Achieving Agreements through Transaction Analysis Part 2

Question 1

Forces that affect the value of all markets (4)

Answer 1

Physical
Economic
Governmental
Social

Question 2

Physical Characteristics of Real Property (3)

Answer 2

Uniqueness + Immobility + Indestructibility

Question 3

Types of Physical Factors (5)

Answer 3

Topography + Water + Location + Popularity + Environment

Question 4

Economic Factors that can affect real estate values (5)

Answer 4

Business Cycles + Real Estate Cycles + Supply & Demand + Buyer’s Market + Seller’s Market

Question 5

Buyer’s Market

Answer 5

Housing market with a large selection of properties from which the buyer can choose

Question 6

Seller’s Market

Answer 6

Housing market where sellers can choose from a large number of buyers who are looking for houses in a particular area

Question 7

Social Factors that impact real estate markets (5)

Answer 7

Population Growth + Population Migration + Population Age + Size of Families + Trends and Tastes

Question 8

Government Factors that affect real estate (4)

Answer 8

Land use controls/zoning laws + Environmental Protection Laws + Eminent Domain + escheat

Question 9

Federal Factors that influence real estate (5)

Answer 9

Fiscal Policy + Monetary Policy + Secondary Mortgage Markets (fannie mae, freddie mac) + government programs (FHA, VA) + taxation

Question 10

What does the principle of substitution state?

Answer 10

States that an informed buyer will not pay more for a property than a comparable substitute

Question 11

Whats does the principle of conformity state?

Answer 11

States that a particular property achieves its maximum value when it’s surrounded by properties that are similar in style and function

Question 12

What does the principle of contribution state?

Answer 12

States that a particular item or feature of a property is only worth what it actually contributes in value to that piece of real estate

Question 13

What are the value characteristics of real property (4)

Answer 13

Demand + Utility + Scarcity + Transferability

Question 14

What is the principle of progression?

Answer 14

When the value of a specific property is helped up by the value of the surrounding properties in the area

Question 15

What is the principle of regression?

Answer 15

When the value of the “best” property is held down by the value of other properties in the area.

Question 16

What is an appraisal?

Answer 16

An estimate or opinion of value supported by objective facts and data

Question 17

What is the highest and best use of a property?

Answer 17

It is the use that supports the highest present value as of the date of the appraisal OR the use that develops the highest present value over a reasonable period of time

Question 18

Cost Approach Formula

Answer 18

Replacement Cost - Accrued Depreciation + Site Valuation = Property Value

Question 19

Cost Approach Formula

Answer 19

Replacement Cost - Accrued Depreciation + Site Valuation = Property Value

Question 20

What is the most commonly used approach to appraisal of residential real property?

Answer 20

Sales comparison approach

Question 21

What is the most commonly used approach to appraisal of residential real property?

Answer 21

Sales comparison approach

Question 22

What does an appraisal report have ? (4)

Answer 22

• Reports a final opinion of value for the subject property
• Explains the appraiser’s rationale and process used in developing the appraisal and conclusion
• supports any opinions with analytical data
• follows professional standards, rules and guidelines

Question 23

What is the Uniform Residential Appraisal Report (URAR)

Answer 23

A standard appraisal report form used by lenders and appraisers for residential appraisals.

Question 24

What is a competitive market analysis (CMA) ?

Answer 24

A method of determining approximate market value

Question 25

T/F

Intermediation increases the mortgage money supply and can lower interest rates?

Answer 25

True

Question 26

T/F

FHA was created to insure loans to low-income borrowers

Answer 26

True - they do not fund loans. FHA provides mortgage insurances so banks don’t incur losses for home loan defaults

Question 27

What does a FHA actually do?

Answer 27

FHA is a loan that is insured by the federal government. FHA DOES NOT MAKE MORTGAGE LOANS TO BORROWERS

Question 28

What is a secondary mortgage market?

Answer 28

When lenders sell the mortgage to an investor to receive funds so that they can make additional mortgage loans to others

Question 29

What are the 3 functions of a primary mortgage market?

Answer 29

1. Origination
2. Underwriting
3. Servicing

Question 30

What is a conforming loan?

Answer 30

a loan that meets the qualifying standards of fannie mae or freddie mac, thus can be sold on the secondary market

Question 31

What is a nonconforming loan?

Answer 31

When a loan does not meet the standards to be sold into the secondary market.

Question 32

What are the two main reasons a loan would be nonconforming?

Answer 32

Size of the loan + Credit Quality of Borrower

Question 33

What is the difference between primary market and secondary market?

Answer 33

Primary - consists of lenders making mortgage loans directly to borrowers
Secondary - consists of private investors and government agencies that buy and sell home mortgages

Question 33

What is the difference between primary market and secondary market?

Answer 33

Primary - consists of lenders making mortgage loans directly to borrowers
Secondary - consists of private investors and government agencies that buy and sell home mortgages

Question 34

What entity is responsible for setting the country’s monetary policy?

Answer 34

The federal reserve

Question 35

By selecting “sellers election of remedies”, what can the seller do?

Answer 35

Seller can keep the earnest money in the event of buyer breach and can also sue the buyer for actual damages or sue the buyer for specific performance