examreview_72678091

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Champions School of Real Estate *

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Jan 9, 2024

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Practice Exam Your score: 90% You have passed the exam. Passing score: 70.0 SCORING BREAKDOWN Correct: 54/60 Incorrect: 6/60 Review answers below Question 1 If a landlord removes the tenant's right of ______, the tenant can claim constructive eviction and vacate the property with no further financial responsibility to the landlord. Acceptance Control Ownership Quiet enjoyment An example of constructive eviction would be turning off the property's water supply. Question 2 What's a land banker? A financier of raw land An appraiser who works with lenders to value raw land

An investor who buys land, develops it, and leases it An investor who holds land in inventory A land banker holds improved land or lots in inventory, banking on appreciation. Question 3 Which type of business risk is insurable? Capital Dynamic Financial Static Dynamic risks are those business risks that cannot be lessened with insurance. Static risks are those where the effect can be lessened with insurance, such as accident liability, theft, and fire. Question 4 Aimee is in the process of taking over property management for a large apartment complex owned by Ginger. What is one thing she should get from Ginger? A 90-day grace period to get all files in order A referral to other commercial property owners A written acknowledgement from all renters stating that they understand the transition taking place.

The contact information for Handy Manny, the maintenance man Aimee will need all information that can help her efficiently manage the property. This includes Handy Manny's contract and contact information, as well as any information about other persons or companies that provides service for the complex. Question 5 Which of the following scenarios describes an example of unilateral rescission? A sales transaction falls through when Nora, the buyer, doesn't qualify for financing. Bobby, the buyer, makes an offer on a house that doesn't meet the appraisal contingency. He cancels the sale. Buyer Alice decides to join the Peace Corps. She and the seller mutually agree to cancel the sale, and the seller keeps Alice's earnest money. Sally, the seller, sells her property to two different buyers. Both buyers sue Sally for specific performance. A contract is rescinded when both parties agree to cancel the agreement and return both parties to their pre-contract position. Question 6 Which of the following do investors like to avoid? High tax liabilities Long-term appreciation Positive cash flow

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Tax write-offs Investors prefer to steer clear of high tax liabilities. However, investments that bring tax write-offs, long- term appreciation, and positive cash flow earn high marks from savvy investors. Question 7 Which of the following is a true statement about when a promissory note is sold? Promissory notes cannot be sold. The note must be notarized. The promissory note is endorsed to the new owner of the loan. When the note is sold, the attached security instrument is assigned to the lender. When a note is sold, the promissory note is endorsed to the new owner of the loan. Question 8 What type of real estate investment must distribute 95% of its income to beneficiaries? Real estate investment trust Real estate mortgage investment conduit Real estate syndicate Real estate trust To avoid the trust income tax, the REIT must distribute 95% of the ordinarily taxable income to the trust beneficiaries, then the beneficiaries report the income for tax purposes.

Question 9 Sharilyn's business and adjacent businesses are arranged in a neat row. Customers enjoy the open- air walkways when they visit her business and others. In which commercial space is Sharilyn's business likely located? Office building Office park Regional shopping center Strip mall In strip malls, businesses are often arranged in a row and have access to open air walkways. Question 10 In addition to analyzing local economic data and evaluating community acceptance, the community and neighborhood market analysis should take into consideration the ________________ and whether it's sufficient enough to support the proposed development. Combined wealth of the community Food production Infrastructure Local colleges Infrastructure includes parking and access to utilities and public transportation.

Question 11 Taxes, construction codes, and development regulations are all ways that ______ can influence a real estate investment and potentially increase or decrease the investment's value. A real estate brokerage Government Society The environment Investors have to be particularly cognizant of government regulations when considering a particular property for investment. These regulations include environmental controls, zoning, federal control of money, taxes, and more. Question 12 In the early 2000s, before the 2007 financial crisis, how would you characterize the real estate market? High interest rates and high property values High interest rates and low property values Low interest rates and high property values Low interest rates and low property values In the late 1990s and early 2000s, mortgage interest rates were low and property values were high. Question 13 There are many advantages to holding property within a trust. One of the most important advantages is that some trusts ______.

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Avoid probate Need not be reviewed by an attorney Require probate Typically take years to sort out The process of probate can take up to a year or more before the property is disbursed to the heirs. Property held within a trust can avoid probate. Question 14 Which of the following statements is true regarding developers who plan to allow FHA financing in their subdivisions? They can only sell to buyers who have FHA loans. They must follow the FHA's minimum building standards. They must obtain financing for their subdivision development from the FHA. They must provide affordable housing in the subdivision. Developers who plan to allow FHA financing in their subdivisions must follow FHA's minimum building standards. The primary difference between general building codes and the FHA's minimum property standards relate to the durability of a dwelling's fixtures. Question 15 Property with ownership by more than one person is known as ______. Co-ownership

Dual ownership Estate by severalty Property partnership Property with ownership by more than one person is known as co-ownership. Question 16 Which of the following individuals is exempt from federal fair housing laws? An investor who owns five properties and uses real estate licensees to assist in the sale of the homes. An investor who owns two single-family homes and doesn't use real estate licensees to assist in the sale of the homes. An owner of a multi-family rental unit with two or four units who doesn't live in one of the units. An owner of a multi-family unit with two or four units who uses a real estate licensee to assist in the rental of the properties. Investors who own three or fewer single-family homes, and who don't use real estate licensees to assist in the sale of the home(s) are exempt, as are owners of multi-family units with two to four units who live in one of the units and don't use real estate licensees to assist in the rental of the properties. Question 17 Which type of tenant typically makes up half of a regional shopping center's tenant mix? Clothing and shoe stores

Dry goods shops General merchandise stores Service and related businesses A typical tenant mix for a regional shopping center is 50% general merchandise stores, 25% service and related businesses, 15% clothing and shoe stores, and approximately 10% dry goods shops. Question 18 Other than a percentage lease, what type of lease is used with regional shopping centers? Full service Graduated Ground Net Lease types most often used with regional and super-regional shopping centers are percentage and net leases. Question 19 Which type of real estate investment trust is designed to deal exclusively in equities? Equity REIT Hybrid REIT Investment REIT

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Mortgage REIT Equity REITS are owners of improved income properties and are designed to deal in equities. Question 20 Ken, Barbie, and Skipper owned a property as a joint tenancy. When Skipper moved out of state, she sold her interest to Midge. Two years later, Ken died. How is the interest in the property divided? Barbie and Midge each own 50%. Barbie and Skipper each own 50%. Barbie, Midge, and Ken's heirs each own one-third. Barbie owns two-thirds, and Midge owns one-third. Joint tenancy includes the right of survivorship, so Ken's interest will pass to the other tenants. But because Midge bought in later than the others, she isn't considered a joint tenant. Ken's share will therefore pass entirely to Barbie. Question 21 Which type of commercial property offers general merchandise and fashion, and is typically enclosed with inward-facing stores connected by a common walkway? Factory outlet Mall Neighborhood center Strip mall

Malls come in two major categories: regional and super-regional (or mega mall). Both have businesses that offer general merchandise and fashion, and are typically enclosed with inward-facing stores connected by a common walkway. Question 22 A decrease in property value over time is called ______. Amortization An anomaly Appreciation Depreciation Depreciation may be used by investors to reduce taxes on investment properties over a specific schedule (27.5 years for income-producing residential properties and 39 years for non-residential properties). Question 23 With an interest-only loan, what happens after the specific period of time that interest-only payments are made is over? The debt is paid. The full principal of the loan is due. The loan is converted. The loan is sold to another lender.

With an interest-only payment, the periodic payments of interest only last for a few years. When the loan term is over, the borrower has to repay the entire principal. This is known as a lump sum payment. This lump sum payment is usually accomplished through refinancing the loan. Question 24 Which of the following could be subject to a gift tax? $23,000 in medical expenses you pay for your neighbor A gift for $20,000 to a political organization A gift of $17,000 to your son A gift of a $50,000 car to a charity The gift tax doesn't apply to the first $15,000 given to a person each year; property given to your spouse; amounts given to political organizations or charities; or tuition or medical expenses you pay on behalf of someone else. Question 25 Mary Kay is looking at a building that has a total of 65,000 square feet, and an efficiency rate of 75%. How many square feet of productive space does the office building have? 16,250 48,750 65,000 81,250

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Productive space is calculated by subtracting non-productive square footage (65,000 x .25) from the building's total square footage. This office building's productive space is 48,750 square feet. Question 26 Under Section _______ of the Internal Revenue Code, an investor in real property can sell that property, reinvest the proceeds in a "like-kind" property, and defer paying capital gains taxes. 1031 1040 180 360 Section 1031 allows investors to defer capital gains by purchasing another investment property almost immediately after selling the relinquished property. These are called "like-kind" exchanges. Question 27 A tenant's new business venture is a software services firm where IT professionals handle programming and customer service tasks for a number of business clients. His employees all work at tables in an open office space. He most likely has a _______ lease for the office space. Gross Loft Percentage Triple net A loft lease is usually for a large open space that may have few amenities.

Question 28 Discounted cash flow analysis and annuity capitalization are forms of ______. Appraisal methods Cost approach appraisal methods Direct capitalization Yield capitalization Both discounted cash flow analysis and annuity capitalization are forms of yield capitalization, which is a technique used to determine future income value. Question 29 Participants in this temporary organization are looking for profit. They may be corporations, partnerships, LLCs, or other entities. C Corporation Joint venture LLC S Corporation These participants are part of a joint venture. The clue here is that it's a temporary organization. Question 30

An increase in property value is called ______. Amortization An anomaly Appreciation Depreciation Appreciation is an increase in property value. Question 31 What type of lease is used most often with community shopping centers? Full service Graduated Net Percentage Tenants are usually asked to sign a percentage lease that charges a minimum base rent as well as a specified percentage of the tenant's gross monthly business. These leases also include some type of arrangement to make annual adjustments to this rent as needed. Question 32 What's a legal agreement or promise made between two parties? A consideration

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A covenant A handshake A negotiation A legal agreement or promise made between two parties is a covenant. Question 33 When do borrowers tend to go with a private loan company? When the location is more convenient When they can pay lower fees and interest rates When they can't secure financing through traditional means When they want to keep their business private Borrowers choose private loan companies when they're unable to secure the funds from other sources, like a commercial bank. Question 34 Which option best describes what an environmental impact statement is? It defines the level of drilling that needs to take place in order to build foundations for the development. It describes and analyzes a proposed action that may have a significant effect on the environment.

It describes local zoning regulations like setbacks, zones, and curb requirements. It illustrates the benefits of the development to the community to improve community acceptance. It describes and analyzes the effects that a proposed action may have on the environment and identifies any significant effects. Question 35 This is the part of Eileen's job that she enjoys the least: Telling tenants they have to leave because they've failed to comply with the terms of their lease. Which commercial property manager duty is Eileen having to perform? Collecting rent Evicting tenants Leasing the property Overseeing maintenance A commercial property manager is responsible for evicting tenants who fail to comply with the terms and conditions of the lease agreement. Question 36 Santiago plans to develop a super-regional shopping center. What size lot will he need? 20 to 80 acres 40 to 100 acres 60 to 120 acres

80 to 140 acres Super-regional shopping centers are built on properties of 60 to 120 acres. Question 37 Which type of legal structure may be either general or limited in type? Corporation Limited liability corporation Partnership Sole proprietorship Partnerships are a common legal structure and may consist of general and limited partners. Question 38 A neighborhood that has been disintegrating for some time is undergoing a rejuvenation, with several properties on one block being heavily renovated or entirely rebuilt. As a result, even the properties that are still old and shabby increase somewhat in value. This is the principle of ________. Anticipation Conformity Progression Regression

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The principle of progression says that that a lower-value property gets a bump in value by being near a higher-value property. Question 39 Wrap-around loans are a form of ______ financing. Conventional Government Junior Senior A wrap-around loan is junior to the initial loan that it's wrapping around. Question 40 If a minor enters into a contract with an adult, which party can hold the other party to the contract? Either party may hold the other party to the contract Neither party since the contract is void The adult may legally hold the minor to the contract The minor may legally hold the adult to the contract If a minor enters into a contract with an adult, the minor may legally hold the adult to the contract, but the adult cannot legally hold the minor to the contract.

Question 41 Which of the following statements about non-compete clauses and community shopping center leases is true? A non-compete clause is included in a community shopping center lease if the tenant requests it. Non-compete clauses are included in leases that contain a cancellation clause. Non-compete clauses aren't used in community shopping center leases. Non-compete clauses are only included in leases with major tenants. Because it's common to have similar businesses within a community shopping center, non-compete clauses aren't used. Question 42 Which of the following does the use provision in a lease describe? How the tenant will pay the rent How the tenant will use the property, including allowable activities The term of the lease Whether the lease is automatically renewable The use provision describes how the tenant will use the property, including allowable activities. Question 43

HUD completed an investigation, after which it received assurances that the situation would be remedied, and that steps were being taken to ensure the discriminatory acts won't happen again. What's this an example of? Conciliation Condemnation Contingency Counter-offer Conciliation is the process of obtaining assurances from the alleged violator that the situation will be remedied, and the promise to take steps to not have a similar situation occur in the future. Question 44 Jarod is the property manager of a community shopping center. How many anchor tenants does the center have? Four One Three Two Community shopping centers are typically designed around two anchor tenants: a national department or variety store and a locally prominent department store or supermarket. Question 45 Which class of office building is aimed at tenants requiring functional space at below-average rents for the area?

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Beyond class category Class A Class B Class C Class C office buildings command below-average rates for the area. They're functional, but not prestigious. Question 46 To compute a monthly principal and interest payment, which of the following pieces of information do you need to know? Interest rate and loan amount Interest rate and term of the loan Monthly payment multiplier Mortgage loan value, annual percentage rate, loan term, and payment frequency Four pieces of information are required: loan value, percentage rate, loan term, and payment frequency. Question 47 Sonya's lease expired, but she hasn't yet moved out and she's not paying rent. Walt has started eviction proceedings. Sonya is considered a(n) ______. Expired tenant

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Holdover tenant Illegal tenant Malingerer A tenant who refuses to leave after the expiration of a lease is called a holdover tenant, and this situation creates an estate at sufferance. Question 48 Which of the following may represent an exemption from federal fair housing laws? A couple who doesn't initially appear to hold minority status A family with members belonging to multiple religious sects A foster family with no biological children An owner-occupied rental property An owner of a multi-family unit with two or four units who uses a real estate licensee to assist in the rental of the properties must follow the fair housing laws, but the owner is exempt if he occupies one of the units and doesn't use a real estate licensee. Question 49 Which of the following statements is true about the effect that e-commerce is having on commercial property investments? Factory outlets, big-box shopping centers, and shopping malls have all been hit hard. The demand for new retail construction has remained steady.

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There's no market for commercial property. Vacancy rates haven't increased. E-commerce has caused a noticeable slowdown in the demand for new retail construction, and the vacancy rates in existing spaces are around 13%. Factory outlets, big box shopping centers, and malls have been hit the hardest of all retail properties. Question 50 When a tenant pays rent to a landlord, the tenant is satisfying which element of a valid lease contract? Acceptance Consideration Legal capacity Mutual assent Rent serves the purpose of consideration for the lease contract. Question 51 Your client, Gabriel, has invested in a rental property. He looks at his property's operating statement, tweaks the numbers based on his knowledge of the market, and re-works the statement. Gabriel has created ______. A debt service statement A gross income statement An operating income statement

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A pro-forma statement Remember that Gabriel is changing the numbers of the operating statement based on his knowledge of the market. Question 52 Which of the following statements is true about constructive eviction? The court may award damages to the tenants. The court may order the vacated tenants to pay monetary damages to the landlord. The landlord can shut off the power to the unit, thereby forcing the tenant out. The tenants who abandoned the property may never legally re-enter the premises. In constructive eviction, the lease is terminated, and no rents are due; however, the tenant may have to go to court to prevail against a claim of unpaid rent. Question 53 What is the formula NOI ÷ V = R used to calculate? The capitalization rate The rate of future growth The recapture rate The terminal value

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This is the formula to calculate a capitalization rate, which is the expected rate of return on investment. NOI ÷ V = R means net operating income ÷ value = rate. Question 54 Which of the following has always had a significant impact on housing demand? Availability or lack of employment Choice of building materials Number of nearby restaurants Popularity of the local mayor Unemployed buyers can't qualify for a loan, and most home purchases are financed. Question 55 The direct capitalization method would be a good choice of appraisal method in which of the following situations? An apartment building in a very rural town where there are no other comparable investment properties. An apartment building that has consistent income and expenses year after year. A property in which the sale is contingent on its ability to produce a particular level of income for the next 10 years. A property which has experienced roller coaster-like ups and downs in income and expenses.

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Direct capitalization is most effective for investment properties where the income and expenses are consistent year after year. Question 56 What is a gift tax? A tax on a deceased person's heirs A tax on charitable donations A tax on luxury items A tax on property received by one person when nothing of value was given in return A gift tax is a tax on property received by one person when nothing of value (or less than full value) was given in return. Question 57 Upon examination of Stevens and Smith's financial statements, their stockholders discover a debt-to- income ratio of 25%. Babson's financial statements indicate a debt-to-income ratio of 33%. Which of these comparison statements is accurate? Babson relies less heavily on debt than Stevens and Smith. Stevens and Smith carries a smaller percentage of debt relative to its income than Babson. Stevens and Smith carry less overall debt than Babson. Stevens and Smith's net profit related to sales is higher.

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A ratio is a comparison of some factor (in this case, debt) to some other measure (income, assets, equity, capital, etc.) Investors compare ratios, not necessarily simple amounts of debt, income, assets, etc. Stevens and Smith's lower debt-to-income ratio means that it relies less heavily on debt as a percentage of its overall income than Babson. Question 58 Which two numbers do you add to calculate maximum price? Annual NOI and cash flow Cash flow and desired rate of return Maximum equity and maximum loan Maximum loan and annual debt service cost After calculating maximum equity and maximum loan, adding the two together equals the maximum price. Question 59 Penelope just finished development of her new office building investment. She's ready to let prospective tenants know that her offices are ready to be let, but she's not sure of the best way to go about it. What should her next step be? Ask her investor friends to come see the new building Hire a lawyer Hold an open house Market the office space

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The goal of marketing office space is to attract prospective tenants and maintain their occupancy. Question 60 Which type of property tax is based on the value of the property? Ad valorem In rem Market value Special assessments Ad valorem taxes are based on the value of the property. Remember that ad valorem is Latin for "according to value."

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