Finance 9 - Processing Real Estate Loans Flashcards
The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.
abstract of title
Express information or fact; that which is known; direct knowledge.
actual notice
All things of value owned by a person or corporation, whether encumbered or not.
assets
An opinion of real estate value commissioned by a bank or an attorney provided by a broker.
broker price opinion (BPO)
The rate of return on a property will produce on the owner’s investment.
capitalization rate
Any document, claim, unreleased lien, or encumbrance that may impair the title to real property or make the title doubtful; usually revealed by a title search and removed by either a quitclaim deed or suit to quiet title
cloud on the title
Notice given to the world by recorded documents. All persons are charged with knowledge of such documents and their contents, whether or not they have documents and their contents, whether or not they have actually examined them. Possession of property is also considered constructive notice that the person in possession has an interest in the property.
constructive notice
The process estimating the value of a property by adding to the estimated land value the appraiser’s estimate of the reproduction or replacement cost of the building, less depreciation.
cost approach
A rating of a borrower’s creditworthiness based on history of payment, amount owed, length of credit history, new credit, and other factors.
credit score
1) In appraisal, a loss of value in property due to any cause, including physical deterioration, functional obsolescence, and external obsolescence. 2) In real estate investment, a deduction for tax purposes taken over the period of ownership of income property, based on the property’s acquisition cost.
depreciation
The process of estimating the value of a property by examining and comparing actual sales of comparable properties.
direct sales comparison approach
Appraiser only observes exterior of the property, with no interior inspection.
drive-by-appraisal
A standardized form listing all of an applicant’s assets and liabilities.
financial statement
The figure used as a multiplier of the gross monthly income of a property to produce an estimate of the property’s value; usually used for single-family residential property.
gross rent multiplier (GRM)
The process of estimating the value of an income-producing property through capitalization of the the annual net income expected to be produced by the property during its remaining useful life.
income approach
Debts incurred.
liabilities
The most probable price that a property would bring in an arm’s-length transaction under conditions on the open market.
market value
Calculated by determining the borrower’s assets and liabilities.
net worth
The final step in the appraisal process, in which the appraiser considers the estimates of value received from the sales comparison, cost, and income approaches to arrive at a final opinion of market value for the subject property.
reconciliation
A court action intended to establish or settle the title to a particular property, especially when there is a cloud on the title.
suit to quiet title
The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimension, and position of a house on a lot, including the determination of any existing encroachments or easements.
survey
A policy insuring a property owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects, and matters specifically excluded by the policy.
title insurance
A search of public records to determine all interests in the property.
title report
Includes the state as guarantor of the title in case of a claim.
Torrens Certificate
A credit report that contains credit information and credit scores from all three major credit reporting agencies.
tri-merge credit report
When its power to purchase other objects defines a property’s value.
value in exchange
When a specific use defines a property’s value.
value in use
An average in which each item in the series being averaged is multiplied by a “weight” relevant to its importance, the result summed, and the total divided by the sum of the weights.
weighted average
System for determining credit score developed by Fair, Isaac & Company.
FICO
