California Real Estate Practice Exam

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Increasing the value of a property by constructing a building on it is known as

Annexation
Appreciation
Improvement
Investment

The correct answer is: Improvement

The concept of increasing the value of a property by constructing a building on it is termed "improvement." In real estate, an improvement refers to any fixed addition made to a property that enhances its value, utility, or capacity. This can include the construction of new buildings, as well as significant renovations or upgrades to existing structures. Improvements are essential in real estate as they typically lead to increased property value and may also enhance the potential for generating income. In contrast to improvement, annexation generally refers to the process of adding land to a jurisdiction, such as a city or municipality. Appreciation indicates an increase in property value over time due to market trends or other factors, but it does not specifically refer to the act of adding structures. Investment involves the allocation of resources into property with the expectation of generating returns, but it encompasses a broader range of activities, not solely the construction of buildings. Therefore, improvement is the most precise term in this context regarding the direct action of enhancing property value through construction.