Unit Exam Flashcards by Liza Abrasaldo

In residential or commercial real estate, licensees practicing as independent contractors must sign an independent contractor agreement.

How well did you know this?

Not at all

Perfectly

Licensees whose income is based on production and NOT hours worked are classified as independent contractors.

How well did you know this?

Not at all

Perfectly

Modular homes and zero-lot-line homes are considered residential property.

How well did you know this?

Not at all

Perfectly

In a tax-deferred exchange, “like kind” means the exchange must be a commercial building for a commercial building.

When it comes to commercial “like kind” is not as strict

How well did you know this?

Not at all

Perfectly

If a property does NOT fit the categories of residential, commercial, industrial, or agricultural property, it is classified as special-purpose property.

How well did you know this?

Not at all

Perfectly

Commercial agents typically close more transactions than residential agents because commercial properties are NOT as complex as residential properties.

How well did you know this?

Not at all

Perfectly

Commercial agents should be familiar with the Americans with Disabilities Act.

How well did you know this?

Not at all

Perfectly

In a tax-deferred exchange, the replacement property must be identified within 45 days and closed within 180 days.

How well did you know this?

Not at all

Perfectly

In the event of an emergency, the landlord may access the property without the consent of the tenant.

How well did you know this?

Not at all

Perfectly

Barrier-free access for the disabled, hiring practices, and labor rates are considered human rights issues for the property manager.

How well did you know this?

Not at all

Perfectly

A principal responsibility of a property manager is to generate income for the owner.

How well did you know this?

Not at all

Perfectly

Indoor air quality, levels of radon, bacteria, and asbestos are environmental concerns for the property manager.

How well did you know this?

Not at all

Perfectly

Determine whether each type of property listed below is considered residential, commercial, or industrial.

Industrial
Commercial
Residential

A)
Warehouse

B)
Condominium

C)
Zero lot-line home

D)
Shopping center

E)
Parking facility

F)
Power plant

Industrial = A,F
Commercial = D,E
Residential = B,C

How well did you know this?

Not at all

Perfectly

Match each term below with its appropriate definition.

Industrial property

Asset manager

Commercial property

Property manager

Tenant improvements

Residential property

A)
Warehouses and power plants

B)
Business, profit-making property

C)
One who specializes in building operations and leasing

D)
Making a space usable for a tenant’s needs

E)
Dwelling occupied as a residence

F)
One who works with the financial aspects of a portfolio of investments

Industrial property = A

Asset manager = F

Commercial property = B

Property manager = C

Tenant improvements = D

Residential property = E

How well did you know this?

Not at all

Perfectly

Match the term or phrase on the left with the appropriate term or phrase.

Net income

Videoconferencing

Decision based on emotion

CIE

CCIM

Decision based on bottom line

A)
A type of learning method

B)
Residential purchase

C)
Commercial designation of NAR

D)
Commercial purchase

E)
Gross income minus expenses and vacancy allowance

F)
Internet-based property listing service

Net income = E

Videoconferencing = A

Decision based on emotion = B

CIE = F

CCIM = C

Decision based on bottom line = D

How well did you know this?

Not at all

Perfectly

Match the following:

Management agreement

Within 45 days of closing

Percentage lease

Within 180 days of closing

IRS Code 1031 Tax Deferred Exchange

CAM charges

A)
Method to defer taxes in investment property sales

B)
Document that creates the agency between the property owner and the management firm

C)
When Code 1031 replacement property must be purchased

D)
When Code 1031 replacement property must be identified

E)
Commercial tenant’s charges to pay for maintenance of common areas

F)
Type of commercial lease used most often in retail situations

Management agreement = C

Within 45 days of closing = E

Percentage lease = D

Within 180 days of closing = A

IRS Code 1031 Tax Deferred Exchange = B

CAM charges = F

How well did you know this?

Not at all

Perfectly

An agent normally lists and sells convenience stores associated with gas stations. Today he has been asked to list and sell a vacant church. This type of property is considered

A)
residential.
B)
industrial.
C)
special purpose.
D)
commercial.

Explanation
The answer is special purpose. Special-purpose property is property that does not fit the description of residential, commercial, industrial, or agricultural property.

How well did you know this?

Not at all

Perfectly

The licensee who lists HUD-owned properties for HUD is known as

A)
the cooperating agent.
B)
the commercial transaction broker.
C)
the HUD office manager.
D)
the broad listing broker.

Explanation
The answer is the broad listing broker. The broad listing broker lists all of HUD’s properties in a specific geographic area in exchange for HUD paying a 1% commission to the broker on each transaction.

How well did you know this?

Not at all

Perfectly

Properties designed for occupancy as a residence include cooperatives, zero-lot-lines, and manufactured housing and are considered which type of property?

A)
Commercial
B)
Agricultural
C)
Industrial
D)
Residential

Explanation
The answer is residential. All property designed for occupancy as a residence by one or more families is residential property.

The successful residential real estate agent considers real estate a

A)
profession.
B)
part-time job.
C)
outlet for social contact.
D)
full-time job.

Explanation
The answer is profession. Real estate is a profession that requires skill in business knowledge, communication, negotiation skills, and more.

With corporate buyers of investment real estate, a goal is to generate income for the stockholders, thereby

A)
decreasing their tax liability.
B)
allowing them to invest more into improving the property.
C)
raising the value of the stock.
D)
giving them more spendable income.

Explanation
The answer is raising the value of the stock. As corporate-owned properties’ income rises, most often so does the value of the stock.

A maneuver often used to increase a business’s cash flow is

A)
change corporate officers.
B)
take out a small-business loan.
C)
sell the business but not the building.
D)
affect a sale and leaseback.

Explanation
The answer is affect a sale and leaseback. Commercial property owners will sometimes sell the property they own, then remain and become the tenants of the new owner. They have received the purchase price, so their cash flow has improved.

Cash or other property added to a tax-deferred exchange in order to equalize values is called

A)
boot.
B)
prepaid closing costs.
C)
additional down payment.
D)
leveraged dollars.

Explanation

The answer is boot. Boot can be other property, real or personal, or cash.

Ownership of the common areas in a condo development is held by the

A)
homeowners.
B)
city.
C)
developer.
D)
county.

Explanation
The answer is homeowners. Homeowners in a condo development share in the ownership of the common areas and pay monthly association fees to maintain them.

The report that could be done at varying intervals, such as monthly, quarterly, or semiannually, and that determines whether an investment has made money or not is called ``` A) gross rent multiplier. B) profit and loss report. C) cash flow report. D) capitalization budget. ```

Explanation The answer is profit and loss report. The P&L statement looks at income and expenses to calculate profit or loss over a period of time.

If there is a written rental agreement between the landlord and the tenant, the landlord must sign it. It should also be signed by ``` A) the broker. B) the tenant. C) the adult children of the tenants sharing occupancy. D) the affiliate broker acting as property manager. ```

Explanation The answer is the tenant. By signing, the tenant acknowledges having read the agreement. Note that possession of the property without signing signifies acceptance by the tenant.

The Horizontal Property Act allows for condominium development. The type of zoning in Tennessee that has essentially replaced the Horizontal Property Act is the ``` A) horizontal property regime. B) Fair Housing Act. C) commercial zoning. D) Americans with Disabilities Act. ```

Explanation The answer is horizontal property regime. Some developers are now demolishing single-family homes and constructing two to four properties on the same lot with an association being formed. Most often the zoning that allows this is horizontal property regime.

At the end of a period, such as after a year of operation, a statement comparing initial budget with actual results is a ``` A) cash flow statement. B) gross rent multiplier statement. C) budget comparison statement. D) profit and loss statement. ```

Explanation The answer is budget comparison statement. The budget comparison statement examines actual financial results with the original operating budget.

The broker who takes on an affiliate broker as an independent contractor must have the licensee sign ``` A) an employment agreement. B) a blank sales contract. C) a property condition disclosure form. D) an independent contractor agreement. ```

Explanation The answer is an independent contractor agreement. For IRS purposes, it is required that independent contractors sign a contract stating they will not be treated as employees.

A risk management solution that would transfer the risk from the property owner to another entity would be to ``` A) remove the source of the risk. B) avoid the risk. C) purchase an insurance policy. D) install a sprinkler system in a building without one. ```

Explanation The answer is purchase an insurance policy. By doing so, financial liability of the risk is transferred from the property owner to the insurance company.

Residential property includes ``` A) power plants and recording studios. B) modular homes and zero-lot-lines. C) government-owned properties. D) industrial complexes and power plants. ```

Explanation The answer is modular homes and zero-lot-lines. Both these types of properties fall under the category of residential properties.

Which of the following would be a responsibility of a commercial real estate property manager? ``` A) Planning emergency evacuation procedures B) Planning social activities for the tenants C) Personally repairing broken toilets D) Personally spreading salt over ice to prevent slippage ```

Explanation The answer is planning emergency evacuation procedures. These plans are beneficial in the event of fire, terrorist threat, and so on, and will help protect the landlord in the event of a civil lawsuit arising from unforeseen events.

A commercial agent has been told by a commercial building owner that he would like to sell his commercial building but cannot afford to because of the tax implications. The BEST solution the agent could suggest to the owner is to ``` A) swap the building for a valued racehorse. B) sell the building to a family member. C) effect a tax-deferred exchange. D) give the agent the building as a gift. ```

Explanation The answer is effect a tax-deferred exchange. Section 1031 of the IRS Code allows for a tax-deferred exchange of like-kind properties. These are also known as like-kind exchanges.

Of the following, the only type of property considered residential real estate is a ``` A) power plant. B) cooperative. C) medical office. D) cemetery. ```

Explanation The answer is cooperative. Residential property is all property designed for occupancy as a residence. Of the choices, the only residential property is the cooperative.

A warehouse is considered which type of property? ``` A) Residential B) Industrial C) Special purpose D) Commercial ```

Explanation | The answer is industrial. Warehouses are considered industrial property.

In addition to the monthly association fee levied by a homeowners association in a planned unit development or condo development, the association may also levy ``` A) impact fees. B) assessments. C) commission for the agent. D) real estate taxes. ```

Explanation The answer is assessments. An assessment is money levied by the homeowners association in a planned unit development or condo development to help pay for major repairs and improvements of common areas.

A school, a church, or a cemetery is considered ``` A) residential property. B) commercial property. C) industrial property. D) special-purpose property. ```

Explanation The answer is special-purpose property. Property that does not fit other zoning classifications is generally considered special-purpose property.

The replacement property in a 1031 tax-deferred exchange must be identified within 45 days of closing and purchased within ``` A) 45 days of closing. B) 180 days of closing. C) one year of closing. D) 90 days of closing. ```

Explanation The answer is 180 days of closing. Time periods and other requirements must be met to comply with IRS requirements in a 1031 tax-deferred exchange.

One of the concerns of a property manager is making a physical space usable for a tenant's particular needs. Doing so is known as ``` A) tenant improvements. B) tenant construction. C) space alteration. D) fixer-upper. ```

Explanation | The answer is tenant improvements. Other names include construction alterations and build-outs.

To define the broker-affiliate broker relationship, the affiliate broker who will be practicing real estate as an independent contractor must sign ``` A) an independent contractor contract. B) an employment contract. C) a listing contract. D) a sales contract. ```

Explanation The answer is an independent contractor contract. Depending on the type of contract, either statutory or common law, the broker may or may not be able to control the activities of the affiliate broker.

The cost advantage that arises with increased output of a product because of the inverse relationship between quantities produced and per-unit fixed cost is ``` A) capitalization rate. B) gross rent multiplier. C) net profit. D) economies of scale. ```

Explanation The answer is economies of scale. The greater the quantity of a good produced, the lower the per-unit fixed cost because the costs are shared over a larger number of goods. The more you buy, the cheaper the per unit cost is! (Consult your local grocery store.)

If an apartment priced at $200,000 generates a monthly rental income of $1,000, the yield on an annualized basis is 6%. This is known as ``` A) straight-line depreciation. B) cash on cash. C) capitalization rate. D) gross rent multiplier. ```

Explanation The answer is cash on cash. To uncover cash on cash, the investor must determine the initial amount to invest to purchase the property. Cash-on-cash yield is useful as an estimate of the initial return from an investment. To determine the 6% return on investment, take the $1,000/month net operating income multiplied by 12 to get the annual net operating income and divide by the $200,000 initial value.

Air quality, levels of radon gas, and asbestos are all concerns of property managers and are considered ``` A) fiscal policy issues. B) human rights issues. C) environmental issues. D) structural issues. ```

Explanation The answer is environmental issues. These, as well as waste disposal, lead-based paint and others, are all environmental issues of concern to property manager.

The broker has given an affiliate a job description including a salary, stating when the affiliate must report to work, when breaks can be taken, daily performance duties and expectations, and when the workday ends for the agent. The affiliate is MOST likely ``` A) a common law independent contractor. B) an unlicensed personal assistant. C) an employee of the broker. D) a statutory independent contractor. ```

Explanation The answer is employee of the broker. By giving the affiliate a salaried job description, the broker has created an employer-employee relationship with the affiliate.

The type of lease where a commercial tenant pays rent, utilities, and all the charges that an owner normally pays, including taxes, insurance, and maintenance, is ``` A) an upside-down lease. B) a lease purchase. C) a triple-net lease. D) a gross lease. ```

Explanation The answer is a triple-net lease. Triple-net leases are almost always exclusively negotiated in commercial transactions, and are also known in some areas as absolute triple-net leases. Remember, because the tenant is paying some or all property charges, the landlord thinks it's neat, thus it's a net lease. If the tenants only paid their rent and none of the property charges, the landlord would think that's gross, resulting in a gross lease!

Doing what it takes to keep good tenants happy, which directly leads to their retention, is known as ``` A) tenant relations. B) property positioning. C) asset management. D) tenant improvements. ```

Explanation The answer is tenant relations. It means keeping the existing good tenants happy enough that they will want to renew their leases and not leave to find another property to rent.