Real Estate Principles: A Value Approach (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate) 3rd Edition Test Bank

Name: Real Estate Principles: A Value Approach (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate) 3rd Edition Test Bank
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Real Estate Principles: A Value Approach (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate) 3rd Edition Test Bank delivers a complete question bank to help you study smarter and score higher.

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1
1. When viewed as a tangible asset, real estate can be defined as the land and its permanent improvements.
Improvements on the land include:
A. fences
B. walkways
C. sewer systems
D. streets
2. Real estate is property, which can be either a tangible or an intangible asset. Which of the following
would be considered an intangible asset?
A. Land
B. Building
C. Mortgage
D. Motor home
3. When the value of land is considered, it is important to distinguish between land and raw land. Raw land
refers to a(n):
A. building site
B. structure on the land
C. property's infrastructure
D. area that does not include any improvements
4. The size of a single family residential lot is typically:
A. less than one acre
B. between one and two acres
C. between two and three acres
D. greater than three acres
5. As of 2008, the single largest asset category in the net worth portfolios of households is:
A. government and corporate bonds
B. stocks and mutual fund shares
C. consumer durable goods
D. housing
6. As of December 2008, the market value of outstanding real estate mortgage debt was:
A. greater than the market value of corporate equities
B. less than the market value of U.S. Treasury securities
C. less than the market value of corporate and foreign bonds
D. greater than the market value of corporate, foreign, and U.S. Treasury debt securities combined
7. 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?
A. User market
B. Capital market
C. Government
D. Local market
8. The demand for real estate derives from the need that participants in the user market have for shelter
and convenient access to other locations. The primary participants in the user market include all of the
following EXCEPT:
A. owner occupants
B. tenants
C. renters
D. pension fund managers

9. In 2007, the housing market was widely viewed as:
A. a resilient asset class that significantly softened the severity of the recession
B. a surging market pushing prices and new construction to unprecedented levels
C. the primary cause of a major economic downturn
D. unrelated to the condition of the U.S. economy
10. Capital markets can be divided into four main categories: private equity, public equity, private debt, and
public debt. An example of a real estate asset that trades in the private equity market is:
A. real property
B. home mortgages
C. equity REITs
D. mortgage backed securities
11. Primarily through land use controls and property tax policy, which of the following branches of
government has the largest influence on real estate values?
A. Local government
B. State government
C. National government
D. Foreign government
12. Competition in the _________, where households and firms compete for the currently available supply of
locations and space, determines the level of rental income for each submarket and property.
A. user market
B. capital market
C. government
D. local market
13. 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
14. Large commercial properties valued well over $10 million are often referred to as:
A. segmented property
B. investment-grade property
C. speculative-grade property
D. immobile property
15. Each property has unique features, whether it is its age, the building design of its structures, or its
location. As such, real estate markets, in contrast to other goods, are considered:
A. homogeneous
B. heterogeneous
C. substitutes
D. complements
16. What proportion of U.S. households own their home?
A. One-third
B. One-half
C. Two-thirds
D. Three-fourths
17. The national government can have a significant impact on the value of real estate through:
A. property tax policy
B. income tax policy
C. building codes
D. real estate licensing requirements

18. The required rate of return that an individual demands on a real estate investment is determined in
the:
A. user market
B. capital market
C. government
D. local market
19. 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
20. Especially in terms of retail properties, which of the following attributes is considered the most likely to
result in drastic value differences between otherwise similar properties?
A. Structural attributes
B. Financing attributes
C. Location attributes
D. Land attributes

1 Key
1. When viewed as a tangible asset, real estate can be defined as the land and its permanent
improvements. Improvements on the land include:
A. fences
B. walkways
C. sewer systems
D. streets
Difficulty: Intermediate
Learning Objective: 1
Ling - Chapter 01 #1
2. Real estate is property, which can be either a tangible or an intangible asset. Which of the following
would be considered an intangible asset?
A. Land
B. Building
C. Mortgage
D. Motor home
Difficulty: Basic
Learning Objective: 1
Ling - Chapter 01 #2
3. When the value of land is considered, it is important to distinguish between land and raw land. Raw
land refers to a(n):
A. building site
B. structure on the land
C. property's infrastructure
D. area that does not include any improvements
Difficulty: Basic
Learning Objective: 1
Ling - Chapter 01 #3
4. The size of a single family residential lot is typically:
A. less than one acre
B. between one and two acres
C. between two and three acres
D. greater than three acres
Difficulty: Intermediate
Learning Objective: 2
Ling - Chapter 01 #4
5. As of 2008, the single largest asset category in the net worth portfolios of households is:
A. government and corporate bonds
B. stocks and mutual fund shares
C. consumer durable goods
D. housing
Difficulty: Intermediate
Learning Objective: 4
Ling - Chapter 01 #5
6. As of December 2008, the market value of outstanding real estate mortgage debt was:
A. greater than the market value of corporate equities
B. less than the market value of U.S. Treasury securities
C. less than the market value of corporate and foreign bonds
D. greater than the market value of corporate, foreign, and U.S. Treasury debt securities combined
Difficulty: Intermediate
Learning Objective: 3
Ling - Chapter 01 #6

7. 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?
A. User market
B. Capital market
C. Government
D. Local market
Difficulty: Intermediate
Learning Objective: 3
Ling - Chapter 01 #7
8. The demand for real estate derives from the need that participants in the user market have for shelter
and convenient access to other locations. The primary participants in the user market include all of the
following EXCEPT:
A. owner occupants
B. tenants
C. renters
D. pension fund managers
Difficulty: Intermediate
Learning Objective: 3
Ling - Chapter 01 #8
9. In 2007, the housing market was widely viewed as:
A. a resilient asset class that significantly softened the severity of the recession
B. a surging market pushing prices and new construction to unprecedented levels
C. the primary cause of a major economic downturn
D. unrelated to the condition of the U.S. economy
Difficulty: Basic
Learning Objective: 3
Ling - Chapter 01 #9
10. Capital markets can be divided into four main categories: private equity, public equity, private debt,
and public debt. An example of a real estate asset that trades in the private equity market is:
A. real property
B. home mortgages
C. equity REITs
D. mortgage backed securities
Difficulty: Intermediate
Learning Objective: 3
Ling - Chapter 01 #10
11. Primarily through land use controls and property tax policy, which of the following branches of
government has the largest influence on real estate values?
A. Local government
B. State government
C. National government
D. Foreign government
Difficulty: Intermediate
Learning Objective: 3
Ling - Chapter 01 #11
12. Competition in the _________, where households and firms compete for the currently available
supply of locations and space, determines the level of rental income for each submarket and
property.
A.

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13. 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
Difficulty: Basic
Learning Objective: 3
Ling - Chapter 01 #13
14. Large commercial properties valued well over $10 million are often referred to as:
A. segmented property
B. investment-grade property
C. speculative-grade property
D. immobile property
Difficulty: Intermediate
Learning Objective: 5
Ling - Chapter 01 #14
15. Each property has unique features, whether it is its age, the building design of its structures, or its
location. As such, real estate markets, in contrast to other goods, are considered:
A. homogeneous
B. heterogeneous
C. substitutes
D. complements
Difficulty: Basic
Learning Objective: 5
Ling - Chapter 01 #15
16. What proportion of U.S. households own their home?
A. One-third
B. One-half
C. Two-thirds
D. Three-fourths
Difficulty: Intermediate
Learning Objective: 4
Ling - Chapter 01 #16
17. The national government can have a significant impact on the value of real estate through:
A. property tax policy
B. income tax policy
C. building codes
D. real estate licensing requirements
Difficulty: Intermediate
Learning Objective: 3
Ling - Chapter 01 #17
18. The required rate of return that an individual demands on a real estate investment is determined in
the:
A. user market
B. capital market
C. government
D. local market
Difficulty: Intermediate
Learning Objective: 3

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19. 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
Difficulty: Intermediate
Learning Objective: 5
Ling - Chapter 01 #19
20. Especially in terms of retail properties, which of the following attributes is considered the most likely
to result in drastic value differences between otherwise similar properties?
A. Structural attributes
B. Financing attributes
C. Location attributes
D. Land attributes
Difficulty: Intermediate
Learning Objective: 5
Ling - Chapter 01 #20

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2
1. A principal definition of real estate is as a bundle of rights associated with the possession, use, and
disposition of property. Each of the following is a fundamental characteristic of property rights
EXCEPT:
A. they are enforceable by the government.
B. they apply only to tangible assets.
C. they are nonrevocable.
D. they are enduring.
2. Property rights can be divided into two classes, real and personal. Which of the following is an example
of real property?
A. Vehicles
B. Stocks and bonds
C. Patents
D. Commercial building
3. 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
4. Which of the following items would most likely be considered a fixture?
A. Custom bookshelves
B. Refrigerator in a single-family residence being sold
C. Fence installed by the tenant of a rental property
D. Antique chandelier
5. Property rights can be dismantled into lesser bundles, referred to as interests, which can then be held by
different individuals. Interests in real property that include possessions are referred to as:
A. fixtures
B. townships
C. licenses
D. estates
6. Which of the following types of ownership estates is the most complete bundle of rights, and therefore
carries the greatest value?
A. Fee simple absolute
B. Fee simple conditional
C. Ordinary life estate
D. Legal life estate
7. Suppose an older homeowner lives adjacent to an expanding university that is interested in acquiring
her residence for future university use. To allow the homeowner to continue to retain all rights of
exclusive possession, use, and enjoyment during her lifetime, yet provide the university with the right of
disposition, the university may want to purchase a:
A. life estate
B. reverter interest
C. remainder estate
D. tenancy for years

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8. While leasehold interests are considered estates, they differ from freehold estates in all of the following
respects EXCEPT:
A. leasehold estates are limited in time.
B. the right of disposition is diminished with a leasehold estate.
C. leasehold estates are not titled interests.
D. leasehold estates are possessory interests.
9. Nonposessory interests (i.e. bundles of real property rights that do not include possession) include all of
the following EXCEPT:
A. leasehold interests
B. easements
C. restrictive covenants
D. liens
10. An easement is the right to use land for a specific and limited purpose. Which of the following easements
involves a relationship between two parcels of land, is a permanent feature of both parcels involved, and
gives the dominant parcel some intrusive use of the servient parcel?
A. Affirmative easement appurtenant
B. Negative easement appurtenant
C. Easement in gross
D. License
11. Which of the following is an example of a negative easement appurtenant?
A. A driveway easement across one parcel to another.
B. Rights-of-way for roads.
C
.
A common drive easement where owners of adjoining lots must permit each other to use a driveway
lying on their shaped property line.
D. A scenic easement used to restrict construction on adjacent parcels so as to preserve a valued view.
12. An important distinction both practically and conceptually is the difference between an easement and a
license. In contrast to an easement, a license:
A. is revocable by the grantor.
B. can be granted orally.
C. is enduring.
D. grants permission to use another's land for a specific and limited purpose.
13. A lien is an interest in real property that serves as security for an obligation. Which of the following is an
example of a general lien?
A. Property tax and assessment lien
B. Mortgage lien
C. Lien arising from a court judgment unrelated to ownership of the property
D. Mechanics' lien
14. Which of the following types of liens is automatically superior to any other lien?
A. Property tax and assessment lien
B. Mortgage lien
C. Lien arising from a court judgment unrelated to ownership of the property
D. Mechanics' lien
15. Co-ownership can occur in a variety of ways, with significant variation in how the bundle of rights is
jointly held. All of the following entities are forms of direct co-ownership EXCEPT:
A. Tenancy in common
B. Tenancy by the entirety
C. Condominium
D. Partnership

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16. Direct co-ownership implies that each co-owner holds a titled interest in the property, but without
exclusive possession with respect to the other co-owners. Which of the following types of direct co-
ownership is considered the closest to the fee simple absolute estate?
A. Tenancy in common
B. Tenancy by the entirety
C. Condominium
D. Partnership
17. Which of the following types of direct co-ownership is a form of joint tenancy for husband and wife?
A. Tenancy in common
B. Tenancy by the entirety
C. Condominium
D. Partnership
18. 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
19. Which of the following forms of co-ownership, historically used for apartment buildings, is not
considered a form of true direct co-ownership, but rather qualifies as a proprietary corporation?
A. Cooperative
B. Tenancy by the entirety
C. Condominium
D. Partnership
20. Property rights created from marriage have a clear implication for real estate transactions. Which of the
following marital property rights gives a spouse a one-half claim on all property acquired "from the fruits
of the marriage?"
A. Dower
B. Curtesy
C. Elective share
D. Community property
21. Restrictive covenants impose constraints on the use of the land, yet are limited in terms of their
enforcement. All of the following are true regarding the enforcement of restrictive covenants
EXCEPT:
A
.
Courts have been reluctant to maintain restrictive covenants for an unreasonably long time and in some
cases states have enacted a time limit on their applicability.
B. Courts may refuse to enforce restrictive covenants due to changing neighborhood character.
C. Courts may refuse to enforce restrictive covenants due to abandonment of the property.
D. Restrictive covenants can be enforced by those who do not hold a legal interest in the property.
22. When multiple individuals have use of a property, but their interests are not simultaneous, this type of co-
ownership is referred to as a:
A. Cooperative
B. Tenancy by the entirety
C. Condominium
D. Timeshare

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23. In some states, mining companies are deemed to own not only the minerals but also the space the
minerals occupied before they were removed, thereby earning the distinction of ownership states.
However, when the owner of an oil or gas well is able to claim all that is pumped from it, regardless of
whether the oil or gas migrated from adjacent property, this is referred to as a _____________ state.
A. Manner of attachment
B. Law of capture
C. Intention of the parties
D. Relation of the parties
24. Bill and Mike go in together to purchase 342 acres of land to use for hunting and family vacations. Ten
years later, Bill dies and Bill's wife wants to sell his half of the land. Mike informs her that, unfortunately,
she has no claim to the land and that upon Bill's death, his ownership interest transferred to Mike. What
type of co-ownership did Bill and Mike have?
A. Tenancy by the entireties
B. Tenancy in common
C. Joint tenancy
D. Condominium
25. The City of Grand Rapids installed a new water main on Oak Street. The city then decided to charge the
property owners along Oak Street a proportional cost of the new water main. If a property owner refuses
to pay their proportional share of the cost, the city may file a(n):
A. property tax lien.
B. assessment lien.
C. general lien.
D. mechanics' lien.
26. Jeff owns 150 acres between a highway and a public beach. The state would like to build a road directly
from the highway to the beach across Jeff's property. The space for this road would be considered
a(n):
A. easement appurtenant.
B. easement in gross.
C. negative easement appurtenant.
D. positive easement appurtenant.

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19. Which of the following forms of co-ownership, historically used for apartment buildings, is not
considered a form of true direct co-ownership, but rather qualifies as a proprietary corporation?
A. Cooperative
B. Tenancy by the entirety
C. Condominium
D. Partnership
Difficulty: Basic
Learning Objective: 6
Ling - Chapter 02 #19
20. Property rights created from marriage have a clear implication for real estate transactions. Which of
the following marital property rights gives a spouse a one-half claim on all property acquired "from
the fruits of the marriage?"
A. Dower
B. Curtesy
C. Elective share
D. Community property
Difficulty: Basic
Learning Objective: 7
Ling - Chapter 02 #20
21. Restrictive covenants impose constraints on the use of the land, yet are limited in terms of their
enforcement. All of the following are true regarding the enforcement of restrictive covenants
EXCEPT:
A
.
Courts have been reluctant to maintain restrictive covenants for an unreasonably long time and in
some cases states have enacted a time limit on their applicability.
B. Courts may refuse to enforce restrictive covenants due to changing neighborhood character.
C. Courts may refuse to enforce restrictive covenants due to abandonment of the property.
D. Restrictive covenants can be enforced by those who do not hold a legal interest in the property.
Difficulty: Advanced
Learning Objective: 4
Ling - Chapter 02 #21
22. When multiple individuals have use of a property, but their interests are not simultaneous, this type of
co-ownership is referred to as a:
A. Cooperative
B. Tenancy by the entirety
C. Condominium
D. Timeshare
Difficulty: Basic
Learning Objective: 8
Ling - Chapter 02 #22
23. In some states, mining companies are deemed to own not only the minerals but also the space the
minerals occupied before they were removed, thereby earning the distinction of ownership states.
However, when the owner of an oil or gas well is able to claim all that is pumped from it, regardless
of whether the oil or gas migrated from adjacent property, this is referred to as a _____________
state.
A. Manner of attachment
B. Law of capture
C. Intention of the parties
D. Relation of the parties
Difficulty: Advanced
Learning Objective: 1
Ling - Chapter 02 #23

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24. Bill and Mike go in together to purchase 342 acres of land to use for hunting and family vacations.
Ten years later, Bill dies and Bill's wife wants to sell his half of the land. Mike informs her that,
unfortunately, she has no claim to the land and that upon Bill's death, his ownership interest
transferred to Mike. What type of co-ownership did Bill and Mike have?
A. Tenancy by the entireties
B. Tenancy in common
C. Joint tenancy
D. Condominium
Difficulty: Advanced
Learning Objective: 6
Ling - Chapter 02 #24
25. The City of Grand Rapids installed a new water main on Oak Street. The city then decided to charge
the property owners along Oak Street a proportional cost of the new water main. If a property owner
refuses to pay their proportional share of the cost, the city may file a(n):
A. property tax lien.
B. assessment lien.
C. general lien.
D. mechanics' lien.
Difficulty: Advanced
Learning Objective: 5
Ling - Chapter 02 #25
26. Jeff owns 150 acres between a highway and a public beach. The state would like to build a road
directly from the highway to the beach across Jeff's property. The space for this road would be
considered a(n):
A. easement appurtenant.
B. easement in gross.
C. negative easement appurtenant.
D. positive easement appurtenant.
Difficulty: Advanced
Learning Objective: 3
Ling - Chapter 02 #26

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3
1. A deed is a special form of written contract used to convey a permanent interest in real property. Unlike
most contracts, a deed requires:
A. both parties to be legally competent and of legal majority age.
B. only the grantee to be legally competent and of legal majority age.
C. only the grantor to be legally competent and of legal majority age.
D. both parties to make promises to perform.
2. 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
3. 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
4. Which of the following clauses contained in a deed defines or limits the type of interest being conveyed?
A. Recital of consideration
B. Words of conveyance
C. Covenant
D. Habendum clause
5. Although deeds can only deliver what a grantor actually owns, they can still vary in "quality." Which of
the following types of deeds is considered to be the "highest quality" because it contains the full set of
legal promises the grantor can make?
A. General warranty deed
B. Special warranty deed
C. Deed of bargain and sale
D. Quitclaim deed
6. Considered a "questionable conveyance of title" by most courts, which of the following types of deeds
is worded to imply no claim of title, but rather only convey what interest the grantor actually has? (Hint:
This type of deed may be used by a developer to convey certain lands of a subdivision to the local
government through dedication.)
A. General warranty deed
B. Special warranty deed
C. Deed of bargain and sale
D. Quitclaim deed
7. While several kinds of real property conveyances result from events beyond the control of the grantor,
the majority of conveyances are voluntary through a deed. Which of the following is an example of a
voluntary conveyance of real property with a deed?
A. Patent
B. Probate
C. Condemnation
D. Implied Easement

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