Real Estate Ch. 23-27 Q and A
A change in zoning for a parcel of land from single-family dwellings to apartment use requires a a. zoning ordinance amendment. b. variance. c. zoning release. d. release of deed restrictions.
A
A condominium owner can obtain all of the following EXCEPT a. severalty ownership of his share of the common elements. b. title insurance on his nit. c. a separate mortgage. d. joint tenancy ownership of his unit.
A
A condominium rules declaration may be changed by a. whatever is stated in the rules declaration. b. at least 50% of the owner-occupied units. c. the condominium owner's association. d. approval of the majority of the condominium unit owners.
A
A rental property produces $2,000 per month in rents and consumes $600 per month in operating expenses. The mortgage payment is $1,200 per month. For the investor, this property produces a a. positive cash flow. b. zero cash flow. c. negative flow. d. break even cash flow.
A
A strip of land that separates one land use from another is called a a. buffer zone. b. median strip. c. non-use zone. d. restricted zone.
A
Cost-push inflation is the result of a. increased manufacturing costs. b. increased demand for a product. c. changes in the money supply. d. changes in interest rates.
A
Demand-pull inflation has little to do with a. manufacturing costs. b. the availability of money. c. buyers bidding against each other. d. too much money chasing too few goods.
A
Denise applied for a permit to build a greenhouse in her back yard. Her request was denied because of setback requirements. She appealed at a hearing before the planning board and subsequently had her permit approved. Denise obtained a. a variance. b. an offset deed. c. a plat approval. d. an encroachment permit.
A
Federal tax laws have traditionally allowed owners of investment properties to deduct all of the following EXCEPT a. depreciation on land. b. maintenance costs. c. operating costs. d. ad valorem taxes.
A
In a condominium, which of the following would be limited common elements? a. Assigned parking spaces b. Landscaped areas c. Unit of the caretaker d. Airspace in each unit
A
Individual ownerships of separate portions of a building plus joint ownership of the common elements is characteristic of a a. condominium. b. cooperative. c. co-op. d. PUD.
A
Individual units in a condominium development are classed as a. real property. b. common elements. c. cooperative elements. d. personal property.
A
Regarding ownership of condominiums, a. owners hold fee simple title to airspace within their units. b. owners register with the Federal Securities and Exchange Commission. c. purchasers own the airspace above their units. d. there is the right of survivorship.
A
The concept of insurance is to a. reimburse the insured for financial losses. b. insure that a loss-causing event will not occur. c. both a and b. d. neither a nor b.
A
The difference between a variance and a nonconforming use is that a. a variance changes the permitted use; nonconforming use does not. b. nonconforming use changes zoning; a variance does not. c. the nonconforming use first occurs after the zoning changes. d. the variance was in effect before the zoning.
A
The owners' association of a condominium meets yearly and makes such changes in the operation of the common elements as is deemed best for all owners. It can change or amend all of the following EXCEPT a. deeds to owners' units. b. fire insurance carrier. c. bylaws. d. restriction against rental of units.
A
When a property is mortgaged to a lending institution, the lender will usually require the owner to provide a. fire and extended coverage on structures. b. personal property coverage. c. medical payment coverage. d. liability coverage.
A
When the supply and demand relationship in a market is unbalanced because of excess supply, it is to the advantage of a. buyers. b. sellers. c. sellers of services only. d. buyers of services only.
A
Which has the greatest effect upon the interest rate an individual must pay for a real estate mortgage loan? a. Federal governmental borrowing b. State governmental borrowing c. Local governmental borrowing d. Competition form commercial and industrial borrowers
A
Zoning is a. a power originating from the sovereign state governments. b. exercised to regulate types of uses, use densities, subdivision requirements, and racial and ethnic quotas. c. exercised by building inspectors. d. little used and of declining importance in real estate.
A
Coverage for additional perils can be obtained by a. purchasing a separate policy. b. adding an endorsement to a regular fire insurance policy. c. both a and b. d. neither a nor b.
A A property damage or public liability policy can be cancelled at any time by the insured.
To be considered a good investment, when a property which generates a negative cash flow is sold, a. there must be a substantial increase in property value. b. there need be little increase in property value. c. the investor is best off if the property has decreased in value. d. there must be a substantial down payment.
A To be considered a good investment, when a property, which generates a negative cash flow, is sold, there must be a substantial increase in property value
A parcel of land 330' × 1320' was subdivided into 8 lots. How many acres were contained in each lot? a. .125 b. 1.25 c. 5.45 d. 8
ANS: B 330' × 1320' = 435,600sq ft; there are 43,560 sq ft per acre so 435,600 / 43,560 = 10acres; 10 acres / 8 = 1.25 acres
A corporation that owns or leases the land and building and, in turn, leases space to its shareholders is characteristic of a a. condominium. b. cooperative. c. joint venture. d. time share.
B
A landowner wishing to deviate slightly from existing zoning codes would ask for a. an amendment to the zoning ordinance. b. a variance. c. a new zoning ordinance. d. exclusion from zoning ordinances.
B
A licensed agent must be aware of local zoning ordinances for all of the following reasons EXCEPT a. zoning requirements are material facts. b. licensees must report zoning violations to the proper authorities. c. the agent must inform his principal of the effects of zoning on his property. d. the law of agency requires knowledge and competence regarding permitted uses of listed property.
B
A licensed agent must be diligent to determine the existing zoning and building regulations for the property that he wishes to sell. Which of the flowing would cause the fewest problems to the agent and his buyer? a. A home, which lies two feet outside the offset line, described on the deed. b. A conforming business that produces such noise and odors as to be an annoyance to a nearby neighborhood. c. A garage that was build by the seller without a building permit and slightly on his neighbor's lot. d. A multi-family apartment building that is a non-conforming use.
B
All of the following have made home purchases by persons of modest income easier EXCEPT a. FHA loan insurance programs. b. creation of extra money by the federal reserve. c. VA loan guarantee programs. d. income tax deductions for mortgage loan interest and taxes.
B
An existing structure that would be prohibited under current zoning laws is called a. a restrictive zone use. b. a nonconforming use. c. an impact statement property. d. a land use restriction.
B
Generally, for every job created by a base industry, there will be created in service industries approximately a. an equal number of jobs. b. two jobs. c. one job for every two persons employed in the base industry. d. four jobs.
B
If a potential investment is referred to as an alligator or loss, the investor knows he can expect a. water problems. b. a negative cash flow. c. no profit. d. a break even investment
B
If you are an owner of a unit in a co-op apartment, your interest would be a. a tenancy at will. b. a proprietary lease. c. fee simple. d. a stock-option.
B
Inflation brought on by increased effort necessary to produce the same quantity of a good or service is known as a. demand-pull inflation. b. real-cost inflation. c. cost-push inflation. d. monetary inflation.
B
Medical payments provided under a homeowner policy can be paid to a. the named insured and family members. b. guests of the insured on the premises. c. claims arising from business pursuits. d. none of the above.
B
Ownership of the common elements by an owners' association is typical of which kind of development? a. Condominium b. Planned unit development c. Cooperatives d. REIT's
B
Restrictions on the type and color of drapes, that are visible to the outside, which a condominium owner can use in his unit, would be found in the a. master deed. b. CC&Rs. c. bylaws. d. house rules.
B
The exact layout of a subdivision is usually shown in detail on the a. deed. b. plat. c. plot. d. CC&Rs.
B
The governing body of a cooperative is called a a. cooperation. b. board of directors. c. cooperator. d. cooperative commission.
B
The post-World War II baby boom includes persons aged a. 30 to 40 in 1960. b. 35 to 40 in 1985. c. 50 to 60 in 1980. d. none of the above.
B
The real estate brokerage industry is an example of a a. base industry. b. secondary industry. c. export industry. d. primary industry.
B
Typically, most families acquire their largest and most expensive housing between ages a. 25 to 35. b. 45 to 55. c. 35 to 45. d. over age 60.
B
Under federal tax laws that allow homeowners to deduct mortgage loan interest, what would be the after-tax cost to a homeowner in the 28 percent tax bracket of a home mortgage loan made at a 12 percent rate of interest? a. 3.36 percent b. 8.64 percent c. 9.5 percent d. 8.0 percent
B
When one holds unimproved land as an investment, expenses such as taxes and interest are a. not deductible for income tax purposes. b. deductible in the year in which the expenses are incurred. c. deductible the following year. d. deductible only when the property is sold.
B
When there is a sudden increase in the demand for housing in a community, the price of existing housing will a. rise slowly over the next 12 months. b. rise rapidly, then fall slightly as supply catches up with demand. c. not reflect the increased demand for approximately 12 months. d. none of the above.
B
Which of the following terms would not apply to an industry that produces goods or services that are locally consumed ? a. Service industry b. Accessory industry c. Secondary industry d. Filler industry
B
A homeowner's insurance policy will NOT protect against which of the following? a. Public liability directly connected with the insured property. b. Damage to household goods contained in the insured premises. c. Flood damage to the insured premises. d. Theft of personal property.
C
A typical HO-A homeowner's policy covers damage caused by a. mudflow. b. civil war. c. freezing water pipes. d. earthquakes.
C
As an owner of real estate, one is exposed to losses by a. damage to the property. b. other persons being injured on the property. c. both a and b. d. neither a nor b.
C
Commercial property has a useful life under IRS guidelines of a. 15 years. b. 27 years. c. 39 years. d. 19 years.
C
Coverage for additional perils can be obtained by a. purchasing a separate policy. b. adding an endorsement to a regular fire insurance policy. c. both a and b. d. neither a nor b.
C
Coverage under any homeowner policy can be extended by adding endorsements covering a. appreciation on the value of the property. b. worker's compensation. c. both a and b. d. neither a nor b.
C
Examples of zoning ordinances are a. condemnations. b. prescribed architectural design. c. density limitations. d. house color.
C
Generally, a person's peak earning years occur at ages a. 25-35 years. b. 35-45 years. c. 45-55 years. d. 60 years.
C
If a property is rented, the landlord should make certain that he has a. adequate liability coverage. b. adequate property damage coverage. c. adequate property damage and liability coverage. d. the renter purchases all insurance.
C
If vacancies and collection losses, property taxes, expenses of operation and loan service are deducted from the gross income, you have a. internal rate of return. b. taxable income. c. net spendable income. d. net worth.
C
In the case of a contradiction between existing zoning and new deed restrictions, which would prevail? a. Zoning b. Deed restrictions c. Whichever is the more restrictive d. The least restrictive
C
Rules governing how a condominium owners' association will be run would be found in the a. master deed. b. CC&Rs. c. bylaws. d. house rules.
C
The New York fire insurance form a. was originally enacted by the legislature of New York state. b. provides the foundation for most property damage insurance policies in this country. c. both a and b. d. neither a nor b.
C
The advent of the secondary mortgage market a. made available previously untapped sources of money for real estate mortgage loans. b. contributed to real estate speculation and inflation in the late 1970s. c. both a and b. d. neither a nor b.
C
The financial responsibility which one has to others as a result of one's actions or negligence is known as a. personal liability. b. public liability. c. both a and b. d. neither a nor b.
C
The liability coverage of a homeowner policy a. applies to the insured premises. b. provides protection away from the premises. c. both a and b. d. neither a nor b.
C
The purchaser of a timeshare week who wants to receive a deed to that specific week would buy a a. leasehold timeshare. b. right-to-use timeshare. c. fee simple timeshare. d. model timeshare.
C
When a government prints more money than is necessary for economic growth, the result is a. a short-term drop in interest rates. b. a long-term drop in interest rates. c. both a and b. d. neither a nor b.
C
When there is a space specified along each property line in a neighborhood within which no building may be erected, it is called a. a sidewalk. b. a commercial lot. c. a setback. d. an offset.
C
Which of the following is necessary in order to calculate cash flow? a. Monthly appreciation b. Mortgage balance c. Monthly rents d. Economic rents
C
An insurance policy which fixes the insurance company's liability to the insured to the actual cash value of the insured property is said to provide a. "old for new" coverage. b. "new for old" coverage. c. "old for old" coverage. d. "new for new" coverage.
C An "old for old" insurance policy fixes the insurance company's liability to the insured to the actual cash value of the insured property
A woman owns an $86,000 house on which she pays $329 per month interest. If she is in a 28% tax bracket, how much less tax will she have to pay per year because she owns it? a. $131.60 b. $653.49 c. $1,105.44 d. $2,763.60
C Annual interest = 329 × 12 = 3,948; since this is all deductible, she saves the cost of paying 28% of this amount in taxes; tax savings = 3,948 × .28 = 1,105.44
If a condominium unit owner defaults on his mortgage, what effect will this default have on the other unit owners in the same condominium project? a. It will create a lien on the other units as well. b. They must make his payments to protect themselves. c. It will create a lien on his condominium unit. d. They will be foreclosed.
C If a condominium unit owner defaults on his mortgage, it will create a lien on his condominium unit.
The lender on a condominium unit will require proof that the a. unit owner carries liability insurance. b. unit owner carries contents insurance. c. condominium association carries insurance on the common elements. d. condominium association carries insurance on the individual owner's contents.
C The lender on a condominium unit will require proof that the condominium association carries insurance on the common elements.
Chapter 23
Condos, PUDs, cooperatives, timeshares
A landlord package policy provides coverage for a. property damage. b. liability. c. loss of rents. d. all of the above.
D
A typical homeowner insurance policy does not cover a. the dwelling. b. living expenses while damage to the residence is being repaired. c. personal property within the dwelling. d. automobiles in the garage on the property.
D
An insurance endorsement is also known as a. a rider. b. an attachment. c. an assignment. d. both a and b.
D
From an investor's point of view, which is the most attractive allowable depreciation period for an investment property? a. 40 years b. 30 years c. 27.5 years d. 15 years
D
In a planned unit development, a developer would be likely to dedicate to the public all of the following EXCEPT a. streets. b. roads. c. parks. d. common elements.
D
In order to keep prices from falling in an economy that is growing at a 4 percent rate, which of the following is necessary? a. A 4% decrease in the money supply b. A constant, unchanging money supply c. A 2% increase in the money supply d. A 4% increase in the money supply
D
Industries which produce goods and services for export are referred to by all of the following terms EXCEPT a. base industries. b. export industries. c. primary industries. d. backbone industries.
D
Kelly finds that her intended improvement, a veterinary clinic, is allowed by the zoning classification of her land only if she gets specific approval for that single use. This is most likely an example of a. a nonconforming use. b. a variance. c. an illegal spot zoning. d. a conditional use permit.
D
Local residents may best gain control over the future development of their community by paying attention to a. land use covenants. b. eminent domain purchases by private individuals. c. restricting the trade of developers and real estate agents. d. public zoning decisions.
D
One of the advantages of condominium ownership versus cooperative ownership is that a. condominium ownership has no common ownership. b. cooperative ownership is free from periodic dues from members. c. cooperative ownership is usually corporate owned and sells stock through the secondary money market. d. condominium units can be individually mortgaged.
D
Real estate values are affected by the federal government's a. tax rules. b. laws. c. deficits. d. all of the above.
D
The ECOA has contributed to greater numbers of homeowners among a. single persons. b. divorced persons. c. employed women. d. all of the above.
D
The New York fire insurance form does not provide coverage for losses a. by fire. b. by lightning. c. sustained while removing property from damaged premises. d. by flood.
D
The Texagum manufacturing Company, which was the largest employer in the city of Westview, recently closed its plant in that city. This will probably result in a. declining real estate values. b. A slow-down in the construction of new homes. c. A decline in the population of Westview. d. All of the above.
D
The authority of government to control land use is derived from the right of a. escheat. b. eminent domain. c. property taxation. d. police power.
D
The inflation guard endorsements are available and automatically increase property damage coverage by a. 1.5% b. 2% c. 2.5% d. all of the above.
D
The money paid for insurance is called the insurance a. rider. b. endorsement. c. peril. d. premium.
D
The term CC&Rs stands for a. covenants, condominiums and restrictions. b. conditions, chattels and regulations. c. commission, conditions and regulations. d. covenants, conditions and restrictions.
D
The war clause exemption in property insurance policies includes losses or damage caused by a. insurrection. b. enemy attack. c. usurped power. d. all of the above.
D
The word variance in land use applies to a. an open-ended use permit. b. loan rates which raise and lower during the term of the loan. c. property taxes. d. zoning.
D
When a property owner obtains permission to open a small business in a residential neighborhood, it is an example of a. nonconforming use. b. grandfathering. c. down zoning. d. spot zoning.
D
When land that was previously zoned for higher-density use is rezoned for lower-density uses, it is called a. spot zoning. b. buffer zoning. c. conditional use. d. down zoning.
D
Which of the following is usually a private decision and unaffected by zoning regulations? a. Setback requirements b. Nonconforming uses c. Variances d. House color
D
You are offered a four-unit residential building in which each unit rents for $500 per month. Given a 5 percent vacancy rate, operating expenses of $700 per month, and mortgage payments of $1,500 per month, you can anticipate a monthly a. net spendable income of $200. b. net spendable income of $300. c. negative cash flow of $200. d. negative cash flow of $300.
D This property would produce a negative cash flow of $300. $500 × 4 = 2,000. 2,000 × .05 = 100. $2,000 - 100 - 700 - 1,500 = -300
Chapter 27
Investing in Real Estate
Chapter 25
Land Use Control
Chapter 24
Property Insurance
Chapter 26
Real Estate and the Economy
If a condominium owner fails to pay his portion of maintenance fees, the response of the owners' association will be to a. evict him. b. place a lien against his unit. c. foreclose. d. report him to the local authorities.
b
Each of the following ownerships combines common ownership and exclusive possession of a dwelling unit. All require dues to support the common elements. Which one allows separate, individual ownership of a dwelling and a lot? a. Timeshare unit b. Condominium c. Cooperative apartment d. Planned unit development
d Planned unit developments allow separate, individual ownership of a dwelling and a lot
