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The recent emergence of discount brokerage services has had a modest effect on the
price of brokerage services. The average commission that a broker could expect to
receive today would most likely range between:
A. 1-2%
B. 3-4%
C. 5-6%
D. 7-10%
Which of the following types of institutions has historically been the largest purchaser
of residential mortgages?
A. Commercial banks
B. Savings and Loans
C. Government sponsored enterprises
D. Mortgage banking companies
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
Based on your understanding of the effect of agglomeration economies in real estate,
you would expect institutional investors to most favor real estate investments in which
of the following areas?
A. small urban markets
B. large urban markets
C. small rural markets
D. large rural markets
One measure of the importance of a publicly traded asset class in the U.S. economy can
be calculated by multiplying the number of publicly traded shares by the current market
price of the stock. The result of this calculation is more commonly referred to as:
A. market capitalization
B. capitalization rate
C. price-earnings ratio
D. earnings-per-share ratio
Using the following information, determine the location quotient for this industry.
Percentage of employment in financial services industry within the local community:
15%, Percentage of employment in financial services industry for the entire U.S.: 4.4%.
A. 0.3
B. 3.4
C. 10.6
D. 19.4
Computer software systems that enable one to manipulate and "map" information with
great flexibility and speed are referred to as:
A. geographical information systems (GIS)
B. psychographics
C. survey research
D. census mapping
In constructing a market-defining 'story," it is helpful to answer a series of fundamental
questions around which analysis can be built. Which of the following questions is
designed to identify the target market?
A. What is the real estate product under consideration?
B. Who are the customers?
C. What aspects of the product do the customers care about?
D. Who are the competitors?
Understanding the revenue generating ability of the core export activities of a local area
has important implications on the market value of real estate. When the income that
these activities generate is re-spent within the community on other local goods and
services, the community is benefiting through a:
A. dividend process
B. multiplier process
C. forced saving process
D. diversification process
In recent years, mortgage lenders responded to the demand from home buyers who
were unable to put 20 percent down on their purchase and were looking to avoid the
private mortgage insurance (PMI) requirement that would typically accompany such a
loan by developing a second mortgage that is created simultaneously with the first
mortgage in an amount of ten percent of the value of the home. This enabled the
borrower to obtain 90 percent financing while avoiding the additional cost of PMI.
These loans are more commonly referred to as:
A. Reverse mortgages
B. Home equity loans
C. Piggyback mortgage loans
D. Subprime mortgage loans
Assume that a veteran decides to purchase a house for $150,000 using a VA loan that
amounts to $44,000. If the buyer were to defaults on the loan, what is the maximum
amount that the VA guarantees the lender?
A. $11,000
B. $22,000
C. $33,000
D. $44,000
In 1989, Congress took major steps to establish depository institution accountability by
requiring these institutions to hold more capital as they take on riskier assets. Which of
the following Congressional acts imposed these capital standards on depository
institutions?
A. Depository Institutions Deregulation and Monetary Control Act
B. Financial Institutions Reform, Recovery, and Enforcement Act
C. Secure and Fair Enforcement for Mortgage Licensing Act
D. Riegle Community Development and Regulatory Improvement Act
Given the following information, determine the value of having an additional bedroom.
Assume that the comparable properties are similar in all other attributes besides those
listed in the table below.
A. $5,000
B. $15,000
C. $20,000
D. $25,000
Some tenants who are subject to long-term leases may desire to transfer all of their
tenant rights and obligations to another party. This is commonly referred to as a(n):
A. assignment
B. sublease
C. concession
D. lease option
Given the following expected cash flow stream, determine the NPV of the proposed
investment in an income producing property and determine whether or not the
investment should be pursued. Investment Horizon: 5 years; Expected Yearly Cash
Flow in each of the next five years: $127,628. Expected Sale Price at end of 5 years:
$1,595,350; Opportunity Cost of Investment 6%; Current Market Price of Property:
$1,750,000
A. NPV is -$20,246; Decision is to invest
B. NPV is -$20,246; Decision is not to invest
C. NPV is $249,967; Decision is to invest
D. NPV is $249,967; Decision is to not invest
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 presence of real estate cycles presents a major challenge when forecasting real
estate market parameters. If the market value of a residential developer's project
exceeds its construction costs, an increase in the supply of units will occur. As the
market becomes oversupplied, we would expect which of the following to occur?
A. an increase in occupancy levels
B. an increase in market values
C. a decrease in real rental rates
D. a decrease in construction costs
Real estate can be viewed as a bundle of rights. How these bundles of rights are
grouped together determines the type of ownership interest an individual (or group of
individuals) can stake claim to. In an ordinary life estate with remainder interests,
which of the following rights is detached from the traditional bundle of rights that
typically defines a fee simple absolute interest?
A. Possession
B. Use
C. Disposition
D. Enjoyment
Survey research has been applied to real estate markets at many levels. Despite its
frequent application, analysts must be cautious with survey use because:
A. it is difficult to implement
B. interviews and questionnaires are not received well by consumers
C. it cannot be used in a small sample area
D. it can be fraught with abortive errors
There are a number of alternatives when it comes to the capital structure for
acquisitions of commercial real estate. Through which of the following lending
relationships does the lender have the right to foreclose on the equity of the borrower's
company in the case of default?
A. Second mortgage loan
B. Mezzanine loan
C. Mini-perm loan
D. Construction loan
For purposes of federal income taxes, real property is classified into four categories.
With which of the following types of real estate is the investor able to reduce his
taxable income to reflect the wear and tear of a property over time?
A. Personal residence
B. Dealer property
C. Trade or business property
D. Investment property
A significant number of mortgage loans use adjustable interest rates, in which the
interest rate of the loan is tied to an index rate that fluctuates over time. For
income-producing property, the most common index rate is the:
A. one-year U.S. Treasury constant maturity rate
B. prime rate
C. London Interbank Offered Rate (LIBOR)
D. cost-of-funds index
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.
Since many commercial properties are held by limited liability corporations or limited
partnerships, it is important to understand the tax consequences at the individual
investor level. Individuals face different tax rates depending on the level of their taxable
income. As of 2012, an individual making between $$85,650 and $178,650 would fall
into which of the following tax brackets?
A. 15%
B. 25%
C. 28%
D. 35%
Assuming that an investor requires a 10% annual yield over the next 12 years, how
much would she be willing to pay for the right to receive $20,000 at the end of year 12?
A. $6,053.91
B. $6,372.62
C. $62,768.57
D. $136,273.84
A fishing company was formed in Juneau, Alaska. Over the next decade, a canning
plant, a processing plant, and a boat repair facility also opened in Juneau. This is an
example of:
A. industry economies of scale
B. agglomeration economies
C. location quotient
D. linkages
You have taken out a $350,000, 3/1 ARM. The initial rate of 6.0% (annual) is locked in
for 3 years. Calculate the outstanding balance on the loan after 3 years. The interest rate
after the initial lock period is 6.5%. (Note: the term on this 3/1 ARM is 30 years)
A. $2,098.43
B. $2,183.95
C. $336,294.25
D. $347,901.57
A property management contract establishes an agency relationship between the
manager and the owner. Considering that the management fee is often calculated as a
percentage of gross income, this would seem to create an agency problem in that the
agreement does not give managers the incentives to control operating expenses while
they attempt to increase rental income. Though seldom the case, basing the property
management fee on which of the following measures would, in theory, better align the
interests of the owner and manager?
A. Effective gross income
B. Net operating income
C. Miscellaneous income
D. Capital expenditures
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
The effective rent calculation is a common measure used to compare the true cost of
one lease to another. While there are a number of limitations to this methodology, the
effective rent calculation captures:
A. interlease risk
B. re-leasing costs
C. the advantages associated with lease flexibility
D. the time value of money
Total mortgage debt outstanding as of the third quarter of 2011 approached $13.6
trillion. Which of the following types of mortgage loans accounts for the greatest
percentage of mortgage debt outstanding?
A. Residential (1-4 family)
B. Apartment (multifamily)
C. Commercial
D. Farm
