FC 81236

Type

Quiz

Book Title

Real Estate Finance & Investments (Real Estate Finance and Investments) 14th Edition

ISBN 13

978-0073377339

March 13, 2017

Most real estate loans have a definite term to maturity, stated in years. The majority of

home loans will typically have a term to maturity between:

A. 1-5 years

B. 5-7 years

C. 7-15 years

D. 15-30 years

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

Property rights can be dismantled into lesser bundles, referred to as interests, which can

then be held by different individuals. Interests in real property that include possessions

are referred to as:

A. fixtures

B. townships

C. licenses

D. estates

Suppose you are interested in taking a mortgage loan for $250,000 in order to purchase

your principal residence. Your lender has suggested that you might be interested in

taking an FHA loan. In order to do so, you must pay an additional up-front mortgage

insurance

premium (UFMIP) of 1.0% of the mortgage balance. If the interest rate on the

fully-amortizing mortgage loan is 5% and the term is 30 years, what is your monthly

mortgage payment assuming the UFMIP is financed?

A. $1,342.05

B. $1,355.47

C. $1,498.88

D. $2,500

When a buyer acquires a property having an existing mortgage loan, a decision must be

made as to whether or not the subsequent owner of the property can preserve the loan.

If the buyer does not add his or her signature to the note, the buyer does not take on any

personal liability. In this case, the buyer is said to:

A. assume the old loan

B. purchase the property subject to the existing loan

C. obtain the property through the use of a contract for deed.

D. foreclose on the property

A recent trend in commercial leases is for tenants to negotiate a cap on the amount of

certain operating expenses they are required to reimburse the landlord. Such caps are

usually negotiated on operating expenses thought to be at least partially controllable by

the owner. Which of the following would typically be considered an operating expense

controllable by the owner?

A. General maintenance

B. Property taxes

C. Insurance payments

D. Utility expenses

A contract for sale of real estate usually calls for the seller to provide evidence of title

as a requisite to completing the sale. Today, the predominant medium through which a

seller meets this requirement is by providing:

A. only a title abstract.

B. only an attorney's opinion of title.

C. only a title insurance commitment.

D. only a seller's disclosure

One of the main differences between residential mortgage loans and permanent

financing of commercial real estate lies in the allocation of liability in the case of

default. In commercial real estate, a "bankruptcy remote" special-purpose entity is

created that shields the actual borrower from personal liability. When a lender cannot

lay claim to the personal assets of the defaulted borrower, this type of loan is commonly

referred to as a:

A. nonrecourse loan

B. mini-perm loan

C. partially amortizing loan

D. interest-only loan

Despite many innovations in the lending process that made mortgage loans more

accessible and affordable to the general public, many potential borrowers faced

considerable barriers in qualifying for a loan and making a down payment. Which of

the following types of loans was designed for a borrower with weak credit, those who

seek 100 percent financing, or who cannot document their income?

A. Conventional prime home loan

B. Affordable housing loan

C. Subprime mortgage loan

D. Bridge loan

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

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

The choice of ownership form for pooled equity investments can also depend on the

desire to avoid personal liability. Which of the following ownership structures suffers

from the major disadvantage of unlimited liability for all investors?

A. C Corporation

B. Subchapter S Corporation

C. General Partnership

D. Limited Partnership

While predicting real estate cycles is difficult, a key indicator used to evaluate where a

property is within the cycle is:

A. the level of household income

B. the form of land use

C. the size of the property

D. the number of building permits issued

Because a city's output capacities change slowly over time, it is important to understand

the supply side (long-run) factors affecting urban growth. Which of the following would

NOT be considered a supply-side factor that impacts a city's economic growth?

A. Nature of the available labor force

B. Quality of life within a community

C. Cooperation of local leadership and government

D. City's export activity

Suppose you have obtained a 6%, 30 year fully-amortizing FHA mortgage loan of

$152,625 to finance the purchase of your primary residence. In so doing, you must pay

an additional mortgage insurance premium (MIP) of 1.10%. If the first-year average

loan balance is $151,775.25, determine the first-year monthly insurance premium

payment.

A. $139.13

B. $1,025.69

C. $1,669.53

D. $1,678.88

Up until the market for these instruments collapsed in 2008, which of the following was

the fastest-growing source of long-term commercial mortgage funds from 2002-2007?

A. Real estate investment trusts (REITs)

B. Commercial mortgage backed securities (CMBS)

C. Construction loans

D. Residential mortgage backed securities (MBS)

If we desire to classify land by its use, land that does not include any improvements to

the land would be categorized as:

A. "Raw" land

B. Building site

C. Developed land

D. Property infrastructure

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. as of the end of 2011?

A. Residential mortgage debt, marketable U.S. government bonds, corporate bonds,

consumer debt

B. Marketable U.S. government bonds, residential mortgage debt, corporate bonds,

consumer debt

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

Contracts for sale may contain sections that cause implementation of the contract to

depend on the successful completion of some prior action such as the buyer's ability to

obtain financing on specified terms. This type of contract is commonly referred to as

a(n):

A. contract assignment

B. equitable title

C. contract with contingencies

D. uniform settlement statement

Jonathan recently sold his home and was able to take home $423,000 after paying the

real estate broker's commission of 6%. If the buyer was ultimately found through a

buyer broker, the dollar commission will need to be split between the listing broker and

buyer broker. If the buyer broker is entitled to 40% of the commission, what is her share

of the commission rounded to the nearest dollar?

A. $10,800

B. $13,500

C. $16,200

D. $27,000

In accordance with RESPA, whenever a buyer obtains a new first mortgage loan from a

chartered or insured lender, when the loan is insured by the FHA or guaranteed by the

VA, or when the loan will be sold to one of the federally related secondary mortgage

market agencies, a good-faith estimate of the settlement costs must be provided by the

lender within:

A. 3 business days

B. 5 business days

C. 30 calendar days

D. 90 calendar days

The majority of residential units in the U.S. are contained in multifamily structures, or

apartment buildings that contain five or more housing units. Which of the following

multifamily structures will range in height from four to nine stories and are typically

found in both cities and suburbs?

A. High-rise apartment buildings

B. Midrise apartment buildings

C. Garden apartments

D. Condominiums

In a mortgage loan, the borrower always creates two documents: a note and a mortgage.

Which of the following pieces of information is provided in the mortgage?

A. How the interest rate is to be computed.

B. Whether the borrower has the right to prepay the principal during the term of the

loan, and any prepayment penalties that would be incurred as a result.

C. Whether the borrower is released from liability for fulfillment of the contract.

D. An unambiguous description of the property that is being pledged as collateral for

the loan.

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 comparable property sold 15 months ago for $105,000. If the appropriate adjustment

for market conditions is 0.25% per month (without compounding), what would be the

adjusted price of the comparable property?

A. $105,262.50

B. $105,393.80

C. $108,937.50

D. $144,375

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

The expertise of several types of engineers must be coordinated by the architect in

bringing together the final structure design. Which of the following types of engineers

is responsible for specifications to achieve safety and stability for a structure's

foundation?

A. Soils engineer

B. Structural engineer

C. Mechanical engineer

D. Civil engineer

While it is often sufficient to rely on informal methods of estimating the market value

of real estate assets, the complexity and large dollar value of many real estate decisions

dictate that formal estimates based on methodical collection and analysis of relevant

market data should be utilized. The unbiased written estimate of the market value of a

property is

commonly referred to as a(n):

A. arm's length transaction

B. appraisal

C. property adjustment

D. reconciliation

If the per share stock price of a REIT is greater than its per share net asset value (NAV),

the REIT is said to be selling at:

A. par value

B. a discount

C. a premium

D. an auction

When a buyer signs an offer to purchase a property, the broker receives a monetary

amount from the purchaser of 5 or 10 percent of the purchase price. This deposit is

commonly referred to as the:

A. commission

B. earnest money

C. closing cost

D. title insurance premium

Suppose an investor is interested in purchasing the following income producing

property at a current market price of $450,000. The prospective buyer has estimated the

expected cash flows over the next four years to be as follows: Year 1 = $40,000, Year 2

$45,000, Year 3 = $50,000, Year 4 = $55,000. Assuming that the required rate of return

is 12% and the estimated proceeds from selling the property at the end of year four is

$500,000, what is the NPV of the project?

A. $8,829.96

B. $9,889.56

C. $428,113.65

D. $459,889.56

Traditional zoning regulations are criticized for often being too rigid in forcing uniform

types of development. One proposed solution to this issue allows traditional zoning

requirements to vary in exchange for an enhancement to the community, such as the

construction of a park. This is more commonly referred to as a:

A. Planned unit development

B. Performance standard

C. Impact fee

D. Growth restriction

In the Elysian Forest example, the planned unit development was destined to be an

unsuccessful venture from its inception because:

A. There was a comparable project in the community that was successful.

B. The site and location of the project was atypical of the area as there were significant

disadvantages in terms of location and visual appeal.

C. The target market was a nontraditional segment that relied heavily on a small portion

of the local University City population.

D. University City was a big, high density city that could not support such

development.

Assume that a borrower has a choice between two comparable fixed-rate mortgage

loans with the same interest rate, but different mortgage terms, one being a 30-year

mortgage and the other a 15-year mortgage. Under financially unconstrained

circumstances, which of the following statements best describes the borrower's

preference?

A. The borrower would prefer the 30-year mortgage.

B. The borrower would prefer the 15-year mortgage.

C. The borrower would be indifferent between the two mortgages.

D. The borrower is unable to compare mortgage loans of two different maturities.