Deck 18: Acquisition, Development, and Construction Financing

Question 1

18-13.Subdivision control ordinances are designed to protect the:

A) seller
B) lender
C) consumer
D) developer

Answer 1

consumer

Question 2

18-20.Construction loan provisions:

A) ensure the availability of the construction loan
B) are details designed to expedite the construction of the facility
C) are details of how the construction is to proceed and how the loan proceeds are to be disbursed
D) both b and c

Answer 2

both b and c

Question 3

18-14.In the case of seller financing,after the seller's note is subordinated,the remaining parties will act:

A) in their own behalf
B) in the seller's behalf
C) in everyone's behalf
D) in the junior position's behalf

Answer 3

in their own behalf

Question 4

The most likely reason for different lenders financing,distinctly different stages of the development process is:

A) to protect the lender
B) specialization
C) to protect the seller
D) to protect the developer

Question 5

18-18.A construction loan commitment is:

A) a reserve of funds held from subcontractors
B) an agreement to make a loan in exchange for a fee
C) an agreement to meet building codes
D) an agreement for an appraisal according to federally mandated requirements

Question 6

The speculator is interested in:

A) appreciation of the land
B) depreciation of the land
C) immediate plans for the land
D) none of the above

Question 7

18-10.When the developer puts up only a portion of the sales price and agrees to pay the balance when the property is developed and sold it is a(n):

A) exaction
B) density bonus
C) subordination
D) subdivision trust

Question 8

The developer is interested in:

A) appreciation of the land
B) depreciation of the land
C) immediate plans for the land
D) none of the above

Question 9

When a construction loan is made and the seller's note has been subordinated:

A) the construction lender will have a junior position in the case of default
B) the seller will have a junior position in the case of default
C) the construction lender will have a senior position in the case of default
D) both b and c

Question 10

Land loans will seldom exceed:

A) 70-80% of the appraised value of the land
B) 80-90% of the appraised value of the land
C) 60-70% of the appraised value of the land
D) 50-60% of the appraised value of the land

Question 11

18-12.In the event of a default,the development lender will have the rights to:

A) dollar based fees
B) impact fees
C) work materials of developer
D) recovery fee

Question 12

18-15.Payments made to municipalities or other local governments by the developer are:

A) impact fees
B) dollar based fees
C) cost recovery fee
D) exaction

Question 13

Land loans are considered to be:

A) risky
B) tax beneficial
C) non-risky
D) none of the above

Question 14

Rolling options are popular with:

A) speculators
B) residential developers
C) lenders
D) commercial developers

Question 15

A large proportion of the covenants and restrictions contained in loans to finance ADC of commercial properties are directed at the:

A) lender
B) seller
C) agency problems d developer

Question 16

18-11.Development includes:

A) subdividing
B) engineering
C) physical work
D) all of the above

Question 17

18-19.If the developer fails to initiate construction,he will generally:

A) be subject to a fee
B) have the commitment fee returned
C) have no right to a return of the commitment fee
D) not be penalized

Question 18

18-16.The process whereby a developer agrees to construct and donate a public facility is:

A) impact fees
B) dollar based fees
C) cost recovery fee
D) exaction

Question 19

Warehousing refers to:

A) tying up as much equity as possible in large parcels of land
B) tying up as much equity as possible in small parcels of land
C) tying up as little equity as possible in large parcels of land
D) tying up as little equity as possible in small parcels of land

Question 20

18-17.Construction loans:

A) generally,are final type of financing prior to "takeout" loan
B) are generally short term
C) have interest payments that are variable and deferred and "financed" by the lender
D) all of the above

Question 21

18-39.The following has an affect on option premiums:

A) length of the time of the option
B) volatility of market prices
C) the strike price of the option
D) all of the above
E) a and b

Question 22

18-40.In order to develop a parcel of land the developer may have to pay the local governmental jurisdiction:

A) impact fees
B) carrying fees
C) community growth fees
D) all of the above

Question 23

18-29.The following affect option premiums:

A) length in time of the option
B) volatility of the market
C) special provisions
D) all of the above

Question 24

18-26.Raw land is acquired by two types of investors.They are:

A) developer/warehouser
B) developer/speculator
C) speculator/warehouser
D) speculator/lender

Question 25

18-32.The two types of impact fees are:

A) dollar based
B) non-dollar based
C) tax based
D) a and b
E) a and c

Question 26

18-33.A developer that constructs and donates a public park is most likely:

A) palm greasing
B) paying "dollar based" impact fees
C) looking for a density bonus
D) none of the above

Question 27

18-28.Instead of buying land outright,many developers prefer:

A) subdivision trusts
B) partial releases
C) release patterns
D) options

Question 28

18-34.The following are covered in a "construction loan commitment":

A) interest rate
B) loan amount
C) description of collateral
D) all of the above.

Question 29

18-24.The purpose of an option is:

A) to exercise a lease on the property
B) to be able to purchase the land at a future time
C) to secure land without securing immediate financing
D) both b and c

Question 30

18-23.From the lender's perspective,the major risk involves:

A) delays in construction
B) interest rate changes
C) permanent construction
D) failure of the value of the collateral to increase in proportion to the expenditures

Question 31

18-37.Raw land is acquired by two types of investors:

A) developer/warehouser
B) developer/speculator
C) speculator/warehouser
D) speculator/lender

Question 32

18-22.For an ADC loan the lender's yield can be determined by finding the rate which equates:

A) the future value of the disbursements to the present value of the loan repayment
B) the present value of the disbursements to the present value of the loan repayment
C) the present value of the disbursements to the future value of the loan repayment
D) the future value of the disbursements to the future value of the loan repayment

Question 33

18-25.ADC financing is done primarily:

A) by institutions that specialize in such lending
B) all at once by one "Master Lender"
C) by small lending institutions
D) without the use of a lawyer

Question 34

18-36.Loan-to-Value ratios for commercial projects are usually:

A) 40-50%
B) 50-60%
C) 60-70%
D) 70-80% e 80-90%

Question 35

18-35.Release provisions written into ADC loans are mainly for the protection of the:

A) builder
B) developer
C) speculator
D) lender

Question 36

18-31.The city or county where the development is taking place may charge the developer ____________________to cover the cost of burden to the infrastructure.

A) impact fees
B) carrying fees
C) community growth fees d all of the above

Question 37

18-21.An independent third party that is a specialist in monitoring the disbursement of the loan to the proper contractors is a:

A) construction loan administrator
B) construction loan processor
C) voucher control agent
D) institutional lender

Question 38

18-38.Instead of buying land outright developers may prefer:

A) to use subdivision trusts
B) to use partial releases
C) to use release patterns
D) to use options to purchase

Question 39

18-30.A rolling option would most likely be used by a:

A) speculator
B) construction company
C) developer
D) all of the above

Question 40

18-27.Land loans will rarely exceed 60% of the appraised value of the land because of:

A) inflation
B) warehousing costs
C) risk of decline in value
D) floatation costs

Question 41

18-45.When a developer puts up only a portion of the sales price and agrees to pay the balance when the property is developed and sold,this is referred to as:

A) subdivision trust
B) rolling options
C) subdivision control
D) exaction

Question 42

18-48.When a lender requires a borrower to hire a specialist to explore the property,including its history of use and its current physical condition,this is referred to as:

A) voucher control
B) inclusionary zoning
C) environmental audit
D) impact fee

Question 43

18-43.Release provisions written into ADC loans are mainly for the protection of the:

A) builder
B) developer
C) speculator
D) lender

Question 44

18-44.The holding of large parcels of properties in advance of the development process is referred to as:

A) developing
B) warehousing
C) speculating
D) release provision

Question 45

18-42.The following should be covered under a construction loan commitment:

A) the interest charge
B) the amount of the loan
C) description of any collateral
D) all of the above

Question 46

18-47.A separate agreement whereby a lender makes a commitment to make a loan in exchange for a fee is referred to as a(n):

A) construction loan commitment
B) impact fee
C) land acquisition loan
D) cost recovery fee

Question 47

18-46.When improvements in the infrastructure are financed by additional property taxes applied to properties in the geographical area of the development it is termed:

A) density bonus
B) tax-increment financing
C) senior financing
D) partial release provision