Exam 1 Material
Chapter 1: The Nature of Real Estate and Real Estate Markets
An Introduction to Real Estate
Real estate is the single largest component of wealth in our society
› Appx. ½ of the world’s total econom
...
Exam 1 Material
Chapter 1: The Nature of Real Estate and Real Estate Markets
An Introduction to Real Estate
Real estate is the single largest component of wealth in our society
› Appx. ½ of the world’s total economic wealth
The term “real estate” is used in 3 ways:
1. Tangible assets
› 1. Improvements on the land = fixed structures 2. Improvements to the land =
making land suitable for construction, etc. (often referred to as infrastructure.
Walkways, drainage, electric, excavation and fill) 3. Raw land.
› Real property is fixed to the land. Personal property is moveable
Real Estate Markets and Participants
Real estate values derive from the interaction of 3 sectors of the economy
› User Markets
Chapter 2: Legal Foundations to Value
The Nature of Property
Rights are claims or demands that our government is obligated to enforce
Chapter 3: Conveying Real Property Interests
Conveyance of real estate interest is uniquely complicated
o Real property is a complex bundle of rights Chapter 4: Government Controls and Real Estate Markets
The Power of the Government to Regulate Land Use Most of the real property in the U.S. is privately owned.
Unregulated competitive bidding would bring about the most productive use of each parcel and
the price paid for the parcel would exactly reflect its usefulness, but this doesn’t happen for a
few reasons
Chapter 7: Valuation Using the sales comparison and Cost Approaches
Market Value, Investment Value, and Transaction Prices
Values of real estate cannot simply be determined in the market. They must be estimated
because real estate has unique characteristics of heterogeneity, infrequent purchases, and
immobility
Chapter 8: Valuation Using the Income Approach
Owners anticipate that they will receive cash flows from the property due to rental income and
price appreciation.
Other valuation approaches are most appropriate for non-income producing properties
Income capitalization – converting periodic income into a present value estimate
Measure of income generally sought by valuers is annual net operating income (expected
annual rental income, net of vacancies, minus operating and capital expenses)
o Owners don’t always get full amt due to taxes and borrowing fees
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