Traditional home mortgage underwriting is said to rest on three elements, the “three
C’s.” The housing expense ratio is one tool that lenders will use to address concerns
associated with which of the “three C’s?”
A.Collateral
B.Creditworthiness
C.Capacity
D.Capability
A traditional zoning ordinance includes all of the following EXCEPT:
A.Minimum setback requirements
B.Minimum lot dimensions
C.Provisions for special use districts
D.Performance standards
Required by the Truth-in-Lending Act, the annual percentage rate (APR) is reported by
the lender to the borrower on virtually all U.S. home mortgage loans. The APR
accounts for all of the following EXCEPT:
A.All finance charges in connection with the loan, such as discount points, origination
fees, and underwriting fees.
B.All compensation to the originating brokers if one was used by the borrower.
C.Any prepayment of principal to be made on the loan.
D.Premiums for required forms of insurance.
One of the main criticisms of property taxes is that the property tax of lower income
households is higher than that of higher income households, as a percentage of their
respective incomes. In other words, taxes are criticized for being:
A.regressive
B.comprehensive
C.concurrent
D.extraterritorial
The refinancing decision is sometimes oversimplified into a few “rules of thumb” that a
borrower uses in order to gauge its potential benefits. Which of the following
methodologies is criticized for its inability to account for a variation in refinancing
benefits due to cost or holding period differences?
A.Payback period approach
B.Net benefit approach
C.Interest rate spread
D.Net present value approach
Six suburban office buildings have been constructed along six consecutive blocks in
Roseland, New Jersey. This is an example of:
A.central place pattern
B.clustering
C.concentric circle
D.multi-nuclei
Federal Housing Administration (FHA) loans differ from conventional loans in a
number of ways. All of the following statements regarding FHA loans are true
EXCEPT:
A.FHA loans are targeted toward first-time homebuyers who are in slightly weaker
financial circumstances than the typical prime conventional borrower.
B.FHA loans are more tolerant in terms of qualifying debt-to-income ratios.
C.FHA loans require higher credit scores than are needed for prime conventional loans.
D.FHA loans contain lower limits on their maximum size than are available through
conforming conventional loans.
The value of a property can be thought of as having two components, a land component
and a building component. Since the land component of the original cost basis is not
depreciable, it is important to understand how much of the property’s value is typically
attributed to the land for tax purposes. As a general rule, the value of land constitutes
what percentage (expressed as a range) of the total value of a commercial property?
A.0% to 10%
B.10% to 30%
C.30% to 50%
D.50% to 70%
In addition to numerous congressional acts that focus more on national regulation, laws
have been created that affect the practice of home mortgage lending at a community or
neighborhood level. For example, laws have been enacted to prevent lenders from
avoiding certain neighborhoods without regard to the merits of the individual loan
applications, a practice more commonly referred to as:
A.rescinding
B.redlining
C.assuming
D.holdout
The Federal Housing Administration (FHA) insures loans made by private lenders that
meet FHA’s property and credit-risk standards. Which of the following statements
concerning FHA insurance is true?
A.The insurance is paid by the lender and protects the lender against loss due to
borrower default.
B.The insurance is paid by the borrower and protects the lender against loss due to
borrower default.
C.The insurance is paid by the lender and protects the borrower against loss due to
lender default.
D.The insurance is paid by the borrower and protects the borrower against loss due to
lender default.
A tool used by real estate analysts to relate a consumer’s activities, interests, opinions,
and values to a consumer’s demographics is referred to as:
A.geographical information systems (GIS)
B.psychographics
C.survey research
D.census mapping
When a mortgage is used as collateral for the issuance of a mortgage-backed security
(MBS), the underlying mortgage is said to be ‘securitized.” As of 2008, approximately
what percentage of residential mortgage loans in the U.S. was being used as collateral
for the issuance of MBS?
A.25%
B.50%
C.75%
D.100%
While balloon mortgage loan payments are typically based on a 30-year amortization
schedule, the loan actually matures in either 3, 5, 7, or 10 years. The relatively short
loan term on a balloon mortgage reduces the lender’s exposure to which of the
following risks?
A.Default risk
B.Interest rate risk
C.Liquidity risk
D.Financial risk
Tax rates are usually stated in mills. Assuming the tax rate in percentage terms is 6.5%,
convert this rate to mills.
A.0.065 mills
B.6.5 mills
C.65 mills
D.650 mills
Real estate appraisal is often considered “more art than science,” since identifying truly
comparable properties is a subjective process. Therefore, it is essential that a
comparable property transaction at least meets the requirement that it was fairly
negotiated under typical market conditions. Which of the following types of
transactions would be most appropriate for use in the sales comparison approach to
valuation?
A.Commingled business transactions
B.Low-interest financing programs
C.Real estate auctions
D.Arm’s-length transactions
The distinction between market rent and contract rent is important due to differences in
lease terms. Office, retail, and industrial tenants most commonly occupy their space
under leases that run:
A.one year or less
B.one to three years
C.three to five years
D.ten years or more
The key to meaningful valuations in real estate is to use defensible cash flow estimates.
All of the following statements are true in regards to generating accurate cash flow
estimates EXCEPT:
A.Investors should include only those sources of income and expenses that relate
directly to the income producing ability of the property.
B.Investors should only consider recent events, rather than long-term trends when
evaluating revenue and expense items.
C.Investors should obtain information about comparable properties whenever possible.
D.Investors should take into consideration local zoning, land use, and environmental
controls that may impact the future flow of funds.
Bill and Mike go in together to purchase 342 acres of land to use for hunting and family
vacations. Ten years later, Bill dies and Bill’s wife wants to sell his half of the land.
Mike informs her that, unfortunately, she has no claim to the land and that upon Bill’s
death, his ownership interest transferred to Mike. What type of co-ownership did Bill
and Mike have?
A.Tenancy by the entireties
B.Tenancy in common
C.Joint tenancy
D.Condominium
Property rights can be divided into two classes, real and personal. Which of the
following is an example of real property?
A.Vehicles
B.Stocks and bonds
C.Patents
D.Commercial building
With a multitude of players involved in the development process, it is important to
understand where they participate within the various stages of development. Which of
the following individuals is the least likely to be involved in the design stage of
development?
A.General contractor
B.Landscape architect
C.Civil engineer
D.Land planner
Given the following information, calculate the load factor for this office property. Total
usable area: 20,000 sq ft, Tenant’s prorated share of common area: 5,000 sq ft.
A.0.25
B.0.80
C.1.25
D.4.00
Given the following information, calculate the net income multiplier for this property.
First-year NOI: $18,750, Acquisition price: $150,000, Equity Investment: 20%.
A.0.1
B.1.6
C.8.0
D.12.5
There are a number of alternatives when it comes to the capital structure for
acquisitions of commercial real estate. Through which of the following lending
relationships does the lender have the right to foreclose on the equity of the borrower’s
company in the case of default?
A.Second mortgage loan
B.Mezzanine loan
C.Mini-perm loan
D.Construction loan
Suppose that a tenant is interested in renting out a two-bedroom apartment for $1000 a
month for the next year. While the tenant requires rent to be paid at the beginning of the
month, he will not be depositing the rental check into a local savings account until the
end of each month. If the annual interest that the tenant can earn on this account is 5%
and interest is compounded monthly, how much will the tenant have in his savings
account at the end of the year?
A.$12,278.86
B.$12,613.94
C.$13,330.02
D.$15,917.13
One measure of the importance of a publicly traded asset class in the U.S. economy can
be calculated by multiplying the number of publicly traded shares by the current market
price of the stock. The result of this calculation is more commonly referred to as:
A.market capitalization
B.capitalization rate
C.price-earnings ratio
D.earnings-per-share ratio
According to the bid-rent model, which of the following changes in the model’s
underlying assumptions would most likely result in a decrease in rents for properties
closest to the central business district (CBD)?
A.An increase in an individual’s hourly wage
B.An increase in the average traveling speed of the individual’s commute
C.An increase in the number of households attempting to live in the area
D.An increase in the number of days an individual must commute to work
The two most important determinants of the classification of an office property are age
and obsolescence. Which of the following classes includes office buildings that are
older and reasonably maintained, but are below current standards for one or more
reasons?
A.Class A office
B.Class B office
C.Class C office
D.Investment grade property
Suppose a taxpayer owns an apartment complex. Under U.S. tax law, in what category
would this property be classified?
A.Personal residence
B.Dealer property
C.Trade or business property
D.Investment property
Assume that a piece of land is currently value at $50,000. If this piece of land is
expected to appreciate at an annual rate of 5% per year for the next 20 years, how much
will the land be worth 20 years from now?
A.$100,898.99
B.$112,633.09
C.$123,860.81
D.$132,664.89
Which of these is most likely to be regarded as a capital expenditure rather than an
operating expense?
A.Replacement of broken windows.
B.Landscape expense.
C.Pressure washing of walls.
D.Upgrade of insulation.
Once a specific use has been chosen for a site, the first stage in the development
process, often considered the “entry ticket to development,” is:
A.establishing site control
B.feasibility analysis
C.financing
D.construction
Given the following information, calculate the depreciation allowance for year 1.
Depreciable Basis: $200,000, Declining Balance Depreciation: 175%, Cost Recovery
Period: 27 years.
A.$3,704
B.$6,481
C.$7,407
D.$12,963
When fully amortizing loans call for equal periodic payments over the life of the loan
they are known as:
A.level-payment mortgages
B.adjustable-rate mortgages
C.interest-only mortgages
D.early-payment mortgages
The hybrid ARM attempts to balance the fixed payment desire of a borrower with the
lender’s desire to increase interest rates if market rates rise in the future. In its most
common form, known as a 2-28, the hybrid ARM will have a fixed-interest rate for:
A.1 year
B.2 years
C.26 years
D.28 years
Given the following information, calculate the loan-to-value ratio for this property.
Loan amount: $450,000, Interest rate: 7.5%, Acquisition price: $550,000
A.0.18
B.0.82
C.0.99
D.1.22