30 Hours RE
Approximately how much would an estate have to be worth to be subject to estate tax? $11 million $1 million $5 million $9 million
$11 million
A 30-unit income-producing property has a sales price of $6 million. Annual gross income is estimated at $500,000. What's the gross income multiplier? 10x 12x 14x 8x
12x
Hiram plans to do a 1031 tax-deferred exchange. He just sold his property. How many days does he have to close on a new property? 180 30 45 60
180
The IRS will only allow _______ of passive losses to be deducted against active taxable income. $2,000 $3,000 $4,000 $5,000
3000
If a property has a potential gross income of $50,000, a vacancy and collection loss of 10%, and taxes are another 10%, what's the effective gross income? $40,000 $45,000 $50,000 $55,000
45,000 Taxes aren't part of this equation.
What's an income shelter? A deductible allowance from after-tax cash flow A deductible allowance from gross income A deductible allowance from net income A deductible allowance from petty cash flow
A deductible allowance from net income
What is capital risk? The risk that an investor cannot secure financing at an affordable rate The risk that is directly related to leverage The risk that the property has a bad location The risk that the required return on investor capital will not be met
A purchase can be put in jeopardy if an investor cannot secure the financing needed at an affordable rate. This capital risk could make the purchase unattractive or more expensive than first analyzed and no longer a pursuable investment opportunity.
You've just received a trio from a title company. Along with an assessor's map and property profile, what other document is included? Deed Marketing report MLS listing Tax record
A trio contains a property profile (which has ownership, parcel, and tax information), an assessor's map, and a deed, which show the owner of record, how title is vested, and the date of recording.
What do you get when you add the purchase price to closing expenses and the cost of any improvements during the time of ownership, then subtract any depreciation taken? Adjusted basis Basis Capital gain ROI
Adjusted basis
What date is used for adjustments to closing costs between the parties to a South Carolina sales contract? Buyer possession Closing date Earnest money receipt date Effective date of contract
All adjustments to closing costs are prorated as of date of closing.
For what properties are wood infestation reports applicable in a South Carolina sales transaction? All new construction residential homes All previously occupied residential homes Commercial and multi-family properties Multi-family and single-family homes that have never been occupied
All previously occupied residential homes. The buyer of a previously occupied South Carolina home may make the purchase contingent on a satisfactory wood inspection report.
Which of the following is a listing agent's duty? Caution the seller against sharing sensitive information during the listing term. Ensure the property sells quickly. Stage the property appropriately. Store excess belongings on the seller's behalf.
Among other duties, a listing agent should caution the seller against sharing sensitive information during the term of the listing.
When using the farming approach, turnover is a key factor when identifying a neighborhood. Which statement best describes turnover? An area that is not currently farmed by another licensee An area that the licensee likes An area with a fair amount of listings—not too many, not too few An area with a variety or home styles, sizes, features, price points, amenities, buyers, etc.
An area with a fair amount of listings—not too many, not too few
In the months before the financial crisis beginning in 2007, what made collateralized debt obligations (CDOs) such an attractive investment? Increasing home prices gave them the perception of a safe, high-yield investment. It was a new type of investment that people wanted to experiment with. They were high-yield investments so most investors ignored the high risk associated with CDOs at the time. They were insured by the federal government.
Because investors and bankers assumed that property values would only continue to increase, CDOs appeared to be safe, high-yield investments.
Your buyer client, Percy, wants to start searching for his dream house and knows he needs to obtain financing to accomplish that. What's his first step? Complete a loan application. Obtain a pre-qualification letter. Sign a purchase agreement. Write an offer.
Before Percy even begins looking for properties, he should get pre-qualified. He may also consider getting pre-approved.
Which of the following elements of the NAR Code of Ethics are used to clarify the articles and support local boards during hearings on ethics violations? Articles Case interpretations Case law Standards of practice
Case interpretations further clarify the code and its articles, and set precedents for local boards during hearings on ethics violations by allowing them to review real life ethics complaints and the final decision.
A comparison of before-tax cash flow to cash invested is known as _________________________. After-tax cash flow Cash-on-cash return Income rate value Return on investment
Cash-on-cash return is a ratio or percentage of the before-tax cash flow divided by the cash invested.
The Broker's Compensation section of a South Carolina sales contract says that ______________. Closing proceeds may be used to pay the brokers' commission Earnest money may be retained to pay broker commission If broker commission is in dispute, the parties must resolve the situation within 30 days In the event of a dispute between the parties, the brokers waive their commission
Closing proceeds may be used to pay the brokers' commission In this section, the parties direct the closing attorney to use proceeds of the sale to pay broker commission.
Which of the following statements about component depreciation is true? Both tangible personal property and real property qualify for component depreciation. Components that are considered part of the real property qualify for component depreciation. Components that can be separated out as tangible personal property qualify for component depreciation. The Tax Reform Act of 1986 increased the range of items that could be depreciated using the component depreciation method.
Components that can be separated out as tangible personal property qualify for component depreciation. - Investors may only use the component depreciation method on tangible personal property.
Days on market is an important market indicator. Which of the following is a true statement about days on market? A greater number of days on market means it's a seller's market. A lower number of days on market for a given neighborhood, compared to the surrounding area, means the market is popular with buyers. Days on market means how long it takes a property to close. If days on market are higher than this time last year, the market is heating up.
Days on market means how long the property remains active on the market before the seller accepts an offer. Fewer days on market means a hotter market.
As foreclosures increased in 2007, what was the response from lenders? Borrow money from the federal government Decrease lending activity Increase lending activity Refinance mortgages for troubled homeowners
Decrease lending activity - Lender balance sheets were negatively impacted by the increase in foreclosures. When the secondary market stopped buying subprime loan packages, lenders slowed their lending activities.
Carol is purchasing a home in South Carolina. When she places her earnest money deposit with the closing attorney, what form might her deposit take? Any legal tender Cash, certified check, or money order Cash or certified check Cash or money order
Earnest money in South Carolina can be paid using a personal check, cash, or through other means.
After determining an ethical dilemma exists and evaluating the situation, what's the next step to handling the situation? Decide what action to take. Explore the ethical choices. File a complaint with the commission. State the reasoning.
Exploring ethical choices or actions is the third step in the process. Drawing in resources—such as a code of ethics or a peer, mentor, or managing broker—is helpful here.
Which of the following contributed to the 2007 financial crisis? Falling home prices Falling interest rates More home sales Rising home prices
Falling home prices were a contributing factor to the 2007 financial crisis.
Which of the following is the best example of investment leverage? Buying multiple properties at once Buying properties on a systematic basis Financing most of an investment and putting very little cash in Paying all cash for an investment to avoid interest payments
Financing most of an investment and putting very little cash in
Robert, a developer, prefers to invest in unimproved land. This is likely because _______. A portfolio of unimproved land shows lenders solid assets Existing structures limit development needs He doesn't want to retrofit an existing structure It's immediately profitable
He doesn't want to retrofit an existing structure
Why should you know when the seller can vacate the property? If a buyer wants to close before the seller can vacate, the seller may need to rent it back from the buyer. You'll need to know when you can have the property staged. You'll want the house empty for showings. You'll want to schedule the closing during the seller's occupancy.
If a buyer wants to close before the seller can vacate, the seller may need to rent it back from the buyer. The timing of vacating an occupied property is important when marketing to buyers who may want to move in before the seller's ready to move out
Which of the following is a common hurdle parties might encounter on the way to closing? A change in unemployment statistics in the area Income tax deductions may change The bankruptcy of a major area employer The property may not appraise
If the property doesn't appraise, the parties will either have to renegotiate the sales price or the buyer will have to put more money down.
Which of the following is a true statement about the Entire Agreement section of a South Carolina sales contract? If spoken agreements are made later, they may be merged with the existing contract. Illegal provisions in the contract may be separated from the contract without affecting the other provisions. Oral agreement supersedes the written contract. The contract is not binding upon heirs of the parties.
Illegal provisions in the contract may be separated from the contract without affecting the other provisions.
______ describes a unique characteristic of real property (differentiating it from other asset classes). Because of it, location plays a key role in value. Immobility Indestructibility Slowness of response to market conditions Uniqueness
Immobility of is one characteristic that makes the real estate market unique. If changes take place in the surrounding area, this impacts the value of local real estate.
Shel and Sheila Silverstein are making an offer on a house on Hilton Head Island. Shel pulls out his checkbook to write a check for the $10,000 in earnest money they're submitting with the offer. Is this acceptable? No. In South Carolina, earnest money may not be paid by personal check. No. In South Carolina, only earnest money up to a maximum of $5,000 may be paid with a personal check. Yes. In South Carolina, earnest money may be paid with a personal check. Yes. In South Carolina, earnest money up to a maximum of $10,000 may be paid with a personal check.
In South Carolina, earnest money of any amount may be paid using a personal check.
Which of the following is a risk most associated with wholesaling as a real estate investment strategy? Inability to immediately resell the property for a profit Running out of money before repairs are finished Tenant issues Vacancies
Inability to immediately resell the property for a profit
What's interest? Amount of payment that will be applied toward the loan balance Amount to be sent for payment Loan balance after the payment is applied Money paid for the use of money
Interest is money paid for the use of money.
What's simple interest? Interest that's calculated based on the current principal of the loan amount multiplied by the interest rate Interest that's calculated based on the total amount of the original loan in addition to the amount calculated for each payment Interest that's calculated based on the total sales prince of the loan multiplied by the interest rate Interest that's reinvested into an account that then earns interest
Interest that's calculated based on the current principal of the loan amount multiplied by the interest rate
Physical possibility, financial feasibility, maximum profitability, and ______ are all considerations when determining highest and best use. Ability to be leveraged Legal permissibility Liquidity Rebuilding cost
Legal permissibility
What is interest? A quantity chosen as a standard in terms of which other quantities may be expressed. A value describing one quantity in terms of another quantity. Money paid consistently at a particular rate for the use of borrowed money. Provides protection against possible damage.
Money paid consistently at a particular rate for the use of borrowed money.
Brokerage fees, commissions, and service income are all examples of ______. Commingled funds Converted funds Non-trust funds Trust funds
Non-trust
The Hendersons are having a very difficult time finding a property that meets their needs. What is a way they can find off-market listings? Ask a real estate agent to poll her sphere of influence. Ask a real estate agent to search the MLS. Search homebuying websites. Visit real estate brokerages to see what properties they are advertising.
Off-market listings are also known as pocket listings. Only the seller, the listing agent, and individuals the seller and listing agent have informed know the property is for sale. It is not posted on the MLS, brokerage websites, or homebuying websites.
In a South Carolina sales transaction, what signifies "notice"? Both parties notifying the other of an event or decision Both parties' signatures Both parties' signatures and dates One party notifying the other party of an event or decision
One party notifying the other party of an event or decision
Which key on a real estate calculator is used to enter the periodic principal and interest payment? INT LOAN AMT PMT TERM
PMT
You represent a buyer of a South Carolina home. A tree falls on the home, causing significant damage. Your buyer wants to terminate. How long does your buyer have to notify the seller of the intent to terminate?
Parties have five business days after notice of damage to deliver a notice of termination to the other party. Without such notice, they agree to proceed according to the contract, and the seller is responsible for repairs.
Financing of vacant land in rural areas is ____________. Illegal Impossible Possible using a 205(k) loan Possible using a Section 502 loan
Possible using a Section 502 loan
Which of these terms can be defined as what a buyer has paid for a property and what the seller has accepted? Appraisal Cost Price Value
Price is the actual amount that a buyer pays for a property. It may be the same as the market value, or it may not.
Which investment cycle is an investor in when there is depreciated basis and tax-deferral through 1031 exchanges? Acquisition Depreciation Ownership Reversion
Reversion
You're assisting Jim, who's selling his South Carolina home. He asks you who's typically responsible for paying the deed recording costs. You tell him __________. "As your representative, this is my cost." "The buyer typically pays this cost to ensure the deed is recorded." "The seller typically pays this." "This fee is split between you and the buyer."
Seller's transaction costs typically include deed preparation, deed recording costs, all costs necessary to deliver marketable title, seller's attorney fees, and any applicable payoffs/satisfactions of mortgages/liens.
The loan type and the amount of down payment impact _______. The closing costs the seller may contribute The closing date The loan origination fee charged The seller's net proceeds
The closing costs the seller may contribute. The amount that a seller may contribute toward closing costs is based on the loan type and the amount of the down payment.
Phoebe's gross monthly income is $4,200, and she has $360 in monthly non-housing debt payments. The lender's qualifying ratios are 28% for the housing ratio and 36% for the total DTI ratio. What's the maximum housing payment she can afford? $1,075 $1,152 $1,176 $1,512
The maximum house payment is the lesser of the amounts calculated using both ratios. DTI: $4,200 x .36 = $1,512. $1,512 - $360 = $1,152. Housing ratio: $4,200 x .28 = $1,176. Phoebe's maximum payment is $1,152.
What is financial risk? The risk that an investor cannot secure financing at an affordable rate The risk that is directly related to leverage The risk that the property has a bad location The risk that the required return on investor capital will not be met
The more money an investor leverages (or borrows), the greater the financial risk.
A lender requests an appraisal of a property under foreclosure. What type of value is the lender most likely to be interested in? Going-concern value Insured value Investment value Liquidation value
The property probably won't fetch market value, but the appraiser can determine a liquidation value where the sale removes the property from the bank's non-performing assets.
If special assessments apply to a property involved in a South Carolina sales transaction, who's responsible for paying the assessment? The brokers representing the buyer and seller The buyer, if the assessment is applied prior to closing The closing attorney The seller, if the assessment is applied prior to closing
The seller, if the assessment is applied prior to closing
Which of the following statements best describes the three-property rule as it relates to tax-deferred exchanges? An investor can exchange no more than three properties per exchange. An investor can exchange no more than three properties per year. An investor can identify up to three replacement properties and not encounter a restriction as to fair market value as long as debt load requirement is met. An investor must own at least three properties to qualify for a tax-deferred exchange.
The three-property rule says that an investor can identify up to three replacement properties and, in this situation, fair market value doesn't matter, provided the investor meets the debt load requirement.
The __________ of real estate markets makes it impossible to generalize the impact events in other areas will have on real estate values. Immobility Indestructibility Slowness of response Uniqueness
This refers to uniqueness. Two identical houses on side-by-side lots have different values.
When using the farming approach to find listings, what factors are important when identifying an area?
Turnover, affinity, diversity
Ben is the listing agent for property seller Terry, who's requested an open listing agreement. From Ben's perspective, what's the disadvantage to signing an open listing agreement with Terry? Open listings are stigmatized for their inherent conflict of interest, and may damage Ben's reputation. Other agents and the seller create more competition against Ben for the commission. With multiple people working on the sale, Ben may only get a fraction of the commission. With no competition for the commission, Ben has little incentive to work hard.
With an open listing agreement, multiple agents and the seller are also looking for buyers. This means a lot of competition for the commission and possibly no return on a broker's invested time and resources.
You blogged about a new development site across town, and someone posted this public comment: "Don't buy in this development! They'll cheat you out of everything and you'll never see your money again!" As the blog's owner, you ________. Can choose to delete or keep the comment, depending on whether or not you want to encourage people to buy properties in the development Hold no responsibility for what someone else posts online Should delete the comment Should post a disclaimer immediately beneath the comment that says you do not support or agree with the comment
You must remove false or misleading information if someone else posts it on your site. An inflammatory comment like this may have some element of truth, but at the very least it's exaggerated, and therefore misleading.
