ALABAMA REAL ESTATE LICENSE EXAM QUESTIONS WITH
FULLY SOLVED AND UPDATED ANSWERS.
An office building is valued at $800,000 when the annual net income is capitalized at a
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
rate of 20%. If the operating expenses and vacancy and rent loss total 40% of the gross
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_income, what is the approximate gross annual income? -- Answer ✔✔ $266,667
_ _ _ _ _ _ _ _ _ _ _
The income approach to value is calculated as follows:
_ _ _ _ _ _ _ _
Annual net income divided by capitalization rate equals value.
_ _ _ _ _ _ _ _ _
Therefore, net income ÷ 0.2 $800,000. _ _ _ _ _ _
The net income is $800,000 × 0.2 = $160,000.
_ _ _ _ _ _ _ _
The net income is 60% (100% 40%) of the gross income.
_ _ _ _ _ _ _ _ _ _
The gross income is $160,000 ÷ 0.6 = $266,667.
_ _ _ _ _ _ _ _
Conformity -- Answer ✔✔ Maximum property values are achieved when properties
_ _ _ _ _ _ _ _ _ _ _
are similar in STYLE and SIZE.
_ _ _ _ _
After passing state exam, you have ___ days to apply for a Temporary License, either
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
on an Active or Inactive basis. -- Answer ✔✔ 90
_ _ _ _ _ _ _ _ _
Utility -- Answer ✔✔ How useful a property is to the marketplace is a very big factor
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
in determining its value.
_ _ _
Temporary Licenses are only valid for ___ year(s), and cannot be renewed. -- Answer
_ _ _ _ _ _ _ _ _ _ _ _ _ _
✔✔ 1 _
,For an Original License, you must pass a ___ hour post-license course. -- Answer ✔✔
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
30
If Temporary License is ACTIVE, the post-license course must be completed within
_ _ _ _ _ _ _ _ _ _ _ _
___ months. -- Answer ✔✔ 6.
_ _ _ _ _
Scarcity -- Answer ✔✔ If a property is useful to the marketplace and it is in scarce
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
supply - it will have greater value.
_ _ _ _ _ _
Demand -- Answer ✔✔ Whether or not the marketplace views a particular type of
_ _ _ _ _ _ _ _ _ _ _ _ _ _
property as desirable. _ _
Effective Demand -- Answer ✔✔ Centers on whether people have the ABILITY to
_ _ _ _ _ _ _ _ _ _ _ _ _
fulfill their desires.
_ _
Example: High interest rates can restrict consumers' ability to purchase even though
_ _ _ _ _ _ _ _ _ _ _ _
they have the desire to purchase.
_ _ _ _ _
Transferability -- Answer ✔✔ Whether or not ownership can easily be transferred. _ _ _ _ _ _ _ _ _ _ _
Highest and Best Use -- Answer ✔✔ The most realistic use that will produce highest
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
present value for a parcel of property (don't over-improve or under-improve a
_ _ _ _ _ _ _ _ _ _ _ _
property).
Regression -- Answer ✔✔ Value of a superior property decreases when located in an
_ _ _ _ _ _ _ _ _ _ _ _ _ _
area of inferior properties.
_ _ _
Progression -- Answer ✔✔ Value of an inferior property increases when located in an
_ _ _ _ _ _ _ _ _ _ _ _ _ _
area of superior properties.
_ _ _
Substitution -- Answer ✔✔ The maximum price a property will sell for is set by the
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
price of another property of equal desirability.
_ _ _ _ _ _
A buyer would substitute the lower priced property for the higher priced.
_ _ _ _ _ _ _ _ _ _ _
, Anticipation -- Answer ✔✔ Purchasing property today with the expectation of some _ _ _ _ _ _ _ _ _ _ _ _
an eventual benefit.
_ _
Increasing / Decreasing Returns (Cost-Benefit Analysis) -- Answer ✔✔ The cost of
_ _ _ _ _ _ _ _ _ _ _ _
making an improvement compared to that increase or decrease in property value that
_ _ _ _ _ _ _ _ _ _ _ _ _
it causes.
_
Contribution -- Answer ✔✔ Similar to Increasing/Decreasing Returns, except it looks _ _ _ _ _ _ _ _ _ _ _
at one element or component at a time and determines whether it adds or detracts
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
from the value of a property (ie adding a garage or another bathroom).
_ _ _ _ _ _ _ _ _ _ _ _
If the post-license course is not completed within ___ year(s), the Temporary License
_ _ _ _ _ _ _ _ _ _ _ _ _
lapses. This period begins on the FIRST DAY of the month AFTER passing the state
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
exam. -- Answer ✔✔ 1 _ _ _ _
For Broker's License, applicant must have ACTIVE Salesperson License for ___ out of
_ _ _ _ _ _ _ _ _ _ _ _ _
___ years immediately preceding the application. -- Answer ✔✔ 2/3
_ _ _ _ _ _ _ _ _
The fee to transfer your Salesperson License to a new Qualifying Broker is $___. --
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Answer ✔✔ $25 _ _
An owner's mortgage includes a clause requiring a prepayment penalty. Three percent
_ _ _ _ _ _ _ _ _ _ _ _
of any outstanding loan principal would be charged by the lender if the owner paid off
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
the principal before the scheduled time. Payments were $296.88, due on the first of
_ _ _ _ _ _ _ _ _ _ _ _ _ _
each month, and included both principal and interest in arrears at 8% per annum. After
_ _ _ _ _ _ _ _ _ _ _ _ _ _
_the owner's July 1 payment, her loan balance was $8,946.23. On August 1, after
_ _ _ _ _ _ _ _ _ _ _ _ _ _
handing her lender the check for her August 1 payment, the owner paid off the entire
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
remaining loan balance. What is the approximate prepayment penalty? -- Answer ✔✔
_ _ _ _ _ _ _ _ _ _ _ _
The monthly house payment, $296.88, includes both interest and principal. The
_ _ _ _ _ _ _ _ _ _ _
prepayment penalty is charged only on the principal, not on interest. Therefore, one
_ _ _ _ _ _ _ _ _ _ _ _ _
must determine how much the new principal loan balance will
_ _ _ _ _ _ _ _ _
be after the August 1st house payment is made. The calculations are as follows:
_ _ _ _ _ _ _ _ _ _ _ _ _
The loan balance after the July 1 payment is $8,946.23 x 0.08 interest rate = $715.70 a
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
year ÷ 12 months = $59.64 interest for July.
_ _ _ _ _ _ _ _
FULLY SOLVED AND UPDATED ANSWERS.
An office building is valued at $800,000 when the annual net income is capitalized at a
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
rate of 20%. If the operating expenses and vacancy and rent loss total 40% of the gross
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
_income, what is the approximate gross annual income? -- Answer ✔✔ $266,667
_ _ _ _ _ _ _ _ _ _ _
The income approach to value is calculated as follows:
_ _ _ _ _ _ _ _
Annual net income divided by capitalization rate equals value.
_ _ _ _ _ _ _ _ _
Therefore, net income ÷ 0.2 $800,000. _ _ _ _ _ _
The net income is $800,000 × 0.2 = $160,000.
_ _ _ _ _ _ _ _
The net income is 60% (100% 40%) of the gross income.
_ _ _ _ _ _ _ _ _ _
The gross income is $160,000 ÷ 0.6 = $266,667.
_ _ _ _ _ _ _ _
Conformity -- Answer ✔✔ Maximum property values are achieved when properties
_ _ _ _ _ _ _ _ _ _ _
are similar in STYLE and SIZE.
_ _ _ _ _
After passing state exam, you have ___ days to apply for a Temporary License, either
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
on an Active or Inactive basis. -- Answer ✔✔ 90
_ _ _ _ _ _ _ _ _
Utility -- Answer ✔✔ How useful a property is to the marketplace is a very big factor
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
in determining its value.
_ _ _
Temporary Licenses are only valid for ___ year(s), and cannot be renewed. -- Answer
_ _ _ _ _ _ _ _ _ _ _ _ _ _
✔✔ 1 _
,For an Original License, you must pass a ___ hour post-license course. -- Answer ✔✔
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
30
If Temporary License is ACTIVE, the post-license course must be completed within
_ _ _ _ _ _ _ _ _ _ _ _
___ months. -- Answer ✔✔ 6.
_ _ _ _ _
Scarcity -- Answer ✔✔ If a property is useful to the marketplace and it is in scarce
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
supply - it will have greater value.
_ _ _ _ _ _
Demand -- Answer ✔✔ Whether or not the marketplace views a particular type of
_ _ _ _ _ _ _ _ _ _ _ _ _ _
property as desirable. _ _
Effective Demand -- Answer ✔✔ Centers on whether people have the ABILITY to
_ _ _ _ _ _ _ _ _ _ _ _ _
fulfill their desires.
_ _
Example: High interest rates can restrict consumers' ability to purchase even though
_ _ _ _ _ _ _ _ _ _ _ _
they have the desire to purchase.
_ _ _ _ _
Transferability -- Answer ✔✔ Whether or not ownership can easily be transferred. _ _ _ _ _ _ _ _ _ _ _
Highest and Best Use -- Answer ✔✔ The most realistic use that will produce highest
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
present value for a parcel of property (don't over-improve or under-improve a
_ _ _ _ _ _ _ _ _ _ _ _
property).
Regression -- Answer ✔✔ Value of a superior property decreases when located in an
_ _ _ _ _ _ _ _ _ _ _ _ _ _
area of inferior properties.
_ _ _
Progression -- Answer ✔✔ Value of an inferior property increases when located in an
_ _ _ _ _ _ _ _ _ _ _ _ _ _
area of superior properties.
_ _ _
Substitution -- Answer ✔✔ The maximum price a property will sell for is set by the
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
price of another property of equal desirability.
_ _ _ _ _ _
A buyer would substitute the lower priced property for the higher priced.
_ _ _ _ _ _ _ _ _ _ _
, Anticipation -- Answer ✔✔ Purchasing property today with the expectation of some _ _ _ _ _ _ _ _ _ _ _ _
an eventual benefit.
_ _
Increasing / Decreasing Returns (Cost-Benefit Analysis) -- Answer ✔✔ The cost of
_ _ _ _ _ _ _ _ _ _ _ _
making an improvement compared to that increase or decrease in property value that
_ _ _ _ _ _ _ _ _ _ _ _ _
it causes.
_
Contribution -- Answer ✔✔ Similar to Increasing/Decreasing Returns, except it looks _ _ _ _ _ _ _ _ _ _ _
at one element or component at a time and determines whether it adds or detracts
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
from the value of a property (ie adding a garage or another bathroom).
_ _ _ _ _ _ _ _ _ _ _ _
If the post-license course is not completed within ___ year(s), the Temporary License
_ _ _ _ _ _ _ _ _ _ _ _ _
lapses. This period begins on the FIRST DAY of the month AFTER passing the state
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
exam. -- Answer ✔✔ 1 _ _ _ _
For Broker's License, applicant must have ACTIVE Salesperson License for ___ out of
_ _ _ _ _ _ _ _ _ _ _ _ _
___ years immediately preceding the application. -- Answer ✔✔ 2/3
_ _ _ _ _ _ _ _ _
The fee to transfer your Salesperson License to a new Qualifying Broker is $___. --
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Answer ✔✔ $25 _ _
An owner's mortgage includes a clause requiring a prepayment penalty. Three percent
_ _ _ _ _ _ _ _ _ _ _ _
of any outstanding loan principal would be charged by the lender if the owner paid off
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
the principal before the scheduled time. Payments were $296.88, due on the first of
_ _ _ _ _ _ _ _ _ _ _ _ _ _
each month, and included both principal and interest in arrears at 8% per annum. After
_ _ _ _ _ _ _ _ _ _ _ _ _ _
_the owner's July 1 payment, her loan balance was $8,946.23. On August 1, after
_ _ _ _ _ _ _ _ _ _ _ _ _ _
handing her lender the check for her August 1 payment, the owner paid off the entire
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
remaining loan balance. What is the approximate prepayment penalty? -- Answer ✔✔
_ _ _ _ _ _ _ _ _ _ _ _
The monthly house payment, $296.88, includes both interest and principal. The
_ _ _ _ _ _ _ _ _ _ _
prepayment penalty is charged only on the principal, not on interest. Therefore, one
_ _ _ _ _ _ _ _ _ _ _ _ _
must determine how much the new principal loan balance will
_ _ _ _ _ _ _ _ _
be after the August 1st house payment is made. The calculations are as follows:
_ _ _ _ _ _ _ _ _ _ _ _ _
The loan balance after the July 1 payment is $8,946.23 x 0.08 interest rate = $715.70 a
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
year ÷ 12 months = $59.64 interest for July.
_ _ _ _ _ _ _ _
