After reviewing questions

Question 1

1. What are the other discriminatory practices under Federal Fair Housing Act? (total of 3)
2. Define these practices.

Rockwell, p79

Answer 1

note: Rockwell, p79 has list of prohibited actions that are done on the basis of RACE, COLOR, RELIGION, SEX, NATIONAL ORIGIN, HANDICAP, or FAMILIAL STATUS
1. Blockbusting, steering, redlining

Blockbusting: someone tries to induce homeowners to list or sell their prop, predicting that ppl of another race, disabled ppl, etc; will be moving into the neighborhood. Thus, will have undersirable sequences, such as lower prop values. the blockbuster then profits by purchasing the homes at reduced prices. blockbusting is a type of PANIC SELLING.

Steering: channeling prospective buyers/tenants toward/away from spec neighborhoods based on their race (or religion, etc) in order to maintain/change the character of the neighborhood.

Redlining: refusal to make a loan bc of the racial or ethnic comp of neighborhood in which the prop is located

Question 2

What are the 3 methods to estimate prop’s value in a formal appraisal?

Rockwell, p115
Felde, p153

Answer 2

1. Cost approach to value: estimating how much it would cost to build a similar structure, and then subtracting the depreciation that has accrued
2. income approach to value: estimating value based on the income the prop can potentially generate
3. sales comparison approach to value: estimating value by comparing the prop to similar props that have been recently sold

Question 3

Diff bw “value in use” and “value in exchange”?

Rockwell, p114

Answer 3

value in use: subjective, by someone who owns/uses it

value in exchange (aka market value): objective, in the eyes of the avg person

Question 4

Length of lease may not run for more than _________ yrs for:

1. city, urban or rural property
2. agricultural land

Felde, p3

Answer 4

Length of lease:

1. city, urban or rural property limited to 99 years
2. agricultural land limited to 51 years

Question 5

What is Effective Gross Income?

p173, Felde

Answer 5

Effective Gross Income = Gross Income - Vacancy Rate - Rent Loss

gross income: total income attributable to the prop at 100% occupancy
effective gross income: deduct vacancy and collection (rent) loss

Question 6

What is Net Operating Income?

p173, Felde

Answer 6

Net Operating Income = Effective Gross Income - Operating Expenses

Net operating income: deduct fixed expenses, variable expenses and replacement allowances (as well as effective gross income) from gross income

Question 7

What is capitalization rate?

p173, Felde

Answer 7

Capitalization Rate = Net Operating Income / Purchase Price or Property Value

capitalization rate: investor’s total expected return which includes a return “on” capital (profit) invested AND a return “of” capital (recovery through depreciation allowances)

• rate of interest which is considered reasonable ROI
• rate of return/yield that other investors with similar prop’s are getting in local market

Question 8

5 days that title to real property may be transferred?

p236, Felde
or p12

Answer 8

Accession
Occupancy
Transfer
Wills
Succession