Commercial Real Estate Certificate

1. Question

Which one of the following business types is NOT eligible for SBA financing?

Manufacturers
Wholesalers
Distributors
Not-For-Profit’s

2. Question

Net Income Multiplier may be used within the Income Approach to develop a market value for the property.

True
False

3. Question

What is the maximum amortization/term on SBA 7a Real Estate Loans?

25 years
15 years
10 years
7 years

4. Question

Yield capitalization techniques have more in common with discounted cash flow than with direct capitalization.

True
False

5. Question

What steps are key to insuring a fast closing? (Check all that apply)

Have a sense of urgency in all conversations.
Be ready to recommend: i. A good attorney or CPA to set up new entities ii. A good insurance agent to get policies in place iii. A good environmental vendor iv. A good surveyor v. A good contractor, architect, or designer if necessary
Have all critical documents ready for the buyers team (prior environmental reports, surveys, lease agreements, rent rolls, historical operating expenses)
If financing is required, have a lender you trust do a “sniff” test on the project to make sure its viable before proceeding

6. Question

The costs to lease up to stabilized occupancy should be accounted for in all three approaches to value.

True
False

7. Question

What are the principal responsibilities of a property manager?

Meet the owner’s goals
Increase the property’s value
Develop and administer a maintenance plan
All the above

8. Question

The actual rental income specified in a lease is also known as contract rent.

True
False

9. Question

What is an example of a non-income producing asset?

Retail strip center
Grocery store
Automotive factory
Vacation home

10. Question

A reconstructed operating statement developed by an appraiser represents his or her opinion of the most probable future net operating income of the property.

True
False

11. Question

If a tenant has an underground storage leak the manager should

Let the tenant deal with it
Call a contractor to plug the leak
Contact the owner and the environmental regulatory agency
All of the above

12. Question

The best comparable sales are those that require the least quantitative adjustments or the least qualitative analysis.

True
False

13. Question

What is NOT an owner’s goal?

Increase NOI by 5%
Lease the building to 85% occupancy
Investor returns at 7.8%
Management fees at 15% above cost

14. Question

The best comparable sales are those where the buyers of those sales would also consider the subject property as an alternative investment.

True
False

15. Question

How can a manager increase the value of a property?

Increase occupancy
Decrease expenses
Keep the landscaping up
Both a and b

16. Question

A tenant falls on the sidewalk in front of the building…

Tell them that you should have fixed that hole
Ignore the issue unless they come tell you they fell
Contact the owner and the insurance company after getting the relevant information
All of the above

17. Question

What is the down payment requirement for a general purpose owner occupied SBA loan?

5%
10%
20%
30%

18. Question

What is a dark clause in a lease?

Section that states lights in the space must be off by a certain time
Section that states outdoor lighting much be off by a certain time
If a larger tenant vacates, the tenant in the lease gets reduced rent or other concession
All of the above

19. Question

What is the down payment requirement for a general purpose owner occupied conventional loan?

5-10%
10-15%
20-25%
30-40%

20. Question

If a tenant has an underground storage leak the manager should…

Let the tenant deal with it
Call a contractor to plug the leak
Contact the owner and the environmental regulatory agency
All of the above

21. Question

What are the primary benefits of SBA 7a Financing Programs? (Select all that apply)

Lower Down Payments
Lower Monthly Payments
Long Term Fixed Rates
Flexible Prepayment Options

22. Question

To control expenses on a property you can…

Defer the job to another year
Ask one of your relatives to do it
Bid qualified contractors with the expertise to do it
All of the above

23. Question

ABC Inc. purchases a building for $1,000,000 using a conventional loan. The bank required a $250,000 down payment. What is the loan to value ratio of the project?

90%
80%
75%
60%

24. Question

An exclusion in a lease may be…

No tanning salons
No food can be sold in an area over 10% of the sf of the space
No other restaurant that sells liquor
All of the above

25. Question

XYZ Inc. purchases a building for $1,000,000 using an SBA loan. The bank required a $100,000 down payment. What is the loan to value ratio of the project?

90%
80%
75%
60%

26. Question

Which of the following is NOT a recognized method of depreciation within the Cost Approach?

Physical Depreciation
Functional Obsolescence
Universal Obsolescence
External Obsolescence

27. Question

What percentage of the building must be owner occupied to qualify for SBA Financing?

30%
45%
51%
75%

28. Question

The contributory value of any site improvements using the cost as the starting point must deduct all applicable depreciation.

True
False

29. Question

Which of the following expenses can often be added to an SBA 7a financing project? (Select all that apply)

Equipment
Parking Lot Repair
Moving Expenses, New Signage, Inventory
Leasehold Improvements

30. Question

Entrepreneurial Incentive should be developed even under depressed market conditions within the Cost Approach.

True
False

31. Question

Which of the following property characteristics are critical to a retail property user:

Floor load capacity
Market demographics
Fire suppression systems
None of the above
All of the above

32. Question

Ceiling height is most critical for which type of property use:

Manufacturing
Distribution/Warehouse
Office
Retail

33. Question

The typical freestanding drug store on the corner leased by Walgreens/CVS can be classified as:

Retail
Single-tenant
Investment real estate
Credit-tenant
All of the above

34. Question

The most important consideration for real estate investors buying property is usually:

The size of the property
The income generated by a property and the reliability of that income
The use of the property
The type of building construction

35. Question

Which of the following would NOT be considered “specialty” real estate?

Data center
Cell tower
Self-storage
Bulk warehouse
Hotels

36. Question

Which of the following is the least important consideration for manufacturing users on choosing locations?

Availability of labor
Utility costs
Government incentives
Shopping and dining amenities nearby
Access to distribution channels – highways, rail, ports

37. Question

Shared conference facilities and nearby shopping and dining amenities are most important to:

Retail users
Warehouse users
Office users
Manufacturing users

38. Question

Which of the following is least consistent with a mixed-use description for real estate:

An industrial park
Large land developments with residential, office and retail uses
Urban developments
A project with all single story buildings

39. Question

The configuration and location of manufacturing facilities:

Can be driven by cost and capacity of utility services
Is consistent across the country and types of products being manufactured
Is use-specific and driven by the process to be performed in the building
All of the above
a and c only

40. Question

Garden office buildings are always distinguished from mid-rise office buildings by:

Proximity of parking to the individual tenant space
Amount of landscaping
Number of stories
All of the above
a and c only

41. Question

A commercial property lease is different from most residential leases because:

The term is often longer for commercial leases
Definition or description of the leased premises is not as important for commercial properties
Commercial leases have more variations and are generally more heavily negotiated
All of the above
a and c only

42. Question

Which of the following is a critical element of all commercial leases:

Term of lease
Definition of leased premises
Maintenance and repair responsibilities
All of the above
b and c only

43. Question

A real estate broker should advise their client to consult an experienced real estate attorney for a commercial lease:

When the term is for more than a year
If the rent is more than $10,000 per year
If the property is a multi-tenant property
Always

44. Question

Co-tenancy, exclusive use and narrow/specific use restrictions are most prevalent and important in:

Industrial property leases
Office leases
Retail leases
Hotel leases

45. Question

In a triple net lease, the Landlord is usually responsible for which of the following expenses and not reimbursed by the Tenant for:

Structural and foundation repairs
Property taxes
Insurance
Common area expenses

46. Question

In a gross, full service office lease with a base year expense stop, the Tenant pays which the following in addition to base rent:

Janitorial expenses
Heating and cooling costs
Its proportionate share of common area maintenance costs
Increases in building operating costs after the base year

47. Question

The following are typical remedies for the Landlord in the event of a Tenant default under a commercial lease:

Termination of the lease
Re-taking possession of the space without terminating the lease
Right for Landlord to perform the obligation and bill the tenant for the cost
All of the above
b and c only

48. Question

A personal guaranty of a lease:

Is necessary if a person has signed the lease individually, but has limited financial resources
Should be evidenced by a separate document from the lease
Is recommended if a business entity is the Tenant under a commercial lease and has
Is not affected by amendments to the lease made by the tenant and landlord.

49. Question

An estoppel certificate or estoppel letter from a Tenant:

Is used by a tenant to request that the landlord stop another tenant from disrupting the building
States the Tenant’s perspective on the current status of the lease
Is used in a sale or financing to keep the tenant from claiming unknown agreements with the landlord after the sale or financing
Can be used instead of a form lease
b and c only

50. Question

A letter of intent:

Is always a binding agreement
Should outline the major business points of the proposed transaction
Should always be prepared by an attorney
Should never include brokerage fee terms
a and d only

51. Question

Generally, the best property description to use for a commercial purchase agreement is:

The legal description from the seller’s deed or title insurance policy
The description from the property tax card
The property tax parcel number
A site plan

52. Question

A liquidated damages clause in a purchase agreement:

Describes how the parties will handle flood damage during the contract term
Limits a party’s damages to a specified amount
Is the only remedy available to sellers in the Indiana Association of Realtors’ standard commercial purchase agreement form
Can be used only to protect Buyers

53. Question

The benefits of using standardized form purchase agreements include:

They may be less intimidating to the parties
They are easily edited and tailored to the transaction at hand
They always save money for the client
All of the above

54. Question

A purchase agreement for a leased property should include provisions for:

Obtaining estoppel certificates from tenants
Obtaining subordination agreements from tenants with recorded leases
Allocation of income and expenses as between Buyer and Seller
All of the above

55. Question

The preferable type of survey to specify for a commercial property purchase is:

A surveyor location report
A mortgage survey
An ALTA/ASCM standard survey
None of the above

56. Question

A phase I environmental assessment includes:

A search of public records for environmental incidents
A visual inspection of the property by a qualified, trained inspector
Soil sampling for contamination
Research of prior uses of the property for environmentally hazardous operations
All of the above, except c

57. Question

Title insurance:

Guarantees a policy holder that they have clear title to the insured property
Is an insurance policy that has a policy limit
Insures the owner against loss from all recorded easements and restrictions
Automatically covers the value of additional property improvements made by an owner

58. Question

Title insurance endorsements can be used:

To recommend a title company to a client
To insure an owner of the current zoning of the property
To insure that two parcels are contiguous to one another
All of the above
b and c only

59. Question

Which of the following is/are true?

A ‘payable-year/cash basis’ proration of property taxes is more frequently used if tenants are reimbursing owner/landlord/seller for taxes under their leases
The ‘payable-year/cash basis’ proration method is consistent with the IRS treatment for property tax prorations
The traditional proration of property taxes (lien basis, in arrears) results in the lowest credit to the Buyer for unpaid taxes
All of the above

60. Question

The review of the title commitment and survey:

Should be done together
Should include review of all documents listed as exceptions on the title commitment
Should verify that all exception documents are reflected on the survey
Might best involve an attorney
All of the above