Certified Residential Appraiser Practice Exam

What does Purchase Power refer to?

1. Ability to negotiate a sale

2. The total amount of assets a buyer has

3. Financial resources available for buying

4. Availability of credit for purchases

The correct answer is: Financial resources available for buying

Purchase Power refers to the financial resources available for buying, which encompasses the actual funds a buyer can access to make a purchase. This includes cash, bank accounts, or any forms of liquid assets that can be readily converted to cash for the purpose of making a purchase. It is a critical concept in real estate as it directly affects a buyer's ability to acquire property. If a buyer has strong purchase power, they are in a better position to negotiate and can confidently make offers on properties without the risk of failing to finance the purchase. In contrast, the other options touch on different aspects of the buying process but do not define Purchase Power as accurately. Negotiating a sale involves skills and strategies that can be influenced by the buyer’s purchasing power but does not equate to the financial resources themselves. The total amount of assets a buyer has is broader in scope, whereas Purchase Power specifically focuses on the resources available for immediate use in transactions. The availability of credit for purchases is also relevant but refers specifically to borrowing rather than the overall financial resources a buyer has at their disposal.