Fin 351 - Chapter 1-5

D. Timeshare

22. When multiple individuals have use of a property, but their interests are not simultaneous, this type of co-ownership is referred to as a: A. Cooperative B. Tenancy by the entirety C. Condominium D. Timeshare

B. Incomplete information

5. After a structure is built, it is impractical for even a building expert to fully assess the quality of the construction and the safety hazards it may harbor. This is an example of which of the following problems that plagues private real estate markets? A. Externalities B. Incomplete information C. Locational monopoly D. Holdout

D. estates

5. 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 possessions are referred to as: A. fixtures B. townships C. licenses D. estates

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

building

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

discounting

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

heterogeneous

Equity investors can choose to participate indirectly in real estate markets by purchasing shares in publicly traded real estate companies. In doing so, investors benefit from all of the following except

highly segmented markets.

As of 2015, the single largest asset category in the net worth portfolios of households is

housing

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

income tax policy.

Which of the following would be considered a tangible asset?

land

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

"raw" or undeveloped land.

B. They apply only to tangible assets.

1. 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: A. They are enforceable by the government. B. They apply only to tangible assets. C. They are nonrevocable. D. They are enduring.

C. externalities

1. While most real property in the United States is privately owned, government regulations limit private property use and therefore play an important role in the determination of property value. Proponents of government intervention argue that regulation is needed to address the unintended and unaccounted for consequences of one land user upon others, more commonly referred to as: A. incomplete information B. locational monopoly C. externalities D. urban sprawl

A. Affirmative easement appurtenant

10. 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? A. Affirmative easement appurtenant B. Negative easement appurtenant C. Easement in gross D. License

D. variance

10. When land use controls impose exceptional hardship and loss of value, a relief mechanism must be provided. This relief is referred to as a: A. building code B. zoning ordinance C. comprehensive plan D. variance

B. The condition is common to other parcels of land in the vicinity

11. In order for the board of adjustment to approve a variance, all of the following conditions must be met EXCEPT: A. The owner must be unable to use the lot as zoned. B. The condition is common to other parcels of land in the vicinity C. The variance must not materially change the character of the neighborhood. D. The condition is unique to the lot.

D. A scenic easement used to restrict construction on adjacent parcels so as to preserve a valued view.

11. Which of the following is an example of a negative easement appurtenant? A. A driveway easement across one parcel to another. B. Rights-of-way for roads. C. A common drive easement where owners of adjoining lots must permit each other to use a driveway lying on their shaped property line. D. A scenic easement used to restrict construction on adjacent parcels so as to preserve a valued view.

D. Performance standards

12. A traditional zoning ordinance includes all of the following EXCEPT: A. Minimum setback requirements B. Minimum lot dimensions C. Provisions for special use districts D. Performance standards

C. A license is enduring.

12. An important distinction both practically and conceptually is the difference between an easement and a license. All of the following characteristics pertain to a license EXCEPT: A. A license is revocable by the grantor. B. A license can be granted orally. C. A license is enduring. D. A license grants permission to use another's land for a specific and limited purpose.

C. Lien arising from a court judgment unrelated to ownership of the property

13. A lien is an interest in real property that serves as security for an obligation. Which of the following is an example of a general lien? A. Property tax and assessment lien B. Mortgage lien C. Lien arising from a court judgment unrelated to ownership of the property D. Mechanics' lien

D. Comprehensive Environmental Response Compensation and Liability Act

13. State and federal control of land uses has increased greatly over the past 40 years due in part to an increased awareness of environmental hazards. Which of the following federal environmental control laws was responsible for establishing the "Superfund" to finance emergency responses and cleanups of abandoned and unregulated waste dumps? A. Clean Water Act B. Resource Conservation and Recovery Act C. Toxic Substances Control Act D. Comprehensive Environmental Response Compensation and Liability Act

B. impact fees

14. Negative externalities can diminish a property's value by imposing costs on the community at large. In order to offset this detrimental impact, economists advocate "internalizing" these externalities by implementing: A. performance standards B. impact fees C. growth moratoriums D. planned unit developments

A. Property tax and assessment lien

14. Which of the following types of liens is automatically superior to any other lien? A. Property tax and assessment lien B. Mortgage lien C. Lien arising from a court judgment unrelated to ownership of the property D. Mechanics' lien

A. Asbestos

15. A major problem in buildings constructed prior to the early 1970's, which of the following environmental hazards commonly associated with insulation has been the focus of costly cleanups at many public buildings, especially schools? A. Asbestos B. Radon C. PCBs (Polychlorinated biphenyls) D. LUSTs (leaking underground storage tanks)

D. Partnership

15. Co-ownership can occur in a variety of ways, with significant variation in how the bundle of rights is jointly held. All of the following entities are forms of direct co-ownership EXCEPT: A. Tenancy in common B. Tenancy by the entirety C. Condominium D. Partnership

A. Tenancy in common

16. 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? A. Tenancy in common B. Tenancy by the entirety C. Condominium D. Tenancy at Will

C. eminent domain

16. The right of government to acquire private property, without the owner's consent, for public use in exchange for just compensation is referred to as: A. inverse condemnation B. regulatory taking C. eminent domain D. dedication

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

17. All of the following statements are true in describing the determination of just compensation EXCEPT: A. The value of the property is based on its highest and best use at the time. B. The value of the property is determined solely by its current use. C. The value is the amount that restores the property owner to a financial position equivalent to that existing before the property was taken. D. The value is the market value of the property if completely taken, or the total value of all financial loss if partially taken

B. Tenancy by the entirety

17. Which of the following types of direct co-ownership is a form of joint tenancy for husband and wife created by marriage that protects each spouse from liens arising from either spouse alone? A. Tenancy in common B. Tenancy by the entirety C. Condominium D. Tenancy at Will

B. ad valorem taxes

18. 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: A. effective tax rates B. ad valorem taxes C. tax-exempt D. regressive

C. Condominium

18. Which of the following types of direct co-ownership combines single person ownership with tenancy in common? A. Cooperative B. Tenancy by the entirety C. Condominium D. Partnership

A. extraterritorial jurisdiction.

19. A developer plans to place a subdivision slightly outside the city limits in an area that is rapidly developing. However, the city claims to have the right to control urban development even in the proposed area. The right the city is attempting to invoke is referred to as: A. extraterritorial jurisdiction. B. urban service area. C. comprehensive plan. D. growth constraint.

A. Cooperative

19. 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? A. Cooperative B. Tenancy by the entirety C. Condominium D. Partnership

C. Public assistance facilities such as homeless shelters.

2. Externalities can play an important 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? A. Nearby parks and recreation facilities B. Quality neighborhood schools C. Public assistance facilities such as homeless shelters. D. Well-kept landscapes.

D. Commercial building

2. Property rights can be divided into two classes, real and personal. Which of the following is an example of real property? A. Vehicles B. Stocks and bonds C. Patents D. Commercial building

D. Community property

20. Property rights created from marriage have a clear implication for real estate transactions. Which of the following marital property rights gives a spouse a one-half claim on all property acquired "from the fruits of the marriage?" A. Dower B. Curtesy C. Elective share D. Community property

A. They are considered ad valorem taxes.

20. Special assessments are levied to pay for specific improvements that benefit a particular group of properties. All of the following characteristics of special assessments are true EXCEPT: A. They are considered ad valorem taxes. B. They are applied as pro rata charges. C. They are levied directly on the properties benefited. D. They are commonly used to finance streets, storm water systems, sidewalks, and other area improvements.

A. regressive

21. 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: A. regressive B. comprehensive C. concurrent D. extraterritorial

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

21. 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: A. Courts have been reluctant to maintain restrictive covenants for an unreasonably long time and in some cases states have enacted a time limit on their applicability. B. Courts may refuse to enforce restrictive covenants due to changing neighborhood character. C. Courts may refuse to enforce restrictive covenants due to abandonment of the property. D. Restrictive covenants are public in nature and therefore can be enforced by those who do not hold a legal interest in the property.

D. homestead exemption

22. In the state of Florida, for example, homeowners may qualify for a tax exemption in which up to $50,000 will be deducted from the assessed value of the property before taxes are calculated as long as the property owner occupies a home as the family's principal residence and has claimed residency within the state. This exemption is better known as the: A. ad valorem exemption B. affordable housing exemption C. growth moratorium D. homestead exemption

B. Law of capture

23. In some states, mining companies are deemed to own not only the minerals but also the space the minerals occupied before they were removed, thereby earning the distinction of ownership states. However, when the owner of an oil or gas well is able to claim all that is pumped from it, regardless of whether the oil or gas migrated from adjacent property, this is referred to as a _____________ state. A. Manner of attachment B. Law of capture C. Intention of the parties D. Relation of the parties

D. exclusionary uses

23. Zoning ordinances that tend to exclude lower income groups by large lot size, or that do not adequately provide low- and moderate-income housing are referred to as: A. special uses B. nonconforming uses C. conforming uses D. exclusionary uses

C. traditional residential planning

24. 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: A. urban sprawl B. urban service area C. traditional residential planning D. new urbanism

C. Joint tenancy

24. Bill and Mike go in together to purchase 342 acres of land to use for hunting and family vacations. Ten years later, Bill dies and Bill's wife wants to sell his half of the land. Mike informs her that, unfortunately, she has no claim to the land and that upon Bill's death, his ownership interest transferred to Mike. What type of co-ownership did Bill and Mike have? A. Tenancy by the entireties B. Tenancy in common C. Joint tenancy D. Condominium

D. Condemnation

25. Eminent domain is the right of government to acquire private land, without the owner's consent, for public use, with due process and just compensation. The legal procedure for exercising the right of eminent domain is referred to as: A. Growth restriction B. Urban sprawl C. Blighted development D. Condemnation

B. assessment lien.

25. The City of Grand Rapids installed a new water main on Oak Street. The city then decided to charge the property owners along Oak Street 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): A. property tax lien. B. assessment lien. C. general lien. D. mechanics' lien.

B. easement in gross.

26. Jeff owns 150 acres between a highway and a public beach. The state would like to build a road directly from the highway to the beach across a number of beach front properties including Jeff's. The space for this road would be considered a(n): A. implied easement B. easement in gross. C. negative easement appurtenant. D. positive easement appurtenant.

A. Planned unit development

26. Traditional zoning regulations are criticized for often being too rigid in forcing uniform types of development. One proposed solution to this issue allows traditional zoning requirements to vary in exchange for an enhancement to the community, such as the construction of a park. This is more commonly referred to as a: A. Planned unit development B. Performance standard C. Impact fee D. Growth restriction

C. Periodic tenancy

27. Brian just began graduate school at the local university and is looking to rent an apartment. A family friend has decided to lease him a two bedroom, one bathroom cottage through an oral agreement with no definite lease period outlined. Which of the following leasehold estates best describes Brian's situation? A. Tenancy for years B. Tenancy at sufferance C. Periodic tenancy D. Tenancy by the entirety

D. Able to use eminent domain to acquire property for private development if is serves public purpose even if the current land use is not blighted.

27. In the history of eminent domain, the Kelo v. New London, Connecticut decision of the U.S. Supreme Court in 2005 affirmed the possibility of a community being: A. Prohibited from using eminent domain. B. Restricted to use of eminent domain only for actual government (public) land uses. C. Able to use eminent domain to acquire property for private development if it serves public purpose and the current land use is blighted. D. Able to use eminent domain to acquire property for private development if is serves public purpose even if the current land use is not blighted.

B. locational monopoly

28. 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: A. incomplete information B. locational monopoly C. positive externality D. negative externality

B. restrictive covenant

28. 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): A. easement B. restrictive covenant C. lien D. estate

C. a discount from the face value of the property taxes due

29. Nearly half of states in the U.S. use the sale of tax lien certificates to manage defaulted property taxes. The certificates are auctioned to the public at: A. the face value of the property taxes due B. the assessed value of the home C. a discount from the face value of the property taxes due D. a premium of the assessed value of the home

A. Dominant parcel

29. 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: A. Dominant parcel B. Servient parcel C. Licensed parcel D. Gross parcel

C. Intention of the parties

3. 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)? A. Manner of the attachment B. Character of the article and manner of adaptation C. Intention of the parties D. Relation of the parties

A. urban sprawl

3. Development taking place in rural areas well beyond the urban fringe is commonly referred to as: A. urban sprawl B. holdout C. urban service areas D. homestead

B. 4.0%

30. 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. A. 2.5% B. 4.0% C. 10.0% D. 12.0%

C. Disposition

30. Real estate can be viewed as a bundle of rights. How these bundles of rights are grouped together determines the type of ownership interest an individual (or group of individuals) can stake claim to. In an ordinary life estate with remainder interests, which of the following rights is detached from the traditional bundle of rights that typically defines a fee simple absolute interest? A. Possession B. Use C. Disposition D. Enjoyment

A. Legal life estate with remainder interest

31. Many states have enacted laws that determine the flow of ownership rights of real property in the case of the owner's death. For example, in the state of Florida if a family residence is declared a homestead and the owner of the property passes away, the surviving spouse and children will have automatic interests in the property. This type of estate is more commonly referred to as: A. Legal life estate with remainder interest B. Ordinary life estate with remainder interest C. Fee simple conditional interest D. Periodic tenancy

C. 65 mills

31. Tax rates are usually stated in mills. Assuming the tax rate in percentage terms is 6.5%, convert this rate to mills. A. 0.065 mills B. 6.5 mills C. 65 mills D. 650 mills

C. 1.65%

32. Given the following information, compute the effective tax rate for the particular piece of property in percentage terms. Market value of property: $325,000, Assessed value of property: $250,000, Exemptions: $50,000, Taxes paid: $5,363. A. 1.50% B. 2.35% C. 1.65% D. 2.68%

B. $375,000

33. 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. A. $75,000 B. $375,000 C. $416,750 D. $425,000

A. $4,685.10

34. 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, Millage Rate: 33.95 mills. A. $4,685.10 B. $4,753.00 C. $11, 882.50 D. $46,851.00

C. 16.73 mills

35. 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. A. 1.69 mills B. 3.35 mills C. 16.73 mills D. 33.95 mills

C. $1,925.10

36. 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. A. $34.50 B. $1,890.60 C. $1,925.10 D. $4,685.10

A. Custom (built-in) bookshelves

4. 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? A. Custom (built-in) bookshelves B. Refrigerator in a single-family residence being sold C. Fence installed by the tenant of a rental property

C. Spaceship earth

4. It was not until the late 1960's that land use controls moved to the forefront of public interest, as the belief that the environment was an endless and costless resource was replaced with the notion that the world was a closed system with limited space, air, water, and other resources. Environmentalists coined which of the following terms to refer to this new point of view? A. Smart growth B. The Silent Spring C. Spaceship earth D. Urban sprawl

B. concurrency requirement

6. Growth management laws at the state level require local jurisdictions to plan for and meet certain requirements. One such requirement prohibits local development unless adequate infrastructure, schools, police/fire protection, and social services have been put in place first. This requirement is referred to as the: A. economic and environmental impact requirement B. concurrency requirement C. affordable housing requirement D. extraterritorial jurisdiction requirement

A. Fee simple absolute

6. Which of the following types of ownership estates is the most complete bundle of rights, and therefore carries the greatest value? A. Fee simple absolute B. Fee simple conditional C. Ordinary life estate D. Legal life estate

D. new urbanism

7. A contemporary planning movement that explicitly advocates a traditional grid pattern of development designed to give pedestrian life priority over motor vehicles (e.g., including narrowed streets with houses close to the street and garage access through side alleys) is commonly referred to as: A. urban sprawl B. urban service area C. traditional residential planning D. new urbanism

C. ordinary life estate with remainder interest

7. Suppose an older 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): A legal life estate with remainder interest B. conditional fee absolute with reverter interest C. ordinary life estate with remainder interest D. tenancy for years

C. Building Codes

8. 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) A. Subdivision regulation B. Zoning C. Building Codes D. Planned Unit Developments

D. Leasehold estates are possessory interests

8. While leasehold interests are considered estates, they differ from freehold estates in all of the following respects EXCEPT: A. Leasehold estates are limited in time. B. The right of disposition is diminished with a leasehold estate. C. Leasehold estates are not titled interests. D. Leasehold estates are possessory interests

If a property's expected annual net income is $89,100 and its current market value is $1,060,000, the property's capitalization rate is

8.4%.

A. leasehold interests

9. Nonposessory interests (i.e. bundles of real property rights that do not include possession) include all of the following EXCEPT: A. leasehold interests B. easements C. restrictive covenants D. liens

B. nonconforming uses

9. When a zoning ordinance is revised, some existing land uses then fall outside the new zoning classification. These land uses are referred to as: A. special uses B. nonconforming uses C. conforming uses D. exclusionary uses

Real estate markets tend to be highly segmented due to the heterogeneous nature of the products. Which of the following examples depicts this issue of market segmentation?

A couple searching for a single-family detached unit has limited their search to be in a specific price range between $350,000 and $400,000.

C. Mortgage

Real estate is property, which can be either a tangible or an intangible asset. Which of the following would be considered an intangible asset? A. Land B. Building C. Mortgage D. Fence

B. A driveway easement across one parcel to another

Which of the following is an example of an affirmative easement appurtenant? A. Right of way for a railroad B. A driveway easement across one parcel to another C. A sunlight easement D. Conservation easement

Real estate values derive from the interaction of three different sectors in the economy. Which of the following sectors serves to allocate financial resources among households and firms requiring funds?

capital market

The required rate of return that an individual demands on a real estate investment is determined in the

capital market.

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

capitalization rate.

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 price appreciation.

An example of a real estate asset that trades in the public debt market is

commercial mortgage backed securities (CMBS).

Competition for the currently available supply of locations and space, coupled with the existing supply of leasable space, determines the

current level of rental rates for each submarket and property.

When viewed as a tangible asset, real estate can be defined as the land and its permanent improvements. Improvements on the land include

fences.

A primary determinant of the feasibility of new construction is the relationship between the current level of property prices and the cost of new construction. We would expect the supply of properties to

increase if current property values are greater than the cost of construction.

The investment-grade property market is typically targeted by all of the following groups of investors except

individual investors.

Consistently the investment target of pension funds, publicly traded real estate companies, and real estate funds, large commercial properties valued well over $10 million are often referred to as

investment-grade property.

The size of a single-family residential lot is typically

less than one acre.

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

Investors in real estate can choose to hold properties directly in the private market or indirectly through publicly traded real estate securities. The market for buying, selling, and leasing real estate can be characterized by all of the following except

low transaction costs.

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

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

real property.

Real estate is defined as land and its permanent improvements. Which of the following is an example of an improvement to the land?

sewer system

Helping to constrain entry into real estate-related occupations, which of the following branches of government is directly involved in establishing rules and regulations for the licensing of professionals in the field of real estate?

state government

All of the following are examples of an improvement on the land except

streets

By the fourth quarter of 2015, U.S. households had accumulated $12.5 trillion in housing equity, which represents about 14 percent of their net worth. What proportion of U.S. households own their home?

two-thirds

The demand for real estate derives from the need that market participants (e.g., owner occupants, tenants, renters) have for shelter and convenient access to other locations. This competition for physical location and space occurs in the

user market.