Word of the Day – The Language of Real Estate

Feasibility Study

1. An analysis of a proposed subject or property with emphasis on the attainable income, probable expenses, and most advantageous use and design.

A feasibility study is often used by a developer to entice investors to put up the front money for a proposed development.

Such a study is required by some mortgage investors and lending institutions before granting a loan commitment. In addition to being a decision-making tool for the developer and lender, it is also a valuable sales tool. However, it is different from a marketability study, which is more concerned with demand for the contemplated use. (See absorption rate, front money.)

The purpose of a feasibility study is to estimate the rate of return obtainable for a specific project and to determine whether the proposed project is economically feasible.

2. A survey of an urban area using federal funds to determine whether it is practicable to under-take an urban renewal project within that area.

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