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Principles of Real Estate II > Day 1 > Flashcards

Day 1 Flashcards

1
Q

What is an appraisal?

A

An appraiser’s opinion of value

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2
Q

What is the loan to value ratio (LTV)?

A

The percentage of value or sales price that a lender is willing to finance

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3
Q

What is Highest and Best Use?

A

The legal use that gives the highest return in money and /or amenities

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4
Q

Principles of Contribution

A
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5
Q

Principle of Change

A
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6
Q

Principles of Anticipation

A
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7
Q

Principle of Substitution

A

A commodity’s value is influenced by the cost of acquiring a substitute or comparable item

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8
Q

Principle of Regression/Progression

A

The Presence of lower priced properties in the area will cause a decline in the value of the subject property

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9
Q

What are the Characteristics of Value ?

A

Demand
Utility
Scarcity
Transferability

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10
Q

What is Market Value?

A

The most probable price a property should bring in a competitive and open Market under all conditions requisite to a fair sale under guidelines published by Fannie Mae & Freddie Mac

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11
Q

What affects the value of a property?

A

Social , Economic,Governmental and Environmental influences

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12
Q

What standards to Appraisers follow?

A

USPAP- Uniform Standards of Appraisal Practice

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13
Q

What are the 3 approaches to value?

A

Sales Comparison Approach,Cost Approach,Income Approach

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14
Q

What is the Sales Comparison approach?

A

AKA Market Data approach, appraiser focuses on recent sales in determining the value of the subject

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15
Q

What is Functional Obsolescence?

A

The Loss in the desirability of the style, layout or function of an element of a property over time. example old heating system adding bedrooms weirdly

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16
Q

What is External Obsolescence

A

Refers to the loss in value of a property caused by factors outside of the property itself ie a landfill being built close by

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17
Q

What is Consummation?

A

The closing of a real estate transaction in which all appropriate documents are signed and the proceeds of the mortgage loan are disbursed by the lender

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18
Q

What is the Equal Credit Opportunity Act (ECOA)?

A

Originally passed in 1974, ensures that all consumers are given an equal chance to obtain credit

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19
Q

What type of discrimination does the Equal Credit Opportunity Act (ECOA) prohibit?

A

Discrimination based on :
-Race

-Color

-Religion

-National Origin

-Sex

-Marital Status

-Age (as long as it’s not a minor)

-Receipt of income from a public assistance program

-The good faith exercise of any right under the consumer credit protection act

20
Q

What is the Secondary Mortgage Market?

A

Exists for the Purchase and sale of existing mortgages to investors. It is designed to provide liquidity tot he residential real estate market.

21
Q

What is Fannie Mae?

A

Federal National Mortgage Association (FNMA) Plays a vital role in financing mortgages and increasing home ownership opportunities in the United States

22
Q

What is Freddie Mac?

A

Just like Fannie Mae , Started for checks and balances

Stands for Federal Home Loan Mortgage Corporation (FHLMC)

23
Q

Why is Loan Pre Qualification/ Pre Approval good ?

A

Helps the Buyer :

-Be more realistic when setting pricing goals

-Buyers Agent has a better understanding of the buyers ability to pay

-The buyers Agent can avoid showing properties that the buyer cannot afford

-Sellers are somewhat reassured that the buyer has sufficient income and credit to close the transaction

24
Q

How long does the Originator have to provide the buyer with the Loan Estimate?

A

Loan Estimate must be provided no later than 3 business days after receipt of the written application

25
Q

What is a Blanket Mortgage ?

A

Covers more than one piece of property , usually done by builders who buy more than one lot in a subdivision. This type of loan is likely to contain a release clause .

This allows the buyer to obtain partial releases of specific lots by making lump sum payments

26
Q

What is a Budget Mortgage ?

A

The monthly house payment includes principal, interest taxes and insurance known as PITI the taxes and insurance portion are held in an escrow account

27
Q

What is Private Mortgage Insurance ?

A

A special form of insurance designed to allow lenders to increase the LTV ratio.

PMI is required when the LTV of a conventional loan exceeds 80%

PMI Insures the difference between the borrower’s down payment and 80% LTV

28
Q

What is Eminent Domain?

A

The right of the government to take private land for public use

29
Q

What is condemnation?

A

The actual action of taking land under Eminent Domain

30
Q

What is Inverse Condemnation?

A

When the Landowner sues the government in order to force the gov to buy his or her land

31
Q

What is Taxation?

A

The Government’s right to tax real estate .When individuals gained the right to own land, the government retained the right to tax it .

32
Q

What is Assessed Value?

A

The value of property for tax purposes

33
Q

What are Mills?

A

Tax rate times assessed value equals the tax payment. rates can be per hundred or per thousand called mills

34
Q

What is Escheat?

A

The process of transferring real estate to the state when a person dies intestate (Without a will)

35
Q

What is Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)?

A

Gives the authority to recover natural resource damages caused by releases of hazardous substances.

Authority for cleanup under the act is granted to :

-Federal natural resource agencies

-States natural resource agencies

-Native American Tribes

36
Q

What is CCIM?

A

Certified Commercial Investment Member under the National Association of REALTORS

37
Q

What is a Short Sale?

A

Occurs when an owner / borrower sells a property with the lender’s consent at a price that is not sufficient to pay off an existing mortgage.

38
Q

What is a broker’s responsibility ?

A

A broker is required to advise a sponsored sales agent of the scope of the sales agent’s authorized activities under the License Act

39
Q

What is Appreciation?

A

The passive increase in the value of a parcel due to market forces.

40
Q

What are the disadvantages or risks of real estate investment?

A

-Lack of Liquidity (Main disadvantage)
-Risk
-Expense
-The need for management

41
Q

What are the Tax advantages included in investing?

A

-Tax Sheltered income
-Favorable capital gains tax treatment
Deferred taxation on exchanges

Tax advantages are the main incentive for real estate investing

42
Q

What are Real estate investment Syndicates?

A

When two or more parties join together to create and operate a real estate investment.
It’s not a form of ownership , but rather a method of raising funds for the purchase of real estate investments

43
Q

What is a REIT?

A

Real Estate Investment Fund

44
Q

What is an Equity REIT?

A

Purchases commercial property such as office buildings, apartments, and self storage facilities

45
Q

What is a mortgage REIT?

A

Invests in mortgage-backed securities and distributes the bulk of their income to investors as dividends paid from the income on the mortgages and sale of mortgages

46
Q

Who are the two largest issuers of real estate mortgage investment conduits?

A

Freddie Mac and Fannie Mae

Principles of Real Estate II (5 decks)

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