Q&A Hero

Q: Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which of the following clauses requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees, or causality insurance premiums? A. Demand clause B. Insurance clause C. Escrow clause D. Exculpatory clause

Q: The federal system and all state systems, require arbitration hearings to comply with established rules of evidence.

Q: For most mortgage loans on commercial real estate, the right of prepayment is constrained through a prepayment penalty. Which of the following types of prepayment penalties requires a borrower to provide the lender with some combination of U.S. Treasury securities that will serve to replace the cash flows of the loan being paid off? A. Yield-maintenance prepayment penalties B. Prepayment lockout C. Defeasance prepayment penalty D. Curtailment penalty

Q: The sole source of qualified expert arbitrators currently is the American Arbitration Association.

Q: Most Adjustable Rate Mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a: A. rate cap B. teaser rate C. payment cap D. prepayment rate

Q: In most state statutes authorizing voluntary arbitration, the agreement to submit to arbitration may be written or oral.

Q: While cases have been settled for hundreds of millions of dollars, there has yet to be a settlement of a case in excess of one billion dollars.

Q: Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately: A. 75 basis points B. 175 basis points C. 275 basis points D. 375 basis points

Q: Once a law suit is filed, ADR may not be used until the suit has gone to judgment or has been dismissed.

Q: A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the: A. one-year U.S. Treasury constant maturity rate B. prime rate C. London Interbank Offered Rate (LIBOR) D. cost-of-funds index

Q: Mandatory arbitration proceedings are generally subject to a de novo judicial review.

Q: In a mortgage loan, the borrower always creates two documents: a note and a mortgage. Which of the following pieces of information is provided in the mortgage? A. How the interest rate is to be computed. B. Whether the borrower has the right to prepay the principal during the term of the loan, and any prepayment penalties that would be incurred as a result. C. Whether the borrower is released from liability for fulfillment of the contract. D. An unambiguous description of the property that is being pledged as collateral for the loan.

Q: The arbitrator is empowered by the parties to reach a binding decision in a voluntary arbitration.

Q: Chapter 9 " Real Estate Finance: The Laws and Contracts

Q: Litigation is always the preferred method of dispute resolution.

Q: Given the following information, calculate the effective gross income multiplier. Sale price: $2,500,000; Effective Gross Income: $340,000; Operating Expenses: $100,000; Capital Expenditures: $36,000. A. 0.136 B. 7.35 C. 10.42 D. 12.25

Q: What is meant by the term "frivolous case" and what is being done to remedy the problem?

Q: Given the following information, calculate the appropriate going-in cap rate using general constant-growth formula. Overall market discount rate = 12%, Constant growth rate projection: 3% per year, Sale price: $1,950,000, Net operating income: $390,000, Potential gross income: $520,000. A. 8% B. 9% C. 10% D. 11.5%

Q: What are some of the theoretical and actual purposes of discovery?

Q: Given the following information, calculate the appropriate going-in cap rate using mortgage-equity rate analysis. Mortgage financing = 75%, Typical debt financing cap rate: 10%, Sale price: $1,950,000, Before Tax Cash Flow (BTCF): $390,000. A. 9.6% B. 10% C. 12.5% D. 13.6%

Q: In a personal injury suit, what may the defendant's attorneys request and obtain by using the discovery methods?

Q: Describe the three criteria that allow the typical long-arm statute to allow jurisdiction over a non-resident defendant?

Q: Given the following information, calculate the effective gross income. Property: 4 office units, Contract rents per unit: $2500 per month, Vacancy and collection losses: 15%, Operating Expenses: $42,000, Capital Expenditures: 10%A. $100,000B. $102,000C. $120,000D. $135,000

Q: What is standing to sue and what must the plaintiff allege to establish required standing?

Q: Given the following information, calculate the net operating income assuming below-line treatment of capital expenditures? Property: 4 office units, Contract Rents per unit: $2500 per month, Vacancy and collection losses: 15%, Operating Expenses: $42,000, Capital Expenditures: 10%:A. $48,000B. $60,000C. $95,000D. $102,000

Q: What is the meaning of res judicata and what is its effect?

Q: Given the following information, calculate the overall capitalization rate. Sale price: $950,000, Potential Gross Income: $250,000, Vacancy and Collection Losses: $50,000, and Operating Expenses: $50,000. A. 15.8% B. 21.1% C. 26.3% D. 36.8%

Q: What must lawyers do in order to preserve an argument for appeal of an evidentiary ruling?

Q: When calculating the net operating income of a property, it is important to identify any expenses that will be incurred in attempts to maintain the property. All of the following would be considered operating expenses EXCEPT: A. Property taxes B. Property insurance premiums C. Mortgage payments D. Utility expenses

Q: Explain the function of jury instructions.

Q: When using discounted cash flow analysis for valuation, an appraiser will prepare a cash flow forecast, often referred to as a: A. restricted appraisal report B. net operating income statement C. direct market extraction D. pro forma

Q: What is a judgment notwithstanding the verdict and motion for judgment as a matter of law and when are they used?

Q: When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is referred to as the property's: A. net sale proceeds B. selling expenses C. terminal value D. current market value

Q: Why are many class-action suits settled?

Q: Gross income multiplier analysis assumes that the subject and comparable properties are collecting market rents. Therefore, it is frequently argued that an income multiplier approach to valuation is most appropriate for properties with short-term leases. Which of the following property types, therefore, would we find it most appealing to use a gross-income multiplier in our analysis? A. Apartments B. Office C. Industrial D. Retail

Q: For smaller income-producing properties, appraisers may use the ratio of a property's selling price to its effective gross income. This is an example of a: A. Net operating income B. Going-out cap rate C. Going-in cap rate D. Gross income multiplier

Q: If the defendant, upon being served, decides to sue the plaintiff, the defendant is then called the ________.A.Plaintiff.B.Counterplaintiff.C.Counterdefendant.D.Appellant.

Q: The going-in cap rate, or overall capitalization rate, is a measure of the relationship between a property's current income stream and its price or value. Which of the following statements regarding cap rates is true? A. It is a measure of total return since it accounts for future cash flows from operations and expected appreciation (depreciation) in the market value of the property. B. It is a discount rate that can be applied to future cash flows. C. It is analogous to the dividend yield on a common stock. D. It is the projected rate at which prices will appreciate in the future

Q: If the judge finds that the verdict is erroneous as a matter of law, she may enter a ________. A.Directed verdict. B.Summary judgment. C.JNOV. D.Voir dire.

Q: The burden of proof in most civil cases is ________. A.Beyond a reasonable doubt. B.Preponderance of the evidence. C.Clear and convincing evidence. D.Beyond all doubt.

Q: Most appraisers adhere to an "above-line" treatment of capital expenditures. This implies which of the following? A. Capital expenditures are subtracted in the calculation of net operating income. B. Capital expenditures are subtracted from net operating income to obtain a net cash flow measure. C. Capital expenditures are added to net operating income. D. Capital expenditures are excluded from all calculations because they are difficult to estimate.

Q: After the judgment is obtained, requiring the defendant's employer to pay some of the defendant's wages to the court on behalf of the plaintiff is called ________. A.Execution. B.Garnishment. C.Depositions. D.Summary.

Q: Which of these is most likely to be regarded as a capital expenditure rather than an operating expense? A. Property taxes B. Trash removal C. Insurance payments D. Roof replacement

Q: Once a judge has determined that the plaintiff is to be awarded a certain sum of money, the plaintiff may begin the process to obtain the money from the defendant by having the sheriff or other court official seize the defendant's property and sell it. This is called: A.Execution. B.Garnishment. C.Deposition. D.Summons.

Q: Operating expenses can be divided into two categories: variable and fixed expenses. Which of the following best exemplifies a fixed expense? A. Utilities B. Property management C. Local property taxes D. Trash removal

Q: In J.E.B. v. Alabama, the Court declared that the use of peremptory challenges by prosecutors in criminal cases to excluded jurors on the basis of ________ violated the equal protection clause A.Gender. B.Religious preference. C.Race. D.National origin.

Q: The expected costs to make replacements, alterations, or improvements to a building that materially prolong its life and increase its value is referred to as: A. operating expenses B. capital expenditures C. vacancy losses D. collection losses

Q: If the judge agrees with the decision of the jury, he will enter the ________. A.Verdict. B.Judgment. C.JNOV. D.Motion for a new trial.

Q: In calculating net operating income, vacancy losses must be subtracted from the gross income collected. The normal range for vacancy and collection losses for apartment, office, and retail properties is: A. between zero and one percent B. between one and five percent C. between five and fifteen percent D. between fifteen and twenty percent

Q: Which burden of proof in a civil case is harder to prove? A.Preponderance of the evidence. B.Clear and convincing evidence. C.Beyond a reasonable doubt. D.Without a doubt.

Q: One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which of the following statements best describes a "graduated" or step-up lease? A. The monthly rent remains fixed over the entire lease term. B. The lease establishes schedule of rental rate increases over the term of the lease. C. Rental rate increases are indexed to the general rate of inflation. D. Rental rates are a function of the sales of the tenant's business.

Q: After the plaintiff has presented all of her evidence, the defendant may make a motion for ________. A.Voir dire. B.Res judicata. C.Summary judgment. D.Directed verdict.

Q: The distinction between market rent and contract rent is important due to differences in lease terms. Office, retail, and industrial tenants most commonly occupy their space under leases that run: A. one year or less B. one to three years C. three to five years D. ten years or more

Q: The examination of potential jurors to determine his or her qualifications and ability to be fair and impartial is called ________. A.Affidavit. B.Equity. C.Voir dire. D.Res judicata.

Q: The starting point in calculating net operating income is the total annual income the property would produce assuming 100 percent occupancy and no collection losses. This is commonly referred to as: A. effective Gross Income B. potential Gross Income C. operating expenses D. capital expenditures

Q: In what type motion does a party ask the judge to decide the case based solely on the complaint and the answer? A.Summary judgment. B.Judgment on the pleadings. C.JNOV. D.General demurrer.

Q: The process of converting periodic income into a value estimate is referred to as income capitalization. Income capitalization models can generally be categorized as either direct capitalization models or discounted cash flow models. Which of the following statements best describes the direct capitalization method? A. Value estimates are based on a multiple of expected first year net operating income. B. Appraisers must make explicit forecasts of the property's net operating income for each year of the expected holding period. C. Appraisers must select the appropriate yield at which to discount future cash flows. D. The forecast must include the net income produced by a sale of the property at the end of the expected holding period.

Q: Marquetta was pulled over by a policeman for speeding. Despite being cooperative, non-threatening and obviously not intoxicated by liquor or drugs, the policeman orders her out of the car and frisks her. He finds a small bag of marijuana in her pocket. This search and seizure was illegal. After she is arrested her attorney wants the discovery of the marijuana suppressed because of the illegal search. The attorney would file a: A.Motion for a directed verdict. B.Motion for a summary judgment. C.Motion to stop abusive discovery. D.Motion in limine.

Q: Net operating income is similar to which of the following measures of cash flow in corporate finance? A. Dividend yield B. Earnings before deductions for interest, depreciation, income taxes, and amortization (EBIDTA) C. Price-earnings ratio D. Discount rate

Q: In Snyder v. Louisiana, a claim that peremptory challenges were made for the purpose of disqualifying black jurors solely based on race: A.Was upheld in part because Laws, a potential white juror with more pressing hardship reasons to be excluded from a sequestered jury than Brooks, a potential black juror, was not similarly excused quickly. B.Was upheld solely because all five potential black jurors in the eligible pool were challenged so a pattern was established. C.Was not upheld because the extreme nervousness shown by potential black juror Brooks was evidence that he might not be a reliable juror. D.Was not upheld because potential black juror Brooks was a college student doing student teaching which was sufficient evidence of extreme hardship.

Q: Which of the following measures is considered the fundamental determinate of market value for income-producing properties? A. Net operating income B. Potential gross income C. Operating expenses D. Capital expenditures

Q: If the defendant does not respond to the complaint as required he is said to be in ________. A.Complaint. B.Default. C.Discovery. D.Voir dire.

Q: Chapter 8 " Valuation Using the Income Approach

Q: Terrell is suing Chad. After the answer has been received, Terrell believes that he should win based solely on the pleadings. Terrell should file a: A.Motion for a directed verdict. B.Motion to dismiss for failure to state a cause of action. C.Motion in limine. D.Motion for a summary judgment.

Q: Suppose that examination of a pro forma reveals that the fifth year net operating income (NOI) for an income producing property that you are analyzing is $138,446 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected rental growth rate for the property to be 5% per year, determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%. A. $988,900.00 B. $1,465,037.00 C. $1,538,289.00 D. $1,615,203.00

Q: Eli, a resident of New York wants to sue Tony, a resident of Texas for a civil incident that occurred in New York. In order to obtain jurisdiction under a long arm statute, the court must find any of the following except: A.Tony must have committed a tort in New York. B.Tony must own property in New York. C.Tony must own property in Texas. D.Tony must have entered into a contract or transacted business that is the subject matter of the law suit in New York.

Q: Suppose that an income producing property is expected to yield cash flows for the owner of $10,000 in each of the next five years, with cash flows being received at the end of each period. If the opportunity cost of investment is 12% annually and the property can be sold for $100,000 at the end of the fifth year, determine the value of the property today. A. $36, 047.76 B. $56,742.69 C. $83,333.33 D. $92,790.45

Q: Once the court's decision is final, the decision is conclusive as to all issues between the parties. This is called ________. A.Voir dire. B.Res judicata. C.Execution. D.Chancery.

Q: Suppose that you are attempting to value an income producing property using the direct capitalization approach. Using data from comparable properties, you have determined the overall capitalization rate to be 11.44%. If the projected first year net operating income (NOI) for the subject property is $44,500, what is the indicated value of the subject using direct capitalization? A. $49,590.80 B. $50,225.73 C. $388,986.00 D. $509,080.00

Q: Courts of appeal require the parties to file a document containing a description of the case and its facts and the research benefiting their client's issues. This document is called a ________. A.Decree. B.Res judicata. C.Brief. D.Pleading.

Q: Three highly similar and competitive income-producing properties within two blocks of the subject property have sold this month. All three offer essentially the same amenities and services as the subject property. The sale prices and estimated first-year NOI for each of the comparable properties are as follows:ComparableSale PriceNOI1A$500,000$55,000B$420,000$50,400C$475,000$53,400Using the information provided, calculate the overall capitalization rate by direct market extraction assuming each property is equally comparable to the subject.A. 11.0%B. 11.2%C. 11.4%D. 12.0%

Q: In Batson v. Kentucky, the Court declared that the use of peremptory challenges by prosecutors in criminal cases to excluded jurors on the basis of ________ violated the equal protection clause. A.Gender. B.Religious preference. C.Race. D.National origin.

Q: Let's assume that we are about to appraise a house using the cost approach. The home was originally constructed in the early 1900s and is one of the last of its kind in this area. The cost of constructing an exact replica of this residence is estimated to be $350,000. On our trip to the actual property, we notice that this is the only residential unit located on this particular road. Based on the current usage of adjacent real estate, we estimate that the property would be worth an additional $25,000 in its highest and best use. However, due to the dramatic shift in the perceived safety of the neighborhood, values of any remaining residential properties in the area have fallen by $20,000. Due to the home's age, we also notice that there has been a significant amount of physical deterioration to the building, amounting to an estimate of $50,000 in lost value. Since the home was built over 100 years ago, the floor plan is quite obsolete relative to current preferences. This has a detrimental effect on the value of the property that is estimated to be approximately $15,000. Given this information, determine the appraised value of the home using the cost approach. A. $265,000 B. $290,000 C. $350,000 D. $460,000

Q: In United States v. Brown, the court examined whether peremptory challenges could be used to exclude a person with regard to religion. The court decided that: A.A person can be challenged based on religious affiliation but not for religious activity. B.A person can be challenged based on religious activity but not for religious affiliation. C.Any challenge based in any part on religion violates the Equal Protection Clause of the Constitution. D.As an Equal Protection Clause issue, the Circuit Court of Appeals could not rule on the issue until the Supreme Court established precedent in the matter.

Q: Assume you have been hired to appraise a local hospital. Your best estimate of the reproduction (or replacement) cost of the building is $3,700,000. However, upon evaluating the use of land in the local area, you have deemed the value of the site to be worth an additional $800,000. If the building has depreciated by $500,000 over its lifetime and there are no further depreciation losses due to external or functional obsolescence, what is the indicated value of the hospital using the cost approach? A. $2,400,000 B. $3,700,000 C. $4,000,000 D. $4,500,000

Q: In a federal class action law suit: A.Only one member of the class must meet the jurisdictional amount of $75,000. B.At least 50% of the class must meet the jurisdictional amount of $75,000. C.The total sued for by the class must add up to the jurisdictional amount of $75,000. D.The average amount sued for by the class must meet the jurisdictional amount of $75,000 each.

Q: In Elk Grove Unified School Dist. v. Newdow, Newdow was: A.Successful because the words "under God" in the pledge of allegiance violated his First Amendment Freedom of Religion rights. B.Successful because the words "under God" in the pledge of allegiance violated his daughter's First Amendment Freedom of Religion rights. C.Unsuccessful because he lacked standing to sue. D.Unsuccessful because he didn't properly state a cause of action.

Q: Suppose that an appraiser has just completed her analysis using the cost approach to valuation. She has determined that the market value of the subject property is $400,000. If the added value of the site was $80,000 and accrued depreciation amounted to $50,000, what was the reproduction cost of the building? A. $270,000 B. $370,000 C. $430,000 D. $530,000

Q: Suppose that we observe two comparable properties that have each sold twice within the past two years. Property A sold 24 months ago for $350,000 and Property B sold 18 months ago for $325,000. If the two properties were sold today at $375,000 and $340,000, respectively, estimate the change in market conditions (percentage change in price) per month, assuming we equally weight the two properties in our analysis? A. 0.19% B. 0.24% C. 0.28% D. 0.33%

Q: Each of the following was an outcome of the Qualcomm v. Bradcom case except: A.Courts may retain jurisdiction to sanction lawyers conduct after a trial is concluded. B.If a client deceives its lawyers, the lawyers are free from liability even if they could have discovered the client's malicious acts. C.Intentionally withholding discovery documents can result in the court ordering the payment of an opponent's attorney fees. D.Lawyers can be held responsible for their client's intentional or negligent withholding of discovery documents if they could have recognized the omission.