Module 11 Flashcards
Change is premised on the ________________relationship that takes place in the market
Cause and effect
Economic Principles in Real Estate
Competition
Change
Anticipation
Supply and demand
- Principle of change
- Principle of anticipation
- Principle of supply and demand
- Principle of competition
Property values vary _____ with changes in supply.
inversely
The ability of an individual or group to participate in a market.
Effective purchasing power
The desire to buy coupled with the ability to pay.
Effective demand
The appraisal principle that states that when several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution.
Substitution
______ is a subprinciple of substitution. It is the cost of options foregone or opportunities not chosen.
Opportunity cost
While an investor’s money is tied up in one property, there may be opportunities that the investor has to pass on that may be potentially more lucrative.
The principle that real property value is created and sustained when contrasting, opposing, or interacting elements are is a state of equilibrium.
Balance
This principle focuses on land and improvements
Balance
I.e.,. a situation where a site improvement does not fit in with its surrounding properties.
The concept that successive increments of one or more agents of production added to fixed amounts of the other agents will enhance income or value at an increasing rate until a maximum return is reached. Beyond a certain point, each additional unit will add less income or value than the unit before it. Also called law of increasing returns or law of decreasing returns.
Increasing and decreasing returns.
The concept that the value of a particular component is measured in terms of the amount it adds to the value of the whole property or as the amount that its absence would detract from the value of the whole.
Contribution
The net income that remains after the costs of various agents of production have been paid.
Surplus productivity.
The appraisal principle that real estate value is created and sustained when the characteristics of a property conform to the demands of its market.
Conformity
The compatibility between a property and its surroundings
External conformity.
The condition that exits when labor, capital, coordination, and land are appropriately combined in a property.
Internal conformity.
The principle that economies outside a property have a positive effect on its value while diseconomies outside a property have a negative effect on its value.
Externalities
_____ externalities. This is the infrastructure such as roads, highways, bridges, utilities, water towers, police and fire protection.
Positive externalities
______ externalities. These are inconveniences imposed on property owners by the action of others. For example an industrial company that pollutes a waterway imposes a negative influence upon property owners downstream from the plant.
Negative externalities
The reasonably probable use of property that results in the highest value.
Highest and Best Use
The four criteria that the highest and best use must meet are:
a. Legal permissibility
b. physical possibility
c. financial feasibility
d. maximum productivity
What is the difference between excess land and surplus land?
Excess land has the potential to be sold separately and is valued separately.
Surplus land cannot be separated from the property and sold off for another use.
Under a use that simply marks time until a different use becomes maximally productive.
Interim Use
The concept that land cannot be valued on the basis of one use while the improvements are valued on the basis of another.
Consistent use
