FIN 340
if we desire to classify land by its use, land that does not include any improvements to the land would be categorized as:
"raw" land
Given the following information, calculate the effective gross income. Property: 4 office units Contract rents per unit: $2500 per month Vacancy and collection losses: 15% Operating Expenses: $42,000 Capital Expenditures: 10%
$102,000
A comparable property sold 15 months ago for $105,000. If the appropriate adjustment for market conditions is 0.25% per month (without compounding), what would be the adjusted price of the comparable property?
$108,937.50
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 Expenditures10% of EGI
$137,700
Given the following information, compute the taxable value for the particular piece of property in dollar terms: Market value of property: $500,000 Assessed value of property: 85 % of the market value of the property Exemptions: $50,000 Taxes paid: $8,250
$375,000
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 11.44%. If the projected first year net operating income (NOI) for the subject property is $44,500, what is the indicated value of the subject using direct capitalization?
$388,986.00
Given the following information, calculate the effective gross income multiplier. Sale price: $950,000 Potential Gross Income: $250,000 Vacancy and Collection Losses: 15% Miscellaneous Income: $50,000
0.36
Three highly similar and competitive income-producing properties within two blocks of the subject property have sold this month. All three offer essentially the same amenities and services as the subject property. The sale prices and estimated first-year NOI for each of the comparable properties are as follows: Comparable/ Sale Price /NOI1 A$500,000$55,000 B$420,000$50,400 C$475,000$53,400 Using the information provided, calculate the overall capitalization rate by direct market extraction assuming each property is equally comparable to the subject.
11.4%
Given the following information, calculate the overall capitalization rate. Sale price: $950,000 Potential Gross Income: $250,000 Vacancy and Collection Losses: $50,000 Operating Expenses: $50,000
15.8%
Given the following information, compute the property tax rate for the community in mills. Total budget expenditures: $250 million, Total non-property tax income: $150 million, Total assessed value of all properties: $5 billion, Total exemptions: $900 million.
24.3 mills
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
30.4%
Given the following information, compute the property tax rate for the community in percentage terms: Total budget expenditures: $108 million Total non-property tax income: $50 million Total assessed value of all properties: $2 billion Total exemptions: $550 million
4.0%
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%.
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.
80%
A conventional mortgage loan is one that is not insured or guaranteed by an agency of the U.S. government. The lender, however, can still pursue a private mortgage insurance (PMI) policy to provide a guarantee for the fulfillment of the borrower's obligations. Typically PMI is required for all loans that have a loan to value (LTV) ratio greater than:
80%.
Mortgage loans made to borrowers with normal credit quality, but who lack the necessary documentation of their financial circumstances typically needed to meet conforming mortgage standards would most likely be considered:
Alt-A loans.
Blockbusting, which involves persuading an individual to sell her home by telling her that minority groups are moving into the neighborhood, is one form of discrimination in housing that is prohibited by which of the following acts of Congress?
Fair Housing Act (Title VIII of the Civil Rights Act)
In 1989, Congress took major steps to establish depository institution accountability by requiring these institutions to hold more capital as they take on riskier assets. Which of the following Congressional acts imposed these capital standards on depository institutions?
Financial Institutions Reform, Recovery, and Enforcement Act
In the late 1960's, Congress created a number of agencies designed to address a struggling secondary market for residential mortgages. Which of the following organizations was developed primarily to guarantee mortgage-backed securities based on pools of FHA, VA and Rural Housing Service loans, rather than issue, buy or sell mortgages?
Government National Mortgage Association (Ginnie Mae)
For smaller income-producing properties, appraisers may use the ratio of a property's selling price to its effective gross income. This is an example of a:
Gross income multiplier
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 an estimate of the most probable selling price of a property in a competitive market.
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:
Mortgage payments
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-repay standard
Which of the following duties refers to a broker's obligation to keep the principal informed about financial aspects of their assignment?
accounting
Real estate taxes represent the largest single source of revenue for a large portion of local governments. Most property taxes are applied in relation to the value of the property, or in other words, they are:
ad valorem taxes.
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
Since mortgages typically have multiple costs associated with them, a borrower may attempt to reduce these costs into a single measure in order to compare two or more mortgages. Which of the following measures is a popular tool for comparing the cost of several mortgages?
annual percentage rate
While it is often sufficient to rely on informal methods of estimating the market value of real estate assets, the complexity and large dollar value of many real estate decisions dictate that formal estimates based on methodical collection and analysis of relevant market data should be utilized. The unbiased written estimate of the market value of a property is commonly referred to as a(n):
appraisal
The expected costs to make replacements, alterations, or improvements to a building that materially prolong its life and increase its value is referred to as:
capital expenditures
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:
commission.
Property rights created from marriage have a clear implication for real estate transactions. Which of the following marital property rights gives a spouse a one-half claim on all property acquired "from the fruits of the marriage?" dower curtesy elective share community property
community property
Eminent domain is the right of government to acquire private land, without the owner's consent, for public use, with due process and just compensation. The legal procedure for exercising the right of eminent domain is referred to as:
condemnation.
Which of the following types of direct co-ownership combines single person ownership with tenancy in common? cooperative tenancy by the entirety condominium partnership
condominium
In the securitization process, mortgages are pooled together and cash flows are packaged into securities to be sold in the secondary market. Agencies and private companies that pool mortgages and sell mortgage-backed securities (MBS) are often referred to as:
conduits.
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:
conforming conventional loans.
The value given up, or promise made, by each party in a contract is referred to as:
consideration.
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
Considered the most common type of home loan, which of the following refers to any standard home loan that is not insured or guaranteed by an agency of the U.S. government?
conventional home loan
Which of the following forms of co-ownership, historically used for apartment buildings, is not considered a form of true direct co-ownership, but rather qualifies as a proprietary corporation? cooperative tenancy by the entirety condominium partnership
cooperative
Which of the following approaches for calculating the market value of a property involves estimating the dollar value associated with replacing the property new, as well as determining the loss in value due to physical, functional, and external obsolescence?
cost approach
If we desire to classify land by its use, land that consists of residents, industrial, commercial and institutional land uses would be classified as
developed land
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
When identifying an easement appurtenant, the parcel of land that benefits from the right to use the land in question is referred to as the:
dominant parcel.
The internal rate of return on a mortgage loan calculated from the lender's perspective is more commonly referred to as the: q
effective borrowing cost.
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:
eminent domain.
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 possessions are referred to as:
estates
Zoning ordinances that tend to exclude lower income groups by large lot size, or that do not adequately provide low- and moderate-income housing are referred to as:
exclusionary uses.
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 allows property owners to list the property with more than one broker?
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
While most real property in the United States is privately owned, government regulations limit private property use and therefore play an important role in the determination of property value. Proponents of government intervention argue that regulation is needed to address the unintended and unaccounted for consequences of one land user upon others, more commonly referred to as:
externalities
When viewed as a tangible asset, real estate can be defined as the land and its permanent improvement. Improvements on the land include:
fences
In acting as an agent for another person, the broker carries several special responsibilities, which by law must be adhered here to throughout the transaction process. These responsibilities constitute what is commonly referred to as a:
fiduciary relationship.
Accrued depreciation is the difference between the current market value of a building and the total cost to reproduce it new. One reason for this difference is related to changes in tastes, preferences, technical innovations, or market standards. This is commonly referred to as:
functional obsolescence.
Which of the following types of institutions has historically been the largest purchaser of residential mortgages?
government sponsored enterprises
Each property has unique features, whether it is its age, the building design of its structures, or its location. As such, real estate markets consist of assets that are considered
heterogeneous
Second mortgage loans in which borrowers borrow against the accumulated equity in their home are more commonly referred to as:
home equity loan.
Negative externalities can diminish a property's value by imposing costs on the community at large. In order to offset this detrimental impact, economists advocate "internalizing" these externalities by implementing:
impact fees.
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?
incomplete information
At the conclusion of the traditional sales comparison approach to valuation, the appraiser evaluates and reconciles the final adjusted sale prices into a single value for the subject property. This single value is commonly referred to as:
indicated value.
which of the following would be considered a tangible asset?
land
It would be hard to overstate the importance of the Federal Housing Administration (FHA) in the history of housing finance. Which of the following instruments created by the FHA is considered the single most important financial instrument in modern housing finance?
level-payment, fully amortizing loan
Recently, mortgage banking has become the natural method for doing mortgage lending. Within the mortgage lending process, which of the following roles serves as the primary revenue source for mortgage banks?
loan servicing
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:
loan underwriting.
In the process of deciding whether to extend a mortgage loan to a prospective borrower, lenders typically examine three elements, more commonly referred to as the "3 C's." Which of the following metrics does a bank use to evaluate the collateral piece of the loan agreement?
loan-to-value ratio
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?
losses due to default on the loan
Which of the following duties refers to a broker's obligation to never subordinate the best interest of their principal to the interests of others?
loyalty
It is common for real estate firms to identify submarkets, such as property types or particular sections of a city, in which they can specialize and concentrate their transaction activity. This practice is referred to as:
market segmentation.
following the completion of a contract for construction or other improvements to a property, a contractor has the right to establish a lien on a property as protection against the case that a property owner defaults on the construction contract. This lien is more commonly referred to a(n)
mechanics' lien
Real estate is property, which can be wither a tangible or an intangible asset. Which of the following would be considered an intangible asset?
mortgage
The emergence of mortgage securities propelled the development of mortgage companies, an entity significantly different from the thrifts and banks that previously dominated the mortgage landscape. Which of the following parties is responsible for providing mortgage origination services and initial funding within this new framework?
mortgage banker
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:
mortgage pipeline.
Which of the following measures is considered the fundamental determinate of market value for income-producing properties?
net operating income
A contemporary planning movement that explicitly advocates a traditional grid pattern of development designed to give pedestrian life priority over motor vehicles (e.g., including narrowed streets with houses close to the street and garage access through side alleys) is commonly referred to as:
new urbanism.
Mortgage loans that fail one or more of the underwriting standards established by government sponsored enterprises are more commonly referred to as:
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:
nonconforming uses.
The ordinary and necessary expenditures owners expect to incur during the next 12 months that do not materially add value, but keep the property competitive in its local rental market are more commonly referred to as:
operating expenses.
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:
option ARM loans.
co-ownership can occur in a variety of ways, with significant variation in how the bundle of rights is jointly held. All of the following entities are forms of direct co-ownership except:
partnership
The starting point in calculating net operating income is the total annual income the property would produce assuming 100 percent occupancy and no collection losses. This is commonly referred to as:
potential Gross Income
The process in which an appraiser weighs the relative reliability of value indicators for the property being valued is more commonly referred to as:
reconciliation
The cost approach to valuation assumes the market value of a new building is similar to the cost of constructing it today. Which of the following terms refers to the expenditure required to construct a building of equal utility using modern construction techniques, materials, and design that eliminates outdated aspects of the structure?
replacement cost
Many older, retired households are considered "house poor." Which of the following forms of loans has been designed to help mitigate this problem by offering additional monthly income to these homeowners in exchange for a portion of their housing equity?
reverse mortgage
The distinctive feature of a joint tenancy is the:
right of survivorship.
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:
secondary mortgage market.
When identifying an easement appurtenant, the parcel of land that is constrained or diminished by the easement is referred to as the:
servient parcel.
In an open-listing contract, an individual broker is entitled to a commission if:
she procures the buyer of the property.
Mortgage loans that meet all general underwriting standards established by government sponsored enterprises except for the dollar size limit are more commonly referred to as:
subprime loans.
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?
subprime mortgage loan
Which of the following leasehold estates best describes the situation in which a tenant who previously occupied a property under a legitimate leasehold interest refuses to vacate?
tenancy at sufferance
Which of the following types of direct co-ownership is a form of joint tenancy for husband and wife created by marriage that protects each spouse from liens arising from either spouse alone? tenancy in common tenancy by the entirety condominium tenancy at Will
tenancy by the entirety
A leasehold interest for a specific period of time is more commonly referred to as:
tenancy for years.
When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is referred to as the property's:
terminal value
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?
three
In the early 1970's, home mortgage lenders were predominantly depository institutions focused on collecting local savings deposits and using these funds to make local mortgage loans. The savings institutions of this era of mortgage financing are more commonly referred to as:
thrifts.
When multiple individuals have use of a property, but their interests are not simultaneous, this type of co-ownership is referred to as a:
timeshare.
A public planning movement that explicitly advocates a cul-de-sac hierarchy of development, an automobile oriented society, and separated land use is more commonly referred to as:
traditional residential planning.
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:
transaction brokerage.
When land use controls impose exceptional hardship and loss of value, a relief mechanism must be provided. This relief is referred to as a:
variance
In addition to providing home mortgages, large commercial banks have specialized in providing short-term funds to mortgage banking companies in order to enable them to originate mortgage loans and hold the loans until the mortgage banking company can sell them in the secondary market. This type of financing is commonly referred to as:
warehousing.
Any contract, whether it is for the sale of real estate or some other entity, must contain five basic elements. However, any contract for the sale of real estate must adhere to two additional requirements. Which of the following contract elements is an additional requirement that must be satisfied in a contract for sale of real estate that isn't necessarily a part of other contracts?
written form
