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Real Estate Exam Prep > Real Estate > Flashcards

Real Estate Flashcards

1
Q

What does PETE stand for?

A

Police Power, Eminent Domain, Taxation, Escheat

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2
Q

What is Escheat?

A

Abandonment (dying with no will and no heirs with the property being taken by the state government)

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3
Q

How is LTV calculated?

A

Loan amount divided by sale price or appraised value (whichever is lower) = LTV

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4
Q

What is Eminent domain?

A

It is the government taking private property for public good.

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5
Q

What does a title insurance policy list?

A

All recorded defects against the title. It just covers issues that have been recorded.

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6
Q

What does a standard title insurance policy insure against?

A

Any recorded title defects or liens.

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7
Q

What are some things generally covered under an extended title policy?

A

Water rights, questions of survey and adverse possession claims.

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8
Q

What does a standard title insurance policy cover?

A

Recorded title defects and liens

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9
Q

What documents would be a condensed history of all records that affect the title?

A

An abstract

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10
Q

What is an abstract?

A

A history of all recorded documents that affect the title.

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11
Q

What is a survey used for?

A

To find boundaries and check for encroachments.

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12
Q

What is an affidavit of title?

A

A sworn statement concerning the title.

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13
Q

What is a chain of title?

A

A list of all owners.

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14
Q

What is a special assessment tax? And what happens if it’s not paid?

A

It is a real estate tax and if not paid, the property could be auctioned off.

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15
Q

What is Ad valorem?

A

Ad valorem tax is a tax whose amount amount is based on the value of a transaction or of property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax.

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16
Q

What are Ad valorem taxes for?

A

General assessment tax, not a special assessment tax.

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17
Q

How are special assessment taxes paid?

A

They are normally paid each year for a certain number of years by the owners of the properties that have been improved.

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18
Q

What do special assessment taxes cover and what do general assessment taxes cover?

A

Special assessment taxes are normally to cover the cost of sewers and sidewalks. General assessment taxes are to cover public good items such as police and fire protection.

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19
Q

What deals with safety in construction?

A

Building codes.

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20
Q

What is a tax on the land plus improvements?

A

General assessment tax. (The more value (ad valorem) in the real property, the more one pays in taxes.

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21
Q

What is used to keep things in order such as zoning and building codes?

A

Police power.

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22
Q

What is the ability of the government to tax private property?

A

Taxation

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23
Q

What word describes Escheat?

A

Abandonment

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24
Q

What does TAR stand for?

A

TAX, Assessed Value, Rate. As a whole, it basically means taxes.

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25
Q

Test for intent (Method of Fixtures)

A

Attachment, Adaptation, Agreement

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26
Q

Which of the following describes an encroachment? Liquid asset, form of trespass, variance, buffer zone

A

Form of trespass

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27
Q

An estate is…

A

The right of ownership.

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28
Q

What rights do I have with Fee Simple Absolute?

A

Absolutely ALL the rights.

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29
Q

How long does Fee Simple Absolute last?

A

Forever

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30
Q

What rights do I have with Fee Simple Defeasible?

A

All rights but one. A fee simple defeasible is a conveyance of property that has conditions placed on it. The holder of a fee simple defeasible possesses the property as a fee simple subject to that condition. If the condition is violated or not met, then the property will either go back to the original grantor or a specified third party.

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31
Q

How long does a Life Estate last?

A

For the life of the grantee.

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32
Q

What happens when grantee of Life Estate dies?

A

Property reverts back to Grantor or third party (remainder-man)

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33
Q

Which estate can there exist a Remainderman?

A

A life estate

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34
Q

How many Freehold Estates are there and what are they?

A 
There are 3 freehold estates.
They are: 
1. Fee Simple or Fee Simple Absolute
2. Fee Simple Defeasible
3. Life Estate
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35
Q

Upon the death of the life tenant, the estate returns to…

A

Fee Simple Absolute.

The Grantor or the Remainderman now owns the property in Fee Simple Absolute.

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36
Q

A life estate is ____________________ but generally not inheritable.

A

Transferable

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37
Q

A life estate is transferable but generally not __________________.

A

Inheritable

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38
Q

How many leasehold estates are there and what are they?

A 
There are 4 Leasehold Estates.
They are: 
1. Estate for Years
2. Periodic Estate
3. Estate at Will
4. Estate at Sufferance
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39
Q

What interest does a tenant have in the property?

A

Leasehold

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40
Q

What interest does a landlord have in the property?

A

Lease fee

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41
Q

What is an Estate at Sufferance?

A

Landlord is “suffering” because tenant hasn’t paid rent and refuses to leave so now an eviction is necessary to get tenant off the property. The tenant is insufferable.

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42
Q

What is an Estate for Years?

A

An estate which lasts a definite amount of time. Has an expiration. This is the most common type of Leasehold estate.

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43
Q

What are two ways the government can acquire privately held land?

A

Eminent domain & Escheat

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44
Q

An estate that lasts only so long as a specified condition is met is known as a

A

Qualified Fee

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45
Q

An irrevocable right to use the lands of another is called?

A

An easement

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46
Q

A holder of a freehold estate has rights of…

A

Ownership

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47
Q

Which estate usually does NOT terminate upon the death of the holder of the estate?

A

Estate for years

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48
Q

Real property taxes are computed based on the property’s…

A

Assessed value

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49
Q

What are the four encumbrances?

A

Deed restrictions, Encroachments, Easements, Liens

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50
Q

What are the government’s right in land?

A

P.E.T.E: Police power, eminent domain, taxation, escheat

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51
Q

How many encumbrances are there and what are they?

A
  1. Liens, encroachments, easements, deed restrictions (Covenants)
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52
Q

Who has the easement on their property?

A

Serving tenement

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53
Q

What is the difference between a license and an encumbrance?

A

A license is revocable

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54
Q

What is the circle formula for taxes?

A

T.A.R.

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55
Q

Freehold estates are for how long?

A

Forever

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56
Q

Leasehold estates are for how long?

A

Definite period of time. Has a termination date.

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57
Q

Which taxes always take priority?

A

County government taxes

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58
Q

Who collects property taxes?

A

The county

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59
Q

What type of process will reveal an encroachment?

A

ILC (Improvement Location Certificate)

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60
Q

What does ILC stand for?

A

Improvement Location Certificate

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61
Q

Can a corporation own a property? If so, how?

A

Yes, by severalty

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62
Q

What form of ownership allows the right of survivorship?

A

Joint tenancy

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63
Q

What’s the best way for a married couple to take title?

A

Consult with an attorney

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64
Q

What act allows for common interest communities to levy (impose) mandatory assessments?

A

Common Interest Ownership Act ALLOWS common interest communities to exist.

We do exist, we can then file a declaration.

We can now levy mandatory assessments.

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65
Q

How do condo owners own the common elements?

A

Tenants in common

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66
Q

What type of ownership will allow all parties to have equal ownership?

A

Joint tenancy

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67
Q

How would we take title if we didn’t want equal shares?

A

Tenants in common

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68
Q

TRUE OR FALSE: In a cooperative, the individual would have to sign a deed in order to sale the property.

A

False. In a cooperative, individuals have ownership of stock, shares.

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69
Q

What document do individuals use to transfer property between individuals?

A

Deed

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70
Q

If government gives property to an individual it’s called?

A

Patent

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71
Q

How does an individual give their property to the government?

A

A dedication

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72
Q

What are the essential elements of a valid deed?

A 
Competent grantor
Signs the deed
Identifiable grantee who accepts the deed
With legal description
Words of conveyance
Consideration
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73
Q

The deed that gives the grantee the most guarantees is?

A

General warranty

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74
Q

What five covenants does a general warranty deed give the grantee?

A

FAQCW

Further assurance “If anything should happen in the future I
I will come back. I will sign anything I
need to sign. You have my assurance.”

Against encumbrances "If there's an encumbrance, I have
told you about it and if there's a
mortgage on this property, I will
pay it off. There will be no
encumbrances on this property
when you give this deed. I assure
you."

Quiet enjoyment “No third party is going to come knocking
at your door saying ‘this property is
mine!’ I guarantee you quiet enjoyment.”

Covenant of siesen “I’ve seized the property and I have a
right to convey it. I’m telling you that I
own it and I am guaranteeing my
ownership and I have a right to
convey it.”

Warranty forever “Forever and ever and ever I will tell you
this, may God strike me dead. I have
ownership, I’m going to give this to you,
it’s yours, forever. I give my warranty on
my life.”

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75
Q

What’s a material fact?

A

Something, if known, might change a decision.

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76
Q

Must a broker disclose a material fact?

A

Yes. If the broker knows about it, she must disclose it.

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77
Q

When does a property actually transfer ownership?

A

Upon delivery and acceptance.

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78
Q

Where do you go to learn or give constructive notice?

A

The courthouse.

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79
Q

In a real estate transaction, who goes to the courthouse and gives constructive notice?

A

The title company.

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80
Q

In a real estate transaction, who gives actual notice?

A

The broker.

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81
Q

How is actual notice given?

A

The broker looks around the property, she uses her eyes.

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82
Q

Does a buyer have to buy both a standard and an extended title policy?

A

No

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83
Q

If a buyer has a mortgage on the property they’re going to have to buy ______________________________ insurance.

A

Mortgagee’s Title

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84
Q

If there’s not a mortgage on the property, what kind of title insurance does the buyer have to purchase?

A

Standard title insurance

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85
Q

What does standard title insurance cover?

A

All the things that might have happened if the title insurance company made a mistake

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86
Q

What does extended title insurance cover?

A

All things that might have been missed when actual notice was taken.

  • Adverse possession
  • Prescriptive easement
  • Things that the courthouse doesn’t have record of
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87
Q

What’s the difference between a title report and a title opinion?

A

A title opinion is done by an attorney, abstract is needed for an opinion.

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88
Q

Definition of an appraisal

A

An estimate or opinion of MARKET VALUE supported by an analysis of relevant property data.

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89
Q

What does CMA stand for in terms of appraisal?

A

Comparative Market Analysis

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90
Q

What further designations can appraisers obtain and where from?

A

MAI: Member of the Appraisal Institute
SRA: Senior Residential Appraiser

From: the Appraisal Institute

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91
Q

An appraisal is required for all of what type of loans?

A

Federally related loans such as conventional, FHA, VA.

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92
Q

What does CMA stand for in terms of a real estate licensee? What other acronyms are related to CMA?

A

Competitive Market Analysis

Others: BPO - Broker’s Price Opinion
BOV - Broker’s Opinion of Value

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93
Q

What does CMA/BPO/BOV do?

A

Assists a seller and a buyer in determining value.

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94
Q

Who performs a CMA/BPO/BOV?

A

A broker.

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95
Q

Can a client be charged a fee for the CMA/BPO/BOV?

A

Yes, a broker can charge a fee but should make it clear that it is not an appraisal.

96
Q

What is the difference between Market Value and Market Price?

A

Market Value is the ideal price a seller wants for their property. Market Price is what a buyer actually pays for it. (The price I want versus the price I got)

97
Q

What does DUST stand for? And these are essential elements of _________________?

A

DEMAND (desire, affordability)
UTILITY (usefulness, does the property fulfill a specific need, it is subjective; based on needs and desires of specific potential buyer)
SCARCITY (there is a finite supply of land, land in specific areas is limited)
TRANSFERABILITY (must have marketable title)

These are essential elements of VALUE.

98
Q

What is DUST?

A

It is value in the real estate market. Basically, it’s the worth based on desirability. It’s in the same category as Market Value & Market Price.

99
Q

What is the Highest and Best use?

A

It is the use that produces the best return on investment over time.

100
Q

What is the meaning of supply and demand?

A

Seller’s market versus buyer’s market.

101
Q

Prices moves __________________ of supply.

A

Opposite. When supply goes up, price goes down.

102
Q

Price moves ___________________ demand.

A

With. When demand goes up, price does up.

103
Q

Does supply and demand determine sales prices and rental rates?

A

Yes

104
Q

What is the most important principle in appraisal and what does it mean?

A

Substitution is the most important principle. It is the basis of the sales comparison approach and is used in all three approaches.

105
Q

What is never a liquid asset?

A

Land

106
Q

The borrower’s right to cure the default and stop the foreclosure sale is _________________________.

A

Equitable redemption

107
Q

A mortgage pledging personal property, as well as real property, as security for a debt is a _______________________.

A

Package mortgage

108
Q

The clause that appears in both the note and the mortgage that allows the lender to demand immediate payment of the entire debt if the borrower defaults is an ______________________________.

A

Acceleration clause

109
Q

A loan that is repaid in one single lump sum at the end of its life is called a straight loan or _______________________.

A

Term loan

110
Q

A loan in which payments are scheduled so the entire principal balance is repaid by the maturity date is a ____________________________.

A

fully amortized loan

111
Q

A final payment that is larger than preceding payments is a _______________________ payment.

A

Balloon

112
Q

A _________________________ is used when more than one property is pledged as security for a single loan.

A

Blanket mortgage

113
Q

A mortgage given by the purchaser to the seller in partial payment for the property is a ____________________________________________.

A

Purchase money mortgage

114
Q

The different between a property’s market value and the debts against it is ____________________.

A

Equity

115
Q

A loan that allows a borrower to make smaller payments of interest and principal but has a balloon payment at the end is a ______________________________.

A

Partially amortized loan.

116
Q

What does amortized mean?

A

Reduce or extinguish a debt by money regularly put aside.

117
Q

The clause that entitles a lender to accelerate the loan if it is assumed WITHOUT THE LENDER’S APPROVAL is an _____________________________________________.

A

Alienation clause

118
Q

Points charges by lenders are computed as a percentage of the _________________________________.

A

Mortgage amount

119
Q

The higher the loan-to-value ratio, the higher the __________________________________.

A

Leverage

120
Q

A contract that gives a buyer the right to occupy the property now and receive a deed after payment in full of the purchase price is a _____________________________.

A

Contract for deed

121
Q

The mortgage makes payments to the mortgagor in a _____________________________.

A

Reverse mortgage

122
Q

The process of converting a future income stream into an expression of present value is _______________________.

A

Capitalization

123
Q

The cost of replacing an improvement with another of similar quality but not an exact replica is ___________________________.

A

Replacement cost

124
Q

Loss in value due to causes external to the property is ____________________________.

A

Economic obsolescence

125
Q

A method of valuing a property by complying the subject property to chi liar properties that have recently sold is the __________________________.

A

Market data approach (sales comparison)

126
Q

Demand, utility, scarcity, and transferability are essential elements of ____________________.

A

Value

127
Q

To obtain the value using the capitalization approach, an appraiser would divide the _______________________ by the capitalization rate.

A

Net operating income

128
Q

An appraisal is an _________________________ of value.

A

Estimate

129
Q

The market data approach is based on the principle of ___________________________.

A

Substitution

130
Q

An appraiser calculates accrued depreciation in the _______________________.

A

cost approach

131
Q

When an appraiser determines the accrued depreciation, outdated plumbing fixtures would be considered ______________________________________.

A

Functional obsolescence

132
Q

An appraiser estimating operating expenses is using the ____________________________.

A

Income approach

133
Q

The market data approach is also known as __________________________.

A

Sales comparison

134
Q

The step in which the appraiser weighs all approaches to determine a final value is __________________________.

A

Reconciliation

135
Q

An appraiser determining the value of shopping center would use the _________________________________.

A

Income approach

136
Q

The best approach to determine the value of library would be the __________________________.

A

Cost approach

137
Q

What common test words are associated with “Sales Comparison/Market Data”?

A

Residential/single family
CMA - BOV, BPO
Subject
Comparables

138
Q

What common test words are associated with “Cost Approach”?

A 
Unique Property (schools, churches)
No income
Depreciation
Appreciation
Replacement
Reproduction
139
Q

What common test words are associated with “Income Approach”?

A

NOI (Net Operating Income)
Investment
Cap Rate (Capitalization Rate)

140
Q

A contract whose terms have been explicitly declared either verbally or in writing is an ____________________________ contract.

A

Express

141
Q

When only one party has the right to void the contract is a _______________________ contract.

A

Voidable

142
Q

When only one party to the agreement makes a promise, the result is a _________________________ contract.

A

Unilateral

143
Q

A contract created by the actions of the parties is an ___________________ contract.

A

Implied

144
Q

A contract with a minor will be ______________________.

A

Voidable

145
Q

A lease agreement in which the tenant pays rent only is a _____________________________.

A

Gross lease (it’s GROSS that I even have to pay rent!)

146
Q

A lease agreement in which the tenant pays rent plus operating expenses is _______________________.

A

Net lease (I’m caught in a net of bills and there’s no getting out!)

147
Q

A unilateral contract in which buyer has the right to purchase a property from the seller, if buyer chooses to do so is an _________________.

A

Option

148
Q

A party attempting to enforce an oral executory contract for the purchase of real estate would be stopped by the _____________________________.

A

Statute of frauds

149
Q

___________________________ means that there was an offer and acceptance; there was no fraud, misrepresentation, or mistake: and the consent was genuinely and freely given.

A

Mutual agreement

150
Q

The party who makes an offer to another is known as the ___________________.

A

Offeror

151
Q

An accepted offer becomes binding on the Offeror upon _________________________________.

A

Communication of acceptance

152
Q

Actual knowledge to enter into a contract by intentionally deceiving a party is ____________________.

A

Fraud

153
Q

Something of value given in exchange for something else of value is ________________________.

A

Consideration

154
Q

___________________________ is not consideration but may be required as part of liquidated damaged in a purchase contract.

A

Earnest money

155
Q

Additional material attached to and made part of an offer is an ______________________.

A

Addendum

156
Q

To modify a written contract, both parties must sign an ___________________________.

A

Amendment

157
Q

The buyer has equitable title in an _______________________ contract.

A

Executory

158
Q

The right of parties to a contract to sue each other to perform the contract terms is _________________________________.

A

Specific performance

159
Q

When the seller keeps only the earnest money or other things of value of a buyer who is in default, the contract remedy is ________________________________.

A

Liquidated damages

160
Q

The priority of a recorded instrument is determined by the date of ________________________.

A

Recording

161
Q

When an attorney or title insurance company traces the ownership of a parcel of land to the beginning of its recorded history, the process is known as a ____________________.

A

Title search

162
Q

A recorded notice stating that a pending lawsuit may affect title to a particular property is a __________________.

A

Lis pendens

163
Q

A document that summarizes all recorded interests affecting title to a given parcel of land is an ______________________________.

A

Abstract of title

164
Q

All the documents that comprise the history of the title are the ______________________.

A

Chain of title

165
Q

Protection against incomplete or defective records of the title to land can best be obtained by securing ________________________.

A

Title insurance

166
Q

In many cases it is better to ______________________ asbestos rather than to __________________ it.

A

Encapsulate

Abate

167
Q

A problem that is not covered by standard or extended title insurance is an ______________________.

A

Exception

168
Q

When prorating, an item paid in advance will be a ______________________ to the buyer.

A

Buyer

169
Q

The federal act that applies to closings and requires a good faith estimate of cost and a HUD-1 Settlement Statement is ______________________.

A

RESPA

170
Q

An item paid in arrears will be a ____________ to the buyer.

A

Credit

171
Q

Most deeds to be recorded must be _____________________.

A

Notarized

172
Q

A new loan will show on the settlement statement as a buyer _________________.

A

Credit

173
Q

Shared items, such as property taxes and water bills, will be ___________________ between the buyer and the seller.

A

Prorated

174
Q

____________________ is an odorless, colorless gas that, if found, is often mitigated by adding ventilation.

A

Radon

175
Q

What is the definition of notarized?

A

Document that is legalized by authority.

176
Q

A written legal document by which ownership of real property is transferred from one party to another is a ___________.

A

Deed

177
Q

The two parties to a deed are the __________________ and _____________________.

A

Grantor and grantee

178
Q

In order to convey title, a deed must be signed by the __________________.

A

Grantor

179
Q

Title does not pass to the grantee until the deed is ________________________________.

A

Delivered and accepted

180
Q

Assurance to grandees that they will not be disturbed by someone else with a lawful interest in the property is the covenant of _______________________________.

A

Quiet enjoyment

181
Q

The type of deed that is considered the best deed for a grantee is a ____________________________.

A

General warranty deed

182
Q

A deed that conveys whatever interest in the property the grantor holds at the time of conveyance and contains no covenants or warranties is an ______________________________.

A

Quitclaim deed

183
Q

A deed with warranties that apply only to the period the grantor owned the property is a _______________________________.

A

Special warranty deed

184
Q

Property owned by one person is said to be owned in ___________________.

A

Severalty

185
Q

A form of concurrent ownership in which each tenant owns an undivided ownership share in the entire property and has no right of survivorship is __________________________________.

A

Tenants in common

186
Q

A form of concurrent ownership in which all owners have equal shares in the property and the right of survivorship is _____________________________.

A

Joint tenancy

187
Q

An undivided interest in a resort condominium as a tenant in common for a specific period each year is a ____________________.

A

Time-share

188
Q

A condominium is created by filing a _________________________.

A

Declaration

189
Q

________________________ does not require co-owners to go through probate to obtain a title.

A

Joint tenancy

190
Q

A person who holds stock in a building owned by a corporation owns the right to a ___________________________.

A

Cooperative

191
Q

List two ways the government can acquire privately held land.

A

Eminent domain

Escheat

192
Q

Public control of land use by the government is known as _____________________________.

A

Police power

193
Q

A right of use or enjoyment which one person has in the lands of another for a specific purpose is an ________________________.

A

Easement

194
Q

A tenant’s right to possess real estate for the term of a lease is a _____________________________.

A

Leasehold estate

195
Q

A tree limb that overhangs into a neighbor’s yard is an example of an ______________________________.

A

Encroachment

196
Q

An easement is not ____________________, but a license is.

A

Revocable

197
Q

A claim that one person has against the land of another to secure payment of a debt is a _______________________.

A

Lien

198
Q

A person who has not been paid for work performed on real property may record a ______________________________.

A

Mechanic’s lien

199
Q

A party wall or a shared driveway is an example of an easement _________________________.

A

Appurtenant

200
Q

The right of an owner to occupy a parcel of real estate forever is a ________________________________.

A

Fee simple absolute

201
Q

The type of lien that takes priority over all others is the ___________________________________ for property taxes.

A

Government lien

202
Q

As part of their right to govern land use, local municipalities enact and enforce ________________________________.

A

Zoning ordinances

203
Q

A freehold estate is an estate of ownership with a(n) _______________________________.

A

Indefinite duration

204
Q

Leasehold estates are estates of possession with a(n) __________________________.

A

Definite duration

205
Q

Zoning laws are set at a _______________________.

A

Local level

206
Q

Deed restrictions are created as a form of _______________________________ over land use.

A

Private control

207
Q

All property other than real estate is known as __________________________.

A

Personal property

208
Q

Real estate consists of three things: land, improvements and ___________________.

A

Rights

209
Q

If a seller is taking a fixture, it must have been _________________________ from the purchase agreement.

A

Excluded

210
Q

Land is not considered a __________________ because it cannot be sold quickly.

A

Liquid asset

211
Q

When articles of personal property are permanently attached to the improvements, they become _______________________.

A

Fixtures

212
Q

Before a new building can be inhabited, a __________________________ of occupancy is required.

A

Certificate of occupancy

213
Q

Permission to vary from strict compliance with zoning requirements may be obtained in the form of a ___________________.

A

Variance

214
Q

When a previously established use does not comply with requirements of a new zoning ordinance, it may be allowed to continue as a _______________________________.

A

Non-conforming use

215
Q

Townships, sections, and meridians are used in the ____________________________________ form of legal description.

A

Rectangular government survey

216
Q

A legal description that uses compass degrees is __________________________.

A

Metes and bounds

217
Q

The type of legal description used in most urban areas is ____________________________________.

A

Lot, block and subdivision

218
Q

A _________________________ may be used to separate two incompatible zoning uses.

A

Buffer zone

219
Q

Real estate and fixtures are transferred with a ______________.

A

Deed

220
Q

Personal property is transferred with a ______________________________.

A

Bill of sale

221
Q

If the buyer is keeping the seller’s personal property, it must be ____________________________ in the purchase agreement.

A

Included

222
Q

What is an example of non-conforming use?

A

A retail store in a residential neighborhood.

223
Q

What other word also means mortgage?

A

Deed of trust

224
Q

What ways can property be foreclosed?

A
  1. No principal/interest (no payment)
  2. No taxes/HOA/Special Assessment
  3. No insurance
  4. Removal of improvements
  5. Alienation without consent
  6. Waste (32 cats, meth lab, depreciating property in an unusual way)
225
Q

What circle formula applies to any situation involving appreciation or depreciation? What does each part stand for? What is the hook?

A 
A = the value AFTER (a=after) the percent change.
B = the value BEFORE (b=before) the percent change.
Per = the formula percentage (ALWAYS 100%)

If it states “appreciation” within the question, you will ADD the percentage specified to PER.

If it states “depreciation” within the question, you will SUBTRACT the percentage specified to PER.

Hook: Think of A=appreciation B=depreciation and that’s PERfect.

226
Q

What circle formula is used for capitalization? What does each part stand for? What is the hook?

A 
I = (income) Net Operating Income/NOI
R = (rate) Capitalization Rate (investor rate of return, also affected by market forces)

V = value (what can be paid for a property to get the expected return)

Hook: IRV is an investor who only cares about capitalization.

(Be sure to compare apples to apples: monthly to monthly, annual to annual)

227
Q

What is the circle formula used for taxes? What does each part stand for? What is the hook?

A 
T = Taxes
A = Assessed Value
R = Rate

Hook: We get stuck in the TAR when we have to pay our taxes.

228
Q

What is the circle formula for Gross Rent Multiplier? What does each part stand for?

A 
Value = Value of the property
GRM = Gross Rent Multiplier
Rent = Rent amount

(Be sure to compare apples to apples: monthly to monthly, annual to annual)

229
Q

Appraisals are not required for which type of loan?

A

Seller-carry loan

230
Q

USPAP matches…

A

Appraiser. (An appraiser is expected to follow USPAP: Uniform Standards of Professional Appraiser Practices)

231
Q

Highest and best use matches…

A

Appraisal. (An appraiser must show the current highest best use in an appraisal)

232
Q

BPO matches…

A

NOT an appraisal.

233
Q

Increasing returns matches…

A

Contribution. (Improvements that add more value than they cost)

234
Q

Most important principle matches…

A

Substitution. (The most important appraisal principle of value is substitution. It’s used in all three methods of valuation)

235
Q

Progression matches…

A

Conformity. (The idea that under-improved property tends to increase)

Real Estate Exam Prep (3 decks)

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