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 tenancyEstate at willLife estateEstate at sufferance Estate at sufferance
When a borrower assumes a loan, he or she does all of the following except which?Maintains the propertyMakes payments on the propertyBecomes liable for the provisions of the loanRelieves the original mortgagor of his or her liability for 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?EastSouthNortheastSouthwest Northeast
What portion of a loan is covered by private mortgage insurance?AllLowerMiddleUpper Upper
Financing for farms depends on all of the following except which?Land productivityCounty code restrictionsWeather conditionsManagement skills County code restrictions
When calculating an interest rate, what is a lender’s “mark-up”?CapTermAdjustmentMargin Margin
Who are the major participants in the secondary mortgage market?Freddie Mae, Ginnie Mac and the FedFannie Mae, Ginnie Mae and Freddie MacFHA, VA and the FedGMAC, FHA, FNMA Fannie Mae, Ginnie Mae and Freddie Mac
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. The case file goes to the lender’s closing department.
What is an abstract of title?A property surveyThe method of transferring ownershipA title insurance policyA historical summary of a property’s title 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 propertyFailure to pay hazard insurance premiumsFailure to pay taxesFailure to meet an installment payment Failure to pay hazard insurance premiums
When an income property investor’s debt is very high, what is the most likely financial impact?Management issuesPositive cash flowExcess depreciationNegative cash flow Negative cash flow
Which of the following properties would be considered recreational?HotelShopping centerMarinaOffice building Marina
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 priceCostMarket valueExchange value Market value
Which item would typically not be part of a loan that is seller financed?Higher front end feesLower interest rateLonger loan termQuicker credit approval Lower interest rate
Which of the following would NOT be a reason for an equity investor to purchase an income property?To obtain a tax exemptionFor property appreciationFor the return rateFor the tax benefits To obtain a tax exemption
Which of the following is not a cycle associated with a syndication?OrganizationDevelopmentOperationLiquidation Development
What is the cost recovery period for nonresidential buildings purchased after May 12, 1993?15 years25 years27.5 years39 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 $3,472.88
If the Fed wants to expand the money supply using an open market operation, which of the following actions would it take?Cut taxesBuy securitiesIncrease the government’s spendingSell securities Buy securities
Under which of the following rights would a borrower be able to redeem his or her property after a foreclosure sale?Statute of fraudsStatutory right of redemptionStrict foreclosure rightEquitable right of redemption Equitable right of redemption
Dallas County is issuing bonds to fund a new high school project. What kind of bonds are these?DebenturesCorporate bondsRevenue bondsGeneral obligation 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 $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. 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?GEMPAMRAMARM ARM
What is the primary role of Fannie Mae?To purchase FHA and VA loansTo guarantee all FHA and VA loansTo originate FHA and VA loansTo insure FHA and VA loans To guarantee all 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 employmentIncome out of line with type of employmentNo prior year earningsMost income comes from gambling Most income comes from gambling
Which of the following would probably not be discovered through a property survey?An easementA restrictionAn encroachmentA chain of title defect A chain of title defect
After a foreclosure sale, who would receive any surplus proceeds after payment of costs, fees, expenses, and liens?BidderTrusteeLenderDebtor Trustee
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?LeverageProgressionEquity purchaseContribution 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 areaMedian income of families in the building’s locationNumber of employees that are currently employed or will be employed in the near futureAmount of space the firm needs for its employees to do their job 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. The comparable sold within the past two weeks.
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. The lender advances one lump sum payment at the start 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?TurnaroundArbitrageGrowthMarket timing Arbitrage
What is the most significant financial feature of a REIT?Ownership by at least a dozen investorsGuaranteed growth in valuePotential for tax-free statusFiduciary relationship to its investors Potential for tax-free status
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. 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 $153.23
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 BoardAbolished the defunct Federal Savings and Loan Insurance Corporation (FSLIC)Established two new federal deposit insurance funds to be managed by the Federal Deposit Insurance CorporationTransferred the regulatory powers of the Federal Home Loan Bank Board to the Federal Reserve Established two new federal deposit insurance funds to be managed by the Federal Deposit Insurance Corporation
A provision in a real estate loan that prohibits any prepayment is called what?Prepayment penaltyDue-on-sale clauseDefeasance clauseLock-in clause Prepayment penalty
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. Service the loan.
Which of the following would not be considered a junior loan?First deed of trustSecond deed of trustEquity loanHome improvement loan First deed of trust
ECOA requires that a lender send a denial notice within30 days.60 days.90 days.120 days 30 days.
When are funds dispersed on a construction loan?Whenever the builder needs themAt closingWhen the building is completeAt specified intervals called draws At specified intervals called draws
Freddie Mac was originally charted to create a secondary market for which type of mortgage loans?FHAVAConventionalSecond trusts Conventional
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?RegressionSubstitutionAnticipationProgression Progression
Which of these items would not need to be prorated on the day of closing?Property taxesHomeowner’s association feesRents for investment propertyAttorney fees 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 recastingOne year forbearanceAssignment of loan to FHAImmediate foreclosure Loan recasting
How are most apartment properties financed?Private lendersConventional lendersGovernment lendersForeign lenders Conventional 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 upPass throughPercentageAbove net Pass through
A property valued at $350,000 has an annual net operating income of $43,750. What is the capitalization rate?0.080.1050.110.125 0.08
Which document separates a regular real estate loan from a construction loan?Building loan agreementPromissory noteAppraisal reportCredit report Promissory note
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?BusinessLiquidityManagementRegulatory Business
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?REITREMTHybridJoint venture REMT
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 $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 $1,181.25
Which of the following is not a valid instrument for transferring property from a seller to a buyer?Quitclaim deedGeneral warranty deedDeed of releaseSpecial warranty deed General 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 clauseSubordination clauseDue-on-sale clauseRelease clause Due-on-sale 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 advisorMortgage brokerMortgage bankerPrivate party lender Mortgage banker
What is the basic entitlement of a VA loan?$36,000.00$60,000.00$104,250.00$144,000.00 $36,000.00
Regulation Z applies to which of these?$35,000 farm loan$50,000 restaurant loan$75,000 condominium loan$85,000 warehouse loan $75,000 condominium loan
Under which type of loan does the lender reduce the interest rate in exchange for part of the future profits?Shared appreciationPledged accountBuydownRenegotiable rate Shared appreciation
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. They guarantee principal and interest payments to the investors regardless of the actual payments collected.
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 approachIncome approachComparable approachSales comparison 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 ActTruth in Lending ActEqual Credit Opportunity ActHome Mortgage Disclosure Act Real Estate Settlement Procedures 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 listingWhen an offer is madeAfter the offer is acceptedWhen the appraisal is done At the time of listing
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 $116,600
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 methodSquare-foot methodUnit-in-place methodQuantity survey 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. A partial release cannot be required, unless it’s provided for specifically in the deed of trust.
Which of the following is not a procedure for controlling risk?Careful selectionRefinancingHedgingDiversifying Refinancing
Swapping operating partnership units for other interests is an example of growing income for a REIT through which method?AcquisitionFinancial engineeringDevelopmentProvision of services Acquisition

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