Week 1 Flashcards
Attributes of land
- Heterogeneity: Unique in location and composition
- Immobility
- Durability (does not depreciate)
- The supply is finite
- Useful to people
Uses of land
- Agriculture
- Commerce - investment
- Industry
- Natural reserve
- Recreation
Land can change due to
- climate
- topography
- Distribution of natural resources, population centres, and industry
- Trends in economics, population, technology, and culture
Define what is real estate
•An identified parcel or tract of land, including improvements if any.
> tangible + Immobile
•Real estate includes all the attachments.
What is bundle of rights
- Bundle of rights refer to the total range of private ownership interests in real property.
- Right to:
- Use (build on, plant a garden, quite enjoyment)
- Sell (e.g. selling your home)
- Lease (consideration provided by a third party to use land/buildings)
- Enter (e.g. easements, crossovers, right of way)
- Give away (gift, bequeath)
Disciplines / industries concerned with property
Law finance "value in exchange or market value" Economics Sociology Geography
Explain factors of value
Utility
Scarcity - supply side
Effective purchasing power
Desire - demand side
Explain demand
Demand: the quantity of products desired by the buyers (willingness to buy)
The graph that shows the relationship between price and demand (quantity) is called “Demand Curve”.
Explain supply
the quantity of products that the suppliers(market) can offer (willingness to sell)
Likewise, “Supply Curve” refers to the graph that explains the relationship between price and supply(quantity).
What is price
Value in exchange a recorded fact (but circumstances might not be known, and this is important infomation)
What is cost
A production value (factual or estimated)
What is value
Must be specific since there are various types of value
E.g market value
Types of value
●Market value – we are concentrating on this ●Value in use ●Use Value ●Investment value ●Business value-assumes “going concern” ●Fair value-assumes Highest and Best Use* ●Liquidation value ●Insurable value Assessed value
Define market value
●Results from the collective value judgement of market participants.
●Based on objective observation of the collective actions of the market.
●International Valuation Standards (IVS)
●“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”
Explain fair value
Similar to market value but not exactly the same
●FV measurement assumes that the asset or liability is exchanged in an orderly (hypothetical) transaction between market participants at the measurement date.
●Does not consider lack of marketability or shareholder’s position.
