Day 1 Flashcards
What is an appraisal?
An appraiser’s opinion of value
What is the loan to value ratio (LTV)?
The percentage of value or sales price that a lender is willing to finance
What is Highest and Best Use?
The legal use that gives the highest return in money and /or amenities
Principles of Contribution
Principle of Change
Principles of Anticipation
Principle of Substitution
A commodity’s value is influenced by the cost of acquiring a substitute or comparable item
Principle of Regression/Progression
The Presence of lower priced properties in the area will cause a decline in the value of the subject property
What are the Characteristics of Value ?
Demand
Utility
Scarcity
Transferability
What is Market Value?
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
What affects the value of a property?
Social , Economic,Governmental and Environmental influences
What standards to Appraisers follow?
USPAP- Uniform Standards of Appraisal Practice
What are the 3 approaches to value?
Sales Comparison Approach,Cost Approach,Income Approach
What is the Sales Comparison approach?
AKA Market Data approach, appraiser focuses on recent sales in determining the value of the subject
What is Functional Obsolescence?
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
What is External Obsolescence
Refers to the loss in value of a property caused by factors outside of the property itself ie a landfill being built close by
What is Consummation?
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
What is the Equal Credit Opportunity Act (ECOA)?
Originally passed in 1974, ensures that all consumers are given an equal chance to obtain credit
What type of discrimination does the Equal Credit Opportunity Act (ECOA) prohibit?
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
What is the Secondary Mortgage Market?
Exists for the Purchase and sale of existing mortgages to investors. It is designed to provide liquidity tot he residential real estate market.
What is Fannie Mae?
Federal National Mortgage Association (FNMA) Plays a vital role in financing mortgages and increasing home ownership opportunities in the United States
What is Freddie Mac?
Just like Fannie Mae , Started for checks and balances
Stands for Federal Home Loan Mortgage Corporation (FHLMC)
Why is Loan Pre Qualification/ Pre Approval good ?
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
How long does the Originator have to provide the buyer with the Loan Estimate?
Loan Estimate must be provided no later than 3 business days after receipt of the written application
What is a Blanket Mortgage ?
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
What is a Budget Mortgage ?
The monthly house payment includes principal, interest taxes and insurance known as PITI the taxes and insurance portion are held in an escrow account
What is Private Mortgage Insurance ?
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
What is Eminent Domain?
The right of the government to take private land for public use
What is condemnation?
The actual action of taking land under Eminent Domain
What is Inverse Condemnation?
When the Landowner sues the government in order to force the gov to buy his or her land
What is Taxation?
The Government’s right to tax real estate .When individuals gained the right to own land, the government retained the right to tax it .
What is Assessed Value?
The value of property for tax purposes
What are Mills?
Tax rate times assessed value equals the tax payment. rates can be per hundred or per thousand called mills
What is Escheat?
The process of transferring real estate to the state when a person dies intestate (Without a will)
What is Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)?
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
What is CCIM?
Certified Commercial Investment Member under the National Association of REALTORS
What is a Short Sale?
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.
What is a broker’s responsibility ?
A broker is required to advise a sponsored sales agent of the scope of the sales agent’s authorized activities under the License Act
What is Appreciation?
The passive increase in the value of a parcel due to market forces.
What are the disadvantages or risks of real estate investment?
-Lack of Liquidity (Main disadvantage)
-Risk
-Expense
-The need for management
What are the Tax advantages included in investing?
-Tax Sheltered income
-Favorable capital gains tax treatment
Deferred taxation on exchanges
Tax advantages are the main incentive for real estate investing
What are Real estate investment Syndicates?
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
What is a REIT?
Real Estate Investment Fund
What is an Equity REIT?
Purchases commercial property such as office buildings, apartments, and self storage facilities
What is a mortgage REIT?
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
Who are the two largest issuers of real estate mortgage investment conduits?
Freddie Mac and Fannie Mae
