REAL PROPERTY

MBE PRACTICE QUESTIONS


Real Property Questions
Question 1
A developer and an investor had been in the
real estate business for many years. Because
of their long-standing relationship, the devel-
oper and the investor, neither of whom was an
attorney, often dispensed with certain legal
formalities when dealing with each other, thus
saving the costs of lawyers’ fees and other
attendant expenses. The investor owned a parcel
of land that the developer was interested in.
At lunch one day, the developer offered to buy
the parcel from the investor for $50,000. The
investor accepted the developer’s offer, and the
parties agreed on June 15 as the closing date.
The developer wrote out and handed the investor
a check for $2,500 with “earnest money” written
in the memo, and they shook hands on their deal.
A few weeks before closing, the developer
called the investor and told him she had changed
her mind about purchasing the land because of
a sudden economic downturn in the area. The
investor appeared at the developer’s office on
June 15 with the deed to the land in his hand.
The developer refused to tender the balance due,
and the investor sued the developer for specific
performance.
Will the investor prevail?
(A) No, because the agreement does not com-
ply with the Statute of Frauds and is, there-
fore, unenforceable.
(B) No, but the court will allow the investor to
keep the $2,500 earnest money as damages.
(C) Yes, because the $2,500 payment consti-
tuted part performance of the contract.
(D) Yes, because the developer and the investor
had established a course of dealing.
Real Property Questions 1.
Question 2
A landowner owned a large piece of property
containing an inn and a bakery. She entered into
a contract to sell the property to a purchaser
for $1 million. The contract was recorded.
The purchaser gave the landowner $200,000
as earnest money. The closing date was set for
September 10, two months after the signing of
the contract.
On August 10, an arsonist set fire to the inn,
which burned to the ground. On September
10, the landowner appeared at the closing and
tendered the deed to the property. The buyer
refused to tender the remaining $800,000 of the
purchase price and demanded the return of his
earnest money. The landowner sued the buyer
for specific performance of the contract. The
buyer countersued for the return of his earnest
money. Both parties stipulate that the value of
the property without the inn is $600,000, that
insurance on the property had lapsed, and that
the common law, unmodified by statute, applies.
What is the most likely result at trial?
(A) The landowner will not prevail on the issue
of specific performance, but will be al-
lowed to keep the earnest money.
(B) The landowner will not prevail on the issue
of specific performance and will be ordered
to return the earnest money.
(C) The landowner will prevail on the issue of
specific performance, but the price will be
abated to $600,000.
(D) The landowner will prevail on the issue of
specific performance for the full contract
price.
2. Real Property Questions
Question 3
A seller contracted to convey her property to
a buyer for $75,000. A title search revealed the
following: (i) There were 25 years left on a lease
of the property, which was recorded. The buyer
agreed to take title subject to the lease but was
not aware that the lease gave the lessee, his heirs,
and assigns an option to purchase the land at
any time before the end of the lease period. (ii)
The roof of the garage on the property extended
approximately one-half inch across the property
line into the airspace of an adjoining neighbor.
The garage did not interfere with any current or
future use of the adjoining lot. (iii) The home on
the property was subject to a $5,000 lien arising
from a dispute involving some remodeling
work. The seller promised to pay off the lien at
closing with the proceeds from the sale. (iv) The
property was subject to an easement by necessity
in favor of the adjoining neighbor. Last month,
the city extended the main road to the neighbor’s
land, but the neighbor planned to continue to use
the easement because it was more convenient.
In a jurisdiction that has a standard race-
notice recording statute and maintains the
common law Rule Against Perpetuities without
any modern statutory reformation, which encum-
brance renders the seller’s title unmarketable?
(A) The lessee’s option.
(B) The encroachment of the garage’s roof.
(C) The $5,000 lien.
(D) The easement.
Question 4
A mother purchased 80 acres of desert land
over 30 years ago. The deed was properly
recorded. Although her family had never even
visited the land, the mother had described to
them the little two-room cabin that sat in the
middle of the parcel near the dry streambed. Ten
years ago, the mother’s son found what he was
certain was the little cabin, and over the next few
years he built a barn, a greenhouse, and some
corrals, all enclosed by a sturdy wire mesh fence.
The area bounded by the fence, containing all
the structures, occupied about two acres of the
80 owned by the mother.
Three years ago, the mother died, validly
devising the 80 acres to the son. The son
entered into a contract for sale of the two acres,
describing it in detail with reference to the struc-
tures and nearby landmarks. The purchaser’s
surveyor discovered that the son had settled
onto a completely different parcel from the one
owned by the mother. The purchaser immedi-
ately announced that he would not proceed with
the sale contract. The state’s statutory period for
establishing adverse possession is five years.
If the son brings an action for specific perfor-
mance of the sale contract, for whom should the
court rule?
(A) The purchaser, because the son does not
own the land he is purporting to sell.
(B) The purchaser, because the son does not
have marketable title to the land he is
purporting to sell.
(C) The son, if he conveys by quitclaim deed.
(D) The son, because the description in the
contract of sale is sufficient to identify the
property and need not be as accurate as one
contained in a deed conveying land.
 Real Property Questions 3.

Question 5 Question 6

A rancher entered into a written contract to
buy a farm from a farmer for $100,000. The
contract stipulated for closing on September 30.
In addition, the contract contained the following
provision: “The taxes shall be prorated as
agreed to by the parties at a later date.” Upon
the signing of the contract, the rancher gave the
farmer a check for $10,000 as a down payment.
On September 28, the rancher notified the
farmer that he would not be able to close on the
farm until October 2, because the closing on his
current home, the proceeds from which were
to be applied to his purchase of the farm, was
unavoidably delayed due to his buyer’s illness.
Meanwhile, the farmer had difficulty finding a
home she liked as well as the farm. She decided
that she would rather not sell the farm and
wished to avoid the contract with the rancher. On
October 2, the rancher showed up at the closing
with the $90,000 to tender to the farmer. The
farmer did not show up. The rancher sues for
specific performance.
A buyer purchased a house from a seller. It
turned out that the concrete used to pour the
foundation had been improperly mixed and the
foundation was crumbling. The buyer discovered
that the cost of repairing the defective foundation
would be over $10,000. She filed suit against the
seller for the cost of repairs.
If the court rules in the buyer’s favor, what is
the likely reason?
(A) The crumbling foundation makes the house
unsafe or uninhabitable.
(B) The seller was the builder of the house.
(C) The buyer took title to the house by
warranty deed.
(D) The buyer had no knowledge of the defect
when she purchased the house, and the
defect was not reasonably apparent.

In whose favor will the court most likely rule?

(A) The farmer, because the tax provision is

an essential term of the contract, and it is
not specific enough to satisfy the Statute of
Frauds.

(B) The farmer, because the rancher materially

breached by not tendering performance on
September 30.

(C) The rancher, because of the operation of the

doctrine of equitable conversion.

(D) The rancher, because time was not of the

essence.
4. Real Property Questions

Question 7
A businessman entered into a contract to sell
his office complex to a purchaser for $1 million.
The purchaser paid the businessman $100,000
in earnest money. The day before the date set for
closing, the purchaser died intestate, leaving her
niece as her only heir. The niece showed up at
the closing with a certified check for $900,000.
home was two stories. The buyer asked the seller
to cancel the contract and to refund the $4,000
earnest money. The seller refused. The buyer did
not appear on the closing date. On September
16, the seller contracted to sell the home to a
purchaser for $198,000. The closing occurred
as planned on October 20. The buyer files suit
against the seller, praying for a refund of the
$4,000 earnest money.

Which of the following is correct? How much is the buyer likely to recover?

(A) The niece may specifically enforce the (A) The entire $4,000, because the buyer had
agreement. a justified medical reason for his failure to
perform.
(B) The businessman may return the $100,000
down payment and cancel the contract. (B) $2,000, because the diminution in value of
the property was only $2,000.
(C) Death terminates the agreement.
(C) $2,000 less any of the seller’s out-of-pocket
(D) Any title acquired would be unmarketable costs involved in remarketing the home.
by reason of the purchaser’s death.
(D) Nothing, because at the time the contract
Question 8 was entered into, $4,000 represented a
reasonable estimate of damages in the event
A seller put her house and lot on the market of breach.
for $200,000. After receiving several offers
within $5,000 of her asking price, the seller
entered into a contract to sell the house and lot to
a buyer for $200,000. The contract provided that
the buyer put up $4,000 in earnest money, which
the seller could treat as liquidated damages
unless:

The seller fails to tender marketable

title to the buyer by the agreed-upon
closing date, the seller commits a
material breach of this contract, or the
buyer dies prior to the closing date, in
which case the earnest money shall be
reimbursed to the buyer’s estate.

The contract was signed on July 24, and the

closing date was set for September 12.

On August 5, the buyer was seriously injured

in an accident. On September 10, the buyer was
released from the hospital in a wheelchair. He
determined that a ranch-style house would make
his life much more bearable, but the seller’s

Question 9
A landowner embarked on an expedition into
a remote jungle, leaving no means to communi-
cate with him. Because property values suddenly
began plummeting in the landowner’s neighbor-
hood, his son believed that it was imperative to
sell his father’s property before it became worth-
less. Having no way to speak to his father ahead
of time, the son prepared a deed conveying
the property to a buyer, but left the line for the
buyer’s name blank. He then signed his father’s
name on it as the grantor, and handed the deed
to the buyer. The deed, however, did not include
any language regarding the amount the father
was to receive in exchange for the property. The
buyer believed that the son was the owner of
the property. When the father returned, he was
happy that the property had been sold.
If the buyer changed his mind and now wishes
to have the conveyance set aside, which of the
following would be his best argument?
(A) The deed was not valid because the rap-
idly declining property values amounted to
extreme duress.
(B) The deed was not valid because the buyer
was not identified in the writing.
(C) The deed was not valid because the consid-
eration for the deed was not contained in
the writing.
(D) The deed was not valid because the son
signed it.
Real Property Questions 5.
Question 10
A man gave a friend a deed purporting to give
to the friend “My property known as Twelve
Oaks, with its five acres of land and the stable
and dressage course located thereon.” The man
told the friend that he was giving the property
to her, but because he did not have a better
description, he wanted to keep the deed until
his attorney could review it. The friend agreed
and gave it back to him. Unfortunately, the man
suffered a heart attack the next day and died
without seeing his attorney. However, when the
friend spoke with the administrator of the man’s
estate, she learned that the man had, as part of
another deed 12 years before, sold that part of
Twelve Oaks on which was located the stable
and dressage course.
The man’s heirs bring an action for declara-
tory relief against the friend, asserting that the
deed to Twelve Oaks is void because it contained
an inaccurate and ambiguous description.
How will the trial court rule?
(A) Against the friend, because the deed failed
to give an accurate description of the prop-
erty owned by the man at the time of his
death.
(B) Against the friend, because the man
informed the friend that he did not know
the description of his property and he
wanted his attorney to prepare the deed.
(C) Against the friend, because the deed
purports to transfer more property than the
man owned and thus is void as a matter of
law.
(D) For the friend, because the error in descrip-
tion was not sufficient to put in doubt what
the man intended to convey to her.
6. Real Property Questions
Question 11
A father drew up a deed conveying his land
to his son. The father never recorded the deed
and left it in the top drawer of his desk in his
study. Two years later, the father died. He left a
will, which declared that all of his property be
divided equally between the son and the father’s
daughter.
While going through his father’s personal
effects, the son discovered the deed to the land.
He showed the deed to his sister and the two of
them agreed not to record the deed. The son put
the deed in a desk drawer in his home. A year
later, the son died. As the executor perused the
son’s personal papers, he came across the deed
and promptly recorded it. He then entered into a
contract to sell the land to a buyer. The daughter
discovered this and promptly filed suit, claiming
an interest in the land. A statute of the jurisdic-
tion provides: “No conveyance is good against a
subsequent purchaser for value, without notice,
who first records.”
How will the court rule?
(A) In favor of the daughter, because there was
no proper delivery of the deed to the land.
(B) In favor of the daughter, because the
executor violated his fiduciary duty when
he recorded.
(C) Against the daughter, because the executor
and the buyer are protected by the
recording act.
(D) Against the daughter, because she is not a
bona fide purchaser.
Question 12
A woman and her friend lived together in
the woman’s home for 20 years. Subsequently,
the woman became disabled because of a heart
ailment and the friend had to take care of her.
The woman told the friend that she wanted to be
sure that the friend got her house after she died,
so she gave the friend a quitclaim deed. The
friend did not record the deed, but put it in his
safe deposit box.
Four months later, the woman’s son found out
about this and told his mother that if she would
sell the house to him, she could live there for
the rest of her life. The woman, who wanted
the money, agreed and carried out the transac-
tion. She told the friend that she had changed
her mind and decided to leave the home to her
children. The friend promised to destroy the
deed, and the next day, he did. Several days
later, however, as the friend and the woman were
driving to the store, their car was hit by a train
and they both died. Both died intestate, and the
son was the woman’s sole heir. The son and the
friend’s heirs claim title to the house.
The friend’s heirs bring an appropriate action
to resolve the dispute. Which party will the court
likely find owned the house?
(A) The friend’s heirs, because the woman did
not tell the friend the truth about why she
was revoking her agreement.
(B) The friend’s heirs, because the friend did
not retransfer title to the woman.
(C) The son, because the friend agreed to
return the title, and did in fact destroy the
deed.
(D) The son, because the friend, as a donee,
would not be able to prevail against the son,
who was a bona fide purchaser.

Question 13
An uncle validly executed and notarized a
deed conveying his beach house to his nephew,
and then validly recorded the deed. When the
nephew, who was experiencing financial diffi-
culties, learned of the recordation of the deed,
he immediately told his uncle that he did not
want the beach house and could not accept
such an expensive gift anyway. Later, the
nephew filed for bankruptcy and the trustee in
bankruptcy asserted an ownership interest in
the beach house on behalf of the debtor’s estate.
The bankruptcy court ruled that the property
belonged to the uncle and not to the nephew, and
thus was not part of the debtor’s estate subject to
distribution.
Which of the following is the strongest reason
in support of the bankruptcy court’s ruling?
(A) There was no presumption of delivery cre-
ated by recordation of the deed because the
nephew did not know of the recordation.
(B) The nephew’s statements to the uncle were
a constructive reconveyance of the property.
(C) There was never an effective acceptance of
delivery of the deed by the nephew.
(D) The recordation of the deed was invalid
because it was done without the nephew’s
permission.
Real Property Questions 7.
Question 14
A buyer entered into a written contract to
purchase a seller’s house for $250,000. The
contract called for the seller to deposit a deed
in escrow forthwith, and for payment of the
purchase price and delivery of the deed through
escrow within 30 days thereafter. The seller
immediately deposited the deed with the escrow
holder. On the 29th day, the seller was injured in
a snowmobile accident and rendered comatose;
he remains in this state to date. On the 30th
day, the sale closed pursuant to the contract; the
seller’s deed was delivered to the buyer, and the
$250,000 was paid over to the seller’s account.
Which of the following is true of the seller’s
incapacity?
(A) It has no effect on the buyer’s title.
(B) It constitutes a defect in the buyer’s title.
(C) It allows his court-appointed guardian to set
aside the buyer’s deed.
(D) It prevented passage of title to the buyer.
8. Real Property Questions
Question 15
A woman purchased a tract of land from a
man by warranty deed. Unbeknownst to the
woman, the man was not the actual owner of the
tract. The woman built a home on the tract and
moved into it. Two years later, the actual owner
learned of the man’s transaction with the woman
and prevented the woman from entering the tract
from that point forward. This led to a costly
court battle. When the woman notified the man
and told him that she thought it was his duty to
straighten this out, he ignored her. The statute of
limitations for actions on deed covenants is four
years.
The woman would succeed in a suit for
damages against the man for breach of which of
the following covenants of title?
(A) The covenant of quiet enjoyment only.
(B) The covenants of seisin, right to convey,
quiet enjoyment, warranty, further assur-
ances, and the covenant against encum-
brances.
(C) The covenants of seisin, right to convey,
quiet enjoyment, warranty, and further
assurances.
(D) The covenants of seisin and right to convey
only.
Question 16
To satisfy a debt owed to a creditor, a son
executed and delivered to the creditor a warranty
deed to a large tract of undeveloped land. The
creditor promptly recorded the deed. Shortly
thereafter, she built a house on the property and
has lived there ever since. The son never actually
owned the land. It belonged to his father, but the
father had promised to leave the property to the
son.
Later, the father died and his will devised the
property to the son. Pressed for money, the son
then sold the land to an investor by warranty
deed, which the investor promptly recorded.
Although the investor paid full value for the
property, he purchased it strictly for investment
and never visited the site. He therefore did not
realize that the creditor was living there, and
knew nothing of the son’s earlier deed to the
creditor.
The jurisdiction in which the land is located
has the following statute: “A conveyance of an
estate in land (other than a lease for less than
one year) shall not be valid against any subse-
quent purchaser for value without notice thereof
unless the conveyance is recorded.”
Which of the following is the most likely
outcome of a quiet title action brought by the
creditor against the investor?
(A) The creditor prevails, because the son had
no title to convey to the investor.
(B) The creditor prevails, because the investor
was not a purchaser for value without notice
of the creditor’s interest.
(C) The investor prevails, because under the
doctrine of estoppel by deed, title inures to
the benefit of the original grantee only as
against the grantor.
(D) The investor prevails, because under the
recording acts, the deed from the son to
the creditor was not in the chain of title
and hence did not constitute notice to the
investor.
 Real Property Questions 9.

Question 17 (B) The defendants, because the amusement

A corporation was in the business of
purchasing real property at below-market prices
and reselling the properties to investors. The
bylaws of the corporation authorized the chief
executive officer (“CEO”) and the director of
the marketing division to enter into contracts
on behalf of the corporation for the purchase or
sale of properties. The corporation had recently
purchased a large parcel of beachfront property
for resale. The CEO secretly opened negotiations
with an amusement park to sell the property.
However, unknown to the CEO or anyone else
in the corporation, the marketing director had
already reached an agreement with a hotel for
the sale of the property.
park is the only purchaser who properly
recorded a deed to the property.
(C) The hotel, because the amusement park had
constructive notice of the hotel’s interests in
the property when the agreement with the
CEO was made.
(D) The hotel, because the attempt to divest the
marketing director of authority to approve
sales of the corporation’s property was
invalid.

On April 23, the marketing director and the

hotel signed a written contract providing for sale
of the property by the corporation to the hotel
for $35 million. On April 25, the board of direc-
tors amended its bylaws, effectively depriving
the marketing director of authorization to bind
the corporation in purchase or sale transac-
tions. This action was immediately publicized
and became known to both the marketing
director and the hotel. On April 26, the hotel
duly recorded its contract. On May 1, the CEO,
still unaware of the marketing director-hotel
agreement, approved sale of the property to the
amusement park for $39 million. The necessary
documents of title were prepared and properly
recorded by the amusement park on May 5. Two
days later, the amusement park learned of the
marketing director-hotel agreement. On May 10,
the date scheduled for closing of the hotel’s sale
agreement, the CEO refused to accept the hotel’s
tender of $35 million and refused its demand for
a deed to the property.

The hotel subsequently brings action against

the corporation and the amusement park for
specific performance and to quiet title to the
property. For whom will the court likely rule?

(A) The defendants, because the board of direc-

tors had deprived the marketing director of
authority to bind the corporation in the sale
of real property.
10. Real Property Questions
Question 18
A landowner owned a large tract of land
containing numerous coal mines. To finance the
renovation of some of the buildings on the land,
the landowner obtained a $50,000 mortgage
from a bank. Shortly thereafter, the landowner,
without notifying anyone of the bank’s interest,
sold the surface of the land to his sister and the
mineral rights to a utility company. The bank
recorded its mortgage the next day; the day after
that, the utility company recorded its deed; the
following day, the sister recorded her deed. None
of the parties dealing with the landowner had
any knowledge of the others at the time of their
transactions.
The jurisdiction in which the land is located
has the following statute: “No conveyance or
mortgage of an interest in land is valid against
any subsequent purchaser for value without
notice thereof whose conveyance is first
recorded.”
If the sister brings an action to quiet title to
the land, what would be the most likely result?
(A) The sister would have only a reversionary
interest.
(B) The sister would have a fee simple absolute
free of the interests of the bank and the
utility company.
(C) The sister would have a fee simple absolute
subject only to the payment of the mortgage
held by the bank.
(D) The sister would have a fee simple interest
subject to the mineral rights of the utility
company and the mortgage held by the
bank.
Question 19
A landowner borrowed $30,000 from a
bank, secured by a mortgage on his land. The
mortgage papers were signed by the landowner
and by the chief loan officer as agent for the
bank on March 18. The loan officer filled out the
appropriate recording form and gave it to a bank
clerk on March 19, instructing him to file the
papers at the county recorder’s office. The bank
clerk inadvertently misplaced the papers. He
discovered the papers on April 10 and filed them
with the county recorder.
At the recorder’s office, the bank clerk discov-
ered a conveyance of the landowner’s land
from the landowner to a buyer dated April 5
and recorded on April 8. Subsequent inquiry
revealed that the buyer paid the landowner
$150,000 for the land after a diligent title search
and that the buyer had no knowledge of the
mortgage on the property until the loan officer
contacted her on April 11. The jurisdiction in
which the land is located follows the lien theory
of mortgages, and has a statute providing: “Any
conveyance of an interest in land shall not be
valid against any subsequent purchaser for value
without notice thereof who first records.”
If the bank seeks a declaration from the court
that the buyer owns the land subject to a $30,000
mortgage with the bank, is the bank likely to
prevail?
(A) Yes, because the bank’s interest was ac-
quired for value prior to the date when the
buyer recorded.
(B) Yes, because the mortgage was merely
security for a loan.
(C) No, because the buyer recorded first.
(D) No, because the jurisdiction follows the lien
theory.
 Real Property Questions 11.

Question 20 (B) The friend would prevail, because under the

A large tract of land was located in a jurisdic-
tion that has adopted the following statute:
No conveyance or mortgage of an
interest in land is valid against a sub-
sequent purchaser for value without
notice thereof whose conveyance is
first recorded.
doctrine of equitable conversion, his “right”
to the property preceded the woman’s
recordation, and thus whatever right she
may have had would have been terminated
before she could record.
(C) The friend would prevail, because he
purchased from the son, whose deed was
recorded before the woman’s deed.

The man who owned the land owed money (D) The woman would prevail, because she
to a woman, and in satisfaction of this debt, the recorded first.
man conveyed the property to her. Although
the woman intended to have the deed recorded,
she mistakenly failed to do so. Two years later,
the man borrowed money from a bank and, to
secure the loan, executed a mortgage deed on
the property. The bank promptly recorded this
mortgage. Three months later, the man, just
before he died, donated the property by general
warranty to his son, who did not know about
the prior events. The son recorded the deed and
entered into a contract with his friend to sell
him the property. The next month, the woman
discovered that the deed in her safe was not
recorded, and so, without notice of any of the
prior transactions, the woman recorded the deed.
A month after that, the friend paid the son full
value for the property, and without actual knowl-
edge of any of the other transactions regarding
the property, the friend had the deed duly
recorded. By the end of the next year, the friend
had expended substantial sums of money on the
property. However, when he put up the property
as security for a loan from the bank, he learned
for the first time of the woman’s claim.

In a suit between the friend and the woman,

which of the following statements most
accurately describes the probable outcome?

(A) The friend would prevail, because the

money he paid for the property, along with
the money expended since then, was far in
excess of what the woman paid, and under
equity, the friend would be deemed the
owner; however, he would have to reim-
burse the woman for what she paid for the
property.
12. Real Property Questions

Question 21 Question 22

An entrepreneur opened a specialized
business on her land. After using up most of
her capital to purchase inventory, however, the
entrepreneur needed more funds and asked her
friend for a $30,000 loan, to be secured by the
business’s inventory. The friend declined the
loan. A desperate entrepreneur then told the
friend she would convey the land, which had
a fair market value of $100,000, to him if he
would give her the loan at the current market
rate of interest. The friend agreed, and the
entrepreneur conveyed the land to the friend
the next day. At that time, the friend gave the
entrepreneur $30,000 in cash, and the parties
orally agreed that the entrepreneur would pay
the friend back at the rate of $1,000 per month,
and that after the loan was paid in full, the friend
would reconvey the land to the entrepreneur.
The friend immediately recorded his deed to the
land.
The entrepreneur made three $1,000 payments
to the friend and then paid no more. She
continued to live on the land but, being very
much in debt, could not repay the loan. The
friend, meanwhile, had received an offer to buy
the land for $100,000.
A vendor sold his house and lot to a vendee
for $60,000 by a written agreement that called
for a $10,000 down payment and $10,000 a
month on the first of each month thereafter
until the balance was paid. The vendee made
the down payment and first month’s payment
on time. He made the second and third months’
payments on the 15th of each month, skipped the
fourth month entirely, and resumed payments
on the 5th of the fifth month. The following
week, the vendor filed an unlawful detainer
action to have the vendee ousted and the contract
forfeited.
Who is likely to prevail?
(A) The vendee, because the vendor waived the
strict performance of the contract.
(B) The vendee, if the contract did not provide
that time was of the essence.
(C) The vendor, but he will have to refund the
vendee the amount of payments made.
(D) The vendor, and he may retain the amount
of payments made.

Which of the following most accurately states

the friend’s right to sell the property?

(A) The friend may sell the land and keep the
entire proceeds.

(B) The friend may sell the land, but he must

give $73,000 of the proceeds to the entre-
preneur.

(C) The friend may sell the land only after

formally foreclosing on the property.

(D) The friend may not sell the land.


Question 23
To secure a loan of $100,000 from a bank, the
owner in fee simple of a parcel of land conveyed
a deed of trust for the land to the bank. The
deed of trust contained a “power of sale” clause,
permitted by the jurisdiction, which allowed the
bank to sell the property in the event of default
without the necessity of a judicial foreclosure
action. After several years, the owner defaulted
on his loan payments to the bank. The bank
informed the owner that it was exercising its
power of sale. After appropriate notices, the
bank conducted a public sale of the land. The
bank was the sole bidder and obtained the
property for $80,000, which was $10,000 less
than the outstanding balance on the loan plus the
expenses of the sale. One month later, the owner
notified the bank that he wanted to pay off the
loan and extinguish the deed of trust, and was
prepared to tender $80,000 to do so. The bank
insisted that the owner must tender $90,000 to
pay off the loan.
If a court in the jurisdiction will require the
bank to accept only $80,000 under the circum-
stances above, what is the likely reason?
(A) The owner had the power to revoke the
trust as long as he was alive.
(B) The bank did not have the authority to bid
on the property at other than a judicial
foreclosure sale.
(C) The owner was exercising a statutory power
rather than an equitable power.
(D) The bank does not have the power to clog
the equity of redemption.
Question 24
A chef purchased a restaurant for $100,000.
As part of his financing, he obtained a purchase
money mortgage from a bank for $60,000. Due
to a clerical error by the bank, the mortgage was
not recorded in the county recorder’s office.
A statute in the jurisdiction provides: “No
conveyance of an interest in land, other than
Real Property Questions 13.
a lease for less than one year, shall be valid
against any subsequent purchaser for value,
without notice thereof, whose conveyance is first
recorded.”
After the chef’s restaurant had been in opera-
tion for five years, business dropped dramati-
cally. To stay in business, the chef obtained a
mortgage from a financing company for $30,000.
The financing company was not informed by
the chef of the mortgage held by the bank. The
next day, the chef contacted the bank about
renegotiating its mortgage. Checking its records,
the bank discovered that the original mortgage
was not recorded and immediately recorded it.
Later that day, the financing company recorded
its mortgage. A few days later, the chef and the
bank agreed to a modification of their mortgage
agreement to allow the chef to make lower
monthly payments in exchange for a higher
interest rate and a longer period of repayment.
Despite this agreement, the chef was unable
to make payments on the financing company
mortgage. The financing company instituted a
foreclosure action six months later, but failed
to include the bank as a party to the foreclosure
action.
If the financing company takes title to the
restaurant at the foreclosure sale, which of the
following statements most correctly describes
the bank’s interest?
(A) The bank’s mortgage on the restaurant sur-
vives under its original terms.
(B) The bank’s mortgage on the restaurant
survives under its modified terms.
(C) The bank’s mortgage is extinguished
because when it was modified it became
junior to the financing company’s mortgage.
(D) The bank’s mortgage is extinguished
regardless of the modification because
it had not recorded before the financing
company obtained its mortgage interest.
14. Real Property Questions

Question 25 and the driver is entitled to the remaining

$40,000.
A cyclist was injured when a driver ran a red
light. The cyclist subsequently sued the driver to (D) The bank is entitled to $30,000, and the
recover for her injuries, and obtained a money driver is entitled to the remaining $60,000.
judgment of $50,000. The state where the cyclist
and the driver reside has the following statute:
“Any judgment properly filed shall, for 10 years
from filing, be a lien on the real property then
owned or subsequently acquired by any person
against whom the judgment is rendered.”

The cyclist filed the judgment in the county

where the driver owned a valuable ranch.
Sometime later, the driver, who was also injured
in the accident, undertook to remodel all the
buildings on the ranch to make them wheelchair-
accessible. The driver borrowed $30,000 from
a bank for the improvements, securing the loan
with a mortgage on the ranch. The bank properly
recorded its mortgage. Before he paid any
principal on the bank’s loan, the driver decided to
build a new barn. He borrowed $20,000 from a
financing company for this purpose, also secured
by a mortgage on the ranch. The financing
company properly recorded its mortgage.

The driver subsequently defaulted on the

bank’s mortgage, and the bank brought a foreclo-
sure action, joining the financing company in
the proceeding. The foreclosure sale resulted
in $90,000 in proceeds after all expenses and
fees were paid. The driver still owes the cyclist
$50,000, the bank $30,000, and the financing
company $20,000.

How should the foreclosure proceeds be

distributed?

(A) The cyclist is entitled to $50,000, the bank

is entitled to $30,000, and the financ-
ing company is entitled to the remaining
$10,000.

(B) The cyclist is entitled to $50,000, the bank

is entitled to $30,000, and the driver is
entitled to the remaining $10,000.

(C) The bank is entitled to $30,000, the

financing company is entitled to $20,000,