Exam (elaborations)
Chapter 16. Property Management (Colibri Real Estate) Questions with Solutions
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Chapter 16. Property Management (Colibri Real Estate)
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Chapter 16. Property Management(Colibri Real Estate)
A buyer would like to start out with a significant amount of equity invested in his house,
so that he can reborrow against the equity if necessary. When structuring a loan, what
should the buyer's highest priority be?
Largest downpayment possible
Longest loan term possible
Lowest interest rate possible
Smallest downpayment possible - answerLargest downpayment possible
Equity refers to the difference between the property's value and the loans against the
property. Therefore, the larger the downpayment the buyer makes, the more equity in
the property he will have initially.
Vandelay Industries sells its office building to Howard Holding Co. in order to raise
some cash, but leases it back from them, so they won't have to move. Once this
transaction closes, what kind of interest does Vandelay have in the property?
Fee simple defeasible
Freehold estate
Life estate
Non-freehold estate - answerNon-freehold estate
The selling party in a sale-leaseback transaction will have a leasehold interest (in other
words, a non-freehold interest) in the property once the transaction is completed.
In a sale-leaseback:
the grantor becomes the grantee
the grantor becomes the lessee
the broker has purchased the property
the property is sold at a loss - answerthe grantor becomes the lessee
The grantor (seller) sells the property, but remains in possession as a lessee (tenant).
One tax advantage of investing in real estate is:
high liquidity
,low risk
homestead protection
sheltering of income - answersheltering of income
Real estate investment is often thought of as a "tax shelter" because it serves to
partially shelter investors from income tax liability.
A property management agreement is amended to take into account some changing
circumstances. The amendment must be signed by the owner and:
the designated broker for the firm providing management services
anyone who works for the brokerage company
the tenant
the tenant and the real estate licensee - answerthe designated broker for the firm
providing management services
A property management agreement is a contract between a property owner and the real
estate firm that provides the management services. It is not a contract between the
property owner and an individual licensee, although in some cases a licensee may sign
on behalf of his brokerage.
A property management agreement must contain which of the following?
A salary for the property manager
What percentage of the property's net income will be used as the manager's
commission
Marketing plans
The property manager's scope of authority - answerThe property manager's scope of
authority
Any property management agreement should include the scope of the manager's
authority, such as whether he can collect and disburse funds. It should also discuss the
manager's compensation, but the compensation need not take the form of salary; it
could be by commission, for example.
Which of the following is typically included in a management agreement?
Certificate of occupancy
Authorization for the property manager to pay expenses
, Joint survivorship
Waiver of subrogation - answerAuthorization for the property manager to pay expenses
Management agreements usually authorize the manager to pay expenses related to the
management of the property.
A property manager decides to offer some additional services beyond what is specified
in the property management agreement. She may do so after:
giving the tenants 30 days' notice
obtaining written authorization from the owner
providing notice to the Department of Licensing
the management agreement is amended in a writing signed by the owner and
designated broker - answerthe management agreement is amended in a writing signed
by the owner and designated broker
Whenever the duties and powers of a property manager change, the property
management agreement (the document that describes the scope of a property
manager's authority) must be amended.
Property management agreements generally include provisions on all of the following
EXCEPT the:
amount of the security deposit that must be collected from each tenant
manager's authority to pay property expenses
starting and termination date of the agreement
manager's responsibility to provide the owner with management reports -
answeramount of the security deposit that must be collected from each tenant
Deposit amounts are found in the rental agreements, not the property management
agreement.
The annual cash flow divided by the equity invested is referred to as _______________.
- answercash on cash
The ease with which an asset may be converted into cash is referred to as its
_______________. - answerliquidity
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