final exam Flashcards
The total demand for a type of real estate offered on the open market by all economic agents within an economy or market that may be leased or sold during a certain period.
Absorption
Traditionally considered land, labor, capital, and coordination (coordination is also sometimes called management or entrepreneurial profit).
Agents of production
An economic theory where value is created by expectations of future benefits such as income, appreciation, tax benefits, etc.
Anticipation
An opinion or estimate of value regarding real estate, as of a specified date, which is supported by documented data. The_______
, or valuation process, is a sequence of steps used by the appraiser to derive a reasonable value estimate.
Appraisal
Judgment supported by facts, logic, and reasonable analysis.
Appraiser’s opinion
Consumers are interviewed based on their opinions or attitudes for certain characteristics of a property to determine demand.
Attitudinal surveys
An economic principle that is caused when numerous factors exert proportional influence on value. Favorable factors include the four agents of production: land, labor, capital, and coordination.
Balance
The center of an urban area, typically zoned for various uses such as retail, office, and residential. Further, in some areas, transportation starts and ends in the ____since it is the central location for employment.
Central Business District (CBD)
An economic principle that demonstrates how new social patterns, technology, employment, transportation, and other factors create new demands for real estate.
Change
A non-residential property for use by office, hotel, or a retail user. Nearly all local governments require restrictions for ______ locations in conjunction with residential properties.
Commercial real estate
An economic principle stating that individuals and firms strive for a greater share of a market to sell or buy goods and services, each acting independently, by offering the most favorable goods and services.
Competition
An economic principle which states that value maximizes when a property is in conformity with the demands of market participants.
Conformity
A principle that states the site and improvements must be valued on the basis of the same use.
Consistent use
__________ is a common concept in economics, and gives rise to derived concepts such as consumer debt.
Consumption
The value of a component of property depending upon its contribution to the value of the whole property. This principle is also known as marginal productivity.
Contribution
The desire for a specific good or service.
Demand
Demand analysis that includes the investigation and identification of the most probable user including his or her preferences based on behavioral, motivational, and psychological factors.
Demand segmentation
The motivation of an individual, group of persons, or business entity to purchase property.
Desire
A person or company who purchases a tract of vacant land and develops the real estate with improvements to yield a profit.
Developer
Patterns of growth that would affect consumer behavior in an area such as a river, forest, topography, transportation, etc.
Development patterns
A process of real estate development whereby vacant land is identified, purchased and a design concept implemented.
Development process
This type of market analysis is the study of a specific macroeconomic market area along with the supply and demand factors for a specific property type focusing on local economics.
Economic base analysis
the social science that studies the production, distribution, and consumption of goods and services.
Economics
Occurs when a prospective purchaser has enough disposable income available to satisfy his or her desires, needs, and wants.
Effective purchasing power
The power of a government to take private property for public use, usually with compensation paid to the owner.
Eminent domain
The value of a piece of property over and above any mortgage or other liabilities attached to it.
Equity
someone who has successfully completed formal study, experience, and passed a state licensing exam, where applicable.
Expert
An economic principle pertaining to an item or event, which is external to the boundaries of the property. It can have a positive or negative effect on the property. Many of the forces that affect or influence real estate values pertain to governmental, physical, economic, and social factors.
Externality
Absolute ownership of real property, limited only by the government powers of taxation, police power, eminent domain, and escheat. In addition, fee simple ownership could also be limited by certain encumbrances such as the mortgage loans, deed restrictions, unpaid taxes, easements, mechanics’ liens, and leases.
Fee simple ownership
A term used in both law and accounting based on the economic term of “market value.” It is the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Fair Market Value (FMV)
__________________is absolute ownership of real property, limited by the four basic government powers of taxation, eminent domain, police power, and escheat as well as encumbrances or conditions in the deed.
Fee simple absolute
A criteria within highest and best use analysis that requires that a use must produce a positive return on investment.
Financially feasible
The study of capital and income that characterizes the financial services industries as part of the SIC/NAIS breakdown of types of industry: finance, insurance, and real estate. The SIC was replaced by the North American (Canada, USA, Mexico) Industry Classification System (NAICS) in 1997.
FIRE (finance, insurance, real estate)
In retailing, general merchandise such as apparel, furniture, etc.
General merchandise, apparel, furniture and other (GAFO)
Relates to information appropriate for many properties, which includes all of the four forces (social, economic, environmental/physical, and governmental).
General data
The principle that an older lower-valued area, often an inner-city neighborhood, can be revitalized as properties are renovated or remodeled.
Gentrification
A type of value used for properties such as a restaurant or hotel which includes both tangible and intangible assets of an established and operating business with an indefinite life, as if sold in aggregate.
market value of the going concern
An economic output divided into physical goods and intangible services.
Goods and Services
A model within market delineation that predicts and describes behaviors that imitate gravitational interaction such as public transportation or real estate demand.
Gravity models
The reasonably probable and legal use of vacant land or an improved property which results in the highest value as a result of applying the four test criteria: physically possible, legally permissible, financially feasible, and the maximally profitable.
Highest and best use
An economic principle that states a feature, repair, addition, etc. might increase or decrease real estate values. As such, the laws of increasing or decreasing returns state that beyond a certain point, adding additional features may or may not increase value.
Increasing/decreasing returns
A fee required by local governments for proposed real estate development that helps the locality pay for costs of public services to the new development such as water, sewer, public schools, etc. These fees typically help the locality reduce the economic burden because of population growth within the area.
Impact fee
An addition to vacant land that increases the value such as a residential home, commercial property, streets, electric, or sewerage system.
Improved property
A market that is characterized by an uneven flow of information, with goods and services that are not easily produced or transferable.
Inefficient market
During the negotiation process, only one party is privy to important information that may affect the outcome of the transaction. Information asymmetry causes inefficient markets, since not all the market participants have access to the information needed for their decision-making processes.
Information asymmetry
The property owner’s ownership interest in a property that is subject to a lease agreement.
Leased fee interest
The interest held by the lessee or tenant(s) in a property based on the lease agreement.
Leasehold interest
A criteria within highest and best use analysis that the appraiser applies by considering both public and private regulations that affect and limit uses for the subject property. These regulations might include easements, zoning, or other land use regulations such as CC&R’s (covenants, conditions, and restrictions) which may be recorded with the deed.
Legally permissible uses
During the research phase of the market analysis, an appraiser determines the level of analysis appropriate for the appraisal. These levels are the inferred analysis and the fundamental analysis.
Levels of a market analysis
A place where goods and services are exchanged, often between buyers and sellers.
Market
Business and real estate cycles travel through an adjustment process due to the length of time it takes to conceive an idea, design a plan of action, finance, and construct the project. Because of these delays, there is a great potential for disequilibrium.
Market adjustments
A ____________ is the classification and study of current supply and demand conditions in a particular area for a specific type of property. Further, the ____________develops the supportable basis for determining highest and best use, vacant or improved.
Market analysis
A ____________ or study consists of interviews, comprehensive data, maps, tables, etc. and demonstrates the marketability of a specific property or the possible future of an existing property.
Marketability analysis
Define the primary and secondary market areas and include the types of tenants or clientele the building might attract and the locations as well as time-distance relationships to nearby complementary services such as restaurants, schools, voting districts, etc. compared to the competition.
Market area delineation concepts
Defines the geographic demand for a specific property.
Market delineation
Entities involved in a real estate transaction that receive and possibly act upon all relevant information.
Market participants
A method of analyzing the market to determine the wants and needs of the population.
Market research
Defines and subdivides a large homogenous market into segments based on location, demographics, and consumer behavior.
Market segmentation
Generally considered the most probable price that a property will sell for, under all conditions of a fair sale, with each party acting with full knowledge and in their own best interest. There are many different specific definitions of market value in common use by appraisers.
Market value
A criteria within highest and best use analysis that identifies the most profitable use to which a vacant or improved property can be put.
Maximally productive
A principle of economics that studies individuals, households, and businesses, in order to better understand their decisions regarding the use of their resources.
Microeconomics
The transfer of an interest in property to a lender as a security for a debt or during the loan period. During this loan period, the property is the lender’s security for a debt.
Mortgage
An area within a larger city, town, or suburb with geographic boundaries.
Neighborhood
An economic principle that describes the income or opportunity that is lost because an alternative was not chosen.
Opportunity cost
The state or fact of exclusive rights and control over property, which may be an object, land/real estate, or some other kind of property (like government-granted monopolies collectively referred to as intellectual property). It is embodied in an ownership right also referred to as title. ________ is the key building block in the development of the capitalist socio-economic system.
Ownership
A criteria within highest and best use analysis that pertains to limitations caused by topography, terrain, wetlands, conservation easements, poor drainage, and limited access or unstable subsoil conditions.
Physically possible uses
In microeconomics, ________is quite simply the conversion of inputs into outputs. It is an economic process that uses resources to create a good or service that is suitable for exchange.
Production
Undeveloped vacant land that does not have any infrastructure or other improvements such as utilities.
Raw land
A tax designation for a corporation investing in real estate, reducing or eliminating corporate income taxes. In return, ______require distribution of 90% income, which may be taxable, into the hands of the investors.
Real estate investment trust (REIT)
A succession of submarkets based on participants with various desires and needs that change autonomously of one another, based on a group of complementary land uses that may be divided by natural barriers, political boundaries, districts, income levels of inhabitants, or streets.
Real estate market
The general contraction of the business cycle in economics during a sustained period. This occurrence is typically over two consecutive quarters of negative GDP growth.
Recession
Also known as the market data approach or market approach, although these two alternative terms are generally considered outdated. It is one of three appraisal methods for estimating value within an appraisal. This approach compares and analyzes the subject property to the sales prices of similar or comparable properties recently sold.
Sales Comparison Approach:
_______ is a factor of value directly associated to supply and demand. When an inadequate supply of real estate in a particular location results in unfavorable demand/supply relationships, prices increase.
Scarcity
A market participant who wishes to transfer ownership of his or her property to a purchaser in exchange for compensation.
Seller
A process used within most market/marketability analyses to determine market conditions such as supply and demand.
Six-Step Process
The ______________ comprise academic disciplines concerned with the study of the social life of human groups and individuals including anthropology, communication studies, economics, human geography, history, political science, psychology, and sociology.
Social Science
Relates to information used directly in the analysis of the subject property and while encompassing the comparables used in the valuation process.
Specific data
A market analysis based on drive times, customer segments, and household incomes. This widely used technique for market delineation is utilized for many purposes including residential, retail, hotel/motel, and industrial analysis for customer loyalty programs, transportation models, proposed development, etc.
Spotting Technique
A _______ is a specialized sub-section of a market based on the geographic or economic conditions. A ________ is a secondary market compared to the primary market.
Submarket
An economic principle that states that a buyer will pay no more for a property than he or she would pay to acquire an equally desirable substitute property.
Substitution
Entails examining and analyzing the current competitive properties and their characteristics based on economic, financial, location, as well as site and building size, if appropriate.
Supply analysis
An economic principle describing how values or prices are related to the number of goods made available ________and the number of goods people want _______
Supply and Demand
An economic principle which states that the net income remaining after the costs of labor, capital, and coordination have been paid is attributable to the land.
Surplus Productivity
A legal term to describe a bundle of rights in a piece of property in which a party may own a legal interest.
Title
These costs include financing, commissions, closing costs, title insurance, moving costs, legal fees, land transfer taxes, deed registration fees, etc. Buying and selling real estate is much more expensive than most types of transactions.
Transaction costs
The ability to purchase, sell, occupy, or dispose of a real estate property in any way desired by the owner
Transferability
A vacant parcel of land which does not have any physical buildings.
Unimproved property
