Finance 52517 | Course Paper

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In acting as an agent for another person, the broker carries several special

responsibilities, which by law must be adhered here to throughout the transaction

process. These responsibilities constitute what is commonly referred to as a:

A.Subagency relationship

B.Dual agency relationship

C.Fiduciary relationship

D.Open listing relationship

The demand for access between land uses is considered the “gravity” that holds a city

together. These relationships between land uses are commonly referred to as:

A.linkages

B.economic bases

C.local economic activities

D.economies of scale

Given the following information, calculate the effective gross income multiplier. Sale

price: $950,000, Potential Gross Income: $250,000, Vacancy and Collection Losses:

15%, and Miscellaneous Income: $50,000.

A.0.36

B.0.30

C.2.8

D.3.3

Which of the following models of urban form is characterized by radial corridors or

wedges representing the pattern of residential land use in relation to the location of the

central business district (CBD)?

A.Bid-rent model

B.Concentric circle model

C.Sector model

D.Multi-nuclei model

Assume that an industrial building can be purchased for $1,500,000 today, is expected

to yield cash flows of $80,000 for each of the next five years, and can be sold at the end

of the fifth year for $1,625,000. Calculate the internal rate of return (IRR) for this

transaction.

A.3.14%

B.7.07%

C.9.20%

D.10.37%

Initially used to survey the Old Northwest Territory (Ohio, Indiana, Illinois, and

Michigan) in 1789, which of the following methods of land description relies on

townships and section numbers as essential units of identification?

A.metes and bounds

B.subdivision plat lot and block number

C.government rectangular survey

D.tax parcel number

Risk is the possibility that actual outcomes will vary from what was expected when the

asset was purchased. If investors require a higher rate of return for undertaking more

risk, the underlying assumption is that investors are:

A.risk neutral

B.risk averse

C.risk taking

D.hedging risk

Leases are considered the engines that drive property values. Therefore, it should not be

surprising that owners of commercial property may seek an independent leasing broker

to focus on finding tenants to lease space. In exchange for their services, leasing

brokers are paid a commission based on what percentage of the face amount of the

lease?

A.0.5 to 1.5%

B.3 to 5%

C.7 to 10%

D.15 to 20%

According to the law of agency, real estate brokers are required to observe several

duties as they act as an agent for an individual trying to buy or sell a property. Which of

the following duties refers to a broker’s obligation to be completely open and honest

with the principal?

A.Disclosure

B.Confidentiality

C.Loyalty

D.Obedience

At the closing, the buyer will be credited for a number of costs that have been paid up

front as well as a number of prorated expenses that account for the period of time

during which the seller occupied the house. All of the following items detailed in the

closing costs involve credits that are commonly passed on to the buyer EXCEPT:

A.Earnest money

B.Hazard insurance premiums

C.Property taxes

D.Mortgage interest

Suppose an investor deposits $2500 in an interest-bearing account at her local bank.

The account pays 2.5% interest compounded annually. If the investor plans on

withdrawing the original principal plus accumulated interested at the end of 7 years,

what is the total amount that she should expect to receive assuming interest rates do not

change?

A.$2,971.71

B.$2,974.89

C.$3,532.43

D.$11,920.93

State licensing laws generally prescribe two levels of real estate brokerage licensing:

the broker license and the salesperson license. Which of the following responsibilities is

an individual with a salesperson license permitted to do?

A.Own and operate a real estate brokerage business

B.Handle money in trust for clients

C.Negotiate listing contracts or contracts for sale

D.Complete legal documents used in sales and leases in their own name

Prospective borrowers often submit loan requests directly to lenders. However,

commercial loan requests can also be submitted through another channel in which a

permanent lender agrees to purchase loans or consider loan requests from a mortgage

banker or broker. This type of business relationship is more commonly referred to as

a(n):

A.installment sale

B.joint venture

C.correspondent relationship

D.sale-leaseback

Recognizing that only recent conveyances alter the status of title, states have

established laws that set limits on how far back a title search must go. These laws are

commonly referred to as:

A.Statute of Frauds

B.recording statutes

C.encroachments

D.marketable title laws

After a structure is built, it is impractical for even a building expert to fully assess the

quality of the construction and the safety hazards it may harbor. This is an example of

which of the following problems that plagues private real estate markets?

A.Externalities

B.Incomplete information

C.Locational monopoly

D.Holdout

In the Palm Grove Office Complex example, the project was destined to be ill-fated

venture from its inception for all of the following reasons EXCEPT:

A.University City did not traditionally provide occupancy to tenants interested in office

space.

B.University City was not well-suited for large office space geared toward firms with

greater than 25 employees.

C.Palm Grove Office Complex lacked the visual exposure, convenient access, and

parking that its competitors held significant comparative advantages in.

D.The structures were primarily designed as general-purpose office space, which

excluded potential occupants such as laboratories or medical offices.

While most real property in the United States is privately owned, government

regulations limit private property use and therefore play an important role in the

determination of property value. Proponents of government intervention argue that

regulation is needed to address the unintended and unaccounted for consequences of

one land user upon others, more commonly referred to as:

A.incomplete information

B.locational monopoly

C.externalities

D.urban sprawl

The monthly mortgage payment divided by the loan amount is commonly referred to as

the:

A.loan balance

B.effective borrowing cost

C.lender’s yield

D.monthly loan constant

Critical to any listing contract is the question of when the broker becomes entitled to a

commission. Traditionally, the broker is still entitled to a commission in all of the

following scenarios EXCEPT:

A.If the seller refuses to sell upon being presented with an offer meeting the original

terms and conditions.

B.If the seller cannot deliver the property for any reason due to his or her fault.

C.If both the buyer and seller sign a contract but then agree to cancel it.

D.If a contract is contingent upon the buyer obtaining financing and the buyer is unable

to do so.

Recently, 15-year mortgages have increased in popularity amongst both borrowers and

lenders. Which of the following groups of borrowers would typically be the least

interested in a 15-year mortgage?

A.Mature households with minimal financial constraints

B.First-time homebuyers

C.Homeowners who are refinancing to obtain a lower rate than is available on a

comparable 30-year mortgage

D.Homeowners who are interested in selling their property within five years

Considering the following information, what is the NPV if the borrower refinances the

loan? Expected holding period: 15 years, Current loan balance: $100,000, Current loan

interest: 9 %, New loan interest: 7.5 %, Cost of refinancing: $4,250

A.-$5,003

B.-$1,014

C.$5,163

D.$9,413

The magnitude of an economic base multiplier depends upon the amount of money that

“leaks” out through expenditures outside of the city limits. The economic multiplier

tends to be higher with each of the following EXCEPT:

A.A higher percentage of local household income is respent within the city.

B.The larger the city is.

C.The less isolated the city is from other cities.

D.The more tourism a city brings in.

Since conforming loans can be much more readily bought and sold in the secondary

mortgage market, they carry a _______ interest rate than comparable nonconforming

loans.

A.higher

B.equal

C.lower

D.more volatile

Property rights created from marriage have a clear implication for real estate

transactions. Which of the following marital property rights gives a spouse a one-half

claim on all property acquired “from the fruits of the marriage?”

A.Dower

B.Curtesy

C.Elective share

D.Community property

Unlike other forms of evidence of title, title insurance guards the grantee against certain

risks. However, there are a number of important limits to title insurance. Which of the

following is an example of the limits to title insurance?

A.It does not protect the grantee from the threat of physical damage to the property.

B.It does not protect a grantee against the legal costs of defending the title.

C.It does not protect a grantee against loss of the property in case of an unsuccessful

title defense.

D.It does not protect against legal attack on the owner’s title arising from a claim that

diminishes the owner’s rights of use.

An important piece of criteria for investors to consider when deciding between real

estate investment opportunities and investing in stocks or bonds is the effect of income

taxes on their return. For most investors, the effective tax rate on commercial real estate

is:

A.greater than the effective tax rate on a stock or bond investment.

B.equal to the effective tax rate on a stock or bond investment.

C.less than the effective tax rate on a stock or bond investment.

D.cannot be compared across asset classes.

Development involves a complex organization of many moving parts. Which of the

following choices is often viewed as the single greatest cause of project delays and cost

overruns?

A.Obtaining permits

B.Financing

C.Effective communication between developer, architect, and engineer

D.Selecting the architect

In the modern framework of home mortgage lending, there are four channels by which

first mortgage home loans are created. Within which of the following channels would

you typically find a Wall Street investment bank obtaining loans, pooling loans, and

creating a senior-subordinate security structure?

A.Traditional direct (portfolio) lending

B.FHA/VA loan securitization

C.Conforming conventional loan securitization

D.Nonconforming Conventional

Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to

terminate the loan at sale of the property. Which of the following types of loans is the

most likely to contain a due-on-sale clause?

A.Federal Housing Administration (FHA) loan

B.Veterans Affairs (VA) loan

C.Conventional home loan

D.An assumable home loan

It is common for investors in real estate to use mortgage debt to help finance capital

investment. The use of debt can have a profound impact on the expected cash flows for

a particular property. Which of the following terms refers to cash flows that represent

the property’s income after subtracting any payments due to the lender?

A.Levered cash flows

B.Unlevered cash flows

C.Discounted cash flows

D.Compounded cash flows

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

The covenants in a deed are the most important differences among types of deeds.

Which of the following covenants promises that the grantor truly has good title and the

right to convey it?

A.Covenant of seizin

B.Covenant against encumbrances

C.Covenant of quiet enjoyment

D.Exceptions and reservation clause