Exam 1, Exam 2, & Sample Final Exam

What are the three methods (approaches) of property appraisal?

a) Sales Comparison, Neighborhood Development, Stock Equivalent

b) Stock Equivalent, Neighborhood Development, Bond Detail

c) Sales Comparison, Cost, Income

d) Cost, Income, Bond Equivalent

C

Which of the following statements about Real Estate Closings is true?

a) The closing process is almost identical across the 50 states, but varies internationally.

b) The buyer and seller must always be at closing together.

c) Closing is seldom delayed for any reason.

d) Closing is when the money and title to the property are exchanged.

D

For the last 10 years, my neighbor’s fence has actually been 5 feet over my property line, all the way down the length of the fence. They do not have my permission for the fence to cross onto my property, but they have been caring for that piece of property and using it for the entire 10 years. I’m inclined to just let them do this until the fence needs replacing, and then have the new fence built on the proper property line. Is there any danger to this course of action?

a) Yes, your neighbors may have already gained title to your property through the doctrine of adverse possession, and if you continue to let them use it in this manner they will almost certainly gain title in this way.

b) Yes, your neighbors may have already gained title to your property through the doctrine of easement by necessity, and if you continue to let them use it in this manner they will almost certainly gain title in this way.

c) No, your neighbors have no recorded claim on your property, so your recorded title will defeat any claim to the property by your neighbors.

d) No, once you have noticed that the property is actually yours, their continued use cannot harm your titl

A

As a practical matter, what is the first thing that should be done after closing on a home?

a) Go out to dinner to celebrate.

b) Move in.

c) Change the locks.

d) Pay any remaining obligations on the house

C

Which of the following best describes the period of time between the signing of a real estate contract and the closing on the property from the buyer’s perspective?

a) A respite from the difficult negotiations that preceded the contract and the moving that will come after closing.

b) A frantic period where multiple tasks must be accomplished in a relatively short time.

c) A happy time where the buyer realizes they have accomplished their goal of buying a home.

d) A frustrating time where missed opportunities are constantly brought to the forefront.

B

Which of the following are credit scores often used for?

a) Mortgage approval

b) Job hiring

c) Automobile insurance rate setting

d) All of the above

D

Which of the following does not usually occur between the signing of a real estate contract to purchase and the closing on the property?

a) Initial price negotiation

b) Inspection of the property

c) Acquisition of financing for the property

d) Appraisal of the property

A

What role did appraisers play in the purchase of real estate in the time period immediately preceding the recent financial crisis?

a) Roadblocks

b) Unbiased observers

c) Unbiased participants

d) Rubber stamp

D

Which of the following will generally not raise your credit score?

a) Credit utilization lower than 30% per card

b) Credit line increases that remain unused

c) On time payments

d) Closing old, unused credit account

D

When a house does not pass inspection, what is the most likely outcome?

a) The buyer will cancel the contract, assuming it is a contract contingent upon passing inspection.

b) The seller will make all repairs indicated in the inspection.

c) The buyer and seller will renegotiate to determine what repairs or price changes must be made for the buying process to proceed.

d) The seller will cancel the contract due to unreasonable demands, assuming it is a contract contingent upon passing inspection.

C

You estimate that you can afford $1500 per month for a house payment. You can get a 30 year mortgage at an interest rate of 4.5%. Approximately how much can you afford to borrow?

a) $540,000

b) $57,000

c) $223,000

d) $296,000

D

You are looking at a new home in Mount Pleasant. The house costs $650,000. You will need to put 5% down to acquire 30 year loan with an interest rate of 5%. What will your monthly payment approximately be?

a) $3300

b) $6500

c) $1800

d) $2700

A

The valid contract to purchase a house states, among other things, that the contract is contingent upon the buyer seeking financing within 10 days, and acquiring financing within 14 days at a rate not to exceed 4.5%. The next day, the buyer goes to several online mortgage websites, her local credit union, and a local mortgage broker seeking financing. She promptly complies with all requests for information, and is approved 13 days later at an interest rate of 4.75%. The buyer refuses to buy the house. Which of the following outcomes is most likely?

a) The seller will successfully sue for damages.

b) The seller will successfully sue for specific performance.

c) The seller will have to try to sell the house to someone else, because this deal is dead.

d) The buyer will be forced to comply with the other terms of the contract.

C

The following is an example of what type of property description?

“Beginning at an iron pipe marked A and thence running South 8 degrees 15 minutes East 75 feet to a pipe marked B, thence North 78 degrees 27 minutes East 34 3/10 feet to a pipe marked C, thence North 11 degrees 28 minutes West 74 9/10 feet to a pipe marked D, thence South 78 degrees 27 minutes West 30 2/10 feet to the place of beginning containing 2410.7 square feet, more or less.”

a) GIS Coordinate System

b) Metes and Bounds

c) Plat

d) Rectangular Survey System

B

The following is an example of what type of property description?

Lot 2, Section 5 Township 42 North, Range 12 East; or Lot 7, section 31,

Township 41 North, Range 9 East

a) Plat

b) Metes and Bounds

c) Rectangular Survey System

d) Street Address

C

What is the function of earnest money in a contract to sell real estate?

a) Earnest money serves as the consideration for the contract, and without it there is no contract.

b) Earnest money serves as a symbol for the buyer’s sincerity, and may provide a cushion to cover expenses for the seller if the deal falls through.

c) Earnest money serves as a symbol of the seller’s sincerity, and may provide a cushion for the buyer if the deal falls through.

d) Earnest money doesn’t really serve a function, it’s an historic relic.

B

Which of the following would not cause a property to fail inspection?

a) Termite Damage

b) Leaking roof

c) Missing caulk around a tub

d) None of the above

D

The contract to purchase a property is contingent upon the property passing inspection. The property fails inspection, the seller refuses to make any repairs, so the buyer refuses to buy the property. Which of the following outcomes is most likely?

a) The buyer will be allowed to withdraw from the contract, but will probably lose his earnest money.

b) The seller will probably lose a case for breach of contract, and may be forced to pay damages to the buyer.

c) Nothing. The contingency was not fulfilled, so everybody gets their money back and goes back to the position they were in before the contract was signed.

d) The buyer will not be allowed to withdraw from the contract unless the failure to pass inspection is deemed “material and significant”.

C

What are liquidated damages?

a) Damages that have already been paid.

b) Damages that are determined at the time the contract is written, and are specified in the contract itself.

c) Damages that are paid in the form of liquid currencies, as opposed to real property.

d) Damages related to water event in coastal, river, or other flood prone locations

B

Which of the following statements regarding a market analysis for real estate is false?

a) All of the sources for residential analysis are available to the public for free.

b) Most sources for commercial analysis are only available at significant cost.

c) Most sources for residential analysis are available for free.

d) The sources available for commercial analysis are generally much more detailed than those available for residential analysis.

A

In class, we discussed a recent court case which is likely to impact real estate. Which of the following best describes this case and the potential ramifications for the real estate industry going forward?

a) Several real estate developers were sued for their contributions to climate change, resulting in a $3 billion verdict against the developers.
This ruling is likely to substantially increase the costs of development in the future, likely by at least 200%.

b) Several real estate developers were sued for their contributions to climate change, resulting in a $3 billion verdict against the developers.
This ruling is likely to eliminate most development in the near future, with a few exceptions.

c) Several real estate brokerages were sued for antitrust violations regarding collusion on commissions, resulting in a $2 billion dollar verdict against the brokerages. This ruling is likely to eliminate residential real estate agents almost entirely, with very few exceptions.

d) Several real estate brokerages were sued for antitrust violations regarding collusion on commissions, resulting in a $2 billion dollar verdict against the brokerages. Right now, buyer agents are a little unsure of exactly how and how much they will be paid, and the industry is in a stage of uncertainty.

D

Suppose you are looking on your favorite residential real estate web site, and you see an area of town that is very close to the areas of primary employment, including your own job. You also notice that this area is substantially cheaper than surrounding areas (for similar homes), including a couple of areas that are farther away from the employment center. What actions regarding your home search should this discovery lead to?

a) You should immediately focus your housing search in this area.

b) None, it's just another area of town to consider.

c) You should look more closely at this area to see if it should be excluded from your list, as this sort of abnormality usually means there is something undesirable, like high crime, about the area.

d) You should immediately make an offer on a house in this area, because this sort of abnormality is usually quickly removed in an efficient real estate market and time is of the essence.

C

When conducting an analysis of residential property versus an analysis of retail property, which of the following statements is typically false (there may be extreme exceptions)?

a) The level of traffic has the opposite effect on value for the two property types.

b) Square footage has the opposite effect on value for the two property types.

c) The amount of area exposed to a main road has the opposite effect on value for the two property types.

d) The overall condition of the property has the same effect on value for the two property types.

B

Which of the following statements about real estate careers is false?

a) Most experienced commercial brokers are paid solely on commission.

b) There are very few salaried positions available in the real estate field.

c) Real estate development is on the high end of the risk/reward spectrum.

d) Real estate jobs are highly cyclical.

B

Which of the following is a condition of the residential broker settlement agreement we discussed in class?

a) Sellers can no longer pay the commission for a buyer's agent.

b) Potential buyers must sign an agreement with a buyer's agent before the agent shows them any houses.

c) Buyer's must pay their agent's 3% commission.

d) Broker commissions must now be a flat fee, not percentage based.

B

I decide to employ a broker to sell my house. The broker and I talk, and we verbally agree to that if he sells my house, I will pay him 5% of the sales price. Next, we write down these terms and both sign a document with these identical term... The broker sells my house for $190,000, but I know the appraised value is actually $200,000, so I refuse to pay him his commission. What is the likely result?

a) The broker will sue me for his commission, and he may win. There is a legal contract between us, the only question is whether I have an available defense or if the broker is unable to produce the written contract.

b) The broker will sue me and will definitely lose. There is no written document, so there is no contract between us.

c) The broker will sue me for his commission, and he will definitely win. There is a legal contract between us.

d) The broker will sue me and will probably lose. There may be a contract, but even if there is, fairness demands that he sell the house for closer to its appraised value.

A

While at a party, a broker offers to list my property in exchange for a 20% commission. In return, I promise not to let anyone else sell the property, or sell it myself. While at the bar finishing our 8th tequila shots (each), we write up the deal and we both sign it. Is this a valid contract?

a) Probably, all three elements for a contract are present. There was an offer, an acceptance, and consideration.

b) Probably, all four elements for a contract are present. There was an offer, an acceptance, consideration, and informed consent.

c) Probably not, there was no consideration because no money changed hands.

d) Probably not, while all the elements for a contract are present, it appears that the parties were probably intoxicated.

D

While at a party, a broker offers to list my property in exchange for a 20% commission. In return, I promise not to let anyone else sell the property, or sell it myself. While at the bar finishing our 8'" tequila shots (each), we write up the deal and we both sign it. The next day, the brokers sells my property but I refuse to pay him this ridiculous commission. He sues me and produces the signed contract at trial, which contains sufficient information to establish the elements of a contract. Stunned by this document, I don't produce any further evidence. What is the likely outcome?

a) Since the broker obviously failed to prove that I was sober when signing this contract, I should win and not have to pay any commission.

b) Since I failed to introduce any evidence of my intoxication when signing the contract, I will probably lose the case and have to pay the commission.

c) Since the broker obviously failed to prove that I was sober when signing this contract, I should win but will have to pay any reasonable expenses incurred by the broker on my behalf.

d) While the broker has established a contract, the principle of habeas corpus dictates that a 20% commission is excessive and I will not have to pay the full amount.

B

According to our class discussions, what is the best way to describe the decision to use a lockbox to sell a house?

a) A bad idea in almost all situations.

b) A good idea in all situations.

c) A test of wills between buyer and seller.

d) A balancing test between security concerns and marketing concerns.

D

Based on our class discussions, a market analysis for real estate involves all of the following except:

a) Careful map study

b) Observations about traffic patterns.

c) Contract negotiations.

d) Mapping price points of similar properties.

C

What are the elements of a contract, excluding any defenses to a contract?

a) Offer and Acceptance

b) Offer, Acceptance, Consideration

c) Offer, Acceptance, Consideration, Capacity

d) Offer, Disclosure, Capacity, Consideration

B

For most home buyers, what is currently most likely to be the most significant barrier to purchasing a home?

a) Downpayment

b) Monthly Payment

c) Difficult to say, downpayment and monthly payment are roughly equal in terms of barrier right now.

d) Finding a real estate agent with enough time to show properties.

C

You are looking at a house that you believe you will need to borrow $350,000 in order to purchase. If interest rates on 30 year mortgages are 2%, what will your approximate principal and interest payment on this mortgage be?

a) $1,850.35

b) $1,293.67

c) $1,686.42

d) $1,475.61

B

N = 360

I = 2

PV = 350000

PMT = ? = $1,293.67

You are looking at a house that you believe you will need to borrow $350,000 in order to purchase. If interest rates on 30 year mortgages are 6.5%, what will your approximate principal and interest payment on this mortgage be?

a) $2,661.21

b) $2,328.56

c) $21,730.49

d) $2,212.24

D

N = 360

I = 6.5

PV = 350000

PMT = ? = $2,212.24

In class, we discussed the areas of town, the traffic patterns, various neighborhood advantages and disadvantages, and what house features we were looking for. Then we looked at price and discovered that we could not afford the house we specified in the areas we really wanted. That led to a sort of "dead end" in our class discussion. Why?

a) We couldn't afford the house, there was nothing else to really talk about.

b) At this point, each buyer typically has to make tradeoffs. Shorter commute times vs smaller homes, longer commute times vs larger homes, etc. While these can be described generally, only the individual knows what is really most important to them.

c) It was time to move on to another subject anyway, so we just stopped there.

d) At this point, each buyer must employ an agent to best leverage his buying power to the maximum advantage. These leverage techniques are closely held trade information, so it's impossible to continue discussing them in class, this is the point where only a licensed agent can provide guidance.

B

Which of the following is not present in the sample Oklahoma real estate listing contract we discussed in class?

a) Numbered pages to prevent the insertion of faked additional pages.

b) A clause requiring the seller to pay the broker the agreed upon commission if the property sells within a set time period (determined when the contract is signed) AFTER the contract expires to a buyer who saw the property while the contract was effective.

c) A clause that requires the broker to seek the highest price possible for the listed property.

d) A clause that allows the buyer to determine whether or not to use a lockbox.

C

I don't think my agent worked very hard to sell my house, so I refuse to pay him the full commission when he sells my house. Naturally he sues me. In court, he is able to provide a written document that contains proof of an offer, acceptance, and consideration. But he fails to produce any evidence that I am of legal age to sign a contract. What is the likely result?

a) I will win since the agent has failed to prove I am of legal age.

b) I will lose because age is irrelevant, the agent performed his part of the contract and deserves to be paid.

c) I will probably lose, because the agent does not have to prove I am of legal age, I have to prove I am not. Unless I introduce proof that I am not of legal age, I will lose.

d) I will probably win, because the lack of proof of age is sufficient to create reasonable doubt.

C

You have just sold your first home as a real estate agent and have taken no advances against your pay. You brought a buyer to a home listed with another agent, who works for another real estate broker. The home eventually sold for $600,000. Assuming equal splits of all commission, and the previously usual commission of 6%, what can you expect to receive from this sale?

a) A pat on the back. The broker always keeps your first commission check.

b) $31,500

c) $7,875

d) $9,000

D

60000 × 6% = 36000 x .5 x .5 = 9000

Based on your budget, you believe you can afford a loan payment of $1500 per month. If interest rates are currently 6.00% on 30 year mortgages, what is the approximate amount of money you can borrow based on your monthly budget?

a) $276,000

b) $187,500

c) $387,000

d) $250,000

N = 360

I = 6

PMT = 1500

PV = 250187

You have $20,000, what price can you afford to pay for a house if the lender will let you put 5% down, but no lower?

a) $300,000

b) $150,000

c) $50,000

d) $400,000

D

20000 / 5% = 400000

Using your answers from the two previous questions, what is (approximately) the highest priced property you can afford?
a) $400,000
b) $250,000
c) $50,000
d) $290,000

B

Ideally, how SHOULD potential buyers start their home search?

a) Look at google maps to estimate time to work. b)

b) Look at Zillow to find attractive homes.

c) Look at savings and monthly budget to determine a price range to search.

d) Look at greatschools.com to find the best local schools

C

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. How much did you borrow?

a) $325,000

b) $485,000

c) $25,000

d) $475,000

B

500000 x (1 - .03) = 485000

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. You took out a 30 year mortgage at a fixed rate of 4.5% on the remaining balance. You have made all payments on time but have paid nothing extra on the mortgage. What was your monthly principal and interest payment on this mortgage?

a) $2,047.36

b) $2,386.43

c) $2,457.42

d) $1,706.37

C

N = 360

I = 4.5

PV = 485000

PMT = 2457.42

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. You took out a 30 year mortgage at a fixed rate of 4.5% on the remaining balance. You have made all payments on time but have paid nothing extra on the mortgage. What is the approximate remaining balance on the mortgage today?

a) $389,564

b) $332,164

c) $493,725

d) $422,077

D

N = 360 - 84

I = 4.5

PMT = 2457.42

PV = 422077.48

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. You took out a 30 year mortgage at a fixed rate of 4.5% on the remaining balance. You have made all payments on time but have paid nothing extra on the mortgage. Over this time, your house has appreciated at a rate of about 5% per year (compounded monthly). What is the approximate price of your house today?

a) $579,000

b) $709,000

c) $553,500

d) $667,000

B

N = 84

I = 5

PV = 500000

FV = 709018.03

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. You took out a 30 year mortgage at a fixed rate of 4.5% on the remaining balance. You have made all payments on time but have paid nothing extra on the mortgage. Over this time, your house has appreciated at a rate of about 5% per year (compounded monthly). If you sell your house today, what is the approximate amount of money you will have left after paying the agent's 6% commission and paying off the balance of your mortgage?

a) $129,286

b) $118,096

c) $77,910

d) $244,383

D

709000 - 422077 - (709000 x 6%) = 244383

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. You took out a 30 year mortgage at a fixed rate of 4.5% on the remaining balance. You have made all payments on time but have paid nothing extra on the mortgage. Over this time, your house has appreciated at a rate of about 5% per year (compounded monthly). Assume that the monthly cost of buying the house is approximately equal to the cost of your alternate shelter or lodging, whatever that might be (probably renting). If you sell your house today, pay the agent's 6% commission, and pay off the balance of your mortgage, what is your rate of return on your property investment (compounded monthly) over the 7 years?

a) 33.72%

b) 3.00%

c) 40.54%

d) 29.96%

C

N = 84

PV = 15000

FV = 244383

I = 40.54%

You purchased your home 7 years ago for $500,000. You made a 3% downpayment on house. You took out a 30 year mortgage at a fixed rate of 4.5% on the remaining balance. You have made all payments on time but have paid nothing extra on the mortgage. Over this time, your house has appreciated at a rate of about 5% per year (compounded monthly). Assume that the monthly cost of buying the house is approximately $800 per month more expensive than your alternate shelter or lodging, whatever that might be (probably renting). If you sell your house today, pay the agent's 6% commission, and pay off the balance of your mortgage, what is your rate of return on your property investment (compounded monthly) over the 7 years?

a) 23.53%

b) -3.00%

c) 20.53%

d) 18.64%

A

You have just purchased a new piece of property about 20 miles south of Augusta, GA. The 5 acre property has been used for years as a small peach orchard, so you wake up bright and early in the morning to go get fresh peaches for a peach cobbler off your new property. (For those of you not from the south who have never had a peach cobbler, it really is your loss. Go find one, there's a reason we don't really eat apple pie.) When you go outside, you discover that the previous owner is already there harvesting your peach crop. Who gets the peaches?

a) You do. You bought the property, everything attached to it is now yours.

b) The previous owner does. These peaches are not attachments since they fall off the trees, so they belong to the previous owner.

c) The previous owner does. These peaches are emblements, and the previous owner is entitled to this harvest.

d) The previous owner does, and he will continue to get future harvests as well. You bought the property, not the rights to the harvest.

C

You purchase a condominium in downtown Dallas. Written into the sales contract and deed is a clause stating that the owner of the condominium has the right to use parking space A4 outside of the building. When you pull in the lot the next afternoon, you notice that the neighbors are in your spot. You politely ask them to move so that you can begin using your spot, but they refuse, saying the spots are available on a first come first serve basis. Who gets to use the spot?

a) You do. This is a right appurtentant, and your right to the parking space is the same as your right to the condo.

b) Whoever gets there first.

c) It's unclear. You have bought the condo, but that does not necessarily give you the right to the spot. Those rights cannot be passed via contract or deed.

d) Your new neighbor. They were first in the building, so they possess a right precedent to claim a spot. •

A

After 20 years, Felix has finally purchased his dream waterfront home. To make the home complete, Felix diverts the river to his front door to create a magical water show for all of his family and guests. The diversion results in a dramatic reduction in water available to everyone downriver, so one of the individuals downriver sues Felix to make him stop this. What is the likely outcome?

a) Felix is going to have to move the river back.

b) Felix is going to have to pay damages to those downriver.

c) It depends on the precise state, but generally speaking in eastern states Felix can do this under the doctrine of Riparian water rights.

d) It depends on the precise state, but generally speaking in western states Felix can do this under the doctrine of prior appropriation so long as Felix was the first to move the water.

D

In class, we talked about the rules for fixtures being a kind of backup. What did we mean by that?

a) Relying on these rules is your best option for making sure you get what you want, and they will backup whatever position you take regarding the property that should convey (transfer)

b) As a buyer, your best option is actually to put anything you really want to convey (transfer) into the contract, and the fixture rules usually only come into play as a backup plan if you don't do this,

c) A simple way to describe the rules for fixtures is that they are based on what a large truck could "backup" to property and take away.

d) The rules for fixtures are based on the legal doctrine of "caveat emptor" and will backup whatever position a seller takes.

B

Which of the following is an example of something that normally conveys (or not) according to convention (habit) in a state, as opposed to the actual laws of fixtures?

a) Curtains

b) Furniture

c) Correctly Installed Outdoor Playsets

d) Refrigerators

D

Based on historic common law, which of the following was not part of the default ownership of real property?

a) Owning the surface of the property

b) Owning the skies above the property.

c) Owning the right to develop, or change the property.

d) All of the above are part of the default ownership of property historically.

D

A representative of a large energy company recently approached you to offer a large sum of money for some oil and natural gas that is located under your family property. Is there a way for you to take advantage of this offer if you don't want to sell your family property?

a) Unfortunately no. The only way to take advantage of this is to sell your property.

b) Unfortunately no. While it is nice of the energy company to speak with you, property owners only own the surface of the property by default.

c) Yes, you can sell the oil and natural gas rights to the company if you wish (assuming you currently own them), without affecting your other ownership rights in the property.

d) Yes, but only if you are willing to have unsightly drills, derricks, and other items on your property..

C

You are about to make an offer for a property with a new hail resistant roof on it. The roof is clearly less than a couple of weeks old, and is one of the reasons you are excited about the property. Should the new roof be of any concern to you?

a) No. It's brand new and if it is not leaking it should not be an issue.

b) Yes, there is a possibility the roof will not be considered a fixture and will not come with the property.

c) Yes, new roofs are often installed improperly and there will be no way for you to catch this (unless you are a roof expert) before buying the house.

d) Yes, there is a possibility that the current owner has not paid for the roof yet, and this could create a lien on the property that could make you responsible for paying for the roof once you buy the property.

D

Which of the following does not describe at least one of the implications of "ways not to sell your house" to potential buyers?

a) Buyer's should be extremely cautious regarding properties that violate the rules, as these sellers are obviously not interested in selling.

b) A buyer who is aware that things like smells, clutter, and loose doorknobs are easily and cheaply fixed may be able to get a deal on a house that other's have passed up.

c) Following many of the rules like keeping a house absolutely clean and not cooking smelly foods becomes increasingly hard for longer time periods. This means that buyers can look at how long a house has been on the market to get an idea of how willing a seller might be to negotiate.

d) There are some issues, like odors that may indicate mold, that are expensive to address so buyers should pay strong attention to those issues.

A

Which of the following is most likely a fixture?

a) A large hot tub that has been placed on the concrete patio.

b) A projector that has been mounted to the ceiling and focused on a 100" screen 15 feet away.

c) Blackout curtains purchased for the bedroom windows from Amazon.

d) A Samsung refrigerator that is placed in a standard sized kitchen alcove.

B

Which of the following is not one of the tests for fixtures?

a) The ratio value test.

b) Manner of attachment.

c) Existence of an agreement (contract).

d) Whether or not removing the tested object will damage the real estate.

A

Do commercial properties mirror the values of residential lots? (Are the same types of lots relatively more valuable or less valuable for both types of properties?)

a) Yes

b) No

c) It varies so much there is not way to really answer the question.

d) Generally no, but it depends on the type of commercial user and even the specific commercial user. This is where a creative agent can potentially add value to a deal.

D

Which of the following colors would be the best choice to use painting the interior of a house that is being prepared for sale?

a) Bright blue.

b) Bright red.

c) Light gray.

d) Anything really eye catching, that really "pops"

C

My great grandmother's chandelier hangs in the foyer of my house. I do not want the chandelier to leave the family when I sell the property. What is the BEST option to accomplish this goal?

a) Clearly disclose in all advertisements for the house that the chandelier does not come with the house.

b) I should remove the chandelier before showing the property to anyone, replacing it with a cheaper light fixture if necessary.

c) I don't need to do anything specific, the chandelier is not part of the property anyway, so the buyer should not reasonably expect it to stay.

d) In addition to the advertising disclosures, I must place a written notice in the foyer that the chandelier does not stay with the property.

B

In class, we talked about ways "not to sell your house". Which of the following is not on that list? a)

a) Poor curb appeal

b) No open houses.

c) Dirt

d) Bad Smells

B

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4%-per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the initial cash flow (CFO) to purchase the house?

a. $5,000

b) $27,500

c) $17,500

d. $22,500

B

down pmt = 350000 × 5% = 17500

1st mo. int = 332500 × 7%/12 = 1938.5833

escrow = 800

CC = 10000

Total = 30239.5833

CF0 = 30239.5833 - (2500 +1000) = 26739.58

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the total monthly cost of the house, including all ownership expenses?

a) $3,012.13

b) $2,500

c) $2,856.43

d) $2,219.75

A

PV = 332500

N = 360

I = 7

PMT = ? = 2212 + 800 = 3012.13

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the initial cost of the rental home?

a. $1,000

b. $10,000

c. $3,500

d. $13,500

C

2500 + 1000 = 3500

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PM, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the monthly cost of the rental home?

a. $1,000

b. $2,500

c. $10,000

d. $2,856.32

B ?

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the remaining balance on the house in 2 years, assuming no extra payments have been made?

a. $337,429.61

b. $273,924.77

c. $279,408.88

d. $325,500.70

D

N = 360 - 24

I = 7

PMT = -2212

PV = ? = 325500.58

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the remaining balance on the house in 6 years, assuming no extra payments have been made?

a. $308,199.41

b. $362,429.33

c. $187,626.64

d. $272,682.75

A

N = 360 - 72

I = 7

PMT = -2212

PV = ? = 308199.3

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the NPV of buying the house to live in for 2 years, and should you buy it based purely on the financial analysis?

a. The NPV is $-12,549.25 and you should not buy the house.

b. The NPV is $5,305.31 and you should buy the house.

c. The NPV is $33,645.41 and you should buy the house.

d. The NPV is -$2,078.18 and you should buy the house.

A

PV = 350000

N = 24

I = 4

?

You are trying to decide whether purchase a home or keep renting. You have two options that are roughly equivalent. You can purchase the home for $350,000. You will need a 5% downpayment and all of the other closing costs will be about $10,000. The interest rate on a 30 year mortgage is 7%. In addition to the monthly principal and interest payment, you will need to budget $800 per month for taxes, PMI, maintenance, and other expenses associated with owning a home. For the rental home, the rent is $2500 per month, and there is a $1000 non-refundable "cleaning fee" due at lease signing, in addition to the first month's rent. You will need to pay a commission of 6% when you sell the house. You estimate the house will appreciate by approximately 4% per year (compounded monthly, not rounded). If you do not spend your savings to buy the home, you estimate that you can invest the money (mostly in loan payoffs) at an average rate of 12%. What is the NPV of buying the house to live in for 6 years, and should you buy it based purely on the financial analysis?

a. The NPV is $15,593.71 and you should buy the house.

b. The NPV is -$6,496.15 and you should not buy the house.

c. The NPV is $2,256.45 and you should buy the house.

d. The NPV is $41,765.42 and you should not buy the house.

C

You are looking at two lots in a new residential development. The lots are approximately the same size, and the developer will sell you either lot for the same price. You can then build the same house on either lot. One lot is on the cul-de-sac, or circle, while the other is located about halfway down one of several roads leading through the subdivision. Which lot should you choose?

a. You should choose the lot on the main road because of the easy access and exit from the neighborhood.

b. You should choose whichever you personally like better since they are offered at the same price.

c. You should choose the cul-de-sac lot because of lower traffic and likely higher property value.

d. You should not choose either lot because the developer should have offered you only one lot to fit your needs.

C

There is as hot tub located on the property I am considering purchasing. Which of the following factors would be MOST likely to make the hot tub a legal fixture?

a. The hot tub is extremely large and heavy, making it difficult to move.

b. The hot tub has been located by placing it onto the concrete patio outside of the main house.

c. The hot tub siding has been carefully chosen from the standard available colors to somewhat match the house siding.

d. The hot tub has been surrounded by a wood deck, making it impossible to remove the hot tub without also removing at least a portion of the deck.

D