REAL ESTATE CONSULTING

AND INVESTMENT ANALYSIS

 MODULE DESCRIPTION
 This module examines residential, multi residential,
commercial, industrial, and special-purpose real
estate investments, as well as reviews application of
investment ratios to expense factors, mortgage loan
constants, and equity yields before and after income
and capital gains taxes. 
 Real estate investment analysis is an organised

investigation of the various factors and elements

which affect the current and the future value of a
particular property and consideration of the
relationship of those factors and elements to an
investment decision.
 LEARNING OUTCOMES
 After successful completion of this module,
the student should be able to:

 Compare real estate investments using NPV

techniques and choose the best investment
 Forecast cash flows and expense
 Build and apply fully functional models to

perform investment analysis. 

PRELIM PERIOD
INVESTING IN REAL ESTATE
 Realty Service Practitioners should posses
an elementary knowledge of real estate
investment so that they can serve a variety of
customers’ needs. More often, customers
expect a licensee to act as an investment
counselor. Therefore the licensee should
always refer an investor to a competent tax
accountant, attorney, or investment specialist
who can give expert advice regarding the
investor’s specific interest.
 Despite unfavorable changes in the tax laws
and uncertainty in the real estate market the
past few years, millions of Filipinos still own
investment real estate.
 This topic discusses some of the basic
concepts of real estate investments. Part 1
covers some of the basic investment terms,
advantages and disadvantages of investing in
real estate. Part 2 covers some of the tax rules
regarding real estate investments. It covers
some of types of real estate investments.
 Recent tax law changes and economic conditions
in some areas have made real estate investment less
attractive than in the past, but there still are several
significant advantages. These include:
 High rate of return- In the past few years local

economic conditions and overabundance of

investment real estate in some areas have produced
poor returns for investors. In general, however, real
estate investments have historically produced a
favorable rate of return for their owners in relation to
other types of investment.
 Advantages of Real Estate Investment:
 In recent years real estate values a gradually

increased over the years and a have improved widely

in various regions of the country due to the various
real estate developments. As a result the ability of
such investment to produce a return greater than the
inflation rate ( to serve as a “hedge against inflation”)
has been improved. This potential profitability has
made some real estate investments very attractive to
potential investors.
 Real estate investments have shown an above –

average rate of return, generally higher than the

prevailing interest rate charged by mortgage lenders.
 Real estate investments have shown an above –
average rate of return, generally higher than the
prevailing interest rate charged by mortgage lenders.
 Theoretically this means that an investor can use the

leverage of borrowed money to finance a real estate

purchase and feel relatively sure that, if held long
enough, the asset will yield more money than it costs
to finance the purchase.
 Real estate investors also receive certain tax benefits,

on the investment in leveraging and taxes.

MIDTERM PERIOD
 ADVANTAGES AND

DISADVANTAGES OF REAL
ESTATE INVESTMENT
 Land Value Appreciation
 Income generation
 Tax benefits and advantages
 Leverage against inflation
 Depreciation cost recovery
 The Investment Appreciation
 The most important form of real estate investment is

direct ownership. Both for individuals and

corporations may own real estate directly and manage
it for appreciation or cash flow (income).
 A property that is held for appreciation is generally

expected to increase in value and show a profit when

sold at some future date. Most likely investment
property, or properties that generate income or cash
flow are held for current and future income generation
as well as potential profit upon sale in the future.
 APPRECIATION: Real estate is an avenue for investment open to all who
are most interested in holding property primarily for appreciation.
 Two main factors affect appreciation: inflation and intrinsic value.
Inflation -is defined as the increase in the amount of money in circulation,
which results in a decline in its value cou0pled with a rise in wholesale and
retail prices.
 Appreciation is the increase in property value over a period of time. It
can be caused by inflation or by the intrinsic value of the property
(characteristics of the property that others view as valuable).
 Example: A parcel of property that is in the center of an affluent and
rapidly growing neighborhood increases in value (appreciates) because of
its location brought about by features and amenities in the area which are
referred to as the non-monetary benefits that accrue to property investment.
 The intrinsic Value of a real estate is the result of a person’s individual
choices or referred to as “Situs” and preference for a given geographical
area, based on the features and amenities that the area has to offer.
 ADVANTAGES AND DISADVANTAGES OF
REAL ESTATE INVESTMENT
 INCOME:
 The wisest initial investment for an individual who

wishes to buy and personally manage real estate

maybe the purchase of rental income property. When
one invest in real estate and the property generates an
income, it is referred to as an investment property.
 CASH FLOW. The ultimate objective of an

investor’s directing funds into income property is to

generate spendable income, usually called cash flow.
CASH FLOW
 The CASH FLOW , is the total amount of money remaining after all
expenditures have been paid, including taxes, administrative cost,
operating costs and mortgage payments.
 The Cash flow produced by any given parcel of real estate is determined
by at least three factors:
 amount of rent received,
 operating expenses and
 Method of debt repayment.
 Cash flow refers to the pesos remaining after all expenses of ownership
have been paid cash flow may be positive or negative.
 Example: A property that has a yearly income of Php100,000 and
operating expenses (i.e., maintenance, mortgage payments, and taxes) of
Php90,000. The property has a positive cash flow of Php10, 000 for the
investor (Php100,000 income – Php90,000 expenses).
LEVERAGE

 LEVERAGE- Is the use of borrowed money to finance the bulk of

investment.
 Leverage is the used of borrowed funds (often referred to as other people’s
money ) to finance the purchase of a real estate investment.
 As a rule an investor can receive a maximum return from the initial
investment (the down payment and closing and other costs) by making a
small down payment, paying a low interest rate and spreading mortgage
payments over as long a period as possible.

 The effect of leveraging for an investor is to provide, on a sale of the asset,

a return that is a reflection of the effect of market forces on the entire
amount of the original purchase price but is measured against only the
actual cash invested.
TAX BENEFITS:
 One of the main reasons real estate investments are popular
and profitable in the past is that laws allows investors to use
losses generated by such investments to shelter income from
other sources. Even if tax laws have changed and some tax
advantages of owning investment in real estate are altered,
with professional tax advice the investor can still make a wise
real estate purchase.
 CAPITAL GAINS:
 The tax laws no longer favor long-term investments by
reducing taxable gain (profit) on their sale or exchange. It is a
known fact that the basis of taxation for sale on real estate is
based on the Zonal Value which has not been regularly
updated or revised over the years.
 Capital gains are defined as the difference between the
adjusted basis of property and its net selling price.
 Basis: A property’s cost basis will determine the

amount of gain to be taxed. The basis of the property

is the investor’s initial cost for the real estate.

 The investor adds to the basis of cost of any physical

improvements subsequently made to the property and
subtracts from the basis the amount of any
depreciation claimed as tax deduction to derive the
property’s adjusted basis.
 When the property is sold by the investor, the amount by
which the sale price exceeds the property’s adjusted basis is
the capital gain.

 For Example, an investor purchased a single family-dwelling

for use as a rental property. The purchase price was P45,000.
The investor is now selling the property for P100,000. Shortly
before the sale date the investor made P3,000 worth of capital
improvements to the house.
 Depreciation of P10,000 on the property improvements has
been taken during the term of the investor’s ownership. The
investor will pay a broker’s commission of seven percent of
the sales price and will pay closing cost ofP600.
 The investor’s capital gain is computed as follows:
Selling Price P100,000
Less:
7% Commission P7,000
Closing costs P 600
P7,600 - P7,600
Net Sales Price P 92,400
 Basis:

Original Costs P45,000

Improvements P 3,000
P48,000
Less:
Depreciation -P10,000
Adjusted Basis P38,000 -P38,000
Total capital gains: P54,000
 
 The difference between the adjusted basis in a property and the net

selling price results in a capital gain (i.e., a profit) or loss.

RISK
 Risk is the possibility of loss from an
investment. In general, the higher the
investment risks, the higher the return the
investor will demand. Any tax deductible
expense is tax shelter because it “shelters”
(reduces) taxable income.
 Tax advantages- Tax advantages for real

estate have been limited by the tax incentives

given by the BOI; however, there are still
some tax benefits.
INFLATION HEDGE
 Inflation Hedge- In some areas real estate values have fluctuated and not
kept pace with inflation. Overall, however, real estate usually increases in
value over time to provide a hedge against inflation. Thus investment in
real estate is a hedge against inflation on a long term.

 Leverage- Real estate can be highly leveraged (i.e., the investor may be
able to borrow up to 80 percent or more of the purchase price), resulting in
greater buying power and possibly a higher return on equity.

 Example: An investor obtains financing for 90 percent of the cost of an

investment property, by investing Php20,000 and investor can purchase a
property worth Php200,000.
 Example: For the investment in the example above, after the first year the
property is worth Php210,000 (a 5 percent increase). The owner’s return
on investment is 50 percent (Php20,000 investment ÷ Php10, 000 increase
= .5). This is a very simplistic example but shows the potential affect of
leverage.
PRE-FINAL PERIOD
 Disadvantages of Real Estate Investments

 There are several disadvantages to investing in real estate.

These include:
 Illiquidity- Real estate is not a liquid investment. Real estate

investments usually involved a long term commitment of

funds. Investors needing access to their invested funds may
suffer a loss trying to sell quickly.
 Reasons why real estate investments are not liquid include the

following: (1) Real estate is non-homogeneous (no two parcels

are alike). Because of this it takes longer to match buyers and
sellers. (2) There is no national real estate market (real estate
markets are local and can vary substantially). (3) There is no
formal marketplace (such as the stock exchanges for stocks) to
speed the process of buying, selling or exchanging properties.
 Need for expert help- Real estate investments often require
the expertise of several professionals like the realty service
practitioners (Salesperson, broker, appraiser, and consultant).
These may also include property managers, tax accountants
and lawyers.

 Management effort- Physical and mental effort, either by the

investor or by a professional property manager, is needed to
manage the investment.
 Risk- As in any investment there is always the possibility of
risk. In real estate investments the risks include a decrease or
lower than expected rise in property value or cash flow. Risk
could be due to social, economic, governmental or political
and natural or environmental factors.
 Tax Rules and Real Estate Investments
 Several tax laws have been passed between enactment of the
Tax Reform Act of 1997 and the Real Estate Investment Trust
Law (REIT) and the present that have significantly affected
the tax rules for real estate investments. Tax rules frequently
real estate investment decisions.
 Tax Rates:
 Taxes are applied to a taxpayer’s taxable income. This is the
amount that remains after deductions and adjustments to
income are applied. The individual tax rate is taxed
progressively up to 32%. Individual refers to personal income
taxes versus corporate tax rate. However, capital gains are
taxed at a maximum rate of 6 percent.
FINAL PERIOD:
 Types of Income:
 For tax purposes income is classified as either

ordinary income or capital gain income.

 Ordinary income includes three types:

 Active income includes wages, tips, commissions,

bonuses and similar income.

 Passive income includes income from activities in

which the taxpayer does not materially participate.

This includes income from limited partnerships and
certain rental activities.
 Portfolio income includes income from interest:
o stock dividends,
o capital gains,
o royalties and
o annuity income.

 Capital gain income results from the sale of

capital assets.
o Capital gains are either short term, if the asset is
held for less than 180 days, as long term, if held for
more than 180 days. Capital gains (whether long or
short term) are added to taxable income.
Types of Investors
◦ An active investor is an investor who materially
participates in managing the property on a regular
and substantial basis. A passive investor is an
investor who does not materially participate in
managing the activity.

Limits on Deducting Losses

◦ Passive Income Losses:
Real estate losses are considered passive losses and
can be used only to offset other passive income. Losses
from passive income cannot offset either active or
portfolio income.
 Unused passive losses, (also called suspended
losses) can be carried over the later years indefinitely.
This may happen either because they exceed passive
income or because there are only passive losses and
no passive income of offsets.
 Example: An investor has two properties. One makes

a profit of Php10,000 and the other has a loss of

Php15,000. The investors can offset the Php10,000
income with the loss but must carry forward the
remaining Php5,000 loss (the suspended loss), and it
cannot be used to offset active income.
 If an investment in a passive activity is sold and there

are unused passive losses, the losses may be used

offset any gain from the sale of the investment.
 Exceptions to Passive Loss Limitation
 Lower income- Investor with lower income

has a limited ability to deduct losses for real

estate against non passive income (i.e., wages).
 An investor with adjusted gross income of less

than Php100,000 can use passive losses for

rental real estate up to Php25,000 to offset any
other income.
 If over Php100,000 up to Php150,000. No
losses are allowed for income over Php150,000
 To be eligible to take the loss, investors must (1) actively
participate (at least making major managerial decisions) in their
rental property and (2) hold at least a 10 percent interest in the
investment. Passive investors (i.e., investors in real estate
syndications) cannot use the losses against non passive income.

 Real Estate Activity starting in 2006, investors who spend at

least 750 hours per year or 50 percent of their working time in
real estate brokerage, leasing, development, management,
construction, acquisitions or conversions can deduct losses from
rental property against ordinary income. Investors qualifying
under this exception are not limited to the Php250,000
maximum tax loss described above.
Exchanges:
 Exchanges: Real estate investors can defer taxation of capital gains by
making a property Exchange.
 Even if property has appreciated greatly since its initial purchase, it may be
exchanged for other property and the property owner will incur tax
liability on the sale only if additional capital or property is also received.
Note, however, that the tax is differed, not eliminated. Whenever the
investor sells the property, the capital gain will be taxed.
 To qualify as a tax-differed exchange, the properties involved must be of
like kind :
 For Example: Apartment building for apartment building. Any additional
capital or personal property included with the transaction to even out the
exchange is considered boot, and the party receiving it is taxed at the time
of the exchange. The value of the boot is added to the basis of the
property with which it is given.
 Exchanges:
 Real estate exchanges are used to trade properties and defer
(not eliminate) tax on any gain. To be eligible as a tax-
deferred exchange, the properties must be of like kind and
held for use in a trade or business or for investment.

 Like - kind property refers to personal property that is

exchanged for other personal property and real property that is
exchanged for other real property. It does not matter what kind
of real property is being exchanged. An office building can be
exchanged for a vacant lot or a store exchanged for an
apartment building. Personal residences and foreign property
do not qualify for exchanges.
 If any cash or other no qualifying property is receive in
addition to the liked- kind property this is called boot. The
value of boot is taxable to the property receiving it.
EXAMPLES

 Example: Investor A exchanges a building worth Php200,000 for investor

B’s building worth Php150,000 a car worth Php20,000 and Php30,000 in
cash. Investor A has a taxable both of Php50,000 (Php20,000 car +
Php30,000 cash).
 Occurs if two parties are willing to trade like kind properties with each
other in the same transaction. This type of exchange seldom occurs.
 Because it is often difficult it is often difficult to find two parties willing to
swap properties, exchanges usually involve more than two properties in
the same transaction. These are called multiple exchanges and still are
considered tax deferred exchanges.
 Example: A, B, C have apartment buildings of different sizes and want to
exchange properties. A acquires C’s property B acquires A’s property and
C acquire B’s property.
 Direct exchanges
 Occurs if two parties are willing to trade like kind

properties with each other in the same transaction.

This type of exchange seldom occurs.
 Because it is often difficult it is often difficult to find

two parties willing to swap properties, exchanges

usually involve more than two properties in the same
transaction. These are called multiple exchanges and
still are considered tax deferred exchanges.
 Example: A, B, C have apartment buildings of

different sizes and want to exchange properties. A

acquires C’s property B acquires A’s property and C
acquire B’s property.
 The intermediary holding the money from the sale must be
someone the seller can’t control. The BIR will not accept a
spouse, a close family member or someone who has been an
agent of the seller (i.e., the seller’s lawyer, accountant or real
estate broker). A lawyer or trust company hired just to handle the
transactions is acceptable.

 If a seller cannot be finding like kind property immediately, a

delayed exchange might be used to defer the gain. This is called
a starker exchange (named after a 1979 court case that
recognized this type arrangement). Under a starker exchange the
proceeds from the sale of property are held beyond the control
of the seller until the seller can locate like kind property in
which to invest the proceeds. Some strict time limits apply.
 Some strict time limits apply.
 The property to be acquired in the exchange

must be identified in writing within 45 days of

the closing date of the sale of the old property.
 Closing on the like kind property found for the

exchange must take place within 180 day after

the closing of the sale of the old property.
 Property acquired in an exchange between

related parties must be held for at least two

years.
 Depreciation
 Depreciation is a deductible expense that
allows the cost of an asset to be
recovered over the asset’s useful life.
Depreciation deductions can be taken
only on property used in a trade or
business or in the production of income.
An owner’s residence cannot be
depreciated because it is not used in a
business, nor can land because it does not
wear out.
 Depreciation Components
o The depreciable basis of the property is the amount that may
be depreciated. For real estate property it is generally the
price of the property plus acquisition costs minus the value
of the land.
o The useful life of an asset is the number of the year the asset
will be useful to the investor, as determined by IRS tax laws.

 Straight line method

o Using the straight- line method. Equal amounts of
depreciation are taken annually over the asset’s useful life.
To calculate depreciation using this method, divide the basis
by the number of years of useful life. For year real property
the useful life is 27.5 years for residential property and 39
years for nonresidential property.
Investment Types
 Direct Ownership
o A common form of investment is direct ownership of
the property. Title to the property can be held by
individuals, corporations or partnerships that control and
manage the property directly. There is a wide selection
of properties for real estate investment. These include
vacant land, houses, condominiums, shopping centers
and apartment and office buildings of many sizes.
Selecting the type of property for investment by direct
ownership requires matching, among other things, the
investors’ capital, tolerance for risks, and capability to
manage the property.
 Real Estate Investment Syndications
o A real estate investment syndicate is a form of
business venture in which a group of people pool
their resources to own and/or develop a particular
piece of property. In this manner people with only
modest capital can invest in large-scale operations
such as high-rise apartment buildings and shopping
centers. A certain amount of profit is realized from
rents collected on the investment, but the main return
usually comes when the syndicate sells the property.
o Syndicate participation can take many different legal
forms, from tenancy in common and joint tenancy to
various kinds of partnership, corporations and trusts.
 Private syndication, which generally involves a small group of closely
associated or widely experienced investors which is distinguished from
Public syndication, which generally involves much larger group of investors
who may or may not be knowledgeable about real estate as an investment.

Real Estate Investment Syndications

o In general, syndication is a business venture in which two or more people
invest their money in real estate project. The form of ownership used by
syndication could be tenancy in common, joint tenancy, general or limited
partnerships. Syndications generate profit for investor when they buy, sell
or develop real estate. They can be small groups (called public
syndications) with hundreds or thousands of investors.
o Because syndication solicit and pool investor’ funds much like stock, they
often come under securities registration laws. These are administered by the
Securities and Exchange Commission under the SEC regulation on the
disclosure to protect investors from fraud. In general outline fraudulent
practices, require the registration of securities prior to sale and require full
disclosure by providing a prospectus to all potential investors.
 Real Estate Investment Trusts
o Real Estate Investment Trust (REITs) allows small
investor to participate in real estate investments
similar to mutual funds for stocks. A trust is formed
and allows investors (called beneficiaries) to
purchase real estate investment trust certificates
issued by the REIT. The REIT then uses the funds
to purchase real estate and mortgages. The
investment certificates can be traded on major stock
exchanges.
o The law that governs the real estate investment trust
in the Philippines is Republic Act No. 8956 of
2009. It also defines real estate investment trust as:
o (cc) “Real Estate Investment Trust” or “REIT‘ is a stock
corporation established in accordance with the Corporation
Code of the Philippines and the rules and regulations
promulgated by the Commission principally for the purpose
of owning income-generating real estate assets. For
purposes of clarity, a REIT, although designated as a “trust”,
does not have the same technical meaning as “trust” under
existing laws and regulations but is used herein for the sole
purpose of adopting the internationally accepted description
of the company in accordance with global best practices.
(Sec.3 RA No. 9856).
o To encourage the establishment of REITs, the law provides
tax incentives to a REIT and its shareholders. For example,
its 30% company income tax rate will be based on the
REIT's net taxable income, but only after deducting the 90%
dividend distribution to its shareholders.
 RealEstate Mortgage Investment Conduit
oThe Real Estate Mortgage Investment
conduit (REMIC) may issue multiple classes
of investor securities backed by a pool of
mortgages. Securities classes can be for
residual interest or regular interests. Holders
of residual securities (only one class can be
issued) receive distribution when loans in the
pool are paid. Holders of regular securities
(one or more classes can be issued) receive
payments based on a fixed or variable rate.
 SUMMARY
o The very important investment in one’s life is to invest in any real
estate. Traditionally, real estate investment offers an above –
average rate of return over properties acquired while acting as an
effective hedge against inflation and allowing the investor to
make use of borrowed funds from the banks or other people’s
money through leverage.
o Investment in real estate has also tax advantages. One would
benefit from very low tax base for transfer tax when sold in a later
date or in the future. On the other hand, real estate investment is
not a highly liquid investment and often carries with it a high
degree of risk and it takes time to re-sell the investment. Another
thing to consider in real estate investment is the lack of expertise
of investors or buyers who need professional advice from realty
service practitioners. Apart from the lack of knowledge in real
estate investment, a certain amount of involvement is usually
required to establish, preserve and maintain the investment.
o Primarily, real estate investment is though as an investment
property held for appreciation purposes and is generally
expected to increase in value or appreciates in the future.
The two main factors affecting appreciation are inflation and
the property’s present and future intrinsic value. Any real
estate investment that is held for income purposes is
generally expected to provide a steady inflow of income
stream, called cash flow, and to show a profit upon is sale on
a future date.
o Any investor hopeful of maximizing leverage in financing
an investment should make a very small down payment as
his equity, pay low interest rates and spread mortgage
payment for longer period possible in the financial market.
By holding on and refinancing investment properties, known
as pyramiding, an investor can even increase real estate
investment holding without additional capital.
o In the case of exchanging one property for another with an
equal or higher selling price an investor can defer paying taxes
on the gain realized until a sale is made. A total tax deferment
occurs when the investor receives no cash or other incentive to
even out the exchange. If the investor receive such as cash or
property it is called boot and is taxed.
o In depreciation an investor can recover cost. Since
depreciation is a loss in value it can be used as a deduction to
the income derived from owning the real estate investment.
Depreciation as a concept is a cost recovery measure that
allows an investor to recover in tax deductions over the period
of its useful economic life.
o The Real Estate Investment Trust (RA No. 9856) of 2009
provides investors on a small scale investment that allows
higher yield of return as high as 90 percent earnings could be
shared to the individual shareholders in real estate investment.
MODULE ASSESSMENT:
MULTIPLE CHOICE.
Choose the correct answer.

1. An important element in a contract of sale is that

the seller will do this in favor of the buyer:

a) Execute a deed of sale

b) Pay the price
c) Transfer the ownership
d) Turnover the property physically
2. The following person cannot acquire by purchase
the property because of fiduciary relationship:

a) Purchase by the aunt of the property of the minor

b) Purchase by the husband under separation of
property
c) An agent under whose administration the property
is entrusted
d) An assessor who will buy his neighbor’s property
3. The most important difference between
a contract to sell and a contract of sale is
that in a contract of sale:

a) Notarization of the contract of sale

b) Transfer of ownership
c) Payment of the price in full
d) Execution of the contract
4. The following sale on financing of
property is covered by the Maceda
Law:

a) Commercial lot
b) Sales to tenants under RA 384
c) Residential lot
d) Industrial lots
5. In case a buyer fails to pay after making 96
monthly installments on a 10 years’ term
purchase of a lot, the percentage refund shall
be:

a) 50%
b) 65%
c) 100%
d) 50% + 5% of the installment for the years
beyond 5 years
6. The written contract of lease for 1 year
already expired but the owner continued
to receive rental during the first 5 days
of the month and is considered as:

a) Renewed one-year lease

b) Month to month lease
c) Implied renewal for one-year
d) Continuing lease
7. If the unit of the owner is covered by
the Rent Control Act of 2009, the owner
may increase the rent for the same
tenant not to exceed:

a) 5%
b) 7%
c) 8%
d) 10%
8. A provision in a mortgage contract
which allows the creditor to
immediately appropriate the property
mortgaged upon non-payment of the
amortizations is referred to as:

 Pactum appropriate
 Pactum non aliendo
 Pactum commissorium
 Pacto stipulation
9. The creditor prohibited the mortgagor
from selling the mortgaged property
during the life of the loan which is void
and is called:

a) Pactum non-sale
b) Pactum non-aliendo
c) Pactum commissorium
d) Pactum selium
10. A loan had to be secured by several
properties of the owner since one
property was not sufficient. It is referred
to as:

a) Blanket mortgage
b) Consolidated mortgage
c) Multiple mortgage
d) Basket mortgage
11. Under the Philippine Expropriation
Law, the initial offer of the government
for the lot affected is ___% of the BIR
zonal value per square meter.

a) 50%
b) 80%
c) 100%
d) 150%
12. A stipulation in a mortgage contract
where the mortgagee is authorized to
appropriate the property upon default or
non-payment of debt is:

a) Pactum Commissorium
b) Pactum de non Aliendo
c) Tacita Rconducta
d) Dacion en pago
13. The voluntary or involuntary
transfer of title to real estate is:

a) Alienation
b) Adverse possession
c) Quit claim
d) Surrender
14. The right of an owner-lessor to receive
the contract rent and reversion of the
property at the end of the lease is called:

a) Lease fee
b) Fee simple
c) Leasehold
d) Net lease
15. A contract in which one of the parties
has used duress to obtain consent can
usually be rescinded:

a) By the party who used duress to obtain

consent
b) By either of the parties
c) Only if both parties mutually agree to
rescind the contract
d) By the innocent party
16. Which of the following may be
considered in choosing a tenant?

a) Marital Status
b) National ancestry
c) Whether the prospective tenant is
on welfare
d) Tenant’s income
17. A provision in a financing agreement which
renders the remaining principal balance of
the loan immediately due and payable upon
default in any stipulated installment.

a) Acceleration clause
b) Defeasance clause
c) Escalation clause
d) Open-end loan provision
18. A lien placed upon property after a
previous lien has been made and
recorded:

a) First mortgage
b) Junior lien
c) Mechanics lien
d) Statutory lien
19. Procedure whereby property pledged as
security for a debt is sold to pay the debt
in event of default in payments or terms.

a) Forfeiture
b) Redemption
c) Foreclosure
d) Auction
20. An agreement between an owner
and a broker to sell a real estate
property:

a) Authorization
b) Joint venture
c) Listing
d) Power of Attorney