Real estate markets are described as inefficient compared with securities markets because:

Correct Answer

C) Properties are unique, information imperfect, transactions slow

Why this is correct: Real estate markets are inefficient due to three key factors: each property is unique (heterogeneous), information is not perfectly or equally available to all parties (imperfect), and transactions involve high costs and take a long time to complete. This slow price discovery creates the need for professional appraisal. Why the other choices are wrong: 'Prices adjust instantly to every new fact' describes an efficient market, the opposite of real estate. 'Buyers and sellers are always equally informed' is false; information asymmetry is common. 'Transaction costs are essentially negligible in real estate' is incorrect; they are significant (e.g., brokerage, title, transfer taxes). Exam tip: Link market inefficiency directly to the appraiser's job: if markets were perfectly efficient, appraisals wouldn't be necessary.