Cht 1: the real estate market

Question 1

What is the definition of value as it applies to real estate?

Answer 1

The present worth of future benefits that would be gained from owning real property

Question 2

What is the definition of price?

Answer 2

The amount of money or other asset that a buyer has agreed to pay and a seller has agreed to accept to complete the exchange of a good or service

Question 3

The value of something is based on the answers to what four questions?

Answer 3

How much do I desire it?
How useful is it?
How scarce is it?
Am I able to pay for it?

Question 4

What costs are incurred to produce a good or service?

Answer 4

capital, materials, and supplies
labor
management
overhead

Question 5

Supply

Answer 5

the quantity of a product or service available for sale, lease, or trade at any given time.

Question 6

Demand

Answer 6

the quantity of a product or service that is desired for purchase, lease, or trade at any given time

Question 7

Define supply and demand.

Answer 7

Supply is the quantity of a product or service available for sale, lease, or trade at any given time.
Demand is the quantity of a product or service that is desired for purchase, lease, or trade at any given time.

Question 8

What happens to a price if the supply increases relative to the demand?

Answer 8

The price decreases

Question 9

What is meant by a state of market equilibrium?

Answer 9

Supply equals demand, and price, cost, and value are identical.

Question 10

List three unique traits of real estate.

Answer 10

Demand must come to the supply
Illiquid
Slow to respond to changes
Inherent product value
Unique appeal of product
Decentralized, local market

Question 11

In addition to demand, what factors influence supply?

Answer 11

development costs, particularly labor
availability of financing
investment returns
a community’s master plan
government police powers and regulation

Question 12

How is the demand for office and industrial real estate calculated?

Answer 12

By identifying employment growth or shrinkage in a market, then multiplying the employment change times the average area of floor space a typical employee uses

Question 13

What are residential users typically concerned with when looking for property?

Answer 13

quality of life
neighborhood quality
convenience and access to services and other facilities
dwelling amenities in relation to household size, lifestyle, and costs

Question 14

What factors weigh heavily in local real estate market conditions?

Answer 14

cost of financing
availability of developable land
construction costs
capacity of the municipality’s infrastructure to handle growth
governmental regulation and police powers
changes in the economic base
in- and out-migrations of major employers

Question 15

What is the main purpose of an economic system?

Answer 15

To produce and distribute a supply of goods and services to satisfy demand

Question 16

Real estate demand is noted by:

Answer 16

the number of property buyers that wish to purchase at any given time.

Question 17

What type of real estate user would be interested in the availability of a labor pool?

Answer 17

Industrial user

Question 18

If price decreases:

Answer 18

demand is declining in relation to supply.

Question 19

Since a producer has limited resources, it is imperative to maximize the efficiency of the production process and:

Answer 19

minimize its costs.

Question 20

Real estate is classified as:

Answer 20

illiquid assets.

Question 21

If demand increases relative to supply:

Answer 21

price increases.

Question 22

What is it called when supply equals demand and price, cost, and value are identical?

Answer 22

Market Equilibrium

Question 23

The third critical element of value is a product’s availability in relation to demand. This is known as:

Answer 23

scarcity.

Question 24

Land has:

Answer 24

both inherent and utility value.

Question 25

How do the elements of supply, demand, and price interact in a market?

Answer 25

In a continuous manner

Question 26

What type of real estate user would be highly concerned about the image and function of a property?

Answer 26

Office user

Question 27

Scarcity impacts:

Answer 27

value.

Question 28

Overhead expense is an example of what type of cost?

Answer 28

Production costs

Question 29

Regional and national economic forces influence the local real estate market in the form of changes in money supply, national economic cycles and:

Answer 29

inflation.

Question 30

Vacancy is defined as the amount of:

Answer 30

total real estate inventory, of a certain type, that is unoccupied at a given time.

Question 31

What is the period of time called when a market adjustment is taking place?

Answer 31

The equilibrium time lag

Question 32

What is the primary force that moves the real estate market?

Answer 32

Employment

Question 33

What is the quantity of a product or service that is desired for purchase, lease, or trade at any given time?

Answer 33

Demand