Unit 1 Chapter 4 Review

Question 1

List the 4 value determinants and how each influences or quantifies an item’s value?

Answer 1

Desire – how much the purchaser wants or needs the item makes the item more or less valuable.

Utility – how well the item can do the job determines its value to the purchaser.

Scarcity – the item is quite valuable if it the supply is limited but its value is less if the supply is great.

Purchasing power – if the purchaser cannot afford to pay a high price for the item, then the item’s value is diminished because it is financially out of reach.

Question 2

What are the principles of physical characteristics of real estate?

Answer 2

Indestructible and immovable
Long term investment
Land does not depreciate, only improvements depreciate
Property insurance insures improvements, not the land
Property is nonhomogeneous, unique

Question 3

What are the unique traits or distinguishing features of real estate?

Answer 3

inherent product value, unique appeal, demand must come to the supply, cannot always be sold for cash, slow to respond to market changes, local market

Question 4

Name seven factors that influence supply of real estate.

Answer 4

Availability of skilled labor, availability of construction loans and financing, availability of land, availability of materials, investment returns, the community’s master plan, government regulation and police power