Which of the following types of ownership estates is the most complete bundle of
rights, and therefore carries the greatest value?
A.Fee simple absolute
B.Fee simple conditional
C.Ordinary life estate
D.Legal life estate
All taxable income from investment property sales must eventually be classified as
either ordinary income, depreciation recapture income, or capital gain income. What is
the maximum tax rate that an investor can be charged on depreciation recapture
income?
A.10%
B.15%
C.25%
D.35%
Modern real estate brokerage normally relies on a multiple listing service (MLS)
through which brokers have access to each other’s listings. Which of the following
types of agency agreements is established with the use of a MLS?
A.Single agency agreement
B.Subagency agreement
C.Dual agency agreement
D.Designated agent agreement
For residential properties, the ratio of prospective rent to gross monthly income is a
valuable screening tool in judging a potential tenant’s ability to fulfill rent obligations.
Generally, this ratio should not exceed:
A.10%
B.20%
C.30%
D.40%
In collecting data for nonresidential property analysis, it is helpful to understand the
business community that currently exists in the specific area in question. A preliminary
approach for ascertaining the number of firms by size, industry, and location is to obtain
data from:
A.the Bureau of Labor Statistics
B.the National Transportation Service
C.the U.S. Bureau of the Census: County Business Patterns
D.the Federal Reserve
In order for the board of adjustment to approve a variance, all of the following
conditions must be met EXCEPT:
A.The owner must be unable to use the lot as zoned.
B.The condition is common to other parcels of land in the vicinity.
C.The variance must not materially change the character of the neighborhood.
D.The condition is unique to the lot.
The developer will face a variety of costs throughout the project’s life. Which of the
following would be classified as a soft cost?
A.Legal fees of the permitting process
B.Costs of materials
C.Labor cost of subcontractors for construction
D.Cost of land
Given the following information, calculate the lender’s yield. Loan amount: $166,950,
Term: 30 years, Interest rate: 8 %, Payment: $1,225.00, Discount points: 2.
A.7.7%
B.8.0%
C.8.2 %
D.10.0 %
Which of the following types of loans is the most common instrument used to finance
the acquisition of existing commercial property?
A.Fixed-rate balloon mortgage loans
B.Floating-rate mortgage loans
C.Mezzanine loans
D.Construction loans
When personal property items such as a range, refrigerator, and household furnishings
may be included in the home loan, which usually carries a longer term and lower
interest rate than if the borrower had financed these items with a separate consumer
loan, this is referred to as a:
A.Purchase-money mortgage (PMM)
B.Package mortgage
C.Home equity loan
D.Reverse mortgage
In contrast to residential mortgage loans, most fixed-rate commercial mortgages do not
allow borrowers to freely prepay the principal on their loan. Which of the following
prepayment penalties ties the penalty that borrowers pay to how far interest rates have
declined since origination?
A.Lockout provisions
B.Yield-maintenance agreements
C.Defeasance
D.Curtailment
Given the following information, calculate the appropriate after-tax discount rate. Tax
rate on comparable risk investment: 35%, Investor’s before-tax opportunity cost: 12%,
Capitalization rate: 8%.
A.2.8%
B.4.2%
C.5.2%
D.7.8%
Most often used in the description of urban property, which of the following methods of
land description contains information regarding the location of various easements and
may even contain a list of restrictive covenants?
A.metes and bounds
B.subdivision plat lot and block number
C.government rectangular survey
D.tax parcel number
Gross income multiplier analysis assumes that the subject and comparable properties
are collecting market rents. Therefore, it is frequently argued that an income multiplier
approach to valuation is most appropriate for which of the following property types?
A.Apartments
B.Office
C.Industrial
D.Retail
Which of the following types of direct co-ownership is a form of joint tenancy for
husband and wife?
A.Tenancy in common
B.Tenancy by the entirety
C.Condominium
D.Partnership
In contrast to maintenance and repair expenditures, which are operating expenses, the
improvement decision generally involves a capital expenditure meant to increase the
value of the structure. Which of the following classifications of improvements calls for
the restoration of a property to satisfactory condition without changing the floor plan,
form, or style of the structure?
A.Rehabilitation
B.Remodeling
C.Adaptive reuse
D.Conversion
The distinction between legal title and equitable title is an important concept in the
contract for sale of real estate. When the buyer obtains equitable title, the seller can no
longer sell the property to someone else, even though the legal title has not officially
passed on. In the contract for sale process, the creation of equitable title occurs when:
A.the contract for sale is written.
B.the contract for sale is signed.
C.the contract terms are agreed upon.
D.each party is deemed legally competent.
Given the following information on a fixed-rate loan, determine the maximum amount
that the lender will be willing to provide to the borrower. Loan Term: 30 years, Monthly
Payment: $800, Interest Rate: 6%.
A.$6,707
B.$9,295.15
C.$13,333
D.$133,433
Recording documents in the public records informs anyone who may have a potential
interest in a property of both the owner and lender. In so doing, it provides what is
commonly referred to as ____________ of an interest in real property.
A.mutual assent
B.constructive notice
C.consideration
D.simultaneous issue
Given the following information, calculate the taxes due on sale for the following fully
taxable sale. Net Sale Proceeds: $1,500,000, Adjustable Basis: $830,000, Depreciation
Recapture: $150,000, Capital Gain Tax: 15%, Depreciation Recapture tax: 25%.
A.$37,500
B.$78,000
C.$100,500
D.$115,500
The risk of bankruptcy tends to travel with the risk of foreclosure since both can result
from financial distress. Known popularly by its section in the Federal Bankruptcy Code,
which of the following types of bankruptcy is a court-supervised workout for a troubled
business?
A.Chapter 1 bankruptcy
B.Chapter 7 bankruptcy
C.Chapter 11 bankruptcy
D.Chapter 13 bankruptcy
Negative externalities can diminish a property’s value by imposing costs on the
community at large. In order to offset this detrimental impact, economists advocate
“internalizing” these externalities by implementing:
A.performance standards
B.impact fees
C.growth moratoriums
D.planned unit developments
Which of the following would be categorized as a cause of external obsolescence?
A.Lack of adequate insulation
B.Deterioration of indoor carpets
C.Increased traffic flow due to more intensive use in the local area
D.Outdated fixtures
Created by Congress to promote an active secondary market for home mortgages,
Fannie Mae and Freddie Mac purchase loans that meet specific underwriting standards
such as loan size, documentation, and payment to income ratio. The loans that Fannie
Mae and Freddie Mac are eligible to purchase are referred to as:
A.conventional loans
B.conforming conventional loans
C.nonconforming conventional loans
D.jumbo conventional loans
In a like-kind exchange, property owners must meet a number of conditions in order to
be eligible to take advantage of this tax deferment. One criterion is for the exchange to
be between “like-kind” properties. Which of the following exchanges represents an
example of an eligible “like-kind” exchange?
A.An apartment property for a mortgage on an apartment property.
B.A retail property in the U.S. for a retail property in China.
C.An office property for shares in an office REIT.
D.A retail property for an office property, both within the U.S.
When land use controls impose exceptional hardship and loss of value, a relief
mechanism must be provided. This relief is referred to as a:
A.building code
B.zoning ordinance
C.comprehensive plan
D.variance
Assuming all else the same, the future value of an annuity due will be _____________
that of an ordinary annuity.
A.Greater than
B.Equal to
C.Less than
D.Incomparable to
A planned unit development (PUD) is a residential development that differs from
traditional residential subdivisions in all of the following ways EXCEPT:
A.It encompasses a blend of detached single family, attached single family, townhouses
and apartments.
B.It typically has larger individual lots with extensive side-yards on the property.
C.It typically includes a variety of common areas.
D.It typically includes a variety of recreational facilities.
When lenders charge discount points (prepaid interest) on a loan, what impact does this
have on the loan’s yield?
A.The yield on the loan will increase.
B.The yield on the loan will decrease.
C.The yield on the loan will be unaffected.
D.The yield on the loan automatically becomes zero.
The going-in cap rate, or overall capitalization rate, is a measure of the relationship
between a property’s current income stream and its price or value. Which of the
following statements regarding cap rates is true?
A.It is a measure of total return since it accounts for future cash flows from operations
and expected appreciation (depreciation) in the market value of the property.
B.It is a discount rate that can be applied to future cash flows.
C.It is analogous to the dividend yield on a common stock.
D.It is the main determinant of a property’s value.