Q&A Hero

Q: If Landon who is 80 years old, writes a trust that states that his property is to go to "my great-great-great grandchild upon my death" and at the time of creating the trust his only child is one year old: A.The trust will be valid and the property must wait until the great-great-great grandchild is born to be finally transferred. B.The trust will fail due to the rule against eventualities. C.The trust will fail due to the rule against continualities. D.The trust will fail due to the rule against perpetuities.

Q: Suppose that an industrial building can be purchased today for $2,500,000. If it is expected to produce cash flows of $180,000 for each of the next five years (assume CFs are received at the end of each year) and can be sold at the end of the fifth year for $2,800,000, what is the internal rate of return (IRR) on this investment? A. 0.09% B. 4.57% C. 9.20% D. 10.37%

Q: If your home is being foreclosed on, should you pay the full amount of the debt before the sale, you may retain ownership of the property. This is called a/an: A.Right of revision. B.Right of recovery. C.Right to cure deficiency. D.Right of redemption.

Q: Suppose that a property can generate cash flows of $10,000 per year for eight years and can sell for $80,000 at the end of the investment period. Assuming a discount rate of 10%, what is the present value of this property (Assume end of period cash flows in your calculation)? A. $117,320 B. $160,000 C. $133,349 D. $90,670

Q: There will be a trustee in transactions involving: A.Mortgages. B.Deeds of trust. C.Land sales contracts. D.Special warranty deeds.

Q: Suppose you have found a tenant who wishes to rent out your vacation home for the next twelve months. You are charging $800 per month in rent. You will collect the first rent payment today and then on the 1st of the month each month thereafter. What is the value of this investment opportunity to you today if you could reinvest your income at an annual rate of 3% with interest compounded on a monthly basis? A. $7,963.20 B. $8,202.10 C. $9,445.80 D. $9,469.42

Q: Which of the following is a mutual benefit bailment? A.Renting a car. B.Lending your car to a friend without receiving consideration. C.Borrowing a car from a friend without paying consideration. D.Buying a car.

Q: Suppose a bank decides to make a mortgage loan to an individual so that they may purchase a home. The homeowner will pay the bank $1500 per month in mortgage payments for the next 30 years. The bank will collect the mortgage payments at the end of the month. What is this promised stream of cash flows worth to the bank today if they could reinvest the monthly income at an annualized rate of 5% for the entire investment horizon? A. $23,058.68 B. $99,658.27 C. $279,422.43 D. $1,248,387.95

Q: An investor just purchased an office building for $100,000. He knows for certain that he can sell the building for $110,000 in 5 years. Approximately how much does he need to charge in annual rent in order to achieve a 15% annual return on the deal (rounded to the nearest hundred dollars)?A. $2,500B. $8,000C. $13,500D. $20,500

Q: Josh has borrowed Amanda's car to get to school. Josh is obligated to exercise: A.Great care. B.Normal care. C.Slight care. D.This is only a loan so he need not exercise any care.

Q: In Spur Industries, Inc. v. Del E Webb Development Co., Spur Industries operated a feedlot well outside of the nearest city limits. When Del Webb bought land near Spur and developed a housing development they sought to have Spur moved or closed as a nuisance. The court decide that: A.Since Del Webb and the subsequent individual land owners moved to the nuisance, Spur won because they had done nothing wrong. B.Spur could be closed down and suffer the loss because they were creating the nuisance and one company can't stand in the way of progress. C.Spur could stay in business at the same location but had to pay damages to the landowners for the diminished value of their land. D.Spur could be ordered closed or would have to move but Del Webb was required to indemnify Spur for their losses and costs.

Q: An investor originally paid $22,000 for a vacant lot 12 years ago. If the investor is able to sell the lot today for $62,000, what would his annual rate of return be on this investment (rounded to the nearest percent)? A. 5% B. 7% C. 9% D. 11%

Q: Assume that a piece of land is currently valued at $50,000. If this piece of land is expected to appreciate at an annual rate of 5% per year for the next 20 years, how much will the land be worth 20 years from now? A. $100,898.99 B. $112,633.09 C. $123,860.81 D. $132,664.89

Q: A lien automatically granted to contractors and laborers who make improvements on real or personal property is known as a: A.General lien. B.Chattel lien. C.Surety lien. D.Mechanic's lien.

Q: You and your roommate are driving through a nice neighborhood when you see some furniture piled on the curb to be picked up by the trash collectors the next morning. You pick up a chair when the home owner opens a window and yells, "get away from my stuff". A.You may claim the chair as lost property. B.You may claim the chair as mislaid property. C.You may claim the chair as abandoned property. D.The homeowner retains ownership until it's picked up the next morning so you must leave it.

Q: Assume that an industrial building can be purchased for $1,500,000 today, is expected to yield cash flows of $80,000 for each of the next five years (with the cash flows occurring at the end of each year), and can be sold at the end of the fifth year for $1,625,000. Calculate the internal rate of return (IRR) for this transaction. A. 3.14% B. 6.78% C. 9.20% D. 10.37%

Q: In Kelo v. City of New London, Connecticut: A.The plaintiff was successful because the defendant's taking of their land violated the Public Takings Clause of the Constitution. B.The plaintiff was successful because the defendant was not taking the property for a valid public use. C.The defendant was successful because the court declined to second guess the City's judgment regarding the efficacy of its development plan or the city's determination as to what land it needs in order to effectuate the project. D.The defendant was successful because the court determined that economic development was not true public use or purpose.

Q: The purchase price of an income producing property today is $570,000. After analysis of the expected future cash flows, expected sales price, and expected yield, the investor determines that the future cash flows have a present value (PV) of $580,000. Taking into consideration the price of the property today, what is the net present value (NPV) of this investment opportunity, and should the investor take the deal? A. $10,000; Yes B. $10,000; No C. -$10,000; Yes D. -$10,000; No

Q: Wayne and Garth are lifelong slackers. They are twins in their mid 40's yet they still live with their parents. Finally on their 45th birthdays, they are told by their parents that they must move out within 60 days. A.Because they have remained on the property for over 20 years as adults, they may remain based on adverse possession. B.Because they have remained on the property for over 20 years as adults, they may remain based on an easement by prescription. C.Because they have remained on the property for over 20 years as adults, and have been open and notorious, they may remain on the property based on eminent domain. D.They must move out.

Q: Assume that an individual puts $10,000 into a savings account that pays 3% interest, with interest being compounded monthly. The individual plans to withdraw the balance in 5 years to buy a car. If he does not make any further deposits over this period, how much will the individual be able to put towards his purchase? A. $10,125.63 B. $11,592.74 C. $11,616.17 D. $58,916.03

Q: When a tenant in common dies, his or her share of the property: A.Passes to the state government. B.Passes to the remaining tenants in common. C.Passes to his or her heirs. D.Passes to the federal government.

Q: Assuming that an investor requires a 10% annual yield over the next 12 years, how much would she be willing to pay for the right to receive $20,000 at the end of year 12? A. $6,053.91 B. $6,372.62 C. $62,768.57 D. $136,273.84

Q: An investor agreed to sell a warehouse 5 years from now to the tenant who currently rents the space. The tenant will continue to pay $20,000 rent at the end of each year including year five in which he will purchase the building for an additional $150,000. Assuming the investor's required rate of return is 10%, how much is this deal presently worth to the investor who was willing to sell? A. $168,953.93 B. $241, 451.07 C. $363,678.50 D. $1,032,475.67

Q: Ruth is visiting her granddaughter Marcy and decides to give Marcy her very expensive cameo brooch that her mother had given her. It has been in the family for over 100 years and is under lock and key and is the only item in a safe in Ruth's home. She offers the brooch to Marcy who accepts. Ruth then gives Marcy the only key to the safe. A.This is not a valid gift because there has been no delivery B.This is a valid gift because there has been an actual delivery C.This is a valid gift because there has been a symbolic delivery D.This is a valid gift because there has been a constructive delivery

Q: Seth takes his laundry to Denise's Dry Cleaners (DDC). When Seth gets his clothes back he notices that two of his shirts, perfect when brought in, are now ripped. Which of the following is correct? A.This was a mutual benefit bailment and DDC owed a duty of reasonable care. B.This was a bailment for the sole benefit of the bailee and DDC owed a duty of slight care. C.This was a bailment for the sole benefit of the bailor and DDC owed a duty of great care. D.This was not a bailment.

Q: Suppose that a landlord is interested in renting out a two-bedroom apartment for $1000 a month for the next year. The landlord requires rent to be paid at the beginning of the month, at which point he will deposit the rental check into a local savings account. If the annual interest that the tenant can earn on this account is 5% and interest is compounded monthly, how much will the tenant have in his savings account at the end of the year? A. $12,278.86 B. $12,330.01 C. $13,330.02 D. $15,917.13

Q: Which of the following cannot apply to real property: A.Easements. B.Gifts. C.Accession. D.Confusion.

Q: Suppose an investor deposits $2500 in an interest-bearing account at her local bank. The account pays 2.5% interest compounded annually. If the investor plans on withdrawing the original principal plus accumulated interest at the end of 7 years, what is the total amount that she should expect to receive assuming interest rates do not change? A. $2,971.71 B. $2,974.89 C. $3,532.43 D. $11,920.93

Q: Willie gave his girlfriend Madonna a gold necklace for her birthday. The next day Madonna broke up with Willie and started dating his best friend Waylon. Willie is heartbroken and furious. He becomes so upset that he commits suicide. Can Willie's estate get the necklace back from Madonna? A.Willie's estate can recover the necklace because a donor is entitled to revoke or withdraw a gift within a reasonable period of time. B.Willie's estate can recover the necklace because Madonna paid no consideration for the gift. C.Willie's estate cannot recover the necklace because he intended to make the gift and delivered it. D.Willie's estate cannot recover the necklace because it was unfair for Madonna to cheat on him.

Q: You have just had a tenant sign a lease contract that guarantees you payments of $100,000 at the end of each year for the next five years. If you wish to determine the present value of these future cash flows (i.e. the value of this cash flow stream to you today), you would use which of the following time value of money processes? A. Compounding B. Discounting C. Amortizing D. Aggregating

Q: Which of the following is the true statement? A.A tenancy in common is a leasehold estate. B.A fixture is a piece of real property so permanently affixed to the other real property that it becomes personal property C.Dirt in a wheelbarrow would be considered personal property D.Dirt in a wheelbarrow would be considered real property.

Q: Uncertainty of cash flows can vary significantly across property types. Which of the following property types is often considered to have the most uncertain expected cash flows? A. Multifamily B. Industrial C. Office D. Hospitality

Q: Larry loses his watch in a city park. Frieda finds the watch lying in the grass while strolling through the park. Frieda discovers Larry's name and address engraved on the back of the watch. Which of the following is correct? A.Frieda may keep the watch since its misplaced property. B.Frieda may keep the watch since its lost property. C.Frieda must contact Larry and tell him that she has his watch. D.Frieda must turn the watch over to whoever runs the park.

Q: The Real Estate Research Corporation (RERC) regularly surveys a sample of institutional investors and managers in order to gain insight into the required returns and risk adjustments used by industry professionals when making real estate acquisitions. Most of the properties that RERC examines are large, relatively new, located in major metropolitan areas and fully or substantially leased. These classifications of properties are commonly referred to as: A. investment grade properties B. speculative grade properties C. net-lease properties D. industrial properties

Q: Mike asks his girlfriend Brandi if he could borrow her car. Brandi agrees to allow Michael to use her car for the day. Which of the following is correct? A.This is a bailment for the sole benefit of the bailor. B.Brandi is the bailee. C.Michael owes the duty of slight care. D.Brandi must tell Mike of any defects regarding the car that aren't obvious.

Q: The internal rate of return (IRR) and the net present value (NPV) are tools that are widely used in real estate investment and finance decision making. An investor would most likely pursue an investment if which of the following circumstances was true? A. The going-in IRR exceeds the investor's required rate of return B. The going-in IRR is less than the investor's required rate of return C. The going-in IRR exceeds the NPV D. The going-in IRR is less than the NPV

Q: The deed that gives the grantee the most rights and protections is the: A.Special warranty deed B.Warranty deed C.Quit claim deed D.Freehold deed

Q: Assuming all else the same, the ___________ of an annuity due will be _____________ that of an ordinary annuity. A. future value; greater than B. present value; equal to C. future value; less than D. present value; less than

Q: Gifts must be: A.Intentionally given. B.Accepted. C.Delivered. D.All of the above.

Q: With compound interest, the investor earns interest on the principal amount invested plus interest on accumulated interest. Which of the following compounding frequencies would yield the investor the greatest ending balance assuming all else is equal? A. Daily B. Monthly C. Quarterly D. Annually

Q: An easement by prescription: A.Creates ownership of the land in question B.Creates a right of use in the land in question C.Occurs when landlocked property is purchased D.Creates a leasehold estate

Q: When discussing time-value-of-money it is necessary to understand some key terminology. Which of the following terms refers to a fixed amount of money paid or received at the end of every period (i.e. a series of equal lump sums)? A. Future value B. Present value C. Ordinary annuity D. Annuity due

Q: A deed promising only to give whatever interests the grantor has is called: A.A simple warranty deed. B.A trust deed. C.A quit claim deed. D.A special warranty deed.

Q: Since investors prefer to have money now rather than later, money received next week, instead of today, is not worth as much to those receiving it, assuming the magnitude of the cash flow in each period is the same. Therefore an adjustment to the prospective cash flows is required. This process is referred to as: A. compounding B. discounting C. amortizing D. hedging

Q: Amy purchases a mattress and box spring from Macy's. Which of the following will create an automatically perfected lien? A.Amy uses a Visa or Master Card. B.Amy uses a Macy's charge card. C.Amy pays cash. D.Both A or B creates an automatically perfected lien.

Q: Risk is the possibility that actual outcomes will vary from what was expected when the asset was purchased. If investors require a higher rate of return for undertaking more risk, the underlying assumption is that investors are: A. risk neutral B. risk averse C. risk taking D. hedging risk

Q: Which of the following would be granted the greatest priority? A.A perfected secured lien. B.A secured lien. C.An attached lien. D.An artisan's lien.

Q: Chapter 14 " The Effects of Time and Risk on Value

Q: What type laws divide counties or municipalities into use districts designated as residential, commercial, or industrial? A.Nuisance. B.Zoning. C.Adverse possession. D.Eminent domain.

Q: Since hazard insurance premiums are paid up-front, the buyer will have to reimburse (credit) the seller a portion of the premium at the closing. Suppose that the insurance policy's coverage began on December 15th of the prior year and the property transaction is set to close on March 16th of a 365-day year. The premium paid originally by the seller was $250. If the coverage will expire as of the end of day December 14th in the current year, what is the dollar amount that the buyer must credit the seller?A. $0.00B. $62.33C. $187.67D. $250.00

Q: Which of the following is a bailment for the sole benefit of the bailee? A.Borrowing a pencil. B.Renting a car. C.Babysitting for free. D.Finding lost or misplaced property.

Q: If a property transaction is scheduled to close on May 14th, calculate the individual tax responsibility for the buyer if the total tax owed at the end of the year is $5,000. For this problem, assume that we are dealing with a 365 day calendar year. A. $0.00 B. $1,821.92 C. $3,178.08 D. $5,000.00

Q: Which of the following is intangible property? A.Copyrights and patents. B.A car. C.Oxygen. D.A house.

Q: Since property taxes are paid in arrears, the buyer will be responsible for paying them after closing. Suppose that the closing date on the home for sale is February 28th of a leap year (e.g., 2012, 2016, etc). How many calendar days would the seller be responsible for when calculating his/her share of the property tax owed for the year in which the home was sold. A. 58 days B. 59 days C. 307 days D. 308 days

Q: Sarah has given 24 acres of land to Kent County for as long as the land is used as a park. Kent County has a: A.Life estate. B.Fee simple defeasible. C.Fee simple absolute. D.Tenancy in Common.

Q: Certain closing costs will be prorated to account for the period of time during which the seller occupied the house. If a transaction is scheduled to close on May 17, 136 days into a 365-day year, calculate the amount that the buyer will be credited if the particular closing cost in question is estimated to be $1000 for the entire year. A. $182.19 B. $372.60 C. $624.66 D. $1000

Q: Mike has a car accident and Maria saves his life. To show his appreciation, Mike gives Maria a life estate in one of the homes he owns. Maria lives there for a while and then accepts a job in another state so she gives the property to her sister Jackie. (This is permissible to do.) Jackie owns the property: A.Until she dies. B.Until Maria dies. C.Until Mike dies. D.Until both Mike and Maria die.

Q: When the seller in a contract for sale fails to perform (e.g. breach of contract, nonperformance, or default), the buyer has a variety of remedies. One such remedy is to appeal to the court to force the defaulting seller to carry out the contract. This remedy is most commonly referred to as suing for: A. Damages. B. Earnest. C. Recission. D. Specific performance.

Q: The Real Estate Settlement Procedures Act (RESPA) is a federal law that requires federally chartered or insured lenders to provide buyers and sellers with expectations of their closing costs prior to the closing date. When a borrower (the buyer) applies for a loan, the lender will provide him/her with which of the following forms that includes details pertaining to specific loan information and an estimate of expenses that the borrower is likely to incur at the closing? A. Uniform Settlement Statement (HUD-1) form B. Good-faith estimate C. Settlement Costs and You booklet D. Certificate of occupancy

Q: Through the government's power of eminent domain, it can take private property for "public use", upon the payment of "just compensation."

Q: At the closing, the buyer will be credited for a number of costs that have been paid up-front (or will be paid after closing) as well as a number of prorated expenses that account for the period of time during which the seller occupied the house. All of the following items detailed in the closing costs involve credits that are commonly passed on to the buyer EXCEPT: A. Earnest money B. Hazard insurance premiums C. Property taxes D. Mortgage interest

Q: Ken is having a bad morning. He has to go to work and can't find his car keys. After search for 20 minutes, he finds them in the pocket of the jeans he wore the previous day. The keys would have been considered lost until he found them.

Q: What kinds of cases generally have the equal protection clause as a central issue?

Q: The laws of some states require that real estate brokers provide buyers and sellers with a list of estimated closing costs before signing a contract for sale. At the closing, it is typically which of the following party's responsibilities to pay the full premium for an owner's title insurance policy? A. Buyer B. Seller C. Lender D. Broker

Q: How has the law related to commercial speech changed over the years?

Q: Recording documents in the public records informs anyone who may have a potential interest in a property of both the owner and lender. In so doing, it provides what is commonly referred to as ____________ of an interest in real property. A. mutual assent B. constructive notice C. consideration D. simultaneous issue

Q: What are police powers and what are they designed to do?

Q: If property owners fail to pay their taxes in a timely fashion, this can create a first lien on the mortgaged property. In order to protect against this, lenders often require that borrowers add what fraction of their estimated tax bill to their required monthly mortgage payments? A. 1/12 B. 1/6 C. 1/4 D. 1/2

Q: What is meant by the term federalism and how does it impact government functions?

Q: Since the seller often has utilized the property for a portion of the year in which the transaction is being made, certain costs associated with the property will be prorated at the closing. All of the following items are subject to being prorated EXCEPT: A. Broker commission B. Prepaid rent C. Property tax D. Mortgage interest

Q: The First Amendment provides protections to individuals with regard to speech, press, assembly, religion, etc Whose actions are individual citizens protected from?

Q: When a buyer signs an offer to purchase a property, the broker receives a monetary amount from the purchaser of 5 or 10 percent of the purchase price. This deposit is commonly referred to as the: A. commission B. earnest money C. closing cost D. title insurance premium

Q: In accordance with RESPA, whenever a buyer obtains a new first mortgage loan from a chartered or insured lender, when the loan is insured by the FHA or guaranteed by the VA, or when the loan will be sold to one of the federally related secondary mortgage market agencies, a good-faith estimate of the settlement costs must be provided by the lender within: A. 3 business days B. 5 business days C. 30 calendar days D. 90 calendar days

Q: When may a state law limit picketing?

Q: What issues must be addressed if a party wishes to have a judicial review of an administrative agency's decision?

Q: While fee splitting between cooperating real estate brokers is permitted, RESPA explicitly prohibits such actions as rebating part of the title insurance premium to the lender who recommended or required the title insurance. These unearned fees are commonly referred to as: A. commissions B. kickbacks C. damages D. specific performance dues

Q: When is a state law governing commerce unconstitutional?

Q: What are the general exceptions to the exhaustion of remedies requirement?

Q: The final step in a real estate transaction is the closing. In most closings, which party is responsible for seeing that the closing is completed successfully? A. Escrow agent B. Lender C. Selling Broker D. Listing broker

Q: How does the supremacy clause affect the states' ability to regulate business?