Real estate-Improvements to the land- walk wat, fences, sewer systems. Building is not.

Mortgage is an intangible

asset. Land is tangible but with no improvements is “raw land”. Single-family residency is usually less than 1 acre.

Housing is the largest asset category. capital market allocate financial resources among households and

firms and determine required rate of return that an individual demands. User market is where

competition for physical location and space occurs. Discounting is when expected stream of rental

income is capitalized into value. Real property is an example that trades in private equity market.

commercial mortgage backed securities (CMBS) trades in the public debt market. Local government has

the largest influence on real estate values. Competition for the currently available supply of locations

determines current level of rental rates for each submarket and property. Real estate markets consist of

assets that are considered heterogeneous. Investment-grade property are real estate funds, large

commercial properties valued well over $10 million. Not targeted by individual investors. Not a low

transaction costs. 2/3 people own their home. Location attributes is the most likely to result in drastic

value differences. Equity investors in real estate get their return through collection of rent and price

appreciation. CAP rate is the ratio of a property's annual net income to its market value. State

government is directly involved in establishing rules and regulations for the licensing. supply of

properties would increase if current property values are greater than the cost of construction. Equity

investors do not benefit from high segmented markets, ex. Couple searching for single house with specific price

range.
Deed requires Only the grantor to be legally competent and of legal majority age. "does herby grant,

bargain, sell and convey unto” is words of conveyance. Covenant of seizin promises that the grantor

has good title and the right convey. Habendum clause limits and defines the type of interest, an

example is "The Seller, for itself and its heirs, hereby covenants with the Buyer, its heirs and

assigns forever. General warranty deed is the “highest quality”, an example is forever warrants to

defend all of the property so granted to the buyer against every person lawfully claiming the

same." Quitclaim deed is considered “questionable conveyance of title”. A Patent is an example of a

voluntary conveyance of real property. If a will dictates the distribution of the decedent's, said to be

Devised. If a landowner gives an adjacent landowner permission to depend on her land, it is

easement by estoppel. Easement of necessity is when the landlocked parcel has no prior path of

access. Adverse possession is when a fee simple interest is conveyed to a new owner without a

deed. Once a document conveying an interest in real property is placed in the public records it

is binding on the public is known as Doctrine of constructive notice. The predominant medium

through which a seller meets this requirement is by providing only a title insurance commitment.

Statute of Frauds is a law requiring any contract conveying a real property interest to be in writing. An

example of the limits to title insurance is that It does not protect the grantee from the threat of physical

damage to the property. Marketable title laws is something states have established laws that set limits

on how far back a title search must go. Metes and bounds is the most unambiguous and is

appropriate for use in documents and is capable of describing even the most irregular of

parcels, can be described as a very precise. subdivision plat lot and block number contains

information regarding the location of various easements and may even contain a list of

restrictive covenants. Government rectangular survey relies on townships and section numbers as

essential units of identification. Covenant of quiet enjoyment promises that the property will not be

claimed by someone with a better claim. An example of Exceptions and reservations clause is "The
Seller is lawfully seized in fee simple of the above described property, less and except a prior

reservation of all oil. Delivery is typically this is accomplished when the grantor hands the deed to

the grantee at closing.

Externalities is when argue that regulation is needed to address the unintended and

unaccounted for consequences of one land user upon others. Public assistance facilities such

as homeless shelter Is considered a negative externality . Urban sprawl is when Development

taking place in rural areas well beyond the urban fringe. Spaceship earth is described as the world was

a closed system with limited space, air, water, and other resources. Incomplete information is

a problem that plagues private real estate markets. Concurrency requirement is one that

prohibits local development unless adequate infrastructure. New urbanization is planning

movement that explicitly advocates a traditional grid pattern of development designed to give

pedestrian life priority. Building Codes is a tool of public land use control represents the earliest method

of police power. Nonconforming uses is when a zoning ordinance is revised, some existing land uses

then fall outside. Variance is a relief that when land use controls impose exceptional hardship and loss

of value and the condition is common to other parcels of land in the vicinity does Not need to be met.

Performance standards is not included in A traditional zoning ordinance. Comprehensive Environmental

Response Compensation and Liability Act was responsible for establishing the "Superfund" to

finance emergency responses. impact fees are used to offset this detrimental impact. The right of

government to acquire private property, without owners consent is the eminent domain. The value of

the property is NOT determined solely by its current use. Ad valorem taxes is when most property taxes

are applied in relation to the value of the property and are levied between 1-4%. Extraterritorial

jurisdiction is when the city claims to have the right to control urban development even in the proposed

area. Special assessments are NOT considered ad valorem taxes. taxes are criticized for being regressive.

In homestead exemption, 50k will be deducted if owner occupies a home as the family's principal

residence and has claimed residency within the state. Zoning ordinances that tend to exclude lower

income groups by large lot size and low income is exclusionary uses. traditional residential planning is a

public planning movement that explicitly advocates a cul-de-sac hierarchy of development. The legal
procedure for exercising the right of eminent domain is Condemnation. Planned unit development

allows traditional zoning requirements to vary in exchange for an enhancement to the

community. In the history of eminent domain, the Able to use eminent domain to acquire property for

private development if it serves public purpose even if the current land use is not blighted is was a

affirmed in 2005 supreme court. Locational monopoly is that “there is no substitute for certain pieces

of land which gives the owner a bargaining advantage.” Sales tax liens are auctioned at a

discount from the face value of the property taxes due. The most recent approach to zoning, form-based

zoning, creates a map by segregation of building shapes. Single-family homes are typically NOT included

in the tax-exempt property classification. ownership rights can be fully removed from the property in a

defaulted lien. Tax rate at 6.5% is 65 mills.

Economic base is A city's potential for growth or its susceptibility to decline. Linkages are the demand

for access between land uses is considered the "gravity". Computer assembly is the least likely to be

considered a high-impact or high-multiplier economic base activity. The economic multiplier tends

to NOT be higher with the less isolated the city is from other cities. A Manufacturing Center is NOT an

example of land use for local economic activity. A City's export activity is NOT be considered a

supply-side factor that impacts a city's economic growth. Agglomeration economies is when specialized

resources emerge in response to demand from multiple industries. Industry economies of scale

examples of how the growth of an industry within a city can create cost advantages for future growth.

An increase in the average traveling speed of the individual's commute would most likely result in a

decrease in rents for properties closest to the central business district. A doctor at the city hospital who

must walk to work would be the one most likely to live closest to the central business district. As rents

increase with proximity to the central business district (CBD), the tendency is for development to build

upward on lots within the CBD to allow multiple tenants. A zone of transition containing warehousing

and other industrial land uses exists between the downtown area and the residential area which would

be closest to the downtown area of the central business district. Sector model is characterized by radial

corridors or wedges representing the pattern of residential land use in relation to the location of the

central business district. An Apparel store is an example of a comparison activity. The resulting pattern

of establishment locations is referred to as central place pattern. the university continues to exist as

a total unit because of industry economies of scale, another example is a processing plant, and a boat

repair facility also opened. An example of clustering is Six suburban office buildings have been

constructed along six consecutive blocks. The multiplier process is when the income that these

activities generate is re-spent within the community on other local goods and services and the
community benefits. Properties located in a city with more advanced development of agglomeration

economies will carry less risk and therefore suffer a smaller price decline during an economic downturn.

You would expect institutional investors to most favor real estate investments in which Large urban

markets.
Chapter 6

Market research does NOT consists of a series of facts that fails to consider the role of investor behavior

in the decision-making process. Proximity to modes of public transportation is Not a nonlocational

factor. Market segmentation is what the nuances in the preferences or needs of market subgroups are

commonly referred to as. Construct a market-defining "story" is the beginning point of the market

research process. The question “Who are the customers?” is designed to identify the target

market. For rental retail space, the key market parameters in question would most likely NOT

include projected sales rates. The "story" approach to market research starts with an analysis of

conditions in the property specific market. A planned unit development (PUD) is a residential

development that differs from traditional residential Except It typically has larger individual lots with

extensive side-yards on the property. The Elysian Forest failed because the target market was a

nontraditional segment that relied heavily on a small portion of the local University City population. In

the Palm Grove Office Complex example, was destined to be an ill-fated venture from its

inception for all of the following reasons except the zoning laws of University City ultimately

prevented the project's developers from starting the construction process. The primary source for

detailed household demographic information is the U.S. Bureau of the Census. A preliminary

approach for ascertaining the number of firms by size, industry, and location is to obtain data

from the U.S. Bureau of the Census: County Business Patterns. To determine if demand in that market

segment will be sufficient to justify proceeding with the project, a developer would be most

interested in estimating a capture rate. A city with a population of at least 50,000 people, is

referred to as a metropolitan statistical area. As the market becomes oversupplied, we would

expect a decrease in real rental rates. In general, the longer the construction lead time the greater

the amplitude of real estate cycles. A geographical information systems (GIS) enable one to manipulate

and "map" information with great flexibility and speed. Psychographics is used to relate a consumer's
activities, interests, opinions, and values to a consumer's demographic. Despite its frequent

application, analysts must be cautious with survey use because it can be fraught with abortive

errors. A key indicator used to evaluate where a property is within the cycle is the number of building

permits issued.
Chapter 7

The difference between real estate and the stock market are market prices are revealed almost

instantaneously to prospective buyers. market value is an estimate of the most probable selling price of

a property in a competitive market. The buyer's investment value is the maximum that he or she

would be willing to pay. The seller's investment value is the minimum that he or she would be

willing to accept. An Appraisal is the unbiased written estimate of the market value of a property.

The Uniform Standards of Professional Appraisal Practice (USPAP) imposes ethical obligations and

minimum standards that must be followed. It is not true that no financial limits are considered when

determining the property's best use. Sales comparison approach is typically considered the most reliable

approach. The Income approach would be most applicable when considering the valuation of retail

office space. The order most professionals prefer is Sales comparison approach, income approach,

cost approach. The cost approach to valuation would most likely be used for an education facility. If a

appraiser is putting together a report for a single family home, the summary appraisal report would be

the most commonly used. Arm's-length transactions would be most appropriate for use in the sales

comparison approach to valuation. There are “three” comparable sales are considered adequate as

long as the properties are very similar to the subject property. Location is not a transactional

adjustment. If the comparable property was known to have had favorable financing terms negotiated

into the transaction price, the transaction price of the comparable property should be adjusted

downward. The transaction price of the comparable property should be adjusted upward if the only

physical difference between the subject property and the comparable is that the comparable

does not have a fireplace. When making adjustments to a comparable property to arrive at a

final adjusted sales price, the adjustment order would be financing terms, market conditions,

location. Replacement cost refers to the expenditure required to construct a building of equal utility

using modern construction techniques. One reason for this difference is related to changes in tastes,
preferences, technical innovations, or market standards is known as functional obsolescence. Increased

traffic flow due to more intensive use in the local area would be categorized as a cause of external

obsolescence. When the appraiser evaluates and reconciles the final adjusted sale prices into a single

value for the subject property, it is known as indicated value.

Chapter 14

(IRR) and the net present value (NPV) are tools that are widely used in real estate investment and

finance decision making. An investor would most likely pursue an investment if the going-in IRR exceeds

the investor's required rate of return. Investment grade properties, are large, relatively new, located

in major metropolitan areas, and fully or substantially leased.