Comprehensive Final

In a "traditional brokerage" relationship, the relation between the selling broker and the buyer is typically classified as which of the following (Hint: In this relationship, the buyer is simply a customer of the seller-broker firm rather than a client): dual agency relationship. "arm's length" relationship. special agency relationship. subagency relationship.

"arm's length" relationship.

In a buyer brokerage relationship, the relation between the listing broker and the buyer broker is typically classified as which of the following (Hint: In this relationship, the buyer is simply a customer of the seller-broker firm rather than a client): dual agency relationship. "arm's length" relationship. special agency relationship. subagency relationship.

"arm's length" relationship.

Suppose that examination of a pro forma reveals that the fifth year net operating income (NOI) for an income producing property that you are analyzing is $138,446 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected growth rate for the property's NOI to be 5% per year, determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%. $988,900.00 $1,538,289.00 $1,615,203.00 $1,465,037.00

$1,615,203.00

Suppose that you are attempting to value an income producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 7.5%. If the projected first year net operating income (NOI) for the subject property is $135,500, what is the indicated value of the subject using direct capitalization? $150,555.56 $1,806,666.67 $144,985.00 $9,033,333.33

$1,806,666.67

Jonathan recently sold his home and was able to take home $423,000 after paying the real estate broker's commission of 6%. If the buyer was ultimately found through a buyer broker, the dollar commission will need to be split between the listing broker and buyer broker. If the buyer broker is entitled to 40% of the commission, what is her share of the commission rounded to the nearest dollar? $10,800 $13,500 $27,000 $16,200

$10,800

Given the following information, calculate the total amount of annual operating expenses for this income-producing property: Minor roof repairs: $20,000 Property taxes: $30,000 Maintenance: $25,000 Janitorial: $15,000 Security: $10,000 Debt service: $175,000 $100,000 $80,000 $275,000 $70,000

$100,000

An investor just purchased an office building for $100,000. He knows for certain that he can sell the building for $110,000 in 5 years. Approximately how much does he need to charge in annual rent in order to achieve a 15% annual return on the deal (rounded to the nearest hundred dollars)? $20,500 $8,000 $2,500 $13,500

$13,500

Assume that a piece of land is currently valued at $50,000. If this piece of land is expected to appreciate at an annual rate of 5% per year for the next 20 years, how much will the land be worth 20 years from now? $100,898.99 $132,664.89 $123,860.81 $112,633.09

$132,664.89

Using the following information, determine the net operating income (NOI) for the first year of operations of the subject property using "above-line" treatment of capital expenditures. Subject Property Number of apartments 15 Market Rent (per month) 1000 Vacancy and Collection Losses 10% of PGI Operating Expenses 5% of EGI Capital Expenditures 10%of EGI $137,700 $135,000 $162,000 $153,900

$137,700

Having a solid grasp of the appropriate scale of financial data is an important first step in any form of analysis. Based on your understanding of the relative size of the U.S. mortgage market, which of the following best represents the approximate amount of total mortgage debt outstanding in the U.S. as of the end of 2022? $18 thousand $18 billion $18 million $18 trillion

$18 trillion

Since hazard insurance premiums are paid up-front, the buyer will have to reimburse (credit) the seller a portion of the premium at the closing. Suppose that the insurance policy's coverage began on December 15th of the prior year and the property transaction is set to close on March 16th of a 365-day year. The premium paid originally by the seller was $250. If the coverage will expire as of the end of day December 14th in the current year, what is the dollar amount that the buyer must credit the seller? $187.67 $62.33 $250.00 $0.00

$187.67

Suppose a potential home buyer is interested in taking a $500,000 mortgage loan that has a term and amortization of 30 years and a fixed mortgage rate of 5.25%. What is the monthly mortgage payment that the homeowner would need to make if this loan is fully amortizing? $2,761.02 $33,458.47 $17,820.72 $552.50

$2,761.02

Given the following information regarding an income producing property, determine the NPV using levered cash flows in your analysis Required equity investment: $270,000 Expected NOI for each of the next five years: $150,000 Debt Service for each of the next five years: $125,000 Expected Holding Period: 5 years Required yield on levered cash flows: 15% Expected Sale Price at end of Year 5: $2,000,000 Expected Cost of Sale: $125,000 Expected Mortgage Balance at time of sale: $1,500,000 $270,245.15 $1,435,029.64 $419,264.54 $245.15

$245.15

Assume you have taken out a partially amortizing loan for $325,000 that has a term of 7 years, but amortizes over 30 years. Calculate the balloon payment at maturity (Year 7) if the interest rate on this loan is 4.5%. $1,646.73 $118,468.21 $324,572.02 $282,835.42

$282,835.42

Suppose an investor deposits $5,000 in an interest-bearing account at her local bank. The account pays 2.5% (annual) with interest compounded monthly. If the investor plans on withdrawing the original principal plus accumulated interest at the end of 10 years, what is the total amount that she should expect to receive assuming interest rates do not change? $6,418.46 $5,105.15 $6,400.42 $96,790.75

$6,418.46

Given the following information, calculate the net operating income assuming below-line treatment of capital expenditures. Property: 4 office units Contract Rents per unit: $2,500 per month Vacancy and collection losses: 15% Operating Expenses: $42,000 Capital Expenditures: 10% $60,000 $48,000 $102,000 $95,000

$60,000

Given the following information, calculate the effective monthly rent payment: Lease Term: 10 years Concession: 1 year free rent to be spread over the term of the lease Rental Space: 5000 square feet Rental Rate: $20 per square foot per year Landlord's discount rate: 10% $7,081 $10,122 $5,901 $4,676

$7,081

Suppose you have found a tenant who wishes to rent out your vacation home for the next twelve months. You are charging $800 per month in rent. You will collect the first rent payment today and then on the 1st of the month each month thereafter. What is the value of this investment opportunity to you today if you could reinvest your income at an annual rate of 3% with interest compounded on a monthly basis? $9,445.80 $7,963.20 $9,469.42 $8,202.10

$9,469.42

Determine the net present value (NPV) of an investment decision to purchase a property for $90,000 that will generate annual cash flows of $10,000 per year for eight years and sell for $80,000 at the end of the eight year holding period, if the appropriate discount rate is 10%? (Note: Assume payments are made at end of year.) +$670 −$2,475 +$2,475 −$609

+$670

When the mortgage banker originates a home loan, she actually creates two assets: the loan and the servicing rights. Servicing fees typically range from: 0.45-0.74 percent of the outstanding loan balance. 0.75-0.99 percent of the outstanding loan balance. 0.19-0.44 percent of the outstanding loan balance. 0.00-0.18 percent of the outstanding loan balance.

0.19-0.44 percent of the outstanding loan balance.

Based on the following information, determine the location quotient for Music City and whether this city has a competitive advantage in the entertainment industry: Employment in Entertainment in Music City: 3,020 Total Employment in Music City: 656,785 Employment in Entertainment (nationally): 2,160,970 Total Employment (nationally): 106,201,232. 0.23; Yes, the city has a competitive advantage in this industry 0.23; No, the city does not have a competitive advantage in this industry. 4.43; No, the city does not have a competitive advantage in the industry 4.43; Yes, the city has a competitive advantage in this industry

0.23; No, the city does not have a competitive advantage in this industry.

Given the following information, calculate the loan-to-value ratio of this commercial loan. Estimated net operating income in the first year: $150,000 Debt service in the first year: $100,000 Loan amount: $1,000,000 Purchase price: $1,300,000 0.77 0.08 1.75 1.30

0.77

Given the following information, calculate the loan-to-value ratio: Loan amount: $800,000 Annual Payment: $62,581 Property Value: $1,000,000 Net Operating Income: $100,000 Operating Expenses: $60,000

0.8

Given the following information, calculate the loan-to-cost ratio for this property. Loan amount: $450,000 Interest rate: 7.5% Acquisition price: $550,000 0.18 0.99 1.22 0.82

0.82

If the debt payment (mortgage payment) is $100,000 and the Net Operating Income (NOI) is $130,000, what is the Debt Coverage Ratio (DCR)?

1.3

Given the following information, calculate the debt coverage ratio of this commercial loan. Estimated net operating income (NOI) in the first year: $150,000 Debt service in the first year: $100,000 Loan amount: $1,000,000 Purchase price: $1,300,000 1.30 0.67 1.50 0.15

1.50

Given the following information, calculate the debt coverage ratio: Loan amount: $800,000 Annual Payment: $62,581 Property Value: $1,000,000 Net Operating Income: $100,000 Operating Expenses: $60,000

1.6

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? 1/6 1/2 1/4 1/12

1/12

If the Effective Gross Income is $100,000 and the derived valuation was $1,000,000, what was the Effective Gross Income Multiplier?

10

In discounted cash flow analysis, the industry standard for pro forma cash flow projections of investment properties is typically: 5 years. 15 years 3 years. 10 years.

10 years.

Given the following information, calculate the effective gross income multiplier for the specific investment: Effective gross income: $49,500 First-year NOI: $18,750 Acquisition price: $520,000 Equity Investment: 20% 0.095 27.7 0.036 10.5

10.5

Given the following information, calculate the going-out cap rate: Estimated holding period: 5 years NOI for year 1: $120,000 NOI for year 5: $150,000 NOI for year 6: $155,250 Expected sale price at end of year 5: $1,350,000 11.1% 11.9% 11.5% 8.9%

11.5%

Given the following information regarding an income producing property, determine the unlevered internal rate of return (IRR): Expected Holding Period: 5 years 1st year Expected NOI: $89,000 2nd year Expected NOI: $91,773 3rd year Expected NOI: $94,526 4th year Expected NOI: $97,362 5th year Expected NOI: $100,283 Debt Service in each of the next five years: $58,444 Current Market Value: $885,000 Required equity investment: $221,250 Net Sale Proceeds of Property at end of year 5: $974,700 Remaining Mortgage Balance at end of year 5: $631,026 12.2% 33.4% 22.9% 10.6%

12.2%

Given the following information, calculate the cash-on-cash return for this investment: First-year NOI: $87,750 Acquisition price: $1,250,000 Equity investment: 35% Before-tax cash flow: $53,500 7.0% 4.3% 12.2% 20.1%

12.2%

The construction lender generally expects his or her loan to be paid off in: more than 10 years. 5-10 years. 2-3 years. less than 1 year.

2-3 years.

Given the following information regarding an income producing property, determine the internal rate of return (IRR) using levered cash flows: Expected Holding Period: 5 years 1st year Expected NOI: $89,100 2nd year Expected NOI: $91,773 3rd year Expected NOI: $94,526 4th year Expected NOI: $97,362 5th year Expected NOI: $100,283 Debt Service in each of the next five years: $58,444 Current Market Value: $885,000 Required equity investment: $221,250 Net Sale Proceeds of Property at end of year 5: $974,700 Remaining Mortgage Balance at end of year 5: $631,026 22.9% 10.6% 12.2% 33.4%

22.9%

If the anticipated annual absorption is 600, and you have 300 units, what is the number of months supply if the overall market has 1200 units? (The 1200 includes your 300.)

24

A developer's selection of an architect is a vital step in the development process as the architect fulfills a number of important roles throughout the life of the project. As compensation for contributions in the design phase, the architect is often given a percentage of the construction cost. For moderately complex designs, the average compensation will be: 1 to 2%. greater than 10%. 3 to 7%. 7 to 10%.

3 to 7%.

While a variety of loan terms are available in a lender's mortgage menu, the most common loan term on a level-payment mortgage is: 40 years. 30 years. 7 years. 15 years.

30 years.

Utilizing the following information, calculate the housing expense ratio. Monthly Principal and interest on mortgage loan: $635 Monthly Tax and insurance payments into escrow: $125 Gross monthly income: $2,500 44.4% 30.4% 53.2% 25.4%

30.4%

There are _________ square feet in an acre.

43,560

Given the following information, calculate the operating expense ratio for this property: Potential gross income: $120,000 Vacancy rate: 9% Net operating income: $57,900 Operating expenses: $51,300 47% 34% 53% 43%

47%

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: 5-6%. 7-10%. 3-4%. 1-2%.

5-6%.

In contrast to conventional home loans, a true interest-only mortgage loan requires the borrower to pay off the full balance of the loan in one single payment after: 15-30 years. 1-5 years. 5-7 years. 7-15 years.

5-7 years.

Since property taxes are paid in arrears, the buyer will be responsible for paying them after closing. Suppose that the closing date on the home for sale is February 28th of a leap year (e.g., 2012, 2016, etc.). How many calendar days would the seller be responsible for when calculating his/her share of the property tax owed for the year in which the home was sold? 58 days 307 days 308 days 59 days

58 days

If the acquisition price is $1,200,000, the potential gross income is $250,000 and the vacancy credit loss is $50,000, what is the Effective Income Multiplier?

6

Suppose that the required rate of return (i.e., IRR) on investment-grade commercial real estate in the U.S. is currently 7.7%. If the current return available on a risk-free U.S. Treasury security of comparable maturity is 1.3%, determine the required risk premium attributable to the aggregate commercial real estate market. 5.9% 7.7% 6.4% 9.0%

6.4%

Unlike the debt coverage ratio, the debt yield ratio (DYR) is not affected by the interest rate or amortization period of the loan; the DYR is simply a measure of how large the NOI is relative to the loan amount. Lenders who rely on this ratio are typically willing to accept a minimum DYR of ranging from: 25-50%. 80-90%. 65-75%. 7-9%.

7-9%.

Given the following information, calculate the going-in capitalization rate for the specific property: First-year NOI: $87,750 Acquisition price: $1,250,000 Equity Investment: 35% Before-tax cash flow: $53,500 20.1% 4.3% 7.0% 10.8%

7.0%

Given the following information, calculate the Effective Borrowing Cost (EBC). Loan amount: $175,000 Term: 30 years Interest rate: 7% Payment: $1,164.28 Discount points: 1 point Origination fee: $3,250 Assume the loan is held until the end of year 10. 7.0% 3.8% 0.6% 7.4%

7.4%

Suppose that the current return available on a risk-free 10-year U.S. Treasury security is 4.7%. If the risk premium currently attributed to investment-grade commercial real estate investments of comparable maturity in the U.S. is 3.7%, determine the current required rate of return (i.e., IRR) on investment-grade commercial real estate. 1.0% 8.4% 2.3% 3.7%

8.4%

A lender is considering whether to approve a mortgage loan on a home recently appraised at a value of $500,000. If the borrower is willing to make a down payment of $100,000, determine the loan-to-value ratio associated with this property. 40% 20% 60% 80%

80%

Suppose that an industrial building can be purchased today for $2,500,000. If it is expected to produce cash flows of $180,000 for each of the next five years (assume CFs are received at the end of each year) and can be sold at the end of the fifth year for $2,800,000, what is the internal rate of return (IRR) on this investment? 9.20% 4.57% 0.09% 10.37%

9.20%

If a homeowner in mortgage distress owes more than the value of the home and is unable to make the loan manageable by refinancing or modifying the mortgage, the next recourse often is a short sale of the property. All the following statements are true regarding a short sale EXCEPT: Legal costs should be lower with a short sale than with foreclosure. A short sale usually enables a better sale price and a faster sale than foreclosure. A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage. A short sale is less damaging to the borrower's credit than a foreclosure, thereby enabling the borrower to be eligible for another mortgage loan sooner.

A short sale relieves the seller of any other outstanding obligations on the home, such as owner association fees or a second mortgage.

Which of the following statements best describes the relation between interest rates offered on comparable fixed-rate and adjustable rate mortgage (ARM) loans? ARM interest rates are typically less than those on fixed-rate mortgages since interest rate risk is borne by both borrower and lender in an ARM. ARM interest rates are typically greater than those on fixed-rate mortgages since interest rate risk is borne by both borrower and lender in an ARM. ARM interest rates are typically less than those on fixed-rate mortgages since interest rate risk is borne solely by the borrower in an ARM. ARM interest rates are typically greater than those on fixed-rate mortgages since interest rate risk is borne solely by the lender in an ARM.

ARM interest rates are typically less than those on fixed-rate mortgages since interest rate risk is borne by both borrower and lender in an ARM.

While college-level courses are not widely available, a number of professional and trade organizations exist in the field of property management. Which of the following certifications awarded by the Institute of Real Estate Management (IREM) is a designation for those individuals specializing the management of apartment buildings? Real Property Administrator (RPA) Accredited Resident Manager (ARM) Certified Property Manager (CPM) Member of Appraisal Institute (MAI)

Accredited Resident Manager (ARM)

APR stands for __________.

Annual Percentage Rate

A/An ___________ is when one party's contractual rights and obligations are transferred to someone else.

Assignment

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? C Corporation subchapter S Corporation limited liability company general partnership

C Corporation

Investment analysts and institutional investors adhere to a "below-line" treatment of capital expenditures. This implies which of the following? Capital expenditures are added in the calculation of net operating income. Capital expenditures are subtracted from net operating income to obtain a net cash flow measure. Capital expenditures are subtracted in the calculation of net operating income. Capital expenditures are added to net operating income to obtain a net cash flow measure.

Capital expenditures are subtracted from net operating income to obtain a net cash flow measure.

Using the "Net Operating Income / Cap Rate = Value" formula, most appraisers adhere to an "above-line" treatment of capital expenditures. This implies which of the following? Capital expenditures are added to net operating income. Capital expenditures are subtracted in the calculation of net operating income. Capital expenditures are excluded from all calculations because they are difficult to estimate. Capital expenditures are subtracted from net operating income to obtain a net cash flow measure.

Capital expenditures are subtracted in the calculation of net operating income.

CCIM stands for _____.

Certified Commercial Investment Member

While college-level courses are not widely available, a number of professional and trade organizations exist in the field of property management. Which of the following certifications awarded by the Institute of Real Estate Management is aimed at individuals who manage larger, residential, office, industrial, or retail properties? Certified Property Manager (CPM) Member of Appraisal Institute (MAI) Accredited Resident Manager (ARM) Real Property Administrator (RPA)

Certified Property Manager (CPM)

Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is a court supervised workout for a troubled household? Chapter 11 bankruptcy Chapter 1 bankruptcy Chapter 7 bankruptcy Chapter 13 bankruptcy

Chapter 13 bankruptcy

Known popularly by its section in the Federal Bankruptcy Code, which of the following types of bankruptcy is the traditional form of bankruptcy wherein the court simply liquidates the assets of the debtor and distributes the proceeds to creditors in proportion to their share of total claims? Chapter 13 bankruptcy Chapter 11 bankruptcy Chapter 7 bankruptcy Chapter 1 bankruptcy

Chapter 7 bankruptcy

Which type of office building generally has the latest amenities, best location and commands the highest rent? First Class Class A Grade A

Class A

Which of the following federal environmental control laws was responsible for giving the EPA authority to control discharges of pollutants into waters of the United States? Toxic Substances Control Act Clean Water Act Resources Conservation and Recovery Act Safe Drinking Water Act

Clean Water Act

Based on your understanding of the factors that impact effective rent, which of the following choices best depicts the impact that concessions or tenant improvements paid by the owner and operating expense reimbursements or other lease expenses paid by the tenant would have on effective rent, respectively? Concessions or tenant improvements paid by the owner lower effective rents; operating expense reimbursements or other lease expenses paid by the tenant increase effective rents Concessions or tenant improvements paid by the owner lower effective rents; operating expense reimbursements or other lease expenses paid by the tenant lower effective rents Concessions or tenant improvements paid by the owner increase effective rents; operating expense reimbursements or other lease expenses paid by the tenant increase effective rents

Concessions or tenant improvements paid by the owner lower effective rents; operating expense reimbursements or other lease expenses paid by the tenant increase effective rents

A "general partnership" is just called a "general partner" in a limited partnership. TRUE OR FALSE?

FALSE

A city's "Subdivision Ordinance" likely governs Homeowner's Association (HOA) Rules and things like keeping the grass cut, not parking cars on the street overnight and the payment of regular dues to the association. TRUE OR FALSE?

FALSE

As long as you have no children in the public school system, you do not need to pay taxes to the school district. TRUE OR FALSE?

FALSE

Construction loans are usually interest free until construction is completed. TRUE OR FALSE?

FALSE

Due to recent changes in tax laws, Tenancies in Common are quickly becoming the most popular form of investment entity. TRUE OR FALSE?

FALSE

If an investor has enough cash to purchase an investment on his own, there will be no actual benefit to pooling equity with other investors. TRUE OR FALSE?

FALSE

In Tarrant County (this is the county that Arlington is in) property taxes are said to be ad valorem, which means taxes are levied as a percentage of the owner's income. TRUE OR FALSE?

FALSE

Private Mortgage Insurance protects the lender on the full amount of the loan. TRUE OR FALSE?

FALSE

VA loans are only available for veterans 65 and over. TRUE OR FALSE?

FALSE

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: FHA loans are more tolerant in terms of qualifying debt-to-income ratios. FHA loans require higher credit scores than are needed for prime conventional loans. FHA loans are targeted toward first-time homebuyers who are in slightly weaker financial circumstances than the typical prime conventional borrower. FHA loans contain lower limits on their maximum size than are available through conforming conventional loans.

FHA loans require higher credit scores than are needed for prime conventional loans.

The Federal National Mortgage Association (Fannie Mae) was originally established to provide a secondary market for FHA-insured and VA-guaranteed loans. All of the following statements regarding Fannie Mae are true EXCEPT: Fannie Mae lends money directly to homebuyers. Fannie Mae fully guarantees timely payment of interest and principal to investors in their mortgage securities. Fannie Mae was once a private, self-supporting company with publicly traded stock that has now been placed into conservatorship by the United States government following the mortgage crisis of 2007-2008. Fannie Mae is authorized to buy both conventional home loans and government-sponsored residential mortgages.

Fannie Mae lends money directly to homebuyers.

GNMA stands for:

Government National Mortgage Association Commonly known as Ginnie Mae.

Based on your understanding of the sales comparison approach, which of the following sequences of steps best identifies the appropriate implementation of the sales comparison approach from start to finish? Identify elements of comparison and value adjustment; select comparable sales; adjust comparable sale prices to approximate subject; reconcile adjusted sale process to obtain indicated value of the subject Select comparable sales; identify elements of comparison and value adjustment; reconcile adjusted sale process to obtain indicated value of the subject; adjust comparable sale prices to approximate subject Adjust comparable sale prices to approximate subject; reconcile adjusted sale process to obtain indicated value of the subject; identify elements of comparison and value adjustment; select comparable sales Reconcile adjusted sale process to obtain indicated value of the subject; adjust comparable sale prices

Identify elements of comparison and value adjustment; select comparable sales; adjust comparable sale prices to approximate subject; reconcile adjusted sale process to obtain indicated value of the subject

The term real estate is used in three fundamental ways. When real estate is defined as a bundle of rights associated with ownership and the use of the site and improvements, it is being viewed as purely a(n): Personal Asset. Intangible Asset. Tangible Asset. Parallel Asset.

Intangible Asset.

While the general concepts of investment value and market value are very similar, there is an important distinction between the two. All of the following statements regarding investment value are true EXCEPT: Investment value applies a discount rate to future cash flows. Investment value is a function of estimated cash flows from annual operations. Investment value takes into consideration estimated proceeds from the sale of the property. Investment value is based on the expectations of a typical, or average, investor.

Investment value is based on the expectations of a typical, or average, investor.

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? It does not protect a grantee against loss of the property in case of an unsuccessful title defense. It does not protect the grantee from the threat of physical damage to the property. It does not protect a grantee against the legal costs of defending the title. It does not protect against legal attack on the owner's title arising from a claim that diminishes the owner's rights of use.

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

Real estate appraisers generally distinguish among the concepts of market value, investment value, and transaction value. Which of the following statements best describes the concept of market value? It is the price we observe when a property is sold. It is an estimate of the most probable selling price of a property in a competitive market. It is the maximum amount that a seller would be willing to accept. It is the value a particular investor places on a property.

It is an estimate of the most probable selling price of a property in a competitive market.

Once a property is under contract, the Seller has ________ title while the Buyer has ________ title.

Legal, Equitable

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: Real estate market research should always be flexible since the research depends directly on the problem at hand. Market research should focus specifically on market segments for the property involved, rather than on the aggregate real estate market. Market research consists of a series of facts that fail to consider the role of investor behavior in the decision-making process. Most important data for a given market study often is not publicly available.

Market research consists of a series of facts that fail to consider the role of investor behavior in the decision-making process.

A property that has a 45% expense ratio would not be a good purchase if the average expense ratio in the market is only 35%. True False More information is required

More information is required

With a performance-based management contract, an asset manager's fees are tied directly to the rate of return earned by investors on the portfolio of managed properties relative to a benchmark. In private commercial real estate, the choice of benchmarks for performance is limited in large part to return indices provided by which of the following organizations? Wilshire Associates Standard and Poor's National Association of Real Estate Investment Trusts National Council of Real Estate Investment Fiduciaries

National Council of Real Estate Investment Fiduciaries

In an income proforma, subtracting Operating Expenses and any Capital Expenditures from Effective Gross Income results in __________.

Net Operating Income

The "front-end" ratio is calculated by dividing the _________ by the __________.

PITI, Gross monthly income

While college-level courses are not widely available, a number of professional and trade organizations exist in the field of property management. Which of the following certifications is awarded by the Building Owners and Managers Association International (BOMA) for successful completion of required course work and the accompanying comprehensive exam on property management? Accredited Resident Manager (ARM) Real Property Administrator (RPA) Member of Appraisal Institute (MAI) Certified Property Manager (CPM)

Real Property Administrator (RPA)

The actual net cash flow generated by a rental property investment may be different than the amount of income the owner must report for federal income tax purposes. Based on your understanding of the tax implications of property depreciation, which of the following statements best describes the difference between taxable income and the property's cash flow as a property ages over time? Since property depreciation is not tax deductible, we would expect taxable income to be less than the property's cash flow, all else equal. Since property depreciation is not tax deductible, we would expect taxable income to be greater than the property's cash flow, all else equal. Since property depreciation is tax deductible, we would expect taxable income to be less than the property's cash flow, all else equal.

Since property depreciation is tax deductible, we would expect taxable income to be less than the property's cash flow, all else equal.

It is commonly said that an agent has a "fiduciary responsibility" to the principal. TRUE OR FALSE?

TRUE

NNN, or Triple Net, leases allow operating expense increases to be passed through to the tenant. TRUE OR FALSE?

TRUE

When using the Sales Comparison Approach, the Appraiser adjusts the subject comparable sales price and not the subject sales price. TRUE OR FALSE

TRUE

The _______________ provides for a temporarily reduced initial rate in Adjustable Rate Mortgages.

Teaser Rate

Let's suppose that a lender has established a 90 percent loan-to-value ratio cutoff as one of its primary underwriting criteria. If a borrower is willing to make a down payment of $125,000 on a home recently appraised at $550,000, which of the following best describes the lender's decision on whether or not to approve the loan along this dimension? The lender denies the loan because the LTV ratio is greater than 90 percent. The lender approves the loan because the LTV ratio is less than 90 percent. The lender approves the loan because the LTV ratio is greater than 90 percent. The lender denies the loan because the LTV ratio is less than 90 percent.

The lender approves the loan because the LTV ratio is less than 90 percent.

Suppose that a property owner plans on spending $15,000 per year over the next 5 years on maintenance and repairs. However, if she does not spend this amount, she will not be able to keep rents at market levels, vacancies will increase, and the resale value of the property in 5 years will be lower. Assume that she would lose about $7,000 a year in net income and would realize a loss of $85,000 in lower property value at the time of sale if maintenance is not maintained on the property. Determine the difference between the present value of the cost of maintaining the property and the loss to the owner if the property is not maintained assuming that the owner could earn a 7 percent return on any funds not invested in maintenance and repairs?

The present value of the maintenance costs is $27,802 less than the present value of the averted loss.

Both parties to a valid and enforceable contract must provide consideration. In a contract for the sale and purchase of real estate, which of the following depicts the seller's consideration? The property to be given up. The option to present a counteroffer. The money or goods that constitute the purchase price. A meeting of the minds with the buyer.

The property to be given up.

When lenders charge discount points (prepaid interest) on a loan, what impact does this have on the loan's yield? The yield on the loan will increase. The yield on the loan automatically becomes zero. The yield on the loan will be unaffected. The yield on the loan will decrease.

The yield on the loan will increase.

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)? Truth-in-Lending Act (TILA) Home Ownership and Equity Protection Act (HOEPA) Real Estate Settlement Procedures Act (RESPA) Equal Credit Opportunity Act (ECOA)

Truth-in-Lending Act (TILA)

Which of the following pieces of legislation established the requirement for a lender to report the annual percentage rate (APR) on a mortgage loan to the borrower? Real Estate Settlement Procedures Act (RESPA) Truth-in-Lending Act (TILA) Equal Credit Opportunity Act (ECOA) Home Ownership and Equity Protection Act (HOEPA)

Truth-in-Lending Act (TILA)

Real estate professionals have long supported strict standards of ethics and practice. Followed by all states and federal regulatory agencies, which of the following imposes ethical obligations and minimum standards that must be followed by all real estate professionals providing formal estimates of market value? Multiple Listing Services (MLS) Uniform Standards of Professional Appraisal Practice (USPAP) Department of Housing and Urban Development (HUD) Office of Federal Housing Enterprise Oversight (OFHEO)

Uniform Standards of Professional Appraisal Practice (USPAP)

In constructing a market-defining "story," which of the following questions is designed to identify the market area? Where are the customers? Who are the customers? What is the real estate product under consideration? What aspects of the product do the customers care about?

Where are the customers?

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? Who are the competitors? Who are the customers? What is the real estate product under consideration? What aspects of the product do the customers care about?

Who are the customers?

There are a set of restrictive conditions that REITs must satisfy on an ongoing basis in order to maintain their special tax status. All of the following statements regarding the main restrictions are true EXCEPT: no five or fewer investors can own more than 50 percent of a REIT's shares. at least 75 percent of the value of a REIT's assets must consist of real estate assets. at least 100 investors must own a REIT's shares. a REIT must distribute at least 75% of its taxable income to shareholders in the form of dividends.

a REIT must distribute at least 75% of its taxable income to shareholders in the form of dividends.

According to the bid-rent model, which of the following individuals would be the one least likely to live closest to the central business district (CBD)? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD.) a doctor at the city hospital who must walk to work a barista at the local coffee shop who uses a car to commute a barista at the local coffee shop who must walk to work a doctor at the city hospital who uses a car to commute

a barista at the local coffee shop who uses a car to commute

According to the bid-rent model, which of the following individuals would be the one most likely to live closest to the central business district (CBD)? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD.) a doctor at the city hospital who must walk to work. a barista at the local coffee shop who uses a car to commute. a doctor at the city hospital who uses a car to commute. a barista at the local coffee shop who must walk to work.

a doctor at the city hospital who must walk to work.

An owner whose property is in a strong market position, where fewer services can be offered to tenants for the same dollar of rental income and where the owner will not lose tenants if the property is under-maintained, is said to participate in a market that has: a relatively elastic demand for space. diseconomies of scale. economies of scale. a relatively inelastic demand for space.

a relatively inelastic demand for space.

The Dodd-Frank Act ushered in a new standard for home mortgage underwriting. Which of the following standards is now required of any lender when underwriting a home loan? ability-to-prepay standard ability-to-securitize standard ability-to-repay standard ability-to-lend standard

ability-to-repay standard

Property taxes in Texas are _________, meaning they are levied as a percent of value.

ad valorem

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? affirmative easement appurtenant easement in gross license negative easement appurtenant

affirmative easement appurtenant

In contrast to rent for residential units, rent for U.S. commercial properties is typically quoted as: a dollar amount per year. a dollar amount per month. a monthly cost per square foot. an annual cost per square foot.

an annual cost per square foot.

"The right to use land for a specific and limited purpose" defines:

an easement

When you are evaluating the prospects for a project that is new in your setting and therefore has no actual relevant market performance data, it is most helpful to use which of the following techniques as the basis for your analysis? recommendation fabrication analogy cooperation

analogy

Which of the following terms refers to a fixed amount of money paid or received at the beginning of every recurring period (i.e. a series of equal lump sums)? ordinary annuity present value annuity due future value

annuity due

The dominant form of mortgage loan structure for income-producing property is a: balloon mortgage loan. conforming mortgage loan. conventional mortgage loan. fully amortizing mortgage loan.

balloon mortgage loan.

In a partially-amortizing mortgage loan, the balance of the principal amount is paid at maturity in what is commonly referred to as a(n): balloon payment. payment cap. early payment. up-front payment.

balloon payment.

The purpose of acknowledgment in a deed is to confirm that the deed is, in fact, the intention and action of the grantor. Acknowledgment is always required for a deed to: forego the offering of consideration as part of the transaction. be placed in the public record. convey what the grantor does not possess. be valid (enforceable).

be placed in the public record.

Based on your understanding of the differences between levered and unlevered cash flows, which of the following is an example of a levered cash flow? net operating income net sale proceeds before-tax cash flow sale price

before-tax cash flow

The placement of nonrecurring capital expenses in pro forma cash flow projections has not been standardized. The modern treatment of capital expenditures in investment analysis is to treat capital expenditures: below-line. out-of-line. above-line. in-line.

below-line.

In a net lease, the tenant is responsible for paying a clearly defined portion of the property's operating expenses. Based on your understanding of the standard definitions of "netness" in commercial leases, the tenant is responsible for which of the following in a net-net lease? both property taxes and insurance only property taxes all operating expenses no operating expenses

both property taxes and insurance

Since the seller often has utilized the property for a portion of the year in which the transaction is being made, certain costs associated with the property will be prorated at the closing. All of the following items are subject to being prorated EXCEPT: property tax. broker commission. prepaid rent. mortgage interest.

broker commission.

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: cease completely. spread to the outskirts of the city. build upward on lots within the CBD to allow multiple tenants. focus on low-income housing projects.

build upward on lots within the CBD to allow multiple tenants.

An interest-only balloon mortgage loan is commonly referred to as a: mezzanine loan bridge loan land acquisition loan bullet loan

bullet loan

Traditional home mortgage underwriting is said to rest on three elements, the "three C's." The housing expense ratio is one tool that lenders will use to address concerns associated with which of the "three C's?" character capacity creditworthiness collateral

capacity

In calculating the net operating income (NOI) of a property, the "above-line" treatment of capital expenditures implies: capital expenditures are included in the calculation of NOI. capital expenditures are excluded from the calculation of NOI. capital expenditures are divided by NOI. capital expenditures are set equal to NOI.

capital expenditures are included in the calculation of NOI.

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? user market capital market property market government

capital market

In recent years, lenders have been unwilling to relieve borrowers from personal liability in the event of fraud, environmental problems, or unpaid property tax obligations. Therefore, some lenders include a clause that pierces the single-purpose borrowing entity to hold the actual borrower liable in such instances. This clause is an example of a: carve-out clause. habendum clause. defeasance. lockout provision.

carve-out clause.

In creating evidence of title, a title search attempts to identify the sequence of conveyances passing ownership down through time. This sequence is more commonly referred to as the: title commitment. chain of title. title abstract. root of title.

chain of title.

Depository institutions primarily engaged in the business of making short-term loans to businesses for inventory financing and other working capital needs are more commonly referred to as: mortgage brokers. thrifts. mortgage banks. commercial banks.

commercial banks.

An example of a real estate asset that trades in the private debt market is a(n): commercial mortgage. mortgage REIT. real property. equity REIT.

commercial mortgage

Real estate brokers serve as intermediaries by bringing buyers and sellers together in the real estate market. For this service, brokers are paid what is commonly referred to as a: recovery fee. listing fee. licensing fee. commission.

commission.

Property rights created from legally enforceable 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?" elective share curtesy dower community property

community property

A city's economic base can be viewed in terms of a multiplier process, in which the money that is brought in through export activities is then recirculated within the city. Which of the following economic activities is the least likely to be considered a high-recirculation or high-multiplier economic base activity? specialized medical services computer assembly tourism retirement

computer assembly

By the power of eminent domain, the government can take private property for public purpose through due process and with just compensation. The process of exercising this power is known as: condemnation. intestate. foreclosure. testate.

condemnation.

The habendum clause defines or limits the type of interest being conveyed. The legal tradition recognizes certain words and phrases as signals of various real property interests. For example, the use of the phrase, "as long as," can communicate which of the following types of interests? conditional fee with reverter easement tenancy for years fee simple absolute

conditional fee with reverter

Created by Congress to promote an active secondary market for home mortgages, Fannie Mae and Freddie Mac purchase loans that meet specific underwriting standards such as loan size, documentation, and payment to income ratio. The loans that Fannie Mae and Freddie Mac are eligible to purchase are commonly referred to as: nonconforming conventional loans. FHA loans. government sponsored loans. conforming conventional loans.

conforming conventional loans.

Which of the following loan types is typically used to finance the costs associated with erecting the building (i.e., "going vertical")? construction loan land development loan land acquisition loan bridge loan

construction loan

The successful conveyance of real estate depends on a well-formed contract for sale since the contract dictates the rights and type of deed involved, as well as choreographs the entire transaction. Which of the following features of the contract for sale refers to the arrangements agreed to by the parties, such as price and date of closing? contract terms contingency clause contract conditions equitable title

contract terms

Which of the following covenants in a deed promises that the property is not burdened by liens, easements, or other limitations, except as noted in the deed? exceptions and reservation clause covenant of seizin covenant against encumbrances covenant of quiet enjoyment

covenant against encumbrances

Which of the following covenants in a deed promises that the property will not be claimed by someone with a better claim to title? covenant of quiet enjoyment covenant of seizin covenant against encumbrances exceptions and reservation clause

covenant of quiet enjoyment

If the mortgage loan is going to be packaged with similar loans and then resold to investors as part of a commercial mortgage-backed security, the originating lender may rely more heavily on examining which of the following ratios in order to determine the maximum amount they are willing to lend to the borrower? (Note: This ratio indicates the cash-on-cash return the lender would earn on its invested capital if it had to foreclose on the property immediately after originating the loan.) debt yield ratio debt coverage ratio debt service ratio equity dividend ratio

debt yield ratio

When cap rates rise, property values:

decline

The yields on commercial mortgages have been approximately 2 percent higher, on average, than the yields on comparable maturity treasury securities over the past 20 years. Often considered the signature risk of commercial mortgage lending, this spread primarily represents: default risk. interest rate risk. fallout risk. pipeline risk.

default risk.

In considering the acquisition of real property, it is important to remember that certain factors may limit ownership rights. Which of the following is an example of a situation in which ownership rights can be fully removed from the property? homeowner association (HOA) bylaws land use controls leasehold interests defaulted lien

defaulted lien

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? yield-maintenance prepayment penalties defeasance prepayment penalty curtailment penalty prepayment lockout

defeasance prepayment penalty

Assume that a borrower's property is reporting negative cash flows and cannot pay the mortgage. The bank notifies the borrower they must pay the loan in full. The mortgage clause that makes this possible is known as the: demand clause. insurance clause. escrow clause. exculpatory clause.

demand clause.

One solution for addressing conflicts of interest that arise from dual agency scenarios is for a broker to appoint a separate salesperson to represent each client. The appointed agent is considered a: universal agent. general agent. designated agent. dual agent.

designated agent.

At the death of a property owner, property will convey either in accordance with a will or without a will. If a will dictates the distribution of the decedent's real property, the property is said to be: patented. devised. dedicated. conveyed by the law of descent.

devised.

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? disclosure obedience confidentiality loyalty

disclosure

Leasehold estates are often defined as the temporary conveyance of all of the following parts of the traditional bundle of rights typically associated with real estate ownership EXCEPT: possession. enjoyment. disposition. use.

disposition.

Since an easement is a non-possessory interest, it is important to understand the right of disposition that is associated with it. In which of the following types of easements is the right of disposition claimed as part of the easement? negative easement appurtenant positive easement appurtenant implied easement easement in gross

easement in gross

A city's potential for economic and population 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: linkages. economies of scale. economic base. local economic activities.

economic base.

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? education facility retail office space one-family residential property high-rise apartments

education facility

The right of government to acquire private property, without the owner's consent, for public use in exchange for just compensation is referred to as: regulatory taking. inverse condemnation. eminent domain. dedication.

eminent domain.

Once a specific use has been chosen for a site, the first stage in the development process, often considered the "entry ticket to development," is: financing. establishing site control. feasibility analysis. construction.

establishing site control.

Property rights can be dismantled into lesser bundles, referred to as interests, which can then be held by different individuals. Interests in real property that include exclusive possession are referred to as: townships. fixtures. licenses. estates.

estates.

There are a number of different types of listing contracts that can be used when marketing a property. Which of the following types of listings requires the broker to be paid a commission if anyone, other than the owner, sells the property during the contract period? open listing exclusive agency listing exclusive right of sale listing FSBO listing

exclusive agency listing

In determining the appropriate listing contract to be used, it is important to know whether a multiple listing service (MLS) will be employed. The MLS only accepts which of the following types of listing contracts? exclusive right of sale listing open listing FSBO listing exclusive agency listing

exclusive right of sale listing

There are a number of different types of listing contracts that can be used when marketing a property. Which of the following types of listings requires the broker to be paid a commission if any other broker, or even the owner, sells the property during the contract period? exclusive right of sale listing open listing single listing exclusive agency listing

exclusive right of sale listing

When a developer decides to break down the project design into sequential phases and begins construction before the last phases of the design are complete, this procedure is more commonly referred to as: build-to-suit construction. fast-track construction. coordination construction. design-build construction.

fast-track construction.

The second stage of the development process requires an analysis of the project's feasibility. The developer will typically begin this stage of the development process with which of the following types of analysis? legal feasibility environmental feasibility political feasibility financial feasibility

financial feasibility

Which of the following types of loans is the most common instrument used to finance the acquisition of existing commercial property? floating-rate mortgage loans fixed-rate balloon mortgage loans construction loans mezzanine loans

fixed-rate balloon mortgage loans

One reason for the difference between a property's current market value and the total cost to replace it new is related to changes in tastes, preferences, technical innovations, or market standards. This is commonly referred to as: physical deterioration. functional obsolescence. tax depreciation. external obsolescence.

functional obsolescence.

According to the text, the fatal flaw for thrifts was:

funding long term loans with short term savings

When measuring REIT income, the REIT industry recommends the use of which of the following earnings metrics? net asset value (NAV) net income funds from operations (FFO) net operating income (NOI)

funds from operations (FFO)

Assuming all else the same, the _________ of an annuity due will be _________ that of an ordinary annuity with the same magnitude cash flows. present value; equal to future value; equal to present value; less than future value; greater than

future value; greater than

For most commercial property types, lease lengths can vary considerably. Therefore, both parties must tradeoff between the advantages and disadvantages associated with particular leasing terms. Owners may prefer longer leases for all of the following reasons EXCEPT: delay of re-leasing costs. gain flexibility. reduction of risk associated with declining interest rates. stability of future cash flows.

gain flexibility.

In most pooled ownership forms a single partner is empowered to act on behalf of the investors in terms of making property investment decisions. Based on your understanding of the different types of pooled ownership, which of the following structures would we expect this issue to be the least prevalent? C corporation general partnership subchapter S corporation limited partnership

general partnership

Which of the following types of liens is automatically superior to any other lien? mortgage lien lien arising from a court judgment unrelated to ownership of the property government property tax and assessment lien mechanics' lien

government property tax and assessment lien

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? government rectangular survey metes and bounds tax parcel number subdivision plat lot and block number

government rectangular survey

Each commercial property has unique features, whether it is its age, the building design of its structures, occupancy or its location. As such, real estate markets consist of assets that are considered: complements. homogeneous. substitutes. heterogeneous.

heterogeneous.

In contrast to public markets, private markets are characterized by individually negotiated transactions that take place without the aid of a centralized market. Therefore, private markets will generally have: low transaction costs and low liquidity. high transaction costs and high liquidity. high transaction costs and low liquidity. low transaction costs and high liquidity.

high transaction costs and low liquidity.

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? locational monopoly incomplete information holdout externalities

incomplete information

Which of the following would be categorized as a cause of external obsolescence? outdated fixtures lack of adequate insulation increased traffic flow due to more intensive use in the local area deterioration of indoor carpets

increased traffic flow due to more intensive use in the local area

Most research oriented universities have many different colleges, each with separate administrations, students, curricula, and facilities. However, the university continues to exist as a total unit because of: economic inefficiencies. negative externalities. locational monopoly. industry economies of scale.

industry economies of scale.

Which of the following is not one of the three "Nets" in NNN Leases? interest expense property taxes common area maintenance or operating expenses insurance

interest expense

When the contract rate at closing is less than the current market rate (i.e., interest rates have increased since the time of the loan commitment), the mortgage banker will have to sell the newly originated loan at a discount. This scenario best depicts the mortgage banker's exposure to which of the following risks? default risk liquidity risk fallout risk interest rate risk

interest rate risk

Commercial banks most commonly provide floating rate loans. However, borrowers who prefer a fixed rate can obtain an agreement that exchanges floating rate payments for a fixed rate schedule. This type of agreement is more commonly referred to as a(n): defeasance. curtailment. interest rate swap. foreclosure.

interest rate swap.

Investors in commercial real estate can hold ownership positions either directly or indirectly. An entity that invests in real estate and sells claims on those investments to the ultimate investors is more commonly referred to as a(n): tenant. sole proprietorship. syndicate. intermediary.

intermediary.

At times, government activities or regulation may result in "taking" most of an owner's property rights and value. In these cases, a property owner may seek compensation under a concept called: eminent domain. regulatory taking. dedication. inverse condemnation.

inverse condemnation.

According to the lecture, real estate can be best defined as:

land and things attached to it.

While leasehold interests are considered estates, they differ from freehold estates in all of the following respects EXCEPT: the right of disposition is diminished with a leasehold estate. leasehold estates are not titled interests. leasehold estates are limited in time. leasehold estates are possessory interests.

leasehold estates are possessory interests.

The developer will face a variety of costs throughout the project's life. Which of the following would be classified as a soft cost? legal fees of the permitting process cost of land labor cost of subcontractors for construction costs of materials

legal fees of the permitting process

The use of mortgage debt to help finance an investment is commonly referred to as: acquisition. leverage. amortization. capitalization.

leverage.

In certain states, such as the state of Florida, the transfer of title to the lender does not occur until the borrower defaults. These states are referred to as: title theory states. conforming states. lien theory states. nonconforming states.

lien theory states.

The final step in a real estate transaction is the closing. In most closings, which party is responsible for seeing that the closing is completed successfully? escrow agent listing broker lender selling broker

listing broker

Primarily through land use controls and property tax policy, which of the following branches of government has the largest influence on real estate values? national government local government state government foreign government

local government

When employing the sales comparison approach, appraisers must consider numerous adjustments to convert each comparable sale transaction into an approximation of the subject property. Adjustments are divided into two groups: transactional adjustments and property adjustments. All of the following are transactional adjustments EXCEPT: conditions of sale. location. financing terms. market conditions.

location.

In efficient financial markets, unregulated competitive bidding should bring about the most productive use of an asset and the price paid for that asset should reflect fair value based on its usefulness. In real estate, this is not always the case. For example, there is no substitute for certain pieces of land which gives the owner a bargaining advantage in determining the value of the land. This feature of real estate markets is commonly referred to as: negative externality. incomplete information. positive externality. locational monopoly.

locational monopoly.

Suppose an owner is trying to decide whether or not to make improvements to her property. Given the following information, what would be the value added or potential loss if the improvements are undertaken? Current rent per square foot: $8.75 Anticipated rent per square foot: $14.50 Cost of improvements: $250,000 Square feet: 34,000 gain of $54,500 loss of $54,500 loss of $195,500 gain of $195,500

loss of $54,500

The frequency of cash flows and reinvestment can have a significant impact on both present value and future value calculations. Based on your understanding of these relationships, as we increase the frequency of discounting (compounding), which of the following relations would we expect to hold true, all else equal: greater present values (greater future values). lower present values (greater future values). lower present values (lower future values). greater present values (lower future values).

lower present values (greater future values).

The most flexible method of land description, capable of describing even the most irregular of parcels, can be described as a very precise, compass-directed walk around the boundary of a parcel. This method is commonly referred to as: tax parcel number. metes and bounds. subdivision plat lot and block number. government rectangular survey.

metes and bounds.

When calculating the net operating income of a property, it is important to identify any expenses that will be incurred in attempts to maintain the property. All of the following would be considered operating expenses EXCEPT: property taxes. utility expenses. property insurance premiums. mortgage payments.

mortgage payments.

Commercial mortgage backed securities (CMBS) backed by government-sponsored enterprises (GSEs) consist entirely of mortgages from which of the following property types? retail office industrial multifamily

multifamily

The proportion of potential gross income not collected, even when supply equals demand in the rental market, is more commonly referred to as the: natural vacancy rate. static vacancy rate. absorption vacancy rate. turnover vacancy rate.

natural vacancy rate.

If a payment cap is applied and the required payment does not cover the interest expense, the unpaid interest is added to the loan thereby increasing the loan balance even though the required payment is being made. This is known as _________________.

negative amortization

Under Dodd-Frank, buyers must be given a review copy of the closing disclosure:

no later than 72 hours before closing

Mortgage loans that fail one or more of the underwriting standards established by government sponsored enterprises are more commonly referred to as: government sponsored loans. conventional loans. nonconforming loans. conforming loans.

nonconforming loans.

When a zoning ordinance is revised, some existing land uses then fall outside the new zoning classification. These land uses are referred to as: special uses. conforming uses. exclusionary uses. nonconforming uses.

nonconforming uses.

UTA's College of Business can provide you with _______ of the classes you need for real estate licensure.

none

There are several key factors that can impact the value of an urban property. Community characteristics such as household income level and makeup are an example of which of the following value-determining factors? land uses nonlocational linkages locational

nonlocational

In a mortgage loan agreement, the financial rights and obligations of borrower and lender are detailed in the: mortgage (Deed of Trust). note. listing contract. assignment of mortgage.

note.

The covenant on a deed that promises Grantor has good and legal title is the Covenant:

of seisin

In considering a 3/1 adjustable-rate mortgage (ARM), the interest rate will adjust every _________ after the specified fixed rate period? three years one year five years two years

one year

Of the following choices, which best describes the operating expenses that you would expect to be paid by the tenant in a net lease agreement? no operating expenses all operating expenses only property taxes both property taxes and insurance

only property taxes

In some leases, the method used to share responsibility for operating expenses is a hybrid of the four basic lease types. For example, the inclusion of which of the following clauses calls for only increases in one or more operating expenses, relative to a base year, to become the responsibility of the tenant? subordination clause operating expense escalation clause operating expense stop clause tenant improvement allowance clause

operating expense escalation clause

Mortgage loans that allow the borrower to switch among a variety of payment arrangements throughout the life of the loan are more commonly referred to as: Alt-A loans. option ARM loans. hybrid ARM loans. subprime loans.

option ARM loans.

Since banks seldom loan 100 percent of construction costs, developers often turn to mezzanine financing to obtain necessary funds. With mezzanine debt, which of the following entities is typically pledged as collateral to the lender? construction materials ownership shares in the development entity personal assets of the developer land

ownership shares in the development entity

Based on your understanding of the three types of accrued depreciation, which of the following refers to the loss in value of a building over time associated with the aging and decay of the building's physical condition? external obsolescence physical deterioration tax depreciation functional obsolescence

physical deterioration

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. mutual assent assignment power of attorney consideration

power of attorney

In most small to medium private real estate deals, syndicators play important roles within the origination, operation, and completion phases of a real estate syndicate's life. All of the following are responsibilities of the syndicator in the operation phase of a syndicate's life EXCEPT: manage properties. manage the syndication. raise additional investment capital if required. prepare the properties for sale.

prepare the properties for sale.

The loan origination market, in which borrowers and lenders come together to provide adequate financing for the purchase of a property, is more commonly referred to as the: secondary mortgage market. primary mortgage market. government sponsored market. over-the-counter market.

primary mortgage market.

A popular adage in real estate is that property value is all about "location, location, location." However, for most property types in nonresidential realms, nonlocational requirements are equally or even more important. All of the following are examples of nonlocational factors EXCEPT: proximity to modes of public transportation. nature of current tenants. floor plate size. amount of parking.

proximity to modes of public transportation.

Since most data that we would like to conduct a thorough market analysis is unavailable, a researcher will find it useful to find a data series that will closely represent the variable of interest. We typically refer to this type of variable as a: proxy. cluster. relevant. correlation.

proxy.

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: home equity mortgage. conventional loan. reverse mortgage. purchase money mortgage.

purchase money mortgage.

The Dodd-Frank Wall Street Reform and Consumer Protection Act created an important new class of home mortgages that is aimed at helping mortgage lenders implement an "ability to repay" standard imposed by the law. These mortgages are more commonly referred to as: Alt-A mortgage loans. qualified mortgage loans. subprime mortgage loans. hybrid mortgage loans.

qualified mortgage loans.

The concentric ring model was based on the design of a city (Chicago) in which _____________ were the dominant form of transportation at the time. airports highways waterways railways

railways

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(n): equity REIT. mortgage-backed security. real property. home mortgage.

real property.

When a borrower replaces an old mortgage loan on a home with a new mortgage loan, often with a lower mortgage rate, on the same home this is more commonly referred to as: technical default. strategic default. refinancing. amortizing.

refinancing.

Based on your understanding of the differences between convenience and comparison activities, which of the following property subtypes is designed to provide mostly comparison goods and services to its customers? power center (with discount store anchors) stand-alone retail store regional mall neighborhood shopping center (with grocery anchor)

regional mall

One of the main criticisms of property taxes is that the property tax of lower income households is higher than that of higher income households, as a percentage of their respective incomes. In other words, taxes are criticized for being: extraterritorial. regressive. concurrent. comprehensive.

regressive.

Once senior liens such as property tax, assessment, and CDD liens have been addressed in the case of default, the priority sequence for processing the remaining liens on the property is determined by the: relative complexity of the structure of the lien. relative size of the liens in dollar terms. relative reputation of the entity that established the lien. relative timing of the establishment of the lien.

relative timing of the establishment of the lien.

When the seller or buyer in a contract for sale fails to perform (e.g., breach of contract, nonperformance, or default), the buyer or seller has a variety of remedies. One such remedy is to agree to return both parties to their precontract status. This remedy is most commonly referred to as: earnest. specific performance. damage. rescission.

rescission.

Which type of interest allows the owner to retake possession at the end of a lease? reversion interest spousal interest remainder interest co-ownership interest

reversion interest

A tenant who expects her business to grow may wish to have a clause included in her lease that grants her the choice to lease adjacent space as soon as it becomes available. This lease option is more commonly referred to as a: right of first refusal. relocation option. renewal option. consideration.

right of first refusal.

Real Property can best be defined as:

rights in land and its permanent structures

One approach to increasing the amount of financial leverage is to obtain a second mortgage. Because the second mortgage lender is in a _________ position than the first lien holder, second mortgages carry _________ interest rates. safer; lower riskier; higher riskier; lower safer; higher

riskier; higher

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? commercial mortgage backed securities (CMBS) installment sale sale-leaseback tenancy-in-common (TIC)

sale-leaseback

While there are several conventional approaches used to estimate the market value of real estate, which of the following is typically considered the most reliable approach? sales comparison approach investment approach cost approach income approach

sales comparison approach

When identifying an easement appurtenant, the parcel of land that is constrained or diminished by the easement is referred to as the: servient parcel. gross parcel. licensed parcel. dominant parcel.

servient parcel.

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? mechanical engineer structural engineer civil engineer soils engineer

soils engineer

It was not until the late 1960's that land use controls moved to the forefront of public interest, as the belief that the environment was an endless and costless resource was replaced with the notion that the world was a closed system with limited space, air, water, and other resources. Environmentalists coined which of the following terms to refer to this new point of view? smart growth spaceship earth urban sprawl The Silent Spring

spaceship earth

Operating expenses can be divided into two categories: variable and fixed expenses. Which of the following best exemplifies a fixed expense? property management trash removal utilities state and local property taxes

state and local property taxes

Helping to constrain entry into real estate related occupations, which of the following branches of government is directly involved in establishing rules and regulations for the licensing of professionals in the field of real estate? local government national government foreign government state government

state government

Even after a property goes into foreclosure, it is still possible for the borrower to reclaim the property as long as they produce the outstanding mortgage balance and all foreclosure costs incurred to that point. In a state such as Florida, this right may even extend beyond the date of the foreclosure sale. When this occurs, this right is more commonly referred to as: statutory redemption. equity of redemption. strategic default. substantive default.

statutory redemption.

Companies or individuals who provide specialized construction activities such as installation of heating, ventilating, and air conditioning systems during the construction process are more commonly referred to as: land planners. subcontractors. general contractors. construction managers.

subcontractors.

As an alternative to gap financing, a developer may form a contract with a construction lender that ultimately makes the original construction lien inferior to the lien securing a subsequent loan. This contract is more commonly referred to as a: floor loan. take-out commitment loan. subordination agreement. miniperm loan.

subordination agreement.

When a party in a contract fails to perform (e.g. breach of contract, nonperformance, or default) the other party has a variety of remedies. All of the following are remedies that an aggrieved seller may pursue EXCEPT: sue for damages. retain the earnest money deposit as liquidated damages. sue for specific performance. agree to rescission of the contract.

sue for specific performance.

A group of persons or legal entities who come together to carry out a particular activity are more commonly referred to as a: broker. trust. security. syndicate.

syndicate.

Brokers or agents that specialize in helping tenants find suitable space are more commonly referred to as: credit tenants. tenant mix. tenant reps. lessors.

tenant reps.

Since most data for a given market study is not readily available, analysts must be creative in their use of data that they are able to obtain. The primary source for detailed household demographic information is: the local tax collector's office. not available publicly. the Federal Reserve. the U.S. Bureau of the Census.

the U.S. Bureau of the Census.

Real estate consists of the physical structures and infrastructure that accompany the land. All of the following are examples of an improvement to the land EXCEPT: streets. the building and parking lot. sewer system. walkways.

the building and parking lot.

Competition for the currently available supply of locations and space coupled with the existing supply of leasable space, determines: the timing of the expected cash flows of an income-producing property. the current level of rental rates for each submarket and property. the riskiness of the expected cash flows of an income-producing property. the cost of financing the purchase of a property.

the current level of rental rates for each submarket and property.

Development of subdivisions, apartments, offices, or other commercial structures can have a lead time of two years or more. In general, the longer the construction lead time: the lower the market value. the greater the amplitude of real estate cycles. the lower the construction cost. the greater the supply of units.

the greater the amplitude of real estate cycles.

One reason why adjustable-rate mortgages (ARMs) have become popular has to do with the impact that they have on the interest rate risk that is borne by the parties involved. If interest rates were to rise on a level-payment mortgage (LPM), the interest rate risk of the loan would typically be borne by: the borrower only. both the borrower and lender. neither the borrower nor the lender. the lender only.

the lender only.

A common criticism of the annual percentage rate (APR) is that it usually understates the true cost of borrowing. The APR may understate the cost of borrowing because it assumes: the loan always goes to maturity. interest rates will always rise. the actual life of the loan is shorter than maturity. upfront fees should be ignored.

the loan always goes to maturity.

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: the time value of money. interlease risk. re-leasing costs. the advantages associated with lease flexibility.

the time value of money.

While there is no specific number of comparables that is required for every appraisal assignment, how many comparable sales are considered adequate as long as the properties are very similar to the subject property? one ten three five

three

The distinction between market rent and contract rent is important due to differences in lease terms. Office, retail, and warehouse tenants most commonly occupy their space under leases that run: three to five years. one year or less. one to three years. ten years or more.

three to five years.

When multiple individuals have use of a property, but their interests are not simultaneous, this type of co-ownership is referred to as a: condominium. cooperative. tenancy by the entirety. timeshare.

timeshare.

Texas is a ____________ theory state.

title

Historically, the most compelling location for a city to arise has been at the intersection of modes of: telecommunication. transportation. data transmission. health care.

transportation.

When examining a REIT's financial statements, GAAP net income will: overstate the funds that are available to distribute to investors as dividends since most real estate assets are depreciable. overstate the funds that are available to distribute to investors as dividends since most real estate assets are not depreciable. understate the funds that are available to distribute to investors as dividends since most real estate assets are depreciable. understate the funds that are available to distribute to investors as dividends since most real estate assets are not depreciable.

understate the funds that are available to distribute to investors as dividends since most real estate assets are depreciable.

Development taking place in rural areas well beyond the urban fringe is commonly referred to as: urban service areas. urban sprawl. homestead. holdout.

urban sprawl.

The demand for real estate derives from the need that market participants (e.g., owner occupants, tenants, renters) have for shelter and convenient access to other locations. This competition for physical location and space occurs in the: user market. government sector. property market. capital market.

user market.

Unlike many publicly traded stock and bond investments, commercial real estate investments: yield returns generated mostly from the asset's net operating income, rather than price appreciation. have going-in and going-out transaction costs that are low (as a proportion of asset value). can be bought and sold in highly liquid markets. yield maximized returns when assets are held for short periods of time.

yield returns generated mostly from the asset's net operating income, rather than price appreciation.

Given the following information, calculate the NPV for this property: Initial cash outflow: $200,000 Discount rate: 15% CF for year 1: $25,876 CF for year 2: $23,998 CF for year 3: $23,013 CF for year 4: $22,105 CF for year 5: $144,670 −$51,875 −$59,657 $295,951 $140,343

−$59,657