaluate the present value. For example, an investor buys income
property leased long-term to a good tenant, anticipating future income.
Anticipation may be based on other factors such as positive or negative changes in the neighborhood
as far as demographics, trends, zoning, etc. For example, a homeowner who is thinking of selling her
property may decide to wait a while because of an imminent change in the zoning that will allow her to
get commercial zoning which should increase the property value.
ASSEMBLAGE: The merging of 2 or more adjacent parcels into one larger tract. Usually done to
create a large enough property for a certain user. The value resulting from assemblage of different
properties is known as PLOTTAGE VALUE.
PROPERTY CHARACTERISTICS
PHYSICAL CHARACTERISTICS AFFECTING VALUE
1. DURABILITY: Although improvements depreciate physically over time, land does not.
Example: Buy some land and let it sit for 30 years and then come back to check on
it, it still looks the same. Even a brick building may still look the same. This feature
increases the value of real estate.
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2. IMMOBILITY: Real estate is not movable.

Example: have you heard that the 3 most important aspect of real estate value is
location, location, location. Immobility can be good or bad because if your property is
in a good location, that will bring its value upwards. But if it’s in a bad location, you
cannot move it elsewhere.
3. HETEROGENEITY (non-homogeneity): Every property is UNIQUE; No two parcels

are alike.
Even when you have two adjacent lots in the subdivision that would seem to be of
the same size and value, they still have two different legal descriptions; one is lot #17
while the other is lot #18.
ECONOMIC CHARACTERISTICS AFFECTING VALUE (D.U.S.T)

1. DESIRABILITY (DEMAND): Whether there are possible buyers interested in the
property that are willing, able, and have the financial means to purchase.
Example: 200-unit condominium complex is built on a waterfront; some units are not
facing the water. Chances are that the units facing the water will sell at a higher price
because they are more desirable, i.e. there is more “demand” on them.
2. SCARCITY (SUPPLY): Whether or not there are other similar properties of a
comparable nature within the same general area that will compete with the subject
property.
Example: a 200-unit condominium complex was pre-sold before construction; finally,
one buyer canceled his purchase agreement because he was being transferred out
of town. When your buyer wants to make an offer on the last remaining unit, it will be
very hard to bargain on the price because of scarcity. Had it been the other way
around, for example, if only 50 units were sold and there were 150 units left on the
market, there will be some room for bargaining and the price may go down.
3. UTILITY: The type of use that the subject property is most suitable for, and whether it
satisfies the needs of a certain buyer.
Example: a small town known for its large retirement community has a new
subdivision being built with mostly one-story Ranch homes. This design will probably
prove to be popular with the majority of people in the city, because those of a
retirement age may have issues with climbing too many stairs, therefore they will be
able to “utilize” this type of design much better than a two story home, especially with
bedrooms located upstairs.
4. TRANSFERABILITY: The ease of transferring property to another person.
Example: Property may be the subject of a dispute between partners, or certain
action taken by a government entity such as the IRS or DEA, therefore, unless these
restrictions are lifted, property will either have a lower value or no value at all.
METHODS OF ESTIMATING VALUE/APPRAISAL PROCESS
SALES OR MARKET COMPARISON APPROACH
1. Also known as THE MARKET DATA APPROACH
2. Most suitable for PRE-OCCUPIED HOUSES AND VACANT LAND.
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3. Value is estimated by using other comparable property that has been recently sold in the same
general area. If the sold comparable has a superior feature in comparison to the subject property,
then it is adjusted downwards, but if it has an inferior feature then it is adjusted upwards.
4. Appraiser gives emphasis to normal inflation, age of improvements, square footage, any good or
bad features such as a garage, basement, bathrooms, fireplace, cracked foundation, evidence of
termite infestation, etc.
Note: The best comparable is a SOLD comparable
Example: You are required to evaluate the subject property that has 2,800 sq. ft. and is similar to
the sold comparable. The subject property does not have a garage. One square foot is worth $120,
and a 2-car garage is worth $10,000.
Subject Property-For Sale

1 sq.ft. is worth $120
2 Car Garage is worth $10,000
in this neighborhood
So 300 sq.ft. X $120 = $36,000

$300,000 + $36,000 = $336,000
2,800 Sq.Ft.
But it has NO Garage, therefore
No Garage
$336,000 - $10,000 = $326,000
Based on the SOLD FOR $ $300,000

2,500 Sq.Ft.
SOLD house, the 2 Car Garage
Subject property
is worth $326,000
Solution
Subject property starts at $300,000

Has 300 sq. ft. extra
300 sq. ft. X $120 = $36,000
$300,000 + $36,000 = $336,000
But it has NO garage

$336,000 - $10,000 = $326,000
Based on the sold property, the subject property is worth $326,000
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5. When comparing property to others sold, at least 3 to 4 SOLD properties should be selected to
compare instead of comparing to one only which may have been sold at exceptionally favorable
terms or under duress.
6- Always compare apples to apples. If one property is situated on a lakefront, do not use the
comparable that is across the street with only “lake access”. If you have a one-story home, do not
compare it to a two-story or a quad level home.
THE COST APPROACH
Most suitable for new property and property with little or no comparables, such as a museum, library,
school, etc. In this method, the appraiser takes the following steps to appraise the property:
A. Land is appraised without the building, using the market comparison approach.
B. The cost of reconstructing the building as a new unit is estimated. A depreciation factor is
applied based on the age and condition of the improvements.
C. The value of the land is then added to the value of the building.
D. REPRODUCTION COST - Is the cost to reproduce an exact duplicate of the same building
using current materials and methods.
E. REPLACEMENT COST - The cost of replacing a building with another that functions in a
similar way but not a duplicate. This method is more suitable for appraising older structures
since it may not be possible to find discontinued building material that would be used at the
present time such as asbestos insulation or plumbing fixtures of a certain type.
F. DEFERRED MAINTENANCE - Existing maintenance and repair requirements that were due
but put off.
G. ACCRUED DEPRECIATION - The amount of depreciation, from all sources that affects
property value. It represents the difference between the cost as new and the present worth of
the improvements, both measured as of the date of the appraisal.
F. ECONOMIC LIFE - Is the period during which the structure is expected to remain useful in its
original function. This period is essential to calculating accrued depreciation.
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METHODS OF DEPRECIATION
1. PHYSICAL DETERIORATION: Ordinary wear-and-tear such as roof leaks, problem with

plumbing, electrical wiring, basement cracks, etc.
2. FUNCTIONAL OBSOLESCENCE: Outdated design and layout inadequacy, property may have
served its purpose in the past but does not meet modern requirements such as commercial building
that lacks parking, 4-bedroom house with one bathroom, etc.
3. EXTERNAL (economic, environmental) OBSOLESCENCE: Loss of value due to changes in

society and the surrounding area such as presence of crime in neighborhood, pollution from
factories, noise from airport, high unemployment, etc.
CURABLE OBSOLESCENCE: Can be corrected. Example, a house with no garage may have
a large enough lot to add a two-car garage.
INCURABLE OBSOLESCENCE: Cannot be or not economically feasible to be corrected or

modified. External obsolescence is the hardest to cure.
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INCOME APPROACH
I- CAPITALIZATION METHOD
1. Used to estimate value of income property.
2. VALUE = NET OPERATING INCOME÷CAPITALIZATION RATE.
A. NET OPERATING INCOME (NOI) = GROSS RENT - OPERATING EXPENSES
I. GROSS RENT: Potential annual projected gross income - Vacancy and rent loss +
Additional income
II. OPERATING EXPENSES: Necessary annual costs to operate the project such as
taxes, maintenance, insurance, utilities and management fees. Although interest is an
expense, it is not considered an operating expense; neither are the vacancy factor,
principal payments, capital improvements or special assessments.
Note: LOAN PAYMENTS are known as DEBT SERVICE, which include principal and
interest. They are not included in calculating the net operating expenses.
B. CAPITALIZATION (CAP) RATE: The rate of return an investor would receive on investment.
Example (1): What is the NOI if the gross rent for the year was $55,000 and the following
expenses were considered: Taxes: $4000/year, Insurance: $3000/year, Utilities: 500/month?
Answer: UTILITIES: $500 X 12 = $6000/YEAR
$55000 - $4000 - $3000 - $6000 = $42,000 NOI
Example (2): An investor is looking at a rate of return

of 12% annually on his/her investment. The property
has a gross income of $26,000/yr. with estimated
expenses of 40% of gross/yr. How much should this
Investor pay for this property?
Answer: NOI = $26,000 - 40% = $15,600

$15,600 ÷ 12% = $130,000
Example (3): In the previous example, if the appraiser

estimates that the Cap Rate in that market should be 10%,
what would the value be?
Answer: $15,600 ÷ 10% = $156,000
Example (4): in the previous example, if the appraiser estimates

the Cap Rate to be 8%, what would the value be?
Answer: $15,600 ÷8% = $195,000
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II- GROSS RENT / INCOME MULTIPLIER METHOD
1- Mostly suitable for a small income property such as a house, duplex, etc.
2- The method applies a multiplier to the estimated gross income of the subject
property, the income is either based on the current rent roll of the property or a
projection of what the property should earn in a competitive market.
3- Although the gross rent/income multiplier provides a fast and brief method of
estimating the value, it does not take into consideration any operating expenses,
vacancies, etc. therefore it may not be as reliable as the capitalization approach
described earlier.
4- Value = GRM x Monthly or Yearly rent
Example: Property (1) was sold for $100,000 and brought gross rents in the
amount of $10,000/yr. What would property (2) be evaluated at with $15,000/yr. in
gross rents?
Solution: G.R.M. = $100,000 $10,000 = 10

10 X $15,000 = $150,000
RECONCILIATION: The process of weighing each of the different approaches to value to

determine the applicability and relevance of the different methods used to arrive at the
conclusion of value.
C. COMPETITIVE/COMPARATIVE MARKET ANALYSIS CMA
1. An estimate of property value (conducted usually by the real estate agent) used to
assist the seller in determining a listing price for the property by relying on sale and
leasing data of comparable properties.
2. A CMA will not be relied upon by the lender in determining the amount of mortgage
loan to be provided to the buyer.
3. According to Michigan State rules, an agent is authorized to provide the CMA only for
the purpose of establishing a selling or leasing price for a property that s/he is
contemplating placing on the market.
4. Methods used for selecting and adjusting comparables for many residential and
some commercial properties are usually similar to those used by licensed appraisers,
an agent who faces a complicated valuation task should seek an expert opinion from
a licensed appraiser.
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Financing (Salesperson 12% | Broker 12%)

A. Basic concepts and terminology
a. LTV ratios, points, origination fees, discounts, broker commissions
b. Mortgage insurance (PMI)
c. Lender requirements, equity, qualifying buyers, loan application procedures
B. Types of loans
1. Conventional loans
2. FHA Insured loans
3. VA guaranteed loans
4. USDA/rural loan programs
5. Amortized loans
6. Adjustable-rate mortgage loans
7. Bridge loans
8. Owner financing (installment and land contract/contract for deed)
C. Financing and lending
1. Lending process application through closing
2. Financing and credit laws and rules
a) Truth in lending
b) RESPA
c) Equal Credit Opportunity
d) CFPB/TRID rules on financing and risky loan features
3. Underwriting
a) Debt ratios
b) Credit scoring
c) Credit history
A. BASIC CONCEPTS AND TERMINOLOGY
How Bank Financing works
1- In a lien theory state such as Michigan, the buyer holds the deed to the property during the
mortgage term.
2- The buyer promises to make all payments to the lender and the mortgage becomes a lien on
the property, but title remains with the buyer. The lender’s lien is discharged once the loan
balance is paid in full.
3- Upon default of borrower, lender can commence a foreclosure action to auction the property
and collect the loan balance.
4- In title theory states, lender becomes the titleholder and has the immediate right to possess
and collect rents from the mortgaged property upon default.
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Bank Mortgage
LTV RATIOS, POINTS, ORIGINATION FEES, DISCOUNTS,

BROKER COMMISSIONS
LOAN/VALUE (LTV) is a proportion between what the value of the property and
the amount of loan that the lender is willing to lend.
A 90% LTV means that the lender is willing to lend 90% of the property value.
Price and value is not always the same. If property appraises for more or less
than the selling price, the lender relies on the lesser of the two amounts.
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Example-1: property sold and appraised for $100,000, the lender will provide 90% loan.
The amount of the loan will be $100,000 X 90% = $90,000.
Buyer needs $10,000 down payment (or 10% of purchase price).
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INTEREST CALCULATIONS
Example: Loan is 50,000, interest rate is 8%, annual interest due =?
Annual interest Due is $4,000
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Example: Loan is $80,000 at 6% interest rate, what is the annual interest,

semiannual interest, quarterly interest and monthly interest?
ANNUAL INTEREST = $4,800

SEMIANNUAL INTEREST = $2,400
QUARTERLY INTEREST = $1,200
MONTHLY INTEREST = $400
Question: In the previous example, what if Mortgage Payment is $450.00/m? How much is Principal
and How Much is Interest and what is the loan balance upon making the first payment?
Before we solve the problem, we need to understand the meaning of AMORTIZATION
AMORTIZATION-The process of paying back a borrowed loan by making payments that include
principal and interest.
NEGATIVE AMORTIZATION: Is the gradual process of increasing the loan balance as a result of
making payments that do not cover the interest due on a loan, causing the unpaid interest to accrued
and be added to the loan balance.
Example: Monthly payment on a $90,000 loan is $500.00 out of which $400.00 is interest and $100.00
is principal. When a full payment is made, the principal balance of the loan is reduced to $89,900 but if
for some reason the borrower only paid $350.00, then not only there will be no principal reduction on
the loan, but the shortage in interest ($50.00) will be added to the principal balance making it $90,050.
This arrangement may be the result of a default by the borrower or the result of an agreement with the
lender who accepts these low payments for a period of time.
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In the previous example, what is the Loan Balance upon making the second
payment?
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POINTS
Each Point = 1% of the LOAN
POINTS may be charged to discount (reduce) the interest on the loan, or it may be assessed as
a loan fee, for example, a 1 point loan commitment fee or origination fee.
Buydown Mortgage: The Borrower may pay discount points to get a lower interest rate, or the
seller may pay on behalf of the borrower. For example, the loan is offered at an interest rate of 6%
but the borrower pays 2 points to drop the rate to 5.5%. The lender’s interest yield should remain at
6% once the 2 discount points are blended into the 5.5% interest rate. i.e., the discount points
increase the lender’s interest yield.
Example: Price is $100,000 and Loan is $90,000. The borrower will pay 2 points, how much in
points will be needed at closing and how much of a down payment will be needed at closing?
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BROKER’S COMMISSION
Example-1: Selling price is $300,000 at 6% commission. How much commission will the broker earn at
closing?
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Example-2: Selling price is $300,000 at 6% commission for a total commission of $18,000. Salesperson
receives 60% of the total commission collected by the broker. How much is the salesperson’s share of
the commission?
Example-3: Selling price is $300,000 at 6% commission for a total commission of $18,000. 2 Brokers
cooperate to sell the property at 50-50 split and each broker pays 60% split to agent. How much did the
selling agent earn?
Answer: $18,000 ÷ 2 = $9,000
$9,000 X 60% = $5,400 is paid to both the listing and the selling agent
MORTGAGE INSURANCE (PMI)
1- A lender usually requires mortgage insurance when the LTV is more than 80%
2- To obtain mortgage insurance, an insurance premium is required.
3- A conventional loan requires PMI (private mortgage insurance). An FHA loan also requires an
insurance premium known as MIP (mortgage insurance premium).
EQUITY: Is the difference between the present value of property and any remaining loan balance.
Example: Property was purchased 5 years ago for $300,000 and has been recently appraised
for $350,000. At the time of purchase, the buyer borrowed $250,000 to purchase the property
and her present loan balance is $230,000. How much equity does the buyer presently have in
the property?
Answer: $350,000 - $230,000 = $120,000
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Qualifying Buyers – PITI
PITI = PRINCIPAL + INTEREST + TAXES + INSURANCE
Example: Bill and Sue make a total of $80,000/yr. The lender allows no more than 39% of their
annual income to be used towards PITI (principal, interest, and taxes, insurance). What is the
maximum monthly PITI that they can afford if property taxes are $7,200 and insurance $1,200?
Answer: $80,000 X 39% = $31,200/yr.÷ 12 = $2,600/Month total PITI
Question: How much of their income is allocated strictly to principal & interest (P&I)?
$7,200 (tax) + $1,200 (insurance) = $8,400 ÷ 12= $700/month
$2,600 - $700 = $1,900 left for P&I
B. TYPES OF LOANS AND SOURCES OF LOAN MONEY
CONVENTIONAL MORTGAGES
1- Mortgage loans in general can be divided into conventional (private) and non-conventional which are
government backed loans. We will discuss the government loans in a different section of this course.
2-CONVENTIONAL MORTGAGE (PRIVATE): Not insured or guaranteed by the government. Approval

is based on borrower’s qualifications such as income /debt ratio, credit rating, etc.
A. NON – INSURED CONVENTIONAL LOAN: Usually involves a Loan to Value Ratio of 80%
or less. Lender feels confident that upon default, a foreclosure sale will bring enough to satisfy
the debt.
B. INSURED CONVENTIONAL LOAN: Insurance obtained privately (PMI) when Loan to Value
Ratio exceeds 80% (as high as 90% to 95% is usually allowed). Upon foreclosure sale,
insurance reimburses lender in case price obtained is less than balance.
FEDERAL HOUSING ADMINISTRATION INSURED LOANS (FHA)
1. Loans insured by the Federal Housing Administration. A government agency established in

1934 and operates under the Department of Housing and Urban Developments (HUD).
2. FHA does not insure the property; it only insures loans made by approved lending
institutions. FHA insures the lender against losses resulting from nonpayment of borrower.
3. A typical loan involves a low-down payment of 3.5% and may be up to 10% for a low credit
score.
4. Directed at residential “owner occupied” properties.
5. APPRAISAL REQUIREMENT: Ordered by the lending institution, this determines Fair

Market Value. Loan is based on the lowest of the purchase price or appraised value.
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6. FHA CODE VIOLATIONS (FHA CONDITIONS): Appraisal report may list violations of FHA
construction code; loan cannot be insured unless property is fixed up.
7. No prepayment penalty.
8. MORTGAGE INSURANCE PREMIUM: An upfront premium (UFMIP) is charged at closing

plus an annual amount that is prorated and paid monthly.
9. ASSUMPTIONS: Available based on lender’s approval of new buyer i.e. formal assumption.
10. Programs: Different programs are available with the most commonly used, the 203B which
is the basic home mortgage program which allows the financing of 1-4 family dwelling, owner
occupied with 3.5% down payment.
VETERAN’S ADMINISTRATION GUARANTEED FINANCING (VA)
1. Came into effect as a result of the Servicemen’s Readjustment Act of 1944.
2. Borrower must be a Veteran and must obtain a “certificate of eligibility”. The unmarried
surviving spouse of a veteran who died on active duty or as the result of a service-
connected disability is eligible for the home loan benefit.
3. No down payment is required.
4. Owner occupied homes qualify. One to four family units are allowed.
5. The Veteran’s Administration guarantees the loan to the lender who forwards funds.
6. FUNDING FEE: Charged to raise money for the program.
7. ASSUMPTIONS: VA loans are assumable by non-veterans with lender’s approval. The

Veteran can go on to purchase another home using the “second entitlement”. The entire
eligibility can be restored if another veteran assumes the loan.
8. APPRAISAL REQUIREMENTS: VA issues a “Certificate of reasonable value” (CRV) limiting

the amount guaranteed by VA. Along with that, the home must be fixed up and free of any VA
code violations.
9. No prepayment penalty.
USDA / DEPARTMENT OF AGRICULTURE RURAL DEVELOPMENT
1- Program assists approved lenders in providing low- and moderate-income households the
opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence
in eligible rural and farming communities.
2- Eligible applicants may build, rehabilitate, improve or relocate a dwelling in an eligible rural area.
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3- The program provides a 90% loan note guarantee to approved lenders in order to reduce the risk of
extending 100% loans to eligible rural homebuyers
AMORTIZED AND PARTIALLY AMORTIZED

(BALLOON) LOANS
FULLY AMORTIZED MORTGAGE: Mortgage Loan has been fully paid - off through the process of
making regular monthly payments (debt service) including principal and interest over the term of the
loan.
Example: A loan of $150,000 at a “fixed rate” of 6% annual interest will be fully repaid over 30 years
(360 payments) at a monthly payment of $899.33/m. At the end of the 30-year term the balance on the
loan will be zero.
BALLOON MORTGAGE / LAND CONTRACT: Also known as a “partially amortized loan”. It

involves regular amortized monthly payments and a lump sum due at the end of loan term.
Example: A loan of $150,000 at a “fixed rate” of 6% annual interest will be fully repaid over 30
years (360 payments) at a monthly payment of $899.33/m. The lender indicated that although the
$899.33 per month is acceptable, the borrower must pay off the entire balance in no more than five
years (60 payments).
The borrower will continue to make regular payments of $899.33/m. The balance due at the end of
five years is $139,581.54, which will pay the loan off completely. This $139,581.54 is known as a
balloon payment.
If the lender would have required a seven-year balloon instead, the borrower will continue to make
regular monthly payments and the balloon payment would be $134,459.08 and so on.
ADJUSTABLE-RATE MORTGAGE (ARM) LOANS
The loan interest rate fluctuates up or down during the loan term at certain “adjustment intervals” based
on a pre-stated reference rate or index such as U.S. Treasury Securities index, the London
Interbank Offered Rate (LIBOR), etc. The adjustments may affect loan payments and/or interest
rates. Periodic adjustments are usually limited with a “cap” which limits an increase or decrease in
interest rate. Details regarding loan adjustments are found in the “Escalation Clause”.
Example: A loan of $150,000 at an adjustable rate of 6% annual interest will be fully repaid over 30
years (360 payments) at a monthly payment of $899.33/m if the interest rate will not change. The
borrower agreed to an ARM with an adjustment period of one year and an annual cap of 2%. The
loan carries a 6% cap for the life of the loan.
This means that the 6% annual interest rate may go up or down once a year but at a maximum
amount of 2%, therefore, even if the market interest rates drop to 3%, the 6% loan rate will only
drop to 4% because of the cap, on the other hand if the rates go up to 9% next year, the most that
the loan interest rate will go up to is 8%, again because of the 2% cap.
Let’s assume that many years later, the mortgage rates increase to 14%; the most that the
mortgage interest rate will go up to is 12% because of the 6% cap for the life of the loan.
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REVERSE MORTGAGE
Lender pays borrower who must be at least 62 years old and have a principal residence, a loan in the
form of either a lump sum, periodic payments, or a line of credit that do not have to be paid back unless
the borrower sells the house, permanently moves out, or dies, whichever comes first. FHA insures the
loan. The purpose of a reverse mortgage is to supplement the mortgagors’ income.
HOME EQUITY LOAN (HEL)
Usually involves a fixed amount loaned to the property owner based on the equity in the home and
secured by the property. It’s usually involves a fixed interest rate and a fixed monthly payment.
Example: A homeowner has a Home appraised at $300,000 with a $200,000 mortgage balance.
The lender agrees to provide a home equity loan but does not want the total amount of debt owed
on the home to exceed 80% of value, i.e. $240,000. The lender may approve a $40,000 Home
equity loan provided that the borrower can afford to make both monthly payments.
HOME EQUITY LINE OF CREDIT (HELOC)
A revolving line of credit (open ended loan) usually with an adjustable interest rate and monthly
payment. Loan is provided to the homeowner based on the amount of equity in the home.
SUBPRIME MORTGAGE
A type of loan granted to individuals with poor credit histories (often below 600), who, as a result of their
deficient credit ratings, would not be able to qualify for conventional mortgages.
BRIDGE LOAN
Is a temporary, short-term loan provided to a borrower who needs to purchase another property while
keeping the existing one or possible trying to sell it. The existing property serves as collateral for the
loan. The bridge loan usually carries an above market interest rate and is tied up to the equity that the
borrower has in the existing property.
SELLER/OWNER FINANCING
LAND CONTRACT (Installment sales contract, Contract for deed)
A. Buyer (VENDEE) pays a down payment to seller (VENDOR) at closing; both parties sign a
Land Contract. Balance is paid in monthly payments including interest.
B. Seller retains title pending full payment of debt. Vendee’s interest in property is
EQUITABLE TITLE.
C. Vendor delivers title to Vendee upon full payment of debt.
D. Although vendor remains to be the titleholder during the contract term, vendee is the
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lawful owner of property. Vendor is said to have NAKED TITLE, i.e. title with no ownership
rights.
PURCHASE MONEY MORTGAGE:
An installment sale similar to a land contract sale but the seller deeds the property to the buyer
at closing and takes back a promissory note secured with a mortgage on the property. If buyer
is in default, seller can foreclose.
DEED OF TRUST:
A. An installment sale method where title is transferred to a third neutral party (TRUSTEE) using
a Deed of Trust (Trust Deed) as security for a balance owed to a creditor, usually a lender or a
seller in an installment sale.
B. If the loan is not satisfied, the trustee may sell property for the benefit of the creditor under
the POWER OF SALE CLAUSE, but if the debt is paid, the trustee would convey title to the
buyer/borrower, Trustor)) using a TRUSTEE‘S DEED.
C. The lender or seller is known as the BENEFICIARY.
PRIMARY MORTGAGE MARKET
PRIMARY LENDERS- PRIMARY SOURCES OF FINANCING :
1. Savings and loan associations S&L

2. Mutual Savings Banks
3. Commercial Banks
4. Credit Unions
5. Life insurance companies
6. Mortgage companies/brokers
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A Mortgage Broker does not originate a loan. S/he coordinates between a borrower
and a lender often shopping several lenders to find the most favorable terms.
SECONDARY MORTGAGE MARKETS
1. Although they do not lend money in a traditional sense, some sources refer to them as “secondary
mortgage lenders”.
2. A lender that receives more demand for loans than funds available may decide to sell its interest in
past loans and mortgages to the secondary market thus receiving more funds to generate more lending
transactions.
3. If the lender has more funds than loan demands, the lender may use these funds to acquire other
lender’s interest in mortgages so that funds may be invested.
4. FEDERALLY CHARTERED SECONDARY MARKETS:
A. THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: ALSO KNOWN AS

GINNIE MAE (GNMA).
1. Government Owned, division of HUD.
2. Purchases high-risk, low-yield loans such as FHA.
3. Guarantees Investment Securities issued by private offerors (banks, mortgage

companies, etc.) and backed by pools of FHA and VA mortgage loans.
4. Raises funding by selling pass-through certificates which are security interests in a

pool of mortgages.
B. THE FEDERAL HOME LOAN MORTGAGE CORPORATION, FREDDIE MAC (F.H.L.M.C).
1. Originally established to provide funding for federal savings and loans.
2. Presently provides secondary market for mortgage loans, primarily conventional

loans.
3. Raises funding by selling bonds in pools that are formed by purchasing mortgages:
the pool of mortgages secures bonds.
C. THE FEDERAL NATIONAL MORTGAGE ASSOCIATION, FANNIE MAE (FNMA).
1. Although chartered by the federal government, it is organized as a private

corporation.
2. Purchases FHA, VA, as well as conventional mortgages and is the oldest and largest
of all markets.
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3. Buys a block or pool of mortgages from a lender in exchange for mortgage-backed

securities in which lender may keep or sell.
MORTGAGE CLAUSES
DUE ON SALE (ALIENATION) CLAUSE: Provides that if the mortgagor transfers ownership to
another person, the amount owed to the lender is immediately due in full.
Alienation: Is the voluntary transfer or disposing of property such as a sale or gift.
Involuntary Alienation: The transfer of property resulting from foreclosure, condemnation, adverse
possession, etc.
ACCELERATION CLAUSE: Makes the full principal amount of the loan payable and due upon
default of borrower.
PRE-PAYMENT PENALTY: A fee charged by some lenders (stated in the loan documents) for
early re-payment of a loan aimed as an incentive for the borrower to slowly pay back the loan as
originally planned, allowing the lender to continue to collect interest.
MORTGAGE DISCHARGE (RELEASE/SATISFACTION): Issued and recorded by the lender as

evidence of releasing the lien that the mortgage created at the time of financing the property.
MORTGAGE ASSIGNMENT: Addresses the procedure of assigning the loan between lenders and
secondary market. Also prohibits the assignment to other borrowers upon the sale of the property
unless lender approval is obtained which usually requires a “formal assumption” where credit and
income verification of the new assignee is obtained.
C. FINANCING AND LENDING
LENDING PROCESS
a. Loan application: Lenders usually use the Uniform Residential Loan Application (URLA),
also known as Fannie Mae form 1003. The application asks for information about the
property being purchased, the type of loan being used, as well as information about the
borrower.
Within three business days of submitting the application, the borrower must be provided
with a “Loan Estimate” which provides an estimate of mortgage loan terms and settlement
charges.
b. Mortgage processing: Loan processors collect a variety of documents relating to the

borrower as well as the property being purchased. They will review the file to ensure it
contains all the documents needed for the underwriting process. Documents include bank
statements, tax records, employment letters, the purchase agreement, etc.
The loan processor will also:
1. Order credit reports (if this hasn’t been done already),

2. Begin verifying income, assets and employment, and
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3. Order a property appraisal (must be ordered through a third neutral party known as
the appraisal management company) in order to determine the value of the property.
c. Mortgage Underwriting: The underwriter examines all the loan documents prepared by the
loan processor, to make sure it complies with lending requirements and guidelines and if so,
a decision will be made to grant the loan.
1. Lender will determine a borrower’s qualification for the loan amount based on a
percentage of gross income.
2. Debt-to-income ratio should not exceed 43% for a qualified mortgage (a qualified
mortgage carries more stable features making it less likely to go in default and is
considered more attractive to the secondary market, other types of mortgages may
allow a higher debt-to-income ratio).
3. To calculate the debt-to-income ratio, add up all the monthly debt payments and
divide them by gross monthly income. The gross monthly income is generally the
amount of money earned before taxes and other deductions are taken out.
Example: If you pay $1300 a month for your mortgage and another $300 a month for
an auto loan and $400 a month for the rest of your debts, your monthly debt
payments are $2000. ($1300 + $300 + $400 = $2,000.) If your gross monthly income
is $5000, then your debt-to-income ratio is 40 percent. ($2000 is 40% of $5000.)
Mortgage underwriters focus on the “three C’s” of underwriting — capacity, credit and
collateral:
1. Capacity — Having the financial ability to repay the mortgage loan

2. Credit — Having good history of repaying debts, as evidenced by the borrower’s
credit reports and scores.
3. Collateral — Property serves as sufficient collateral for the loan based on the
appraisal report issued by the appraiser.
4. Mortgage Loan Approval and Closing
• Once the underwriter approves the loan, they will issue a “clear to close”
statement allowing the loan to be funded upon closing.
• All loan documents are sent to the title company that has been chosen to handle
the closing.
• At least 3 business days before closing, borrowers will receive a Closing
Disclosure (TRID), stating loan terms such as monthly payments as well as
various closing fees.
CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)

RULES ON FINANCING RISKY LOAN FEATURES
1- Protects consumers from irresponsible and predatory mortgage lending by requiring lenders to
ensure that prospective buyers can repay their mortgage.
a- Financial information must be supplied and verified.

b- A borrower must have sufficient assets or income to pay back the loan.
c- Teaser rates can no longer mask the true cost of a mortgage.
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2- Predatory lending: Imposing unfair and abusive loan terms on borrowers including high interest
rates, high fees, and the use of aggressive sales tactics and deception in lending.
3- Qualified Mortgage: Consumers will have greater assurance that they can pay back the loan.
Among the features of a Qualified mortgage lending:
a- No excess upfront points and fees

b- No toxic loan features such as terms that exceed 30 years, interest-only payments,
or negative-amortization payments.
c- Cap on how much income can go toward debt generally set at 43% debt-to-income ratio
with some exceptions.
TRUTH IN LENDING ACT (TILA)

(REGULATION Z)
1. PURPOSE:
A. Credit institutions must inform borrowers of the true cost of obtaining credit for
residential one to four family dwelling thereby allowing borrowers to freely shop and
compare loan terms of various lending institutions and avoid any hidden costs.
B. Requires lender to use the Annual Percentage Rate (APR ) that includes all interest
charges, finance charges, commitment fees, origination fees, discount points, loan pre-
payment charges, etc.
C. The lender must provide a “loan estimate” that informs the borrower of the
anticipated charges required at closing no later than 3 business days after submitting
a loan application. It requires the use of the “closing disclosure” to disclose the
settlement costs to the buyer at least 3 business days before consummation of the
loan.
D. Applies to most residential mortgage loan but NOT to commercial and business
loans.
2. ADVERTISING REQUIREMENTS
A. Concerned with truth in advertising.
B. When advertising interest rates, lenders must use the annual percentage rate [APR]
C. If the amount of interest is advertised in dollars or per annum interest; all finance
charges must be included in the advertisement.
D. Triggering phrases / terms: A broker who advertises property based on “seller

financing” is prohibited from advertising “down payment”, “monthly payment”, “number of
payments” or “amount of any finance charges” (also known as “triggering terms”) unless
all financing terms are advertised as well.
E. Advertising such as “low down payment”, “easy terms”, “assumption available”, etc.
APR or cash price only is legal without including anything else in the ad.
Example: An ad reads: “You can buy this house on land contract $2,000 down”.
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This ad does not comply with regulation Z. The person should advertise this
way: Purchase price is $40,000.00, down payment is $2,000.00, monthly
payments are $400.00, interest rate 10%, and number of payments is 190.
Example: An agent advertises: You can buy this house with reasonable interest
rate and a low-down payment. Price is $59,900.00.
This ad complies with regulation Z, because the agent did not advertise more
than the cash price of property. If s/he would have advertised the low amount of
the down payment, then s/he must have disclosed all financing details.
3. THE RIGHT TO RESCIND A TRANSACTION
A. When refinancing residential property (1 to 4 family dwelling) an owner may rescind

the loan within 3 business days after closing date and receive refund of loan fees paid.
B. The 3-day period starts after lender makes disclosure of legal right to borrower.
REAL ESTATE SETTLEMENT PROCEDURES ACT(RESPA)
A. A Federal law administered by the Consumer Financial Protection Bureau (CFPB)
B. The main objective is to protect homeowners by assisting them in becoming better educated while
shopping for real estate services.
C. Transactions covered are first or second federally related mortgage loans made on one to four
family residences, condominiums and cooperatives, federally related loans such as FHA or VA or other
government backed or assisted loans, loans from lenders with federally insured deposits, loans that are
purchased by federally controlled secondary mortgage markets.
D. The law requires certain procedures to be followed in closings, to inform the buyers and the sellers
of their charges and credits related to settlements. It prohibits kickbacks(i.e. payments when
services have not been provided) involving “settlement service providers” such as lenders, real
estate agents, title insurance services, appraisals, credit reports, inspections, surveys, and
legal services.
Example: Title Agency pays agent $300 for every file he refers to them. Mortgage Company does the
same. Both instances are examples of “kickbacks”.
INTEGRATED DISCLOSURE RULE (TRID)
1- TRID is the TILA / RESPA Integrated Disclosure Rule.
2- TILA is the Truth in Lending Act and RESPA is the Real Estate Settlement Procedures Act. The
CFPB (Consumer Financial Protection Bureau) modified both rules in its TRID final ruling.
3- In addition, and within 3 business days of receiving the loan application, the lender must
provide a “loan estimate” that informs the borrower of the anticipated charges required at
closing. It requires the use of the “closing disclosure” (CD) to disclose the settlement costs to
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FINANCING
the buyer at least 3 business days before consummation of the loan.
4- Both the buyer and seller must receive Closing Disclosures (CD) that provides details of the
transaction. The seller’s CD is provided by the settlement agent (such as the title company), the
Buyer’s CD is provided by the lender unless the sale does not involve a loan, then the
settlement agent is responsible for both CDs.
5- The Loan Estimate must be provided within three business days of receiving the loan
application, and the prospective borrower then has 10 business days to respond as to whether
he or she wishes to proceed. The TRID Rule generally requires creditors to deliver or mail a
Loan Estimate to consumers no later than seven business days before consummation of a
loan.
6- Any significant change to the loan (e.g. a different loan product, switching from a fixed rate
to an adjustable rate loan, a change in APR, the addition of a prepayment) triggers a new
3-day waiting period for the CD.
EQUAL CREDIT OPPORTUNITY (ECOA)
1- An act that prohibits lenders from discriminating against borrowers because of race, creed,
color, national origin, age, receipt of public assistance, sex, marital status, or the exercise
of rights under the Truth-in-Lending Act.
2- Lender may not ask the candidate if they plan to have children or additional children, but
creditors can ask about the number, ages, and financial obligations relating to all existing
children.
3- Lender may not disallow regular sources of income, such as reliable veteran's
benefits, welfare payments, Social Security payments, alimony, child support, etc.
4- Lender must inform the candidate if they have been denied or granted credit within 30 days of
receiving their completed application. And give the specific reason(s) why one is denied credit
or granted credit differently than under the terms for which they originally applied.
MORTGAGE FORECLOSURE
When the borrower is in default, the lender may move to auction off the property subject to mortgage
lien.
DEED IN LIEU OF FORECLOSURE: Upon default, lender (mortgagee) agrees not to go through
foreclosure and accepts a deed from the borrower (mortgagor) surrendering property to lender in full
satisfaction of debt.
Benefit to borrower: Avoid legal action, avoid deficiency judgment, and possibly save credit,
depending on the agreement with the lender.
Benefit to lender: Take the property over without delay of legal action and redemption. Avoid legal
expenses. Avoid possible damage to property.
SHORT SALE: A sale of distressed property that is approved by a lender who is willing to discharge
the mortgage by accepting less than the loan balance owed.
Ex: Property was purchased for $250,000 with a mortgage loan of $225,000. Later the property
declined in value and it is presently worth only $170,000, yet the loan balance remains to be $220,000.
The lender may approve a “short sale” and agree to accept $170,000 and discharge the mortgage.
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FINANCING
A MORTGAGE MAY BE FORECLOSED IN THE FOLLOWING MANNER:
1. BY A CIVIL LAWSUIT IN CIRCUIT COURT (JUDICIAL FORECLOSURE)

A. Filing a complaint in court.
B. Notifying all the persons that have interest in the property.
C. The court will hold a hearing and allow all parties to present their claim.
D. Court will then order the sale of the property if lender prevails.
NOTE: This process can be lengthy and expensive; therefore, it is not widely used.
2. FORECLOSURE BY ADVERTISEMENT
In order for this method to be employed, the mortgage must contain a “POWER OF SALE BY
ADVERTISEMENT” clause-enabling lender to foreclose by advertising as follows:
A. Notice is given to the mortgagor by advertising in a legal newspaper that is circulated

in the county where the property is located, once a week for four consecutive weeks.
B. A public auction is held by a sheriff to sell the property.
C. The property is sold to the highest bidder.
NOTE: if more than the amount owed by the mortgagor to the mortgagee is bid, the
excess is paid to the mortgagor, but if highest bid is not enough to satisfy the loan then a
DEFICIENCY JUDGMENT against the mortgagor is obtained to hold him/her personally
liable for the difference. Delinquent property taxes take priority to the mortgage
D. SHERIFF'S DEED: Executed by sheriff to highest bidder and is recorded.
E. REDEMPTION PERIOD: Time allowed the mortgagor following sheriff sale to pay
back the highest bidder to redeem property (typically 6 months for single family dwelling
in Michigan, some exceptions may apply).
F. If mortgagor redeems property, sheriff’s deed is void. Notice of redemption is made

clear on public record and the existing mortgage is discharged.
G. WRIT OF RESTITUTION: Obtained from court, authorizing sheriff to evict occupants

because property is not redeemed, and the sheriff's deed has vested title in new
purchaser.
H. REAL ESTATE OWNED by the lender (REO): If the current market value of the
foreclosed property is less than the debt owed, investors will not bid at a foreclosure
sale; therefore the lender will bid on the property and receive a sheriff’s deed. And
unless the property is redeemed, title will pass to the lender.
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FINANCING
REVIEW QUESTIONS
Q - 1. Loan $65,200, L / V = 65%, Price?
Q - 2. Commission due to broker $5,432, based on 7%, Price?
Q - 3. Interest due in six months $3,422 and annual interest is 6.25%, Loan?
Q - 4. Price $75,450, loan ratio 80% with 2 points. How much does buyer need to close deal?
Q - 5. Price $150,000 at 90% loan with 1 point. How much in points is due at closing?
Q – 6. Loan amount $200,000 at 6% interest with $1,500/m. what is loan balance upon making 1st payment?
ANSWERS
1. $65,200
65,200 ÷ 65% = $100,307.69
? = 100,307.69 65%
2. $5,432
$5,432 ÷ 7% = $77,600
? = $77, 600 7%
3. $3,422 x 2 = $6,844 annual interest $6,844

$6,844 ÷ 6.25% = $109,504
? = $109,504 6.25%
4. $60,360 $1,207.20
$75,450 80% $ 60,360 2%
$75,450 X 80% = $60,360 is the loan
$60,360 X 2% = $1,207.20 Points Due
$15,090 + $1,207.20 = $16,297.20 Total needed to close
5. $150,000 X 90% = $135,000 is the loan amount
$135,000 X 1% = $1,350 points due at closing
6. $200,000 X 6% = $12,000/yr.÷ 12 = $1,000/M interest
$1,500 – $1,000 = $500 applied to principal
$200,000 – $500 = $199,500 balance upon making first payment
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PRINCIPLES OF AGENCY
Principles of Agency (Salesperson 10% | Broker 9%)
A. Agency and non-agency relationships

1. Types of agents and agencies
2. Other brokerage relationships (non-agents)
a) Transactional
b) Facilitators
B. Agent’s duties to clients
1. Fiduciary responsibilities
2. Traditional agency duties (COALD)
3. Powers of attorney and other delegation of authority
C. Creation of agency and non-agency agreements; disclosure of conflict of interest
1. Agency and agency agreements
a) Key elements of different types of listing contracts
b) Key elements of buyer brokerage/tenant representation contracts
2. Disclosure when acting as principal or other conflict of interest
D. Responsibilities of agent to customers and third parties, including disclosure, honesty, integrity, accounting for
money
E. Termination of agency
1. Expiration
2. Completion/performance
3. Termination by force of law
4. Destruction of property/death of principal
5. Mutual agreement
A. AGENCY AND NON-AGENCY RELATIONSHIPS
TYPES OF AGENTS AND AGENCIES
AGENT: A person who acts on behalf of another person known as the principal/client.
SUB-AGENT: An agent of an agent.
Example: A salesperson is the sub-agent of the broker who is the agent of the seller or buyer. A co-
operating broker (selling broker) may become a sub-agent of the listing broker if they both agree to
represent the seller.
SELLER’S AGENT: An agent who has a listing agreement and who acts solely on behalf of the seller.
BUYER’S AGENT: An agent who has a buyer agency agreement and who acts solely on behalf of
the buyer.
DUAL AGENCY: Agent has legal representation with both seller and buyer in the same transaction.
Legal, only with written informed consent, of all parties.
TRANSACTION COORDINATOR/FACILITATOR: A licensee who is not acting as an agent of either

the buyer or the seller. A licensee may act as a transaction coordinator upon full disclosure to all the
parties to the transaction.
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DESIGNATED AGENCY
A. Broker may designate individual salespersons as exclusive agents of their clients.
B. A broker and a client may enter into a designated agency agreement. In the absence of a
written designated agency agreement, a client is considered to have an agency relationship with
the broker and all affiliated licensees.
C. If designated agents who are affiliated licensees represent different parties in the same real
estate transaction, the brokers, and all supervisory brokers, are considered disclosed
consensual dual agents for that real estate transaction.
D. Two designated agents who are affiliated licensees may each represent a different party in
the same transaction and shall not be considered dual agents.
E. A designated agent shall not disclose confidential information of a client to any licensee,
whether an affiliated licensee, except that a designated agent may disclose to any supervisory
broker confidential information of a client for purposes of seeking advice or assistance for the
benefit of the client.
SPECIAL AGENT: Principal authorizes agent to represent him/her in a specific matter and has given
him/her certain limited authority to that effect. Broker is usually appointed as special agent of the client.
GENERAL AGENT: Agent is authorized to represent the principal in a range of matters. Such agency
is created using a general “power of attorney” making the agent an attorney-in-fact.
POWER OF ATTORNEY: Legal document that authorizes a person to act on behalf of another as
his/her ATTORNEY-IN-FACT. May authorize a person to offer for sale, sell, collect monies at a closing
on behalf of the owner, etc.
FIDUCIARY RESPONSIBILITIES
1. A real estate broker operates as an agent of the seller or buyer.
2. Agent must legally obtain the right of representation by securing an EMPLOYMENT CONTRACT.
3. The employment contract is known as the LISTING AGREEMENT when working for the seller and a
BUYER AGENCY AGREEMENT when representing the buyer.
4. The person who employs the broker is the PRINCIPAL (CLIENT) while the opposite party is the
CUSTOMER.
5. Principal is owed trust and loyalty while the customer is owed fairness and honesty.
6. The relationship between an agent and his/her principal is called a FIDUCIARY, which is a
relationship of loyalty and trust. The broker is also known to be the FIDUCIARY.
7. A salesperson employed by the broker is directly an agent of the broker; the broker is the
salesperson’s principal.
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8. Because the salesperson is loyal to the broker who in turn is loyal to the principal, salespersons,
associate brokers, as well as cooperating brokers who operate as sub-agents, ultimately owe their
fiduciary duty to the principal.
C. CREATION AND DISCLOSURE OF AGENCY AND NON-AGENCY AGREEMENTS
AGENCY AND AGENCY AGREEMENTS
KEY ELEMENTS OF DIFFERENT TYPES OF LISTING CONTRACTS
A. EXPRESSED AGENCY/AGREEMENT: Written listing or buyer agency contract or verbally

stating “I am your agent”.
B. IMPLIED (OSTENSIBLE) AGENCY: Leading a person to believe that agent is representing him
by so acting or making statements such as telling the customer, “I protect your interest”, “I will get
you the best possible deal from the other party”.
AGENCY DISCLOSURE: Provided by the agent to buyers, sellers, landlords and tenants (for
residential property 1 – 4 unit dwellings or building sites used for the same purpose, including
condominiums) in advance, before they provide agent any confidential information. Purpose is to
state agent’s position as to which party is being represented.
PROCURING CAUSE: The effort that an agent contributes that ultimately results in a sale.
TYPES OF LISTINGS:
1. EXCLUSIVE RIGHT TO SELL:
The broker is employed as the sole agent of the principal and is promised a fee
regardless of who procures a buyer, whether broker under contract, another broker, or
even the owner.
2. EXCLUSIVE AGENCY LISTING:
Gives broker THE sole right to sell property, however, owner reserves right to sell by
him/her without paying commission. If any other broker sells the property, listing broker
is still protected.
3. OPEN LISTING:
A. Broker under contract is not the sole agent. It allows owner to list with as many
brokers as desired or sell property herself without paying a commission.
B. For the broker to be paid, s/he must be able to prove that s/he was the procuring
cause for the sale.
Example: Seller lists the property with four brokers. One of the four brokers sells the
property; the seller will pay the broker who sold the property. The other three brokers will
not receive a commission.
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4. A NET LISTING
A. Seller agrees to accept a certain price for the property, above which, the broker is
permitted to sell property for more and keep the difference. The broker ignores his
fiduciary duty that requires disclosing the true value of the property. The listing does not
set the asking price, it only specifies what the seller wishes to net after the sale.
B. This listing is ILLEGAL in Michigan
Example: Property has fair market value of $400,000, but the seller feels it is
worth $350,000. The broker promises seller the $350,000 and is permitted by
seller to ask any amount higher than $350,000 and keep the difference. The
broker does not tell the seller the true value and seller has no idea what the
broker will be trying to sell the property for.
PROTECTION CLAUSE: A clause inserted in a listing agreement aimed at protecting the

listing broker in the event that a buyer who was found by the broker returns to purchase the
property, directly from the owner but after the expiration date of the listing agreement.
KEY ELEMENTS OF BUYER BROKERAGE/TENANT REPRESENTATION CONTRACTS
EXCLUSIVE BUYER/TENANT AGENCY AGREEMENT: Buyer/tenant agrees to be solely

represented by a certain broker to locate property for sale or lease. Exclusivity means that
the broker will earn a commission when the buyer/tenant buys or leases a property whether
through the broker's efforts, or if the buyer/tenant locates property on his own, even if listed
by another broker or offered through a private owner.
The agreement is usually structured to pay the broker a certain commission by the client, but
the broker may agree to accredit the client for commission received from the seller or the
seller's agent.
For example, the agreement with the buyer may call for a 3% commission to be payable
upon purchasing a property, but the buyer's agent is offered a 3% commission split by
the listing agent, therefore, the money received from the listing agent will be accredited
to the buyer's account resulting in offsetting the commission due from the buyer. If,
however, the buyer's agent is only offered 2% commission split by the listing agent, the
buyer will owe his agent a 1% commission at closing.
This is not to say that a broker could not get paid by both buyer/tenant and seller/landlord
(although unlikely) after proper disclosure and consent of all the parties.
The broker owes a fiduciary duty to the buyer/tenant and will treat the opposite party as a
customer.
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DISCLOSURE WHEN ACTING AS PRINCIPAL

OR OTHER CONFLICT OF INTEREST
1- An agent who wants to buy property for his own account must make his position known.
2- An agent who represents a friend or relative must also disclose any conflict of interest that may
exist.
3- This issue is further discussed under “State Rules and Regulations”.
DUTIES TO CLIENT/PRINCIPAL
(BUYER, SELLER, TENANT OR LANDLORD)
1. TRUST, LOYALTY AND SKILL:
A. An agent must be trustworthy and has his first obligation of loyalty to the principal. Principal’s
interest must always come before agent.
Example: As agent of seller, must not recommend a lower price to buyer.
B. DISCLOSURE: Agent must notify principal of any information in his/her possession that can
promote the client’s interest such as knowledge of market conditions that improve the seller’s
bargaining position or the fact that there are multiple offers on the property and so on.
Example: Agent tells owner that the asking price is too low for present market conditions.
C. CONFIDENTIALITY: Must not divulge client’s sensitive information to customers unless

authorized by client, even after the agency relationship has terminated.
D. INDEMNIFICATION: An agent is liable to indemnify a principal for loss or damage resulting

from his/her act.
E. Must be knowledgeable with regards to marketing, negotiating, and current laws affecting
client’s rights and obligations. Must not give accounting, legal, or other expert advice outside the
scope of agency.
F. Must avoid PUFFING, or exaggerating facts, which can be misleading.
PUFFING: The exaggeration of property qualities to an extent that exceeds reality such as
saying: This new subdivision being built across the street is the largest, nicest, and most
expensive in the state and will help double your property value! Unless the statement is
proven to be correct, it is classified as Puffing which may result in legal liability against the
agent.
Statements based on proven facts and/or opinions are acceptable, such as saying: Based on
the public record, this house is the largest in this subdivision! Or saying: This house has one
of the nicest layouts that I have seen in a long time! Those statements are not misleading.
2. CARE AND OBEDIENCE:
A. SPECIAL AGENT must exercise authority with care. Must obey instructions without
substituting own judgment.
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B. Offering property for sale, advertising, yard signs, etc. must be authorized by the
owner.
3. ACCOUNTING FOR FUNDS
A. Agent must account for all funds received.
B. Agent must separate funds from his/her own personal money and account as required
by law.
RESPONSIBILITIES OF AGENT TO CUSTOMERS AND

THIRD PARTIES, INCLUDING DISCLOSURE, HONESTY,
INTEGRITY, ACCOUNTING FOR MONEY
1- Although an agent has a fiduciary duty to the client, s/he must be fair and honest with the
customer and any third parties.
2- Disclosure of nonmaterial facts to a customer such as a divorce, transfer, murder or suicide that
may have taken place at the property can only be done with client’s approval. But the agent
cannot remain silent regarding material facts such as a bad furnace, Water heater, roof leak,
etc.
3- State law requires agents to fully account for monies received from buyers and tenants as well.
Full accounting must be provided, and the broker’s books can be audited by the state.
E. TERMINATION OF AGENCY
EXPIRATION
1- According to state law, a listing or a buyer agency agreement must have a definite
expiration date, for example: this agreement should expire October 31st 20XX.
2- Upon expiration, the agency relationship is terminated unless the client signs a new
agreement.
3- More discussion will follow under State rules and regulations.
COMPLETION/PERFORMANCE
When the contract with the client is fully performed, i.e. the listed property is sold, or if the
buyer/client finds the property he is looking for, the contract with the client is terminated.
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TERMINATION BY FORCE (OPERATION OF LAW)
1- If the contract with the client was signed under duress or as a result of fraud, a court of law
may declare it to be null and void.
2- Under certain circumstances the listed property may be taken over by court such as in the
case of foreclosure, bankruptcy, condemnation, etc.
3- The Insolvency (Bankruptcy) of the broker will result in termination of agency because the
listing is a contract that requires personal service, therefore if the broker who has the
listing (not the salesperson) is no longer in operation because of bankruptcy, loses his
license, etc.
DESTRUCTION OF PROPERTY/DEATH OF PRINCIPAL
1- Destruction of property leads to a concept known as “impossibility of performance”. If the

property, for example, is destroyed by a fire, or a Tornado, this will be a reason to terminate
the listing.
2- Death/insanity of the principal or the broker results in termination of agreement because the
listing /buyer agency agreement requires personal performance of the parties. If either
party cannot perform, the contract terminates.
MUTUAL AGREEMENT
Broker and Client may mutually agree to terminate the agency relationship for various
reasons such as a decision by the owner to take the property off the market or a buyer/client
who may choose to stop looking to buy property.
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70
Seller
Buyer
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Property disclosures (Salesperson 5% | Broker 5%)
A. Property condition
1. Property condition that may warrant inspections and surveys
2. Proposed uses or changes in uses that should trigger inquiry about public or private land use controls
B. Environmental issues requiring disclosure
C. Government disclosure requirements (LEAD)
D. Material facts and defect disclosure
PROPERTY CONDITION & DISCLOSURE
PROPERTY OWNER’S ROLE REGARDING PROPERTY CONDITION
SELLER’S DISCLOSURE STATEMENT (SD): Sellers of residential property (one to four family
dwellings) must complete and sign seller’s disclosure statement and deliver it to the buyer before
entering into a binding purchase agreement.
If purchaser signs an offer without being provided with disclosure, s/he may withdraw from transaction
before closing and receive deposit refund.
Real estate offices (or the real estate licensee) must make the form available to the public even if
the person requesting the form is not a client of the agent.
Purchase agreement must identify that the buyer has or has not received the SD. Delivery can be
using a hardcopy or by electronic means.
SELLER’S RESPONSIBILITY FOR WITHOLDING INFORMATION
FRAUD: An intentional misstatement of facts.

Example: Seller knows that property is situated on 2 acres, but he states that he has 5 acres.
SILENT FRAUD (Non-Disclosure): The act of withholding information regarding concealed

property defects from the buyer while the seller knows if such information is disclosed, it may result
in losing the sale or offering a lower price.
Example: Seller paves over an old, leaky underground storage tank because he does not want
a potential buyer to find out about it.
MISREPRESENTATION (INNOCENT/NEGLIGENT MISREPRESENTATION): An innocent

misstatement of facts not intended to deceive the buyer.
Example: Seller believes that his property is situated on 5 acres and that is what he documents
in the sale, but the truth is that the property only sits on 2 acres. The seller should have known
that fact but was careless in making his statement.
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PROPERTY DISCLOSURES
Michigan Complied Laws Complete Through PA 41 of 2005 © Legislative Council, State of Michigan Courtesy of www.legislature.mi.gov
73
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LATENT DEFECT: A defect that is hidden but known to the seller only and cannot be revealed by an
ordinary inspection of the agent or buyer, such as a crack in a basement wall that is concealed behind
some drywall or paneling. A “non disclosure” of a defect will result in seller committing “silent fraud”.
PATENT DEFECT: A defect that can be discovered as a result of a reasonable inspection that is
conducted on the property, such as an obvious roof leak, furnace problem, etc.
LICENSEE’S ROLE REGARDING PROPERTY CONDITION
1- If licensee is aware of certain property defects, licensee has a duty to disclose the information to
the buyer even if licensee was a seller’s agent.
2- Licensee must encourage the seller to disclose all known defects even if the defect is not
addressed in the seller’s disclosure statement.
STATE POSITION REGARDING DISCLOSURE: A licensee’s disclosure of material facts in the

property shall not be considered grounds for disciplinary action by the Department against the
licensee, despite a claim by the seller that such disclosure constituted disloyalty to the seller.
MATERIAL FACTS RELATED TO PROPERTY CONDITION OR LOCATION
MATERIAL FACTS: Have direct effect on value such as a leak in the roof, pollution, a bad furnace, etc.
It may not be a defect but an issue that a buyer must know such as the fact that the seller has made an
addition to the property without a permit or has an ongoing legal problem with a neighbor or the
association. Material facts must be disclosed to the buyer.
If the seller chooses not to disclose a material fact, the agent may not continue to represent the seller.
NON-MATERIAL FACTS: Have no effect on value such as the reason for the sale, seller is sick, getting
a divorce, seller lost job and is desperate for money, or, for example, that a murder or suicide has
occurred in the house. No duty is imposed to disclose. In fact, as agent of seller, you will jeopardize
seller’s bargaining position by voluntarily disclosing such unnecessary information.
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ENVIRONMENTAL ISSUES REQUIRING DISCLOSURE

LEAD PAINT DISCLOSURES
1- As discussed earlier under the section “land use controls and regulations”, a property may
have certain environmental hazards that must be dealt with when selling or leasing that
property.
2- Environmental hazards may also exist outside the property such as a nearby dump, air pollution
a nearby factory, oil refinery, Storage tanks that are buried outside the property, and so on.
3- The seller’s disclosure statement addresses certain issues, but the fact remains that if the seller
or agent knows of any hazards, full disclosure is required. Keep in mind that the seller’s
disclosure statement only applies to residential property (1-4 family dwellings). The seller of
commercial property or vacant land may complete a disclosure statement but on voluntary
basis.
10. Environmental Problems: Are you aware of any substances, materials, or products that may be an
environmental hazard such as, but not limited to, asbestos, radon gas, formaldehyde, lead-based paint, fuel or
chemical storage tanks and contaminated soil on the property
unknown____ yes____ no _____ If yes, please explain: ________________________________
__________________________________________________________________________________________
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CONTRACTS
Contracts (Salesperson 13% | Broker 13%)
A. General knowledge of contract law

1. Requirements for validity
2. Factors affecting enforceability of contracts
3. Void, voidable, unenforceable contracts
4. Rights and obligations of parties to a contract
5. Executory and executed contracts
6. Notice, delivery and acceptance of contracts
7. Breach of contract and remedies for breach
8. Termination, rescission and cancellation of contracts
9. Electronic signature and paperless transactions
10. Bilateral vs. unilateral contracts (option agreements)
B. Contract Clauses, including amendments and addenda
C. Offers/purchase agreements
1. General requirements
2. When offer becomes binding
3. Contingencies
4. Time is of the essence
D. Counteroffers/multiple offers
1. Counteroffers
2. Multiple offers
A. GENERAL KNOWLEDGE OF CONTRACT LAW
REQUIREMENTS FOR VALIDITY
1- OFFER AND ACCEPTANCE: Requires “Mutual Assent” also known as “Meeting of The
Minds”. The contract must show a clear intent to form a contract as a result of an offer that is
made by an “offeror” and acceptance by the “offeree”.
a-The parties must agree on all the terms of the contract and understand all items. Acceptance
of an offer or a counteroffer must be absolute and not partial. Any changes made to the offer will
render the offer “null and void”.
b-Offer is normally deemed accepted when acceptance has been communicated back to the
offeror before the expiration of the time limit stated in the offer. Once accepted by the seller, no
other offers can be accepted unless specifically allowed by the contract or possibly accepted as
a “back-up” offer.
c-An offer or counteroffer may be REVOKED by the offeror prior to the offeree’s acceptance
being communicated back to her.
Counteroffer: is an offer that is made by one of the parties to the contract in response to a
previous offer that is received. For example, the seller has listed the property for $300,000 and
the buyer offers $280,000, the seller sends a counteroffer in the amount of $290,000 and the
buyer has a choice of either accepting the $290,000 offer or sending a counteroffer in the
amount of $285,000 and so on and so forth.
Sending the counteroffer means that the offeree has rejected the earlier offer received from the
other party. Therefore, sending $290,000 counteroffer means that the $280,000 offer has been
rejected. If the buyer simply rejects the $290,000 counteroffer and does not send a counteroffer
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CONTRACTS
to the seller, that means the end of the transaction and the buyer has the right to ask for a
deposit refund.
If, later, the seller changes his mind and finally decides to accept the $280,000 original offer, it
may be too late, and he must see if the buyer is willing to make a $280,000 offer again because
the original offer does not exist anymore.
Methods of creating a counteroffer
1- Make the required changes on the existing offer, initial the changes and send it to the other
party. If the other party agrees with your changes, s/he can initial those changes, which
finalizes the agreement. The other party may make new changes on the counteroffer, initial,
and send it back and now it's a new counteroffer.
2- Reject the existing offer and draft a new offer (clearly marked as a counteroffer) to be sent
to the other party and see if s/he accepts or may send you another counteroffer and so on.
Multiple offers and counteroffers
1- If the seller receives multiple offers, s/he may only accept one. Any additional offers that the
seller wishes to accept must be clearly marked as a backup offer.
2- It is not recommended that a seller sends multiple counteroffers to multiple buyers because
what if all of them got accepted? How can the seller sell the property to multiple buyers?
3- If several buyers want to buy the same property and the seller does not like any of their
offers, he may notify all of them with a certain deadline, by which, they can submit their
highest and best offer, and the seller can then choose one offer to accept.
Electronic signature and paperless transactions
1- Parties to a contract may agree to abide by electronic/paperless documents. That fact

should be stated in writing.
2- An electronic/digital signature is as enforceable as an ink signature.
“Bottom Lining” a contract - Serves only as verification that a copy of the signed/accepted
purchase agreement has in fact been provided to the buyer which renders the purchase
agreement binding on all parties because an accepted offer/counteroffer is not binding until the
offeror has been notified. The delivery of copies to all parties also satisfies Michigan
Occupational Code:
R 339.22307(3) “Upon obtaining a proper acceptance of the offer to purchase, signed by the
seller, the licensee shall promptly deliver true executed copies of the acceptance to the
purchaser and seller.”
Bottom lining is needed only if the parties are using a hard copy. If, for example, the parties
have agreed to electronic communications, an emailed, accepted offer will satisfy the state
requirement and will serve as proof that an offeror has been notified of the offeree’s acceptance.
AMENDMENT: A contract used to amend (change) the terms of a purchase agreement when
such changes are necessary after an offer has successfully been negotiated and accepted by
the parties, but before the closing.
It should not be confused with an “Addendum” (Addenda for plural) which is a rider or addition
to an existing contract such as a list of personal property that is added to a real estate purchase
agreement.
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CONTRACTS
2- VALUABLE CONSIDERATION: Parties to the contract promise to provide something of value.

Consideration may be monetary or equivalent to money such as a “note”, “love and affection”
(also known as “good consideration”) or a promise to act or not to act (forbearance), etc. there is
no minimum amount of money set by law. An Earnest Money Deposit (EMD) is used in the
sales contract (purchase agreement) to show the buyer’s serious intent and good faith.
The promise of consideration exchanged in a contract could be UNILATERAL or BILATERAL.
A. UNILATERAL CONTRACT:A promise is exchanged for an act. Example: Option Contract.
B. BILATERAL CONTRACT: A promise is exchanged for another promise. Example: An

accepted offer to purchase, a signed lease, etc.
3- LEGAL CAPACITY: Persons entering a contract must have legal capacity, also known as
“contractual ability”, i.e., of sound mind and legal age. A person who is severely intoxicated,
suffers a drug dependency, Alzheimer disease, Dementia, etc. may lack contractual ability.
Illiterate persons are considered competent if they enter the contract with full understanding and
sign by placing an X mark that is witnessed..
4. LEGAL OBJECTIVE: A contract for an illegal purpose is void.
ENFORCEABILITY OF CONTRACTS:
1. VALID CONTRACT: Legally binding; one that contains all the necessary contractual
elements.
2. VOID CONTRACT: Missing an essential element, may not be enforced against one party by
the other.
Example: You contract with a non-licensed person and promise to pay a real estate
commission. The contract is void.
3. VOIDABLE CONTRACT: Can be voided or enforced by one party to the transaction who
may have entered the contract under duress or was misled which results in being legally injured.
Example: Seller lies about the size of a building but later the building proves to be worth
twice as much. The buyer can choose to enforce the contract instead of declaring it
“void” due to fraud.
4. UNENFORCEABLE CONTRACT: Not enforceable in a court of law such as a verbal

contract, a signature is obtained under duress, expiration of statute of limitations, etc.
STATUTE OF FRAUDS: Requires certain contracts to be in writing in order to be enforceable. Also

requires parties to sign contract to become bound by its terms.
STATUTE OF LIMITATIONS: Law that allows a specific time limit during which the parties to a contract
may bring legal suit to enforce their rights after which time such rights are lost.
EXECUTORY CONTRACT: A contract that establishes duties to be performed by the parties on a

specified future date. The contract remains executory as long as it has not been fully performed such
as a purchase agreement, a lease contract, a land contract, etc. once performed, the contract is
considered to be executed, i.e. terminated. For example, a purchase agreement is considered
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CONTRACTS
executed upon closing the transaction.
CONTINGENCIES
A contingency is a condition placed in a contract allowing a party to back out of the contract in the event
the stated condition(s) are not met. A contingency may also be referred to as an “escape clause”.
Example 1: An offer to purchase is subject to obtaining financing. If buyer diligently tries and is
rejected by lender, s/he can choose to cancel the agreement, get a deposit refund and the property
is back on the market.
Example 2: Seller receives an offer from buyer (1) that is subject to the sale of the buyer’s house.
The seller wishes to accept but does not want to be at the mercy of the buyer who may not sell his
house anytime soon. The seller counters by adding an “escape clause” stating: in the event that the
seller receives a second good offer from buyer (2), he will give the first buyer 72 hours to remove
the “house selling” contingency and proceed with the purchase, otherwise the seller has the right to
declare the first offer “null and void” and sell to the second buyer.
TERMINATION OF CONTRACT:
A. PERFORMANCE: The purpose for which the contract was established has been satisfied.
For example, a purchase agreement is performed at closing. A listing agreement is performed
upon the sale of the property.
B. RESCISSION: The cancellation of an already signed contract, returning to status quo.
Example: Regulation Z allows an owner who is refinancing residential property to rescind a

loan within three banking days after closing the loan, for a full refund of all fees paid.
C. OPERATION OF THE LAW:
1- Termination because of an illegality: The contract may have been signed as a result
of fraud; a party was acting under duress or was a minor, or the expiration of the statute
of limitation.
2- Impossibility of performance: Such as in the case of destruction of premises that is

the subject of a listing agreement, purchase agreement, or a lease.
3- Termination by death or insanity: If the person who is liable to perform under a

contract dies or becomes legally insane the other party can cancel.
Example: A broker is hired to sell property under a listing agreement. A month later, the
broker is no longer in business, becomes insane, or dies. The listing agreement will be
terminated. Death, insanity, insolvency of the salesperson has no effect on the validity of
the listing because it is signed between the seller and the broker not between seller and
salesperson.
D. LEGAL CONTINGENCY: The contract may specifically state that if the buyer, for example,
could not get certain financing, he may have the option to declare the purchase agreement null
and void.
E. EXPIRATION of contract
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CONTRACTS
F. REVOCATION by offeror before the offer is accepted.
G. REJECTION by the offeree who receives an undesirable offer.
B. CONTRACT CLAUSES
DURESS: To use force, threats or violence to force someone to enter into a contract.
UNDUE INFLUENCE: A situation created when in a close and confidential relationship one
party has taken advantage of another to influence him/her to such a degree that freely given
consent and understanding has been seriously impaired.
Example: A buyer calls upon the courts to rescind a purchase agreement because the
seller’s agent misled the buyer to believe that he is acting on his behalf and that the contract
was in the buyer’s favor.
SPECIFIC PERFORMANCE: Legal action taken to obtain a court order directing the breaching
party to perform under the terms of the contract as agreed.
Example: Seller refuses to close the transaction after accepting a purchase agreement.
Buyer may have the option to sue the seller, legally compelling him to close the transaction.
LIQUIDATED DAMAGES: An amount of money paid to a party in the contract to fully satisfy or
“liquidate” any damages suffered.
RESCISSION [to rescind (v)]: The termination of a valid contract, and returning to “Status
Quo”
EQUITABLE TITLE: Legal interest that buyer acquires in property after the signing of a sales
contract (purchase agreement) by all parties that gives her the legal right to compel the seller to
deliver title to property when the buyer pays the entire purchase price.
Also, the right given to the purchaser on the land contract (Vendee)
TIME IS OF THE ESSENCE: A clause that is added when the time limit expressed in the
contract is not flexible; the contract must be performed on or before a certain deadline. The
contract will terminate exactly at the deadline stated unless the parties to the contract agree to
extend the time limit.
Example: If you were supposed to meet your client at 3 PM but got stuck in traffic, you can
probably arrive 10 minutes late with no problem. But if you had a train or a plane to catch,
can you be 10 minutes late? Therefore, when the purchase agreement states: closing date
is on or before October 10, 20XX, “time is of the essence”, a court of law will not grant any
flexibility in case the buyer wants to close a week later.
BREACH OF CONTRACT AND

REMEDIES FOR BREACH
1. A breach is a violation of any of the terms or conditions of a contract without legal excuse.
2. Upon default, the innocent party may do the following:
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CONTRACTS
A. The buyer may ask for a refund of his money.

B. The seller may keep the buyer’s deposit as “liquidated damages”.
C. Either party may sue for damages.
D. Either party may sue for “specific performance”.
ASSIGNMENT AND NOVATION
1. TO ASSIGN (verb): To transfer one’s rights and obligations to another.
ASSIGNMENT (noun): A legal instrument used to pass or transfer rights and obligations from
one party under contract to another. Real Estate contracts are usually assignable unless
specifically prohibited in the contract, or if the contract calls for personal performance such as in
the case of a listing agreement, then assignment will not be available.
1. The person who assigns his rights is called the ASSIGNOR.
2. The person receiving the rights (assuming the rights) is the ASSIGNEE.
NOTE: Although a contract has been assigned, the assignor may still be liable to meet the terms
of the contract if the assignee does not, unless the assignor is specifically released of obligation
in writing.
2. NOVATION OF CONTRACT: The substitution of a new contract in place of an existing one or the
substitution of a party in place of another where the new party becomes obligated under the new contract
which extinguishes the obligation of the previous party. For example, refinancing an existing loan with a
new one which terminates the obligation under the old loan, or terminating an existing lease and replacing
it by signing a new lease with another tenant at possibly more favorable terms.
OPTION CONTRACT
1. A unilateral contract by which an OPTIONOR (generally an owner) gives an OPTIONEE (a

possible purchaser/buyer or lessee) the right to buy or lease the owner's property at a fixed price
for a stated period. It requires the optionor to sell if the optionee chooses to exercise the option.
2. The optionee pays a non-refundable option fee for acquiring the right to the option and
assumes no obligation to exercise the option.
3. Usually assignable by the optionee to other interested parties.
4. The optionee does not agree to buy; s/he only reserves the right to buy.
RIGHT OF FIRST REFUSAL: Allows an individual (investor or tenant) to match a purchase price or
rent offered to the owner by a third party. If the purchaser/tenant agrees to match, the property is sold
or lease to the investor/tenant and not to that third party.
Ex: Investor signs a “right of first refusal” on land requiring owner to inform him of any offers received
before the owner accepts. The owner notifies the investor that he is in receipt of $250,000 cash offer
from his neighbor and the investor notifies seller that he is willing to match it. The seller must sell
property to the investor and not the neighbor.
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LEASING & PROPERTY MANAGEMENT
Leasing & Property Management (Salesperson 3% | Broker 4%)
A. Basic concepts/duties of property management

B. Lease Agreements
1. Types of leases, e.g., percentage, gross, net, ground
2. Key elements and provisions of lease agreements
C. Landlord and tenant rights and obligations
D. Property manager’s fiduciary responsibilities
E. ADA and Fair Housing compliance in property management
F. Setting rents and lease rates (BROKER ONLY)
A. BASIC CONCEPTS
LEASE: An agreement for possession of land that belongs to the LESSOR (landlord) for a certain
period of time in consideration of a payment of rent or other income by the LESSEE (tenant).
LEASEHOLD: Is the legal interest that a tenant/lessee has in leased premises. The landlord/lessor
is usually the holder of a fee simple estate and has a reversionary right to the property once the
tenant/lessee vacates the premises.
DUTIES OF A PROPERTY MANAGER:
a- Locate tenants to fill in vacancies in the managed property

b- Supervise property maintenance and pay necessary bills as needed
c- Work with tenants to resolve complaints
d- Analyze comparable market rents to set the right lease rates for the managed property
e- Collect rent and be held accountable to the owner through an accurate bookkeeping system
TYPES OF TENANCY
1. ESTATE (TENANCY) AT WILL:
A. Estate for an Indefinite/Undetermined duration usually continues month to month with

consent of landlord and tenant.
B. Either party can terminate occupancy by giving the other a notice.
2. ESTATE (TENANCY) FOR YEARS:
A. A lease is created with a certain predetermined duration of time.
B. All parties are obligated to meet the terms of the lease.
3. ESTATE (TENANCY) FROM PERIOD TO PERIOD:
A. Also called an estate from year to year or periodic estates.
B. Involves automatic equal renewals in the lease. It may be created by special contract or
simply upon the termination of an “estate for years” where the lease stipulates that, upon lease
termination, the tenant may stay (hold over) on a month to month basis, or year to year basis or
whatever the lease calls for.
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4. ESTATE (TENANCY) AT SUFFERANCE:
Tenant occupies the premises with the landlord’s consent but later loses such consent.
B. LEASE AGREEMENTS
TYPES OF LEASES
A. NET LEASE: More common in commercial leasing, the tenant pays rent, plus some or all
operating expenses such as property taxes, insurance, maintenance, etc. Referred to as a
TRIPLE NET lease.
B. GROSS LEASE: More common in residential housing. Provides that tenant pays a fixed
amount of rent and landlord pays operating expenses, such as maintenance, taxes, insurance,
etc.
The lease may contain increases based on future expenses in relation to property taxes,
insurance and maintenance. Increases specified using an ESCALATION CLAUSE.
C. PERCENTAGE LEASE:
1. Normally used for retail outlets and department stores.
2. Paid in proportion to gross sales of the leased retail establishment
3. BASE RENT: Specified as a minimum, plus a percentage of the gross sales.
Example: Department store is leased for $120,000/yr. base rent plus 1% of gross sales. If
store revenue were $10,000,000/yr., percentage rent would be $100,000 in addition to base rent
D. GRADUATE LEASE (STEP-UP LEASE): Pre-planned rent increases scheduled at certain

intervals and described in an ESCALATION CLAUSE. More popular in commercial leasing
especially when the landlord is anxious to fill in vacancy. Used to attract tenants and help them
get established by lowering rent payments at the beginning of the lease term.
Example: A five-year lease starts at $500/month for the first year, $800/month for the second
year, and $1,200/month thereafter for the third, fourth and fifth years.
E. INDEX LEASE: Provides for rent adjustments based on a predetermined index such as the
consumer price index, cost of living index, or another index.
F. GROUND LEASE (LAND LEASE): Lease of land that allows for erection of a building,
usually a long-term net lease. Tenant agrees to pay all expenses on land. Also, it is found in
mobile home parks where land is leased to place a mobile home on it. Farmers may also utilize
a land lease when they lease additional acreage to farm.
G. OIL AND GAS LEASE: Owner executes a lease to a company who searches for oil and gas
and receives a percentage of the profits (royalty).
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NOTE: The previous types of leases merely describe “features” in a lease that can be
combined. For example, a gross lease may also be an index lease, or a net lease may be a
step-up lease and so on.
KEY ELEMENTS AND LEASE PROVISIONS
THE SUB-LEASE CLAUSE:
1. Prohibits tenant from sub-leasing without consent of landlord.
2. The sub-lease process:
A. Tenant may act as a landlord and sublease a portion or all the premises s/he occupies to
another tenant.
B. Tenant is known as the SUB-LESSOR and the new tenant is the SUB-LESSEE
C. The interest of the sub-lessor is known as a SANDWICH LEASE.
D. Sub-lessor is not usually relieved of liability. In case new tenant [sub-lessee] damages
property, sub-lessor is liable (unless sub-lessor is specifically released of liability).
Example: Tenant rents a four-bedroom house for $600 and subleases one bedroom to a
college student for $200 a month. The college student is the sub-lessee, the tenant is the sub-
lessor and the owner of the four-bedroom house is the lessor.
THE ASSIGNMENT OF LEASE CLAUSE:
1. Prohibits assignment of lease without lessor's consent.
2. The assignment of lease process:
A. A tenant (lessee, assignor) transfers rights and obligations in lease to another (assignee).
B. Assignor is still liable if assignee does not meet obligation (unless assignor is specifically
released of liability).
Example: Tenant rents a four-bedroom house for $600 a month on a one-year lease. Three
months later he assigns the lease to another tenant (assignee) who assumes the lease and
starts to make monthly payments to the lessor (original landlord). The assignee has full rights
and obligations under the lease.
FIXTURES CLAUSE: Addresses whether fixtures installed by the tenant must be, could be or could
not be removed after expiration of lease and which party is responsible (usually the tenant) to repair
damages caused by the installation or removal of fixtures.
THE LEASE RUNS WITH THE LAND: When ownership of leased property transfers, the lease
continues to be binding on the tenant as well as the new owner.
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LEASE WITH OPTION TO BUY: A tenant signs a lease on property giving her the right (option) to
purchase it at a certain price and terms during a set duration. The tenant is only obligated for the initial
lease term. No further obligation exists. If the tenant decides to exercise her option, the lessor must
perform.
For example: Tenant signs a one-year lease with an option clause allowing the tenant to purchase the
property for $250,000 on or before lease expiration. The tenant is obviously obligated for the one-year
lease but there is no obligation to purchase the property. If the tenant decides to exercise her option,
she will simply notify the landlord of her intention and the landlord is obligated to sell the property at the
price and terms set in the option.
LEASE PURCHASE: An interested buyer is given the right to lease the property for a period but signs
a purchase agreement which will go into effect upon lease expiration. This is different than a “lease with
option to buy” which does not obligate the tenant to purchase the property at the end of the lease.
TERMINATION OF LEASE:
1. PERFORMANCE (EXPIRATION): Tenant meets obligation under lease.
2. MUTUAL AGREEMENT (SURRENDER): Tenant and landlord agree to terminate lease

before expiration.
3. EVICTION: Legal or constructive.
Constructive eviction: An act of a landlord that is of such a character as to deprive the tenant
of the beneficial use and enjoyment of the property. It may result from landlord’s action, such as
entering premises without permission, shutting off utility services, etc. or may result from
landlord’s failure to maintain the premises making it inhabitable. The act results in breaching
the lease covenant of “peaceful possession” which entitles the tenant to break the lease without
obligation and possibly punish the landlord.
4. OPERATION OF THE LAW: Bankruptcy, condemnation, foreclosure, tax sale, etc.
5. DESTRUCTION of premises (impossibility of performance).
SETTING RENTS AND LEASE RATES
1. As a landlord or tenant – representative, a broker must have a good knowledge of market rental
rates.
2. Market rents are dictated by the going rates for comparable properties.
3. A broker has a fiduciary duty towards landlord and tenant clients and is required to possess the
necessary skills to research the market and determine the amount of rent that a property should
be marketed at or the rent that a tenant-client should be paying.
4. For residential property, landlord and tenant rights are determined under Michigan landlord –
tenant relationship act and the Michigan truth in renting act.
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TRANSFER OF TITLE
Transfer of title (Salesperson 6%/ Broker 5%)
A. Title Insurance
1. What is insured against
2. Title searches, title abstracts, chain of title
3. Marketable vs insurable title
4. Potential title problems and resolution
5. Cloud on title, suit to quiet title (BROKER ONLY)
B. Deeds
1. Purpose of deed, when title passes
2. Types of deeds and when used
3. Essential elements of deeds
4. Importance of recording
C. Escrow or closing; tax aspects of transferring title to real property
1. Responsibilities of escrow agent
2. Prorated items
3. Closing statements/TRID disclosures
4. Estimating closing costs
5. Property and income taxes
D. Special processes
1. Foreclosure
2. Short sale
E. Warranties
1. Purpose of home or construction warranty programs
2. Scope of home or construction warranty programs
A. TITLE INSURANCE
WHAT IS INSURED AGAINST?
1. A policy that protects the insured against monetary losses that result due to a defective title, protection;
may protect against:
A. Unrecorded instruments.
B. Forged instruments and deeds.
C. Any information that the examining attorney might overlook.
D. Undisclosed or missing heirs, etc.
2. Remember, title insurance policy does not insure the property. The owner needs to get a homeowner’s
policy or other Insurance as needed.
3. The best Title Policy is one that is issued “without standard exceptions”.
4. TYPES OF TITLE POLICIES (BOTH the buyer and the seller must obtain title insurance)
A. OWNER'S POLICY: Usually provided and paid for by the seller (premium is paid once upon
purchasing the policy at closing). The policy is issued in the amount of the purchase price and
protects the purchaser and his/her heirs against losses due to title defects.
B. LENDER’S (MORTGAGEE’S) POLICY: Insures the lender’s interest in the property against
losses due to a defective title. Issued in the amount of the mortgage loan. Coverage is reduced
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TRANSFER OF TITLE
with the decrease in mortgage balance. Provided by the borrower for the benefit of the lender
(premium is paid once upon purchasing the policy at closing).
TITLE SEARCHES, TITLE ABSTRACTS, CHAIN OF TITLE
1- Title is searched by inspecting the chain of recorded instruments: including deeds, land contracts,
assignments, mortgages, etc. The main purpose of the search is getting information about Ownership
and Encumbrances.
2. ENCUMBRANCES: Liens, mortgages, taxes, leases, easements, judgments, deed restrictions,

possibly encroachments, etc. attached to property that may become a burden and which may diminish its
value. Encumbrances “run with the land”, i.e. unless cleared before the sale, it continues to affect the
property and must be honored by the new owner.
3. EVIDENCE OF TITLE: Shown by collecting group of facts resulting from the recording of instruments.
A. CONSTRUCTIVE NOTICE: Public notice, results from recording an instrument.
1. An instrument does not have to be recorded to be valid.
2. A recorded instrument will have a direct effect on title search.
3. Unrecorded instruments do not give the public any notice and have no effect on subsequent
owners or lenders who record their interest in good faith.
4. Instruments are recorded CHRONOLOGICALLY, i.e., in the order and date that it was
received.
B. ACTUAL NOTICE: Notice given to a person when he sees or is notified of an instrument, he

may see a person in possession, or notices an encroachment on the property.
Example: A person buying land who sees evidence of a road that passes through the land
must take notice although the public record and/or surveys do not mention that road.
4. PRIORITIES OF LIENS: An instrument that was recorded before another has priority over the latter.
Example: Two mortgage loans are recorded at different times. The first mortgage was
recorded in 2010 and the second in 2016. The mortgage that was recorded in 2010 is a first
mortgage (senior mortgage lien) and the 2016 mortgage is second (junior mortgage lien). The
first mortgage will have priority over the second mortgage in the event of foreclosure and will
be paid first when property is sold at a foreclosure auction.
Example: A mortgage is placed on property in the year 2010 but it was not recorded. In 2016
another mortgage was placed on the same property and it was promptly recorded. The latter
mortgage created a first (senior) lien because it was recorded first, i.e. before the 2010
mortgage. In the event of foreclosure, the latter mortgage will have priority over the 2010
mortgage and any proceeds resulting from a foreclosure auction will first be directed to it. The
2010 mortgage will not be paid unless there is extra money left from the foreclosure sale.
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TRANSFER OF TITLE
Subordination clause: States that the rights of a mortgage holder will be secondary or subordinate
to a later lien or encumbrance, giving the second encumbrance priority.
5. CHAIN OF TITLE: The chronological succession of all recorded conveyances that lead to the present
title being held. For example: from Jones to Davis to Smith to Nelson and so on
6. TITLE ABSTRACTS
1. A summary of all recorded encumbrances and conveyances affecting title. It does not
guarantee title to anybody. An attorney's opinion (CERTIFICATE OF TITLE) is required to
show that title is marketable.
2. Use has mostly ceased in the real estate market in favor of title insurance.
3. In Michigan, title is generally considered marketable if there appears to be no unresolved

clouds on the title for the past 40 years and there is no one presently in hostile possession.
CLOUD ON TITLE, SUIT TO QUIET TITLE
CLOUD ON THE TITLE: Defects affecting marketability of title. Normally title insurance company would
attempt to clarify before agreeing to insure title.
Example: Johnson buys property from Sharon and Bill Smith. Bill Smith brings a lady to the closing
who claims to be Sharon Smith and who presents a fake ID. Later it is discovered that the real
Sharon Smith never signed the deed, creating a cloud on the title.
QUIETING TITLE SUIT: Court-ordered hearing held to determine land ownership. Action may be the
result of a person's claim to establish ownership and/or remove a cloud from the title.
LIS - PENDENS: A legal document that gives notice of a lawsuit affecting property.
SELLER’S AFFIDAVIT: A sworn statement that specifies the seller does in fact hold title as well as a
attesting to other facts as required by the insurance company such as the marital status of the seller, the
existence of liens that may not be on public record, unpaid taxes and utility bills, that the seller is not
involved in bankruptcy, etc
SUBROGATION CLAUSE: A clause in the title policy that allows the insurance company to seek
reimbursement for a paid claim, from a third party who is responsible for the loss.
MARKETABLE TITLE: Free from any clouds or defects. Enables a purchaser to resell property without
additional effort to clear title.
UNMARKETABLE TITLE: Title may have certain defects that must be cleared. A cloud on the title may
be as simple as an unpaid tax bill and as serious as a deed that is missing a signature of one of the
owners.
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TRANSFER OF TITLE
B. DEEDS
PURPOSE OF DEED, WHEN TITLE PASSES
DEED: An instrument used to transfer title to real estate.
GRANTOR: One who transfer title to real estate, usually a seller.
GRANTEE: The person receiving title, usually a buyer.
DEED ESSENTIALS
A. NAMES AND ADDRESSES of the Grantor and the Grantee.
B. CLAUSE OF CONVEYANCE, (GRANTING CLAUSE): Deed must spell out that title is being
transferred from the Grantor to the Grantee.
For example: From Davis to Nelson.
C. TO HAVE AND TO HOLD CLAUSE, (HABENDUM CLAUSE): Specifies how title is

conveyed, whether a fee simple absolute, defeasible fee, or life estate.
For example: From Tom to Sharon for her natural lifetime only. Upon her death, title reverts
to Tom.
D. VALUABLE CONSIDERATION: A clause acknowledging that the grantor has received

consideration, there is no minimum amount of money required by law.
E. LEGAL CAPACITY: Grantor must be of sound mind and legal age. Although a grantee can
be a minor, a grantor must be of legal age. Property titled to a minor can be deeded by a court-
authorized legal guardian.
F. LEGAL DESCRIPTION
G. EXECUTION: Signed by the Grantor: The Grantee does not sign the deed
H. DELIVERY AND ACCEPTANCE: For title to pass, the deed must be voluntarily delivered by
grantor, and accepted by grantee.
I. RECORDING: Although not mandatory to validate a deed, a deed should be immediately

recorded at the register of deeds for public record. To record in Michigan, the following is required
by the Register of Deeds in addition to the previous requirements:
1. Date
2. Name and address of person preparing the deed.
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TRANSFER OF TITLE
3. Signatures appearing on the deed must have names printed or typed underneath.
4. Address of the Grantor and Grantee.
5. Acknowledgment (notarizing): Grantor signs in the presence of a Notary Public, a

judge, or other official.
An acknowledgment: A declaration made in the presence of an authorized official, by

someone stating that s/he is that person and is acting under no pressure and with free will.
TYPES OF DEEDS (GENERAL WARRANTY,

SPECIAL WARRANTY, QUITCLAIM) AND WHEN USED
I. WARRANTY DEED
1. GENERAL (FULL) WARRANTY DEED: Contains ALL deed covenants, gives assurance of the
quality of title and provides the most liability for title defects against the grantor.
A. COVENANT OF SEISIN: Grantor guarantees that he is "seized" or actually possesses a fee-

simple or other interest and s/he has the right to convey such to Grantee.
B. COVENANT AGAINST ENCUMBRANCES: Grantor guarantees that title is free of all

encumbrances except those stated in the deed or on the public record and that s/he will protect
the buyer's title against any liens, debts, or other encumbrances that may arise.
C. COVENANT OF QUIET ENJOYMENT: Grantor covenants that the property is free from
claims of others claiming title to it.
D. COVENANT OF WARRANTY OF TITLE (warranty forever): Grantor forever warrants title to

the premises conveyed and promises to defend the Grantee's title against all claims and will
compensate the Grantee with money if the title became defective.
E. COVENANT OF FURTHER ASSURANCE: If a cloud (defect) surfaces on title after

conveyance, Grantor agrees that s/he will execute any instruments necessary to eliminate the
problem.
2. SPECIAL WARRANTY DEED: Conveys title but covenants only against claims arising out of the
Grantor's period of ownership. This deed is often used by lenders who sell foreclosed property and
provide assurance against title defects for the period that the lender (grantor) owned the property,
which may be for a short period of time.
II. QUIT CLAIM DEED: Used to relinquish or quit whatever interest the Grantor may have in the property
if any at all. It does not guarantee that Grantor owns the property and gives no assurance to the quality
of the title. This deed provides the least liability for title defects against the grantor, yet it places maximum
liability against the grantee who is not receiving any covenants of title.
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TRANSFER OF TITLE
III. JUDICIAL DEED: Ordered by court such as:
1. Executor's Deed: Issued with approval of Probate Court by the “Personal Representative” of the
estate (executor) named by a person who died “Testate”, i.e. died leaving a will.
Devise: Real Estate that is willed.

To Devise: To will property to a person or entity.
Devisor: The deceased also referred to as the “testator”
Devisee: The heir.
2. Administrator's Deed: Issued with approval of Probate Court by “Personal Representative” of the
estate (administrator) who is appointed by probate court because the deceased did not leave a will,
i.e. died Intestate.
3. Guardian's Deed: Issued by someone appointed to protect a minor, an insane, or an incapacitated

person
4. Trustee's Deed
5. Sheriff's Deed
BILL OF SALE: Transfers title to Chattel (personal property). For example, when closing a transaction
that involves appliances, a deed would not be suitable to transfer title to a stove or refrigerator. A bill of
sale would be needed.
C. ESCROW OR CLOSING; TAX ASPECTS OF TRANSFERRING TITLE TO REAL PROPERTY
RESPONSIBILITIES OF ESCROW AGENT
1. Verify identity of parties.

2. Parties to sign all necessary documents.
3. Funds and documents to be distributed to the right individuals.
4. Documents are recorded at “Register of Deeds”.
5. Proper IRS and state forms to be filed such as: 1099-S, L-4260, Property transfer affidavit, T-
1056/2368- Affidavit of homestead exemption.
PRORATED ITEMS
1. Necessary upon sale of property.

2. Property taxes are usually paid annually, and a proration is required to provide debits and credits to
both Buyer and seller.
3. For income producing properties, rent received by seller in advance is prorated until end of rental
period and paid to buyer at closing.
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TRANSFER OF TITLE
CLOSING STATEMENTS/TRID DISCLOSURES
A. A broker shall furnish a closing statement showing all receipts and disbursements affecting buyer
and seller. This requirement does not apply if the closing is conducted by a title insurance
company.
B. Broker must supervise all closings by being present in person or near a telephone or other
telecommunication device to answer any concerns during from closing.
C. Further discussion under the Michigan Rules and Regulations section.
D. Also see the Integrated Disclosure Rules discussed earlier in the “Financing” section under
RESPA and TILA.
ESTIMATING CLOSING COSTS

Some of the common debits and credits that are encountered at closing
Subject Seller Buyer

Debit Credit Debit Credit
Purchase Price X X
Buyer’s Loan X
Loan Charges/Points X
Seller Concessions X X
Title Insurance/Owner’s X
Title Insurance /Lender’s X
Mortgage Pay-Off X
Commission X
Delinquent Prop. Tax X
Transfer Tax X
Outstanding liens X
Closing fees (depends on

agreement)
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TRANSFER OF TITLE
PROPERTY AND INCOME TAXES
INCOME TAX IMPLICATIONS OF HOME OWNERSHIP
1. CAPITAL GAINS: Result from the sale of a capital asset such as real estate.
2. BASIS: Amount of investment owner has in property including purchase price plus
improvements.
Example: House purchased for $140,000 and homeowner added a family room for
$50,000 and installed new roof for $10,000. The new basis is $200,000, so if house is sold
for $235,000, the capital gains will be the following:
$140,000 + $50,000 + $10,000 = $200,000 property adjusted basis
$235,000 – $200,000 = $35,000 capital gain
3. CAPITAL GAINS ON THE SALE OF A HOME:
A. Gains on the sale of a “principal residence” are exempt (up to $250,000 per person and
$500,000 for a married couple filing jointly)
B. To qualify as “principal residence” the taxpayer must have lived in the home for a total
of 24 months out of the last 60 months that preceded the sale of the home.
4. INTEREST DEDUCTIONS: The IRS allows homeowners an itemized interest deduction on

interest paid to finance a principal residence as well as a second vacation home.
Example: A person is on 30% tax bracket and is allowed to deduct $5000. That person will
pay $1500 less in income tax.
NOTE: Real estate taxes on a principal residence will count on an itemized tax return, but not
homeowner’s insurance or condominium association fees.
INCOME TAX IMPLICATIONS FOR REAL ESTATE INVESTMENTS
1. INCOME TAX is due on profits generated from investment rental operation.
2. CAPITAL GAIN TAXES: Taxes due on gains recognized on the sale of a capital asset such as
real estate.
3. TAX SHELTER—DEPRECIATION
A paper loss allowed that decreases yearly profits generated from use of rental or business
property.
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TRANSFER OF TITLE
A. Land is not depreciable.
B. Improvements are depreciable over a period allowing for reduction in taxable income.
Example 1: Residential income property purchased for $350,000 including land

valued at $75,000 value. $275,000 improvement is depreciated over 27.5 years at
an average of $10,000/yr. If profit from rental operation in one year was $14,000,
then $10,000 depreciation is deducted, and taxable income is only $4,000.
Example 2: Commercial property $568,000 (including land valued at $100,000).

Based on a 39-year depreciation schedule the building depreciates $468,000 ÷ 39
= $12,000 each year. The investor keeps the building for 10 years claiming total
depreciation of $12,000 X 10 = $120,000.
Advantages to investing in real estate
1- Tax shelter: Being able to defer a portion (or all) of the profits that are generated by real estate
investments.
2- Leverage: Obtaining financing to purchase investment property.
3- Appreciation: Real estate values benefit from inflation as well as supply and demand.
4- Cash flow: Money generated from income-producing properties.
Disadvantages of real estate investments
1- Liquidity: Harder to convert to cash in comparison to other investments such as stocks.

2- Management responsibilities; those can be alleviate by hiring professional management.
3- Possible loss of value with bad economy.
D. SPECIAL PROCESS: Foreclosure & Short Sale – See “Financing” section
E. WARRANTIES
PURPOSE OF HOME OR
CONSTRUCTION WARRANTY PROGRAMS
Home/Construction Warranty
1- A home warranty (for an existing home or newly built) compensates the buyer in case of defects
or breakdowns occurring on property after purchase.
2- Protects both seller and buyer since it reduces chances of legal claims against seller and provides
buyer with vehicle to recover for damages.
3 – Protects against anything inside the unit such as a bad furnace or leaky water heater.
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TRANSFER OF TITLE
WARRANTY DEED
STATUTORY FORM FOR INDIVIDUALS
KNOW ALL MEN BY THESE PRESENTS: That
whose street number and post office address is
Conveyand Warrant to
whose street number and post office address is
the following described premises situated in the _____________________________________ of County of

_____________________________________________________________________________________________
for the sum of: ________________________________________________________________________________
subject to
Dated this __________ day of__________
Signed in the presence of: Signed and Sealed:

_____________________________________________ ______________________________________(L.S.)
_____________________________________________ ______________________________________(L.S.)
STATE OF MICHIGAN ___________________________________________(L.S.)
COUNTY OF ss. ______________________________________(L.S.)
The foregoing instrument was acknowledged before to me this “(1) ____________ day of _________________, by “(2)
____________________________________________________________________________________________________
“(3) ________________________________
Notary Public,
My Commission expires ________________________ ____________________________County, Michigan
“Note: (1) insert date (2) insert name of person(s) acknowledged (grantor) (3) signature of person taking acknowledgment
County Treasurer’s Certificate City Treasurer’s Certificate
Please note the following: Drafted by:
1. The name of each person who signs this instrument shall Business Address:
be legibly printed, typewriting or stamped upon such
instrument immediately beneath the signature of such person.
2. If the notarial act is performed outside the State of Michigan,
the acknowledgement must show the rank or title and serial After recording return to:
number, if any, of the person taking the acknowledgment.
The official seal of the person performing the notarial act
outside the State of Michigan should be affixed to the deed.
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TRANSFER OF TITLE
Practice of real estate (Salesperson 10% | Broker 10%)
PracticeA.ofTrust
real /escrow
estate (Salesperson
accounts 12 items/Broker 12 items)
1. Purpose and definition of trust accounts, including monies held in trust accounts
2. Responsibility for trust monies, including commingling/conversion
B. Federal fair housing laws and the ADA
1. Protected classes
2. Prohibited conduct (red-lining, blockbusting, steering)
3. Americans with Disabilities (ADA) 4. Exemptions
C. Advertising and technology
1. Advertising practices
a) Truth in advertising
b) Fair housing issues in advertising
2. Use of technology
a) Requirements for confidential information
b) Do-Not-Call List
D. Licensee and responsibilities
1. Employee
2. Independent Contractor
3. Due diligence for real estate transactions
4. Supervisory responsibilities (BROKER ONLY)
a) Licensees
b) Unlicensed personnel
E. Antitrust laws
1. Antitrust laws and purpose
2. Antitrust violations in real estate
A. TRUST/ESCROW ACCOUNTS
PURPOSE AND DEFINITION OF TRUST ACCOUNTS,

INCLUDING MONIES HELD IN TRUST ACCOUNTS
RESPONSIBILITY FOR EARNEST MONEY

AND OTHER TRUST MONIES,
INCLUDING COMMINGLING/CONVERSION
BOTH OF THE ABOVE ARE DISCUSSED UNDER TRUST ACCOUNT

REQUIREMENTS TO FOLLOW UNDER MICHIGAN RULES AND REGULATIONS
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PRACTICE OF REAL ESTATE
B. FEDERAL FAIR HOUSING LAWS
PROTECTED CLASSES
1. CIVIL RIGHTS ACT OF 1866: Prohibits discrimination because of race. The

US Supreme Court decision in Jones v. Mayer bars ALL Racial discrimination
in the sale and rental of property without exceptions.
2. CIVIL RIGHTS ACT OF 1968: Also known as the Fair Housing Act. Title VIII
of the act prohibits discrimination in the sale, rental and financing of dwellings
based on race, color, religion, or national origin. Amended in 1988 to add
disability and familial status.
3. THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1974: Prohibits

discrimination based on sex, and requires the use of an equal housing opportunity
poster.(Equal housing symbol to be used in certain advertisements).This poster
contains a statement that indicates broker displaying symbol supports fair housing
and affirmative marketing and advertising programs.
4. THE MICHIGAN PERSONS WITH DISABILITIES CIVIL RIGHTS ACT:

Approved by the Governor on July 28, 1976--Defines the civil rights of individuals
who have a disability to prohibit discriminatory practices, policies, and customs in
the exercise of those rights and to provide for the promulgation of rules.
5. THE MICHIGAN CIVIL RIGHTS ACT “ELLIOT LARSON”: Approved by the

Governor on January 13, 1977--Prohibits against discrimination because of age
and marital status and, with regards to employment, height and weight.
6. FAIR HOUSING AMENDMENT ACT OF 1988: Prohibits discrimination

because of disability (mental or physical) and familial status (families with
children).
A protected disabled individual may suffer from a determinable physical or

mental condition, which limits one or more of that individual's major life
functions, but is unrelated to his/her ability to acquire, rent or maintain
property, includes individuals receiving treatment to recover from drug or
alcohol addiction. Such condition may result from one or more of the
following:
a. disease, including Alcoholism, AIDS or a drug addiction

b. injury
c. congenital condition at birth
d. functional disorder
Also protected are persons associated with the disabled buyer or renter AND
persons residing in, or intending to reside in, a dwelling after it is sold, rented,
or made available.
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For example, a landlord or a condominium association may have a policy

against allowing pets to occupy an apartment unit or a condominium but the
landlord or association must accommodate a disabled individual who has a
service animal and may not even charge an additional deposit for the animal.
A landlord may not allow a tenant who may be a social drinker or a

recreational drug user but must accommodate an individual who is in the
process of recovering from alcoholism or drug addiction.
Service animals: According to the Fair Housing Act- Section I: Reasonable

Accommodations for Assistance Animals under the FHA Act and Section 504,
an assistance animal is not a pet. It is an animal that works, aids, or performs
tasks for the benefit of a person with a disability, or provides emotional support
that alleviates one or more identified symptoms or effects of a person's
disability.
Americans With Disabilities Act (ADA):Prohibits discrimination based on

disability.
1- Applies to businesses that serve the public or have 15 or more employees.

2- Title III of the ADA requires that businesses provide accommodations to
persons with disabilities and access that is equal or similar to that available to
the general public.
3- Requires that businesses become accessible to disabled customers.
Accessibility requirements include:
a- removal of architectural barriers

b- parking
c- entrance doors
d- security gates
e- maneuvering space
f- service counters
g- fixed seating and tables
Discrimination, under the Fair Housing Act includes the following: A person shall
not:
A. Deny any individual the full and equal enjoyment of goods, service,
facilities, privileges, and accommodations of a public place, because of
a disability.
B. Print, circulate, post, mail, or cause to publish or advertise

indicating that full use and enjoyment of a public place will be refused
or denied for a person with a disability.
C. REFUSE TO PERMIT, at the expense of the disabled, reasonable

modifications of existing premises occupied or to be occupied by the
disabled if such modifications may be necessary to afford the disabled
the full enjoyment of the premises.
99
Example: A tenant asks permission to install a ramp on the house

that he is renting and offers to pay for it. The ramp is need because
of the tenant’s disability. Management may not refuse the request
but can request that the tenant does the work according to code
and would be responsible to fix any damages.
D. MULTI-FAMILY DWELLINGS: All 4-or-more unit apartment

complexes placed in service after March 13, 1991 must be accessible
to disabled individuals if the apartment unit is a ground floor unit or is
served with an elevator.
COVERED TRANSACTIONS
Listing, selling, leasing, appraising, negotiating a sale, and any other related real estate
services.
TYPES OF VIOLATIONS AND ENFORCEMENT
1. ADVERTISING: To make or cause to be made, printed, or published, any notice,

statement or advertisement, with respect to the sale or rental of a dwelling that indicates
a preference, limitation or discrimination.
Example: Agent advertises: This cozy 2-bedroom condo is an empty nester’s dream
come true.
Obviously, the agent appears to be in favor of people who have no children.
2. PREVENTING THE INSPECTION of property, available for sale or lease.
3. BLOCKBUSTING: Also known as PANIC PEDDLING. To profit from inducing any

person to sell or rent dwellings by representing entry of certain groups of people of a
particular race, color, etc.
Example: Agent tells homeowners in the neighborhood that a new group home has been
placed in their neighborhood and they should consider selling their properties as soon as
possible before they lose value. The fact is that even though group homes may house
mentally disabled individuals or individuals who are in the process of recovering from a
drug addiction; those individuals are well supervised and not considered dangerous. The
agent probably knows that fact but is making the statement to scare people into selling as
soon as possible and hopefully pick up some listings.
100
101
4. DISCRIMINATION BY FINANCIAL INSTITUTIONS: In loaning money or in giving

favorable terms and interest rates.
REDLINING: A lender refuses loans on property located in certain sections of the city
altogether regardless of qualifications of property or applicant.
5. REFUSING TO BROKER OR APPRAISE real estate, because of race, color, etc.
6. ACCEPTING A LISTING by a licensee, knowing that discrimination might exist against

a certain group of people by the seller.
Example: Seller tells the agent to screen potential buyers before they view his property
and to make sure that they are not of a certain race, religion, nationality, etc. The agent
has a duty to refuse the listing. And if the agent takes a listing in good faith but later
discovers the seller's intentions, the agent has a duty to cancel the listing.
7. STEERING: Directing minority persons into or away from neighborhoods because of

their minority status.
Example: The agent shows a minority buyer homes only in predominately minority
neighborhoods. This is unethical due to its discriminatory practices.
8. RETALIATION ACTS of a respondent against a complainant or against a member of

the Civil Rights Commission performing his/her duty or against any other person involved
in the investigation as a witness or as a third party.
REMEDIES UNDER FEDERAL LAW:
1. A person can file a complaint alleging that an act of discrimination has

occurred against him/her with the Secretary of the Department of Housing and
Urban Development (HUD) and within (1) one year from the date of the
occurrence of such an alleged violation.
Certain cases may be assigned to the Department of Justice (DOJ) for

investigation and possible legal action.
A person may also file a civil lawsuit in federal court.
2. HUD may also file a complaint on its own initiative and without a complaint
from the public.
3. An attempt is made to negotiate a conciliation agreement with the violators and

HUD may seek temporary or permanent injunctions. HUD can issue a "charge"
against the alleged violator.
102
4. Penalties
A. Administrative: The ALJ may assess a civil penalty against any respondent
for each separate and distinct discriminatory housing practice.
B. A judge in a Federal District Court may award all relief ordinarily available
as well as penalties.
REMEDIES UNDER STATE LAW:
Individuals who feel they have been discriminated against can file complaints with:
1. Michigan Civil Rights Commission within 6 months
2. Filing private civil law suit, in Circuit Court
EXEMPTIONS
EXEMPTIONS UNDER FEDERAL LAW:
Exemptions are allowed if they are not based on racial discrimination, illegal
advertising and/or if an agent is involved
1. Rooms or units in dwellings to be occupied by not more than four families, if

the owner lives in one unit.
2. Religious organizations operating dwellings for other than commercial reasons.

Membership in such religion must not be restricted against color, sex, race, or
national origin.
3. Private club operating dwellings not for commercial purposes, i.e., non-profit
organization
4. For senior citizens housing, discrimination is allowed under the following

circumstances:
A. Against persons who are not 55 years old or older, if 80 percent of the
units or more are occupied by at least one person who is 55 or older.
B. Against persons who are not at least 62 years of age or older, if the
housing complex is occupied solely by persons who are 62 years old or
older.
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C. ADVERTISING AND TECHNOLOGY
TECHNOLOGY ISSUES IN ADVERTISING

TRUTH IN ADVERTISING
1- Follow state rules (discussed later) with regards to advertising by broker and
salesperson.
2- Website must also have the name of Broker and telephone number or street address.
3- Avoid misleading “framing” which misleads consumer as to the identity of listing

broker.
4- Email solicitations must include an option to “opt out”, i.e., the recipient can
“unsubscribe” if she wishes.
5- Always update website and remove sold listings.
6- Confidential information gathered from clients and customers must remain

confidential even if the business relationship with licensee no longer exists.
7- Do Not Call List - Federal telemarketing rules
Before making unsolicited telephone calls, licensee must make sure of the following:
a. The telephone number being called is not placed on the national “do not call
registry”.
b. Licensee must not deliberately block their caller ID.
c. Licensee must not use pre-recorded messages.
d. When asked not to call again, licensee must place the recipient’s number on a
“no call” list and not attempt to bother this individual again.
e. The Established Business Relationship Exemption- To qualify for the

“established business relationship” exception, the call must be made
(1) within 18 months after the recipient’s last purchase, delivery or payment,
or
(2) within 3 months after the recipient makes an inquiry of, or submits an
application to, the caller.
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REAL ESTATE CALCULATIONS
Real estate calculations (Salesperson 5% | Broker 7%)
A. Basic math concepts

1. Loan-to-value ratios
2. Discount points
3. Equity
4. Down payment/amount to be financed
B. Calculations for transactions
1. Property tax calculations
2. Prorations
3. Commission and commission splits
4. Seller’s proceeds of sale
5. Buyer funds needed at closing
6. Transfer fee/conveyance tax/revenue stamps
7. PITI (Principal, Interest, Taxes and Insurance) payments
C. Calculations for valuation, rate of return (BROKER ONLY)
1. Net operating income
2. Depreciation
3. Capitalization rate
4. Gross Rent and gross income multipliers
A. Basic math concepts

1. Loan-to-value ratios *
2. Discount points *
3. Equity *
4. Down payment/amount to be financed *
B. Calculations for transactions
1. Property tax calculations**
2. Prorations
3. Commission and commission splits *
4. Seller’s proceeds of sale *
5. Buyer funds needed at closing *
6. Transfer fee/conveyance tax/revenue stamps
7. PITI (Principal, Interest, Taxes and Insurance) payments*
* see “financing” section

** see “land use controls and regulations” section
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CALCULATIONS FOR TRANSACTIONS, INCLUDING MORTGAGE CALCULATIONS
Example: Calculate the monthly payment on an $80,000 loan at 6.5% rate, 20-year
amortization
Based on the Table, the factor for 20 years is 7.46
$80,000 ÷ 1000 = 80, 80 X 7.46= $596.80
To Find Monthly Mortgage Payment + Principal and Interest, memorize this

formula: (Loan ÷ 1000) X Factor =
106
PRORATIONS OF PROPERTY TAXES
Example: Tax paid in advance in the amount of $1,800/yr. for a calendar year. What
proration is necessary at closing using the exact days (actual days) method?
If question states that 1 year is = 360 days

$1,800 ÷ 360 = $5.00/day
Number of days to reimburse seller are: 30 + 30 + 30 + 7 =

97 days left in the year
97 X $5.00 = $485.00 Debit Buyer and Credit Seller
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Example: Tax paid in arrears in the amount of $1,800/yr. for a calendar year. What
proration is necessary at closing?
KEEP IN MIND:
If property tax is paid IN ADVANCE =Credit Seller/Debit Buyer
If property tax is paid IN ARREARS = Credit Buyer/Debit Seller
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TRANSFER TAX
1. REVENUE STAMPS:
A. Paid by the seller to the county when deed is recorded.
B. Amount 55 cents per $500.00 of price or fraction thereof.
C. No fees required for transfers under $100.00, or if no money is exchanged

such as between relatives.
Example: How much revenue stamps due to record deed with price of
$47,200.00?
Answer: $47,200.00 is rounded to $47,500.00
47,500  500 = 95 x 0.55 = $52.25
2. STATE TAX:
A. Paid by seller to the State upon deed recording.
B. Amount $3.75 per $500 of price or fraction thereof.
C. No fees required for transfers under $100.00, or if no money is exchanged

such as between relatives.
Example: How much State tax due to record deed with price tag of
$47,200?
Answer: $47,200.00 is rounded to $47,500.00
47,500  500 = 95 x $3.75 = $356.25
Total transfer tax due is $52.25 + $356.25 = $408.50
Note: you can add $3.75 + $.55 = $4.30 per $500 or $8.60 per $1,000
Therefore $47,500  500= 95 X $4.30 = $408.50
Remember This Formula:
(Selling Price ÷ 500) X $4.30 = Total Transfer Tax
109
MICHIGAN STATE LAWS AND RULES
[NOTE: On examination questions dealing with Michigan Laws and Rules,

"Department" refers to the Department of Licensing and Regulatory Affairs;
"Board" refers to the Board of Real Estate Brokers and Salespersons]
Duties and Powers of the Department and the State Board of Real Estate
(Salesperson-3%, Broker-3%)
General powers
Investigations, conferences, hearings, and exemptions
Penalties
GENERAL POWERS
THE DEPARTMENT OF LICENSING & REGULATORY AFFAIRS
1. The Department is headed by the Director. The Director is appointed by the

Governor.
2. Only the Department can issue or renew a license.
3. The purpose of regulation is Consumer Protection.
4. Real estate licensees are regulated under the Michigan Occupational Code.
THE REAL ESTATE BOARD
1. Consists of nine (9) members appointed by the Governor to serve for four (4)
years for not more than two (2) consecutive terms.
2. Six (6) of the members have a Real Estate license and three (3) represent the
public. Major duties include:
A. The interpretation of licensing requirements.
B. Aiding the Department in investigations against licensees and

assessing penalties.
C. Recommending to the Department to issue or renew a license to a

person who has met the requirements. A person who is declined by the
Department may still petition the Board to receive license.
D. Recommending approval for educational courses and joining the

Department in approving the form and contents of the licensing
examination.
110
E. May promulgate rules setting and adjusting the minimal standards

of practice.
INVESTIGATIONS, CONFERENCES, HEARINGS,

AND EXEMPTIONS
1. Complaints are filed with the Department. The Department may also start an
investigation at its own motion at random. A complaint must be filed within 18
months after 1 of the following dates, whichever occurs later:
(a) The date of the alleged violation.
(b) If the alleged violation occurs in connection with a real estate transaction, the
date the transaction is completed.
2. The Department, upon receiving a complaint alleging rule violation shall

immediately begin its investigation.
3. Notice is mailed to the licensee at his/her last known address of record.
4. In investigating a complaint, the Department may petition the Department of

attorney general to issue a SUBPOENA (court order) ordering a person to appear
for an investigation or ordering a person or company to produce records related to the
investigation.
5. The “Investigative Unit” of the Department shall conduct the investigation. If no

violation appears to have taken place, the complaint shall be considered
UNFOUNDED and notice is forwarded to the complainant and the respondent.
6. If the investigation results in evidence of violation, the department shall prepare a

FORMAL COMPLAINT to be served on the respondent. The Department may also
issue one or more of the following orders even before a FORMAL HEARING is held
especially if the investigation reveals a possible “imminent threat” to the public.
A. An order summarily suspending the license.
B. An order to cease and desist from a violation.
NOTE-1: License revocation will not be ordered unless a FORMAL HEARING is

held.
NOTE -2: If the license is suspended while the investigation is taking place, the
licensee may not operate. On the other hand, if the licensee is not notified of a
license suspension then he may continue to operate while the investigation is
taking place.
7. The complainant and the respondent shall be served a notice of an opportunity to

resolve the problem at an INFORMAL HEARING. A member of the Board may
attend the informal hearing.
111
8. The informal hearing may result in a settlement that may include license
revocation, suspension, limitation, probation, restitution, censure, or any other
penalty.
9. If the informal hearing does not result in a settlement, a formal hearing shall be
scheduled.
10. The formal hearing shall be heard by an “Administrative Law Judge” (ALJ), and
the conclusion of the hearing shall be submitted to the Director.
11. If formal hearing results in evidence of violation, The ALJ may recommend
penalties, however the final determination is left to the Board members who may
either accept the Judge’s recommendation or assess different penalties within sixty
(60) days. If the Board did not make a determination within 60 days, the Director may
do so.
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VIOLATIONS/PENALTIES
I. VIOLATIONS:
A licensee is subject to disciplinary action if s/he commits one or more of the following
acts:
1. Acting for more than one party in a transaction (dual agency) without the
knowledge and written consent of the parties except in the practice of property
management.
2. Representing or attempting to represent a real estate brokers other than the

employer, without the expressed knowledge and consent of the employer.
3. Failure to account for money coming into the licensee's possession, which
belongs to others.
4. Changing the business location (by the broker) without notifying the
Department.
5. A real estate broker, failing to return a salesperson's license within five (5)
days, when notified that the salesperson has changed employment, and is being
transferred to a different broker's office.
6. Paying a commission to a person who is not licensed.
However, a licensed real estate broker may pay a commission to a licensed real
estate broker in another state if the non-resident real estate broker does not
conduct business in this state.
7. Failing to deposit in non-interest bearing demand account (known as the Trust

or Escrow account) money belonging to others coming into the hands of the
licensee in compliance with the following:
A. A real estate salesperson shall, upon receipt, pay over to the

employing broker any money that s/he receives regarding a transaction
that the salesperson is involved in on behalf of his/her employing broker.
B. Money deposited in the broker's trust account must remain and be

accounted for at the consummation or termination of the transaction. No
one may use this money until that time. If so, it may be an illegal
conversion of funds.
C. A real estate broker shall deposit funds into the trust account within (2)
banking days after the signing of a purchase agreement by all parties.
D. A broker shall keep accurate records of all funds deposited in the trust
account as well as funds paid out of the account. Records must be
maintained for at least 3 years.
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Commingling Funds: The act of placing money received from

buyers to purchase real estate with the broker's personal money, or
vice versa.
8. Failing to provide a written agency disclosure to prospective buyers, sellers,

landlords and tenants of residential property 1 to 4 family dwellings or building
sites used for the same purpose, including condominiums.
9. Commits an act of gross negligence.
10. Fails to comply with a subpoena issued under this act.
II. PENALTIES:
A person who commits a violation may be assessed one or more of the following
penalties:
1. Placement of one or more of the following limitations:
A. A requirement that a financial statement certified by a certified public

accountant (CPA) must be filed with the department at regular intervals
B. A requirement, which reasonably assures that a licensee, is competent

to perform an occupation for example: An agent may have to attend
additional educational courses.
C. A requirement that all contracts related to the licensee's business must

be reviewed by an attorney.
D. A requirement that a licensee have on file with the Department a bond

not to exceed $5,000.00 for a period of five years.
E. Certain activities may be restricted.
F. A time limit may be imposed
G. Activity of agent may be confined to a certain geographic location for a

set time.
2. Suspension of a license – Can be assessed by the Board after conducting a

hearing or may be the result of an initial investigation only (before holding a
hearing) if the Department finds that the licensee’s conduct represents an
imminent threat to the public.
3. Denial of a license.
4. Revocation of a license
5. A civil fine, to be paid to the Department, not to exceed $10,000.00. The

license may be suspended until the fine is paid.
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6. Censure – an expression of disapproval
7. Probation. Licensee is put under evaluation for a period, so that the Board may
determine if the licensee can practice a certain occupation with competence.
8. A requirement that restitution be made.
9. The following penalties apply to persons who do not have a license but practice
a regulated occupation:
A. The first time a person or entity engages, or attempts to engage, in an

occupation that is regulated under this article without being licensed, shall
be found guilty of a misdemeanor which could result in a fine of not more
than $500.00 or incarceration of ninety (90) days, or both.
B. A second violation is also a misdemeanor and the penalty is up to

$1,000.00, or incarceration of not more than one (1) year, or both.
Licensing Requirements (Salesperson-5%, Broker-4%)

Activities requiring a license and exemptions
Types of licenses
Eligibility for licensing
License renewal, including continuing education
Transfer or change in license
ACTIVITIES REQUIRING A LICENSE

AND EXEMPTIONS
I.ACTIVITY REQUIRING LICENSING: A person who engages in one or more of the

following activities regarding real estate or business opportunity for another, with
intent to collect a fee, compensation, or valuable consideration must be a Real Estate
licensee.
• Sells or offers to sell.
• Buys or offers to buy.
• Lists, offers or attempts to list.
• Negotiates for the purchase, sale, exchange, or mortgage.
• Negotiates for the construction of a building, on real estate.
• Property management: Leases, offers to lease, rents, or offers to rent,

real estate for improvement on the real estate.
• A broker or associate broker who conducts a market analysis (not an

appraisal), which does not involve a federally related transaction if the
market analysis is put in writing and is for the sole purpose of
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LICENSING REQUIREMENTS
establishing a listing or a leasing price and a disclaimer states in

boldface print:
THIS IS A MARKET ANALYSIS, NOT AN APPRAISAL AND WAS PREPARED BY

A LICENSED REAL ESTATE BROKER OR ASSOCIATE BROKER, NOT A
LICENSED APPRAISER.
II. NON-LICENSED PERSON ENGAGED IN THE SALE OF OWNED REAL ESTATE: A

person or entity is in the practice of real estate as a principal vocation if s/he:
A. Enters more than five real estate sales in a twelve-month period.
B. Dedicates more than half of his/her working time to the sale of real estate, or more
than fifteen hours a week, whichever is less, during any consecutive six-month
period.
C. Holds himself / herself out to the public as being principally engaged in the real
estate business.
III. EXEMPTIONS: The following parties, associations, corporations and/or partnerships

may be engaged in the sale of real estate for a fee, without a license.
1. A LICENSED BUILDER who builds and sells new single-family homes, two units,
three units, or four-unit family dwellings.
2. AN ATTORNEY AT LAW, acting as an attorney at law.
3. ATTORNEY IN FACT acting under power of attorney.
4. A RECEIVER, OR TRUSTEE in bankruptcy, AN ADMINISTRATOR, EXECUTOR,

or other person selling UNDER AN ORDER FROM COURT.
5. A TRUSTEE selling under a deed of trust.
6. A TENANT receiving up to one half month’s rent from the owner or from the agent
of the owner, for referring another prospective tenant in the same building.
7. A person who is REGULATED UNDER THE MORTGAGE BROKERS AND

SERVICERS LICENSING ACT (See 7D16), if s/he does not perform an activity
that requires a real estate license.
8. A licensed real estate broker may pay a commission (referral fee) to a real estate
broker that is licensed by another state if the nonresident real estate broker
does not conduct in this state a negotiation for which a commission is paid.
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TYPES OF LICENSES
1. REAL ESTATE BROKER
2. REAL ESTATE ASSOCIATE BROKER
3. REAL ESTATE SALESPERON
ELIGIBILITY FOR LICENSING
I.REAL ESTATE BROKER
1. Must pass the licensing examination.
2. Before receiving a real estate Broker's license, an applicant shall have

completed ninety (90) classroom hours in real estate fundamentals, approved by
the Department, of which not less than nine (9) hours shall be instruction on civil
rights and equal opportunity in housing.
3. Person must have been engaged in the real estate business for not less than
three (3) years.
4. A broker's license will not be issued to a person who has been convicted of
embezzlement of funds
II.REAL ESTATE ASSOCIATE BROKER
An individual who has met the broker's license requirement but is employed by a
real estate broker under an associate broker's license.
III. REAL ESTATE SALESPERSON
An individual employed by a broker who may perform Real Estate transactions.

Must meet the following requirements:
1. Attend a 40-hour pre-licensing course.
2. Pass the licensing examination.
A NON - LIVING ENTITY AS A BROKER
1. A broker's license may be granted to an entity such as a Corporation, Limited

Liability Company (LLC), Partnership, Association, Joint Venture, or Trust.
2. Each officer or member of the entity designated by the real estate broker as
active shall apply for and obtain an associate real estate broker's license. This
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individual is known as the PRINCIPAL ASSOCIATE BROKER. An associate

broker who is not an officer or member of an entity is a NON-PRINCIPAL
ASSOCIATE BROKER.
3. If the real estate broker's license of an entity is revoked, suspended, or the

broker dies, that results in suspending the license of any associate brokers and
salespersons connected with the broker.
4. A broker's license, issued to a non-living entity, or an individual or a principal

associate broker is not transferable, however a non-principal associate
broker's license is transferable.
5. An associate real estate broker shall not be licensed under more than 1
individual entity holding a real estate broker's license unless the associate real
estate broker is an active member or active officer of the entity.
LICENSE ISSUANCE AND CONTENTS
1. Issued after paying the proper fee and shows such information as licensee's
name, address, permanent I.D. number, and expiration date, the name of the
employing broker and the salesperson's name.
2. A broker shall retain custody of the licenses of all the licensees that are
associated with the real estate company.
POCKET CARDS
1. Shall certify that the person whose name appears on the card is a real estate
licensee and is doing business in that capacity.
2. A real estate licensee shall carry the pocket card while doing business.
NON - RESIDENT LICENSE
1. A nonresident of this state may become a real estate broker or a real estate
salesperson by conforming to the requirements of the law, including experience,
education and test requirement.
2. A nonresident applicant shall file an irrevocable consent that an action may be

commenced against the applicant in the proper court of a county of this state in
which a cause of action may arise in which the plaintiff may reside, by the service
of process or pleading authorized by the laws of this state on the department, the
consent stipulating and agreeing that service of process or pleadings on the
department shall be taken and held in court to be as valid and binding as if due
service had been made upon the applicant in this state.
3. No reciprocal licensing agreements with other states
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4. Nonresident broker must have an actual physical location and must maintain a
trust account in this state for any deposits received on transactions conducted
within the state.
LICENSE RENEWAL, INCLUDING

CONTINUING EDUCATION
1. A license cycle is based on 3 years. For example, the current cycle runs
November 1, 2018 to October 31, 2021. The following cycle will start on
November 1, 2021 and ends on October 31, 2024. Each year of the license cycle
starts on November 1 through October 31 of the next year. A licensee must attend
18 clock hours of continuing education per license cycle. [ licensee must complete 2
hours of eligible legal continuing education within each license cycle year, all other
required credits may be completed at any time during the license cycle]
2. A license or registration shall lapse on the day after the expiration date.
3. “Relicensure” means the granting of a license to a person whose license has

lapsed for failure to renew the license within 60 days after the expiration date.
4. A person who fails to renew a license or registration on or before the expiration

date shall be permitted to renew the license or registration by payment of the
required license or registration fee and a late renewal fee within 60 days after the
expiration date.
5. The department may relicense without examination a licensee whose license has
lapsed for less than 3 years if the licensee if the individual completes 6 clock
hours of continuing education for each year and partial year that have elapsed
since the expiration of his or her last license
6. The department may relicense a broker whose license has lapsed for 3 or more
continuous years if the licensee provides proof of the successful completion of 1
of the following:
(a) Six clock hours of continuing education for each of the years the license was
lapsed.
(b) Ninety clock hours of broker pre-licensure instruction.
(c) Passing the broker licensing examination.
7. A salesperson whose license has been lapsed for 3 or more continuous years
may be relicensed if the licensee provides proof of the successful completion of
1 of the following:
(a) Six clock hours of continuing education for each of the years the license was
lapsed.
(b) Forty clock hours of salesperson pre-licensure instruction.
(c) Passing the salesperson licensing examination.
TRANSFER OR CHANGE IN LICENSE
1. A salesperson or non-principal associate broker may terminate employment by

giving a written or oral notice to the employing broker.
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2. The employing broker shall forward the salesperson's license to the Department
within five (5) DAYS of such notice by certified mail.
3. Another license may not be issued to a salesperson unless the pocket card is
returned to the Department or has been successfully accounted for. A salesperson
may successfully account for his pocket card, by getting the dated signature of the
new broker or associate broker on the back of the pocket card as well as the license
number.
4. When a TRANSFER APPLICATION accompanied by the proper fee is filed with

the Department stating that the licensee had complied with the pocket card
requirements, the Department shall consider the signed pocket card as evidence of
licensing for FORTY FIVE (45) DAYS from the date endorsed on the back of the card.
Statutory Requirements Governing the Activities of Licenses (Salesperson-

10%, Broker-15%)
Advertising
Commissions and Specific Services for Which Fees may be charged
Disclosure/conflict of interest
Handling of contracts, documents, listing and recommendations
Handling of monies and trust accounts
Place of business/branch office requirements (Broker Only)
Record keeping
Inducements
Alternative Dispute Resolution vs. Arbitration (Broker only)
No disclosure duty attaches to stigmatized property
Closing responsibilities
ADVERTISING
1. A licensee may not advertise in any manner to misrepresent material facts.
2. A salesperson shall only advertise under the supervision of the employing broker
and in the name of the broker. Any advertising displayed or published on or after
January 1, 2018, that includes the name of an associate broker, a salesperson, or a
cooperating group of associate brokers or salespersons employed by the same real
estate broker, shall include all the following:
(a) The telephone number or street address of the employing broker.

(b) The business name of the employing broker, in equal or greater type size
than the name of the associate broker, salesperson, or cooperating group.
3. A Broker may not advertise to buy, sell, rent, lease, exchange, or mortgage real
property, or business opportunity unless s/he gives the public the definite
impression that the advertiser is a broker and not a private party.
4. Advertising the licensed name must be accompanied with a telephone number or

street address.
5. A broker must not advertise using a different name other than the name the broker
is licensed under.
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CONTRACTUAL RELATIONSHIPS
6. A salesperson may not advertise to buy or sell property under his own name as a
private party unless it is his own residence.
7. A salesperson may not advertise to lease or rent property as a private individual

unless s/he is the owner of property.
DISCLOSURE/CONFLICT OF INTEREST
1. SALE OF PROPERTY OWNED BY SALESPERSON (OTHER THAN PRINCIPAL

RESIDENCE): Shall be deemed to be done as a principal vocation of the salesperson
and the sale shall be done through a licensed broker.
2. SALE OF PROPERTY OWNED OR UNDER OPTION BY BROKER: Subject to the

act and these rules.
3. SELLING PROPERTY OWNED BY LICENSEE: This fact must be revealed to the

purchaser in writing before an offer to purchase is signed. Disclosure required
whether licensee is acting under personal name, with other partners, or as an entity.
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4. LICENSEE ACQUIRING INTEREST, COMMISSION:
A. A licensee involved in the purchase of real estate or business opportunity shall

make his/her position known to the owner (in writing) before the purchase
agreement is completely signed by all parties. Disclosure required whether
licensee is acting under personal name, with other partners, or as an entity.
B. A licensee that buys or otherwise acquires an interest in real property, directly

or indirectly, and that is owed a commission, fee, or other valuable consideration
as a result of the sale, shall disclose that the licensee is licensed under this part to
the seller or owner to receive the specified consideration.
C. All disclosures must be in writing, and proof must be presented upon request
to the Department.
D. A broker or salesperson interested in obtaining an option on property must

make his/her true position known to the owner.
5. COMMISSIONS FOR OTHER SERVICES:
A. A licensee who is entitled to receive, either directly or indirectly, a real estate

commission as a result of the sale of property, may not also receive a referral fee
or other valuable consideration for placing a loan in connection with that
transaction unless the licensee obtains the prior written consent of the buyer and
seller in that transaction and the fee is not otherwise prohibited by the real estate
settlement procedures Act (RESPA).
B. A licensee who is entitled to receive, either directly or indirectly, a real estate

commission as a result of the sale of property, may not also receive a referral
fee or other valuable consideration from an abstract, home warranty, title
insurance, or other settlement service provider in connection with that transaction
unless the licensee obtains the prior written consent of the party or parties with
whom the licensee has an agency relationship and the fee is not otherwise
prohibited by the real estate settlement procedures Act (RESPA).
6. DUAL AGENCY:
A. Licensee becomes agent of opposite parties in the same transaction
B. Legal with proper written consent from all parties.
C. Licensee will not be able to disclose all known information to either the seller or
the buyer.
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HANDLING OF CONTRACTS, DOCUMENTS,

LISTING AND RECOMMENDATIONS
OFFERS TO PURCHASE
(PURCHASE AGREEMENTS, SALES CONTRACTS):
R 339.22307. (1) A licensee shall promptly deliver to the buyer a signed copy
of the offer to purchase after it has been signed by the buyer.
(2) A licensee shall promptly deliver all written offers to purchase to the seller
upon receipt. Delivery may be made through any method acceptable to the
parties including in person, by mail, or through an electronic communication
pursuant to the uniform electronic transactions act, 2000 PA 305, MCL
450.831 to 450.849. The use of electronic records or digital signatures for any
real estate transaction requires the prior agreement of the parties.
(3) Upon obtaining a proper acceptance of the offer to purchase, signed by
the seller, the licensee shall promptly deliver true executed copies of the
acceptance to the purchaser and seller.
(4) A licensee is not subject to disciplinary action for failing to submit to the
seller any additional offers to purchase that are received after the seller has
accepted an offer and the sales agreement is fully executed, unless a service
provision agreement requires that subsequent offers be presented.
(5). The licensee, upon receiving an offer to purchase shall recommend to the
purchaser that a TITLE INSURANCE policy (Owners Policy) be submitted by
the seller to the buyer.
LISTING AGREEMENTS /
BUYER AGENCY AGREEMENTS:
1. Also referred to as “Service Provision Agreement”
2. Client must be provided with a copy upon signing the agreement.
3. Agreement shall have a DEFINITE EXPIRATION DATE.
4. Agreement shall not require the client to send a written cancellation notice
upon expiration of service term.
5. Agreement must have an ANTI-DISCRIMINATION CLAUSE stating that

Discrimination Because Of Race, Color, Religion, National Origin, Age, Sex,
Marital Status, Disability And Familial Status Is Prohibited By Law.
6. A Net Listing or net Buyer agency agreement is prohibited.
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7. "Property management employment contract" means the written

agreement entered into between a real estate broker and client concerning the
real estate broker's employment as a property manager for the client; setting
forth the real estate broker's duties, responsibilities, and activities as a
property manager; and setting forth the handling, management, safekeeping,
investment, disbursement, and use of property management money, funds,
and accounts.
HANDLING OF MONIES AND TRUST ACCOUNTS
DEPOSITS
1. All monies received from others in connection with a real estate activity must
be deposited in the broker's TRUST (ESCROW) ACCOUNT. Rental income /
security deposits from tenants must be deposited in a separate management
account.
2. A real estate salesperson shall pay or deliver to the real estate broker, upon
receipt, a deposit or other money paid in connection with a transaction in which
the real estate salesperson is engaged on behalf of the real estate broker.
3. A salesperson shall not accept a deposit check made out to salesperson. All
checks must be written to the order of the broker (as licensed).
4. A broker who receives a deposit shall be responsible for it in full at the time of
consummation or termination of the transaction. A broker who illegally uses money
deposited in his trust fund for personal use can be found guilty of embezzlement
/ illegal conversion of funds.
5. A broker must deposit the earnest money in the trust account no more than (2)
two banking days after receiving notice that an offer to purchase is accepted by
all parties.
If a purchase agreement signed by a seller and purchaser provides that a deposit

be held by an escrowee other than a real estate broker, a licensee in possession
of such a deposit shall cause the deposit to be delivered to the named escrowee
within 2 banking days after the licensee has received notice that an offer to
purchase is accepted by all parties.
6. Disbursement of an earnest money deposit shall be made in accordance

with the agreement signed between the parties. However, if there is a deposit
dispute, funds shall remain in the broker’s trust account until a civil action has
determined to whom the deposit must be paid, or until the buyer and seller have
agreed, in writing, to the disposition of the deposit. The broker may also
commence a civil action to interplead the deposit with the proper court.
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TRUST ACCOUNTS (ESCROW ACCOUNT)
1. A broker may maintain more than one trust account and may have up to two
thousand ($2,000) dollars of his own money, in each trust account.
2. The trust account must be held with a financial institution in a non-interest

bearing demand account. A Broker can maintain more than one trust account
especially if the amount of deposits exceed the FDIC insurance limit that is
available per account.
3. Checks drawn must be signed by a broker or associate broker
4. Cosignatories may be used; an individual who is not a broker or associate

broker may be authorized to sign checks drawn against the trust account only if
his/her signature is accompanied by the signature of a broker or an associate
broker.
5. "Property management account" means an interest-bearing or noninterest-

bearing account or instrument used in the operation of property management.
PLACE OF BUSINESS/BRANCH OFFICE

REQUIREMENTS
1. A broker may do business any place in the State.
2. A broker must maintain an ACTUAL PHYSICAL LOCATION where business is

conducted, and records are kept.
3. A broker who has a branch office must be reasonably available to supervise

that location. A branch office is any location in addition to the broker's main where
the broker regularly does business, meet with clients, or such location is held out
to the public as a place of business.
4. A duplicate license must be secured for each branch office. A broker may not
change an address of a place of business without first notifying the Department.
5. A branch office that is more than twenty-five (25) miles from the nearest
boundary of the municipality in which the main office of the real estate broker is
located must be under the direct supervision of an associate broker. An associate
broker or salesperson can manage a branch within the 25 mile radius.
RECORD KEEPING
A broker shall maintain bookkeeping for at least 3 years. At a minimum, the

system shall consist of both of the following:
(a) A record which shows the chronological sequence in which funds are
received and disbursed, as follows:
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(i) For funds received, the record shall include all the following information:
(A) The date of receipt and deposit and the date it is deposited at the trust
fund.
(B) The name of the party who provided the funds to the broker.
(C) The name of the seller.
(D) The amount and purpose of the funds.
(ii) For funds disbursed, the record shall include all the following information:
(A) The date of the disbursement.
(B) The payee.
(C) The check number.
(D) The purpose of the disbursement.
(E) The amount of the disbursement.
(iii) A current balance of the account or accounts shall be maintained and be

available to the department upon request.
(b) A record which shows receipts and disbursements as they affect a single,
particular transaction between a buyer and seller. The record shall segregate 1
transaction from another transaction as follows:
(i) For funds received, the record shall include all the following information:
(A) The names of both parties to a transaction.

(B) The property address or brief legal description.
(C) The dates and amounts received.
(ii) For funds disbursed, the record shall include all the following information:
(A) The date.

(B) The payee.
(C) The check number.
(D) The amount of the disbursement.
Bookkeeping for Property Management
1. Management duties are governed by the management employment contract.

2. A manager shall maintain property management accounts separate from all
other accounts and managed in accordance with the property management
employment contract.
3. A property management account may be an interest-bearing account or
instrument, unless the property management employment contract provides to
the contrary. Any interest shall be handled in accordance with the employment
contract.
4. The manager shall maintain records of
a- funds deposited and withdrawn from property management accounts
b- date of the transaction, from whom the money was received or to whom it
was given
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c- other pertinent information concerning the transaction the property

management employment contract may require.
5. Records are subject to inspection by the department.
INDUCEMENTS
LOTTERY, GAMES, AND CONTESTS
A real estate broker or salesperson may not promote the sale of real estate using
a plan involving a lottery, contest, game, prize, or a drawing.
However, offering the same gift by a broker to all clients or customers does not
violate the rules.
Example: Broker advertises: “list your house with me in the month of April and
your name will go into a drawing to win a vacation” this ad is illegal.
If broker advertises: “list your house with my company in April and get a toaster
oven”, this ad is legal because there is no element of chance.
ALTERNATIVE DISPUTE RESOLUTION VS.

ARBITRATION
ARBITRATION
1- A form of dispute resolution by which parties to a dispute agree to submit to in order to

have their dispute/disagreement finally decided by a single arbitrator or panel of
arbitrators.
2- If the parties agree to binding arbitration, the parties may not seek relief with the courts
unless they allege that the arbitrator was biased, or s/he exceeded his/her authority.
3- According to Michigan law, a party may seek a court order to enforce the results of
arbitration.
4- If the parties to a contract wish to settle their disputes through arbitration, their contract
should state that fact. If a contract does not call for arbitration, the parties may agree to
arbitration later once a dispute arises.
5- Arbitration process is generally faster and less expensive than court procedure.
6- Arbitration in Michigan is governed by the Uniform Arbitration Act
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NO DISCLOSURE DUTY ATTACHES

TO STIGMATIZED PROPERTY
1. Property may have been the scene of a murder, suicide, drug activity, or other
stigmatizing event
2. No disclosure duty is imposed under Michigan Law
3. Licensee may disclose knowledge of registered former sex offenders who are
known to be living within a proximity of property. Failing to disclose information
shall not be grounds for action against licensee
MICHIGAN SEX OFFENDERS REGISTRATION ACT - PA 295 of 1994
1. Individuals residing in Michigan must register with the local police department if he
or she was convicted of a sex offense after October 1, 1995. Names are published
online.
2. Also known as Megan’s Law.
3. Article 25, Section 2518 of the Michigan Occupational Code states “An action shall
NOT be brought against a real estate broker, an associate broker, or a real estate
salesperson under the following circumstances:
“For failure to disclose any information from the compilation that is provided or
made available under the Sex Offenders Registration Act.”
CLOSING RESPONSIBILITIES
1. A broker/associate broker involved in a transaction shall conduct the closing

personally or may have a salesperson or other person(s) conduct the closing
UNDER THE BROKER/ASSOCIATE BROKER COMPLETE SUPERVISION.
2. Supervision can be conducted in person or through other electronic means

such as telephone, email, etc.
3. A broker or associate broker who is involved at the closing shall furnish, or

cause to be furnished, to the buyer and seller, a complete and detailed closing
statement signed by the broker or associated broker showing each party all
receipts and disbursements affecting that party. This requirement does not apply
if the closing is conducted by a title insurance company.
4. A transaction may not be closed contrary to the original purchase agreement

without written approval of the buyers and the sellers. I.E. AN AMENDMENT must
be prepared and signed by all the parties.
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Contractual Relationships (Salesperson – 5%, Broker – 5%)
Agency relationships available in MI

1. Transaction coordinator
2. Designated agency
3. Dual agency
4. Agency disclosures
Broker/Salesperson relationships
Service Provision Agreements (Listings, Buyer Broker)
AGENCY RELATIONSHIPS AVAILABLE IN MICHIGAN

(DISCUSSED EARLIER UNDER “GENERAL PRINCIPLES OF AGENCY” SECTION
1. TRANSACTION COORDINATOR
2. DESIGNATED AGENCY
3. DUAL AGENCY
4. AGENCY DISCLOSURE
BROKER/SALESPERSON RELATIONSHIPS
1. A salesperson licensed under a broker is responsible only to that broker and can carry
out only those responsibilities assigned by that broker.
2. A salesperson has no authority to make contracts or receive compensation directly

from a principal. All activities are performed in the name of the broker.
3. Determination of Independent Contractor
A. The employment contract between broker and salespersons sets the pace for
whether the salesperson is an employee or an independent contractor
B. In defining legal responsibilities, state license laws generally treat the

salesperson as an employee. Therefore, any wrongdoing may be reflected on
both, the salesperson and the broker.
C. Tests applied by administrative bodies and courts may conclude type of

relationship based on the following factors (none of these should be taken as a
sole indication)
1. A written contract clearly identifying the salesperson/associate
broker as an independent contractor and NOT an employee
2. Setting work hours
3. Mandating place of business
4. Method of payment (guaranteed wage or strictly commission)
5. Withholding payroll taxes and
6. Dress code
7. Paying benefits.
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COMPANY POLICIES, PROCEDURES AND STANDARDS
Broker is required to supervise salespersons and associate brokers
“SUPERVISION: The overseeing or participation in the work of another individual

by a broker or associate broker with the following minimum circumstances:
1. Direct communication in person, radio, telephone or other

telecommunication between supervised individual and broker/associate
broker who is available on a continuous basis.
2. Licensed broker or associate broker is available on a regularly

scheduled basis to do all the following:
A. Review the practice of the supervised individual

B. Provide consultation
C. Review records
D. Further educate the supervised individual in the performance of
the individual’s functions
3. Supervising broker/associate broker provides predetermined operating

policies and procedures to assist salespersons and associate brokers in
day-to-day activity and outlines legal requirements of practice and
company policy on certain issues such as:
A. Work ethics
B. Obtaining listings
C. Handling funds
D. Advertising
E. Closings
F. Compensation, etc.
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ADDITIONAL STATE TOPICS/LAND DIVISION ACT
Additional State Topics (Salesperson-5%, Broker-6%
Land Division Act - Public Act 591 (Disclosure of Private Road)

Michigan fair housing
1. Elliott-Larsen Civil Rights Act
2. Persons with Disabilities Civil Rights Act
Landlord Tenant Relationship Act, Truth in Renting Act
Usury laws (Broker only)
State Transfer Tax
Michigan Condominium Act
Michigan State Housing Development Authority (MSHDA)
Uniform State Anti-trust Act
Michigan Right to Farm Act (Seller’s Disclosure Required)
Changes in the Land Contract Laws (Dodd Frank Law-federal)
LAND DIVISION ACT - PUBLIC ACT 591

(DISCLOSURE OF PRIVATE ROAD)
1. PURPOSE:
A. So that the land may be properly divided and laid out, under uniform condition
that applies to all landowners in order to make the land suitable to build on or to
use for any public improvements.
B. So that when the land is bought and sold, people could accurately and upon
the proper surveys, tell the boundaries of their land and be able to use accurate
legal description.
C. So that the size of the divided parcels of land will not be too large to be served
with enough streets, roads, and adequate drainage and sewers.
PERCOLATION TEST: Performed to measure how well land absorbs water in

order to determine the design of a septic system.
UNINCORPORATED TOWN: The fact must be disclosed to the buyer because

certain services may be slow to come by such as police, fire, and ambulance
support. Roads may suffer poor maintenance and often treated as private roads
that owners may have to maintain.
SPLITS ALLOWED WITHOUT FORMALLY CREATING A SUBDIVISION?
A. Property 10 Acres or less can be divided into 4 parcels.
B. One additional split allowed for each additional 10 acres up to parcels 120
acres in size.
C. One additional split for each additional 40 acres above 120 acres.
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D. Two bonus splits if a new road is built to accommodate access or if at least

60% of original parcel is maintained in one parcel after the split.
E. New parcels over 40 acres in size earn their own split rights after a 10 year
wait.
Example: Assuming that at least 60% of the original parcel is left as one
parcel, how many parcels can a developer create out of 40 acres without
formally subdividing?
Answer: Total of (9) parcels. 4 splits for the first 10 acres, 1 more split for
each additional 10 acres above the first 10 acres and 2 additional bonus
splits for keeping 60% of original parcel as one parcel.
F. To qualify for splitting, the property must qualify as a “parent parcel”, i.e. parcel
must have existed on or before March 31st, 1997.
PENALTIES:
A sale of land split in violation of the act is voidable at the option of the purchaser. The
seller must forfeit any consideration and is liable to the purchaser for damages. As of
October 1, 1997, a violation of the division and exempt split provisions is punishable by a
$1,000 civil fine for each parcel sold.
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133
LANDLORD TENANT RELATIONSHIP ACT
LANDLORD TENANT RELATIONSHIP ACT,

TRUTH IN RENTING ACT
Regulates the relationships between landlords and tenants relative to rental agreements for residential
rental units.
The Truth in Renting requires the following Disclosure
NOTICE: MICHIGAN LAW ESTABLISHES RIGHTS AND OBLIGATIONS FOR PARTIES

TO RENTAL AGREEMENTS. THIS AGREEMENT IS REQUIRED TO COMPLY WITH THE
TRUTH IN RENTING ACT. IF YOU HAVE ANY QUESTIONS ABOUT THE
INTERPRETATION OR LEGALITY OF A PROVISION OF THIS AGREEMENT, YOU MAY
WANT TO SEEK ASSISTANCE FROM A LAWYER OR OTHER QUALIFIED PERSON.
If the lease fails to contain the landlord’s name and address or the required notice, the tenant can
sue to:
• void the rental agreement;
• force the landlord to include the required notice statement in all rental agreements he or
she enters into; and,
• recover $500 or actual damages, whichever is greater.
The Truth in Renting contains many prohibited clauses under Sec. 3 such as:
• Waiving tenant’s rights to the security deposit requirements

• Discriminates under Michigan Elliot-Larson
• Waiving tenant’s rights to legal eviction procedures
• Forcing a tenant to pay landlord’s legal fees
• Changing lease provision without the written consent of the tenant
When a tenant discovers a prohibited provision in their lease, tenants can write a letter to their
landlord, pointing out the questionable provision(s). Once the landlord receives the tenant’s letter,
he/she has 20 days to correct the problem for ALL TENANTS by:
1. notifying all tenants potentially affected by provision; and

2. voiding or altering the illegal provision.
If the landlord fails to cure the lease within 20 days, any affected tenant may seek relief by
taking one or more of the following actions to:
• void the rental agreement and terminate the tenancy

• enjoin the lessor from including the provision in any rental agreement subsequently
entered into and to require the lessor to cure the violation in all rental agreements in which
the provision occurs and to which the lessor is currently a party
• recover damages in the amount of $250 or actual damages, whichever is greater.
THE SECURITY DEPOSIT ACT
1. SECURITY DEPOSIT: Is an advance amount paid by the tenant to the landlord (not
including the first rental period) and must be refunded upon expiration of the lease term
unless the landlord legally establishes the right to a portion or all of it.
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2. AMOUNT: Shall not exceed one and one-half month rent, in addition to the first month's
rent.
Example: House rents for $400 per month, what is the maximum amount that can
be charged to the tenant to move in?
Answer: Security deposit is one and one-half of a month's rent maximum equals
$600 and the first month rent is $400 therefore the total is $1000.
3. REQUIREMENTS: Landlord shall not require a security deposit unless tenant has been
notified in writing, no later than 14 days after the tenant's possession of property, of the
following:
A. Name and address of landlord.
B. Name and address of the financial institution where the deposit is held.
C. Tenant's obligation to notify, within 4 days of terminating occupancy, of a

forwarding address. Notice should include the following statement, in twelve
points, bold face type, at least four points larger than the body of the notice or
lease agreement:
NOTICE
YOU MUST NOTIFY YOUR LANDLORD, IN WRITING, WITHIN 4 DAYS AFTER
YOU MOVE, OF A FORWARDING ADDRESS, WHERE YOU CAN BE
REACHED AND WHERE YOU WILL RECEIVE MAIL. OTHERWISE, YOUR
LANDLORD SHALL BE RELIEVED OF SENDING AN ITEMIZED LIST OF
DAMAGES AND, THE PENALTY ADHERENT TO THAT FAILURE.
4. USE OF SECURITY DEPOSIT:
A. To reimburse the landlord for damages, caused by the tenant.
B. To reimburse the landlord for delinquent rent, utility bills, rent due from
premature termination of lease.
5. INVENTORY CHECKLIST:
A. Landlord shall use inventory checklists at the commencement and termination

of tenancy to show property condition in detail including but not limited to,
carpeting, draperies, appliances, windows, furniture, walls, closets, shelves, paint,
doors, plumbing fixtures, and, electric fixtures.
B. Upon lease commencement, landlord shall give two copies of the inventory
checklist to tenant. Those copies shall be the same used for the termination of
occupancy and tenant shall complete such, and return one copy to the landlord,
within 7 days of occupancy. The checklist shall contain the following, in twelve
points, bold face type, at the top of the first page:
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NOTICE
YOU SHOULD COMPLETE THIS CHECKLIST, NOTING THE CONDITION OF

THE RENTAL PROPERTY, AND, RETURN IT TO THE LANDLORD, WITHIN 7
DAYS AFTER OBTAINING POSSESSION OF THE RENTAL UNIT. YOU ARE
ALSO ENTITLED TO REQUEST AND RECEIVE A COPY OF THE LAST
TERMINATION INVENTORY CHECKLIST, WHICH, SHOWS WHAT CLAIMS
WERE CHARGEABLE TO THE LAST PRIOR TENANTS.
6. DAMAGES:
A. Upon termination of occupancy, landlord must send to the tenant, within 30

days, a list of damages including cost of repair and a check for the difference.
The notice shall include the following in twelve points bold face type at least four
points larger than the body of the notice:
NOTICE
YOU MUST RESPOND TO THIS NOTICE, BY MAIL, WITHIN 7 DAYS AFTER
RECEIPT IS OBTAINED, OTHERWISE, YOU WILL FORFEIT THE AMOUNT
CLAIMED FOR DAMAGES.
B. Failing to send notice within 30 days constitutes agreement that no damages

occurred, and landlord shall remit deposit immediately to tenant. If tenant fails to
provide landlord with forwarding address, within four days of termination of
occupancy, landlord is relieved from sending damage notice.
USURY LAWS
Laws that limit the legal interest rate a lender can charge the borrower.
1. In Michigan, criminal usury ceiling is set at 25% APR. While regulated lenders
may charge up to 25% APR, non-regulated lenders cannot usually exceed 11% APR
(certain exemptions apply).
2. A seller of a “free and clear” principal residence (i.e. the seller owes no money and
is placing a first lien) can charge more than 11%.
3. A creditor who charges a usurious interest rate may legally lose its right to collect
interest for the life of the loan.
MICHIGAN CONDOMINIUM ACT
I. Information given to prospective purchaser for new construction
1. Must provide detailed information concerning construction and proposed operating

procedures.
2. Preliminary reservation agreement gives purchaser first opportunity to buy but can
never binds parties.
3. Purchase agreement is not binding until nine (9) business days after developer delivers
condominium documents to purchaser.
4. Condominium documents must include:
A. Recorded master deed with attached by-laws and subdivision plans
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MICHIGAN CONDOMINIUM ACT
B. Copy of purchase and escrow agreements

C. Condominium Buyers Handbook
D. Disclosure Statement
II. TIME-SHARE UNITS
1. Involves separation of individual units from common areas

2. Allows owner to purchase specific time intervals
3. Also called "interval ownership"
III. LEASEHOLD CONDOMINIUMS
1. If owner wants to rent his/her unit he/she must give association notice and
supply them with copy of lease.
2. Tenant must follow all condominium rules and by-laws.
3. If tenant fails to follow rules or by-laws, association may evict him.
IV. CONDOMINIUM CONVERSIONS
1. Covers conversion of any building (residential use only) from rental to

condominium ownership if it has six (6) or more rental units.
2. Protects any person living on premises (not necessarily the "tenant")
A. People with specific disability recognized by state income tax law

B. Residents over age of 65 years
3. For each qualified resident, developer must make offer of extended lease
[specific qualifications, terms and conditions should be referenced in statute for
further clarification].
MICHIGAN STATE HOUSING

DEVELOPMENT AUTHORITY (MSHDA)
1. PURPOSE
Addresses housing needs of Michigan's low and moderate-income citizens
A. Authority's loans and operating expenses are financed through sale of tax-exempt
bonds and notes to private investors.
B. Proceeds of notes and bonds are loaned at below-market interest rates to developers
of rental housing, for single-family home mortgages and for home improvement loans.
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MSHDA
2. ROLE IN SINGLE FAMILY
A. For low and moderate-income households.
B. Borrowers must occupy property as principal residence.
C. No MSHDA funds for refinancing.
D. New homes: dwellings must be constructed by licensed residential builder or erected by

licensed mobile home dealer.
E. Previously occupied home: used homes, condominiums if not conversions from rental
units, used mobile homes if multiple-section on foundations permanently affixed to real
estate.
UNIFORM STATE ANTI-TRUST ACT
1. Certain types of trade restraints are so injurious to competition no justification can ever be
advanced to sustain them and are defined as "per se" unreasonable
A. Price-fixing
B. Boycotts or concerted refusals to deal
C. Territorial or custom allocation
D. Tying agreements
2. Examples of dangerous words or phrases by real estate licensees, which may evidence anti-
trust violations and permit a judge to infer illegal conspiracy:
A. "Everyone charges the same commission rate."
B. "The MLS only accepts 90-day listings."
C. "We shouldn't cooperate with any broker who cuts his/her commissions."
D. "The MLS has a rule against lowering commission rates."
E. "Nobody works on his/her listings because of the low rates s/he charges."
F. "Let's do something about his/her discount fee policy."
G. "This is our market area. Tell him to stay in his/her own territory."
3. Criminal prosecution shall not be brought under Michigan Antitrust Act if prosecution has been
initiated under federal Sherman Antitrust Act arising out of same transaction or occurrences.
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UNIFORM STATE ANTI-TRUST ACT
4. Penalties under federal and state statutes
A. Felony conviction
B. Fine not to exceed $100,000
C. Imprisonment not to exceed three (3) years
D. Any person injured in his/her business or property by anyone violating Act may
sue and recover treble damages plus reasonable attorney fees
5. Liability insurance will not cover criminal act and violation of antitrust law is a criminal
act.
NOTE: Licensees must not participate in discussions with other competing agents
that may suggest “price fixing” or other violations. If a licensee happens to be in a
meeting where these issues are discussed or suggested, the licensee must leave the
meeting if s/he does not want to be implicated in a conspiracy.
MICHIGAN RIGHT TO FARM ACT

(SELLER’S DISCLOSURE REQUIRED)
1. Defines certain farm uses, operations, practices, and products; to provide certain
disclosures
2. Provides for circumstances under which a farm shall not be found to be a public or
private nuisance
A. A farm or farm operation shall not be found to be a public or private nuisance if the
farm operation conforms to generally accept agricultural and management practices
according to policy determined by the Michigan commission of agriculture.
B. A farm or farm operation shall not be found to be a public or private nuisance if the
farm or farm operation existed before a change in the land use or occupancy of land
within 1 mile of the boundaries of the farm land, and if before that change in land use
or occupancy of land, the farm or farm operation would not have been a nuisance.
3. The “Seller’s disclosure form” requires the disclosure of a farm or a farming

operation
See P.5- 8. Farm or farm operation in the vicinity; or proximity to a landfill, airport,
shooting range, etc.?
unknown____ yes____ no _____
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RIGHT TO FARM ACT
4. The act protects farmers despite local ordinances that may pass to oppose their
operation.
CHANGES IN THE LAND CONTRACT LAWS

(DODD FRANK LAW-FEDERAL)
EFFECTIVE JANUARY 10, 2013

A seller who finances the sale of owned residential property must use the services of a loan originator
to qualify the buyer. The following exclusions apply:
SELLER FINANCING 1 PROPERTY WITHIN 12 MONTHS - EXCLUSION
A natural person, estates, and trusts (no entities) that sell only 1 property in a 12-month period
and who owns the property that serves as security for the financing must comply with the following:
1. The person is not the builder or contractor of the residence.
2. The repayment of the balance does not result in negative amortization. The rule does not
prohibit a balloon payment.
3. The loan interest rate is fixed for at least five years.
SELLER FINANCING 3 PROPERTY WITHIN 12 MONTHS - EXCLUSION

This exclusion applies to “persons” as defined broadly under TILA to include not only “natural” persons
but ``also a wide range of organizations such as corporations, partnerships LLCs etc. who owns
the property that serves as security for the financing:
The following requirements must be met:
1. The person is not the builder or contractor of the residence.
2. The financing is fully amortizing (no balloon mortgages or negative amortization).
3. The loan interest rate is fixed for at least five years.
4. The person determines in good faith that the consumer (buyer) has a reasonable ability to
repay, i.e. checking W2s, 1099s, tax returns, etc.
140
MATH SHEET
Acre: 43,560 Sq. Ft A company has 20,000 square feet of land. A parcel of land 242ft by 450ft was sold
They need 4 times as much space for a for $50,000. What was the price per acre?
Tricks to remember 43,560: new project. What is the minimum amount
of acreage they need to complete the Solution:
A. “7-11” trick (4+3 and 5+6) project? Step 1: 242ft X 450ft = 108,900 sq.ft.
Step 2: 108,900 sq. ft ÷ 43,560 (acre) = 2.5
B. You can switch the “4” and “3” and it will A. 1 acres acres
be sequential: 34,560 (remember to switch B. 2 acres Step 3: $50,000 ÷ 2.5 acres= $20,000/acre
the “3” and “4” back!) C. 3 acres
D. 4 acres
If asked to find HALF Acres, multiply full
acres X 2. Answer:
20,000 sq. ft. X 4 = 80,000 sq. ft.
Example, if there’s 5 acres and you’re asked 80,000 sq. ft. ÷ 43,560 sq. ft. = 1.8 acres
to find half acres, the answer is 10 half They need at least 2 acres (B)
acres.
Q: How many acres in the NW¼ OF

SE¼ OF SW¼ OF SECTION 23?
A: 640 ÷ 4 ÷ 4 ÷ 4 = 10 Acres
÷ SMALL NUMBER
÷
Remember to start at the END of the
question. So, start with the Section 23
BIG NUMBER X
(640) and go backwards (left)… it’s
neighbor has a small “4” in the
Da %
denominator. So, 640 ÷ 4. Then do it
again and again.
Loan amount $200,000 at 6% interest. Payment

Property is assessed at $80,000 with 62 mills, what $1,500/M. What is the balance upon making 1st
are the taxes due? payment?
$80,000 X 6.2% = $4,960 Step 1: $200,000 X 6% = $12,000/yr.÷ 12 = $1,000/M
*Careful! They may give you the assessed value at the interest
beginning of the question. So, don’t take it and divide by Step 2: $1,500 – $1,000 = $500 applied to principal
2. It’s already in “half”. Step 3: $200,000 – $500 = $199,500 balance upon
making first payment
APPRAISED = Full Value vs. ASSESSED = ½ Value in MI
If property tax is paid IN ADVANCE

NET OPERATING INCOME (NOI) = GROSS RENT - OPERATING EXPENSES
=Credit Seller/Debit Buyer
If property tax is paid IN ARREARS An investor is looking at a rate of return

= Credit Buyer/Debit Seller of 12% annually on his/her investment.
The property has a gross income of
$26,000/yr. with estimated expenses of
40% of gross/yr. How much should this
Property (1) was sold for $100,000 and brought investor pay for this property?
gross rents in the amount of $10,000/yr. What would
property (2) be evaluated at with $15,000/yr. in Answer: NOI = $26,000 - 40% = $15,600
gross rents? $15,600 ÷ 12% = $130,000
Solution: G.R.M. = $100,000 $10,000 = 10

10 X $15,000 = $150,000
141
141
To Calculate Transfer Tax:
MATH SHEET
Based on a 39 year depreciation schedule.
MEMORIZE THIS: The building is valued at $468,000. The owner kept it for
(Selling Price ÷ 500) X 4.30 = 11 years. What is the adjusted basis after 11 years?
Think of this as the seller’s formula. Why? Because someone
is selling their home and they have to pay transfer tax to the Step 1: $468,000 ÷ 39 Years = $12,000
county ($.55 cents per $500) and state ($3.75 per $500). They
will not ask you to find state tax or county tax. Instead, they
Step 2: $12,000 X 11 Years = $132,000
will ask you to find transfer tax ($.55 + $3.75 = $4.30). Step 3: $468,000 - $132,000 = $336,000
BE CAREFUL: They’re going to throw irrelevant information at
you such as Loan to Value Ratio, Points, Broker Commission, (Notice how “land value” was not given here. If that
etc…
IGNORE EVERYTHING EXCEPT THE SELLING PRICE
happens, just use the building value like example above).
To Calculate Monthly Mortgage Payment + Principal and Interest:
MEMORIZE THIS: (Loan ÷ 1000) x Factor = QUESTION ON POINTS 1:
A man bought a house for $87,500 and had two deposits of

LAND DIVISION ACT $1000 each. He had a down payment balance of $6750. The
loan-to-value ratio is 90% of the loan and a 3% loan origination
Land up to 10 acres can be divided into 4 parcels (pieces). fee. How much was the origination fee? Round to the nearest
dollar.
- Two bonus splits if a new road is built to accommodate access
-$2363
or if at least 60% of original parcel is maintained in one parcel after the split. -$2394
-$2598
- New parcels over 40 acres in size earn their own split rights after a 10 year wait. -$2672
Example: How Many Splits Do You Get For 26 Acres of Land? The only thing that matters here is:
26 Acres 1. The house price ($87,500)

- 10 acres = 4 Splits
_______________ 2. The LTV (90%)
3. The points (3%)
16 Acres Left
-10 Acres = 1 Split
Everything else doesn't matter.
_______________
6 Acres Left (You can’t split this anymore because it’s not 10+) So, points are paid on the loan... The house was $87,500 and the bank is
only giving 90% of that for a loan ($78,750).... 3% (or, points/origination
ANSWER: 5 Splits –The answer could be written like this: fee) = $78,750 x 3% = $2,362.50 = Go with $2363
THREE 2-Acre Lots and TWO 10-Acre Lots
QUESTION ON POINTS 2: QUESTION ON COMMISSION:
Buyers write an offer for $325,000 with 20% down Two real estate firms shared equally a 6% commission on the
payment, which is accepted. They must pay 1.5% sale of a house. The listing licensee was paid 60% of his
discount points to obtain financing. What amount brokers share. The house is sold for $110,000. How much did
will they owe for points? the listing agent earn?
- $3900 - $1,320
- $2437.50 - $1,980
- $4,875 - $2,640
- $6,500 - $3,980
ANSWER: The house is $325,000 and the buyers ANSWER: Two brokers are splitting 6%: 3% for one broker and 3%
HAVE 20% down… Points are paid on what they DON’T for the other. Let’s focus on only our broker (3%). The Listing
HAVE (the loan). You have to figure out what they don’t Licensee (you) gets 60% of your brokers 3%. If the house sold for
have. $110,000, our broker gets 3% ($3300) and we get 60% of that…
$3300 X 60% = $1,980.
$325,000 – 20% = $260,000 (they don’t have)
$260,000 X 1.5% = $3900 they owe in points
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Common Fees in Real Estate*:
$88 to MiPlus to register an account to take the exam (one time fee – free for veterans)
$79 to PSI each time you take the exam
$479/year - $1100/year – Board/Association - A real estate association is a trade group made up of

agents and brokers that can provide trainings, lobby the government, produce market research, and
operate an MLS for the benefit of its members.
$55/month – MLS (Multiple Listing Service) – You cannot join the MLS without the board.
$0/month - $250/month – Broker Fees – Includes monthly mentorship, training, access to office
resources.
$__________/month – Marketing. Everyone has their own marketing budget for postcards, Google/FB
advertising, Radio, TV, Billboards, etc.
*Some of these fees may change over time. They are here to give you a general idea of what you could
expect.
Common Documents in Real Estate*:
Listing Agreement – We use this to get the sellers property on the market and to make our
relationship with them official. It sets the duration of the listing, our commission, etc.
Agency Disclosure – Used for both the seller and the buyer separately. If you’re representing both,
you have to have both people sign it along with a dual agency agreement.
Lead Paint Disclosure – The seller discloses if there’s lead in the house; the agent initials it stating
that they told the seller about the danger of lead paint in the home. Later, the buyer acknowledges if
they want to inspect for lead paint or waive their right to inspect.
Sellers Disclosure – Given to the seller(s) and later signed by the buyer. Must disclose any patent
defects/material facts about the house and must be filled out in its entirety or the buyer has an option to
back out of the deal.
Addendum/Amendment – Used if there is anything additional that needs to be mentioned or changed

regarding a transaction.
Purchase Agreement – This document is always signed by the buyer first when giving an offer to a
seller for their home.
Exclusive Buyer Agency – This makes the relationship between the buyer and the agent official and
ensures your commission is paid just in case the seller is not providing one (or not enough of one).
*There may be other documents you will use. This is a general idea of the “everyday” documents you
will come across.
143
GLOSSARY
GLOSSARY ADMINISTRATOR
A “Personal Representative.” A person appointed
ABSTRACT OF TITLE by court to settle the estate of a person who died
The summary of various recorded documents relating to intestate (without a will).
title, it shows any liens, judgments, taxes, etc. An ADMINISTRATOR’S DEED
attorney’s opinion (certificate of title) is required to A deed issued by an administrator (personal
assure the buyer of the quality of title. Buyers are representative) of an estate who is appointed by
encouraged to use title insurance regardless of the probate court.
attorney’s opinion. ADVERSE EASEMENT (PRESCRIPTIVE
ACCELERATION CLAUSE EASEMENT, EASEMENT BY PRESCRIPTION)
A mortgage clause that declares the entire loan balance due An easement acquired by means of a notorious and
and payable in full immediately upon default by the borrower. continuous use of property for the statutory period of
ACCRETION time prescribed by state law.
The addition to real estate by gradual accumulation of ADVERSE POSSESSION
soil and land through operation of nature, which may A person occupies another person’s property for a
include accumulation of sand because of wind or mud to statutory period of time and then seeks a court order
property located on water. to receive title to property. Occupancy must be
ACCRUED DEPRECIATION continuous, notorious, and hostile.
Loss in value that the property has suffered over a AFFIDAVIT
period of time. It is the difference between the A sworn written statement acknowledged by a
replacement cost of a building (as new) as of the date of notary public or other official authorized to
the appraisal and the presently appraised value of that administer an oath or affirmation.
same building. AGENCY
ACKNOWLEDGEMENT (NOTARIZATION) A relationship created when a principal appoints
A declaration made before a duly authorized official by a another, called an agent, to act in a certain capacity.
person testifying that he/she is that person and that AGENT
he/she is signing a document with his/her free will. A person authorized to represent another to act on
ACRE his/her behalf.
43,560 square feet AIR RIGHTS
ACTUAL NOTICE (OPPOSITE OF CONSTRUCTIVE / The right of the real estate owner to the space
PUBLIC NOTICE) above his / her land up to infinity.
Actually notifying a person of an existing instrument or AIR SPACE
other claim to property by means of showing documents Space that is solely owned by a condominium co-
or other physical evidence. owner located between floors, walls, and ceilings.
AD VALOREM (LATIN WORD) AMENDMENT
According to value. Higher property value, means A necessary contract that must be signed by a
higher property taxes buyer and seller when a transaction is being closed
ADJUSTABLE RATE MORTGAGE (ARM) contrary to the original terms of the agreement.
A loan arrangement where the monthly payment and/or AMENDMENT OF A PURCHASE AGREEMENT
interest rates would fluctuate with market conditions at A contract used to amend (change) the terms of a
certain adjustment intervals. purchase agreement when some changes are
ADMINISTRATIVE LAW JUDGE (ALJ) necessary after an offer has successfully been
An individual who is appointed by the Department to negotiated and accepted by the parties, but changes
hear a case presented against a licensee. He or she are necessary before the closing.
will make a determination following the hearing and AMENITIES
present the finding to the Board. Circumstances contributing to the pleasure and
enjoyment resulting from owning real estate.
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GLOSSARY
AMERICANS WITH DISABILITIES ACT (ADA) ASSIGNMENT

A federal law that requires public facilities, and A contract used to transfer a person’s rights,
employers, to make reasonable accommodations for interest, and/or obligations under a contract to
disabled individuals. another.
AMORTIZATION ASSIGNMENT OF CONTRACT
The process of making regular payments on a loan, The act of transferring a person’s interest and/or
including principal and interest. obligations under a contract to another.
ANNUAL ASSIGNMENT OF LEASE CLAUSE
Per year. A lease clause that addresses the circumstances
ANTI-DISCRIMINATION CLAUSE under which a lease can be assigned by the tenant
A statement that must be inserted in every listing (assignor) to another tenant (assignee). It usually
agreement and buyer agency agreement (service requires the pre-approval of the landlord (lessor).
provision agreement) stating that neither the client nor ASSIGNOR
the agent would discriminate against any individual’s A person who assigns (transfers) his / her interest in
race, color, religion, national origin, age, sex, marital a contract to another
status, disability, and familial status. ASSOCIATE BROKER
developments in the area where the property is located. A broker who is employed by another broker.
APPRAISAL ATTORNEY-IN-FACT
An opinion issued by a state licensed appraiser A person authorized under a “power of attorney” to
estimating the value of property based on property act on behalf of a principal in conducting business or
features and market conditions. personal activity.
APPRAISER BALLOON PAYMENT
A state licensed person who is employed to establish A lump sum payment (larger than the normal
the value of property. installments made on a loan) required to pay off a loan
APPRECIATION balance.
The increase of property value resulting from economic BASE LINE
conditions. Imaginary line that runs in an East-West direction
APPURTENANCE and intersects with the meridian line.
A privilege, right, or improvement that passes on with BASE RENT
land upon transfer of title. The minimum amount of rent charged in a
ARMS LENGTH TRANSACTION percentage lease. In addition, the lease usually
A transaction that occurs in a competitive market that requires the tenant to pay a percentage of retail
leads to a fair sale involving a willing buyer and seller, sales.
both acting with knowledge of the property under no BIANNUAL
duress. Also called semi-annual, payable twice a year.
ASSEMBLAGE BILATERAL CONTRACT
The merging of adjacent properties into one common The opposite of “unilateral contract. “Involves a
ownership or use. promise that is exchanged for another promise.
ASSESSED VALUE BILL OF SALE
Value allocated by the local government for An instrument used to transfer interest in personal
tax purposes. property (chattel).
ASSESSOR BLIND AD
A person employed by the local government to evaluate An illegal ad by which a licensee tries to mislead the
property for tax purposes. public into thinking that the advertiser is a private
ASSIGNEE party or possibly hiding his/her true identity.
The person to whom an assignment is made. He/she BLOCK BUSTING (PANIC PEDDLING)
assumes the rights and responsibilities of another To profit from inducing any person to sell or rent
person who is obligated under a contract. dwellings by representing entry of certain minority
group(s) into a neighborhood.
145
GLOSSARY
BLUE-SKY LAWS CERTIFICATE OF TITLE

Laws that regulate the licensing and registration of An opinion issued by an attorney regarding
securities and security dealers. marketability of title, usually derived from a title
BOARD OF DIRECTORS search or an abstract of title.
An elected group of owners in a subdivision or condominium CHAIN OF TITLE
association whose job is to meet regularly to enforce the The history of all of the documents affecting the
association’s bylaws and to overlook the maintenance of the transfer of property title.
common elements. CHATTEL MORTGAGE (SECURITY AGREEMENT)
BREACH OF CONTRACT A mortgage contract that secures a note evidencing a
The violation of an obligation that is stated in a contract. loan borrowed to secure personal property.
BUFFER ZONE CIVIL RIGHTS ACT OF 1866
A zoning use that separates two different use districts Prohibits discrimination because of race without
such as planning a park between an industrial and a exceptions.
residential district. CLAUSE OF CONVEYANCE (GRANTING
BUNDLE OF RIGHTS CLAUSE)
A group of rights that are received when property is A statement in a deed spelling out the actual
acquired including such legal rights as possession, conveyance of title from grantor to grantee.
enjoyment, lease, sell, will, mortgage, etc. CLOSING STATEMENT
BYLAWS A statement showing debits and credits of buyers
Rules enforced by subdivision and condominium and sellers that must be signed by the broker /
associations regulating the use of properties and associate broker at the time of closing.
common elements. For example limiting the number of CLOUD ON THE TITLE
pets a co-owner may keep in her condominium. A claim or encumbrance that is still outstanding. If
CAPITAL GAINS proved to be valid then it will affect the marketability
Gains resulting from the sale of a capital asset such as of title.
real estate. COLLATERAL
CAPITAL IMPROVEMENT The property that is given as security for a loan.
Improvements to property that add to its value extending COMMINGLING FUNDS
Mixing the broker’s personal funds with trust
the useful life.
account funds belonging to the public.
CAPITALIZATION COMMITMENT FEE
Determining the value of property by calculating its net Fee charged by a lender to guarantee a borrower that a
operating income and dividing it by a capitalization rate. certain promised loan interest rate and terms are set for
CAPITALIZATION RATE a certain period of time.
The rate of return that is expected to be obtained on COMMON ELEMENTS
capital invested in income property. Portions of a condominium project owned jointly by
the condominium owners as tenants in common.
CASH FLOW
Usually extends to all structural portions of a
The income generated from income property, which is condominium, parking lots, yards, stairs, elevators,
equal to the gross income minus the expenses and debt hallways, etc.
service. COMPETENT
CERTIFICATE OF NO DEFENSE (ESTOPEL Legally qualified to act.
CERTIFICATE) COMPLAINANT
An instrument signed by the mortgagor (borrower) stating A person making a complaint against another
person.
the full amount of the balance and interest rate on the
COMPOUND INTEREST
borrowed loan. Interest accrued on previously earned interest.
CERTIFICATE OF REASONABLE VALUE (CRV) CONCURRENT ESTATE
Issued by a VA approved appraiser to show Fair Market Ownership of a property by two or more persons at
Value for purpose of financing. the same time.
CONDEMNATION
The legal process of exercising the government’s
right of “eminent domain.”
146
GLOSSARY
CONDOMINIUM additional parking, contribute to the entire value of a

Ownership of a unit in a multi-unit structure restaurant business?
accompanied by the ownership of common elements. CONVENTIONAL MORTGAGE
CONDOMINIUM CONVERSION A mortgage loan arrangement that is neither insured nor
The act of converting units in a rental complex into guaranteed by the government.
individually owned units that may be bought or sold. CONVEYANCE
CONDOMINIUM FEE (ASSOCIATION FEE) The transfer of interest in real property from one
An expense assessed in proportion to the cost person to the other.
necessary to operate the condominium association such COOPERATIVES
as maintenance and insurance of common elements. A system of ownership reflected in leasing a unit by
CONFORMITY a stockholder of a corporation that owns the entire
The placement of a property in harmony with other multi-unit structure, using a “proprietary lease.”
surrounding properties that contributes to achieving its CORPORATION
highest and best use. For example locating a home in a A non-living entity that is treated as a person with
subdivision rather than next to an industrial park. rights and liabilities as well as income tax.
CONSIDERATION CORRECTION DEED
An amount of money or something of value that must be A deed issued to correct an error in another deed.
promised in a contract to make it valid. COUNTEROFFER
CONSTRUCTION LIEN (MECHANIC’S LIEN) A proposal initiated by a party to a contract resulting
A lien placed on real property for unpaid construction from a prior incoming proposal that was found to be
bills. unacceptable. The counteroffer is a way to
CONSTRUCTIVE NOTICE compromise and negotiate a mutually acceptable
Notice given to the public when a legal document is agreement to all parties.
recorded at the “register of deeds” office. The recorded COVENANT
documents are available to the public and are revealed A provision entered into an instrument promising
upon a title search. certain action or inaction possibly limiting or allowing
CONTINGENCY the use of property.
A requirement or condition in a contract that must be COVENANT AGAINST ENCUMBRANCES
met to validate a contract or certain obligation. A covenant in a deed where the grantor guarantees
CONTINGENT OFFER that title is free from all encumbrances except those
An offer that bears a condition placed by a party to the stated in the deed or on the public record, and that
contract. Such condition must be satisfied for the he /she will protect the buyer’s title against any
contract to become binding on that party. liens, debts or other encumbrances that may arise.
CONTINUING EDUCATION REQUIREMENTS COVENANT OF FURTHER ASSURANCE
Educational requirements consisting of 6 classroom A covenant in a deed that states, if a cloud surfaces
hours that must be completed by the licensee on a on a title after conveyance, grantor agrees that
yearly basis to be allowed to renew the real estate he/she will execute any instruments necessary to
license on time. eliminate the problem.
CONTRACT COVENANT OF QUIET ENJOYMENT
A written or oral agreement that may involve one or more A covenant in a deed where the grantor covenants
parties acting in a certain capacity. that the property is free from claims of others
CONTRACT OF SALE (PURCHASE AGREEMENT) claiming title to it.
Or the “buy and sell agreement” whereby the buyer and COVENANT OF SEISIN (SEIZIN)
the seller agree to conduct a sale and set the price, A deed covenant where the grantor guarantees that
terms and conditions of the sale. he is (seized) or actually possesses a fee simple or
CONTRIBUTION other interest in the property and has the right to
Value added by one component of property in convey it to the grantee.
comparison to the whole. For example, how much value
would an adjacent vacant lot; recently acquired for
147
GLOSSARY
COVENANT OF WARRANTY OF TITLE (WARRANTY money to satisfy the debt secured by the mortgage.
FOREVER) DELIVERY AND ACCEPTANCE
A covenant in a deed where the grantor forever warrants The voluntarily delivery of a deed by the grantor
title and promises to defend the grantee’s interest (during his/her lifetime) and acceptance by the
against all claims and will compensate the grantee with grantee.
money if title became defective in the future. DEPRECIATION
CREDITOR The loss of property value.
A person to whom money is owed by the debtor. DESIREABILITY
CURABLE OBSOLESCENCE An economic characteristic of property affecting
Outdated features in property that may be feasibly value which represents whether or not there are
corrected to bring the property to current standards. possibly buyers interested in the property that are
CURTESY willing, able and have the financial needs to
A lifetime interest granted to the husband in his wife’s purchase.
real estate granted to him upon her death. DETERIORATION
DEBT SERVICE The physical wear and tear that leads to
Loan payments including principle and interest. depreciation.
DEBTOR DEVISE
A person who owes money to another called the creditor. Real estate that is willed.
DEDICATION DEVISEE
The donation of privately-owned property to public use. The heir.
DEED DEVISOR
An instrument that conveys title in real property from one The deceased.
person to the other. The person giving up title is called DIRECT ENDORSEMENT
the grantor and the person receiving title is the grantee. The ability of a lender to approve FHA loans without
DEED IN LIEU OF FORECLOSURE prior approval from the Federal Housing Administration
A peaceful surrender of property by the mortgagor as long as the loan meets the necessary requirements.
(borrower) to the mortgagee (lender) where the mortgagee The purpose is to save time on loan processing.
agrees not to go through the foreclosure process and DISCHARGE OF MORTGAGE
accepts a deed from the mortgagor who surrenders the A document issued and recorded by the lender as a
property in full satisfaction of debt. mortgage release evidencing the satisfaction of a
DEED OF TRUST mortgage.
Used to convey title to a “trustee” pending an installment DISCOUNT POINTS
sale and full payment of debt at which time the “trustee” will Loan fees equal to 1% of the loan amount, charged by
deed the property to the buyer using a “trustee’s deed.” the lender in advance at closing which helps to raise the
DEED RESTRICTIONS lender’s interest yield.
A requirement in a deed that limits the future use of the DOMINANT ESTATE (TENAMENT)
property being conveyed. The property that benefits from an appurtenant
DEFAULT easement.
Non-performance of an obligation DOMINANT TENANT
DEFEASIBLE FEE The owner of the dominant estate that benefits from
Also called a “qualified fee. “Interest in real estate that an appurtenant easement.
may be terminated upon the happening of a certain DOWER RIGHT
event. The right of a wife, to her husband’s real estate
DEFFERRED MAINTENANCE granted to her upon his death.
Existing maintenance and repair requirements that are DUAL AGENCY
due but put off. An agency relationship that involves representing
DEFICIENCY JUDGEMENT opposite parties in a transaction.
A court judgment obtained by the creditor against a
mortgagor when a sheriff’s sale does not generate enough
148
GLOSSARY
DUE-ON-SALE CLAUSE (ALIENATION CLAUSE) EMINENT DOMAIN

A mortgage clause that gives the lender the right to call the The government’s right to take private property for
whole loan balance due when ownership of property public use, provided that the taking is necessary and
transfers. after paying fair and just compensation. The court
DURABILITY action through which eminent domain is taken is
A physical characteristic that refers to the long lasting known as “condemnation.”
nature of real estate. ENCROACHMENT
DURESS A trespass of a building tree, fence, etc., over the
To use force against someone to enter into a contract. property line of another. It may be detected by a
EARNEST MONEY survey.
The amount of deposit made by the prospective buyer ENCUMBRANCE
on property as evidence of good faith. Liens, mortgages, taxes, leases, easements, judgments,
EASEMENT deed restrictions, possibly encroachments, etc. attached
The right to use real property that belongs to another, for to property that may become a burden and which may
a certain purpose. diminish its value. Encumbrances “run with the land”, i.e.
EASEMENT APPURTENANT unless cleared before the sale, it continues to affect the
A “right of way” given to a neighboring property which property and must be honored by the new owner.
may be used usually for ingress and egress. It is said to EQUITABLE TITLE
“run with the land”. (1) Interest held by a vendee under a land
EASEMENT BY GOVERNMENT CONDEMNATION contract.
An easement that is obtained by the government on (2) Interest obtained by the buyer under a
private property for public use. The law requires the contract of sale (purchase agreement) when
taking to be necessary and requires the payment of fair signed by all parties.
and just compensation to the owner. EQUITABLE LIEN
EASEMENT BY NECESSITY Placed on property as a result of a civil dispute such
A court ordered easement for the benefit of a landlocked as for compensation claim, slander, harassment,
parcel over an adjacent property to provide access. non-payment of bills, etc.
EASEMENT BY PERSCRIPTION (ADVERSE EQUITY
EASEMENT) The difference between the property fair market value
Obtained with a court order as a result of an open, and amount of money owed on it.
continuous and notorious trespass over the property that EQUAL CREDIT OPPORTUNITY ACT
continues for the statutory period of time. A federal law that prohibits lenders from
EASEMENT BY RESERVATION discriminating against borrowers because of their
Created by a person who transfers ownership of minority status or because of receiving public
property but withholds the right to use a portion of the assistance.
property. EROSION
ECONOMIC LIFE The gradual wearing away of land due to the natural
The length of time during which a property can be movement of water.
profitably utilized. ESCALATION CLAUSE
ECONOMIC OBSOLESCENCE (EXTERNAL) A provision in a contract that allows for the adjustment of
Loss of value in real estate due to the exterior factors interest rate, payments, lease payment, etc., to satisfy
such as a declining neighborhood, air pollution, etc. certain contingencies.
EGRESS ESCALATOR LEASE
The way out from the property. The opposite of ingress. A lease that contains an escalation clause which
EMBLEMENTS calls for future increases or decreases in rent based
Crops and other annual plantings that can be retained on future fluctuations in the property operating
by the seller as personal property when property is sold. expenses.
149
GLOSSARY
ESCHEAT FANNIE MAE

The transfer of title/ownership to the State when a The Federal National Mortgage Association. A private
person dies without a will or heirs. corporation that provides funding as a secondary
ESCROW ACCOUNT market.
(1) In case of a budget mortgage, the bank holds F.D.I.C.
money for taxes and insurance on the property Federal Deposit Insurance Corporation. A federal
in a special account. This account is adjusted agency that insures deposits at commercial banks and
as payments are received or bills are paid. savings and loan associations.
(2) An account held by the real estate broker to FEE
deposit earnest money paid by the public. Interest in real property that may be inherited.
ESTATE FEE SIMPLE ABSOLUTE
(1) Property held by a deceased person. A non-conditional fee simple. The highest estate a
(2) The degree and nature of interest a person has in person can have in real property and is only subject
real property. to government powers.
ESTATE IN REMAINDER FEE SIMPLE CONDITIONAL
Interest in real property created by a deed or will that An interest in real estate that, although granted,
names a third party or entity to whom title will pass upon terminates upon the violation of a certain activity
death of the life tenant. The third party is referred to as that the new owner must not perform. For example,
the “remainder man.” property that is conveyed on condition that there
ESTATE IN REVERSION would be no consumption of alcohol on it.
An interest in real property that reverts to the original FEE SIMPLE DETERMINABLE
person who granted it to the life tenant and who holds a An interest in real estate given for a special purpose
“reversionary interest.” and has a special limitation or condition that the new
EXCLUSIVE AGENCY LISTING owner must perform. For example property is
A listing by which the broker is specified as an exclusive granted to a college “as long as” it is used for
agent, but the seller may sell the property to a buyer educational purposes.
procured due to the seller’s efforts without paying a FHA LOAN
commission. A loan that is insured by the federal housing
EXCLUSIVE RIGHT TO SELL administration and initiated by an approved lender.
A listing that employs one exclusive agent and promises FIDUCIARY
a fee in the event anyone procures a buyer including (1) The loyalty relationship between the agent
other competing agents or even the seller. and the principal.
EXECUTED CONTRACT (2) The agent who owes loyalty to the principal.
A contract that has been completely performed and FIXTURES
terminated. Personal property attached to real estate on
EXECUTION permanent basis to become a part of it.
The signing of the deed by the grantor. FIXTURES CLAUSE
EXECUTOR A lease clause that addresses whether fixtures
A person named in a will to handle the deceased’s installed by the tenant can or cannot be removed
estate. Also may be referred to as the “personal after the expiration of the tenancy. It specifies the
representative” of the estate. party responsible for the removal and repairs that
EXECUTOR’S DEED may become necessary after detachment of fixtures.
A deed issued with by the executor (personal FORMAL COMPLAINT
representative) of an estate. Formal charges issued by the Department, following
EXECUTORY CONTRACT an investigation, and determining that enough
A contract that has not been performed in full yet. evidence exists in regards to a certain violation.
FAIR HOUSING AMMENDMENT OF 1988 FRAUD
A fair housing act that prohibits discrimination because An intentional misstatement of facts.
of disability and familial status.
150
GLOSSARY
FREDDIE MAC
The Federal Home Loan Mortgage Corporation.A federal GROSS LEASE
agency that provides money for the secondary market. A lease that requires the tenant to pay a set amount
FREEHOLD ESTATE of rent while the landlord pays the property
An interest in real property for at least a lifetime. operating expenses.
FUNCTIONAL OBSOLESCENCE GROSS RENT
Loss in value of property due to poor layout, design and Rent collected from tenants before paying property
décor that is not up-to-date. operating expenses.
G.R.M. GROUND LEASE
The Gross Rent Multiplier, used in estimating value of A lease of land only used by farmers to cultivate
income property based on its gross income. property or by a person or entity interested in using
GENERAL AGENT land to place improvements on it.
One who is authorized to represent the principal in a GUARDIAN
range of matters. A person appointed by court or by another person to
GENERAL LIEN (BLANKET LIEN) handle the property and affairs of a person that is a
Applies to a group of properties that an individual owns. minor or mentally incapable.
Usually results from the owner’s personal liability such H.U.D.
as income tax liens or a lien that is placed as a result of The Department of Housing and Urban
a blanket mortgage. Development
GENERAL WARRANTY DEED HABENDUM CLAUSE (TO HAVE AND TO HOLD)
A deed that contains all covenants of title. A deed clause that defines the extent of ownership
GRADUATED LEASE (STEP-UP-LEASE) the grantor is conveying. For example: From
A lease that calls for future increases in rent payment at Anderson to Smith, “to have it and to hold it” for her
certain future intervals. natural lifetime only and upon her death, title to
GRADUATED PAYMENT MORTGAGE revert back to Anderson.
A mortgage arrangement that contains an escalation clause HETROGENEITY
that allows for lower payments or interest in the early stages Physical characteristic of property affecting value
of repayment with higher payment and/or interest in the that refers to the fact that every property is unique
future. and no two parcels are alike.
GRANDFATHER CLAUSE HIGHEST AND BEST USE
A clause in the law that allows for the continuation of a The use of land that produces the highest value,
pre-existing use, allowing an exemption from zoning provided that it is legal, economical, and physically
laws or building codes. possible.
GRANT HOME MORTGAGE DISCLOSURE ACT
To transfer interest in real estate using a deed. A federal law that requires lenders whose loans are
GRANTEE federally related to disclose the number of loans
A person receiving title to real estate by means of a made in various areas in an effort to eliminate
deed. redlining.
GRANTOR HOME OWNER’S ASSOCIATION
A person conveying his / her interest in real estate to A committee that consists of the owners in a
another person by means of a deed. subdivision or condominium complex whose job is to
GROSS EASEMENT provide for regulations aimed at preserving and
The right to use property of a person or entity who is not maintaining property values and co-owners
usually a neighbor, given mostly to utility companies relations. It establishes bylaws and collects
such as for the purpose of gas, electricity, cable, water association fees to pay for maintaining the common
and sewer, etc. elements.
HOMESTEAD
The right given to a homeowner to exempt his / her
home from judgments and bankruptcies.
151
GLOSSARY
HORIZONTAL PROPERTY ACT (THE CONDOMINIUM INGRESS AND EGRESS

ACT / THE STRATA ACT) Getting into the property and existing from it.
The law that provide for the creation of a condominium INSTALLMENT SALE METHOD
development allowing co-owners to hold fee simple title to A method of purchase involving paying the purchase
their units with a specified share of the common elements. price for property in installments.
IMMOBILITY INSTRUMENT
A physical characteristic of property that refers to the A written legal document.
fact that real estate is not moveable. INSURED MORTGAGE
IMPLIED AGENCY A mortgage that secures debt, which is insured by a
An agency relationship created by misleading a government agency or private corporation.
customer to believe that an agent is representing her as INTEREST PER ANNUM
a client. Annual interest.
IMPROVEMENTS INTESTATE
Additions to property that is of a permanent nature such Dying without a will.
as building a house, garage, deck, installing water, INVENTORY CHECKLIST
sewer, and utility lines. Required under Michigan law to be checked when
INCOME APPROACH the tenants move into the residential unit and move
A method of appraising property using a relation out. It allows tenant, landlord, and possible a court
between the amount of money invested and the return of law to determine whether the property has
on investment. suffered damages due to tenant’s actions.
INCOME PROPERTY JOINT TENANCY
Real estate that produces income to the owner. Ownership held by two or more people with “rights
INCURABLE OBSOLESCENCE of survivorship”.
Outdated property features that may be very hard, JOURNAL
impossible, or uneconomical to correct. For example, A bookkeeping system that consolidates
adding a garage to a home that is located on a very transactions and monies received and paid through
narrow lot, or trying to improve upon a declining the broker’s trust account.
neighborhood that is negatively affecting the value of the JUNIOR LIEN (SECOND)
subject property. A lien placed on property after a first lien has been
INDEPENDENT CONTRACTOR placed and recorded. This type of lien is secured by a
One who is retained to perform a certain act, but who is junior mortgage (also called a second mortgage), which
subject to the control and discretion of another, only as has lower priority than the first mortgage.
to the end result and not as to the way in which he LAND CONTRACT
performs the act. This person normally sets his / her A contract by which the buyer of real estate pays the
own working hours, pays his / her own expenses, purchase price in installments. The seller retains the title
receives no employment benefits, and pays for his / her to the property until the full payment of debt.
own income tax. LAND DIVISION ACT
INDEX LEASE State law that regulates the dividing of land and
A lease that is adjusted according to a specified index creation of subdivisions. It requires land to be
such as the consumer price index, cost of living index, properly laid out with roads and utilities and for the
etc. subdivision to be recorded with the county register
INFORMAL HEARING (INFORMAL RESOLUTION of deeds office to create accurate legal descriptions.
CONFERENCE) LATENT DEFECT
A meeting between the complainant and the respondent A hidden defect that is known to the seller only and
aimed at settling a formal complaint. It may result in cannot be revealed by an ordinary inspection of the
license suspension, revocation, limitation, or certain agent or buyer. For example, a crack in a basement
fines. wall that in concealed behind drywall or paneling.
INGRESS Not disclosing may result in seller committing “Silent
The way to enter a property. Fraud.”
152
GLOSSARY
LEASE LIS PENDENS

A contract used to establish a rental arrangement Notice of a pending lawsuit filed against property
between a lessor (landlord) and a lessee (tenant) to rent that may affect the marketability of title.
property for a pre-determined period of time. LITTORAL RIGHTS
LEASE WITH OPTION Land owner’s claim to the use and enjoyment of
A lease contract that includes an option clause which water that is adjacent to his / her property in large
allows the tenant to purchase the leased property for a navigable lakes or oceans. Ownership of land
set price and terms, or obtain additional lease renewals. extends to the high water mark.
LEASED FEE LOAN TO VALUE RATIO
The interest that a landlord has in the leased property. The relationship between the borrowed loan and the
LEASEHOLD ESTATE value of property, presented as a percentage. For
The legal interest of a tenant in leased property. example, if the value is $100,000.00 and the loan to
LEGAL CAPACITY (CONTRACTUAL ABILITY) value ratio is 80%, a borrower can borrow $80,000.00.
Being of legal age and sound mind. LOT-BLOCK-SUBDIVISION
LEGAL DESCRIPTION A method of legal description that identifies
A unique description of land that can be relied upon to properties by reference to a subdivision plat filed by
establish its boundaries with a survey. the developer with the county register of deeds
LEGAL OBJECTIVE office.
The legal purpose of a contract that has been entered MARKET COMPARISON APPROACH (MARKET
into. A contract for an illegal purpose is void. DATA APPROACH)
LESSEE Appraisal method that employs information available
The tenant. on comparable sold properties.
LESSOR MARKET PRICE
The landlord. The actual price paid for property at a certain point
LEVERAGE in time.
The use of borrowed money to finance property. MARKET VALUE (FAIR MARKET VALUE)
LICENSE What a willing buyer will most probably pay a willing
(1) A personal privilege or right granted by legal seller if neither one of them is under any pressure to
authority to perform a certain occupation. buy or to sell, both have reasonable knowledge of
(2) Permission of a personal and temporary nature the property, and the property stays on the market
granted to use another person’s property such for a reasonable length of time.
as for the purpose of fishing or hunting. MARKETABLE TITLE
LIEN Unclouded title that that can be freely transferred.
A charge or claim by a creditor against a property of a MASTER DEED
person or entity, threatening to dispose of the property to A deed that converts land and improvements into a
satisfy the claim. condominium project.
LIEN THEORY STATES MERIDIAN LINE
States whose law allows lender to receive a lien on the Imaginary line that runs in a North - South direction
mortgaged property and not title. intersecting with the base and township lines.
LIFE ESTATE METES AND BOUNDS
Interest in real property given to a person for the A method of legally describing land using a “point of
duration of a lifetime. beginning”, distance measurements, boundaries,
LIFE TENANT monuments and benchmarks.
A person or entity who receives title to the real property MICHIGAN TRUTH AND RENTING ACT
for the duration of a lifetime. A law that regulates rental agreements for
LIQUIDATED DAMAGES residential property. It provides for rights and
An amount of money paid to a party in a contract to fully obligations to landlords and tenants alike. It
satisfy or “liquidate” any damages suffered. requires the inclusion of certain clauses in a
residential lease to protect residential tenants.
153
GLOSSARY
MILL NON-MATERIAL FACTS

Equal to one tenth of one cent or 0.001 of a dollar. Facts about property of no effect on value such as
MINOR the reason for the sale. Example: Seller lost his /
A person who is under the age of majority. her job and is desperate for money.
MONUMENT NON-PRINCIPAL ASSOCIATE BROKER
Evidence of a boundary. Such as a concrete block, An associate broker who is not an officer or member
wooden stake, iron pipes, trees, streams, fences, or any of a real estate entity. He / she has no power to
other identifiable object. make decisions for the entity.
MORTGAGE NON-RESIDENT LICENSEE
A contract used to hypothecate property as security for a An individual who is licensed in the state of
debt. Michigan, who actually resides in another state.
MORTGAGEE She / he must meet all of the licensing requirements
A person or entity that receives a mortgage contract from a for the state of Michigan and sign an “irrevocable
debtor. consent of service”.
MORTGAGEE’S TITLE POLICY (LENDER’S POLICY) NOTICE TO QUIT
A title insurance policy (issued for the amount of the A legal notice given to a tenant demanding that the
loan) that insures the lender’s interest in the property tenant vacates the leased premises within a limited
against losses due to a defective title. time.
MORTGAGOR NOVATION
Person or entity that delivers a mortgage contract to a The substitution of a person or entity in place of
creditor to secure a loan. another. Or the substitution of a contract in place of
NAKED TITLE an existing one.
Title held by a person or entity without the bundle of rights. OFFEREE
NET LEASE The person to whom the offer is made.
A lease that requires the tenant to pay rent plus property OFFEROR
operating expenses. The person making the offer.
NET LISTING OPEN END MORTGAGE
A listing that involves a seller who is promised a A mortgage that allows the borrower to borrow up to a
minimum price for the property above which the broker predetermined line of credit.
receives his / her commission as the difference between OPEN LISTING
the sale price minus the minimum amount guaranteed to The owner reserves the right to hire more than one
the seller. Illegal in many states. broker to list the property (at the same time) and
NET OPERATING INCOME pays one commission only to the broker who sells it.
Annual income, generated from property after deducting OPERATING BUDGET
operating expenses. A statement used to forecast future rents,
NET OPERATING INCOME (NOI) vacancies, and operating expenses for income
Is equal to the yearly gross rent received from income producing property.
property minus the yearly operating expenses. OPERATING EXPENSES
NON-CONFORMING USE Necessary costs to operate the income property
The use of property that is inconsistent with the zoning such as property taxes, maintenance, insurance,
law. utilities, and management fees (not including the
NON-FREEHOLD ESTATES debt service).
Leasehold Interest in real property for less than a OPTION CONTRACT
lifetime. A contract used to reserve the right to purchase or
NON-LIVING ENTITY AS A BROKER lease property during a set period of time and for a
A corporation, partnership, association, joint venture, specified price and terms.
trust, or limited liability company that holds a real estate OPTIONEE
broker’s license. It consists of at least one associate A person who receives an option to buy or lease a
broker. property.
154
GLOSSARY
OPTIONOR PHYSICAL DETERIOTATION

The person who gives an option on property. A factor that contributes to loss of value due to wear
ORDINARY LIFE ESTATE and tear of property such as a roof leak, problem
An interest in real estate given for the duration of the with plumbing, electrical wiring, etc.
new owners lifetime. Upon their death, property will PITI
revert back to the grantor or a third specified party. Refers to a mortgage loan payment that includes
OWNER’S ASSOCIATION principal, interest, taxes and insurance.
A committee that is formed to establish regulations in PLAT
condominium projects and subdivisions. A map showing location and dimensions of property.
OWNER’S TITLE POLICY POCKET CARD
Title insurance policy issued in the name of the new An identification card, supplied by the department to
property owner, usually provided and paid for by the a licensee, which must be carried while doing
seller. The policy is issued in the amount of the business.
purchase price and protects the purchaser and his / her POINTS
heirs against losses due to a defective title. A loan fee charged by the lender to originate and /
PARTITION SUIT or process a loan. Each point represents one
Originated by one or more co-owners asking the court to percent of the loan amount.
order the splitting of their interest to end the tenancy POINT OF BEGINNING (P.O.B.)
when a voluntary agreement cannot be reached. The monument where the metes and bounds
PARTY DRIVEWAY description starts and ends.
A driveway that is shared between two adjacent POLICE POWER
properties.(An example of an appurtenant easement). Power vested in government to make laws and
PARTY WALL regulations for the health, safety, and welfare of the
A wall that is located on the lot line between two public, such as planning, zoning, building codes,
adjacent properties. (An example of an appurtenant health codes, environmental protection laws, etc.
easement). POWER OF ATTORNEY
PATENT DEFECT An instrument that authorizes a person to act on
A defect that can be discovered as a result of a behalf of another.
reasonable inspection that is conducted on the property PREPAYMENT PENALTY
such as a roof leak, furnace problem, etc. Charged by a lender to the borrower who pays a loan
PERCENTAGE LEASE balance early, i.e., before the scheduled payback time.
A lease that sets the rent amount based on retail sales PRIMARY LENDER
generated by the tenants business. A lender who initiates the loan to the borrower such as,
PERCOLATION TEST commercial banks, credit unions, saving and loans, etc.
Performed to measure how well land absorbs water in PRINCIPAL
order to determine the design of a septic system. If an A person who authorizes another called an agent to
offer is being made to purchase land that is not served act on his / her behalf.
with city sewers than the offer should be subject to a PRINCIPAL ASSOCIATE BROKER
percolation test. An officer or member of an entity designated by the
PERENIAL PLANTINGS real estate broker as active. This person can run
Trees, lawns, shrubs, etc. that continue to grow on the non-living entity and has decision-making
property without the need of replanting every season. powers. In the event that there are several
They are considered as real estate and are expected to officers/principal associate brokers, only one
be included in the sale of property. principal broker is designated as the “broker of
PERSONAL PROPERTY (CHATTEL) record” who is in charge of the day-to-day business
Movable goods that are not permanently attached to real decisions and supervision.
property such as furniture, appliances, other free- PROCURING CAUSE
standing items, etc. The effort that leads to finding a buyer, which
ultimately results in a sale.
155
GLOSSARY
PROMISSORY NOTE REAL ESTATE SETTLEMENT PROCEDURES

Evidence of debt showing the loan amount, interest rate, and ACT (RESPA)
payment method. A federal law that requires certain procedures to be
PROPRIETARY LEASE followed at closings (settlements) on first and
The lease given by a corporation to a shareholder in a second mortgage loans made on 1-4 family
cooperative housing project. residences. Requires the lender to inform the
PROTECTION CLAUSE (IN A LISTING AGREEMENT) buyers and sellers of their charges and credits
A clause inserted in a listing agreement aimed at related to the settlement. It prohibits kickbacks
protecting the listing broker in the event that a buyer involving lenders, real estate’s agents, title
who was found by the broker returns to purchase the insurance services, appraisers, credit reports,
property directly from the owner but after the expiration inspections, surveys and legal services.
date of the listing agreement. REAL PROPERTY
PUFFING Real Estate. Includes land, improvements,
The fraudulent exaggeration of facts. perennial plantings, the air space above, subsurface
PUR AUTRE VIE ESTATE rights, water related rights, anything attached
An interest in real property granted for the life of a third permanently to the land. Seller may sell all rights or
party other than the person that granted the estate or reserve a portion such as selling the surface but
the new owner. reserving mineral rights.
PURCHASE AGREEMENT-“Contract of Sale” REALITY OF CONSENT
A buy-sell agreement between buyer and seller whereby Parties enter a contract with free will, i.e. no fraud,
the buyer and the seller agree to conduct a sale and set duress, etc.
the price, terms and conditions of the sale. RECONCILATION
PURCHASE MONEY MORTGAGE The process of evaluating each appropriate
An installment sale method whereby the person receiving appraisal method used in estimating value to arrive
title to the property gives a note and a mortgage to the to a single and most supportable conclusion.
grantor (seller). RECTANGULAR SURVEY SYSTEM
QUARTERLY INTEREST A method of legal description that employs the use
Interest calculated on a loan every three months. For of Base, Meridian, Township and Range lines.
example if annual interest on an $80,000 loan is 6%, REDEMPTION
then the annual interest due is $4,800 and the quarterly The right of a property owner (mortgagor or vendee) to
interest is $1,200. reclaim his/her property after losing it through court
QUIETING TITLE action.
Court action taken to establish ownership and / or REDLINING
remove a cloud from the title. An illegal act by a lender (or other service provider)
QUIT CLAIM DEED who refuses to make loans on property located in a
A deed that conveys the grantor’s interest in property certain section of the city regardless of the
without any warranties of title. qualifications of property or applicants, because of
QUITE ENJOYMENT the residents’ minority status.
The right of possession without outside interference. REGRESSION
RANGE A larger and more expensive dwelling may lose value if
A strip of townships 6 miles wide running in a North to it is located near smaller low-priced dwellings.
South direction. REGULATION Z
RANGE LINES Truth-in-lending law. A federal law that requires credit
Imaginary lines that run parallel to the meridian line in 6- institutions to inform the borrowers of the true cost of
mile intervals. obtaining credit.
RELICTION
Land is exposed when water permanently recedes.
156
GLOSSARY
REMAINDER ESTATE RIPARIAN RIGHTS

The interest of a remainder man who is entitled to An owner’s right in land that borders or includes a
receive property after death of a life tenant. stream, river, or inland lake. The rights include
REMAINDERMAN access to and use of the water.
A third party (person or entity) named in a deed (other SALES COMPARISON APPROACH
than the grantor or his / her heirs) to whom the property Also known as the “market data approach” or
reverts after the termination of a life estate. “market comparison approach”. Appraisal method
REPLACEMENT COST APPROACH (COST that employs information available on comparable
APPROACH) sold properties with adjustments made for superior
A method of appraising property best used for brand and/or inferior features.
new property or property with little or no comparables. It SALE-LEASEBACK
takes into consideration the cost of the land that the The sale of property with the seller leasing back the
building is situated on, the cost of replacement of the same.
building as new, minus the accrued deprecation. SANDWICH LEASE
REPRODUCTION COST A lease created as a result of a situation where the
Is the cost to produce an exact duplicate of a building. tenant subleases his / her property to other tenants.
RESCISSION SCARCITY
To rescind (v).The termination of a valid contract and An economic characteristic of property affecting
returning to “status quo.” value which represents whether or not there are
RESTRICTIVE COVENANT (DEED RESTRICTION) other similar properties of a comparable nature
A restriction or clause in the deed that limits the future within the same general area that will compete with
use of property being granted. the subject property.
REVERSERVE MORTGAGE REVERSE ANNUITY SECONDARY MORTGAGE MARKET
MORTGAGE The market that provides money to purchase existing
A mortgage loan arrangement used by an elderly borrower mortgages from primary lenders.
who receives regular monthly payments from the lender SECTION OF LAND
(secured by property) for a set period of time allowing the Area of land equal to one square mile or 640 acres.
balance and interest accrued to be repaid at the end of that SELLER’S AFFIDAVIT
period. A sworn statement required by the title insurance
RIGHT OF RESCISSION company to be signed by the seller at the time of
A borrower who refinances residential property (1 – 4 closing affirming certain required information and
family dwelling) has three business days after the day declaring that he/she is not aware of any clouds that
he/she closes on the loan to cancel the loan without were not revealed during the title search.
obligation and receive a refund of any loan fees that SEMI ANNUAL INTEREST
were paid. Interest calculated on a loan every 6 months. For
RIGHT OF FIRST REFUSAL example, if annual interest on an $80,000 loan is
A right given to a tenant or other individual to match a 6%, then the annual interest due is $4,800 and the
price offered by a third party for the purpose of leasing semiannual interest due is $2,400.
or purchasing property. SERVIENT ESTATE (TENEMENT)
RIGHT OF SURVIVORSHIP The property that is subject to an appurtenant
The right of a joint tenant or a tenant by the entireties to easement and encumbered by it.
the deceased partner’s share, conveyed to him / her SERVIENT TENANT
automatically without the process of probate. The owner of the servient estate who allows the
RIGHT OF WAY dominant tenant to cross over his / her property.
A form of easement that allows a person to pass over SERVICE PROVISION AGREEMENT
the property of another. An employment contract between the broker and a
client such as a listing or a buyer agency
agreement.
157
GLOSSARY
SUB-AGENT
SETBACK ORDINANCE An agent of an agent.
Zoning law that requires a building to be erected at a SUB-LEASE CLAUSE
certain distance from the property line. A lease clause that addresses the sub-leasing of the
SETTLEMENT property by the tenant (lessee) to another tenant
Closing the transaction. (sub-lessee). It usually requires the pre-approval of
SEVERALTY OWNERSHIP the lessor.
Ownership of property by one person or single entity. SUBLEASING
A tenant (lessee) acts as a landlord and lease a
SEVERANCE portion or all of the property to another tenant (sub-
The act of detaching a fixture from real estate turning it lessee).
once again to chattel. SUBORDINATION CLAUSE
SHERIFF’S DEED A clause in an instrument (such as a mortgage or lease)
A deed issued by a court officer (a sheriff) to convey title to that places the instrument in a secondary position to a
property sold as a result of foreclosure action. subsequent instrument or lien.
SPECIAL AGENT SUBPOENA
One who is authorized to represent the principal in a A court order obtained in the process of
specific matter, typically a real estate broker. investigating a licensee (with the help of the
SPECIAL ASSESSMENT Department of Attorney General) ordering a person
An amount due to the local government for services to appear for an investigation or to present certain
provided to the property such as paving the street, records.
installing utilities, etc. SUBROGATION CLAUSE
SPECIAL WARRANTY DEED A clause in an insurance policy that allows the
A deed that limits the grantor’s warranty of title to insurance company who pays a claim to seek
defects arising during his / her ownership of the reimbursement from the party who caused the loss.
property. SUBSTITUTION
SPECIFIC PERFORMANCE A theory used to evaluate property that takes into
Legal action taken to obtain a court order directing the consideration the cost of obtaining another
breaching party to perform under the terms of the comparable property.
contract as agreed. SURRENDER OF LEASE
STATUTE OF FRAUD The cancellation of a lease by mutual, bilateral
A law that requires certain contracts to be in writing in agreement between the landlord (lessor) and the
order to be enforceable in a court of law. tenant (lessee).
STATUTORY LIEN TAX SHELTER
A legal lien provided by an act of law such as for unpaid A legal means by which an investor may reduce or
property tax or income tax. defer payment of tax.
SPECIFIC LIEN TENANCY (ESTATE) AT SUFFERANCE
Applies to a certain parcel that is the subject of a lien The tenancy created when the tenant has gained
such as property tax liens, mortgage liens, special possession to the property legally but has now lost
assessments. In contrast, a taxpayer may face a general the landlord’s approval to stay.
(blanket) lien, which applies to a group of owned TENANCY (ESTATE) AT WILL
properties such as an income tax lien. A rental arrangement of an indefinite duration that
STATUTE OF LIMITATIONS entitles either landlord or tenant to terminate it with
A law that sets a time limit for legal action to be brought legal notice.
in court to enforce a valid contract. TENANCY (ESTATE) FOR YEARS
STEERING Tenancy of a known and set duration usually
Directing minority persons into or away from certain created with a lease contract.
neighborhoods because of their minority status.
158
GLOSSARY
TENANCY BY THE ENTIRETIES TIME IS OF THE ESSENCE

Interest in real estate representing ownership of the A clause in a contract used to emphasize that the
entire property by each of the husband and wife with expressed time limits are not flexible and that the
rights of survivorship. parties named in a contract must act on or before a
TENANT definite deadline.
A person who occupies land as a freehold or non- TIME SHARE OWNERSHIP
freehold estate. Multiple purchasers buy interests in the same
TENANTS IN COMMON parcel, each of whom own a different time interval.
Property is owned by two or more individuals with equal For example one owner could own the first week of
or unequal interest, each owning a proportionate share a month while another owner owns the second week
with an undivided interest without the rights of of the same month.
survivorship. TITLE
TERM MORTGAGE (NON-AMORTIZED) A group of elements that proves ownership in
A relatively short-term loan that does not involve regular property.
amortized payments. The borrower makes periodic interest TITLE INSURANCE
payments and pays the entire principal at the end of the
Insurance against losses resulting from a defective
term.
TESTATE title.
To die with a will. TITLE THEORY STATES
TESTATOR States whose law allows a lender to receive title not a
A person who dies with a will. lien on the mortgaged properties.
THE BOARD TORRENS LAND TITLE
The Board of Real Estate Brokers and Salespersons A system of title registration organized by some
consists of nine voting members appointed by the
states to verify that title is vested in a certain person
governor, 6 of whom must have a license and 3 that
represent the public. It’s duties include the interpretation or entity.
of licensing requirements, aiding the department in TOWNSHIP
investigations, recommending the issuance and renewal A parcel of land measuring 6 miles by 6 miles in size
of licenses, recommending approval for educational resulting from the intersection of Range and
courses, setting and adjusting minimal standards of Township lines.
practice, and assessing penalties against licensees who TOWNSHIP LINES
violate the rules.
Imaginary lines running 6 miles apart parallel to the
THE DEPARTMENT
Base line.
The Department of Licensing & Regulatory Affairs.
TRADE FIXTURES
Headed by the director who is appointed by the
Personal property used in trade or business such as
governor. Only the Department can issue, renew, or
freezers, coolers, shelves, cash registers, etc.
revoke a license.
TRANSFERABILITY
THE GOVERNMENT NATIONAL MORTGAGE
An economic characteristic of real estate referring to
ASSOCIATION (GINNIE MAE, GNMA)
the ease of transferring ownership from the seller to
A government chartered secondary market that purchases
the buyer.
loans made by primary lenders providing them with cash to
TRANSFER TAX
continue their lending operations. It raises funding by selling
Paid upon the recording of a deed to the local
pass-through certificates on Wall Street, which are security
government and / or state.
interests in mortgage pools.
TRID
THE SECUTIRY DEPOSIT ACT
Integrated Disclosure Rule that requires disclosures
The law that regulates the security deposit paid by a
upon loan application and before loan settlement.
residential tenant. It limits the amount of the deposit to
TRUST ACCOUNT (ESCROW ACCOUNT)
1.5% of rent.
A non-interest-bearing demand account placed with
TIER
a financial institution used to keep monies received
A strip of townships 6 miles wide running in an East –
by the broker belonging to others until the
West direction.
consummation or termination of the transaction. If
159
GLOSSARY
the broker also conducts property management

operations, two trust accounts must be maintained. One VA MORTGAGES
for tenants’ deposits and rents and the other for the A mortgage loan issued to a veteran, which is guaranteed by
purchase and sale of property. the veteran’s administration. It requires no down payment.
VALID CONTRACT
A legally binding contract that contains all necessary
TRUSTEE
contractual elements.
(1) A neutral party who holds title to property to secure VALUABLE CONSIDERATION
payment of an installment loan under a “deed of Something of value such as money, property or a mere
trust” arrangement. promise that is exchanged in a contract to receive other
(2) A person or entity that is in charge of property held goods or services. Necessary to validate the contract.
by a trust. VALUATION
(3) A court appointed person that handles property in The act of estimating value of property.
bankruptcy. VENDEE
An installment purchaser of property on a land contract
agreement.
UNDUE INFLUENCE
VENDOR
A situation created when in a close and confidential The seller of property under a land contract arrangement who
relationship one party has taken advantage of another to is entitled to receive payments and is the holder of “Naked
influence him / her to such a degree that freely given Title”.
consent and understanding has been seriously impaired. VETERAN’S ADMINISTRATION GUARANTEED FINANCING
UNENFORCEABLE CONTRACT (VA)
A contract that would not be enforced by a court of law A loan that is initiated to individuals who have served in the
such as a contract that does not meet the statute of military forces. It requires no down payment and is guaranteed
by the Veteran’s Administration.
frauds or the statute of limitations.
VOID
UNILATERAL CONTRACT
Not binding or unenforceable.
A contract that contains a promise in exchange for an VOIDABLE CONTRACT
act. A contract that may be enforced or voided by a party to
UNITY OF INTEREST the transaction who is “legally injured.”
The equal interest that is shared by two or more owners WARRANTY DEED
of property. A deed whereby the grantor covenants (promises) to the
UNITY OF POSSESSION grantee protection against any future claims of title by a
The equal and undivided possession shared by two or third party.
WRIT OF ATTACHMENT
more owners of property that entitles them to its full use
Obtained to stop an owner from disposing of property until
and enjoyment.
a lawsuit that affects the marketability of the property has
UNITY OF TIME been decided.
Refers to the fact that two or more owners of property WRIT OF RESTITUTION
must take title at the same time. A court order authorizing a sheriff to evict occupants after the
UNITY OF TITLE sale of property in a sheriff’s sale and the expiration of the
Two or more owners of property must take title through redemption period.
the same deed or will. ZONING
UNMARKETABLE TITLE Regulating the use of property by the local government to
insure proper development of the community.
Clouded title that has certain defects that must be
ZONING VARIANCE
cleared. It may be as simple as an unpaid property tax
Zoning permission allowing the introduction of a
bill, or it could be as serious as a deed that is missing
non-conforming use.
the signature of one of the owners.
UTILITY
An economic characteristic of value representing the
type of use that the subject property is most suitable for
and whether it satisfies the need of buyers.
160
INDEX
Abatement, 27, 28 Buydown Mortgage, 47

ABSTRACT OF TITLE, 89 BUYER BROKER AGREEMENT, 64, 231
ACCELERATION CLAUSE, 56 BYLAWS, 20
Accretion, 12, 143 Capital Gains, 94
ACCRUED DEPRECIATION, 36, 143 CAPITALIZATION, 38, 145
Acknowledgment, 91 CAPITALIZATION (CAP) RATE, 38
ACRE, 8, 143 CAPITALIZATION METHOD, 38
ACTIVITY REQUIRING LICENSING, 115 CARE AND OBEDIENCE, 67
ACTUAL NOTICE, 88 CHAIN OF TITLE, 89
AD VALOREM, 22, 143 Chattel, 5
ADJUSTABLE RATE MORTGAGE (ARM), 52 CIVIL RIGHTS, 98, 145, 233
administrative law hearing officer, 112 Civil Rights Act of 1866, 98, 233
ADMINISTRATOR, 116, 143 Civil Rights Act of 1968, 98
Administrator's Deed, 92 CLAUSE OF CONVEYANCE, 90
ADVALOREM, 22 CLIENT, 64
adverse easement, 15 closing disclosure, 58, 59
ADVERSE POSSESSION, 16 Closing Disclosure (TRID), 57, 230
ADVERTISING - REAL ESTATE RULE, 120 CLOSING RESPONSIBILITIES, 128
ADVERTISING REQUIREMENTS -TILA, 58 CLOSING STATEMENTS, 93
AGENCY DISCLOSURE, 65 CLOUDS ON THE TITLE, 89
AGENT, 63 COMMERCIAL EASEMENT, 15
AGENT’S DUTIES TO CLIENTS, 64 Commingling Funds:, 114
AIR SPACE, 21 COMMISSIONS FOR OTHER SERVICES, 122
Alienation, 56 COMMON ELEMENTS, 20
ALIENATION CLAUSE, 56 COMPANY POLICIES, PROCEDURES AND STANDARDS,
ALTERNATIVE DISPUTE RESOLUTION, 127 130
AMENDMENT, 78, 128 COMPETITIVE /COMPARATIVE MARKET ANALYSIS
Americans With Disabilities Act (ADA):, 99 CMA, 39
AMORTIZATION, 44 COMPLETION/PERFORMANCE, 68
ANNUAL PLANTINGS, 6 CONCURRENT ESTATE, 18
ANTICIPATION, 33 CONDEMNATION, 26, 228
ANTI-DISCRIMINATION CLAUSE, 123 CONDOMINIUM, 20, 146, 151
ANTI-TRUST ACT, 138 CONDOMINIUM ACT-MICHIGAN, 136
APPRAISALS, 32 CONDOMINIUM ASSOCIATION, 20
Appurtenances, 13 CONDOMINIUM BOARD OF DIRECTORS, 20
APR, 58 CONDOMINIUM COVERSION, 137
ARBITRATION, 127 CONDOMINIUM FEE, 20
ARM’S LENGTH TRANSACTION, 33 CONDOMINIUM FINANCING, 21
asbestos, 28 CONDOMINIUM INSURANCE, 21
ASBESTOS, 28 CONDOMINIUM TAXES, 21
asbestos abatement, 28 CONDOMINIUMS, 20
ASSEMBLAGE, 33 CONFIDENTIALITY, 67
ASSESSED VALUATION, 22 CONFORMITY, 33
ASSESSMENT RATE, 22 Constructive eviction, 86
ASSIGNMENT, 82 CONSTRUCTIVE NOTICE, 88
ASSIGNMENT OF LEASE CLAUSE, 85 CONSUMER FINANCIAL PROTECTION BERAU (CFPB),
ASSIGNMENTS OF CONTRACTS, 82 57
ASSOCIATE BROKER, 117 Consumer Financial Protection Bureau (CFPB), 59
ASSUMPTIONS, 51 CONSUMER PROTECTION, 3
ATTORNEY IN FACT, 116 CONTINGENCIES, 80
backup offer, 78 CONTINGENCY, 80
back-up” offer, 77 CONTRIBUTION, 33
BALLOON MORTGAGE, 52 conventional loan, 49
BASE LINES, 8 CONVENTIONAL MORTGAGES, 50
BASE RENT, 84 COOPERATIVE OWNERSHIP, 21
BASIS, 94 COOPERATIVES, 21
BILATERAL, 79 COST APPROACH, 36
Bilateral contract, 79 Counteroffer, 77
BILL OF SALE, 92 COVENANT, 31, 91, 146, 147, 156
BLOCK BUSTING, 100, 144, 233 COVENANT AGAINST ENCUMBRANCES, 91
Board, 110 COVENANT OF FURTHER ASSURANCE, 91
BRIDGE LOAN, 53 COVENANT OF QUIET ENJOYMENT, 91
Broker, 2 COVENANT OF SEISIN, 91
BROKER COMMISSION, 48 COVENANT OF WARRANTY OF TITLE, 91
BUFFER ZONE, 26 creating a counteroffer, 78
BUNDLE OF RIGHTS, 21 CURABLE OBSOLESCENCE, 37
161
INDEX
CUREABLE, 147 ESTATE IN REVERSION, 18

CURTESY, 18 ESTATE IN SEVERALTY, 18
CUSTOMER, 64 EXCLUSIVE AGENCY LISTING, 65, 231
DEATH OF PRINCIPAL, 69 EXCLUSIVE BUYER/TENANT AGENCY AGREEMENT, 66,
DEBT SERVICE, 38 231
Deed, 60, 230 EXCLUSIVE RIGHT TO SELL, 65, 231
DEED, 90 executed contract, 79
DEED RESTRICTION, 31 EXECUTION, 90
DEFEASABLE FEE ESTATES, 17 EXECUTOR, 116
DEFERRED MAINTENANCE, 36 Executor's Deed, 92
DEFICIENCY JUDGMENT, 61, 230 EXECUTORY CONTRACT, 79
DEMAND, 34 EXEMPTIONS FAIR HOUSING, 103
demand account, 125 EXEMPTIONS TO REAL ESTATE LICENSE, 116
Department of attorney general, 111, 234 EXPIRATION, 68, 80
DEPOSITS, 124 EXPRESSED AGECY, 65
DESIGNATED AGENCY, 64 F.H.A. FINANCING, 50
DESTRUCTION OF PROPERTY, 69 FACTORS AFFECTING VALUE, 34, 229
Devise:, 92 FAIR HOUSING, 98, 149
DISCLOSURE, 67 Fair housing amendment act of 1988, 98
Do Not Call List, 104 FAIR HOUSING EXEMPTIONS, 103
DODD FRANK LAW, 140 FAIR HOUSING REMEDIES, 103
DOMINANT, 14, 147 FANNIE MAE (FNMA), 55
DOMINANT ESTATE, 14 Federal / State Income Tax Liens, 13
DOWER RIGHTS, 18 FEDERAL FAIR HOUSING LAWS, 98
dual agency, 113 FEDERAL HOME LOAN MORTGAGE, 55
DUAL AGENCY, 63, 122 FEDERAL HOME LOAN MORTGAGE CORPORATION, 55
DUE ON SALE CLAUSE, 56 FEDERAL NATIONAL MORTGAGE ASSOCIATION, 55
DURABILITY, 33 federally, 55
DUTIES TO CLIENT/PRINCIPAL, 67 FEE SIMPLE, 17, 149
EASEMENT, 14, 15, 143, 148, 150 FEE SIMPLE CONDITIONAL, 17
EASEMENT APPURTENANT, 14 FEE SIMPLE DETERMINABLE, 17
EASEMENT BY NECESSITY, 15 FEE-SIMPLE ESTATES, 16
Easement by Prescription, 15 FHA loan, 49
EASEMENT BY RESERVATION, 15 FIDUCIARY, 64
EASEMENT IN GROSS, 15 FIDUCIARY RESPONSIBILITIES, 64
EASEMENTS, 13 Fixtures, 5
ECONOMIC OBSOLESCENCE, 37 FIXTURES CLAUSE, 85
ECONOMIC LIFE, 36 Flood Plain, 27
Electronic signature and paperless transactions, 78 FORECLOSURE BY ADVERTISEMENT, 61
ELLIOT LARSON, 98, 233 formal complaint, 111
embezzlement of funds, 117 formal hearing, 112, 234
emblements, 6 FORMAL HEARING, 111
EMINENT DOMAIN, 26, 228 FRAUD, 72
ENCROACHMENT, 16 FREDDIE MAC (F.H.L.M.C)., 55
ENCUMBRANCES, 12, 88 FREEHOLD ESTATE, 16
ENFORCEABILITY OF CONTRACTS, 79 FREEHOLD ESTATES, 16
environmental audit, 28, 228 FULLY AMORTIZED MORTGAGE, 52
Environmental Impact Report, 27 FUNCTIONAL OBSOLESCENCE, 37
EQUAL CREDIT OPPORTUNITY, 60 funding fee, 51
EQUALIZATION-STATE EQUALIZED VALUE [SEV], 23 GENERAL (FULL) WARRANTY DEED, 91
EQUITABLE LIEN, 13 General Agent, 64
EQUITABLE TITLE, 53, 81, 232 General Lien, 13
EQUITY, 49 GINNIE MAE (GNMA)., 55
Erosion, 12 GLOSSARY, 143
ESCALATION CLAUSE, 84 GOVERNMENT CONDEMNATION, 15
ESCALATOR LEASE, 84 GOVERNMENT NATIONAL MORTGAGE ASSOCIATION,
ESCHEAT, 26 55
ESCROW ACCOUNT, 124 GOVERNMENT RECTANGULAR SURVEY SYSTEM, 8
ESTATE, 3, 18, 83, 84, 94, 110, 116, 117, 145, 147, 149, GRANTEE, 90
150, 152, 154, 155, 156, 157 GRANTING CLAUSE, 90
ESTATE (TENANCY) AT SUFFERANCE, 84 GRANTOR, 90
ESTATE (TENANCY) AT WILL, 83 GROSS, 11, 38, 84, 141, 150
ESTATE (TENANCY) FOR YEARS, 83 GROSS LEASE, 84
ESTATE (TENANCY) FROM PERIOD TO PERIOD, 83 GROSS LIVING AREA, 11
Estate (tenency) from year to year, 83 GROSS RENT / INCOME MULTIPLIER METHOD, 39
ESTATE IN REMAINDER, 18 GROUND LEASE (LAND LEASE), 84
162
INDEX
Guardian's Deed, 92 LOT, BLOCK, SUBDIVISION, 7

HABENDUM CLAUSE, 90 LOTTERY, 127
HETEROGENEITY, 34 market analysis, 116
HIGHEST AND BEST USE, 33 MARKET DATA APPROACH, 34
HOME EQUITY LINE OF CREDIT(HELOC), 53 MARKET PRICE, 32
HOME EQUITY LOAN (HEL), 53 MARKET VALUE, 32
Home Warranty, 95 MASTER PLAN, 26
HOMEOWNERS ASSOCIATION (HOA, 32 material facts, 75
HOMESTEAD, 18 MATERIAL FACTS, 75
HOUSING AND COMMUNITY DEVELOPMENT ACT, 98 Mechanic’s Lien, 13, 227
IMMOBILITY, 34 Megan’s Law, 128
IMPLIED AGENCY, 65, 231 MERIDIAN LINES, 8
impossibility of performance, 69 METES AND BOUNDS, 7, 227
INCURABLE OBSOLESCENCE, 37 METHODS OF DEPRECIATION, 37
INDEMNIFICATION, 67 METHODS OF LEGAL DESCRIPTION, 7
Independent Contractor, 129 MICHIGAN HANDICAPPERS CIVIL RIGHTS ACT, 98
INDEX LEASE, 84 MICHIGAN OCCUPATIONAL CODE, 3
INDUCEMENTS, 127 MICHIGAN RIGHT TO FARM ACT, 139
informal hearing, 111 MICHIGAN STATE HOUSING, 137
INNOCENT MISREPRESENTATION, 72 MILLAGE RATE (TAX RATE), 23
INSURED CONVENTIONAL LOAN, 50 MIS-REPRESENTATION, 72
INTEGRATED DISCLOSURE RULE, 59 MOLD, 31
Inter vivos, 18 MONUMENT, 7
INTEREST CALCULATIONS, 43 MORTGAGE, 50, 51, 56, 116, 143, 145, 147, 150, 151, 153,
Interest deductions, 94 155, 156, 158
Intestate, 92 MORTGAGE FORECLOSURE, 60
INVENTORY CHECKLIST, 135 MORTGAGE INSURANCE (PMI, 49
Involuntary Alienation, 56 Mortgage lien, 13
irrevocable consent, 118 MORTGAGE RELEASE, 56
JOINT TENANCY, 19 MORTGAGEE'S (LENDER'S) POLICY, 87
JUDICIAL DEED, 92 MULTI-FAMILY DWELLINGS, 100
JUDICIAL FORECLOSURE, 61 Multiple Listing Service, 2
kickbacks, 59 Multiple offers and counteroffers, 78
LAND CONTRACT, 53, 230 MUTUAL (BILATERAL) AGREEMENT (SURRENDER), 86
LAND CONTRACT LAWS - DODD FRANK, 140 MUTUAL AGREEMENT, 69
LAND DIVISION ACT, 131 NAKED TITLE, 53
Latent defect, 75 NEGATIVE AMORTIZATION, 44
LEAD PAINT DISCLOSURES, 76 NET LEASE, 84, 232
LEASE, 83 net Listing, 123
LEASE RUNS WITH THE LAND, 85 NET LISTING, 66
LEASE WITH OBLIGATION TO PURCHASE, 86 NET OPERATING INCOME, 38, 141
Leasehold estate, 16 NON – INSURED CONVENTIONAL LOAN, 50
LEGAL CAPACITY, 79 NON MATERIAL FACTS, 75
LEGAL DESCRIPTION, 6 NON-CONFORMING USE, 228
LEGAL OBJECTIVE, 79 NON-FREEHOLD ESTATE, 16
LENDING PROCESS, 56 NON-LIVING ENTITY AS BROKER, 117
LESSEE, 83 non-principal associate broker, 118
LESSOR, 83 NON-RESIDENT LICENSE, 118
Leverage, 95 NOVATION OF CONTRACTS, 82
LICENSE, 13, 227 OFFER AND ACCEPTANCE, 77
LICENSE RENEWAL, 119 OFFERS TO PURCHASE, 123
LICENSEE ACQUIRING INTEREST, COMMISSION, 122 OIL AND GAS LEASE, 84
lien theory state, 40 OPEN LISTING, 65
LIENS, 13 OPERATING EXPENSES, 38
LIFE ESTATE, 17 OPERATION OF THE LAW, 80, 86
limitation, 114 OPTION CONTRACT, 82
LIQUIDATED DAMAGES, 81 OPTIONEE, 82
Liquidity:, 95 OPTIONOR, 82
LIS - PENDENS, 89 ORDINARY LIFE ESTATE, 17
LISTING AGREEMENT, 64, 231 OWNER'S POLICY, 87
LISTING AGREEMENTS, 123 PANIC PEDDLING, 100
LITTORAL RIGHTS, 12 partially amortized loan, 52
loan estimate, 58 PARTITION SUIT, 19
Loan Estimate, 56, 60 Party driveway, 14
LOAN PAYMENTS, 38 Party wall easement, 14
LOAN/VALUE, 41 PATENT DEFECT, 75
163
INDEX
PENALTIES MICHIGAN RULES, 114 REVENUE STAMPS, 109

PERCENTAGE LEASE, 84 REVERSE MORTGAGE, 53
Percolation test, 131 REVOCATION, 80
PERENNIAL PLANTINGS, 6 REVOKE OFFER, 77
PERFORMANCE, 80 RIGHT OF FIRST REFUSAL CLAUSE, 233
PERFORMANCE (EXPIRATION), 86 right of re-entry, 17
periodic estates, 83 Right of Survivorship, 18
PERSONAL EASEMENT, 15 RIGHT TO FARM ACT, 139
PERSONAL PROPERTY, 5 RIGHT TO RESCIND A TRANSACTION, 59
PERSONAL PROPERTY TAX, 23 RIPARIAN RIGHTS, 12
Personal Representative, 92 RUNS WITH THE LAND, 14
PHYSICAL DETERIORATION, 37 SALES CONTRACTS), 123
PITI, 50 SALES OR MARKET COMPARISON APPROACH, 34
PLACE OF BUSINESS/BRANCH OFFICE, 125 Salesperson, 2
PLANNING, 26 SANDWICH LEASE, 85
PLOTTAGE VALUE, 33 SCARCITY:, 34
POCKET CARDS, 118 SECONDARY MORTGAGE, 55
POINT OF BEGINNING (P.O.B.), 7 SECTION, 8
POINTS, 47 SECURITY DEPOSIT ACT, 134
POLICE POWER, 26, 228 SELLER/OWNER FINANCING, 53
power, 61 SELLER’S DISCLOSURE, 72
POWER OF ATTORNEY, 64 SELLERS AFFIDAVIT, 89
PRE-PAYMENT (EARLY PAYMENT) PENALTY, 56 SELLING PROPERTY OWNED BY LICENSEE, 121
PRINCIPAL, 64 service of process, 118
principal associate broker, 118 Service Provision Agreement, 123
PRINCIPAL RESIDENCE EXEMPTION (PRE), 23 SERVIENT ESTATE, 14
PRIORITIES OF LIENS, 88 SET BACK ORDINANCE (BUILDING LINE, SET BACK
PRIVATE ROAD, 131 LINE), 26, 228
PROCURING CAUSE, 65, 231 SEVERANCE, 6
Property management account, 125 SHERIFF'S DEED, 61
Property management employment contract, 124 SHORT SALE, 60, 230
property’s fair market value, 23 SILENT FRAUD, 72, 231
PROPRIETARY LEASE, 21 SOURCES OF FINANCING, 54
PRORATIONS OF PROPERTY TAXES, 107 SPECIAL AGENCY, 64
PROTECTION CLAUSE, 66, 231 SPECIAL ASSESSMENTS, 13, 23, 227
PUFFING, 67 SPECIAL WARRANTY DEED, 91
PUR-AUTRE VIE ESTATE, 17 Specific Lien, 13
PURCHASE AGREEMENTS, 123 SPECIFIC PERFORMANCE, 81
QUIETING TITLE, 89 STATE TAX, 109
QUIT CLAIM DEED, 91 Statute of Frauds, 79, 232
QUIT CLAIM DEEDS, 91 Statute of limitations, 79
RADON, 30 STATUTORY LIEN, 13
Radon mitigation, 30 STEERING, 102
RANGE, 8 STEP-UP LEASE (GRADUATE LEASE, 84
RANGE LINES, 8 STIGMATIZED PROPERTY, 128
REAL ESTATE OWNED by the lender, 61 SUB-AGENCY, 63
REAL ESTATE SETTLEMENT PROCEDURES ACT, 59 SUB-LEASE CLAUSE, 85
Real Estate Tax Liens, 13 sub-lease process, 85
REAL PROPERTY, 5 SUB-LESSOR, 85
RECEIVER, 116 SUBORDINATION CLAUSE, 89, 233
RECORD KEEPING-TRUST ACCOUNT, 125 SUBPRIME MORTGAGE, 53
RECORDING, 90 SUBROGATION CLAUSE, 89, 233
REDEMPTION PERIOD, 61 SUBSTITUTION, 33
REDLINING, 102, 234 SUPERVISION, 130
REFUSE TO PERMIT, 99, 233 Target Homes, 28
Register Of Deeds, 90 TAX CALCULATION, 23
REGULATION Z, 58 Tax paid in arrears, 108
REJECTION, 80 Tax shelter, 95
Relicensure, 119 TAX SHELTER-DEPRECIATION, 94
Reliction, 12 TAXABLE VALUE, 23
Rentable Area, 11 TAXATION, 22
REO, 61 TECHNOLOGY ISSUES IN ADVERTISING, 104
REPLACEMENT COST, 36 TENANT, 14, 147, 152, 156, 158
REPRODUCTION COST, 36 TENANTS BY THE ENTIRETIES, 18
RESCISSION, 80, 81 TENANTS IN COMMON, 19
RESPA, 59 TERMINATION BY FORCE OF LAW, 69
164
INDEX
TERMINATION OF A LEASE, 86 UNIFORM STATE ANTI-TRUST ACT, 138

TERMINATION OF CONTRACT, 80 UNILATERAL, 79
Testate, 92 unilateral contract, 82, 232
THE RIGHT TO RESCIND A TRANSACTION, 59 Unilateral contract, 79
TIER, 8 UNITY OF INTEREST, 19
TILA, 59 Unity of Possession, 19
TIME IS OF THE ESSENCE, 81 UNITY OF POSSESSION, 19
TIME-SHARE, 137 Unity of Time, 19
TIME-SHARED OWNERSHIP, 21 UNITY OF TIME, 19
TITLE INSURANCE, 87, 123, 235 Unity of Title, 19
TITLE SEARCH, 88 UNITY OF TITLE, 19
title theory states, 40 UNMARKETABLE TITLE, 89
TO HAVE AND TO HOLD CLAUSE, 90 Usable Area, 11
TOWNSHIP, 8 USDA / DEPARTMENT OF AGRICULTURE, 51
TOWNSHIP LINES, 8 USE OF SECURITY DEPOSIT, 135
Trade Fixtures, 6 USPAP, 32
TRANSACTION COORDINATOR/ FACILITATOR, 63 USURY LAWS, 136
TRANSFER OR CHANGE IN LICENSE, 119 UTILITY, 34
TRANSFER TAX, 109 VALID CONTRACT, 79
TRANSFERABILITY, 34 VALUABLE CONSIDERATION, 78, 90
TRID, 59 VENDEE, 53
Triggering phrases / terms, 58 VENDOR, 53
TRUST ACCOUNT, 124 VETERAN’S ADMINISTRATION GUARANTEED
TRUST ACCOUNTS, 125 FINANCING, 51
Trust Ownership, 22 VIOLATIONS MICHIGAN RULES, 113
TRUTH IN ADVERTISING, 104 VOID CONTRACT, 79
TRUTH IN LENDING (REGULATION Z), 58 VOIDABLE CONTRACT, 79
TYPES OF LEASES, 84 Wetland, 27
TYPES OF LISTINGS, 65 WRIT OF RESTITUTION, 61
TYPES OF TITLE POLICIES, 87, 233 zoning, 26, 33, 145, 150, 153, 154, 165, 166, 169, 228
UNDUE-INFLUENCE, 81 ZONING ORDINANCE, 26
165
MULTIPLE CHOICE - PROPERTY OWNERSHIP
MULTIPLE CHOICE QUESTIONS, PROPERTY

OWNERSHIP A. Equal shares because they must have
the unity of interest
1. John who owns his farm as a tenant by the B. Equal shares because the deed
entirety wishes to sell 2 acres out of his does not specify that one of them would
5000-acre farm. What must he be receive a larger interest than the other
concerned with? C. Unequal shares and the deed must
A. His heir’s approval be corrected because tenants in
B. His spouse’s approval common may or may not have equal
C. His tenant’s occupancy rights shares
D. Government rights D. Unequal shares, because each one
of the ladies will only receive 100%
2. John received a 90-day permission to cross entireties.
his neighbor’s property with his vehicle,
what type of arrangement did he have with 7. A method of legally describing land that
his neighbor? involves baselines and range lines is the:
A. An easement A. Informal reference system
B. An encroachment. B. Lot subdivision method
C. A license C. Metes-and-bounds
D. An appurtenance D. Rectangular survey system
3. Sharon owns several investment properties. 8. An area of land that is one mile by one-mile
Occasionally, she falls behind on her bills square is called:
and a lien is placed against the properties. A. A township
Which of the following liens would most B. A section
likely be a general (blanket) lien? C. An acre
A. Property tax lien D. A check
B. Construction lien
C. Special assessments lien 9. An owner of property whose property is
D. Income tax lien located next to a small body of water or a
stream has:
4. Which of the following involves obtaining a A. Littoral rights
court order allowing access for property that B. Erosion rights
is landlocked? C. Encroachment rights
A. A granted easement D. Riparian rights
B. An easement by reservation
C. An easement by necessity 10. Regarding condominiums, which of the
D. A gross easement following is not true?
A. Common elements are owned by all
5. Seller wishes to take the roses from a co-owners.
perennial rose bush with him upon selling B. Association fees are paid to the
the house. What should the agent advise condominium association to maintain
the seller to do? common elements and insure them.
C. If a co-owner does not use a
A. Nothing, roses continue to grow every common element such as a swimming
year and therefore are personal property pool, then she does not have to pay her
which is not included in the sale unless the share of the association dues.
buyer specifically ask for it D. All co-owners must honor the
B. The seller should exclude the roses in bylaws.
the purchase agreement
C. The seller can remove the roses but only 11. All the following is true about joint tenants
at the end of the season except:
D. Any plants on the property must stay and A. They have the right of survivorship.
be included in the sale B. They must inherit or purchase
property at the same time.
6. Sue, John, Bill and Kimberly received a C. Ownership is received with the
deed that is made to all of them as tenants same deed or will.
in common. If the deed does not mention D. They may own property in equal or
their ownership interest, what shares would unequal shares.
be allocated to them?
166
12. A permanent right to use someone else’s

property for a purpose is known as: 20. When verifying a legal description that
A. A license provides direction to a survey, a monument is
B. Encumbrance used to set which of the following?
C. An easement
D. Public right A. Total gross area
B. Building size
13. In addition to the meridian, the base line C. Boundary
intersects with which of the following? D. Elevation
A. Section lines
B. Tier lines 21. A broker is concerned about a trespass
C. Range lines over a property. How should he help the owner
D. Correction lines verify such an encroachment?
A. Contact the local planning
14. A life tenant can do all but which of the commission
following? B. Contact the local zoning board
A. Devise (will) C. Contact an appraiser
B. Lease D. Contact a surveyor
C. Mortgage
D. Sell 22. An easement by prescription is obtained by:
A. Forcing the owner over which the
15. The following owners do not have the right easement is given to give the right
of survivorship: of way with a court order because
A. Tenants in common. the person seeking the easement is
B. Tenants at will. land-locked.
C. Joint tenants. B. A grant from a property owner to
D. Tenants by the entireties. benefit the neighboring property.
C. Trespassing for the statutory
16. When an estate is held by husband and period.
wife, it is usually known as: D. Condemnation powers of the
A. Martial estate government.
B. Marriage in severalty estate
C. A joint estate 23. Which of the following is true regarding
D. Tenancy by the entireties easements?
A. The owner of the servient estate
17. When a person owns property alone, must allow the dominant tenant to
he/she is known as: use any portion of the servient
A. Lonely tenant estate.
B. Single tenant B. The concept of servient and
C. Severalty tenant dominant tenants is found in the
D. Uncommon tenant gross easement.
C. When the servient and the
18. When two or more individuals own dominant properties are merged,
property without rights of survivorship and in the easement appurtenant is
unequal portions, they probably own it as: extinguished.
A. Tenants by the entireties D. The dominant tenant owns the
B. Joint tenants servient property.
C. Tenants in common
D. Legal tenants 24. All of the following are true about
easements except:
19. John deeds property to Sharon for her life A. The party wall is an example of an
time, stipulating that the property reverts to him appurtenant easement and it is
after her death. Sharon sells the property to Bill. located on the property line of two
Which of the following is true? adjacent properties.
A. If Bill dies, property reverts to John B. A party driveway is an easement
B. If Sharon dies, property reverts to appurtenant.
John C. A gross easement is given to the
C. If John dies, Bill owns the property neighboring property so it will not
in fee simple be land-locked.
D. Sharon may not sell the property
167
D. If an individual purchases property D. Receive approval of the association

subject to an easement, she must prior to any changes being made
honor the easement.
31. Regarding condominium association fees:
25. A right, privilege or improvement that A. They may or may not be paid by
passes along with the property is/are: each co-owner depending on whether
A. An emblement. they use the common elements.
B. An encroachment. B. They include all property taxes but
C. An appurtenance. not mortgage payments for the owners.
D. Government rights. C. They are used to maintain and
insure the common elements.
26. Sarah and Jason are joint tenants. All the D. They are tax deductible for the
following are true about their ownership except: homeowner.
A. If Sarah dies, her share goes to
Jason. 32. A concept of ownership reflected in leasing
B. If Jason dies his share transfers to units after purchasing stock in a corporation that
his estate. owns a multi-unit complex is known as:
C. Sarah and Jason must have equal A. Condominiums
interest. B. Shared ownership
D. Sarah and Jason could have either C. Cooperatives
purchased or inherited the property as D. Real estate stock ownership
joint tenants.
33. One of the advantages of condominium
27. Chuck and Sharon are tenants in common. ownership over a cooperative is:
All the following are true about their ownership A. It is cheaper to acquire.
except: B. It is usually located in better
A. They may own property in equal or locations.
unequal shares. C. It is real estate ownership in fee
B. They may have received the simple.
property through a deed or will. D. It involves stock ownership, which is
C. Either one of them could sell his/her more attractive.
share without approval of the other.
D. When Sharon dies, her share goes 34. How many acres are there in the north half
to Chuck. of the southeast quarter of the southwest
quarter of a section?
28. The concept of “air space” is found in the A. 20 acres
following type of ownership: B. 32 acres
A. Cooperatives C. 8 acres
B. Joint tenancy D. 64 acres
C. Condominiums
D. Common element ownership 35. An imaginary line running north-south that
intersects with the baseline is:
29. In a condominium complex, all the A. The meridian line
following are considered common elements B. The township line
except: C. The section line
A. The pool D. The check line
B. The structural portions of the unit
C. The parking lot and the yard 36. A method of legally describing land that
D. Furniture uses monuments and point of beginning is the:
A. Rectangular survey system
30. A condominium owner wants to make B. Lot subdivision system
changes to the exterior of his unit. He must: C. Metes-and-bounds
A. Be sure that quality of construction D. Monument system
is up to city code
B. Be sure that colors used match the 37. Imaginary lines running six miles apart
rest of the units and are in harmony parallel to the baseline are called:
C. Make sure that the association A. Range lines
approves the changes after B. Meridian lines
construction is completed C. Township lines
D. Tier lines
168
to the edge of the stream then north 200ft to the

38. A buyer interested in purchasing a house concrete block situated on the road. How far is the
noticed a chandelier hanging from the living concrete monument from the P.O.B.?
room ceiling that he really liked and wrote a
purchase agreement without specifically a- 200ft
including it. After closing, he noticed that the b- 100ft
seller removed that chandelier. Which of the c- 150ft
following is true? d- 300ft
A. The buyer has no right to the chandelier
unless he would have included it
specifically in the purchase agreement.
B. The seller had the right to remove the
chandelier because it is normally chattel
and must be purchased separately.
C. The chandelier was a part of the real
estate because it was permanently
attached as a fixture and the seller had no
right to remove it.
D. The chandelier would have been
included in the sale only if it was easily
removable and not permanently attached.
39. David gave a house to his mother as a life

estate stipulating that after her death, property shall
revert to David or his heirs; but upon the mother’s
death, a will was discovered directing the property
to be given to charity. Which of the following is
true?
A. The charity has the right to claim the

property in probate court.
B. The mother had the right to will the
property as a fee simple owner to anyone
she wanted.
C. The mother’s will has no legal effect
unless it was recorded.
D. Regardless of the will, property will
revert to David or his heirs.
40. All of the following are true regarding

condominium ownership except:
A. It involves ownership of stock in a
corporation
B. It involves payment of association fees
C. It involves abiding by bylaws
D. It involves common elements
41. Which of the following items could never

constitute a fixture?
A. A tree
B. A bookshelf
C. A pool
D. Land
42. A legal description states: From the point of

beginning (P.O.B.) 200ft south to the steel rod
monument then east 100ft along the wooden fence
169
MULTIPLE CHOICE - LAND USE CONTROLS
MULTIPLE CHOICE QUESTIONS, LAND USE

CONTROLS 6. A developer who wants to build houses
in a subdivision with a 20-foot setback
1. Property assessed value is $36,725, instead of the 30 feet allowed under the
and the tax rate is 37 mills. What is the ordinance must obtain a:
amount of tax due to the city? A. Setback use
A. $1,250 B. Special ordinance ruling
B. $1,359 C. Variance
C. $2,718 D. Permit restriction
D. $5,435
7. When the deed limits the use of the
2. The street in your neighborhood has property, this is known as:
been paved by the city. How will that A. Deed zoning
affect your tax bill? B. Deed variance
A. Millage rate will increase. C. Restrictive covenant (deed
B. Assessed value will decrease. restriction)
C. You may receive a bill for special D. Owner’s restriction
assessments
D. Your property tax will be lowered. 8. Sharon wants to build a department
store on land zoned residential single
3. John purchases property zoned for family. She must apply for and receive:
multiple units and plans to build an A. A zoning variance
apartment complex on it but discovers a B. A deed covenant
deed restriction that limits the use to C. Code permission
single family only. You should tell John D. Grandfather variance
that:
A. The deed restriction has no power 9. A law that establishes the minimum
against a zoning ordinance. distance between the lot line and where
B. Based on the restriction, he could the improvements can be erected is
build single-family homes or known as the:
apartments as he wishes. A. Frontage distance
C. The deed restriction will supersede B. Setback ordinance
the zoning ordinance because it is C. Bulk zoning distance
more restrictive. D. Building distance
D. The zoning ordinance must be
honored because government’s 10. When zoning law allows a certain use
rights are superior to private rights. but deed restriction limits that same use,
the one that would prevail is the:
4. A clause in the law that allows an A. Zoning law
individual to continue a non-conforming B. Deed restriction
use after a zoning law has changed, is C. Building permit
called: D. Setback authority
A. A zoning ordinance.
B. A deed restriction. 11. Zoning law addresses all of the following
C. A restrictive covenant. except:
D. A grandfather clause. A. Use of property
B. Setback line
5. When the use of property does not C. Grandfather clause
match the zoning allowed, the situation D. Restrictive covenants
is best referred to as:
A. A grandfather clause. 12. The right of the government to make
B. A zoning variance. laws for the health, safety and welfare of
C. Illegal the public is known as:
D. Non-conforming use A. Eminent domain
170
B. Condemnation 18. The right of the government to take

C. Taxation private property for public use is known
D. Police power as:
A. Eminent Domain
13. Placing a park between an industrial B. Zoning
area and a single-family subdivision is C. Police Power
an example of: D. Escheat
A. Buffer Zone
B. Grandfather Clause 19. The right of the government to make
C. Zoning Variance laws for the use of land such as zoning,
D. Restriction exemption building codes, environmental protection
laws, etc. is known as:
14. A study that results from examining the A. Police Power
factors which a land development or B. Eminent Domain
construction project would have on the C. Escheat
environment is known as: D. Government Bylaws
A. A phase I environmental audit
B. An environmental impact report 20. John died leaving no will or heirs. What
C. A construction development study happens to his property?
D. A mitigation study A. It passes to his wife and kids
B. It passes to any surviving partners
15. A buyer who discovers contamination C. It passes to the state
with property before the closing may do D. It passes to probate
all of the following except:
A. Request that the seller conducts a 21. A target home is a home that was built
cleanup of the contamination before 1978 and may contain
B. Offer to buy the property at a lower A. Asbestos
price B. Lead paint
C. Withdraw from the sale C. Mold
D. Force the seller to perform a D. Radon
complete cleanup of the toxic waste
22. A licensee is selling a home that is built
16. An owner is faced with a zoning change before 1978. What should she be
requiring residential developments only concerned with or do?
in the area where his gas station is A. Recommend an asbestos inspection
located, what are his choices? B. Recommend radon inspection
A. Apply for a variance C. Provide a lead paint educational
B. Change the use to residential in pamphlet and give the buyer 10
order to comply with the current days to do his due diligence
zoning law D. Mold infestation
C. Continue to operate without
interruption 23. A colorless odorless radioactive gas that
D. According to law, the owner is given is known to travel inside the ground and
one year to sell the station provided penetrate building material in the home
that the zoning change is disclosed and cause health problems is known as:
A. Radon
17. A national chain plans to build a B. Carbon monoxide
pharmacy on land that used to have a C. Sewer gas
gas station, what would the chain or its D. Oxygen
lender require?
A. An environmental impact report 24. All of the following have a duty to
B. A phase I environmental audit disclose known environmental hazards
C. Proof that the gas station operation such as lead paint, radon and asbestos
has ceased at least 10 years ago except:
D. A zoning variance A. The seller
B. The landlord
171
C. The buyer B. Millage assessments

D. The agent C. Special assessments
D. Community beautification assessments
25. Lead would be least likely found in:
A. Pipes 31. Vacant property is listed for sale near the
B. Soil Grand River that has had a history of over
C. Paint flowing it’s banks since 1904. What would
D. Insulation you recommend to a potential buyer?
A. Get a home warranty
26. What was the primary reason asbestos B. Get a title insurance policy without
was used in buildings? exceptions
A. Excellent strength quality when C. Check the public records such as DEQ
mixed with drywall flood maps and take into consideration
B. Excellent insulation qualities the possibility of requiring flood
C. It creates high quality paint insurance
D. It was added mostly to siding to D. Make sure that the house is built without
make it water proof a walk out basement
27. Private Control on Land Includes: 32. Licensee lists a struggling but operating
A. Deed restrictions grocery store located in a residential
B. Grandfather clauses neighborhood. The sale is taking too long
C. Court injunctions because the business is not generating
D. Government Condemnation good revenue. The seller decides to close
down the business without canceling the
28. All of the following are true regarding listing because the building has value. A
lead paint abatement except: buyer expresses interest in buying the
building and re-establishing it as a grocery
A. It should be carefully done by the store. What should the agent tell the
owner using the proper respirator buyer?
B. It includes paint removal from the
interior and exterior of the home A. The new grocery store is
C. It may require replacement of a automatically grandfathered
layer of earth surrounding the home B. Check with the local government to
D. It can be costly and is usually paid see if the new buyer’s operation
for by the seller may continue as a nonconforming
use
29. A tool and die shop is located inside a C. Apply for a variance
residential neighborhood since the D. Prepare an environmental impact
1950s. Presently, and due to varies report and submit it to the local
ordinances, the shop does not comply government
with zoning but the local government
has allowed it to remain in business.
This situation is known as: 33. Which of the following situations results in
A. A grandfather/nonconforming escheat?
use A. The city has a public project and must
B. A zoning variance take private property that belonged to a
C. A special use permit deceased
D. A buffer zone B. A person dies leaving his entire
property to a charity while disinheriting his
30. Charges assessed for improvements own spouse
C. A person dying with no heirs or will
provided by the local government that
D. A person dying leaving her share to a
benefit the property
surviving partner
A. Property improvement assessments
172
MULTIPLE CHOICE - VALUATION AND MARKET ANALYSIS
MULTIPLE CHOICE QUESTIONS, 7. When appraising a brand-new house

VALUATION & MARKET ANALYSIS surrounded by older houses, the best method
used is the:
1. An apartment building grosses $2,000 per A. Income approach
month with expenses averaging 35% of gross B. Market comparison approach
income. What is the net operating income (NOI) C. Actual cash paid to the builder to
for the project? erect improvements
A. $1,300 D. Cost approach
B. $24,000
C. $15,600 8. Which of the following is true about income
D. $8,400 property evaluation?
A. The cost of land must be estimated
2. Of the different methods of appraising separately and then the cost of
property, which of the following is the most improvements must be added to it.
appropriate for appraising vacant land? B. Appraiser must look at acquisition
A. The cost approach cost when property was purchased.
B. The gross rent multiplier approach C. The capitalization approach is the
C. The capitalization approach most suitable.
D. Market data (comparison) approach D. Expenses such as property taxes,
maintenance and insurance are seldom
3. When using the market/sales comparison taken into consideration.
approach, an appraiser takes the following into
consideration: 9. All of the following are taken into
A. Income and expenses of property consideration when using the market
B. Capitalization expected by investors comparison approach except:
C. Features that the property has in A. The price of the sold comparables in
comparison to other property sold in the the neighborhood.
neighborhood B. The subject property features such
D. Depreciation on improvements as square footage, number of
bathrooms, garage, central air
4. Property value is least affected by: conditioning, etc.
A. Supply and demand C. Property location and age in
B. Quality and features comparison to the sold comparables.
C. Activity of buyers in an area D. The capitalization rate an investor
D. The owner’s acquisition cost would reasonably accept.
5. Which of the following indicates functional 10. The price that a willing buyer will most
obsolescence? probably pay a willing seller under no pressure,
A. Leak in the roof and provided that property is available on the
B. Sewage treatment plant next to the market for a reasonable length of time, is known
property as:
C. One-car garage in a neighborhood A. Market price.
of mostly two-car garages B. Economic price.
D. High property taxes C. Market value.
D. The buyer’s value.
6. When a house is located in a neighborhood
with several boarded-up houses and gangs on 11. A factor which an appraiser multiplies gross
the street, this property loses value due to: income from property by to appraise its value is:
A. Physical deterioration A. Capitalization factor
B. Functional obsolescence B. Rental factor
C. Economic obsolescence C. Expense factor
D. Crime effect on occupants D. Gross rent multiplier
173
12. In estimating the square footage of a C. Arm’s length transaction

building for replacement purposes, an appraiser D. Appraised price
would use: 19. When using the cost approach, an appraiser
A. Interior dimensions of the structure. will consider all of the following factors except:
B. Lot size dimensions. A. Economic life
C. Exterior dimensions. B. Deferred maintenance
D. Lot frontage dimensions. C. Accrued depreciation
13. To determine the value of a church, the D. NOI
appraiser will probably use: 20. All of the following are considered principles
A. The income capitalization approach. of value except:
B. The cost approach. A. Conformity
C. The market data approach. B. Substitution
D. The congregation approach. C. Contribution
D. Acquisition cost
14. A 10,000 sq. ft. mansion surrounded by 21. When a sale occurs in a competitive market
1,500 sq. ft. homes would most likely be and under no duress, this transaction is known
appraised using: as:
A. Market comparison approach A. Fair market value transaction
B. The square foot approach B. Arm’s length transaction
C. The cost approach C. Highest and best value
D. The gross living area approach D. Full anticipation transaction
15. A small rental property sold for $60,000 and
it had annual gross income of $10,000. Using 22. Which of the following would have the least
the gross rent multiplier what would another effect on property value?
property located in the same neighborhood be A. Interest rates
valued at if it had a monthly gross income of B. Economic growth
$1,500? C. Brokers’ commissions
A. $90,000 D. Loan availability
B. $108,000
C. $ 120,000 23. Which of the following would be the least
D. $9,000 likely to be curable?
16. What would income property be valued at if A. Economic obsolescence
it had $50,000 annual gross income with 40% B Physical deterioration
expense ratio and the agent uses 10% C. Functional obsolescence
capitalization rate? D. Destruction of property
A. $300,000
B. $200,000 24. Replacement cost may be used to estimate
C. $250,000 the value of a variety of properties but it is
D. $500,000 especially utilized in the appraisal of
17. When comparing an appraisal report to a
comparative market analysis, which of the A. A new strip center
following is NOT a factor to consider?
B. A historic building
A. An institutional lender will not rely on
the market analysis to grant a loan C. A new home located in an old
B. An appraisal is provided by a state neighborhood
licensed appraiser while the market D. Vacant land
analysis is provided by a broker.
C. An appraisal is a determination of 25. Which of the following is used in the cost
value while the market analysis is a approach when estimating the value of
recommendation of listing price improvements?
D. An appraisal report is usually more
detailed and must follow USPAP A. Assessed value of building and land
18. The price received for sold property is B. Cost to build a similar building at
A. Market price today's prices
B. Market value
174
C. Price per square foot of comparable 28. Property benefits from its good location.
properties Which characteristic adds to its value?
D. Cost of financing and accrued
depreciation A. Durability
B. Heterogeneity
26. Julie is thinking of buying a nicely C. Scarcity
remodeled, large home located in a D. Immobility
neighborhood of small, simple and older homes.
29. Which of the following is not an
Which of the following is true regarding economic characteristic of real estate?
principles of value?
A. Utility
A. The principle of conformity plays a B. Transferability
large role in this case because of the C. Durability
way the D. Desirability
house is situated
B. The principle of contribution is 30. The fact that most of the subdivision lots
have been sold and buyers are
considered because any improvements
competing for the last ones that are left
done to the property would result an is due to:
equal increase in value
C. Substitution comes into play because A. Desirability
a buyer will have difficulty finding a B. Scarcity
replacement for this house in this C. Utility
neighborhood D. Heterogeneity
D. Based on the principle of regression,
the house may lose value
27. An owner of property discovers damage

done to asbestos insulation that is
wrapped around an old boiler in his
home. All of the following is true except?
A. A total abatement of asbestos must

be conducted for the entire home
B. An expert should be consulted to
evaluate the extent of the damage,
and the meantime the homeowner
should not leave the damaged
portion exposed and possibly apply
duct tape to it
C. Depending on the situation,
encapsulation may be
recommended instead of total
removal
D. Family members should avoid in the
area until assured that the damaged
asbestos is dealt with
175
MULTIPLE CHOICE -FINANCING
MULTIPLE CHOICE, FINANCING C. Property must not be larger than four

units.
1. All of the following are true regarding a D. Applicant must be willing to pay an
Veteran’s Administration Loan except: insurance premium.
A. The loan is guaranteed by the
Veteran’s Administration. 7. An individual may qualify for an FHA loan.
B. Any credit worthy individual including Where would you refer him?
non-veterans can assume the loan. A. To the Department of Housing and
C. The Administration obtains a Urban Development
certificate of reasonable value and B. To the Federal Housing
requires the house to be brought up to Administration
code. C. To any participating primary lender
D. The veteran must put down at least D. To the Federal Home Loan Mortgage
3% down payment. Corporation
2. All of the following are examples of primary 8. A relatively short-term loan that involves
lenders except: regular monthly payments and a lump sum due at
A. Savings and loans the end of the loan term is:
B. Credit unions A. A reverse mortgage.
C. Commercial banks B. Partially amortized loan
D. GNMA C. A subprime loan.
D. Adjustable rate loan.
3. All of the following are true regarding
government related loans except: 9. Kim refinanced her property to raise cash for
A. An FHA loan is insured by the Federal purchasing another investment property. This type
Housing Administration. of mortgage loan is known as:
B. A VA loan is guaranteed by the A. A balloon mortgage
Veteran’s Administration. B. A bridge loan
C. An FHA loan requires payment of C. A fully amortized mortgage
insurance premiums D. A reverse mortgage
D. A VA loan may be granted to an
investor who intends to rent the entire 10. A land contract gives the buyer all of the
property. following except:
A. The right to live on the property.
4. A type of mortgage suitable for those thinking B. The right to lease out the property.
of semi-retirement that involves receiving regular C. The right to sell the property.
monthly payments for a specified period is known D. Legal title to the property.
as:
A. Retirement mortgage 11. When the loan payments remain the same,
B. Graduated mortgage leaving a lump sum due at the end of the loan
C. Amortized mortgage term, this lump sum payment is called:
D. Reverse mortgage A. An acceleration payment.
B. A lump sum payment.
5. When financing property with a lender, which C. A balloon payment.
instrument is required to create a lien on the D. A loan-end payment.
property being financed? 12. Helen bought a $185,000 home and financed
A. The promissory note it 100% through the local bank. Chances are she
B. The land contract obtained:
C. The mortgage contract A. An FHA loan.
D. The deed B. A conventional loan.
C. A balloon mortgage loan.
D. A VA loan.
6. Regarding a VA loan, all of the following are
true except: 13. Upon the sale of property, title remains with
A. Applicant must be entitled to receive the seller and will not be transferred until the buyer
VA loan. makes the final payment on the balance. This is
B. Applicant must intend to live in the known as:
house. A. FHA financing.
176
B. A zero down-payment loan. 19. Seller sold property on the installment plan
C. A land contract. and promised to convey title to the buyer when the
D. A lease with option. balance is finally paid off. This arrangement is best
described as a:
14. A lender questions a couple’s mortgage
application asking if they were planning to marry A. Home financing
and have several children because their income is B. Land contract /contract for deed
barely enough to support the mortgage payments. C. Purchase money mortgage
This behavior by the lender D. Loan transfer mortgage
A. Violates the civil rights act of 1866 20. The right of a person to reclaim his property
B. Is legal as long as it helps the buyer after a foreclosure sale is the right of:
qualify for a loan A. Rescission
C. Violates the equal credit opportunity act B. Acceleration
D. Violates TRID requirements C. Redemption
D. Alienation.
15. At closing, the lender pressures a borrower to
close the transaction despite the fact that he’s 21. A lender agrees to settle a mortgage loan at
being quoted 2 point higher than the loan estimate. less than the loan balance, this is known as
This behavior by the lender
A. Short sale
A. Violates equal credit opportunity act B. Liquidation sale
B. Violates the fair housing act C. REO sale
C. Is a predatory lending practice D. Deficiency sale
D. Violates the mortgage fraud act
22. The mortgagor decides to peacefully
16. Which of the following will trigger a new loan surrender property to the mortgagee. This is
estimate and closing delay? referred to as:
A. Friendly foreclosure.
B. Sale lease back.
A. A sudden increase in the mortgage
C. Bank purchase of property.
interest rates
D. A “deed in lieu of foreclosure”.
B. Lender misquoted the amount of points
on the TRID
23. If the borrower is making regular equal
C. Borrower cannot qualify for a 15 year
monthly payments, which is true about principal
loan and must switch to 30 year
and interest portions of his payment?
D. Lender fails to provide a closing
disclosure 3 business days before A. They remain the same.
consummation of loan B. The principal portion is increased
while the interest portion is decreased.
C. The interest portion is increased while
17. Another name for a land contract is the principal portion is decreased.
D. The loan balance is increased.
A. Installment sale contract/contract for
deed 24. The purpose of the truth-in-lending law is to:
B. Seller financing contract A. Limit the amount of interest charged
C. Seller mortgage contract to the buyer.
D. Seller-Buyer contract B. Limit the amount of closing cost.
C. Enable borrowers to easily shop
18. Which of the following is not a conventional around for interest rates.
loan? D. Stop usury.
A. Jumbo home loans 25. The truth-in-lending law permits the

B. Partially amortized loans advertising of the following without making any
C. FHA loans further disclosure:
D. Hard money loans A. $2,000 down payment.
B. 10% interest.
C. $625 per month payment.
177
D. Reasonable monthly terms. B. Establish and regulate closing

charges.
26. Which of the following is not included in the C. Disclose to the consumer the true cost
APR? of obtaining credit.
A. Legal fees. D. Help the government close down
B. Prepayment penalties. violating lenders.
C. Non-refundable application fee.
D. Interest per annum. 33. When a foreclosure sale does not bring
enough to satisfy the loan balance, the lender may:
A. Cancel the sale.
27. All of the following may be considered as B. Make a counteroffer to the highest
practice of Predatory lending except bidder.
A. Tricking a borrower into believing that C. Sue the mortgagor for a “deficiency
an interest rate is lower than it actually is. judgment”.
B. Leading the borrower to believe that he D. Do nothing and accept the highest
has the ability to pay a greater payment bid.
than he can actually afford.
C. Excessive loan fees 34. A clause that requires the full loan balance to
D. Requiring the borrower to attempt credit become due to the creditor if property is disposed
repair in order to raise credit score of is:
A. Acceleration clause
B. Due on sale/alienation clause
28. When financing a home through VA, the C. Escalation clause
points are based on: D. Partial payment clause.
A. The purchase price
B. The loan amount
C. The CRV 35. The following is true about foreclosure sales:
D. The accelerated amount A. If more than the amount owed to the
lender is bid, the extra money is
29. A mortgage clause that calls the entire loan considered a profit to the lender.
balance due upon default is: B. The mortgage is paid first and then
A. The escalation clause the unpaid property taxes are paid.
B. The acceleration clause C. If foreclosure sale did not bring
C. The amortization clause enough to satisfy the loan, the bank must
D. The prepayment clause collect the difference from insurance.
D. If two mortgages existed on the
30. When mortgage loan is satisfied, the lender property, the senior will be paid first and
will issue and record: then the junior.
A. A discharge
B. A letter of intent 36. Which of the following is true regarding
C. An estoppel certificate mortgage assignment?
D. An indemnification letter A. They are illegal.
B. They are not allowed by law for
31. The prepayment penalty on a $50,000 conventional loans but they are
mortgage is as follows: First year penalty is 3.5%, permissible for government loans.
second year is 2.25%, third year is 1%. If the loan C. A prepayment penalty will be due
was paid off during the second year, calculate the upon assignment.
penalty. D. A formal assumption involves
A. $1,125 approval of the new purchaser by the
B. $1,750 lender.
C. $3,375
D. $500 37. A property can be auctioned in a Sheriff sale,
but the owner/mortgagor has the right to get it back
32. The purpose of the truth-in-lending act is to: by paying the Sheriff’s deed holder. This right is
A. Save the public money on buying known as:
homes. A. Acceleration
B. Redemption
C. Due on sale
178
D. Deficiency 45. The Truth-in-Lending law is designed to do

which of the following?
38. Quarterly interest due is $2,000 and the loan A. Limit the amount of interest charged
amount is $100,000, what is the annual interest the borrower
rate that is charged by the lender? B. Limit the amount of closing costs
A. 8% C. Make it possible to easily shop loan
B. 2% interest and terms
C. 4% D. Stop usury
D. 10%
46. Property purchased for $600,000 with a
39. The difference between property fair market $500,000 mortgage, it’s present value is $750,000
value and the amount owed on it is the: and the mortgage balance is 450,000. How much
A. Mortgagor’s equity. equity does the owner have?
B. Statutory equity. A. $100,000
C. Mortgagee’s equity. B. $150,000
D. Fair market equity. C. $300,000
D. $250,000
40. A person’s right to reclaim property after
foreclosure is called the: 47. The restrictions relating to advertisement of
A. The statutory right of redemption. credit terms contained in the Truth-in-Lending law:
B. The bank’s permission to redeem. A. Would permit the use of the phrase "no
C. Redemption of equity. down payment" without further disclosure
D. Redemption legal reclaim. of financing terms.
41. The payment of an old loan with a new loan is B. Apply to newspaper, TV, radio, and
termed "refinancing". Which is the least likely magazine ads, but not to direct mail
purpose for "refinancing" loans? solicitation.
A. To acquire the property C. Mandates the use of the interest
B. To pay for rehabilitation or amount in dollars when advertising.
modernization D. Mandates the use of the annual
C. To get more advantageous loan than percentage rate (APR) when advertising
was on the property interest rates.
D. To raise money for purposes of
satisfying a balloon payment 48. Regulation Z provides a right of rescission:
A. To first mortgages only.
42. A buyer wants to take out an FHA loan. The B. That expires three business days after
broker should refer the buyer directly to: the date of consummation of the
A. Any approved lending institution such transaction or the date on which the lender
as a bank or savings and loan association. makes material disclosures, whichever is
B. An FHA appraiser in the area. later.
C. The Federal Housing Administration C. That applies to commercial and
Office. residential loans.
D. The Federal National Mortgage D. For Junior liens only.
Association.
49. Charley is purchasing a home for $78,000 and
43. Under Truth-in-Lending, it is permissible to the lender is giving a 90 percent loan at 10 percent
advertise which of the following statements alone? interest, plus a 2 percent loan origination fee. How
A. $2000 down much is the loan origination fee?
B. 10% interest per annum A. $1,560
C. Low down payment B. $1,404
D. $125 per month C. $7,020
D. $1,650
44. Truth-in-Lending laws apply to:
A. Commercial loan transactions involving 50. Based on 9% annual interest, how much
real property simple interest accumulates in one year if a buyer
B. Residential real estate mortgages 1-4 purchases a property for $85,000 and receives a
family dwellings loan based on a 75% loan to value ratio?
C. All personal property transactions A. $7,650
D. Unconscionable contracts B. $5,738
C. $1,913
179
D. $4,250 B. Payments must be made more

frequently at a future specified date.
51. In the event a first mortgagee fails to record C. The interest rate can increase.
his/her mortgage and a good-faith second D. Payments may not be made more
mortgagee records his/her mortgage first, which of frequently than specified.
the following would be true?
A. The second mortgagee has priority. 57. If the mortgagee has the property sold at a
B. The borrower is personally liable only foreclosure sale and it brings an amount
to the first lender inadequate to pay off the loan, what can the
C. Both lien holders split the loss mortgagee do?
D. Recording is not an issue; it is the date A. Sue the mortgagor for the deficiency
of the loan that matters B. Cancel the sale
C. Hold the mortgagor criminally liable
52. Assume that a buyer is making fully amortized D. Cancel the redemption period
payments of $600 per month on a purchase-money
mortgage. Which of the following is true? 58. The points of non-conventional loans are
A. The amount applying to the principal computed and based on:
decreases each month.
B. The interest payment stays the same. A. Sales price
C. Interest and principal payments are B. Listing price
constant. C. Loan amount
D. Closing costs
D. The amount applying to interest
decreases each month.
59. A mortgagor's right to reclaim the foreclosed
property from the successful bidder within a certain
53. What would a homebuyer use to insure a period of time starting from the date of the foreclosure
conventional loan? sale is:
A. Federal Housing Administration
B. Federal Home Loan Bank A. Satisfaction of mortgage
C. Federal National Mortgage Association B. Equitable right of title
D. Private Mortgage Insurance (PMI) C. An action for judgment
D. Statutory right of redemption
54. Of the following, who is benefited by an
acceleration clause in a mortgage? 60. When is a mortgagor most likely released from
A. The borrower liability under a mortgage?
B. The lender
C. A future purchaser upon resale of A. Upon a sale subject to the mortgage
property B. Upon an assumption of the mortgage
D. The trustee C. Upon a sale under a land contract
D. Upon recording a discharge
55. All of the following are considered benefits to a
61. A clause in a mortgage that may permit the
deed in lieu of foreclosure except:
lender to call the entire balance due if the property is
A. Mortgagee receives property sold or otherwise conveyed by the mortgagor is
immediately without waiting out called:
redemption time
B. Mortgagor and mortgagee avoid the A. Defeasance clause
expense of legal process B. Alienation clause (due on sale clause)
C. Property will probably have less C. Acceleration clause
damage when received by mortgagee D. Power of sale
D. Mortgagor must pay the mortgagee the
difference between the mortgage balance 62. Mortgage satisfaction is evidenced by which of
and the current appraised value of the following?
property
A. Estoppel certificate
56. An "acceleration clause" found in a promissory B. A discharge
note or mortgage would mean that: C. Acceleration
A. Upon the happening of a certain event, D. Promissory note
the entire amount of the unpaid balance
becomes due. 63. In real estate financing, the debt is evidenced by:
180
A. A mortgage
B. A promissory note 69. Susan used a $30,000 home equity loan secured
C. A chattel mortgage by her present home, to purchase an investment that
D. A financing statement she was thinking of fixing and flipping at a later time,
which of the following types of loans is most
64. Which of the following is a source of primary applicable to her situation?
mortgage funds?
A. Government National Mortgage A. A partially amortized loan
Association B. A balloon mortgage
B. Federal National Mortgage Association C. A bridge loan
C. Federal Home Loan Mortgage D. An interest only loan
Corporation
D. Federal Savings and Loan Association 70. Which of the following violates RESPA
65. Two years ago, John bought a home on a VA A. Licensee offers the use of his light duty truck
loan. John has just been transferred to another city to help move his client after closing.
and is concerned with his present mortgage as well B. Broker offers additional bonus to any
as purchasing a new home after the transfer. What licensee who sells company listings that
can John do? have been on the market more than 4
months.
A. Surrender the home to VA who
C. Title company offers a bonus to licensee for
guarantees the loan
referring transactions to them.
B. Must sell the home to another veteran
C. Allow a non-veteran to assume the loan D. Broker offers a $500 gift certificate to any
and move on to purchase another home on a buyer who closes a transaction with her
second entitlement company
D. The lender must accept a deed in lieu of
foreclosure and record a loan discharge 71. A lower loan to value ratio can lead to
66. Which of the following is true regarding REO? A. Lower Equity

A. Property available on the short sale B. Higher chance of default
B. Property sold with seller financing C. Increased equity
C. Property in the process of foreclosure and D. Higher interest rate
can be redeemed by an investor
D. Property owned by a foreclosing lender
72, Helen signed an offer for $150,000 and applied for
67. Which of the following is NOT considered to be a a VA loan. The appraiser issued a certificate of
benefit of an FHA loan? reasonable value stating that the home was valued at
A. A low down payment $140,000. What are Helen’s options?
B. Property will be fixed up before closing
C. Loans are automatically assumable A. Seller must drop the price to $140,000
D. Loans are insured B. Seller does not have to reduce the price but
the lender cannot make the loan with this
68. During foreclosure, Sharon was informed that her discrepancy
house was sold by the court, but she had a limited C. She can obtain a 100% loan based on the
time to get it back if she paid a certain amount, what lower value and she can pay the $10,000
was the court referring to? difference out of pocket
D. Abandon the VA program in favor of an FHA
A. Right of redemption loan because if the house does not appraise,
B. Process of acceleration
she only has to pay 3.5% of the price
C. Right of first refusal
difference and FHA covers the rest.
D. The due-on-sale right
181
MULTIPLE CHOICE -PRINCIPLES OF AGENCY
MULTIPLE CHOICE- PRINCIPLES OF AGENCY buyer thinks he can get from another lender where
the mortgage loan officer is a friend of the buyer.
Your duty is to:
1. Which of the following is true regarding an A. Leave the buyer alone, since he is a
open listing given to 4 different brokers if one of client and should not be bothered.
them sold it? B. Contact the loan officer directly and
A. They all split the commission. tell him.
B. 50% of the commission goes to the C. Inform the buyer of the other lender’s
one who sold it and the other 50% is rates and urge him to take the savings.
distributed between the other brokers. D. Ignore the lower rates, since that will
C. An open listing is illegal. cause delays in financing and hard
D. Only the broker who sold the property feelings between the two friends.
receives a commission and the others get
nothing. 6. A broker is hired under an exclusive right-to-
sell listing agreement and later is told by the owner
2. All but which one of the following are proper that the owner’s daughter is buying the house
responsibilities of the listing agent? directly from the father. The broker should:
A. Loyalty to the principal A. Terminate the listing.
B. Due diligence and skill B. Insist that the daughter write the offer
C. Accounting for funds and through the broker’s company.
indemnification C. Inform the seller that he will owe a
D. Obtaining the best possible financing commission.
for the buyer D. Advise the seller to wait until the
listing expires six months later, then sell
3. Listing agent knows that seller is anxious and the property to his daughter in order to
willing to take less than the listing price. The buyer avoid paying a commission.
asks if the agent recommends any other price
besides the asking price. Agent must: 7. A person who authorizes another person to act
A. Be honest and indicate that seller will on his/her behalf is called:
accept less.
A. The salesperson
B. Tell the buyer that seller indicated that
B. The fiduciary
he will not accept less under any
circumstances. C. The agent
C. Tell the buyer that he could make an D. The principal
offer but the agent can guarantee nothing.
D. Call the seller and ask him if he 8. A listing agent is least likely responsible for
should tell the buyer that the seller will telling a prospective buyer that:
take less. A. House has a potential structural defect.
B. Zoning makes the potential use of
4. As a buyer’s agent, a broker feels that property
is overpriced, but buyer indicates willingness to property non-conforming.
offer full price. Broker must do which of the C. Inspection of a house has shown some
following? signs of termite damage.
A. Have the buyer sign a full price offer D. An owner will accept less for a property
and present it to the seller for a fast sale. than what it is listed for.
B. Tell the buyer to offer less and not
present an offer unless the buyer agrees
9. After showing a property a number of times and
to lower the price.
C. Advise the buyer as to what the fair not securing an acceptable offer, the broker
market value should be and leave it up to decides to buy the property himself. He must do
her. which of the following?
D. Urge the buyer to offer full price A. Wait until the listing expires and then
because the broker always has duty to the submit an offer to purchase
seller, no matter what type of agency is B. Make his/her true position known to the
created. seller
5. As agent of the buyer, you know that a certain C. Buy it through a third party
bank is offering lower interest rates than what the D. Must split the profit with the owner
182
10. The listing broker owes a direct fiduciary 16. The broker’s responsibilities in presenting to
responsibility to whom? the seller a written offer to purchase include:
A. The listing salesperson A. Making known to the seller all written
B. The buyer offers before seller accepts an offer
C. The listing owner B. Making known the legal ramifications
D. The cooperating broker and practical effects of an offer
C. Advise the seller as to the tax
11. A sub-agent of a seller would best be described consequences of the sale
as which of the following? D. Advise the seller to reject the initial
A. Special agent offer in an effort to get a higher price
B. General agent
C. Transaction coordinator 17. All but which one of the following are proper
D. Attorney in fact responsibilities of a real estate agent?
A. Loyalty
12. The best description of a special agent would B. Indemnification
be a person who: C. Financing
A. An attorney D. Accounting for funds
B. A broker
C. Has limited authority 18. All of the following are duties of an agent to a
D. Contractual authority principal except:
13. If a prospective buyer makes an offer that is A. Indemnification

much lower than the listed price, the broker must B. Loyalty
do which of the following? C. Skill
A. Try to persuade the seller to accept it D. Puffing
B. Present the offer to the seller
C. Do not accept the offer 19. Listing owner tells broker that he will not pay
D. Accept the offer and wait until other him a commission because the seller sold the
offers on the property are made before property himself, most likely the seller has signed
presenting it to the seller A. An exclusive right to sell
14. An owner requests a broker to list a property B. An exclusive agency listing
for sale at $70,000. Upon inspection, the broker C. A limited service listing
believes the property is worth $80,000. The broker D. A short term listing
should:
A. Get a net listing for the property at 20. A salesperson responds to an ad in the paper
$70,000 by a “For Sale by Owner.” The owner gives the
B. Buy the property for $70,000 salesperson a key to inspect the property being
C. Inform the seller that the property is sold. What type of agency is thereby created?
worth $80,000 A. Fiduciary
D. Suggest that the owner list the property B. Implied agency
for $75,000 so that there will be room for C. Contractual
bargaining D. None
15. Termination of listing by force of law applies to 21. A salesperson is negotiating a sale on property
which of the following? listed on the MLS, who is she directly responsible
A. Property is condemned by the city to:
B. Property is hit by tornado, only the A. Listing broker
basement is left B. Her employing broker
C. Listing had expired C. Cooperating salesperson
D. Property is sold and closed D. The seller
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buyer during the protection period, the

22. As agent of the seller, a real estate broker is seller must pay a commission
usually authorized to do all except which of the
following? 26. Except under specific conditions, an agent may
A. Bind the principal under a sales serve only one principal at a time; however, a
contract principal may have more than one agent. Which of
B. Advertise the listed property the following would best describe such a situation?
C. Place a “for sale” sign on the listed A. Multiple listing
property B. Open listing
D. Cooperate with the other brokers to C. Exclusive agency
complete a sale D. Exclusive right to sell
23. A seller documents on the seller’s disclosure 27. Which of the following does not terminate an
statement that termites have destroyed the floor agency created by a listing?
and that the swimming pool is in violation of the city A. Insolvency of the listing broker
setback requirement. Furthermore, the seller B. Fire destroying the listed property
indicates that the neighbor’s garage encroaches 3 C. Insanity of listing salesperson
inches over his property line and tells the listing D. Revocation of the broker's license
agent that he is anxious to sell the house because
he is being transferred. Which of the following facts 28. Which of the following is an example of
should least likely be discussed by the agent with Puffing?
the buyer? A. Agent tells a buyer that she loves the
A. Condition of floor decor in the house
B. Pool violation B. Agent tells buyer that the landscape is
C. The transfer one of the nicest that she had seen in a
D. The encroachment long time
C. Agent tells buyer that within the next
24. Sally and David work for sunshine Realty. Sally five years, the economy in the city is
listed a house and was designated as a seller's expected to experience the highest growth
agent, David obtained a buyer agency contract and in the nation
was designated as a buyer’s agent. In the event D. Agent tells buyer that the kitchen was
that David's buyer buys Sally's listing, which designed by an award-winning architect
licensee of the company becomes a dual agent?
A. Sally only 29. An agency that gives a broker an exclusive
B. David only right as an agent, but owner retains the right to sell
C. Both Sally and David the property himself, without paying a commission,
D. Their broker is:
A. An exclusive agency listing
25. According to the laws of agency: B. An open listing
A Broker must always charge a C. An exclusive right to sell
commission and put the amount on the D. A sale by owner listing
listing form
B. Broker may sue and collect a 30. A contract providing for the payment of a
commission even without disclosing that commission to the listing broker, no matter who
s/he acted in dual capacity sells the property, is called a(n):
C. A net listing is legal but only if the agent A. Net listing
makes a reasonable amount of profit on B. Open listing
the property C. Exclusive-agency listing
D. If a listing has a protection clause and D. Exclusive-right-to-sell listing
the seller sells the property to the broker’s
184
31. In the process of obtaining a listing on a property to rob him at the property. Furthermore, the agent
that shares a driveway with the adjacent house, the discovers three registered sex offenders in the
owner insists that you don’t mention this fact to any neighborhood. As far as the condition of the property
prospective purchaser. Regarding this problem, you the seller refuses to provide a seller’s disclosure
should: statement but asks the agent not to mention the fact
A. Inform a prospective buyer despite the that the roof and basement leaks when it rains. If the
seller’s insistence agent accepts the listing, she must inform the seller
B. Not mention this fact unless a buyer asks that she would have to disclose
C. Refuse the listing A. The leak
D. Do as the seller asks B. The murder/suicide
C. The shooting of the intruder
32. If a broker holds two listings, an open listing on D. The registered sex offenders
one property and an exclusive agency listing on
another, and one week after both listings expire the
two owners get together and exchange properties 36. After listing the property, a buyer approaches the
without previously being shown the properties, the agent at an open house, introduces himself, and asks
salesperson may: to negotiate directly with the seller. The agent tells the
A. Sue for full commission on both buyer to deal directly with him and promises that he
B. Sue for commission on the open listing will take good care of the buyer and very possibly get
C. Demand full commission on the exclusive him a good price on the property because he is aware
listing of the seller's motivation to sell. What type of
D. Receive no commission from either listing relationship is created between the agent and the
buyer?
33. The phrase “procuring cause” is most significant
in relation to: A. An agent-customer relationship
A. An exclusive agency B. An expressed agency with the buyer
B. An open listing C. An implied/ostensible agency with a buyer
C. An exclusive-right-to-sell listing D. A designated agency with the buyer
D. A net listing
37. All of the following will terminate a listing between
34. John and Sally work for a broker who does not a broker and seller except:
practice designated agency. John listed a house and A. Destruction of the listed property
Sally obtained a buyer agency contract from her B. Bankruptcy of the listing owner
buyer. If Sally's buyer buys John's listing, what sort of C. The sale of the property
agency relationship is there? D. The owner informs the broker that he will not
A. John is the seller's agent, Sally is a be able to pay the full commission because
buyer's agent, and the broker is a dual an offer submitted by the broker was too low
agent.
B. Everyone including John, Sally, other 38. John works for a broker who practices designated
agents in the company, and the broker, is a agency. John listed property and was designated as
dual agent. the seller's agent. Two weeks later, John obtained a
C. John, Sally, and the broker are dual buyer agency and was designated as the buyer’s
agents. Other agents in the company remain agent. John's buyer bought his listing. What is the
neutral. agency relationship with the buyer and seller?
D. John is a seller's agent, Sally is a buyer's
agent, the broker does not become a dual A. John is a transaction coordinator; his broker
agent unless he supervises both John and is a dual agent.
Sally in the same transaction. B. John is a transaction coordinator as well as
his broker.
35. In the process of performing due diligence, a C. John is a dual agent as well as the broker.
listing agent discovers that there was a D. John is a buyer's agent; the broker is a
murder/suicide that took place in the property 15 seller's agent because the listing is in the
years ago. Furthermore, he discovers that the listing broker’s name.
owner had shot and killed an intruder that was trying
185
39. A transaction coordinator is one who: 43. How would a buyer's agent most likely help a
client?
A. Represents neither buyer nor seller.
B. Acts as an agent of both buyer and seller. A. Obtain an appraisal on properties that the
C. Acts as an assistant to an agent to buyer is interested in, in order to recommend
coordinate different stages of the a purchase price
transaction. B. Conduct a market analysis on a property that
D. Represents neither buyer nor seller but must the buyer is interested in and recommend a
advise them equally. purchase price
C. Research the history of the property as to
the price paid by the seller to acquire the
40. After obtaining six listings, Kimberly decides to property as well as the cost of improvements
leave her real estate company and join a different made
broker, what is the status of the listings? D. Contact the listing broker and inquire as to
the seller's motivation to sell and the least
A. They follow her to the new company price that she will accept
B. They must be released by the Broker and
relisted with the new company 44. Which of the following terminates a listing by
C. They stay with the former broker “operation of law”?
D. The owners will have a choice as to which
company they prefer to go with A. Death of the broker who holds the listing
B. Seller decides not to sell the property
41. Which of the following is true regarding a six- C. The death of the salesperson who gained the
month exclusive buyer agency contract? listing
D. The sale and closing of the listed property
A. The buyer may sign the agreement with
multiple brokers. Only the broker who locates
a suitable property is entitled to a commission 45. Seller indicated that a designer ceiling fan was
B. A broker will not be compensated unless the not to be included in the sale and he excluded the
buyer either purchases one of the broker’s item in the listing agreement. If the agent prepares the
listings or a listing offered in cooperation with purchase agreement, who’s responsibility is it to
another broker exclude the fan from the sale?
C. Regardless of who found the property, the
broker is due a commission if the buyer buys A. It may not be excluded because it’s a fixture.
during the six-month period B. The seller.
D. If the broker locates property during the six- C. The seller must hire an attorney to go over
month term, it must be exclusively made the contract and write proper language to
available to the buyer who signed the contract exclude the fan.
D. The agent.
42. Which of the following is true with regards to the
licensee's practice and limitations under a 46. While showing a few houses to a Buyer/Client, he
dual agency? becomes interested in 2 houses found on the MLS,
one of which can barely afford but the listing agent
A. The licensee gets paid by both buyer and offers you a higher commission split while the other is
seller more within his budget but is paying a much smaller
B. The licensee must not advise neither side and commission. You recommend the less expensive
allow the parties to carry-on with their own home even though it pays you less. This behavior
negotiations coincides with the duty of
C. The licensee is not at liberty to disclose 100%
of known information to neither side A. Confidentiality
D. The licensee has a full fiduciary duty to both B. Indemnification
sides
C. Loyalty
D. Obedience
186
MULTIPL CHOICE QUESTIONS - PROPERTY CONDITION & DISCLOSURE
MULTIPL CHOICE QUESTIONS, PROPERTY B. Leaks from a nearby toxic waste

CONDITION & DISCLOSURE dump site have caused
underground pollution.
1- The purpose of the seller’s disclosure C. Seller indicated that she will accept
statement is to: less for the property
D. The city inspector will probably not
issue a permit to build on this
A. Determine all defects with the
property unless a cleanup takes
property
place
B. Inform a potential buyer of
conditions known to the seller
C. Be able to sue the seller for any 6- An owner asks the salesperson if his
defects with the property company will accept less commission. The
D. Stop the buyer from withdrawing salesperson must:
from the sale before closing
A. Leave the commission blank after
signing the listing agreement and
2- A buyer signed a purchase agreement see if the broker will later allow a
and was later able to legally withdraw lower commission.
from the transaction and received a B. Tell the owner that all commissions
refund of the deposit. Under which of are set by the state and there is
the following circumstances was the nothing he can do
buyer able to rescind the transaction? C. Lower the commission to any
reasonable amount agreed upon
A. The buyer could not be approved for between the salesperson and the
a loan at favorable interest rates owner.
B. The buyer was surprised that his D. Tell the owner that the decision
employer was transferring him to must be made by the broker and he
another city has no authority to accept less
C. The buyer heard that someone was commission.
killed in the house
D. The buyer did not receive a seller’s 7- The street in your neighborhood has
disclosure statement been paved by the city. How will that
affect your tax bill?
3- All of the following are material facts
except: A. Millage rate will increase.
B. Assessed value will decrease.
A. Leak in the roof C. You may receive a bill for special
B. Crack in the basement wall assessments
C. Problem with plumbing D. Your property tax will be lowered.
D. Seller is anxious to sell
8- An agent inspects a new listing and
4- Seller’s disclosure statement must notices obvious leaks in the roof as well
be provided to buyer: as around windows. He is told by the
seller that the furnace is not working
A. No later than nine business days properly and that all the defects will be
after signing the offer to purchase disclosed on the seller’s disclosure
B. Before an offer to purchase is statement. The agent also notices water
signed in the basement, but the seller tells him
C. Any time before closing to ignore the water because he had paid
D. No later than two days after closing a company to fix it, but it still leaked,
therefore they were coming back to fix it
5- The listing salesperson has no duty to again under warranty. Which of the
inform a buyer that: following is NOT considered to be
A. Zoning is a problem for the property proper behavior by agent?
187
MULTIPL CHOICE QUESTIONS - PROPERTY CONDITION & DISCLOSURE
A. Make sure that the leaks and the 11- Which of the following would be
furnace issue are disclosed covered under a home / construction
B. Recommend an inspection to a warranty?
potential buyer just in case there
are more defects in the property A. Damages resulting from
C. Since the issue with the overpaying for the property
basement is covered by B. Damages resulting from a
warranty, there is no need to be defective title
concerned with it C. Damages resulting from a
D. Provide a completed seller’s defective furnace
disclosure statement to the D. Damages resulting from an
buyer before signing the unpaid water bill prior to closing
purchase agreement
12- John is thinking about selling his
9- A provision placed in the deed by
house but wants to try it “by owner” to
the seller aimed at controlling the
see if he can save the commission.
present and future use of property is
Sally provides John with a free market
called:
analysis hoping to list the property and
informs him of the necessity of providing
A. Seller restriction a seller’s disclosure statement. John
B. Land use regulation
thanks Sally for her service but refuses
C. Unnecessary burden on the
to list the house with her. If John needs
buyer
a copy of the seller’s disclosure form,
D. Deed restriction
where can he get it?
A. Sally must provide it to him even

10- An agent is selling a vacant lot in a
though he did not hire her
neighborhood that is not served with
B. Sally can refer him to the state
sanitary sewers. The agent should website where he can download
make the purchase agreement it
subject to C. Sally can suggest that he
contact a lawyer or the local
A. A foundation inspection government
B. A percolation test D. Sally should tell him that the
C. A soil sampling inspection disclosure is required only when
D. A building permit a licensee is involved in the sale
of the property
188
MULTIPLE CHOICE - CONTRACTS
MULTIPLE CHOICE - CONTRACTS A. The optionee may assign the option

to a third party.
1. When the parties to a contract agree to close B. The optionee may exercise the
by a certain deadline with absolutely no option at any time within the six
extensions, what must the contract state? months.
A. Irrevocable offer clause C. The optionor may not force the
B. Time is of the essence clause optionee to perform under the
C. Time extension clause option.
D. Absolute deadline clause D. The optionor must return the option
payment if the optionee does not
2. When a party to a contract makes a promise exercise the option.
in exchange for another promise, this contract is:
A. Unilateral 7. When a party to a contract fails to meet its
B. Bilateral terms, this is known as:
C. Implied A. Novation
D. Executed B. Assignment
C. Breach
3. All of the following elements are essential to D. Performance
validate a contract except:
A. Valuable consideration 8. Seller accepted an offer and later refused to
B. Legal capacity of the parties close the deal. The buyer may do which of the
C. Meeting of the minds following:
D. Witnessing A. Do nothing.
B. Ask for his deposit to be refunded,
4. A 25-year-old individual signed a contract since there is no other legal remedy.
with a 17-year-old. The contract may be subject C. Sue the broker.
to the following: D. Sue for specific performance.
A. If the minor decided not to perform,
he may be forced to do so by a court of 9. A novation is:
law. A. The same as a sublease
B. The major is not obligated to B. Acquiring property after encroaching
perform. on it for the statutory period
C. It is up to the minor to enforce the C. The substitution of a new person or
contract or to void it. contract in place of another
D. The contract is enforceable by the D. A nonperformance
major but not the minor.
10. Seller is asking $200,000 cash and the
5. A purchase agreement is signed by all buyer offered $180,000 which was rejected by
parties, but later it is determined that the price the seller. The seller sent a counteroffer for
will be lowered in return for the seller not $190,000 but the buyer rejected it. Later the
including some of the appliances. What must seller decided to accept the original $180,000.
the agent do? A. The buyer is obligated to buy the
A. Do nothing; it is up to the parties to property for $180,000.
do what they want. B. The seller has no right to accept the
B. Close the deal based on the new $180,000 price since he had rejected it
terms; just make sure that the closing in the first place.
statement reflects the new price. C. It is up to the buyer to offer $180,000
C. Cancel the purchase agreement and again, since his original offer was
have them sign a new one. rejected.
D. Draw an amendment reflecting the D. The buyer should have accepted the
changes and have the parties sign it counteroffer, because counteroffers are
before the closing. always binding.
6. Under an option period of six months to

purchase property, all of the following are true
except:
189
11. The best and most satisfying way of D. Offer is accepted, buyer is notified
terminating a contract is: of acceptance, and there is an earnest
A. Abandonment money deposit with the broker.
B. Breach
C. Default 18. According to law, the smallest amount of
D. Performance monetary deposit that must accompany an offer
to purchase is:
12. The name of a law that requires contracts A. $500
to be in writing for them to be enforceable is: B. $1.00
A. Statute of limitations C. No less than 5% of the purchase
B. Statute of written contracts price.
C. Statute of frauds D. None is specified
D. The occupational code
19. Tom made an offer and placed a deposit
13. All of the following are considered real with the seller and the offer was accepted. Later
estate contracts except: he decided to withdraw from the deal, and the
A. An option seller released him and gave him back his
B. A sales contract deposit. This is known as:
C. A mortgage A. Breach
D. Duress B. Rescission
C. Novation
14. When purchaser defaults on purchase D. Lack of interest
agreement, the earnest money deposit is: 20. All of the following are true regarding a
A. Paid to the broker sales contract except:
B. Paid to the seller as liquidated A. It is binding on both parties.
damages B. It will be terminated at the closing.
C. Refunded to the buyer because it is C. It sets the price and terms.
illegal to keep anyone’s money D. It transfers legal title.
D. Legally split between the broker and
the seller 21. Under an option to purchase property for
$125,000 with a $2,000 option fee, all of the
15. To withdraw an offer before it is accepted is following are true except:
known as: A. Option may be assigned.
A. Rescission B. Option must be exercised.
B. Rejection C. Optionor may not refuse to sell.
C. Revocation D. Option fee is not refundable.
D. Breach
22. Charles put an offer on a house subject to
16. Under what circumstances can a buyer obtaining financing and the offer was accepted
revoke his/her offer to purchase? by the seller. Later Charles was unable to
A. Any time before the closing. obtain financing and brought the seller a letter of
B. No later than three days after it has rejection from the bank. Which of the following
been accepted by the seller. is true about Charles’ deposit?
C. Any time before he/she is notified A. The deposit must be kept with the
that his/her offer was accepted by the broker until Charles finds another
seller. property.
D. Once an offer is made, it may not be B. The seller gets the deposit.
revoked unless rejected by the seller. C. The broker keeps the deposit as
liquidated damages.
17. A purchase agreement is considered D. The deposit is refunded to Charles.
accepted and binding on both parties when:
A. A full price offer is made by the 23. Buyer makes an offer subject to the sale of
buyer. the buyer’s house; the seller does not want to
B. A closing takes place. wait indefinitely. What should the seller do?
C. The acceptance of the seller has
been communicated back to the buyer.
190
A. Reject the offer unless the buyer agent who presented him with a second offer
already has a purchase agreement on that was much lower than the first offer that he
the house that he is selling has. What should the agent do?
B. Accept the offer, especially if the A. Reject the second cooperating offer,
market is slow, but keep reminding the since it is much lower and there is no
buyer that he must sell his property as chance the seller will accept it.
soon as possible B. Tell the cooperating agent that he
C. Accept the offer but add an “escape must wait, since there is already an offer
clause” reserving the right to accept a that must be either accepted or rejected
subsequent offer from a different buyer before any other offer could be
D. Accept the offer but place a short presented.
deadline on the closing, if the buyer C. Take the second offer and present it
cannot close by the stated deadline, the to the seller anyway.
purchase agreement will automatically D. Take the second offer from the
become null and void agent, but it is legal not to present it to
the seller since there is no chance that
24. All of the following have contractual ability she will accept it.
except:
A. An unmarried person 18 years old. 28. As agent of the buyer, Susan is showing an
B. An illiterate person. out of town buyer a house that has been on the
C. A single 62-year-old man still living market for 18 months listed at $300,000. What
with his parents. must Susan do regarding her knowledge of the
D. A well-educated college professor length of time the property has been on the
well under the influence of alcohol. market?
A. Disclose this fact because it is a
25. Interest that buyer acquires in property state law requirement.
after the signing of a sales contract by all B. Not disclose because it can
parties: jeopardize the seller’s bargaining
A. Title position.
B. Adverse possession C. Susan must mention this fact to the
C. Equitable title buyer because, as a buyer’s agent, she
D. None whatsoever must disclose all known facts about
property especially something that could
26. Seller is asking $125,000 but accepted a improve the client’s bargaining position.
$110,000 offer subject to financing. A week D. Should ask the seller if they mind
later a full-price offer is made to the seller. that such a fact be disclosed to the
Under which of the following circumstances can buyer.
the seller accept the second offer?
A. Under no circumstances 29. Landlord gives tenant the right to buy
whatsoever. The seller may not accept property at a certain price on or before lease
any other offers once an offer is expiration, this is known as:
accepted. A. Lease with option to buy
B. Only after contacting the first buyer B. Lease with obligation to buy
and getting his permission to accept a C. Lease with tenancy
second offer. D. Lease with specific performance
C. As a backup offer, which will only be
effective if the first buyer withdrew from 30. What should a seller who decides to revoke
the deal. a counteroffer do?
D. Only after sending a certified letter A. She must make sure that buyer is
to the first buyer and not receiving an notified before the counteroffer is
answer within a specified period. accepted.
B. She may not do so.
27. An agent received an offer to purchase and C. She must notify the buyer of
contacted the seller but was not able to see her accepting another offer, which
until 10 o’clock at night. Before leaving his automatically nullifies her counteroffer.
office, he was contacted by another cooperating
191
D. She must wait at least 3 days from B. Breach of contract

the date of her counteroffer according to C. Menace
law. D. Rejection
31. As a buyer’s agent, the best time to qualify 36. In a contract that involves a buyer and a
a buyer is: seller, if the seller fails to perform, the buyer may
A. After an offer has been made and do all of the following except:
the price is determined. A. Sue for damages.
B. At no time, since the buyer should B. Get back the deposit money.
know how much she can afford. C. Sue for specific performance.
C. If the buyer requests that the agent D. Leave the purchase price with a
analyze her financial position. court clerk and occupy the property
D. Before selecting houses to show so anyway
we can determine what a buyer can
afford. 37. If one of the parties to a contract of sale
(purchase agreement) signs the contract based
32. Tenant requested a low monthly rental rate on false statements about the property, the
for one-year and agreed to purchase the contract is voidable on which of the following
property at the end of the lease, this grounds?
arrangement is known as: A. Contractual ability of the parties
A. Lease with option to buy B. Duress
B. Lease with right of first refusal C. Misrepresentation of facts
C. Lease with obligation to buy D. Lack of consideration
D. Tenancy from period to period
38. A novation is best defined as:
33. An offer to purchase is accepted and later it A. The assignment of one party to
is determined that the closing cannot take place another of a contract wherein both the
on the date stated in the contract of sale original parties remain liable.
(purchase agreement). If the buyer and seller B. The substitution of one party for
agree to delay the closing 10 days, the broker another in a contract wherein the
should: original contract is extinguished, and the
A. Draw an amendment and have the undertaking of the new party is a new
buyer and seller sign it. obligation.
B. Rescind the transaction and draft a C. The same as a revocation.
new offer. D. A means of acquiring title by adverse
C. Change the closing date of the possession.
contract and have the seller initial it.
D. Do nothing because the parties 39. Upon the seller's default, what should
agreed to the change. happen to the earnest money deposit?
A. It belongs to the broker.
34. Under an option for a period of 120 days to B. It is returned to the buyer
purchase a property for $40,000 with payment of C. It is used to reimburse the broker for
$2,000 option fee, all the following statements out of pocket expenses, the rest is given
are true except: back to the buyer.
A. The optionee is the buyer. D. It is automatically applied towards
B. The optionor is the seller. future purchase of other property by the
C. The optionor may not force the buyer.
optionee to perform under the option.
D. In order for the optionee to purchase
the property, she must be willing to 40. Which of the following phrases is out of
match any offer that comes on the place?
property from a third party. A. Valuable consideration
B. Offer and acceptance
35. When a party to a contract does not satisfy C. Breach.
the terms of the contract, this is called: D. Mutual assent
A. Novation
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41. Buyer made an offer at less than the asking D. To bind the contract, otherwise it will not
price. Seller then made a counteroffer. Buyer be binding even if the seller accepts the
would not accept the counteroffer. If seller then offer
agreed to accept the first offer, which of the
following statements about the transaction is 43. Property owner signs an option with land
true? developer agreeing to sell his property for $3
A. The buyer must complete the deal. million to this developer. The option is valid for 3
B. The broker can force the buyer to years. This agreement is
perform.
C. The buyer was released from the offer A. A bilateral contract between the parties
because the seller made a counteroffer. where both buyer and seller have agreed
D. The broker is liable if the contract is to perform
unenforceable. B. A unilateral contract where the buyer only
has made a commitment
C. A unilateral contract because only the
42. What is the most important reason for seller is obligated
placing an earnest money deposit? D. A purchase agreement between the
parties
A. Valuable consideration
B. Liquidated damages
C. To show the seller that the buyer is
serious about the purchase
193
MULTIPLE CHOICE – LEASING AND PROPERTY MANAGEMENT
MULTIPLE CHOICE – LEASING AND

PROPERTY MANAGEMENT 7. A lease that specifies lower rent payments in
the early stages and later the rent is increased is
known as:
1. A lease that requires a tenant to pay all A. A partially increased lease
operating expenses such as property taxes, B. Graduated lease
insurance and maintenance, is: C. Percentage lease
A. A percentage lease. D. A low rent lease
B. A net lease.
C. A graduated lease. 8. A lease provides for increases based on future
expenses of property, this is explained in the :
D. A gross lease.
A. First right of refusal clause
2. A tenant who is interested in purchasing the B. Net lease clause
house she is leasing and wants a chance to match C. Escalation clause
a bid that may come in from a third party should D. Expense clause
obtain:
A. A lease option. 9. A nine-month lease creates:
B. Right of first refusal. A. Tenancy from period to period.
C. A lease assignment. B. Tenancy at sufferance.
D. A third-party contract. C. Tenancy for years.
D. Tenancy in common.
3. The following statement is true concerning 10. Sharon purchases a 10-unit apartment
subleasing: building and discovers that six of the tenants have
A. The lessor collects rent directly from low rent leases while the others are paying low rent
the sublessee. on a month-to-month basis. What can Sharon do?
B. The sublessor is leasing from the A. Inform the tenants with leases that
sublessee. they have to re-negotiate a new lease with
C. The sublessee is the owner. the new owner.
D. The sub-lessor is liable for damages B. Immediately raise rents on those who
caused by the sub-lessee. have month-to-month leases.
C. Legally, she could evict everyone and
4. When the tenant pays a fixed amount of rent replace the units with new tenants.
and the landlord pays expenses on the property, D. She could raise rents for tenants that
this is a: are on month-to-month basis with proper
A. Gross lease written notice; as for those who have
B. Net lease leases, she must wait until the leases
C. Escalation lease expire.
D. Expense paid lease
11. Which of the following would probably be
under a percentage lease?
5. Which is true about assigning a lease?
A. A doctor’s clinic.
A. According to the law, once a lease is
assigned, the assignor must be released B. A single family home.
from responsibility if the assignee did not C. An apartment unit.
pay. D. A retail establishment.
B. The assignee is automatically
released from liability. 12. June leases a warehouse and pays $3,000
C. The landlord/lessor may or may not per month and pays all property taxes,
release the assignor/lessee of liability. maintenance and insurance on the building. June
is probably under:
D. It is the same as a sublease.
A. A gross lease.
6. The tenant’s interest in leased premises is B. A warehouse lease.
known as: C. An expense paid lease.
A. A life lease. D. A net lease.
B. A reversionary estate.
C. Tenant’s rights. 13. An escalation clause in a lease will probably
provide for:
D. A leasehold estate.
A. The right to terminate a lease.
194
MULTIPLE CHOICE – LEASING AND PROPERTY MANAGEMENT
B. The right to assign the lease. lease expire, she will be given the opportunity to
C. The right to assign or sublease. match any offer made on her space by a third
D. Adjustments of rental payments in the party. This is known as:
future. A. A lease extension.
B. A longer lease.
14. All of the following have leasehold estates C. A lease option.
except: D. First right of refusal.
A. Tenant at will
B. Tenant for years 19. Which of the following will NOT terminate
C. Tenant from period to period a lease?
D. Tenant by the entireties A. Destruction of property.
B. Government condemnation.
15. When an assignment of lease clause is C. The death of the landlord who has a
placed in a lease, this means that: life estate.
A. The lessee may not assign the lease D. The sale of the property.
under any circumstances.
B. The lessee may assign the lease to
anyone she chooses without notice to the 20. Which of the following is true about deed
landlord. restrictions?
C. The lessee may not sublease without A. The local government to limit the
approval of the landlord. use of property places them.
D. The lessee may not assign the lease B. They are unenforceable if the
without approval of the landlord. grantor is dead.
C. They must be honored unless the
16. When Susan signed a lease on her grantor files a “quieting title suit” to
barbershop, her attorney recommended a fixtures avoid them.
clause that will serve to: D. They “run with the land”.
A. Provide her with automatic renewals
upon expiration of lease.
B. Allow her to match an offer by a third 21. A deed restriction is placed in the deed by:
party to purchase the property. A. The broker
C. Allow her to remove any permanently B. The grantee
attached personal items upon expiration of C. The grantor
lease D. The lender
D. Requires landlord to install all fixtures
that she needs for her operation. 22. Tenant wishes to lease residential property
but does not want any surprises as far as
17. When John’s lease expired, he was not sure monthly expenses, the tenant should request
whether he wanted to renew the lease or not, to sign a
because his boss told him that he may be
transferred. So he continued to send rent A. gross lease
payments to his landlady, who continued to accept B. net lease
them. John’s tenancy is known as: C. percentage lease
A. Tenancy from period to period. D. graduated lease
B. Tenancy at sufferance.
C. Tenancy in common.
D. Tenancy for years. 23. Which of the following leases would a
motivated landlord offer to attract tenants
18. When Helen decided to lease space in a strip and fill vacancies?
center to open up a Karate school she wanted to A. Net lease
have the right to renew her lease upon expiration B. Graduate / step up lease
but the landlord refused to grant her a lease option C. Percentage lease
but gave her a written promise that should her D. Index lease
195
MULTIPLE CHOICE – TRANSFER OF TITLE
MULTIPLE CHOICE, TRANSFER OF TITLE 7. When closing a transaction, property taxes

that were due but not paid are:
1. In order to deliver title, the following must A. A debit to the buyer and a credit to
happen: the seller.
A. Grantor signs deed, grantee signs B. A debit to the seller.
deed C. A credit to the buyer.
B. Grantor and grantee sign, but deed D. Normally not prorated
must be delivered and accepted by
grantee 8. On the closing statement, an amount of
C. Grantor signs and delivers deed to property tax paid in advance by the owner for a
the grantee period extending after the day of the closing is:
D. Grantor signs, delivers deed, and A. A debit to the seller.
deed must be recorded. B. A credit to the buyer.
C. A debit to the seller but a credit to
2. A general warranty deed must contain: the buyer.
A. The covenant against D. A debit to the buyer but a credit to
encumbrances the seller
B. A willing, able and ready seller
C. Monetary consideration 9. To inspect for clouds on the title, you must:
D. All covenants of title A. Order a survey.
B. Order an environmental audit.
3. A type of deed that involves no warranties C. Order title search.
and conveys whatever interest the grantor may D. Pay a visit to the Register of Deeds
have in property is the: office.
A. Special warranty deed
B. Bargain and sale deed 10. Title insurance will protect against all but
C. Covenant deed which of the following?
D. Quit claim deed A. A missing heir.
B. Forged signature.
4. Which of the following is not necessary to C. Unrecorded lien.
validate a deed? D. Fire in the house.
A. A competent grantor
B. The granting clause 11. To remove a cloud from the title through
C. Valuable consideration court proceedings, an individual must:
D. Recording A. Obtain an abstract of title.
B. Obtain actual notice.
5. A warranty deed contains covenants as to C. File a quieting title suit.
the quality of: D. Obtain title insurance.
A. Construction
B. Environmental problems 12. A lender’s title policy is effective until:
C. Title A. A claim is paid.
D. The type of use B. Property is sold.
C. A cloud appears on the title.
6. John deeded property to Charles, who failed D. The loan is paid off.
to record. Later John deeded property to Susan,
who accepted it in good faith and recorded it. 13. All of the following regarding title search is
Who would have superior rights to this property? true except:
A. Charles, because he bought it first. A. An abstract is the result of recorded
B. John, because by selling it twice conveyances and encumbrances.
neither sale was valid. B. An abstract will reveal the last
C. Susan, because she recorded first. owner of record.
D. Charles and Susan will split the C. An abstract is better than a title
property policy because it insures against
monetary losses resulting from a
clouded title.
196
MULTIPLE CHOICE – TRANSFER OF TITLE
D. Both abstracts and title insurance are

the result of title search. 20. Which of the following is most likely a
disadvantage to real estate ownership?
14. The time allowed for recording an instrument is: A. Leverage.
A. 24 hours B. Cash flow.
B. 72 hours C. Liquidity.
C. No more than 90 days D. Appreciation
D. No time limit
21. A Bill of Sale is used:
15. Constructive notice is established by: A. Strictly when furniture is sold with a
A. Showing the document to an individual. house.
B. Recording a document at the Register of B. When real estate that houses a
Deeds office. business is sold.
C. Filing a document with the court clerk. C. To transfer title to chattel
D. Notifying an individual by certified mail D. When subsurface rights like oil and
after recording. minerals are sold.
16. In the real estate business, all but which one of 22. Which type of deed provides the least liability to
the following documents are usually recorded? the Grantor?
A. Deed A. General warranty deed
B. Land contract B. Full warranty deed
C. Mortgage C. Quit claim deed
D. Promissory note. D. Special warranty deed
17. Helen has two mortgages on her property. One 23. All of the following are considered differences
was placed in 1990 when she bought her home and between an owner’s title policy and the lender’s policy
the other in 1997 when she took a home equity loan except:
from a different lender. It appears that the first lender
failed to record the mortgage. Which of the following
A. One of them covers the purchase price
is true?
while the other covers the loan amount.
A. The first lender has a senior position B. One is paid for by the seller while the
since they had given the money first and the other is paid for by the buyer/borrower.
mortgage they received was dated earlier C. One protects the buyer while the other
than the second mortgage. protects the lender.
B. Upon foreclosure, the 1990 mortgage D. One compensates the buyer for losses
will be paid first, and if any funds are left, due to a defective title while the other
then it will go to the second mortgage dated guarantees to the lender that title will not be
1997. defective.
C. If the 1997 home equity loan was
recorded, then it became a senior lien. 24. All of the following judicial deeds except:
D. Both loans have equal standing in the A. Sherriff’s deed
eye of the law. B. Administrator’s deed
C. Guardian’s deed
18. All of the following must take place at the closing D. Special warranty deed
except:
A. Deed is signed by the seller and buyer. 25. The main purpose of the settlement statement is
B. Closing statement is provided and to:
signed by the broker.
A. Show seller concessions
C. Closing is supervised by the broker. B. State the amount of the broker's commission
D. Documents are sent to be recorded at C. Allow credit for buyer’s deposit
the Register of Deeds office. D. Describe debits and credits for buyer and
seller
19. The clause in the title policy that allows an
insurance company who paid a claim to seek 26. Helen signs a buyer agency contract with her
reimbursement from the party who caused the loss is nephew Tom. The contractual relationship has been
called: established with:
A. Subordination clause. A. Tom
B. The cloud clause. B. Tom’s broker
C. Quieting title clause. C. Potential sellers
D. Subrogation clause. D. Brokers in the MLS
197
MULTIPLE CHOICE – PRACTICE OF REAL ESTATE
MULTIPLE CHOICE - PRACTICE OF 5. A family with children was legally turned

REAL ESTATE down and was not allowed to rent in an
apartment building. Which of the following
1. The following logo is required by law to be would be an acceptable reason for the rejection?
included in the following: A. The complex was a senior citizen’s
A. Options to purchase but not to lease complex for ages 62 or older.
real estate. B. The complex was an adult
B. Certain real estate display ads. community for those eighteen years old
C. All closing statements and or older.
residential rental C. The apartment building had a lot of
agreements. students who would need their quiet to
D. Commercial leases only. study.
D. The family had little babies who
would cry at night and bother everyone.
6. A lending institution has a policy of not

making loans in a certain part of town because it
is populated mostly by minorities. Although they
2. A minority owner requests that the licensee would not state that reason on their rejection
deletes the anti-discrimination clause from the letter, they make sure they find something wrong
listing because he is offended by it and would with the applicant to turn him down. This
not even dream of discriminating against other practice is known as:
minority individuals. The licensee must: A. Neighborhood steering
A. Delete the clause. B. Unethical bank lending
B. Get permission from the broker C. Redlining
before the clause is deleted. D. Minority credit screening.
C. Ask the seller to wait until he sees
the buyers in case they are of a different 7. Which of the following is permissible under
race group and the seller may still want civil rights acts?
to discriminate anyway. A. Referring a buyer with AIDS to
D. Tell the seller that it is a state another company salesperson who has
requirement and a listing will not be recently tested HIV positive because
valid without it. they will probably be more comfortable
with each other.
B. Refusing to rent to a mentally
3. To suggest to property owners that their disabled individual despite the fact that
property may be losing value due to entry of she is accompanied by her mother who
minorities into the neighborhood is: is competent and will sign the lease.
A. Legal as long as property is not C. Refusing to rent to a blind person
listed below fair market value. with a leader dog because the complex
B. Known as racial steering. allows no pets.
C. Called blockbusting. D. Refusing to show a minority
D. Legal if done with government individual a house priced at $1.5 million
approval. dollars because the licensee knows that
the buyer cannot afford to purchase
4. An owner contacted an agent asking to list more than a $350,000 home.
property but indicated that minorities would not
be allowed to buy. The agent must: 8. After vacating property, the manager noticed
A. Get state approval before listing that his disabled tenant has made a few
property. changes on the property. Which of the changes
B. Follow client’s instructions. can the manager charge the tenant to restore?
C. Refuse the listing. A. Tenant installed an elevator in the
D. Accept the listing but show it to house.
minorities anyway. B. The front door was widened, and a
ramp was installed.
198
C. Additional lighting was added to A. This act is prohibited because it is

help tenant who has poor eyesight. discrimination against familial status
D. Deaf tenant has connected doorbell B. This act is permitted under
to lights inside the house, so they blink exemptions - certain rules apply
when someone rings the doorbell. C. The owner can limit the number of
children but cannot refuse to rent
9. A two-story apartment building is recently altogether
placed in service. Which level must have D. This act is prohibited because it is
accessibility to disabled individuals? discrimination with regards to
A. Both levels. marital status
B. Upstairs only if elevators are
installed.
C. The ground level only if no elevators 13. A condominium Association bylaws prohibit
are installed. pets that weigh more than 25 pounds. Sharon's
D. Neither level needs to be accessible son has an animal that has been trained to
unless it was used for group homes. provide assistance, but it weighs more than 25
pounds. What can the association’s manager
10. An interested buyer indicated that she do?
would only buy the house she was just shown if
the neighborhood is “all white”. The agent A. As long as the bylaws clearly state a
responded by saying, “This neighborhood is, in
weight limit, the manager can prohibit
fact, racially integrated”. Which of the following
the family from having the animal.
is true?
B. The manager can prohibit the animal
A. As long as agent was telling the but only if the family can replace that
truth, there is no problem. animal with another that weighs less
B. Agent should also recommend to
than 25 pounds
buyer to drive around neighborhood and
C. Nothing
inspect what type of minorities live there
D. Allow the animal but can charge
before buying.
additional fees and deposit
C. Agent is guilty of “racial steering”.
The proper answer would have been, “I
am prohibited by law from discussing 14. Owner knows of mold growth inside the
this matter”. living room walls. He paints the walls and
D. Agent should have screened a few replaces some of the wallpaper. The home is
neighborhoods for the racial immediately sold to an unsuspecting buyer
composition of the occupants before without mentioning the mold. The buyer
bringing the buyer to this neighborhood discovers the mold months later. This act by the
and wasting her time. seller is known as:
11. Which of the following acts prohibited A. Silent fraud

discrimination because of race without B. Innocent misrepresentation
exceptions? C. Fraud
A. Civil Rights Act of 1866 D. Buyer Beware
B. Michigan Civil Rights Act (Elliot-
Larson) 15. Under what circumstances can a broker in
C. Fair Housing Amendment Act of Michigan pay a commission to someone who is
1988 not licensed in the state of Michigan?
D. Civil Rights Act of 1968
A. Under no circumstances
12. An owner of a duplex would not allow a B. Only to a licensed builder
family with children to live in the unit upstairs C. If the person is a licensed broker
because children will be jumping up and down from out of state and sends a referral
and he cannot go to sleep when he hears the D. Only if the person lives in another
noise. According to the fair housing act country
199
16. A Russian property owner approaches a 19. Which of the following violates the fair
Russian agent to sell a restaurant that sells housing act?
mostly Russian food. The agent lists the
property and advertises strictly in Russian media A. Showing a minority buyer, a home in a
to attract Russian businesspeople who may be predominantly minority neighborhood
B. Refusing to show property to a minority
interested in operating the restaurant. This
buyer who cannot afford it
action by the agent is: C. Refusing to deal with a minority buyer
who has poor credit, no income, and
A. Legal and will probably result in cannot qualify to purchase real estate
finding the best possible purchaser D. Showing a Hispanic buyer homes, only
B. Illegal because an agent cannot in predominantly occupied Hispanic
advertise in minority publications neighborhoods
C. Illegal because it discriminates
against potential buyers who are not 20. A minor inherits property from his deceased
Russian parents. If the property must be sold to pay for
the minor’s living expenses, which of the
D. Legal as long as he is following the
following is true?
owner’s instructions
A. If the minor was competent enough to
17. Upon investigating a licensee by HUD, which
receive title to the property, she is
of the following would be the least determining competent to deed the property to a
factor in determining a violation? buyer
B. The property cannot be sold unless the
A. Licensee did not use the equal minor reaches the age of majority
housing opportunity logo in his C. A court – authorized legal guardian of
advertising the minor can deed the property to a
B. Licensee directed advertising of a buyer
certain property to minority publications D. Only a probate judge can sell the
property because a minor cannot
C. Licensee agreed to list property from
receive title, title remains in the name of
a discriminating owner, but licensee the court until the minor reaches the age
never discriminated and showed the of majority
property to everyone
D. Licensee did not intend to 21. A real estate brokerage advertises to attract
discriminate but his actions resulted in veterans. Do these ads violate the fair housing
discrimination laws?
18. After getting tired of trying to fix a leak in A. Yes, it discriminates against non-
the basement, the seller decided to apply veterans.
paneling to cover the cracks and sell the house. B. No, brokers can isolate any group
The buyer did not suspect any leaks in the and advertise to them
basement, since she was purchasing the home C. No, veterans from various protected
during the wintertime when the ground is frozen groups can qualify as long as they show
and no leaks usually happen. The seller’s action good credit and income
is best described as: D. Yes, because the ads are directed to
a certain protected group instead of
A. Silent fraud. equal treatment
B. Perfectly legal under the theory of
“caveat emptor”.
C. Misrepresentation
D. Fraud
200
22. A lender advertises that it specializes in

reverse mortgage loans. Which legal issues
apply?
A. The ad violates the fair housing act

B. The ad discriminates against young
borrowers
C. There is no legal issue; any person
from any protected class can qualify
D. . It illegally discriminates against
individuals who do not own a principal
residence
23. A private club has a wide variety of members

who come from different nationalities, race,
religion, etc. which of the following is true if the
club builds senior citizen housing for its own
members?
A. Must allow any senior to occupy a

unit, regardless of that individual’s
race, color, religion, etc.
B. The club can limit occupancy of the
units to its own members as long as
the housing project is set up as a
nonprofit operation
C. The club must allow both members
and nonmembers to buy or lease
into the project, but the only
exception can be the race of the
applicant
D. limiting occupancy, strictly to its own
members violates the fair housing
act
24. John, a private owner who’s looking to

share his 2-bedroom home with a
roommate, which of the following is
permitted under the Fair Housing
exemptions?
A- He may advertise with preference

to a male tenant
B- He may advertise with preference
to an African American
C- He may employ a broker to screen
applicants
D- He may select a tenant with
preference to the size of the family
201
MULTIPLE CHOICE - REAL ESTATE CALCULATIONS
MULTIPLE CHOICE - REAL ESTATE 6. If salesperson’s commission was $594

CALCULATIONS based on a 40% split, what was the total
commission collected by the real estate
1- Quarterly interest due on a $185,000 company?
loan is $2,775. What is the annual
interest rate? A. $1,485
B. $2,970
A. 6% C. $990
D. $1,980
B. 1.5%
C. 3%
7. Loan amount $60,000 with 4% annual
D. 2%
interest. Monthly payment is $300/month,
what is the balance upon making the first
2- Property tax of $4660/yr. paid in payment?
advance based on exact days method
(calendar year). The seller stayed 6 months A. $59,700
and sold the property. What is the proration B. $59,800
at closing? C. $59,750
D. $59,900
A. $2,330 credit buyer and debit
seller 8. Sue and Bill gross $90,000/yr. The
B. $2,330 debit buyer and credit lender allows 43% of their income
seller towards PITI. If property tax is $6000/yr.
C. $4,600 debit the buyer and credit and insurance $1,200/yr. How much of a
seller mortgage payment (P&I) can they
D. $4,600 debit seller and credit afford?
buyer A. $2,625
B. $3,225
3- Property tax $2,646.25 payable in C. $2,725
advance (calendar year) but delinquent. D. $3,125
Using exact days method what proration is
due if closing is scheduled April 28? 9. Two brokers cooperate to sell a
$250,000 house and equally share a 7%
A. $848.25 debit seller commission. The listing salesperson
B. $848.25 debit buyer splits commissions with her broker
C. $1,798 debit seller based on 65 – 35 in favor of the
D. $1,798 debit buyer salesperson. How much commission
does the salesperson receive?
4- Property sold for $72,650. Commission
A. $11,375
6%. Calculate the transfer tax due to the
B. $5,687.50
county and the state
C. $8,750
D. $3,062.50
A. $ 312.39
B. $ 624.79
10. What is the total depreciation deduction
C. $ 627.80
on residential income property
D. $ 619.20
purchased for $165,000 including land
valued at 20% of the total price if the law
5. If price is $128,000 and loan-to-value
requires residential income property to
ratio is 75% with 3 points, how much in
be depreciated over 27.5 years and the
points is due at closing?
owner kept the property for 11 years?
A. $2,880
B. $3,840
A. $99,000
C. $3,280
B. $66,000
D. $1,840
C. $52,800
D. $79,200
202
ANSWERS - REAL ESTATE CALCULATIONS
ANSWERS - MULTIPLE CHOICE - REAL 7- (D) $60,000 x 4% = $2,400 is the annual

ESTATE CALCULATIONS interest due on the loan
1- (A) Hint: the interest rate is annual; therefore, $2,400 ÷ 12 months = $200 interest due at the
you cannot divide quarterly interest paid by end of the first month
annual interest rate.
$300 - $200 = $100 is the principal portion of the
$2,775 x 4 = $11,100 annual interest paid monthly payment in the first month
$11,100 ÷ $185,000 = .06 = 6%
$60,000 - $100 = $59,900 is the balance on the
loan upon making the first monthly payment
2- (B) If the seller only stayed six months, there
is no need to complicate the issue and count the
8. (A) $90,000 x 43% = $38,700 is what the
number of days in each month, one half of
lender is willing to allocate towards PITI
$4660 is equal to $2330 that the buyer must
(principal, interest, taxes, insurance])
reimburse the seller, i.e. debit the buyer and
credit that amount to the seller.
$38,700 - $6000 - $1200 = $31,500 per year will
be allocated towards P&I (principal and interest)
3- (A) The seller has failed to pay his taxes;
therefore, he owes property taxes from January
$31,500 ÷ 12 = $2,625 towards principal and
1 to April 27 (buyer is responsible for April 28
interest each month
the closing date). The daily tax is calculated as
$2,646.25 ÷ 365 days = $7.25 so the number of 9. (B) $250,000 x 7% = $17,500 is the total
days add up to 31+28+31+27=117 days x commission paid which will be split between the
$7.25= $848.25 which will be debited to the two brokers
seller.
$17,500 ÷2 = $8,750each broker’s share of the
4- (C) Hint: the commission amount has nothing commission.
to do with the transfer tax because the tax is
paid on the total selling price regardless of The broker in each company splits 65-35 in
commission. favor of the salesperson which means that the
salesperson receives 65% of the commission
The price must also be rounded up to the next collected by the broker.
$500.
$8,750 x 65% = $5687.50 is what the
Transfer tax is $4.30 for each $500 of the price. salesperson receives in each company.
$72,650 is rounded to $73,000 10. (C) Hint: According to tax law, land does not
depreciate, only the building value is written off
$73,000 ÷ $500 = 146 x $4.30 = $627.80 for purpose of depreciation.
5- (A) Hint: Points are paid on the loan amount, $165,000 – 20% = $132,000 is the value of the
not on the purchase price. building for purpose of depreciation
$128,000 x 75% = $96,000 is the loan amount $132,000 ÷ 27.5 years = $4800 is the amount of
depreciation write-off allowed each year
$96,000 x 3% = $2,880 points due
$4800 x 11 years = $52,800 is the total amount
6- (A) $594 ÷ 40% = $1,485 of depreciation deduction that was taken over
the period of 11 years.
203
MULTIPLE CHOICE –MICHIGAN RULES AND REGULATIONS
1. Which of the following is not a purpose of D. Recorded master deed with

the Land Division Act? attached by-laws and subdivision
A. So that the size of the divided plans
parcels of land will not be too large
to be served with enough streets, 6. Interval ownership of property is reflected in
roads, and adequate drainage and which of the following?
sewers. A. Timeshare
B. So that the price of the sold lots B. Lifetime stock ownership in a
would not inflate beyond the CPI. corporation
C. So that when the land is bought and C. Reoccurring annual lease
sold, people could accurately and D. Life estate
upon the proper surveys, tell the
boundaries of their land and be able 7. A licensee is selling vacant home site in an
to use accurate legal description. area that does not have municipal sewers.
D. So that the land may be properly Which of the following is true?
divided and laid out. A. Vacant lots may not be sold
unless they are served with
2. Under the Land Division Act, property up to municipal sewer and water
the size of 10 Acres can be divided into 4 B. Money in the amount of 10% of
parcels. How many splits are allowed for the purchase price must be held
each additional 10 acres? in escrow until the property is
A. 3 served with municipal sewer
B. 2 and water
C. 1 C. The purchaser is responsible for
D. 4 connecting the property to
municipal sewers before
3. If the monthly rent is $600/m, what is the beginning construction
most amount of money a landlord can D. The sale should be made
charge a tenant to move in? contingent on a percolation test
A. $1,500 that would be acceptable to the
B. $900 health Department
C. $600
D. $2,100 8. Which of the following is true with regards to
the Michigan condominium act
4. A landlord charging a deposit must inform
the tenant of his obligation to notify the A. For new and existing
landlord of a forwarding address within condominiums, the purchase
__________ days after vacating. agreement is not binding until
nine business days after
A. 4 developer delivers condominium
B. 30 documents to the purchaser
C. 7 B. Condominium documents must
D. 45 be delivered to the purchaser
including the recorded master
5. In regard to construction of new deed as well as information
condominiums, a purchase agreement is not about the real estate company
binding until nine (9) business days after that will be holding the deposit
developer delivers condominium documents C. Recorded master deed, bylaws,
to purchaser. Which of the following is not purchase and escrow
required? agreement, condominium
A. Evidence of minimum 2-year buyer’s handbook and
warranty on construction disclosure statement are all
B. Condominium Buyers Handbook documents that must be
C. Copy of purchase and escrow delivered by the developer to
agreements the purchaser
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D. If a buyer signs a purchase B. The amount of control the

agreement on new construction broker has over the agent as far
and is not given necessary as working hours
documents, buyer can withdraw C. Whether the salesperson is
from the purchase agreement required to wear a certain color
within three business days jacket or place a car sign
D. Whether the salesperson must
9. All of the following are true with regards to attend weekly meetings with the
MSHDA except: broker
A. Provides financing for low- and
moderate-income households 13. Under the Michigan right to Farm act all of
B. Borrowers must property as the following are true except:
principal residence A. A farm operation shall not be found
C. Money is available for to be a public nuisance if the farm
purchasing or refinancing operates under general accepted
D. Monies available for existing practices
homes or new construction B. A farm operation shall not be found
to be a public nuisance if it existed
10. Which of the following statements are before a change in land-use within 1
acceptable under the antitrust act mile of the boundaries of the
A. Everyone charges the same farmland
commission rate C. A seller of property located in the
B. The MLS only accepts a minimum vicinity of a farm operation must
ninety-day listing disclose that fact on the seller's
C. This is our market area. Tell him to disclosure statement
stay in his own territory D. If a local ordinance passes that
D. Our company pays a 25% referral would make the farming operation
fee if you send us business unacceptable in the area, the local
government can apply the new
11. A licensee happens to be in a meeting with ordinance to the existing farmers
other agents from other companies who shut them down.
appear to be discussing fixing their
commissions. In order for the licensee to be 14. With regards to condominium conversions,
in compliance with antitrust laws what must which of the following is inapplicable?
she do? A. Lease extensions must be
A. Express disagreement with what is offered to occupants over age of
going on and immediately leave the 65 years
meeting B. Lease extensions must be
B. Discuss issues with other agents offered to occupants with
and inform the broker of what specific disability recognized by
happens and let the broker decide state income tax law
C. Discuss the issues with other agent C. Law requires any person living
but let them know that what is going on premises to purchase the
on may be in violation of the unit
antitrust laws D. Law covers conversion of any
D. Remain quiet at the meeting building (residential use only)
from rental to condominium
ownership if it has six (6) or
12. The best indication as to whether a more rental units.
salesperson is working as an independent
contractor or not is? 15. What is the total amount of transfer tax due
A. The type of real estate being to the state and county if the purchase price
sold such as residential or was $45,750?
commercial A. $393.45
B. $387.00
C. $395.60
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D. $337.50 C. Failing to purchase a title insurance

for the buyer
Feedback: 3.75+.55= 4.30 per 500 of the D. Failing to promptly present an offer
price. 45,750 is rounded up to to purchase because another offer
46,000 ÷ 500 X 4.30 = 395.60 may be coming in a day or two
16. Which of the following is NOT true about the 19. An offer to purchase is signed by all parties
broker's trust fund? and a second offer comes on that property.
A. Salespeople may never be The licensee’s duties in presenting the
allowed to sign checks on the second offer must comply with the following:
trust fund. A. If an offer is already signed by all
B. Cosignatories may be used; an parties, the licensee does not have
individual who is not a broker or a duty to present more offers unless
associate broker may be instructed by the seller
authorized to sign checks drawn B. Future offers must be presented and
against the trust account only if accepted as backup offers
his/her signature is C. The seller may legally withdraw from
accompanied by the signature the accepted offer if the second
of a broker or an associate offer has better price and terms
broker. D. The licensee is required to present
C. The trust account must be held all offers even if one offer has
with a financial institution in a already been accepted
non-interest-bearing demand
account. 20. With regards to a service provision
D. A broker may maintain more agreement which of the following is true?
than one trust account and may A. A listing agreement shall have a
have up to two thousand definite expiration date or an anti-
($2,000) dollars of his own discrimination clause
money, in each trust account. B. A net listing is illegal unless the
licensee is receiving a reasonable
17. Which of the following is not true about the amount of money as commission
broker's place of business? C. The agreement shall not require the
A. A broker may not change an client to send a written cancellation
address of a place of business notice upon expiration of service
without first notifying the term
Department. D. In the event that the agreement
B. A branch office that is more than does not have a definite expiration
twenty-five (25) miles from the date, it may be automatically
city limit where the broker's renewed
main office is maintained must
be under the direct supervision 21. With regards to closings, a licensee shall
of an associate broker. have which of the following duties?
C. A broker must maintain an A. Either the salesperson or the broker
actual physical location where must attend the closing in person
business is conducted, and B. A closing statement must be
records are kept. prepared by the broker and signed
D. It can be anywhere in the US. by both buyer and seller
C. Any last-minute changes at the time
18. Which of the following violates the rules with of closing must be reflected in a
regards to licensee's responsibility in written amendment signed by all
handling offers to purchase? parties
A. Failing to provide a copy of the D. Supervision of the closing shall be
rejected offer or counteroffer to all done by the broker or it may be
parties delegated to an officer of the title
B. Failing to promptly present a verbal company
offer the seller
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offer to purchase is accepted by

22. With regards to deposits, which of the all parties
following is applicable? 25. With regards to trust accounts all of the
A. The broker shall maintain a trust following are true except
account to deposit all monies A. They are also known as escrow
received from buyers and accounts and it must be maintained
tenants alike at a financial institution in a non-
B. A salesperson receiving money interest-bearing demand account
must turn it over to the B. A broker may maintain more than
employing broker as soon as one trust account and may have up
possible unless another offer is to $2,000 of his own money in each
expected to arrive within three account
business days C. Checks drawn must be signed by a
C. Salesperson receiving a deposit broker or associate broker
check payable to himself must D. Salespeople are not allowed to sign
sign the back of the check and checks on the trust fund
immediately hand it to the
employing broker 26. Under what circumstances can a broker not
D. A broker must deposit the be responsible for an earnest money deposit
earnest money in the trust fund associated with the sale of the property
no more than 2 banking days A. If he releases his liability to the
after receiving notice that an money and the purchase agreement
offer to purchase is accepted by B. If he deposits the money in the
all parties company general fund instead of the
trust fund
23. An offer to purchase is signed by the buyer C. If he turns the deposit over to the
on Monday and accepted on Tuesday, the seller and let the seller control it
broker must deposit the earnest money D. If the parties agree that the deposit
deposit into his trust fund no later than will be held by a third party such as
A. Tuesday a title company and both sign an
B. Wednesday agreement to that effect
C. Thursday
D. Friday 27. With regards to place of operation which of
the following is applicable?
24. All of the following are true with regards to A. A broker may do business from an
handling deposits except actual place or instead may use a
A. All monies received from others website for people to reach him
in connection with the real B. A broker may not have a branch
estate activity must be office unless it's managed by an
deposited in the broker's trust associate broker
account. Rental income as well C. A broker may not have a branch
as security deposits from office more than 25 miles from the
tenants must be deposited in a city limit where the broker maintains
separate management account his main office
B. A salesperson receiving money D. Branch offices must be licensed by
must turn it over to her the Department and the broker may
employing broker immediately not change an address of a place of
C. A salesperson shall not accept a business without first notifying the
deposit check made out to the department
salesperson. All checks must be
written to the order of the broker 28. With regards to record-keeping all of the
D. A broker must deposit earnest following are true except
money in her trust account no A. The broker must maintain a system
more than three banking days that consolidates all monies coming
after receiving notice that an into the possession of the broker as
well as all monies paid out
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B. The broker must have a system that B. The department must first
segregates one transaction from the receive a complaint against the
other licensee before it starts an
C. A broker who receives deposits from investigation
the public will not need a C. Once a complaint is filed with
bookkeeping system if he can the department, the department
delegate that duty to his agents will seek an injunction to revoke
D. The broker's bookkeeping system the license until the results of
must show the amounts, dates, the investigation are determined
purpose, and the names of the D. The department may not seek
parties paying or receiving funds an order to summarily suspend
a license until a licensee, based
29. A licensee is subject to disciplinary action if on a hearing, is found to be
s/he commits all of the following violations responsible for a violation.
EXCEPT:
A. Charging the client more than 32. Which of the following penalties can be
the maximum legal commission assessed against an individual who is selling
B. Changing the business location real estate without a license?
(by the broker) without notifying A. Up to one year incarceration
the Department B. Suspension or revocation of
C. Failure to account for money license
coming into the licensee's C. A $10,000 fine per violation
possession, which belongs to D. Requiring him to have a CPA to
others balance his books
D. Acting for more than one party
in a transaction (dual agency) 33. Which of the following is true with regards to
without the knowledge and the hearings that are conducted by the
written consent of the parties department?
A. In the event that the initial
30. Which of the following is a violation of the investigation shows evidence of a
Trust Fund Requirements? possible violation, the licensee must
A. A broker keeping track of the attend a formal hearing
amount of money received into B. A licensee may settle a complaint at
the fund but NOT the amounts an informal hearing or may choose
paid. to have her case heard by an
B. A real estate broker depositing administrative law judge at a formal
funds into the trust account hearing
within (2) banking days after the C. Once an investigation reveals a
signing of a purchase possible violation, the Department of
agreement by all parties. Atty. Gen. will indict the licensee
C. Maintaining the broker's D. A licensee may choose to have both
personal funds in an account, a formal and informal conference
separate than the trust account. with the department and then
D. A real estate salesperson choose which hearing results in a
immediately turning over money more favorable outcome.
received, into the hands of the
broker. 34. Upon receiving a notice of investigation, the
licensee must
31. Which of the following is true with regards to A. Wait for a subpoena in order to start
investigations that are conducted by the cooperation with the Department
department? B. Make his books and records
A. The department may seek a available if an investigator
subpoena from the Department requested them
of Atty. Gen. to force an un- C. Choose a formal hearing
cooperating broker to produce D. Choose an informal hearing to settle
books and files the complaint
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C. Requiring a salesperson to pay

35. All of the following can result from an initial a civil fine of $10,000 for
investigation of the licensee except refusing to maintain accurate
A. Considering the complaint to be books and records of the
unfounded company trust fund
B. An order to summarily suspend the D. Ordering a salesperson to serve
license 12 months in jail for violating
C. An order to cease and desist from a administrative rules
violation
D. An order to revoke the license 39. Which of the following is true with regards to
license renewal?
36. Which of the following is considered to be a A. Due by October 31 of each year
violation? B. Based on a three-year renewal
A. Acting as a dual agent cycle from the effective
B. Working with an investor to buy issuance date of the individual
commercial property without license and must be
providing an agency disclosure form accompanied by 6hr continuing
C. A broker failing to return a education
salesperson's license within three C. Based on a three-year renewal
business days after being notified cycle including 6hr continuing
that the salesperson has changed education for each year the
employment license was active
D. A broker failing to deposit funds into D. Based on a three-year renewal
the trust account within two banking cycle by December 31 of each
days after the signing of a purchase year
agreement by all parties
40. Which of the following is true with regards to
37. With regards to the handling of money, license transfer?
which of the following is considered to be a A. The former broker has five days
violation? to return the license when
A. A broker places tenant’s security informed that a licensee
deposit in a management account requests a transfer
B. A broker depositing earnest money B. The pocket card must be signed
in a personal account but by the former broker as well as
maintaining accurate records of the the new broker to create a 45
funds belonging to the public day temporary license
C. Depositing funds received from the C. A salesperson may transfer but
public into the trust account within not an associate broker
two banking days after the signing D. A salesperson must first receive
of a purchase agreement by all written approval from the
parties Department before starting to
D. A real estate salesperson paying work for the new broker
money received from the public to
the broker instead of depositing the 41. Which of the following is a violation of
funds into the company trust fund advertising requirements?
38. Which of the following is considered to be a A. Broker Larry Adams is licensed

penalty that would be assessed against a as Green Valley Realty and
salesperson? advertises as Green Valley
A. Requiring the salesperson to be Realty without mentioning his
bonded for ten thousand dollars name
and for five years B. A broker is required to give the
B. Suspending the license of a definite impression in the ad
salesperson who cannot afford that the advertiser is a broker
to pay restitution and can be reached at an
actual place
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C. A broker must not advertise disclosing that she is in fact a

using a different name other licensee
than the name that the broker C. A licensee may not purchase listed
is licensed under property and receive a commission
D. A broker advertises his on it
principal residence as a private D. A licensee receiving a commission
party on property that she is purchasing
must disclose that information in
42. Which of the following is considered to be a writing any time before closing
violation with regards to advertising of
property by a salesperson? 45. With regards to purchasing property by
A. A salesperson may not privately licensee who will be receiving a commission
advertise property that she for other services, which of the following is
personally owns unless it is her true?
principal residence A. A licensee who is entitled to
B. A salesperson may not advertise to receive a real estate
lease or rent property as a private commission as a result of
individual unless she is the owner of property sale may not receive
the property additional fees for providing
C. Salesperson may not advertise additional services
owned rental property unless the B. A licensee who is entitled to
sale is done through a licensed receive a real estate
broker commission as a result of
D. A salesperson advertising listed property sale may collect
property must state either her additional fees for providing
broker's name or her own name other services after satisfying
based on client's instructions RESPA requirements and
getting written consent from all
43. All of the following are considered to be parties in the transaction
advertising requirements under the rules, C. A licensee may receive
except additional fees for providing
A. A salesperson must only advertise other services above and
under the supervision of the beyond the sale of property but
employing broker and in the name that is limited to receiving a fee
of the broker for selling a home warranty
B. A broker may not advertise to buy or D. A licensee may receive
sell real estate unless he gives the additional fees for providing
public a definite impression that the other services in addition to the
advertiser is a broker and not a real estate commission. RESPA
private party requirements as far as kickback
C. Selling property owned by a prohibition does not apply as
licensee requires written disclosure long as all parties in the
of that fact before an offer to transaction give written
purchase is signed permission
D. Advertising the licensed name must
be accompanied with both 46. All of the following requires a Real Estate
telephone number and street license by a person except:
address A. Helps a person to lease her
property at no charge
44. Which of the following is true with regards to B. Lists or offer or attempts to list
a licensee acquiring interest in property? C. Buy or offer to buy
A. A licensee may not purchase D. Sell or offer to sell
property that is listed with her firm
B. A licensee may not purchase 47. A person is considered to practice the real
property from the public without first estate business as a principal vocation if he
does all of the following except:
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A. Holds himself / herself out to the 51. What is the main difference between a
public as being principally broker and an associate broker?
engaged in the real estate A. A broker supervises the company
business. while an associate broker is hired
B. Sells a commercial building that for the purpose of recruiting and
he owns for a price in excess of training salespeople
Ten Million Dollars B. A broker is responsible for
C. Dedicates more than half of maintaining trust funds while an
his/her working time to the sale associate broker is hired as a
of real estate, or more than branch manager
fifteen hours a week, whichever C. An associate broker is strictly hired
is less, during any consecutive to supervise branch offices
six-month period D. An associate broker is employed by
D. Enters into more than five real a broker
estate sales in a twelve-month
period 52. If the broker's license of an entity is revoked,
48. All of the following are considered legal what happens to the licenses of those
practices for a salesperson except employed by the entity
A. Conducting a market analysis for a A. All licenses of associate brokers and
fee salespersons will be revoked as well
B. Negotiate the lease on a newly B. The license of the associate broker
constructed shopping center is revoked but the salespersons
C. Purchasing property for his own may transfer to another broker
account with the intent to re-sell C. The licenses of all the associate
D. Working as a consultant for a fee brokers and salespersons are
suspended
49. An unlicensed individual will be considered D. The revocation of the entity's license
to be practicing real estate as a principal has no effect on the associate
vocation if she brokers and salespersons
A. Enters into five real estate sales
within a 12-month period 53. With regards to the license and pocket card
B. Generates most of her income of requirements
rental property that she owns A. A licensee must have the pocket
C. Dedicates more than half of her card on his person at all times
working time to the sale of real B. The license must be presented to a
estate during a consecutive six- homeowner during all showings
month period C. License remains in the custody of
D. Buys a foreclosed house, fix it up, the broker while the pocket card
and resells it for a profit remains with the licensee
D. Either the pocket card or the
50. Which of the following may be exempt from business card can be shown to a
licensing requirements? homeowner who requests legal
A. A licensed builder who usually buys proof that an individual is actually
and sells between 10 to 15 bank- real estate licensee
owned properties each year
directing his crew to remodel them 54. With regards to a nonresident license
and then sell all of them A. The state of Michigan will license an
B. Attorney-at-law who negotiates applicant from a different state upon
sales between his clients and showing proof that he is licensed in
potential buyers his home state
C. And attorney-in-fact acting under B. A licensee who wishes to receive
power of attorney the Michigan license must meet all
D. A tenant receiving up to one month licensing requirements
rent for referring another tenant in C. A non-resident may be automatically
the same building licensed in Michigan only if his state
has reciprocity with Michigan
211
D. A "consent of service" must be C. The department may assess a

signed by non-residents otherwise penalty, yet the board can only
the applicant must obtain all evaluate educational courses
necessary education and pass an D. The board is headed by the director
exam while the department is headed by a
chairperson
55. Exemption to licensing include all the
following except: 60. Real estate licensees in Michigan are
A. A salesperson working part-time licensed under the
B. Attorney in fact acting under power A. Michigan occupational code
of attorney B. Michigan licensing act
C. An attorney at law, acting as an C. The real estate broker and
attorney at law salesperson code
D. A licensed builder who builds and D. Public act 332 of 1985
sells new single-family homes, two
units, three units, or four-unit family 61. Which of the following is true?
dwellings A. If a salesperson mishandles money
received from a buyer, both the
56. Which of the following are duties of the real salesperson and the broker may be
estate Board? subject to investigation.
A. Issuing a license B. If a salesperson places a misleading
B. The interpretation of licensing ad in the newspaper, the broker is
requirements not responsible, provided that the
C. Processing license renewals salesperson wrote the ad himself.
D. Collecting renewal fee C. A broker may not have a branch
57. Which of the following is not a duty of the office more than 25 miles away from
Board? the city limit where her main office is
A. Recommending policy to the located.
Federal Reserve System D. Licensee must carry a pocket card
B. Setting and adjusting the minimal all the time.
standards of practice
C. Recommending approval for 62. The following person must be licensed to
educational courses perform a real estate service and receive
D. Recommending to the Department compensation:
to issue or renew a license A. One who specializes in selling coin-
operated car washes
58. Which of the following is true with regards to B. Attorney-in-fact
the board of brokers and salespersons? C. A receiver
A. They meet three times a year or as D. An executor or administrator
often as necessary
B. They are elected by the real estate 63. All of the following are true regarding a non-
licensees living entity acting as a broker except:
C. They promulgate rules to set and A. It must have at least one principal
adjust the standards of practice associate broker
D. They aid the department during B. If the only associate broker in the
investigations but may not assess entity lost his license, the entity
penalties cannot continue to operate unless
another associate broker steps in to
59. Which of the following is true with regards to take responsibility for company
the duties of the department and the board? operations
A. The board issues and renews C. A non-living entity licensed as a
licenses but the department can broker must consist of at least one
order penalties associate broker and one
B. Both the board and the department salesperson
participate in investigating licensees
212
D. A non-living entity licensed as a the real estate company - (All

broker may be a corporation, disclosures must be in writing).
partnership, joint venture, etc. D. It is better to send a friend to the
seller and buy that property, since
64. Which of the following is prohibited by the licensee could advise the friend
licensing rules? as to the seller's bottom line. Later,
A. Buying dinner for a friend in an effort the friend could deed the property
to keep communication channels back to the licensee and that should
open in case he may decide to sell not cause any hard feelings.
his hotel.
B. Sending flowers to a mortgage 67. Sally, an ethical licensee, was notified by an
officer that may refer clients back to owner asking to list his property for
the licensee someday $160,000. Upon inspecting the property,
C. Refusing to negotiate for the sale of Sally felt that the property should be sold for
property unless the client pays a $225,000 and the seller cheerfully listed it
nonrefundable retainer fee. for the higher price. Ninety days later, the
D. Asking an unlicensed friend to help seller accepted a $220,000 offer and told
you negotiate a transaction and Sally that he will gladly pay her a $5,000
promising to pay her a fee. bonus above and beyond her commission.
Which is true regarding this additional
65. All of the following are true regarding bonus?
advertising by licensee except: A. Any bonuses above and beyond the
A. A broker is free to advertise his normal commission stated in the
principal residence for sale privately. listing are paid and kept by the
B. A broker advertising his own broker; the salesperson may not
investments for sale must give the share any of that amounts,
definite impression that the according to state rules and
advertiser is a broker. regulations.
C. A salesperson renting her own B. The additional $5,000 must be
investments may advertise privately. added on to the commission and
D. A salesperson selling his/her then paid to Sally through her
principal residence is free to broker.
advertise it as a private party C. It is legal for Sally to accept the
$5,000 bonus directly from the seller
66. After listing property for 3 months, the as long as the check is made
licensee decides to buy it herself. Which of payable to her personally.
the following is true regarding this situation? D. It is illegal for a licensee to accept
A. Wait until the listing expires and buy any additional commission from the
directly from the owner to save the seller once the amount is set in the
commission the owner would have listing agreement.
paid to the real estate company and
caution the owner not to mention 68. Sally, who works for Sunshine Realty, listed
this to the real estate broker. a house that was sold by Max, who works
B. Wait until the last day the listing for Green Valley Realty which is headed by
expires, then approach the seller to broker Peggy. Max's buyer did not wish to
show him that his property is very sign a buyer's broker agreement with Green
hard to sell; therefore, he should Valley Realty, and the agency disclosure
lower the price and possibly sell it to that Max submitted to the seller when he
the licensee. met with him to present the offer showed
C. Licensee should directly approach that he was a seller's agent. Which of the
the seller and ask him if he would following is true?
sell it to the licensee for a certain A. If Max commits fraud, his buyer
price, and indicate also that the could sue Max, his broker Peggy,
licensee may be receiving a part of Sally's broker, and the seller;
the commission paid by the seller to because it appears that Green
Valley Realty is a sub-agent of the
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listing broker; therefore, they are 71. A non-licensed assistant helping a

both representing the seller. salesperson may do all of the following
B. Max's broker, Peggy, has the final except:
responsibility at the closing to A. Occasionally show houses to the
provide a signed closing statement salesperson’s buyers when he is
to the parties and to make sure that busy with other customers
no errors are committed throughout B. Take telephone messages for the
the process. salesperson
C. At closing, Max's broker, Peggy, will C. Help registering incoming buyers
directly receive 50% of the into an open house held by the
commission from the seller, she will salesperson
then pay Max's share of the D. Address” thank you” letters to past
commission. clients
D. Throughout the whole process of
showing the house and negotiating 72. Before presenting an offer to purchase, a
a sale, Max should have tried to salesperson receives another offer on the
satisfy the buyer by getting him the same property just before she leaves the
lowest possible price for the house office to meet with the seller. On her way to
and recommending conditions in the the appointment, she is contacted on her
offer that would best serve the mobile phone to be told that another offer
buyer, because if it wasn't for the will be written on the same property later
buyer's money, a sale would not that day. Which one of the following choices
have taken place. is correct for the salesperson to do?
A. Present the offer that came first,
69. All of the following are indications that the present the second offer if the first
salesperson is working as an independent offer is rejected, and ask the seller
contractor except: not to decide because a third offer
A. The broker withholds payroll taxes may be coming.
from her paycheck. B. Present the two offers she has at
B. She chooses her own time and the same time unless one of the
number of hours to work offers has a contingency that the
C. She gets paid strictly by commission salesperson believes cannot be
when she produces sales. met; then present only the offer she
D. She has a written contract with the feels has a chance of acceptance.
broker indicating that she is an C. Present the two offers that she
independent contractor, not an already has but inform the seller of a
employee. possible third offer later on.
D. Wait for the third offer to come, and
70. All of the following are true regarding paying then present all three offers at the
commissions and referral fees except: same time.
A. If a salesperson receives a lead
from a salesperson in another 73. A deposit check made out by a buyer to the
company, she must pay that name of the salesperson must:
salesperson a split directly from her
commission. A. Be certified by the bank to make
B. Business leads between Michigan sure funds are available, then
brokers may be sent and received immediately given to the broker.
and referral fees may be paid as B. Not be accepted.
well. C. Be endorsed by the salesperson
C. A Michigan broker may send a and given to the broker.
referral out-of-state and receive a D. Be cashed and turned over to the
fee from the out-of-state broker. broker immediately.
D. A broker licensed in Michigan may
receive a referral from a broker 74. An offer is signed by the buyer and deposit
operating in another state. is handed to the salesperson on Monday.
On Tuesday, broker is notified that the seller
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has accepted the offer. The deposit must be the listings with him, but he must be
at the bank no later than sure he can service those listings.
A. Wednesday
B. Thursday 77. When a licensee fails to meet license
C. Tuesday renewal requirements by the legal deadline.
D. Monday Which of the following may occur?
A. License is revoked
75. Which of the following is true regarding a B. License is suspended
real estate transaction? C. License lapse one day after
A. Due to the complexity of real estate deadline
transactions, it is permitted by the D. Licensee may continue to operate
Department that parties agree on as long as he has met his continuing
changes through telephone or education requirement
video-recorded conference that 78. Sally Jones is a licensed real estate agent.
could be referred to at a later date. She comes and goes as she pleases, gets
B. Changes decided upon by buyer paid strictly by commission but is required to
and seller must be done outside the get her broker's permission before
closing and preferably after the negotiating a commission rate and before
closing date, where the broker is not submitting any advertising to the media.
involved. Which of the following applies to Sally?
C. If an offer to purchase is signed by A. Sally must match the deduction on
all parties and later the price must her paycheck for the Social Security
be changed, an "amendment" is (FICA) deduction
signed by the parties reflecting the B. Sally will be receiving a W-2 form to
change. file your income tax returns every
D. Once an offer to purchase is signed year
by all parties, they have no right to C. Sally needs to file her income tax
make any changes. returns based on a 1099 form
D. Sally can expect the company to
76. After obtaining twelve listings, David, a give her paid vacations and health
salesperson, decided to resign his position insurance benefits
with XYZ Realty and transfer to another city 79. Which of the following takes place when a
to follow his wife who was offered a new salesperson begins work with a broker?
position as a computer programmer for a A. The commission split is negotiated
major corporation. Which of the following is B. The cities and neighborhoods that
true regarding the listings he had obtained? the salesperson will be working at is
A. The listings must stay with the assigned
former broker because they belong C. Policy and procedures manual
to the broker anyway. The former including an employment contract is
broker will have to pay a provided to the salesperson
commission when the listings are D. The department is notified of the
sold directly to David only if David's estimated length of employment that
employment contract with the former the broker anticipates for that
broker dictates that. salesperson
B. Listings must stay with the former 80. A broker hires a salesperson and
broker but state law requires the arranges for her to receive a $300 draw
former broker to pay the selling every week until she starts selling real
commissions to David if those estate and upon each closing the
listings were sold. amount of the draws are deducted from
C. David could take the listings with the commissions that the salesperson is
him to the new company, provided supposed to receive based on a
that both brokers sign an agreement percentage of the selling price. This
to assign the listings. arrangement indicates that the
D. As long as David finds another job salesperson is a(an):
with another real estate company in A. Employee
Michigan, he has the right to take B. Independent contractor
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C. Branch manager 85. Salesperson accepts a deposit check

D. Assistant of an agent payable to him personally, cashes the
81. A broker wishes to become a money and spends it. Who is liable?
salesperson. What is the requirement?
A. The salesperson
B. The broker
A. Attend a 40-hour salesperson C. Both salesperson and broker
pre-license course and take the D. No one is liable as long as the
salesperson's exam but must money is returned
maintain both licenses at the same
time 86. With regards to a prize that a broker wishes
B. Apply for a salesperson’s license to offer to clients, which of the following is
and maintain both broker and legal?
salesperson license together A. A drawing must be conducted
C. Apply for an associate broker's under the supervision of the
license which is the same as a department
salesperson B. A drawing must be fair and the
D. Surrender the broker's license to broker cannot secretly award the
the department and obtain a prize to one of his friends instead of
salespersons license a client
C. The prize must be provided by the
82. According to the Dodd Frank Act. An owner broker to every client without a
who wishes to finance the sale of his own drawing
property must employ the services of a loan D. A drawing can only be conducted in
originator unless he qualifies under an conjunction with a charity
exemption. All of the following are 87. Broker fails to renew license by October 31st
exemptions under the law except: of the renewal year. When does the license
lapse?
A. Seller is not the builder of the property A. October 31st
B. Seller does not use negative B. November 1st
amortization C. December 31st
C. The loan interest rate is fixed for at least D. January 1st next year
five years
D. Seller does not finance more than five 88. Which of the following is true regarding the
properties within a 12-month period broker’s practice?
A. Deposits must be handed over by
salespeople to broker no later than
83. After receiving all the legal splits on a 100 2 banking days after the signing of
acre parcel without creating a subdivision, an the PA
investor left a 60 acre parcel undivided. How B. Closing statement must be provided
many years would someone have to wait by the title company and signed by
before splitting the 60-acre parcel without broker and salesperson
creating a subdivision? C. A broker may choose to have more
than one trust fund
A. 5 years D. Advertising may not list the name of
B. 10 years the salesperson
C. 2 year
D. 25 years
89. All of the following usually requires a service
84. An owner of 30 acres wishes to create as provision agreement except:
many splits as possible under the law
without having to record a subdivision, which A. Advertising the property
of the following split can he create as the B. Accepting an earnest money deposit
maximum allowed by law? on behalf of a seller
C. Negotiating a transaction for the
seller
A. Six-5-acre parcels D. Contacting the assessor’s office for
B. Four parcels – 7 acres each and Two-1- information on the property
acre parcels
C. One parcel-18 acres, another 6-acre 90. With regards to the closing, which of the following
parcel and six more parcels-1 acre each is a listing broker’s duty?
D. Four-7.5-acre parcels
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A. Supervise the closing

B. The closing statement must be
prepared by the title company 96. John was fired after complaining that the soap
C. Attend the closing in person company that he used to work for was mixing
D. Both buyer and seller must sign the chemicals and dumping the waste into the sanitary
closing statement sewers. Which of the following has the right to take
action against the company for ruining the
91. Which of the following is considered to be an environment?
illegal conversion of funds by a broker?
A. John
A. Broker receives a commission and places it B. Any environmental group
into his trust fund instead of his general fund C. Anyone
B. Broker deposits $5000 into the trust fund but D. The state
two days before closing he transfers $3000
into his general fund to pay the office rent 97. Which of the following is most likely considered to
C. Broker deposits a $2500 deposit into the be illegal?
trust fund 10 days after receiving it
D. Broker delivers a deposit from his trust fund A. Private seller on land contract charges 14%
to the closing agent on the day of the closing interest
B. A bank charges 24% interest on a mortgage
92. Which of the following is not made a part of a loan
residential lease under Michigan landlord – tenant C. A broker charges a 26% commission
relationship act D. A buyer pays commission to the broker
instead of the seller
A. Consideration provided to the landlord
B. 2.5 months deposit 98. Regarding the complaint process, which of the
C. Address of the premises following is more accurate in relation to the role of the
D. Lease term Department and the board?
A. When a complaint is filed, investigation is

93. Which of the following penalties can the board of carried on by the Board and if licensee is in
real estate brokers and salespersons assess? violation, Board members will assess the
penalties that will be enforced by the
A. Exemplary/ punitive damages for slander of Department.
title B. Investigations and hearings are conducted
B. Reimbursement of court cost and legal fees
by the Department. Penalties are assessed
C. Censure
by the Board.
D. Indictment
C. Upon investigation, if a licensee is found to
represent an imminent threat to the public,
94. Kimberly is attending a meeting with licensees the Department may summarily suspend his
from different companies to discuss certain MLS license. He can then appeal that suspension
issues. Which of the following statements, if made by to the Board.
the other agents, would not cause Kimberly to D. Once a complaint is filed with the
immediately express disagreement and leave the Department it is reviewed by the Board
meeting? members at their next meeting and if the
complaint has merits, it is assigned to the
A. The MLS should have a rule against Department for investigation.
lowering commission rates
B. The MLS should only accept 6-month listings 99. Which of the following is not a permissible use of
C. Nobody should work on his/her listings the tenant’s security deposit?
because of the low rates s/he charges
D. We cooperate with other brokers but do not A. Kitchen cabinets must be cleaned of grease
always share commissions
resulting from frying
95. Which of the following can become an associate B. A hole in the wall resulting from opening a
broker? door against a broken door stopper
C. A carpet that is so dirty, the carpet cleaner
A. A Corporation said it cannot be cleaned
B. LLC D. Tenant forgot to pay the last month’s rent
C. An individual Broker before vacating
D. A partnership
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ANSWERS TO MULTIPLE CHOICE QUESTIONS
ANSWERS - 4. D 17. C 34. B

PROPERTY 5. D 18. A 35. D
OWNERSHIP 6. C 19. D 36. D
7. C 20. D 37. B
1. B 8. A 38. A
21. B
2. C 9. B 39. A
10. B 22. C 40. A
3. D 23. A
4. C 11. D 41. A
12. D 24. B 42. A
5. B
13. A 25. B 43. C
6. B
7. D 14. B 26. D 44. B
8. B 15. D 27. A 45. C
9. D 16. C 28. D 46. C
10. C 17. B 29. C 47. D
11. D 18. A 30. B 48. B
12. C 19. A 49. B
13. C 20. C ANSWERS TO 50. B
14. A 21. B MULTIPLE 51. A
15. A 22. C CHOICE - 52. D
16. D 23. A FINANCING 53. D
17. C 24. C 54. B
18. C 25. D 1. D 55. D
19. B 26. B 2. D 56. A
20. C 27. A 3. D 57. A
21. D 28. A 4. D 58. C
22. C 29. A 5. C 59. D
23. C 30. C 6. D 60. D
24. C 31. C 7. C 61. B
25. C 32. B 8. B 62. B
26. B 33. C 9. B 63. B
27. D 10. D 64. D
28. C 11. C 65. C
29. D ANSWERS- 12. D 66. D
30. D VALUATION & 13. C 67. C
31. C MARKET 14. C 68. A
32. C 15. C 69. C
ANALYSIS
33. C 16. C 70. C
34. A 17. A 71. C
1. C 72. C
35. A 2. D 18. C
36. C 19. B
3. C ANSWERS-
37. C 20. C
38. C 4. D 21. A PRINCIPLES OF
39. D 5. C 22. D AGENCY
40. A 6. C 23. B
41. D 7. D 24. C 1. D
42. B 8. C 25. D 2. D
26. A 3. C
9. D
27. D 4. C
ANSWERS- 10. C 5. C
LAND USE 11. D 28. B
29. B 6. C
CONTROLS 12. C 7. D
30. A
13. B 8. D
1. B 31. A
14. C 32. C 9. B
2. C 10. C
15. B 33. C
3. C 11. A
16. A
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12. C 30. A 9. C
13. B 31. D 10. D
14. C 32. C 11. C
15. A 33. A 12. D
16. A 34. D 13. C
17. C 35. B 14. D
18. D ANSWERS - 36. D 15. B
19. B PROPERTY 37. C 16. D
20. D CONDITION & 38. B 17. C
21. B DISCLOSURE 39. B 18. A
22. A 40. C 19. D
23. C 1. B 41. C 20. C
24. D 2. D 42. A 21. C
25. D 3. D 43. C 22. C
26. B 4. B 23. D
27. C 5. C 24. D
28. C 6. D ANSWERS – 25. D
29. A 7. C LEASING 26. B
30. D 8. C
31. C 9. D 1- B ANSWERS -
32. D 10. B PRACTICE OF
2- B
33. B 11. C REAL ESTATE
3- D
34. B 12. A
4- A
35. A 5- C 1. B
36. C ANSWERS - 6- D 2. D
37. D CONTRACTS 7- B 3. C
38. C
8- C 4. C
39. A 1. B 9- C 5. A
40. C 2. B 10- D 6. C
41. C 3. D 11- D 7. D
42. C 4. C 12- D 8. D
43. B 5. D 13- D 9. C
44. A 6. D 14- D 10. C
45. D 7. C 15- D 11. A
46. C 8. D 16- C 12. B
9. C 17- A 13. C
10. C 18- D 14. A
11. D 19- D 15. C
12. C 20- D 16. C
13. D 21- C 17. B
14. B 22- A 18. A
15. C 23- B 19. D
16. C 20. C
17. C 21. C
ANSWERS -
18. D 22. C
TRANSFER OF
19. B 23. B
TITLE
20. D 24. D
21. B
22. D 1. C
2. D ANSWERS -
23. C
3. D CALCULATIONS
24. D
25. C 4. D
26. C 5. C 1. A
27. C 6. C 2. B
28. C 7. B 3. A
29. A 8. D 4. C
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5. A 40. A 96. C
6. A 41. D 97. A
7. D 42. D 98. B
8. A 43. D 99. A
9. B 44. B
10. C 45. B
46. A
47. B
48. A
49. C
ANSWERS
50. C
MULTIPLE
51. D
CHOICE -
MICHIGAN 52. C
RULES & 53. C
54. B
REGULATIONS
55. A
56. B
1. B 57. A
2. C 58. C
3. A 59. B
4. A 60. A
5. A 61. A
6. A 62. A
7. D 63. C
8. C 64. D
9. C 65. A
10. D 66. C
11. A 67. B
12. B 68. A
13. D 69. A
14. C 70. A
15. C 71. A
16. A 72. C
17. D 73. B
18. D 74. B
19. A 75. C
20. C 76. A
21. C 77. C
22. D 78. C
23. C 79. C
24. D 80. B
25. D 81. D
26. D 82. D
27. D 83. B
28. C 84. C
29. A 85. C
30. A 86. C
31. A 87. B
32. A 88. C
33. B 89. D
34. B 90. A
35. D 91. B
36. D 92. B
37. B 93. C
38. B 94. D
39. C 95. C
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222
223
224
225
226
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KEY POINTS FOR THE EXAM
1. A freestanding bookshelf = Chattel

A built in bookshelf = Fixture
2. AGREEMENT BETWEEN THE PARTIES = IF IT’S IN WRITING BETWEEN THE PARTIES, IT

STANDS (as long as it doesn’t violate contract law i.e. something illegal)!
For example, a seller mentions in the purchase agreement that she is going to take the roses from
her rose bush to her new home but she will leave the rose bed leveled for future plantings, the buyer
can’t do anything if he signed the purchase agreement. He can’t later argue “the rose bush was a
perennial!”
3. METES AND BOUNDS (Measures BOUNDARIES)
4. What legal description describes property through a series of distances and angular measurements?
= Metes and Bounds
5. If someone wants to build a subdivision, what do they have to do? A detailed plan is submitted to the
local authority such as the planning commission for approval.
6. Anything recorded at the register of deeds must be NOTARIZED.
7. Section: 640 Acres
8. The third line WEST of the Meridian line is 18 miles away.
9. Acre: 43,560 Square Feet
10. Riparian Rights = Rights enjoyed by land owners whose land is located next to rivers, streams or
inland lakes --- Remember “R” in Riparian standing for “River”
11. With Riparian Rights, owners have the right of reasonable use of water and own the property all the
way to the middle of the stream or center of the lake that they are situated on.
12. What is the opposite of Erosion? Accretion
13. Mechanic’s Lien [Construction Lien]: A person who furnishes materials and/or effort to improve land
and is not paid by the landowner may place a lien on the property.
14. Special Assessments: Cost due for improvements performed by the local government such as
installing city sewers or water, paving the street, etc.
15. LICENSE: Permission, of a personal and temporary nature, granted to enter someone's land for a
particular purpose such as a license to fish or hunt.
16. You have an easement running over your property, that makes you the = SERVIENT estate
17. FEE SIMPLE = The BEST/HIGHEST type of ownership recognized by law
18. Which is true about a qualified fee estate? If the grantee (buyer) is not abiding by the restrictions set
forth by the grantor (seller), the property may revert back to the grantor (seller).
19. Life Estate = Granted to a person (life tenant) for a lifetime.
228
20. Which is Owning in Severalty? = An Entity (Careful, don’t pick LLC. or INC.)
21. Tenants by the entireties could also be joint tenancy with survivorship.
22. John and Bob are Joint Tenants. John dies. What happens to property? It goes to Bob.
23. If the deed does not state a percentage of ownership, each of the grantees is presumed to receive:
equal interest.
24. Somebody’s roof starts to leak 3 months after they move into their new condo, who is responsible for
paying for it to be repaired? The association.
25. You are said to own 100% of the AIR SPACE in your condominium.
26. In COOPERATIVES, what are given to owners to signify ownership? PROPRIETARY LEASES
27. EMINENT DOMAIN: The government’s right to take private property for public use provided that
taking is necessary and after payment of just compensation.
CONDEMNATION: Action through which Eminent Domain is accomplished when an owner does not
voluntarily agree to relinquish ownership.
28. Somebody dies with a will and with heirs, what is impossible? ESCHEAT
29. POLICE POWER: Vested in government to make laws and regulations for the health, safety and
welfare of the public.
30. SETBACK ORDINANCE (Building line, setback line): Distance from lot edge to where building is
erected.
31. NON-CONFORMING USE: The use of the land that does not match the zoning law.
32. A gas station (commercial) owner is operating his business when the city makes an announcement
that the area is now residential. What does he have to do? Nothing! He can continue to operate his
business as usual.
BONUS QUESTION: What if he wants to sell his gas station? Will the new owner have to switch to
residential? = HAVE THE BUYER TALK TO THE MUNICIPAL (CITY) DEPARTMENT THAT
HANDLES ZONING ISSUES! DON’T ASSUME HE’S GRANDFATHERED IN.
33. If a piece of land is potentially contaminated, it is highly advisable to perform an environmental audit
or an environmental site assessment on the property to determine if contamination exists.
34. Asbestos is fire resistant.
35. If the find asbestos in a public building, what would be the safest method of removal?: Encapsulation
of asbestos can be safer than removal.
36. Special disclosure required for sale and rental of property that contains lead based paint as well as
(EPA) Informational pamphlet.
37. Buyers are given a 10 day period to inspect the property for lead based paint.
38. Lead is found in paint, piping, and soil – NOT in insulation.
229
39. Radon: Colorless, odorless radioactive gas resulting from decay of natural radioactive substances.
40. Private control on land use includes: deed restrictions
41. A requirement that all structures have an attached garage that measures 30x33 is an example of a
covenant.
42. Deed restrictions are also known as CC&R’s
43. Upon violation of a deed restriction, a court injunction may be obtained by a neighbor or
neighborhood association to stop the violators.
44. An appraisal report is a written opinion that is provided by a licensed appraiser. The appraisal is not
a guarantee or a determination as to what the selling price will be in an open market.
45. If you have a buyer that’s interested in buying a newly remodeled home that’s located near ugly
properties, they may lose value due to the principle of regression.
46. If you have someone that owns a vacant lot in a busy city who wants to turn it into a parking lot, you
may want to recommend that the highest and best use of that land may be something like a
building.
47. What are economic characteristics that affect value? Remember D.U.S.T! (Desirability, Utility,
Scarcity, Transferability)
48. Sales/Market Comparison Approach: Value is estimated by using other comparable property that
has been recently sold in the same general area.
49. When trying to comp out a 1 story ranch, you want to use another 1 story structure that recently
sold! – Even if it’s a townhome, if it’s 1 story and sold recently, that’s the best answer. And no, you
can’t use a 2 story and “cut the square footage in half”.
50. Which is true about the COST APPROACH: The cost of reconstructing the building as a new unit is
estimated. *Careful! Don’t pick an answer that makes you calculate the assessed value + land.
(Assessed has to do with tax)*
51. When you’re trying to value an older building, use the replacement cost. (Reproduction cost might
also be there but don’t pick it).
52. An outdated floor plan would be an example of functional obsolescence.
53. A property located next to a noisy airport would be an example of external obsolescence.
54. Another name for a market analysis = CMA (Competitive or Comparative Market Analysis)
55. PITI = PRINCIPAL + INTEREST + TAXES + INSURANCE
56. What is the biggest benefit of a FHA loan? Low down payments of approximately 3.5%.
57. No down payment is required for VA LOANS.
58. What is a disadvantage of a partially amortized loan? It involves a lump sum due at the end of loan
term.
230
59. The purpose of a reverse mortgage is to supplement the mortgagors’ income. An elderly couple
may use this type of loan.
60. What’s another name for a land contract? Installment sales contract or Contract for deed.
61. What is the primary purpose of the secondary mortgage market? A lender that receives more
demand for loans than funds available may decide to sell its interest in past loans and mortgages to
the secondary market thus receiving more funds to generate more lending transactions.
62. GINNIE MAE, FREDDIE MAC, and FANNIE MAE are secondary mortgage markets. NOT SALLY
SUE.
63. Alienation Clause: Provides that if the mortgagor transfers ownership to another person, the amount
owed to the lender is immediately due in full.
64. Mortgage Discharge (Release/Satisfaction): Issued and recorded by the lender as evidence of
releasing the lien that the mortgage created at the time of financing the property.
65. At least 3 business days before closing, borrowers will receive a Closing Disclosure, Stating loan
terms such as monthly payments as well as various closing fees.
66. Any significant change to the loan switching from a fixed rate to an adjustable rate loan,
triggers a new 3-day waiting period for the CD.
67. Truth In Lending is associated with REGULATION Z
68. Lenders may use the APR when advertising
69. When refinancing residential property an owner may rescind the loan within 3 business days after
closing date and receive refund of loan fees paid.
70. RESPA = Prohibits “Kickbacks” (i.e. payments when services have not been provided) involving
“settlement service providers” such as lenders, real estate agents, title insurance services,
appraisals, credit reports, inspections, surveys, and legal services.
71. DEED IN LIEU OF FORECLOSURE: Upon default, lender agrees not to go through foreclosure and
accepts a deed from mortgagor surrendering property to lender in full satisfaction of debt.
72. SHORT SALE:A sale of distressed property that is approved by a lender who is willing to discharge
the mortgage by accepting less than the loan balance owed.
73. At a property auction, if highest bid is not enough to satisfy the loan then a DEFICIENCY
JUDGMENT against the mortgagor is obtained to hold him/her personally liable for the difference.
74. At a property auction, unpaid property taxes always get paid FIRST!
75. If a broker wants John to work exclusively with the seller and Marie to work exclusively with the
buyer, this would be designated agency.
76. If a seller authorizes you to accept offers on her behalf through a power of attorney, you can do as
they say. For example, she authorizes you to accept any cash offers over $130,000 cash; if
$140,000 cash comes in, take it!
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77. The employment contract is known as the LISTING AGREEMENT when working for the seller and a
BUYER AGENCY AGREEMENT when representing the buyer.
78. The contractual relationship that’s created between the broker and seller: Expressed Agreement
79. IMPLIED (OSTENSIBLE) AGENCY: Leading a person to believe that agent is representing him by
so acting or making statements such as telling the customer, “I protect your interest”, “I will get you
the best possible deal from the other party”.
80. Agency disclosure statements must be given in advance, before they provide agent any confidential
information.
81. PROCURING CAUSE: The effort that an agent contributes that ultimately results in a sale.
82. EXCLUSIVE RIGHT TO SELL (THE BEST LISTING!): The broker is employed as the sole agent of
the principal and is promised a fee regardless of who procures a buyer.
83. EXCLUSIVE AGENCY LISTING (THE SECOND BEST LISTING): Gives broker THE sole right to
sell property, however, owner reserves right to sell by him/her without paying commission. If any
other broker sells the property, listing broker is still protected.
84. EXCLUSIVE BUYER/TENANT AGENCY AGREEMENT (The “Twin Sister” of the Exclusive Right to
Sell): The broker will earn a commission when the buyer/tenant buys or leases a property whether
through the broker's efforts, or if the buyer/tenant locates property on his own, even if listed by
another broker or offered through a private owner.
85. PROTECTION CLAUSE: A clause inserted in a listing agreement aimed at protecting the listing
broker in the event that a buyer who was found by the broker returns to purchase the property,
directly from the owner but after the expiration date of the listing agreement.
86. TRUST, LOYALTY AND SKILL is owed to your clients.
87. Puffing: An exaggeration of facts i.e. a realtor claiming that property values will double by next year.
88. The broker and seller are not getting along, what would have to happen for the listing to terminate?
The house burns down.
89. When must you provide the sellers disclosure statement? When entering into a binding purchase
agreement.
90. The real estate licensee must make the sellers disclosure statement available to the public if
requested.
91. SILENT FRAUD (Non-Disclosure): The act of withholding information regarding concealed property
defects from the buyer while the seller knows if such information is disclosed, it may result in losing
the sale or offering a lower price.
92. Material Facts = OBVIOUS things that are wrong i.e. bad furnace, leaky roof
Non-Material = Death in house, sellers are desperate to move
93. Never offer expert advice – If your buyer is curious about a potential issue about the house, urge
them to get an inspection!
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94. If you have a seller who insists you keep something materially wrong with the house a “secret”,
refuse the listing!
95. If your buyer is waiting on a seller to respond to an offer and they get impatient, you should revoke
your current offer before you make any new offers to other sellers.
96. Contracts do not have to be “bottom lined”: Even if a buyer refuses to sign the “bottom line” of a
purchase agreement, it is nonetheless binding and in full force and effect.
97. $0 is required by law to enter into a contract.
98. Why do we have an Earnest Money Deposit (EMD)? = Valuable Consideration
99. If someone is not of legal age when they entered into a contract, the contract is VOIDABLE.
100. STATUTE OF FRAUDS: Requires certain contracts to be in writing in order to be enforceable. Also
requires parties to sign contract to become bound by its terms.
101. If you’re given a “verbal listing” you may or may not be entitled to a commission.
102. Seller receives an offer from buyer that is subject to the sale of the buyer’s present house. The seller
wishes to accept but does not want to be at the mercy of the buyer who may not sell his house
anytime soon. The seller counters by adding an “escape clause”.
103. A broker is hired to sell property under a listing agreement. A month later, the broker dies. The
listing agreement will be terminated due to operation of law.
EQUITABLE TITLE: Legal interest that buyer acquires in property after the signing of a sales contract
(purchase agreement) by all parties that gives her the legal right to compel the seller to deliver title to
property when the buyer pays the entire purchase price.
104. Option Contract: A unilateral contract by which the seller must perform.
105. Optionee = Buyer
106. Tenancy at Will = Leasing month to month i.e. an undetermined duration
107. Tenancy for Years = A lease with a beginning date and an end date. Don’t be fooled: a 3-month lease
could be Tenancy For Years – It doesn’t have to be a “year”. Don’t let the word “years” trick you.
108. NET LEASE: the tenant pays rent, plus some or all of operating expenses such as property taxes,
insurance, maintenance, etc.
109. Net Lease: Also referred to as a TRIPLE NET lease.
110. If you have people that are looking to rent space but they don’t want any surprises in their rent,
recommend a gross lease.
111. Percentage leases are found mainly in retail.
112. If you represent the LESSEE, you represent the TENANT.
233
113. RIGHT OF FIRST REFUSAL: Allows an individual (usually a tenant) to match a purchase price or
rent offered to landlord by a third party. If tenant agrees to match price, then the property is sold or
re-rented to the tenant and not to the third party.
114. Title insurance covers against any unrecorded documents, forged documents, or undisclosed/missing
heirs.
115. What is true about title insurance? (BOTH the buyer and the seller must obtain title insurance)
116. Subordination vs. Subrogation
Subordination clause: States that the rights of a mortgage holder will be secondary or subordinate
to a later lien or encumbrance, giving the second encumbrance first priority.
Subrogation clause: A clause in the title policy that allows the insurance company who pays a claim
to seek reimbursement from the party who caused the loss.
117. Special Warranty Deeds only protects against claims arising out of the Grantor's (sellers) period of
ownership.
118. Quit Claim Deed: This deed provides the least liability for title defects against the grantor (seller).
119. What is a settlement/closing statement? – A document that shows buyer and seller debits and credits
120. A broker or associate broker who is involved at the closing shall furnish, or cause to be furnished, a
complete and detailed closing statement signed by the broker or associated broker showing each
party all receipts and disbursements affecting that party and provide copies to buyer and seller. This
requirement doesn’t apply if the closing is conducted by a title company.
121. Gains on the sale of a “principal residence” are exempt (up to $250,000 per person and $500,000 for
a married couple filing jointly)
122. What is a disadvantage of investing in real estate? Liquidity
123. What does a home warranty protect against? Anything inside the unit such as a bad furnace or a
leaky water heater.
124. CIVIL RIGHTS ACT OF 1866:Prohibits discrimination because of race, without exceptions.
125. THE MICHIGAN CIVIL RIGHTS ACT “ELLIOT LARSON”: Prohibits against discrimination because of
age and marital status.
126. A landlord may not allow a tenant who may be a social drinker or a recreational drug user but must
accommodate an individual who is in the process of recovering from alcoholism or drug addiction.
127. REFUSE TO PERMIT, at the expense of the disabled, reasonable modifications of existing premises
occupied or to be occupied by the disabled if such modifications may be necessary to afford the
disabled the full enjoyment of the premises. i.e. a lady in a wheelchair or a deaf tenant.
128. BLOCKBUSTING: To profit from inducing any person to sell or rent dwellings by representing entry
of certain groups of people of a particular race, color, etc… Think of this as a realtor walking down a
BLOCK, BUSTING down people’s doors freaking them out.
234
129. REDLINING: A lender refuses loans on property located in certain sections of the city altogether
regardless of qualifications of property or applicant.
130. A realtor decides to show homes ONLY to Asian buyers because the seller is Asian. This is unethical
due to its discriminatory practices (Steering).
131. If a private club refuses to rent to a minority family, they aren’t discriminating if they have dwellings
that are not being operated commercially (nonprofit i.e. they’re exempt).
132. Why do we get licensed? Consumer Protection
133. Who appoints the 9 members of the board? The governor
134. Real Estate Board – 9 Members: Six (6) of the members have a Real Estate license and three (3)
represent the public.
135. What does the board do? They interpret licensing requirements, aid the Department in investigations
against licensees, recommend to the Department to issue or renew a license to a person who has
met the requirements, recommend approval for educational courses and joining the Department in
approving the form and contents of the licensing examination, promulgate rules setting and adjusting
the minimal standards of practice.
136. With investigating a complaint, the Department may petition the Department of attorney general to
issue a SUBPOENA (court order) ordering a person to appear for an investigation or ordering a
person or company to produce records related to the investigation.
137. If the informal hearing does not result in a settlement, a formal hearing shall be scheduled.
138. Can you pay a commission to a licensed, non-resident? Yes, a licensed real estate broker may pay a
commission to a licensed real estate broker in another state if the non-resident real estate broker
does not conduct business in this state.
139. A real estate broker, failing to return a salesperson's license within five (5) days is in violation.
140. Money deposited in the broker's trust account must remain and be accounted for at the
consummation or termination of the transaction. No one may use this money until that time. If so, it
may be an illegal conversion of funds.
141. A real estate broker shall deposit funds into the trust account within (2) banking days after the signing
of a purchase agreement by all parties. So, if the buyer makes an offer and EMD is received on
Monday, and the seller accepts the offer on Tuesday, Thursday is the deadline.
142. The department may suspend you immediately, without investigation, if you're an imminent threat to
the public.
143. The Department can fine you, not to exceed $10,000.00. The license may be suspended until the fine
is paid.
144. The board may censure you as a penalty if you commit a violation.
145. Non licensed people engaged in the sale of owned real estate may not enter into more than five real
estate sales in a twelve-month period. Anything over that shall be done with a broker.
235
146. A real estate licensee shall carry the pocket card while doing business.
147. No reciprocal licensing agreements with other states
148. When must a licensee renew their license to avoid interruptions? October 31
149. A licensee gets licensed in the 2nd year of a 3-Year Cycle. How much continuing education do they
need? 12 hours (6 hours + 6 hours)
150. When advertising, the telephone number or street address of the employing broker must be on the
advertisement (careful, don’t pick telephone number and street address). Also, the business name of
the employing broker, in equal or greater type size than the name of the associate broker,
salesperson, or cooperating group.
151. A P.O. BOX does not count as a brokers “business address” (don’t pick an answer that says ‘the
broker’s telephone number or P.O. Box must be advertised on marketing material’)
152. Dual agency is only legal with written consent of both parties.
153. Is a licensee limited when acting as a dual agent? Yes, they will not be able to disclose all known
information to either the seller or the buyer.
154. The licensee, upon receiving an offer to purchase shall recommend to the purchaser that a TITLE
INSURANCE policy (Owners Policy) be submitted by the seller to the buyer.
155. If the licensee receives a written offer, they should submit it immediately. Don’t wait for any “verbal
offers” to come in later. Written offers get submitted right away.
156. A branch office that is more than twenty-five (25) miles from the city limit where the broker's main
office is maintained must be under the direct supervision of an associate broker. A top producing
salesperson can manage the branch locations within the 25 mile radius.
157. A salesperson shall not accept a deposit check made out to salesperson. All checks must be written
to the order of the broker (as licensed).
158. A broker may not advertise in any other name than what they’re licensed under.
159. A broker may maintain more than one trust account and may have up to two thousand ($2,000)
dollars of his own money, in each trust account.
160. No lottery, contests, or drawings allowed when advertising your real estate deals. However, if
everyone gets the same gift, it’s ok i.e. everyone gets a rose or a garage opener.
161. In case of co-operating brokers, the final responsibility for the closing lies with the listing
broker/associate brokers.
162. Failing to disclose knowledge of sex offenders shall not be grounds for action against licensee. If a
buyer asks if there’s sex offenders in the area, give them the name of a website for them to check.
163. State license laws generally treat the salesperson as an employee. Therefore, any wrongdoing may
be reflected on both, the salesperson and the broker. That means, if the broker is on vacation and
their salesperson does something wrong back home, they’re still both in trouble.
236
164. What’s the use of the security deposit? To reimburse landlord for damage to unit or nonpayment of
rent.
165.
SECURITY DEPOSIT ACT:
A landlord may not collect more than 1 month + ½ month of rent as a security deposit. For example, if
your rent is $400/month:
$400 (1st month) + $200 (½ month) = $600 Security Deposit

WARNING: They will try to trick you by saying it’s OK to charge 2 months security deposit (wrong! It’s only month + ½)
4 Days = A tenant has 4 days to notify their landlord of a forwarding address of where their deposit can be
sent.
30 days = A landlord has 30 days to prepare an itemized list of damages to provide to tenant
7 days = The tenant has 7 days to respond
166. In Michigan, criminal usury ceiling is set at 25% APR. While regulated lenders may charge up to 25%
APR, non-regulated lenders cannot usually exceed 11% APR (certain exemptions apply). So, if you’re
asked about a land contract being offered with 12% interest that would be against usury laws.
167. A master deed must be recorded by condominium/subdivision developer before building.
168. Who does MSHDA help? Michigan's low and moderate-income citizens
169. Licensees must not participate in discussions with other competing agents that may suggest “price
fixing” or other violations. If a licensee happens to be in a meeting where these issues are discussed
or suggested, the licensee must leave the meeting if s/he does not want to be implicated in a
conspiracy. This violates Michigan’s Antitrust Laws.
170. Be careful of using dangerous words or phrases like “everyone charges 10% commission rate, it’s no
big deal”, or “Sorry, the MLS only allows 90 day listings, we can’t any shorter than that” – However,
it’s OK to say “our company charges a 3% co-broking fee when working with other companies” –
That’s fine.
171. Michigan Right to Farm Act: The act protects farmers despite local ordinances that may pass to
oppose their operation.
172. Days after a purchase agreement has been signed, a new ordinance will cause a railroad track to be
placed next to the buyers new house – If you represent the seller, there’s no need to mention this
because it’s a matter of public record. However, if you represent the buyer, you may want to mention
it. Although, it may be difficult to back out of the agreement unless you can prove that the sellers
knew of this new ordinance and acted in bad faith.
173. If you listed a house and the seller accepted an offer, you have technically earned your commission
because you provided a buyer willing, able and ready to buy. Even if the seller notified you of divorce,
for example.
237
174. Crops/emblements are considered to be personal property i.e. chattel
175. It is not the agent’s responsibility to notify the buyer that they may be in a flood zone. The seller, on
the other hand, must be truthful on their Sellers Disclosure Statement and make mention of that fact if
known. If you represent the buyer, advise them to check with the city (municipality).
176. A mortgage is considered a specific lien.
177. The CAN-SPAM act is referring to spamming people. So, don’t block your caller ID, mass text, use
ringless voicemail, and don’t call people on the “Do Not Call” list.
178. A broker needs 90 hours of class time and at least 3 years of experience to qualify as a broker.
179. Mineral rights under the surface of land may be retained separately if a house is sold.
238

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185

NAME: (As It Appears On Your Driver’s License)

Street Address: City:

State: ZIP Code: Last 4 Digits of Social Security #:

BIRTHDATE: EMAIL ADDRESS:

Home Phone: ( ) Cell Phone: ( )

❑CASH Supervisor Initials Required:___________ ❑ CHECK # ___________________

❑ CREDIT CARD # ____________________________________________

Exp: ________________________ 3 or 4-Digit Security Code ________________

❑ Friend ❑ Our Flyer ❑ YellowPages.com❑ Google ❑ Yahoo❑ MSN

❑T.V. ❑Other: (please specify) ______________________________________

ATTENDANCE AND MAKE-UP POLICY

PREREQUISITE- There are no specific educational prerequisites to attend the courses.

INFORMATION ON REAL ESTATE SALESPERSON

STEPS TO OBTAIN A MICHIGAN REAL ESTATE SALESPERSON LICENSE

1) COMPLETE YOUR REAL ESTATE FUNDAMENTALS (PRELICENSURE) COURSE: Your school

2) COMPLETE AND SUBMIT YOUR REAL ESTATE SALESPERSON LICENSE APPLICATION:

3) RECEIVE AUTHORIZATION TO TEST:

5) TAKE AND PASS EXAM:

Dearborn Examination Center

Holt-Lansing Examination Center

Southfield–Crossroads Examination Center

Southfield-Lahser Road Examination Center

Grand Rapids Examination Center

Gaylord Examination Center

Marquette Examination Center

Property Ownership Page 5

Land Use Controls and Regulations Page 22

Valuation and Market Analysis Page 32

Principles of Agency Page 63

Property Disclosures Page 72

Leasing & Property Management Page 83

Transfer of Title Page 87

Practice of Real Estate Page 97

Real Estate Calculations Page 105

Michigan State Laws and Rules

Index Page 161

Multiple Choice Questions Page 166

QUESTIONS AND ANSWERS

A license enables you to collect compensation for:

1. Negotiating for the sale or purchase of property.

3. Negotiate for construction and development of property.

4. The sale of businesses including the name, goodwill, and equipment

Question 2: Who issues the license?

Question 3: Do I work alone or does someone else supervise me?

2. A salesperson must be employed by a Broker who will supervise his/her activities.

Question 5: How do I exactly work and get paid?

4. Although a salesperson usually works as an independent contractor, sometimes s/he

Question 6: How does cooperation with other Brokers take place?

Question 7: What if the house does not sell?

2. Provides for certain rules, fees, and fines.

Property Ownership (Salesperson 6% | Broker 7%)

A. Real versus personal property; conveyances

A - REAL VERSUS PERSONAL PROPERTY

2. PERSONAL PROPERTY [CHATTEL]

1B- DEFINING FIXTURES

HOW TO DETERMINE IF AN ITEM IS CHATTEL OR A FIXTURE

1. METHOD OF ATTACHMENT AND RELATION:

Example: A freestanding bookshelf = Chattel

A. ANNUAL PLANTINGS (CROPS, EMBLEMENTS): Are personal property. They

❑CASH Supervisor Initials Required:_ ❑ CHECK # _________

Exp: ________ 3 or 4-Digit Security Code