Real Estate Principles
Final Test Solutions
Course Introduction
Real Estate Principles provides a comprehensive introduction to the fundamental concepts, terminology, and practices that govern the real estate industry. The course covers topics such as property rights, real estate law, contracts, agency relationships, land use, financing, and the basics of property valuation. Students will gain insights into the roles of buyers, sellers, brokers, and agents, as well as the procedures involved in real estate transactions. Through case studies and practical examples, this course equips students with the essential knowledge needed to understand how real estate markets function and lays the groundwork for advanced study or professional licensure in the field.
Recommended Textbook
Real Estate Finance 9th Edition by John P. Wiedemer
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16 Chapters
189 Verified Questions
189 Flashcards
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Chapter 1: History and Background
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14 Verified Questions
14 Flashcards
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Sample Questions
Q1) A word that has the legal meaning of a borrower remaining in possession of property pledged as security for a loan is
A) Possession
B) Collateral
C) Security
D) Hypothecate
Answer: D
Q2) Of the following, the more precise description of a share of stock is:
A) An indication of an obligation.
B) A form of unsecured debt.
C) An evidence of ownership
D) A kind of security.
Answer: C
Q3) The need to have a borrower sign both a mortgage and a promissory note is necessary as these two documents are:
A) Both collateral instruments
B) Considered interlinked documents
C) Must both be recorded to have a perfected interest
D) None of the above
Answer: B
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Chapter 2: Money and Interest Rates
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11 Verified Questions
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Sample Questions
Q1) Monetary policies in this country are under the control of the A) Office of Thrift Supervision
B) Secretary of the Treasury
C) Federal Reserve Bank Board
D) Federal Deposit Insurance Corporation
Answer: C
Q2) The purpose of cash reserves as required by the FED are best described as
A) Cash placed on deposit with the FED at no interest as a cushion to meet emergency requirements of member banks
B) Cash held off the market to controlled interest rates
C) A source of income for the fed
D) A better control over a bank's lending policies
Answer: A
Q3) The major source of money funding residential mortgage loans today is
A) Money market funds
B) Commercial bank time deposits
C) The federal government
D) The sale of mortgage backed securities
Answer: A
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Page 4
Chapter 3: Mortgage Money: Regulated Lenders
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12 Verified Questions
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Sample Questions
Q1) While the distinction between mortgage bankers and brokers is diminishing, a full service mortgage banker means being capable of all of the following EXCEPT
A) Originating or negotiating a loan
B) Funding a loan a closing
C) Servicing a loan until pay off
D) Holding a whole loan in portfolio
Answer: C
Q2) Which of the following is most descriptive of the primary market?
A) The loan origination market
B) Trading in second mortgages
C) The buying and selling of mortgage loans
D) The market created by Fannie Mae and Freddie Mac
Answer: A
Q3) The secondary market for mortgage loans can best be described as theA) Operations of Fannie Mae/Freddie Mac
B) Market for trading second mortgages
C) Purchase and /or sale of mortgage loans after origination
D) Market for trading in Ginnie Mae contracts
Answer: C
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Page 5
Chapter 4: Other Primary Market Lenders
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Sample Questions
Q1) Computerized loan origination is a procedure that allows a real estate agent to A) analyzed a loan without consulting a qualified underwriter.
B) approve and fund mortgage loans in house
C) assist an applicant for a mortgage loan and transmit the information via computer to a lender
D) set its own standards for loan qualification.
Q2) The fee a mortgage lender charges for assembling a loan package and determining acceptance or rejection of an applicant is called a loan
A) Underwriting Fee
B) Servicing Fee
C) Assembling Fee
D) Origination Fee
Q3) The Farm Credit System consists primarily of
A) a Cooperative, borrower-owned network of farm lending banks
B) the Rural Development Service of the Department of Agriculture and related agencies
C) only the Federal Land Bank Associations
D) the government agency that underwrites all qualifying farms loans.
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Chapter 5: Mortgage Money: the Secondary Market
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Sample Questions
Q1) The primary purpose of federal agency underwriting of securities backed by mortgage loan pools is to
A) earn greater fees for the government.
B) enhance the credit-worthiness of an investment in mortgage-back securities.
C) exercise more control over the mortgage business.
D) direct more funds into low-income housing.
Q2) Which of the following best describe the difference between a CMO and a CDO?
A) The CDO is a security the CMO is not.
B) The CMO can be tranched and the CDO cannot.
C) The CDO can have other asset classes other than mortgage loans.
D) A CMO will always be higher rated by S & P and Moody's than a CDO.
Q3) A mortgage pool can be described as
A) a block of loans serving as collateral for an issue of securities.
B) a pool of loans organized so that the winner takes the highest return.
C) another type of loan guarantee.
D) a block of defaulted loans whose risk is shared by a group of mortgage investors.
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Page 7
Chapter 6: The Mortgage Documents
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Sample Questions
Q1) Loans made within the parameters and using the uniform documents as required by Fannie Mae and Freddie Mac are known as:
A) Fannie Mae or Freddie Mac loans
B) Conforming loans
C) Other Conventional loans
D) Government standard loans
Q2) If a buyer accepts the responsibility to pay an existing loan on the property purchased, it is called:
A) Release of Liability
B) Exercise of the Due-on-Sale Clause
C) A Liability Exchange
D) A Loan Assumption
Q3) The key difference between a contract for deed and a mortgage instrument is A) the manner in which payments are made
B) in a contract for deed, title does not pass until part or all of the payments are made
C) state laws differ on contract meaning
D) mortgage instruments are not permitted in all states
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Chapter 7: Mortgage Repayment Plans
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Sample Questions
Q1) One reasons for the Option ARM's decline in use is
A) better rate adjustment options on new innovative mortgage products.
B) product was used for mortgagors that it was inappropriate for their risk profile.
C) the 15 year option for amortization ceased to exist.
D) the low interest rate environment.
Q2) Which of the following is the most important distinguishing feature of an adjustable rate mortgage?
A) The payment amount is fixed for the life of the loan.
B) The lender has the right to change the interest rate during the term of the loan.
C) The term of the loan may be extended.
D) The borrower has the right to reject a change in the payment amount.
Q3) A note allowing monthly repayment amounts less than are necessary to fully amortize a loan during its term is called a
A) Growing Equity Mortgage
B) Graduated payment note
C) Balloon payment note
D) Buy-down note
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Chapter 8: Federal Government Underwriting Programs
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Sample Questions
Q1) When a VA loan has been properly assumed, a veteran has a right to a release of liability upon meeting all of the following requirements EXCEPT
A) loan must be currently paid
B) property must be sold to another veteran
C) purchaser must be qualified to buy
D) purchaser must agree to assume the loan
Q2) Which FHA Program Section has been phased out and is now covered by FHA's Section 203(b) program with higher restrictions on collateral approval?
A) Section 354
B) Section 203(k)
C) Section 234(d)
D) Section 1492
Q3) FHA loans originated on or after December 15, 1989 are restricted to which of the following assumption policies?
A) Freely assumable but seller remains liable
B) Cannot be assumed for first five years of mortgage obligation
C) New buyer must be approved by FHA prior to title transfer
D) No assumptions are permitted
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Chapter 9: Borrower Quali cation
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Sample Questions
Q1) The Act that prohibits certain types of discrimination in the granting of credit is the:
A) Fair Credit Reporting Act
B) Equal Credit Opportunity Act
C) Real Estate Settlements Procedures Ace
D) Fair Housing Act
Q2) The Federal Credit Reporting Acts primary provisions are to:
A) make available to the mortgagor procedures for disputing accurate information on their credit report.
B) create a rule that all credit report users provide a copy of the credit reports to the borrower.
C) provide satisfactory procedures to ensure the confidentiality and accuracy of consumer credit information.
D) allow practical procedures to deny credit to credit-worthy borrowers.
Q3) The source of repayment of a home loan is expected to come from:
A) income derived from the property itself
B) additional borrowing
C) the personal income of the borrower
D) other rental income
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Chapter 10: Property Analysis
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Sample Questions
Q1) The underlying theories that support evaluation of a property are called:
A) Approaches to value
B) Qualification for designations
C) Principles of appraisal
D) Whatever local practices prevail
Q2) The capitalization value of a $30,000 income stream to an investor seeking a 12.5 percent return is:
A) $120,000
B) $200,000
C) $240,000
D) $480,000
Q3) The kind of depreciation most closely associated with inadequate building design is A) Design inadequacy
B) Physical deterioration
C) Functional obsolescence
D) External obsolescence
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12
Chapter 11: Commercial Loans: Construction and Land Loans
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Sample Questions
Q1) Unlike the permanent loan, a construction loan usually requires the endorsement of the:
A) Owner/builder
B) Future tenants
C) Landowner
D) Mortgagee
Q2) The top designation for a accountant preparing a financial statement is:
A) Certified Management Accountant
B) Certified Public Accountant
C) Federal Approved Accountant
D) Designated Accountant
Q3) A release clause in a real estate development loan agreement is one that:
A) allows the borrower to withdraw from the agreement
B) defines the conditions under which lots can be released from the mortgage for resale to builders
C) calls for releasing collateral back to the lender
D) triggers the release of a lender from any further participation in the loan
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Page 13
Chapter 12: Commercial Building and Farm Loans
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Sample Questions
Q1) Multifamily housing must comply with a 1988 amendment to Fair Housing Act that adds which of the following to the prohibition against discrimination?
A) Pets and other personality
B) Elderly persons
C) Citizenship and employment
D) Familial status and handicapped
Q2) The least amount of management is needed for operating:
A) a warehouse
B) a shopping center
C) an office building
D) an apartment
Q3) When seeking funding which of the following is not one kinds of information that a religious institution facilities lender might feel was key?
A) Minimum of three years average adult worship attendance.
B) Annual contributions from each of the largest 15 donors for the previous year (the names of the donors are not usually required).
C) Annual salaries/income of ministerial staff
D) Cash on hand in building fund
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Chapter 13: Other Financing Practices
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Sample Questions
Q1) In a non-judicial foreclosure, the power of sale clause in a mortgage grants the right to take the action to the:
A) Court
B) Mortgagor
C) Trustee
D) New buyer
Q2) All of the following are true of maximum and minimum limits for conventional loans EXCEPT:
A) Fannie Mae/Freddie Mace set new limits each year for their conventional/conforming loans
B) if a prospective loan exceeds an institution's in-house limit, other lenders may join in a participation loan
C) setting minimum limits for loan amounts is a possible violation of the Fair Housing Act
D) all states set limits on the maximum amount for residential loans within the state
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Chapter 14: Technology Advances in Mortgage Lending
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11 Verified Questions
11 Flashcards
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Sample Questions
Q1) Mortgage loan origination software must increasingly be compatible with:
A) Microsoft Excel
B) TurboTax
C) Third party originator web portals
D) Mortgagebot
Q2) Which of the following is NOT a loan classification with Freddie Mac's "Loan Prospector"?
A) Rejected
B) Accepted
C) Refer
D) Caution
Q3) Which of the following is true of loans made on the Internet?
A) They are always higher cost mortgage loans
B) There is no opportunity for sham operators to take advantage of consumers
C) A user must travel to find an Internet outlet
D) A seeker of a loan can maintain limited anonymity while asking for information
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16
Chapter 15: Environmental Issues
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10 Flashcards
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Sample Questions
Q1) In many parts of the country, contaminated areas are being removed from the Superfund program allowing clean-ups to be accomplished and the land returned to useful activity under which of the following programs?
A) Restoration program
B) Brownfields program
C) ASTM's transaction screen
D) Contamination release program
Q2) Regulation implementing the Endangered Species Act Define a "taking" as:
A) abusing land that harbors an endangered species
B) only if its habitat is destroyed
C) killing an endangered species and/or damaging or destroying its habitat
D) failure to report the presence of an endangered species
Q3) Which of the following statements is FALSE in regard to asbestos in a building?
A) Ingestion of microscopic fibers can cause asbestosis, a noncancerous disease
B) The real danger lies in loose, or "soft," asbestos not that occurring in hard form
C) In all cases where asbestos is found, the EPA recommends immediate removal
D) The EPA will accept an in-place management program rather than require removal of all asbestos
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17
Chapter 16: Settlement Procedures
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12 Verified Questions
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Sample Questions
Q1) In a settlement procedure, prepaid interest is required for the time period from September 21 (date of closing) through September 30. What amount of prepaid interest is due for a loan of $200,000 at 5% interest? (Banker's year is 360 Days)
A) $250.00
B) $277.78
C) $246.57
D) 208.33
Q2) RESPA requires disclosure of estimated closing costs for residential loans at which of the following times?
A) Any time prior to actual closing
B) Within three days of loan application
C) Only if requested by the borrower
D) Within three days of loan application and again one day prior to closing if the borrower request it
Q3) The primary purpose of the Truth-in-Lending Act is to
A) require full disclosure of the amount of the promissory note
B) provide meaningful information to borrowers on the cost of consumer credit
C) discourage excessive loan costs for consumers
D) establish limits on the total charges a lender can assess for a loan
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