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.
Real estate appraisers generally distinguish among the concepts of market value,
investment value, and transaction value. Which of the following statements best
describes the concept of market value?
A.It is an estimate of the most probable selling price of a property in a competitive
market.
B.It is the value a particular investor places on a property.
C.It is the price we observe when a property is sold.
D.It is the maximum amount that a seller would be willing to accept.
Assume an investor with $5000 to invest is considering several alternatives, each
covering ten years. Which of the following alternatives would you expect the investor
to choose accounting for the time-value-of-money in your calculations?
A.Investor receives $500 at the end of year 1, plus the original $5000 at the end of year
10.
B.Investor receives $50 at the end of each year for 10 years, plus the original $5000 at
the end of 10 years.
C.Investor receives $500 at the end of the 10th year, plus the original $5000.
D.Investor receives $5000 at the end of year 10.
The choice of which method to use in constructing the contracted rental rate can also be
impacted by the type of property being leased. With which of the following property
types would one expect to see a percentage rent method used?
A.Apartment
B.Office
C.Industrial
D.Retail
Newer industrial parks have begun to specialize in providing space that can be
configured to suit the diverse needs of various tenants. This type of industrial space is
more commonly referred to as:
A.Warehouse
B.Plant and Factory
C.Flex space
D.Research and Development
The potentially large amount of taxes due on sale of commercial property has caused
investors and policy makers to seek ways to defer taxes on the disposition of a property.
A popular option has become for investors to swap one eligible property for another in
order to avoid or defer capital gains taxes. Which of the following methods for
deferring taxes does this describe?
A.Installment sale
B.Fully-taxable sale
C.Like-kind exchange
D.Sale leaseback
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
The development of Fannie Mae and Freddie Mac established the framework for a
liquid secondary market for residential mortgages. By the fourth quarter of 2008, the
share of all residential mortgage loans owned or securitized by Fannie Mae and Freddie
Mac approached approximately:
A.5%
B.16%
C.38%
D.76%
Profitability ratios, income multipliers, and financial risk ratios can be used to provide a
quick assessment of a property’s relative value. Which of the following ratios measures
the overall income-producing ability of the property?
A.Capitalization rate
B.Equity dividend rate
C.Debt coverage ratio
D.Operating expense ratio
Certain closing costs will be prorated to account for the period of time during which the
seller occupied the house. If a transaction is scheduled to close on May 17, 136 days
into a 365-day year, calculate the amount that the buyer will be credited if the particular
closing cost in question is estimated to be $1000 for the entire year.
A.$182.19
B.$372.60
C.$624.66
D.$1000
All of the following statements are true in describing the determination of just
compensation EXCEPT:
A.The value of the property is based on its highest and best use at the time.
B.The value of the property is determined solely by its current use.
C.The value is the amount that restores the property owner to a financial position
equivalent to that existing before the property was taken.
D.The value is the market value of the property if completely taken, or the total value of
all financial loss if partially taken.
It was not until the late 1960’s that land use controls moved to the forefront of public
interest, as the belief that the environment was an endless and costless resource was
replaced with the notion that the world was a closed system with limited space, air,
water, and other resources. Environmentalists coined which of the following terms to
refer to this new point of view?
A.Smart growth
B.The Silent Spring
C.Spaceship earth
D.Urban sprawl
Given the following information, compute the property tax rate for the community in
percentage terms. Total budget expenditures: $108 million, Total non-property tax
income: $50 million, Total assessed value of all properties: $2 billion, Total exemptions:
$550 million.
A.2.5%
B.4.0%
C.10.0%
D.12.0%
In calculating net operating income, vacancy losses must be subtracted from the gross
income collected. The normal range for vacancy and collection losses for apartment,
office, and retail properties is:
A.between zero and one percent
B.between one and five percent
C.between five and fifteen percent
D.between fifteen and twenty percent
The strength of a successful developer lies in his or her ability to select design
professionals and engineers that play vital roles in the project’s plan and completion.
Which of the following individuals would be most concerned, on a general level, with
the design aesthetics, optimal use and preservation of the site, traffic flows, utility
systems and drainage systems?
A.Land planner
B.Landscape architect
C.Mechanical engineer
D.Environmental agent
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
The type of deed offered by the grantor is communicated through a phrase such as
“does herby grant, bargain, sell and convey unto . . .” This clause is referred to as the:
A.recital of consideration
B.words of conveyance
C.covenant
D.habendum clause
Once possession and control are conveyed in a lease agreement, the owner must
provide the tenant with uninterrupted use of the property without any interference from
any entity that may threaten to impose upon the tenant’s leasehold interest in the
property. In other words, the tenant is entitled to which of the following?
A.Quiet enjoyment
B.Tenant improvement
C.Concession
D.Expansion option
Partially amortizing mortgage loans require periodic payments of principal, but are not
paid off completely over the loan’s term to maturity. Instead, the balance of the principal
amount is paid at maturity in what is commonly referred to as a:
A.balloon payment
B.early payment
C.up-front payment
D.payment cap
Of the $3.6 trillion in outstanding mortgage debt in the U.S., approximately 71% is
privately held by institutional and individual investors. Which of the following
institutions is the largest single source of private mortgage funds?
A.Savings institutions
B.Life insurance companies
C.Government Sponsored Enterprises
D.Commercial banks
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
Estimating the market value of real estate is complicated by the unique characteristics
of real estate markets. In contrast to stock markets, real estate markets are characterized
by all of the following EXCEPT:
A.No two assets are considered perfect substitutes for one another.
B.Market prices are revealed almost instantaneously and continuously to prospective
buyers.
C.Transactions of similar assets occur infrequently.
D.The physical location of the asset being sold plays an important role in the pricing
process.
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
In addition to providing home mortgages, large commercial banks have specialized in
providing short-term funds to mortgage banking companies in order to enable them to
originate mortgage loans and hold the loans until the mortgage banking company can
sell them in the secondary market. This type of financing is commonly referred to as:
A.Mortgage pipeline
B.Loan servicing
C.Warehousing
D.Loan underwriting
While a sublease and an assignment are two distinct choices for a tenant who wishes to
transfer his rights during the term of a lease, both agreements:
A.transfer all of a tenant’s rights to another party
B.transfer only a subset of rights to another party
C.grant another party the right to cancel the original lease before expiration
D.maintain that the original tenant be held liable for fulfilling the original lease unless
otherwise specified
A popular adage in real estate is that property value is all about “location, location,
location.” However, for most property types in nonresidential realms, nonlocational
requirements are equally or even more important. All of the following are examples of
nonlocational factors EXCEPT:
A.Floor plate size
B.Amount of parking
C.Nature of current tenants
D.Proximity to modes of public transportation
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
While the general concepts of investment value and market value are very similar, there
is an important distinction between the two. All of the following statements regarding
investment value are true EXCEPT:
A.Investment value is based on the expectations of a typical, or average, investor.
B.Investment value is a function of estimated cash flows from annual operations.
C.Investment value takes into consideration estimated proceeds from the sale of the
property.
D.Investment value applies a discount rate to future cash flows.
In contrast to public markets, private markets are characterized by individually
negotiated transactions that take place without the aid of a centralized market.
Therefore, private markets will generally have:
A.High transaction costs and high liquidity
B.High transaction costs and low liquidity
C.Low transaction costs and high liquidity
D.Low transaction costs and low liquidity
While the development of the secondary market for mortgages focuses on funding
provided by long-term holders of mortgage assets, loan originators still play an
important role in the growth of the commercial real estate market. Historically, the most
active commercial mortgage originators have been:
A.Mortgage conduits
B.Government Sponsored Enterprises
C.Pension funds
D.Life insurance companies
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 prices were higher than most homes in the area and 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.