Deck 4: Government Controls and Real Estate Markets

Question 1

All of the following statements are true in describing the determination of just compensation EXCEPT:

A) The value of the property is based on its highest and best use at the time.
B) The value of the property is determined solely by its current use.
C) The value is the amount that restores the property owner to a financial position equivalent to that existing before the property was taken.
D) The value is the market value of the property if completely taken, or the total value of all financial loss if partially taken.

Answer 1

B

Question 2

It was not until the late 1960's that land use controls moved to the forefront of public interest, as the belief that the environment was an endless and costless resource was replaced with the notion that the world was a closed system with limited space, air, water, and other resources. Environmentalists coined which of the following terms to refer to this new point of view?

A) Smart growth
B) The Silent Spring
C) Spaceship earth
D) Urban sprawl

Answer 2

C

Question 3

When a zoning ordinance is revised, some existing land uses then fall outside the new zoning classification. These land uses are referred to as:

A) special uses
B) nonconforming uses
C) conforming uses
D) exclusionary uses

Answer 3

B

Question 4

While most real property in the United States is privately owned, government regulations limit private property use and therefore play an important role in the determination of property value. Proponents of government intervention argue that regulation is needed to address the unintended and unaccounted for consequences of one land user upon others, more commonly referred to as:

A) incomplete information
B) locational monopoly
C) externalities
D) urban sprawl

Question 5

A traditional zoning ordinance includes all of the following EXCEPT:

A) Minimum setback requirements
B) Minimum lot dimensions
C) Provisions for special use districts
D) Performance standards

Question 6

A developer plans to place a subdivision slightly outside the city limits in an area that is rapidly developing. However, the city claims to have the right to control urban development even in the proposed area. The right the city is attempting to invoke is referred to as:

A) extraterritorial jurisdiction.
B) urban service area.
C) comprehensive plan.
D) growth constraint.

Question 7

A contemporary planning movement that explicitly advocates a traditional grid pattern of development designed to give pedestrian life priority over motor vehicles (e.g., including narrowed streets with houses close to the street and garage access through side alleys) is commonly referred to as:

A) urban sprawl
B) urban service area
C) traditional residential planning
D) new urbanism

Question 8

The right of government to acquire private property, without the owner's consent, for public use in exchange for just compensation is referred to as:

A) inverse condemnation
B) regulatory taking
C) eminent domain
D) dedication

Question 9

Growth management laws at the state level require local jurisdictions to plan for and meet certain requirements. One such requirement prohibits local development unless adequate infrastructure, schools, police/fire protection, and social services have been put in place first. This requirement is referred to as the:

A) economic and environmental impact requirement
B) concurrency requirement
C) affordable housing requirement
D) extraterritorial jurisdiction requirement

Question 10

Real estate taxes represent the largest single source of revenue for a large portion of local governments. Most property taxes are applied in relation to the value of the property, or in other words, they are:

A) effective tax rates
B) ad valorem taxes
C) tax-exempt
D) regressive

Question 11

Which of the following tools of public land use control represents the earliest method of police power to regulate land use? (Hint: Standards for energy efficiency and sustainability are the most recent trends in the application of this land use control)

A) Subdivision regulation
B) Zoning
C) Building Codes
D) Planned Unit Developments

Question 12

State and federal control of land uses has increased greatly over the past 40 years due in part to an increased awareness of environmental hazards. Which of the following federal environmental control laws was responsible for establishing the "Superfund" to finance emergency responses and cleanups of abandoned and unregulated waste dumps?

A) Clean Water Act
B) Resource Conservation and Recovery Act
C) Toxic Substances Control Act
D) Comprehensive Environmental Response Compensation and Liability Act

Question 13

After a structure is built, it is impractical for even a building expert to fully assess the quality of the construction and the safety hazards it may harbor. This is an example of which of the following problems that plagues private real estate markets?

A) Externalities
B) Incomplete information
C) Locational monopoly
D) Holdout

Question 14

When land use controls impose exceptional hardship and loss of value, a relief mechanism must be provided. This relief is referred to as a:

A) building code
B) zoning ordinance
C) comprehensive plan
D) variance

Question 15

Development taking place in rural areas well beyond the urban fringe is commonly referred to as:

A) urban sprawl
B) holdout
C) urban service areas
D) homestead

Question 16

Negative externalities can diminish a property's value by imposing costs on the community at large. In order to offset this detrimental impact, economists advocate "internalizing" these externalities by implementing:

A) performance standards
B) impact fees
C) growth moratoriums
D) planned unit developments

Question 17

In order for the board of adjustment to approve a variance, all of the following conditions must be met EXCEPT:

A) The owner must be unable to use the lot as zoned.
B) The condition is common to other parcels of land in the vicinity
C) The variance must not materially change the character of the neighborhood.
D) The condition is unique to the lot.

Question 18

Externalities can play an important role in determining a property's price, either by adding value through positive externalities or by diminishing value through negative externalities. Which of the following is most likely to be considered a negative externality?

A) Nearby parks and recreation facilities
B) Quality neighborhood schools
C) Public assistance facilities such as homeless shelters.
D) Well-kept landscapes.

Question 19

One of the main criticisms of property taxes is that the property tax of lower income households is higher than that of higher income households, as a percentage of their respective incomes. In other words, taxes are criticized for being:

A) regressive
B) comprehensive
C) concurrent
D) extraterritorial

Question 20

Special assessments are levied to pay for specific improvements that benefit a particular group of properties. All of the following characteristics of special assessments are true EXCEPT:

A) They are considered ad valorem taxes.
B) They are applied as pro rata charges.
C) They are levied directly on the properties benefited.
D) They are commonly used to finance streets, storm water systems, sidewalks, and other area improvements.

Question 21

The most recent approach to zoning, form-based zoning, creates a map by segregation of:

A) Land uses
B) Building shapes
C) Property taxes
D) Performance standards

Question 22

A public planning movement that explicitly advocates a cul-de-sac hierarchy of development, an automobile oriented society, and separated land use is more commonly referred to as:

A) urban sprawl
B) urban service area
C) traditional residential planning
D) new urbanism

Question 23

Given the following information, compute the taxable value for the particular piece of property in dollar terms. Market value of property: $500,000, Assessed value of property: 85 % of the market value of the property, Exemptions: $50,000, Taxes paid: $8,250.

A) $75,000
B) $375,000
C) $416,750
D) $425,000

Question 24

Most communities contain a number of tax-exempt properties. All of the following are typically included in the tax-exempt property classification EXCEPT:

A) Places of worship
B) Universities
C) Government owned properties
D) Single-family homes

Question 25

While property tax rates can vary across geographic regions, ad valorem taxes are typically levied at rates between:

A) 1.0 to 4.0 percent
B) 5.0 to 9.0 percent
C) 10.0 to 15.0 percent
D) 16.0 to 20.0 percent

Question 26

In the state of Florida, for example, homeowners may qualify for a tax exemption in which up to $50,000 will be deducted from the assessed value of the property before taxes are calculated as long as the property owner occupies a home as the family's principal residence and has claimed residency within the state. This exemption is better known as the:

A) ad valorem exemption
B) affordable housing exemption
C) growth moratorium
D) homestead exemption

Question 27

Traditional zoning regulations are criticized for often being too rigid in forcing uniform types of development. One proposed solution to this issue allows traditional zoning requirements to vary in exchange for an enhancement to the community, such as the construction of a park. This is more commonly referred to as a:

A) Planned unit development
B) Performance standard
C) Impact fee
D) Growth restriction

Question 28

In considering the acquisition of real property, it is important to remember that certain factors may limit ownership rights. Which of the following is an example of a situation in which ownership rights can be fully removed from the property?

A) Land use controls
B) Leasehold interests
C) Home owner association (HOA) bylaws
D) Defaulted lien

Question 29

Zoning ordinances that tend to exclude lower income groups by large lot size, or that do not adequately provide low- and moderate-income housing are referred to as:

A) special uses
B) nonconforming uses
C) conforming uses
D) exclusionary uses

Question 30

Given the following information, calculate the total annual tax liability of the homeowner. Market value of property: $537,500, Assessed value of property: 60 % of the market value, Exemptions: $2,500, School District Millage Rate: 29.25 mills, County and Township Millage Rate: 5.75 mills.

A) $7,437.50
B) $11,200.00
C) $11,287.50
D) $188,125.00

Question 31

Given the following information, calculate the total annual tax liability of the homeowner. Market value of property: $350,000, Assessed value of property: 40 % of the market value, Exemptions: $2,000, State Millage Rate: 0.25 mills, County Millage Rate: 13.70 mills.

A) $34.50
B) $1,890.60
C) $1,925.10
D) $4,685.10

Question 32

Nearly half of states in the U.S. use the sale of tax lien certificates to manage defaulted property taxes. The certificates are auctioned to the public at:

A) the face value of the property taxes due
B) the assessed value of the home
C) a discount from the face value of the property taxes due
D) a premium of the assessed value of the home

Question 33

Given the following information, compute the property tax rate for the community in percentage terms. Total budget expenditures: $108 million, Total non-property tax income: $50 million, Total assessed value of all properties: $2 billion, Total exemptions: $550 million.

A) 2.5%
B) 4.0%
C) 10.0%
D) 12.0%

Question 34

In the history of eminent domain, the Kelo v. New London, Connecticut decision of the U.S. Supreme Court in 2005 affirmed the possibility of a community being:

A) Prohibited from using eminent domain.
B) Restricted to use of eminent domain only for actual government (public) land uses.
C) Able to use eminent domain to acquire property for private development if it serves public purpose and the current land use is blighted.
D) Able to use eminent domain to acquire property for private development if it serves public purpose even if the current land use is not blighted.

Question 35

Tax rates are usually stated in mills. Assuming the tax rate in percentage terms is 6.5%, convert this rate to mills.

A) 0.065 mills
B) 6.5 mills
C) 65 mills
D) 650 mills

Question 36

Eminent domain is the right of government to acquire private land, without the owner's consent, for public use, with due process and just compensation. The legal procedure for exercising the right of eminent domain is referred to as:

A) Growth restriction
B) Urban sprawl
C) Blighted development
D) Condemnation

Question 37

Given the following information, compute the effective tax rate for the particular piece of property in percentage terms. Market value of property: $325,000, Assessed value of property: $250,000, Exemptions: $50,000, Taxes paid: $5,363.

A) 1.50%
B) 2.35%
C) 1.65%
D) 2.68%

Question 38

Given the following information, calculate the total annual tax liability of the homeowner. Market value of property: $350,000, Assessed value of property: 40 % of the market value, Exemptions: $2,000, Millage Rate: 33.95 mills.

A) $4,685.10
B) $4,753.00
C) $11, 882.50
D) $46,851.00

Question 39

In efficient financial markets, unregulated competitive bidding should bring about the most productive use of an asset and the price paid for that asset should reflect fair value based on its usefulness. In real estate, this is not always the case. For example, there is no substitute for certain pieces of land which gives the owner a bargaining advantage in determining the value of the land. This feature of real estate markets is commonly referred to as:

A) incomplete information
B) locational monopoly
C) positive externality
D) negative externality

Question 40

Given the following information, calculate the effective tax rate expressed in mills. Market value of property: $280,000, Assessed value of property: 50 % of the market value, Exemptions: $2,000, Annual tax liability: $4,685.10.

A) 1.69 mills
B) 3.35 mills
C) 16.73 mills
D) 33.95 mills

Question 41

Given the following information, compute the property tax rate for the community in mills. Total budget expenditures: $250 million, Total non-property tax income: $150 million, Total assessed value of all properties: $5 billion, Total exemptions: $900 million.

A) 2.00 mills
B) 2.43 mills
C) 20.0 mills
D) 24.3 mills

Question 42

To determine a property's annual tax liability in dollars, it is useful to first convert the millage rate to an annual percentage. If the millage rate is 25 mills, determine the property tax rate in percentage form.

A) 0.025%
B) 0.25%
C) 2.50%
D) 25.00%