General Market Analysis Highest & Best Use (McKissock) Questions with 100% Complete Solutions

Agents of Production - The factors that combine to create value of developed real property; they include land, labor, capital, and entrepreneurial coordination; which is sometimes also called entrepreneurial profit. Central Business District (CBD) - The center of an urban area is typically zoned for various uses such as retail, office, and residential. Further, in some areas, transportation starts & ends in the CBD since it is the central location for employment. Consumption - A common concept in economics, and gives rise to derived concepts such as consumer debt. Consumer Credit - Consumer debt that has been paid Consumer Debt - Consumer credit is outstanding. In macroeconomic terms, it is the debt that is used to fund consumption rather than investment. Decline, Contraction, Downturn, or Recession - An event that occurs in a life cycle when an economy or area can no longer compete at a profitable level due to sale decreases resulting in decreased occupancy, absorption rates, and construction. Demographics - Study of a population and its characteristics such as age, sex, familial status, occupation, etc. Efficient market - Characterized by goods or services that are easily produced, readily transferable, with a large volume of knowledgeable buyers & sellers. General Data - Relates to information appropriate for many properties; includes all of the four forces, (social, economic, environmental, and governmental) Information Asymmetry - During the negotiation process, only one party is privy to important information that may affect the outcome of the transaction. Information asymmetry causes inefficient markets, since all the market participants do not have access to the information needed for their decision making process. Investment & Consumer Goods - Real estate is purchased with the expectation of attaining a return on investment, with the intention of using it as an investment vehicle and/or consumer good. Limited Partnership - A partnership with at least one passive partner whose liability is limited to the amount invested & at least one partner whose liability extends beyond the monetary investment. Market Area Delineation concepts - Define the primary and secondary market areas & include the type of tenants or clientele buildings might attract & their location, as well as the time-distance relationship to nearby complementary services such as restaurants, schools, voting districts, etc. as compared to the competition Market Delineation - Defines the geographic demand for a specific property. It is often accomplished by identifying the property type & features, the market area, and the available substitute & complementary properties. No matter the property type, market delineation identifies specific boundaries in which the subject is located, along w/ comparable sales, rents, & land sales. Market Segmentation - Defines & Subdivides a large homogenous market into segments based on location, demographics, and consumer behavior REIT - A tax designation for a corporation investing in real estate, reducing or eliminating corporate income taxes. In return, REITs require distribution of 90% income, which may be taxable, into the hands of the investors. Recession - The general contraction of the business cycle in economics during a sustained period of time. This occurrence is typically over two consecutive quarters of negative GDP growth Revitalization, upturn, or recovery - Occurs in a life cycle after a decline & before the growth cycle occurs again. Revitalization may occur due to rehabilitation and/or renovation as an area undergoes gentrification Real Estate cycles (4 Stages) - Expansion, Contraction, Recession, & Recovery Mortgaged Backed Securities (MBS) - Investors purchase securities issued by Fannie Mae or Freddie Mac, backed by residential mortgages or bonds issued by a trust that holds pools of commercial mortgages. These securities issued represent a portion of a pool of mortgages. Inefficient Market - Characterized by goods & services that are not easily produced or transferred, with a variable & inconsistent level of information & knowledge among participants A Market Segments Meets ALL of the following criteria: - --Distinct from other segments; --Homogeneous or consistent within the segment; --Responds similarly to a market stimulus; --Reached by a market intervention Specific data - Relates directly to the Subject Property. For example, city/county tax assessments, zoning, info relating to improvements, etc. Forces Affecting Local Real Estate - Governmental, Environmental, Economic, Social It is important to consider these market influences since they affect the highest & best use of the subject property. Concentric Ring Growth Pattern - Can be used to explain growth patterns around major employment centers Market analysis - The classification and study of current supply & demand conditions in a particular area for a specific type of property. Further, the market analysis develops the supportable basis for determining highest & best use, vacant or improved. Conformity - An economic principle which states that property value is maximized when the characteristics of a property are in conformance with market expectations and demands. General Data - Relates to information appropriate for many properties which include all four economic forces (Social, Economic, Environmental, Governmental) Opportunity Cost - An economic principle; the income lost by not choosing an alternative. Primary Data - Data that has been compiled for a specific purpose and has not been collated or merged with others. Primary data relates to specific markets in which the property is located & may include specific sales information, surveys of buyers' preferences, absorption statistics for the assignment, and competitive inventory surveys.