Real Estate Markets Flashcards
(32 cards)
An example of a governments force that affects real estate value would be:
- Market demand for mortgage loans
- Population changes in the market
- Changes in decorating styles
- Changes in local building codes
-Changes in local building codes
Market demand and population changes in the market are examples of economic forces, while a change in decorating styles is an example of a social force
The four forces that influence real estate values are:
- Social, economic, governmental, and environmental
- Land , labor, capital and green space
- Eminent domain, police power, escheat and taxation
- Government, social, taxation, and economic condition
-Social, economic, governmental, and environmental
Zoning and environmental protection regulations are examples of :
- Clouds on title
- Public Use
- Escheat
- Police Power
- Police Power
An example of a governmental influence on real estate values would be:
- An IRS credit for first time homebuyers
- National trends in residential decorating
- Soil productivity levels
- Local brokers’ customs and procedures
- An IRS credit for first time homebuyers
Fill in the blank:
The location of a parcel of real estate next to a busy highway is best described as a _____ influence.
- Governmental
- Social
- Generic
- Geographic
- Geographic
Fill in the blank:
The subject real estate is a 0.23-acre site improved with a single-unit residence that is 22 years old. The house has not been updated since construction. The brokers are all reporting that first-time buyers want modern decorating rather than the styles in place in the subject property. This can be classified as a(n) ________ problem.
- Governmental
- Social
- Ecological-environmental
- Financial
- Social
The current or prior ownership who owns the real estate property is
- Very important to appraisers in all cases
- Never important to appraisers
- Very important to title insurance companies or abstractors
- Never important to title insurance companies.
- Very important to title insurance companies or abstractors
In a few cases, buyers for real property may be willing to pay more because of the prior ownership of the property if, for example, a famous or historically significant person was a prior owner. However, ownership is not a factor in most cases. While the appraiser should know about the ownership (option b), it is not a valid reason for adjusting a value opinion (option a). On the other hand, title insurance companies (option d) must know who owns the real property because they are insuring who has either the right to convey it or to mortgage it.
The Federal Reserve just raised interest rates between banks, and long-term mortgage rates increased 1.0%. This will most likely affect real estate prices
- Very little
- Very Much
- Only if the lenders also change underwriting standards
- Only if buyers have offsetting earned income losses.
- Very much
Changing interest rates at the Federal Reserve usually impact mortgage interest rates. This in turn affects the affordability or profitability of real estate, which increases or decreases demand, which then affects values more than a little (option a). Changes in underwriting standards (option c) and changes in income levels for borrowers (option d) also affect real estate demand, but that is independent of this issue.
Under pressure from parents in the city of Treemont, the local government passes an ordinance that lowers the speed limit to 15 miles per hour on all city streets. The result is many more speeding tickets and a more difficult time traversing the streets. This will likely cause
- More drivers to commute through the town
- Merchants to make more money due to slower traffic in the area
- Merchants to suffer because people will avoid the area and therefore the merchants
- Lower revenue for the city.
- Merchants to suffer because people will avoid the area and therefore the merchants
Treemont will not see an increase in drivers commuting through town (option a). Drivers will instead avoid the area and find different ways around. This will hurt gas stations, drugstores, and fast food restaurants that rely on traffic counts for business. This will lower demand for commercial real estate in the area and lower prices. While there could be some winners from the slower traffic, most merchants will suffer because people will avoid this area (option b). The increase in traffic tickets will generate more, not less, revenue for the city (option d).
Several popular home decorating books have recently promoted an all-new motif, including a new color scheme, new plumbing and lighting styles, and new carpet designs. This motif is very different from any previous decorating scheme, and local builders report that 90% of the buyers are choosing it. This change in attitude will
- Not affect prices of existing improved competing residences
- Negatively affect vacant lot prices
- Make houses less expensive to build
- Cause most existing and older houses in the same market segment to suffer functional obsolescence because of changes in desired features that do not exist in the older homes
- Cause most existing and older houses in the same market segment to suffer functional obsolescence because of changes in desired features that do not exist in the older homes
The situation described would probably negatively affect existing homes that do not have the new style (option a). It should not affect land prices (option b), since the decorating has not yet been completed. This situation will also not affect cost much (option c), unless there were economic benefits in the new style.
The subject is a vacant 0.75-acre lot on the side of a hill in a platted subdivision. All of the lots in the subdivision are priced at $75,000. The subject slopes 15% from left to right (as one faces the site). This lot will most likely be the last to sell because
- Buyers prefer right-to-left rather than left-to-right slopes.
- Buyers prefer a building site this is low in the center and higher near the edges, shaped like a bowl
- Buyers know that a steep site is much more expensive to build a house on
- It was underpriced
- Buyers know that a steep site is much more expensive to build a house on
Buyers would have no reason to choose a left-to-right slope vs. a right-to-left slope (option a) unless there is a sunlight or wind issue, which sometimes favors one direction. Sites with bowl-like topography (option b) are often not buildable because of poor drainage. The water drains to the building rather than away from it. Sites that are elevated at the building site are preferred because of drainage. The subject lot may or may not be underpriced (option d), but this is not specified.
The subject is a commercial site improved with a 100,000-sq.-ft., multitenant retail building. This area has recently enjoyed a significant increase in employment because of the expansion of the widget plant at the edge of town. This increase in jobs will likely
- Increase the unemployment rate
- Decrease the number of families in the area
- Increase the number of families on the area, the amount of income, and sales within the shopping center.
- Increase the population, but decrease the sales volume in the shopping center
- Increase the number of families on the area, the amount of income, and sales within the shopping center.
The increase in jobs will likely decrease unemployment rates. An increase in jobs usually causes an increase in the number of families. An increase in population cause san increase in sales volume in the shopping center.
The subject site is a 200-acre agricultural site. There is no demand for residential, commercial, or industrial land, and the soil productivity in this area has caused prices of farmland to increase. The most important economic factor for this parcel would be?
- The prices of products grown on the parcel( the price per bushel of corn, beans, etc)
- The cost of crop production (fuel, seeds, fertilizer, etc)
- The level of taxation by the government (income and property taxes)
- All of the above
- All of the above
The prices of products, the cost of production, and the level of taxation all affect the income from the farmland, which allows farmers to pay more or less for property.
The subject real estate is a 90-unit apartment complex in Bigville. The apartment unit count in this market was recently increased substantially because of extra demand for apartments caused by a rash of recent single-unit foreclosures. Unfortunately, too many people got the idea to build new apartments at the same time, and now the market is overbuilt. This oversupply problem will cause
- Market rents and market values to increase
- Market rents to decrease and market values to increase
- Market rents and market values to decrease
- Market rents and market values to decrease
If there is an oversupply of units for rent, the market rents should decrease, which will cause gross and net incomes to decrease and therefore market values to decrease.
Fill in the blank:
The subject is a residential property in a remote location and is accessible only by a dirt road. In the winter months, the road is impassable. The dirt road is a public right of way. This is considered a(n) ________ limitation.
- Governmental
- Social
- Environmental
- Geographic
- Governmental
The limitation is caused by government limits on road construction and maintenance.
Fill in the blank:
The subject real estate is located 28 miles north of downtown Bigville and improved with a single-unit residence. The local brokers have repeatedly stated that this property is too far from the employment centers and the drive time is inhibiting a sale. This is an example of ________ influence on real estate.
- Governmental
- Economic
- Social
- Geographic
-Geographic
The government (option a) did not create this problem. Economic conditions (option b) are not responsible for this problem, nor are social norms (option c).
Under which circumstances would the climate affect real estate prices?
- the subject real estate is improved with an apartment building in an area with high unemployment. There is a very high vacancy rate due to people leaving the area to find employment.
- The subject is an industrial building in a small town. The only users of such a building need a highly skilled workforce, which does not exist in the town or nearby areas.
- The subject is a single-unit residence. There is an oversupply because there was a particularly hard winter last year and many owners are moving to warmer areas.
- The subject is a fast food restaurant site, but the local government does not allow drive through window.
- The subject is a single-unit residence. There is an oversupply because there was a particularly hard winter last year and many owners are moving to warmer areas.
High unemployment in the market area (option a) is an example of an economic influence. An industrial building in an area that lacks a skilled workforce (option b) is an example of an economic or social influence. A fast food restaurant located in an area where the government forbids drive-through windows (option d) is an example of governmental influence.
The subject real estate is a 1.5-acre site improved with a gas station and located next to a six-lane local thoroughfare. The last two gas stations on the site failed. Which of the following options provides a possible reason for this failure?
- Gas stations need low rather than high traffic counts
- Gas stations need easy ingress and egress; high traffic counts are useless if customers cannot get in or out conveniently.
- Gas stations must have long-term leases to allow for continuity of use.
- Gas stations do not need high-visibility locations.
- Gas stations need easy ingress and egress; high traffic counts are useless if customers cannot get in or out conveniently.
Gas stations need high traffic counts (option a) and high visibility (option d). Gas stations also need easy access and direct and crossover ingress and egress. A gas station next to an interstate highway without an exit ramp is likely to fail. Long-term leases (option c) are not related to this situation.
The subject real estate is located in a county with no zoning or land use controls in place. The surrounding counties all have zoning controls. This will probably lead to:
- Excellent land use compatibility.
- Higher prices for commercial than in similar areas with zoning controls.
- Fewer offensive land uses in the area (landfills, oil refineries, and other noisy, smelly, or ugly land uses)
- More offensive land uses in the area ((landfills, oil refineries, and other noisy, smelly, or ugly land uses)
- More offensive land uses in the area ((landfills, oil refineries, and other noisy, smelly, or ugly land uses)
When one area does not have zoning but others do, offensive land uses will be drawn to the area without the zoning (options a and c). Since any parcel can be used for commercial purposes, the supply will be much higher and prices will usually be lower (option b). The only limit on commercial use will be the frontage on busy streets.
Theodore died without a will or any known relatives. The state took the property and auctioned it off. The state’s right to do this is known as:
- Condemnation absolute
- Police Power
- Eminent domain
- Escheat
- Escheat
The state’s right to the property is known as escheat. Police power (option b) is the right of the government to regulate property to protect public health, safety, and welfare, and eminent domain (option c) is the right of government to acquire property for the common good with just compensation.
Langley owned a small 100-acre farm in Hamilton County. He had no heirs, no friends, and no will when he died. Which of the following statements is true?
- The land will stay in Langley’s name forever because he died without heirs.
- The land will pass to the adjacent property owners equally
- The land will pass to the first person to occupy the land for seven years – i.e., squatter’s rights
- The state will take the property and sell it.
- The state will take the property and sell it.
To prevent land owned by persons without heirs from becoming unusable, the common-law rule of escheat allows the state to take the property if nobody else has claim to it (option a). The adjacent property owners may wish they could inherit the property, but they won’t
(option b). The state will take the property if there are no heirs. Adverse possession may occur, but it takes many years (depending on the state where the property is located) for this to happen (option c). If there are no heirs, the state will take the property and resell it to provide for future use. This is known as the power of escheat.
A fee simple interest in real property is limited by the government’s right of
- Taxation, eminent domain, police power, and easements
- Taxation, eminent domain, police power, and escheat
- Eminent domain, police power, leases, and escheat
- Eminent domain, police power, zoning, and escheat
- Taxation, eminent domain, police power, and escheat
The government does not retain easements when they initially sell land to private citizens. Easements must be purchased (option a), even by the government. Leases are not a government right retained for all properties (option c). Zoning is a form of police power (option d).
The fifth Amendment to the US Constitution
- Prohibits the consumption of alcoholic beverages
- Requires the government to pay just compensation for land taken for the common good.
- Limits the number of terms the president can serve.
- Gave women the right to vote
- Requires the government to pay just compensation for land taken for the common good.
The Eighteenth Amendment prohibited the consumption of alcohol, but it was repealed by the Twenty-First Amendment (option a). The Twenty-Second amendment limited the number of terms the president can serve to two (option c). Women’s voting rights were provided for in the Nineteenth Amendment (option d). The Fifth Amendment established rules for grand juries, eminent domain (just compensation), due process, and double jeopardy.
A state government decided to widen a road in front of the Anderson residence. The government’s right to acquire this property for the public use is known as
- Eminent Domain
- Condemnation
- Easement
- Taxation
- Eminent Domain
Governments have the right to take property for the public good with payment of just compensation. The right to do this is known as eminent domain, and the process is known as condemnation.
