Guide to Passing the AMP Real Estate Exam SIXTH EDITION

53 Pages·2016·0.75 MB·English

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JOYCE BEA STERLING, DREI
Guide to Passing the AMP
Real Estate Exam
SIXTH EDITION
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JOYCE BEA STERLING, DREI,
WITH DEREK MCNEAL, CONTRIBUTING EDITOR
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Guide to Passing the AMP
Real Estate Exam
SIXTH EDITION
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This publication is designed to provide accurate and authoritative information
in regard to the subject matter covered. It is sold with the understanding that the
publisher is not engaged in rendering legal, accounting, or other professional
advice. If legal advice or other expert assistance is required, the services of a
competent professional should be sought.
President: Dr. Andrew Temte
Chief Learning Officer: Dr. Tim Smaby
Executive Director, Real Estate Education: Melissa Kleeman-Moy
Development Editor: Rosita Hernandez
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GUIDE TO PASSING THE AMP REAL ESTATE EXAM SIXTH EDITION
©2016 Kaplan, Inc.
Published by DF Institute, Inc., d/b/a Dearborn Real Estate Education
332 Front St. S., Suite 501
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La Crosse, WI 54601
All rights reserved. The text of this publication, or any part thereof, may not be
reproduced in any manner whatsoever without written permission from the
publisher.
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Printed in the United States of America
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ISBN: 978-1-4754-3574-0
PPN: 1970-1106
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C O N T E N T S
Preface v Condominiums 43
Basic Concepts and Terminology 45
Introduction vii
Types of Leases 46
Basic Elements and Provisions of Leases 48
U N I T 1
Rights and Duties of the Parties 49
Agency Relationships and
Remedies for Default/Nonperformance 50
Contracts 1
Sole Proprietorship 50
Creating Agency 1 Corporation 50
Types of Agency (Including Implied General or Limited Partnership 51
Agency) 1 Limited Liability Company (LLC) 52
Rights, Duties, and Obligations of the Liens (Voluntary, Involuntary, and
Parties 2 Priority) 53
Termination and Remedies for Easements/Rights-of-Way/Licenses 54
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Nonperformance 4 Preexisting Leases 56
Disclosure (Related to Representation) 4 Encroachment 56
Unilateral/Bilateral 4 Deed Conditions, Covenants, and
Validity 4 Restrictions 56
Void and Voidable 5 Property Owner Associations 57
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Notice of Delivery/Acceptance 5 Americans with Disabilities Act (ADA) 58
Executory/Executed 6 Land Use Restrictions and Regulations (i.e.,
Enforceability 6 Zoning) 59
Addenda to Contracts 6 Property Taxation 61
Electronic Signatures/Paperless Subdivision/Planned Unit Regulations (e.g.,
Transactions 6 Condominiums, Cooperatives, Planned Unit
General PrinciplesM and Legal Concepts 7 Developments) 61
Purchase Contract (Contract of Sale, Purchase
and Sale Agreement, etc.) 7 U N I T 3
Options (Contractual Right to Buy) 8
Finance 73
Basic Provisions/Purpose/Elements 9
PEquity 73
Conditions for Termination/Breach of
Loan-to-Value Ratio 73
Contract 10
Term and Payment 73
Offer and Acceptance (Counteroffers, Mul-
Principal and Interest 74
tiple Offers, Negotiation) 11
Contingencies 12 LDirect and Indirect Costs (Points,
Discounts) 75
Duties and Obligations of the Parties 12
Return on Investment/Rate of Return 78
Handling Funds of Others (Trust/Escrow
Government Programs (e.g., FHA, VA) 81
Funds, Earnest Money, Delivery) 12
Conventional 83
General Principles and Legal Concepts 13
Basic Provisions/Purpose/Elements 13 Owner-EFinanced 83
Land Contract/Contract for Deed 84
Duties and Obligations of the Parties 14
Basic Elements and Provisions of Financing
Conditions for Termination/Breach of
Instruments 84
Contract 18
Legal Principles 87
Remuneration/Consideration/Fees 19
Nonperformance (e.g., Foreclosure,
Types of Service/Listing Contracts 19
Default) 89
Real Estate Settlement Procedures Act
U N I T 2
(RESPA) 91
Real Property Ownership/Interest 39
Regulation Z 92
Joint Tenancy 41 Truth in Lending Act 92
Tenancy in Common 41 Antitrust 93
Trusts 43 Mortgage Fraud 93
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iv Guide to Passing the AMP Real Estate Exam Sixth Edition
Equal Credit Opportunity Act 95 Social Media and Internet 159
Dodd-Frank Act (TILA-RESPA Integrated Federal Fair Housing Act 160
Disclosure [TRID] Rule) 95 Protected Classes 162
Preapproval and Prequalification (e.g., Debt Redlining 163
Ratios, Credit Scoring, and History) 96 Blockbusting 164
Parties to the Lending Process (e.g., Loan Orig- Steering 164
inator, Underwriter, Mortgage Broker) 98 Advertising 164
Short Sale 99
U N I T 6
U N I T 4 Property Management 179
Real Property 111
General Principles of Property Management
Metes and Bounds 111 Agreements 179
SRectangular Survey 112 Basic Provisions/Purpose/Elements of Property
Lot and Block 114 Management Agreements 180
Structures (Space and Volume) 114 Types of Contracts 182
Livable Area 115 Duties and Obligations of the Parties 185
Land Measurement 115 Market Analysis and Tenant Acquisition 187
Basic CAoncepts and Terminology 116 Accounts and Disbursement 189
Influences and Characteristics Affecting Property Maintenance and Improvements 190
Value 116
Comparative Market Analysis (Performed by a U N I T 7
Real Estate Licensee) 118 Real Estate Calculations 203
Broker Price Opinion 118
Compensation, Commission, and Fees 203
Real Property (e.g., Fixtures vs. Personal Prop-
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Valuation/Market Sale Price and Yields 208
erty, Chattel) 119
Net to Seller, Cost to Buyer (Credits and
Sales Comparison (Market Data)
Debits) 214
Approach 121
Tax and Other Prorations 217
Cost Approach 122
Points 221
Income Analysis Approach 123 P
Loan-to-Value Ratios 221
Appraisal Process/Procedure 123
Measurement (e.g., Square Footage, Acreage,
Definition of Clear (Marketable) Title 124
Volume) 225
Matters Affecting Title 125
Property Management/Investment (e.g., Rate of
Recordation 125
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Return) 229
Title Insurance 126
Deeds 128
Sales Exam I 249
Will 130
Court-Ordered Sale (e.g., Foreclosure) 131 Sales Exam II 266
Settlement Procedures (Closing the
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Transaction) 131 A P P E N D I X A
State-Specific Questions to Know 283
U N I T 5
Marketing Regulations (Purchase and
A P P E N D I X B
Rental) 145
Forms 285
Environmental Concern (e.g., Lead-Based
Paint, Radon) 145
Glossary 291
Property Condition 153
Material Facts 156 Index 319
Antitrust 157 Key Point Review-To-Go 327
Do-Not-Call List 157
CAN-SPAM Act 159
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P R E F A C E
It is with pride that we present the sixth edition of Guide to Passing the AMP
Real Estate Exam. This was the first exam guide on the market that was designed
specifically for the licensing exam administered by Applied Measurement Pro-
fessionals, Inc. The AMP exam questions are complex, and we believe this book
will provide you with the testing edge to help you pass the exam.
Other than attending class, one of the most effective ways to prepare for your
state exam is by studying exam topics and answering practice questions. Guide
to Passing the AMP Real Estate Exam contains a streamlined review of the areas
covered on the exam and 960 practice questions to help you prepare for your
exam.
In writing the exam guide, the author has assumed that the reader is attending
Sa real estate prelicense class and that this book is being used as a review of
the material covered in class. Specific state information regarding fair housing,
transfer of deeds, and so on, should be obtained from your classroom instructor.
A B O U T T H E A U T H O R
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Joyce Bea Sterling, DREI, CDEI, SFR, e-Pro, GHS, SHS, has been teaching
real estate principles, practices, and law since 1986, and has helped thousands
of students pass their exams. Her instructional career includes being an adjunct
professor at Northern Kentucky University (previously an AMP state) and teach-
ing continuing education classes for the Kentucky Association of REALTORS®,
the Career Development Center Inc., and numerous real estate boards and bro-
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kers in Kentucky and Ohio. She was an instructor at the National Association
of REALTORS® in 2003, 2004, and 2006. With a Bachelor of Arts in Educa-
tion from Northern Kentucky University, and a Suggestive Accelerated Learning
and Teaching Certificate from Iowa State University, Joyce is a Distinguished
Real Estate Instructor (DREI). She also teaches the Short Sales and Foreclosures
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Resources (SFR) and e-Pro classes.
As an instructor, Joyce has taught every grade from kindergarten through col-
lege. Her credentials also include loan origination, Reverse Mortgage Specialist,
Senior Housing Specialist, GLeneral Housing Specialist, e-Pro, public speaking,
and stress management consultation. Joyce is coauthor of Modern Real Estate
Practice in Illinois, 3rd Edition, and audio reviews for various state exams.
A C K N O W L E D G M E N T S
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Special thanks go to Derek McNeal for his participation in the preparation of the
sixth edition of Guide to Passing the AMP Real Estate Exam by serving as a con-
tributing editor. McNeal has a combined background experience in accounting,
law, and real estate (investments, sales, and management leasing). He currently
teaches real estate prelicensing, continuing education, investing, and the pres-
tigious Certified Negotiation Expert designation, as well as how to become a
notary public. He has also served on the board of directors for the AMP Real
Estate Exam Item Task Force in Illinois.
Special thanks also go to Grace Ronkaitis, Attorney, Asset Law Group, PLLC,
Honor, Michigan, for her participation in the preparation of the fifth edition
of Guide to Passing the AMP Real Estate Exam by serving as a reviewer. Her
insights and suggestions are appreciated.
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vi Guide to Passing the AMP Real Estate Exam Sixth Edition
This book is dedicated to my daughter, Carrie Sterling Trapp; my nieces, Kenzie
Singleton and Keith Singleton; and my nephew, Branham Singleton. I am proud
of your values and your accomplishments.
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I N T R O D U C T I O N
A B O U T Y O U R E X A M
Knowledge is power—and knowledge of real estate can make or save you thou-
sands of dollars in the future. Congratulations on your decision to secure a real
estate license! To get started, you must pass the AMP exam; then, you can begin
your career as a real estate licensee.
Applied Measurement Professionals, Inc. (AMP), of Lenexa, Kansas, began in
1990 with the goal of supplying professional testing for future real estate agents.
Effective December 31, 2015, PSI Services LLC (PSI) acquired AMP. (Due to
this acquisition, AMP exam material and testing may be subject to change).
This introduction will help you review basic reading and study skills, understand
the format of the questions, and develop an exam strategy. The remaining units
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will guide you through a review of the seven areas covered on your real estate
exam.
AMP provides a candidate’s handbook that contains your exam application.
It is available through your school or the real estate commission and provides
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you with specific information regarding your own state exam. It is also avail-
able at www.goamp.com. Please read it carefully. This guide was written to be
a streamlined review of the material presented in the classroom. More in-depth
information about each subject is contained in the textbook.
U S I N G T H I S G U I D E T O P R E P A R E F O R
MY O U R E X A M
This comprehensive exam prep guide contains a variety of study tools to help
prepare you for your examination. The units follow the subject areas presented
on the national AMP outline found in the candidate’s handbook (available at
www.goamp.cPom).
National AMP Outline Number of Items
Agency Relationships and Contracts 28
Real Property Ownership/InteresLt 13
Finance 14
Real Property 14
Marketing Regulations 10
Property Management 8
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Real Estate Calculations 13
There are two sections on your exam: (1) the national section, which is reviewed
in detail in this guide; and (2) the state section, which covers individual state
laws. The exam will include pretest questions that do not count toward your
score.
In the units, a light bulb icon is placed next to the material that is vital for you
to know.
At the end of each unit is a 70-question unit review, as well as a matching quiz
covering important concepts from the unit. Both are designed to assess your
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viii Guide to Passing the AMP Real Estate Exam Sixth Edition
knowledge of key concepts and to show you exactly where you need to return
for further review and study.
There are two 110-question exams, which include rationales. The two exams are
found after the unit reviews.
There is a complete glossary covering the topics found on the AMP exam.
A removable key point review-to-go is contained at the end of the book. The
pages are perforated, so tear them out and take them with you wherever you go.
Even if you have only 10 to 15 minutes to study, the repetition of reading the
key points will help you commit them to memory. Also, review that section in
the final days or hours before your exam. These pages are very effective for last-
minute studying!
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T I P S F O R E F F E C T I V E S T U D Y I N G
Listening Effectively
AMost real estate students have work, family, and many other responsibilities.
That’s why it is so important to concentrate intently on the information the
instructor presents in class. Here are three basic rules for listening effectively.
Rule 1. Listen to what the instructor is saying, as well as to the inflections in
the instructor’s voice. An instructor’s voice will change as important material is
presented.
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Rule 2. Instructors do not know what will be on any given test. However, some
material is more important than other material. Listen carefully for the material
that the instructor indicates you must know for the state and national exams.
Rule 3. Your tiPme is valuable; make the most of it while you are in class. A
student who doodles, reads other material, or goes on a mental vacation during
class time is missing valuable information.
Reading Effectively L
Comprehensive reading is a skill that takes practice. Here are some steps to help
you develop this essential skill for studying and passing the test.
Step 1. Begin preparation for your exam with your textbook or other instruc-
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tional materials. Most text authors provide a preview of the material, as well as a
summary at the end of each unit. Read the preview, skim the headings, and read
the summary to grasp the author’s plan of presentation of the material. Then,
with an understanding of what is to be learned, read the unit.
Step 2. Highlight important words and terms while you are reading. Be sure to
learn the words that you do not understand, or ask your instructor their mean-
ings. Be sure you learn the vocabulary words. This is essential for passing your
exam.
Step 3. If possible, relate the material to your own life experiences. Recall list-
ing your property with an agent, as well as what occurred during the real estate
transaction. Read the important material at least three times, and then take the
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Introduction ix
test at the end of the unit. Read the material until you understand why you missed
any of the questions.
Step 4. Next, use this guide to help you review the important material until you
sit for your exam. Even if you have only a few minutes to review, it will help keep
the material fresh in your mind. Remember . . . repetition is the key to learning.
Step 5. When you have completed your classes, read the most important mate-
rial in this guide at least three times, and then answer as many test questions as
you can. You will find test questions at the end of every review area and sample
salesperson tests at the end of this guide. The more questions you can answer, the
easier the state exam will be.
Other Study Tips
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Read the class assignment before attending class to help you identify the areas in
which you want to ask questions.
Find a quiet place to study. When studying at home, resist answering the phone
Aor engaging in any other activities that can be distracting, such as having the tele-
vision or radio on in the background. Most schools have a library or classroom
available for study. If you make the effort to go to the library, you will probably
be able to better focus on learning the material.
Consider forming a study group or finding another individual with whom you
can study. Each individual should commit to reviewing the material indepen-
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dently before attending the study session. Determine your goals for each group
meeting, and appoint a group leader to keep you on target.
Sometimes, one person may try to dominate the study group. Be aware of any
people who want to control the entire group or who think they have all the right
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answers. Studying in groups should be a joint effort.
U N D E R S T A N D I N G Q U E S T I O N F O R M A T S
The following question formLats can be found on your AMP exam. Many students
miss questions because they do not take the time to read them carefully.
When approaching a question on your state exam, read and answer each ques-
tion three times. Read the first time to identify the format of the question being
asked and its content. Read the second tiEme to create in your mind a scenario of
what the question is asking and to identify key words and phrases. Then, read
each question a third time to make sure that you understand exactly what is being
asked.
Answer the question in your mind, then read the answers to find that answer.
Read each answer three times. There may be a key word or phrase in one of the
answers or in the question that indicates the right answer. There should be ample
time to read each question and each answer three times, but pace yourself. Keep
track of the time and complete the test. Let’s explore some of the types of ques-
tions that you may encounter on your exam.
Questions will be classified according to one of the following three levels of
learning:
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