Exam 4: Invigilated Theory Exam (PREX-1060A) Free Practice Test

Question 1

Which of the following is a risk associated with investing in commercial real estate?

A. The relative lack of capital growth during the holdover period

B. The insufficiency of cash flow during the holding period

C. The fact that rent, leased space, and building size are fixed

D. The relative lack of liquidity

Correct Answer: D

Question 2

The cost approach is one method of real estate evaluation that an appraiser may use to estimate the value of a commercial property. Which of the following is NOT an accurate statement regarding the cost approach?

A. The cost approach is preferred for newer construction properties, as the appraiser would not need to make a subjective estimation of the accrued depreciation of the building.

B. The cost approach is preferred for older construction properties, as calculating depreciation on them is fairly straightforward.

C. The cost approach is useful for the appraisal of property types for which sales and income data are scarce, such as industrial and special-purpose properties.

D. The cost approach is typically used to appraise income-generating properties.

Correct Answer: B

Question 3

In a commercial transaction, which of the following is NOT a responsibility of the lawyer?

A. Remedy of title issues

B. Review of financial statements

C. Exchange of legal documents

D. Review of the Agreement of Purchase and Sale

Correct Answer: B

Question 4

Which of the following is a reason why an owner might consider redeveloping an industrial property?

A. The existing building no longer provides the highest and best use of the site.

B. The cost of relocating is low.

C. A similar building can be bought at a low price.

D. A redevelopment will seriously disrupt the current operation.

Correct Answer: A

Question 5

What should a salesperson do if they are unable to secure documentation to verify the usable and rentable areas of a property?

A. Use a laser measuring tool to take the measurements and use the R/U factor to calculate the figures

B. Use the R/U factor to calculate the figures

C. Recommend that the landlord obtain the professional services of a measuring company to obtain the figures

D. Use a laser measuring tool to take the measurements

Correct Answer: C

Question 6

A tenant is renting 4,000 square feet of space in a commercial shopping center under a net lease. The base rent is $20 per square foot per annum, and there is a percentage rent of 5% of gross sales over the base rent. The tenant has annual gross sales of $1,000,000. The annual expenses are $10 per square foot. How much annual base rent does the tenant have to pay?

A. $130,000

B. $120,000

C. $60,000

D. $80,000

Correct Answer: D

Question 7

All of the following aspects of a commercial property may affect its eligibility for Leadership in Energy and Environmental Design (LEED) certification, EXCEPT:

A. Innovative elements

B. Sustainability

C. Energy efficiency

D. Vacancy rate

Correct Answer: D

Question 8

A salesperson is assisting both the tenant and the landlord in a commercial property rentaltransaction. Which of the following statements about calculating the remuneration for this transaction is correct?

A. Remuneration can be calculated based on the difference between the listing price and the actual rental price.

B. The tenant may be required to pay the deficiency between the contracted amount in the tenant representation agreement and the amount actually paid by the landlord.

C. Remuneration can be an agreed amount or a percentage of the rental price, but not a combination of both.

D. Salespersons are prohibited from indicating directly that remuneration is fixed by any association but can indicate it indirectly.

Correct Answer: B

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Humber College Exam 4: Invigilated Theory (PREX-1060A) Free Practice Test