Property Management Exam Questions
Course Introduction
Property Management is a comprehensive course designed to introduce students to the principles, practices, and legal frameworks involved in managing real estate assets. The course covers essential topics such as leasing, tenant relations, property maintenance, financial operations, risk management, and marketing of both residential and commercial properties. Students will learn how to effectively oversee property operations, ensure regulatory compliance, and apply ethical standards in decision making. By integrating practical case studies and contemporary industry trends, this course equips participants with the skills necessary to succeed in the dynamic field of property management.
Recommended Textbook
Real Estate Finance Theory and Practice 6th Edition by
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22 Chapters
473 Verified Questions
473 Flashcards
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Terrence M. Clauretie
Page 2
Chapter 1: Finance and Real Estate
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13 Verified Questions
13 Flashcards
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Sample Questions
Q1) The definition of real property includes:
A) only that property that can be seen and touched
B) all of the rights and privileges of the use of real estate
C) only land and buildings,the rights and privileges cannot be included
D) a and c
Answer: B
Q2) Risk:
A) is the same as risk-return tradeoff
B) is the possibility that the actual result will differ from the expected outcome
C) states that investors require additional expected returns for taking on additional risk
D) doesn't need to be considered when analyzing a potential investment
Answer: B
Q3) Financial markets can be partitioned into two categories:
A) primary and secondary
B) liquid and non-liquid securities
C) long-term and temporary instruments
D) money markets and capital markets
Answer: D
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3
Chapter 2: Money Credit and the Determination of Interest
Rates
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20 Verified Questions
20 Flashcards
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Sample Questions
Q1) The liquidity effect:
A) refers to the initial short-term effect of a decrease in the money supply when interest rates rise
B) refers to the initial short-run effect of an increase in the money supply on interest rates
C) decreases the amount of excess cash individuals hold when interest rates drop
D) has no effect on the demand for bonds
Answer: B
Q2) Economists agree:
A) inflation stops growing after it reaches double digits
B) inflation cannot continue year after year
C) inflation,especially if it is consistent year after year,creates expectations of future inflation
D) inflation doesn't play an important role in the determination of market interest rates
Answer: C
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Chapter 3: Finance Theory and Real Estate
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24 Verified Questions
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Sample Questions
Q1) Positive financial leverage occurs when:
A) the asset is finance with all equity
B) the cost of borrowing exceeds the return on the investment
C) the cost of the debt is less than the return on the investment
D) there is a decline in the return on equity
Answer: C
Q2) A call option on a mortgage is:
A) the homeowner's right to prepay the current balance prior to its maturity
B) the lender's right to foreclose in the event of default
C) the homeowner's right to take a second mortgage out on the equity in the home
D) the lender's right to resell the mortgage to another lender
Answer: A
Q3) Agency costs include:
A) agent costs,bonding costs,and monitoring costs
B) monitoring costs,bonding costs,and structuring costs
C) bonding costs,structuring costs,and agent costs
D) monitoring costs,agent costs,and structuring costs
Answer: B
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Chapter 4: The Early History of Residential Finance and
Creation of the Fixed Rate Mortgage
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) You take a fixed-rate mortgage for $132,000 at 6.75% for 30 years,monthly payments.At the end of the second year,you unexpectedly inherit $18,000 from your now-favorite uncle.You decide to apply this $18,000 to the principal balance of your loan.How many payments are remaining after the extra lump sum payment is made?
A) 233.33
B) 126.67
C) 121.15
D) 272.00
E) none of the above
Q2) In Roman law the an instrument used to secure a loan was called a fiducia,which means:
A) public
B) trust
C) finance
D) secrecy
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6
Chapter 5: Modern Residential Finance
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4 Verified Questions
4 Flashcards
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Sample Questions
Q1) Negative amortization refers to the fact that:
A) the balance of a loan grows larger rather than smaller
B) the amount of interest on a loan becomes larger rather than smaller
C) the reduction in the value of a property falls below the loan amount
D) none of the above
Q2) Assumable loans and carry backs:
A) have totally replaced FHA and VA financing
B) are examples of what is termed creative financing
C) are short-term loans with balloon payments
D) are two forms of FHA financing
Q3) Disintermediation refers to:
A) the withdrawal of funds from financial institutions by depositors in excess of deposits
B) financial institutions withdrawing from the Federal Reserve System
C) financial institutions shifting from FHA loans to conventional loans
D) none of the above
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Chapter 6: Alternative Mortgage Instruments
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) Maintaining a certain value of an adjustable rate mortgage by trading off caps and discount points can be referred to as:
A) frequency of rate change
B) historical replication
C) terminal wealth preservation
D) pricing ARM terms
Q2) Your grandfather takes a reverse annuity mortgage on his house for $135,000 at 7.00% for five years.His payments are an equal annual annuity of $21,939.If he decides to repay the loan at the end of year three,what amount is owed?
A) $54,247
B) $59,529
C) $75,469
D) $104,678
E) $107,507
Q3) The longer the time between rate adjustments on an adjustable rate mortgage:
A) the less risk assumed by the lender
B) the less probability of prepayment
C) the more risk assumed by the lender
D) the greater the fluctuation in the rate on the loan
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Page 8
Chapter 7: Financing and Property Values
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Sample Questions
Q1) The term "carryback financing" refers to:
A) a motivated seller who takes back a note at a low rate in order to sell the property
B) a situation where the lender takes the property back after a default on the loan
C) an assumable loan in which a lender waives the discount points in order to complete the loan transaction
D) an assumable FHA loan
Q2) The term "cash equivalent" value refers to:
A) the value of a residential property while it is listed
B) the amount of discount points charged by a lender
C) the value of a property if sold for all cash
D) the cash equivalency of the mortgage on a property
Q3) Mortgage Revenue Bonds,a class of bonds called municipals,are issued by state and local governments and:
A) allow the government to purchase property for government use
B) provide an interest rate at a higher rate than corporate bonds
C) provide interest that is free of federal taxation
D) provide interest that is free from capital gains taxation
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9
Chapter 8: Federal Housing Policies: Part 1
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19 Verified Questions
19 Flashcards
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Sample Questions
Q1) "Points" are defined as:
A) a fee charged by the lender to the seller for extending the loan to the buyer
B) a fee charged by the lender to the borrower for extending the loan
C) a fee charged by the seller to the buyer as a part of the selling price
D) a fee charged by the lender to the seller to defray the risk of a loan that can't have a higher interest rate because of regulations governing the allowable rates
Q2) Federal Home Loan Banks obtain a significant amount of the funds they lend to thrifts from the sale of FHLB bonds in the capital market.These bonds are:
A) guaranteed by the US government
B) not guaranteed,but the thrifts are required to purchase them in order to receive loans from a FHLB
C) not guaranteed,but provide a high rate of return when compared to less risky bonds
D) not guaranteed,but the banks operate under a federal charter and government supervision
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Chapter 9: Federal Housing Policies: Part 2
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12 Verified Questions
12 Flashcards
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Sample Questions
Q1) The term "redlining" refers to a practice of:
A) lenders setting higher income standards for minority group members.In other Words,setting a "red line" of income level which a minority must meet
B) automatically denying loans to minority group members
C) drawing a red line around an area on a map defining which areas are predominantly minority occupied
D) drawing a red line around an area on a map defining neighborhoods within which a lender would not make mortgage loans
Q2) Which of the following are exempt from the provisions (except for racial discrimination)of the Fair Housing Act of 1968?
A) an owner-occupant who does not employ a broker
B) religious organizations
C) private clubs that do not operate commercially for a profit
D) all of the above
E) none of the above
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Chapter 10: The Secondary Mortgage Market
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40 Verified Questions
40 Flashcards
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Sample Questions
Q1) 10-32.A secondary mortgage market transaction that occurs when a lender sells mortgages to an agency which,in turn issues an NMS back to the lender is called:
A) a swap
B) a repurchase agreement
C) mark-to-market
D) none of the above
Q2) 10-28.The secondary mortgage market developed because it solved:
A) regional mismatch of sources and uses of funds
B) interest rate risk for mortgage originators
C) a and b
D) none of the above
Q3) 10-13.Rating agencies review the credit risk of the collateral of CMOs for all of the following except:
A) type of property
B) location of property
C) interest rates d loan-to-value ratio of property
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Chapter 11: Valuation of Mortgage Securities
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25 Flashcards
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Sample Questions
Q1) 11-18.If the value of the IO strip is most sensitive to changes in the market rate when this rate is between 100 and 300 basis points below the coupon on the pool,then those investors who desire to obtain the hedging benefits of the IO strip should purchase:
A) strips of passthroughs 100-300 points below the market rate
B) only strips of passthroughs at the market rate
C) strips of passthroughs 100-300 points above the market rate
D) only PO strips 100-300 points below the market rate
Q2) The revenues associated with servicing loans include all except:
A) the servicing fee
B) the float on escrow accounts
C) the float between the receipt of monthly payments and the payment of proceeds to the purchaser of the loans
D) the administrative and overhead costs associated with servicing the pool
Q3) Variables that affect the sinking fund balance include:
A) the prepayment rate on mortgages in the pool
B) the reinvestment rate on the sinking fund
C) the initial overcollateralization
D) the default rate
E) all of the above
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Page 13
Chapter 12: Controlling Default Risk Through Borrower
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41 Verified Questions
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Sample Questions
Q1) When a loan is originated the lender will make certain that the appraised value of the house is:
A) equal to the amount of the loan
B) greater than the amount of the loan
C) less than the amount of the loan
D) a or b
Q2) For 95% loan-to-value loans FNMA requires that,as a percent of gross income,the payment not exceed:
A) 10%
B) 15%
C) 25%
D) 18%
Q3) 12-30.Due to efficiencies of the secondary mortgage market,conforming loans often carry interest rates below that of non-conforming loans by:
A) 2 basis points
B) an average of 7 basis points
C) 200 basis points
D) 10-50 basis points
Page 14
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Chapter 13: Loan Origination, Processing, and Closing
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43 Flashcards
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Sample Questions
Q1) Accepted Appraisal Standards require that the appraiser consider three approaches to the determination of value:
A) cost,market,and income
B) pricing,buying,and selling
C) cost,market,and purchase
D) none of the above
Q2) 13-40.A record stating the amounts that are to go to the buyer and seller when a loan is closed is called:
A) note
B) truth-in-lending disclosure
C) settlement statement
D) recording
Q3) The method based on the premise that the buyer will not pay more for a property than for a the expense of constructing a comparable property with the same utility is:
A) the market approach
B) the income approach
C) the cost approach
D) the buyer approach
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15
Chapter
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Sample Questions
Q1) A deficiency judgment is:
A) a judgment that allows the mortgagor to redeem the property prior to foreclosure
B) a judgment against the borrower for the difference between the amount owed to a lender and the value of the property sold at a foreclosure sale
C) a judgment that allows the mortgage insurer to pursue the lender for losses in a foreclosure
D) none of the above
Q2) FHA mortgage insurance:
A) protects the borrower against all losses due to default
B) protects the lender against all losses due to fraud
C) protects the lender and borrower from all losses due to foreclosure
D) none of the above
Q3) Foreclosure is a process that:
A) returns the property to a borrower when the loan is paid off
B) is consistent in all states as required by federal law
C) is exercised by a buyer of the property
D) none of the above
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Page 16
Chapter 15: Value, Leverage, and Capital Structure
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10 Verified Questions
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Sample Questions
Q1) A key non-real estate source of property cash flow is:
A) tax shelter
B) managerial talent
C) use of equity financing
D) debt financing
E) all the above
Q2) In any property cash flows are derived from two avenues:
A) operating cash flows
B) from sale of property
C) management costs
D) a and c
E) a and b
Q3) 15-10.Residential income property is depreciated over:
A) 15 years
B) 30 years
C) 39 years
D) 27.5 years
E) 20 years
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Chapter 16: Federal Taxation and Real Estate Finance
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Sample Questions
Q1) 16-13.Passive loss limitation rules allow active participants in a real estate investment to offset up to _________________ of income from other classes:
A) $15,000
B) $25,000
C) $30,000
D) $50,000
E) none of the above
Q2) A test that determines if the original issue discount (OID)rules apply is the:
A) time value of money test
B) adequacy of interest test
C) risk-return test
D) a and b
E) b and c
Q3) Factors that affect the value of tax savings from depreciation include:
A) amount of depreciation
B) acceleration of depreciation
C) the marginal tax rate
D) all of the above
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18
Chapter 17: Sources of Funds for Commercial Real Estate
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Sample Questions
Q1) The largest supplier of commercial real estate debt is:
A) state and local retirement funds
B) commercial banks
C) thrifts
D) pension funds
Q2) Insurance companies invest primarily in:
A) CMOs
B) commercial mortgages
C) residential mortgages
D) none of the above
Q3) Thrifts specialize in:
A) residential loans
B) multi-family properties
C) commercial properties
D) none of the above
Q4) The primary institutional investors in equity real estate are:
A) pension funds
B) federal credit agencies
C) unions
D) none of the above
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Chapter 18: Acquisition, Development, and Construction Financing
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Sample Questions
Q1) 18-28.Instead of buying land outright,many developers prefer:
A) subdivision trusts
B) partial releases
C) release patterns
D) options
Q2) 18-45.When a developer puts up only a portion of the sales price and agrees to pay the balance when the property is developed and sold,this is referred to as:
A) subdivision trust
B) rolling options
C) subdivision control
D) exaction
Q3) 18-44.The holding of large parcels of properties in advance of the development process is referred to as:
A) developing
B) warehousing
C) speculating
D) release provision
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Page 20
Chapter 19: Permanent Financing of Commercial Real
Estate Properties
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Sample Questions
Q1) All of the following are criteria for capital leases except:
A) the lease terms provide for the transfer of the ownership title of the property to the lessee at the end of the lease term
B) the lease contains an option to purchase the asset at a bargain price
C) the present value of the minimum lease payments is less than 90 percent of the current fair market value of the asset (less any investment tax credit retained by the lessor)
D) the lease term is equal to or greater than 75 percent of the estimated economic life of the asset
Q2) 19-15.Compared to standard loan agreements the risk of an equity participation loan:
A) is increased for the lender and the investor
B) is decreased for the lender and the investor
C) is increased for the investor and decreased for the lender
D) is increased for the lender and decreased for the investor
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Chapter 20: Ownership Structures for Financing and Holding Real Estate
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36 Verified Questions
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Sample Questions
Q1) 20-35.The following is one of several criteria a REIT must meet so as to be a tax-free entity:
A) derive at least seventy-five percent of income from real estate related investments
B) retain at least one-half of all income
C) can not at any time sell off real estate assets
D) none of the above
Q2) 20-10.The best form of ownership for large-scale real estate investments is:
A) publicly traded partnership
B) REITs
C) C-corporation
D) a and b
Q3) The main determinants of the form of ownership for real estate are:
A) income tax laws
B) issues of liability
C) access to capital markets
D) a and b
E) all of above
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Page 22
Chapter 21: Real Estate in a Portfolio Context
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Sample Questions
Q1) Diversification has value that results from risk reduction that occurs when:
A) the returns on the combined assets are perfectly correlated
B) the returns on the combined assets are inversely related to the business cycle
C) the returns on combined assets are uncorrelated
D) none of the above
Q2) At a point where the return on asset A and the return on asset B are both above their average,the numerator in the coefficient of determination will be:
A) negative
B) positive
C) can be either negative or positive
D) indeterminate
Q3) Diversification involving real estate can take place by:
A) property type
B) geography
C) analyzing the diversification of regional economies
D) all of the above
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Chapter 22: Liability, Agency Problems, Fraud, and Ethics in Real Estate Finance
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Sample Questions
Q1) A lender that has a property taken because of its use in drug transactions can use a defense referred to:
A) due diligence
B) good faith dealings
C) breach of contract
D) innocent-owner
Q2) One who intentionally causes injury to another is subject to liability to the other for that injury,if this conduct is generally culpable and not justifiable under the circumstances.This is referred to as:
A) prima facia tort
B) breach of contract
C) fraud
D) strict liability
Q3) Making of a promise with no intention of fulfilling it is referred to as:
A) nondisclosure fraud
B) promissory fraud
C) tort
D) fiduciary
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