Louisiana Real Estate Salesperson Exam — All Questions

An owner wants to build closer to the lot line than the ordinance allows because of an unusual hardship unique to the lot. The owner should apply for a:

• a.a legal nonconforming use predating the rules
• b.a conditional use permit for a special use
• c.variance✓
• d.a complete rezoning of the district

A variance permits a use or dimension that departs from the zoning ordinance because of a special hardship, without changing the zoning itself. A conditional use permit allows a listed special use, a nonconforming use predates the ordinance, and rezoning changes the district classification.

A gas station that lawfully operated before the area was rezoned residential, and is allowed to keep operating, is best described as:

• a.a legal nonconforming use✓
• b.an illegal spot zone
• c.a conditional use permit
• d.a hardship variance granted by the zoning board of appeals

A legal nonconforming use is one that was lawful before a zoning change and is permitted to continue ('grandfathered'), though expansion or rebuilding may be limited. A variance and a conditional use are permissions granted under the current zoning, and spot zoning singles out one parcel improperly.

A church or hospital is permitted within a residential district because it serves the public. This is typically allowed through:

• a.a private deed restriction recorded by the developer
• b.a conditional (special) use permit✓
• c.a legal nonconforming use that predates the ordinance
• d.a variance granted because of an owner's personal hardship

A conditional (special) use permit authorizes a use that is compatible with a district under set conditions, such as a church, school, or hospital in a residential zone. A variance addresses hardship deviations, a nonconforming use predates the ordinance, and a deed restriction is private.

When a valid private deed restriction is more restrictive than the local zoning ordinance, which provision generally controls?

• a.neither, because the conflict makes both unenforceable
• b.the more restrictive of the two✓
• c.the zoning ordinance, which always overrides private restrictions
• d.the less restrictive of the two provisions

When public zoning and a valid private restriction differ, the more restrictive provision generally governs, so an owner must satisfy both. Zoning does not automatically wipe out stricter private covenants, and courts do not default to the more lenient rule or void both.

A comprehensive (master) plan is best described as:

• a.a federal regulation governing residential mortgages
• b.a long-range guide for a community's growth and land use✓
• c.an appraisal report on one specific property
• d.the detailed architectural blueprint for a single building

A comprehensive plan is a local government's long-range policy guide for orderly growth, coordinating land use, transportation, and public facilities; zoning is one tool used to implement it. It is not a single building's plan, a federal rule, or an appraisal.

Subdivision regulations primarily govern:

• a.how raw land is divided into lots with streets and utilities✓
• b.the handling of federal fair housing complaints
• c.the interest rate a lender may charge on a construction loan
• d.the state licensing and examination of appraisers

Subdivision regulations control the division of land into lots and the layout of streets, drainage, and utilities, often requiring a recorded plat approved by the local authority. They do not set loan interest rates, license appraisers, or handle fair housing complaints.

A developer transfers ownership of land for public streets and parks as a condition of subdivision approval. This transfer is called:

• a.dedication✓
• b.adverse possession
• c.escheat
• d.condemnation

Dedication is the transfer of privately owned land to the public for streets, parks, or other public use, common in the subdivision approval process. Escheat and condemnation are governmental acquisitions, and adverse possession is acquiring title through long, hostile occupancy.

If a land-use regulation deprives an owner of essentially all economically viable use of the property, a court may find that the regulation amounts to:

• a.a regulatory taking✓
• b.a variance
• c.a special assessment
• d.a dedication

If a regulation deprives an owner of essentially all economically viable use, courts may find a regulatory taking that requires just compensation, even though ordinary police-power rules need no payment. A variance is relief from zoning, a dedication is a land gift, and a special assessment is a tax for improvements.

A special assessment is a charge levied against specific properties to pay for:

• a.the general operating budget of the state government
• b.the monthly operating and reserve fees charged by a private homeowners association to its members
• c.the federal income taxes owed by the property owner
• d.a local public improvement that benefits those properties, such as sidewalks or sewers✓

A special assessment is a lien placed on the specific parcels that benefit from a local public improvement such as sidewalks, streets, or sewers, apportioned by the benefit received. It differs from general property taxes and from private HOA dues.

The use of a parcel that is legally permitted, physically possible, financially feasible, and maximally productive is called its:

• a.a legal nonconforming use
• b.a leasehold estate
• c.highest and best use✓
• d.a littoral right

Highest and best use is the reasonably probable use that is legally permissible, physically possible, financially feasible, and most productive, yielding the highest value; it underlies appraisal and site analysis. The other terms describe unrelated estate, zoning, or water concepts.

An owner whose land is completely surrounded by other parcels, with no access to any public road, may obtain access through an easement by:

• a.prescription
• b.estoppel
• c.necessity✓
• d.condemnation

An easement by necessity arises when a parcel is landlocked, giving the owner a legal right of access across the grantor's remaining land. A prescriptive easement comes from long hostile use, estoppel from reliance on permitted use, and condemnation is a government taking.

A temporary moratorium on new building permits and a requirement for environmental impact reports are examples of government controls exercised under:

• a.eminent domain
• b.police power✓
• c.the statute of frauds
• d.the right of escheat

Growth controls such as building moratoriums and environmental review requirements are police-power regulations protecting public welfare and resources. Eminent domain takes property with compensation, escheat handles heirless estates, and the statute of frauds concerns written contracts.

The four characteristics essential to value, remembered as DUST, are demand, utility, scarcity, and:

• a.desirability
• b.taxability
• c.transferability✓
• d.durability, meaning how long the item physically lasts

The elements of value are Demand, Utility, Scarcity, and Transferability (DUST): a good must be wanted, useful, in limited supply, and legally transferable to have market value. Durability, taxability, and desirability are not the four recognized elements.

Market value is best defined as:

• a.the exact amount that one particular, motivated buyer actually paid for it at the closing table
• b.the most probable price a property should bring in a competitive and open market✓
• c.the total money spent to build the improvements new
• d.the value the assessor sets for property taxation

Market value is the most probable price a property should bring in a competitive, open market under fair conditions with a willing, informed buyer and seller. Price is what a specific buyer actually pays, cost is the money to create the improvements, and assessed value is set for tax.

The principle holding that value is created by the expectation of future benefits from owning a property is:

• a.contribution
• b.anticipation✓
• c.substitution
• d.regression

Anticipation holds that value is created by the expectation of future benefits, such as income or appreciation - a key idea in the income approach. Substitution caps value at the cost of an equal alternative, contribution measures a component's added value, and regression is loss of value from lower-valued neighbors.

A modest house located among much larger, more expensive homes tends to be worth more than it otherwise would because of the principle of:

• a.contribution
• b.conformity
• c.progression✓
• d.regression

Progression means a lower-valued property gains value from being near higher-valued properties. Regression is the opposite - a high-value home loses value among lower-value ones. Contribution concerns a component's added value, and conformity favors similar, harmonious uses.

In the cost approach, the loss in value of the improvements from all causes is called:

• a.depreciation✓
• b.capitalization
• c.appreciation
• d.amortization

The cost approach estimates value as the replacement cost of the improvements new, minus accrued depreciation, plus land value; depreciation is that loss in value. Appreciation is a gain, amortization is loan repayment, and capitalization converts income to value.

An outdated floor plan with a bedroom reachable only by walking through another bedroom is an example of:

• a.external obsolescence
• b.functional obsolescence✓
• c.physical deterioration from ordinary wear and tear
• d.economic appreciation

Functional obsolescence is a loss in value from outdated or poorly designed features within the property, such as a bad floor plan or too few bathrooms. Physical deterioration is wear and tear, and external obsolescence comes from negative influences outside the property.

A well-maintained home loses value because a noisy new highway is built right next to it. This loss is:

• a.physical deterioration from wear
• b.a form of curable depreciation the owner can fix
• c.functional obsolescence in the design
• d.external (economic) obsolescence✓

External (economic) obsolescence is loss in value caused by factors outside the property boundary, such as a new highway, and it is generally incurable because the owner cannot fix it. Physical deterioration is wear, and functional obsolescence is an internal design flaw.

Using the income approach, a property has a net operating income of $60,000 and the market capitalization rate is 8%. What is the indicated value?

• a.$750,000✓
• b.$480,000
• c.$600,000
• d.$68,000

Income-approach value equals net operating income divided by the capitalization rate: $60,000 / 0.08 = $750,000. Multiplying by the rate would give $4,800, and the other figures come from mis-dividing; a lower cap rate would indicate an even higher value.

For a given, unchanging net operating income, as the capitalization rate applied to it increases, the indicated value:

• a.stays the same
• b.increases
• c.decreases✓
• d.doubles

Value equals income divided by the cap rate, so raising the cap rate lowers the value for the same net operating income (an inverse relationship); a higher required return means a buyer pays less per dollar of income. Value does not stay constant or double.

The gross rent multiplier (GRM) is calculated by dividing:

• a.the sale price by the gross monthly (or annual) rent✓
• b.the sale price by the annual net operating income
• c.the property's monthly rental income by its sale price
• d.the net operating income by the capitalization rate

The gross rent multiplier equals sale price divided by gross rent (Price = GRM x Rent). It uses gross rent, not net income, and does not subtract expenses, which makes it a quick screening tool rather than a precise valuation method.

A comparable property is superior to the subject because it has an extra garage. To account for this in the sales comparison approach, the appraiser:

• a.adjusts the subject property's value upward
• b.subtracts value from the comparable's sale price✓
• c.ignores the difference between the two
• d.adds value to the comparable property's recorded sale price

In the sales comparison approach, adjustments are made to the comparables, never the subject. If a comparable is superior (has a feature the subject lacks), the appraiser subtracts value from the comparable's price to make it equivalent to the subject; inferior comparables are adjusted upward.

A comparative market analysis (CMA) prepared by a licensee differs from an appraisal because it:

• a.is required by federal law on every real estate sale
• b.is an informal pricing tool, not a formal appraisal✓
• c.must always be performed by a state-certified appraiser under USPAP
• d.relies exclusively on the cost approach to value

A CMA is an informal estimate a licensee prepares from comparable sold, active, and expired listings to help price a property; it is not a certified appraisal and does not require an appraiser's license. Formal appraisals are USPAP-governed opinions of value.

Reconciliation, in the appraisal process, refers to:

• a.prorating the property taxes at the closing table
• b.recording the deed in the county public records
• c.balancing the broker's separate client trust and operating escrow accounts
• d.weighing the results of the approaches into a final value opinion✓

Reconciliation is the appraiser's final step of analyzing and weighting the value indications from the applicable approaches to reach a single, supportable opinion of value; it is judgment, not a simple average. It is unrelated to escrow, recording, or proration.

The cost approach to value is generally MOST appropriate for valuing:

• a.a parcel of vacant farmland
• b.a newly built public library✓
• c.a small rental duplex
• d.a thirty-year-old single-family tract home

The cost approach works best for new or special-purpose properties (schools, libraries, churches) that rarely sell and generate no market income, so comparables and income data are scarce. Standard homes use sales comparison, and income property uses the income approach.

'Plottage' refers to the increase in value that can result when:

• a.a single large lot is subdivided into many separate smaller lots
• b.a building physically depreciates over time
• c.two or more adjoining parcels are combined under one owner✓
• d.the market capitalization rate rises

Plottage is the added value created when adjacent parcels are merged (assembled) into one larger, more useful parcel under a single owner; the process of combining them is assemblage. Splitting land is subdivision, and the other choices are unrelated.

An appraisal is best defined as:

• a.the figure set by the tax assessor
• b.a guaranteed final selling price for the subject property
• c.the price the seller is currently asking
• d.an opinion or estimate of value as of a specific date✓

An appraisal is a professional, supportable opinion or estimate of a defined value (such as market value) as of a specific effective date; it is not a guarantee of sale price. The list price is the seller's asking figure, and assessed value is set for taxation.

The principle of contribution states that the value of any component of a property is measured by:

• a.the amount it originally cost the owner to construct
• b.how much it adds to the whole, not what it cost✓
• c.the total price of the entire property
• d.its full replacement cost when new

Contribution holds that a component (such as a remodeled kitchen or a pool) is worth what it adds to the property's total value, which may be more or less than its cost. An improvement can cost more than it returns, so cost does not equal value added.

Installing a $100,000 kitchen in a neighborhood of modest, lower-priced homes usually will not return its full cost. This illustrates the principles of:

• a.littoral rights
• b.escheat
• c.anticipation of future ownership benefits
• d.contribution and regression✓

An over-improvement will not return its full cost because the market and the surrounding lower-valued homes limit how much value the upgrade contributes - the principles of contribution and regression. Anticipation concerns future benefits, while escheat and littoral rights are unrelated.

In a deed of trust, which party holds legal (or 'naked') title to the property until the loan is repaid?

• a.beneficiary
• b.trustee✓
• c.trustor
• d.mortgagee

In a deed of trust there are three parties: the trustor (borrower), the beneficiary (lender), and a neutral trustee who holds title as security and reconveys it when the debt is paid or sells it on default. The mortgagee is the lender in a two-party mortgage, not a deed of trust.

The loan clause that lets a lender call the entire remaining balance due if the borrower sells or transfers the property is the:

• a.a subordination clause changing lien priority
• b.alienation (due-on-sale) clause✓
• c.the acceleration clause triggered by the borrower's default
• d.a defeasance clause releasing the lien at payoff

An alienation or due-on-sale clause lets the lender demand full payment when the property is transferred, preventing an unapproved assumption. An acceleration clause makes the balance due on default, defeasance releases the lien at payoff, and subordination lowers a lien's priority.

The term 'hypothecation' means:

• a.transferring full legal ownership of the property permanently to the lender
• b.refinancing an existing loan at a lower rate
• c.pledging property as security for a loan while keeping possession✓
• d.paying off the entire loan balance ahead of schedule

Hypothecation is pledging property as collateral for a debt without giving up possession, which is exactly what a mortgage or deed of trust does; the borrower keeps living in the home while the lien secures the loan. It is not a transfer of ownership or a payoff.

The gradual repayment of a loan's principal and interest through regular, scheduled payments is called:

• a.hypothecation
• b.acceleration
• c.subordination
• d.amortization✓

Amortization is paying off a loan through scheduled payments that cover interest and reduce principal, so the balance reaches zero by the end of the term; early payments are mostly interest and later ones mostly principal. The other terms describe different loan features.

A loan whose regular payments do not fully retire the debt, leaving a large lump sum due at the end of the term, has a:

• a.a negative amortization cap
• b.a prepayment penalty
• c.balloon payment✓
• d.a fully amortized structure

A partially amortized (or interest-only) loan leaves an unpaid balance due as a lump-sum balloon payment at the end of the term. A fully amortized loan pays off completely with the last regular payment; negative amortization is a growing balance, and a prepayment penalty is a charge for early payoff.

Discount points paid to a lender at closing are used to:

• a.fund the initial escrow reserve
• b.buy down (lower) the loan's interest rate✓
• c.cover the property appraisal fee
• d.pay the real estate broker's sales commission

Discount points are prepaid interest a borrower pays at closing to lower (buy down) the note's interest rate; one point equals one percent of the loan amount. They are not commission, appraisal, or escrow charges, though they do affect the loan's overall cost.

One discount point equals what percentage of the loan amount?

• a.0.1%
• b.10%
• c.1%✓
• d.0.5%

One point equals one percent (1%) of the loan amount - for example, one point on a $200,000 loan is $2,000. Points are used either as discount points to lower the rate or as an origination fee, and they are calculated on the loan, not the sale price.

Under Regulation Z, if an advertisement states a 'trigger term' such as a specific down payment or monthly payment, the ad must also disclose:

• a.other key credit terms such as the annual percentage rate (APR)✓
• b.the property's most recent assessed value
• c.the listing broker's commission rate
• d.the full legal name and mailing address of the property's seller

Under Regulation Z, using a trigger term in an ad (such as a specific down payment, payment amount, or term) requires disclosure of additional credit terms, including the APR, so consumers see the full cost. The other items are unrelated to Truth in Lending advertising.

RESPA (the Real Estate Settlement Procedures Act) applies to and primarily regulates:

• a.the annual assessment of real property for taxation
• b.the state licensing, testing, and continuing education of real estate agents
• c.appeals of local zoning decisions
• d.federally related mortgage loans and their settlement (closing) costs✓

RESPA governs federally related mortgage loans, requiring settlement-cost disclosures and prohibiting kickbacks and referral fees for settlement services. It does not handle agent licensing, property tax assessment, or zoning appeals.

RESPA specifically prohibits a lender or title company from paying or receiving:

• a.a loan origination fee for work performed
• b.an unearned kickback for referring settlement business✓
• c.a standard document recording charge
• d.a legitimate discount point that is charged to the borrower

RESPA's Section 8 bars kickbacks, referral fees, and unearned fees among settlement service providers because they inflate consumer costs. Discount points, origination fees, and recording charges are legitimate charges for actual services, which RESPA allows.

Under the TILA-RESPA Integrated Disclosure (TRID) rule, the borrower must receive the Closing Disclosure at least how many business days before loan consummation?

• a.1
• b.7
• c.2
• d.3✓

Under TRID, the lender must deliver the Closing Disclosure to the borrower at least three business days before loan consummation, giving time to review the final terms and costs. The Loan Estimate is due within three business days after application; this waiting period helps prevent last-minute surprises.

The Equal Credit Opportunity Act (ECOA) prohibits a lender from basing a credit decision on all of the following EXCEPT:

• a.the applicant's receipt of public assistance
• b.the applicant's sex, marital status, or age
• c.the applicant's demonstrated creditworthiness and ability to repay✓
• d.the applicant's race, color, religion, or national origin background

ECOA bars credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. A lender may - and must - evaluate an applicant's creditworthiness, income, and ability to repay, since those are legitimate lending factors.

A conventional mortgage loan is best described as one that is:

• a.always insured by the Federal Housing Administration
• b.not insured or guaranteed by any government agency✓
• c.always guaranteed by the Department of Veterans Affairs
• d.funded directly with money from the federal government

A conventional loan carries no government insurance or guarantee; the lender relies on the borrower's credit and the property, often requiring private mortgage insurance if the down payment is under 20%. FHA loans are insured and VA loans are guaranteed, but the government does not fund them directly.

Private mortgage insurance (PMI) on a conventional loan primarily protects:

• a.the seller's equity in the home
• b.the lender against loss if the borrower defaults✓
• c.the borrower personally if they happen to lose their job
• d.the appraiser from a valuation error

PMI protects the lender (not the borrower) against loss if a borrower with a low down payment defaults; it is typically required when the loan-to-value ratio exceeds 80% and can usually be canceled once enough equity is reached. It does not protect the borrower, seller, or appraiser.

An FHA loan is:

• a.insured by the FHA and made by approved private lenders✓
• b.available only to eligible military veterans
• c.made directly by the federal government to buyers
• d.guaranteed against loss by the Department of Veterans Affairs

FHA loans are made by FHA-approved private lenders and insured by the Federal Housing Administration, which lets lenders offer low down payments to qualified buyers. VA loans are guaranteed for veterans, neither is funded directly by the government, and FHA loans are open to the general public.

A key benefit of a VA-guaranteed loan for eligible veterans is that:

• a.it eliminates every closing cost on the purchase
• b.it is a grant that never has to be repaid
• c.it charges the veteran borrower absolutely no interest at all over the term
• d.it can allow an eligible veteran to purchase with no down payment✓

The VA guarantee protects the lender against loss, allowing eligible veterans to buy with little or no down payment and no monthly mortgage insurance. It is still a loan that must be repaid with interest, and it does not waive all closing costs.

Under a straight (term) note, each periodic payment covers:

• a.only the property taxes and insurance
• b.principal only, with no interest ever charged
• c.equal payments of principal and interest that fully retire the debt over time
• d.interest only, with the full principal due at the end of the term✓

A straight, or term, loan is interest-only during the term, so the entire principal remains due as a lump sum at maturity. An amortized loan blends principal and interest to pay off the balance; payments do not cover principal alone or only taxes and insurance.

The clause in a mortgage or deed of trust that permits a later loan to take priority over an existing lien is the:

• a.acceleration clause
• b.subordination clause✓
• c.a defeasance clause releasing the lien
• d.prepayment clause

A subordination clause is an agreement that an existing lien will move to a lower priority so a new loan can take precedence, often used with construction financing. Defeasance releases a lien at payoff, acceleration makes the balance due on default, and a prepayment clause addresses early payoff.

Usury laws are designed to:

• a.set a minimum down payment on every loan
• b.require the purchase of federal flood insurance coverage
• c.cap the maximum interest rate a lender may charge✓
• d.mandate title insurance on all sales

Usury laws set a legal ceiling on the interest rate a lender may charge, protecting borrowers from excessive rates; charging above the limit is usury. They do not address flood or title insurance or down payment minimums.

When a buyer takes title 'subject to' an existing mortgage rather than assuming it, the buyer:

• a.must pay off the existing balance at closing
• b.becomes fully and personally liable for the entire mortgage debt owed
• c.is not personally liable but can lose the property if payments stop✓
• d.must formally qualify with the lender to assume it

Buying 'subject to' a loan means the buyer makes the payments but takes on no personal liability; if payments stop, the lender can foreclose and the buyer loses the property, though the original borrower remains liable. Assuming a loan, by contrast, makes the buyer personally liable and usually requires lender approval.