Question 1

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

Accepted Answer

A)   Fence
B)   Building
C)   Sewer system
D)   Personal property C

Question 2

The size of a single family residential lot is typically:

Accepted Answer

A)   less than one acre
B)   between one and two acres
C)   between two and three acres
D)   greater than three acres A

Question 3

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

Accepted Answer

A)   Local government
B)   State government
C)   National government
D)   Foreign government A

Question 4

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:

Accepted Answer

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

Question 5

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?

Accepted Answer

A)   User market
B)   Capital market
C)   Government
D)   Property market

Question 6

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:

Accepted Answer

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

Question 7

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

Accepted Answer

A)   real property
B)   real estate operating companies
C)   equity REITs
D)   commercial mortgage backed securities (CMBS)

Question 8

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

Accepted Answer

A)   fences
B)   walkways
C)   sewer systems
D)   streets

Question 9

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:

Accepted Answer

A)   User Market
B)   Capital Market
C)   Government Sector
D)   Property Market

Question 10

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

Accepted Answer

A)   amortization
B)   discounting
C)   compounding
D)   accounting

Question 11

Which of the following would be considered a tangible asset?

Accepted Answer

A)   Land
B)   Lease agreement
C)   Mortgage
D)   Listed REIT

Question 12

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

Accepted Answer

A)   user market
B)   capital market
C)   government
D)   local market

Question 13

The investment grade property market is typically targeted by all of the following groups of investors EXCEPT:

Accepted Answer

A)   Pension funds
B)   Individual investors
C)   Listed equity REITs
D)   Real estate private equity funds

Question 14

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

Accepted Answer

A)   Land
B)   Building
C)   Mortgage
D)   Fence

Question 15

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

Accepted Answer

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

Question 16

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:

Accepted Answer

A)   segmented property
B)   investment-grade property
C)   speculative-grade property
D)   immobile property

Question 17

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?

Accepted Answer

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.

Question 18

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:

Accepted Answer

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

Question 19

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

Accepted Answer

A)   property tax policy
B)   income tax policy
C)   building Codes
D)   real estate licensing requirements

Question 20

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?

Accepted Answer

A)   Local government
B)   State government
C)   National government
D)   Foreign government

Exam 1: The Nature of Real Estate and Real Estate Markets