FI 331 test 1

If we desire to classify land by its use, land that does not include any improvements to the land would be categorized as:

"raw" land.

A recent college graduate has obtained employment at a major financial institution in a big city. Since she just graduated, she has decided to continue to rent her college apartment in the suburbs and make the daily commute to the city for work. She currently pays $1,000 per month to rent an apartment in the suburbs. She works at the bank 5 days a week and it takes her 1 hour to commute from her home to her office. According to the assumptions of the bid-rent model, what should this recent grad be willing to pay in rent per month to live in the big city if her hourly wage rate is $20? (In your calculations, assume there are 4 weeks in a given month.)

$1,800

Given the following information, calculate the total annual tax liability of the homeowner: Market value of property: $350,000 Assessed value of property: 40 % of the market value Exemptions: $2,000 State Millage Rate: 0.25 mills County Millage Rate: 13.70 mills

$1,925.10

Given the following information, compute the taxable value for the particular piece of property in dollar terms: Market value of property: $500,000 Assessed value of property: 85 % of the market value of the property Exemptions: $50,000 Taxes paid: $8,250

$375,000

An individual works downtown and pays $600 per month in rent for an apartment located 10 miles from her office. She has calculated that she spends 30 minutes per day driving each way to the office and it costs her $4 per day in gas and lost productivity. Using the framework of the bid-rent model, how much would she be willing to pay for an apartment downtown, assuming a 20-workday month?

$680

While property tax rates can vary across geographic regions, ad valorem taxes are typically levied at rates between _____________blank of a property's market value.

1.0 to 4.0 percent

Given the following information, calculate the effective tax rate expressed in mills: Market value of property: $280,000 Assessed value of property: 50 % of the market value Exemptions: $2,000 Annual tax liability: $4,685.10

16.73 mills

Given the following information, compute the property tax rate for the community in mills. Total budget expenditures: $250 million, Total non-property tax income: $150 million, Total assessed value of all properties: $5 billion, Total exemptions: $900 million.

24.3 mills

Given the following information, compute the property tax rate for the community in percentage terms: Total budget expenditures: $108 million Total non-property tax income: $50 million Total assessed value of all properties: $2 billion Total exemptions: $550 million

4.0%

Which of the following federal environmental control laws was responsible for giving the EPA authority to control discharges of pollutants into waters of the United States?

Clean Water Act

Unlike other forms of evidence of title, title insurance guards the grantee against certain risks. However, there are a number of important limits to title insurance. Which of the following is an example of the limits to title insurance?

It does not protect the grantee from the threat of physical damage to the property.

Real estate is property, which can be either a tangible or an intangible asset. Which of the following would be considered an intangible asset?

Mortgage

All of the following statements are true in describing the determination of just compensation EXCEPT:

The value of the property is determined solely by its current use.

According to the bid-rent model, which of the following individuals would be the one least likely to live closest to the central business district (CBD)? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD.)

a barista at the local coffee shop who uses a car to commute

According to the bid-rent model, which of the following individuals would be the one most likely to live closest to the central business district (CBD)? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD.)

a doctor at the city hospital who must walk to work.

An important distinction is the difference between an easement and a license. All of the following characteristics pertain to a license EXCEPT:

a license is enduring.

Real estate taxes represent the largest single source of revenue for a large portion of local governments. Most property taxes are applied in relation to the value of the property, or in other words, they are:

ad valorem taxes.

An owner of land may involuntarily and unknowingly give up the rights to land. When a fee simple interest is conveyed to a new owner without a deed and without the consent or knowledge of the original owner, this is said to be conveyed by:

adverse possession.

An easement is the right to use land for a specific and limited purpose. Which of the following easements involves a relationship between two parcels of land, is a permanent feature of both parcels involved, and gives the dominant parcel some intrusive use of the servient parcel?

affirmative easement appurtenant

According to the bid-rent model, which of the following changes in the model's underlying assumptions would most likely result in a decrease in rents for properties closest to the central business district (CBD)?

an increase in the average traveling speed of the individual's commute

Property rights can be divided into two classes, real and personal. Which of the following is an example of real property?

an office building

The City of Baltimore installed a new water main along a main roadway. The city then decided to charge the property owners along this main roadway a proportional cost of the new water main. If a property owner refuses to pay their proportional share of the cost, the city may file a(n):

assessment lien.

Within the framework of the bid-rent model, as rents increase with proximity to the central business district (CBD), the tendency is for development to:

build upward on lots within the CBD to allow multiple tenants.

Which of the following tools of public land use control represents the earliest method of police power to regulate land use? (Hint: Standards for energy efficiency and sustainability are the most recent trends in the application of this land use control.)

building codes

The most recent approach to zoning, form-based zoning, creates a map by segregation of:

building shapes.

Considered a fundamental pricing metric in commercial real estate markets, the ratio of a property's annual net operating income to its market value is more commonly referred to as a(n):

capitalization rate.

Providers of convenience activities find it profit-maximizing to disperse over the region of potential customers to the point where each establishment is equidistant from another and is separated by the minimum distance that allows sufficient customers to support each establishment. The resulting pattern of establishment locations is referred to as:

central place pattern.

An example of a real estate asset that trades in the public debt market is a(n):

commercial mortgage-backed security (CMBS).

Services and products that users seek to obtain from the closest available source are more commonly referred to as:

convenience activities.

Which of the following forms of co-ownership, historically used for apartment buildings, is not considered a form of true direct co-ownership, but rather qualifies as a proprietary corporation?

cooperative

Which of the following covenants in a deed promises that the property is not burdened by liens, easements, or other limitations, except as noted in the deed?

covenant against encumbrances

Which of the following covenants in a deed promises that the property will not be claimed by someone with a better claim to title?

covenant of quiet enjoyment

Based on your understanding of the rules for determining when an object becomes a fixture, which of the following items would most likely be considered a fixture at the time of sale?

custom (built-in) bookshelves

Based on your understanding of the supply and demand dynamics of user/space markets, the new construction of units would, all else equal, cause which of the following effects?

decrease equilibrium rental rates and decrease property value

When entities such as roadways and utilities in subdivisions become the property and responsibility of the local government to maintain, this process is more commonly referred to as:

dedication

In order for a deed to be a valid conveyance of property, there must be an observable, verifiable transfer of the deed to the grantee. Typically, this is accomplished when the grantor hands the deed to the grantee at closing. Which of the following basic requirements of a deed does this represent?

delivery

At the death of a property owner, property will convey either in accordance with a will or without a will. If a will dictates the distribution of the decedent's real property, the property is said to be:

devised

The expected stream of rental income is capitalized into value by converting expected future cash flows into present value through a process called:

discounted cash flow analysis.

Once a document conveying an interest in real property is placed in the public records it is binding on the public, whether or not they try to learn of it. Based on the common law tradition, this policy is known as the:

doctrine of constructive notice.

When identifying an easement appurtenant, the parcel of land that benefits from the right to use the land in question is referred to as the:

dominant parcel.

While the vast majority of conveyances of real property are private grants through a deed, there are multiple ways in which voluntary conveyance can occur without a deed. Which of the following types of easements can occur if a landowner gives an adjacent landowner permission to depend on her land? (E.g., A landowner may give a neighbor permission to rely on sewer access or drainage across his or her land.)

easement by estoppel

All of the following are modes of conveying real property involuntarily without a deed EXCEPT:

easement by estoppel.

All of the following are modes of conveying real property voluntarily without a deed EXCEPT:

easement by prescription.

Jayden owns 150 acres between a highway and a public beach. The state would like to construct a road directly from the highway to the beach across a number of beach front properties including Jayden's. The space for this road would be considered a(n):

easement in gross.

Proposals for large-scale developments must be accompanied by studies that analyze the project's effect on the surrounding area. This requirement is referred to as the:

economic and environmental impact requirement.

A city's potential for economic and population growth or its susceptibility to decline is determined by a set of economic activities that the city provides for the world beyond its boundaries. Economists refer to this set of activities as a city's:

economic base.

An example of a real estate asset that trades in the public equity market is a(n):

equity REIT.

Property rights can be dismantled into lesser bundles, referred to as interests, which can then be held by different individuals. Interests in real property that include exclusive possession are referred to as:

estates.

Although deeds can only deliver what a grantor actually owns, they can still vary in "quality." Which of the following types of deeds is considered to be the "highest quality" because it contains the full set of legal promises the grantor can make?

general warranty deed

Consider the following excerpt from a sample deed: "The Seller covenants with The Buyer that it has a good right to convey, that the property is free from all encumbrances, and that it forever warrants to defend all of the property so granted to The Buyer against every person lawfully claiming the same." Based on your understanding of the relation between a deed's covenants and the type of deed being conveyed, which type of deed is being conveyed in the statement above?

general warranty deed

Which of the following types of liens is automatically superior to any other lien?

government property tax and assessment lien

In a deed, the person or entity conveying the real property interest is more commonly referred to as the:

grantor.

Each commercial property has unique features, whether it is its age, the building design of its structures, occupancy or its location. As such, real estate markets consist of assets that are considered:

heterogeneous.

The national government can have a significant impact on the value of real estate through:

income tax policy.

Based on your understanding of the supply and demand dynamics of user/space markets, an increase in demand for leasable space would, all else equal, cause which of the following effects?

increase equilibrium rental rates and increase property value

The growth of the motion picture industry in Los Angeles, the petrochemical industry in Houston, the software industry in "Silicon Valley," are all examples of how the growth of an industry within a city can create cost advantages for future growth. Economists refer to this phenomenon as:

industry economies of scale.

A fixture is an object that formerly was personal property but has become real property. Of the following four rules for determining whether an object has become a fixture, which is the most dominant (i.e., if there is a conflict, which rule prevails)?

intention of the parties

Based on your understanding of the effect of agglomeration economies in real estate, you would expect institutional investors to most favor real estate investments in which of the following areas?

large urban markets

Nonpossessory interests (i.e., bundles of real property rights that do not include possession) include all of the following EXCEPT:

leasehold interests.

The demand for access between land uses is considered the "gravity" that holds a city together. These relationships between land uses are commonly referred to as:

linkages.

Primarily through land use controls and property tax policy, which of the following branches of government has the largest influence on real estate values?

local government

Especially in terms of retail properties, which of the following attributes is considered the most likely to result in drastic value differences between otherwise similar properties?

location attributes

In efficient financial markets, unregulated competitive bidding should bring about the most productive use of an asset and the price paid for that asset should reflect fair value based on its usefulness. In real estate, this is not always the case. For example, there is no substitute for certain pieces of land which gives the owner a bargaining advantage in determining the value of the land. This feature of real estate markets is commonly referred to as:

locational monopoly.

Recognizing that only recent conveyances alter the status of title, states have established laws that set limits on how far back a title search must go. These laws are commonly referred to as:

marketable title laws.

One of the most important requirements of a land description is for it to be unambiguous. Which of the following methods of property description is the most unambiguous and is appropriate for use in legal documents?

metes and bounds

The most flexible method of land description, capable of describing even the most irregular of parcels, can be described as a very precise, compass-directed walk around the boundary of a parcel. This method is commonly referred to as:

metes and bounds.

Which of the following models of urban form is characterized by smaller central business districts (CBDs) located on the outskirt of the city?

multi-nuclei model

Understanding the revenue generating ability of the core export activities of a local area has important implications on the market value of real estate. When the income that these activities generate is re-spent within the community on other local goods and services, the community is benefiting through a:

multiplier process.

When a zoning ordinance is revised, some existing land uses then fall outside the new zoning classification. These land uses are referred to as:

nonconforming uses.

A deed is a special form of written contract used to convey a permanent interest in real property. Unlike most contracts, a deed requires:

only the grantor to be legally competent and of legal majority age.

A traditional zoning ordinance includes all of the following EXCEPT:

performance standards.

Externalities can play a key role in determining a property's price, either by adding value through positive externalities or by diminishing value through negative externalities. Which of the following is most likely to be considered a negative externality?

public assistance facilities such as homeless shelters

Considered a "questionable conveyance of title" by most courts, which of the following types of deeds is worded to imply no claim of title, but rather only convey what interest the grantor actually has? (Hint: A developer may use this type of deed to convey certain lands of a subdivision to the local government through dedication.)

quitclaim deed

Capital markets can be divided into four main categories: private equity, public equity, private debt, and public debt. An example of a real estate asset that trades in the private equity market is a(n):

real property.

One of the main criticisms of property taxes is that the property tax of lower income households is higher than that of higher income households, as a percentage of their respective incomes. In other words, taxes are criticized for being:

regressive.

Suppose a homeowner lives adjacent to an expanding university that is interested in acquiring her residence for future university use. To allow the homeowner to continue to retain all rights of exclusive possession, use, and enjoyment during her lifetime, yet provide the university with the right of disposition, the university may want to purchase a(n):

remainder interest from an ordinary life estate.

Tom recently purchased a home in a residential subdivision. While mowing his lawn and planting new shrubs for the first time since moving in, Tom's neighbor came outside to inform him that he was violating one of the subdivision's rules which required the use of a specific professional lawn service for all property landscaping needs. Assuming this requirement can be enforced by the subdivision authority, this would be an example of a(n):

restrictive covenant.

Restrictive covenants impose constraints on the use of the land, yet are limited in terms of their enforcement. All of the following are true regarding the enforcement of restrictive covenants EXCEPT:

restrictive covenants are public in nature and therefore can be enforced by those who do not hold a legal interest in the property.

When identifying an easement appurtenant, the parcel of land that is constrained or diminished by the easement is referred to as the:

servient parcel.

Most communities contain a number of tax-exempt properties. All of the following are typically included in the tax-exempt property classification EXCEPT:

single-family homes.

The description of land in a deed must be unambiguous. All of the following would be considered acceptable legal descriptions of land EXCEPT:

street address.

Which of the following leasehold estates best describes the situation in which a tenant who previously occupied a property under a legitimate leasehold interest refuses to vacate?

tenancy at sufferance

Which of the following types of estates involves the least enforceable bundle of rights?

tenancy at will

Direct co-ownership implies that each co-owner holds a titled interest in the property, but without exclusive possession with respect to the other co-owners. Which of the following types of direct co-ownership is considered the closest to the fee simple absolute estate?

tenancy in common

At the death of a property owner, property will convey either in accordance with a will or without a will. When a will dictates the distribution of the decedent's real property, this mode of conveyance is more commonly referred to as:

testate.

Real estate consists of the physical structures and infrastructure that accompany the land. All of the following are examples of an improvement to the land EXCEPT:

the building and parking lot.

Capital markets can be divided into two broad categories: equity interests and debt interests. Equity investors in real estate expect to earn a return on their investment through:

the collection of rent and selling or refinancing the asset.

The magnitude of an economic base multiplier depends upon the amount of money that "leaks" out through expenditures outside of the city limits. The economic multiplier tends to be higher with each of the following EXCEPT:

the less isolated the city is from other cities.

A principal definition of real estate is as a bundle of rights associated with the possession, use, and disposition of property. Each of the following is a fundamental characteristic of property rights EXCEPT:

they apply only to tangible assets.

A public planning movement that explicitly advocates a cul-de-sac hierarchy of development, an automobile oriented society, and separated land use is more commonly referred to as:

traditional residential planning.

According to the Department of Agriculture, which of the following land types constitutes the lowest percentage of land use in the United States?

urban land

If we desire to classify land by its use, land that consists of residential, industrial, commercial, and institutional land uses would be classified as:

urban land.