real estate final
An earnest money deposit is:
A payment of money by a buyer to evidence good faith
In analyzing a borrower's credit worthiness, the lender will typically examine the borrower's FICO score (a product developed by the Fair Isaac Corporation). High-quality (prime) borrowers are those with a credit score above
660
A partially amortizing loan always will have
A balloon payment
Elements of traditional zoning include all except: A. Performance standards. B. Setback requirements. C. Bulk limits. D. Land use categories. E. Provision for special use districts.
Performance standards
Real estate brokers are paid commissions primarily for
Providing a service
Permitting entails a commitment of significant time and cost. What part of the process is especially treacherous?
Public Hearings because the local land use authorities may kill a project. Community opposition may result in costly delays
A powerful tool for managing, manipulating, and displaying location-specific data is:
Geographic information systems
Foreclosure tends to be quickest in states that:
Have power of sale
Home equity loans typically:
Have tax-deductible interest charges
Property taxes are a main source of revenue for:
Local government
If a mortgage is to mature (i.e. become due) at a certain future time without any reduction in the original principal balance, this is called:
An interest-only mortgage.
Financial compensation for property managers is usually determined as a percentage of gross rental income What "agency" problem does this seem to create? What category are they looking to maximize?
PGI
A common risk that frequently interferes with a lender's efforts to work out a defaulted loan through either non-foreclosure means or foreclosure is:
Bankruptcy
Real estate salespersons can lose their licenses for:
Commingling escrow (trust) money with personal funds
Let's suppose that a lender has established a 90% loan-to-value ratio cutoff as one of its primary underwriting criteria. If a borrower is willing to make a down payment of $125,000 on a home recently appraised at $550,000, which of the following best describes the lender's decision on whether or not to approve the loan along this dimension?
The lender approves the loan because the LTV ratio is less than 90%.
Based on your understanding of the differences between levered and unlevered cash flows, which of the following is an example of a levered cash flow?
before-tax cash flow
When a property is sold for less than its adjusted basis, its depreciation (wear and tear) was:
Underestimated.
Since the seller often has utilized the property for a portion of the year in which the transaction is being made, certain costs associated with the property will be prorated at the closing. All of the following items are subject to proration except
broker commission
The process of creating a "market-defining story" includes all of these questions except:
What is the price
Property rights can be divided into two classes, real and personal. Which of the following is an example of real property?
commercial building
When discussing time-value-of-money it is necessary to understand some key terminology. Which of the following terms refers to a fixed amount of money paid or received at the end of every recurring period (i.e., a series of equal lump sums)?
ordinary annuity
A traditional zoning ordinance includes all of the following except
performance standards
Present value:
Will always equal a project's purchase price when the discount rate is the internal rate of return.
Which of the following is an example of an affirmative easement appurtenant?
a driveway easement across one parcel to another
The purpose of a closing statement is to:
a.Determine who pays the brokerage commission b.Allocate expenses and receipts of buyer and seller
Concerned with a potential information asymmetry problem, state legislators have been proactive in passing legislation that protects the rights and interests of tenants within which of the following property types?
apartment
When viewed as a tangible asset, real estate can be defined as the land and its permanent improvements. Improvements on the land include
fences
Development taking place in rural areas well beyond the urban fringe is commonly referred to as
urban sprawl
If property owners fail to pay their taxes in a timely fashion, this can create a first lien on the mortgaged property. In order to protect against this, lenders often require that borrowers add what fraction of their estimated tax bill to their required monthly mortgage payments?
1/12
Suppose a developer is interested in building a new apartment community. Through her market research, the developer has determined that the target market segment potential in year 1 consists of 100 households. The developer believes that the target market segment potential will grow by 5% annually over the next five years. If the developer projects a capture rate of 25% for each of the next five years, how many units does she plan on selling by the end of year 5?
138 units
The maximum loan-to-value ratio for an FHA loan over $50,000 is approximately:
97%
In most straightforward transactions involving houses or other relatively small properties, the contract is:
A form, with blanks filled in by the broker.
What portion of households own their home?
About 2/3
Ways that a lender may respond to a defaulted loan without resorting to foreclosure include all of the following except:
Accelerate the debt.
Estimated capital expenditures
Are subtracted from NOI in an above-line treatment
Income multipliers:
Are useful as a preliminary analysis tool to weed out obviously unacceptable investment opportunities.
Which of the following statements regarding capitalization rates on commercial real estate investments is the most correct?
Cap rates vary positively with the perceived risk of the investment
The market in which required rates of return on available investment opportunities are determined is referred to as the:
Capital Market
From a home mortgage lender's perspective, which statement is true about the effect of bankruptcy upon foreclosure?
Chapter 7 bankruptcy is the most "lender friendly" form.
Which of these marriage-related forms of co-ownership gives each spouse a one- half interest in any property that is "fruits of the marriage"?
Community property
The cycle of real estate market research starts with:
Creating a market defining story
Which of the following is not an operating expense associated with income-producing (commercial) property?
Debt service
How does routine maintenance and repair affect a property's performance for its intended use?
Doesn't change it
The authority for approving site plans for large projects ultimately rests with the:
Elected governing council
When contracts for the sale of real property are placed with a disinterested third party for executing and closing, they are said to be placed in:
Escrow
A broker, acting as the agent of a seller, must deal honestly and fairly with whom?
Everyone involved in the transaction
The operating expense ratio:
Expresses operating expenses as a percent of effective gross income.
The final price for each comparable property reached after all adjustments have been made is termed the:
Final adjusted sale price.
The dominant loan type originated by most financial institutions is the:
Fixed-payment, fully amortized mortgage
Private mortgage insurance (PMI) is usually required on _____ loans with loan-to-value ratios greater than _____ percent.
Home 80 %
Real estate markets differ from other asset classes by having all of the following characteristics Except:
Homogeneous product
Factors that affect housing market segmentation include all except:
Household unemployment status.
Storm water drainage systems are best described as:
Improvements to the land
In the sales comparison approach, the value obtained after reconciliation of the final adjusted sales prices from the comparable sales is termed the
Indicated opinion of value.
If maintenance and repair decisions are deferred, what does that do to short term NOI?
Increases it
As a general rule, using financial leverage:
Increases risk to the equity investor.
Which of the following mortgage types has the most default risk, assuming the initial loan-to-value ratio, contract interest rate, and all other loan terms are identical?
Interest only loans
What term best describes the maximum price a buyer is willing to pay for a property?
Investment value
A strong assertion about the large amount of data seemingly available for real estate market research is that most of it is:
Irrelevant to a given analysis
Rules used by courts to determine whether something is a fixture include all except:
Law of Capture
Which of the following is not a form of property right?
License
When construction costs exceed the amount of the construction loan, a developer frequently will seek to cover the gap with:
Mezzanine financing
Features of an office building that may be important to one market segment or another include:
Nature of other tenants Floor plan size Amount of parking
A simple but durable method of determining whether to refinance is to use:
Net benefit analysis.
One of the most effective ways that salespersons or brokers can distinguish themselves as a preferred agent in a particular specialization of real estate brokerage is to:
Obtain a related industry designation.
Which of the following conditions would be a defect to mutual assent in a contract for the sale of real property?
One party attempts to perpetrate fraud on the other
Taxable income from the rental of actively managed depreciable real estate is classified as:
Passive Income
Which of the following is one of the terms of a real estate contract?
Price to be paid
Which one would not be deferred maintenance?
Replace a roof
A mortgage that is intended to enable older households to "liquify" or reduce the equity in their home is the:
Reverse annuity mortgage
Ratio analysis:
Serves as an initial evaluation of the adequacy of an investment's expected cash flows.
A type of loan that has grown in volume in recent years which has raised concerns about predatory lending practices is the:
Subprime mortgage
If a buyer defaults on a contract to purchase real property, which of the following is not a remedy the seller can pursue?
Sue for specific performance
Which of these forms of co-ownership could best be described as "normal ownership," except that multiple owners share identically in one bundle of rights?
Tenancy in common
According to most listing contracts, a broker has earned a commission when
The broker finds a buyer who is ready, willing, and able to buy on the terms specified in the listing contract
A down payment deposit from a potential buyer must be held in:
The broker's escrow trust account.
The approach to real estate market research advocated in this chapter starts with the:
The nature of the property
The net present value of an acquisition is equal to:
The present value of expected future cash flows, less the initial cash outlay.
The purchase price that will yield an investor the lowest acceptable rate of return is:
The property's investment value to that investor.
"New urbanism" is a term used to describe:
The theory that residential and commercial uses should be integrated, streets and parking should discourage through traffic, and neighborhoods should be pedestrian oriented.
Real estate transactions do not close when the contract for sale is signed by both parties because:
Title must be checked An inspection must be made Documents must be prepared Financing must be arranged
For tax purposes, a substantial real property improvement (CAPX) made after the initial purchase is:
Treated like a separate building.
As the level of perceived risk increases,
Values decrease and expected returns increase.
Which of the following is an example of a negative easement appurtenant?
a scenic easement used to restrict construction on adjacent parcels so as to preserve a valued view
In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage?
an unambiguous description of the property that is being pledged as collateral for the loan
Single-year-return measures and ratios can be categorized into three groups: profitability ratios, multipliers, and financial ratios. All of the following are considered financial ratios except
capitalization ratio
A new residential development will face competition from other new developments, other builders, and sales of existing homes. To determine if demand in that market segment will be sufficient to justify proceeding with the project, a developer would be most interested in estimating a
capture rate
Real estate brokers serve as intermediaries by bringing buyers and sellers together in the real estate market. For this service, brokers are paid what is commonly referred to as a
commission
Contracts for sale may contain sections that cause implementation of the contract to depend on the successful completion of some prior action such as the buyer's ability to obtain financing on specified terms. This type of contract is commonly referred to as a(n)
contract with contingencies
Considered the most common type of home loan, which of the following refers to any standard home loan that is not insured or guaranteed by an agency of the U.S. government?
conventional home loan
The yields on commercial mortgages have been approximately 2 percent higher, on average, than the yields on comparable maturity treasury securities over the past 15 years. Often considered the signature risk of commercial mortgage lending, this spread primarily represents
default risk
Which of the following types of loans is the most common instrument used to finance the acquisition of existing commercial property?
fixed-rate balloon mortgage loans
For smaller income-producing properties, appraisers may use the ratio of a property's selling price to its effective gross income. This is an example of a
gross income multiplier
A primary determinant of the feasibility of new construction is the relationship between the current level of property prices and the cost of new construction. We would expect the supply of properties to
increase if current property values are greater than the cost of construction.
Preferences of households can vary with time, prosperity, and context. The nuances in the preferences or needs of market subgroups are commonly referred to as
market segmentation
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender, i.e., the individual who receives the mortgage claim, is known as the
mortgagee
A contract for sale of real estate usually calls for the seller to provide evidence of title as a requisite to completing the sale. Today, the predominant medium through which a seller meets this requirement is by providing
only a title insurance commitment
certain costs associated with a property's upkeep as well as the manner in which it was financed can be depreciated and therefore have a beneficial impact on the tax paid by the investor in a particular year. Which of the following cash outflows is deductible for income tax purposes in the year in which they are made?
operating expenses
Suppose a homeowner is reluctant to refinance until he is reasonably sure that interest rates are not going to fall appreciably from where they currently are. In this case, the homeowner appears to be concerned about which of the following costs associated with refinancing?
opportunity cost
Traditional zoning regulations are criticized for often being too rigid in forcing uniform types of development. One proposed solution to this issue allows traditional zoning requirements to vary in exchange for an enhancement to the community, such as the construction of a park. This is more commonly referred to as a
planned unit development.
Which of these liens has the highest priority?
property tax lien
A comprehensive plan usually deals with which of the following elements?
public services, population, land use
Once possession and control are conveyed in a lease agreement, the owner must provide the tenant with uninterrupted use of the property without any interference from any entity that may threaten to impose upon the tenant's leasehold interest in the property. In other words, the tenant is entitled to which of the following?
quiet enjoyment
In contrast to maintenance and repair expenditures, which are operating expenses, the improvement decision generally involves a capital expenditure meant to increase the value of the structure. Which of the following classifications of improvements calls for the restoration of a property to satisfactory condition without changing the floor plan, form, or style of the structure?
rehabilitation
Most often used in the description of urban property, which of the following methods of land description contains information regarding the location of various easements and may even contain a list of restrictive covenants?
subdivision plat lot and block number
Restrictive covenants for a subdivision usually can be enforced by:
subdivision residents or lenders with mortgage loans in the subdivision
A market where tenants negotiate rent and other terms with property owners or their managers is referred to as a
user market