REAL4000 Test 1 Singh Exam
Questions and Answers
What is real estate? - -the term RE is used in 3 ways
(1.) tangible asset
(2.) bundle of rights
(3.) Industry Profession
- (1.) Tangible Perspective - Lands and buildings - -- raw land
- structures (improvements on the land)
- improvements to the land
- (2.) Bundle of Rights perspective - --including non-physical items
- (3.) Real Estate as an industry and profession - -- referring to the field as a
whole
- careers in Real Estate
- How important is Real Estate to the Economy? - --25% of the total U.S.
GDP
- housing market alone accounts for 17-18%
- Generates nearly 70% of local government revenue thru property tax
- creates jobs for 9 million americans
- Real Estate is important because of the.... - -- stock factor
- flow factor
- stock factor - -as an asset class, RE represents a large portion of wealth,
for households as well as corporations
- Flow factor - -RE represents an important sector of the economy in terms
of contribution to GDP and employment
- U.S. economy is sensitive to housing values
- Real Estate values are determined by interactions in 3 markets/ sectors - -
1. User/ Space markets
2. Capital/ Financial Markets
3. Asset/Property Markets
*governmental sector*
- 1. User Market (Space/Rental Markets) - -- market for the physical real
estate
- buyers receive right to use space
- determines rental rates
, - "local and usually competitive
- separate local markets for various property types: retail, offices, industrial,
residential
- highly segmented
- 2. Capital/Financial Market - -- Real Estate competes for funds in capital
market w/ other asset classes, such as stocks and bonds
- investors select a mix of investments based on expected returns and risk
- 3. asset/ property markets - -- Public Capital Markets
- Private Capital Markets
- public capital markets - -- Small homogeneous units (shares) of ownership
in - assets trade in public exchanges
- Many buyers and sellers
- Price quotes available for all to see
- high degree of liquidity
-informationally efficient
- private capital market - -- absence of centralized market (or even price
lists)
- assets trade infrequently in private transactions (lack of transparency)
- common for " whole" assets to be traded in single transaction (indivisibility)
- less liquidity than the public markets
- higher transaction costs
- * Governmental Influence - -- Local (most important)
- Federal
- State ( Least Important)
- Local Gov influence (MOST) - -- land use regulations
- building codes
- property taxes
- provision of services
- Federal Gov Influence - -- income tax policy
- housing subsidies
- federal flood insurance
- environmental controls
- consumer protection (FPB)
- State Gov Influence (LEAST) - -- licensing of RE agents, appraisers,
mortgage brokers
- disclosure laws
- environmental regulations
Questions and Answers
What is real estate? - -the term RE is used in 3 ways
(1.) tangible asset
(2.) bundle of rights
(3.) Industry Profession
- (1.) Tangible Perspective - Lands and buildings - -- raw land
- structures (improvements on the land)
- improvements to the land
- (2.) Bundle of Rights perspective - --including non-physical items
- (3.) Real Estate as an industry and profession - -- referring to the field as a
whole
- careers in Real Estate
- How important is Real Estate to the Economy? - --25% of the total U.S.
GDP
- housing market alone accounts for 17-18%
- Generates nearly 70% of local government revenue thru property tax
- creates jobs for 9 million americans
- Real Estate is important because of the.... - -- stock factor
- flow factor
- stock factor - -as an asset class, RE represents a large portion of wealth,
for households as well as corporations
- Flow factor - -RE represents an important sector of the economy in terms
of contribution to GDP and employment
- U.S. economy is sensitive to housing values
- Real Estate values are determined by interactions in 3 markets/ sectors - -
1. User/ Space markets
2. Capital/ Financial Markets
3. Asset/Property Markets
*governmental sector*
- 1. User Market (Space/Rental Markets) - -- market for the physical real
estate
- buyers receive right to use space
- determines rental rates
, - "local and usually competitive
- separate local markets for various property types: retail, offices, industrial,
residential
- highly segmented
- 2. Capital/Financial Market - -- Real Estate competes for funds in capital
market w/ other asset classes, such as stocks and bonds
- investors select a mix of investments based on expected returns and risk
- 3. asset/ property markets - -- Public Capital Markets
- Private Capital Markets
- public capital markets - -- Small homogeneous units (shares) of ownership
in - assets trade in public exchanges
- Many buyers and sellers
- Price quotes available for all to see
- high degree of liquidity
-informationally efficient
- private capital market - -- absence of centralized market (or even price
lists)
- assets trade infrequently in private transactions (lack of transparency)
- common for " whole" assets to be traded in single transaction (indivisibility)
- less liquidity than the public markets
- higher transaction costs
- * Governmental Influence - -- Local (most important)
- Federal
- State ( Least Important)
- Local Gov influence (MOST) - -- land use regulations
- building codes
- property taxes
- provision of services
- Federal Gov Influence - -- income tax policy
- housing subsidies
- federal flood insurance
- environmental controls
- consumer protection (FPB)
- State Gov Influence (LEAST) - -- licensing of RE agents, appraisers,
mortgage brokers
- disclosure laws
- environmental regulations
