Exam 1

1. What is real estate?

A. land and buildings

B. a bundle of rights

C. an industry

D. all of the above

2. What is an example of intangible property?

A. automobile

B. lease agreement

C. land

D. iPhone case

3. Can the cost of something be different than the value?

A. yes

B. no

4. Is real property tangible or intangible?

A. tangible

B. intangible

C. both

D. neither

5. What three markets interact in real estate?

A. users, capital, property

B. land, labor, capital

C. capital, financial, money

D. debt, equity, capital

6. If a property income is 100,000 and the capitalization rate is 8 percent, what is the value indication?

A. 80,000

B. 800,000

C. 1,250,000

D. 250,000

7. If a property value is 700,000 and the capitalization rate is 9 percent, what is the income?

A. 63,000

B. 7,777,777

C. 77,000

D. 6,300,000

8. What is the strongest possessory interest estate?

A. leased fee

B. fee simple

C. leasehold

D. tenancy at sufferance

9. Do leaseholds have titles to property?

A. yes

B. no

10.  What is a life estate?

A. ownership until the death of someone

B. a leasehold right

C. tenancy at sufferance

D. all of the above

11. What type of deed is most preferred?

A. quitclaim deed

B. sheriff’s deed

C. warranty deed

D. seller deed

12. An easement is a ________________

A. non-possessory right in real estate.

B. debt

C. loan

D. tenancy at sufferance

13. Can you sell property and retain some of the rights?

A. yes

B. no

14. Do real estate contracts require consideration?

A. yes

B. no

15. What are three powers that government exercises over real estate?

A. habeas corpus, regulation, taxation

B. taxation, taking, regulation

C. taking, taxation, easement

D. regulation, taxation, habeas corpus

16. What is an externality?

A. costs or benefits on a third party

B. leasehold interest
C. condemnation

D. inversion

17. When the Saudi government needs land to build a road, do they have to pay the owner?

A. yes

B. no

18. Is the value of something a fact or an opinion?

A. fact

B. opinion

19. What happens to the capitalization rate as risk increases?

A. increases

B. decreases

C. no change

20. Can real estate have negative value?

A. yes

B. no

Short Answer: 5 questions at 4 points each = 20 points potential

If the property income is 200,000 and the value is 1,800,000, what is the capitalization rate ?

200,000 / 1,800,000 =  0.111 = 11.1%

If the value is 3,000,000 and the capitalization rate is 4 percent, what is the income?

 3,000,000 x .04 = 120,000

If the property income is 250,000 and the value is 1,800,000, what is the capitalization rate ?

 250,000 / 1,800,000 = 0,139 = 13.9%

If the value is 3,000,000 and the capitalization rate is 5 percent, what is the income?

3,000,000 x .05 = 150,000

Name five reasons that the real estate market is different than other markets.

Heterogeneous

Immobile

Localized

Segmented

Private Transactions

 

What is the difference between equity and debt in real estate?

Equity is ownership

Debt is mortgage loans

If the price of crude oil increases, what will happen to the values of real estate in Riyadh and why?

Saudi GDP per capita will increase, raising spending, increasing income on real estate. If Income increases, then value also increases.

If the price of crude oil decreases, what will happen to the values of real estate in Riyadh and why?

Saudi GDP per capita will decrease, reducing spending, reducing income on real estate. If Income decreases, then value also decreases.