You are working on a CMA for your new listing. The seller has indicated that he really wants to list his home for $400,000 or more. Which of the following would indicate that price may be too high?
The closest comparable is a two-story while your client’s house is a ranch house.
There are no comparables within the last six months.
There were three expired listings priced between $400,000 and $425,000.
Two properties recently sold for just under $400,000.
Jan is a real estate licensee gathering information to help her seller determine a good listing price. How could expired listings help her in this process?
They determine approximately how long it will take the property to sell.
They help determine the price at which the property is most likely to sell.
They illustrate the price at which the property won’t sell.
Comparative market analysis is most effective when a licensee limits the data collection time frame for sold properties. A CMA should look at properties that sold within ______.
In the last two years
No later than three to six months ago
Within 18 to 24 months
Within the last six to 12 months
Clark works for Acme Bank and asks for your assistance. He wants you to look at a property that’s about to go into foreclosure and provide him with a report on its current marketability and an approximate market value. What’s Clark most likely asking you to provide?
Appraisal
BPO
CMA
Professional opinion
Real estate licensees turn to specific information sources when preparing CMAs for clients. Which of the following information sources is best for estimating the market value of a property?
Comparable sales
Construction costs
Previous sales price
Time to close
Which type of analysis starts with a visit to the property, a search on the MLS, and a comparison of comparable sales, and hopefully ends in a listing for a real estate licensee?
Appraisal
Broker price opinion
Comparative market analysis
Credit analysis
What’s the primary purpose of a CMA?
To determine an appropriate listing price range
To ensure that the sales price reflects the cost of replacement
To provide the property value to the lender
To set a price that an appraiser will approve
A comparative market analysis is an evaluation that real estate professionals use to determine an appropriate listing price range. Then the licensee should narrow it down, with the sellers, to the appropriate list price. CMAs can also be used to determine an appropriate offer price but are NOT estimates of value.
Marcy’s offer on a home was accepted! Which party will be contacting her about arranging an appraisal?
The closing attorney
The lender
The seller’s agent
The title insurance representative
You need to perform a sales comparison for your clients. Comparable A’s adjusted sales price is $277,000. Comparable B’s adjusted sales price is $255,000. How might you use this data to determine a list price range for the clients’ home?
Find the average of the adjusted sales prices of Comparable A and Comparable B.
Give more weight to the list price on Comparable A, because it’s lower.
Give more weight to the list price on Comparable B, because the subject property will likely sell more quickly at this higher price.
Give more weight to the list price on the comparable that’s most similar to the property.
In which form of price determination does the real estate professional often just drive by the property and take photos, then complete paperwork for the lender?
Appraisal
Broker’s price opinion
Comparative market analysis
Competitive market analysis
When licensees follow through on what prospects have asked, arrive for meetings on time, and come prepared, what trait are they exhibiting?
Competence
Documentation
Effective communication
Empathy
Which type of analysis is a broad estimate of price in case the lender must take over the property and sell it to an investor or on the market?
Appraisal
Broker’s price opinion
Comparative market analysis
Credit analysis
Which feature is most likely to be the cause of an adjustment to a comparable when preparing a CMA?
Busy street
Color
Demographics
Interest rates
When pricing a property, which of the following is a reason a licensee would consider expired listings?
To determine approximately how long it will take the home to sell
To determine the price at which a property is most likely to sell
To determine the price at which a property won’t sell
To determine the property’s competition
Which of the following is typically used for purposes other than a prospective listing or sale?
Appraisal
AVM
BPO
CMA
When presenting a CMA, if you take the time to explain the CMA process, help the prospective sellers understand what’s behind the numbers, and ultimately leave the decision of the list price up to them, what characteristic have you demonstrated?
Documentation
Effective communication
Law-abiding
Precision
Which of the following statements regarding automated valuation models is true?
Appraisers rely on AVM data in their analysis.
Licensees should rely on computer-generated reports rather than doing their homework.
The values returned by AVMs are always accurate.
Trulia, Zillow, and RealtyTrac use AVMs to return values.
What is an opinion on a listing price range determined by comparing recently sold properties, current competing properties, and properties that didn’t sell?
Appraisal
Broker price opinion
Collective market analysis
Comparative market analysis
Which of the following is an example of the proper way to use a computer-generated CMA?
Assure your clients that the data it produces is 100% accurate and can be relied upon.
Rely on the data produced to suggest a listing price.
Use it as a tool, in combination with visiting comparables, checking sales history, and making adjustments for differences before suggesting a listing price.
Use the information provided rather than visiting comparables and making adjustments.
Which of the following statements is true about appraisals?
“Appraisal” and “CMA” are interchangeable terms for a property valuation.
Appraisals may only be performed by certified appraisers (with certain exceptions in some states).
Either certified appraisers or managing brokers may perform appraisals.
Real estate licensees may perform appraisals on foreclosed properties, but a certified appraiser must perform all other appraisals.
How many adjustments should a licensee make to the subject property when performing a comparative market analysis?
It depends
One
Two
Zero
When completing a CMA, what might be indicated if a comparable property had a quick sale?
It’s a buyer’s market.
The market for similar homes is good.
The other agent was incompetent.
The property was priced too high.
When a real estate professional goes beyond a broad brushstroke approach to a CMA and takes the time to research not only recent sales, but competition and expired listings, what trait are they exhibiting?
Diligence
Documentation
Effective communication
Empathy
Which type of listing can help a real estate professional determine how quickly a home in a given price range received an accepted offer?
Expired
Foreclosed
Pending
Withdrawn
What does a CMA determine?
Availability of funding
Cost of replacement
Cost per square foot
Market price range
Ellen has only been licensed for two weeks, but she’s already toured the home of potential clients, the Birds. What should she do to next to secure the listing?
Call her mom and get a pep talk.
Prepare a CMA.
Print out two copies of her professional resume.
Review her pre-licensing coursework for information about taking property photos.
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Real estate is a ______, unlike stocks or bonds.
Buy-and-hold investment
Novice-friendly investment
Tangible asset class
Tax-free holding
What does a mortgage real estate investment trust invest in?
Lease contracts
Personal property
Real estate debt
Real estate property
Sally is helping her Aunt Jess shop for another rental property. Aunt Jess likes to reminisce about the “good old days” when everything cost less. “Your Uncle Floyd and I bought our first rental property for $80,000 and that was a nice house. It was new, too. You couldn’t touch that house for less than $250,000 today. Times change, huh, honey?” Aunt Jess is referring to which kind of investment risk?
Business
Buying power
Interest rate
Liquidity
What are the two types of real estate investment trusts?
Debit and credit
Mortgage and equity
Mortgage and lease
Residential and commercial
Aside from cash flow, appreciation, and earning passive income, what is another reason someone may want to legally invest in real estate?
For depreciation
For liquidity
To hedge against inflation
To launder money
Which of the following statements is true of investment properties?
They can be leveraged.
They’re guaranteed to make a profit.
They’re highly liquid.
They’re very low risk.
The chance that an investor might lose money is known as _______.
Illiquidity
Liquidity
Local markets
Risk
During periods of inflation, $10,000 today will be worth less tomorrow. This is an example of what type of risk?
Business
Buying power
Interest rate
Liquidity
Which of the following is an example of illiquidity?
An investor may lose invested capital.
Investments in real estate are difficult to sell quickly without loss of capital.
Real estate markets are international in nature.
Real estate markets are local in nature.
What types of investors should take into consideration the risk of a holding period?
Any type of investor
Buy and hold investors only
Fix and flip investors only
Wholesalers only
When an investment cannot be sold quickly without the loss of capital, it is said to be what?
Illiquid
Leveraged
Liquid
Risky
The numbers on the residential apartment building Tony bought looked great on paper. However, expenses have been far more than what he originally budgeted. This is an example of what type of risk?
Business
Interest rate
Liquidity
Safety
_______ refers to the fact that investments in real estate cannot be sold very quickly without loss of capital.
Illiquidity
Liquidity
Local markets
Risk
What type of real estate investment may meet the definition of being a security and must adhere to the rules and regulations of the Securities and Exchange Commission?
Real estate investment trust
Real estate mortgage investment conduit
Real estate syndicate
Real estate trust
In terms of investment, liquidity means an investment ______.
Can easily be converted to cash
Can’t be sold
Is a cash cow
Will experience ebbs and flows in value
What is borrowing money to finance an investment known as?
Brokerage
Equity
Leverage
Liquidity
Daniella’s rental property is barely covering her expenses. Two of her six tenants have moved out, and she has had to upgrade the building’s heating and air conditioning systems. This is an example of which type of risk at work?
Business
Financial
Liquidity
Safety
Real estate is NOT considered a _______ investment because it may be more difficult to sell quickly without a loss of capital.
Good
Liquid
Profitable
Risky
What’s the amount of money you have now called?
An investment
Future value
Present value
Principal
The difference between what an investor plans to make and spend and what actually happens is known as ______ risk.
Business
Financial
Liquidity
Safety
What can help an investor ride out a holding period?
Avoiding economic changes
Being highly leveraged
Having adequate reserves
Nothing
What type of real estate investment is similar to collateralized mortgage obligations (CMOs)?
Real estate investment trust
Real estate mortgage investment conduit
Real estate syndicate
Real estate trust
Raymond has invested almost all of his money in real estate. If he has to sell it quickly, he may lose money due to what type of risk?
Buying power
Interest rate
Liquidity
Safety
Which type of risk refers to the chance that an investor might lose earnings or capital?
Business
Financial
Liquidity
Safety
What type of real estate investment must distribute 95% of its income to beneficiaries?
Real estate investment trust
Real estate mortgage investment conduit
Real estate syndicate
Real estate trust
Joanie sees herself as a mover and shaker, a leader, someone who jumps in and gets things done. She likes to be involved and in charge. When she decides to start investing in real estate, which of these choices is she most likely to select as her investment vehicle?
A multi-family residential income property
A real estate investment trust
A real estate mortgage investment conduit
A real estate syndicate membership
Which of the following is the best example of investment leverage?
Buying multiple properties at once
Buying properties on a systematic basis
Financing most of an investment and putting very little cash in
Paying all cash for an investment to avoid interest payments
Sam recently purchased some investment property by borrowing money to fund most of the purchase. What is Sam’s investment?
Guaranteed to make a profit
Leveraged
Liquid
More difficult to sell
Which of the following is a term that describes how easy it is to get your money out of an investment by selling it or converting it into cash?
Going concern value
Leverage
Liquidity
Risk
Which of these is most likely to be part of an equity REIT’s investment?
Mortgages secured by commercial properties
Mortgages secured by residential properties
Retail shopping centers
Undeveloped land parcels
What is a major advantage of real estate investment over other types of investment?
Ability to leverage
Aesthetics
Availability
Familiarity
What phrase describes the amount that today’s dollars grows to over time?
An investment
Future value
Present value
Principal
Tenant turnover, increases in property taxes, and other costs are examples of what?
Illiquidity
Liquidity
Need for expert help
Risks
Real estate investing may be done individually, in partnerships, or through what other means?
Corporations
Credit reports
Credit unions
E&O insurance
The idea that money gains or loses value over time describes which concept?
Inflation
Interest
Time is money
Time value of money
The idea that $100 gains or loses value over time is called what?
Deflation
Inflation
Stagflation
Time value of money
What is the best definition for “the time value of money”?
It’s not wise to sell your time for money.
Money gains or loses value over time.
Money increases in value over time.
Time is money.