Finance Real Estate Principles Weekly Quizzes

Quiz 1: 1. 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. lien arising from a court judgment unrelated to ownership of the property 2. 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 apply only to tangible assets 3. All of the following are examples of an improvement on the land except a. Streets 4. 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 enduring 5. 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 6. 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 a. collection of rent and price appreciation 7. 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. capitalization rate 8. 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" or undeveloped land. 9. Property rights can be divided into two classes, real and personal. Which of the following is an example of real property? a. commercial building 10. Real estate is defined as land and its permanent improvements. Which of the following is an example of an improvement to the land? a. sewer system 11. 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. Mortgage 12. 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. capital market 13. 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. restrictive covenants are public in nature and therefore can be enforced by those who do not hold a legal interest in the property. 14. 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 his or her proportional share of the cost, the city may file a(n) a. assessment lien 15. 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 16. Which of the following is an example of a negative easement appurtenant? a. a scenic easement used to restrict construction on adjacent parcels so as to preserve a valued view 17. Which of the following is an example of an affirmative easement appurtenant? a. a driveway easement across one parcel to another 18. Which of the following types of liens is automatically superior to any other lien? a. property tax and assessment lien 19. 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 20. Which of the following would most likely be involved in the Equity Capital Market: a. Building Owner Quiz 2: 1. 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. new urbanism 2. A cul-de-sac is a road within a residential neighborhood which has no outlet. Which type of urban planning model would most likely include cul-de-sacs?: a. Traditional 3. A deed is a special form of written contract used to convey a permanent interest in real property. Unlike most contracts, a deed requires a. only the grantor to be legally competent and of legal majority age 4. A law requiring any contract conveying a real property interest to be in writing in order to be enforceable is a modern application of the a. statute of frauds. 5. A section is a 1 square mile subdivison of a township as used in a government rectangular survey. How many acres are in a section? a. 640 6. 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. Partnership 7. 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? a. general warranty deed 8. 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 ownership is a divisible percentage ownership and not a shared ownership in the entire property? a. tenancy in common 9. 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? a. Delivery 10. Most often used in the description of urban property, which of the following methods of land description contains information regarding the location of various easements and may even contain a list of restrictive covenants? a. subdivision plat lot and block number 11. 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 make an effort to learn of it. Based on the common law tradition, this policy is known as the a. doctrine of constructive notice 12. 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 a. marketable title law 13. The covenants in a deed are the most important differences among types of deeds. Which of the following covenants promises that the grantor truly has good title and the right to convey it? a. covenant of seizin 14. The description of land in a deed must be unambiguous. All of the following would be considered acceptable legal descriptions of land except a. street address 15. The map of a subdivision, which displays a sectioned subdivision in parcels, the parcels identified by numbers, and this map is placed in public records, it is called a a. Plat 16. 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 a. metes and bounds 17. 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 (i.e, what does title insurance NOT cover)? a. It does not protect the grantee from the threat of physical damage to the property 18. 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 19. Which of the following types of deeds is worded to imply no claim of title, but rather only conveys what interest the grantor actually has, if any? a. quitclaim deed 20. 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. Externalities Quiz 3: 1. A city's potential for 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 a. economic base 2. A new faculty member at the local university pays $1,500 per month to rent an apartment in the downtown area. She teaches on campus three days a week and works from home the remaining two days. On the days when she must commute, given the heavy traffic congestion, it takes her two hours each way to commute from downtown to campus. According to the assumptions of the bid-rent model, what should this professor be willing to pay in rent per month to live near campus if her hourly wage rate is $25? (In your calculations, assume there are four weeks in a given month.) a. $2,700 3. 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. a doctor at the city hospital who must walk to work 4. 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 adjacent to each other at the center of the CBD.) a. a barista at the local coffee shop who uses a car to commute 5. 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? a. $680 6. Cities such as New York are able to host a variety of complex industries because of the development of specialized resources that support their growth. When specialized resources emerge in response to demand from multiple industries, this is referred to as a. agglomeration economies 7. 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. Condemnation 8. 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 9. Given the following information, compute the property tax rate for the community in percentage terms. Total budget expenditures: $108 million; total nonproperty tax income: $50 million; total assessed value of all properties: $2 billion; total exemptions: $550 million. a. 4.0% 10. Most communities contain a number of tax-exempt properties. All of the following are typically included in the tax-exempt property classification except a. single-family homes 11. 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. ad valorem taxes 12. 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 13. Tax rates are usually stated in mills. Assuming the tax rate in percentage terms is 6.5%, convert this rate to mills. a. 65 mills 14. The growth of the motion picture industry in Los Angeles, the petrochemical industry in Houston, and 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 a. industry economies of scale 15. 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. eminent domain 16. 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 respent within the community on other local goods and services, the community is benefiting through a a. multiplier process 17. Using the following information, determine the location quotient for Motor City: employment in motor vehicle manufacturing within Motor City: 12,643; total employment in Motor City: 560,379; employment in motor vehicle manufacturing (nationally): 152,750; total employment (nationally): 106,201,232. a. 15.7 18. Using the following information, determine the location quotient for this industry: percentage of employment in financial services industry within the local community: 15%; percentage of employment in financial services industry for the entire United States: 4.4% a. 3.4 19. 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. Variance 20. 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. building codes Quiz 4: 1. A developer of a new townhome community estimates that there will be 1,200 home (all types) sales in University City over the next year. An analysis of demographic information has revealed that the core market share for the townhome project within the community is 10%. Assuming a capture rate of 20%, what is the developer's first-year projection of townhome sales in the new community? a. 24 units 2. A new residential development will face competition from other new developments, other builders, and sales of existing homes. To determine if demand in that market segment will be sufficient to justify proceeding with the project, a developer would be most interested in estimating the percentage of the market that the developer expects to convert to sales. This is called a a. Capture rate 3. A popular adage in real estate is that property value is all about "location, location, location." However, for most property types in nonresidential realms, non locational requirements are equally or even more important. All of the following are examples of non locational factors except a. proximity to modes of public transportation 4. In constructing a market-defining story, it is helpful to answer a series of fundamental questions around which analysis can be built. Which of the following questions is designed to identify the target market? a. Who are the customers? 5. In contrast to conventional market analysis, the story approach to market research starts with an analysis of a. conditions in the property-specific market 6. Preferences of households can vary with time, prosperity, and context. The nuances in the preferences or needs of market subgroups are commonly referred to as a. market segmentation 7. Professor James Graaskamp often asserted that when one buys real estate, what one is buying is a set of assumptions about the future. Therefore, it is not surprising that the beginning point of the market research process is to a. construct a market-defining story 8. Since most data for a given market study is not readily available, analysts must be creative in their use of data that they are able to obtain. The primary source for detailed household demographic information is a. the U.S. Bureau of the Census 9. Suppose a developer is interested in building a new residential subdivision. Through his market research, the developer has determined that the target market segment potential in year 1 consists of 160 households. If the developer projects that he will be able to sell 24 homes in the first year, what is his assumed capture rate? a. 15% 10. Suppose that you were interested in building a luxury apartment complex in your hometown. In your analysis of local demographics, you discover that the target market makes up only 5% (core market share) of the households that currently rent (or would be interested in renting) in this town. If market experts believe that a total of 5,000 apartment units will be rented in your entire hometown within the next year, what is the projected number of units the developer could expect to lease in year 1 if he is able to capture 20% of the market potential? a. 50 units