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Practice Test 2 (Dummies)

Terms in this set (100)

A rental building has several different types of insurance. A property manager may want to have which of the following?
A. fire/hazard insurance
B. errors/omissions insurance
C. casualty insurance
D. rent loss insurance
B. Property manager gets errors/omissions insurance for his own protection and the other 3 for a building
Rents are typically set:
A. after an analysis of the building by a certified appraiser
B. somewhat arbitrarily
C. based on the expenses of the building
D. based on market rents and vacancy rates
D. An owner usually looks at market rents of similar buildings and the vacancy rate of other buildings and his own to determine a proper rental rate
Salesperson Sally works for broker Bob. Unknown to Bob, Sally has been particularly rude to Vietnamese customers. If she is charged with a fair housing violation, will broker Bob also be held responsible?
A. yes
B. no
C. only if she is an employee
D. only if Bob had known
A. Broker Bob is responsible for everything that Salesperson Sally does
A property manager analyzing a building's risk may recommend all except which of the following?
A. retain risk
B. transfer risk
C. avoid risk
D. contain risk
D. Retaining, transferring and avoiding risk are 3 ways to deal with risk. The 4th (which isn't listed) is to control it
Broker A and Broker B meet to discuss a listing that both of them are working on. They discuss the commission they will share. Which of the following is true?
A. they have violated antitrust laws on price fixing
B. they have violated local real estate board practice if the fee they are discussing is beyond that standard fee schedule
C. they really can't discuss anything because the state real estate commission sets fees
D. no violation of the law has occurred
D. The antitrust law doesn't apply to cooperating brokers for a particular transaction
Broker A and Broker B, who have real estate agencies on opposite sides of town, meet at the beginning of the year and agree that each one will handle sales only in his part of town and not interfere with sales in the other broker's area
A. they have violated the antitrust law prohibiting price fixing
B. they have violated the antitrust law prohibiting market allocation
C. they have violated the antitrust law on group boycotting
D. they have violated no antitrust law
B.
Seller Sam hires Broker Bob to sell his house. Bob brings Buyer Betty to see the house. Assuming there is no dual agency, which of the following is correct?
A. Sam is the customer; Bob is the agent
B. Sam is the customer; Betty is the client
C. Sam is the client; Betty is the customer
D. Betty is the client; Bob is the agent
C. The agent represents the client, who may be a buyer or seller. The person not represented by the agent is the customer
An agency established with a written document is always
A. an express agency
B. an implied agency
C. an agency by estoppel
D. an agency by ratification
A. If the agreement is in writing, it's expressed
Fran notifies all the brokers in her area that her house is for sale and says she will work with
any broker who brings a buyer. She is creating
A. a seller's listing
B. a free-for-all listing
C. an open listing
D. an exclusive right to sell listing
C. An open listing gives several brokers a chance to sell the property.
Exclusive right to sell: an agreement with one broker who is paid whether the broker or the owner sells the property
Seller's/Free-for-all listings are not listings
Seller Sara agrees to let Broker Ben keep any amount over the $200,000 that she needs if he sells her house. This is called...
A. an open listing
B. a gross listing
C. a net listing
D. a buyer's listing
C.
Open listing gives several brokers a chance to sell a property.
Gross/buyer's listings are made up
You are representing Seller Sharon and bring Buyer Barbara, your customer, to see the house. Barbara makes an offer. Barbara has confidentially told you about the bankruptcy she went through two years ago, but she thinks she will be financially approved to buy the house. What, if anything, should you do with the information about the bankruptcy?
A. Tell Sharon
B. Keep the information confidential as Barbara asked you to
C. Keep the information confidential unless the deal doesn't go through
D. Contact the bank to verify Barbara's financial status
A. Your fiduciary duties include disclosure to your client of all important information, even if it's personal to the customer and you've been asked to keep it confidential. You don't owe your customer the duty of confidentiality
Several people are involved in most real estate transactions. The duty of loyalty requires you to put their interest in what order of priority?
A. yourself, customer, client
B. yourself, client, customer
C. customer, client, yourself
D. client, yourself, customer
D. The fiduciary principal of loyalty requires you to put the client's interest above all others, even your own.
A homeowner refuses to rent an apartment in his two-family house to an African American family. Which of the following is true regarding this action with respect to fair housing laws?
A. this is legal because there is an exception to the law for 1-4 family houses
B. this is legal only if the owner lives in the house himself
C. this is legal as long as the homeowner does not use discriminatory advertising
D. this is illegal
D. There's no exception for race as per the Civil Rights Act of 1866
"Christians only" is the advertisement for a house that's for sale. This is
A. legal if the house is owner-occupied
B. illegal unless a real estate agent is used
C. legal because it's a one-family house
D. illegal
D. Even if there's an exception to one of the antidiscrimination acts, discriminatory advertising, which includes any mention of religion, isn't permitted
A young married woman's income is discounted by 50% by a bank when she applies for a mortgage loan because she is of childbearing age. This is
A. illegal discrimination
B. legal discrimination because of the business aspects of banking
C. called redlining
D. legal because protection of a depositor's money supersedes other laws
A. Gender is a protected class in housing discrimination including lending practices
A Portuguese couple looking for a house asks a real estate agent to show them houses in Portuguese neighborhoods. Which of the following is correct?
A. the agent can accommodate this request because the buyers are asking for it
B. the agent should tell the buyers that she will show them houses in a number of different neighborhoods that meet their needs
C. the agent should refuse to work with the buyers
D. the agent should agree, then show the buyers houses in other neighborhoods
B. Real estate agents may not participate in steering, even if the customer directs it.
Advising people on which neighborhoods they would be happy in may be construed as
A. redlining
B. blockbusting
C. steering
D. canvassing
C.
The Jones vs. Mayer decision basically confirmed
A. the constitutionality of fair housing laws
B. the legality of the various exceptions to fair housing laws
C. no exception for race in fair housing laws
D. the owner-occupied exemption for fair housing laws
C. Jones vs Mayer decision confirmed that the 1866 Civil Rights Act was still in effect and superseded the 1968 Federal Fair Housing Act, permitting NO exceptions for race
A young woman is refused the right to buy a condominium in a complex that restricts purchases to people 50 years of age or older. This is
A. illegal
B. legal
C. legal if there is a restrictive covenant in the condominium deed
D. legal if the complex is specifically designated as senior citizen housing for people over the age of 50
A. Housing may be restricted to people 62 years of age and older or 55 years of age or older in cases where at least one occupant per unit is 55 and at least 80% of the units are occupied by people 55 or older
The lumber for a deck that has not yet been built is
A. personal property
B. a fixture
C. a trade fixture
D. real estate
A. Personal property is tangible, moveable and not permanently attached to real estate
The interest of a tenant in a rented building is most properly known as
A. leasehold
B. leased fee
C. tenant's rights
D. tenancy in fee
A.
Reversion of title is a feature of what type of interest?
A. fee simple
B. fee simple condition precedent
C. fee simple condition subsequent
D. fee simple determinable
D. You may have been attempted to answer C, which allows the right of reentry (the grantor's right to go to court to reclaim the property). In fee simple determinable, the title reverts back to the grantor if a certain condition isn't met
I give my sister permission to live in a house I own until the death of her son. I have created
A. an ordinary life estate
B. a life estate pur autre vie
C. a leased hold interest
D. a tenancy for life
B. The length of a life estate pur autre vie is for the lifetime of a 3rd party rather than the person actually receiving the life estate
In an ordinary life estate, the length of time of the estate interest is the lifetime of the person receiving the life estate
Littoral rights for properties abutting the ocean give ownership
A. to the mean high water mark
B. to a point 200 ft. out from the shore
C. to the state ownership line
D. to nothing because littoral rights have to do with non-navigable rivers
A. Littoral rights give owners of property next to large bodies of water ownership of land up to the mean high water mark. Riparian rights involve rivers and streams
Jewelry cases in a jewelry store are an example of
A. fixtures
B. personal property
C. trade fixtures
D. real estate
C. Trade fixtures, are used in association with a business use of property
A fixture
A. is always assumed to accompany a property that is sold
B. is always assumed to belong to the seller and may be removed
C. is usually sold separately with a bill of sale
D. is not considered real estate
A. A fixture becomes real estate when it is attached and is always assumed to go with the property when sold. Personal property is normally sold with a bill of sale
In what way does PUD generally differ from a condo?
A. Condos have homeowners associations; PUDs do not
B. Condos have monthly common charges; PUDs do not
C. Condo owners own the airspace occupied by their unit and the land under and around their units as tenants in common; PUD owners own the land under and around their units individually
D. Condo owners own shares in a corporation; PUD owners own the real estate individually
C.
Both PUDs and condos generally have homeowners associations and monthly common charges. Cooperative owners own shares in a corporation
Three people each buy pieces of property next to each other for farm use . As a matter of efficiency they hire one person to manage the farm as a single unit even though the properties are owned separately . How is the property owned?
A. joint tenancy
B. tenancy in common
C. tenancy by the entirety
D. tenancy in severalty
D. This is a case of 3 individual owners. Sole ownership is tenancy in severalty.
All others apply to ownership of one property by more than one person
A proprietary lease is a unique characteristic of what form of ownership?
A. Condo
B. cooperative
C. time share
D. PUD
B. Cooperative ownership provides for ownership of shares in a corporation that owns the building. The proprietary lease allows occupancy of the unit
A corporation usually owns property in
A. joint tenancy
B. tenancy in common
C. tenancy by the entirety
D. tenancy in severalty
D. Corporations are considered a single person, and ownership by a single person is tenancy in severalty
Liability that is limited to the investment does NOT apply to
A. partners in a general partnership
B. a corporation's shareholders
C. limited partners in a limited partnership
D. limited liability corporations
A. 3 of the choices feature limited liability, and only 1 (a general partnership) doesn't
The type of co-ownership that allows an owner's property to be left to her heirs is
A. tenancy by the entirety
B. tenancy in severalty
C. tenancy in common
D. joint tenancy
C. Tenancy in common has no right of survivorship, which means that a person's shares of property go to heirs upon the person's death, not to the other owners of the property
You want to build your house ten ft. closer to the road than the zoning ordinance permits. You will likely try to get
A. a zoning ordinance change
B. a variance
C. a deed restriction amendment
D. an infrastructure change
B. Applying for a variance, is a change in the zoning ordinance for one lot.
Trying to get a zoning ordinance change won't likely happen because it is only dealing with one property
You own a factory that has been in your family for 100 years . Houses have sprung up all around it and the zoning is now a residential. How would your factory most likely be classified?
A. temporary use
B. transitional use
C. interim use
D. nonconforming use
D. Nonconforming use is one that existed before the current zoning and isn't in accordance with current zoning
The drawing showing an entire subdivision and the lots it is being divided into is most properly called
A. a survey map
B. a plat map
C. a filed map
D. a metes and bounds map
B. Plat map is the technical term for a map of lands that have been approved for subdivision
A mortgage is most accurately described as what type of lien?
A. involuntary and general
B. voluntary and general
C. voluntary and specific
D. involuntary and specific
C. No one can force you into a mortgage agreement, so it's voluntary. And a mortgage applies to only one property, so it's specific
A restriction in the deed says you can't run a business out of your home. The zoning ordinance says you can. Which of the following is true?
A. you can't run a business out of your home
B. you can run a business out of your home
C. you can run a business out of your home if you get the town to give you a special permit
D. the deed restriction is invalid because it is against the public interest
A. If a conflict arises between a deed restriction and public law, the stricter rule applies
The loss of a right to enforce a deed restriction is called
A. prescriptive rights
B. adverse possession
C. escheat
D. laches
D.
The assignment of costs between the buyer and the seller at the closing is called
A. finishing fees
B. proration
C. closing accounting
D. real estate settlement and procedures
B. Costs and payments are debited and credited between the buyer and seller
How many acres are in a section?
A. 640
B. 320
C. 160
D. 40
A. Section = 1mi long
5,280 x 5,280 = 27,878,400
Then convert to acres (by dividing by 43,560) which is 640 acres
The deed that provides warranties only for the duration of the grantor's ownership is called a
A. general warranty deed
B. special warranty deed
C. quitclaim deed
D. grantor's deed
B. Special warranty deed provides warranties only for the ownership period of the grantor.
General warranty deed provides warranties back to the beginning of time
If the seller paid taxes in advance for the whole year and he sells the house on July 1, which of the following is true?
A. the grantor gets a credit, and the grantee gets a debit
B. the grantor gets a debit, and the grantee gets a credit
C. the grantor and grantee both get credits
D. the grantor and grantee both get debits
A. The grantor is the seller, and the grantee is the buyer. A credit is the amount owed to you. A debit means that you owe an amount
A deed often used to clear up a cloud on a title is
A. a trust deed
B. a referee's deed
C. a special warranty deed
D. a quitclaim deed
D. A quitclaim deed provides no warranties and often is used to clear up title problems
The act of recording a deed provides or accomplishes
A. actual notice of ownership
B. constructive notice of ownership
C. proof of ownership
D. transfer of ownersip
B. Constructive notice is essentially setting up a situation in which someone who's interested can get information. Recording the deed in the public records does that
Which of the following is not a form of voluntary alienation?
A. gift
B. sale
C. dedication
D. forfeiture
D. Voluntary alienation is giving up title to property of your own free will. Gifts, sales and dedication are voluntary. Forfeiture is an involuntary loss of the title to a property because of a violation of a condition in the deed
You have just lost a large portion of the hill you live on due to a sudden mudslide. You are the victim of
A. erosion
B. avulsion
C. escheat
D. forfeiture
B. Avulsion is the sudden loss of land through natural processes.
Erosion is the loss of land through a gradual natural process
A religious group was given property for use in building a church. Instead, they lease the property out to raise money for their missionary work. The group loses the property for violation of the deed condition through a process called
A. avulsion
B. escheat
C. foreclosure
D. forfeiture
D. Forfeiture is loss of ownership of a property because of a violation of deed condition.
Foreclosure is seizing of property for nonpayment of a debt such as taxes/mortgage loan
The process by which multiple owners can accumulate the statutory time necessary to claim adverse possession or a prescriptive easement is called
A. accumulation
B. accretion
C. tacking
D. notorious possession
C. "Tacking = time" and time is what you're accumulating
If you die intestate, the law distributes your assets according to the laws of
A. descent
B. inheritance
C. probate
D. surrogacy
A. The laws of descent govern the distribution of your assets after death (intestate = without a will)
The court that handles wills is called
A. inheritance court
B. civil court
C. surrogate's court
D. devisee's court
C. Surrogate's court handles an estate on behalf of someone else, namely the deceased
You sign an option agreement to purchase some land while a zoning change is being sought. Which of the following is true?
A. You must purchase land
B. You must purchase the land if the zoning change is granted
C. The seller must sell you land
D. The seller must renegotiate with you if you want
C. A simple option agreement is a unilateral agreement, in which only one person is obligated to do what is promised. In this case, the seller has to sell the land to the buyer (option holder) if the buyer wants to purchase the land. The simple option agreement doesn't require the buyer to act. If the buyer refuses to buy at the terms originally stated in the option agreement, the seller is under no obligation to renegotiate the deal.
A buyer wants to make sure everything is okay with the house he's buying. He most likely would
A. have every house he looks at inspected by a qualified home inspector
B. sign an option on a house he likes so that he doesn't lose it while it is inspected
C. put an inspection contingency clause in the sales contract
D. not sign the contract until the house is inspected
C. A contingency clause in a contract requires that something be completed before the closing can take place
The parol evidence rule generally says that
A. written contracts take precedence over oral contracts
B. oral contracts take precedence over written contracts
C. written contracts can be modified by oral contracts
D. real estate sales contracts may be oral or in writing
A. Written contracts take precedence over oral contracts, also oral modification of written contracts may not be enforceable. All real estate sales contracts must be in writing
Forcing a buyer to go through with a property purchase that he does not want to do is
A. a novation
B. an assignment
C. a suit for compensatory damages
D. a suit for specific performance
D
Novation involves a new contract
Assignment is the same contract with a different buyer
Suit for compensatory damages is a suit for money
A contract for the sale of property is said to be
A. executed
B. executory until the closing
C. executory until the closing whereupon it is executed
D. executed until closing whereupon it is executory
C A real estate sales contract is said to be executory until closing because all the terms have not yet been fulfilled. It is executed at closing because at that point, all the terms have been fulfilled
Joe agrees to buy Sally's house. When Joe can't come up with the money, Tim agrees to take over the contract and buy Sally's house under the same terms. This is called
A. a mutual agreement
B. a novation
C. an assignment
D. a delegation
C. There is a mutual agreement for Tim to take over the contract, but it's an assignment of the existing contract
Assignment: Party B takes over the obligations of Party A and Party A no longer has any liability.
Delegation: Party A asks Party B to fulfill the terms of Party A's contract. Party A is still responsible
A landlord who is selling a building allows a tenant to stay until the building is sold. This is
A. an estate at sufferance
B. an estate at will
C. an estate for years
D. a periodic estate
B. Estate at will: tenant will stay as long as the landlord lets him
At sufferance: landlord "suffers" when the tenant stays, because the landlord wants him to leave
For years: lasts for a definite period of time
Periodic estate: renews itself as each period expires
A tenant's lease expires, and the landlord does not give the tenant a new lease but instead allows her to stay and collects rent from her every month. Which of the following is true?
A. an estate for years has become a periodic estate
B. a periodic estate has become an estate for years
C. a periodic estate has become an estate at will
D. an estate for years has become an estate at sufferance
A. Estate for years is the regular lease with a beginning and end. A periodic estate renews itself from period to period and the landlord accepts rent
The fact that a lease of longer than a year must be in writing is a typical provision of
A. RESPA
B. UCC
C. the statute of frauds
D. the parol evidence rule
C.
Landlord A rents space to Tenant B. Tenant B agrees to rent the same space to Tenant C. This is most likely
A. an assignment
B. a novation
C. a sublease
D. a net lease
C. Sublease: the original tenant remains responsible for the lease provisions but executes a lease between herself and the new tenant
A tenant rents an apartment from a landlord. The tenant pays rent and the landlord pays all the building expenses. This is
A. a net lease
B. a proprietary lease
C. a triple net lease
D. a gross lease
D.
Net lease: tenant pays some part of the building's expenses
Triple net lease: tenant pays all of the building's expenses
Proprietary lease: cooperative apartment owner
A feature unique to a ground lease is that
A. the tenant pays all expenses
B. the tenant pays no expenses
C. the term may be unusually long
D. the tenant pays rent based on the revenues the property generates
C. Ground leases often involve someone leasing vacant land to a building, tend to be for unusually long terms. 50-100 yrs is not unusual
What phase of environmental assessment creates a management plan for the hazardous waste area?
A. 1
B. 2
C. 3
D. 4
D. Phases of environmental assessment are:
1. review of records and physical inspection of the property
2. testing
3. cleaning up the contamination
4. managing the contamination
Various allergic and respiratory symptoms that develop in an office building and then persist even after leaving the building may be
A. BRI
B. SBS
C. OSHA
D. CERCLA
A. BRI: building related illness, symptoms persist even after leaving the building
Homes built before what year require lead paint disclosures?
A. 1978
B. 1979
C. 1980
D. 1981
A.
A colorless, odorless gas that may cause cancer is
A. asbestos
B. electromagnetic fields
C. radon
D. BRI
C. Radon is a gas formed from radioactive rocks usually beneath a house. Comes up through basements and can be alleviated by ventilation
Typically, individual on-site sanitary waste disposal systems are sized by the number of
A. square feet
B. bedrooms
C. bathrooms
D. people
B. Bedrooms often determines number of people in the house and therefore the size of on-site sanitary waste disposal system (septic system)
The test done to determine the soil's capability to absorb leachate from a septic system is called
A. a site test
B. an absorption analysis
C. a percolation test
D. a leach field analysis
C.
Investment value is
A. the same as market value
B. the same as value in use
C. the value to a typical investor
D. the value to an individual investor
D. Investment value can be the same as market value by coincidence. A typical investor will pay market value for a building. A specific investor will look at investment value for a particular use
The value usually associated with real estate taxes is
A. market value
B. appraised value
C. assessed value
D. tax value
C. Technically no such thing as tax value. Market value may be used in tax value, but real estate taxes are based on assessed value. Appraised value is an estimate of value and is usually but not exclusively associated with market value
A transaction in which a father sells property to his son would not be used in an appraisal because
A. it is not an arm's length transaction
B. it is an invalid transaction
C. it is a value in use transaction
D. such a sale can use only the cost approach
A. All appraisals depend on use of market value transactions, which presume an arm's length transaction.
Arm's length transaction: no relationship exists between parties
A comparable sale has 4 bedrooms compared to the subject's 3 bedrooms. The 4th bedroom is worth $30,000. What do you do with that number?
A. add it to the subject's value
B. subtract it from the subject's value
C. add it to the comparable's sale price
D. subtract it from the comparable's sale price
D. You never touch the subject in the sales comparison approach. Instead you make adjustments to the comparable. If the comparable is better than the subject, you subtract; if it's worse than the subject, you add
The method of estimating replacement or reproduction cost that requires you to know the original cost of construction of the building is
A. the square foot method
B. the quantity survey method
C. the unit in place method
D. the index method
D. The 3 incorrect answers all are methods for estimating reproduction cost or replacement cost that involve either calculating building costs per sq. ft. or pricing out the various construction components
The total number of years a building is considered to contribute to the value of the property is a good definition of
A. chronological age
B. effective age
C. economic life
D. remaining economic life
C. Chronological age: actual age of building
Effective age: current apparent age of building, taking into account level of maintenance and upgrades
Remaining economic life: number of years left in which building will contribute to the value of the land
A number that relates net operating income to value is
A. the gross rent multiplier
B. the capitalization rate
C. the depreciated cost factor
D. the effective gross income factor
B. You divide the net operating income by the capitalization rate to get value
Which of the following does not fit in a group?
A. Consumer Credit Protection Act
B. Truth in Lending Act
C. Regulation Z
D. Equal Credit Opportunity Act
D. First 3 answers are essentially interchangeable names for the same act, which controls advertising and the provision of information with respect to loans. Equal Credit Opportunity Act prohibits discrimination in granting credit
A person buys a furnished house and wants to finance the purchase of both the house and the furniture through a mortgage loan. She tries to get
A. a blanket mortgage
B. a purchase money mortgage
C. a temporary loan
D. a package mortgage
D. Package mortgage loan covers real and personal property
Which of the following is not a typical obligation of the mortgagor?
A. maintain the property
B. keep a hazard insurance policy in force
C. get permission for alterations
D. advise the mortgagee of a change in the escrow account balance
D. Need to know who the mortgagor (borrower) and mortgagee (lender) are. Other answers relate to the borrower's duties.
Which one of the following does not affect the interest rate adjustment in an adjustable-rate mortgage loan?
A. index
B. equity
C. margin
D. cap
B. Equity is the difference between value of property and all the debts owed on the property
In a fixed-rate amortized loan, which one of the following does not vary from month to month?
A. monthly payment
B. interest paid
C. principal paid
D. remaining principal owed
A. Monthly payment remains the same while the portion of the principal you pay goes up, amount of interest goes down and you pay off more and more of the overall principal
The discount rate is
A. the amount of points you pay to reduce your interest rate
B. the amount of interest federal reserve banks charge each other for loans
C. the amount of interest paid on treasury bonds
D. the amount of money as a percent of total deposits that banks must keep in cash
B. Discount rate vs. discount points
Discount points: prepaid interest that you pay at the beginning of a loan to reduce the interest rate that you pay
A property is foreclosed and sold for nonpayment of the mortgage loan. The sale does not cover the remaining balance of the mortgage loan. The bank goes to court to seek
A. judicial foreclosure
B. statutory redemption
C. equitable redemption
D. deficiency judgment
D. Deficiency judgment: makes borrower personally obligated to pay balance of a debt
Judicial foreclosure: wrong here because foreclosure has already happened
Statutory and Equitable redemption: rights of the person whose property was foreclosed to pay off the debt and get the property back
The term most closely associated with real estate taxes is
A. ad valorem
B. appraised value
C. market value
D. cost approach
A. "Ad Valorem" means "based on the value" relates directly to real estate taxes because taxes are based on the value of the property.
Appraised value/market value can be used to figure out assessed value for tax purposes
Cost approach is an appraisal technique for estimating value
The assessment ratio is used to
A. determine the tax rate
B. convert market value to value in use
C. convert market value to assessed value
D. determine property tax exemptions
C. Multiply property's market value by assessment ratio to get assessed value
Someone protesting his assessment has to prove that
A. his taxes are too high
B. his taxes are higher than those of similar properties
C. his assessment is too high
D. his assessment is unequal to those of similar properties
D. Taxes are not about assessments.
Although you may think your assessment is too high, remember that assessments are about being equal among similar properties
Capital gains is calculated using
A. the depreciated basis
B. the original price of the property
C. the adjusted basis
D. the capital gains basis
C. Adjusted basis is the best answer because it's the last number you use in figuring capital gains
A reason people invest in real estate is because real estate is
A. low risk
B. highly liquid
C. easy to manage
D. highly leveraged
D. Generally you can borrow money easily to buy property. And that's what leverage is
Real estate investors expect to make money all the following ways except through
A. tax benefits
B. staying liquid
C. capital appreciation
D. positive cash flow
B. Real estate isn't considered a liquid investment; you can't get your money out of it quickly
When calculating the adjusted basis for capital gains purposes, depreciation is
A. subtracted from the total cost of the property
B. subtracted from the value of the building only
C. added to the adjusted basis
D. subtracted from taxes due
A. Depreciation is subtracted from the total cost of the property to get adjusted basis. Remember that depreciation is calculated only against the value of the building; buildings depreciate, but land doesn't
In analyzing a possible real estate investment, potential gross income - vacancy/collection loss + other income - operating expenses =
A. effective gross income
B. net operating income
C. debt service
D. cash flow
B.
If properties are NOT equal in value in an exchange, one person will have to pay the other
A. capital gains
B. loot
C. boot
D. adjusted basis value
C.
A property was sold for $260,000, which is 130% of what the owner paid for it. What had the owner paid for the property?
A. $100,000
B. $160,000
C. $200,000
D. $230,000
C. 130%/100=1.3
260,000/1.3=200,000
A building generates gross rent of $30,000 and just sold for $360,000. What is the gross rent multiplier?
A. 12%
B. 8%
C. 10
D. 12
D. 360,000/30,000=12
A building has a net operating income of $45,000. Buildings like this are appraised using a capitalization rate of 11%. What is the estimated value of the building?
A. $409,000
B. $450,000
C. $495,000
D. $540,000
A. 45,000/0.11=409,090
(Answers like this are usually rounded)
How many cubic feet are in a warehouse that measure 80ft x 50ft x 18ft high?
A. 72,000
B. 4,000
C. 2,340
D. 145
A.
Seller Sally pays $1,200 in taxes in advance for the year on January 1. She sells her house to buyer Brian and closes on June 1. Who owes what to whom?
A. seller owes the buyer $700
B. buyer owes the seller $700
C. seller owes the buyer $500
D. buyer owes the seller $500
B. Credit is an amount owed to you, debit is an amount you owe. Brian owes Sally
1,200/12months=100per month
Seller is in the house 5 months, buyer in the house 7. So
7x100=700
If the tax rate is $30 per $1,000, what are the taxes on property assessed at $80,000?
A. $240
B. $2,400
C. $800
D. $300
B. 80,000/1,000=80
80x30=2400
The payment factor for a 25yr loan at 6% interest is $6.85. What is the monthly payment on a mortgage loan of $175,000
A. $1,199
B. $875
C. $583
D. $618
A. Amount of mortgage/1,000=units of 1,000
Units of 1,000xpayment factor=monthly payment
175,000/1,000=175
175x6.85=1,198.75
(rounded to 1,199)
What is the commission if a property sold for $250,000 and the commission rate is 5%?
A. $15,500
B. $12,500
C. $10,500
D. $7,500
B. 250,000x0.05=12,500
What is the total interest you will pay on an 8% amortized 25yr mortgage loan of $200,000 if the monthly payments are $1,400?
A. $420,000
B. $300,000
C. $220,000
D. $200,000
C. 1,400x12monthsx25=
420,000 in total payments
420,000-200,000=220,000
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