© 2015 OnCourse Learning Chapter 1 Introduction to Real Estate Principles.

© 2015 OnCourse Learning

Chapter 1Introduction to Real

Estate Principles

IN THIS CHAPTER

• An introduction to real estate and the real estate profession.

• Definitions of real property, personal property, and related terms.

• Factors affecting real estate and the real estate profession.

Real estate, real property, or realty• land and everything that is

permanently attached to the land• components of land– surface of the earth - surface– area above the surface - air space– area below the surface - mineral

rights

Personal property

• everything that is not real property

Physical characteristics ofreal property

1. Immobility2. Indestructibility

(permanence)3. Heterogeneity

(uniqueness)

Economic characteristics of real property

1. Scarcity/limited availability2. Permanence of investment3. Location4. Modification by improvement

GENERAL CONCEPTS OF LAND USEAND INVESTMENT

• Physical Factors Affecting Land Useo Locationo Topographyo Soil conditionso Sizeo Shapeo Subjection to floodingo Action of the suno The presence or absence of minerals

GENERAL CONCEPTS OF LAND USEAND INVESTMENT

• Artificial Factors Affecting Land Use

o Streetso Highwayso Adjacent land use patternso Availability of public utilities

GENERAL CONCEPTS OF LAND USEAND INVESTMENT

• Economic Factors Affecting Land Useo Local property tax assessmentso Tax rateso Wage and employment levelso Availability of financingo Interest rateso Growth in the communityo Zoningo Fire regulationso Building codeso Extent of community planning

Highest and Best Use

The use of land that will preserve the land utility, provide the greatest income, and result in the greatest present value of the land.

Land Use Restrictions

• Feudal system - land was owned or controlled by the king

• Allodial system - individual, private ownership of land

• City planning and zoning• Building codes• Private restrictions on land use

Investment

• The outlay of money expecting income or profit

• Or the acquisition of property expecting income or profit

THE REAL ESTATE PROFESSION

• Real estate brokerage• National Association of

REALTORS® (NAR), organized in 1908

• REALTOR® is a professional in real estate who subscribes to a strict code of ethics

• Association of Real Estate License Law Officials (ARELLO), established in 1929

THE REAL ESTATE PROFESSION

• Real estate licensee - a person licensed to sell real estate

• May specialize in one or more fields, such as:– farmland– multifamily dwellings– commercial– retail– residential– industrial sales

The Fundamentals of aReal Estate Transaction

• Listing Contract - a property owner employs a real estate firm to market a property for a prescribed period of time at a prescribed price and terms

• Contract for Sale - a binding contract to buy and sell real property results from the written acceptance of a written offer to purchase with proper notification.

The Fundamentals of aReal Estate Transaction

• Financing - the concept of borrowing is called leverage.

• Leverage - the use of someone else’s money to enhance your own.

• Final Settlement - completion of the real estate transaction.

THE REAL ESTATE MARKET

• A free market provides buyer and seller time without undue pressure or urgency.

• Properties are given substantial exposure.

• Properties are available for inspection.

THE REAL ESTATE MARKET

• The physical characteristics of land create special conditions.

• The real estate industry traditionally has been subject to cyclical periods.

• The goal of a real estate salesperson is to read the market and act accordingly.

allodial system Association of Real Estate License Law Officials (ARELLO)feudal systemfree marketheterogeneityhighest and best usehomogeneityimmobilityindestructibilityinvestmentland use controlsleveragelisting contractlocationNational Association of REALTORS® (NAR)personal propertyreal estatereal propertyREALTOR®realtyscarcitysupply and demand

CHAPTER TERMINOLOGY REVIEW