©THEBRIGHT EXAM STUDY SOLUTIONS 8/21/2024 1:28 PM
Real Estate 306 Midterm 1 Questions With
Correct Answers
Real estate - answer✔✔physical asset
anything that can be owned or possessed; RIGHTS from owning property
if you have right of possession, you own real estate
profession and an industry
real estate as a physical asset - answer✔✔is the land and all permanent attachments to the land
and anything it is suitable for; ex. fixed structures or parking garage potential
real estate as a bundle of rights - answer✔✔it is the services/benefits real estate provides ex.
shelter, privacy etc
also have air rights, surface rights, mineral, oil and gas rights
can pick an choose sticks in the bundle of "ownership rights"
real property vs personal property - answer✔✔real property = anything immovable, ex land,
home, anything attached to the land, permanent
personal property = something that can be moved like RV or furniture
what are the three different markets in RE - answer✔✔user markets
capital markets
property markets
user market - answer✔✔competition among users for physical location and space. competition
determines the price of each land parcel
creates supply and demand
user market for physical real estate - answer✔✔buyers receive the right to use space
rental rates are determined by supply and demand
demand: individuals, households, and firms who require space for consumption or production
purposes
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supply: real estate owners/operators who rent space to tenants
capital markets - answer✔✔allocate financial resources among households and firms requiring
funds
ex. stocks, bonds, mortgage contracts... anything that will give a financial return
provides equity and debt
property markets - answer✔✔determine required property specific investment returns, values,
etc
intersection of user and capital markets
other characteristics of real estate markets - answer✔✔high transaction costs b/c expensive to
enter and exit market (time and $)
real estate is illiquid, fewer buyers
high asset value - debt financing is needed
long economic life
traditions - symbol of power, stability (people want to won homes, white house)
capitalization rate - answer✔✔ratio of property's annual net income from rental operations to its
value
net income/price of property
role of government on real estate - answer✔✔local government = most influential, property
taxes, fees, construction restrictions
state government = least influential, sets requirements for local governments
federal government = housing subsidies, income tax policies, environmental policies
explain why real estate is heterogeneous - answer✔✔each property has unique features... even
homes that are built exactly the same are different because they're in different locations
what is a localized market - answer✔✔homes are near other homes, apartments are near other
apartments. this increases competition in the market
what is a segmented market - answer✔✔people looking for homes are not going to look for them
in a condo market. they will stay in the localized home market. this is why there are different
segments in real estate
improvements on the land vs improvements to the land - answer✔✔on = any fixed structure;
decks, fences walls
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to = making the land more suitable for something else; ex streets, walkways drainage systems
intangible assets vs tangible assets - answer✔✔intangible assets = contractual rights, mortgage,
lease agreements, financial claims (stocks/bonds)
tangible assets = cars, land, buildings
property - answer✔✔anything that can be owned or posessed
land vs raw land - answer✔✔land = infrastructure, but not any structure; ex building site or lot
raw land = areas that dont have any improvements
fee simple estate - answer✔✔implies ABSOLUTE OWNERSHIP (all sticks in the bundle)
- right of exclusive use, benefit, and disposition
- police powers empower government to protect health, welfare, and safety of the public
- real estate rights CAN be reduced to protect health, safety, and welfare
fee simple ownership is limited by taxation, eminent domain, police powers, escheat
escheat - answer✔✔if there are no heirs to give land to, the government takes it
rights of owning real estate - answer✔✔claims or demands that the government is obligated to
enforce
nonrevokable (cant take it away once you own it)
enduring; they dont fade away with time
The rights that give real estate value include... - answer✔✔the right to prevent others from using
property without permission (exclusive use)
right to use the property ourselves
right to dispose of it as we wish
personal rights - answer✔✔personal freedoms
property rights - answer✔✔tangible and intangible, exclusive possession, to use and dispose
fixture - answer✔✔object that was formerly personal property but is now considered real
property
how do you determine what becomes a fixture - answer✔✔manner of attachment
character of the article and manner of adaptation
