Chapter 1

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? A. Structural attributes B. Financing attributes C. Location attributes D. Land attributes

C. Location attributes

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

C. Mortgage

Real estate is defined as land and its permanent improvements. Which of the following is an example of an improvement to the land? A. Fence B. Building C. Sewer system D. Personal property

C. Sewer system

By the third quarter of 2011, U.S. households had accumulated $6.2 trillion in housing equity, which represents about 11 percent of their net worth. What proportion of U.S. households own their home? A. one-third B. one-half C. two-thirds D. three-fourths

C. two-thirds

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. A couple searching for a single-family detached unit is willing to consider other residential property types such as an attached townhouse unit or condominium. B. A couple searching for a single-family detached unit has limited their search to homes in a single elementary school district C. A couple searching for a single-family detached unit has set a timeline for their search of 6 months, at which point they will renew their current apartment lease. D. 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.

D. 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.

As of 2011, the single largest asset category in the net worth portfolios of households is: A. government and corporate bonds B. stocks and mutual fund shares C. consumer durable goods D. housing

D. housing

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: A. localized markets B. highly segmented markets C. privately negotiated contracts D. low transaction costs

D. low transaction costs

Competition for the currently available supply of locations and space coupled with the existing supply of leasable space, determines: A. the current level of rental rates for each submarket and property B. the riskiness of the expected cash flows of an income-producing property C. the timing of the expected cash flows of an income-producing property D. the cost of financing the purchase of a property

A. the current level of rental rates for each submarket and property

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? A. User market B. Capital market C. Government D. Property market

B. 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): A. Appreciation rate B. Capitalization rate C. Discount rate D. Internal rate of return

B. Capitalization rate

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? A. Local government B. State government C. National government D. Foreign government

B. State government

The required rate of return that an individual demands on a real estate investment is determined in the: A. user market B. capital market C. government D. local market

B. capital market

The expected stream of rental income is capitalized into value by converting expected future cash flows into present value through a process called: A. amortization B. discounting C. compounding D. accounting

B. 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 A. homogeneous B. heterogeneous C. substitutes D. complements

B. heterogeneous

The national government can have a significant impact on the value of real estate through: A. property tax policy B. income tax policy C. building Codes D. real estate licensing requirements

B. income tax policy

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: A. segmented property B. investment-grade property C. speculative-grade property D. immobile property

B. investment-grade property

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: A. Low transaction costs B. Risk sharing amongst investors C. Highly segmented markets D. High information efficiency

C. Highly segmented markets

If we desire to classify land by its use, land that does not include any improvements to the land would be categorized as: A. "Raw" land B. Building site C. Developed land D. Property infrastructure

A. "Raw" land

Primarily through land use controls and property tax policy, which of the following branches of government has the largest influence on real estate values? A. Local government B. State government C. National government D. Foreign government

A. Local government

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: A. The collection of rent and price appreciation B. The collection of interest on the borrowed funds used to purchase the property C. The receipt of property taxes D. The case of a borrower default on required mortgage payments

A. The collection of rent and price appreciation

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: A. User Market B. Capital Market C. Government Sector D. Property Market

A. User Market

When viewed as a tangible asset, real estate can be defined as the land and its permanent improvements. Improvements on the land include A. fences B. walkways C. sewer systems D. streets

A. 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: A. increase if current property values are greater than the cost of construction B. decrease if current property values are greater than the cost of construction C. increase if current property values equal the cost of construction D. decrease if current property values equal the cost of construction

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

The size of a single family residential lot is typically: A. less than one acre B. between one and two acres C. between two and three acres D. greater than three acres

A. less than one acre

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. real property B. home mortgages C. equity REITs D. mortgage backed securities

A. real property