Chapter 1 Flashcards
Real estate (real property or realty) consists of
Land and everything that is permanently attached to the land
Title to real property is evidenced by
A deed
Personal property (chattel or personalty)
Is everything that is not land or that is not permanently attached to the land. Personal property is readily moveable
Bill of sale
An instrument that may be used to transfer ownership of personal property.
Physical characteristics of land include
Immobility
Permanence (indestructibility)
Uniqueness (NonHomogeneity)
Immobility
Land can NOT be relocated from one place to another. Makes the market for land a strictly local market.
Permanence (indestructibility)
Land is a permanent commodity and it cannot be destroyed because its geographic coordinates remain the same.
Uniqueness (Nonhomogeneity)
No two parcels are identical in either physical or a legal sense. Parcels differ in aspects such as soil, drainage, view and vegetation. Gives rise to the concept of Specific performance.
Economic obsolescence
Land values can change positively or negatively as a result of changing conditions in the surrounding area are said to suffer from __________ when such changes adversely affect the value of land. An investor should be alert to changing conditions that can affect the value of the investment
Economic characteristics of land are
Location (situs)
Improvements
Permanence of investment
Scarcity
Scarcity
Is its availability. It has a fixed supply base. No additional physical supply of land is being produced to keep pace with the every increasing population.
Modification by improvement
Increases the economic supply of land due to the construction of highways, bridges, water reservoirs, purification plants and public utilities.
Location or (situs)
The characteristic that has the greatest effect on property value. The value of the location can be increased by improvements.
The highest and best use concept
Considers all the physical and economic factors affecting the land.
That use which will provide the peroperty owner the best possible return on an investment over a specified time period. Resulting in the highest possible present value of land.
Present value
The value at the time of appraisal. Highest and best use can and does change with time.
T/F an over improvement or an under improvement does not provide the optimum income to the land and as a result the land is not put to it’s highest and best possible use.
True
Public land use controls
Exists in the form of city planning and zoning, state and regional planning, building codes, suitability for occupancy requirements and environmental control laws. Examples include public buildings, public parks, watersheds,streets and highways.
Regulation of land use in the private sector exists but the form of
Protective of restrictive covenants established by developers, restrictions in individual deals or prohibiting a specified land use.
Real estate investment offers the opportunity to make profit in three ways
Appreciation, positive cash flow and tax advantage.
Appreciation
Increase in market value during the time the investors holds the property.
Positive cash flow
The gross effective income produced by the property exceeds the total of operating expenses.
Tax advantages
Result from appreciation or gains being taxed at a capital gain rate lower than the investors marginal tax rate when the property is sold from deductions of property taxes, insurance and other expenses during the time the investor owns the property.
Real estate transactions can be traced from biblical times between seller and buyer
The business of real estate brokerage is a product of the 20th century. North Carolina adopted its real estate license law statue in 1957
NAR is a
Trade group
The term realtor
Is a registered trademark of NAR and it identifies licensees who are also members of the local, the state and the national association. All licensees are not realtors
Free market
The buyer and seller negotiate a purchase and sale without undue pressure, urgency or outside influence other than the principle of supply and demand. Supply and demand determines real estate prices. Market value depends on the free market concept.
Immobility, non homogeneity and uniqueness requires the market to be local.
real estate causes the market to be local in character requiring local specialists who are familiar with market conditions , property values and availability.
What are some factors affecting supply and demand?
Interest rates, availability of financing for purchase and construction, population migrations, variations in population trends, family formations, government regulations, local and national economic conditions and the availability and cost of building sites, construction materials and labor.
Success in real estate business is built on
Knowledge, service to others, and ethical conduct in all dealings.
