Chapter 1

Question 1

Office buildings and retail space are examples of

a. commercial real estate.
b. special use real estate.
c. residential property.
d. industrial property.

Answer 1

a. commercial real estate.

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Office buildings and retail space are examples of commercial real estate. Special use property includes churches and dormitories; industrial property includes warehouses and factories.

Question 2

In terms of real estate investment, another name for deopreciation is

a. leverage.
b. cost recovery.
c. liquidity.
d. intrinsic value.

Answer 2

b. cost recovery.

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b. Depreciation, or cost recovery, allows an investor to recover the cost of an income-producing asset through tax deductions over the asset’s useful life.

Question 3

All of these factors will tend to affect demand for real estate EXCEPT

a. transfer taxes.
b. employment levels.
c. wage rates.
d. demographics.

Answer 3

a. transfer taxes.

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a. Transfer taxes affect the supply of real estate; employment levels, wage rates, and demographics affect demand for real estate.

Question 4

When the population of a town suddenly increases, which of these is MOST likely to occur?

a. Rental rates will fall due to increased competition
b. Demand for housing will decrease
c. New housing starts will decrease
d. Real estate prices will increase

Answer 4

d. Real estate prices will increase

Question 5

The idea that no two parcels of land are exactly alike is called

a. immobility.
b. subdivision.
c. uniqueness.
d. location.

Answer 5

c. uniqueness.

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No matter how identical they may appear, no two parcels of real estate are ever exactly alike; each occupies its own unique geographic location.

Question 6

All of these factors can affect the supply of real estate EXCEPT

a. demographics.
b. labor force.
c. construction costs.
d. government controls.

Answer 6

a. demographics.

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a. Demographics affect the demand for real estate. The labor force, construction costs, and government controls affect the supply of real estate.

Question 7

Property management, appraisal, financing, and development are all

a. specializations directly linked to state and federal government financial policies.
b. separate professions within the real estate industry.
c. real estate brokerage professions.
d. demographic factors that affect demand for real property in a commercial market.

Answer 7

b. separate professions within the real estate industry.

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b. Property management, appraisal, financing, and development are not linked to the government; they are all linked to real estate business.

Question 8

A property owner who does not want to deal with the everyday tasks of managing a rental property can hire

a. a property manager.
b. an appraiser.
c. a home inspector.
d. a developer.

Answer 8

a. a property manager.

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a. A property manager handles the day-to-day tasks of managing property for an owner. An appraiser provides an opinion of value; a home inspector looks for problems with the property; and the developer improves the property.

Question 9

When the supply of a certain commodity decreases while demand remains the same, the price of that commodity will tend to

a. remain the same.
b. increase.
c. decrease by 10%.
d. decrease by 20%.

Answer 9

b. increase.

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b. When consumers continue to demand a product for which there is limited supply, the price generally increases.

Question 10

All of these are examples of government policies that can affect the real estate market EXCEPT

a. the Federal Reserve Board’s discount rate.
b. a shortage of skilled labor or building materials.
c. land-use controls, such as zoning.
d. federal environmental regulations.

Answer 10

b. a shortage of skilled labor or building materials.

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b. A shortage of skilled labor will affect the supply of real estate, and this labor shortage is not generally associated with governmental policies.