REU Study C. 14-20

Are Multi-Story Homes More or Less Cost Effective to Build Than One-Story Homes?

Multi-Story Homes Are More Cost-Effective to Build. This stems from the fact that when one level is stacked on top of another, the cost of the additional foundation, roofing, and other materials are saved. A multi-story home can include two or more levels and include decks and porches on each level.

If a house is located in a 100-year flood zone, the chance, in percentages, that it will flood at some point during a typical 30-year mortgage period is:

26%

George has done some research about insurance policies online. He is planning to add more rental properties to his portfolio this summer, and asks his agent if she knows whether he will qualify for replacement value cost (RVC) NFIP coverage. His agent, Paula tells him "no," because...?

In order to qualify for RVC coverage, George must live in a home 80 percent of the time. This policy typically does not apply to real estate investors.

An investor purchased a property for $2,600,000 using all cash. What is the NOI on the property after year one if the investor earned a 10% cash-on-cash return?

$260,000. The NOI will equal the purchase price multiplied by the cash-on-cash return. This equals $2,600,000 x 0.10 = $260,000.

Martha just bought a new house and expects the house to appreciate at 3% per year. How much would the property be worth in one year if she purchased the house for $288,000?

$296,640; multiply the current value by 1.03. This equals $288,000 x 1.03 = $296,640.

If a property is currently worth $330,000, what will the property be worth in one year if it appreciates at a rate of 2.5%?

$338,250

A property is currently worth $296,000. How much did the property depreciate if it was worth $298,960 a year ago?

1%; divide the previous year's value by the current value and then subtract 1. This equals $298,960 / $296,000 = 1.01. 1.01 - 1 = 0.01 or 1%.

What are the types of sexual harassment?

1. Quid Pro Quo 2. Hostile Environment

An investor is looking to purchase a property for $2,500,000. If the property has an NOI of $150,000, what is the going cap rate?

6%

For a facility to qualify as housing for older persons under the terms of HOPA, what percentage of units must have at least one resident age 55 or older?

80%

Cheryl is preparing a management agreement for a new client. What information can she use in the property description?

A legal description from the recorded property deed

Who pays the property management fee?

A professional property manager operates under a binding contract with the owner that details the fee for services. Typically, a property manager's fee represents a percentage of the monthly rent collected, but other fee structures are possible. Fees can vary from one region to another; commercial fees differ from residential rates, and long-term lease fees are different from short-term rentals.

Define "pro-forma"

A real estate pro forma report details a property's projected net operating income (NOI) and cash flow projections using its current and potential rental income and operating expenses.

How long does a commercial lease need to be before a tenant is expected to record that lease in the office of the register of deeds?

A tenant who is leasing a property for a term of more than three years should record the lease with the office of the register of deeds.

Under an estate at sufferance, the landlord could go to court to have a trespassing tenant evicted. What is another possible remedy?

Accept the tenant for another similar lease term

When the lessee (tenant) signs the lease, what contract element is satisfied?

Acceptance. The tenant's signature means they have accepted the contract. The offer is made by the landlord when the contract is drafted. Consideration refers to something of value, which will be the rent specified in the lease. Legal capacity is the minimum age requirement to enter into a contract, which is 18 years of age.

An investor has several multi-family buildings he wants to sell in the next year. His real estate agent tells him that he can force the appraised value to rise by...?

Adding amenity packages based on trends in the area

Which of the following activities is not banned by the Fair Housing Act (FHA)? A Advertising in a way that does not discriminate based on someone's race, color, national origin, religion, sex, familial status, or disability. B Denying a loan to someone based on their race, color, national origin, religion, sex, familial status, or disability. C Refusing to rent, negotiate, or sell to someone based on their race, color, national origin, religion, sex, familial status, or disability. D Changing the terms and conditions of a transaction based on someone's race, color, national origin, religion, sex, familial status, or disability.

Advertising in a way that does not discriminate based on someone's race, color, national origin, religion, sex, familial status, or disability. The Fair Housing Act (FHA) bans discriminatory marketing practices, but the law does allow you to advertise in a way that does not discriminate. The FHA bans real estate agents from refusing to rent, negotiate, or sell to someone based on their race, color, national origin, religion, sex, familial status, or disability. The FHA also bans you from changing the terms or conditions of a sale or denying a loan to someone based on these protected categories.

Carolyn found a home that she can afford. It is not in a known flood plain, and she doesn't want to buy flood insurance since her mortgage lender doesn't require it. Her agent recommends she purchase flood insurance, because...? A All of these statements are true B Coverage is minimal compared to the average residential claim related to flood damage C The price of the average flood insurance policy through NFIP is only $700 per year D Policies are lower in low-risk areas

All of these statements are true

What are the cons to forced hot air heating systems?

Although forced hot air systems have pros like being inexpensive to install, they generally require more upkeep, and homeowners know when they are running.

What type of tax statement includes assessments from a variety of agencies such as school taxes, water district taxes, road and bridge fees, and both city and county property taxes?

An annual combined appraisal district tax statement

Which list below covers the three most common homeowner policy coverage areas? A Structures, land, landscaping, and medical liability B Buildings, building contents, and medical coverage for people who are hurt on your property C Building, land, and building contents D None of the answer choices provided are correct

Buildings, building contents, and medical coverage for people who are hurt on your property. Building damage, a person's belongings, and medical coverage are the most common.

How is enforcement of the North Carolina Fair Housing Act carried out?

By the North Carolina Human Relations Commission or a private lawsuit in state court

Brenda has lived in her home for ten years. Her job is transferring her to another state, and she can't decide whether to convert her home to a rental property or sell it outright. Her real estate agent reminds her that if she sells her property, she can deduct mortgage origination points when reporting ............ on her federal taxes.

Capital gains or losses

Net operating income divided by the purchase price equals the...?

Capitalization rate

Which of the following occurs when the landlord hasn't upheld their end of the lease agreement resulting in the tenant not being able to occupy the leased property? A Elective eviction B Actual eviction C Constructive eviction D Judgment eviction

Constructive eviction. Remember, actual eviction is associated with the tenant breaching the lease, while constructive eviction is associated with the landlord breaching the lease.

A maintenance task performed to identify, isolate, and rectify a problem with a property so that the property can be restored to an acceptable condition is known as...?

Corrective maintenance

What does discrimination based on "familial status" mean?

Discriminating against someone based on their marital status or their children

What Is the Purpose of a Foundation Footing?

Distribute Weight and Prevent Sinking and Shifting because footings are located at the lowest part of a foundation. They are wider than the foundation wall and help distribute weight. Without adequate footings, foundation walls could sink in areas, cause the home to shift, and create the risk of collapse.

If a tenant agrees to pay rent, property taxes and insurance premiums, what type of lease do they have?

Double net lease

What is the effective gross income of a property that has an NOI of $400,000 and expenses totaling $520,000?

Effective gross income equals NOI plus expenses. In this example, the effective gross income will equal $400,000 + $520,000 = $920,000.

Who can terminate an estate at will?

Either the landlord or the tenant, or both of them

An investor's down payment on a property is equal to their initial ........... in the property.

Equity. On day one, the investor's equity will equal their down payment. Over time, as the loan gets paid down, and the property increases in value, the investor's equity will grow.

What does FICO stand for?

Fair Isaac Corporation

What are the three most common types of insulation used in houses?

Fiberglass batts, foam and loose fill. Batts are also called blankets and these are rolled between joists. Foam and loose fill are both typically considered blown-in due to the way they are deployed. Although cellulose and wool are common materials, others such as fiberglass particles are used in batts.

Even if someone has flood insurance, not all flooding is covered, and exceptions include which of the following? A Flooding that happened as a result of another problem, such as a sewer backup that was not itself caused by flooding. B A flood that happened because of a rising river or pond. C Flood damage as a result of a hurricane or other natural disaster. D Flooding that occurred in an area designated as a 100-year flood plain.

Flooding that happened as a result of another problem, such as a sewer backup that was not itself caused by flooding. There is some flooding that is not covered, such as flooding that resulted from a sewer backup that was caused by a reason other than flooding.

The 1988 amendments to the Fair Housing Act protected which group of people from housing discrimination?

Handicapped people

What is "constructive eviction"?

It is a type of eviction that occurs because the landlord fails to keep a property dwelling safe and habitable. According to a standard rental agreement, the landlord must keep the property safe and habitable. If they fail to do so, the tenant may not be able to safely or reasonable live in the property. They have to move and therefore cannot meet the terms of the lease they agreed to. The landlord's actions or inactions create a situation in which the tenant is essentially evicted, even if the landlord does not actively try to evict them.

How long do hot water heating systems typically last?

Hot water heating systems are known to last more than 30 years. They are proven reliable systems with comparatively long life expectancies.

Which of these tenants is least likely to want to enter into a ground lease? A Independent insurance agent B Fast-food chain C Retail Mega-store D Grocery store chain

Independent insurance agent. Long-term tenants will most likely enter into a ground lease. An independent contractor, including an insurance agent, do not need long-term leases.

A couple of states forbid using credit-based insurance scores, but it's still common in other states. Why?

Insurance is a numbers game and people with low credit scores have been shown to file claims more frequently. It's been shown that people with low credit scores often file claims more frequently and that means the likelihood of someone with a low credit score filing a claim is higher than average.

Discount points allow buyers to prepay ............ in exchange for a lower interest rate on a mortgage loan.

Interest; paid upfront as a percentage of the loan amount. The more points a borrower buys, the less the interest rate on the loan.

Define "risk of loss."

It's when and under which conditions the responsibility for any loss on the property passes from the seller to the buyer.

What is the term for a legal contract created when a property owner enters into an agreement with a tenant, giving the tenant the right to occupy and use real property, subject to terms and conditions?

Lease

When specific improvement provisions are included in a lease, giving the tenant the right to improve the property, they are sometimes referred to as...?

Leasehold improvements. Leasehold improvements allow the tenant to make improvements to the property. The remaining answer choices are not provisions found in a lease.

Carol is a property manager who works closely with investors who have residential portfolios in a college town. When establishing the length of service terms, she understands that...?

Length of service terms are flexible, and she must consider both her income and the owners' financial goals. The property manager is responsible for ensuring the owner hits their desired return on investment.

Which statement is true about homeowners and insurance coverage in the United States? A Many US homeowners are under-insured. B Most US homeowners are over-insured. C Every US homeowner is required to maintain continuous coverage on buildings and contents. D Less than 10 percent of homeowners in the US have active insurance policies.

Many US homeowners are under-insured. Many properties are under-insured. Homeowners may try to save money on insurance, or they understate the potential value of their real and personal property.

What are punitive damages?

Monetary punishments against the at-fault party, which are awarded to the victim. Punitive damages are punishments against an at-fault party that are awarded to a victim. For example, if HUD determines that a real estate agent has discriminated against someone, they may order the real estate agent to pay the victim the direct costs they incurred as a result of the discrimination as well as punitive damages of a certain amount.

Which law states that the owners of owner-occupied buildings with four or fewer units are not bound by the terms of the Fair Housing Act (FHA)?

Mrs. Murphy's Law

What is the NFIP?

National Flood Insurance Program

The 1968 additions to the Fair Housing Act (FHA) banned discrimination based on which of the following categories? A National origin and religion. B Sex and national origin. C Sex and disability. D Sexual orientation and age.

National origin and religion

The value of a commercial property is primarily based on which of the following? A Net operating income B Gross income C After-tax cash flow D Expenses

Net Operating Income

Under this type of lease, the tenant is responsible for base rent plus additional expenses like taxes, insurance, and maintenance?

Net lease; commonly associated with commercial tenants.

What are the types of coverage offered by NFIP?

One that is specifically for the building and the other that is for items inside the building

With this type of lease, the landlord negotiates to receive compensation based on a commercial tenant's sales in the leased space?

Percentage lease. A percentage lease is commonly associated with commercial retail tenants. In this type of lease, the landlord receives a percentage of the tenant's revenue in exchange for a lower fixed rent.

The top line in the income section of a pro-forma lists which of the following?

Potential gross income

What kind of insurance protects lenders against losses if a buyer fails to make payments?

Private mortgage insurance

Who is responsible for making sure local ordinances about occupancy controls are met when a property owner leases space to a tenant?

Property owner/landlord

What does ADA Title III address?

Public Accommodations Aims to prevent discrimination in places that are owner or leased privately but are open to the public, ex. Restaurant Understand how it relates to alterations that must be made to commercial properties Regulated and enforced by US Department of Justice

Which of the following activities is banned under the terms of the Fair Housing Act (FHA)? A Quoting different terms to people based on their race, color, national origin, religion, familial status, disability, or sex. B Quoting different terms to people based on when they contact you about a property. C Convincing sellers or landlords to change their terms to sell or rent a piece of property more quickly. D Offering the same terms to people regardless of their race, color, national origin, religion, familial status, disability, or sex.

Quoting different terms to people based on their race, color, national origin, religion, familial status, disability, or sex. Under the terms of the Fair Housing Act (FHA), you cannot offer different terms to people based on their race, color, national origin, religion, familial status, disability, and sex. However, as a real estate agent, you may need to adjust the terms of a sale based on timing or to sell a property faster. This is not illegal as long as you aren't changing the terms based on someone's race, color, national origin, religion, familial status, disability, or sex.

What are the general minimum "R" ratings for exterior walls and floor insulation?

R-13 and R-19

What is the most common cause for breaching a lease?

Rent is not being paid

Which of the following is not an example of a common lease restriction? A Restricted access hours to the leased unit B Occupancy limits C Provision about pets D Restriction on commercial activities

Restricted access hours to the leased unit. Nearly all leases will not have any restrictions on access to the property, especially for residential leases. However, there may be a limit to the number of tenants/occupants, a pet policy, and restricted uses.

What term describes money a tenant pays up front, but gets back at the end of the lease term if the property is returned in substantially the same condition?

Security deposit

James and three college friends want to buy a houseboat, with each of them owning an equal share. If the lender issues a joint 1098 showing interest, PMI, and points paid in the amount of $3000, how much can James deduct as expenses on his federal tax return?

Since James is sharing ownership with three other people, the $3,000 costs will be divided by 4. $3,000 / 4 = $750. Since the IRS allows mortgage interest, PMI, and discount points to be deducted on one's income taxes, James will be able to deduct $750.

What does ADA Title II address?

State and Local Governments Prohibits discrimination against those with disabilites in programs and public entities provided by state and local governments Gov.ts must make reasonable accommodations in programs to avoid discrimination

What is the primary function of eaves?

To prevent water from impacting exterior walls because eaves extend out beyond the exterior wall. This helps push rainwater away from the home rather than allow it to run down the side of a house, potentially seeping inside. Although eaves are sometimes used by homeowners to store items in the attic, their main purpose is water protection.

What is "blockbusting"?

Telling white residents to sell their homes because people of color are moving into the neighborhood. In the past, real estate agents used this tactic to convince people to sell their homes quickly for low prices. The Fair Housing Act (FHA) bans blockbusting.

What does a leasehold estate entitle a tenant to do?

Temporarily possess, occupy and use real estate. A leasehold estate does not offer the full bundle of rights (unlike a fee simple estate); however, temporary possession and the right to quiet enjoyment is included.

Under which of these scenarios would using a percentage lease make the most sense? A Tenant is a coffee shop in a strip mall B Tenant is an individual leasing an apartment C Tenant is a big box store looking for a new location D Lessee is an oil and gas company wanting to expand drilling

Tenant is a coffee shop in a strip mall. A percentage lease is commonly associated with commercial retail tenants. In this type of lease, the landlord receives a percentage of the tenant's revenue in exchange for a lower fixed rent.

Which group enforces the terms of the Fair Housing Act?

The Department of Housing and Urban Development (HUD)

When you become a real estate agent, how does the Fair Housing Act (FHA) affect your marketing and advertising?

The FHA bans you from using discriminatory language in your marketing or advertising. The Fair Housing Act (FHA) has strict guidelines related to marketing and advertising. Under the terms of the FHA, real estate agents cannot use discriminatory language in their marketing or advertising. They cannot encourage or discourage people from renting or buying a property based on their race, color, national origin, religion, familial status, disability, or sex.

Why did the North Carolina legislature implement the North Carolina Vacation Rental Act?

The act was implemented due to the great expansion of privately owned residences rented to tourists. State lawmakers recognized that the vacation rental market was expanding significantly and they wanted to ensure that there were laws in place to protect all parties. The rental transactions related to these residences presented unique situations not normally found in standard residential rental law and it was necessary to enact laws regulating the competing interests of landlords, real estate brokers and tenants.

Who works out the terms for possession when a property is sold?

The buyer and seller do it with advice from experts, which may include their real estate professional, their attorney, insurance agent, or more.

Money set aside by a property owner for long-term capital expenditures to a property is known as the...?

The capital reserve budget

What are the total expenses of a property with an effective gross income of $850,000 and an NOI of $400,000?

The expenses will equal the effective gross income minus the NOI. In this example, the expenses will equal $850,000 - $400,000 = $450,000.

What document establishes the guidelines for the agency relationship between a property manager and the property owner(s)?

The formal management agreement. The management agreement is signed between the owner and property manager. It creates a general agency relationship.

If the language of an estate at will lease says tenancy continues at the will or desire of the tenant, under what circumstances can the landlord terminate the lease?

The landlord may not be able to terminate the lease

What is a landlord required to do if they use the security deposit or a portion of the security deposit to pay for things permitted by North Carolina law?

The landlord must provide an accounting of how the security deposit was used to the tenant. The security deposit is the tenant's property, not the landlord's. Because the landlord is using the property of the tenant, even if the use is justifiable under North Carolina law, the landlord must keep a record of what they used it for and now much of the deposit they used. They need to provide that documentation to the tenant so that the tenant knows how and why their money was used by the landlord.

Who is usually responsible for maintaining common areas like corridors, shared security offices, walkways, and elevators in a mall or shopping center?

The management company

Which fee typically covers basic services, like accounting, reporting, and tenant screening?

The management fee. The property management fee covers the day-to-day management of the property, such as collecting and processing rent, communicating with tenants, conducting annual property inspections, coordinating repairs, and responding to emergency maintenance calls.

How is the term risk, as it is used in the insurance industry, defined?

The odds that a specific thing will happen. Insurance companies evaluate the odds that a specific thing will happen to determine risk so they can calculate how much money they need to reserve to pay claims.

How much notice to vacate does the owner of a foreclosure have to give tenants if they plan to move into the home?

The owner must only give the tenant a 90-day notice to vacate. While North Carolina law is written to provide some protection for tenants in foreclosures, that law must also balance the needs of the owner. A new owner who plans to rent the property to another tenant must act in a manner similar to any other rental owner, but a new owner who wants the home as their residence is allowed to move in more quickly.

A property that is identified as moderate or low risk means what?

The owners of such property can get flood insurance with Preferred Risk Policies, or PRPs, and save money over the cost of high-risk coverage.

Christine is looking at an older home in a quiet neighborhood. She knows that it might be hard to repair or replace the dwelling if it was directly hit by a tornado or there was a fire. The best homeowner policy for her is probably an HO-8 policy specifically designed for older homes. Which statement most accurately gives an overview of the Older Home Coverage?

The plan doesn't cover water damage without an additional rider, but pays the actual cash value minus depreciation.

If the buyer moves in early, what happens with the homeowners insurance?

The seller's homeowners policy would not cover these circumstances. Homeowners insurance is designed to cover the homeowners while they are living in the property.

What is the North Carolina State Fair Housing Act?

The state of the federal Fair Housing Act designed to prevent real estate agents and sellers from engaging in discriminatory practices

Who must sign a lease to make it valid?

The tenant and the landlord, or their authorized agent(s)

What does time-value of money mean?

The time value of money (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity.

Why are heating systems important from a real estate perspective?

They are major systems that impact property values and finances due to energy efficiency and potential repairs or replacement. Heating systems are considered big-ticket items in a residential or commercial property. They impact long-term budgeting.

What could happen if the seller has to take legal action to remove the buyer?

They might be unable to show or sell the property while the process goes on. The process becomes difficult or the buyers fight the eviction, they might not allow the property to be shown, discourage potential buyers who do show up, or be otherwise disruptive.

The seller allowed Charlie and Skylar to move in early; then their financing fell through, so now what happens?

They will need to move out, because the seller is still the owner of the property and will want to get it back on the market. Regardless of the lease agreement, if the buyer cannot complete the purchase, the seller still owns the property and will want to get it back on the market and sold as soon as possible.

Employment is discussed in which of the ADA 'titles'...?

Title 1 of the ADA addresses employment.

ADA regulations for 'Telecommunications' is discussed in what title...?

Title IV

If they change their mind, how can a landlord cancel the summary ejectment process?

To cancel the eviction process, they must file a notice of voluntary dismissal

Why are attics usually vented?

To circulate air, maintain temperatures and reduce moisture because attics can trap heat and humidity. Moisture ranks among the most damaging items in a home. It can impact beams, rafters and promote dangerous mold growths.

Why was the Fair Housing Act created?

To eliminate discrimination in the housing market. As part of the Civil Rights Act of 1968, the Fair Housing Act (FHA) became law. The FHA is designed to eliminate discrimination in the housing marketing, and its rules apply to everyone involved in real estate transactions, including landlords, real estate agents, lenders, and others. The act describes protected groups of people as well as prohibited acts that discriminate against these people.

Why do construction professionals use bridging?

To hold floor joists in place. Bridging is the small pieces of wood that carpenters insert between floor joists to prevent jostling and shifting. This technique typically creates a series of crisscrossing materials between the joists. Bridging is typically set in place before subfloors are nailed to the floor joists.

True or False: If a lease does not specify any restrictions, the tenant can use the leased space for any lawful purpose?

True. If no restrictions are specified, the tenant can use the property for any lawful purpose.

Define "underwriting"

Underwriting simply means that your lender verifies your income, assets, debt and property details in order to issue final approval for your loan.

If a unit is not being rented, it should be classified as a/an...?

Vacancy

When was the Housing for Older Persons Act (HOPA) signed into law?

signed into law by President BIll Clinton in 1995. It was an amendment to Title VIII of the Fair Housing Act (FHA) from 1968

How does HUD discourage discrimination?

With fines and penalties

Jason owns a piece of land without improvements. How does he calculate annual depreciation?

You cannot depreciate unimproved land according to the IRS

Three weeks after Justin signed a management agreement with a local property management company, a tornado ripped through the area, totally destroying a managed building. He should be able to get out the contract if the agreement included a/an...?

early termination clause that requires the property to be habitable

A ............ is a group of independent businesses under one roof.

mall

What does ADA Title V address?

variety of provisions relating to ADA as a whole State immunity, insurance provisions, design and construction standards Spells out relationship between ADA and various state/federal laws