PR II

Question 1

Acerage (43,560)

Answer 1

To solve for acreage (area measurement for land), we divide the square footage of the land by 43,560 feet.

Step 1: Calculate Square Footage (multiply dimensions of property)
Step 2: Divide Square Footage of land by 43,560 feet.

Question 2

Amortization

Answer 2

Amortization is the repayment of a loan over time in equal installments that include principal and interest.

Example 1: After closing on her house, Audrey’s lender sent her the amortization schedule of her mortgage payments, including how much of each monthly payment would go to principal and how much of each payment would go to interest.

Example 2: Unless you plan on paying off your mortgage immediately or have an interest-only loan, you’ll be paying off your principal via an amortization schedule.
Amortization (cont.)
Each month, the payment is the same, with more being paid to interest at the beginning of the life of the loan and more being paid to principal at the end.
Note: It’s important to note that interest on amortized loans is paid in arrears, which means that the interest is paid after it’s received/issued to the borrower. For example, you usually pay for internet service before you use it; however, you pay your electricity bill for electricity you’ve already used, a.k.a. in arrears.

Question 3

General Data

Answer 3

General Data information about a property’s location, Includes City, Region and neighborhood in which the property is situated.

Question 4

Specific Data

Answer 4

information regarding the property itself

Question 5

General vs. Specific Date

Answer 5

Appraisers use both specific and General to appraise property

Question 6

Principal of Anticipation

Answer 6

Principle of Anticipation: The idea that the present value of a property is affected by the anticipated income or utility that property will give its property owner.
Example: Jimmy is buying a property and plans to rent it out for business purposes his ability to make income off of rent is affecting the amount he is willing to bid on the house.

Question 7

Principal of Contribution

Answer 7

Principle of Contribution: The idea that a propertys overall value is made up of the combined value of each of its parts. But the contributory value of an item is not always equal to the price of that item.

Example: Jimmy renovated his kitchen, but was disappointed that the appraisal of his house only added part of the cost of the renovation to his house’s value Jimmy learned that his house’s overall value is made up of the value of all of the parts. (The brokendown A/C affects his house’s value as much as the new kitchen.)

Question 8

Principal of Substitution

Answer 8

Principle of Substitution: States that the value of something is affected by the cost of getting a similar (substitute) item elsewhere.

Example: Jimmy wants to put his house for sale, and his neighbor Shane, who has an almost identical house in his neighbor, put his house up for sale Jimmy is carefully watching Shane (and vice versa).

Question 9

Principal of Change

Answer 9

Principle of Change: Reminds us that the condition of a property, the desirability of its location, and the market in which it exists can always change, which could affect the value of the property.

Example: Jimmy got an appraisal for his home in 2015, but market conditions have changed so that appraisal is no longer correct

Question 10

Principles of Supply and Demand

Answer 10

Principles of Supply and Demand: States that when supply is low and demand is high, prices will increase. And if supply is plentiful and demand is low? Prices will then drop.

Example: The local factory in Jimmy’s town shut down, and suddenly 30% of the town put their house for sale due to this supply increase (and demand decrease), the value of Jimmy’s house decreased.

Question 11

Principle of Conformity

Answer 11

Principle of Conformity: Claims that maximum value is realized when land use is in harmony with surrounding standards.

Example: Jimmy’s house has a “farmhouse look” and so do the houses that surround his the high value of Jimmy’s house is partly a result of the fact that the houses that surround his have a similar look.

Question 12

Principle of Regression & Progression

Answer 12

Principles of Regression & Progression: states that the presence of higher value or lower value homes near the subject property can change its value.

Example: Jimmy’s small home is surrounded by larger, more expensive homes. The value of Jimmy’s house is probably increased through the principle of progression.

Question 13

Characteristics of Value (DUST)

Answer 13

Demand: If there are multiple buyers interested in a property, the property will increase in value.

Utility: Properties need to be useful or serve some kind of purpose in order to have value to a buyer. An empty lot, for example, may not look like it has much utility, but to a buyer who wants to build a custom home in that area, its quite useful!

Scarcity: If the amount of housing in an area is low in supply, it grows in value.

Transferability: Whether its government rules or a title issue, anything that limits the transferability of real estate makes it less valuable.

Question 14

Appraisal Report

Answer 14

An appraisal report is a report from a Licensed appraiser that sums up a property’s market value based on collected data.

1- The appraisal report is usually paid by the buyer.

2-The appraiser that will complete the appraisal report is usually chosen by the lender. In other words, the lender chooses an appraiser not the report.

Lender usually asks for this during the mortgage origination process.

*After a buyer’s offer is accepted and the lender is trying to give the buyer final approval for a loan.

Question 15

Comparative Market Analysis (CMA)

Answer 15

NOT AN APPRAISAL
Use information regarding recently sold homes in the area to arrive to an indication of the fair market value (FMV) of a similar property would be.

USES
To guide your client towards a proper price range for their property.

1. Evaluate the neighborhood.
2. Evaluate the subject property.
3. Get your comparables.
4. Compare and adjust selected comparables.
5. Establish a listing price range.

Question 16

Market Value

Answer 16

is the price for which a property will sell if offered openly under normal conditions. Market value is all about the present. What will someone pay for their property TODAY?

Question 17

Depreciation

Answer 17

Depreciation, a concept well known by appraisers, is the loss of value because of obsolescence (becoming obsolete) or deterioration.

Depreciation is also tied closely with a property’s effective age, an estimated age that is influenced by the updates and quality of maintenance of the propert

Question 18

3 ways to calculate value of real estate

Answer 18

Sales Comparison Approach (Market Date Approach)
Cost Approach
Income Approach

Question 19

Sales Comparison Approach (Market Date Approach)(used mostly for owner-occupied residential property and vacant land) 3 ways to calculate value of real estate

Answer 19

In this method, an appraiser collects data from the previous sales of similar properties ( at least 3) in the area with similar features: amenities, square footage, number of rooms, and location.

They then analyze how much these comparable properties have sold for and account for the differences in the properties. Used to determine Fair Market Value.

Appraisers rely heavily upon the sales comparison approach for appraising owner-occupied residential properties and vacant land.

Question 20

Cost Approach (used for new construction) 3 ways to calculate value of real estate

Answer 20

Used to estimate a propertys current market value using the cost approach, an appraiser needs to estimate the current cost of reconstructing the property with improvements (the replacement cost).
This estimate is added to the value of the land, and then depreciation of the home since it was first built is subtracted.

The cost approach is a great approach to value for appraisers to use on new construction.
There are several methods used for determining value within the cost approach:
-Quantity survey method: the appraiser tallies the value of everything that goes into the cost
-Unit-in-place method: takes direct and indirect costs into account, combines them into a simplified cost for a building component
-Square foot method: the appraiser estimates a cost per square foot for that specific type of building and multiplies it by the square footage of the structure

Question 21

Income Approach (Commercial Properties)

Answer 21

known as the income approach. Appraisers generally use the income approach for commercial buildings like shopping centers, office buildings, and apartment buildings.

In short, the income approach determines the amount of income the property could make over a year and references the sale of other rental properties in the are

Question 22

Amortized Loan

Answer 22

The full amount of the principal and all interest due will be reduced to zero.

Payments made at the beginning be mostly interest, while payments made at the end will be mostly principal.

Question 23

Holographic Will

Answer 23

Cannot be change!!! is a will and testament that has been entirely handwritten and singed by the testator(person who made will).

Question 24

illustrate a tenancy at sufferance turning into a periodic estate

Answer 24

A tenancy at sufferance is when a tenant remains in possession of a property beyond their lease’s terms, without landlord consent.

A periodic estate has a fixed lease period, meaning that the lease is automatically renewed at the end of end of each lease period** until a party terminates it.

Question 25

Mary wants to buy a parcel of raw land, but she knows she needs to find out how is the property zoned, how it was used previously, if there are any usage restrictions, and if there is a building moratorium in effect. All of these factors contribute to determining whether or not the land is:

Answer 25

Buildable and Developable

Question 26

As opposed to general license holders, agricultural land specialists should have a more specific knowledge of:

Answer 26

water and mineral rights, soil requirements, public land leases, hunting tags, and livestock and farm production

Question 27

Regarding a fixed-rate mortgage that is fully amortized. The amount of interest to be paid is predetermined. True of False:

Answer 27

TRUE

Question 28

True or False:
A landlord has failed to maintain the HVAC unit in an apartment during below freezing temperatures. The tenant could seek constructive eviction.

Answer 28

TRUE

Question 29

Lease Purchase Agreement

Answer 29

A lease where part of a tenant’s rent is applied to the property’s purchase price; the property title transfers upon full payment.

Question 30

How many feet in a mile?

Answer 30

43, 560

Question 31

What is the difference between publicly traded REITs & non-traded REITs?

Answer 31

A real estate investment company that is publicly traded on listed exchanges is usually an REIT. There are publicly traded REITs and non-traded REITs.

Question 32

Preventive Maintenance

Answer 32

Conducting periodic inspections to catch minor issues before they become major failures

Question 33

REO

Answer 33

“Real Estate Owned”

Question 34

The state needs to acquire someone’s private land in order to build a six-lane highway. The government MUST:

Answer 34

provide just compensation in exchange for the property

Question 35

What is a Gross Lease?

Answer 35

A gross lease assumes the tenant will be responsible for the payment of a fixed-monthly charge, whereas the landlord will be responsible for maintenance, security, taxes, utilities, etc.
In some cases, the tenant may also pay utility bills.

Question 36

Concept of the time value of money?

Answer 36

The underlying principle is that if today’s money can begin earning interest immediately, it is worth more the sooner it is received.

Question 37

A tenant operates a small retail store in a shopping center. The landlord pays all operating expenses; the tenant pays a base rent of $1,500 per month, plus 15% of monthly gross profits over $15,000. The tenant has a what type of lease?

Answer 37

percentage lease

Question 38

Haley’s condominium purchase is financed by a PACKAGE MORTGAGE. What does this imply about the condominium she purchased?

Answer 38

Her condominium purchase most likely includes the condominium but also all personal property and appliances installed on the premises.

Question 39

A 20-acre property is about to be sold. Before it can be sold, however, the loan connected to the property has to be paid in full. What is the name of the provision in the mortgage that would require this full payment?

Answer 39

alienation clause

Question 40

33. Rex purchased an investment property with the intention of renting it out. To finance it, he set up a partially amortized loan with a balloon payment. What risk could this pose for him as the borrower?

Answer 40

If his property fails to gain value through renter revenue, Rex could be caught with insufficient funds at the time of the larger balloon payment.

Question 41

Single family homes, apartments, shopping malls, and office buildings are all examples of what type of real estate investment?

Answer 41

Real Property Asset

Question 42

Ben has recently purchased a policy for title insurance. Two weeks after making his purchase, it is revealed that there were unknown liens attached to the title. What is TRUE of this situation?

Answer 42

Any problems that arise after policy purchase are not covered.

Question 43

What is an easement in Gross?

Answer 43

An easement in gross is a legal right to use another individual’s land for as long as the owner owns that land or until the holder of the easement dies

Question 44

A buyer purchased property from a seller. Shortly after closing, the buyer discovered that there were serious flaws in the title that made it unlikely that the property could be resold in the future. What is the buyer’s best course of action?

Answer 44

Because the buyer has accepted the deed, the only recourse is to sue the seller under any covenants contained in the deed.

Question 45

Kelly buys a beach house from Desiree for a sales price of $500,000. On the closing statement, $500,000 is listed as a debit to:

Answer 45

Kelly

Question 46

What protects consumers from abusive settlement practices and provides them with information pertinent to all settlement costs?

Answer 46

RESPA

Question 47

Which Act was enacted in 1990 that identified and protected disabilities?

Answer 47

The ADA

Question 48

What is a Gross Lease?

Answer 48

A gross lease assumes the tenant will be responsible for the payment of a fixed-monthly charge, whereas the landlord will be responsible for maintenance, security, taxes, utilities, etc. In some cases, the tenant may also pay utility bills.

Question 49

22. Approximately how many 100,000 square foot lots could a developer fit onto a 20 acre piece of land?

Answer 49

Step 1. Multiply 20 acres by 43,560 square feet to get 871,200 square feet.
Step 2. Divide 871,200 square feet by 100,000 square feet to get 8.7, which rounds to 9.

A developer could fit approximately 9 of those lots onto a 20 acre piece of land.

Question 50

21. How is market value decided for a property?

Answer 50

It is based on collected data taken about the property

Question 51

On the Closing Disclosure prorated interest paid before closing on an existing assumed mortgage is a:

Answer 51

credit to the seller

debit to the buyer

Question 52

What is a periodic estate?

Answer 52

a fixed lease period in which the lease is automatically renewed at the end of each lease period until the landlord or tenant acts to terminate it

Question 53

True or False

Credit Unions typically serve clients with large amounts of credit card debt.

Answer 53

FALSE

Question 54

What is a PROPERTY MANAGER’S primary duty?

Answer 54

to protect the property owner’s investment and maximize the owner’s return on that investment

Question 55

What type of property is typically dependent on other businesses in the area to help create foot and car traffic?

Answer 55

commercial property

Question 56

A property is sold for $100,000. The buyer has paid $12,000 as earnest money and is obtaining a 70% loan. Based on the information provided, how much additional cash will the buyer have to bring to the closing?

Answer 56

$18,000

Question 57

9. What protects buyers and families from exposure to lead from paint, dust, and soil?

Answer 57

Lead-Based Paint Disclosure

Question 58

What is used to Modify a will?

Answer 58

A codicil would be used to modify a will.

Question 59

Land used for municipal buildings, state legislative houses, schools, military installations, streets and highways, and parks is most likely:

Answer 59

Public Ownership of Land

A certain amount of land must be controlled by public ownership for public use and enjoyment. Public ownership of land is the role of government to own and maintain public land such as streets, highways, and parks.

Public ownership of land also includes: municipal buildings, state legislative houses, schools, and military installations.

Question 60

How would you find the interest for a $12,000 loan with an interest rate of 10% over thirteen months?

Answer 60

($12,000 x 10%) / 12 X 13 = interest

Question 61

Stuart considers making several improvements on his home before he sells it because he knows each component of his property contributes to the overall value. Which principal of appraisal is Stuart using, and what other factor should Stuart consider?

Answer 61

Principle of contribution; Stuart should keep in mind an improvement’s cost will not always add a comparable value to his home

Question 62

Alexis owns a fried chicken restaurant, Tender Times. When her area is rezoned from residential to commercial, she is allowed to keep Tender Times running. What is this type of property use called?

Answer 62

nonconforming use

Question 63

When does Involuntary Alienation occur?

Answer 63

Involuntary alienation occurs when a property is transferred without the owner’s consent.

Question 64

Jim gradually takes over the vacant lot next to his property. After 10 years of using the property, Jim takes possession of the property. What is this an example of?

Answer 64

Adverse Possession

Question 65

Principals of Appraisals

Answer 65

	Principles of Appraisals are:
	Anticipation 
	Contribution
	Substitution
	Change 
	Conformity 
	Progression 
	Regression

Question 66

A major gasoline company has an oil spill in the Gulf of Mexico. In this situation, what piece of legislation will hold the gas company responsible for the spill and also has a $9 billion Superfund to aid environmental cleanup?

Answer 66

(CERLA)
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) provides broad federal authority to respond directly to releases or threatened releases of hazardous substances that may endanger public health or the environment.

Question 67

A type of SPV that holds commercial and residential mortgages in trust, assembles said mortgages into pools based on risk, and issues bonds (securities) on these pools to sell to investors in the secondary mortgage market is a(n):

Answer 67

A REMIC is a special purpose vehicle (SPV) that holds commercial and residential mortgages in trust, assembles said mortgages into pools based on risk, and then issues bonds (securities) on these pools to sell to investors on the secondary mortgage market.

Question 68

A variable lease is a leasehold agreement in which the base rent changes. Variable leases can take form of?

Answer 68

Variable leases can take the form of: a graduated lease or an index lease

Question 69

Who is the representative of the title insurance company who reviews the title insurance commitment, prepares the Closing Disclosure, and conducts the closing? :

Answer 69

closing agent

Question 70

abstract of Title

Answer 70

An abstract of title is an abbreviated history of a property, including information on any transfers, grants, wills, conveyances, liens, and encumbrances. It’s a report detailing what was discovered in the title search.

Question 71

 Kelly buys a beach house from Desiree for a sales price of $500,000. On the closing statement, $500,000 is listed as a debit to:

Answer 71

Kelly (the buyer)
A debit is a charge; an amount that the party being debited owes and must pay at the closing. So, the sales price of the property is shown as a debit to the buyer (Kelly).

Question 72

Kelly buys a beach house from Desiree for a sales price of $500,000. On the closing statement, $500,000 is listed as a debit to:

Answer 72

Kelly (the buyer)
A debit is a charge; an amount that the party being debited owes and must pay at the closing. So, the sales price of the property is shown as a debit to the buyer (Kelly).

Question 73

habendum clause

Answer 73

When you need to define or limit the ownership interest of the grantee (such as a fee simple, defeasible fee, or life estate interest), a habendum clause should follow the granting clause, and its provisions must agree with those set down in the granting clause.

Question 74

Texas Boot Strap

Answer 74

The Texas Bootstrap Loan Program is a self-help housing construction program that provides very low-income families (owner-builders) an opportunity to purchase or refinance real property on which to build new housing or repair their existing homes through “sweat equity.”

Question 75

During the transaction process, the buyer of a property is charged with knowledge of all the documents that are recorded in the public record as well as the responsibility to:

Answer 75

A marketable title is one that is free from significant defects that have the potential to subject the buyer to litigation. Essentially, having a marketable title assures the buyer of the property that they will not have to defend the title.

Question 76

Brad and Janet are getting divorced and splitting up their assets. Brad is leaving the state and giving up his claim to their shared property. What type of deed will Janet and Brad utilize to give sole ownership to Janet?

Answer 76

quitclaim deed

Question 77

What is covered by Regulation Z?

Answer 77

A mortgage secured by a residence would be covered by Regulation Z

Question 78

What is covered by Regulation Z?

Answer 78

A mortgage secured by a residence would be covered by Regulation Z

Question 79

Alexis owns a fried chicken restaurant, Tender Times. When her area is rezoned from residential to commercial, she is allowed to keep Tender Times running. What is this type of property use called?

Answer 79

nonconforming use

Question 80

 Emma is a seller’s agent. She prepares a thorough document for her seller client, James, that includes information from homes in the area that have recently been sold. She gives this document to James to help James appropriately price his property. What is this document called?

Answer 80

Comparative market analysis

Question 81

Emma is a seller’s agent. She prepares a thorough document for her seller client, James, that includes information from homes in the area that have recently been sold. She gives this document to James to help James appropriately price his property. What is this document called?

Answer 81

Comparative market analysis

Question 82

Which of the following is TRUE about a Certificate of Mold Remediation?

Answer 82

must be passed to property buyers for five years and it prevents insurance companies from using previous mold claims against a property

Question 83

What does constructive notice presume?

Answer 83

a diligent individual can search the public record to gain an understanding of a property, including present and past interests in that property

Question 84

What is net operating income?

Answer 84

The net operating income (NOI) is the pre-tax amount of income after all necessary expenses have been taken out to give an idea of what the actual income will be.
Net operating income is the measurement of revenue from the property minus all necessary operating expenses.
To determine the net operating income of a property, you simply need to subtract the operating expenses of the property from the effective gross income.
Effective Gross Income minus Operating Expenses = Net Operating Income

Question 85

• Must Name the grantor and grantee
• State that consideration was given
• state that it is a conveyance
• Contain the legal description
• Signed by the grantor
• Accepted by grantee

Answer 85

Valid Deed

Question 86

What is one way investors can get a break on taxes?

Answer 86

Investors can claim tax-sheltered income through depreciation expenses.

Question 87

 Tina has owned a donut shop for years. The area is re-zoned as residential, making commercial activity illegal. Tina gets special permission from the zoning board to continue to run the business. Months later, she sells the property to Al, who starts a dumpling business. The new business is a(n):

Answer 87

illegal nonconforming use

Question 88

Tina has owned a donut shop for years. The area is re-zoned as residential, making commercial activity illegal. Tina gets special permission from the zoning board to continue to run the business. Months later, she sells the property to Al, who starts a dumpling business. The new business is a(n):

Answer 88

illegal nonconforming use

Question 89

Leon purchases a property from Jon. At closing, Leon needs to pay Jon the sales price of the property and Jon is debited the cost of a fee as per the closing agreement. Who is paying the fee debited to Jon?

Answer 89

Jon is paying the fee, as it is debited to him.
 Leon Buyer (credit)
 Jon Seller (Debit)

Question 90

The following regarding owner’s title insurance policies and lender’s title insurance policies is TRUE or False:

• owner’s policies are usually issued for the sales price of the ;
• lender’s policies are usually issued on the dollar amount of the loan

Answer 90

TRUE

Question 91

Quiet Claim Deed

Answer 91

A quitclaim deed provides the grantee with the least protection of any deed, while imposing the least liability on the grantor.
It carries no covenants or warranties and conveys only such interest that the grantor may have when the deed is delivered.
A quitclaim deed frequently is used to cure a title defect, called a cloud on the title. It is also used when a grantor allegedly has inherited property but is not certain that the decedents title was valid.

Question 92

Special Purpose Deed

Answer 92

A deed in trust is a method of delivering a deed into a trust from a trustor to a trustee until some future event that would cause the trustee to deliver the deed to the beneficiary/grantee. A trustees deed is used when a trustee named in a will, trust agreement, or deed of trust (mortgage document) sells or conveys property out of the trust. A deed executed pursuant to court order, a sheriffs deed, an executors deed, and an administrators deed, among others, are signed and delivered by court o

Question 93

How may feet in a square mile?

Answer 93

5280

Question 94

An area is zoned for residential use only. If a person would like to operate a business in their home, what could he or she do?

Answer 94

Seek a conditional-use permit from the zoning board, if it is defined as allowable

Question 95

Fixed Rate Amortized Loan

Answer 95

loan features constant payments of principal and interest throughout the life of the loan

Question 96

Which type of loan is exempt from RESPA

Answer 96

Loans on vacant land are an exception to RESPA

Question 97

Tyrone signed a lease on a residential property. His lease lasts 9 months. Doe he need to signa a lease?

Answer 97

NO

Tyrone’s lease is less than a year and therefore may be verbal.

Question 98

Earnest Money

Answer 98

Deposit made by a buyer to a seller in order to show the buyers good faith in the transaction. Upon closing, the buyer receives a credit for this prepaid deposit.

Question 99

If an owner/ landlord decodes to sell their property while engaged in a lease the current tenant will continue to have full possession of the property until the leave expires TRUE OR FALSE

Answer 99

TRUE

Question 100

Easement by Prescription

Answer 100

These easements are granted after the dominant estate has used the property in a hostile, continuous, and open manner for a statutorily prescribed number of years. This type of easement is also called a prescriptive easement.

Question 101

Easement by Necessity

Answer 101

This type of easement is also known as an easement appurtenant, meaning that it benefits the piece of land, rather than an individual.

Question 102

Tranches

Answer 102

The tranches of a REMIC are organized with different maturities, coupons, and priorities of payment — all of which allow the issuer of the REMIC to structure distinct bond classes for investors to choose from.

Question 103

Ownership transfers from the grantor to the grantee when the deed is:

Answer 103

delivered to and accepted by the grantee

Question 104

PITI

Answer 104

four components of a monthly mortgage payment

Payment Interest Taxes Insurance

Question 105

Deceptive or questionable practices by lenders to entice a borrower to assume a mortgage loan would be considered:

Answer 105

predatory lending

(RESPA protects predatory lending) us a consumer protection statute that aims to help educate consumers about closing and settlement services.

Question 106

The primary mortgage market is the arena in which borrowers and lenders meet up for the purposes of negotiating loans terms of a mortgage transaction.

Answer 106

Primary Mortgage Market

Question 107

Bundles of loans that are purchased from lenders by holding warehouse agencies, only to be repackaged and resold to investors, are known as mortgage-backed securities

Answer 107

Mortgage-backed Securities

Question 108

Balloon Payment Loans

Answer 108

The most notable feature of a balloon payment loan is that the final payment is larger than the others.

Question 109

VA Loan

Answer 109

guaranteed mortgage loan available to eligible veterans and their spouses to purchase or construct homes.

Question 110

FHA

Answer 110

largest insurer of mortgages in the world

Question 111

Conventional Loan

Answer 111

mortgage that is not backed or insured by government agencies

Question 112

VLB

Answer 112

a division of the General Land Office of Texas, administers 3 programs to assist Texas Veterans in pur chasing a principal residence and/or land and in financing home improvements

Question 113

Ginnie May

Answer 113

established as a government-owned corporation and is not considered GSE

Question 114

FDIC

Answer 114

Insure deposits
Supervise financial institutions for safety and soundness
Make large financial institutions resolvable
Manage receiverships

Presently, the FDIC insures deposits up to $250,000 per depositor, per account.

Question 115

Federal Reserve System

Answer 115

The Federal Reserve System is the nations central bank, and it operates to maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate. The Federal Reserve System divides the country into 12 federal reserve districts, each served by a federal reserve bank.

The Federal Reserve (or “Fed”) can affect the economy by raising or lowering the fund reserve requirements or the discount rate.

Question 116

Three Major Players in the Secondary Mortgage Market

Answer 116

The three major players in the secondary mortgage market are:

• Fannie Mae - Federal National Mortgage Association (FNMA) (GSE)
• Freddie Mac - Federal Home Loan Mortgage Corporation (FHLMC) (GSE)
• Ginnie Mae - Government National Mortgage Association (GNMA) (NOT GSE)

Unlike Fannie Mae and Freddie Mac, Ginnie Mae is NOT privately held but is a wholly owned government organization and is NOT a government-sponsored enterprise (GSE).

Simply put, the secondary mortgage market is the place where mortgages are bought and sold

GSE–Government Sponsored

Question 117

Mortgages are created in?

Answer 117

Primary mortgage market when a borrower takes out the loan.

Question 118

Major Loan Categories?

Answer 118

Major Loan Categories
*Amortized Loans: A fixed-rate amortized loan payment plan features constant payments of principal and interest throughout the life of the loan; also called direct reduction loans.

• Adjustable-Rate Mortgage: With an ARM, the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly; the initial rate and payment amount on an ARM will remain in effect for a limited period.
• Balloon Payment Loans: Does not fully amortize over the term of the note, thus leaving a balance due at maturity, requiring a large final “balloon” payment.
• Conventional Loans: Conventional loans refer to mortgages not backed or insured by government agencies. FHA Loans: Federal Housing Administration loans refers to a loan that is insured by the agency and protects the lender from loss in event of borrower default. The FHA is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.
• VA Loans: The Department of Veterans Affairs (VA) guarantees loans for eligible veterans and their spouses; the term VA loan refers to a loan that is not made by the agency, but guaranteed by it.

Conforming and Nonconforming Loans: Describes loans that either do (conforming) or do not (nonconforming) meet Fannie Mae and Freddie Mac guidelines.

Question 119

Package Mortgage

Answer 119

A package mortgage includes not only the real estate but also all personal property and appliances installed on the premises

Question 120

Subprime mortgage

Answer 120

A package mortgage includes not only the real estate but also all personal property and appliances installed on the premises

Question 121

Private Mortgage Insurance

Answer 121

private mortgage insurance (PMI) is required on conventional loans for which the borrower has invested less than 20%

Question 122

Amortized Loans (Fixed Rate)

Answer 122

payment plan features constant payments of principal and interest throughout the life of the loan. The lender first credits the monthly payment towards the interest owed for the month, with the remainder of that payment going toward reducing the principal balance

Question 123

Advantage of non conforming conventional loans?

Answer 123

Time (less than 30 days) and No limits (unlike government backed loans)

Question 124

Who pays origination fees?

Answer 124

borrower

Question 125

Three type of Land Use Controls

Answer 125

There are three primary types of land-use controls:

1. Public land-use controls: Government-issued land-use controls such as zoning ordinances, subdivision regulations, and building codes.
2. Private land-use controls: Land-use controls that are put into place by nongovernmental entities, such as real estate developers. Most commonly, these come in the form of deed restrictions.
3. Public ownership of land: The role of government to own and maintain public land such as streets, highways, and parks.

Question 126

4 types of Public Land Use Controls (PETE)

Answer 126

Here are some quick and easy-to-remember definitions of the four public land-use controls:

Police Power: Right of the state to regulate and restrict land-use in order to protect the public, including enforcing zoning and building codes

Eminent Domain: Right of the state to seize a citizens private property for public use without the owner’s consent but with compensation

Taxation: Right of the state to charge real estate to pay for services provided by the government

Escheat: Right of the state to seize a deceased person’s estate if an individual dies without a will and has no surviving spouse, lineal descendants, or other known heirs

Question 127

ZONING –NON CONCOFMING USE

Answer 127

If a property had a lawful use (it was in the correct zone), but the zoning changed, people might continue using it anyway.

When a pre-existing structure violates a zoning regulation, it is considered nonconforming use.

Question 128

Variances: An Exception To Zoning

Answer 128

Variances are permission granted by the government so that property may be used in a manner not allowed by the current zoning.

Example: If Josh wanted to add a guesthouse in his backyard but zoning did not allow the expansion on his property, he would need to request a variance from the local government.

Question 129

Alienation
Alienation is the process and act of transferring property from one party to another.
.

Answer 129

Alienation may be voluntary, usually by sale or gift, or involuntary, usually by an operation of the law.

Voluntary alienation is the method by which property is transferred from the current owner to another party either by sale or gift.

This is the process that takes place when a seller conveys a property to the buyer. The owner is doing this of the sellers own free will.

Involuntary Alienation
Involuntary alienation is the taking of an owners property without their consent.
It could be carried out by operation of law and include several concepts: escheat, eminent domain, tax or mortgage foreclosure, and erosion.

Adverse possession is another means of involuntary alienation. An owner who does not use their land or does not inspect it for a number of years may lose the title to another person who has some claim to the land, takes possession, and uses the land. By statute, the possession must be open, notorious, and continuous for a number of years as determined by Texas state law

Question 130

Resident manager vs. managing agent (the difference)

Answer 130

A resident manager lives on-site

Question 131

Prorated Items

Answer 131

Prorated Items
Some expenses are prorated at the time of the property sale. Examples of items that are typically prorated at closing include:
Prepaid general real estate taxes Interest on an assumed loan Rents collected in advance
Buyer’s Earnest Money
In almost all instances, the buyer pays an earnest money deposit at the time the purchase contract is negotiated.
At closing, the buyer receives a credit for the money that they have prepaid.

Question 132

The FHA, and the insurance offered through the FHA, impacted the actions of the FHA-approved lenders who could offer loans. What kind of a change did that insurance make?

Answer 132

FHA insurance protected approved lenders against losses, expanding the pool of potential homebuyers lenders were willing to underwrite loans for.
FHA insurance protected approved borrowers against losses, expanding the pool of potential homebuyers lenders were willing to underwrite loans for.
FHA insurance made loan qualifications more strict, limiting the pool of potential homebuyers lenders could underwrite loans for.
FHA insurance made loan qualifications less strict, expanding the pool of potential homebuyers lenders could underwrite loans for.

Question 133

Using Cost Approach:
The replacement cost to build a house is approximately $350,000. Similar lots presently sell for $100,000. The property’s physical deterioration equals about $60,000. Based on the cost approach, what would be the value of this property?

Answer 133

Subtract the cost of depreciation ($60,000) from the replacement cost ($350,000) and add the cost of the unimproved land ($100,000), you will come to a total value of $390,000.

Question 134

Main Reasons to invest in Real Estate?

Answer 134

These are the main reasons to invest in real estate:

1. Income / Cash Flow: Spendable cash that an investment generates after accounting for the operating expenses, debt service, and taxes
2. Appreciation: Increase in the value of the property over time
3. Investment Gain: Increase in value due to active and purposeful development of the property

Question 135

Rate of Return of an investment?

Answer 135

The gain or profit expressed as a percentage of the investment cost for a specified period of time.

Question 136

Auctioneer

Answer 136

In Texas, even though auctioneers are unquestionably involved in the sale of real estate, according to Section 101.005(4) of the Texas Real Estate License Act, they are exempt from needing a real estate license as long as:

They are licensed as auctioneers under Chapter 1802 of the Texas Occupations Code
They do not perform any other act of a broker or license holder
Licensing regulations for auctioneers will vary by state

Question 137

What entity consists of 11 district banks that are regulated by the Federal Housing Finance Agency?

Answer 137

As of 2018, the Federal Home Loan Bank (FHLB) system consists of 11 district bank

Question 138

Formula for Loan Principal

Answer 138

Total Sales Price - down payment= Loan Principal

Question 139

Cash to lose Formula= Down payment - earnest money

Answer 139

Example: If a buyer’s down payment is $20,000 and they put down $5,000 in earnest money, then we know the buyer must put down a remaining amount of $15,000 ($20,000 - $5,000 = $15,000) in cash on closing day.

Question 140

Origination Points

Answer 140

Origination Points
To pay for loan application services, lenders charge borrowers origination fees.
Origination fees are also called origination points. Usually, loan origination points are 1% of the loan amount, but the amount can vary.
Example: If Mary has a $100,000 mortgage and has one origination point, then she would owe the bank $1,000. $100,000 x 1% = $1,000

Question 141

Discount Point

Answer 141

Another type of loan point is discount points.
In exchange for purchasing discount points, the lender will offer the borrower a lower interest rate. This is also called buying down the rate. Typically, one discount point will lower a buyer’s interest rate 0.25%.
Recap: Discount points cost more in the short-term (fees), but cost less in the longterm (lower monthly payments).

Question 142

Property Taxes What are property taxes based on?

Answer 142

Property taxes are based upon two things:

The tax rate The assessed value of the property
Knowing this, there are two ways that a homeowner’s taxes can increase:

Property tax rate increases Property’s assessed value increases

Question 143

Pro Rated Taxes and Dues

Answer 143

Proration: To allocate or distribute an annual expense across smaller chunks of time.
Prorations can be calculated using a 360-day year or a 365-day year. (Pay attention to the instructions.) The seller pays for the prorated amount of expenses from the beginning of the year up to the day of closing and the buyer pays for all ongoing expenses from the day after closing to the end of the year. Ongoing expenses include property taxes and homeowner association dues.

Prorated Taxes= Daily tax rate x total seller days

Formula:
Step 1: Solve for the daily tax rate (divide annual tax rate by the 365 OR 360 days however the problem states it.)
Step 2: Add up how many days the seller owned the house in the current year. (Include closing day!)
Step 3: Multiply the daily tax rate by the number of days the seller owned the house. ( Step 1 x Step 2)

Question 144

Solving for Acreage

Answer 144

To solve for acreage (area measurement for land), we divide the square footage of the land by 43,560 feet.
Step 1: Calculate Square Footage (multiply dimensions of property)
Step 2: Divide Square Footage of land by 43,560 feet.

Question 145

Comparative Market Analysis

Answer 145

Comparative Market Analysis
A comparative market analysis, or CMA is NOT an appraisal. It does, however, use information regarding recently sold homes in the area to arrive at an indication of what the fair market value of a similar property would be. It’s a tool you’ll use to guide your client towards a proper price for their property.

1. Evaluate the neighborhood.
2. Evaluate the subject property.
3. Get your comparables.
4. Compare and adjust selected comparables

Question 146

How to estimate a propertys current market value using the Cost Approach (New Construction)?

Answer 146

To estimate a propertys current market value using the cost approach, an appraiser needs to estimate the current cost of reconstructing the property with improvements (the replacement cost). This estimate is added to the value of the land, and then depreciation of the home since it was first built is subtracted.

The cost approach is a great approach to value for appraisers to use on new construction.

Question 147

Sales Comparison Approach

Answer 147

Sales Comparison Approach
The first way to approach value calculation, sales comparison (or direct sales comparison), is also known as the market data approach. In this method, an appraiser collects data from the previous sales of similar properties in the area with similar features: amenities, square footage, number of rooms, and location.

They then analyze how much these comparable properties have sold for and account for the differences in the properties. From this study, the appraiser estimates the subject propertys market value.
To do this, the appraiser gathers at least three comparison sales, or comparables.
Appraisers rely heavily upon the sales comparison approach for appraising owner-occupied residential properties and vacant land.