Chapter 15 - Practice Exams and Review Questions **

The real estate market is a cyclical in nature and tends to follow the business cycle. When at its peak, what is the typical order of the subsequent business cycle phases? (a) contraction, expansion and trough (b) expansion, trough and contraction (c) contraction, trough and expansion (d) trough, contraction and expansion

(c) contraction, trough and expansion

All of the following statements apply to the real estate market, EXCEPT: (a) Situs value is value resulting from location. (b) Real estate is immobile. (c) Each parcel of real estate is unique. (d) The real estate market is national in nature.

(d) The real estate market is national in nature.

In which condition does market equilibrium theoretically exist? (a) When supply exceeds demand (b) When demand exceeds supply (c) When costs and prices stabilize (d) When supply and demand are in balance

(d) When supply and demand are in balance

What term refers to the phenomenon that occurs in older neighborhoods where younger, single people and small families begin purchasing properties and rehabilitate or renovate them to live in proximity to urban services? (a) neighborhood depreciation (b) age discrimination (c) government revitalization (d) gentrification

(d) gentrification

What term refers to the legal use that generates the most return on the land and any improvements, when compared to alternative uses? (a) legally permissible use (b) efficient market use (c) peak use (d) highest and best use

(d) highest and best use

Which of the following market factors will typically result in increased demand? (a) A decrease in prices (b) A decrease in income (c) An increase in mortgage interest rates (d) A decrease in population

(a) A decrease in prices

Which of the following best describes the free enterprise system? (a) A market system (b) A centralized system (c) A socialist system (d) A communist system

(a) A market system

When estimating supply, it is not necessary to consider which of the following? (a) Price (b) Availability of materials (c) Availability of skilled labor (d) Availability of land

(a) Price

Which of the following terms relates specifically to the location of a property? (a) Situs (b) Site Density (c) Demographics (d) Plottage

(a) Situs

Which of the following statements is true regarding the real estate market? (a) The real estate market is local in nature. (b) Sellers are not normally emotional about their homes. (c) Determining an accurate sales price is a simple process. (d) Finding ready, willing, and able purchasers for listed property is an ea

(a) The real estate market is local in nature.

All of the following conditions would typically exist in a free enterprise system, EXCEPT: (a) government is in control of the products and services produced (b) anyone can participate and land is privately owned (c) entrepreneurs determine what products and services are produced (d) products and services are produced based on the price at which they can be sold profitably

(a) government is in control of the products and services produced

All of the following are physical characteristics of land EXCEPT: (a) it depreciates (b) it is indestructible (c) it is immobile (d) it is heterogeneous

(a) it depreciates

Which statement correctly describes the typical impact on demand due to other factors in the market? (a) when prices rise, demand typically decreases (b) when population increases, demand typically decreases (c) when income increases, demand typically decreases (d) when interest rates go up, demand typically increases

(a) when prices rise, demand typically decreases

The real estate market experiences changes and cycles. What is the term used to describe the phase of the market where there is not enough demand to meet the current over-supply of available housing units? (a) An inflationary market (b) A buyer's market (c) A seller's market (d) An expanding market

(b) A buyer's market

Which external force affecting value is indicated by the number of vacancies in an area? (a) Social (b) Economic (c) Governmental (d) Environmental

(b) Economic

An investor purchases a lot with an abandoned house for $100,000, along with an adjacent vacant lot for $115,000. The investor demolishes the house, and then sells the two lots together for $250,000. What would the additional value be called? (a) Assemblage value (b) Combination value (c) Plottage value (d) Investment value

(c) Plottage value

Complete the statement. When the supply of available properties exceeds the demand for those properties, it is a: (a) balanced market. (b) seller's market. (c) buyer's market. (d) market under-supply.

(c) buyer's market.

All of the following are indications of expansion in the market EXCEPT: (a) increasing demand (b) increasing supply (c) declining construction (d) increasing prices and rent

(c) declining construction

In the real estate market the seller of a $500,000 home is not in competition with the seller of a $100,000 home. Which term refers to the creation of different levels of competition in the market based on price? (a) distribution (b) supply (c) production (d) stratified demand

(d) stratified demand

Two factors that affect a real estate market are supply and demand. Which of the following would be a good indicator of the measure of supply versus demand? (a) The population of the community (b) Consumer preferences such as number of bedrooms and bathrooms (c) The asking price of recently listed homes in the community (d) the vacancy rate within the community

(d) the vacancy rate within the community

All of the following are conditions in an efficient market EXCEPT: (a) prices of goods and services are low and affordable (b) goods are homogeneous, small, lightweight and easily transportable (c) buyers and sellers are brought together from an organized market mechanism (d) there are government regulations that limit production

(d) there are government regulations that limit production

How does the real estate market react to shifts in consumer demand? (a) Rapidly (b) Slowly (c) Not at all (d) Through changes in zoning laws

(b) Slowly

Which term is used to describe the relatively new phenomenon in which small families move into older neighborhoods, renovate the properties, and displace poorer residents? (a) Putrefaction (b) Gentrification (c) Stabilization (d) Blockbusting

(b) Gentrification

Real estate economists look at several market conditions to predict where the market is headed. Which of the following factors is considered to be a particularly valuable market indicator, known as "the barometer of the real estate market?" (a) The stock market (b) Availability of credit (c) The LIBOR rate (d) The Federal Reserve Discount Rate

(b) Availability of credit

Which factor of production refers tot he risk-taking and management component of production? (a) capital (b) entrepreneurial ability (c) land (d) labor

(b) entrepreneurial ability

What is the term used for the value that results from the location of a parcel of land within a community? (a) market value (b) situs value (c) highest and best value (d) plottage value

(b) situs value

What is the correct order of the business cycle phases? (a) Expansion, trough, peak, and contraction (b) Peak, contraction, expansion, and trough (c) Expansion, peak, contraction, and trough (d) Peak, trough, expansion, and contraction

(c) Expansion, peak, contraction, and trough

All of the following considered factors of production, EXCEPT: (a) Capital (b) Entrepreneurship (c) Inventory (d) Land

(c) Inventory

It has been determined that the value of three lots, each having a value of $10,000, would have a value of $50,000 as a single tract parcel. Which concept does this illustrate? (a) Attachment (b) Parceling (c) Plottage (d) Appreciation

(c) Plottage

All of the following are indications of a growth period in the neighborhood life cycle EXCEPT: (a) low costs and favorable interest rates (b) newly cleared land is made available for construction (c) for sale signs appear with increased frequency (d) sustained demand

(c) for sale signs appear with increased frequency

Which characteristic correctly describes the real estate market? (a)organized and efficient (b) homogeneous products (c) local in nature (d) free of government influence

(c) local in nature

Which term refers tot he quantity of an item that is available? (a) market equilibrium (b) demand (c) supply (d) price

(c) supply

In the real estate market, what is a developer considered to be? (a) A lender (b) A competitor (c) A consumer (d) A supplier

(d) A supplier

Which of the following might be indicated if a neighborhood appears to have an abundance of "For Sale" signs and an unusually high number of rentals available? (a) Neighborhood growth is continuing. (b) A period of revitalization has begun. (c) The neighborhood has entered a period of stability. (d) Decline in the neighborhood may be indicated.

(d) Decline in the neighborhood may be indicated.

What is the correct order in which the criteria for estimating highest and best use should be considered? (a) Physically possible, legally permissible, maximally productive, and economically feasible (b) Legally permissible, economically feasible, maximally productive, and physically possible (c) Economically feasible, legally permissible, physically possible, and maximally productive (d) Legally permissible, physically possible, economically feasible, and maximally productive

(d) Legally permissible, physically possible, economically feasible, and maximally productive

Which of the following is a characteristic of the real estate market? (a) The market is local in nature and, as such, is influenced only by local economic, social, environmental, and governmental forces. (b) The market responds rapidly to changes in supply and demand. (c) Real estate products are generally homogeneous within a geographical area. (d) Real estate products are typically unique, which results in a non-centralized market.

(d) Real estate products are typically unique, which results in a non-centralized market.

What is the term used for the increased value of two or more parcels of land that are combined as an assemblage? (a) highest and best value (b) situs value (c) highest assemblage value (d) plottage value

(d) plottage value

What type of market exists when there are more buyers than sellers? (a) balanced market (b) government controlled market (c) buyers market (d) sellers market

(d) sellers market

what is the correct sequential order of the 4 criteria applied to determine highest and best use of a parcel of real estate?

legally permissible, physically possible, financially feasible, maximally productive