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Barney Fletcher Cards > Section 4 - Finance & Valuation > Flashcards

Section 4 - Finance & Valuation Flashcards

1
Q

acceleration clause

A

​​​​​​​A mortgage clause stating that the entire balance of the debt becomes due and payable immediately upon default of any of the terms of the mortgage.

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2
Q

accrue

A

To make periodic additions of increase; to augment Accrued depreciation is accumulated depreciation; accrued interest already earned.

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3
Q

acre

A

43,560 square feet.

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4
Q

adjustable rate mortgage

A

A mortgage loan on which the interest rate rises and falls with changes in prevailing rates.

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5
Q

adjusted basis

A

Sales price of property less commissions, fix-up fees, and closing costs.

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6
Q

ad valorem

A

(Latin) “According to the value.” The principal usage is in Ad Valorem taxes that are assessed in proportion to the property’s value.

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7
Q

amortization

A

The gradual repayment of a debt in periodic amounts.

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8
Q

annual percentage rate (APR)

A

A uniform measure of the cost of credit that includes interest, discount points, and loan fees.

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9
Q

annuity

A

An annual allowance, payment, or income.

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10
Q

appraisal

A

A supportable and defensible estimate or opinion of the value of property as of a specific date, for a specific purpose.

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11
Q

appreciation

A

Increase in value of a property due to natural or economic factors. The opposite of depreciation.

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12
Q

arrears

A

Overdue or past due.

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13
Q

assessed value

A

The valuation placed upon property by a public tax assessor as the basis for taxes.

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14
Q

assumption of mortgage

A

When taking title to property with an existing mortgage, assuming full personal liability for its repayment.

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15
Q

balloon mortgage

A

A mortgage that requires a lump sum payment (balloon payment) at the end.

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16
Q

bankrupt

A

A person whose liabilities exceed his assets making him unable to meet all financial obligations. Bankruptcy is a legal status; a court of law must judge the person to be insolvent. Declaring bankruptcy does not automatically absolve a person from all financial obligations.

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17
Q

basis

A

The price paid for property; used in calculating income taxes.

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18
Q

blanket mortgage

A

A mortgage covering more than one parcel of land.

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19
Q

buy-down

A

A cash payment to a lender so as to reduce the interest rate a borrower must pay.

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20
Q

call provision

A

Allows the lender to demand immediate and full payment of loan.

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21
Q

cap

A

Maximum increase in the interest rate of an ARM (adjustable rate mortgage).

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22
Q

capital gain

A

The gain (profit) on the sale of an appreciated asset.

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23
Q

capitalization

A

A method of determining the present value of a future income stream.

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24
Q

capitalization rate

A

The percentage rate of return used in capitalization.

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25
Q

cash flow

A

The net spendable income from an investment, determined by the deducting all operating and fixed expenses from the gross income. When expenses exceed income, a negative cash flow results.

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26
Q

cash-on-cash

A

The cash flow produced by a property divided by the amount of cash necessary to purchase it.

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27
Q

certificate of eligibility

A

Needed by a veteran in order to obtain a VA loan.

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28
Q

chain

A

A method of measurement; 66 feet.

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29
Q

chattel mortgage

A

A mortgage secured by personal property.

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30
Q

closing costs

A

The expenses incurred and paid at the time of settlement in the transferring of property.

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31
Q

co-borrower

A

An individual who shares responsibility for repaying a loan with the original borrower.

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32
Q

collateral

A

Property that is used as security on a loan.

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33
Q

commingle funds

A

To combine escrow funds in the same account with personal or business funds.

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34
Q

commission

A

Earnings based on a percentage of the total amount of sales.

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35
Q

commitment

A

A promise, or firm agreement, that may legally be relied upon by other parties, such as a loan commitment.

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36
Q

consideration

A

Anything of value given to induce another person to enter into a contract.

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37
Q

conventional loan

A

Commonly, any loan not insured or guaranteed by a government agency.

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38
Q

convertible

A

An ARM that may be converted to a fixed-rate loan

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39
Q

credit history

A

A summary of a person’s borrowing and repayment history.

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40
Q

credit report

A

A detailed report of an individual’s credit history prepared by a credit bureau and used by a lender to in determining a loan applicant’s creditworthiness.

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41
Q

credit unions

A

Member owned cooperatives that offer deposit accounts and lending services to consumers and small businesses.

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42
Q

debt

A

Money owed.

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43
Q

debt service

A

Periodic payment of the principal and interest on a loan.

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44
Q

deed in lieu of foreclosure

A

Voluntary act by borrower and lender. Sometimes called a “friendly foreclosure.”

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45
Q

deed of trust

A

Used instead of a mortgage in some states.

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46
Q

default

A

Failure to pay back a loan.

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47
Q

depreciation

A

Decrease in the value of property due to natural economic factors. The opposite of appreciation.

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48
Q

direct capitalization

A

A method of converting an estimate of a single year’s income into value in one direct step.

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49
Q

discount points

A

A fee charged by the lender at settlement that results in increasing the lender’s effective yield on the money borrowed. One discount point equals one percent of the loan amount.

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50
Q

due-on-sale clause (alienation or call clause)

A

Gives the lender the right to call the entire loan balance if the property is sold or otherwise conveyed.

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51
Q

economic life (useful life)

A

The time remaining during which a property can be profitably and feasibly used.

52
Q

economic obsolescence

A

A loss in property value brought about by external environmental or economic forces.

53
Q

economic rent

A

The estimated income that a property should provide under current market conditions. It may be above or below actual rent.

54
Q

effective yield

A

Calculation of the return on investment that considers price paid, the time held, and the interest rate.

55
Q

equity

A

Market value of a property less the debt against it.

56
Q

exculpatory clause

A

Clause in a lease that relieves the landlord of a liability for personal injury to tenants and for property damage, but does not protect the lessor from injuries to third parties. Also used in mortgages to restrict a borrower’s liability to a specific property.

57
Q

Fannie Mae (FNMA)

A

Federal National Mortgage Association – A quasi-governmental private corporation whose primary function is to purchase and sell mortgages in the secondary mortgage market.

58
Q

fair market value

A

Price a property should bring if a reasonable period of time is allowed to find a buyer and both parties are fully informed and neither party is under undue influence.

59
Q

FHA loan

A

A loan insured by the Federal Housing Administration.

60
Q

Freddie Mac (FHLMC)

A

(Federal Home Loan Mortgage Corporation) Provides a secondary mortgage market for residential mortgages written by federally chartered institutions.

61
Q

functional obsolescence

A

A loss in property value brought about by defects in the design or structure of a building.

62
Q

Ginnie Mae (GNMA)

A

(Government National Mortgage Association) An agency of HUD, whose principal objectives are in the area of government housing programs. It offers permanent financing for low-rent housing.

63
Q

gross income

A

The total amount of money received from income property, before deducting expenses.

64
Q

gross rent multiplier (grm)

A

A number that when multiplied by a property’s gross rents produces a rough estimate of the property’s worth.

65
Q

home equity loan

A

A type of loan in which the borrower uses the equity in his or her home as collateral for the loan.

66
Q

hypothecate

A

To use property as security for a debt without giving up possession of it.

67
Q

inflation

A

A continuous rise in the price of goods and services.

68
Q

installment sales method

A

Method of reporting gains on sale of property to spread out payment of taxes.

69
Q

jointly and severally liable

A

Enforceable on the makers as a group and upon each maker individually.

70
Q

leasehold value

A

The difference between the market value of a lease and what is being paid of the lease.

71
Q

leverage

A

The use of borrowed funds to obtain the maximum percentage of return on one’s holdings.

72
Q

liquid asset

A

An asset that can quickly be converted into cash.

73
Q

lot-and-block description

A

A description of real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as identified on a subdivided plat.

74
Q

maker

A

The person who signs a promissory note.

75
Q

market price

A

The actual amount for which a piece of property is sold.

76
Q

market value

A

The amount that a willing buyer would pay, or that a willing seller would take. Often substantially different from market price.

77
Q

metes-and-bounds

A

A legal description of a parcel of land that begins at a well-marked point and follows the boundaries, using directions and distances around the tract, back to the point of beginning.

78
Q

mill

A

One tenth of a cent, one-thousandth of a dollar ($.001).

79
Q

millage rate

A

Rate per dollar of assessed valuation. The rate of real property taxes is often expressed as a millage rate.

80
Q

mortgage, mortgagee, mortgagor

A

A pledge of property for security of a debt. The mortgagor gives the mortgage and is generally the present owner or buyer; he is the borrower (debtor). The mortgagee receives the mortgage and is the lender of funds (creditor).

81
Q

mortgage banker, mortgage loan correspondent, mortgage company

A

A person or firm that specializes in originating and servicing mortgage loans, normally using money from other sources.

82
Q

mortgage broker

A

A person who arranges or obtains mortgage financing for others.

83
Q

mortgage insurance premium

A

One time lump-sum payment charged by FHA for insurance when loan is made.

84
Q

negative amortization

A

A situation wherein a loan payment is insufficient to pay the interest due and the excess is added to the balance owned.

85
Q

neighborhood

A

A section of a town or city.

86
Q

net income

A

The amount of income left after deducting operating expenses from gross income.

87
Q

net operating income

A

Gross income less operating expenses, vacancies, and collection losses.

88
Q

note

A

A signed instrument acknowledging the existence of a debt and the promise to pay.

89
Q

obsolescence

A

The state, process, or condition of being or becoming obsolete.

90
Q

operating expenses

A

Costs involved in operating a business, such as rent, utilities, and salaries.

91
Q

origination fee

A

Service fee for processing a loan. Not considered interest.

92
Q

parcel

A

Part of a larger tract of real estate.

93
Q

physical depreciation

A

A decline in property value due to time and the action of the elements; physical deterioration.

94
Q

physical deterioration

A

The loss in value due to wear and tear of the structure.

95
Q

P.I.T.I.

A

(principal, interest, taxes, and insurance)
Most residential mortgage payments include the above and are therefore referred to as P.I.T.I.

96
Q

plat map

A

A map of a town, section, or subdivision indicating the location and boundaries of individual properties. Also called a subdivision plat.

97
Q

plottage

A

The appraisal principle that holds that merging separately owned pieces of property into one large single lot will increase the value of the separate pieces.

98
Q

PMI (private mortgage insurance)

A

Insures top 20%-25% of a loan to protect lender against losses.

99
Q

point

A

One percent of the principal or face amount of a mortgage.

100
Q

prepayment penalty

A

A stipulated (normally expressed as a percentage of the balance) for prepayment of a mortgage.

101
Q

promissory note

A

A written evidence of a debt, together with the promise to repay.

102
Q

prorate

A

To allocate according to one’s interest or share.

103
Q

Real Estate Settlement Procedures Act (RESPA)

A

A federal law that deals with procedures to be followed in certain types of real estate closings.

104
Q

Regulation Z (truth in lending)

A

A federal law requiring certain disclosures when extending or advertising credit.

105
Q

reverse mortgage

A

The lender makes payments to a homeowner who later repays in a lump sum.

106
Q

sales comparison approach

A

Process of estimating the value of property through examination and comparison of actual sales of comparable properties.

107
Q

satisfaction of mortgage

A

An instrument that acknowledges the full payment and completion of all terms of a mortgage.

108
Q

scarcity

A

Limited quantities of resources; a lack of supply.

109
Q

secondary mortgage market

A

A market created to provide liquidity for mortgage financing.

110
Q

securities and exchange commission

A

An independent agency of the government that regulates financial markets and investment companies.

111
Q

settlement agent

A

Person who collects all the funds necessary to close the transaction and disburses the funds to the appropriate parties.

112
Q

special assessment

A

A special tax levied to pay for a specific improvement, such as sidewalks, sewers, etc.

113
Q

stigmatized property

A

A property that has acquired an undesirable reputation due to an event that occurred on or near it, such as a violent crime.

114
Q

subordination

A

A process in which the holder of a superior mortgage agrees to give up his priority position.

115
Q

subrogation

A

The substitution of one creditor for another, as in the selling of a mortgage.

116
Q

tax sale (tax certificate) (tax deed)

A

A sale, normally an auction of property that is in default of taxes assessed against it. Title to the property is passed by a tax certificate or tax deed; the exact procedure varies from state to state.

117
Q

term loan

A

A loan requiring interest-only payments until the maturity date (due date) at which time the entire principal is due.

118
Q

trust, trustor, trustee

A

A property interest held by one person or entity for the benefit of another. The trustor is the creator of the trust; the trustee is the administrator; the beneficiary receives the income or benefits of the trust.

119
Q

useful life

A

The estimated or useful life of a property.

120
Q

usury

A

The lending of money at greater than the maximum rate allowed by law.

121
Q

uniqueness

A

A physical characteristic of real estate referring to the fact that each parcel of land, each building, and each house is said to be different.

122
Q

VA loan

A

A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs.

123
Q

value (valuation)

A

The estimated worth of a property as measured by its capacity to command other goods in exchange.

124
Q

variable rate mortgage

A

A mortgage on which the interest rate rises and falls with changes in prevailing interest rates.

125
Q

yard

A

3 feet.

126
Q

yield

A

The dollar amount of income realized on an investment. Yield is expressed as a percentage of principal: Annual Yield (%) = net annual return invested principal

Barney Fletcher Cards (4 decks)

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