Principles of Real Estate II Practice Exam: Questions & Answers: Latest Updated

What type of insurance protects the business if it is unable to produce income due to a covered event? (Ans-Business interruption (Business interruption insurance protects against loss of income when a business is unable to produce due to a covered event.) Colleen and Judy purchased a dilapidated townhome in an estate sale. Due to their fix-up work and the current economy, the property value has skyrocketed. They decide to sell it to get their equity out of it. After they list it, a woman comes forward, saying she is an heir to the previous owner and lays claim to the property. Which general warranty deed covenant protects Colleen and Judy? (Ans-The covenant of warranty (The covenant of warranty assures that the grantor will warrant and defend the title against the lawful claims of others.) Loans made to high-risk borrowers, at higher interest rates and with higher fees, are ______. (Ans-Subprime loans (The higher fees and rates are meant to compensate the lender for the higher risk associated with subprime loans) Taxes that are set aside for redevelopment and that stem from public financing when there is little help from the government are called what? (Ans-TIFs (Tax Investment Financing (TIF) is a method of public financing when local governments need assistance in the redevelopment of certain areas. TIRZs do stem from TIFs. The general program of public financing for redevelopments is known as TIF.) Your client, William, wants to run a tax office out of his home. He lives in an area that is not zoned for that purpose. What must William obtain to operate his tax office legally? (Ans-A special use permit (To operate his tax office legally, William must obtain a special use permit.) The Institute of Real Estate Management, an affiliate of the National Association of REALTORS®, offers a specific certification program. What designation would you earn upon completing this program? (Ans-Certified Property Manager (IREM offers a Certified Property Manager certification program and designation.) A 20-unit apartment building sells for $5 million. The property can bring in $400,000 in annual gross income. What is the gross income multiplier (GIM)? (Ans-12.5 (Calculate GIM by dividing the $5 million sales price by the $400,000 gross annual income: $5 million ÷ $400,000 = 12.5.) What could be a consequence if there were no secondary mortgage market? (Ans-Lenders might not have funds available to make new loans to the public. (Purchases made on the secondary market provide primary lenders with funds to continue making loans. Without this market, lending funds might become scarce.) To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which one of these elements listed has the highest priority? (Ans-Conditions of sale (The elements appraisers consider in the sales comparison approach are applied in a specific order: financing terms and cash equivalency, conditions of sale, market conditions at the time of contract and closing, location, and physical characteristics.) What is the broker's role at closing? (Ans-Collect commission (One of the broker's responsibilities at closing is to collect the commission money.) When sites with hazardous substances are identified, which of the following mandates that the responsible party cleans them up? (Ans-CERCLA (CERCLA identifies sites that have hazardous substances, and requires the responsible party to clean them up.) When you use a comparative market analysis to calculate a suggested price range for a particular property, which of the following actions will you take? (Ans-Use adjusted prices from sold comparables and refine the range with data about active listings, expired listings, and possibly pendings.