Real Estate 101 Finances Final Exam Questions

What type of tenancy exists when a tenant wrongfully remains without the landlord's consent after the expiration of a lease? Periodic tenancy Estate at will Life estate Estate at sufferance

When a borrower assumes a loan, he or she does all of the following except which? Maintains the property Makes payments on the property Becomes liable for the provisions of the loan Relieves the original mortgagor of his or her liability for the loan

Most mutual saving banks are located in what part of the country? East South Northeast Southwest

What portion of a loan is covered by private mortgage insurance? All Lower Middle Upper

Financing for farms depends on all of the following except which? Land productivity County code restrictions Weather conditions Management skills

When calculating an interest rate, what is a lender's "mark-up"? Cap Term Adjustment Margin

Who are the major participants in the secondary mortgage market? Freddie Mae, Ginnie Mac and the Fed Fannie Mae, Ginnie Mae and Freddie Mac FHA, VA and the Fed GMAC, FHA, FNMA

What happens after the underwriter approves a loan? The documents go to the escrow company. The tile search is initiated. The case file goes to the lender's closing department. The underwriter orders a property survey.

What is an abstract of title? A property survey The method of transferring ownership A title insurance policy A historical summary of a property's title

Which of the following actions is a technical default that rarely results in a foreclosure? Failure to maintain the property Failure to pay hazard insurance premiums Failure to pay taxes Failure to meet an installment payment

When an income property investor's debt is very high, what is the most likely financial impact? Management issues Positive cash flow Excess depreciation Negative cash flow

Which of the following properties would be considered recreational? Hotel Shopping center Marina Office building

The highest price a buyer is willing to pay and the lowest price the seller will accept for a property is known as what? Market price Cost Market value Exchange value

Which item would typically not be part of a loan that is seller financed? Higher front end fees Lower interest rate Longer loan term Quicker credit approval

Which of the following would NOT be a reason for an equity investor to purchase an income property? To obtain a tax exemption For property appreciation For the return rate For the tax benefits

Which of the following is not a cycle associated with a syndication? Organization Development Operation Liquidation

What is the cost recovery period for nonresidential buildings purchased after May 12, 1993? 15 years 25 years 27.5 years 39 years

Jim got a $3,000 savings account at 5 percent interest compounded annually. What will his balance be after four years? $3,646.52 $3,600.00 $3,472.88 $3,307.50

If the Fed wants to expand the money supply using an open market operation, which of the following actions would it take? Cut taxes Buy securities Increase the government's spending Sell securities

Under which of the following rights would a borrower be able to redeem his or her property after a foreclosure sale? Statute of frauds Statutory right of redemption Strict foreclosure right Equitable right of redemption

Dallas County is issuing bonds to fund a new high school project. What kind of bonds are these? Debentures Corporate bonds Revenue bonds General obligation bonds

According to the formula for calculating the down payment on an FHA loan, what would be the minimum down payment on a home that sold for $110,000? $1,375.00 $3,585.00 $3,135.00 $3,850.00

Developer Pete is working on a plan for a new subdivision. In which case will it be subject to the Interstate Land Sales Full Disclosure Act? The subdivision will have more than 25 lots. The subdivision will be marketed locally. All of the lots in the subdivision will be more than 15 acres each. The subdivision will be marketed out of state.

Amanda and Ralph Halpern have lived in their current home for over 35 years. They are in their 70s and Ralph has had some medical problems that have caused them to incur some very high medical bills. Which type of loan could be a viable solution for them? GEM PAM RAM ARM

What is the primary role of Fannie Mae? To purchase FHA and VA loans To guarantee all FHA and VA loans To originate FHA and VA loans To insure FHA and VA loans

Which of the following items would not be considered a red flag on the Verification of Employment form gathered by an underwriter? Three-month time gap between current and previous employment Income out of line with type of employment No prior year earnings Most income comes from gambling

Which of the following would probably not be discovered through a property survey? An easement A restriction An encroachment A chain of title defect

After a foreclosure sale, who would receive any surplus proceeds after payment of costs, fees, expenses, and liens? Bidder Trustee Lender Debtor

What is the term used to describe being able to purchase an investment property with less cash down and a good loan-to-value ratio? Leverage Progression Equity purchase Contribution

All of the following factors will affect the market rent on an office building except which one? How likely it is that new firms will locate to the area Median income of families in the building's location Number of employees that are currently employed or will be employed in the near future Amount of space the firm needs for its employees to do their job

When using the sales comparison approach to estimating value, the appraiser will make an adjustment in which of the following circumstances? The comparable sold within the past two weeks. The seller is offering market-rate owner-financing. The subject property was closer to the mall. The subject property has a lesser effective age than a comparable.

Which of the following statements is FALSE about a combination construction loan? It requires only one closing. The lender advances one lump sum payment at the start of the construction. The permanent loan will take over at a time specified in the loan document. The permanent loan start should coincide with the completion of the construction.

Investor Sam bought a property directly in a private market transaction and then he was able to earn a profit by creating a publicly-traded entity and issuing stock to the public. What investment strategy did Sam use? Turnaround Arbitrage Growth Market timing

What is the most significant financial feature of a REIT? Ownership by at least a dozen investors Guaranteed growth in value Potential for tax-free status Fiduciary relationship to its investors

FIRTPA allows an exception of its withholding rule in all of the following cases except which? The property is worth less than $300,000 and the purchasers are buying it as personal residence. The transaction is not subject to tax because of a US tax treaty with another country, and the buyer and seller are not related. The seller or buyer gets a "withholding certificate" from the IRS, which decreases the amount to be withheld. The seller is not a US citizen.

Robert and Pam get a $175,000 mortgage for 30 years at a fixed rate of 6.75%. Their monthly payment amount is $1,135.05. What will the principal payment be when they make their fourth payment? $151.52 $152.37 $153.23 $154.09

Which of the following is not a provision of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)? Placed the 12 district Federal Home Loan Banks under control of the Federal Housing Finance Board Abolished the defunct Federal Savings and Loan Insurance Corporation (FSLIC) Established two new federal deposit insurance funds to be managed by the Federal Deposit Insurance Corporation Transferred the regulatory powers of the Federal Home Loan Bank Board to the Federal Reserve

A provision in a real estate loan that prohibits any prepayment is called what? Prepayment penalty Due-on-sale clause Defeasance clause Lock-in clause

Mortgage brokers generally do all but which of the following? Collect a placement fee. Service the loan. Check the soundness of the investment. Bring borrowers and lenders together.

Which of the following would not be considered a junior loan? First deed of trust Second deed of trust Equity loan Home improvement loan

ECOA requires that a lender send a denial notice within 30 days. 60 days. 90 days. 120 days

When are funds dispersed on a construction loan? Whenever the builder needs them At closing When the building is complete At specified intervals called draws

Freddie Mac was originally charted to create a secondary market for which type of mortgage loans? FHA VA Conventional Second trusts

Tim and Sue have the smallest home in a sought-after neighborhood. The value of their home is increased because of the higher value of the other homes in the neighborhood. This is an example of what principle? Regression Substitution Anticipation Progression

Which of these items would not need to be prorated on the day of closing? Property taxes Homeowner's association fees Rents for investment property Attorney fees

What is the most common technique lenders use when dealing with an FHA loan that is in default due to circumstances beyond the borrower's control? Loan recasting One year forbearance Assignment of loan to FHA Immediate foreclosure

How are most apartment properties financed? Private lenders Conventional lenders Government lenders Foreign lenders

Building owner Carl has entered into a lease agreement with retail shop owner Sara that says Carl will pay all operating expenses up to a certain amount and then Sara will be responsible for anything over that amount. What is this called? Step up Pass through Percentage Above net

A property valued at $350,000 has an annual net operating income of $43,750. What is the capitalization rate? 0.08 0.105 0.11 0.125

Which document separates a regular real estate loan from a construction loan? Building loan agreement Promissory note Appraisal report Credit report

Greg bought an apartment building two years ago. He found out recently that the building will become rent-controlled. Greg is a victim of what kind of risk? Business Liquidity Management Regulatory

Amanda Green has invested in a real estate trust that will get income from mortgage interest, loan origination fees and buying and selling mortgages. Amanda has invested in what kind of trust? REIT REMT Hybrid Joint venture

Jim and Sue have three children. What is the maximum amount they can give each year without having to pay a gift tax? $12,000.00 $24,000.00 $36,000.00 $78,000.00

Paul and Jenny purchased a home from Fernando and Kris. The closing is set for September 2. The real estate taxes of $1,575 will be due at the end of the year. Using the 12-month/30-day method, what will be Fernando and Kris's share of the taxes? $516.39 $1,052.00 $1,058.76 $1,181.25

Which of the following is not a valid instrument for transferring property from a seller to a buyer? Quitclaim deed General warranty deed Deed of release Special warranty deed

Harry Samson wanted the purchaser of his property to assume his loan, but the lender refused. The lender was exercising his rights under what clause? Prepayment clause Subordination clause Due-on-sale clause Release clause

Sally and Dan Monroe are applying for a mortgage. They have selected Tim Steele to work with. Tim will prequalify the Monroes, find an appropriate loan product for them, and work with them through loan approval. After settlement, Tim's company will service the loan. What is Tim? Financial advisor Mortgage broker Mortgage banker Private party lender

What is the basic entitlement of a VA loan? $36,000.00 $60,000.00 $104,250.00 $144,000.00

Regulation Z applies to which of these? $35,000 farm loan $50,000 restaurant loan $75,000 condominium loan $85,000 warehouse loan

Under which type of loan does the lender reduce the interest rate in exchange for part of the future profits? Shared appreciation Pledged account Buydown Renegotiable rate

Which of the following is TRUE about Ginnie Mae's fully modified pass-through securities? They guarantee principal and interest payments to the investors regardless of the actual payments collected. They vary the yields to the investors as the market interest rates fluctuate. They maintain constant yields by paying only the interest to the investors. They are no longer viable options and have been eliminated.

The type of appraisal that uses comparable properties as a basis and is the primary approach used for resale homes is known as which? Cost approach Income approach Comparable approach Sales comparison approach

What law says that borrowers must receive a good faith estimate of the closing costs within three business days of the loan application? Real Estate Settlement Procedures Act Truth in Lending Act Equal Credit Opportunity Act Home Mortgage Disclosure Act

From a real estate agent's point of view, when should the planning for financing of an investment property begin? At the time of listing When an offer is made After the offer is accepted When the appraisal is done

What is the effective rental income for a company that has a potential rental income of $172,000, vacancies equaling $12,000, operating expenses of $28,400, and debt service of $15,000? $116,600 $131,600 $160,000 $172,000

Contractor Phil is trying to determine what a building would cost new. He estimates the costs of all the needed materials, the labor, supplies, overhead, all expenses and even profit. What is the method Phil is using? Index method Square-foot method Unit-in-place method Quantity survey method

If a developer has signed a blanket deed of trust covering all lots of the subdivision, what is true about partial releases? A partial release cannot be required, unless it's provided for specifically in the deed of trust. A partial release can always be obtained, even if it's not specifically provided for. It can be obtained only if there is a subordination agreement incorporated into the deed of trust. It cannot be obtained until at least 50 percent of the lots in the subdivision are sold.

Which of the following is not a procedure for controlling risk? Careful selection Refinancing Hedging Diversifying

Swapping operating partnership units for other interests is an example of growing income for a REIT through which method? Acquisition Financial engineering Development Provision of services