ch2 day1

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:

• they are enforceable by the government

• they apply only to tangible assets

• they are nonrevocable

• they are enduring

Property rights can be divided into two classes, real and personal. Which of the following is an example of real property?

• vehicles

• stocks and bonds

• patents

• an office building

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)?

• manner of the attachment

• character of the article and manner of adaptation

• intention of the parties

• relation of the parties

Based on your understanding of the rules for determining when an object becomes a fixture, which of the following items would most likely be considered a fixture at the time of sale?

• custom (built-in) bookshelves

• refrigerator in a single-family residence being sold

• fence installed by the tenant of a rental property

• curtains

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 exclusive possession are referred to as:

• fixtures

• townships

• licenses

• estates

Which of the following types of ownership estates is the most complete bundle of rights, and therefore carries the greatest value?

• fee simple absolute

• fee simple conditional

• ordinary life estate

• legal life estate

Suppose a 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(n):

• legal life estate with remainder interest

• conditional fee absolute with reverted interest

• remainder interest from an ordinary life estate

• tenancy for years

The expected stream of rental income is capitalized into value by converting expected future cash flows into present value through a process called:

• amortization

• discounted cash flow analysis

• direct capitalization

• proforma

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(n):

• real property

• home mortgage

• equity REIT

• mortgage-backed security

An example of a real estate asset that trades in the public debt market is a(n):

• real property

• real estate operating company

• equity REIT

• commercial mortgage-backed security (CMBS)