Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily
reduced interest rate commonly referred to as a:
A.rate cap
B.teaser rate
C.payment cap
D.prepayment rate
When using discounted cash flow analysis for valuation, an appraiser will prepare a
cash flow forecast, often referred to as a:
A.restricted appraisal report
B.net operating income statement
C.direct market extraction
D.pro forma
There are three main types of income subject to federal taxation. Which of the
following types of income includes income generated from rental real estate
investments?
A.Active income
B.Portfolio income
C.Passive income
D.Residual income
In making single-asset real estate investment decisions, the first pass often involves
calculating a series of returns, ratios, and multipliers. Which of the following is often
cited as a limitation associated with this type of analysis?
A.They are difficult to calculate
B.They are complex to understand
C.They fail to incorporate cash flows beyond the first year of the analysis
D.They are rarely used by industry professionals
Given the following information, calculate the going-in capitalization rate for the
specific property. First-year NOI: $18,750, Acquisition price: $150,000, Equity
Investment: 20%.
A.2.5%
B.12.5%
C.15.6%
D.62.5%
The demand for real estate derives from the need that participants in the user market
have for shelter and convenient access to other locations. The primary participants in
the user market include all of the following EXCEPT:
A.owner occupants
B.tenants
C.renters
D.pension fund managers
Suppose an owner is trying to decide whether or not to make improvements to her
property. Given the following information, what would be the value added or potential
loss if the improvements are undertaken? Current rent per square foot: $8.75,
Anticipated rent per square foot: $14.50, Cost of improvements: $250,000, Square feet:
34,000.
A.Gain of $54,500
B.Loss of $54,500
C.Gain of $195,500
D.Loss of $195,500
When employing the sales comparison approach, appraisers must consider numerous
adjustments to convert each comparable sale transaction into an approximation of the
subject property. Adjustments are divided into two groups: transactional adjustments
and property adjustments. All of the following are transactional adjustments EXCEPT:
A.Financing terms
B.Market conditions
C.Conditions of Sale
D.Location
In contrast to base activities, local economic activities (or secondary activities) serve
the local business and households that are recirculating the income derived through the
city’s economic base. Which of the following activities is NOT an example of land use
for local economic activity?
A.Retail centers
B.Restaurants
C.Automotive services
D.Regional office center
An alternative vehicle for financing commercial property involves having the lender
acquire an ownership (equity) interest in the property by supplying a portion of the
required equity capital in addition to providing the permanent debt financing. This type
of financing arrangement is commonly referred to as a(n):
A.installment sale
B.joint venture
C.land sale-leaseback
D.complete sale-leaseback
An early model of land use is the concentric ring model of urban form developed by
E.W. Burgess. Which of the following is closest to the downtown area of the central
business district (CBD)?
A.Blue-collar residential land use.
B.A zone of transition containing warehousing and other industrial land uses exists
between the downtown area and the residential area.
C.White-collar clerical residential land use.
D.Executive residential land use.
Given the following information, calculate the debt coverage ratio for this investment.
Potential gross income: $120,000, Vacancy rate: 9%, Net operating income: $57,900,
Operating expenses: $51,300, Acquisition Price: $520,000, Debt service: $40,000.
A.0.69
B.1.45
C.2.73
D.8.29
Using the following information, determine the location quotient for this industry.
Percentage of employment in financial services industry within the local community:
15%, Percentage of employment in financial services industry for the entire U.S.: 4.4%.
A.0.3
B.3.4
C.10.6
D.19.4
In most small to medium private real estate deals, syndicators play important roles
within the origination, operation, and completion phases of a real estate syndicate’s life.
All of the following are responsibilities of the syndicator in the operation phase of a
syndicate’s life EXCEPT:
A.Manage the syndication
B.Manage properties
C.Raise additional investment capital if required
D.Prepare the properties for sale
One of the main distinctions between commercial mortgage loans and residential
mortgage loans lies in the personal liability of the borrower. With residential loans, the
lender can hold the borrower personally liable in the event of a default. Such loans are
commonly referred to as:
A.recourse loans
B.nonrecourse loans
C.conforming loans
D.nonconforming loans
In recent years, home equity loans have become a popular form of second mortgage.
Their popularity has been a result of all of the following EXCEPT:
A.Lower interest rates than other consumer debt
B.Shorter terms than other consumer debt
C.Tax-favored status
D.Aggressive marketing by lenders
When fund managers collect contributions from multiple sources and “commingle”
them to purchase properties, this is referred to as the use of commingled real estate
funds. Which of the following institutional investors utilize commingled real estate
funds for approximately one-half of their investments in real estate?
A.Investment banks
B.Life insurance companies
C.Real estate advisory firms
D.Pension funds
The City of Grand Rapids installed a new water main on Oak Street. The city then
decided to charge the property owners along Oak Street a proportional cost of the new
water main. If a property owner refuses to pay their proportional share of the cost, the
city may file a(n):
A.property tax lien.
B.assessment lien.
C.general lien.
D.mechanics’ lien.
There are three major types of REITs: Equity REITs, Mortgage REITs, and Hybrid
REITs. Each differs in terms of what they invest in. Which of the following choices best
describes the investment focus of an Equity REIT?
A.Invests a significant percentage of their assets in both properties and mortgages
B.Invests primarily in and operates commercial properties
C.Purchases mortgage obligations
D.Purchases ownership interests in shares of pension funds and life insurance
companies
In an indexed lease, rents are dependent on a regularly reported index, most commonly
the consumer price index (CPI). By using the CPI as an index rate, the risk of
unexpected increases in general inflation is shifted to the _________, and therefore a
_________ base rental rate will typically be required.
A.owner; higher
B.owner; lower
C.tenant; higher
D.tenant; lower
Which of the following is an example of a negative easement appurtenant?
A.A driveway easement across one parcel to another.
B.Rights-of-way for roads.
C.A common drive easement where owners of adjoining lots must permit each other to
use a driveway lying on their shaped property line.
D.A scenic easement used to restrict construction on adjacent parcels so as to preserve a
valued view.
While floating rate mortgage loans may offer lower interest rates to borrowers than
comparable fixed-payment mortgages, floating-rate loans may increase a lender’s
exposure to which of the following risks since borrowers may not be able to continue to
service the debt if payments on the loan increase significantly?
A.Default risk
B.Interest rate risk
C.Liquidity risk
D.Pipeline risk
Survey research has been applied to real estate markets at many levels. Despite its
frequent application, analysts must be cautious with survey use because:
A.it is difficult to implement
B.interviews and questionnaires are not received well by consumers
C.it cannot be used in a small sample area
D.it can be fraught with abortive errors
While several kinds of real property conveyances result from events beyond the control
of the grantor, the majority of conveyances are voluntary through a deed. Which of the
following is an example of a voluntary conveyance of real property with a deed?
A.Patent
B.Probate
C.Condemnation
D.Implied Easement
The going-in capitalization rate can vary significantly by property quality. Which of the
following classes of properties within a particular property type would be expected to
have the highest cap rates?
A.Class A properties
B.Class B properties
C.Class C properties
D.Cap rates would be equal across all classes within the same property type
After construction has been completed, a developer may decide to seek additional
financing. If current interest rates are relatively high, but the developer expects them to
decline in the near future, the developer would most likely seek financing in the form of
a:
A.subordination agreement
B.miniperm loan
C.take-out commitment loan
D.floor loan
In commercial leases, rents do not necessarily have to be kept constant over the life of
the lease term. One option is for there to be prespecified increases in the contract rental
rate over time, sometimes referred to as ‘step-ups” or “escalations.” This type of rent
treatment is commonly referred to as:
A.flat rent
B.graduated rent
C.indexed rent
D.percentage rent
In the securitization process, mortgages are pooled together and cash flows are
packaged into securities to be sold in the secondary market. Agencies and private
companies that pool mortgages and sell mortgage-backed securities (MBS) are often
referred to as:
A.thrifts
B.credit unions
C.conduits
D.automated underwriters
To put into perspective the amount of residential mortgage debt outstanding, it is useful
to compare this market to other prominent sources of available debt. Listing the issuer
with the largest amount of debt outstanding first, which of the following choices best
depicts the relative rank ordering amongst the major sources of outstanding debt in the
U.S.?
A.Residential mortgage debt, marketable U.S. government bonds, corporate bonds,
consumer debt
B.Marketable U.S. government bonds, residential mortgage debt, consumer debt,
corporate bonds
C.Corporate bonds, marketable U.S. government bonds, residential mortgage debt,
consumer debt
D.Consumer debt, residential mortgage debt, marketable U.S. government bonds,
corporate bonds
Since the architect can be involved in various stages of the development process, there
are a number of methods used to compensate him for his services, each of which may
depend on the particular phase of development. If the architect provides pre-design
services or schematics early in the development process, he will typically be
compensated:
A.on an hourly basis
B.as a percentage of construction expenses
C.by a fixed fee plus expenses
D.only if he stays on the project through completion of the construction phase
A major problem in buildings constructed prior to the early 1970’s, which of the
following environmental hazards commonly associated with insulation has been the
focus of costly cleanups at many public buildings, especially schools?
A.Asbestos
B.Radon
C.PCBs (Polychlorinated biphenyls)
D.LUSTs (leaking underground storage tanks)
Most appraisers would say that report writing is one of the most important functions
that they perform. Assume that an appraiser is putting together a report for a major
income-producing property. Which of the following reporting options would be the
most appropriate?
A.Self-contained appraisal report
B.Summary appraisal report
C.Restricted appraisal report
D.Oral appraisal report