1. With regard to double taxation, distributions, and the treatment of the losses, general partnerships are most like

a. S corporations.
b. C corporations.
c. Limited partnerships.
d. Real estate investment trusts.

2. Which statement is false concerning the limited partnership form of ownership?

a. The general partner has nearly complete control and is liable for debts and actions of the partnership.
b. The limited partners have no management control and are not liable except to the amount of their investment.
c. The limited partners cannot enjoy tax deduction benefits but the general partners can.
d. The partnership is not a taxable entity.
e. None of the above.

3. Which is not a function of real estate markets?

a. To allocate existing space.
b. To expand or contract space to meet changing conditions.
c. To determine land uses.
d. To delineate market boundaries.
e. All of the above.

4. What are the consequences of the fixed location of real estate?

a. The property cannot be moved to take advantage of better market opportunities elsewhere.
b. The property cannot be moved to avoid a negative influence on value from usage of adjacent property.
c. Market participants must invest more in information about the asset because of all the factors that can affect values at a location.
d. Answers a, b, and c are all correct.
e. None of the above.

5. How much would you pay for the right to receive nothing a year for the next 10 years and $300 a year for the following 10 years if you can earn 15 percent interest?

a. $372.17.
b. $427.99.
c. $546.25.
d. $600.88.
e. $1,505.63.

6. If an income-producing property is priced at $5,000 and has the following income stream

Year After-Tax Cash Flow
1 $1,000
2 -2,000
3 3,000
4 3,000

Would an investor with a required rate of return of 15 percent be wise to invest at the current price?

a. No, because the project has a net present value of _$1,139.15.
b. No, because the project has a net present value of _$1,954.91.
c. Yes, because the project has a net present value of $1,069.66.
d. Yes, because the project has a net present value of $1,954.91.
e. An investor would be indifferent between purchasing and not purchasing the above property at the stated price.

7. Zoning is an exercise of which type of general limitation on property rights?

a. Eminent domain.
b. Taxation.
c. Police power.
d. Escheat.
e. All of the above.

8. Ronald Frump, a local real estate tycoon, has asked you to analyze one of his properties. It consists of a one-acre site and a 25-year-old warehouse. Specifically, he wants to know whether the existing building should be torn down and a new one constructed, and if so, what type and size of building should be constructed. You consider the zoning and other constraints to the type of property that could be created and decide the following three alternatives are the most likely buildings for the site:

If the site were vacant (or is made vacant), which building should be constructed, and what would be the value of the site, using a capitalization rate of 11 percent?

a. No. 3, light mfg building, $340,909.
b. No. 1, warehouse, $359,779.
c. No. 1, warehouse, $ 454,545.
d. No. 2, warehouses, $376,225..
e. None of the above.

9. All of the following are members of the development team except

a. Lawyers.
b. Engineers.
c. Zoning board.
d. General contractor.
e. Construction manager.

10. For a development project to be feasible

a. The market value of the project must exceed the construction loan amount.
b. The construction loan amount must exceed the cost of development.
c. The cost of development must exceed the market value of the project.
d. A feasibility study must say so.
e. None of the above answers are correct.

11. You have appraised a single-family residence using all three approaches to value. The indicated values are, respectively, sales comparison approach, $89,800; cost approach, $92,400; and gross rent multiplier analysis, $87,500. You decide the sales comparison approach is most reliable and should be weighted 50 percent. The cost approach is next in reliability, and it should be weighted 40 percent. GRM analysis should be weighted 10 percent. What is your final estimate of value (rounded to the nearest $100)?

a. $91,000.
b. $89,900.
c. $90,200.
d. $90,600.
e. $90,900.

12. To reflect a change in market conditions between the date on which a comparable property sold and the date of appraisal of a subject property, which type of adjustment is made?

a. Conditions of sale.
b. Market conditions.
c. Location.
d. Financing terms.
e. Unit.

13. A comparable property sold six months ago for $150,000. The adjustments for the various elements of comparison have been calculated as follows:

Location: 5 percent
Market conditions: 8 percent
Physical characteristics: $12,500
Financing terms: $2,600
Conditions of sale: -0-
Legal characteristics: -0-
Use: -0-
Nonrealty items: $3,000

What is the comparable property's final adjusted sale price?

a. $160,732.
b. $164,400.
c. $169,600.
d. $162,500.
e. $163,232.

14. An appraiser estimates that a property will produce NOI of $25,000, the yo is 11 percent, and the growth rate is 2.0 percent. What is the total property value (unrounded)?

a. $277,778.
b. $227,273.
c. $323,762.
d. $243,762.
e. $231,580.

15. Which of the following types of properties probably would not be appropriate for income capitalization?

a. Apartment building.
b. Shopping center.
c. Farm.
d. Warehouse.
e. Public school.

16. The operating expense ratio

a. Highlights the relationship between net operating income and operating expenses.
b. Shows the percentage of potential gross income consumed by operating expenses.
c. Expresses operating expenses as a percent of effective gross income.
d. Is the reciprocal of the break-even ratio.

17. The internal rate of return equation incorporates

a. Future cash outflows and inflows, but not initial cash flows.
b. Future cash outflows and inflows, and initial cash outflow, but not initial cash inflow.
c. Initial cash outflow and inflow, and future cash inflows, but not future cash outflows.
d. Initial cash outflow and inflow, and future cash outflow and inflow.

18. A sandwich leasehold is

a. A lease on a small restaurant.
b. The assignment of a lessee's rights to a new lessee.
c. The interest of a lessee who sublets part of the lessee's rights to a sublessee.
d. A lease by an owner to two or more parties.
e. A reverse lease from the lessee back to the owner.

19. Current NOI for a 10-year-old retail center equals $50,000. After a $300,000 renovation, NOI should climb to $75,000. If the market capitalization rate equals 12 percent, what is the value of the center after renovation?

a. $625,000.
b. $500,000.
c. $350,000.
d. $600,000.
e. None of the above.

20. When lenders sell mortgages to third parties

a. They must have the permission of the borrower.
b. Borrowers frequently don't know the mortgage has been sold.
c. The mortgage must be a first mortgage.
d. The mortgage must be in foreclosure.
e. They are breaking the law.

21. Due-on-sale clauses

a. Are found in most conventional residential mortgages.
b. Are not found in FHA and VA mortgages.
c. Are fully enforceable by lenders.
d. Apply when the property is sold but not when a default occurs.
e. All of the above.

22. The dominant loan type originated by most financial institutions is the

a. Fixed-payment, fully amortized mortgage.
b. Adjustable rate mortgage.
c. Purchase money mortgage.
d. FHA-insured mortgage.

23. Which of the following statements is true about 15-year and 30-year fixed payment mortgages?

a. 30-year mortgages are more popular than 15-year mortgages among home owners who are refinancing.
b. Borrowers pay more total interest over the life of a 15-year mortgage than on a 30-year loan.
c. The remaining balance on a 30-year loan declines more quickly than an otherwise comparable 15-year mortgage.
d. Assuming they can afford the payments on both mortgages, borrowers should chose a 30-year mortgage over an otherwise identical 15-year loan if their risk-adjusted opportunity cost of equity exceeds the mortgage rate.

24. Consider a $75,000 mortgage loan with an annual interest rate of eight percent. The loan term is seven years, but monthly payments will be based on a 30-year amortization schedule. What is the monthly payment? What will be the balloon payment at the end of the loan term?

a. $550.32; $69,358.
b. $468.78; $75,000
c. $550.32; $71,236
d. $468.78; $73,177
e. None of the above

25. Which of these is a valid motivation for a participation loan?

a. It lowers the borrower's required debt service.
b. It gives the lender protection against unexpected inflation.
c. It provides a mechanism to control the distribution of business risk between lender and borrower.
d. a and b, but not c.
e. All three, a, b and c.

26. Which of these financial firms is most likely to invest in a large, long-term mortgage loan on a shopping center?

a. Credit union.
b. Commercial bank.
c. Savings and loan association.
d. Life insurance company.
e. Mortgage banker.

27. How are commission rates charged by real estate brokers determined?

a. By agreement among local Realtors.
b. By rule of the local Board of Realtors.
c. By state real estate commissions.
d. By agreement between broker and principal.
e. By state law.

28. According to most listing contracts, a broker has earned a commission when

a. A contract for sale is signed by the buyer.
b. The transaction closes.
c. The broker finds a buyer who is ready, willing, and able to buy on the terms specified in the listing contract.
d. The seller signs a listing contract.
e. The broker sends a bill for services rendered to the principal (usually the seller).

29. Which of the following conditions would be a defect to mutual assent in a contract for the sale of real property?

a. One party attempts to perpetrate fraud on the other.
b. The contract is in written form.
c. The contract contains an inadequate description of the property.
d. One of the parties is legally incompetent.
e. The contract does not specify a time for closing.

30. Oral evidence in contract disputes is prohibited by

a. A parol contract.
b. An executory contract.
c. An inferred contract.
d. An unspecified contract.
e. The parol evidence rule.