What Influences The Supply Of Real Estate?

Recently, I wrote about the five factors that influence the demand of real estate.  If there is a list for demand, you can bet your next commission check that there is a list for supply.

In the perfect real estate market, supply and demand are in equilibrium.

The variables that influences supply are land, labor, lumber, and loans.  Let’s go through these one at a time:

Land – it is very difficult to build more house if there isn’t any land.  You take a city like Key West.  There is very little land left, so there isn’t a lot of building going on. (Well, there wasn’t before Hurricane Irma.)

Labor – this refers to skilled labor: carpenters, roofers, electricians, etc.  Speaking of Hurricane Irma…  Right after the hurricane, if you needed a roofer, you would get put on a list.  The roofer would say, “Can you keep that blue tarp up there for six months because our list is pretty long?”  You didn’t have a lot of choices because even the bad roofers were busy.

Lumber – Actually, it’s all material, but I’m saying lumber because it works better with my L list.  If builders can’t get material, they can’t build houses.  A few years ago, there was a glass houses.  If you wanted to construct a building, you have to opt to have zero windows, pay more for the glass (sometimes prohibitively more), or wait until there was more glass.  When the supply of buildings materials is low, the supply of new houses is also low.

Loans – This applies to construction loans.  If builders can’t get loans (or if they cost too much), they aren’t building as many speculative homes.  But as soon as the loans become more available, the builders start building away.

Be sure you know the four factors that influence the supply of real estate.  This is something that’s been on the Florida real estate sales associate exam before.

And remember, when you have a list in the book like this, there is a good chance that the question will be phrased like:

Which factor does NOT influence the supply of real estate?

a. availability of land
b. availability of situs
c. availability of construction loans
d. availability of skilled labor

Of course, the answer is B because situs is not on our list of four items.

Be sure to get comfortable with this NOT type of question. It’s pretty common on the Florida state exam.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate.  My father, Ron Climer, sold Climer School of Real Estate in 2014.  You can find me at Demetree School of Real Estate

By |2021-08-25T14:40:30-04:00January 8th, 2018|

Does That Belong To The Buyer Or Seller? It’s Up To IRMA.

If you are anywhere even close to Florida, as in anywhere in the same hemisphere, you are probably sick of hearing about Irma.  Irma is coming.  Now it’s going east.  Nope, it went west.  Irma is gone, but left destruction.  We’ve been hearing about Irma for at least a week.  In all this storm talk, no one has mentioned Irma and the story of Florida’s first home sale.  It’s an old story that not many people know.  Fortunately, as a native Floridian, I know the story.

Back in the good old days, Mr. Seller put his house up for sale.  Mr. Buyer loved the house.  In fact, one of the things Buyer loved most was that the backyard was fenced in, which was rare in those days.  After closing, Buyer returned to the house and the fence was gone.  It wasn’t because Hurricane Irma ripped the fence up.  It was gone because the Seller took the fence with him!  He wanted a fence at his new house, so he took the fence with him!  Can he do that?  Seller said he sold the house, not the fence.

Irma is not just a hurricane. It’s a test to determine whether an item is a fixture.

Buyer was furious.  He wanted that fence.  Buyer and Seller didn’t have the foresight to include the fence in the contract, so they went to court to let the judge decide.  The judge was a very stoic woman with her hair pulled tightly in a bun.  Her name was Irma.  After listening to the facts, Judge Irma said the fence belonged to the Buyer.  The Seller was incredulous.  “How on earth did you decide that?”  Judge Irma explained the four-part test she used (and humbly named after herself).

Intent – What did the buyer or seller say to each other?  If the seller said, “I’m taking the fencing with me?” then his intent is pretty clear.

Relationship Between the Parties – There’s a difference between a buyer/seller relationship and a landlord/tenant relationship.  It’s also different if you are a commercial tenant or a residential tenant.  In a dentist office, for example, the have those special dentist chairs and overhead spotlights.  That stuff is screwed into the floor or the ceiling.  It is a serious installation, but it’s part of the dentist’s office.  When the dentist leaves, he’s going to take his special chairs and lights.  If a residential tenant installed a basketball hoop outside by putting the pole in concrete, they can’t take it with them.  That relationship is different than a commercial relationship.

Method of Attachment or Annexation – How firmly is the item attached?  A trash can that sits on the floor is not very firmly attached, so it is personal property and goes with the seller.  But a door that is hanging on hinges in the doorway is more permanently attached, so it stays with the house.  Or let’s consider our fence… when the fence is installed at a house, it is real property and stays with the property.  Once a hurricane comes and knocks it down, it is no longer attached, so it is personal property.

Adaptation – How well does the item fit in the house?  For example, our fence was cut specifically for the size of this house.  It stays with the house.  Storm shutters are another example of something that was made for that specific house.  Something that does not adapt to the house would be considered personal property, and would go with the seller.

An item, like the fence, that was once personal property but is now real property is called a fixture.  So the test that Judge Irma used to determine whether the item was a fixture is I-R-M-A.

If you found this story and acronym helpful, leave a comment below.  If you would like to hear more stories that will help you remember and understand what you need to know for the Florida real estate sales associate exam, give me a call or sign up for my review class at Demetree School of Real Estate.

Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate.  My father, Ron Climer, sold Climer School of Real Estate in 2014.  You can find me at Demetree School of Real Estate

By |2021-08-25T14:48:58-04:00September 12th, 2017|
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