Finance 9 - Processing Real Estate Loans

Question 1

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.

Answer 1

abstract of title

Question 2

Express information or fact; that which is known; direct knowledge.

Answer 2

actual notice

Question 3

All things of value owned by a person or corporation, whether encumbered or not.

Answer 3

assets

Question 4

An opinion of real estate value commissioned by a bank or an attorney provided by a broker.

Answer 4

broker price opinion (BPO)

Question 5

The rate of return on a property will produce on the owner’s investment.

Answer 5

capitalization rate

Question 6

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

Answer 6

cloud on the title

Question 7

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.

Answer 7

constructive notice

Question 8

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.

Answer 8

cost approach

Question 9

A rating of a borrower’s creditworthiness based on history of payment, amount owed, length of credit history, new credit, and other factors.

Answer 9

credit score

Question 10

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.

Answer 10

depreciation

Question 11

The process of estimating the value of a property by examining and comparing actual sales of comparable properties.

Answer 11

direct sales comparison approach

Question 12

Appraiser only observes exterior of the property, with no interior inspection.

Answer 12

drive-by-appraisal

Question 13

A standardized form listing all of an applicant’s assets and liabilities.

Answer 13

financial statement

Question 14

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.

Answer 14

gross rent multiplier (GRM)

Question 15

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.

Answer 15

income approach

Question 16

Debts incurred.

Answer 16

liabilities

Question 17

The most probable price that a property would bring in an arm’s-length transaction under conditions on the open market.

Answer 17

market value

Question 18

Calculated by determining the borrower’s assets and liabilities.

Answer 18

net worth

Question 19

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.

Answer 19

reconciliation

Question 20

A court action intended to establish or settle the title to a particular property, especially when there is a cloud on the title.

Answer 20

suit to quiet title

Question 21

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.

Answer 21

survey

Question 22

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.

Answer 22

title insurance

Question 23

A search of public records to determine all interests in the property.

Answer 23

title report

Question 24

Includes the state as guarantor of the title in case of a claim.

Answer 24

Torrens Certificate

Question 25

A credit report that contains credit information and credit scores from all three major credit reporting agencies.

Answer 25

tri-merge credit report

Question 26

When its power to purchase other objects defines a property’s value.

Answer 26

value in exchange

Question 27

When a specific use defines a property’s value.

Answer 27

value in use

Question 28

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.

Answer 28

weighted average

Question 29

System for determining credit score developed by Fair, Isaac & Company.

Answer 29

FICO