The Real Estate Settlement Procedures Act (RESPA) is a federal law that requires
federally chartered or insured lenders to provide buyers and sellers with information on
all settlement costs. According to RESPA, loan closing information must be prepared on
a special form known as the:
A. Uniform Settlement Statement or HUD-1 form
B. Good-faith estimate of settlement costs
C. Settlement Costs and You booklet
D. Certificate of occupancy
Blockbusting, which involves persuading an individual to sell her home by telling her
that minority groups are moving into the neighborhood, is one form of discrimination in
housing that is prohibited by which of the following acts of Congress?
A. Riegle Community Development and Regulatory Improvement Act
B. Secure and Fair Enforcement for Mortgage Licensing Act
C. Fair Housing Act (Title VIII of the Civil Rights Act)
D. Equal Credit Opportunity Act
Added to the index of the adjustable rate is a margin, which is the lender’s “markup.”
For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has
been stable at approximately:
A. 75 basis points
B. 175 basis points
C. 275 basis points
D. 375 basis points
In recent years, which of the following pooled ownership structures are used by private
funds that are trying to attract capital from very high net worth and institutional
investors?
A. General partnership
B. Limited partnership
C. C corporation
D. Limited liability company
Many states have enacted laws that determine the flow of ownership rights of real
property in the case of the owner’s death. For example, in the state of Florida if a family
residence is declared a homestead and the owner of the property passes away, the
surviving spouse and children will have automatic interests in the property. This type of
estate is more commonly referred to as:
A. Legal life estate with remainder interest
B. Ordinary life estate with remainder interest
C. Fee simple conditional interest
D. Periodic tenancy
Foreclosure is considered the ultimate recourse of the lender because it allows the
lender to bring about sale of the property to recover the outstanding indebtedness. All of
the following statements regarding foreclosure are true EXCEPT:
A. Foreclosure is a costly process for all parties involved.
B. Only those claimants who are properly notified and engaged in the foreclosure suit
can lose their claims to the property.
C. When a lender forecloses on a property, it extinguishes all superior liens, bringing
about a free and clear sale of the property. .
D. The net recovery by a lender from a foreclosed loan seldom exceeds 80 percent of
the outstanding loan balance and commonly is much less than this amount.
With a performance-based management contract, an asset manager’s fees are tied
directly to the rate of return earned by investors on the portfolio of managed properties
relative to a benchmark. In private commercial real estate, the choice of benchmarks for
performance is limited in large part to return indices provided by which of the following
organizations?
A. Standard and Poor’s
B. National Association of Real Estate Investment Trusts
C. National Council of Real Estate Investment Fiduciaries
D. Wilshire Associates
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
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
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
State and federal control of land uses has increased greatly over the past 40 years due in
part to an increased awareness of environmental hazards. Which of the following
federal environmental control laws was responsible for establishing the “Superfund” to
finance emergency responses and cleanups of abandoned and unregulated waste
dumps?
A. Clean Water Act
B. Resource Conservation and Recovery Act
C. Toxic Substances Control Act
D. Comprehensive Environmental Response Compensation and Liability Act
Given the following information, calculate the leasing agent’s commission in dollar
terms. Lease Term: 10 years, Monthly Rent: $5,000, Commission: 3%.
A. $150
A. $1,500
C. $1,800
D. $18,000
Each property has unique features, whether it is its age, the building design of its
structures, or its location. As such, real estate markets consist of assets that are
considered:
A. homogeneous
B. heterogeneous
C. substitutes
D. complements
Suppose that you have begun to gather some demographic data in order to project the
potential sales of a new development project. The developer hopes to be able to target
the following household types who fall in the upper 10% of income brackets: Empty
Nesters, Single Parents, and Unrelated Individuals. Utilizing the following population
information, determine the core market share that the development project yearns to
target with this project. Total Owner Occupant Households: 48,000; Traditional
Families in the Upper 10% of Income Brackets: 25,000; Empty Nesters in the Upper
10% of Income Brackets: 5,000; Single Parents in the Upper 10% of Income Brackets:
10,000; Unrelated Individuals in the Upper 10% of Income Brackets: 8,000
A. 4.17%
B. 47.92%
C. 52.08%
D. 92.00%
The tax treatment of real estate holdings that are classified as trade or business property
and are held for more than one year is more commonly referred to as which of the
following sections of the tax code?
A. Section 1231
B. Section 1031
C. Section 856
D. Section 851
Recently, mortgage banking has become the natural method for doing mortgage
lending. Within the mortgage lending process, which of the following roles serves as
the primary revenue source for mortgage banks?
A. Loan commitment
B. Loan funding
C. Loan servicing
D. Loan sales
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
Based on your understanding of the rules for determining when an object becomes a
fixture, which of the following items would most likely be considered a fixture at the
time of sale?
A. Custom (built-in) bookshelves
B. Refrigerator in a single-family residence being sold
C. Fence installed by the tenant of a rental property
D. Curtains
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
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.
Based on your understanding of the relation between risk and the phases of an income
producing property’s life, which phase would you expect to entail the highest risk?
A. Development and construction phase
B. Lease-up stage
C. Stable operation phase
D. All three stages of a property’s life have similar and equal risk
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
While uncertainties involving the multitude of players and stages in the development
process provide a great deal of risk, market cycles tend to compound these risks. Out of
the four phases of a market cycle, which would be the most desirable point for a
developer to enter the market?
A. Trough
B. Expansion
C. Peak
D. Decline
State licensing laws generally prescribe two levels of real estate brokerage licensing:
the broker license and the salesperson license. Which of the following responsibilities is
an individual with a salesperson license permitted to do?
A. Own and operate a real estate brokerage business
B. Handle money in trust for clients
C. Negotiate listing contracts or contracts for sale
D. Complete legal documents used in sales and leases in their own name
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
The choice of ownership form for pooled equity investments depends heavily on federal
tax considerations. Which of the following ownership structures suffers from the major
disadvantage of double taxation?
A. C Corporation
B. Subchapter S Corporation
C. General Partnership
D. Limited Liability Company
In discounted cash flow (DCF) analysis, the sale price of the property must be estimated
at the end of the expected holding period. The most common method for determining
the terminal value of the property is the:
A. yield capitalization method
B. direct capitalization method
C. repeat-sales approach
D. cost approach
An important piece of criteria for investors to consider when deciding between real
estate investment opportunities and investing in stocks or bonds is the effect of income
taxes on their return. For most investors, the effective tax rate on commercial real estate
is:
A. greater than the effective tax rate on a stock or bond investment
B. equal to the effective tax rate on a stock or bond investment
C. less than the effective tax rate on a stock or bond investment
D. cannot be compared across asset classes.
U.S. tax law is designed to raise revenues for the operations of the federal government
and to promote certain socially desirable real estate-related activities. Tax legislation is
combined into a single section of the federal statutory law commonly referred to as:
A. Section 1231
B. Section 1031
C. the Internal Revenue Code
D. Tax Reform Act
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
Unlike the debt coverage ratio, the debt yield ratio (DYR) is not affected by the interest
rate or amortization period of the loan; the DYR is simply a measure of how large the
NOI is relative to the loan amount. Lenders who rely on this ratio are typically willing
to accept a minimum DYR of
A. 10%
B. 20%
C. 60%
D. 80%
The most common definition of a city used for government data collection and
reporting, identified as a single labor market area centered around a city with a
population of at least 50,000 people, is referred to as a:
A. township
B. central business district
C. metropolitan statistical area
D. county
Suppose an investor deposits $2500 in an interest-bearing account at her local bank.
The account pays 2.5% interest compounded annually. If the investor plans on
withdrawing the original principal plus accumulated interest at the end of 7 years, what
is the total amount that
she should expect to receive assuming interest rates do not change?
A. $2,971.71
B. $2,974.89
C. $3,532.43
D. $11,920.93
Eminent domain is the right of government to acquire private land, without the owner’s
consent, for public use, with due process and just compensation. The legal procedure
for exercising the right of eminent domain is referred to as:
A. Growth restriction
B. Urban sprawl
C. Blighted development
D. Condemnation