Modern Real Estate Practice 21st Edition Practice Exam 2

Modern Real Estate Practice 21st Edition (Practice Exam 2) Flashcards In one commercial building, a tenant intends to start a small health food shop. An identical, adjacent building houses a showroom leased to a major national retailing chain. Both tenants have long-term leases with identical rents. If the appraiser uses a capitalization rate for the store leased to the national retailing chain that is lower than the rate for the other building, which statement is TRUE?A. The indicated value of the chain's property will be lower than the indicated value of the food-shop property.B. The indicated value of the chai's property will be higher than the indicated value of the food-shop property.C. The appraiser would then be compelled to make use of the sales comparison approach to value.D. It would indicate the appraiser believes a building occupied by a chain-store tenant is more valuable than an identical one occupied by a health food shop.

• The indicated value of the chain's property will be lower

than the indicated value of the food-shop property Which statement is TRUE regarding a capitalization rate?A.The rate decreased when the risk increases.B. An increase in rate, while other elements remain the same, means an increase in valueC. The net income is multiplied by the rate to the estimate valueD. A decrease in rate, while other elements remain the same, results in an increase in value

• a decrease in rate, while other elements remain the

same, results in an increase in value The section in a purchase contract that would provide for the buyer to forfeit any earnest money if the buyer fails to complete the purchase is known as a provision forA.liquidated damagesB. punitive damagesC. hypothecationD.subordination

• liquidated damages

Against a recorded deed from the owner of record, the party with the weakest position is aA. person with a prior unrecorded deed who is not in possession.B. person in possession with a prior unrecorded deed.C. tenant in possession with nine months remaining on the lease.D.painter who is half-finished painting the house at the time of the sale and who has not yet been paid.

• person with a prior unrecorded deed who is not in

possession The rescission provisions of the Truth in Lending Act (Regulation Z) apply to which type of transaction?A. Home purchase loansB. Construction lendingC. Business financingD. Consumer credit

• Consumer credit

A parent owned property that was conveyed to an adult child "so long as no real estate broker or salesperson ever

sets foot on the property." If a broker or a salesperson visits the property, ownership will revert to the parent.Based on these two conveyances, which statement is TRUE?A. The child holds the property in fee simple determinableB. The child holds the property in fee simple defeasible, subject to a condition subsequent.C. The child may not transfer ownership of the property without the parent's permission.D. The parent has retained a right of re-entry with regard to the property

• The child holds the property in fee simple determinable

When a teacher died, a deed was found in the teacher's desk drawer. Although the deed had never been recorded, it was signed, dated, and acknowledge. The deed gave the teacher's house to a local charity. The will, however,

provided as follows: "I leave all of the real and personal

property that I own to my beloved niece." In this situation, the house MOST likely will go toA. the charity, because acknowledgement creates a presumption of deliveryB. the charity, because the teacher's intent was clear from the deedC. the niece, because the deed was never delivered to or accepted by the charityD. the niece, because the deed had not beene recorded

• the niece, because the deed was never delivered to or

accepted by the charity

A decedent's estate was distributed by will as follows: 54%

to the surviving spouse, 18% to the children, 16% to the grandchildren, and the remainder to the decedent's college.The college received $79,000. How much did the children receive? Round your answer to the nearest dollar.A.

$105,333B. $118,500C. $355,500D. $658,333

B. $118,500

An easement terminatesA. automaticallyB. when the owner of the servient tenement wishes to do soC. if the owners of the dominant and servient tenements become one and the sameD. when a property owner dies

• if the owners of the dominant and servient tenements

become one and the same A purchaser buys a house for $234,500 for use as a rental by making a $25,000 cash down payment and taking out a $209,500 mortgage for 30 years. The lot value is $80,000.If the purchaser wants to depreciate the property over a period of 27.5 years, what will be the annual depreciation amount using the straight-line method? Round your answer to the nearest cent.A. $3,818.18B. $4,709.09C.

$5,618.18D. $7,444.44

C. $5,618.18

It is discovered after a sale of a parcel of land that the land parcel is 10% smaller than the seller represented it to be.The real estate professional who passed this information on to the buyer isA. not liable as long as the real estate professional only repeated the seller's data.B. not liable if the misrepresentation was unintentionalC. not liable if the buyer actually inspected the parcelD. liable if the real estate professional knew or should have known of the discrepancy

• liable if the real estate professional knew or should have

known of the discrepancy Which of the following BEST describes the capitalization rate under the income approach to appraising real estate?A. Rate at which a property increases in valueB.Rate of return a property earns as an investmentC. Rate of capital required to keep a property operating most efficientlyD. Maximum rate of return allowed by law on an

investment

• Rate of return a property earns as an investment

An investor wants to buy an apartment building and wants to sell a factory to finance the purchase. The investor also wants to incur as little tax liability as possible. What is the best way to accomplish the investor's goals?A. Buy the apartment building before selling the factoryB. Pay more for