Real Estate Finance, Sixth Edition Quizzes
Instructions: Quizzes are open book. All answers are True or False, or Multiple Choice.
Answer key for the online and CD-ROM book is located on Page 493.
Answer key for the printed book is located on page 494.
Quiz 1 —­Chapters 1-5, Pages 13-54
____ 1. The goals, anticipations and positions of lenders and owners of real estate are:
a. diametrically opposed.
b. adversarial.
c. similar.
d. a and b.
____ 2. If the wording of a trust deed so states, options to buy, purchase agreements and sales escrows
trigger the due-on clause.
____ 3. A signed promissory note is not the debt itself but evidence of the existence of the debt.
____ 4. A promissory note does not need to be secured by use of a security device such as a trust
deed.
____ 5. Under a(n) _______________, no periodic payments of principal are scheduled; the entire
amount of principal is paid in one lump sum.
a. adjustable rate note (ARM)
b. all-inclusive trust deed note (AITD)
c. installment note
d. straight note
____ 6. _______________ call for periodic adjustments to the interest rate, the amount of scheduled
payments, and the principal amount (when a negative amortization is involved).
a. Graduated payment (GPM) provisions
b. Adjustable rate notes (ARMs)
c. Fixed-rate notes (FRMs)
d. All-inclusive trust deeds (AITDs)
____ 7. Graduated payment (GPM) provisions are in great demand when interest rates or home prices:
a. rise quickly.
b. decrease quickly.
c. decrease slowly.
d. stay constant.
____ 8. Real estate loans made or arranged by an institutional lender or real estate broker are not exempt from usury restrictions.
____ 9. To be enforceable, an agreement to pay money on a future date must be definite and certain
in its terms.
___ 10. In the case of a nonrecourse, purchase-money loan or a seller carryback note, the buyer is not
personally liable for the debt.
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Quiz 2 — Chapters 6-9, Pages 55-87
____ 1. A promissory note contains a buyer’s promise to pay a private lender or carryback seller the:
a. principal amount agreed to.
b. principal amount agreed to plus any interest.
c. interest only.
d. none of the above.
____ 2. On a note secured by an owner-occupied, one-to-four unit residential property, a prepayment
penalty may be imposed for up to ten years after closing.
____ 3. A penalty on broker-arranged loans for any prepaid principal exceeding ______ of the remaining balance may be imposed for up to seven years after the origination of the loan.
a. 5%
b. 10%
c. 20%
d. 25%
____ 4. When a third party signs a note, that third party becomes liable for repayment of the note.
____ 5. A(n) _______________ in a note is used to convert a lender’s recourse paper into nonrecourse
paper.
a. exculpatory clause
b. choice-of-law provision
c. equitable assignment
d. guarantee agreement
____ 6. A written modification agreement attached to a promissory note is called an:
a. allonge.
b. execution.
c. forbearance.
d. mutual agreement.
____ 7. A(n) _______________ occurs when a buyer of real estate is willing to cash out a seller’s
equity in real estate and assume the existing loan which encumbers the property.
a. novation agreement
b. cash-to-loan (CTL) transaction
c. exculpatory clause
d. seller carryback transaction
____ 8. The modification of the interest rate on a carryback note is subject to usury laws.
____ 9. The modification of an existing trust deed note triggers the due-on clause in other trust deeds
of record on title to a property.
___ 10. The amount a lender can charge for prepayment of a loan depends on:
a. the type of property.
b. the owner’s use of the property.
c. the broker’s involvement in negotiations.
d. all of the above.
479
Quiz 3 — Chapters 10-14, Pages 88-127
____ 1. When real estate law is applied, a lock-in clause becomes a:
a. restraint on alienation.
b. prepayment penalty.
c. promissory note.
d. due-on clause.
____ 2. Lock-in clauses are permitted in limited carryback situations when they are necessary to assure installment sales profit tax treatment.
____ 3. Disguised penalty provisions are enforceable.
____ 4. A complete late charge provision must include:
a. the span of any grace period following the due date before a payment becomes delinquent.
b. the amount of the late charge.
c. a requirement for notice from the trust deed holder to impose the late charge and make a
demand for its payment.
d. all of the above.
____ 5. If a private lender fails to enforce collection of a late charge for any delinquency by a notice
and demand for its payments, the lender waives its right to collect a late charge on that payment.
____ 6. On a loan secured by an owner-occupied, single family residence, only one late charge per
delinquent payment may be charged regardless of the number of months the payment is delinquent.
____ 7. The dollar amount of the final/balloon payment on a carryback note must be disclosed:
a. in a Seller Carryback Disclosure Statement attached to the purchase agreement.
b. in a written due date notice delivered between 90-150 days before the final/balloon payment is enforced.
c. a and b.
d. none of the above.
____ 8. A(n) _______________ is any final payment on a note which is an amount greater than twice
the amount of any one of the six regularly scheduled payments preceding the date of the final
payment.
a. call provision
b. balloon payment
c. due-on clause
d. interest payment
____ 9. An owner who places a trust deed lien on his real estate is called a:
a. trustor.
b. trustee.
c. beneficiary.
d. creditor.
___ 10. A trust deed gives a beneficiary a security interest in a property, called a:
a. mortgage-in-fact.
b. lien.
c. mutual agreement.
d. reconveyance.
480
Quiz 4 — Chapters 15-19, Pages 128-165
____ 1. When an owner intends to reconstruct destroyed improvements and restore his property to its
original value, a lender cannot automatically refuse to release hazard insurance proceeds to
him.
____ 2. A future advances clause in a trust deed allows a lender to:
a. pay the premiums on an insurance policy.
b. add the premiums paid to the loan balance and demand immediate reimbursement.
c. charge an interest rate of 10% on the advance of a premium for insurance coverage.
d. a and b.
____ 3. When provisions in a trust deed which encumbers any type of real estate establishes an impound account for payment of taxes and insurance premiums, a beneficiary must:
a. reconvey his interest in the property.
b. set the amount of the initial deposit and monthly payments for the impound account.
c. pay property taxes and insurance policy premiums from the account.
d. b and c.
____ 4. A beneficiary can require an owner of any type of real estate to pay an additional amount to
cover a deficiency in an impound account.
____ 5. A financial institution making loans secured by one-to-four unit residential property must pay
at least 4% interest annually on an impound account.
____ 6. Following a default, a(n) _______________ in a trust deed transfers the right to collect rental
income from the income producing property to a beneficiary.
a. impound account
b. land sales contract
c. assignment of rents provision
d. a and b
____ 7. If a lender enforces an assignment of rents provision, it is obligated to pay reasonable property
operating costs on the written demand from an owner until:
a. a receiver is appointed.
b. the lender ceases to enforce its assignment of rents clause.
c. a and b.
d. none of these.
____ 8. A court-appointed receiver is never considered the owner-operator of a property for which he
is charged with the care.
____ 9. Intentional failure to timely send a beneficiary statement results in a _______________ forfeiture by a lender to the person making the request.
a. $100
b. $200
c. $300
d. $400
___ 10. A sale-leaseback transaction is not limited by usury laws since it is not considered a loan.
481
Quiz 5 — Chapters 20-24, Pages 166-206
____ 1. An equity purchase investor who violates the five-day cancellation period or takes unconscionable advantage of the seller-in-foreclosure is subject to a fine no greater than $35,000 for
each violation.
____ 2. For the EP investor to receive the tax benefits of owning real estate, he must limit the leaseback to a periodic tenancy or a tenancy with a fixed date at which time the tenant is to vacate
the premises. ____ 3. In times of _______________, lenders seize any event to trigger the due-on clause in order to
increase the interest yield on their portfolio.
a. falling interest rates
b. rising interest rates
c. stable interest rates
d. none of the above
____ 4. _______________ occurs when a broker or attorney assists a buyer or seller to mask the
change of ownership from a lender with the primary purpose of avoiding the lender’s due-on
enforcement.
a. Tortious interference with prospective economic advantage
b. Adviser due-on interference
c. A privileged communication
d. Interest differential
____ 5. A lender can enforce its due-on clause and call a loan due on its future discovery of any sale
of the secured real estate.
____ 6. A seller is liable for a deficiency on the foreclosure of a purchase-money debt taken over under
any procedure by a buyer.
____ 7. Recourse loans are classified as purchase-money loans.
____ 8. A lender can enter into an agreement with both a buyer and a seller for the buyer’s assumption
of the loan and a release of the seller’s liability, called a:
a. novation.
b. indemnity.
c. substitution of liability. .
d. a and c.
____ 9. Borrowers under loan programs insured by the Federal Housing Administration (FHA) or
Veterans Administration (VA) receive anti-deficiency protection against FHA and VA claims.
___ 10. A security device called a(n) _______________ perfects a lien on personal property against
later claims.
a. UCC-1 Financing Statement (UCC-1)
b. UCC-2 Change Form (UCC-2)
c. UCC-3 Request for Information Form (UCC-3)
d. all of the above
482
Quiz 6 — Chapters 25-29, Pages 207-239
____ 1. Seller financing, also called a(n) _______________, involves carrying back a note for a portion of the price remaining unpaid after the buyer’s down payment.
a. installment sale
b. credit sale
c. a or b
d. none of the above
____ 2. A(n) _______________ states the exact amount and terms for repayment of a debt a buyer
owes to a seller.
a. promissory note
b. wraparound security device
c. trust deed lien
d. b and c
____ 3. A seller can reduce his risk of loss and defer profit taxes by using an all-inclusive trust deed
(AITD) note.
____ 4. A listing agent can use a(n) _______________ to demonstrate the financial risk facing a seller
should he have to recover the property on a buyer’s default.
a. Carryback Foreclosure Cost Sheet
b. purchase agreement
c. a and b
d. none of the above
____ 5. On the transfer of any interest in a property by an owner, a lender has the right on each transfer
to:
a. accelerate (call) the loan balance of the loan.
b. recast the loan.
c. increase the interest rate on the loan.
d. a and b.
____ 6. To be enforceable, the waiver of a lender’s right to call a loan due on a transfer must be in
writing.
____ 7. A written carryback disclosure statement is required to be presented to both a buyer and seller
for their review and signatures for one-to-four unit residential properties.
____ 8. Carryback disclosure statements are not legally required in carryback transactions creating
_______________ which do not bear interest or include finance charges.
a. straight notes
b. adjustable rate notes (ARMs)
c. interest only notes
d. installment sales
____ 9. Until the carryback disclosure statement is approved by a buyer and seller in a one-to-four
unit sales transaction, a(n) _______________ exists in favor of the buyer which allows him
to cancel the transaction.
a. straight note
b. trust deed lien
c. wraparound security device
d. statutory contingency
___ 10. When a broker prepares a carryback financial disclosure statement, he must provide exact dollar figures and may not approximate unknown amounts.
483
Quiz 7 — Chapters 30-32, Pages 240-264
____ 1. A listing agent does not have the duty to voluntarily advise a seller of the known risks of a
carryback sale.
____ 2. Foreclosure cost calculations are made by an agent and reviewed with a seller when accepting
a listing and:
a. proposing the listing.
b. after a judicial foreclosure.
c. presenting an offer.
d. upon conclusion of a sale.
____ 3. When the amount of an underlying senior loan is more than _______________ of a property’s
current market value and the buyer defaults on the seller’s carryback note, the seller should
negotiate with the buyer for a deed-in-lieu of foreclosure.
a. 60%
b. 65%
c. 70%
d. 75%
____ 4. _______________ occurs when an owner fails to maintain his property.
a. Impairment of the security or waste
b. The right of redemption
c. An unlawful detainer
d. b and c
____ 5. If a buyer wiped-out by foreclosure refuses to vacate the property on the expiration of the
three-day notice to quit, the carryback seller may proceed with a(n):
a. self-help removal of the buyer.
b. unlawful detainer (UD) action.
c. involuntary bankruptcy petition.
d. a and c.
____ 6. Written disclosures itemizing a buyer’s credit information are not mandated on all sales involving one-to-four unit residential properties when the seller carries back a portion of the
sales price.
____ 7. A buyer’s _______________ is the total value of his assets minus his total debt obligations,
and is on the bottom line shown on a(n) _______________.
a. expense; operating statement
b. negative cash flow; Annual Property Operating Data Sheet (APOD)
c. income-to-debt ratio; financial statement
d. net worth; balance sheet
____ 8. An all-inclusive trust deed (AITD) is always a junior trust deed, usually a second which is
subordinate to a pre-existing trust deed.
____ 9. A(n) _______________ occurs when the balance on an all-inclusive trust deed (AITD) sinks
below the balance on a wrapped loan.
a. crossover
b. switch
c. inverse order of alienation
d. negative gain
___ 10. Two types of all-inclusive trust deeds (AITDs) exist, including:
a. equity payoff and partial payoff.
b. full payoff and interest payoff.
c. equity payoff and full payoff.
d. interest payoff and partial payoff.
484
Quiz 8 — Chapters 33-35, Pages 265-294
____ 1. The spread between the interest rate on an underlying loan and the all-inclusive trust deed
(AITD) note is called:
a. margin.
b. effective yield.
c. balance of the purchase price.
d. overriding interest rate.
____ 2. The _______________ on a seller’s equity in an all-inclusive trust deed (AITD) note is calculated using the principal amount of the underlying trust deed note, the equity amount on the
AITD note and the interest rate spread between these two notes.
a. effective interest yield
b. effective rate of return
c. shrinking AITD equity
d. net annual interest income
____ 3. A seller’s ______________ is the total of the interest earned on an all-inclusive trust deed
(AITD) minus all interest expenses incurred on a wrapped loan.
a. net annual interest income
b. effective rate of return
c. default interest rate
d. lower-than-market interest rate
____ 4. Under an elevated payment note, payments start low and are adjusted upward to maintain the
original amortization period.
____ 5. A reverse assumption occurs when a lender agrees to waive its right to call a loan due and
consents to an all-inclusive trust deed (AITD) in exchange for a modification of the note by
a seller.
____ 6. Land sales contracts, also called ________________, are an alternative form of documentation for a carryback sale.
a. lease-option sales
b. lease-purchase agreements
c. contracts for sale
d. contracts for deed
____ 7. ________________ were widely used from the late 1960s to the late 1970s as the preferred
method for avoiding due-on enforcement by lenders.
a. Equitable conversions
b. Contract escrows
c. Land sales contracts
d. Lease-option sales
____ 8. Under a land sales contract, title is conveyed to a buyer when he pays _______________ the
remaining unpaid amount on the purchase price.
a. one-fourth
b. one-half
c. three-fourths
d. all
____ 9. A sale structured as a lease-option is not considered a sale.
___ 10. A(n) _______________ is often used to provide recorded protection for a buyer’s investment
in an otherwise unrecorded transfer, such as one involving a two-step contract escrow.
a. IRS 1099-S form
b. disguised security device
c. reverse trust deed
d. ownership interest
485
Quiz 9 — Chapters 36-38, Pages 295-314
____ 1. A buyer can obtain a conventional loan from:
a. portfolio lenders.
b. institutional lenders.
c. warehousing lenders.
d. all of the above.
____ 2. A prudent buyer should submit loan applications to multiple lenders, even if he is pre-qualified
for financing from one.
____ 3. A Real Estate Settlement Procedures Act (RESPA) lender must provide a buyer with:
a. a good faith estimate of all loan related charges and the Department of Housing and Urban Development (HUD) published Special Information Booklet.
b. IRS Form 4506.
c. HUD-1 or HUD-1A closing statement.
d. a and c.
____ 4. A buyer’s _______________ is his ability to make loan payments, as evaluated by his debtto-income ratio.
a. willingness
b. capacity
c. loan-to-value ratio (LTV)
d. a and c
____ 5. An owner may not rely on or recover his losses incurred due to the breach of a lender’s oral
loan commitment.
____ 6. Duplicate charges for integral services, called _______________, are redundant and constantly experienced by the buying and selling public.
a. kickbacks
b. hidden costs
c. customary costs
d. a or b
____ 7. Agents acting under their employing broker are prohibited from accepting a fee from any
person other than their broker.
____ 8. A(n) _______________ loan is a federal loan which establishes a no-service, no-second-fee
restriction on brokers and agents.
a. Real Estate Settlement Procedures Act (RESPA)
b. Truth in Lending Act (TILA)
c. Regulation Z
d. b and c
____ 9. Real estate brokers and agents are not prohibited from knowingly underestimating lender
closing costs.
___ 10. A lender may not amend the loan terms on a Truth in Lending Act (TILA) statement after the
statement has been given to a borrower.
486
Quiz 10 — Chapters 39-40, Pages 334-355
____ 1. Non-veteran buyers with little cash available for a down payment can buy a home by qualifying for a purchase-assist mortgage insured by the:
a. Truth in Lending Act (TILA).
b. Federal Housing Administration (FHA).
c. Veterans Administration (VA).
d. a and b.
____ 2. The most commonly used Federal Housing Administration (FHA) Owner-occupied, One-toFour Family Home Mortgage Insurance Program is the:
a. Section 221.
b. Section 223(e).
c. Section 203(b).
d. Section 251.
____ 3. The maximum Federal Housing Administration (FHA)-insured loan available to assist a buyer
in the purchase of a residential property is determined by the county in which the property is
located and the type of residential property.
____ 4. _______________ is the total of a buyer’s wages and salary, including social security, alimony, child support and government assistance, after the payment of taxes.
a. Gross effective income
b. Adjusted gross income
c. Net equity income
d. Effective income
____ 5. Loans insured by the Federal Housing Administration (FHA) contain a due-on-sale clause
which allows the FHA to accelerate the loan if the property is sold in violation of assumability
requirements.
____ 6. The Federal Housing Administration (FHA) can not obtain a money judgment against a homebuyer when the FHA suffers a loss due to the difference between the amount the FHA paid to
a lender and the price received from the sale of the property.
____ 7. A real estate lender may require a borrower to obtain and pay the premium for private mortgage insurance (PMI) as a condition for making a trust deed loan.
____ 8. Some lenders and private mortgage insurance (PMI) carriers offer a ______________ program in which the lender pays the mortgage insurance premium.
a. Guaranteed Payment Mortgage Plan (GPMP)
b. Lender-Assist Mortgage Insurance (LAMI)
c. Lender-Paid Mortgage Insurance (LPMI)
d. Premium-Paid Mortgage Insurance (PPMI)
____ 9. To qualify for private mortgage insurance (PMI), a buyer must:
a. be a natural person, not a corporation, partnership or limited liability company.
b. take title as the vested owner of the property.
c. submit PMI applications to at least two PMI carriers.
d. a and b.
____ 10. A buyer will be required to submit ______________ for review by a private mortgage insurer.
a. a copy of the loan application
b. a credit report current within 90 days and covering a minimum of two years
c. an appraisal of the real estate to be purchased
d. all of the above.
487
Quiz 11 — Chapters 41-42, Pages 356-369
____ 1. The amount of interest a private, non-exempt lender can charge a borrower is regulated by the
California Constitution and statutes, called:
a. interest regulations.
b. usury laws.
c. limitation clause.
d. Article XI.
____ 2. The maximum rate of interest which can be charged on a non-exempt loan secured by real
estate is the greater of:
a. 5% per year or the discount rate of the Federal Reserve Bank of San Francisco (FRBSF),
plus 5%.
b. 5% per year or the discount rate of the FRBSF, plus 10%.
c. 10% per year or the discount rate of the FRBSF, plus 5%.
d. 10% per year or the discount rate of the FRBSF, plus 10%
____ 3. These two classifications of private loan transactions exist relating to interest rates private
lenders can charge on real estate loans:
a. exempt and brokered.
b. exempt and unbrokered.
c. brokered and restricted.
d. unbrokered and restricted.
____ 4. The Federal Reserve discount rate used to calculate the usury threshold rate for loans agreed
to during a particular month is the FRBSF rate for the _____ day of the previous month.
a. 1st
b. 10th
c. 25th
d. last
____ 5. The most common penalty suffered by a lender for a usury law violation is the nullifying of
all interest on a loan.
____ 6. A salesperson who is employed by a broker and arranges a loan will exempt the loan from
usury limitations.
____ 7. Usury laws apply only to a loan or forbearance of money, goods, or contract rights covering
chose in action.
____ 8. While the modification of a carryback note on a default ____ convert the debt into a loan and
thus the debt is not controlled by usury laws, a loan transaction disguised as a carryback sale
____ subject to usury laws.
a. does; is
b. does; is not
c. does not; is
d. does not; is not
____ 9. A private lender cannot exempt his loans secured by real estate from usury interest limitations
by becoming licensed as a real estate broker.
___ 10. A carryback note which holds an unconscionable interest rate is enforceable if agreed to by
the buyer.
488
Quiz 12 — Chapters 43-46, Pages 370-404
____ 1. The California legislature enacted anti-deficiency laws to set a limitation on the amount recoverable as a money judgment for debts secured by real estate.
____ 2. A creditor secured by real estate may obtain a money judgment for a deficiency after the
completion of a trustee’s sale.
____ 3. An owner’s _______________ a property by payment of a debt in full is terminated on the
completion of a trustee’s sale.
a. right to reinstate
b. right to redeem
c. right to foreclose
d. right to satisfy
____ 4. Anti-deficiency rules no longer apply to a carryback debt when the debt to the seller becomes
secured by real estate other than the real estate sold, called:
a. substitution of security.
b. exhaustion of the security.
c. waiver of the security.
d. subordination of the security.
____ 5. A letter of credit is unenforceable if:
a. the obligation is secured by a purchase money trust deed on owner-occupied, one-to-four
unit residential property.
b. it is issued to a trust deed beneficiary to cover a future default on the obligation.
c. a and b
d. none of the above
____ 6. A(n) _______________ in a trust deed authorizes the holder of a note to declare the note immediately due on a material default on the trust deed.
a. acceleration clause
b. due-on clause
c. final/balloon payment
d. b and c
____ 7. After a notice of default (NOD) has been recorded, an owner of real estate can bring current
any monetary or curable defaults stated in the NOD at any time prior to five business days
before the trustee’s sale.
____ 8. When an owner fails to meet his obligations regarding the care, use and maintenance of real
estate, he is in default under the _______________ in the trust deed.
a. debt obligation
b. due-on sale clause
c. waste provision
d. b and c
____ 9. A(n) _______________ is the court-ordered sale in a judicial foreclosure by public auction of
the secured property.
a. sheriff’s sale
b. trustee’s sale
c. referee’s sale
d. a and c
___ 10. The court may appoint an appraiser, called a(n) _______, to advise the court on the value of
the property.
a. fair market value (FMV) indicator.
b. probate judge.
c. FMV referee.
d. probate referee.
489
Quiz 13 — Chapters 47-48, Pages 405-431
____ 1. The key to a trust deed holder’s ability to nonjudicially foreclose on secured real estate by a
trustee’s sale is the power-of-sale authority and power-of-sale provision contained in the trust
deed.
____ 2. When a trust deed is in default and a foreclosure on the property is required, the beneficiary
must deliver a(n) _______________ to the trustee.
a. trustee’s sale guarantee
b. Declaration of Default and Demand for Sale
c. notice of default
d. all of the above
____ 3. A notice of default (NOD) contains a statutorily mandated statement which sets forth the
_______________ on a note or other obligation secured by the trust deed.
a. monetary default
b. coverage
c. monetary damages
d. buyer’s current address
____ 4. Any person interested in obtaining a copy of a notice of default (NOD) may record a Request
for NOD to assure they will be notified of a default and sale.
____ 5. The first properties sold at a trustee’s sale should be those which have not been further encumbered with liens junior to the trust deed being foreclosed, a procedure called:
a. reverse order of alienation.
b. enforcement of the power-of-sale provision.
c. 120 day redemption period.
d. inverse order of alienation.
____ 6. A trustee’s sale may not be postponed by the trustee at any time or for any reason prior to the
completion of the foreclosure sale.
____ 7. Each bid made at a trustee’s sale is a(n) _______________ to purchase the property. However,
any subsequent __________ bid cancels a prior bid.
a. irrevocable offer; higher
b. irrevocable offer; lower
c. revocable offer; higher
d. revocable offer; lower
____ 8. Residual funds which exceed the amount of debt foreclosed and remain after a trustee’s sale
are called:
a. interpleader action.
b. surplus funds.
c. residual equity.
d. additional financing.
____ 9. A notice of delinquency will be sent to the person requesting the notice within 10 calendar
days after two consecutive months of unpaid and delinquent monthly installments on the senior trust deed note. ___ 10. A(n) _______________ assures a junior lienholder he will be notified when a delinquency in
installments has existed for more than four months and 15 days.
a. Request for Notice of Default (NOD)
b. Request for Notice of Delinquency (NODq)
c. Declaration of Default (DOD)
d. Request for Notice of Trustee’s Sale (NOTS)
490
Quiz 14 — Chapters 49-52, Pages 432-452
____ 1. A(n) _______________ in a lender’s trust deed authorizes it to accept partial payments to
reinstate a loan without waiving its right to foreclose if a debt remains.
a. waiver clause
b. non-waiver clause
c. reinstatement clause
d. final/balloon payment clause
____ 2. Under a(n) _______________, an owner of property conveys his property to a carryback
seller or lender in exchange for the cancellation of a debt.
a. land sales contract
b. lease-option sales
c. deed-in-lieu
d. deed absolute
____ 3. A deed-in-lieu handed to a trust deed holder in advance of a default is voidable by the owner
of the property who signed the deed.
____ 4. Commencement of one foreclosure remedy precludes the commencement and completion of
another.
____ 5. Attorney fees are collectible in an action for judicial foreclosure:
a. on an owner’s reinstatement of a note and trust deed prior to the foreclosure decree.
b. on completion of the judicial foreclosure.
c. five days prior to the completion of the judicial foreclosure.
d. a and b.
____ 6. In the instance of a judicial foreclosure, attorney fees are fixed at the notice of default (NOD)
fee schedule until entry of the:
a. foreclosure fee schedule.
b. foreclosure decree.
c. future advances provision.
d. a and c.
____ 7. Accrued interest paid on a loan, the proceeds of which funded a person’s trade or business
activities, may be written off as a(n) _______________ of the person’s business.
a. operating expense
b. tax deduction
c. personal use loan
d. itemized deductions
____ 8. Points paid to a lender to originate a loan are considered _______________ since points and
interest have not yet accrued.
a. nominal interest
b. life-of-loan accrual
c. prepaid interest
d. a and b
____ 9. In order to deduct points in the year they are paid, a purchase-assist or improvement loan does
not need to be secured by a buyer’s or homeowner’s principal residence.
___ 10. A loan incurred in connection with the purchase or improvement of a homeowner’s principal
residence qualifies the points paid to originate the loan for deduction in the year paid.
491
Quiz 15 — Chapters 53-55, Pages 453-477
___ 1. To qualify home improvement loans for interest deductions, the new improvements must:
a. add to the property’s market value.
b. prolong the property’s useful life.
c. adapt the property to residential use.
d. any of the above.
____ 2. The proceeds from a home equity loan may only be used to improve a property.
____ 3. To qualify for a home loan interest deduction, a loan must be secured by:
a. a principal residence.
b. a second home.
c. substantial improvements.
d. a or b.
____ 4. Interest deductions on home loans are only allowed for interest which has accrued and been
paid, called:
a. itemized deduction.
b. qualified interest.
c. adjusted gross income.
d. itemized deduction phaseout.
____ 5. If a seller reports a sale as an installment sale on his income tax return, he will defer payment
of a significant amount of the profit taxes to a later date.
____ 6. All profit taken on a sale is reported in the year of the sale, unless the profit is:
a. excluded, exempt or deferred.
b. exempt, equitable or unrecaptured.
c. deferred, depreciated or assumed.
d. excluded, recaptured or recognized.
____ 7. Taxwise, a seller’s goal in an installment sale is to structure the net sales proceeds to produce
the highest profit-to-equity ratio possible.
____ 8. The process by which a seller pledges his carryback note as collateral for a loan is called:
a. hypothecation.
b. reinvestment.
c. reverse assumption.
d. mortgage over basis.
____ 9. Every debt that is the result of a seller’s extension of credit on a sale has an Internal Revenue
Service (IRS) _______________ of interest.
a. imputed interest rate
b. periodic payment schedule rate
c. return of capital rate
d. Applicable Federal Rate (AFR)
___ 10. If the principal amount of a carryback note is greater than the Internal Revenue Service (IRS)
accrual threshold, a seller must report interest income each year as the interest accrues without
regard for when the payments are received.
492
Answer References
for Online and CD-ROM versions
The following are the answers to the quizzes for Real Estate Finance, Sixth Edition
and the page numbers where they are located.
Quiz 1
1. D
2. T
3. T
4. T
5. D
6. B
7. A
8. F
9. T
10. T
14
27
38
38
39
41
41
43
45
46
Quiz 2
1. B
2. F
3. C
4. T
5. A
6. A
7. B
8. F
9. F
10. D
Quiz 6
1. C
2. A
3. T
4. A
5. D
6. T
7. T
8. A
9. D
10. F
207
208
209
218
225
227
231
234
236
238
Quiz 11
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
B
C
C
C
T
T
T
C
F
F
356
359
359
358
360
362
364
366
366
368
55
56
57
63
63
73
73
75
77
81
Quiz 7
1. F
2. C
3. D
4. A
5. B
6. F
7. D
8. T
9. A
10. C
240
243
243
245
245
248
255
257
259
261
Quiz 12
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
T
F
B
A
C
A
T
C
A
D
372
372
377
380
382
387
388
390
394
402
Quiz 3
1. A
2. T
3. F
4. D
5. T
6. T
7. C
8. B
9. A
10. B
88
91
94
94
97
99
103
103
110
113
Quiz 8
1. D
2. B
3. A
4. F
5. T
6. D
7. C
8. D
9. F
10. C
265
266
269
271
272
281
282
284
288
290
Quiz 13
1. T
2. B
3. A
4. T
5. D
6. F
7. A
8. B
9. F
10. B
493
405
410
411
414
417
418
422
424
426
430
Quiz 4
1. T
2. D
3. D
4. T
5. F
6. C
7. C
8. F
9. C
10. F
129
131
136
137
140
143
148
148
156
165
Quiz 9
1. D
2. T
3. D
4. B
5. T
6. D
7. T
8. A
9. F
10. F
296
303
310
313
315
320
320
322
327
329
Quiz 14
1. B
2. C
3. T
4. F
5. D
6. B
7. A
8. C
9. F
10. T
432
436
437
442
443
445
447
449
450
452
Quiz 5
1. F
2. T
3. B
4. A
5. T
6. F
7. F
8. D
9. F
10. A
167
171
175
184
186
187
188
190
193
202
Quiz 10
1. B
2. C
3. T
4. D
5. T
6. F
7. T
8. C
9. D
10. D
334
334
336
340
341
345
346
347
354
354
Quiz 15
1. D
2. F
3. D
4. B
5. T
6. A
7. F
8. A
9. D
10. T
454
455
455
456
458
459
461
465
471
476
Answer References
for Printed version
The following are the answers to the quizzes for Real Estate Finance, Sixth Edition
and the page numbers where they are located.
Quiz 1
1. D
2. T
3. T
4. T
5. D
6. B
7. A
8. F
9. T
10. T
04
14
25
25
26
26
28
30
31
32
Quiz 2
1. B
2. F
3. C
4. T
5. A
6. A
7. B
8. F
9. F
10. D
Quiz 6
1. C
2. A
3. T
4. A
5. D
6. T
7. T
8. A
9. D
10. F
173
174
175
184
189
192
195
198
200
201
Quiz 11
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
B
C
C
C
T
T
T
C
F
F
305
306
306
307
308
311
313
314
315
316
39
40
40
45
46
53
56
58
59
64
Quiz 7
1. F
2. C
3. D
4. A
5. B
6. F
7. D
8. T
9. A
10. C
203
205
206
208
208
210
216
218
220
221
Quiz 12
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
T
F
B
A
C
A
T
C
A
D
320
321
324
327
330
335
336
338
341
348
Quiz 3
1. A
2. T
3. F
4. D
5. T
6. T
7. C
8. B
9. A
10. B
69
71
73
74
76
78
81
82
89
91
Quiz 8
1. D
2. B
3. A
4. F
5. T
6. D
7. C
8. D
9. F
10. C
225
226
228
230
231
239
240
242
245
246
Quiz 13
1. T
2. B
3. A
4. T
5. D
6. F
7. A
8. B
9. F
10. B
494
351
355
356
358
362
362
364
367
369
372
Quiz 4
1. T
2. D
3. D
4. T
5. F
6. C
7. C
8. F
9. C
10. F
106
107
111
112
113
117
121
121
128
136
Quiz 9
1. D
2. T
3. D
4. B
5. T
6. D
7. T
8. A
9. F
10. F
254
255
266
269
271
275
275
278
281
283
Quiz 14
1. B
2. C
3. T
4. F
5. D
6. B
7. A
8. C
9. F
10. T
375
379
380
384
385
386
389
390
391
393
Quiz 5
1. F
2. T
3. B
4. A
5. T
6. F
7. F
8. D
9. F
10. A
138
141
145
152
154
154
155
158
160
164
Quiz 10
1. B
2. C
3. T
4. D
5. T
6. F
7. T
8. C
9. D
10. D
287
287
289
291
294
296
297
298
304
304
Quiz 15
1. D
2. F
3. D
4. B
5. T
6. A
7. F
8. A
9. D
10. T
396
396
397
397
399
400
402
405
410
414