Introduction to Real Estate Test Preparation
Course Introduction
Introduction to Real Estate offers a comprehensive overview of the real estate industry, including its fundamental concepts, principles, and practices. The course explores the various types of real estate such as residential, commercial, and industrial properties, as well as the processes surrounding buying, selling, leasing, and property management. Topics include real estate markets, property valuation, legal and regulatory frameworks, financing methods, urban development, and the roles of agents and brokers. Through case studies and practical examples, students gain insights into current trends and challenges facing the real estate sector, preparing them for future coursework or entry-level careers in the field.
Recommended Textbook
Real Estate Principles A Value Approach 4th Edition by Wayne Archer
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23 Chapters
660 Verified Questions
660 Flashcards
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Chapter 1: The Nature of Real Estate and Real Estate Markets
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Sample Questions
Q1) 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
Answer: B
Q2) 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
Answer: B
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Page 3
Chapter 2: Legal Foundations to Value
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) 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
Answer: C
Q2) 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
Answer: C
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Chapter 3: Conveying Real Property Interests
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Sample Questions
Q1) 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
B)Covenant against encumbrances
C)Covenant of quiet enjoyment
D)Exceptions and reservation clause
Answer: A
Q2) The type of deed offered by the grantor is communicated through a phrase such as "does herby grant,bargain,sell and convey unto ..." This clause is referred to as the:
A)recital of consideration
B)words of conveyance
C)covenant
D)habendum clause
Answer: B
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5
Chapter 4: Government Controls and Real Estate Markets
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) 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
Q2) 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
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6
Chapter 5: Market Determinants of Value
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) According to the bid-rent model,which of the following changes in the model's underlying assumptions would most likely result in a decrease in rents for properties closest to the central business district (CBD)?
A)An increase in an individual's hourly wage
B)An increase in the average traveling speed of the individual's commute
C)An increase in the number of households attempting to live in the area
D)An increase in the number of days an individual must commute to work
Q2) 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 re-spent within the community on other local goods and services,the community is benefiting through a:
A)dividend process
B)multiplier process
C)forced saving process
D)diversification process
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7
Chapter 6: Forecasting Value: Market Research
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) Survey research has been applied to real estate markets at many levels.Despite its frequent application,analysts must be cautious with survey use because:
A)it is difficult to implement
B)interviews and questionnaires are not received well by consumers
C)it cannot be used in a small sample area
D)it can be fraught with abortive errors
Q2) In contrast to conventional market analysis,the "story" approach to market research starts with an analysis of:
A)conditions in global real estate markets
B)conditions in national real estate markets
C)conditions in state real estate markets
D)conditions in the property specific market
Q3) Computer software systems that enable one to manipulate and "map" information with great flexibility and speed are referred to as:
A)geographical information systems (GIS)
B)psychographics
C)survey research
D)census mapping
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Chapter 7: Valuation Using the Sales Comparison and Cost Approaches
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Sample Questions
Q1) The sequence of adjustments to the transaction price of a comparable property would make no difference if all adjustments were dollar adjustments.However,if percentage adjustments are involved then the sequence does matter.In making adjustments to a comparable property to arrive at a final adjusted sales price,the proper sequence for the following adjustments would be:
A)Financing terms,market conditions,location.
B)Location,market conditions,financing terms.
C)Market conditions,location,financing terms.
D)Location,financing terms,market conditions.
Q2) In real estate markets,a transaction occurs only when the investment value of the buyer exceeds the investment value of the seller.The buyer's investment value is the ________ that he or she would be willing to pay for a particular property,while the seller's investment value is the _______ that he or she would be willing to accept.
A)minimum;minimum
B)minimum;maximum
C)maximum;minimum
D)maximum;maximum
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Chapter 8: Valuation Using the Income Approach
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Sample Questions
Q1) The cap rate is an important metric that investors use to analyze the state of commercial real estate markets.When interpreting cap rate movements,an increase in cap rates over time would indicate that:
A)The discount rate used in TVM (time value of money)calculations has increased
B)The discount rate used in TVM (time value of money)calculations has decreased
C)Property values have increased
D)Property values have decreased
Q2) Given the following information,calculate the effective gross income multiplier.Sale price: $2,500,000;Effective Gross Income: $340,000;Operating Expenses: $100,000;Capital Expenditures: $36,000.
A)0.136
B)7.35
C)10.42
D)12.25
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10
Chapter 9: Real Estate Finance: The Laws and Contracts
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27 Verified Questions
27 Flashcards
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Sample Questions
Q1) With most standard home loans,the lender can hold the borrower personally liable in the event of a default.Such loans are commonly referred to as:
A)recourse loans
B)nonrecourse loans
C)conforming loans
D)nonconforming loans
Q2) When a buyer acquires a property having an existing mortgage loan,a decision must be made as to whether or not the subsequent owner of the property can preserve the loan.If the buyer does not add his or her signature to the note,the buyer does not take on any personal liability.In this case,the buyer is said to:
A)assume the old loan
B)purchase the property subject to the existing loan
C)obtain the property through the use of a contract for deed.
D)foreclose on the property
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11
Chapter 10: Residential Mortgage Types and Borrower
Decisions
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37 Verified Questions
37 Flashcards
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Sample Questions
Q1) In a fixed-term,level-payment reverse mortgage,sometimes called a reverse annuity mortgage,or RAM,a lender agrees to pay the homeowner a monthly payment,or annuity,and expects to be repaid from the homeowner's equity when he or she sells the home or obtains other financing to pay off the RAM.Consider a household that owns a $150,000 home free
And clear of mortgage debt.The RAM lender agrees to a $100,000 RAM for 10 years at 6 percent.Assume payments are made annually,at the beginning of each year to the homeowner.Calculate the annual payment on the RAM.
A)$7,157.35
B)$7,586.80
C)$12,817.73
D)$13,586.80
Q2) A common criticism of the annual percentage rate (APR)is that it usually understates the true cost of borrowing.The APR may understate the cost of borrowing because it assumes:
A)interest rates will always rise
B)the loan always goes to maturity
C)the actual life of the loan is shorter than maturity
D)upfront fees should be ignored
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Chapter 11: Sources of Funds for Home Mortgages
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Suppose an institution has purchased a $250,000 mortgage loan from the loan originator and wishes to create a mortgage pass-through security.In doing so,this institution will generate revenue by charging a servicing fee of 35 basis points.If the monthly mortgage payment on the loan is $1,250,how much income is passed through to the investor in the mortgage pass through each month (rounded to the nearest dollar)?
A)$73
B)$375
C)$875
D)$1177
Q2) The development of Fannie Mae and Freddie Mac established the framework for a liquid secondary market for residential mortgages.In 2010,the share of all residential mortgage loans owned or securitized by Fannie Mae and Freddie Mac approached approximately:
A)5%
B)16%
C)44%
D)76%
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Chapter 12: Brokerage and Listing Contracts
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Sample Questions
Q1) Federal and state laws prohibit discrimination in housing.However,exemptions do exist depending on the particular type of property that is being considered.All of the following activities could be considered exempt in specific scenarios EXCEPT:
A)Refusing to sell or rent to a person because of race.
B)Refusing to sell or rent based on familial status (i.e.having children).
C)Refusing to sell or rent to persons based on age.
D)Refusing to sell or rent a single-family home based on religion provided the owners do not employ the services of a broker or agent.
Q2) It is common for real estate firms to identify submarkets,such as property types or particular sections of a city,in which they can specialize and concentrate their transaction activity.This practice is referred to as:
A)internet marketing
B)open listing
C)discount brokerage
D)market segmentation
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14
Chapter 13: Contracts for Sale and Closing
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Sample Questions
Q1) When the seller in a contract for sale fails to perform (e.g.breach of contract,nonperformance,or default),the buyer has a variety of remedies.One such remedy is to appeal to the court to force the defaulting seller to carry out the contract.This remedy is most commonly referred to as suing for:
A)Damages.
B)Earnest.
C)Recission.
D)Specific performance.
Q2) The final step in a real estate transaction is the closing.In most closings,which party is responsible for seeing that the closing is completed successfully?
A)Escrow agent
B)Lender
C)Selling Broker
D)Listing broker
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Chapter 14: The Effects of Time and Risk on Value
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Sample Questions
Q1) Suppose a bank decides to make a mortgage loan to an individual so that they may purchase a home.The homeowner will pay the bank $1500 per month in mortgage payments for the next 30 years.The bank will collect the mortgage payments at the end of the month.What is this promised stream of cash flows worth to the bank today if they could reinvest the monthly income at an annualized rate of 5% for the entire investment horizon?
A)$23,058.68
B)$99,658.27
C)$279,422.43
D)$1,248,387.95
Q2) An investor just purchased an office building for $100,000.He knows for certain that he can sell the building for $110,000 in 5 years.Approximately how much does he need to Charge in annual rent in order to achieve a 15% annual return on the deal (rounded to the nearest hundred dollars)?
A)$2,500
B)$8,000
C)$13,500
D)$20,500
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Chapter 15: Mortgage Calculations and Decisions
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30 Verified Questions
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Sample Questions
Q1) Let's assume that you have just taken out a mortgage loan for $200,000 with an origination fee of 2 points due upfront.The mortgage term is 30 years and the mortgage rate is fixed at 4%.What is the cost of the origination fee in dollar terms?
A)$400.00
B)$954.83
C)$4000.00
D)$4954.83
Q2) Given the following information on a fixed-rate fully amortizing loan,determine the maximum amount that the lender will be willing to provide to the borrower.Loan Term: 30 years,Monthly Payment: $800,Interest Rate: 6%.
A)$6,707
B)$9,295.15
C)$13,333
D)$133,433
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17
Chapter 16: Commercial Mortgage Types and Decisions
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) Different financing requirements usually are involved in the various phases of a property's life.Which of the following types of loans is used to finance improvements to the land,such as sewers,streets and utilities?
A)Land acquisition loans
B)Land development loans
C)Construction loans
D)Bridge loans
Q2) Assume you have taken out a balloon mortgage loan for $2,500,000 to finance the purchase of a commercial property.The loan has a term of 5 years,but amortizes over 25 years.Calculate the balloon payment at maturity (Year 5)if the interest rate on this loan is 4.5%.
A)$5,637.99
B)$13,895.82
C)$2,196,447.59
D)$2,495,479.19
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18
Chapter 17: Sources of Commercial Debt and Equity Capital
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Sample Questions
Q1) Given the following information,calculate the price-FFO multiple for the following REIT.Net income: $1,200,000,Gain/losses from infrequent and unusual events: $0,Amortization of tenant improvements: $120,000,Amortization of leasing expenses: $75,000,Depreciation (real property): $2,675,000.Stock Price: $40;Market Capitalization:
$40,000,000
A)0.10
B)4.07
C)9.83
D)393.12
Q2) Of the $3.2 trillion in outstanding mortgage debt in the U.S. ,approximately 714% is privately held by institutional and individual investors.Which of the following institutions is the largest single source of private mortgage funds?
A)Savings institutions
B)Life insurance companies
C)Government Sponsored Enterprises
D)Commercial banks
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19
Chapter 18: Investment Decisions: Ratios
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Sample Questions
Q1) The going-in capitalization rate can vary significantly by property quality.Which of the following classes of properties within a particular property type would be expected to have the highest cap rates?
A)Class A properties
B)Class B properties
C)Class C properties
D)Cap rates would be equal across all classes within the same property type
Q2) Given the following information,calculate the equity dividend rate for this investment.First-year NOI: $18,750,Before-tax cash flow: $11,440,Acquisition price:
$520,000,Equity Investment: 20%.
A)2.2%
B)3.6%
C)11.0%
D)18.02%
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Chapter 19: Investment Decisions: NPV and IRR
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Sample Questions
Q1) The use of financial leverage in purchasing an income-producing property can affect the amount of cash required at acquisition,the net cash flows from rental operations,the net cash flows from the eventual sale of the property,and the ultimate return on invested equity.Assuming the going-in IRR is greater than the effective borrowing cost,if an investor increases his leverage rate,say from 75% to 80%,we would expect which of the following to occur?
A)Both NPV and going-in IRR increase
B)NPV decreases,while going-in IRR increases
C)NPV increases,while going-in IRR decreases
D)Both NPV and going-in IRR decrease
Q2) Changes in the discount rate used to complete net present value analysis can have a significant impact on the estimated value of the investment and therefore affect the overall investment decision.As the required internal rate of return (IRR)increases,the net present value will:
A)decline
B)increase
C)remain the same
D)become zero
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Chapter 20: Income Taxation and Value
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Sample Questions
Q1) Limited liability companies (LLCs)and limited partnerships are preferred to corporate ownership structures because these forms of ownership allow investors to obtain limited liability and avoid the double taxation faced by corporations.This tax benefit can be extremely important as the maximum capital gain rate for corporations remains at (as of 2012):
A)15%
B)25%
C)35%
D)45%
Q2) The tax treatment of real estate holdings that are classified as trade or business property and are held for more than one year is more commonly referred to as which of the following sections of the tax code?
A)Section 1231
B)Section 1031
C)Section 856
D)Section 851
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Chapter 21: Managing Residential Rental Property
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Sample Questions
Q1) While some property owners choose to perform both the property and asset manager functions themselves,many commercial property owners choose to employ professional property managers instead.The property manager works under a management contract in which the manager is empowered to serve as the owner's fiduciary.This type of relationship is more commonly referred to as a(n):
A)agency relationship
B)open listing relationship
C)joint-venture
D)correspondent relationship
Q2) Suppose an owner is trying to decide whether or not to make improvements to her Property.Given the following information,what would be the value added or potential loss if the improvements are undertaken? Current rent per square foot: $8.75,Anticipated rent per square foot: $14.50,Cost of improvements: $250,000,Square feet: 34,000.
A)Gain of $54,500
B)Loss of $54,500
C)Gain of $195,500
D)Loss of $195,500
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Page 23
Chapter 22: Managing Non-Residential Rental Property
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Sample Questions
Q1) Retail establishments are found in a variety of forms,the simplest of which is: (Hint: fast-food franchise)
A)Freestanding retail outlet
B)Strip center
C)Power center
D)Regional mall
Q2) When securing a new tenant for a commercial rental property,the owner of the property might incur an additional expense that amounts to the cost of refurbishing the rental space to meet the needs of the tenant's business.The allocation of money for this added expense is more commonly referred to as a(n):
A)tenant improvement allowance
B)concession
C)sublease
D)expense stop
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Chapter 23: Development: The Dynamics of Creating Value
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Sample Questions
Q1) Suppose that a developer pre-leases space to a financially strong,national tenant such as Home Depot,without having yet built the structure in which they will be leasing space.This is more commonly referred to as a:
A)ground lease
B)build-to-suit
C)design-build
D)contract for deed
Q2) With a multitude of players involved in the development process,it is important to understand where they participate within the various stages of development.Which of the following individuals is the least likely to be involved in the design stage of development?
A)General contractor
B)Landscape architect
C)Civil engineer
D)Land planner
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