Exam 1 FINC 3250 Principles of Real Estate Chris Tomlinson questions and answers

Exam 1 FINC 3250 Principles of Real Estate Chris Tomlinson 1. Types of real estate a. Residential real estate: real estate that is used to live 1. This will be the biggest classification of real estate ii. Single family residential real estate: one complete living unit under the same roof 1. E.g. a house iii. Multi-family residential real estate: multiple individual living units on the same property 1. E.g. an apartment, duplex, or townhouse b. Commercial real estate: real estate used for some business purpose i. Includes industrial ii. An office, retail store, strip mall, shopping center, factory, etc. c. Agricultural real estate: real estate used for the cultivation of natural resources i. Not just “farming,” think natural resources ii. Timber iii. Non-traditional agricultural 1. Solar farms 2. Wind farms d. Public real estate i. Government uses 1. Schools 2. Courthouses 3. City halls 4. Government offices ii. Parks 1. National 2. State 3. Local iii. Military bases (even secret CIA prisons) 1. All public property is not open to the public 2. Physical characteristics of land (dirt) i. Property is the most stable form of collateral b. Immobility: land cannot be moved c. Indestructibility: land cannot be destroyed d. Nonhomogeneity: no two parcels of land are exactly alike i. Even if they might be the exact same, they are in a different location or have a different view 3. Economic characteristics of land a. Scarcity: real estate is scarce, there may not be enough land in areas where a lOMoARcPSD|14985576 lot of people really want to live or work i. No one is making any more property 1. Supply and demand b. Fixity: land is expensive and takes a long time to pay for itself i. The nature of real estate is fixed 1. Either it doesn’t change, or it only changes over an extended period of time ii. Property is considered to be stable as an investment iii. The only way property can change quickly is through the government 1. Zoning laws, etc. c. Situs: locational preference, either due to natural (e.g. the coast) or manmade (e.g. good schools) phenomena i. This will really overlap with scarcity ii. Location will always determine the value of property iii. People could either want to live close to or away from this location preferences 1. Hurricanes, tornadoes, etc. d. Modification: improvements to the land can change the value of the property i. I.e. buildings 4. Careers in real estate a. Whenever anyone says they work in real estate, the only thing that comes to most people’s minds is selling houses i. That is only one of the many ways that a person can make a living working in real estate ii. Consider the following possibilities: 1. Real estate broker/real estate agent a. Real estate agent: represent clients in buying or selling property b. Can specialize in certain types of properties, but mostly this happens in bigger markets (don’t confuse these with the types of real estate above; there is no buying/selling public property) i. Residential ii. Commercial iii. Industrial iv. Agricultural 2. Property management 3. Rental brokerage 4. Appraisal a. Appraiser: person whose job is to determine the value of real estate lOMoARcPSD|14985576 b. They can be really busy for selling a house, refinancing, or insurance purposes 5. Development 6. Urban planning 7. Mortgage: document agreeing to borrow money to purchase a house, and using that house as collateral i. Typically stretched out between 15-30 years ii. Document that allows the bank to foreclose a property b. Mortgage broker: someone who connects the lender with the buyer (brokering the deal) i. There is not really a lot of need for brokers right now 1. You can usually just go straight to the lender c. Mortgage lender: lends (loans) the money for the purchase of real estate i. Typically a bank 8. Investing a. All you need is money to be a real estate investor 9. Government service a. Lending programs b. Valuation c. Environmental protection d. Securitization 10. Consulting a. Normally somebody that has experience and provides advice or assistance in some real estate related field, i.e. development, property acquisition, etc. b. Consulting is very broad c. All a consultant does is sell their knowledge or experience i. Typically they have another job, but they can give you the knowledge you need; they are not just a consultant 11. Mortgage-backed securities: establishes an entity to purchase mortgages, then sells interest of that entity as securities (like stocks) 12. Research and education 13. Real estate attorney a. Closing/transactional attorney