Principles Of Real Estate II

Which of the following is a triggering term when used in advertising financing?

"10% down"

A property sells for $200,599, which is 15% more than the owner paid eight years ago. What did the owner originally pay for the property (round to the nearest cent)?

$174,433.91

A property generates $30,000 in net operating income and has a 15% cap rate. Using the income approach, what is its value?

$200,000

Jim and Crystal bought their rundown little "shack" 15 years ago. Over the years, they've made structural improvements, built additions, and remodeled nearly every square inch of the property. They're ready for their next adventure and have sold their property for a capital gain of $300,000. Assuming they meet all the criteria to qualify for the capital gain exclusion (and are married filing jointly), how much of this gain can they exclude?

$300,000

Giant Industries has a $674,232 gross operating income, operating expenses of $329,129, and other expenses totaling $38,719. What is the net operating income?

$345,103

The owner of a duplex charges $2,000 per month for each unit. Over the last 12 months, one half of the property was vacant for six months. What was the owner's effective gross income for this 12-month period?

$36,000

Whitney and Justin are about to close on their refinance, and their loan amount is $362,000. They are paying a 1.5% origination fee. How much will their origination fee be?

$5,430

Ahmed leases a 600-sq.-ft. space in an office building. His gross lease rent is $16 per square foot. What's Ahmed's monthly lease payment?

$800

Carol and Leonard Shultz bought their new home for $330,795, and it appraised at $416,300. The assessment ratio for their area is 22%, and the tax rate is 2.8%. What is the assessed value of their new home?

$91,586

The water and sewer for a property closing on January 10 is billed in arrears. Assuming the sellers own the property the day of closing, which formula(s) can be used to calculate their prorated debit using the calendar year method?

(Monthly expense ÷ 31 days) × 10 days

Which section of the Internal Revenue Code allows the owner of real property to sell that property, then reinvest the proceeds in a "like-kind" property and defer paying any capital gains taxes?

1031

A 20-unit apartment building sells for $5 million. The property can bring in $400,000 in annual gross income. What is the gross income multiplier (GIM)?

12.5

Bob just closed on his investment property. He's already identified a replacement property that he'll be exchanging into by using a 1031 tax-deferred exchange. How many days does he have to close on his replacement property?

180

John wants to do a 1031 tax exchange. He just sold his property. How many days does he have to close on a new property?

180

What is 40% of 200?

80

An abandoned or otherwise unused commercial or industrial site that contains suspected contaminants is known as a what?

A brownfield

Nina and Rob prepaid some of their interest to their lender when financing their new home. What's this called?

A buydown

What does "cash-on-cash return" mean?

A comparison of before-tax cash flow to cash invested

What's a legal agreement or promise made between two parties?

A covenant

What type of capital gain is considered short term?

A gain on a property owned one year or less

What type of business may be defined as: "An organization with many members who jointly participate in a real estate investment"?

A syndicate

What is a triggering term?

A word or phrase that, when used in advertising, requires the disclosure of all of the terms of a loan

As ______ property manager, you need to negotiate favorable leases with businesses. Longer-term leases are great for the owner, but you want to make sure you build in stepped-up increases in leasing rates.

An office

What is dynamic risk?

An uninsurable business risk resulting from economic, tax, and market changes

Which board determines the national rules for creating an appraisal and reporting its results?

Appraisal Standards Board

Which of the following statements is true about appraisals?

Appraisals may only be performed by certified appraisers (with certain exceptions in some states).

Prior to signing the closing documents, what should the parties have already done?

Assured themselves that the conditions and contingencies of the purchase agreement have been met.

When does the seller's broker receive commission?

At or just after the closing

Dynamic and static risk are considered ________ risks.

Business

What are the steps in a proration?

Calculate the daily rate, then multiply rate by the number of days in the proration period.

Which document is used to establish the path and proof of ownership?

Chain of title

______ is the principle that the more similar properties there are on the market, the lower the price will be driven.

Competition

Which option is an item on the buyer's checklist to do before closing on a home?

Complete loan application

FACTA requires anyone with access to consumers' credit reports to ______.

Comply with the records disposal rule

Which economic principle pertains to how a change in a property affects its value as a whole?

Contribution

Seller Martin is looking at his Closing Disclosure. Which one of the following items is he likely to see?

Debits

Richard gave his town six acres adjacent to his property for use as a public park. This type of property transfer is called a ______.

Dedication by deed

How do you calculate the monthly rate for annual taxes using a statutory year?

Divide by 12

Economic, tax, and market changes are types of _______ risk.

Dynamic

Which term means the power of the government to take private land for public use?

Eminent domain

Which written statement will be used to consider ways to minimize a project's negative impact on the environment?

Environmental impact statement

Which type of real estate investment trust is designed to deal exclusively in equities?

Equity REIT

Which type of closing is conducted with a neutral third party holding the funds, and the buyer and seller may never meet?

Escrow closing

Being a retail property manager includes being responsible for ______.

Establishing some leases as percentage leases, where a base rent per square foot is augmented by a percentage share in the tenant's gross

Which type of deed conveys real property from a decedent's estate to a buyer?

Executor's deed

Brandy is going to purchase a strip mall. She is trying to determine exactly how much to borrow for this purchase. She understands that the more she borrows, the greater her risk. What type of risk is she evaluating?

Financial risk

To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first?

Financing terms and cash equivalency

How many decimal places should be displayed on your calculator?

Five

In Texas, as part of the actual eviction process, a landlord will file a suit for possession in the local justice of peace court. What is another name for this type of suit?

Forcible detainer suit

Which of the following terms may be defined as a form of depreciation or loss in value caused by defects in design?

Functional obsolescence

Boris is an appraiser working for the Smith family. They've hired him to perform an appraisal on their six-bedroom house. What two types of data will Boris gather?

General and specific

You need to perform a sales comparison for your clients. Comparable A's adjusted sales price is $277,000. Comparable B's adjusted sales price is $255,000. How might you use this data to determine a list price range for the clients' home?

Give more weight to the list price on the comparable that's most similar to the property.

In general, a deductible will ______

Help lower your premium

What might Trina's mother have bequeathed to Trina?

Her jewelry and fine china

What economic principle is related to a property's most profitable use that is both legal and economically feasible?

Highest and best use

When appraisers look past how a property is being used to determine a more optimal function, what are they determining?

Highest and best use

Which type of real estate investment trust derives its income from the rent or sale of property and interest dividends?

Hybrid REIT

Because these types of properties have both specific physical and complex operational requirements, they are usually handled by more experienced real estate professionals.

Industrial

To whom would a 1031 tax exchange usually appeal?

Investors

Hotels, motels, golf courses, resorts, and sporting arenas belong to which of these property categories?

Leisure

What information does the Loan Estimate provide to buyers under required disclosures law?

Loan payment schedule

Barry wants to help prevent mold in his laundry room. What is one thing he can do?

Make sure the laundry room has good air circulation.

Carla Ricardo has been offered her dream job in another state. She asks her current landlord to let her out of her lease early. The landlord agrees to do so, with no strings attached. Carla and her landlord have decided to terminate the contract through ______.

Mutual agreement

Investor Igor made $120,000 last year, but had $25,000 in losses from his rental properties. Can Igor take the full $25,000 deduction on his taxes, assuming he is actively involved in the management and operation of his rental properties?

No. Igor's $25,000 deduction will be decreased by 50 cents for every dollar he makes over $100,000.

Craig is a Texas tenant with a written estate-for-years tenancy. How much notice must he give his landlord if he wants to terminate his lease upon expiration of the lease term?

None

Where do live auctions typically take place?

On the steps of the local courthouse

acob wants to give a written termination notice to his month-to-month tenant. How much notice must he give the tenant?

One month

In the case of adverse possession, possession and use of a property must be well known to others. This is otherwise known as what?

Open and notorious

Parcels of land are valued at $50,000 each. However, when two of the parcels are joined, they are valued at $120,000. What economic principle is at work here?

Plottage

Which of the following is a piece of specific data an appraiser may gather?

Property lot size

In the real estate business, which professional's primary role is to protect brokerages from litigation and to answer questions for licensees about legal matters regarding real estate transactions?

Real estate attorney

In the real estate business, whose primary role is it to provide clients with the information they need to make informed decisions about their own specific real estate interests?

Real estate counselor

In the real estate business, whose primary role is it to make improvements to land?

Real estate developer

Anyone working for a property management company in Texas and who works for more than one owner is _______.

Required to have a minimum of a sales agent license to collect rent and perform other real estate functions

Bridget has an investment portfolio that includes an equity REIT. Which of these is most likely to be part of the REIT's investment?

Retail shopping centers

What's a fraction?

Something that's divided into a number of equal parts

The economic principle that tells us that when supply goes up, price goes down is also called ______.

Supply and demand

An affidavit of title is a ______.

Sworn statement by the seller that no unpaid bills remain for repairs or improvements to the property

With a triple net lease, the tenant pays ______ separately from the base rent.

Taxes, insurance, and maintenance

Which of the following is a true statement about U.S. Department of Veterans Affairs loans?

The VA will guarantee a loan based on the sales price or the certificate of reasonable value (CRV).

The property management agreement cements what relationship between the property manager and the owner?

The agency relationship

Who does a pre-closing final walk-through of a property?

The buyer and the buyer's agent

Which feature of the Superfund Amendments and Reauthorization Act (SARA) was the most impactful for landowner liability?

The innocent landowner immunity status option

Which one of the following pieces of information should all commercial leases contain?

The lease agreement start and end dates

Marcy's offer on a home was accepted! Which party will be contacting her about arranging an appraisal?

The lender

Marshall is a home inspector who is walking the lot of the property he's inspecting with a survey in hand. Which of the following will he note as an encroachment on the inspection report?

The neighbor installed a basketball hoop next to his driveway, six inches over the property line.

In pricing a property, what might expired listings tell the real estate professional?

The price at which a property won't sell

How do the primary and secondary mortgage markets work together?

The primary market packages loans to sell to the secondary market.

What is capital risk?

The risk that an investor cannot secure financing at an affordable rate

What is financial risk?

The risk that is directly related to leverage

What is business risk?

The risk that the required return on investor capital will not be met

Who's responsible for paying for recording documents to clear all defects from the title?

The seller

The Closing Disclosure must be provided to the borrower at least ______ days before the day of closing.

Three

Your client, Ray, is worried about title issues that may arise after closing. Remind Ray of his secret protection: ______.

Title insurance

Who delivers the evidence of a clear title at the closing?

Title insurance representative

When a buyer assumes the seller's current loan, what is the purpose of an estoppel certificate?

To show the balance due on the loan

What would be an altruistic reason for a municipality to accept a land dedication?

To use the land for public benefit

What standards do appraisers follow?

Uniform Standards of Professional Appraisal Practice

Which of the following is a typical accrued adjustment?

Unpaid real estate taxes

Before moving out, Texas tenant Adam failed to give sufficient notice to his landlady, Yolanda. Yolanda is so happy the lease agreement included that provision in bold type about tenants who fail to give sufficient notice and what that means with regard to the security deposit. Given the situation, which of the following statements is true?

Yolanda does not have to refund any of Adam's security deposit.