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
B.$1,500
C.$1,800
D.$18,000
A city’s potential for growth or its susceptibility to decline is determined by a set of
economic activities that the city provides for the world beyond its boundaries.
Economists refer to this set of activities as a city’s:
A.linkages
B.economic base
C.local economic activities
D.economies of scale
Real estate market research is an important process used by analysts to facilitate a better
understanding of a property’s future profit potential. All of the following statements
regarding market research are true EXCEPT:
A.Real estate market research should always be flexible since the research depends
directly on the problem at hand.
B.Most data about general real estate is relevant to a given market study.
C.Most important data for a given market study often is not publicly available.
D.Market research should focus specifically on market segments for the property
involved, rather than on the aggregate real estate market.
In recent years, many U.S. investors have expanded their purchases of real estate into
foreign countries, and many foreign investors have held interests in U.S. real estate.
This is an example of what is commonly referred to as ________________ of real
estate markets.
A.deregulation
B.globalization
C.disintermediation
D.industrialization
Several techniques can be used to obtain an indication of land value. The cost approach
to valuation would most likely be used for which of the following properties?
A.One-family residential property
B.Retail office space
C.Education facility
D.High-rise apartments
Externalities can play an important role in determining a property’s price, either by
adding value through positive externalities or by diminishing value through negative
externalities. Which of the following is most likely to be considered a negative
externality?
A.Nearby parks and recreation facilities.
B.Quality neighborhood schools.
C.Public assistance facilities such as homeless shelters.
D.Well-kept landscapes.
Since most real estate assets are depreciable, using accounting income to measure a
REIT’s cash flow may actually understate the funds that are available to distribute to
investors as dividends. Therefore, REITs utilize a measure that adds back depreciation
and amortization expenses, more commonly referred to as:
A.Net income
B.Net asset value
C.Funds from operations
D.Effective gross income
Within the framework of the bid-rent model, as rents increase with proximity to the
central business district (CBD), the tendency is for development to:
A.spread to the outskirts of the city.
B.build upward on lots within the CBD to allow multiple tenants.
C.cease completely.
D.focus on low-income housing projects.
The market for buying, selling, and leasing real estate can be characterized by all of the
following EXCEPT:
A.localized markets
B.highly segmented markets
C.privately negotiated contracts
D.low transaction costs
The location of competitors within a particular land use area may be influenced by
whether the types of services and products are convenience activities or comparison
activities. Which of the following is an example of a comparison activity?
A.Supermarket
B.Coffee boutique
C.Fast-food restaurant
D.Apparel store
Given the following information, calculate the total amount of annual operating
expenses for this income-producing property. Lawn care: $10,000, Property taxes:
$24,000, Maintenance: $35,000, Janitorial: $25,000, Security: $32,000, Debt service:
$145,000.
A.$102,000
B.$126,000
C.$247,000
D.$271,000
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
A new residential development will face competition from other new developments,
other builders, and sales of existing homes. To determine if demand in that market
segment will be sufficient to justify proceeding with the project, a developer would be
most interested in estimating a:
A.capture rate
B.capitalization rate
C.risk-free rate
D.risk premium
In contrast to conventional market analysis, the ‘story” approach to market research
starts with an analysis of:
A.conditions in global real estate markets
B.conditions in national real estate markets
C.conditions in state real estate markets
D.conditions in the property specific market
The $6 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
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
The process of converting periodic income into a value estimate is referred to as income
capitalization. Income capitalization models can generally be categorized as either
direct capitalization models or discounted cash flow models. Which of the following
statements best describes the direct capitalization method?
A.Value estimates are based on a multiple of expected first year net operating income.
B.Appraisers must make explicit forecasts of the property’s net operating income for
each year of the expected holding period.
C.Appraisers must select the appropriate yield at which to discount future cash flows.
D.The forecast must include the net income produced by a sale of the property at the
end of the expected holding period.
Restrictive covenants impose constraints on the use of the land, yet are limited in terms
of their enforcement. All of the following are true regarding the enforcement of
restrictive covenants EXCEPT:
A.Courts have been reluctant to maintain restrictive covenants for an unreasonably long
time and in some cases states have enacted a time limit on their applicability.
B.Courts may refuse to enforce restrictive covenants due to changing neighborhood
character.
C.Courts may refuse to enforce restrictive covenants due to abandonment of the
property.
D.Restrictive covenants can be enforced by those who do not hold a legal interest in the
property.
For most mortgage loans on commercial real estate, the right of prepayment is
constrained through a prepayment penalty. Which of the following types of prepayment
penalties requires a borrower to provide the lender with some combination of U.S.
Treasury securities that will serve to replace the cash flows of the loan being paid off?
A.Yield-maintenance prepayment penalties
B.Prepayment lockout
C.Defeasance prepayment penalty
D.Curtailment penalty
It would be hard to overstate the importance of the Federal Housing Administration
(FHA) in the history of housing finance. Which of the following instruments created by
the FHA is considered the single most important financial instrument in modern
housing finance?
A.Level-payment, fully amortizing loan
B.Adjustable rate mortgage
C.Partially-amortizing balloon loan
D.Subprime mortgage loan
In calculating the net operating income (NOI) of a property, the “above-line” treatment
of capital expenditures implies:
A.capital expenditures are excluded from the calculation of NOI.
B.capital expenditures are included in the calculation of NOI.
C.capital expenditures are set equal to NOI.
D.capital expenditures are divided by NOI.
The market value of U.S. real estate held by non-real estate corporations is estimated to
exceed $2 trillion. All of the following are examples of noninvestible commercial real
estate that are held by non-real estate entities EXCEPT:
A.Medical office buildings owned by the doctors
B.Branch offices owned by the bank
C.Plant and equipment owned by steel corporations
D.Assembly plant building owned by a group of investors as part of a sale-leaseback
agreement with an auto manufacturer
Which of the following types of direct co-ownership combines single person ownership
with tenancy in common?
A.Cooperative
B.Tenancy by the entirety
C.Condominium
D.Partnership
Given the following information, calculate the estimated terminal value of the property
at the end of its holding period. Going-out cap rate: 9%, Estimated holding period: 5
years, NOI for year 5: $100,500, NOI for year 6: $102,000.
A.$1,113,333
B.$1,116,667
C.$1,133,333
D.$1,166,667
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
Because the mortgage conveys a complex claim for a long period of time, clauses are
included in anticipation of possible future complications. Which of the following
clauses requires a borrower to make monthly deposits into an account in order to pay
obligations such as property taxes, community association fees, or causality insurance
premiums?
A.Demand clause
B.Insurance clause
C.Escrow clause
D.Exculpatory clause
In the initial round of market analysis, analysts will attempt to provide key numbers that
characterize the current condition and trend in the market. For rental retail space, the
key market parameters in question would most likely include all of the following
EXCEPT:
A.Projected occupancy growth
B.Projected rental rate growth
C.Currency occupancy levels
D.Projected sales rates
One of the main differences between residential mortgage loans and permanent
financing of commercial real estate lies in the allocation of liability in the case of
default. In commercial real estate, a “bankruptcy remote” special-purpose entity is
created that shields the actual borrower from personal liability. When a lender cannot
lay claim to the personal assets of the defaulted borrower, this type of loan is commonly
referred to as a:
A.nonrecourse loan
B.mini-perm loan
C.partially amortizing loan
D.interest-only loan
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
Given the following information, compute the effective tax rate for the particular piece
of property in percentage terms. Market value of property: $325,000, Assessed value of
property: $250,000, Exemptions: $50,000, Taxes paid: $5,363.
A.1.50%
B.2.35%
C.1.65%
D.2.68%
A developer plans to place a subdivision slightly outside the city limits in an area that is
rapidly developing. However, the city claims to have the right to control urban
development even in the proposed area. The right the city is attempting to invoke is
referred to as:
A.extraterritorial jurisdiction.
B.urban service area.
C.comprehensive plan.
D.growth constraint.
Which of the following terms refers to a written agreement that binds the lender to
make a loan to the borrower provided the borrower satisfies the terms and conditions of
the agreement?
A.Loan application
B.Loan commitment
C.Loan underwriting
D.Loan document
Real estate values derive from the interaction of three different sectors in the economy.
Which of the following sectors serves to allocate financial resources among households
and firms requiring funds?
A.User market
B.Capital market
C.Government
D.Local market
Both owners and managers must carefully designate their responsibilities in the
management agreement. In a management agreement, all of the following would
typically be responsibilities of the property manager EXCEPT:
A.Maintenance of financial accounts for money collected from tenants
B.Liability
C.General property management
D.Reports on property performance
Suppose that a developer pre-leases space to a financially strong, national tenant such
as Home Depot, without having yet built the structure in which they will be leasing
space. This is more commonly referred to as a:
A.ground lease
B.build-to-suit
C.design-build
D.contract for deed