Real Estate Markets
Exam Materials
Course Introduction
This course provides an in-depth examination of real estate markets, exploring their structure, function, and key drivers. Students will analyze the economic, financial, and regulatory factors influencing real estate markets, including supply and demand dynamics, property valuation, and market trends. The course covers both residential and commercial segments, introducing concepts such as market cycles, investment analysis, and the role of government and financial institutions. Real-life case studies and current market data are used to help students develop practical skills for evaluating and participating in real estate markets.
Recommended Textbook
Real Estate Principles A Value Approach 5th by David Ling
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23 Chapters
796 Verified Questions
796 Flashcards
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Page 2
Chapter 1: The Nature of Real Estate and Real Estate
Markets
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) 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
Answer: A
Q2) 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
Answer: D
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Chapter 2: Legal Foundations to Value
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) Which of the following types of direct co-ownership is a form of joint tenancy for husband and wife created by marriage that protects each spouse from liens arising from either spouse alone?
A) Tenancy in common
B) Tenancy by the entirety
C) Condominium
D) Tenancy at Will
Answer: B
Q2) Since an easement is a non-possessory interest, it is important to understand the right of disposition that is associated with it. In which of the following types of easements is the right of disposition claimed as part of the easement?
A) Implied easement
B) Easement in gross
C) Negative easement appurtenant
D) Positive easement appurtenant
Answer: B
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4
Chapter 3: Conveying Real Property Interests
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Sample Questions
Q1) At the death of a property owner, property will convey either in accordance with a will or without a will. If a will dictates the distribution of the decedent's real property, the property is said to be:
A) patented
B) devised
C) conveyed by the law of descent
D) dedicated
Answer: B
Q2) 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
B) doctrine of constructive notice
C) habendum clause
D) actual notice
Answer: A
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5
Chapter 4: Government Controls and Real Estate Markets
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42 Verified Questions
42 Flashcards
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Sample Questions
Q1) Nearly half of states in the U.S. use the sale of tax lien certificates to manage defaulted property taxes. The certificates are auctioned to the public at:
A) the face value of the property taxes due
B) the assessed value of the home
C) a discount from the face value of the property taxes due
D) a premium of the assessed value of the home
Q2) Given the following information, compute the property tax rate for the community in percentage terms. Total budget expenditures: $108 million, Total non-property tax income: $50 million, Total assessed value of all properties: $2 billion, Total exemptions: $550 million.
A) 2.5%
B) 4.0%
C) 10.0%
D) 12.0%
Q3) A traditional zoning ordinance includes all of the following EXCEPT:
A) Minimum setback requirements
B) Minimum lot dimensions
C) Provisions for special use districts
D) Performance standards
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Page 6
Chapter 5: Market Determinants of Value
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32 Flashcards
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Sample Questions
Q1) Because a city's output capacities change slowly over time, it is important to understand the supply side (long-run) factors affecting urban growth. Which of the following would NOT be considered a supply-side factor that impacts a city's economic growth?
A) Nature of the available labor force
B) Quality of life within a community
C) Cooperation of local leadership and government
D) City's export activity
Q2) Using the following information, determine the location quotient for Springfield. Employment in Aerospace Products within Springfield: 30,044; Total Employment in Springfield: 208,054; Employment in Aerospace Products (nationally): 474,905; Total Employment (nationally): 106,201,232
A) 0.03
B) 12.10
C) 15.70
D) 32.29
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Chapter 6: Forecasting Value: Market Research
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Sample Questions
Q1) Suppose that you have begun to gather some demographic data in order to project the potential sales of a new development project. The developer hopes to be able to target the following household types who fall in the upper 10% of income brackets: Empty Nesters, Single Parents, and Unrelated Individuals. Utilizing the following population information, determine the core market share that the development project yearns to target with this project. Total Owner Occupant Households: 48,000; Traditional Families in the Upper 10% of Income Brackets: 25,000; Empty Nesters in the Upper 10% of Income Brackets: 5,000; Single Parents in the Upper 10% of Income Brackets: 10,000; Unrelated Individuals in the Upper 10% of Income Brackets: 8,000
A) 4.17%
B) 47.92%
C) 52.08%
D) 92.00%
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
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Chapter 7: Valuation Using the Sales Comparison and Cost Approaches
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38 Verified Questions
38 Flashcards
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Sample Questions
Q1) While there is no specific number of comparables that is required for every appraisal assignment, how many comparable sales are considered adequate as long as the properties are very similar to the subject property?
A) One
B) Three
C) Five
D) Ten
Q2) The cost approach to valuation assumes the market value of a new building is similar to the cost of constructing it today. Which of the following terms refers to the expenditure required to construct a building of equal utility using modern construction techniques, materials, and design that eliminates outdated aspects of the structure?
A) Reproduction cost
B) Replacement cost
C) Fixed cost
D) Variable cost
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Page 9
Chapter 8: Valuation Using the Income Approach
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36 Verified Questions
36 Flashcards
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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) Suppose that examination of a pro forma reveals that the fifth year net operating income (NOI) for an income producing property that you are analyzing is $138,446 (you can assume that this cash flow occurs at the end of the year). If you estimate the projected rental growth rate for the property to be 5% per year, determine the projected sale price of the property at the end of year five if the going-out capitalization rate is 9%.
A) $988,900.00
B) $1,465,037.00
C) $1,538,289.00
D) $1,615,203.00
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Chapter 9: Real Estate Finance: The Laws and Contracts
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35 Verified Questions
35 Flashcards
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Sample Questions
Q1) Added to the index of the adjustable rate is a margin, which is the lender's "markup." For standard Adjustable Rate Mortgage (ARM) loans, the average industry margin has been stable at approximately:
A) 75 basis points
B) 175 basis points
C) 275 basis points
D) 375 basis points
Q2) A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates over time. For income-producing property, the most common index rate is the:
A) one-year U.S. Treasury constant maturity rate
B) prime rate
C) London Interbank Offered Rate (LIBOR)
D) cost-of-funds index
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Chapter 10: Residential Mortgage Types and Borrower
Decisions
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43 Flashcards
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Sample Questions
Q1) Federal Housing Administration (FHA) loans differ from conventional loans in a number of ways. All of the following statements regarding FHA loans are true EXCEPT: A) FHA loans are targeted toward first-time homebuyers who are in slightly weaker financial circumstances than the typical prime conventional borrower. B) FHA loans are more tolerant in terms of qualifying debt-to-income ratios
C) FHA loans require higher credit scores than are needed for prime conventional loans. D) FHA loans contain lower limits on their maximum size than are available through conforming conventional loans.
Q2) Based on your understanding of the risks associated with different mortgage loan types, which of the following mortgage loans would be considered the safest with respect to default risk?:
A) subprime mortgage loans
B) qualified mortgage loans
C) option ARM loans
D) alt-A mortgage loans
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Chapter 11: Sources of Funds for Home Mortgages
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Sample Questions
Q1) In 1989, Congress took major steps to establish depository institution accountability by requiring these institutions to hold more capital as they take on riskier assets. Which of the following Congressional acts imposed these capital standards on depository institutions?
A) Depository Institutions Deregulation and Monetary Control Act
B) Financial Institutions Reform, Recovery, and Enforcement Act
C) Secure and Fair Enforcement for Mortgage Licensing Act
D) Riegle Community Development and Regulatory Improvement Act
Q2) Traditional home mortgage underwriting is said to rest on three elements, the "three C's." The housing expense ratio is one tool that lenders will use to address concerns associated with which of the "three C's?"
A) Collateral
B) Creditworthiness
C) Capacity
D) Capability
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Chapter 12: Brokerage and Listing Contracts
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Sample Questions
Q1) Critical to any listing contract is the question of when the broker becomes entitled to a commission. Traditionally, the broker is still entitled to a commission in all of the following scenarios EXCEPT:
A) If the seller refuses to sell upon being presented with an offer meeting the original terms and conditions
B) If the seller cannot deliver the property for any reason due to his or her fault.
C) If both the buyer and seller sign a contract but then agree to cancel it.
D) If a contract is contingent upon the buyer obtaining financing and the buyer is unable to do so.
Q2) Real estate brokers serve as intermediaries by bringing buyers and sellers together in the real estate market. For this service, brokers are paid what is commonly referred to as a:
A) commission
B) licensing fee
C) recovery fee
D) listing fee
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14
Chapter 13: Contracts for Sale and Closing
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30 Flashcards
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Sample Questions
Q1) Suppose that you just sold a property that has annual property taxes of $2,427.22. If the closing occurred on March 13 , calculate your share (Seller's share) of the total property taxes. For this problem, assume that we are dealing with a 365 day calendar year.
A) $482.26
B) $1990.17
C) $1,996.96
D) $2,479.22
Q2) When a buyer signs an offer to purchase a property, the broker receives a monetary amount from the purchaser of 5 or 10 percent of the purchase price. This deposit is commonly referred to as the:
A) commission
B) earnest money
C) closing cost
D) title insurance premium
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Chapter 14: The Effects of Time and Risk on Value
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) Suppose your personal financial goal is to retire with a million dollars in your savings account. How much must you deposit monthly in an account paying 5% a year (with interest being compounded monthly and your deposits occurring at the end of the month), to accumulate $1,000,000 by your 65 birthday if you begin your deposits on your 22 birthday? (Note: Assume that you started with no savings in the account prior to your first deposit at age 22 and you do not make a deposit on your 65 birthday)
A) $552.13
B) $701.90
C) $21,282.95
D) $186,354.63
Q2) Assume that an individual puts $10,000 into a savings account that pays 3% interest, with interest being compounded monthly. The individual plans to withdraw the balance in 5 years to buy a car. If he does not make any further deposits over this period, how much will the individual be able to put towards his purchase?
A) $10,125.63
B) $11,592.74
C) $11,616.17
D) $58,916.03
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Chapter 15: Mortgage Calculations and Decisions
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38 Flashcards
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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) For the purposes of estimating the effective borrowing cost (EBC), only those up-front expenses associated with obtaining the mortgage should be included, not the settlement costs associated with obtaining ownership of the property. With this in mind, which of the following costs should not be included in one's calculation of EBC?
A) Discount points
B) Loan origination fees
C) Appraisal fee
D) Buyer's title insurance
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17
Chapter 16: Commercial Mortgage Types and Decisions
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Sample Questions
Q1) While floating rate mortgage loans may offer lower interest rates to borrowers than comparable fixed-payment mortgages, floating-rate loans may increase a lender's exposure to which of the following risks since borrowers may not be able to continue to service the debt if payments on the loan increase significantly?
A) Default risk
B) Interest rate risk
C) Liquidity risk
D) Pipeline risk
Q2) The note is the document used to create a legal debt. In most states, the note creates personal liability for residential borrowers. When mortgage lenders have access to other borrower assets in situations where the foreclosure sale price is less than the total amount of the loan outstanding, we commonly refer to this type of loan as a:
A) nonrecourse loan
B) mini-perm loan
C) partially amortizing loan
D) recourse loan
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18
Chapter 17: Sources of Commercial Debt and Equity Capital
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Sample Questions
Q1) In most small to medium private real estate deals, syndicators play important roles within the origination, operation, and completion phases of a real estate syndicate's life. All of the following are responsibilities of the syndicator in the operation phase of a syndicate's life EXCEPT:
A) Manage the syndication
B) Manage properties
C) Raise additional investment capital if required
D) Prepare the properties for sale
Q2) Given the following information, calculate the price-FFO multiple for the following REIT. Funds from Operation: $75,555,000; Stock Price: $17.80; Shares Outstanding: 185,000,000
A) 0.03
B) 0.14
C) 7.27
D) 43.58
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Chapter 18: Investment Decisions: Ratios
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Sample Questions
Q1) Profitability ratios, income multipliers, and financial risk ratios can be used to provide a quick assessment of a property's relative value. Which of the following ratios measures the overall income-producing ability of the property?
A) Capitalization rate
B) Equity dividend rate
C) Debt coverage ratio
D) Operating expense ratio
Q2) In determining a property's before-tax cash flow from operations (BTCF) and net operating income (NOI), it is important to understand how each accounts for the use of financial leverage in its calculation. Which of the following statements is true in regards to how these two measures account for the use of financial leverage?
A) BTCF and NOI are both levered cash flows
B) BTCF is an unlevered cash flow, while NOI is a levered cash flow
C) BTCF is a levered cash flow, while NOI is an unlevered cash flow
D) BTCF and NOI are both unlevered cash flows
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Chapter 19: Investment Decisions: NPV and IRR
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Sample Questions
Q1) Given the following information regarding an income producing property, determine the NPV using levered cash flows in your analysis. Required equity investment: $270,000; Expected NOI for each of the next five years: $150,000; Debt Service for each of the next five years: $125,000; Expected Holding Period: 5 years; Required yield on levered cash flows: 15%; Expected Sale Price at end of Year 5: $2,000,000; Expected Cost of Sale: $125,000; Expected Mortgage Balance at time of sale: $1,500,000
A) $245.15
B) $270,245.15
C) $419,264.54
D) $1,435,029.64
Q2) Suppose you purchased an income producing property for $95,000 five years ago. In Year 1, you were able to negotiate a lease that paid $10,000 per year at the end of each year. If you are able to sell the property at the end of year 5 for $100,000 (after receiving our final lease payment), what was the internal rate of return (IRR) on this investment?
A) -18.18%
B) 1.03%
C) 9.57%
D) 11.37%
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Chapter 20: Income Taxation and Value
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Sample Questions
Q1) The potentially large amount of taxes due on sale of commercial property has caused investors and policy makers to seek ways to defer taxes on the disposition of a property. A popular option has become for investors to swap one eligible property for another in order to avoid or defer capital gains taxes. Which of the following methods for deferring taxes does this describe?
A) Installment sale
B) Fully-taxable sale
C) Like-kind exchange
D) Sale leaseback
Q2) Under certain circumstances, investors are permitted to reduce the amount of the taxable income that they report by an amount that is intended to reflect the wear and tear of an asset over time. This is commonly referred to as:
A) appreciation
B) depreciation
C) capital gains
D) capital losses
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Chapter 21: Managing Residential Rental Property
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Sample Questions
Q1) Commercial real estate returns are determined in no small part by how well the ongoing management function is performed. Management decisions can be classified into two categories: property management and asset management. Which of the following functions would be considered a primary responsibility of an asset manager?
A) Property acquisitions and dispositions
B) Marketing a property to prospective tenants
C) Maintaining the condition of the property
D) Signing leases
Q2) The real estate industry applies which of the following labels to individuals who are responsible for the day-to-day operations of the property.
A) Asset manager
B) Property manager
C) Leasing broker
D) Tenant
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Chapter 22: Managing Non residential Rental Property
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Sample Questions
Q1) Which of the following classes of the office sector includes office buildings that are considered the most prestigious in their tenancy, location, amenities and overall desirability?
A) Class A office
B) Class B office
C) Class C office
D) Class D office
Q2) Lenders may request that property owners of rental properties include a clause in their lease agreement that gives the lender the right to terminate the lease and evict the tenant, even if the tenant has fulfilled all of its responsibilities under the lease, in the case that the owner of the property defaults on her mortgage. This part of the lease agreement is more commonly referred to as a:
A) Subordination clause
B) Non-disturbance agreement
C) Relocation option
D) Expansion option
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Chapter 23: Development: The Dynamics of Creating Value
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Sample Questions
Q1) Suppose that a development group would like to determine if the local zoning and land-use ordinances will permit the type of development they desire. However, they do not want to be obligated to purchase the property if they find that their proposed development will not be permitted. To gain control of the site without being obligated to perform, the development group should purchase which of the following?
A) Ground lease
B) Option
C) Fast-track
D) Floor loan
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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