RE FINAL EXAM STUDY GUIDE

Leasing a property gives a business owner greater flexibility.
TRUE
FALSE

TRUE -

Adverse possession requires:
permanent structures to be built
secret use of a property
a contract for deed
open, notorious, and continuous use of a property

OPEN, NOTORIOUS AND CONTINUOUS USE OF PROPERTY
Through adverse possession, an owner who does not use their land or does not inspect it for a number of years may lose the title to another person who has some claim to the land, takes possession, and uses th

The right of one party to access or use the land of another is a(n):
encroachment
easement
assessment
lien

EASEMENT

Jim's family decided to sell one of their next-door brownstones, but still wanted to be able to use the next door driveway to access their parking spot. In the deed of the house they sold, they created an easement across the driveway. What kind of easemen

EASEMENT BY GRANT

The person or company who benefits from an easement in gross is called the:
dominant tenant
licensee
servient tenant
primary party

DOMINANT TENANT

Jenny has the right to cross her neighbor's property in order to access the boat ramp, but the right ends if she sells her property to another person. What kind of easement does Jenny have?
easement in gross
floating easement
dominant estate
easement appu

EASEMENT IN GROSS
An easement in gross is an easement that specifically applies to the person or entity (not the specific land).

For the last ten years, the O'Reilly brothers have, with his permission, parked their motorcycles in Mr. Sanders's side lot. Now Mr. Sanders wants to put a garden in the lot and revoked their parking privileges. They claim they have an easement by prescri

NO, BECAUSE THEY WERE PARKING WITH PERMISSION
An easement by prescription must be open, notorious, hostile, and adverse. The landowner cannot have granted permission.

Which of the following is TRUE of party walls?
A party wall separates two different properties, but it can only be owned by one party.
They are most commonly found in single-family residential property.
The owners on each side share the right of use and h

THE OWNERS ON EACH SIDE SHARE THE RIGHT OF USE AND HAVE AN EASEMENT IN THE OTHER SIDE OF THE WALL
A party wall is a wall shared by two separate properties. The owners on each side share the right of use, often as an easement. Specifically, both property o

What must happen in order to terminate an easement by releasing it?
A document must be signed by the easement-holder only.
An easement cannot be released without going to court.
A verbal agreement is sufficient for releasing the easement.
All affected par

ALL AFFECTED PARTIES MUST SIGN A DOCUMENT RELEASING THE EASEMENT
An easement can be released by the person who has the right to use the easement. Termination of an easement in this manner should always be recorded. This is achieved by all parties signing

Our friend Jim decided to buy back the neighboring brownstone to tear them both down and build a condo. Remember that he had an easement through the neighbor's driveway. In what way was this easement terminated?
by merger
by prescription
by release
by cou

BY MERGER
Because he is combining the two properties, the easement was terminated by merger.

Why are homes with liens on them hard to sell?
because the lien will increase property taxes for the buyer
because the lien will be transferred with the home to the buyer
because the cost of the lien is added to the loan amount
because the lien can be con

BECAUSE THE LIEN WILL BE TRANSFERRED WITH THE HOME TO THE BUYER
Liens are attached to a specific property, and so a buyer acquires all of the liens on the property they buy.

What is a specific lien?
a claim against all property an individual owns
an individual's ability to use a portion of a neighboring landowner's land
a part of a property that is over a neighbor's property line
a claim against a particular parcel of real es

A CLAIM AGAINST A PATICULAR PARCEL OF REAL ESTATE
Specific liens are claims against particular parcels of real estate and they do not affect any other property. A general lien, on the other hand, is a claim against any property an individual owns.

What is a lis pendens?
a list that prioritizes liens on a property
a term used for federal judgement liens
a contract used to formalize a lien
a notice used to inform the public when a lawsuit is filed that affects a specific piece of real estate

A NOTICE USED TO INFORM THE PUBLIC WHEN A LAWSUIT IS FILED THAT AFFECTS A SPECIFIC PIECE OF REAL ESTATE

What happens if a deceased person's cash reserves aren't sufficient to cover their debt?
Real and personal property will be liquidated.
Personal property will be liquidated, but real property is protected.
Real property will be liquidated, but personal pr

REAL AND PERSONAL PROPERTY WILL BE LIQUIDATED
Debts are paid using liquid assets (like money in a bank account) if possible. If the deceased person's cash reserves won't cover the debt, real and personal property will be liquidated.

If a property owner does not pay their income taxes, the IRS may put what on their property?
HOA lien
federal tax lien
assessment lien
ad valorem tax lien

FEDERAL TAX LIEN

What could cause a federal tax lien to be placed on a property?
unpaid ad valorem taxes
unpaid income taxes
unpaid assessments
an unpaid HOA lien

UNPAID INCOME TAXES

A mortgage is an example of a:
specific, involuntary lien
general, voluntary lien
general, involuntary lien
specific, voluntary lien

SPECIFIC, VOLUNTARY LIEN

College Credit Union has decided to give Melissa a loan. In exchange, they have a mortgage on Melissa's house. Which term best describes College Credit Union?
license holder
mortgagor
beneficiary
mortgagee

MORTAGAGEE
Mortgagee is the term that best describes College Credit Union. Having received a mortgage in exchange for giving Melissa a loan, College Credit Union is a mortgagee.

Which of the statements below is an example of a mortgagor?
Erica, a loan officer, approved Jamesy's loan.
Jamesy took out a loan in order to purchase her home.
Michael, a buyer's agent, represented Jamesy as a client during the homebuying process.
Big Ba

JAMESY TOOK OUT A LOAN IN ORDER TO PURCHASE HER HOME

Which of the following is TRUE of mechanic's liens?
They are not valid in the state of New York unless the property owner consents.
They are valid for a period of five years and cannot be renewed.
They are general liens that attach to all of the person's

THEY ATTACH TO THE PROPERTY ON WHICH WORK WAS DONE AND LAST FOR ONE YEAR

What kind of lien is a bail bond lien?
general and involuntary
specific and involuntary
specific and voluntary
general and voluntary

SPECIFIC AND INVOLUNTARY

What does the word "ad valorem" mean?
according to the city
according to the county
according to the school district
according to value

ACCORDING TO VALUE

Property taxes are based on what?
the flat rate for the county
the size of the city
the school district
the value of the property

THE VALUE OF THE PROPERTY

A city has plans to add sidewalks to a particular neighborhood. What is most likely to happen?
The cost of the sidewalks will be divided among all property owners in the city, not just the affected neighborhood.
All affected homeowners must pay the specia

ALL AFFECTED HOMEOWNERS MUST PAY THE SPECIAL ASSESSMENTS OR ELSE HAVE A TAX LIEN PLACED ON THEIR PROPERTY

How are liens prioritized?
Liens are prioritized in the same order in which they were recorded, with the exception of taxing entities taking priority over others.
Mechanic's liens must be paid off first, and the rest are paid in the same order of their re

LIENS ARE PRIORITIZED IN THE SAME ORDER IN WHICH THEY ARE RECORDED, WITH THE EXCEPTION OF TAXING ENTITIES TAKING PRIORITY OVER OTHERS

What happens if the debt secured by the lien is for a larger amount than the proceeds of the property sale?
The remainder of the debt is automatically forgiven by the lender.
The sale will not be allowed to close if the proceeds cannot cover the lien amou

THE SELLER HAS THE OPTION OF SETTLING THE REMAINING DEBT BY PAYING THE BALANCE AT THE CLOSING

Which of the following is true of deeds?
A deed is the legal document that transfers real estate title from one party to another.
A deed is a bundle of rights that a property owner holds.
Deeds are the behaviors and actions expected in an agency relations

A DEED IS THE LEGAL DOCUMENT THAT TRANSDERS REAL ESTATE TITLE FROM ONE PARTY TO ANOTHER

Josie is sixteen. She is buying her first car. Matt has agreed to sell her his old Civic. They sign a contract saying she will pay him $10,000. The next day, she decides to stick with her bike for a while instead. Can Matt enforce the contract? Why or why

NO, BECAUSE SHE IS NOT 18

In the world of real estate, what is a title?
the bundle of ownership rights to a property
the abbreviated history of ownership of a specific property
a document used to transfer a property to another party
a loan given to potential homebuyers

THE BUNDLE OF OWNERSHIP RIGHTS TO A PROPERTY

Which of these is NOT an example of voluntary alienation?
Ginger sells her condo to Richard.
Bob's home is foreclosed on by the bank.
Selena deeds her vacation rental to her daughter.
Samuel donates his historic home to the local historic preservation gro

BOBS HOME IS FORECLOSED ON BY THE BANK

Which of these is NOT an example of involuntary alienation?
Albany takes Laura's farmland (with fair compensation) to build a water treatment plant.
Anson dies without a will or heirs, and the state assumes his property.
Marjorie wills her family home to

MAJORIE WILLS HER FAMILY HOME TO HER CHILDREN

Which of the following happens in escheat?
Ownership interest in the property is transferred to an ex-spouse.
Ownership interest in property is transferred if the deceased gave previous consent.
Ownership interest in the property is transferred directly t

OWNERSHIP INTEREST IN THE PROPERTY IS TRANSFERRED DIRECTLY TO THE STATE WITHOUT THE DECEASED'S CONSENT

If a grantor's name has been changed since the original title was acquired, the deed must reflect:
at least one name, but either is acceptable
the current name of the grantor only
the previous name of the grantor only
both names of the grantor

BOTH NAMES OF THE GRANTOR

The granting clause should contain the following information EXCEPT:
the grantor's intention to convey the property at this time
a description of any limits there might be to the grantees' interest in the property
the grantor's intention to sell within a

THE GRANTOR'S INTENTION TO SELL WITHIN A YEAR

What is the purpose of a habendum clause?
define or limit the ownership interest of the grantee
make conveyance contingent upon funding
name a back-up grantee
ensure the grantee has complete ownership interest

DEFINE OR LIMIT THE OWNERSHIP INTEREST OF THE GRANTEE

Tina buys a property from Richard. The property has a deed restriction attached to it that specifies the property is not to be sold to people of a certain faith. When Tina goes to sell the property, her first offer is from a person of that faith. Is the d

NO, BECAUSE IT VIOLATES FAIR HOUSING LAW

Janice's elderly mother has legally given Janice the authority to carry out all of her business dealings. Janice has:
limited power of attorney
reversionary rights
general power of attorney
tenancy in common

GENERAL POWER OF ATTORNEY

What must happen to a deed for title to be transferred?
delivery and acceptance
title search
signing the deed
recording the deed

DELIVERY AND ACCEPTANCE

Which of the following is TRUE about a deed?
If the grantee loses the deed, the grantor has to reclaim the estate.
The grantee can't return the property by returning the deed.
Execution of a valid deed conveys title.
Recording is necessary to make a deed

THE GRANTEE CANT RETURN THE PROPERTY BY RETURNING THE DEED

Documents relating to real property must be kept on file in the:
state where the property is located
state where the owner resides
county where the property is located
city where the owner resides

COUNTY WHERE THE PROPERTY IS LOCATED

Which legal description will likely include the phrase "point of beginning"?
rectangular survey
vertical land
metes and bounds
recorded plat

METES AND BOUND

What direction do longitude lines, or meridians, run?
north to south, perpendicular to the equator
between the tropic of capricorn and the tropic of cancer
in township grids north of the equator
east to west, parallel to the equator

NORTH TO SOUTH, PERPENDICULAR TO THE EQUATOR

Township lines intersect with range lines to create townships, which are how many square miles?
6 square miles
36 square miles
16 square miles
64 square miles

36 SQUARE MILES

How many acres are there in each square mile (section) in a township?
460
640
560
240

640

In terms of the surface area surveyed, which surveying system is used to describe the most land in the U.S.?
rectangular survey
vertical land description
recorded plat
metes and bounds

RECTANGULAR SURVEY

What is a datum base point established by?
satellite data
mean sea level
the tallest building in town
the soil

MEAN SEA LEVEL

What is the space above a parcel of land called?
air lot
air estate
datum
sky parcel

AIR LOT

What will a developer need to determine the need for leveling, grading, and engineering problems that may arise?
recorded plat
vertical survey
survey
contour

CONTOUR

What survey method is used for expressing condominium ownership boundaries?
rectangular survey
vertical land description
recorded plat
metes and bounds description

VERTICAL LAND DESCRIPTION

What is a benchmark?
a system used to depict parks on a map
permanent reference marker for both locational and elevation points
the grade of land on which a structure is built
mark on a plat indicating the pivot point of a parcel of land

PERMANENT REFERENCE MARKER FOR BOTH LOCATIONAL AND ELEVATION POINTS

Which covenant means that the grantor states that they hold the title that is being conveyed in the deed?
Covenant of Right to Convey
Covenant of Seisin
Covenant of Further Assurances
Covenant of Warranty Forever

COVENANT OF SEISIN

Jessica and Sam are getting a divorce. It's an amicable separation, and it's decided that Jessica will keep their apartment while Sam will keep both cars. What kind of deed will Jessica ask Sam to sign to clarify her sole title on the apartment?
bargain a

QUITCLAIM DEED

Who are the three parties on a deed of trust?
borrower, lender, broker
borrower, lender, trustor
borrower, lender, trustee
borrower, lender, seller

BORROWER, LENDER, TRUSTEE

Thuy takes out a mortgage in order to buy a home. She puts 20% down. Who has title to the house, and why?
Thuy, because she put down more than 5%.
The bank, because doesn't have 51% equity yet.
Thuy, because in a mortgage, the buyer has title and the bank

THUY, BECAUSE IN A MORTGAGE, THE BUYER HAS TITLE AND THE BANK HAS A LIEN

Which of these would most negatively affect the marketability of a title?
a buyer's credit score
a mortgage
a mechanic's lien
the size of the property

A MECHANIC'S LIEN

Which of the following is TRUE about the chain of title revealed through a title search?
A court action called a suit to quiet title is needed to establish ownership if there is a gap in the chain.
It's a condensed record of the last "link" in the chain,

A COURT ACTION CALLED A SUIT TO QUIET TITLE IS NEEDED TO ESTABLISH OWNERSHIP IF THERE IS A GAP IN THE CHAIN

Giving notice" of one's interest in a real property can be broken into:
real notice and instructive notice
actual notice and instructive notice
constructive notice and actual notice
constructive notice and real notice

CONSTRUCTIVE AND ACTUAL NOTICE

Which type of policy assures a lender they have a valid first lien against the property?
leasehold title insurance policy
certificate of sale policy
residential owner's title policy
lender's title insurance policy

LENDER'S TITLE INSURANCE POLICY

Which of the following would NOT be covered by a title insurance policy?
A forged inspection document
An encumbrance created prior to the deed's recording
Another person claiming ownership to the land
Damage to the property from a fire

DAMAGE TO THE PROPERTY FROM A FIRE

An owner's policy extended coverage often covers the following items EXCEPT:
Mining claims
Water rights
Electricity access
Unrecorded liens

ELECTRICITY ACCESS

Who is NOT likely to attend the closing of a real estate transaction?
lender's representative
seller
appraiser
buyer's agent

APPRAISER

Which of the following is NOT a good reason for closings to be separately attended by the seller and buyer?
The cooperating brokers do not always cooperate like they should.
The order of buyer and seller closing doesn't matter, so individual schedules can

THE COOPERATING BROKERS DO NOT ALWAYS COOPERATE LIKE THEY SHOULD

Which of these actions should be taken during a final walkthrough?
the signing of the agency agreement
the signing of the contract
the negotiation of the purchase price
ensuring agreed-upon repairs have been completed

ENSURING AGREED-UPON REPAIRS HAVE BEEN COMPLETED

Which of the following items should a seller NOT put into escrow with the title company by closing?
any payoff letters from lenders
a survey
title evidence
affidavits of title

A SURVEY

Which party typically requires homeowners insurance?
the insurance company
the lender
the seller
the buyer's agent

THE LENDER

When does the mansion tax apply?
when property is sold in New York City
when the home is over 5,000 square feet
when consideration is $10 million or more
when consideration is $1 million or more

WHEN CONSIDERATION IS $1 MILLION OR MORE

Do RESPA requirements apply when a purchase is financed by a loan insured by the FHA?
No, the purchase must be financed by a federally related mortgage loan.
No, the loan must be guaranteed by the VA.
Yes, loans insured by the FHA are included.
Yes, but o

YES, LOANS INSURED BY THE FHA ARE INCLUDED

Can a seller ever require a buyer to purchase title insurance from a specific title company?
No, never.
No, unless they have family ties at the title company.
No, unless they pay for all costs for themselves and the buyer.
Yes, in order to purchase the pr

NO, UNLESS THEY PAY FOR ALL COSTS THEMSELVES AND THE BUYER

According to RESPA guidelines, if an escrow account contains an amount more than $50 in excess of the allowable limit, the lender:
must return that amount to the borrower within 30 days
must notify the borrower and give them the option of a refund or cred

MUST RETURN THAT AMOUNT TO THE BORROWER WITHIN 30 DAYS

What is the official name of the RESPA/TILA form that serves as the closing statement?
HUD-1 Disclosure
Good Faith Estimate
Closing Disclosure
TILA Disclosure

CLOSING DISCLOSURE

How will closing cost expenses be determined?
through the sales contract
through an amendment to the sales contract
state guidelines
NAR standards

THROUGH THE SALES CONTRACT

Who determines how the expenses in a real estate transaction will be allocated?
The listing broker
The title company
The buyer's attorney
The lender

THE TITLE COMPANY

Title and inspection fees are examples of non-recurring closing costs that are associated with:
Title and inspection fees are NOT examples of non-recurring closing costs.
the home-purchase process
the lender
neither the lender nor the home-purchase proces

THE HOME-PURCHASE PROCESS

When talking about a closing statement, a negative balance or a negative amount is referred to as a credit.
FALSE
TRUE

FALSE. A credit is a positive balance or a positive amount.

A prepaid item is an expense that has already been paid by:
the buyer
the seller
the lender
the title company

THE SELLER

An HOA has an annual, prepaid fee of $1,080. A new buyer closes on a home in the neighborhood with exactly 3 months left in the year. How much will the buyer's prorated fee cost?
$145
$300
$90
$270

270

What is reconciliation?
factoring the debits and credits from the purchase price to determine how much money the buyer and seller must bring to closing
the sum of a buyer's closing costs
the process of figuring out proration amounts
another term for the e

FACTORING THE DEBITS AND CREDITS FROM THE PURCHASE PRICE TO DETRERMINE HOW MMUCH MONEY THE BUYER AND SELLER MUST BRING TO CLOSING

Jennifer wants to buy a new home, so she takes out a loan from Muddy Bank. Three months later, Muddy Bank transfers her loan (and note) to its rival bank, Grassy Bank. Determine what happens with Jennifer's loan.
Jennifer has to pay the remaining loan amo

JENNIFER'S LOAN MERELY CHANGES HANDS; SHE NOW OWES HER LOAN DEBT TO GRASSY BANK

What information is specified by the note?
the amount of the debt, the interest rate, and the terms of repayment
the rate of return, the interest rate, and the amount of repayment
the due date of repayment and inspection report of the collateral
the amoun

THE AMOUNT OF DEBT, THE INTEREST RATE AND THE TERMS OF REPAYMENT

In order to purchase her dream house, Jane is taking out a loan. In exchange for the loan, Jane is giving her lender a mortgage. What term best describes Jane?
mortgagor
mortgagee
beneficiary
license holder

MORTGAGOR

Which of the statements below is an example of a mortgagor?
Jamesy took out a loan in order to purchase her home.
Big Bank gave a loan to Jamesy so she could purchase her home.
Michael, a buyer's agent, represented Jamesy as a client during the homebuying

JAMESY TOOK OUT A LOAN IN ORDER TO PURCHASE HER HOME

When a borrower goes to a mortgage loan officer to apply for a loan, they are talking to someone in which type of market?
secondary
All choices are correct.
primary
government sponsored

PRIMARY

Brooke is in the mortgage industry. Primarily, she talks with buyers and helps them locate the right lender for their financial situation. Brooke is a:
mortgage broker
listing agent
buyer's agent
mortgage banker

MORTGAGE BROKER

When a loan is amortized, the monthly payments _____ for the term of the loan. At the end of the term, the balance will be $0.
are unpredictable
increase
are the same
decline

ARE THE SAME

Which could NOT cause a borrower to default?
failure to maintain proper insurance
failure to pay property taxes
failure to keep up with roof maintenance
failure to maintain the original landscaping

FAILURE TO MAINTAIN THE ORIGINAL LANDSCAPING

Equitable redemption occurs before the auction of property and allows:
a debtor to resume normal monthly payments
a lender to recast a loan for the defaulting debtor in lieu of foreclosure
a debtor to take a lender to court over default payments
a default

A DEFAULTING DEBTOR TO PAY THE DEFAULTED PORTION OF THE DEBT AND PREVENT FORECLOSURE

A provision in the mortgage contract that triggers the payment in full of the loan upon the sale or conveyance of the property is known as a(n):
alienation clause
equitable redemption
deficiency judgement
breach letter

ALIENATION CLAUSE

A commission is commonly a percentage of the:
offer
listed price
sales price
seller's salary

SALES PRICE

To solve for the part, you need to multiply the total by the percentage.
TRUE
FALSE

TRUE

Eden puts an offer in on a three-story Victorian home in Hudson. She puts earnest money into an escrow account but the deal falls through - it turns out the house was infested with termites and didn't pass inspection. Eden is worried she won't receive her

HER EARNEST MONEY WILL BE RETURNED TO HER; HER CONTRACT SPECIFIES THAT SHE WILL RECEIVE THIS MONEY IF A PROPERTY DOESN'T PASS INSPECTION

What happens to the earnest money on closing day?
It is transferred to the buyer.
It is released from the lender.
It is put into an escrow account.
It is transferred to the seller.

IT IS TRANSFERRED TO THE SELLER

If a buyer makes a 20% down payment and obtains a $100,000 mortgage, what is the sales price of the property?
$125,000
$160,000
$148,200
$117,550

$125,000
If the mortgage is $100,000 after a 20% down payment, that means that $100,000 represents 80% of the total sales price. $100,000 / 0.8 = $125,000.

Shawn is buying a house. He put 20% down as a down payment and obtained a $150,000 mortgage from a lender. What is the total sales price of Shawn's purchase?
$170,000
$187,500
$300,000
$192,750

$187,500
A loan for $150,000 and a 20% down payment means that Shawn's sales price was $187,500.

The cost of a point depends on whether it is a discount point or an origination point.
TRUE
FALSE

FALSE
Both discount points and origination points cost 1% of the loan amount.

How much would 1 discount point cost for a $25,000 loan?
$250
$500
$2,500
$5,000

$250

Which of these is a reason the seller might not receive the entire purchase price when it's all said and done?
all of these are correct
they need to pay interest on the earnest money deposit
commission payments are taken from the sale
payment of the buyer

COMMISSION PAYMENTS ARE TAKEN FROM THE SALE

A seller sells their home for $500,000. They didn't use an agent, but they did have to pay $10,000 in closing costs. In addition, they had to pay off their $123,000 mortgage. What is the net to seller?
$196,00
$490,000
$367,000
$298,000

$367,000

Jan wants $10,000 in profit from the sale of her home. She has to pay off her $150,000 mortgage, as well as $7,000 in closing costs and 6% in commission. How much does she need to sell her home for?
$254,242
$217,659
$177,660
$167,000

$177,660

What is the next-smallest municipal division in New York, after state?
city
town
village
county

COUNTY

What determines how a city's government is structured?
the mayor
the city's court of appeals
the city's charter
the state law

THE CITY'S CHARTER

The city of Brunching-on-Hudson, NY, is governed by an elected city council and an elected mayor. However, the mayor doesn't have veto power over the laws passed by the city council. What is this kind of government called?
rule by committee
4-and-1 govern

WEAK MAYOR-COUNCIL

What is the governing body of a town?
town board
town council
town assembly
town clerk

TOWN BOARD

Jay lives in a big, depressing mansion located just outside the village of West Egg. What kind of municipality is Jay's home located in?
unincorporated land
a town
a hamlet
the suburbs

A TOWN

Which of these is NOT a right given to local government by the New York Municipal Home Rule Law?
taxing citizens
creating zoning regulations
overturning state laws
passing laws

OVERTURNING STATE LAWS

The New York City Council passes a law banning plastic bags, even though they are not banned elsewhere in the state. Why is this allowed?
Environmental regulation in cities over 1,000,000 people is overseen by the EPA, not state regulatory statutes.
Citie

THE STATE CONSTITUTION GIVES CITIES, TOWNS, AND VILLAGES THE RIGHT TO PASS THEIR OWN LAWS IF THEY DONT CONTRADICT STATE LAWS

What is the relationship between a town's master plan and its zoning regulations?
Zoning regulations should reflect the priorities of the master plan.
The master plan should be shaped by zoning regulations.
There is no connection between zoning regulation

ZONING REGULATIONS SHOULD REFLECT THE PRIORITIES OF THE MASTER PLAN

The village board of trustees of Adorableville, NY, wants to pass zoning regulations increasing the allowable density for condo buildings downtown. What do they need to be able to show to pass these regulations?
that they have a solution in place to deal

THAT THE MASTER PLAN SHOWS INCREASED DENSITY BENEFITS TO THE COMMUNITY

How does a municipality set the property tax rate?
by evaluating the total market rate of all property in the municipality
by making a budget and calculating their financial needs
by taking a percentage of the municipality's total federal tax payments
by

BY MAKING A BUDGET AND CALCULATING THEIR FINANCIAL NEEDS

Which of these is NOT something planning boards do?
advise on zoning regulations
grant zoning variances
create the capital budget
create the master plan

GRANT ZONING VARIANCES

After a master plan is adopted, what can a municipality start to create or refine?
a map
zoning ordinances
an annual budget
taxes

ZONING ORDINANCES

What is the difference between a subdivider and a developer?
a subdivider builds investment property, a developer builds primary residences
a subdivider creates a new neighborhood, a developer builds in existing neighborhoods
a subdivider is a governmenta

A SUBDIVIDER PARCELS OUT THE LAND, A DEVELOPER BUILDS THINGS ON IT

What makes cluster zoning different from other kinds of zoning?
All retail for an area is required to stay in a delimited area.
The density is determined for an entire area, not lot-by-lot.
There are no limitations on building height in cluster zoning.
Th

THE DENSITY IS DETERMINED FOR AN ENTIRE AREA, NOT LOT-BY-LOT

What are the two most important things the zoning board of appeals does?
determine property tax rates and assess homes
create a master plan and official map
interpret zoning regulations and grant variances
write zoning ordinances and consult on environmen

INTERPRET ZONING REGULATIONS AND GRANTING VARIANCES

Raddad found the perfect location for his artisanal, vegan ice cream shop. The only downside is that it's in a building that is zoned for residential use. What can he do?
Lobby city council to change the building code.
Apply for a use variance.
Apply for

APPLY FOR A USE VARIANCE

Leo signs a lease for a space to open his donut shop, only to realize that the area is actually zoned for residential use only. What does he need to get to be allowed to open his donut emporium?
a use variance
a zoning exception
an area variance
a buildin

A USE VARIANCE

What is the architectural review board primarily concerned with?
exteriors
zoning regulations
interiors
building code

EXTERIORS

What three agencies have to approve a plan to build in a wetland in New York?
the Army Corps of Engineers, the EPA, and the New York State Department of Conservation
the National Park Conservancy, the FDA, and the New York State Wetlands Protection Agency

THE ARMY CORPS OF ENGINEERS, THE EPA, AND THE NYS DEPARTMENT OF CONSERVATION

Kerry bought a gorgeous old farmhouse upstate. When she was researching the property's history, she found out that it was once owned by Fiorello LaGuardia. She's planning to apply for the house to be on the State Register of Historic Places. Why might she

TO GET A TAX CREDIT TO HELP WITH REHABILITATION EFFORTS

On what are construction permit fees based?
a standard fee schedule
the cost of the project
the median cost of building in the area
the operating budget of the developer

THE COST OF THE PROJECT

A couple wants to purchase a two-family building that has recently been converted to a one family, but the CO has not been updated. What potential issues could come up during the sale?
The DOB could put a lien on the property until the CO was fixed.
The s

THE LENDER WOULDN'T APPROVE THE LOAN WITHOUT AN UPDATED CO

How would you describe the difference between a planning board and a planning department?
A planning board is concerned with interiors while a planning department is concerned with exteriors.
A planning board does research while a planning department crea

A PLANNING BOARD MAKES A MASTER PLAN WHILE A PLANNING DEPARTMENT IMPLEMENTS IT

What is the relationship between a municipality's budget and the property tax rate?
The tax rate determines the budget based on how much tax income will be raised that year.
The budget is ad valorem when compared with the municipality's tax rate.
The budg

THE BUDGET DETERMINES THE RATE BASED ON HOW MUCH MONEY THE MUNICIPALITY NEEDS TO FUNCTION

What is one reason a home's assessed value might be lower than its market value?
The home is in a historic district.
The municipality uses partial assessment.
The assessment was not for tax purposes.
The market value was figured using the cap rate system.

THE MUNICPALITY USED PARTIAL ASSESSMENT

The town of Mont Blanc, NY has decided to use a partial assessment rate of 75% for all homes. Is this legal, and why?
Yes, because the assessed value is over 50% of the market value.
No, because New York homes can't be assessed at over 6% of their value.

YES, BECAUSE ALL HOMES ARE BEING ASSESSED THE SAME WAY

New York's "piece of the pie" taxation styles heavily favors which kind of property?
commercial property
residential property
vacant property
industrial property

RESIDENTIAL PROPERTY

Why is a 20.385% residential tax rate not burdensome for New York City class one properties?
That tax rate is only applied to 6% of a home's market value.
New York taxpayers can afford to pay a higher tax rate.
Exemptions and tax credits ensure most New Y

THE TAX RATE IS ONLY APPLIED TO 6% OF A HOME'S MARKET VALUE

How does an assessor determine market value using the cost approach?
determine how much it would cost to replace the building
calculate the total cost to buy the property
find the cost of the land
use the total amount an income-producing property costs to

DETERMINE HOW MUCH IT WOULD COST TO REPLACE THE BUILDING

Esperanza got her most recent tax assessment in the mail. After talking to her neighbors and thinking it over, she's decided to challenge the assessment. What is one possible reason she would make this challenge?
She wanted to be granted a partial-assessm

SHE BELIEVES HER PROPERTY WAS ASSESSED UNFAIRLY

If a town decides to go to full assessment for residential properties, how can a homestead tax option help ease the tax burden on homeowners?
It allows properties classified as homesteads to avoid tax increases for ten years following the adoption of the

IT ALLOWS THE MUNICIPALITY TO TAX HOMESTEADS AT A DIFFERENT RATE

Which of the following ISN'T a responsibility of the office of the receiver of taxes?
doing collections for the municipality
mailing out tax bills to homeowners
taking care of some of the municipality's accounting functions
assessing properties for taxabl

ASSESSING PROPERTIES FOR TAXABLE VALUE

A homeowner has a 1% deductible on her homeowners insurance policy. Her home is worth $300,000. A fire damages her property, and an adjuster decides it will cost $50,000 to repair the damage (and it's covered). How much of the $50,000 will she pay?
$500
$

$3,000

What is the difference between an independent insurance agent and an insurance broker?
An agent only works with one insurance company, while a broker works with many.
An agent is paid by the client, while a broker is paid by the insurance company.
An agen

AN AGENT HAS APPOUNTMENTS WITH INSURANCE COMPANIES, WHILE A BROKER DOES NOT

A real estate agent has a client who is a first-time homebuyer, and frankly, pretty clueless. This goofball wants to get the absolute minimum amount of insurance, with a super-high deductible policy. The agent believes this is a mistake. What can the agen

EDUCATE THEIR CLIENT ABOUT WHY THE POLICY IS A RISKY IDEA, THEN LET IT GO

Why do lenders require property insurance?
To protect their investment in the property
Because it earns them a tax credit
To ensure the buyer is protected if something happens
Because it is mandated by the federal goverment

TO PROTECT THEIR INVESTMENT IN THE PROPERTY

For what year's insurance payment does a lender collect money from a borrower to hold in escrow?
the next year
the previous year
the current year
It depends on the specific borrower.

THE NEXT YEAR

Lyn has an event-planning business that specializes in "extreme" experiences: sky diving, wild animal encounters, Fugu preparation classes, etc. She operates out of an old building she owns in a flood zone. When she gets commercial insurance, is she likel

NO, BECAUSE HER NEEDS ARE VERY SPECIFIC AND DIFFICULT TO COVER

Why is dwelling insurance more appropriate for landlords than homeowners insurance?
It's more cost-effective for investors.
It allows for more flexibility in adding riders and umbrella policies.
It offers higher liability limits than homeowners insurance.

IT DOESNT COVER PERSONAL PROPERTY (WHICH BELONGS TO THE TENANT)

What is the most comprehensive dwelling insurance, DP-1, DP-2, or DP-3 (and why)?
DP-3, because it is an all-risk policy.
DP-2, because it covers the most named perils.
DP-2, because it doesn't exclude earthquakes or nuclear war.
DP-1, because it includes

DP-3, BECAUSE ITS AN ALL-RISK POLICY

What is the difference between HO-4 and HO-6 homeowners policies?
HO-4 policies are all-risk, HO-6 policies are named peril
HO-4 policies are for smaller homes, HO-6 policies are for larger homes
HO-4 policies are for renters, HO-6 policies are for condos

HO-4 POLICIES ARE FOR RENTERS, HO-6 IS FOR CONDOS

What is the purpose of an umbrella policy?
To increase liability coverage above normal limits
To replace more expensive homeowners policies
To ensure inflation doesn't drop insurance coverage below coinsurance requirements
To protect specific valuable ite

TO INCREASE LIABILITY COVERAGE ABOVE NORMAL LIMITS

Why is using replacement cost considered more desirable for insurance coverage than using actual cash value?
Because it takes longer to receive an actual cash value settlement
Because actual cash value fluctuates with the local market
Because replacement

BECAUSE THE REPLACEMENT COST OF PROPERTY IS HIGHER THAN ITS ACTUAL CASH VALUE, GIVING YOU BETTER COVERAGE

rchie owns a building whose replacement cost is $750,000. His insurance has a 80% coinsurance requirement. What is the least amount of coverage he can have to avoid paying a coinsurance penalty?
$750,000
$600,000
$500,000
$675,000

$600,000

Betty's home insurance covers replacement costs for her current wiring, which costs $120 a foot to install. Her home burns down. Local code has changed, and now requires wiring that costs $180 a foot to install. She has no law or ordinance riders. How muc

$60 A FOOT

Which of the following would NOT be considered when determining the cost of a homeowner's insurance premium?
the size of the mortgage
the age of the home
the condition of the roof
the amount of the deductible

THE SIZE OF THE MORTGAGE

Why should homeowners who qualify for standard insurance get that insurance instead of NYPIUA insurance?
NYPIUA coverage is more expensive.
NYPIUA coverage has to be renewed every six months.
NYPIUA coverage is doesn't have flood insurance, while flood co

NYPIUA COVERAGE IS MORE EXPENSIVE

Which category of property owners are required to purchase flood insurance?
people in any known flood plain
people in the 500-year flood plain
people in the 100-year flood plain
people in the 50-year flood plain

PEOPLE IN THE 100-YEAR FLOOD PLAIN

How many violent, job-related deaths were experienced by real estate professionals in 2016?
11
57
27
10

27

A city is renovating its public library. Who or what is indirectly paying for the rennovations?
the municipality's leader
sales tax
the subdivision's landlord
real estate tax

REAL ESTATE TAX

What is unique about property tax rates in New York?
New York's property tax rates are adjusted once every year.
New York's property tax rates are adjusted once every two years.
New York's property tax rates are high when compared with other states.
New Y

NY'S PROPERTY TAX RATES ARE HIGHER WHEN COMPARED WITH OTHER STATES

Explain why the lender was able to repossess your Derek Jeter Mercedes.
Because you defaulted on car payments.
Because you defaulted on car payments and the lender filed a lien on your car.
Because you neglected to pay for the adequate auto insurance and

BC YOU DEFAULTED ON CAR PAYMENTS AND THE LENDER FILED A LIEN ON YOUR CAR

Jennifer, a property owner in Brooklyn, wonders how her property taxes are established. Her neighbor Tommy tells her that they are calculated according to the value of her property. This means property taxes are a(n):
income tax
special assessment
unfair

AD VALOREM TAX

Which of the following jurisdictions does not issue property taxes in New York?
states
citites
counties
villages

STATE

Gerald owns two properties: one in Yonkers and one in Ithaca. Property taxes on his Ithaca property are very high, so he decides to make his Yonkers property his permanent residence (reasoning that if his Ithaca property is vacant he won't be taxed on it)

THIS WILL NOT SOLVE GERALD'S PROBLEM, AS EVEN VACANT PROPERTY IS TAXED

Raul is head of budgeting for Oswego. The Oswego budget relies heavily on property taxes. Raul is complaining about making the budget because, he says, it is difficult to predict future property tax revenue. Evaluate Raul's complaint.
Raul is right; prope

RAUL IS WRONG; PROPERTY TAXES ARE RELATIVELY DEPENDABLE AND EASY TO PREDICT

The cash that an investment generates after accounting for the operating expenses, debt service, and taxes associated with the enterprise is called:
adjusted investment income
post-expense income
cash in
cash flow

CASH FLOW

A REIC provides opportunities for investors to purchase a single mortgage.
FALSE
TRUE

FALSE - A real estate investment conduit (REIC) provides opportunities for investment via the purchase of securities backed by a pool of multiple mortgages

Which of the examples below BEST describes investment gain?
A property owner purchasing a home in a hot market with the intention of reselling in five years without doing any improvements.
A property owner purchasing an empty lot for the purpose of resell

A PROPERTY OWNER BUYING A "FIXER UPPER" AND THE RESELLING THE HOME AFTER REMODELING THE KITCHEN AND THE BATHROOMS

One of the the primary incentives for investing in commercial real estate is the:
income generation
low rate of return
high-risk factor
tax benefit

TAX BENEFIT

What message does the concept "time value of money" try to convey?
Money does not change in value over time if invested.
Today's money is worth more now than the same amount will be in the future.
Money depreciates in value over time if invested.
Today's

TODAY'S MONEY IS WORTH MORE NOW THAN THE SAME AMOUNT WILL BE IN THE FUTURE

Single-family home owners own:
the building
neither the building nor the lot
the building and the lot on which it stands
the lot

THE BUILDING AND THE LOT ON WHICH IT STANDS

The IRS does NOT allow property to be depreciated if it is:
residential
retail building
undeveloped land
single family

UNDEVELOPED LAND

Which of the following is an example of a mixed-use building?
an apartment building with more than 100 housing units
a building that has retail shops and housing units
an two-story townhouse that shares a yard
an apartment building with more than four lev

A BUILDING THAT HAS RETAIL SHOPS AND HOUSING UNITS

Which of the following BEST describes a mixed-use building?
A building with shops on the ground floor and apartments up above.
A private home in residential neighborhood.
An office building with a garage built into the lower levels.
A building complex wit

A BUILDING WITH SHOPS ON THE GROUND FLOOR AND APARTMENTS UP ABOVE

Building 1301 has a basement and three levels above ground. What type of building is it?
kinda-rise
mid-rise
low-rise
high-rise

LOW-RISE

Building 6602 is an older, functional building that attracts price-driven tenants. Which class of building is Building 6602?
Class D
Class B
Class A
Class C

CLASS C

Which of the following statements is TRUE?
In general, office tenants are all the same and do not look for anything specific in their office space.
The office building market is considered a low-risk, low-reward investment.
The office building market tend

THE OFFICE BUILDING MARKET TENDS TO FOLLOW RESIDENTIAL MARKET TRENDS ABOUT 2-3 YEARS LATER

Which of the following is usually anchored by a supermarket?
factory outlet
strip center
mall
neighborhood center

NEIGHBORHOOD CENTER

Jenna's tenants at her strip mall complain about a lack of foot traffic. Which of the solutions below might BEST solve this problem?
Building a bigger sign.
Lowering the rental rate for tenants.
Identifying an anchor tenant with a high demand for the stri

IDENTIFYING AN ANCHOR TENANT WITH A HIGH DEMAND FOR THE STRIP MALL

Which of the following is the most common lease used for retail properties?
ground lease
percentage lease
gross lease
net lease

PERCENTAGE LEASE

Which property category do distribution centers and warehouses fall under?
agricultural property
residential property
industrial property
special-purpose property

INDUSTRIAL PROPERTY

Industrial property tenants tend to require lots of communication and overhead.
TRUE
FALSE

FALSE - Industrial property tenants are generally very low maintenance.

Which of the descriptions below is MOST LIKELY an industrial property?
Mitch's tenants are very low-maintenance and their rent is generally high per square foot in comparison to other investment properties.
Shane's tenants are high-maintenance and the mar

MITCH'S TENANTS ARE VERY LOW MAINTENANCE AND THEIR RENT IS GENERALLY HIGH PER SQUARE FOOT IN COMPARISON TO OTHER INVESTMENT PROPERTIES

Real estate refers to:
any manmade structures on otherwise unimproved property
the land and any manmade structures
the land and improvements
unimproved property

THE LAND AND IMPROVEMENTS

Which statement BEST represents an incentive to buying undeveloped land?
Undeveloped land is best for buyers looking to immediately live on the land.
Undeveloped land often comes with minimal "red tape," so building new structures is a very quick process.

UNDEVELOPED LAND IS OFTEN CHEAPER AS IT GENERALLY COMES WITH LOWER TAXES AND NO BUILDING INSURANCE

The primary question most unimproved land buyers will need to ask themselves is:
whether or not their land is in a good location
whether or not they have time to invest
whether or not they need their investment to be a source of income
whether or not the

WHETHER OR NOT THE LAND THEYRE BUYING IS BUILDABLE

Which is NOT something buyers should consider when buying unimproved land?
access to utilities
the local economy
the political climate
zoning restrictions

THE POLITICAL CLIMATE

What is a unique aspect of undeveloped land in comparison to other types of investment properties?
Undeveloped land has a low characteristic of liquidity.
Investors can use leverage to purchase land.
Land has a risk factor.
Land can not be depreciated on

LAND CAN NOT BE DEPRECIATED ON INCOME TAXES

An investor looking to make an income off of renters should consider buying unimproved land.
TRUE
FALSE

FALSE - Investors looking to make money off of renters should probably steer clear of unimproved land unless they are willing to wait a considerable amount of time. Unimproved land is best for investors not needing an immediate source of income from the l

Jedidiah is interested in purchasing an apartment building in order to make some rental income. What term best describes Jedidiah?
a developer
a commercial tenant
an investor
an amenity purchaser

AN INVESTOR

Jami is looking to purchase a warehouse that is close to her business' headquarters. Which term best defines Jami?
an amenity purchaser
a developer
a prospective investor
a commercial tenant

AN AMENITY PURCHASER

Which of the following is NOT an advantage to leasing?
staying up to date
ability to capture appreciation
lower amount of initial cash
flexibility

ABILITY TO CAPTURE APPRECIATION

Which of the following is NOT an example of a common area?
a dining room in an apartment
a public bathroom at a coffee shop
a lobby in an office building
a bike storage room in a condo development

A DINING ROOM IN AN APARTMENT

Which is the most commonly used price measurement in New York commercial real estate leases?
price per square foot
price per cubic foot
price per room
price per square yard

PRICE PER SQUARE FOOT

Price per square foot reflects the:
monthly rental rate of a property
annual tax assessment of a property
annual rental rate of a property
monthly tax assessment of a property

ANNUAL RENTAL RATE OF A PROPERTY

Agent Ann is helping a growing startup find a new office space. Ann finds a great location with almost 5,000 sq ft. When the client sees the space, they realize there are two other companies, two kitchens, and a bathroom also sharing the space. What is TR

AGENT ANN WAS QUOTING THE RENTABLE SQUARE FOOTAGE OF THE SPACE

Which is the correct formula for calculating loss factor?
(RSF - USF) � USF
(USF - RSF) � RSF
(USF - RSF) � USF
(RSF - USF) � RSF

(RSF - USF) � RSF

Which of the following statements is TRUE regarding building efficiency?
Building efficiency can be found by dividing usable square footage by rentable square footage.
All choices are correct.
Building efficiency is the opposite of loss factor.
Building e

ALL CHOICES ARE CORRECT

Which of the following statements is true?
A building's loss factor and its building efficiency should add up to 100%.
A building's loss factor is always greater than its building efficiency.
A building's loss factor and its building efficiency will proba

A BUILDING'S LOSS FACTOR AND ITS BUILDING EFFICIENCY SHOULD ADD UP TOO 100%

Based solely on the information below, which office building option is the best deal for tenants?
Office Building D with a loss factor of 54%.
Office Building A with a loss factor of 60%.
Office Building C with a loss factor of 39%.
Office Building B with

OFFICE BUILDING C WITH A LOSS FACTOR OF 39%

Lisa has 30,000 rentable square footage & 20,000 usable square footage. Using the information provided and the formula LF = (RSF-USF) � RSF, what is Lisa's loss factor?
33%
.33%
50%
.55%

33%

Lisa has 30,000 rentable square footage & 20,000 usable square footage. Using the information provided & the formula Building Efficiency = USF � RSF, what is the building efficiency of Lisa's new building?
66%
50%
33%
150%

66%

Lisa wants to lease 3,000 usable square feet of office space at an office building with a loss factor of 33%. How much feet will she be billed for?
3,000 SF
990 SF
99,000 SF
3,990 SF

3,990 SF

Net leases are most commonly used for:
leasehold properties
undeveloped properties
commercial properties
residential properties

COMMERCIAL PROPERTIES

In a triple-net lease, the expenses that a tenant must pay:
are always fixed
can be both fixed and variable
are always variable
are neither fixed nor variable

CAN BE BOTH FIXED AND VARIABLE

For which type of property are percentage leases most commonly used?
residential buildings
retail buildings
industrial buildings
office buildings

RETAIL BUILDINGS

Upon the expiration of a ground lease, ownership of any construction on the land reverts to the:
renting commercial tenant
original landowner
builder
lessee

ORIGINAL LANDOWNER

In a sublease, who remains responsible for paying for rent to the landlord?
the original tenant
the landlord
the lessor
the subletter

THE ORIGINAL TENANT

Kristine's lease doesn't allow her to sell purses in her boutique shop. Which clause does she need to change in order to have permission?
estoppel clause
use clause
sublease clause
attornment clause

USE CLAUSE

Jenny recently purchased property with currently-existing tenants and wants to make sure she receives future rent. What does she need to create?
sublease clause
index clause
use clause
letter of attornment

LETTER OF ATTORNMENT

Which type of electricity service charges tenants a pro-rata bill based on the percentage of space they occupy?
sub-metered electric service
utility provider service
rent-inclusion electric service
direct meter electric service

RENT-INCLUSION ELECTRIC SERVICE

Which stipulation in a contract permits landowners to raise rent?
use clause
estoppel clause
escalation clause
attornment clause

ESCALATION CLAUSE

Which clause allows property owners to pass through unexpected increases in property operating costs to the tenants?
pass-through clause
attornment clause
escalation clause
use clause

PASS-THROUGH CLAUSE

Which of the following clauses ties tenants' rent to any increase of building personnel salaries?
attornment clause
Porter's Wage Escalation clause
Consumer Price Index clause
use clause

PORTER'S WAGE ESCALATION CLAUSE

Which of the following is an example of space risk?
The local rental rates in the Watermark neighborhood decrease after three new apartment buildings were built.
Building construction costs increase as tariffs increase on building materials.
Housing price

THE LOCAL RENTAL RATES IN THE WATERMARK NEIGHBORHOOD DECREASE AFTER THREE NEW APARTMENTS BUILDINGS WERE BUILT

Which of the following is an example of capital market risk?
The Federal Reserve recently announced a decision to raise their interest rate.
The price of building construction has rapidly increased due a shortage of construction workers.
The local unemplo

THE FEDERAL RESERVE RECENTLY ANNOUNCED A DECISION TO RAISE THEIR INTEREST RATE

Which of the following is an example of default risk?
Karen is unable to purchase a prospective real estate investment after the Federal Reserve raised the interest rate.
A new apartment building was recently constructed in the same neighborhood as Janae'

AMBER LOST HER REAL ESTATE INVESTMENT AFTER THE BANK FORECLOSED ON HER HOME

Which investment property type has a higher legislative risk?
office buildings
residential property
retail property
unimproved land

UNIMPROVED LAND

Which of the following demonstrates the principle of liquidity?
Due to a scarcity of rental housing units, Jenna was able to raise rent for her rental property.
Through financial analysis, Joey has found that the office building market rental rates tend t

IT WILL TAKE JAMI SEVERAL MONTHS TO SELL HER BEANIE BABIES FOR THEIR MARKET VALUE

Jenna owns a bond. She can easily sell her asset, but she cannot easily do it for its fair market value. Which of the following is true?
bonds have low liquidity, low marketability
bonds have high liquidity, high marketability
bonds have low liquidity, hi

BANDS HAVE LOW LIQUIDITY AND HIGH MARKETABILITY

Which of the following is true?
A retail property is an investment that demonstrates high marketability.
A stock is an investment that demonstrates high liquidity.
An office building is an investment that demonstrates high liquidity.
A savings account is

A SAVINGS ACCOUNT IS AN INVESTMENT THAT DEMONSTRATES HIGH LIQUIDITY

Janelle is taking out a mortgage in order to purchase an investment property. What is this an example of?
time value of money
risk
leverage
liquidity

LEVERAGE

Kelsey's investment property mortgage payments cost more than the income it produces. What is this an example of?
liquidity
positive leverage
negative leverage
neutral leverage

NEGATIVE LEVERAGE

In general, lenders require higher down payments for investment properties than for residential properties.
TRUE
FALSE

TRUE - In general, lenders require higher down payments for investment properties than they do for buyers seeking to purchase a home.

Which of the following is an example of an actual?
operating statement
proforma statement
listing agreement
seller's disclosure form

OPERATING STATEMENT

What does a proforma statement do for an investment property?
shows the transactional history
shows the projected profits and expenses
a surgeon's schedule for the day
an official document that lists a property's expenses and income

SHOWS THE PROJECTED PROFITS AND EXPENSES

Jenna hired an analyst to examine how much she could charge in rent according to local rates. What is the analyst projecting?
market rent
rent roll
contract rent
rental income

MARKET RENT

What is the gross potential rental income of the GNB property? It has 30,000 square feet and the market rate is $1,000 per square feet.
$28,500,000
$29,000
$30,000
$30,000,000

$30,000,000

Using historical data, the prospective buyers are projecting a 5% vacancy and collections risk for the GNB building. The GNB building has a Gross Potential Rental Income of $30,000,000. What is the vacancy cost of the GNB building?
$1,500,000
$25,000,000

$1,500,000

Last year, the GNB building received $200,000,000 in rental income, $1,000,000 in vending machine fees, $1,500,000 in parking garage fees, and $400,000 in laundromat fees. How much did the GNB building produce in other income?
$197,100,000
$202,900,000
$2

$2,900,000

Calculate the effective gross income of the GNB building. It has $30,000,000 in gross potential rental income, a vacancy cost of $1,500,000, and $2,900,000 in other income.
$34,400,000
$28,600,000
$31,400,000
$25,600,000

$31,400,000

Which real estate metric identifies a property's rental income if it is 100% leased?
gross potential rental income
other income
effective gross income
vacancy cost

GROSS POTENTIAL RENTAL INCOME

Which of the following is the best practice for helping a conservative investor minimize risk with their real estate investment?
projecting a higher amount for potential gross rental income
projecting a higher amount for vacancy cost
not accounting for no

PROJECTING A HIGHER AMOUNT FOR VACANCY COST

Which real estate metric calculates the non-rental income produced by a property?
effective gross income
other income
potential gross rental income
potential gross non-rental income

OTHER INCOME

Which real estate metric identifies the total (rental and non-rental) income a property would realistically receive without accounting for expenses?
potential gross rental income
effective gross income
other income
net operating income

EFFECTIVE GROSS INCOME

For which of the following does effective gross income account?
property taxes
vending machine earnings
mortgage payments made to a lender
property management costs

VENDING MACHINE EARNINGS

Which of the following expenses can be classified as an operating expense?
mortgage payments
any payment towards mortgage interest
property management salaries
funds set aside for a future roof replacement

PROPERTY MANAGEMENT SALARIES

The GNB building had the following expenses last year: $5,000,000 (property management), $10,000,000 (repairs), $8,000,000 (property taxes), $2,000,000 (property insurance), $7,000,000 (mortgage payments), & $3,000,000 (reserve replacement funds). What ar

$25,000,000

If the GNB has an effective gross income of $31,400,000 and $25,000,000 in operating expenses, what is its net operating income?
$6,400,000
$56,400,000
$31,400,000
$25,000,000

$6,400,000

What are funds set aside for periodic improvements for a property's components?
replacement reserves
operating expenses
debt service
capital expenditures

REPLACEMENT RESERVES

What is a property's annual income that remains after paying its operating costs?
efficient gross income
gross income
net operating income
before tax cash flow

NET OPERATING INCOME

Under which accounting category are property taxes, property management fees, and landscaping fees filed?
other income
debt service
replacement reserves
operating expenses

OPERATING EXPENSES

The property owners of the Goliath National Bank building pay a monthly mortgage payment of $520,000. What is the annual debt service cost of the Goliath National Bank Building?
$6,400,000
$10,500
$520,000
$6,240,000

$6,240,000

The annual debt service cost of the Goliath National Bank building is $6,240,000. Its net operating income is $6,400,000. What is the before tax cash flow of the Goliath National Bank building?
$6,526,000
$160,000
$12,640,000
$520,000

$160,000

What is the annual income that remains after an investment property pays its operating expenses and debt service?
before tax cash flow
effective gross income
after tax cash flow
net operating income

BEFORE TAX CASH FLOW

What is the amount of cash flow a property produces before meeting its debt obligations?
unlevered cash flow
before tax cash flow
capitalization rate
levered cash flow

UNLEVERED CASH FLOW

All of the following are types of taxes that affect real estate investments EXCEPT:
income taxes
property taxes
payroll taxes
capital gains taxes

PAYROLL TAXES

What is a property's annual income that remains after paying operating expenses, debt service, and taxes?
after tax cash flow
cash flow
net operating income
before tax cash flow

AFTER TAX CASH FLOW

What is a property's annual income that remains after paying its operating costs and debt service?
net operating income
before tax cash flow
after tax cash flow
cash-on-cash return

BEFORE TAX CASH FLOW

What is the total investment cost for the prospective buyers of the GNB building based off the following information? They have a $1,700,000 down payment, $200,000 in attorney fees, $50,000 in inspection fees, and $50,000 in title insurance fees.
$1,900,0

$2,000,000

What is the cash-on-cash return of the GNB building? Its before tax cash flow is $160,000 and their proposed total investment cost is $2,000,000 (cash-on-cash return = before tax cash flow � total investment cost.)
1.2%
8.9%
8%
89%

8%

What is the measure of the gain or loss of an investment weighed in relation to another metric?
after tax cash flow
before tax cash flow
cash-on-cash return
rate of return

RATE OF RETURN

What is the total amount of cash an individual finances up front in an investment property?
property price
down payment
closing costs
total investment cost

TOTAL INVESTMENT COST

What is a rate of return that calculates the cash profit earned as a percentage of the cash invested?
rate of return
before tax cash flow
cash-on-cash return
capitalization rate

CASH-ON-CASH RETURN

At the listing price of $160,000,000, what is the cap rate of the GNB building? Its net operating income is $6,400,000.
2.5%
25%
40%
4%

4%

Select the sales price below that reflects a building with a cap rate of 8% and a net operating income of $6,400,000.
$51,200,000
$80,000,000
$8,000,000
$800,000

$80,000,000

Which real estate metric gives a present value for a property's future income value?
capitalization rate
return on investment
cash-on-return
rate of return

CAPITALIZATION RATE

Which metric demonstrates how much income a property produces in relation to the cost of investment?
net operating income
capitalization rate
cash-on-cash return
return on investment

CASH-ON-CASH RETURN

Which of the investors' needs is the internal rate of return most likely to meet?
Jami wants to compare potential investments using their NOI and listing price.
Ina is looking for a property that will produce a return quickly through its cash flow.
Bob is

INA IS LOOKING FOR A PROPERTY THAT WILL PRODUCE A RETURN QUICKLY THROUGH ITS CASH FLOW

Hannah purchased a home for $100,000 in cash. She spent $25,000 in repairs on the home, and then sold the home for $200,000. What's her ROI?
50%
200%
6%
60%

60%

What is a rate of return that calculates the profit earned in relation to cost and time and accounts for the principle of time value of money?
capitalization rate
return on investment
internal rate of return
cash-on-cash rate

INTERNAL RATE OF RETURN

Which rate of return calculates profit earned as a percentage of a property's total cost?
cash-on-cash return
internal rate of return
capitalization rate
return on investment

RETURN ON INVESTMENT

Bob wants to compare single-family homes using their NOI and listing prices. Which rate of return below will BEST help Bob compare the single-family homes?
internal rate of return
cash-on-cash return
capitalization rate
return on investment

CAPITALIZATION RATE

Home A has a cap rate of 8.3%, a $10,000 NOI, & a listing price of $120,000. Home B has a cap rate of 6.7%, a $5,000 NOI, & a listing price of $75,000. Home C has a cap rate of 7.8%, a $7,000 NOI, & a listing price of $90,000. Based off this info alone, w

HOME A

Single homeowners are exempt from paying taxes on up to ____ of the capital gains from the sale of their home every ___ years.
25%; two
$500,000; three
$250,000; two
$150,000; three

$250,000; TWO

What makes an IRA withdrawal for a down payment different from a regular early IRA withdrawal?
You don't have to pay any taxes on the money at all.
You don't have to pay a 10% early withdrawal penalty.
You are refunded the money once you qualify for Socia

YOU DONT HAVE TO PAY A 10% EARLY WITHDRAWL PENALTY

A homeowner in New York paid $9,800 in state taxes, $3,500 in city taxes, and $11,000 in ad valorem property taxes in 2018. How much can they deduct from their taxes?
$11,000
$24,300
$10,000
$13,300

$10,000

In 2018, pair of married homeowners take out a $200,000 home equity loan to create the ultimate Nancy Meyers kitchen. They also have a primary mortgage of $500,000. What amount of their loan debt will have tax-deductible mortgage interest?
$700,000
$500,0

$700,000

What happens if you rent out your vacation home more than 14 days in a year?
It becomes taxed as an income-producing property.
It becomes your primary residence for tax purposes.
It loses eligibility for the mortgage interest tax deduction.
It violates th

IT BECOMES TAXED AS AN INCOME-PRODUCING PROPERTY

What is TRUE about capital gains taxes?
They are taxes paid every year by a homeowner to support school districts.
They will reduce the amount of ad valorem school taxes paid on the homestead.
They are taxes on the profit a person makes when they sell the

THEY ARE TAXES ON THE PROFIT A PERSON MAKES WHEN THEY SELL THEIR PRINCIPAL RESIDENCE

What two things are added to a property's basis to get the adjusted basis?
improvements and closing costs
sale price and appreciation
tax credits and the value of the land
mortgage interest and property taxes

IMPROVEMENTS AND CLOSING COSTS

A homeowner sells her primary residential home and realizes a gain (profit) of $185,000 from the sale. How much tax will this homeowner pay on the capital gains?
None. She is exempt from capital gains up to $250,000 every two years.
None. Homeowners are e

NONE. SHE IS EXEMPT FROM CAPITAL GAINS UP TO $250,000 EVERY TWO YEARS

Married homeowners Jean-Luc and Beverly bought a home for $300,000. Jean-Luc had to relocate for a job (more than 50 miles away) after living in the home for 12 months. They sold the home for $350,000. What amount of money will they owe capital gains tax

$0

Gerard has a few investment properties. He pays Jimmy to manage them. What kind of income is Gerard making from his properties?
tax-exempt
active
passive
portfolio

PASSIVE