Questions - Chapter 16

Question 1

All of the following statements about property management are correct EXCEPT:

A. property management is a specialized field within the real estate industry.
B. a property manager acts as an agent of the property owner.
C. the terms property manager and resident manager have the same meaning.
D. a property manager is a fiduciary.

Answer 1

16-1 C

Question 2

The property management agreement is different from that of a listing agreement in which of the following ways?

A. property management contracts do not have to be in writing from the inception of the agreement
B. dual agency is NOT allowed in a property management agreement
C. property management contracts do NOT have to automatically expire at the end of the agreement
D. property management agreements do NOT have to contain anti discrimination language

Answer 2

16-2 C

Question 3

A budget based on forecast income and property management are correct EXCEPT:

A. stabilized budget.
B. projected budget.
C. anticipated budget.
D. operating budget.

Answer 3

16-3 A

Question 4

Which of the following creates an agency relationship between a property manager and the property owner?

A. management proposal
B. management report
C. management agreement
D. management plan

Answer 4

16-4 C

Question 5

A nonlicensed, salaried employee working for a licensed real estate broker who is contracted to manage property for a property owner can perform all of the following activities without a real estate license EXCEPT:

A. marketing.
B. showing properties.
C. negotiating terms of a lease.
D. instituting legal actions.

Answer 5

16-5 C

Question 6

Failure of the broker to perform duties under the property management agreement:

A. is a breach of the duty of agency.
B. would make the broker liable to the owner, but not to the Real Estate Commission.
C. would make the broker liable to the Real Estate Commission, but not to the owner.
D. none of the above.

Answer 6

16-6 A

Question 7

Agency agreements must be in writing from the time of inception with a:

A. licensee.
B. lessor.
C. lessee.
D. lien holder.

Answer 7

16-7 B

Question 8

With a tenant, oral agency must be converted to a written format prior to:

A. the beginning of the lease term.
B. first substantial contact.
C. submitting an offer to purchase.
D. submitting an offer to lease or rent.

Answer 8

16-8 D

Question 9

Acme Property Management has contracted to manage a eight-unit apartment building for a 9% management fee on all rents collected. The units each rent for $850 per month. Currently there are six units that are fully rented, one that was rented for 18 days and one that was occupied but the tenant failed to pay the monthly rent. How much management fee is Acme entitled to this month?

A. $612
B. $581
C. $505
D. $490

Answer 9

16-9 C

Question 10

A property management company has agreed to manage the Happy Hills apartments. Happy Hills consists of six units that each rent for $950 per month. Last month one of the units was vacant. If the management fee was 8%what amount did the management company earn?

A. $190
B. $380
C. $456
D. $4,560

Answer 10

16-10 B

Question 11

A tenant makes a rental payment in cash. When is the property management firm required to deposit the cash in the escrow account?

A. no later than three banking days after receipt
B. no later than 72 hours after receipt
C. immediately, but no later than three banking days after receipt
D. no later than 72 hours after receipt but not counting holidays

Answer 11

T16-1 C

All monies received by brokerages must be deposited within 3 banking days.

Question 12

Which of the following actions is a property manager permitted to perform? l. Prepare depreciation schedules for the property owner. ll. Make capital improvements to the property for the property owner when the property manager deems them necessary for the property owner.

A. l only
B. ll only
C. Both l and ll
D. Neither l nor ll

Answer 12

T16-2 D

Property managers would not prepare depreciation schedules as those have to do with taxation and the providing of tax advice. They also would not “make” capital improvements, though they might supervise or manage such activity on behalf of the property owner.

Question 13

A real estate broker acting as an owner’s property manager may:

A. profit from private contracts at the expense of the owner
B. manage the client’s property in a manner most advantageous to the broker
C. be held accountable for complete and accurate trust account records
D. hold a provisional broker license so long as he is the principal broker of the management firm

Answer 13

T16-3 C

Property management firms are required to keep accurate and complete records.

Question 14

All of the following are important functions of a property manager, EXCEPT:

A. supervising the maintenance of the property
B. protecting the physical integrity of the property
C. meeting the functional requirements of the tenants
D. preparing the owner’s income tax returns

Answer 14

T16-4 D

All of the other answers are proper roles for a property manager. They would not be involved in the providing of tax advice or preparing tax returns for the owner.

Question 15

The property manager’s chief concern should be that the property:

A. is seldom vacant because it is consistently rented at the lowest rent that produces a profit
B. is managed to achieve the highest rate of return possible for the owner’s investment
C. manager’s time is maximized in management of the property
D. exhibits the proper amount of the owner’s pride of ownership

Answer 15

T16-5 B

This is the primary obligation of a property manager: to achieve the highest rate of return consistent with the property owner’s investment objectives.

Question 16

Functions of the property manager include all of the following, EXCEPT:

A. producing the best possible net operating income for the owner
B. preservation and maintenance of the property
C. carrying out a fiduciary relationship to the owner
D. fulfilling fiduciary duties and obligations to the tenants

Answer 16

T16-6 D

A property manager does not have any fiduciary duties or obligations to the tenants. The property manager’s client is the owner. They owe the owner fiduciary duties, not the tenants.

Question 17

A property manager’s primary obligation is to:

A. the tenants
B. the owner
C. the banker
D. government authorities

Answer 17

T16-7 B

This is because the formal agency agreement exists between the owner and the property manager. This agency relationship imposes fiduciary obligations on the property manager.

Question 18

The type of maintenance that is most often overlooked is:

A. corrective maintenance
B. repairs
C. routine maintenance
D. preventative maintenance

Answer 18

T16-8 D

Preventative maintenance includes activities and service that prevent future problems and expenses for the property owner.

Question 19

Because of the complexity of the laws that affect today’s properties, property managers are required to have knowledge in all of the following areas, EXCEPT:

A. environmental hazards
B. accessible construction
C. nondiscriminatory practices
D. investment securities laws

Answer 19

T16-9 D

Property managers are not investment consultants and are not expected to be investment experts.

Question 20

A property manager is paid 8% of all collected rents each month from a 20-unit apartment building. There are 5 one-bedroom units that rent for $500, 10 two-bedroom units that rent for $650 and 5 three-bedroom units that rent for $800. If the units are fully leased and the property manager collects for all the units except two of the two-bedroom units, how much is the management fee for this month?

A. $912
B. $936
C. $1,040
D. $1,950

Answer 20

T16-10 B

The property manager collected the following rents: 5 x $500 = $2,500; 8 x $650 = $5,200 (because two of these units were not collected); 5 x $800 = $4,000. The rents total $2,500 + $5,200 + $4,000 = $11,700. $11,700 x 8% = $936.

Question 21

Property managers under NC law are required to keep all property records for how long?

A. 1 year
B. 3 years
C. 5 years
D. 10 years

Answer 21

T16-11 B

All licensees, brokerages and firms in NC are required to keep records for a three year period. The three year period is from the date of closing, lease termination or termination of the employment, whichever occurs last.

Question 22

Unlicensed assistants in a property management office may do all of the following, EXCEPT:

A. fill in the blanks on preprinted forms and leases
B. show rental properties
C. receive commissions based on the properties they handle
D. collect and handle rent monies

Answer 22

T16-12 C

In order to be a unlicensed assistant these personnel cannot be paid based on commissions and cannot be independent contractors. They must be salaried W2 employees of the property management firm.

Question 23

Property managers are legally permitted to perform all of the following functions, EXCEPT:

A. create concessions, discounts and inducements for occupancy
B. collect and review competitive bids for improvements or repairs
C. perform a market analysis of rents for the owner
D. advise the property owner on the tax consequences of their investment

Answer 23

T16-13 D

Property managers do not give or provide tax or investment advice.

Question 24

Premier Properties is an out-of-state apartment complex company. Premier has been engaged in the building of rental complexes in various states and has decided to erect a complex in North Carolina. The company hires a full-time employee who is located on site, receives a regular salary and is also compensated with a free unit provided to them by Premier. The company has asked this person to manage the entire property and perform all of the duties of a property manager, including the handling of all rent and security deposits. Under North Carolina law, this person:

A. must be a licensed broker
B. has to be affiliated with a property management entity with a supervising BIC
C. does not need to be licensed
D. may act as a manager, but must hire NC real estate licensees to handle the money

Answer 24

T16-14 C

A person or entity does not have to be licensed to manage their own property. A company’s own property includes property that is handled or managed by the company’s own W2 salaried employees. These people do not need to be licensed.

Question 25

In regard to the transfer and retention of risk, which of the following statements is INCORRECT regarding property management?

A. a low deductible transfers risk and a high deductible retains risk
B. risks can be controlled by installing sprinklers and fire doors and taking other preventative measures
C. a low deductible retains risk and a high deductible transfers risk
D. removing a swimming pool avoids risk

Answer 25

T16-15 A

A low deductible transfers risk from the owner to the insurance company. A high deductible results in the owner retaining the risk.