Unit 1: Intro to the Real Estate Business- 4%

Question 1

Associate licensee

Answer 1

A licensed real estate salesperson who is employed by or associated with the broker to perform brokerage activities on behalf of or for the broker.

Question 2

Appreciation

Answer 2

An increase in the worth or value of a property due to economic or related causes, which may prove to be either temporary or permanent; opposite of depreciation

Question 3

Broker

Answer 3

In VA, any person or business entity, including, but not limited to, a partnership, association, corporation, or limited liability corporation, who, for compensation or valuable consideration sells or offers for sale, buys offers to buy, or negotiates the purchase or sale or exchange of real estate, including units or interest in condominiums, cooperative interest… or time-shares in a time-share program… or leases or offers to lease, or rents or offers for rent, any real estate or the improvements thereon for others

Question 4

Capital gain

Answer 4

Profit earned from the sale of an asset

Question 5

Depreciation

Answer 5

In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence

Question 6

Equity buildup

Answer 6

That portion of the loan payment directed toward the principal rather than the interest, plus any gain in property value due to appreciation

Question 7

Exchanges

Answer 7

A transaction in which all or part of the consideration is the transfer of like-kind property (e.g., real estate for real estate).

Question 8

Fair housing

Answer 8

The federal law that prohibits discrimination in housing based on race, color, religion, sex, disability, familial status, and national origin.

Question 9

Leverage

Answer 9

The use of borrowed money to finance an investment.

Question 10

Liquidity

Answer 10

The ability to sell an asset and convert it into cash, at a price close to its true value, in a short period of time.

Question 11

Market

Answer 11

A place where goods can be bought and sold and a price established.

Question 12

Real estate licensee

Answer 12

In real estate practice, a person who has the skills and knowledge to be licensed as a real estate broker or salesperson.

Question 13

Sales associate

Answer 13

A person who performs real estate activities while employed by a licensed real estate broker.

Question 14

Salesperson

Answer 14

Any person, other than an associate broker, who acts on behalf of a real estate broker in performing any act authorized to be performed by the broker in this unit.

Question 15

Supply and demand

Answer 15

The appraisal principle that follows the interrelationship of the supply of and demand for real estate. Because appraising is based on economic concepts, this principle recognizes that real property is subject to the influences of the marketplace as with any other commodity.

Question 16

Nationwide Multistate Licensing System and Registry was created to register _______

Answer 16

mortgage loan originators

Federal law requires mortgage loan originators to qualify for the Nationwide Multistate Licensing System and Registry.

Question 17

A major manufacturer of automobiles announces that it will relocate one of its factories, along with 2,000 employees, to a small town. What effect will this announcement MOST likely have on the small town’s housing market?

Answer 17

Houses will likely become more expensive.

he expected arrival of 2,000 employees and their families in a small town will cause sellers to raise their prices in expectation of the greatly increased demand and the long time it takes to build new housing. It becomes a sellers’ market, and the many buyers will have to compete for the few houses available.

Question 18

If demand remains steady when the supply of a commodity decreases, the price will _____

Answer 18

increase

Under the laws of supply and demand, if supply of a commodity decreases with demand remaining the same or increasing, prices go up.

Question 19

Which of the following factors affects supply?

Answer 19

Monetary policy

Government monetary policies affect the supply of land available for development. Population, demographics, and wage levels affect demand for real estate.

Question 20

Mortgage loan originators work in which specialization of the real estate market?

Answer 20

Financing

Federal law requires mortgage loan originators to qualify for the Nationwide Multistate Licensing System and registry (NMLS).

Question 21

A person or company responsible for maintaining a client’s property and maximizing the return on the client’s investment is serving as ______

Answer 21

a property manager.

The basic responsibility of the property manager is to protect the owner’s investment and maximize the return on investment.

Question 22

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

Answer 22

a shortage of skilled labor or building materials.

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

Question 23

Which factor is MOST likely to influence demand for real estate?

Answer 23

Wage levels and employment opportunities

When wage levels and job expansion are increasing, workers are more likely to buy real estate; when job opportunities are scarce or wage levels low, demand for real estate usually drops.

Question 24

The BEST way for owners to determine the market value of their home is to

Answer 24

get an appraisal

The key word here is best. The most accurate way to determine value is to have an appraisal. Only if an appraisal is not available would a CMA be a good answer.

Question 25

When demand for a commodity decreases and supply remains the same,

Answer 25

price tends to fall.

Under the concept of supply and demand, if demand decreases and supply remains the same, producers need to attract more customers, and so prices fall.

Question 26

In many states, the real estate sales associate is

Answer 26

a licensed real estate salesperson.

Some states require all real estate licensees to have a broker’s license, while others issue separate licenses to brokers and salespersons, but all recognize that sales associates work for an employing broker, who is responsible for the sales associates’ conduct.

Question 27

The property manager’s basic responsibility is to

Answer 27

protect the owner’s investment and maximize return.

The property manager accepts the responsibility under the management agreement to protect the property owner’s investment.

Question 28

When the supply of a commodity decreases while demand remains the same, price tends to

Answer 28

rise.

Under the laws of supply and demand, if supply of a commodity decreases with demand remaining the same or increasing, prices go up.

Question 29

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

Answer 29

uniqueness.

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 30

A professional opinion of a property’s market value, based on established methods and using trained judgment, is performed by

Answer 30

a real estate appraiser.

Although real estate professionals, counselors, and inspectors also look closely at a specific property, only an appraiser is qualified to produce a formal opinion of value—an appraisal.

Question 31

Which of the following statements is TRUE about the real estate industry?

Answer 31

It includes many specialized areas and businesses.

Appraisal, property management, financing, subdivision and development, home inspection, counseling, and education are all separate businesses within the large and complex real estate field. Prudent real estate professionals will have a basic knowledge of these specialized areas.

Question 32

Commercial real estate includes

Answer 32

office space, shopping centers, and stores, as well as theaters, hotels, and parking facilities.

Warehouses, factories, and land in industrial districts are considered industrial properties.

Question 33

Which factor primarily affects supply in the real estate market?

Answer 33

Governmental monetary policy

Population, demographics, and employment impact demand for a commodity, but governmental monetary policy strongly influences the supply and value of property in a local market.

Question 34

In general, when the supply of a certain commodity increases,

Answer 34

price tends to drop.

If demand is constant and supply increases, sellers compete with each other by lowering prices.

Question 35

Another name for depreciation is

Answer 35

cost recovery.

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 36

The scope of the property manager’s work depends on the terms of the individual employment contract, known as

Answer 36

a management agreement.

The scope of the manager’s work depends on the terms of the individual employment contract, known as a management agreement. Whatever tasks are specified, the basic responsibility of the property manager is to protect the owner’s investment and maximize the return on that investment.

Question 37

When supply and demand for a good or service are roughly balanced, the price of the good or service

Answer 37

remains stable.

The operation of the principle of supply and demand creates stable prices when both supply and demand are in balance, inflation (higher prices) when demand is higher than supply, or deflation (lower prices) when supply is higher than demand.