Professor James Graaskamp often asserted that when one buys real estate, what one is
buying is a set of assumptions about the future. Therefore, it is not surprising that the
beginning point of the market research process is to:
A. collect relevant data to examine the market and test initial definitions
B. evaluate the results of market analysis
C. construct a market-defining ‘story”
D. refine market definitions and collect additional data
Concerned with a potential information asymmetry problem, state legislators have been
proactive in passing legislation that protects the rights and interests of tenants within
which of the following property types?
A. Office
B. Retail
C. Industrial
D. Apartment
Assume you have been hired to appraise a local hospital. Your best estimate of the
reproduction (or replacement) cost of the building is $3,700,000. However, upon
evaluating the use of land in the local area, you have deemed the value of the site to be
worth an additional $800,000. If the building has depreciated by $500,000 over its
lifetime and there are no further depreciation losses due to external or functional
obsolescence, what is the indicated value of the hospital using the cost approach?
A. $2,400,000
B. $3,700,000
C. $4,000,000
D. $4,500,000
Since property taxes are paid in arrears, the buyer will be responsible for paying them
after closing. Suppose that the closing date on the home for sale is February 28th of a
leap year (e.g., 2012, 2016, etc). How many calendar days would the seller be
responsible for when calculating his/her share of the property tax owed for the year in
which the home was sold.
A. 58 days
B. 59 days
C. 307 days
D. 308 days
Given the following information, calculate the capitalization rate for the following
apartment complex. Number of apartments: 15; Market Rent (per month): $1,000;
Vacancy and Collection Loss: 10% of potential gross income; Operating Expenses: 5%
of effective gross income; Capital Expenditures: 10% of effective gross income;
Acquisition Price: $1,710,000.
A. 8.1%
B. 9.0%
C. 9.5%
D. 10.5%
With most standard home loans, the lender can hold the borrower personally liable in
the event of a default. Such loans are commonly referred to as:
A. recourse loans
B. nonrecourse loans
C. conforming loans
D. nonconforming loans
Given the following information, calculate the effective tax rate expressed in mills.
Market value of property: $280,000, Assessed value of property: 50 % of the market
value, Exemptions: $2,000, Annual tax liability: $4,685.10.
A. 1.69 mills
B. 3.35 mills
C. 16.73 mills
D. 33.95 mills
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.
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 that an appraiser has just completed her analysis using the cost approach to
valuation. She has determined that the market value of the subject property is $400,000.
If the
added value of the site was $80,000 and accrued depreciation amounted to $50,000,
what was the reproduction cost of the building?
A. $270,000
B. $370,000
C. $430,000
D. $530,000
Primarily through land use controls and property tax policy, which of the following
branches of government has the largest influence on real estate values?
A. Local government
B. State government
C. National government
D. Foreign government
Which of the following tools of public land use control represents the earliest method of
police power to regulate land use? (Hint: Standards for energy efficiency and
sustainability are the most recent trends in the application of this land use control)
A. Subdivision regulation
B. Zoning
C. Building Codes
D. Planned Unit Developments
Development taking place in rural areas well beyond the urban fringe is commonly
referred to as:
A. urban sprawl
B. holdout
C. urban service areas
D. homestead
Lenders generally require private mortgage insurance (PMI) for conventional loans
over 80 percent of the value of the security property. PMI protects a lender against
which of the following?
A. Losses due to default on the loan
B. Legal threat to the lender’s mortgage claim
C. Stoppage of mortgage payment after the death of the insured borrower
D. Changes in the index rate associated with an adjustable rate mortgage
Real estate is property, which can be either a tangible or an intangible asset. Which of
the following would be considered an intangible asset?
A. Land
B. Building
C. Mortgage
D. Fence
If mortgage rates decline significantly, borrowers may decide to prepay the principal on
their loan even if they face prepayment penalties. One way that lenders protect
themselves from prepayments in such circumstances is by requiring the borrower who
prepays to purchase for the lender a set of U.S. Treasury securities whose coupon
payments replicate the cash flows the lender will lose as a result of the early retirement
of the mortgage. This process is referred to as:
A. Lockout
B. Yield-maintenance
C. Defeasance
D. Curtailment
State licensing laws prescribe behavioral requirements with which licensees must
comply to keep their licenses. Licensing laws generally seek to prevent brokers from
partaking in all of the following activities EXCEPT:
A. Handling money in trust for clients
B. Taking kickbacks without the employer’s knowledge
C. Offering the property at terms other than those specified by clients
D. Failure to submit all offers to the client
Given the following information, calculate the net operating income assuming
below-line treatment of capital expenditures? Property: 4 office units, Contract Rents
per unit: $2500 per month, Vacancy and collection losses: 15%, Operating Expenses:
$42,000, Capital Expenditures: 10%:
A. $48,000
B. $60,000
C. $95,000
D. $102,000
The growth of the motion picture industry in Los Angeles, the petrochemical industry in
Houston, the software industry in “Silicon Valley,” are all examples of how the growth
of an industry within a city can create cost advantages for future growth. Economists
refer to this phenomenon as:
A. industry economies of scale
B. agglomeration economies
C. locational monopoly
D. economic inefficiencies
When a zoning ordinance is revised, some existing land uses then fall outside the new
zoning classification. These land uses are referred to as:
A. special uses
B. nonconforming uses
C. conforming uses
D. exclusionary uses
By the third quarter of 2011, U.S. households had accumulated $6.2 trillion in housing
equity, which represents about 11 percent of their net worth. What proportion of U.S.
households own their home?
A. one-third
B. one-half
C. two-thirds
D. three-fourths
Using the following information, determine the location quotient for this industry.
Percentage of employment in financial services industry within the local community:
15%, Percentage of employment in financial services industry for the entire U.S.: 4.4%.
A. 0.3
B. 3.4
C. 10.6
D. 19.4
Especially in terms of retail properties, which of the following attributes is considered
the most likely to result in drastic value differences between otherwise similar
properties?
A. Structural attributes
B. Financing attributes
C. Location attributes
D. Land attributes
Since mortgages typically have multiple costs associated with them, a borrower may
attempt to reduce these costs into a single measure in order to compare two or more
mortgages. Which of the following measures is a popular tool for comparing the cost of
several mortgages?
A. Upfront fees
B. Contracted interest rate
C. Annual percentage rate
D. Teaser rate
Although deeds can only deliver what a grantor actually owns, they can still vary in
“quality.” Which of the following types of deeds is considered to be the “highest
quality” because it contains the full set of legal promises the grantor can make?
A. General warranty deed
B. Special warranty deed
C. Deed of bargain and sale
D. Quitclaim deed
The $6.5 trillion total market value of commercial real estate can be broken into four
quadrants. Which of the following sectors of the commercial real estate market
currently accounts for the largest proportion of market value?
A. Public equity
B. Privately held equity
C. Publicly traded mortgage debt
D. Privately held mortgage debt
Consider the following excerpt from a sample deed: “The Seller covenants with The
Buyer that it has a good right to convey, that the property is free from all encumbrances,
and that it forever warrants to defend all of the property so granted to The Buyer against
every person lawfully claiming the same.” Based on your understanding of the relation
between a deed’s covenants and the type of deed being conveyed, which type of deed is
being conveyed in the statement above?
A. General warranty deed
B. Special warranty deed
C. Deed of bargain and sale
D. Quitclaim deed
The yields on commercial mortgages have been approximately 2 percent higher, on
average, than the yields on comparable maturity treasury securities over the past 15
years. Often considered the signature risk of commercial mortgage lending, this spread
primarily represents:
A. Default risk
B. Interest rate risk
C. Pipeline risk
D. Fallout risk
Given the following information, calculate the effective gross income multiplier. Sale
price: $2,500,000; Effective Gross Income: $340,000; Operating Expenses: $100,000;
Capital Expenditures: $36,000.
A. 0.136
B. 7.35
C. 10.42
D. 12.25
Some commercial mortgages have adjustable, or floating, interest rates. The index rate
to which the contract rate is tied is typically which of the following for commercial
mortgages?
A. The yield on a constant maturity Treasury security of the same term
B. The cost of funds index (COFI)
C. The London Interbank Offer Rate (LIBOR)
D. The interest rate on a comparable maturity level-payment mortgage