FIN 266 Cumulative Final

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 March 18th 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. A. 78 days B. 79 days C. 287 days D. 288 days

78 days

When a mortgage is used as collateral for the issuance of a mortgage-backed security (MBS), the underlying mortgage is said to be "securitized." As of the end of 2010, approximately what percentage of residential mortgage loans in the U.S. was being sold into the secondary market and being used as collateral for the issuance of MBS? A. 25% B. 40% C. 85% D. 100%

85%

Given the following information, calculate the load factor for this office property. Total usable area: 20,000 sq. ft., Tenant's prorated share of common area: 5,000 sq. ft. A. 0.25 B. 0.80 C. 1.25 D. 4.00

1.25

Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as "technical" defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (i.e., a substantive default)? A. One day B. 30 days C. 60 days D. 90 days

90 days

For all but the largest of developers, the marketing and leasing of the project will be through an external broker. Given their special knowledge of the target market, it would be most beneficial for the developer to bring the broker into the development process during which of the following stages? A. Design B. Financing C. Construction D. Operation

design

In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage? A. How the interest rate is to be computed. B. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. C. Whether the borrower is released from liability for fulfillment of the contract. D. An unambiguous description of the property that is being pledged as collateral for the loan.

an unambiguous description of the property that is being pledged as collateral for the loan

While some property owners choose to perform both the property and asset manager functions themselves, many commercial property owners choose to employ professional property managers instead. The property manager works under a management contract in which the manager is empowered to serve as the owner's fiduciary. This type of relationship is more commonly referred to as a(n): A. agency relationship B. open listing relationship C. joint-venture D. correspondent relationship

agency relationship

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

an annual cost per square foot

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

assignment

Since the issues in many transactions are similar, brokers often use standard preprinted contract forms. Generally, the best standard form contracts are those prepared and approved by which of the following parties? A. Office supply firm B. Seller C. Board of Realtors D. Web source of generic legal forms

board of realtors

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: A. Broker commission B. Prepaid rent C. Property tax D. Mortgage interest

broker commission

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? A. Certified Property Manager (CPM) B. Accredited Resident Manager (ARM) C. Real Property Administrator (RPA) D. Member of Appraisal Institute (MAI)

certified property manager

The two most important determinants of the classification of an office property are age and obsolescence. Which of the following classes includes office buildings that are older and reasonably maintained, but are below current standards for one or more reasons? A. Class A office B. Class B office C. Class C office D. Investment grade property

class C office

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: A. commission B. licensing fee C. recovery fee D. listing fee

commission

When the supply of space exceeds the demand, it is common for owners to provide the tenant with a period of free or perhaps reduced rent. This is commonly referred to as a(n): A. tenant improvement allowance B. concession C. sublease D. expense stop

concession

Maintenance and repair of a property is an ongoing process that can be divided into four principal categories. Which of the following classifications includes ordinary repairs to a building on a day-to-day basis (e.g. repairing a broken window, fixing a leaking roof)? A. Custodial maintenance B. Corrective maintenance C. Preventive maintenance D. Deferred maintenance

corrective maintenance

When leasing nonresidential properties, owners would prefer to rent exclusively to high quality tenants. Such owners will tend to seek out companies whose general debt obligations are rated "investment grade" by one of more of the U.S. rating agencies. These potential tenants are more commonly referred to as: A. tenant reps B. credit tenants C. tenant mix D. in-house leasing agents

credit tenants

Concerned with a potential information asymmetry problem, state legislators have been proactive in passing legislation that protects the rights and interests of tenants within which of the following property types? A. Office B. Retail C. Industrial D. Apartment

Apartment

In more complex development projects, a developer may choose to combine the roles of the architect and general contractor into one in order to mitigate design-cost conflicts that otherwise must be negotiated when plans are revised. This arrangement is more commonly referred to as a: A. build-to-suit B. subordination agreement C. design-build D. fast-track

design-build

Based on your understanding of the relation between risk and the phases of an income producing property's life, which phase would you expect to entail the highest risk? A. Development and construction phase B. Lease-up stage C. Stable operation phase D. All three stages of a property's life have similar and equal risk

development and construction phase

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? A. Land B. Ownership shares in the development entity C. Personal assets of the developer D. Construction materials

ownership shares in the development entity

The majority of financing for the acquisition of land for development is most likely to come from which of the following parties? A. Developer B. Banks C. Pooled equity of a limited liability corporation (LLC) D. Insurance companies

pooled equity of a limited liability corporation (LLC)

The management agreement provides for a management fee that is usually in the range of 3 to 6% of which of the following measures of property income? A. Potential gross income B. Effective gross income C. Net operating income D. Income tax liability

effective gross income

One of the traditional requirements for individuals who wish to obtain a brokerage license has been to demonstrate financial capacity to cover damage judgments brought against them by clients. In order to address this concern, some states have required licensees to first obtain: A. Private mortgage insurance (PMI) B. Errors and omission insurance C. Deposit insurance D. Hazard insurance

errors and omission insurance

Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums? A. Demand clause B. Insurance clause C. Escrow clause D. Exculpatory clause

escrow clause

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? A. Open listing B. FSBO listing C. Exclusive agency listing D. Exclusive right of sale listing

exclusive right of sale listing

While uncertainties involving the multitude of players and stages in the development process provide a great deal of risk, market cycles tend to compound these risks. Out of the four phases of a market cycle, which would be the most desirable point for a developer to enter the market? A. Trough B. Expansion C. Peak D. Decline

expansion

Newer industrial parks have begun to specialize in providing space that can be configured to suit the diverse needs of various tenants. This type of industrial space is more commonly referred to as: A. Warehouse B. Plant and Factory C. Flex space D. Research and Development

flex space

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: A. Delay of re-leasing costs B. Reduction of risk associated with declining interest rates C. Gain flexibility D. Stability of future cash flows

gain flexibility

With a multitude of players involved in the development process, it is important to understand where they participate within the various stages of development. Which of the following individuals is the least likely to be involved in the design stage of development? A. General contractor B. Landscape architect C. Civil engineer D. Land planner

general contractor

Which of these is not typically a responsibility of a property manager? A. Marketing & Leasing B. Tenant relations C. Maintenance D. Income tax analysis.

income tax analysis

First National Bank "locked in" an interest rate for Bob of 8.5%. At the time of the closing, the market interest rate had risen to 9.25 %. This is an example of A. interest rate risk. B. fallout risk. C. collateral risk. D. loan risk.

interest rate risk

When construction costs exceed the amount of the construction loan, a developer may seek to cover the gap using mezzanine financing. All of the following statements regarding mezzanine debt are true EXCEPT: A. Mezzanine debt use is less expensive than normal construction financing B. Mezzanine debt use avoids dilution of equity returns C. Mezzanine debt use is less expensive than equity financing D. Mezzanine debt use avoids the foreclosure process in the case of default

mezzanine debt use is less expensive than normal construction financing

The majority of residential units in the U.S. are contained in multifamily structures, or apartment buildings that contain five or more housing units. Which of the following multifamily structures will range in height from four to nine stories and are typically found in both cities and suburbs? A. High-rise apartment buildings B. Midrise apartment buildings C. Garden apartments D. Condominiums

midrise apartment buildings

Mortgage banks typically will attempt to sell loans as quickly as possible after they are originated by either issuing mortgage securities or selling the loan to an intermediary that will subsequently sell the loan in the secondary market. The period between loan commitment and loan sale is referred to as the: A. mortgage pipeline B. mortgage note C. mortgage fallout D. mortgage term

mortgage pipeline

It is possible to have a secured real estate loan without a mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which of the following events occurs after the closing when dealing with a contract for deed? A. Offer B. Acceptance C. Possession of the property passes to the buyer D. Title to the property passes to the buyer

possession of the property passes to the buyer

Mortgage originators can either hold loans in their portfolios or sell them to investors. When a mortgage originator decides to sell mortgages to another institution, this transaction occurs in what is commonly referred to as the: A. primary mortgage market B. secondary mortgage market C. over-the-counter market D. loan origination market

secondary mortgage market

The laws of some states require that real estate brokers provide buyers and sellers with a list of estimated closing costs before signing a contract for sale. At the closing, it is typically which of the following party's responsibilities to pay the full premium for an owner's title insurance policy? A. Buyer B. Seller C. Lender D. Broker

seller

When the seller in a contract for sale fails to perform (e.g. breach of contract, nonperformance, or default), the buyer has a variety of remedies. One such remedy is to appeal to the court to force the defaulting seller to carry out the contract. This remedy is most commonly referred to as suing for: A. Damages. B. Earnest. C. Recission. D. Specific performance

specific performance

Suppose you have just purchased your first home for $300,000. At the time of purchase you could only afford to commit to a down-payment of $15,000. In order to make the loan, the lender requires you to obtain private mortgage insurance (PMI) on their behalf. Suppose over time you paid down the principal of the loan to $280,000 and at that point in time you can no longer make any mortgage payments (i.e., you default on the loan). If the lender were to foreclose on your property and sell it for $228,000, what would the lender's loss of principal be taking into consideration the protection of mortgage insurance? (Let's assume that the PMI in this case covers the top 30% of the loan) A. $0 B. $52,000 C. $57,000 D. $72,000

$0

Assume a retail tenant is paying a base rent of $120,000 per year (or $10,000 per month). In addition, the tenant must pay 7 percent of gross store sales in excess of $143,000 per month as percentage rent. If the store produces $170,000 in gross sales in a month, what is the total rent due for the month? A. $10,000 B. $10,158 C. $11,890 D. $21,900

$11,890

Suppose an institution has purchased a $250,000 mortgage loan from the loan originator and wishes to create a mortgage pass-through security. In doing so, this institution will generate revenue by charging a servicing fee of 35 basis points. If the monthly mortgage payment on the loan is $1,250, how much income is passed through to the investor in the mortgage pass through each month (rounded to the nearest dollar)? A. $73 B. $375 C. $875 D. $1177

$1177

Given the following information, calculate the leasing agent's commission in dollar terms. Lease Term: 10 years, Monthly Rent: $5,000, Commission: 3%. A. $150 A. $1,500 C. $1,800 D. $18,000

$18,000

Assume that a veteran decides to purchase a house for $150,000 using a VA loan in the amount of $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

$22,000

Suppose you are interested in selling your home and would like to clear a net value of $300,000. If you have agreed to pay your broker a commission of 5.5% (no matter who ultimately is responsible for finding the buyer), what price must you sell the home for in order to meet your net profit (rounded to the nearest dollar)? A. $282,540 B. $300,000 C. $316,500 D. $317,460

$317,460

Jim has hired a real estate broker to help facilitate the sale of his home. If the broker requires a commission of 6%, how much will Jim clear from the sale (after the commission has been paid) if he is able to sell his house for $478,723 (Assume that Jim has already paid off his mortgage)? A. $424,528 B. $450,000 C. $478,723 D. $507,446

$450,000

The property manager works under a management agreement between the property owner and the property management firm. As compensation for his duties, the property manager will negotiate a management fee. Given the following information, calculate the dollar compensation to the property manager in year 1. Potential Gross Income of the property: $250,000; Vacancy and Collection Losses: 15%; Miscellaneous Income: $50,000; Management Fee: 3%. A. $4,875 B. $6,375 C. $7,500 D. $7,875

$7,875

Mortgage originators often offer many types and forms of available residential loans as part of their mortgage menu. However, the predominant form of prime conventional mortgage remains the: A. (fixed-rate) level payment mortgage (LPM) B. adjustable rate mortgage (ARM) C. subprime mortgage D. alt-A mortgage

(fixed-rate) level payment mortgage (LPM)

In accordance with RESPA, whenever a buyer obtains a new first mortgage loan from a chartered or insured lender, when the loan is insured by the FHA or guaranteed by the VA, or when the loan will be sold to one of the federally related secondary mortgage market agencies, a good-faith estimate of the settlement costs must be provided by the lender within: A. 3 business days B. 5 business days C. 30 calendar days D. 90 calendar days

3 business days

Leases are considered the engines that drive property values. Therefore, it should not be surprising that owners of commercial property may seek an independent leasing broker to focus on finding tenants to lease space. In exchange for their services, leasing brokers are paid a commission based on what percentage of the face amount of the lease? A. 0.5 to 1.5% B. 3 to 5% C. 7 to 10% D. 15 to 20%

3 to 5%

Christopher has hired a real estate broker to help facilitate the sale of his home. Realizing that Christopher is most likely going to realize a loss on his investment due to the recent decline in housing values in his neighborhood, the broker has agreed to charge Christopher a lower commission rate as long as Christopher enters into an exclusive right of sale listing contract. If Christopher ends up selling his house for $364,583 and takes home $350,000 after paying the real estate broker's commission, what was the commission rate that the broker ended up charging? A. 4.0% B. 4.2% C. 8.0% D. 14.6%

4%

Suppose that you are in the process of deciding whether or not to refinance your fixed rate mortgage at a lower rate and you are interested in using the payback period rule of thumb to help you in your decision. Your lender has informed you that the cost of refinancing would be $4,300. If your original monthly mortgage payment was $1,250 and your new monthly mortgage payment would be $1,150 after refinancing, determine the payback period. A. 3 months B. 4 months C. 43 months D. 158 months

43 months

In analyzing a borrower's credit worthiness, the lender will typically examine the borrower's FICO score (a product developed by the Fair Isaac Corporation). High quality (prime) borrowers are those with a credit score above: A. 350 B. 620 C. 660 D. 850

660

Federal Housing Administration (FHA) loans differ from conventional loans in a number of ways. All of the following statements regarding FHA loans are true EXCEPT: A. FHA loans are targeted toward first-time homebuyers who are in slightly weaker financial circumstances than the typical prime conventional borrower. B. FHA loans are more tolerant in terms of qualifying debt-to-income ratios C. FHA loans require higher credit scores than are needed for prime conventional loans. D. FHA loans contain lower limits on their maximum size than are available through conforming conventional loans.

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

Even the smallest building project involves a multitude of separate contractors to complete construction. Therefore, it becomes difficult for the developer to monitor the construction process. Which of the following individuals serves as the developer's liaison and representative on the project site? A. General contractor B. Construction manager C. Land planner D. Subcontractor

construction manager

Recording documents in the public records informs anyone who may have a potential interest in a property of both the owner and lender. In so doing, it provides what is commonly referred to as ____________ of an interest in real property. A. mutual assent B. constructive notice C. consideration D. simultaneous issue

constructive notice

A recent trend in commercial leases is for tenants to negotiate a cap on the amount of certain operating expenses they are required to reimburse the landlord. Such caps are usually negotiated on operating expenses thought to be at least partially controllable by the owner. Which of the following would typically be considered an operating expense controllable by the owner? A. General maintenance B. Property taxes C. Insurance payments D. Utility expenses

general maintenance

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

government sponsored enterprises

In retail property types, rents are quoted on the basis of which of the following? A. Usable area B. Gross floor area C. Gross leasable area D. Rentable area

gross leasable area

. The rental income generated by a lease can depend significantly on the proportion of property-level operating expenses paid by the tenant. In which of the following types of leases is the landlord responsible for all operating expenses? A. Gross lease B. Net lease C. Net-net lease D. Triple net lease

gross lease

There are a number of ways that a developer can finance the establishment of site control, each with its own advantages and disadvantages. Which of the following methodologies calls for only the initial land rent to be paid out before development actually gets under way? A. Joint venture B. Option C. Contract for deed D. Ground lease

ground lease

At the closing, the buyer will be credited for a number of costs that have been paid up-front (or will be paid after closing) as well as a number of prorated expenses that account for the period of time during which the seller occupied the house. All of the following items detailed in the closing costs involve credits that are commonly passed on to the buyer EXCEPT: A. Earnest money B. Hazard insurance premiums C. Property taxes D. Mortgage interest

hazard insurance premiums

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.

if a contract is contingent upon the buyer obtaining financing and the buyer is unable to do so

The developer will face a variety of costs throughout the project's life. Which of the following would be classified as a soft cost? A. Legal fees of the permitting process B. Costs of materials C. Labor cost of subcontractors for construction D. Cost of land

legal fees of permitting process

Both owners and managers must carefully designate their responsibilities in the management agreement. In a management agreement, all of the following would typically be responsibilities of the property manager EXCEPT: A. Maintenance of financial accounts for money collected from tenants B. Liability C. General property management D. Reports on property performance

liability

Throughout the process of originating and selling mortgages, mortgage companies face a number of risks. Therefore, it is important for a lending institution to evaluate the risks of mortgage loan default through a process commonly referred to as: A. mortgage fallout B. loan servicing C. warehousing D. loan underwriting

loan underwriting

The ability of homeowners to prepay the principal on their outstanding mortgage balance creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through which of the following? A. Defeasance B. Yield Maintenance Provision C. Demand Clause D. Lockout Provision

lockout provision

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. A. Gain of $54,500 B. Loss of $54,500 C. Gain of $195,500 D. Loss of $195,500

loss of $54,000

Lenders generally require private mortgage insurance (PMI) for conventional loans over 80 percent of the value of the security property. PMI protects a lender against which of the following? A. Losses due to default on the loan B. Legal threat to the lender's mortgage claim C. Stoppage of mortgage payment after the death of the insured borrower D. Changes in the index rate associated with an adjustable rate mortgage

losses due to default on the loan

While a sublease and an assignment are two distinct choices for a tenant who wishes to transfer his rights during the term of a lease, both agreements: A. transfer all of a tenant's rights to another party B. transfer only a subset of rights to another party C. grant another party the right to cancel the original lease before expiration D. maintain that the landlord be held liable for fulfilling the original lease unless otherwise specified

maintain that the landlord be held liable for fulfilling the original lease unless otherwise specified

In each stage of the development process, the developer faces risks that can have a profound impact on the success of the particular project. Which of the following risks is of primary concern after the construction phase has been completed? A. Environmental risk B. Title risk C. Market risk D. Permitting risk

market risk

To put into perspective the amount of residential mortgage debt outstanding, it is useful to compare this market to other prominent sources of available debt. Listing the issuer with the largest amount of debt outstanding first, which of the following choices best depicts the relative rank ordering amongst the major sources of outstanding debt in the U.S. as of the end of 2011? A. Residential mortgage debt, marketable U.S. government bonds, corporate bonds, consumer debt B. Marketable U.S. government bonds, residential mortgage debt, corporate bonds, consumer debt C. Corporate bonds, marketable U.S. government bonds, residential mortgage debt, consumer debt D. Consumer debt, residential mortgage debt, marketable U.S. government bonds, corporate bonds

marketable u.s. government bonds, residential mortgage debt, corporate bonds, consumer debt

State licensing laws generally prescribe two levels of real estate brokerage licensing: the broker license and the salesperson license. Which of the following responsibilities is an individual with a salesperson license permitted to do? A. Own and operate a real estate brokerage business B. Handle money in trust for clients C. Negotiate listing contracts or contracts for sale D. Complete legal documents used in sales and leases in their own name

negotiate listing contracts or contracts for sale

Since the architect can be involved in various stages of the development process, there are a number of methods used to compensate him for his services, each of which may depend on the particular phase of development. If the architect provides pre-design services or schematics early in the development process, he will typically be compensated: A. on an hourly basis B. as a percentage of construction expenses C. by a fixed fee plus expenses D. only if he stays on the project through completion of the construction phase

on an hourly basis

In certain circumstances, mutual assent between the contracting parties may be broken, thus invalidating the contract. Which of the following defects to mutual assent involves compelling a person to act by the use of force or threat? A. One of the parties is under duress. B. One of the parties is under undue influence. C. One of the parties is under menace. D. One of the parties is committing fraud.

one of the parties is under duress

Of the following choices, which best describes the operating expenses that you would expect to be the paid by the tenant in a net lease agreement? A. No operating expenses B. Only property taxes C. Both property taxes and insurance D. All operating expenses

only property taxes

Suppose that a development group would like to determine if the local zoning and land-use ordinances will permit the type of development they desire. However, they do not want to be obligated to purchase the property if they find that their proposed development will not be permitted. To gain control of the site without being obligated to perform, the development group should purchase which of the following? A. Ground lease B. Option C. Fast-track D. Floor loan

option

In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods without regard to the merits of the individual loan applications, a practice more commonly referred to as: A. rescinding B. redlining C. assuming D. holdout

redlining

Federal and state laws prohibit discrimination in housing. However, exemptions do exist depending on the particular type of property that is being considered. All of the following activities could be considered exempt in specific scenarios EXCEPT: A. Refusing to sell or rent to a person because of race. B. Refusing to sell or rent based on familial status (i.e. having children). C. Refusing to sell or rent to persons based on age. D. Refusing to sell or rent a single-family home based on religion provided the owners do not employ the services of a broker or agent.

refusing to sell of rent to a person because of race

An activity that would NOT constitute a violation of the Fair Housing Act would be A. refusing to sell, rent, or deal with any person. B. advertising housing as available to only certain buyers. C. refusing to sell or rent to persons under 62 in "elderly" residential facilities. D. denying or limiting the use of real estate services to anyone.

refusing to sell or rent to persons under 62 in elderly residential facilities

In contrast to maintenance and repair expenditures, which are operating expenses, the improvement decision generally involves a capital expenditure meant to increase the value of the structure. Which of the following classifications of improvements calls for the restoration of a property to satisfactory condition without changing the floor plan, form, or style of the structure? A. Rehabilitation B. Remodeling C. Adaptive reuse D. Conversion

rehabilitation

The choice of which method to use in constructing the contracted rental rate can be impacted by the type of property being leased. With which of the following property types would one most expect to see a percentage rent method used? A. Apartment B. Office C. Industrial D. Retail

retail

The lease is a contract between a property owner and tenant that transfers exclusive use and possession of space to the tenant, but allows the owner to retake possession of the property at the expiration of the lease. Which type of interest allows the owner to retake possession at the end of a lease? A. Remainder interest B. Reversion interest C. Spousal interest D. 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: A. relocation option B. right of first refusal C. renewal option D. consideration

right of first refusal

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? A. Commercial mortgage backed securities (CMBS) B. Sale-leaseback C. Tenancy-in-common (TIC) D. Installment sale

sale-leaseback

Fannie Mae and Freddie Mac operate in which mortgage market? A. primary market B. secondary market C. sub-market D. none of the above

secondary market

Despite many innovations in the lending process that made mortgage loans more accessible and affordable to the general public, many potential borrowers faced considerable barriers in qualifying for a loan and making a down payment. Which of the following types of loans was designed for a borrower with weak credit, those who seek 100 percent financing, or who cannot document their income? A. Conventional prime home loan B. Affordable housing loan C. Subprime mortgage loan D. Bridge loan

subprime mortgage loan

Many Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a: A. rate cap B. teaser rate C. payment cap D. prepayment rate

teaser rate

In an indexed lease, rents are dependent on a regularly reported index, most commonly the consumer price index (CPI). By using the CPI as an index rate, the risk of unexpected increases in general inflation is shifted to the __________, and therefore a _________ base rental rate will typically be required. A. Owner; higher B. Owner; lower C. Tenant; higher D. Tenant; lower

tenant; lower

The importance of brokers in the real estate market is often overlooked. In the absence of a real estate broker, one would expect all of the following to be true EXCEPT: A. The asking price would most likely be higher, on average, than in the case where a broker was involved because the seller is in total control of the sale B. A seller would most likely rely on a "thinner" market (i.e. the seller has access to fewer prospective buyers) C. It would be more difficult for an individual to buy a property D. Buyers would be more inclined to negotiate prices downward by at least the value of a typical commission.

the asking price would most likely be higher, on average, than in the case where a broker was involved because the seller is in total control of the sale

The distinction between legal title and equitable title is an important concept in the contract for sale of real estate. When the buyer obtains equitable title, the seller can no longer sell the property to someone else, even though the legal title has not officially passed on. In the contract for sale process, the creation of equitable title occurs when: A. The contract for sale is written. B. The contract for sale is signed. C. The contract terms are orally agreed upon. D. Each party is deemed legally competent.

the contract for sale is signed

Although the function of commercial brokerage is the same as that of residential brokerage, the activities of commercial brokers usually differ considerably from those of residential brokers due to fundamental differences in these two markets. All of the following statements regarding commercial brokerage are true EXCEPT: A. Relative to residential transactions, commercial transactions tend to be larger B. The parties in commercial mortgage transactions are typically less knowledgeable than those in residential transactions. C. An important part of the commercial broker's service is to provide the prospective buyer with reports that enable him to complete due diligence for the property D. Commercial brokers are often required to lower their commission in order to negotiate compromises between buyers and sellers when they reach an impasse over price.

the parties in commercial mortgage transactions are typically less knowledgeable than those in residential transactions

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? A. A meeting of the minds with the buyer. B. The option to present a counteroffer. C. The property to be given up. D. The money or goods that constitute the purchase price.

the property to be given up

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

the time value of money

To the extent the tenant is permitted to alter the leased premises, the lease should clearly state when this may be done, and under what circumstances. The lease must also be clear about the ownership of such improvements once completed. Which of the following terms refers to items of personal property that are attached to the real property, are paid for and installed by the tenant, and may be removed by the tenant at the termination of the lease? A. Trade fixtures B. Anchors C. Concessions D. Expense stop

trade fixtures

In dual agency, conflicts of interest may arise since a single broker has both the listing contract with the seller and a buyer agency agreement with the purchaser. One way that states have attempted to deal with this issue is to develop a new type of brokerage relationship in which the broker assists the buyer and seller, but does not represent either party. This type of brokerage relationship is commonly referred to as: A. unintended dual agency B. universal agency C. transaction brokerage D. multiple listing

transaction brokerage

Traditional home mortgage underwriting is said to rest on three elements, the "three C's." Recent research has confirmed that the underwriting characteristic most strongly associated with default is: A. Value of the Collateral B. Creditworthiness of the borrower C. Capacity of the lender D. Capability of the borrower

value of the collarteral

In general, most contracts - including a real estate contract - can be assigned. All of the following statements regarding assignment are true EXCEPT: A. Any type of personal performance contracted by one party cannot be assigned without that party's permission. B. Land contracts are not assignable without the owner's permission C. If buyers of real estate assign the contract, the new buyers may pay the agreed upon price and obtain title to the property. D. When buyers assign their rights to someone else, they escape liability under the original contract.

when buyers assign their rights to someone else, they escape liability under the original contract

Demolition of an existing property on an urban site will likely occur: A. After the building has been abandoned for a reasonable period of time. B. When the highest and best use of the property is a taxpayer use, such as a parking lot or recreational park. C. When the site value, assuming a new use, exceeds the value of the site under its existing use, plus the cost of demolition. D. When the site value, under its existing use, exceeds the cost of demolition.

when the site value, assuming a new use, exceeds the value of the site under its existing use, plus the cost of demolition

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

yield returns generated mostly from the assets net operating income, rather than price appreciation