State: Michigan | Category: Real Estate | All tests in this Category:
Practice Test 1 Practice Test 21. A subordination clause most benefits which party?
The trustor benefits because a new loan can take priority over an existing loan, allowing for additional financing options.
2. In a single-net (N) lease, which expense is paid by the tenant?
In a single-net lease, the tenant is responsible for property taxes while the landlord covers other operating costs.
3. The cost approach is most appropriate for valuing:
The cost approach works best for new or unique properties where comparable sales are limited. Older homes may have significant depreciation, making other approaches more reliable.
4. In Michigan, if a fixed-term residential lease ends and the tenant remains without a new term, the tenancy generally becomes:
When a fixed-term lease expires and no new term is agreed, the tenancy usually becomes a periodic (month-to-month) tenancy, terminable by 30 days’ notice in many Michigan contracts. Always check the specific lease terms for renewal provisions.
5. Under Michigan law, a real estate contract for the sale of property must be...
The Michigan Statute of Frauds requires real estate contracts to be in writing and signed to be enforceable.
6. In Michigan, which entity is primarily responsible for preparing and delivering the closing package (deed, mortgage, and related documents)?
Title companies or attorneys prepare, review, and deliver the closing package in Michigan transactions.
7. If a mechanic's lien claim is not timely filed or perfected, it may be unenforceable.
Timely filing and perfection are typically required for enforcement of a mechanic's lien.
8. Private mortgage insurance (PMI) protects the lender against:
PMI provides financial protection to lenders if a borrower defaults on a mortgage with a low down payment.
9. A life estate pur autre vie is measured by the life of whom?
Pur autre vie means 'for another's life'—the measuring life is a person other than the life tenant named in the deed.
10. Effective gross income is calculated by:
Effective gross income = potential gross income – vacancy and collection losses, representing the actual expected income from the property.
11. A junior mortgage is usually:
A junior mortgage is secondary to the primary mortgage and is repaid after the first lien in case of default.
12. Which statement best describes a mutual rescission in Michigan real estate contracts?
Mutual rescission occurs when both parties agree to terminate the contract, ending obligations.
13. A ceiling fan permanently installed in a home is classified as:
A permanently installed ceiling fan is considered a fixture, thus part of real property.
14. Under MI agency law, if a party asks about another party's confidential information, what is the licensee's obligation?
Licensees should not disclose confidential information without consent; they may provide non-confidential information or seek client authorization.
15. How does Michigan treat applicants with criminal convictions when applying for licensure?
The Board evaluates criminal history on a case-by-case basis, considering factors like the nature and timing of offenses.
16. Which act governs the licensing and escrow practices in Michigan?
The Michigan Real Estate Licensing Act governs professional licensing and related escrow practices within the state.
17. When must the agency relationship be disclosed to a prospective client in Michigan?
MI law requires disclosure of agency relationships at the first substantial contact to ensure informed decisions and prevent misrepresentation.
18. When a lien is satisfied, the lienholder should provide a release that is recorded.
A lien release clears the title and should be recorded to remove the encumbrance.
19. What document is used to show the condition of title and any exceptions before closing?
A title commitment (title report) lists the title's condition, liens, and exceptions that must be addressed before closing.
20. If a property is changed from Class I to Class II due to a change in use (eg, residential to commercial), what is the likely effect on its property tax?
Changing from a residential Class I to a higher-use Class II generally increases the tax burden due to higher applicable millage and assessment values.
21. A property’s highest and best use is defined as:
Highest and best use refers to the use that is legally permissible, physically possible, financially feasible, and most productive, producing the maximum value for the property.