Principles.of Real Estate 2

A loan with an interest rate tied to a readily available index - the rate will be adjusted periodically causing payment changes

Adjustable Rate Mortgage (ARM)

An appraiser's opinion of value

Appraisal

What helps overcome the difficulties of objectively estimating the value of properties?

Appraisals

The ______ is the sum of regular debt plus the house payment.

Back Ratio

Mortgage that covers more than one piece of property?

Blanket Mortgage

The market in which ______ and mortgage _______ come together to create and negotiate terms of a mortgage transaction is called the primary mortgage market.

Borrowers, lenders

Mortgage where monthly house payment includes principal, interest, taxes nd insurance (PITI)

Budget Mortgage

A _____ is an area of land separating one land use from another, such as residential from commercial.

Buffer Zone

Interest rate a Reserve Bank charges eligible financial institutions to borrow funds on a short-term basis

Discount Rate

The right of the government to take private land for public use

Eminent Domain

The Energy Star program is focused primarily on

Energy Efficiency

The right of the government to take an individual's land if he or she dies without a will or heirs

Escheat

_____ is the process of transferring real estate to the state when a person dies intestate (without a will) and without heirs.

Escheat

The loss in value of a property caused by factors outside of the property itself

External Obsolescence

What do Government loans include?

FHA, VA, USDA

T/F Most lenders, especially for conforming loan programs, do not normally conduct simple desk reviews at their desks.

False

T/F A field review, which has an exterior only, or drive-by, inspection is deemed acceptable for low LTV or low-risk loans.

False

T/F Condemnation is the right of the government to take private land for public use.

False

T/F Deed restrictions and CC&Rs are usually not permanent and in most cases, expire after the passage of 20 years.

False

T/F Deterioration is the reduction in value of property from causes such as deterioration or obsolescence

False

T/F External obsolescence is the loss in desirability of the style, layout, or function of an element of a property over time.

False

T/F Functional Obsolescence refers to the loss in value of a property caused by factors outside of the property itself

False

T/F If the proposed use of property violates zoning, the owners must request a permit which is permission to bend the rules.

False

T/F Market value is not one of the concepts that are typically misunderstood in an appraisal.

False

T/F The 3 approaches to value are the sales comparison approach, the cost approach and capitalization

False

T/F The ENERGY STAR program is operated by the U.S. Department of Justice (DOJ).

False

T/F The principle of conformity suggests that the value of a property is equal to the sum of the contributory value of each of its component parts

False

T/F There is a five-year right of redemption for homestead property sold at a tax auction in Texas

False

T/F Under the Toxic Substances Control Act of 1976, the TCEQ is given the authority by the Federal Government to require record-keeping, testing, reporting, and regulation of certain substances.

False

Ordered by lenders when dealing with high-LTV loans

Field Review

The legal procedure under which property may be sold to satisfy an unpaid promissory note

Foreclosure

Conventional conforming loans most conform to the standards of ____ and _____.

Freddie Mac, Fannie Mae

The ________is the house payment as a percentage of income.

Front Ratio

Loss in the desirability of style, layout or function of an element of a property over time

Functional Obsolecence

A residential heating system featuring steam radiators may adequately warm the rooms, but buyers today prefer heating methods that are less obvious and take up less space, is an example of what?

Functional Obsolescence

Refers to the loss in desirability of the style, layout, or function of an element of a property over time

Functional obsolescence

What types of depreciation are there?

Physical Depreciation, Functional Obsolescence, External Obsolescence

Loss in a property's value due to daily wear and tear

Physical Deterioration

The right of the government to regulate and control the way that an individual uses his or her land.

Police Power

The market in which borrowers and lenders come together to create and negotiate the terms of a mortgage transaction

Primary mortgage market

Value is maximized when there is a reasonable degree of homogeneity or sameness in a neighborhood

Principle of Conformity

The value of a commodity is influenced by the cost of acquiring a substitute or comparable item

Principle of Substitution

States that purchase price is affected by the expectation of future appeal and benefits

Principle of anticipation

The value of a subject property is increased by the value of surrounding properties

Principle of progression

_________ is a special form of insurance designed to allow lenders to increase the LTV ration. a) Errors and Omissions Insurance b) Liability Insurance c) Mortgage Insurance Premium d) Private Mortgage Insurance

Private Mortgage Insurance (PMI)

What elements are needed for a credit application to be complete?

Property Address, Estimated Value, Name of the borrower, Social Security Number, Income, Loan Amount

The government's right to tax real estate

Taxation

The ______ is an agency responsible for affordable housing as well as the regulation of the state's manufactured housing industry. a) Texas Real Estate Commission b) Texas Department of Insurance c) Texas Department of Housing and Community Affairs d) Texas Realtors

Texas Department of Housing and Community Affairs

T/F Fannie Mae and Freddie Mac have been instrumental in standardizing residential appraisal reporting through the widespread adoption of the Uniform Residential Appraisal Report.

True

T/F A greyfield describes land containing abandoned structures that are available for redevelopment

True

T/F Appraisals are a critical part of any transaction where financing is involved because lenders use them to determine the market value of the property being used to secure the loan.

True

T/F Chronological age is the actual age of the property in years.

True

T/F GRM = Sales Price / Monthly Rate

True

T/F Price does not equal value.

True

T/F Reconciliation is the final step in the appraisal process

True

T/F The Interstate Land Sales Full Disclosure Act is currently administered by the Consumer Financial Protection Bureau (CFPB).

True

T/F The appraiser will gather at least 3 comparison sales known as "comparable"

True

T/F The comparable sale can differ from the subject property in 2 ways. It can have features that are superior or inferior.

True

T/F The loan-to-value ration (LTV) is the percentage of value or sales price that a lender is willing to finance

True

T/F The principle of anticipation states that the purchase price is affected by the expectation of future appeal and benefits

True

T/F The value of a property may be affected by social, economic, governmental and environmental influences

True

T/F There are three phases of an environmental site assessment

True

T/F Title to land in the United States can be traced back to its original owner, which is referred to as the sovereignty of the soil.

True

The Energy Star program is operated by the

U.S. Department of Energy (DOE)

Fannie Mae Form 1004

URAR

The ____ offers 100% financing for rural loans for first time and repeat home buyers' primary residences.

USDA

Standard that have been established by the Appraisal Standards Board of the Appraisal Foundation

USPAP

The process of making a lending decision

Underwriting

A(n) ______ is a loan that is guaranteed by the government.

VA Loan

Does not always equal price

Value

If the loan limits the loan-to-value ratio to a maximum of 90% and the appraised value of the home is $100,000, what is the maximum loan amount permitted under the program?

$90,000

A loan with an adjustment period of 1 year is called a?

1-year ARM

If the lender uses an index that currently is 1.50% and adds a 2.50% margin, what would the fully indexed rate be?

4.00%

According to value

Ad Valorem

Which of the following federal laws was passed to ensure the banks would serve the needs of the community in which they were chartered to do business? a) Truth in Lending Act b) Regulation Z c) Equal Opportunity Credit Act d) Community Reinvestment Act

Community Reinvestment Act (CRA)

A ______ loan refers to a loan made with real estate as security and which does not involve government participation in the form of insuring or guaranteeing the loan.

Conventional

What 2 broad categories are residential mortgages divided into?

Conventional, Government loans

What is a good acronym to remember characteristics of property value?

DUST

What are the four characteristics of property value?

Demand, Utility, Scarcity, Transferability

Reduction in the value of a property due to deterioration or obsolecence

Depreciation

______ loans are divided into 3 categories: FHA, VA, and USDA.

Government

______ loans are divided into three categories: FHA, VA, and USDA

Government

The legal use that gives the greatest return in money and/or amenities

Highest and Best Use

The legal use for property that gives the greatest return in money and/or amenities

Highest and best use

Instrument lender uses for measuring changes in interest rates

Index

Percentage of value or sales price that a lender is willing to finance

Loan-to-value ratio

Percent added to the index in order to calculate the payment interest rate

Margin

Sales Comparison Approach is also known as

Market Data Approach

The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale

Market Value

The price a willing seller will sell for, and the price a willing buyer will pay

Market Value

The process of creating a new mortgage loan

Origination

The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower, are considered ______ activities.

Origination

What acronym is helpful to remember the elements that make a credit application complete?

PENSIL

Mortgage that includes both real and personal property (Fixtures and Furnishings)

Package Mortgage

The practice of refusing to provide financing in a particular location

Redlining

The approach used as the best indicator of value for existing properties

Sales Comparison

What are the 3 approaches to value?

Sales Comparison Approach, Cost Approach, Income Approach

If a type of property in a market area is too abundant, it has reduced value

Scarcity

Title to land in the United States can be traced back to its original owner

Sovereignty of the Soil

The percentage of value to sales price that a lender will lend is known as the _______ ratio.

loan-to-value