Chapter 1: Basic Real Estate Concepts Flashcards

Chapter 1: Basic Real Estate Concepts Flashcards

tenements (definition)Aka for Real Property, land, and hereditamentsEverything of a permanent nature associated with land and ordinarily transferred with the land. Tenements are both tangible (e.g., buildings) and intangible (e.g., air rights).Do you think higher taxes tend to encourage or discourage spending and investing?A. EncourageB. Discourage

• Discourage

Uniqueness1/3 of physical characteristics of landeach piece of land is inherently unique.Since no more land can be created in any given location, this uniqueness leads buyers to view land as a scarce commodity, creating value. (unless a feature makes it less valuable obvi) real estate broker (definition)person or business entity. one who is licensed to represent another person in a real estate transaction with the intent to receive compensation or valuable considerationmore specifically, they do these things for a

fee:sellslistsleasesexchangesnegotiatesor otherwise deals

in the real estate of others neighborhood (definition)any contiguous area that may be identified by similar characteristics or physical boundaries.Mixed-Use Property as commercial investment real estateMixed-use buildings do not technically fall into any of the commonly referenced use groups like residential, industrial, and manufacturing. A mixed-use building could combine retail and office space on the first floor with residential on the floors above, or, it could combine industrial, office, and retail.Each of these are social factors that may affect the real estate market EXCEPTa. demographic changes.b.location.c. migration.d. scarcity.

• scarcity.

Scarcity1/4 value characteristicsbasically stating limited supply which influences demand. Econ principles. Beach houses cost more. etc.Real Estate (definition)The actual physical land and everything, both natural and man-made, which is attached (or appurtenant) to it.Land (definition)The surface of the earth; actual dirt on the ground, part of a waterway that is owned, or even a swampy marsh. From a legal standpoint, land also refers to everything under the ground to the center of the earth, and everything over the land into the air (within limits to allow for air traffic).Liquidity (definition)the ability to convert an asset into cash quickly without the loss of principal

Real estate cycles tend to lag somewhat behind general business cycles in response to supply and demand. T/F?T land use controlsPublic or private restrictions on how land may be used (e.g., zoning).Indestructibility1/3 of physical characteristics of land{real estate cannot be destroyed}tornadoes and earthquakes can physically change a property and its improvements, ownership interests are far broader. Thus, real estate will always have some value by virtue of its mere existence.liquidity of a real estate investment property usually not immediately convertible to cash without some loss of total valueThis characteristic of real estate makes it one of the more non-liquid or illiquid of the various investment alternatives.From an investment perspective, then, the illiquidity of real property is a disadvantage.The principal that an investor pays on a mortgage is an example of using leverage to build equity. T/F?T Location1/4 value characteristicsA place where something exists; an area with preferred features, giving it value to the property; the exact location or position of a piece of real estate.As the supply of homes in the area rises, what would you expect to happen to home prices in the short term?A.Home prices will fall slightly from their high points.B. Home prices will continue to rise.C. Home prices should not be affected.D. It's not possible to predict.

• Home prices will fall slightly from their high points.

Personal Property AKAChattel or Personalty Morgan took out a mortgage to buy some rental property.He is able to repay the debt with the rent he collects, and he is earning equity. This is an example ofa. leverage.b.liquidity.c. marketability.d. return.

• leverage.

Which is an example of a public land restriction?a. deed restrictionb. restrictive covenantc. subdivision regulationd.zoning ordinance

• zoning ordinanceNOT a. deed restrictionWhy?

Leverage (definition)the effect borrowed funds have on investment returnscan increase or decrease an investor's return compared to purchasing with all cash Which is NOT an example of an improvement?a. the barn on the back of the propertyb. the fence running along the edge of the propertyc. the sewer line running along the front of the propertyd. the line of pine trees planted along the edge of the property

• the line of pine trees planted along the edge of the

propertyNOT c. the sewer line running along the front of the propertywhy?Improvements1/4 value characteristicsAdditions to real property that are man-made, substantial fixtures, such as buildings.Each of these is a physical characteristic that may affect real estate values EXCEPTa. immobility.b.

indestructability.c. transferability.d. uniqueness.

• transferability.

A single-family residence that is converted into a doctor's office is categorized as mixed-use space. T/F?F Physical characteristics of real estateImmobilityIndestructibilityUniqueness (non-homogeneity) Real estate cycles (definition)general swings in real estate activity resulting in increasing or decreasing activity and property values during different phases of the cycle.Real estate cycles are dependent on business cycles but trail behind because they depend on many elements of business cycles to be in full swing before they can respond.swings bc market responds to supply and demand which RE has inherit difficulties adjusting buyer's market (definition)a housing market where there are more sellers than buyers. Generally, in this situation, the buyer is in a position to negotiate a lower price or more favorable terms.Government ForcesLocal level: planning & zoning, property taxation, building & health codes, and regulations affecting development play a

significant role in the cost and desirability of REState level:

developmental agencies overseeing roads, waterways, and other factors that affect overlapping jurisdictions are

impacted.Federal level: legislation affecting the operation of

lending institutions affects RE industry. (many federal government actions are a deliberate attempt to counteract the business cycles) forced that affect all marketsPhysical. The physical attributes of property that impact the

real estate market: Immobility, indestructibility, and

uniqueness.Economic. The four characteristics that must

be present for an item to achieve maximum value: Scarcity,

location, improvements, and permanence of investment.Governmental. Real estate markets can be affected by local state, and federal government laws, actions, and policies (e.g., fiscal, monetary, and taxation policies).Social. Include demographic changes like population growth, population age, the size of families, trends, and buyer tastes and standards.bundle of rightslegal rights conferred to owners of real property, like the right to mortgage, sell, make improvements, enjoy, lease, and use property unless there are restrictions absolute land ownershipthe complete bundle of rights belongs to the owner Which situation would NOT likely result in a seller's market?a. high construction costsb. low interest ratesc.migration out of an aread. minimal new construction

• migration out of an area

A real estate licensee who is an independent contractor is paid based on successful real estate transactions, not on hours worked. T/F?T Marketability (definition)is the ability to convert an asset to cash quickly, at any price