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Uncertainty of cash flows can vary significantly across property types. Which of the
following property types is often considered to have the most uncertain expected cash
flows?
A.Multifamily
B.Industrial
C.Office
D.Hospitality
While there is no specific number of comparables that is right for every appraisal
assignment, how many comparable sales are considered adequate as long as the
properties are very similar to the subject property?
A.One
B.Three
C.Five
D.Ten
The benefit of being classified as a capital gain is that the income is subject to a tax rate
that maxes out at 15%, which may be well below the tax rates associated with
depreciation recapture income and ordinary income for a particular investor. In order to
qualify for the lower capital gain tax rate, the property being sold must be held for more
than:
A.1 month
B.3 months
C.6 months
D.12 months
If the per share stock price of a REIT is greater than its per share net asset value (NAV),
the REIT is said to be selling at:
A.par value
B.a discount
C.a premium
D.an auction
If property owners fail to pay their taxes in a timely fashion, this can create a first lien
on the mortgaged property. In order to protect against this, lenders often require that
borrowers add what fraction of their estimated tax bill to their required monthly
mortgage payments?
A.1/12
B.1/6
C.1/4
D.1/2
Most real estate loans have a definite term to maturity, stated in years. The majority of
home loans will typically have a term to maturity between:
A.1-5 years
B.5-7 years
C.7-15 years
D.15-30 years
When property managers are looking to secure a mix of tenants for which "the whole is
greater than the sum of its parts," or in other words a group of tenants that shares
similar characteristics such that the experience of living together is mutually beneficial,
they are seeking what is referred to as:
A.permanence potential
B.synergism
C.rehabilitation
D.adaptive reuse
As of December 2008, the market value of outstanding real estate mortgage debt was:
A.greater than the market value of corporate equities
B.less than the market value of U.S. Treasury securities
C.less than the market value of corporate and foreign bonds
D.greater than the market value of corporate, foreign, and U.S. Treasury debt securities
combined
A lien is an interest in real property that serves as security for an obligation. Which of
the following is an example of a general 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
Capital markets can be divided into four main categories: private equity, public equity,
private debt, and public debt. An example of a real estate asset that trades in the private
equity market is:
A.real property
B.home mortgages
C.equity REITs
D.mortgage backed securities
Despite the magnitude of their real estate holdings, many non-real estate corporations
have historically expended little effort to manage these assets effectively. Recently, the
development of which of the following markets has helped to quell concerns related to
this issue?
A.Commercial mortgage backed securities (CMBS)
B.Sale-leaseback
C.Tenancy-in-common (TIC)
D.Installment sale
Mortgage loans made to borrowers with normal credit quality, but who lack the
necessary documentation needed to meet conforming mortgage standards would most
likely be considered:
A.subprime loans
B.option ARM loans
C.hybrid ARM loans
D.alt-A loans
Congress has enacted a number of regulations that have established criteria for
evaluating home loan applicants and mandating disclosures in the origination of home
loans. Which of the following congressional acts requires important disclosures
concerning the cost of consumer credit, including the computation of the annual
percentage rate (APR)?
A.Equal Credit Opportunity Act (ECOA)
B.Truth-in-Lending Act (TILA)
C.Real Estate Settlement Procedures Act (RESPA)
D.Home Ownership and Equity Protection Act (HOEPA)
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
When using discounted cash flow analysis for valuation, the appraiser must estimate the
sale price at the end of the expected holding period. This price is referred to as the
property's:
A.net sale proceeds
B.selling expenses
C.terminal value
D.current market value
The importance of brokers in the real estate market is often overlooked. In the absence
of a real estate broker, one would expect all of the following to be true EXCEPT:
A.Real estate values would be higher.
B.A seller would most likely rely on a "thinner" market (i.e. the seller has access to
fewer prospective buyers).
C.It would be more difficult and costly for an individual to buy or sell a property.
D.Buyers would be more inclined to negotiate prices downward by at least the value of
a typical commission.
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.Physical hazards
D.Changes in the index rate associated with an adjustable rate mortgage
The required rate of return that an individual demands on a real estate investment is
determined in the:
A.user market
B.capital market
C.government
D.local market
When leasing nonresidential properties, owners would prefer to rent exclusively to high
quality tenants. Such owners will tend to seek out companies whose general debt
obligations are rated "investment grade" by one of more of the U.S. rating agencies.
These potential tenants are more commonly referred to as:
A.tenant reps
B.credit tenants
C.tenant mix
D.in-house leasing agents
In ascertaining whether a borrower has the ability to pay off his loan over time, a
mortgage bank may rely on calculating a total debt ratio as part of its underwriting
process. Utilizing the following information, calculate the total debt ratio. Principle and
interest: $635, Tax and insurance: $125, Car lease: $350, Gross monthly income:
$2,500
A.25.4%
B.30.4%
C.44.4%
D.53.2%
While some property owners choose to perform both the property and asset manager
functions themselves, many commercial property owners choose to employ
professional property managers instead. The property manager works under a
management contract in which the manager is empowered to serve as the owner's
fiduciary. This type of relationship is more commonly referred to as a(n):
A.agency relationship
B.open listing relationship
C.joint-venture
D.correspondent relationship
Suppose a buyer agrees to purchase a tract of land for $40,000. The buyer is only able
to obtain a mortgage for $32,000. Rather than let the deal fall through, the seller agrees
to accept $4,000 in cash and a note from the buyer for the remaining $4,000. This type
of transaction is commonly referred to as a:
A.conventional loan
B.home equity mortgage
C.purchase money mortgage
D.reverse mortgage
Given the following information on a 30-year fixed-payment loan, determine the
remaining balance that the borrower has at the end of seven years. Interest Rate: 7%,
Monthly Payment: $1,200.
A.$17,143
B.$79,509
C.$164,402
D.$180,369
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
An easement is the right to use land for a specific and limited purpose. Which of the
following easements involves a relationship between two parcels of land, is a
permanent feature of both parcels involved, and gives the dominant parcel some
intrusive use of the servient parcel?
A.Affirmative easement appurtenant
B.Negative easement appurtenant
C.Easement in gross
D.License
One of the traditional requirements for individuals who wish to obtain a brokerage
license has been to demonstrate financial capacity to cover damage judgments brought
against them by clients. In order to address this concern, some states have required
licensees to first obtain:
A.Private mortgage insurance (PMI)
B.Errors and omission insurance
C.Deposit insurance
D.Hazard insurance
Given the following information, calculate the break-even ratio on the following
commercial property. Operating expenses: $650,000, Capital expenditures: $105,000,
Potential gross income: $2,500,000, Debt service in the first year: $960,000, Loan
amount: $20,000,000, Purchase price: $27,300,000
A.43.7 %
B.55.8 %
C.68.6 %
D.75.2 %
In a mortgage loan, the borrower always creates two documents: a note and a mortgage.
Which of the following pieces of information is provided in the mortgage?
A.How the interest rate is to be computed.
B.Whether the borrower has the right to prepay the principal during the term of the
loan, and any prepayment penalties that would be incurred as a result.
C.Whether the borrower is released from liability for fulfillment of the contract.
D.Whether the lender has the right to accelerate the loan, requiring the borrower to pay
it off, in the case that the property is sold prior to the term of the loan.
If all appraisal methods are appropriate for use in valuing a particular property, there is
a clear order of preference that real estate professionals adhere to. Which of the
following depicts the preferred order, with the most preferable approach being listed
first and the least preferable listed last?
A.Sales comparison approach, cost approach, income approach
B.Income approach, Sales comparison approach, cost approach
C.Cost approach, income approach, sales comparison approach
D.Sales comparison approach, income approach, cost approach
An owner of land may involuntarily and unknowingly give up the rights to land. When
a fee simple interest is conveyed to a new owner without a deed and without the
consent or knowledge of the original owner, this is said to be conveyed by:
A.Prescription
B.Adverse possession
C.Accretion
D.Reliction
An investor originally paid $22,000 for a vacant lot 12 years ago. If the investor is able
to sell the lot today for $62,000, what would his annual rate of return be on this
investment?
A.5%
B.7%
C.9%
D.11%
Contracts for sale may contain sections that cause implementation of the contract to
depend on the successful completion of some prior action such as the buyer's ability to
obtain financing on specified terms. This type of contract is commonly referred to as
a(n):
A.assignment
B.equitable title
C.contract with contingencies
D.uniform settlement statement
