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Chapter 2

Flow and Sources of Real Estate Funds

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Learning Objectives

• Describe how funds flow from those individuals and institutions with an excess of funds to those with a lack or deficit of funds and a need to borrow

• List key sources of funds in real estate finance

• Describe how these sources operate

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The Financing Process

• Bonds, mortgages, promissory notes

• Common stocks

Debt Instruments Equity Instruments

•Entities needing funds include households, businesses, and governments

•These entities also have funds available for lending

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Transferring Funds• Direct transfer of funds from surplus entity to

deficit entity

• Transfers through intermediaries• Thrifts• Commercial bonds• Mutual Savings Banks• Credit Unions• Insurance Companies• Pension Funds• Investment Companies• Finance Companies

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Transfer of Funds Through Securities Markets

• Money Market

• Capital Market

• Primary and Secondary Market

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