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Real Estate Licensing Course > Unit 1: Basic Real Estate Concepts > Flashcards

Unit 1: Basic Real Estate Concepts Flashcards

1
Q

Land:

A
  • Is the earth’s surface
  • Extends downwards to the center of the earth with surface rights, and
  • Stretches upward to infinity with air rights.
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2
Q

Real Estate includes:

A
  • Land at, above, and below the earth’s surface, and
  • All things permanently attached to the land, both natural and man-made.
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3
Q

Real Property includes:

A
  • The land itself,
  • The improvements thereon,
  • Interests,
  • Benefits, and
  • Rights inherent in the ownership of land and real estate.
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4
Q

Physical Characteristics of Real Estate:

A
  • Immobility
  • Indestructibility
  • Uniqueness
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5
Q

Economic Characteristics of Real Estate:

A
  • Scarcity
  • Location (Most Important)
  • Improvements
  • Performance of Investment
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6
Q

Real Estate brokerage is:

A

The business of bringing people together in a real estate transaction conducted by:
1. A broker
2. A provisional broker

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7
Q

A broker is:

A

A person or company licensed to list, lease, buy, exchange, auction, negotiate or sell real estate property for others for compensation.

They may be the agent of the buyer, seller, or both.

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8
Q

A provisional broker is:

A

Broker that conducts brokerage activities but must operate under the supervision of a BIC until they complete certain educational requirements.

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9
Q

Appraisal is:

A

The process of estimating a property’s value (typically market value) that is based on established methods and an appraiser’s professional judgment.

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10
Q

Appraisals are regulated by:

A
  • Licensing or certification is required for many federally-related transactions.
  • NC requires separate licensing or certification for appraisals.
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11
Q

Property management is:

A

Conducted by a property manager, a person or company hired to maintain and manage property on behalf of its owner.

Scope of work depends on management agreement.

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12
Q

Property manager’s main responsibility:

A

To protect the owner’s investment while maximizing the owner’s financial return.

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13
Q

Financing is:

A

The business of providing the funds that make real estate transactions possible through:

  • Mortgage or deed of trust loans secured by the property, and
  • Commercial banks, savings associations, mortgage bankers, and mortgage brokerage companies.
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14
Q

Property Development involves:

A
  • Splitting a single property into smaller parcels (subdividing), and
  • Constructing improvements on the land (development)
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15
Q

Counseling involves:

A

Providing independent advice based on sound professional judgment.

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16
Q

Education provides:

A

Real estate information to practitioners and consumers alike.

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17
Q

Types of real property:

A
  • Residential
  • Commercial
  • Industrial
  • Agricultural
  • Special-purpose
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18
Q

Residential real property:

A

Single and multi-family homes

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19
Q

Commercial real property:

A

Office space, shopping centers, stores, theaters, hotels, parking lots

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20
Q

Industrial real property:

A

Warehouses, factories, power plants, land in industrial districts

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21
Q

Agricultural real property:

A

Farms, timberland, ranches, orchards

22
Q

Special-purpose real property:

A

Schools, places of worship, cemeteries, govt held property

23
Q

Principles of Supply & Demand:

A
  • When the supply increases and demand remains stable, prices go up
  • When demand increases and supply remains stable, prices go up
24
Q

Factors affecting the supply of real estate:

A
  • Labor force availability
  • Construction and material cost
  • Govt controls: environmental restrictions, land use, building codes, zoning
  • Govt financial policies that impact interest rates and money supply
25
Q

Factors that affect the demand for real estate:

A
  • Population: some areas grow faster than others, some decline
  • Demographics: Family size, lifestyles, niche marketing
  • Employment and wage levels: influence housing affordability
  • Business cycles
  • Real Estate Cycle
  • Govt anticyclical efforts
26
Q

Four stages of the business cycle:

A
  1. Expansion
  2. Recession
  3. Depression
  4. Revival
27
Q

Bundle of legal rights:

A

Rights of ownership including:
- Right to possession and use,
- Right to exclude others,
- Right to profit from the land,
- Right to dispose of or encumber the land.

28
Q

“Land, tenements, and hereditaments”

A

Describes all the rights capable of being owned or enjoyed.

29
Q

Tenements:

A

Any structures attached to the land

30
Q

Hereditaments:

A

Any interests in real estate capable of being inherited.

31
Q

Immobility:

A

Physical characteristic of Real Property

Some substances of land are removable and topography can be changed, but geographical location of land can never be changed.

32
Q

Indestructibility:

A

Physical characteristic of real property.

Land is durable and indestructible, but the improvements on it depreciate and can become obsolete, reducing value.

33
Q

Uniqueness

A

Physical characteristic of real property.

No two parcels of land are ever exactly the same, all differ geographically.

34
Q

Nonhomogeneity or Heterogeneity

A

The uniqueness of land

35
Q

Scarcity

A

Economic characteristic of real property

Supply of land in a given location or of a particular quality may be limited, increasing demand.

No more land can be produced, having positive impact on value.

“Buy land. They ain’t making no more of the stuff.”

36
Q

Location:

A

Most important economic characteristic of real property

Area preferences – people’s choices and tastes regarding a given area.

37
Q

Situs:

A

Social factors impact area preferences (location) in addition to economic factors.

38
Q

Improvements

A

Economic characteristic of real property

Any addition or change to land or a building that affects the property’s value.

Improvements ON the land: improvements of a private nature (house, fencing, etc.)

Improvements TO the land: improvements of a public nature (sidewalks, sewer systems, curbing, etc.)

39
Q

Improved Land:

A

Two meanings:

  1. Improvements: if buildings are constructed on the land.
  2. Improved land: if the land has been prepared for development (grading, installation or utilities, etc.)
40
Q

Permanence of Investment:

A

Economic characteristic of real property

Once land is improved, the total capital and labor used represent a large fixed investment.

ROI tend to be long-term and relatively stable but makes improved RE unsuitable for rapid-turnover investing.

41
Q

Highest and Best Use

A

The use that will give the owners the greatest actual return on their investment.

If property put to its H&B use, its value will be maximized.

Only one H&B use at a time, and it can change.

42
Q

Land Use Controls:

A

Third-party controls that limit potential uses of real property (public and private).

43
Q

Advantages of real estate investment:

A
  • Well-located, fairly priced investments show good rate of return
  • Most real estate values tend to keep pace with rate of inflation
44
Q

Disadvantages of real estate investment:

A
  • RE is not a liquid asset
  • Need expert advice
  • Management decisions need to be made
  • High degree of risk
45
Q

Point of equilibrium:

A

The point at which supply and demand are balanced.

46
Q

Chattel:

A

Items of movable personal property, including such tangibles as furniture, clothing, money, bonds, bank accounts

47
Q

Market:

A

Place where goods are bought and sold, where value for those goods is established, and where it is advantageous for buyers and sellers to trade.
- Markets facilitate this exchange by providing a setting in which the supply and demand forces of the economy can establish market value.
- RE market is a free market and is local in nature.

48
Q

Personal Property:

A

(Or personalty) All property that does not fit the definition of real property.
- Primary characteristic: movability

49
Q

Real Property:

A

The land, everything that is permanently attached to the land, and everything that is appurtenant to (or goes with) the land.

50
Q

Business Cycle

A

The upward and downward fluctuations in business activities generally characterized by four stages: expansion, recession, depression, and revival.

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