Property rights created from marriage have a clear implication for real estate
transactions. Which of the following marital property rights gives a spouse a one-half
claim on all property acquired "from the fruits of the marriage?"
A. Dower
B. Curtesy
C. Elective share
D. Community property
Given the following information, calculate the appropriate going-in cap rate using
mortgage-equity rate analysis. Mortgage financing = 75%, Typical debt financing cap
rate: 10%, Sale price: $1,950,000, Before Tax Cash Flow (BTCF): $390,000.
A. 9.6%
B. 10%
C. 12.5%
D. 13.6%
Given the following information, calculate the NPV for this property. Initial cash
outflow: $200,000, Discount rate: 15%, CF for year 1: $25,876, CF for year 2: $23,998,
CF for year 3: $23,013, CF for year 4: $22,105, CF for year 5: $144,670.
A. -$51,875
B. -$59,657
C. $140,343
D. $295,951
Suppose a developer is interested in building a new residential subdivision. Through his
market research, the developer has determined that the target market segment potential
in year 1 consists of 160 households. If the developer projects that he will be able to sell
24 homes in the first year, what is his assumed capture rate?
A. 6.67%
B. 15%
C. 24%
D. 85%
The large and generally well-known retailers who draw the majority of customers to a
shopping center are more commonly referred to as:
A. Outlets
B. Anchors
C. Strips
D. Chains
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
When calculating the net operating income of a property, it is important to identify any
expenses that will be incurred in attempts to maintain the property. All of the following
would be considered operating expenses EXCEPT:
A. Property taxes
B. Property insurance premiums
C. Mortgage payments
D. Utility expenses
At the closing, the buyer will be credited for a number of costs that have been paid
up-front (or will be paid after closing) as well as a number of prorated expenses that
account for the period of time during which the seller occupied the house. All of the
following items detailed in the closing costs involve credits that are commonly passed
on to the buyer EXCEPT:
A. Earnest money
B. Hazard insurance premiums
C. Property taxes
D. Mortgage interest
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
Which of the following types of liens is automatically superior to any other lien?
A. Property tax and assessment lien
B. Mortgage lien
C. Lien arising from a court judgment unrelated to ownership of the property
D. Mechanics' lien
Assume you have taken out a partially amortizing loan for $325,000 that has a term of 7
years, but amortizes over 30 years. Calculate the balloon payment at maturity (Year 7)
if the interest rate on this loan is 4.5%.
A. $1,646.73
B. $118,468.21
C. $282,835.42
D. $324,572.02
Tom recently purchased a home in a residential subdivision. While mowing his lawn
and planting new shrubs for the first time since moving in, Tom's neighbor came
outside to inform him that he was violating one of the subdivision's rules which
required the use of a specific professional lawn service for all property landscaping
needs. Assuming this requirement can be enforced by the subdivision authority, this
would be an example of a(n):
A. easement
B. restrictive covenant
C. lien
D. estate
While the vast majority of conveyances of real property are private grants through a
deed, there are multiple ways in which voluntary conveyance can occur without a deed.
Which of the following types of easements can occur if a landowner gives an adjacent
landowner permission to depend on her land? (E.g. A landowner may give a neighbor
permission to rely on sewer access or drainage across his or her land.)
A. Easement by prior use
B. Easement of necessity
C. Easement by estoppel
D. Dedication
Growth management laws at the state level require local jurisdictions to plan for and
meet certain requirements. One such requirement prohibits local development unless
adequate infrastructure, schools, police/fire protection, and social services have been
put in place first. This requirement is referred to as the:
A. economic and environmental impact requirement
B. concurrency requirement
C. affordable housing requirement
D. extraterritorial jurisdiction requirement
An early model of land use is the concentric ring model of urban form developed by
E.W. Burgess. Of the following land uses, which would be closest to the downtown area
of the central business district (CBD) according to Burgess' model?
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 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%
The rental income generated by a lease can depend significantly on the proportion of
property-level operating expenses paid by the tenant. In which of the following types of
leases is the tenant responsible for all operating expenses?
A. Gross lease
B. Net lease
C. Net-net lease
D. Triple net lease
The emergence of mortgage securities propelled the development of mortgage
companies, an entity significantly different from the thrifts and banks that previously
dominated the mortgage landscape. Which of the following parties is responsible for
providing mortgage origination services and initial funding within this new framework?
A. Mortgage banker
B. Mortgage broker
C. Portfolio lender
D. Security analyst
In real estate markets, a transaction occurs only when the investment value of the buyer
exceeds the investment value of the seller. The buyer's investment value is the
________ that he or she would be willing to pay for a particular property, while the
seller's investment value is the _______ that he or she would be willing to accept.
A. minimum; minimum
B. minimum; maximum
C. maximum; minimum
D. maximum; maximum
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 shares in a publicly traded REIT
B. A retail property in the U.S. for a retail property in China
C. An office property for a principal residence.
D. A retail property for an office property, both within the U.S.
Suppose a developer is interested in building a new townhome community. Through his
market research, the developer has determined that the target market makes up 10%
(core market share) of the households that currently reside in the metropolitan area. If
an analysis of data from the MLS indicates that there should be approximately 500
residential sales in this area over the next year, what is the projected number of units the
developer could expect to sell in year 1 if he is able to capture 50% of the market
potential?
A. 500 units
B. 250 units
C. 50 units
D. 25 units
Changes in the discount rate used to complete net present value analysis can have a
significant impact on the estimated value of the investment and therefore affect the
overall investment decision. As the required internal rate of return (IRR) increases, the
net present value will:
A. decline
B. increase
C. remain the same
D. become zero
If the lender has agreed to offer you a loan with a loan-to-value ratio of 85%, what is
the size of the loan if the purchase price of the home is $500,000?
A. $75,000
B. $400,000
C. $425,000
D. $588,235
For most mortgage loans on commercial real estate, the right of prepayment is
constrained through a prepayment penalty. Which of the following types of prepayment
penalties requires a borrower to provide the lender with some combination of U.S.
Treasury securities that will serve to replace the cash flows of the loan being paid off?
A. Yield-maintenance prepayment penalties
B. Prepayment lockout
C. Defeasance prepayment penalty
D. Curtailment penalty
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. Of the following,
which is the primary risk that a lender reduces their exposure to through the relatively
short loan term on a balloon mortgage?
A. Default risk
B. Interest rate risk
C. Liquidity risk
D. Financial risk
In an analogy to the stock market, the net operating income of a property can be viewed
as which of the following?
A. Annual dividend expected to be produced by the property
B. Annual return on the value of the property
C. Market value of the property
D. Price-earnings ratio of the property
Certain costs associated with a property's upkeep as well as the manner in which it was
financed can be depreciated and therefore have a beneficial impact on the tax paid by
the investor in a particular year. Which of the following cash outflows is deductible for
income tax purposes in the year in which they are made?
A. Operating expenses
B. Capital expenditures
C. Up-front financing costs
D. Repayment of principal
Let's assume that you have just taken out a mortgage loan for $200,000 with an
origination fee of 2 points due upfront. The mortgage term is 30 years and the mortgage
rate is fixed at 4%. What is the cost of the origination fee in dollar terms?
A. $400.00
B. $954.83
C. $4000.00
D. $4954.83
The use of mortgage debt to finance an income property investment has certain tax
consequences. For example, up-front financing costs for investment properties are not
fully deductible in the year in which they are paid. Instead, they must be amortized over
the life of the loan. If up-front financing costs on a 30-year loan total $6,000, what is
the maximum amount per year that the investor can deduct when calculating taxable
income from rental operations? (Assume that there is no prepayment on the loan)
A. $100
B. $200
C. $2,400
D. $6,000
Which of these is most likely to be regarded as a capital expenditure rather than an
operating expense?
A. Property taxes
B. Trash removal
C. Insurance payments
D. Roof replacement
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
In considering the main components of a construction budget, which costs would be
expected to constitute the largest portion of a development project's expense?
A. Land costs
B. Hard construction costs
C. Soft construction costs
D. Marketing costs
A commercial real estate loan may take 90 days from the signing of the purchase and
sale contract until loan closing. Therefore, there is the possibility for interest rates to
fluctuate during this period. In some cases, the lender may offer the borrower the
opportunity to "lock in" the interest rate on the loan. To protect against exposure to rate
increases during this period, the borrower is often willing to pay a nonrefundable fee as
part of what is more commonly known as a:
A. Lockout provision
B. Rate lock agreement
C. Floating rate agreement
D. Yield maintenance provision
Violations of the requirements of a note that do not disrupt the payments on the loan
tend to be viewed as "technical" defaults. In practice, how many days must a payment
be overdue in order for lenders to treat a default as serious (i.e., a substantive default)?
A. One day
B. 30 days
C. 60 days
D. 90 days
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
