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Adjustments for physical characteristics are intended to capture the dimensions in
which a comparable property differs physically from the subject property. If the only
physical difference between the subject property and the comparable is that the
comparable does not have a fireplace, which of the following adjustments should take
place?
A. The transaction price of the comparable property should be adjusted downward.
B. The transaction price of the comparable property should be adjusted upward.
C. The transaction price of the subject property should be adjusted downward.
D. The transaction price of the subject property should be adjusted upward.
Co-ownership can occur in a variety of ways, with significant variation in how the
bundle of rights is jointly held. All of the following entities are forms of direct
co-ownership
EXCEPT:
A. Tenancy in common
B. Tenancy by the entirety
C. Condominium
D. Partnership
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
Which of the following types of ownership estates is the most complete bundle of
rights, and therefore carries the greatest value?
A. Fee simple absolute
B. Fee simple conditional
C. Ordinary life estate
D. Legal life estate
While the principal parties to a transaction must be legally competent for a contract to
be valid, it is possible for a party acting on behalf of a principal to obtain this legal
right. In order for personal representatives and trustees to be authorized to act on behalf
of a principal, a legal instrument commonly referred to as ____________ must be in
place.
A. assignment
B. power of attorney
C. mutual assent
D. consideration
Net operating income is similar to which of the following measures of cash flow in
corporate finance?
A. Dividend yield
B. Earnings before deductions for interest, depreciation, income taxes, and amortization
(EBIDTA)
C. Price-earnings ratio
D. Discount rate
It is common for real estate firms to identify submarkets, such as property types or
particular sections of a city, in which they can specialize and concentrate their
transaction activity. This practice is referred to as:
A. internet marketing
B. open listing
C. discount brokerage
D. market segmentation
Relative to residential loans, the underwriting process for commercial loans is more
complicated. The commercial loan underwriting process focuses first on which of the
following?
A. Individual borrower's credit quality
B. Income producing potential of the collateral property
C. Individual borrower's wages
D. Individual borrower's personal assets
In addition to numerous congressional acts that focus more on national regulation, laws
have been created that affect the practice of home mortgage lending at a community or
neighborhood level. For example, laws have been enacted to prevent lenders from
avoiding certain neighborhoods without regard to the merits of the individual loan
applications, a practice more commonly referred to as:
A. rescinding
B. redlining
C. assuming
D. holdout
Tax rates are usually stated in mills. Assuming the tax rate in percentage terms is 6.5%,
convert this rate to mills.
A. 0.065 mills
B. 6.5 mills
C. 65 mills
D. 650 mills
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
Loan servicing includes a number of responsibilities such as collecting monthly
mortgage payments from the borrower, remitting principal and interest payments to
investors, ensuring sufficient escrow payments are being made by the borrower, and
managing default if it should arise. In exchange for these services, mortgage bankers
receive a fee. If the outstanding loan balance is $250,000 and the annual servicing fee is
0.35%, what is the monthly fee for servicing the loan?
A. $72.92
B. $729.17
C. $875.00
D. $8,750.00
Mortgage originators often offer many types and forms of available residential loans as
part of their mortgage menu. However, the predominant form of prime conventional
mortgage remains the:
A. (fixed-rate) level payment mortgage (LPM)
B. adjustable rate mortgage (ARM)
C. subprime mortgage
D. alt-A mortgage
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
In contrast to base activities, local economic activities (or secondary activities) serve
the local business and households that are recirculating the income derived through the
city's economic base. In other words, we can distinguish local economic activities from
export activities by thinking about whether or not the activity brings money into the city
from outside sources. Which of the following activities is NOT an example of land use
for local economic activity?
A. Retail centers
B. Restaurants
C. Automotive services
D. Manufacturing Center
Federal Housing Administration (FHA) loans differ from conventional loans in a
number of ways. All of the following statements regarding FHA loans are true
EXCEPT:
A. FHA loans are targeted toward first-time homebuyers who are in slightly weaker
financial circumstances than the typical prime conventional borrower.
B. FHA loans are more tolerant in terms of qualifying debt-to-income ratios
C. FHA loans require higher credit scores than are needed for prime conventional loans.
D. FHA loans contain lower limits on their maximum size than are available through
conforming conventional loans.
In collecting data for nonresidential property analysis, it is helpful to understand the
business community that currently exists in the specific area in question. A preliminary
approach for ascertaining the number of firms by size, industry, and location is to obtain
data from:
A. the Bureau of Labor Statistics
B. the National Transportation Service
C. the U.S. Bureau of the Census: County Business Patterns
D. the Federal Reserve
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
Suppose your personal financial goal is to retire with a million dollars in your savings
account. How much must you deposit monthly in an account paying 5% a year (with
interest being compounded monthly and your deposits occurring at the end of the
month), to accumulate $1,000,000 by your 65th birthday if you begin your deposits on
your 22nd birthday? (Note: Assume that you started with no savings in the account
prior to your first deposit at age 22 and you do not make a deposit on your
65thbirthday)
A. $552.13
B. $701.90
C. $21,282.95
D. $186,354.63
Prior to determining the treatment of capital expenditures in the calculation of NOI, it is
important to distinguish these costs from operating expenses. In contrast to operating
expenses, capital expenditures:
A. add to the market value of the property
B. are deductible for tax purposes in the year in which they are paid.
C. are necessary to keep the property operating and competitive in its local market.
D. may include minor repairs that do not add to the property's useful life.
Real estate markets tend to be highly segmented due to the heterogeneous nature of the
products. Which of the following examples depicts this issue of market segmentation?
A. A couple searching for a single-family detached unit is willing to consider other
residential property types such as an attached townhouse unit or condominium.
B. A couple searching for a single-family detached unit has limited their search to
homes in a single elementary school district
C. A couple searching for a single-family detached unit has set a timeline for their
search of 6 months, at which point they will renew their current apartment lease.
D. A couple searching for a single-family detached unit has limited their search to be in
a specific price range between $350,000 and $400,000.
Let's assume that we are about to appraise a house using the cost approach. The home
was originally constructed in the early 1900s and is one of the last of its kind in this
area. The cost of constructing an exact replica of this residence is estimated to be
$350,000. On our trip to the actual property, we notice that this is the only residential
unit located on this particular road. Based on the current usage of adjacent real estate,
we estimate that the property would be worth an additional $25,000 in its highest and
best use. However, due to the dramatic shift in the perceived safety of the
neighborhood, values of any remaining residential properties in the area have fallen by
$20,000. Due to the home's age, we also notice that there has been a significant amount
of physical deterioration to the building, amounting to an estimate of
$50,000 in lost value. Since the home was built over 100 years ago, the floor plan is
quite obsolete relative to current preferences. This has a detrimental effect on the value
of the property that is estimated to be approximately $15,000. Given this information,
determine the appraised value of the home using the cost approach.
A. $265,000
B. $290,000
C. $350,000
D. $460,000
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
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
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
In an attempt to regulate home mortgage lending after the mortgage crisis of 2007,
which of the following acts created an independent oversight agency tasked with the
responsibility of overseeing and enforcing Federal consumer financial protection laws,
enforcing anti-discrimination laws in consumer finance, restricting unfair, deceptive or
abusive acts or practices, receiving consumer complaints, promoting financial
education, and watching for emerging financial risks for consumers?
A. Equal Credit Opportunity Act (ECOA)
B. Truth-in-Lending Act (TILA)
C. Real Estate Settlement Procedures Act (RESPA)
D. Dodd-Frank Wall Street Reform and Consumer Protection Act
When multiple individuals have use of a property, but their interests are not
simultaneous, this type of co-ownership is referred to as a:
A. Cooperative
B. Tenancy by the entirety
C. Condominium
D. Timeshare
The starting point in calculating net operating income is the total annual income the
property would produce assuming 100 percent occupancy and no collection losses. This
is commonly referred to as:
A. effective Gross Income
B. potential Gross Income
C. operating expenses
D. capital expenditures
When a landowner subdivides land in a way that causes a parcel to be landlocked, it is
possible for property to be voluntarily conveyed without a deed. If the landlocked
parcel has no prior path of access, which of the following types of easements will
automatically be created to make the land useful?
A. Easement by prior use
B. Easement of necessity
C. Easement by estoppel
D. Dedication
Congressional legislation has repeatedly altered the period of time over which rental
real estate may be depreciated. Currently, residential income producing property (e.g.
apartments) may be depreciated over no less than:
A. 3 years
B. 7 years
C. 15 years
D. 27 years
Suppose you have taken out a $200,000 fully-amortizing fixed rate mortgage loan that
has a term of 15 years and an interest rate of 4.25%. In month 2 of the mortgage, how
much of the monthly mortgage payment does the principal repayment portion consist
of?
A. $705.51
B. $708.33
C. $796.22
D. $799.04
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. Monthly
principal and interest on mortgage loan: $635, Monthly Tax and insurance payments
into escrow: $125, Monthly Car lease payment (lease term is 3 years): $350, Gross
monthly income: $2,500
A. 25.4%
B. 30.4%
C. 44.4%
D. 53.2%
