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Perry Real Estate College Final Exam V2 |
2026 /202 7 | Questions & Complete Solutions |
Real Estate Licensing | Grade A
Introduction:
Prepare with confidence using this comprehensive, easy-to-understand study guide created to help you master the key concepts covered in the Perry Real Estate College Final Exam. This resource includes well-organized explanations, practice-style questions, and complete solution breakdowns to strengthen your understanding of real estate principles, laws, finance, contracts, property ownership, and exam-tested topics. Perfect for students preparing for Real Estate Licensing exams, this guide is designed to support effective studying, reinforce core ideas, and boost your exam readiness for the 2026/ curriculum. ✓ Clear and structured content ✓ 100 study questions with full explanations ✓ Great for revision and last-minute review ✓ Ideal for real estate licensing preparation NATIONAL TEST 6: Economics; Appraisal
6.1 If the price of an item is increasing, one can usually assume that a. demand for the item is decreasing in relation to supply of the item. b. demand for the item is increasing in relation to supply of the item. c. supply of the item is increasing. d. demand for the item and supply of the item are increasing. 6.1 (b) demand for the item is increasing in relation to supply of the item. In a market economy, the primary interactions between supply, demand and price are: if supply increases relative to demand, price decreases; if supply decreases relative to demand, price increases; if demand increases relative to supply, price increases; and if demand decreases relative to supply, price decreases. 6.2 When the market for an item has achieved market equilibrium, which of the following statements is true? a. New suppliers will enter the market and drive the price down. b. Demand will slowly taper off, driving the price down. c. Unmet demand for the item is directed toward demand for some other item. d. Supply and demand are equal, and price and value are equal. 6.2 (d) Supply and demand are equal, and price and value are equal. A market tends toward a state of equilibrium in which supply equals demand, and price, cost, and value are identical. According to this principle, market demand moves to meet supply, and supply moves to meet demand. If there is an extreme shortage of an item for which there is normally a strong demand, suppliers will rush to increase production to close the gap. If inventories of an item are very high, suppliers will stop production until the oversupply has been depleted.
a. an immediate rise in the demand for industrial real estate, but no other changes in the real estate market. b. an increase in demand for all types of real estate. c. a housing boom, but no other changes in the real estate market. d. an immediate increase in the prices for industrial and office real estate, but no impact on the residential market. 6.5 (b) an increase in demand for all types of real estate. New businesses will arise to support the new company. They will hire new employees, some from out of town. The new employees will need housing. Hence the demand for residential real estate, as well as for commercial and industrial, will intensify, and it will also stimulate new construction. 6.6 What is "absorption?" a. The amount of new space that is added to available space over a period of time. b. The number of houses that are built over a period of time. c. The amount of space that is occupied at any given time. d. The number of available units that become occupied over a period of time. 6.6 (d) The number of available units that become occupied over a period of time. Absorption is the amount of available property that becomes occupied over a period of time. 6.7 When vacancies are declining in a real estate market, it is common for the market to experience
a. rising prices. b. falling prices. c. falling construction activity. d. falling absorption. 6.7 (a) rising prices. Within the business cycle of real estate, declining vacancy indicates a combination of increasing demand which "fills up" supply which in turn decreases. As space becomes scarcer, rents for available space increase. 6.8 The price for any product is a function of four fundamental determinants of value. These are a. durability, feasibility, mobility, and location. b. desire, utility, scarcity, and purchasing power. c. popularity, recognizability, promotion, and rebate. d. fungibility, costs, convenience, and uniqueness. 6.8 (b) desire, utility, scarcity, and purchasing power. The value of something is based on the answers to four questions: how much do I desire it; how useful is it; how scarce is it; and am I able to pay for it. 6.9 A town is rapidly growing, but all the buildable vacant lots in the most desirable area have already been occupied. In this case, it is likely that the price of existing homes in that area a. will stabilize, since the population must stabilize. b. will increase.
6.11 (c) the market is over-supplied. Falling prices indicate an oversupply of commercial properties in relation to demand. In this case, construction of new supply will also slow down. 6.12 A construction boom in a market is an indication that prices a. have been increasing. b. have been declining. c. have been in equilibrium. d. have exceeded supply. 6.12 (a) have been increasing. A rise in prices is a market signal that there is an undersupply of product in relation to demand. As the market moves toward equilibrium, builders construct more buildings to meet the unmet demand. 6.13 Why is real estate traditionally considered a relatively illiquid economic product? a. Its physical form is fixed. b. Real estate is defined as land, not water. c. It is often difficult to convert to cash. d. It cannot be moved. 6.13 (c) It is often difficult to convert to cash.
Since real estate is often a large, long-term investment that has no exact duplicate, the process of a buyer's evaluating and choosing the right property is long and complex; hence, finding a buyer at a desired price can take a long time. 6.14 What does "base employment" refer to in the context of real estate demand? a. The lowest category of employment in terms of wages and desirability b. The number of persons employed in base industries in an area c. The number of persons employed on military bases in an area d. The labor pool available for employment in all industries in an area 6.14 (b) The number of persons employed in base industries in an area Base employment is the number of persons employed in the base industries that represent the economic foundation of an area. It is the driving component of total employment, which includes secondary and support industries, and which creates demand for all types of real estate. 6.15 What is "vacancy" in real estate market economics? a. A property that has no owner-occupant b. The total number of properties of a certain type that are on the market at a given time c. The absence of certain types of users in a given market area d. The total existing space of a certain type that is unoccupied at a given time 6.15 (d) The total existing space of a certain type that is unoccupied at a given time Vacancy is the amount of total real estate inventory of a certain type that is unoccupied at a given time. It is often stated as a percentage of total inventory, the vacancy rate for that property type.
6.18 There is a lot of new construction going on in the town of Florence. Which of the following would most likely be the immediate effect on the real estate market? a. Demand increases and prices rise. b. Vacancy rises and prices fall. c. Absorption and vacancy decrease. d. Supply decreases relative to demand. 6.18 (b) Vacancy rises and prices fall. New construction generally occurs to meet an excess of demand. By adding supply, it tends to increase vacancy and lower prices until supply-demand equilibrium is achieved. 6.19 What kind of real estate users are most concerned with neighborhood quality, access to services, property amenities, and quality of life in their demand for real estate? a. Retail b. Office c. Industrial d. Residential 6.19 (d) Residential While all types of users may have these needs, they are most prominent for residential users because of concerns for family comfort and safety. Retail users are more concerned with competitive features of the trade area; office users care more about occupancy costs and suitability for the business; industrial users care more about such features as functionality, accessibility, and the labor pool.
6.20 One distinguishing feature of real estate as an economic product is a. its easy convertibility to cash. b. its quick response to changes in supply-demand balance. c. its susceptibility to swings in the local economy. d. the easy substitutability of one item for another. 6.20 (c) its susceptibility to swings in the local economy. Because a real property cannot be transferred to a large, central real estate marketplace, its marketability is closely tied to local conditions. Investors and users must come to the product, unlike other types of economic product that can be moved to a place in search of greater demand. 6.21 Bill Parsons paid $450,000 for a house to operate as a rental property, figuring that he could rent it out at a rate of $2,700 a month. In paying a price based on the property's ability to generate a desired future income, Parsons was motivated by the economic principle known as a. substitution. b. anticipation. c. supply and demand. d. utility. 6.21 (b) anticipation. Anticipation is the value principle that a buyer will pay a price based on the benefits the buyer expects to derive from a property over a holding period. For example, if an investor anticipates an annual rental income from a leased property to be one million dollars, this expected sum has a direct bearing on what the investor will pay for the property.
Assemblage, or the conjoining of adjacent properties, sometimes creates a combined value that is greater than the values of the unassembled properties. The excess value created by assemblage is called plottage value. 6.24 What is the difference between market value and market price, if any? a. There is no difference. b. Market value is a broker's estimate; market price is a precise number derived by a licensed appraiser. c. Market value is an average price derived from comparable sales; market price is a price based on the cost of creating the property. d. Market value is an estimate; market price is the price at which a property sold. 6.24 (d) Market value is an estimate; market price is the price at which a property sold. Market value is an estimate of the price at which a property will sell at a particular time. The market price, as opposed to market value, is what a property actually sells for. Market price should theoretically be the same as market value if all the conditions essential for market value are present. Market price, however, may not reflect the analysis of comparables and of investment value that an estimate of market value includes. 6.25 Which of the following is a valid requirement for defensibly characterizing a property's living area? a. Countable living area must be attached to the main house. b. Closets must be excluded from gross living area. c. The property must be finished, i.e., have completed studwork and sub-flooring. d. Enclosed porches and stairways cannot be counted as living area.
6.25 (a) Countable living area must be attached to the main house. Generally, one cannot count an outbuilding that is not attached to the main house, i.e., a barn or shed. 6.26 How is a property's gross living area generally measured? a. From the lot's area, minus the area of improved buildings b. From the exterior walls, above grade, excluding open areas c. By measuring the interior rooms d. By measuring area of all enclosed rooms, minus the basement and attic 6.26 (b) From the exterior walls, above grade, excluding open areas Gross living area is measured from the outside and includes all attached and enclosed areas, minus rooms below grade and portions of area above grade. 6.27 Which of the following statements properly describes the central concept of the sales comparison approach? a. Find the median price of recently sold comparable properties and add or subtract dollar amounts in the subject property to account for competitive differences. b. Make dollar adjustments to the sale prices of comparable properties to account for competitive differences with the subject. c. Find at least three comparable properties that are currently for sale and make dollar adjustments to the listing prices to account for competitive differences with the subject. d. Apply an appreciation factor to the price at which the subject property most recently sold and make dollar adjustments to account for competitive differences with comparable properties currently for sale.
d. subtracts value from the subject property if it is inferior to a comparable. 6.29 (a) adds value to a comparable that is inferior to the subject property. If the comparable is inferior to the subject in some characteristic, an amount is added to the price of the comparable. If the comparable is better than the subject in some characteristic, an amount is deducted from the sale price of the comparable. This neutralizes the comparable's competitive advantage or disadvantage in an adjustment category. For example, a comparable has a swimming pool and the subject does not. To equalize the difference, the appraiser deducts an amount, say $6,000, from the sale price of the comparable. 6.30 The best comparable property for use in the sales comparison approach is the one that a. requires the most and largest adjustments. b. requires the fewest and smallest adjustments. c. sold most recently at the highest price. d. is located closest to the subject property. 6.30 (b) requires the fewest and smallest adjustments. As a rule, the fewer the total number of adjustments, the smaller the adjustment amounts, and the less the total adjustment amount, the more reliable the comparable. 6.31 A house is being appraised using the sales comparison approach. The house has three bedrooms, two bathrooms, and a patio. The appraiser selects a comparable house that has three bedrooms, 3 bathrooms, and no patio. The comparable house just sold for $400,000. A bath is valued at $7,000, and a patio at $2,000. Assuming all else is equal, what is the adjusted value of the comparable? a. $402,000.
b. $407,000. c. $395,000. d. $405,000. 6.31 (c) $395,000. Since the comparable has an extra bath, it is adjusted downward to equalize with the subject. Conversely, since it has no patio, the appraiser adds value to the comparable. Thus, $400, minus $7,000 plus $2,000 equals $395,000. 6.32 Which of the following statements properly describes the central methodology of the cost approach to appraisal? a. Apply a depreciation factor to the reported actual cost of acquiring and improving the subject property. b. Estimate the cost of building the improvements on the subject property. c. Estimate the land value and add to this the actual cost of the improvements adjusted for competitive differences with similar properties. d. Add the estimated land value and cost of improvements and subtract the accrued depreciation of the improvements. 6.32 (d) Add the estimated land value and cost of improvements and subtract the accrued depreciation of the improvements. The cost approach consists of estimating the value of the land "as if vacant;" estimating the cost of improvements; estimating and deducting accrued depreciation; and adding the estimated land value to the estimated depreciated cost of the improvements. 6.33 One of the strengths of the cost approach is that it
a. $675,000. b. $650,000. c. $625,000. d. $575,000. 6.35 (d) $575,000. To appraise value using the cost approach, add the land value to the value of the depreciated improvement. Thus you have $150,000 + ($475,000 - 50,000), or $575,000. 6.36 Which of the following statements properly describes how to apply the income capitalization approach to appraisal? a. Apply a rate of return to the price paid for an income property. b. Divide the income a property generates by a rate of return. c. Estimate the amount of income a property must generate to return the capital amount invested in it. d. Estimate the rate of return a property owner receives from income generated by the property. 6.36 (b) Divide the income a property generates by a rate of return. An appraiser obtains an indication of value from the income capitalization method by dividing the estimated net operating income for the subject by the rate of return, or capitalization rate. The formula is: NOI / Cap rate = Value. 6.37 A strength of the income capitalization approach is that it a. uses a rate of return that is required for all potential purchasers in a market.
b. yields an accurate projection of investment income. c. uses a method that is also used by investors to determine how much they should pay for an investment property. d. can be used with any type of property in any market. 6.37 (c) uses a method that is also used by investors to determine how much they should pay for an investment property. The strength of the income approach is that it is used by investors themselves to determine how much they should pay for a property. Thus, in the right circumstances, it provides a good basis for estimating market value. The approach, however, does not project what an income property's future income will be. Moreover, it is not an applicable method for estimating value if the subject is a non-income producing property. 6.38 A property is being appraised using the income capitalization approach. Annually, it has an estimated gross income of $60,000, vacancy and credit losses of $3,000, and operating expenses of $20,000. Using a capitalization rate of ten percent, what is the indicated value (to the nearest $1,000)? a. $370,000. b. $400,000. c. $570,000. d. $600,000. 6.38 (a) $370,000. First, identify net income by subtracting out vacancy and expenses. Then divide by the capitalization rate. Thus, ($60,000 - 3,000 - 20,000) ÷ 10% = $370,000. 6.39 An apartment building that sold for $450,000 had monthly gross rent receipts of $3,000. What is its monthly gross rent multiplier?
