Ch 5-6 Flashcards
A mathematical model used to develop values for each property within a group or universe of properties.
defines
Mass Appraisal Model
A quantitative technique used to identify and measure adjustments to the sale prices or rents of comparable properties; to apply this technique, sales or rental data on nearly identical properties is analyzed to isolate and estimate a single characteristic’s effect on value or rent.
defines
Paired Data Analysis
A programmed algorithm for systematically building a multiple linear regression model by adding significant variables, deleting insignificant variables, or both, and then assessing the model resulting from the addition or deletion.
Defines
Stepwise Regression Analysis
- Computer software that queries property and market data, analyzes comparable property and market information to assign a value or range of value to a particular property; or generates metrics applicable to assessing the credibility of valuation-related statements or conclusions.
- A computer software program that analyzes data using an automated process. For example, xxx may use regression, adaptive estimation, neural network, expert reasoning, and artificial intelligence programs. Note that the output of an xxx is not, by itself, an appraisal. An xxx output may become a basis for appraisal, appraisal review, or appraisal consulting opinions and conclusions if the appraiser believes the output to be credible and reliable for use in a specific assignment.
AVM
AVMs have three principal limitations:
- First, they are dependent upon the accuracy, comprehensiveness, and timeliness of the data they use. Data issues can include incomplete public records, insufficient sales of properties with comparable features within a specified geographic area, and a lag between the time when the market data are current and the AVM uses the data to generate an estimate of value.
- Second, AVMs cannot be used to determine the physical condition and relative marketability of a property.
- Third, AVMs can never fully incorporate the breadth of knowledge and judgment of a skilled appraiser.
AVMs tend to work best in circumstances when
- there is a relative abundance of current data
- properties in a given area are relatively homogenous
- a property’s condition and marketability are relatively typical for the area.
AVMs can be used as a meaningful tool to enhance xx
risk management.
“When using an AVM in an appraisal, appraisal review, or appraisal consulting assignment, an appraiser should have a xx of how the AVM analyzes data to determine whether the AVM measures and reflects market activity for the subject property.
“The appraiser does xxx, or xxx, the AVM’s algorithm or intricacies of its statistical or mathematical formulae. However, the appraiser should be able to xxx and verify that the AVM is consistent in producing results that accurately reflect prevailing market behavior for the subject property.”9
basic understanding
not need to know
be able to explain
describe the AVM’s overall process
The “price of money” is expressed as
an interest rate.
The supply of money in the U.S. is regulated by the x
Federal Reserve System (the Fed).
“The Federal Reserve’s efforts to influence the level of economic activity by regulating the availability of money and the rate of interest.”
defines
Monetary Policy
The Fed has three tools it can utilize to control monetary policy:
open market operations,
the discount rate, and
reserve requirements.
The Fed can influence both the x of money and the x of money.
supply
cost
The Fed has the power to raise or lower the interest rate they employ when lending money to commercial banks and other depository institutions called the
discount rate
When the Fed purchase securities, they x the supply of money.
increase (it is like printing money)
The prime rate is
the rate set by individual banks when lending money to their most highly-rated customers.
The Fed was founded in x, and it consists of x regional banks. The Fed is an x entity; it is accountable to the xx.
1913
12
independent
U.S. Congress
The lender assumed the risk and had to service the loan. However, it was a secured loan with the house as collateral. The loan had strings on it, as the bank had a lien against the property and held the ultimate rights to take over the property in the event of a failure to perform the terms of the mortgage agreement. They had the right to foreclose.
defines
Traditional / Bundled Mortgage Model
Who are the secondary market participants?
Originators (Depositories, Mortgage brokers and Mortgage bankers)
Secondary Markt (Fanie, Freddie, Ginnie, Private Investors)
Investors (Pension Funds, Insurance companies, Mutual Funds, Foreign Investors)
The act of investing directly to enhance investment return rather than placing deposits in financial intermediaries such as commercial banks or savings banks, which reinvest their deposits at higher returns than paid to depositors.
defines
Disintermediation
Disintermediation “cuts out the middle-man” - i.e., the intermediary - but may increase investment risk as a result (e.g., loss of FDIC insurance).
For example, the state of New York had a usury law that had been in place over 50 years, which set the limit at 8.5%. When lenders wanted to charge 9% in the early 1970s, they were not allowed to. This led to what was called disintermediation.
Essentially, investors in New York took their money elsewhere. This led to deposits being placed
in institutions in New Jersey, Connecticut and other nearby states that had higher usury limits.
What is a Mortgage assumption?
When mortgage rates are going up or are in a state of flux, it may be attractive for a buyer to purchase a house and take over its existing mortgage, rather than getting a new one at a higher or less stable rate. All the mortgage obligations are then transferred to the qualified buyer.
Some mortgages permit assumptions, and others do not. At present, only FHA and VA loans are assumable without the permission of the lender.
What is a Mortgage assumption?
When mortgage rates are going up or are in a state of flux, it may be attractive for a buyer to purchase a house and take over its existing mortgage, rather than getting a new one at a higher or less stable rate. All the mortgage obligations are then transferred to the qualified buyer.
Some mortgages permit assumptions, and others do not. At present, only FHA and VA loans are assumable without the permission of the lender.
“A contract in which a purchaser of real estate agrees to pay a small portion of the purchase price when
the contract is signed and additional sums, at intervals and in amounts specified in the contract, until the total purchase price is paid and the seller delivers the deed; used primarily to protect the seller’s interest in the unpaid balance because foreclosure can be exercised more quickly than it could be under a mortgage.
defines
Land Contract
Also called contract for deed;
installment (sale) contract
= Seller Financing
xxx is a variation of seller financing, and offers buyers an alternative to a second mortgage. The seller keeps the existing mortgage on behalf of the buyer, plus lends additional money to cover the price paid above the balance of the underlying loan.
A “wrap-around contract”
