Real Estate Investment
True or false? Only the grantor/trustor of the trust may receive any income from the property while it's in trust.
True
True or false? Owners participate in the brokerage's profits and losses without taxation to the company.
True
True or false? Participants in a joint venture may hold title as joint tenants or tenants in common.
True
True or false? Sandy and John are married. They may purchase an apartment in New York in John's name only.
True
True or false? Spouses may transfer real and personal property into a trust and then name themselves as joint trustees with rights of survivorship.
True
True or false? State law requires you to keep all transaction documents, listing agreements, sales contracts, disclosures, etc., for a set period of time.
True
True or false? Subsequent financing, such as a refinance, on a property that already has a home acquisition loan opened against it may also qualify as home acquisition debt.
True
True or false? The debt used for acquisition financing (for tax purposes) must be used only for the purchase or improvement of the property; anything beyond these expenses isn't considered part of the acquisition financing for tax purposes.
True
True or false? The victim may seek restitution through an administrative proceeding.
True
True or false? When a person dies, estate assets outside of a trust must go through probate. Probate can take up to a year or more before the property is disbursed to the heirs.
True
What is used if the borrower doesn't repay the loan and the trustee is authorized to foreclose on the property and likely convey the property?
Trustee's deed
Let's say there is a monthly payment multiplier of 5.36822 per thousand. So the total principal should be divided by 1,000. When looking at a $200,000 property, you'll divide by 1,000 = 200. Multiply 200 by the factor to get the principal and interest payment per month. Plug in the numbers to see what the payment per month would be. $1,001.32 $1,073.64 $1,296.21
$1,073.64
Now that we know Aaron's annual debt service cost ($100,000), and we already knew his loan factor (0.09305), let's calculate his maximum loan. $1,234,659 $982,763 $1,074,691 $748,998
$1,074,691
We know that the original loan was for $17,000 with an interest rate of 9.5%. How much interest would be charged if the loan is paid off in 11 months? $1,545 $1,416 $1,480 $1,615
$1,480
Now that we know Aaron's maximum loan ($1,074,691) and his maximum equity ($500,000), what is his maximum price (rounded to the nearest dollar)? $799,788 $1,574,691 $354,822 $1,074,691
$1,574,691
Aaron wants to purchase an investment property. He knows the property has a NOI of $150,000 and he talked to his lender so he knows its debt coverage ratio is 1.5 and that it will give Aaron a loan for 30 years at 8.5%. Aaron wants to get a 10% return on his equity investment. The loan factor is 0.09305. What is the annual debt service cost? $10,000 $55,000 $85,000 $100,000
$100,000
Approximately how much would an estate have to be worth to be subject to estate tax? $1 million $5 million $9 million $11 million
$11 million
Based on current laws, a certain amount of money can be gifted tax-free every year from one individual to another. So it's possible that a married couple, each spouse having two generous parents, could receive up to _______ to secure a real estate transaction, without those parents having to pay a gift tax. $28,000 $18,000 $120,000 $52,000 $15,000
$120,000
Cheryl bought her home three years ago for $217,000. Assuming her home appreciated at the 3% rate typical of her current market, how much is her home worth now? $223,705.30 $230,416.46 $237,121.76 $247,380.00
$237,121.76
Rufus is once again before a judge for violating fair housing laws. The judge has found Rufus guilty and is imposing the maximum monetary penalty she can for a two-time offender who has committed the second offense within five years of the first, which is __________. $16,000 $37,500 $65,000 $100,000
$37,500
A property is generating $100,000 in income and has expenses of $25,000. The investor pays $3,000 toward mortgage principle each year and $32,000 toward interest, plus another $4,000 in income taxes. What is the before-tax cash flow? $45,000 $40,000 $36,000 $50,000
$40,000
What is the annual interest on a $600,000 loan on which the interest rate is 7%? $4,200 $7,000 $42,000 $60,000
$42,000
An appraiser is using the direct capitalization method to value an investment property, using the following figures: Net operating income = $60,000 Capitalization rate = 13% Using the formula of NOI ÷ R = V, what's the market value? $613,009 $461,538 $712,458 $78,000
$461,538
Mildred is the seller in an installment sale of a commercial property. If her installment obligations at the end of the tax year are ________________, she has the option to pay the capital gains tax in full at sales time or through installment sale deferment. $2 million or less $3 million or less $4 million or less $5 million or less
$5 million or less
Next, let's say we've already calculated Aaron's cash flow at $50,000. His desired rate of return is 10%. What's his maximum equity? $2,500 $50,000 $500,000 $25,000
$500,000
Similar properties in the area of Jimmy's $800,000 property are returning a rate of 9%. What could he anticipate his net annual income to be? $7.2 million $72,000 $88,500
$72,000
An investment property has expenses of $50,000. The investor pays $8,000 toward mortgage principal and $64,000 toward interest. He also pays about $28,000 in income taxes. How much is the before-tax cash flow if the income generated is $200,000? $150,000 $86,000 $78,000 $50,000
$78,000
A property has 100 rental units that rent for $750 per month. What's the potential annual gross income? $750,000 $900,000 $855,000
$900,000
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? 8x 10x 12x 14x
12x
Vacancy rates in existing brick-and-mortar stores are around ______. 12% 13% 16% 20%
13%
A property valued at $1 million is returning a net annual income of $85,000. What's its cap rate? 7% 7.5% 8% 8.5%
8.5%
Mycroft is a developer who is receiving federal subsidies for building low-income housing. What type of tax credit will he receive? 4% 6% 7% 9%
4%
Raymond is an investor who plans to do a 1031 tax-deferred exchange. How many days does he have from the day of closing on one property to identify and commit in writing to buying the next property? 15 days 30 days 45 days 60 days
45 days
In addition to the one major tenant, how many tenants does a neighborhood shopping center normally have? 2 to 8 3 to 10 4 to 15 5 to 20
5 to 20
Investor Randy is interested in purchasing acreage to subdivide and sell as luxury residential lots. He describes what he's looking for as "suburban with a rural feeling." Which tract of land might Randy be inclined to choose based on his description? A 60-acre parcel of rural farmland that's located 40 miles from the nearest major population center and has mature trees and wide open views of the horizon A 40-acre tract 12 miles from the nearest interstate with three creeks and rolling hills A 35-acre undeveloped plot that's adjacent to the highway and near industrial properties
A 40-acre tract 12 miles from the nearest interstate with three creeks and rolling hills
Which of the following would be considered a good investment in terms of location? A 40-acre tract two miles from the nearest highway and situated between the edge of a major urban center and a nearby suburb Nine acres of farmland that was once part of a larger tract, located in a rural area 20 miles from town A 100-acre parcel of rolling grassland 15 miles west of the nearest interstate and 12 miles south of a town with a population of 208
A 40-acre tract two miles from the nearest highway and situated between the edge of a major urban center and a nearby suburb
Who or what entity directs the activities of credit unions? A branch manager The NCUA chairperson The head of the FDIC A board of directors
A board of directors
In addition to condominiums and cooperatives, your investor clients may be interested in condops. What exactly is a condop? A building with both commercial and residential units A cooperative property that only houses commercial activities A condominium property that only houses commercial activities
A building with both commercial and residential units
What can an on-site property manager negotiate with a prospective tenant to have included in the lease agreement to ensure that the tenant is running a profitable business? Common area fees A cancellation clause Graduated rent increases A right-of-first-refusal clause
A cancellation clause
Who is a real estate licensee who manages properties for one or more property owners
Individual property manager
Why are investors concerned about the rate of return for their investment? Investors want to measure of the risk factor of their investment. A low rate of return is a guarantee that an investment will be profitable. A difference in interest rate, or rate of return on funds, can have a huge impact on the success of the investment. A high rate of return means that the future value of the money invested will decrease over time.
A difference in interest rate, or rate of return on funds, can have a huge impact on the success of the investment.
Judging by the description of the Westwood neighborhood on the previous page, how would you describe the its economy? Meager with few amenities or facilities nearby to accommodate increased use A slightly overgrown older community with lots to offer an aging citizenry A good mix of both recreational and professional accommodations Run down and covered with dilapidated abandoned buildings
A good mix of both recreational and professional accommodations
What's a payment cap? A limit to how much interest can be changed during an adjustment period A limit to how much monthly payments can increase during an adjustment period A limit to how much monthly payments can increase during any given year
A limit to how much monthly payments can increase during any given year
What is assessed value? A figure used to calculate the amount of money needed for a down payment The amount applied by local government to individual parcels of real estate that will benefit from road or other infrastructure improvements A percentage of market value; also the amount of property value to which the tax rate is applied The probable sales price if the property were listed today and a willing seller and buyer were involved in the transfer of ownership
A percentage of market value; also the amount of property value to which the tax rate is applied
Angus is willing to pay the owner a bonus to get a particular location in the neighborhood shopping center for his business. What location does Angus want for his store? A spot in the center The end closest to the main exit The end closest to the main entrance The building next to the major tenant
A spot in the center
What is used to verify, clarify, correct, or create an accurate legal description? A survey A satellite image An address A home inspection
A survey
Which of the following is a true statement about tax credits and tax deductions? They are the same thing. A tax deduction is preferable. A tax credit is preferable. Tax deductions are better than tax credits for those in higher tax brackets.
A tax credit is preferable.
Which type of alternative financing is also known as an all-inclusive loan? A joint venture A wrap-around loan A sale-leaseback An assumption loan
A wrap-around loan
Henry dies, and his property is not held in a trust. Thus, his estate will go through probate to ensure his property is distributed to his heirs in accordance with his will. The probate process often takes ______ before the property is distributed to the heirs of the deceased. A few days A year or more A few hours 20 years or more
A year or more
Which of the following is an advantage to investing in a single-family home rental? Vacancies Economy of scale Landlord responsibilities and tenant relationships Ability to depreciate an appreciating asset
Ability to depreciate an appreciating asset
Once delivery is made, what is presumed?
Acceptance
In this section, the seller either accepts the offer or comes back with a counter-offer. Attorney Approval Waiver Addenda Signatures of Buyer/Seller Notices Acceptance of Offer by Seller
Acceptance of Offer by Seller
What is an oath of a subscribing witness, such as a notary public?
Acknowledgment
What is the process of combining separate adjacent parcels into one piece?
Assemblage
The element of a deed that signifies the grantor's intention to transfer title to the grantee is the ______. Transference clause Evidence of title Consideration Act of conveyance
Act of conveyance
What kind of investment is Wholesaling? Active Passive
Active
What kind of investment is a Fix and Flip? Active Passive
Active
What is the physical removal of the tenant, accomplished by legal process?
Actual eviction
This section identifies any items that are being made part of the contract agreement. Attorney Approval Waiver Addenda Signatures of Buyer/Seller Notices Acceptance of Offer by Seller
Addenda
Which of the following acts requires office buildings to be accessible to disabled individuals, such as those who use wheelchairs? Fair Housing Act Americans with Disabilities Act Housing and Economic Recovery Act Real Estate Settlement Procedures Act
Americans with Disabilities Act
Risk that an investment will not realize the required return on investor capital.
Business risk
What's the definition of appreciation? A decrease in property value An increase in property value A refinancing strategy Paying off a loan over time
An increase in property value
What is a corporation? A business or firm owned and run by two or more parties and created by contract between the parties A business structure that has no general partners and whose owners have limited personal liability for business debts. Simplest business form in which one person owns the business and is personally responsible for its debts. An independent legal entity owned by shareholders that can enter into contracts, incur taxes, and pay taxes apart from its owners.
An independent legal entity owned by shareholders that can enter into contracts, incur taxes, and pay taxes apart from its owners.
Which of the following best describes a real estate syndicate? An organization with many investors who jointly participate in a real estate investment A business or firm owned and run by two or more parties and created by contract between the parties A business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation A legal entity owned by shareholders who can enter into contracts, incur debts, and pay taxes apart from the owners
An organization with many investors who jointly participate in a real estate investment
In order to arrive at annual debt service cost, divide ______ by the debt coverage ratio. Annual NOI Maximum loan Loan factor Maximum equity
Annual NOI
Which of the following formulas is used for determining ROI? Annual cash flow ÷ initial cash investment Annual cash flow × initial cash investment Annual cash flow - initial cash investment Annual cash flow + initial cash investment
Annual cash flow ÷ initial cash investment
Fatima purchases an apartment building near the site of a new industrial park. Which principle of value is this? Anticipation Substitution
Anticipation
What is the principle of value that says that a property's value is the total sum anticipated future benefits in today's dollars?
Anticipation
Which of the following must developers register with the Consumer Financial Protection Bureau? Any subdivisions that have 20 or more nonexempt lots Any subdivisions that have 40 or more nonexempt lots Any subdivisions that have 80 or more nonexempt lots Any subdivisions that have 100 or more nonexempt lots
Any subdivisions that have 100 or more nonexempt lots
Which of the following is a current trend in condominium investments? Changing condos into cooperatives Charging condo owners monthly association fees Building fewer condominiums in affluent areas Applying the condo format to other types of properties
Applying the condo format to other types of properties
What does a land banker bank on? Market dynamics Appreciation Employment rates Buyer preferences
Appreciation
Which of the following is a characteristic of subprime loans prior to the Great Recession? Approved for people with low incomes and poor credit histories An interest rate below prime rate Often included adjustable rate mortgages with low initial interest rates Positively impacted by rising interest rates Loan defaults
Approved for people with low incomes and poor credit histories Often included adjustable rate mortgages with low initial interest rates Loan defaults
What is the substitution of tenants, putting the responsibility for the lease contract in the new tenant's hands (although it doesn't fully relieve the former tenant from liability should the new tenant fail to pay); requires landlord's written permission?
Assignment
An LOA of 10% means that assessments are _________. At 10% of value At a 10-mill rate At 10 times value At full assessment
At 10% of value
The seller can use this section to indicate whether or not an attorney needs to approve the agreement. Attorney Approval Waiver Addenda Signatures of Buyer/Seller Notices Acceptance of Offer by Seller
Attorney Approval Waiver
Corey didn't understand how the commercial building he rented space in could be going through foreclosure. The building had been at full capacity the entire time he had his lease. At least the new owner was well known for being a great property manager, which helped Corey sleep well at night, since he must remain a tenant to the new owner. Which lease clause applies to this situation? Use Subordination Nondisturbance Attornment Sublease
Attornment
Barriers to completing a land development project may include a tough regulatory environment, the community's attitude toward development, the permitting process, and the _________. Quality of the soil Availability of utilities Transportation system Proximity of the neighboring town
Availability of utilities
What may come with or without covenants of warranty?
Bargain and sale deed
Any profits real estate investors earn are only realized once they sell the investment. These profits are called capital gains, and they're taxable. To calculate the capital gain or loss on an investment, an investor must first calculate the adjusted basis for the property. Which of the following formulas is used to calculate the adjusted basis? Basis + improvement costs made during ownership - accrued depreciation Basis + improvement costs made during ownership Basis - improvement costs made during ownership Basis ÷ improvement costs made during ownership + accrued depreciation
Basis + improvement costs made during ownership - accrued depreciation
Investor Bob owns a commercial property. He receives $100,000 in income from the property but is only taxed on $75,000. What might explain this? Bob may have an income shelter. Some of Bob's income is portfolio income and not taxable. Bob's accountant miscalculated his taxes. Bob took a capital gain exclusion.
Bob may have an income shelter.
When it comes to real estate investments, "commercial" is _______. An investment strategy A property type Both an investment strategy and a property type Neither an investment strategy nor a property type
Both an investment strategy and a property type
Let's say there is a feud between Jack and Joe. With no reconciliation in sight, the brothers decide they can't be tenants together. Jerry brings his two feuding brothers together to discuss their options. Which two of these options might solve the issue? Bring legal action to have the property partitioned. Apply for joint tenancy.
Bring legal action to have the property partitioned.
Which items below fall under the jurisdiction of local authorities? Select all that apply. Budgeting Building codes Population size control Site plan review Subdivision developments Zoning
Budgeting Building codes Site plan review Subdivision developments Zoning
Who usually manages a single, large property, and may work as the property manager's or property's owner's employee?
Building manager
Which of the following is one reason for the popularity of commercial leasing? There can be many obligations and hidden costs in a lease, which can be onerous for tenants if they aren't aware of them. Business owners can often make more money on their business than they can on the appreciation of the building where they conduct that business. Rental rates can include annual escalations based on market conditions. The landlord holds the right of reversion at lease end. Tenants may be required to move at the end of the lease.
Business owners can often make more money on their business than they can on the appreciation of the building where they conduct that business.
With a promotional land sale agreement, who's at risk if the underlying mortgage falls into default and foreclosure? Buyer Seller Lender Investor
Buyer
How do investors determine if the time is right to either purchase or sell? By looking at interest rates By studying many aspects of the market By calculating the potential profit margin By gauging the interest of other investors in the same property
By studying many aspects of the market
In terms of investment, liquidity means an investment __________. Can easily be converted to cash Is a cash cow Will experience ebbs and flows in value Is difficult to sell
Can easily be converted to cash
What would an investor get after subtracting the adjusted basis from an investment property's sales price? Depreciation Operating expenses Capital gain or capital loss Appreciation of depreciation
Capital gain or capital loss
Either the ability to secure financing at an affordable rate, or the loss of the principal amount invested.
Capital risk
This section outlines the requirements for the seller to provide proof that the property is habitable. Zoning/Bldg. Code Compliance Condition of Property Certificate of Occupancy Services Risk of Loss
Certificate of Occupancy
Although conversion may seem like a great idea, investors should take certain steps prior to taking any action. Which of the following steps is NOT required? Check with the SEC to find out if the conversion will be allowed. Check with the local government to find out if the conversion will be allowed. Determine whether the costs to convert will pay for themselves at sales time. Conduct a feasibility study to determine whether the market will support the conversion.
Check with the SEC to find out if the conversion will be allowed.
According to the National Association of REALTORS® , the majority of foreign investment in U.S. real estate has so far come from ____________. Canadians Chinese Japanese Europeans
Chinese
Which class of office building is aimed at tenants requiring functional space at below-average rents for the area? Beyond class category Class B Class C Class A
Class C
What is a corporation in which the company's stockholders, directors, and officers are typically the same people?
Close Corporation
Property owned in common and in equal shares by both spouses
Community property
What is one who has the capacity (legal and mental) to enter into a contract?
Competent party
Which of the following statements about component depreciation is true? 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. Both tangible personal property and real property qualify for component depreciation.
Components that can be separated out as tangible personal property qualify for component depreciation.
What is evidence that something of value (usually money) is being exchanged?
Consideration
What is the situation in which the tenant is prohibited from quiet enjoyment of the premises, and vacates (in such cases, the tenant is evicted for all practical purposes because enjoyment of the premises is not available)?
Constructive eviction
When representing buyers, make sure they can extricate themselves from the transaction with their earnest money protected in the event that it's impossible to continue with the transaction. Buyers ensure this through the appropriate use of ___________. A voided check Contingencies Deadlines A unilateral contract
Contingencies
Anya, an owner of an older rental property, is ready to cash out. How would she realize the most profit? Ask her investment friends to buy her out Convert the rental property to condominium ownership Upgrade the property, and then turn it into a cooperative Submit a request to the U.S. Department of the Interior to designate the property as historic
Convert the rental property to condominium ownership
Mike and Ike set up a real estate company. Mike, Ike, and Spike each own a portion of the stock. Mike & Ike Realty is a legal entity of its own. Mike is involved in a ______. Limited liability company Corporation Partnership Sole proprietorship
Corporation
What is an independent legal entity defined by law and owned by shareholders?
Corporation
What do cooperative owners receive to demonstrate ownership? Corporation shares and a proprietary lease Mortgage Deed House laws
Corporation shares and a proprietary lease
What must happen to effect a transfer of title by deed?
Delivery and Acceptance
What are deeds executed to a court order?
Court-ordered deeds
What is an agreement or promise made between the parties?
Covenant
Which of these terms refers to any type of promise or agreement between two parties to a lease contract, such as a landlord and a tenant? Covenant Pinky promise Sacred Conveyance
Covenant
What covenant states that the grantor assures the grantee that there are no encumbrances against the title other than those set forth in public record or the deed itself?
Covenant against encumbrances
What covenant states that the grantor promises to provide any additional assurances that the grantee reasonably requires and will perform any acts necessary to correct any defects in the title being conveyed?
Covenant for further assurances
What covenant states that the grantor assures the grantee that the grantee won't be disturbed in the use and enjoyment of the property because of a title defect passed on by the grantor?
Covenant of quiet enjoyment
What covenant states that the grantor has the capacity and right to convey title?
Covenant of right to convey
What covenant states that the grantor owns the title specified in the deed?
Covenant of seisin
What covenant states that the grantor will warrant and defend the title to the grantee against the lawful claims of others. This is the best warranty—and most important—for protecting the grantee, as it contains no limits as to the possible claimants protected against?
Covenant of warranty
Craig's loan is secured by a mortgage. Who holds legal title when this security instrument is used? Craig's lender Craig The seller A third-party trustee
Craig
What may be made directly to the grantee or to an agent of the grantee, such as an attorney, real estate broker, or the title company issuing the title?
Delivery
Which of the following is commercial banks' main supply of funds to lend? Commercial account fees Demand accounts Federal funds Loan fees and points
Demand accounts
For income-producing residential property, which straight-line method would an investor use to calculate the property's annual depreciation allowance? Depreciable basis ÷ 25 years Depreciable basis ÷ 27.5 years Depreciable basis ÷ 39 years Depreciable basis ÷ 40 years
Depreciable basis ÷ 27.5 years
Which of the following investment methods is a "non-discounted" approach to determine an investment's value? Direct capitalization Operating leverage Yield capitalization Financial leverage
Direct capitalization
What method of investment analysis would you use if you wanted to determine an investment's value based on its expected future yield? Non-discounted investment analysis (e.g., direct capitalization) Discounted investment analysis (e.g., yield capitalization) Operating leverage Financial leverage
Discounted investment analysis (e.g., yield capitalization)
This trust may be altered or discontinued by any of the parties to the trust. Irrevocable Discretionary
Discretionary
What is a trust that may be altered or discontinued by any of the parties to the trust?
Discretionary trust
How do you calculate maximum loan? Divide annual NOI by debt coverage ratio Divide annual debt service cost by loan factor Subtract annual debt service cost from annual NOI Divide cash flow by desired rate of return
Divide annual debt service cost by loan factor
How do you calculate maximum equity? Divide annual debt service cost by loan factor Divide cash flow by desired rate of return Divide annual NOI by debt coverage ratio Subtract annual debt service cost from annual NOI
Divide cash flow by desired rate of return
Which one of these clauses in a deed meets the requirements for act of conveyance? For good and valuable consideration Does hereby bargain, grant, deed, and convey Free and clear with Warranty Covenants
Does hereby bargain, grant, deed, and convey
When does impossibility of performance of a contract occur? Both parties fully meet the terms of the contract. One or both parties have completed only a portion of the terms agreed to in the contract. One party didn't meet the terms of the contract in the specified time frame and is being required to do exactly what was agreed to in the contract. Due to circumstances beyond their control, the parties can't legally or practically do what they've agreed to do.
Due to circumstances beyond their control, the parties can't legally or practically do what they've agreed to do.
Which of the following is a requirement for a trust to qualify as a real estate investment trust? During the last half of any year, no more than 50% of shares were owned by five or fewer people Taxable as a non-profit organization Managed by a chief operating officer May be an insurance company or a financial institution
During the last half of any year, no more than 50% of shares were owned by five or fewer people
A type of business risk that is uninsurable because it's determined by economic, tax, and market changes.
Dynamic risk
Which of the following statements about state fair housing laws is true? Although states are encouraged to implement their own fair housing laws, they aren't required to do so. Generally, state fair housing regulations tend to be narrower in scope than the federal laws. Each state is responsible for establishing and implementing its own fair-housing regulations. State fair housing laws aren't required to contain the same seven protected classes as the federal law.
Each state is responsible for establishing and implementing its own fair-housing regulations.
What is the trust benefit that states that a beneficiary interest in the land can be conveyed without having to go through the formality of a deed?
Ease of conveyance
In investments, each type of depreciation is defined by a particular event. Which of the following best describes a depreciation type and an event it's tied to? Economic depreciation and cost recovery Economic depreciation and physical deterioration Tax depreciation and physical deterioration Operating depreciation and taxing authority
Economic depreciation and physical deterioration
What occurs when losses from vacancies and credit losses (for example, when tenants fail to pay their rent and it becomes uncollectible) are deducted from potential gross income?
Effective gross income
Enod formed a sole proprietorship under the name Enod Randolph, DBA Purveyor of Property. He then purchased a property and used it as an illegal dump site. Which of the following is a true statement about this situation? The legal entity he registered the business under would have sole liability. Enod would bear full responsibility for the loss.
Enod would bear full responsibility for the loss.
True or false? Madge and Steve are married. Steve may purchase a home in Arizona only in Steve's name, and it will belong to Steve only.
False
Office party notifications Vital record General record Ephemeral record
Ephemeral record
What indicates there's legal proof (the accepted offer) that the property is meant to be a person's someday—closing day, that is?
Equitable title
Your clients, the Nguyens, have signed a contract for deed to purchase a property. What rights do the Nguyens receive? Equitable and justifiable title Equitable title and possession of the property Equitable and legal title Equitable and legal title and right of possession
Equitable title and possession of the property
If you have a REIT that receives most of its revenue from property rental, what type of REIT do you have? REMT Equity Leasehold Tax-deferred
Equity
What kind of trust purchases properties?
Equity REIT
Essential or not essential? Includes the grantee's address
Essential
Essential or not essential? Includes the grantor's address
Essential
Essential or not essential? Names a grantee who is living
Essential
Essential or not essential? The deed must be delivered to the grantee or an agent of the grantee.
Essential
What is a type of possession in which a tenant stays after the right to possess has terminated?
Estate at sufferance
What is a type of leasehold estate in which the duration of the lease is unknown at the time it is created?
Estate at will
What may be terminated at will by either party?
Estate at will
What is a fixed termination type of lease that may be for a day, week, month, year, several years, or any definite period of time; when the specified date occurs, the lease terminates automatically?
Estate for years
What ownership type indicates one person owns the property, and all other interests are severed?
Estate in severalty
Which lease clause verifies facts that are already in writing? Repeat Remainder Estoppel Attornment
Estoppel
Jeannie is an investor interested in purchasing a warehouse. Two properties on opposite ends of town are fairly comparable in terms of price and features. Which of the following is a true statement? Jeannie doesn't need to be concerned about property tax rates. Even though the properties are similar in price and features, the property taxes for the properties could vary a lot. Jeannie won't be able to deduct the property expense on an investment property. Since the properties are both similar in price and features, property taxes for both should be roughly the same.
Even though the properties are similar in price and features, the property taxes for the properties could vary a lot.
This is the part of Eileen's job that she enjoys the least: telling tenants they have to leave because they've failed to comply with the terms of their lease. Which commercial property manager duty is Eileen having to perform? Leasing the property Collecting rent Evicting tenants Overseeing maintenance
Evicting tenants
Ricky Nubbins is three months behind in his rent and has received several reminders from the landlord that the rent is past due. Unbeknownst to Ricky, the landlord has begun working through proper channels to legally end Ricky's lease before the contract end date. The landlord is terminating his lease through ______. Expiration Mutual agreement Eviction Actual eviction
Eviction
What is land that can be excised (separated) from land and sold separately without harming the ability to develop the original parcel?
Excess land
True or false? The role of the trustor and trustee can't be performed by the same person.
False
True or false? The victim may seek redress in federal court within three years of the alleged violation.
False
True or false? There are no costs associated with maintaining a trust.
False
True or false? They must be established for at least a 10-year period.
False
True or false? To participate in a joint venture, parties form a corporation.
False
What is a type of bargain and sale deed with a covenant?
Executor's deed
Enrico is the owner of a duplex. He lives in one of the units and rents out the other. He handles the rental himself. Exempt Not Exempt
Exempt
True or false? A holdover tenant has an estate at will.
False
True or false? A leasehold estate is the contract that allows a tenant to live on the property.
False
True or false? All state laws require licensees to keep records for one year.
False
True or false? Both living and testamentary trusts avoid probate.
False
True or false? Corporations can't receive, hold, and transfer title to real property, nor can they give or hold a mortgage to secure a debt owed to the corporation.
False
True or false? Corporations may only be dissolved voluntarily.
False
True or false? For married couples filing separately, the maximum amount of debt that can be treated as acquisition debt for tax purposes on a main home plus a second home is $1 million.
False
True or false? Foreign buyers purchased $153 billion in property in the U.S.
False
True or false? Gene has owned his home in New Mexico for six years. Four years ago he married Jade. Because New Mexico is a community property state, the house belongs to both Jade and Gene.
False
True or false? It's a corporate entity.
False
True or false? Land trusts must be created at the time the real estate is purchased, not after it's been acquired.
False
True or false? With a land trust, the person who establishes the trust (the trustor) can't also be the beneficiary.
False
Conventional loans may be conforming or nonconforming, depending on whether they meet ______ guidelines. FDIC Fannie Mae and Freddie Mac Department of the Treasury State banking law
Fannie Mae and Freddie Mac
During this phase, the developer is trying to determine two things: "Can I build it, and if I build it, will they come?"
Feasibility study
Taxes, construction codes, and development regulations are all ways that ______ can influence a real estate investment and potentially increase or decrease the investment's value. A real estate brokerage Federal and local government Society The environment
Federal and local government
What is ownership that is for an undetermined length of time—"free" of an end date?
Fee simple ownership
During this step, the developer evaluates the potential rate of return on the investment, building costs, tax considerations, and available financing options to reduce costs.
Financial analysis
Risk that is directly related to leverage—the higher the leverage, the higher the risk.
Financial risk
Deidra wants to invest in a super-regional shopping center. What size trade area can she plan to service? Five to 10 miles Five to 25 miles Five to 35 miles Five to 45 miles
Five to 25 miles
What costs are those that do not change based on the amount of sales (e.g., mortgage, insurance, property taxes)?
Fixed costs
In which of the following payment plans are the borrower's payments lower for a few years and then higher for the remainder of the loan period? Flexible payment plan Fully amortized payment plan Interest-only payment plan Partially amortized payment plan
Flexible payment plan
Stew is buying Freddie's property. What must occur for the transfer of title to take place? Freddie must deliver the deed to Stew. Stew must sign the deed. Stew must convey the deed. Freddie and Stew must sign the deed.
Freddie must deliver the deed to Stew.
What is a tenant who refuses to leave after the expiration of a lease?
Holdover tenant
What contains the strongest and broadest guarantee of all the deed types, and the greatest protection of the grantee's ownership interest?
Full Covenant and Warranty Deed
Which type of deed is sometimes called a general warranty deed and contains all six covenants? Full covenant and warranty deed Quitclaim deed Bargain and sale deed Referee's deed
Full covenant and warranty deed
What type of gross lease includes the base rent, the nets, utilities and janitorial expenses in one price per square foot lease rate, which allows the base rent to remain stable over time?
Full service lease
Participates in the management of the partnership General Partner Limited Partner
General Partner
Personally liable (both jointly and separately) if partnership debts exceed partnership assets General Partner Limited Partner
General Partner
What is the most common form of corporation? Elected officers govern the company's affairs, while the designated licensed broker is directly responsible for the real estate transactions.
General or "C" Corporation
What conveys personal liability to partnership debts that exceed the partnership assets? General partners are jointly and separately liable for these debts.
General partnerships
Bills and invoices Vital record General record Ephemeral record
General record
Prospect and referral correspondence Vital record General record Ephemeral record
General recore
Non-discounted approaches to value such as direct capitalization use capitalization rates to calculate value. Which of the following statements best describes the relationship between capitalization rate and value? There's no relationship between capitalization rate and value. Generally, there's an inverse relationship between capitalization rate and value. For example, investments with low cap rates mean lower risk and higher value. Generally, there's is a direct relationship between capitalization rate and value. For example, investments with low cap rates mean lower risk and lower value. There's a random relationship between capitalization rate and value. For example, sometimes investments with low rates of return yield higher value and sometimes they do not.
Generally, there's an inverse relationship between capitalization rate and value. For example, investments with low cap rates mean lower risk and higher value.
What is often a gift from one family member to another?
Good consideration
Who is the person receiving title?
Grantee
Who is the person conveying the title?
Grantor
Who may convey several types of deeds, depending on the form in which title is being conveyed?
Grantor
What kind of trust is a method of conveying or granting title to an income-producing property to another, generally a family member, via a trust?
Grantor Retained Income Trusts (GRITs)
Adjustable rate mortgage interest rates are often linked with a recognized ______. Bank Index Public figure Government entity
Index
What is an interesting method of conveying or granting title to an income-producing property to another, generally a family member, via a trust?
Grantor-retained income trust (GRIT)
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? Triple net Gross Net Percentage
Gross
What is the income received before those expenses are deducted?
Gross income
What is the relationship of a property's sale price to its gross income for properties with more than five units?
Gross income multiplier
What is the relationship of a property's sale price to its gross income for properties up to four units?
Gross rent multiplier
What is a description of the act of conveyance?
Habendum Clause
Hannibal's three-year commercial lease agreement will be ending soon. Hannibal's landlord has consented to an automatic lease renewal when the lease term is up. Based on this scenario and standard lease provisions for automatic renewals in commercial lease agreements, which of these statements is true? Hannibal's lease agreement will be automatically renewed for three years. Hannibal will have to negotiate a new rent rate once his original lease term is up. After three months, Hannibal and his landlord will have to enter into a new lease agreement. Hannibal's lease agreement will be renewed on a month-to-month basis.
Hannibal's lease agreement will be renewed on a month-to-month basis.
Phil Barksdale is an investor. He frequently purchases foreclosed properties at auction, rehabs them, and sells them for a profit. Frequently, because of the nature of his acquisitions, Phil receives the properties with a referee's deed—a type of bargain and sale deed without a covenant. Because lenders won't lend on this type of property (because it gives the buyer no protection from title claims), Phil pays cash. Why does Phil receive a referee's deed? He inherited the property from his uncle. He was the highest bidder on a foreclosed property. The grantor released his interest in the property to Phil. Phil was awarded the property in a divorce settlement.
He was the highest bidder on a foreclosed property.
An increase in sales will substantially affect profits for companies with what sort of leverage? Low operating leverage High operating leverage Financial leverage Combined leverage
High operating leverage
High level of fixed costs relative to variable costs
High operating leverage
When a company has a high level of fixed costs relative to its variable costs, it has ___________________. Financial leverage Combined leverage Low operating leverage High operating leverage
High operating leverage
What is the principle of value that describes a property's most profitable use that's both legal (conforms to zoning) and economically feasible?
Highest and best use
How can an investor determine whether asbestos is present in a building they plan to purchase? Handle the questionable material to see if it's friable. Hire an experienced person or company to do asbestos testing. Buy an asbestos testing kit. Remove the material and send it to an approved lab for testing.
Hire an experienced person or company to do asbestos testing.
What kind of financing is based on the available equity in the borrower's home?
Home equity loan
Which of these is an example of a junior finance instruments? Auto loan Home equity loan Income property loan First mortgage
Home equity loan
What kind of financing is used for improvements, such as updates or additions, and are another form of mortgage-related funding that comes from commercial banks?
Home improvement loan
What kind of trust invests in real estate debt and purchases properties?
Hybrid REIT
When is an investor required to pay the alternative minimum tax? If the investor hasn't had to pay income tax for two years in a row If the investor is being audited for income tax evasion and is found guilty If the tax calculated on IRS Form 6251 is higher than that calculated on the investor's regular tax return If the investor owns more than two properties that have shown a profit over the past year and the profit exceeds $100,000
If the tax calculated on IRS Form 6251 is higher than that calculated on the investor's regular tax return
What occurs when the property is destroyed or made the subject of eminent domain?
Impossibility of completion
Where are underground storage tanks primarily found? In newer homes In newer industrial sites In parks and golf courses In older homes and former industrial sites
In older homes and former industrial sites
Sonia, a property manager, wants to improve her tenant management skills. Which of the following should she do? Impose a fine of $5 every time a tenant needs to talk to her. Include rules in her written lease contracts. Start eviction processes on the three tenants who cause the most problems. Waive that month's late fees for all tenants.
Include rules in her written lease contracts.
Capitalization rate is the return on investment other investors are receiving on similar properties in a given marketplace. Which three of the following are factors in the capitalization formula? Income Value Rate Interest
Income Value Rate
In addition to analyzing local economic data and evaluating community acceptance, the community and neighborhood market analysis should take into consideration the ________________ and whether it's sufficient enough to support the proposed development. Education Infrastructure Food production Combined wealth of the community
Infrastructure
The Stewarts have lived in their home along the Eastern Seaboard for 30 years and don't have any intention of selling. They're responsible homeowners, so every now and then they make sure to determine the _______ of their home in case it's destroyed and must be replaced. Going-concern value Insured value Salvage value Value in use
Insured value
What is the time period when the property is under development?
Integration
In the formula for the future value of money, what does the "i" represent? FV = PV (1 + i) N Interval of time Interest Investment Inflation
Interest
Which of the following definitions describes compound 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 reinvested into an account that then earns interest.
Interest that's reinvested into an account that then earns interest.
What kind of financing is used largely for construction loans?
Interim financing
What type of lease provides for rental of floor space for wide open loft type spaces?
Loft lease
What exemption to the "every two years" rule concerning the capital gains exclusion allows a seller to claim a partial exclusion when the seller is forced to sell early? Necessary exclusion Partial conversion Involuntary conversion Capital gains exclusion
Involuntary conversion
Once established, this trust can't be altered until the goals of the trust have been met. Irrevocable Discretionary
Irrevocable
What is a trust that can't be changed once established until the purpose of the trust is achieved?
Irrevocable trust
Kirby died. If his wife survived, and he lived in a community property state, what happens to the property he owned? It's distributed to the community. It passes according to the terms of his will. It passes to his children. It passes to his wife.
It passes to his wife.
What does a non-compete clause in a neighborhood shopping center lease do? It prevents a property manager working for another neighborhood shopping center owner. It prevents tenants within the same neighborhood shopping center from sharing their rent rates with another. It prevents a tenant from opening a store in another neighborhood shopping center within a 10-mile area. It prevents the property manager or landlord from leasing to a business that competes with the current tenant.
It prevents the property manager or landlord from leasing to a business that competes with the current tenant.
Acknowledgment is a key element to a deed. Why should a grantee always receive an acknowledged deed? It provides the grantee title protection against other purchasers of the same property from the grantor. It provides the grantor title protection against other purchasers of the same property from the grantee. It constitutes the transfer of the title between grantor and grantee.
It provides the grantee title protection against other purchasers of the same property from the grantor.
What happens at the end of the term established for a grantor retained income trust? It passes through probate. It vests to the beneficiary. It's automatically extended for period not to exceed 10 years. It's fully taxable.
It vests to the beneficiary.
What is it about strip stores that makes them appealing to small investors? The buildings are located away from busy thoroughfares. The building owners don't have to cater to the needs of a variety of tenants. It's easier to secure a mortgage loan for a small commercial project. Commercial tenants tend to prefer short-term leases, which means an opportunity to increase rents more often.
It's easier to secure a mortgage loan for a small commercial project.
Let's look at what landlords can and can't do after an eviction. Provided the landlord has the right to evict, which of the following statements is NOT true? The unit returns to the possession of the landlord, who may then lease it again. It's illegal for landlords to place a lien on the tenant's belongings as security for payment of rent owed. The landlord may enter the unit and take possession of it, or take action to regain possession. If a court judgment is awarded based on a tenant's non-payment of rent, the landlord may be granted the right to seize any of the tenant's personal property on the premises in order to compel the tenant to pay rent.
It's illegal for landlords to place a lien on the tenant's belongings as security for payment of rent owed.
Each of the responsible parties is personally responsible for the total damages.
Joint and several liability
What ownership type indicates equal ownership with undivided rights of possession and requires unity of four separate conditions: All owners must have the same type of interest in the property, all must receive their title at the same time from the same source, all must have the same percentage of ownership, and all must have the right to undivided possession in the property. Joint tenancy includes the right of survivorship, meaning when one joint tenant dies, that person's share automatically goes to the other surviving joint tenant(s)?
Joint tenancy
Fairwell Lending must seek the court's permission to foreclose on a property used as collateral for a loan that is in default. What type of foreclosure process is likely being used? Judicial foreclosure Non-judicial foreclosure Deed in lieu of foreclosure Arbitration
Judicial foreclosure
Mitchell is interested in forming an organization that will combine the pass-through taxation benefits of a partnership with the minimal liability of a corporation. What organization should he consider? S-corp LLC Partnership Joint venture
LLC
What kind of trust is similar to other trusts except that itʼs formed specifically to hold real estate—real property is the only asset within the trust?
Land trust
What means that all contacts must be written for a legal purpose?
Lawful objective
What is a contract that transfers possession for consideration?
Lease
What term indicates that fraud occurs when misrepresentation of a material fact is intentional?
Misrepresentation
Which of the following is an investment strategy investors can employ during extended holding periods to protect their profit potential? Give the land to a family member. Land gifts are sheltered from tax burdens. Lease the land to a tenant farmer on a profit-sharing basis. Sell low. It's better to get a smaller profit than to end up broke. There aren't any options, which is why the investor needs to be prepared for any eventuality during the holding period.
Lease the land to a tenant farmer on a profit-sharing basis.
What defines the legal relationship between the parties who sign the lease. It grants possession, but not title, to the tenant, and is for a limited period of time?
Leasehold estate
What is the legal relationship between the parties who sign the lease; grants possession, but not title, to the tenant, and is for a limited period of time?
Leasehold estate
When they don't want to sell just yet, investors in single lots can sometimes gain value by _______________. Subdividing Leasing Installing a built-in swimming pool Holding on to the investment for at least 10 years
Leasing
What is used in order to describe what the parties are agreeing is being conveyed?
Legal Description
What indicates who the owner of real property and all of the rights that go along with that ownership is?
Legal title
What is a tenant?
Lessee
What is a landlord
Lessor
This section specifies the deadline for the seller's response to the buyer's offer. Responsibilities of Persons Real Estate Broker clause Life of Offer Entire Contract Deposit to Listing Broker
Life of Offer
What's purpose is to dictate the ways in which a property may or may not be used?
Limitations and Subject to Clause
Silent partner General Partner Limited Partner
Limited Partner
What always has one or more general partners who assume liability? The other limited partners are limited in their liability and authority by the amount of money theyʼve contributed.
Limited partnerships
The second little investor wanted to buy a second piece of property, but was unable to. In his particular situation, his land was not ________. Leveraged Liquid Risky
Liquid
What is a trust that is created during a personʼs lifetime, and is often used when minor children are involved?
Living trust
What is created during a personʼs lifetime, and is often used when minor children are involved?
Living trust
Which organization is responsible for reviewing site plans for new developments? City council Department of urban planning Mayor's office Local planning board
Local planning board
Which of the following resources would you utilize to find property listings to use for comparable values and rental surveys? Globe Street IREM LoopNet
LoopNet
Which of the following single lot properties have a greater potential for being rezoned? Lots located near town lines Lots located near railroad tracks Lots located near open space Lots located in established neighborhoods
Lots located near town lines
In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market? Low interest rates and low property values High interest rates and low property values Low interest rates and high property values High interest rates and high property values
Low interest rates and high property values
Low level of fixed costs relative to variable costs
Low operating leverage
Mrs. Hudson hasn't heard from her tenant Madeline for a while. Madeline didn't pay rent for the last two months, and hasn't returned any phone calls. After delivering a written notice, Mrs. Hudson enters Madeline's apartment and finds it empty. Apparently, Madeline moved out, even though the lease doesn't end for another two months. Which of the following is true about this scenario? Madeline is legally obligated to pay rent, even though she moved out. Mrs. Hudson can't legally charge rent for the months after Madeline moved out.
Madeline is legally obligated to pay rent, even though she moved out.
What kind of financing can be obtained for mobile/manufactured home purchases?
Manufactured home loan
Why is it important for tenants and owner/landlords to review the insurance section of a commercial lease? Sometimes insurance is not required, so the section should be removed from the lease. The tenant and owner/landlord need to agree on which insurance agent to use. 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. The tenant needs to witness that the landlord has specified in the lease the amounts of insurance the owner is carrying on the building and its contents.
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.
During this step, the developer looks at the bigger picture market factors, including the surrounding and local market area, the demographics of the community, whether traffic patterns are favorable, and political attitudes toward new development.
Market analysis
Which two numbers do you add to calculate maximum price? Annual NOI and cash flow Maximum equity and maximum loan Cash flow and desired rate of return Maximum loan and annual debt service cost
Maximum equity and maximum loan
What type of gross lease has all (or part) of the nets included as part of the base rent (not as a separate charge)?
Modified gross lease
What provides the collateral and spells out what happens if the borrower fails to pay as promised in the promissory note?
Mortgage
Who are lenders who use either their own funds or funds borrowed from a "warehouse lender" to fund mortgages?
Mortgage bankers
Who are also often investors' friends, because, while they don't originate loans, mortgage brokers match consumers with loan products from a variety of lenders?
Mortgage brokers
What are the two primary types of deductions a taxpayer may take on a primary residence? Furnishings Mortgage interest Property taxes Lawn care maintenance
Mortgage interest Property taxes
To compute a monthly principal and interest payment, you need to know which of the following? Interest rate and term of the loan Monthly payment multiplier Interest rate and loan amount Mortgage loan value, annual percentage rate, loan term, and payment frequency
Mortgage loan value, annual percentage rate, loan term, and payment frequency
What occurs only when there is a meeting of the minds, or when the parties are in complete agreement about the purpose and terms of the contract?
Mutual agreement or offer and acceptance
Private loan companies may be found in many places. There are ___________, regional, and local lenders, and even individual entrepreneurs who loan money. Municipal National Collateral Governmental
National
Which type of lease is most commonly used with regional shopping centers? Net Graduated Full service
Net
What occurs once you deduct operating expenses from effective gross income?
Net operating income
Once investors determine their net operating income, they can calculate their taxable income. Which of the following formulas is used to arrive at taxable income? Net operating income + reserves - mortgage interest - annual depreciation - carryover of losses (if any) = taxable income Net operating income + reserves - annual depreciation - carryover of losses (if any) = taxable income Net operating income + reserves - mortgage interest - carryover of losses (if any) = taxable income Net operating income - mortgage interest - annual depreciation - carryover of losses (if any) = taxable income
Net operating income + reserves - mortgage interest - annual depreciation - carryover of losses (if any) = taxable income
Ken understands the importance of interpreting market conditions. He has found that keeping track of how many new homes are being built in his area is a valuable indicator of demand. Which market indicator provides this information? Price levels Inventory rates New building permits Sales volume
New building permits
Who might be impacted by the expiration of abatements? Adjoining states Prior homeowners New buyers Renters
New buyers
Even with vacant land, underground storage tanks are a possibility if the site contained structures previously. Which of the following is NOT likely to have used an underground storage tank? New residential developments to store heating oil Older homes to store heating oil Commercial or industrial building to store chemicals
New residential developments to store heating oil
Which one of the following statements about niche marketing is true? Niche marketing means that you concentrate buying and selling in one physical area. Niche marketing is illegal in some states. Niche marketing involves market segmentation.
Niche marketing involves market segmentation.
What form of business is designed for two or more people who wish to engage in business for profit?
Partnership
Why is it so important to research whether no-growth policies exist? No-growth policies can result in overwhelming amounts of red tape to get through in order to a permit approved. No-growth policies are an indication the investor should walk away without trying.
No-growth policies can result in overwhelming amounts of red tape to get through in order to a permit approved.
Todd found acreage on the edge of a bustling town, and he's considering investing in and subdividing the land. He's done his research, so he knows the town experienced a lot of growth over the past five years and is in need of new housing options. But his research also showed an almost complete lack of new permits issued during the same time period. After asking around, Todd learns the local government has stalled all new construction permits recently in an effort to keep the small-town feel. Todd's concerned about whether he can get his permits approved. Should he make the investment in this sort of situation? Yes! Others may have encountered issues but that doesn't mean Todd will also. He won't know unless he tries. No. Todd should hold off on the investment. It appears the local government may be practicing a no-growth policy.
No. Todd should hold off on the investment. It appears the local government may be practicing a no-growth policy.
Alana heard the landlord at the property she was looking at was a bit of a brute. She signed a lease anyway and opened her Mexican cafe shortly after. Lately, the landlord had been threatening to evict Alana, but her attorney assured her that he has no basis to do so since Alana continued to meet the terms of her lease. Which lease clause applies to this situation? Use Subordination Nondisturbance Attornment Sublease
Nondisturbance
Essential or not essential? Contains the grantee's signature
Not Essential
Essential or not essential? Names a grantee who has reached the age of majority
Not Essential
Essential or not essential? Names a grantee who is legally competent
Not Essential
Marsha is an investor who owns four single-family homes and sells her properties without the assistance of a real estate professional. Exempt Not Exempt
Not Exempt
Willy is an investor who owns two single-family homes and uses real estate professionals to assist in the sale of the home(s). Exempt Not Exempt
Not Exempt
Essential or not essential? The deed must be officially accepted by the grantee.
Not essential
Essential or not essential? The grantee must state that the deed is accepted.
Not essential
Property manager Martha can expect the property owner to _______. Collect rent Handle maintenance issues Obtain and maintain proper insurance Screen tenants
Obtain and maintain proper insurance
What issue could an investor face in an anti-development community? Finding skilled laborers Finding land to purchase Obtaining a building permit Obtaining financing for the project
Obtaining a building permit
Which element of a valid contract is established by the signatures of all parties? Competent parties Lawful objective Consideration Offer and acceptance
Offer and acceptance
What is a sum provided by a tenant to a landlord to cover extraordinary expenses or unpaid rent when a tenant vacates?
Security deposit
What refers to the relationship between the investment or company's fixed costs and its variable costs?
Operating leverage
What is the manner in which an individual acquires rights or liabilities automatically due to law, and not through an agreement or act of their own?
Operation of law
What is the right of a tenant to renew a lease upon the expiration of a lease period (seen frequently in commercial leases)?
Option to renew
Which section defines the items that the sellers want to leave behind and those they want to remove (exclude)? Contingencies Parties to the Contract Property Condition Disclosure Other Items Included Price and Payment Property Description
Other Items Included
When Saundra Neill signed a property management agreement with Awesome Altus Properties, Inc., she made sure the agreement stated explicitly that Awesome Altus owned each property she would be managing. In which section of the agreement would she find this verification? Description of duties Insurance provision Owner's covenants Signature of the parties
Owner's covenants
Who are the parties to a property management agreement Landlord and tenant Owner(s) and agent Owner(s) and tenant Property manager and the brokerage
Owner(s) and agent
What means that only a portion of what a party has agreed to has been completed?
Partial completion
Although commonly used with shopping centers and malls, Sylvia likes to use a _____________ lease, in which her tenants pay their base rent plus a percentage of their gross sales. Net Percentage Graduated Full service
Percentage
Which type of lease is used most commonly with community shopping centers? Net Percentage Graduated Full service
Percentage
What type of lease has the tenant pay a base rent plus an additional charge that is a percentage of the tenant's gross sales?
Percentage lease
What involves possessory interest that's automatically renewed at the end of each period specified in the lease (e.g., month-to-month)?
Periodic estate
What is possessory interest that is automatically renewed at the end of each period specified in the lease?
Periodic estate
What periodic estate automatically renews itself for successive tenancy unless one party terminates?
Periodic estate
How often does an adjustable rate go through an adjustment period? Periodically, as determined in the mortgage Every 10 years, according to the standard ARM Annually, to make sure the investor always has the best rate Every seven years
Periodically, as determined in the mortgage
Which of the following best describes foreclosure by writ of entry? Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed Petition to enter, repossession, notice of eviction Notification of pending auction, public auction, notice of eviction Petition for immediate repossession and eviction
Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed
What refers to the increase or decrease in land value that occurs when several parcels are combined into one large plot, as that value compares to their combined total value if sold individually?
Plottage
Which of the following is income that comes from investments, which includes capital gains, interest, and dividends? Active Passive Stock Portfolio
Portfolio
Joint tenancy requires unities of time, title, interest, and ______. Partnership Personal property Possession Prescription
Possession
Which section let's sellers know when they need to clear out so that the buyer can move in? Home Equity Theft Prevention Title and Related Documents Possession of Property Transfer Tax, Recording Costs Closing Date and Place
Possession of Property
What is the income a property could bring in if it were leased at full capacity, with all tenants paying full rent?
Potential gross income or scheduled gross income
What's the name of the clause that's standard in a deed of trust and can be included in a mortgage, which allows the lender to foreclose non-judicially? Non-judicial Foreclosure Foreclosure Sale Power of Sale Sale of Property
Power of Sale
Matilda likes to feel that her investment is keeping her money safe, without letting it lose value. What's her primary purpose for investing in real estate? Preserve capital Profit Tax shelter
Preserve Capital
What is the trust benefit that states that the identity of the trust owner is not made public?
Privacy
None of us will live forever. What process must be initiated in order to determine how a deceased's property is distributed to heirs? Probate Mourning Interpleader Ancillary probate
Probate Ancillary probate
What is the principle of value that says that a lower-value property gets a bump in value thanks to the nearby higher-value property?
Progression
What is it called where the borrower promises to repay the debt to the lender?
Promissory note
In which section does the seller notify the buyer whether disclosures are being provided or not? Contingencies Parties to the Contract Property Condition Disclosure Other Items Included Price and Payment Property Description
Property Condition Disclosure
During this step, the developer keepins an eye out for any building issues as well as potential environmental factors.
Property analysis
Marylou signed a written agreement with her agent, Westin, so he can manage her properties. What agreement did she sign? Lease Listing agreement Property management agreement Power of attorney
Property management agreement
The income from what reliable source benefits the entire community by funding essential services and public works? Fundraisers Private donations Property taxes Special assessments
Property taxes
What is the tenant's right to enjoy the property without being dispossessed or trespassed upon?
Quiet enjoyment
What doesn't offer any grantee warranties; it simply releases the grantor's property rights to the grantee?
Quitclaim deed
Which of the following calculators would best be used for performing computations of monthly payments, maximum loan amount, and remaining balance on a loan? Real estate Graphing Basic Scientific
Real Estate
This section identifies the broker who is responsible for bringing about the purchase and sale of the property. Responsibilities of Persons Real Estate Broker clause Life of Offer Entire Contract Deposit to Listing Broker
Real Estate Broker clause
What is a trust that meets the IRS requirements to avoid the double tax burden imposed on corporate earnings?
Real Estate Investment Trust
What is an entity used to pool mortgage loans and issue mortgage-backed securities?
Real Estate Mortgage Investment Conduit (REMIC)
What kind of trust doesn't buy properties, but instead invest in real-estate debt?
Real Estate Mortgage Trust
What does a mortgage real estate investment trust invest in? Real estate debt Personal property Real estate property Lease contracts
Real estate debt
What is vital if the grantee wants to protect the title against future buyers of the same property from the same grantor?
Recording
What protects the grantee from the grantor selling the same property to future buyers?
Recording
What contains no covenant or warranties but does imply ownership (seisin)?
Referee's deed
The houses in one neighborhood are all of similar sizes and style. When the Smiths' house goes into foreclosure, what principle will affect the value of the next-door neighbors' house if they sell at the same time? Anticipation Progression Regression Conformity
Regression
What is the principle of value that says a lower quality property located adjacent to a higher quality property can lower the value of the higher quality property?
Regression
Property in lieu of tax (PILOT) programs do which of the following? Permanently decrease property taxes Reimburse municipalities for lost property tax revenues. Raise property taxes Temporarily decrease property taxes
Reimburse municipalities for lost property tax revenues.
What is the process of redeveloping with new improvements and often with a different use, aka revitalization?
Rejuvination
Buyer Trina is unexpectedly transferred overseas, so she has to cancel her contract to buy Lori's house. Lori agrees. Release Rescission
Release
What causes the parties agree to terminate before the contract is fully executed, whether a listing contract or a sales contract?
Release
Which clause found in a promotional land sale agreement states the property will be released from the underlying lien after a certain percentage of the balance on the individual lot purchase has been paid? Release Return Retracting Recognition
Release
Noel is scheduled to meet with one of the anchor store tenants this afternoon. The tenant has been a major contributor to the success of the shopping center, and Noel wants to make sure to retain her business. What property manager's responsibility is Noel fulfilling? Overseeing daily operations Handling shoppers' complaints Finding and securing new tenants Renewing leases with existing tenants
Renewing leases with existing tenants
What is one of the first things an office building owner must do to convert property to an office condominium? Create an office condo owners association Remove all the existing tenants Renovate the building Find a new location
Renovate the building
Which of the following is NOT part of performing a feasibility study? Financial analysis Property analysis Rental analysis Site analysis
Rental analysis
Property manager Elise sends a monthly report to her client Katherine, who owns an apartment complex. What can Katherine expect to see on this report? A list of all renters and their contact information A list of subcontractors who will be maintaining the property Rental receipts, income, disbursements, and operating expenses Details of all tenant concerns
Rental receipts, income, disbursements, and operating expenses
Several years ago, Darcy invested in a co-op. She absolutely loved it at first—living among like-mind individuals who shared similar interests—but eventually she found the exclusive "members only" atmosphere oppressive and she wanted out. But, of course, she couldn't just sell her shares and rid herself of her lease without the board's approval, and there were already so many empty units due to other members not being able to make their mortgage payments that she feared she was stuck. If only the board would vote to convert the cooperative to condos! What would be the advantage of such a conversion? There are two correct answers. Resale would be easier. Further foreclosures might be prevented. Shareholder fees could be increased to help offset vacancies. Board members could increase the applicant pool and still keep their high entrance standards.
Resale would be easier. Further foreclosures might be prevented.
Abbie learns the seller has no legal right to sell the house she's buying because his aunt actually owns it. Abbie cancels the contract. Release Rescission
Rescission
What is a definitive end of the parties' commitments under an agreement usually due to a breach of contract—one in which the parties are returned to their pre-contract status, which in legal (and Latin) terms is called status quo ante?
Rescission
Who lives on site and may work for a real estate broker, managing agent, or owner?
Resident manager
This section makes it clear that the parties who sign are responsible for complying with the terms of the contract. Responsibilities of Persons Real Estate Broker clause Life of Offer Entire Contract Deposit to Listing Broker
Responsibilities of Persons
Makes the current owner and prior owners liable.
Retroactive liability
Some residential lease agreements give tenants the option to purchase the property before that leased property can be sold to someone else. What is this known as? First come, first served Right of first refusal Buyout Lease transference
Right of first refusal
The chance that an investor might lose money is known as __________. Local markets Risk Illiquidity Liquidity
Risk
Davis Partners, LLC, has just entered into an arrangement where it will be selling its newly developed property to a group of investors while still occupying the property for its corporate offices. What type of alternative financing has Davis Partners acquired? Joint venture Sale-leaseback Wrap-around loan
Sale-leaseback
What is an optional arrangement on a sale-leaseback arrangement? Sale-leaseback sale Sale-leaseback buyback Sale-leaseback donation Sale-leaseback cash out
Sale-leaseback buyback
Samuel Carlson needs to finance an investment property he wants to purchase. He doesn't want any equity partners, and he doesn't want to lease property he owns. What's his best option to get the extra funds he needs? Samuel should bring in the lender on the deal as a joint venture. Extra equity means he can close the deal. A sale-leaseback sounds like a good option for Samuel. He'll get used to leasing his property, and will appreciate the indirect liability the lease will become on his balance sheet. Samuel needs a wrap-around loan, a new loan that wraps around the seller's existing loan.
Samuel needs a wrap-around loan, a new loan that wraps around the seller's existing loan.
What is the illegal eviction in which the landlord has taken matters into his own hands, and evicts the tenant without using legal procedures?
Self-help eviction
Property solely and separately owned by one spouse
Separate property
In this section, the seller identifies the types of service utilities available on the property. Risk of Loss Services Zoning/Bldg. Code Compliance Certificate of Occupancy Condition of Property
Services
With this alternative to foreclosure, borrowers receive permission from their lender to sell the property for less than the amount owed on the borrower's mortgage. Bankruptcy Repayment plan Short sale Voluntary conveyance of deed
Short sale
What is required in order to execute a legal document?
Signature of the Grantor
These sections verify that the buyer and seller agree to the terms of the contract and the dates on which the verification was made. Attorney Approval Waiver Addenda Signatures of Buyer/Seller Notices Acceptance of Offer by Seller
Signatures of Buyer/Seller
What is the simplest business type—a business of one owner?
Sole proprietorship
What is another name for a bargain and sale deed?
Special warranty deed.
What is a lawsuit to force the other party to perform under the contract terms (no monies, just actions)?
Specific completion
An insurable business risk that includes insuring for accident liability, fire, theft, and vandalism.
Static risk
To protect themselves from liability, it's a good idea for property managers to ______. Avoid evictions at all cost Hold frequent community activities Stay up to date on local landlord-tenant laws Speak with each tenant daily
Stay up to date on local landlord-tenant laws
What is the purpose of an abatement program? Stimulate community revitalization Put a moratorium on building Increase development costs and fees Increase costs and put a moratorium on future development
Stimulate community revitalization
What's the name of the method investors use to calculate their annual property deduction? Economic Depreciable basis Straight-line depreciation Tax depreciation
Straight-line depreciation
The owner is absolutely responsible, regardless of who's at fault.
Strict liability
Blane owns a music store. He polls his customers and learns that they tend to come from less than a mile away. That's probably because Blane's store is in this type of location. Strip mall Regional shopping center Neighborhood center Factory outlet mall
Strip mall
Sharilyn has a commercial enterprise. Her business and adjacent businesses are arranged in a neat row. Customers enjoy the open-air walkways when they visit her business and others. Sharilyn's business is likely in a _______. Regional shopping center Office building Office park Strip mall
Strip mall
What is a corporation that doesn't pay corporate income taxes, so they avoid double taxation? In addition, shareholders may deduct losses on their income taxes representing their share of the corporation's losses.
Su chapter S Corporation
What is an agreement for a new occupant to live in the premises and pay rent to the former tenant, who pays the landlord (requires landlord's written permission; doesn't relieve the former tenant from liability)?
Sublease
What occurs when one party has met most but not all of the terms specified in the contract and may be required to pay damages for the terms not met?
Substantial completion
Tim's condo is identical to one in the same complex that's also for sale, so the purchase price will probably be very similar. Which principle of value is this? Anticipation Substitution
Substitution
What is the principle of value that is the idea that a property's value is determined by what it would cost to purchase a similar substitute property?
Substitution
Which of the following statements describes an off-site residential property manager? Oversees the maintenance of office buildings Negotiates lease terms and rental rate with each tenant Supervises on-site personnel for multiple properties Manages the day-to-day operations for a single property
Supervises on-site personnel for multiple properties
What is the amount of that item available at a given time for a given price?
Supply
What is more land than is needed for the planned development, but not enough land to carve out for another purpose?
Surplus land
Which of the following must adhere to the rules of the Securities and Exchange Commission? LLPs LLCs Syndicates Partnerships
Syndicates
How are real estate syndicates taxed? Syndicates are not taxed. Taxation depends on the form of the syndicate. Syndicates are always taxed as a partnership. Taxation depends on the number of investors.
Taxation depends on the form of the syndicate.
In most states, married couples usually hold property as ______. Tenancy in common Tenancy in severalty Joint tenancy Tenancy by the entirety
Tenancy by the entirety
Madge and Steve are married when they purchase a townhome. They take ownership as a type of tenancy that has the right of survivorship. That means if either dies, the other becomes the townhome's sole owner. Neither may pledge their interest in the property to another without the other spouse joining in the deed. If Madge and Steve divorce, their tenancy would end automatically by divorce decree, and they would become tenants in common. What type of ownership do Madge and Steve have? Estate in severalty Tenancy in common Joint tenancy Tenancy by the entirety
Tenancy by the entirety
What ownership type indicates this type of tenancy also has the right of survivorship. Only available to married couples, this form of ownership also includes unity of time, title, interest, possession, and marriage?
Tenancy by the entirety
Jack, Jerry, and Joe are brothers. Their parents die, leaving them the family home. Each holds an undivided interest in the entire property, and there's no right of survivorship. If one of them dies, that brother's share will go to whomever he has stipulated in his will. What ownership type describes Jack, Jerry, and Joe's situation? Estate in severalty Tenancy in common Joint tenancy Tenancy by the entirety
Tenancy in common
What ownership type indicates each person is entitled to possession of the whole. If one dies, that person's ownership is inheritable, and doesn't necessarily pass to the other owner(s)?
Tenancy in common
Which of the following is a residential property manager's duty? Mowing and yard work Tenant screening Guaranteed profits for the owner Increasing vacancy rates
Tenant screening
What is a trust that is one created according to the terms of the will of a deceased person?
Testamentary trust
What is one created according to the terms of a deceased person's will?
Testamentary trust
Which of the following statements best describes the 200% rule as it relates to tax-deferred exchanges? The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property. The capital gains realized from the property sale can't be more than 200% of the original purchase price. The fair market value of the relinquished property must be 200% more than the property (or properties) selected. The capital gains realized from the property sale can't be more than 200% of the sale price.
The combined fair market value of the property (or properties) selected can't be more than 200% of the relinquished property.
Who or which entity pays the PILOT fee for federal government-owned land? Individuals or businesses that use the land The federal government Taxpayers The local government where that land is located
The federal government
What must occur before a deed may be recorded? The grantor must acknowledge it. The grantee must sign it. The grantee must deliver it to the grantor. The grantor must sign it and the grantee must acknowledge it.
The grantor must acknowledge it.
Which of the following is evaluated on an annual or quarterly basis to determine the broader economic strength of the area by judging how many goods and services are produced within the market area being evaluated? The population The employment rate The gross domestic product The median income
The gross domestic product
If your investor realized a gain of $140,000 on the sale of an investment property, and the depreciated amount was $20,000, what would happen? The investor will pay 25% on the $20,000 and 15% on the other $120,000. The investor will pay 25% on the $20,000 and 20% on the other $120,000. The investor will pay 25% on the $20,000 and either 15 or 20% on the other $120,000. The investor will pay 15% on the $20,000 and either 20 or 25% on the other $120,000.
The investor will pay 25% on the $20,000 and either 15 or 20% on the other $120,000.
What does "capacity to contract" in a lease refer to? The legal requirement that anyone who signs a lease must be competent enough to do so (e.g., sane and of legal age) The standard lease requirement that a potential tenant will submit to a background check prior to signing a contract The expectation that the tenant is capable of living alone The legal requirement that the lease must be signed before it is official
The legal requirement that anyone who signs a lease must be competent enough to do so (e.g., sane and of legal age)
Bonnie has a mortgage on her investment property, but she allows the homeowners insurance to lapse. Which of these is a possible consequence of this action? The lender can sue Bonnie. The lender can place Bonnie's loan in default. Bonnie won't be allowed to pay off her loan early. Bonnie's mortgage payments will increase.
The lender can place Bonnie's loan in default.
Jake and Eddie have a promissory note agreement that states that Jake will pay back the money he owes Eddie, with interest. Who's required to sign the note? The maker only The payee only Both the maker and the payee The maker, the payee, and the trustee
The maker only
Foreclosure by entry and possession is not a common practice in most states. In states where this method of foreclosure is used, what may happen after court permission is obtained to physically take possession of the property? The mortgagee, along with the county sheriff, forcibly removes the mortgagor from the property. The local police arrest the mortgagor for trespassing. The mortgagee can take the property peacefully in the presence of a witness. The mortgagee places a sign on the door and waits for the mortgagor to leave the property.
The mortgagee can take the property peacefully in the presence of a witness.
When a mortgage is sold, how is the transfer made? The note is endorsed and the mortgage is assigned. The note is assigned and the mortgage is endorsed. A bill of sale is attached to the note and the mortgage. The note and mortgage are re-issued and the payee/mortgagee's name is replaced.
The note is endorsed and the mortgage is assigned.
Investors who reside in their own plex can use it as a tax shelter under which of the following conditions? The owner owns more than one plex and uses one of the units in each plex as a residence. The owner isn't collecting enough in rent from the tenants to cover the mortgage payment. The owner "pays" a fair market rent and includes this (plus the tenant's rent) in annual income. The owner lives in one of the units and pays a property management company to manage the plex and the tenants.
The owner "pays" a fair market rent and includes this (plus the tenant's rent) in annual income.
Tenants also enjoy benefits in a lease arrangement, although not quite as many as the landowner. Which of the following is a tenant benefit? The tenant may deduct costs of improvements from the lease payments. The tenant can write off lease payments as operating expenses. The tenant's costs for improvements are reimbursed at the end of the lease.
The tenant can write off lease payments as operating expenses.
True or false? Chinese investors were the largest investors in U.S. real estate.
True
Private loan companies take on substantial risk when they issue a loan to an investor who's unable to secure financing elsewhere. Which of the following IS NOT a way that they insulate themselves from that risk? They don't take any special precautions because investors are traditionally able to repay their loans. They may charge up to the maximum allowable interest for the loan. They may put a lien on the property for which the loan is being taken. They may require collateral to secure the loan.
They don't take any special precautions because investors are traditionally able to repay their loans.
Which of the following statements is true regarding developers who plan to allow FHA financing in their subdivisions? They can only sell to buyers who have FHA loans. They must follow FHA's minimum building standards. They must provide affordable housing in the subdivision. They must obtain financing for their subdivision development from the FHA.
They must follow FHA's minimum building standards.
Which of the following describes community property rights? Each has equal ownership with undivided possession rights. Each person is entitled to possession of the whole. One person owns the property and all other interests are severed. They're a requirement in some states for married couples to acquire title to real estate as community property.
They're a requirement in some states for married couples to acquire title to real estate as community property.
Deborah wants to invest in a community shopping center. What size trade area can she plan to service? Two- to four-mile Three- to six-mile Four- to eight-mile Five- to 10-mile
Three- to six-mile
Monica and Daniel Nicks have applied and been approved for a mortgage loan. Who will provide them the money for the loan? Mark Anderson, a mortgage broker Tina Mathers, a mortgage banker Skip Lightly, the Nickses' real estate agent Andy Carmichael, the title company representative
Tina Mathers, a mortgage banker
True or false? Debt that doesn't qualify as home acquisition debt may qualify as home equity debt.
True
True or false? HUD may attempt a resolution through conciliation.
True
Why would a property manager need to know an owner's desired return on investment? To decide if the owner is worth working for To determine how much of an annual raise to request To recommend other investments to achieve that goal To determine how to generate the required net profit
To determine how to generate the required net profit
Why do land investors investigate the topography of a potential property? To determine if the topography is appropriate for the planned construction To evaluate community acceptance of the project Because each investor has personal preferences To determine if the topography will pose an insurance risk
To determine if the topography will pose an insurance risk
Why might an investor purchase a single lot? To leave it as is forever To develop it and sell it in its improved form For the grazing opportunity To combat urban sprawl
To develop it and sell it in its improved form
A good property manager understands the owner's primary goal with regard to the property. Which is a reason investors often purchase commercial properties? To run their own business To generate regular cash flow To manufacture their own product
To generate regular cash flow
What is the purpose of the contract for deed? To help buyers complete the purchase when they can't qualify for other financing options. To get around paying fees to a bank for the mortgage. To avoid paying private mortgage insurance. To help sellers market property in ways that are more creative.
To help buyers complete the purchase when they can't qualify for other financing options.
Which one of these best describes the purpose of the Limitations and Subject To Clause section of a deed? To indicate that property is being transferred To provide evidence that something of value is being exchanged To provide a formal description of the item being transferred To identify any deed restrictions to which the property is subject
To identify any deed restrictions to which the property is subject
Why are many middle-income cooperatives converted to condominiums? To make resale easier To avoid fair housing lawsuits To take advantage of income tax shelters To provide housing for rejected co-op applicants
To make resale easier
What can be depreciated by an investor? Tools and equipment Land Expenses Water
Tools and equipment
True or false? In a leasehold estate, the right of possession is transferred, but not title or ownership.
True
When you have an idea of the niche you want to go after, the next thing to consider is population. Select the data that must be taken into account in a thorough demographic study. (Select all that apply.) Total population Age Median income GDP Employment rate
Total population Age Median income GDP Employment rate
Which type of net lease sometimes requires a tenant to pay the interest payments on the lessor's mortgage on the property in addition to base rent? Double net Net Triple net Quadruple net
Triple net
What type of net lease is one in which the tenant pays all expenses related to the property in addition to the rent?
Triple net lease
True or false? A board of directors is not required.
True
True or false? A corporation's bylaws define the corporation's structure and provide it with operational and managerial aspects.
True
True or false? A joint venture is a temporary organization formed by two or more parties to invest in real estate (or other businesses).
True
True or false? A land trust is formed specifically to hold real estate—real property is the only asset within the trust.
True
True or false? A lease that ends on a specific date, like December 31, is an estate for years.
True
True or false? A living trust is created during a person's lifetime and is established to convey property.
True
True or false? A record is anything that you generate or document as part of your business.
True
True or false? A testamentary trust is one created according to the terms of the will of a deceased person.
True
What term indicates when an act of persuasion overcomes another individual's free will and judgment?
Undue influence
Janice and Steve's oceanfront house is worth significantly more than an identical house up the coast a few miles. Which characteristic of the real estate market do they have to thank for this? Immobility Indestructibility Uniqueness Governmental policy
Uniqueness
Property manager Alexandra wants to ensure she gets everything she needs from the property owner when she begins to manage the property. What's the best way to do this? Ask the office manager. Just do her best. She's not going anywhere so if she misses something she can get is as needed. Use a takeover checklist. Let the owner decide what he thinks she should have.
Use a takeover checklist.
Which of the following can be defined as what a property is worth? Cost Price Value Appraisal
Value
What costs are those that do change based on the amount of sales (e.g., raw materials, commissions, utilities)?
Variable costs
Client documents and case files Vital record General record Ephemeral record
Vital record
Listing agreements and client contracts Vital record General record Ephemeral record
Vital record
Can you match this scenario with the investment type that it describes? Sid already has a buyer in mind when he makes his embarrassingly low offer for a property with motivated sellers. Buy and hold Fix and flip Wholesaling Limited partnership
Wholesaling
One advantage to filing a complaint locally is a shorter response time. Generally, when can a complainant expect an answer to a locally filed action? Within 15 days Within 30 days Within 45 days Within 60 days
Within 30 days
What signifies the grantor's intention to transfer title to the grantee?
Words (or Act) of Conveyance
Xavier and Juanita Jenkins want to make a few improvements to their leased apartment. The couple would like to rip up the carpet in the living room and have the hardwood floors underneath restored. Which of the following statements about the improvements is true? Xavier and Juanita will be able to deduct the cost of the improvements from their rent. Xavier and Juanita need to get the landlord's permission before they make any improvements to the property. Xavier and Juanita aren't required to ask the landlord's permission to make this type of alteration to the property. Xavier and Juanita will have to re-carpet the floors before they terminate their lease.
Xavier and Juanita need to get the landlord's permission before they make any improvements to the property.
Frank and JoAnn Bren have lived in their home for 35 years. They've successfully paid off both their mortgage and a second mortgage they took out when Frank, Jr. went to law school. They are now ready to downsize. They found a buyer, Cheryl Marcus, who is thrilled with the traditional lines and the beautifully landscaped front and backyard. She plans to install a gazebo near the outdoor fountain that Frank installed six years ago. When the deed is transferred from the Brens (the grantors) to Ms. Marcus (the grantee), it will be a full covenant and warranty deed. There are no liens or encumbrances, and title is clear as a bell. Does the deed for the Brens' property have the covenant of seisin?
Yes
Which of the following is often used to value complex commercial properties like office complexes, shopping centers, or other investments that may take years to stabilize? Annuity capitalization Sales comparison approach Direct capitalization Yield capitalization
Yield capitalization
Knowing what you know now about the time value of money, which scenario is the best option? Your grandma gives you $10 for your birthday. You put it in your piggy bank. Your uncle offers to give you $1,000 now or $1,000 in five years. You ask him to wait five years and then give it to you. Your uncle offers to give you $1,000 now or $1,000 in five years. You tell him to get out his checkbook. You want the money now. You purchase a certificate of deposit with the cash.
Your uncle offers to give you $1,000 now or $1,000 in five years. You tell him to get out his checkbook. You want the money now. You purchase a certificate of deposit with the cash.
Which of the following government influences can affect value by restricting use of a property, perhaps even preventing the highest and best use of a property? Construction codes Zoning Federal control of money Taxes
Zoning
In this section, the seller verifies that the property is zoned for a specific use and complies with building codes and ordinances. Zoning/Bldg. Code Compliance Condition of Property Certificate of Occupancy Services Risk of Loss
Zoning/Bldg. Code Compliance
When an investment property is sold, three taxes that apply are transfer tax, capital gains, and ______. Ordinary income tax Property tax Recaptured depreciation Tenant tax
depreciation
Is a potential for high yields an advantage/disadvantage or real estate investing?
Advantage
Your investor client Marty likes to buy fixers in up and coming areas. Sometimes he sells them quickly after he and his team renovate them, and other times he rents them out. Right now, the market has cooled down. Think about Marty's investment strategies and how he might best manage his properties and his financial position in a cool market. Which of the following are good options for him? Because supply is high, Marty should consider buying more property to renovate. Marty should wait to buy more property when the market heats. Marty will want to hold on to his finished properties, rent them out, and wait to sell them when demand rises and inventory drops.
Because supply is high, Marty should consider buying more property to renovate. Marty will want to hold on to his finished properties, rent them out, and wait to sell them when demand rises and inventory drops.
What is the principle of value that says that as an area goes through this change cycle, property values fluctuate as well?
Change
Which section documents where the closing will take place and on what day? Home Equity Theft Prevention Title and Related Documents Possession of Property Transfer Tax, Recording Costs Closing Date and Place
Closing Date and Place
Investors who maintain strong relationships with local ________ will have a source of information about market trends, such as what cap rates local investors are willing to accept. Property managers Real estate investment bloggers Government officials Commercial real estate lenders
Commercial real estate lenders
What is the principle of value that is related to supply and demand?
Competition
This section specifies that the buyer agrees to receive the property in its current state. Risk of Loss Services Zoning/Bldg. Code Compliance Certificate of Occupancy Condition of Property
Condition of Property
What is the principle of value that says that value is created and maintained when a property's characteristics conform to its neighborhood?
Conformity
What term indicates that a contract must be entered into as a free and voluntary act, entered into without undue influence or duress?
Consent or voluntary agreement
What is the giving of something of value in exchange for something of value
Consideration
Which section identifies the circumstances and conditions under which the transaction might need to be terminated? Contingencies Parties to the Contract Property Condition Disclosure Other Items Included Price and Payment Property Description
Contingencies
What is the principle of value that has to do with how alterations to a property impact its value as a whole?
Contribution
What refers to how many of a particular item consumers are willing and able to buy at a given time for a given price?
Demand
This section identifies the amount of earnest money the buyer has put down to show good faith and interest in the property. Responsibilities of Persons Real Estate Broker clause Life of Offer Entire Contract Deposit to Listing Broker
Deposit to Listing Broker
Are high capital requirements an advantage/disadvantage or real estate investing?
Disadvantage
Is high risk an advantage/disadvantage or real estate investing?
Disadvantage
What is the period when the property is deteriorating and needs constant upkeep to maintain its viability?
Disintegration
What includes the use or threat of force, such as blackmail or bodily harm?
Duress
Which four of these factors contributed to the economic crisis that we experienced in 2007 through 2009? Easier credit increased the number of subprime mortgages. Fannie Mae's made an effort to increase homeownership rates. The belief that housing prices would continue to rise. The massive jump in foreclosures depressed the housing market. HUD required lenders to make more subprime loans.
Easier credit increased the number of subprime mortgages. Fannie Mae's made an effort to increase homeownership rates. The belief that housing prices would continue to rise. The massive jump in foreclosures depressed the housing market.
This section puts the parties on notice that verbal assurances will not be enforceable. Responsibilities of Persons Real Estate Broker clause Life of Offer Entire Contract Deposit to Listing Broker
Entire Contract
Your client is a large developer who wants to build new retail space. She's considered zoning, construction codes, and development regulations. What other governmental influence will she also need to consider? Community demographics Environmental codes Architectural uniqueness
Environmental codes
What is the period of stable use?
Equilibrium
When property values remain at the same level and are at their highest monetary value, the neighborhood is in what stage of the neighborhood life cycle? Growth Decline Equilibrium Rejuvenation
Equilibrium
Which part of the cycle is in effect when a condominium complex has all its units occupied by owners whose HOA dues pay to maintain the grounds in immaculate condition? Integration Equilibrium Disintegration Rejuvenation
Equilibrium
True or False? Although investors rely on licensees for contractual needs and services, they don't tend to depend on licensees for market trend information.
False
True or False? Appraisers aren't a good source of information for investors because appraisers generally work for lenders.
False
True or false? A real estate investor is extraordinarily intelligent.
False
True or false? An investor acts on his gut feelings when investing.
False
True or false? Investors don't rely on their personal observations; they prefer data.
False
Allen picked up remodeling skills from his family's construction business. Which of the following real estate investments is a great fit for his skills? Buy and hold Wholesaling Fix and flip Limited partnership
Fix and flip
Daisy has a knack for maintaining positive relationships and wants an investment where she's in control. Is this a good fit?
Good fit
In which section do the sellers disclose whether they are behind on payments, and buyers indicate whether they intend to occupy the property? Home Equity Theft Prevention Title and Related Documents Possession of Property Transfer Tax, Recording Costs Closing Date and Place
Home Equity Theft Prevention
The cliffs where Janice and Steve's oceanfront house is perched and eroded. heir home is suddenly a lot closer to the ocean, uncomfortably close. In fact, and now their property is worth a whole lot less. What characteristic of the real estate market is affecting the value of their home? Immobility Indestructibility Uniqueness Governmental policy
Immobility
You can't move land, and location plays a huge role in the value of real estate. This refers to the ____________ of the real estate market. Indestructibility Immobility Uniqueness Slowness of response
Immobility
Which of the following is a passive type of real estate investment? Fix and flip Wholesale Buy and hold Limited partnership
Limited partnership
A lender requests an appraisal of a property under foreclosure. What type of value is the lender most likely to be interested in? Investment value Going-concern value Liquidation value Insured value
Liquidation value
Arthur is an investor client who's excited to purchase his first investment property. He's worked with you to describe the type of property that aligns with his goals and strategy, so you've found one that meets all his criteria. But despite your best efforts, the deal falls through. What would be the best action for Arthur to take in this situation if he wants to be a successful real estate investor? Fire you and find a better real estate professional to be on his team. Spread rumors about the seller to prevent other buyers from making an offer on the property, then make another lower offer. Continue to negotiate with the seller, even if he has to adjust his investment plans. Move on and find another property that will align with his strategy.
Move on and find another property that will align with his strategy.
Ivor is looking for a safe investment that offers high yields. Is this a good fit?
Not a good fit
This section describes how notices to the parties may be delivered and deemed received. Attorney Approval Waiver Addenda Signatures of Buyer/Seller Notices Acceptance of Offer by Seller
Notices
Which section identifies the seller and buyer who are entering into the contract? Contingencies Parties to the Contract Property Condition Disclosure Other Items Included Price and Payment Property Description
Parties to the Contract
What kind of investment is a limited partnership? Active Passive
Passive
For both homeowners and real estate investors, buying real estate is considered a good way to _____________. Discover multiple tax loopholes Get rich quick Increase a credit rating immediately Preserve capital
Preserve capital
Which section defines the purchase price, whether there are any seller-paid closing costs, and how the buyer intends to pay for the property? Contingencies Parties to the Contract Property Condition Disclosure Other Items Included Price and Payment Property Description
Price and Payment
Which section provides a legal description of the property being offered for purchase? Contingencies Parties to the Contract Property Condition Disclosure Other Items Included Price and Payment Property Description
Property Description
Ishmael is an investor client who tells you he wants to invest in a hotel for crews of whaling ships. It needs to be near the waterfront and definitely near a whaling port. He knows he'll be able to manage the hotel in a way that his target audience will appreciate. Which segment(s) has he defined in his request? Property type Location Investment strategy
Property type Location Investment strategy
Which of the following statements regarding investments is true? Real estate investment is different from other investments because there's potential for earning income two different ways from the same investment. Many investors choose real estate over other types of investments because real estate investments are virtually risk free, provided the investor follows the law. In general, when an investor sells a property, it's likely to be for a lower price, because properties depreciate over time. Only inexperienced investors consider real estate as a hedge against inflation, because property values typically decrease over time.
Real estate investment is different from other investments because there's potential for earning income two different ways from the same investment.
This section specifies that the seller is responsible for any risk of loss or damage to the property until the title transfers. Zoning/Bldg. Code Compliance Condition of Property Certificate of Occupancy Services Risk of Loss
Risk of Loss
When prices go down because there are too many homes on the market and too few buyers, this is an example of ______. Conformity Progression Supply and demand Regression
Supply and demand
You may recall that consideration is one of the essential elements of a valid contract and that consideration is something of value. In a real estate transaction, which of the following are examples of consideration? The sale price of the property The buyer's promise of payment The seller's promise to convey the property to the buyer The earnest money a buyer puts down The buyer's payment for the property The seller's conveyance of a marketable title to the buyer
The buyer's promise of payment The seller's promise to convey the property to the buyer The earnest money a buyer puts down The buyer's payment for the property The seller's conveyance of a marketable title to the buyer
In which sections does the seller affirm that a good and marketable title will be conveyed to the buyer at closing? Home Equity Theft Prevention Title and Related Documents Possession of Property Transfer Tax, Recording Costs Closing Date and Place
Title and Related Documents
Which section notifies both the buyer and the seller about how closing adjustments will be handled? Home Equity Theft Prevention Title and Related Documents Possession of Property Transfer Tax, Recording Costs Closing Date and Place
Transfer Tax, Recording Costs
True or false? A real estate investor focuses on an investment strategy.
True
True or false? A real estate investor studies the market consistently.
True
True or false? A real estate investor works with a strong team.
True
True or false? Successful investors learn to recognize burgeoning trends and distinguish market cycles so they can plan ahead.
True
Your real estate investor client, Annalise, has an investment plan that includes purchasing several acres of property downtown. When the deal falls through, you know Annalise, an experienced, smart investor, will make the right decision, which is to: Use any means necessary to find out the amount she needs to offer to make the deal happen. Walk away from the property, and move onto another one. Follow her gut instincts and chase the property. Stick to her original investment plan, whatever it takes.
Walk away from the property, and move onto another one.
