Principles Of Real-estate 2 Practice Test

The smallest property on the block is priced lower than any others, but the higher-priced properties that surround it help to drive the property's market value up. What economic principle is at work here?

Progression

Trudy loved her new neighbors. The investor couple bought every available house on Trudy's block and was working hard to renovate them and increase their value. Trudy decided that she'd sit back, relax, and let her property's value go up, too, thanks to ______.

Progression

On which principle of value is the sales comparison approach based?

Substitution

You know a property's effective gross income and its operating expenses. How would you calculate the net operating income?

Subtract operating expenses from effective gross income.

Which of the following must adhere to the rules of the Securities and Exchange Commission?

Syndicates

In the world of appraisals, what does TAF stand for?

The Appraiser Foundation

How long must a taxpayer have lived in a home in order to claim a capital gain exclusion?

Two of the preceding five years

During the preapproval process, a(n) ________ verifies the borrowers' credit and determines if the loan will be approved.

Underwriter

Why are lenders required to provide the Loan Estimate and Closing Disclosure forms to loan applicants and borrowers?

Why are lenders required to provide the Loan Estimate and Closing Disclosure forms to loan applicants and borrowers?

Your client is purchasing a single-family home with a VA-guaranteed loan. The listing price is $150,000. Is an appraisal by a certified appraiser required?

Yes, and since the purchase is financed with a VA-guaranteed loan, the appraiser must be VA certified.

Your client is purchasing a single-family home with a conventional loan. The listing price is $410,000. Does this situation require a licensed or certified appraiser?

Yes, it's required.

Which of the following formulas can be used to calculate annual rent for a net lease?

(Rent per square foot + TIM expenses) x number of square feet leased

How many square feet are in a 30-acre parcel of land?

1,306,800 square feet

A small duplex sold for $550,000. Each unit can gross $2,500 in monthly rent for the owner, and there are no additional income sources from the property. What's the GRM?

110

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

Your seller client must include a lead-based paint disclosure if her home was built prior to ______.

1978

Tyrell and Barb bought a commercial investment property in 2009 during the real estate market downturn. Through what year will they be able to depreciate the investment?

2048

Vacancy rates are a key indicator of supply and demand for tenant occupancy spaces. Which of the following is true?

A decrease in vacancy rate indicates an increased demand for space.

Cheri is the lessee of a house with a detached garage. Harriett has leased only the garage from Cheri. However, Cheri remains bound by the terms of the lease agreement with the lessor. This is an example of _______.

A sublease

Which of these is excluded on a title insurance policy on Martha's property because of the schedule of exceptions?

A verbal lease agreement Martha has with her neighbor who leases Martha's garage

Which classification of appraiser is the first step to obtaining a license or certification?

Appraiser trainee

Which of the following is a true statement about how adjustments are made in the sales comparison approach?

Appraisers adjust upward when a comparable is missing a feature found in the subject property.

What type of value is of interest to taxing authorities?

Assessed value

Carmen's original one-year commercial lease has ended, and now, with her landlord's permission, she has gone into a month-to-month lease situation. What type of clause was in the original lease agreement that enabled this situation to occur?

Automatic renewal

Which type of loan has a lump sum payment due at the end of the loan because the installment payments aren't sufficient for paying off the principal and interest?

Balloon mortgage

When considering loan risk, which two items will lenders consider in equal measure?

Borrower and property

At closing, who pays for and receives clear title for the property being purchased?

Buyer

How does a title insurance company prove that a seller has ownership rights to a property?

By performing a title search to create a chain of title or abstract of title

Under ______, landowners can be held responsible for the cleanup costs of hazardous waste, even if they did not cause the waste.

CERCLA

What type of notice results from publicly recording a title transfer?

Constructive notice

Which of the following is defined as what it would take to recreate a property if it disappeared off the face of the earth today?

Cost

What's the term for a charge that either party has to pay at closing?

Debit

A property owner who wishes to convey property to a new owner will generally use a ______.

Deed

In order to convey real property, which one of the following documents would you use?

Deed

The Environmental Protection Agency (EPA) works to protect human health and the environment through which one of the following actions?

Developing and enforcing federal laws regarding human health and the environment

Which type of business risk is uninsurable?

Dynamic

The secondary mortgage market buys loans from the primary market. How does this aid the lending market?

Ensure funds are available to borrowers

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

Environmental impact statement

What did the Clean Air Act authorize the EPA to do?

Establish air quality standards for the protection of human health and the environment.

Niko Habshek has decided to move somewhere else when his lease ends on April 30. This would be considered termination through ______.

Expiration

Closings are usually held ______.

Face-to-face or through escrow

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

When you're using the sales comparison approach to value a property, which of the following is considered a category of adjustment?

Financing terms and cash equivalency

Fiona signed a lease with her landlord for a commercial building. A percentage of Fiona's sales will be paid to the landlord, in addition to her lease payment. Why would Fiona agree to this arrangement?

Fiona wants to reduce her base rent.

Which of the following statements related to 1031 tax-deferred exchanges is true?

Foreign investors may participate.

Because property managers do a lot of number crunching and prepare monthly and yearly financial reports, they must have a command of _______.

Generally accepted accounting principles

Which term refers to the person conveying title, often called the "party of the first part," in a deed?

Grantor

Charlie, who owns and leases out a commercial building, pays taxes, maintenance, and insurance on the building. What type of lease agreement does Charlie have with his tenants?

Gross

Joann purchased her house with a mortgage loan from her friendly neighborhood bank. Which of these most likely happened to Joann's loan soon after she received it from her bank?

Her bank sold it on the secondary market as an investment product.

What might Trina's mother have bequeathed to Trina?

Her jewelry and fine china

In the case of adverse possession, possession and use of a property must be open and notorious. What else must it be?

Hostile

Identifying the purpose of the appraisal leads the appraiser to do what next?

Identify data needed.

Darrel loves working in the mortgage lending industry. On a daily basis, he works with multiple lenders to find and negotiate the best deals for his customers. What is Darrel's profession?

Mortgage broker

Which of the following best describes an equity real estate investment trust?

Invests in equity by owning income-producing property, such as malls, apartments, or office parks

What are prepaid expense items?

Items to be divided proportionately between the buyer and seller that the seller hasn't fully used

Which of the following sellers must attach the Lead-Based Paint or Lead-Based Paint Hazard Addendum to their purchase contracts?

Lily inherited her mother's 1940s farmhouse and has decided to put it on the market.

Damien was representing a commercial property owner. Which one of the following duties can the owner expect Damien to perform on the property owner's behalf?

Locate and qualify potential tenants.

Why is it important for tenants and owner/landlords to review the insurance section of a commercial lease?

Many times, the amount of insurance specified in the lease is higher than the amount a tenant actually carries, and higher than the amount the landlord actually requires.

Marsha's title insurance policy was issued on closing day, which was June 18. The policy lists the standard exclusions as well as requirements for the company to issue the policy, such as paying off existing recorded liens. Which one of these will NOT be addressed in the schedule of exceptions?

Marsha's second mortgage on the property, which she plans to get next January

What are the two types of real estate investment trusts?

Mortgage and equity

How often can the capital gains exclusion be claimed?

Once every two years

Which payment plan consists of the borrower making payments of interest and principal on a periodic basis, with a large amount due at the end of the loan term?

Partially amortized payment plan

A rundown home, overgrown with weeds and in desperate need of repairs, is driving down property values on the block. What economic principle is at work here?

Regression

How can you determine easements, and encroachments of a property? Select the answer that would provide the most comprehensive search.

Research the deed and title history, check maps at the county recorder's office, and review land surveys.

how do you calculate GRM

Sales price divided by monthly rent

In which market do lenders purchase packaged loans?

Secondary mortgage market

Luciana is very successful in her profession, partially because she was fortunate enough to connect with several developers in the early days of her career. Since then, she's built a solid reputation as the "go to" person in the state to list properties on the MLS and show model homes in newly developed communities. What's Luciana's profession?

She's a real estate licensee.

Who is responsible for obtaining an appraisal?

The buyer

What is the formula NOI ÷ V = R used to calculate?

The capitalization rate

John and Michelle received a general warranty deed when they purchased their house from Ted. A couple of months after they moved in, their neighbor, Bryant, drove his four-wheeler across their property to access the lake front. John discovered that Ted and Bryant agreed to an easement over Ted's property several years earlier. Which general warranty deed covenant does this represent?

The covenant against encumbrances

Let's say you take out a 30-year adjustable rate mortgage loan with a five-year interest-only payment period. When will you start paying toward the principal and interest?

The last 25 years

Which party at closing requires the property to be free and clear of encumbrances and requires title insurance and hazard insurance?

The lender

In situations where a leased property is sold, and the tenants have been notified of the transfer of their security deposits, who is responsible for refunding the security deposits when the tenants' leases are up?

The new owner

Who are the parties to a property management agreement?

The property manager and property owner

Who is responsible for requesting a loan payoff statement before closing?

The seller

Which of these actions is a violation of the Residential Lead-Based Paint Hazard Reduction Act when a property constructed before 1978 is being marketed by a licensee?

The seller's agent fails to provide the pamphlet, "Protect Your Family from Lead in Your Home," to prospective buyers.

Paula is bidding on a property that's being sold at a foreclosure auction. She's excited about the great deal she's getting on the property after she finds out she submitted the winning bid. What could cause Paula's great deal to turn into a nightmare?

The title to the property may have hidden issues that could cost her a lot of money to clear.

Which of the following is a benefit of automated underwriting?

There is no chance of personal prejudice entering into the decision.

Julia and her husband, Mark, are financing the purchase of their new home. Their lender requires that they have title insurance. When and how often will they need to pay the title insurance?

They will only pay once, at the time that the policy is issued.

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

While walking through your seller's commercial property prior to listing it, you noticed that the soil is a strange color, and that there are some solid deposits in the soil toward the back of the property. You recommended that the seller have the soil tested for the presence of any sort of hazardous material. Which of the following is true?

You are only liable for disclosing known hazards, not suspected ones.