Real Estate 306 Exam 1 Questions with Correct Answers Graded A+
real estate - Answers physical asset
anything that can be owned or possessed; RIGHTS from owning property
if you have right of possession, you own real estate
profession and an industry
real estate as a physical asset - Answers is the land and all permanent attachments to the land and
anything it is suitable for; ex. fixed structures or parking garage potential
real estate as a bundle of rights - Answers it is the services/benefits real estate provides ex. shelter,
privacy etc
also have air rights, surface rights, mineral, oil and gas rights
can pick an choose sticks in the bundle of "ownership rights"
real property vs personal property - Answers real property = anything immovable, ex land, home,
anything attached to the land, permanent
personal property = something that can be moved like RV or furniture
what are the three different markets in RE - Answers user markets
capital markets
property markets
user market - Answers competition among users for physical location and space. competition
determines the price of each land parcel
creates supply and demand
user market for physical real estate - Answers buyers receive the right to use space
rental rates are determined by supply and demand
demand: individuals, households, and firms who require space for consumption or production purposes
supply: real estate owners/operators who rent space to tenants
capital markets - Answers allocate financial resources among households and firms requiring funds
ex. stocks, bonds, mortgage contracts... anything that will give a financial return
provides equity and debt
, property markets - Answers determine required property specific investment returns, values, etc
intersection of user and capital markets
other characteristics of real estate markets - Answers high transaction costs b/c expensive to enter and
exit market (time and $)
real estate is illiquid, fewer buyers
high asset value - debt financing is needed
long economic life
traditions - symbol of power, stability (people want to won homes, white house)
capitalization rate - Answers ratio of property's annual net income from rental operations to its value
net income/price of property
role of government on real estate - Answers local government = most influential, property taxes, fees,
construction restrictions
state government = least influential, sets requirements for local governments
federal government = housing subsidies, income tax policies, environmental policies
explain why real estate is heterogeneous - Answers each property has unique features... even homes
that are built exactly the same are different because they're in different locations
what is a localized market - Answers homes are near other homes, apartments are near other
apartments. this increases competition in the market
what is a segmented market - Answers people looking for homes are not going to look for them in a
condo market. they will stay in the localized home market. this is why there are different segments in
real estate
improvements on the land vs improvements to the land - Answers on = any fixed structure; decks,
fences walls
to = making the land more suitable for something else; ex streets, walkways drainage systems
intangible assets vs tangible assets - Answers intangible assets = contractual rights, mortgage, lease
agreements, financial claims (stocks/bonds)
tangible assets = cars, land, buildings
property - Answers anything that can be owned or posessed
land vs raw land - Answers land = infrastructure, but not any structure; ex building site or lot
real estate - Answers physical asset
anything that can be owned or possessed; RIGHTS from owning property
if you have right of possession, you own real estate
profession and an industry
real estate as a physical asset - Answers is the land and all permanent attachments to the land and
anything it is suitable for; ex. fixed structures or parking garage potential
real estate as a bundle of rights - Answers it is the services/benefits real estate provides ex. shelter,
privacy etc
also have air rights, surface rights, mineral, oil and gas rights
can pick an choose sticks in the bundle of "ownership rights"
real property vs personal property - Answers real property = anything immovable, ex land, home,
anything attached to the land, permanent
personal property = something that can be moved like RV or furniture
what are the three different markets in RE - Answers user markets
capital markets
property markets
user market - Answers competition among users for physical location and space. competition
determines the price of each land parcel
creates supply and demand
user market for physical real estate - Answers buyers receive the right to use space
rental rates are determined by supply and demand
demand: individuals, households, and firms who require space for consumption or production purposes
supply: real estate owners/operators who rent space to tenants
capital markets - Answers allocate financial resources among households and firms requiring funds
ex. stocks, bonds, mortgage contracts... anything that will give a financial return
provides equity and debt
, property markets - Answers determine required property specific investment returns, values, etc
intersection of user and capital markets
other characteristics of real estate markets - Answers high transaction costs b/c expensive to enter and
exit market (time and $)
real estate is illiquid, fewer buyers
high asset value - debt financing is needed
long economic life
traditions - symbol of power, stability (people want to won homes, white house)
capitalization rate - Answers ratio of property's annual net income from rental operations to its value
net income/price of property
role of government on real estate - Answers local government = most influential, property taxes, fees,
construction restrictions
state government = least influential, sets requirements for local governments
federal government = housing subsidies, income tax policies, environmental policies
explain why real estate is heterogeneous - Answers each property has unique features... even homes
that are built exactly the same are different because they're in different locations
what is a localized market - Answers homes are near other homes, apartments are near other
apartments. this increases competition in the market
what is a segmented market - Answers people looking for homes are not going to look for them in a
condo market. they will stay in the localized home market. this is why there are different segments in
real estate
improvements on the land vs improvements to the land - Answers on = any fixed structure; decks,
fences walls
to = making the land more suitable for something else; ex streets, walkways drainage systems
intangible assets vs tangible assets - Answers intangible assets = contractual rights, mortgage, lease
agreements, financial claims (stocks/bonds)
tangible assets = cars, land, buildings
property - Answers anything that can be owned or posessed
land vs raw land - Answers land = infrastructure, but not any structure; ex building site or lot
