RE Finance Unit 10: RE Loan Underwriting Flashcards
Appraisal
An estimate of value of a property based upon comparison of real estate prices and the market for real estate.
Assets
All things of value, encumbered or not, owned by a person, corporation, or other entity.
Cloud on the Title
An outstanding encumbrance that, if valid, would affect or impair the owner’s property title.
Cost Approach
Provides a value indication that is the sum of the estimated land value, plus the depreciated cost of the building and other improvements. The total cost of constructing a new building today frequently sets the upper limit of value, assuming the building is the highest and best use for the land.
Credit Report
Document indicating credit circumstances of a borrower of a real estate loan.
Depreciation
Loss of value due to all causes, but usually considered to include physical deterioration, functional obsolescence, and economic obsolescence.
Direct Sales Comparison Approach
Uses sales prices as evidence of the value of similar properties. The price at which a particular property sells is the price determined by the interaction of supply and demand at the time of sale.
Drive-by Appraisal
Literally, appraising from a car window.
Fair Isaac Corporation (FICO)
Company which originated credit scoring.
Financial Statments
A compilation of a borrower’s assets, liabilities, and earnings records.
Gross Rent Multiplier (GRM)
Sales price or value divided by gross rents equals the gross rent multiplier.
Income Approach
Estimating the value of an income-producing property by capitalizing its net annual income.
Income Ratio
The relationship between a borrower’s total income and the amount needed to make one month’s mortgage payment.
Liabilities
Debts incurred.
Market Value
The highest price for which a property would sell, assuming a reasonable time for the sale and a knowledgeable buyer and seller acting without duress.
