Unit 1 key points

Question 1

Broker

Answer 1

Peron/company licensed to buy/sell/exchange/lease real property for others for compensation

Question 2

Salesperson/associate

Answer 2

Conducts brokerage activities on behalf of broker

Question 3

Property Management

Answer 3

Hired to maintain and manage property on behalf of the owner. Protects owner’s investment while maximizing owner’s financial return.

Question 4

Financing

Answer 4

Business of providing funds that make real estate transactions possible through loans secured by a mortgage or deed of trust on the property, with funding provided by commercial banks, thrifts, credit unions, mortgage bankers, mortgage brokers

Question 5

Subdivision and development

Answer 5

splitting a single property into smaller parcels (subdividing) and constructing improvements on the land (development)

Question 6

Home Inspection

Answer 6

Interest of both parties, will show results of a thorough survey of observable conditions

Question 7

Real estate counseling

Answer 7

Independent advice based on sound professional judgement regarding how to buy/sell/invest

Question 8

Supply and demand

Answer 8

Influenced by uniqueness and immobility of parcels.

When supply increases relative to demand, price goes down. When demand increases relative to supply, price goes up.

Question 9

Factors affecting supply

Answer 9

Labor force availability
Construction and material cost
Gov control
Monetary policy that impacts rates and money supply

Question 10

Factors affecting demand

Answer 10

Population
Demographics
Employment wage levels

Question 11

Buyer can benefit from

Answer 11

Tax deductions
Exclusion of gain on sale
Tax credits

Question 12

Advantages of investing

Answer 12

• High RATE OF RETURN
• Greater CONTROL over investment
• Property APPRECIATION > EQUITY BUILDUP
  -LEVERAGING of funds to provide greater purchasing power
  -TAX BENEFITS of DEPRECIATION
• DEDUCTIONS
• Use of property EXCHANGE to avoid taxation
• Treatment of income from a property sale as CAPITAL GAIN

Question 13

Disadvantages of investing

Answer 13

• Lack of LIQUIDITY
• Requires ACTIVE MANAGEMENT

Question 14

Cooperative

Answer 14

Units that share common walls and facilities within a larger building. Owner does not own a unit, but owns shares in a corporation that holds title to real estate. Each shareholder receives a proprietary lease to a specified unit.

Question 15

Planned Unit Development (PUD)

Answer 15

Consist entirely of residences but can also serve to merge such diverse land uses as housing, recreation, and commercial units into one self contained development. Planned under special zoning ordinances

Question 16

Mixed-use developments (MUDs)

Answer 16

High rise developments, combined office spaces. Single vertical community

Question 17

Condominiums

Answer 17

Ownership without maintenance responsibilities. Own a unit and co-owner of common areas

Question 18

Condominiums

Answer 18

Ownership without maintenance responsibilities. Own a unit and co-owner of common areas

Question 19

Condominiums

Answer 19

Ownership without maintenance responsibilities. Own a unit and co-owner of common areas

Question 19

Condominiums

Answer 19

Ownership without maintenance responsibilities. Own a unit and co-owner of common areas

Question 20

Equity

Answer 20

Investor value. Different between market value and amount still owed

Question 21

Tax deductions

Answer 21

Homeowners may decuct from their gross income some or all of the mortgage interest paid up to a certain point

Question 22

Monetary policy effects on housing industry

Answer 22

1) Gov’s monetary policy established by the federal reserve
2) Federal reserve established a discount rate on money it lends to the banks
3) Discount rate affects interest rate that banks charge consumers
4) Interest rate on a home affects its affordability

Question 23

Equity buildup

Answer 23

Portion of the loan payment directed toward the principal rather than the interest, plus any gain in value due to appreciation

Question 24

Leverage

Answer 24

Use of borrowed money to finance and investment (risk)

Question 25

Depreciation

Answer 25

(cost recovery) in appraisal, a loss of value due to any cause

Question 26

Capital gain

Answer 26

Profit/ difference between the purchase price and its net selling price