REE3043 EXAM 2 SG MC LATEST QUESTIONS AND VERIFIED
ANSWERS
You are projecting that 5,000 apartment units will sign new leases in the market area next year. Target
luxury market makes up to 5% of households by income that currently rent (or would be interested in
renting). Assuming a capture rate of 20% of segment potential, how many luxury apartment units should
a developer expect to lease in year one if...
A.1000 units
B. 500 units
C. 250 units
D.50 units - CORRECT ANSWER✅✅✅D. 50 Units
If the market value of multifamily housing (apt bldgs) exceeds its construction cost, an increase in the
supply of units will occur. As the market becomes oversupplied, we would expect which of the following
to increase?
A. Occupancy levels
B. Market values
C. Vacancy levels
D. Constructioncosts - CORRECT ANSWER✅✅✅C. Vacancy levels
Oversupply means there are more apts for rent than there are hholds looking for apts. In this market
phase we expect vacancy levels to increase (i.e., occupancy levels to decrease)
The objective of a market analysis is to provide key numbers that characterize the potential for a real
estate project. For rental retail space, the key market parameters in question would most likely include
projections for all of the following except:
A. Occupancy rates
B. Rent level
C. Rent growth
D. Sales rates - CORRECT ANSWER✅✅✅D. Sales Rates
The primary source for detailed household demographic information in the U.S. is the:
A. Regional Economic Accounts from the Bureau of Economic Analysis
,B. Employment Situation Summary from the Bureau of Labor Statistics
C. American Community Survey from the U.S. Census Bureau
D. County Business Patterns Report from the U.S. Census Bureau - CORRECT ANSWER✅✅✅C.
American Community Survey from the U.S. Census Bureau
A new residential development will face competition from other new developments, other builders, and
sales of existing homes. To determine if demand in the project's core market segment will be sufficient
to justify proceeding, a developer would apply what rate to estimate sales per year:
A. Capture rate
B. Capitalization rate
C. Absorption rate
D. Risk risk-free rate - CORRECT ANSWER✅✅✅A. Capture rate
Suppose a developer is interested in building a new suburban residential development with 30 units.
Through his market research, the developer has determined that the target market makes up 20% (core
market share) of the households that currently reside in the metropolitan area. If an analysis of data
from the MLS indicates that there should be approximately 500 residential sales in this area over the
next year, how many years will it take the developer to sell all of his units if he is able to capture 10% of
the market segment potential?
A. 1 year
B. 2 years
C. 3 years
D. 4 years - CORRECT ANSWER✅✅✅C. 3 years
Development of apartments, offices, or other commercial structures can have a lead time of two years
or more. In general, the longer the construction lead time the:
A. Lower the construction cost
B. Greater the supply of units
C. Lower the market value
D. Greater the amplitude of real estate cycles - CORRECT ANSWER✅✅✅D. Greater the amplitude of
real estate cycles
, A comparable property sold 15 months ago for $105,000. If property values are increasing at a simple
rate of 0.25% per month (no compounding), what would be the adjusted sale price of the comparable
property?
A. $105,262.50
B. $105,393.80
C. $108,937.50
D. $144,375.00 - CORRECT ANSWER✅✅✅C. $108,937.50
VT = V0(1 + gn)
= $105,000(1 + 0.0025*15)=$108,937.50
Comparable property #3 in the market data grid for 4632 NW 56th Drive sold for $499,000. After making
the appropriate adjustments for transactional, locational, and physical characteristics, what would be
the adjusted price of the comparable property?
A. $537,241
B. $520,079
C. $489,041
D. $466,541 - CORRECT ANSWER✅✅✅490,080?
Under the cost approach to appraisal, the expenditure required to construct a building with equal utility
as the one being appraised is termed...
A. Reproduction cost
B. Replacement cost
C. Normal sale price
D. Market-adjusted normal sale price - CORRECT ANSWER✅✅✅B. Replacement cost
Utility means usefulness. Reproduction cost, the cost of producing an exact replica, best represents the
theoretical basis for the cost approach, but is nearly impossible to implement because building
technology and regulations change over time. So, replacement cost is used with the cost approach
instead of reproduction cost.
ANSWERS
You are projecting that 5,000 apartment units will sign new leases in the market area next year. Target
luxury market makes up to 5% of households by income that currently rent (or would be interested in
renting). Assuming a capture rate of 20% of segment potential, how many luxury apartment units should
a developer expect to lease in year one if...
A.1000 units
B. 500 units
C. 250 units
D.50 units - CORRECT ANSWER✅✅✅D. 50 Units
If the market value of multifamily housing (apt bldgs) exceeds its construction cost, an increase in the
supply of units will occur. As the market becomes oversupplied, we would expect which of the following
to increase?
A. Occupancy levels
B. Market values
C. Vacancy levels
D. Constructioncosts - CORRECT ANSWER✅✅✅C. Vacancy levels
Oversupply means there are more apts for rent than there are hholds looking for apts. In this market
phase we expect vacancy levels to increase (i.e., occupancy levels to decrease)
The objective of a market analysis is to provide key numbers that characterize the potential for a real
estate project. For rental retail space, the key market parameters in question would most likely include
projections for all of the following except:
A. Occupancy rates
B. Rent level
C. Rent growth
D. Sales rates - CORRECT ANSWER✅✅✅D. Sales Rates
The primary source for detailed household demographic information in the U.S. is the:
A. Regional Economic Accounts from the Bureau of Economic Analysis
,B. Employment Situation Summary from the Bureau of Labor Statistics
C. American Community Survey from the U.S. Census Bureau
D. County Business Patterns Report from the U.S. Census Bureau - CORRECT ANSWER✅✅✅C.
American Community Survey from the U.S. Census Bureau
A new residential development will face competition from other new developments, other builders, and
sales of existing homes. To determine if demand in the project's core market segment will be sufficient
to justify proceeding, a developer would apply what rate to estimate sales per year:
A. Capture rate
B. Capitalization rate
C. Absorption rate
D. Risk risk-free rate - CORRECT ANSWER✅✅✅A. Capture rate
Suppose a developer is interested in building a new suburban residential development with 30 units.
Through his market research, the developer has determined that the target market makes up 20% (core
market share) of the households that currently reside in the metropolitan area. If an analysis of data
from the MLS indicates that there should be approximately 500 residential sales in this area over the
next year, how many years will it take the developer to sell all of his units if he is able to capture 10% of
the market segment potential?
A. 1 year
B. 2 years
C. 3 years
D. 4 years - CORRECT ANSWER✅✅✅C. 3 years
Development of apartments, offices, or other commercial structures can have a lead time of two years
or more. In general, the longer the construction lead time the:
A. Lower the construction cost
B. Greater the supply of units
C. Lower the market value
D. Greater the amplitude of real estate cycles - CORRECT ANSWER✅✅✅D. Greater the amplitude of
real estate cycles
, A comparable property sold 15 months ago for $105,000. If property values are increasing at a simple
rate of 0.25% per month (no compounding), what would be the adjusted sale price of the comparable
property?
A. $105,262.50
B. $105,393.80
C. $108,937.50
D. $144,375.00 - CORRECT ANSWER✅✅✅C. $108,937.50
VT = V0(1 + gn)
= $105,000(1 + 0.0025*15)=$108,937.50
Comparable property #3 in the market data grid for 4632 NW 56th Drive sold for $499,000. After making
the appropriate adjustments for transactional, locational, and physical characteristics, what would be
the adjusted price of the comparable property?
A. $537,241
B. $520,079
C. $489,041
D. $466,541 - CORRECT ANSWER✅✅✅490,080?
Under the cost approach to appraisal, the expenditure required to construct a building with equal utility
as the one being appraised is termed...
A. Reproduction cost
B. Replacement cost
C. Normal sale price
D. Market-adjusted normal sale price - CORRECT ANSWER✅✅✅B. Replacement cost
Utility means usefulness. Reproduction cost, the cost of producing an exact replica, best represents the
theoretical basis for the cost approach, but is nearly impossible to implement because building
technology and regulations change over time. So, replacement cost is used with the cost approach
instead of reproduction cost.
