The CE Shop: 30-HR. TX PRINCIPLES OF REAL ESTATE II

Moratorium

(n.) a suspension of activity; an official waiting period; an authorized period of delay

Educational Requirements of a Licensed Real Estate Appraiser

-Associates degree (or higher)-OR 30 semester credit hours-from an accredited college or university -75 additional hours of TALCB-specified courses (ontop of the appraisal trainee hours) (150 hrs in total) -At least 2k hours of appraisal work experience over a minimum of 12 months

FIRREA

-Financial Institutions Reform, Recovery, and Enforcement Act of 1989 -Requires that fedarally related appraisals be conducted by a state-licensed or certified appraiser.

The Cost Approach to finding Appraised value

-Measures value as a cost of production, including the acquisition of land and the construction costs -Most often used for new construction, Unique properties, and special-purpose commercial uses

BPO (Broker's Price Opinion)

-Minimal cost ($50-200), which must be paid to the licensee's broker -Performed by a real estate licensee -Comparable Sales method used -Basic to moderate level of detail -Prepared for a lender (in a foreclosure or short sale situation) or relocation company

Gross Rent Multiplier (GRM)

-Sales Price/Gross Rent -Best used for 1-4 family units where the primary use is a rental property.

Gross Income Multiplier (GIM)

-Sales price / gross annual income -Suitable for 5-unit or larger income properties

URAR's Required Exhibits

-Street Map -Exterior Building Sketch -Clear, descriptive photographs showing the subject property's front, back, and street scenes -Clear, descriptive photographs showing the front of each comparable property -Other Data necessary to provide an opinion of market value

USPAP

-Uniform Standards of Professional Appraisal Practice -a set of standards of practice to follow when providing appraisal services.

Licensed Real Estate Appraiser

-Works with Federally Related transactions, non-complex one-to four- unit residential properties with a transaction value of LESS THAN 1 MILLION -Commercial properties having a transaction value of LESS THAN 250 mil -MAY NOT APPRAISE SUBDIVISIONS

Appraisal

-costs $400+ -Performed by a state licensed or certified appraiser -Multiple methods of performing the appraisal are used, including sales comparison and cost. Appraisers may also use the income approach for income-producing properties -very detailed -Prepared for the lender, buyer, seller, or sometimes the courts.

CMA (Comparative Market Analysis)

-free -performed by a real estate licensee -comparable sales method is used -basic to moderate level of detail -Prepared for a seller or a buyer

What is 1 point?

1% of the Loan Amount

Valuation Process of the USPAP

1. State the Problem 2. List the Data Needed and Where to Find It. 3. Gather the Data (general and specific) 4. Determine the property's highest value and best use 5. Estimate the Value of the Land 6. Estimate property value using three approaches to value 7. Reconcile the Data 8. Report the Appraised Value

What happens when an appraisal comes back lower than the asking price?

1. They can acknowledge a fail 2. The buyer can increase the down payment 3. The seller can lower the asking price 4. They can compromise

A Buyer must pay 4 points at closing on a 100k home loan. How much do they have to pay?

100,000 x .04= 4,000

The federal government has a goal to transform the way energy is consumed in commercial buildings across the country. It wants to accomplish this by what year?

2050

Yield Capitalization

A method used to convert future benefits into present value by 1) discounting each future benefit at an appropriate yield rate, or 2) developing an overall rate that explicitly reflects the investment's income pattern, holding period, value change, and yield rate.

Licensee

A person holding a valid license

Appraiser

A person holding certification to estimate the value of real property according to standardized principles of valuation

Real Estate Broker

A person licensed as a broker who performs brokerage activities and collects compensation

Lender

A person who arranges financing for the buyer of real property

Developer

A person who constructs improvements on raw land

Real Estate Attorney

A person who holds a law degree and specializes in real estate; may legally broker deals

Home Inspector

A person who is affiliated with a national nonprofit trade association, has passed the appropriate exam, and evaluates properties for their condition

Real Estate Sales Agent

A person who performs real estate activities while associated with a licensed real estate broker

Real Estate Counselor

A person who provides services to help determine viability of a real estate asset or project

Real Estate Investor

A person who puts money or property into a real estate project for profit

Subdivider

A person who splits a single property into smaller parcels in preparation for development

Nonconforming use

A pre-existing use of land which does not conform to the zoning ordinance but which may legally remain. When it is sold, the new owners will have to comply with current zoning.

Home Occupation

A residential zone where the residents of the dwelling conduct business out of their home.

Evaluaiton

A study of a property that does not necessarily return a price or value

Incentive Zoning

A system by which developers receive zoning incentives on the condition that specific physical, social, or cultural benefits are provided to the community.

Accessory Apartment/Accessory Use

An additional property subordinate to the main use of the property such as an equipment shed or mother-in-law suite

Area Variance

An exception that allows a property owner to legally deviate from certain building codes or setback requirements.

Reconciliation

Analyzing the findings from the appraisal (valuation) approaches used, then weighing the findings that each provided.

What is the formula for calculating a loan balance?

Annual Interest % Interest Rate

What is the formula for calculating annual property taxes PER MILL ($)

Assessed Property Value % 1000 OR Assessed Property Value x Mill Rate % 1000

What is the formula for calculating annual property tax?

Assessed Property Value x Tax Rate

Which classification of appraiser can appraise all types of real property without regard for transaction value? A.Appraiser trainee B. Certified general appraiser C. Certified residential appraiser D. Licensed appraiser

B. Certified general appraiser

Lisa purchased an older home with a large backyard that's perfect for her pack of collies to romp in. Six months after she bought the property, a total stranger knocked on her door and told her he's the true property owner. After investigating, it turns out the person who sold Lisa the property had forged the deed without the true owner's knowledge. What's true about Lisa's situation? A. Her homeowner's policy may protect her from loss. B. Her lender must initiate a quiet title action to resolve the issue. C. Her title insurance policy may protect her from loss D. The county clerk where the documents were recorded is liable.

C. Her title insurance policy may protect her from loss

SARA is an amendment to which environmental act?

CERCLA

Direct Capitalization Method

Calculates the Net Operating Income (NOI) for a property over the next year, the napplies a capitalization rate to that income to derive a market value for the property. - Cap rate (R)= I (net operating income)/V (property value) R=I/V

Ratio or percentage of the before-tax cash flow divided by the cash invested.

Cash-on-cash return

The Office Building Category

Class A - prestigious Class B - fair to good Class C - functional, below average rent

Deed Restrictions

Clauses in a deed limiting the future uses or appearance of the property.

What are CC&Rs

Conditions-contingencies in which a property might be won or lost if the condition is violated Covenants-agreements between two or more parties that, if violated, can be terminated Restrictions- limits on a specific property

Jennifer is the owner of the single-family residence in which she resides. How long can she take to depreciate her property?

Depreciation is limited to investment properties—you can't depreciate a personal residence or vacation home.

Curable Depreciation

Depreciation that can be fixed at reasonable cost.

Private Land Controls

Easements, Liens, and Deed Restrictions

Appraiser Qualifications Board (AQB)

Establishes the minimum education, experience, and examination requirements an individual must meet in order to become a licensed or certified appraiser.

You're a farmer. Which loan program might be tailor-made for you?

Farmer Mac

Special/Conditional Use Permit

Given to those who want to use a property in a way that isnt in accordance with zoning regulations; but provides a service that was in the public interest, like a golf course.

The Industrial Category

Heavy manufacturing Light manufacturing Warehouse & distribution

The Healthcare Category

Hospitals Urgent care centers Doctor's offices

The Leisure Category

Hotels/motels Golf courses Resorts Sporting arenas Movie theaters Restaurants

What is the formula for calculating Annual Loan Interest?

Loan Balance x Interest Rate

Depreciation (appraisal)

Loss of property value due to any physical, functional or external condition.

The Specialty Category

Mixed-Use Combined retail/residential Planned Unit High-density, zoning mix Transit-Oriented Near transportation hub

The Retail Category

Neighborhood shopping centers (strip malls) Regional shopping malls

Which entity insures VA loans?

No entity, because they are guaranteed (NOT INSURED) by the U.S. Department of Veterans Affairs

How often can interest rates change on an adjustable rate loan with a flexible payment plan?

Once a Month

What is the formula for finding the Amount of Depreciation?

Original Value x (100%-x%)

What is the formula for finding the Amount of Appreciation?

Original Value x Appreciation Rate

Variance/Use Variance

Permission obtained from zoning authorities to build a structure or conduct a use that is expressly prohibited by the current zoning laws; an exception from the zoning ordinances.

Incurable Depreciation

Physical deterioration that cannot be repaired in a cost-effective manner.

Aesthetic Zoning

Requires buildings to conform to architectural style & design

Group home

Residential facilities for unrelated individuals with physical, mental, or behavioral disabilities. These are protected by the Fair Housing Act.

Appraisal Practices Board (APB)

Responsible for finding and distributing thoughts on known valuation methods and techniques.

Bulk Zoning Regulations

Restrict the density of buildings in an area through building design requirements such as floor-area-ratios (FAR), setbacks, lot size, building placement, and open requirements.

What is the Formula for finding the Net to Seller?

Sales Price x (100%- %Commission)

The Residential Category

Single-family Multifamily Apartment buildings Condominiums, cooperatives

The current value of a property is $105,000. What was the original cost of the property if there has been a 30% loss in value?

Take the current value of the property divided by the total depreciation: 100% ‒ 30% = 70%, then $105,000 ÷ 0.70.

TALCB

Texas Appraisers Licensing and Certification Board- appraisers version of TREC

Who encourages the use, understanding and Implementation of the Uniform Standards of Professional Appraisal Practice (USPAP) as required by FIRREA

The Appraisal Standards Board

Who reviews transactional documents for accuracy prior to or at closing and requires the property to be free and clear of defects before approving the buyer's loan application?

The Lender's Attorney

Who is responsible for providing the title insurance company with an affidavit of title?

The Seller

A strip mall valued at $850,000 has a $67,500 annual net operating income. What is the capitalization rate for the strip mall?

The cap rate formula is: net operating income ÷ value = rate (I ÷ V = R). So $67,500 ÷ $850,000 = .079 or 7.9%. This formula can work in reverse as well: value (purchase price) × cap rate = net operating income (V × R = I).

Commercial leases may contain an automatic renewal clause. If this is the case, what happens after the lease's original term has come to an end?

The lease continues on a month-to-month basis.

Value in use

The price a property is worth to its current owner as currently enjoyed

Market Value

The price at which a willing buyer and a willing seller strike a deal given normal market conditions

When considering loan risk, which two items will lenders consider in equal measure?

The property's value (as underlying collateral) and the borrower's ability to repay the loan will be equal considerations for the lender.

What type of notice results from publicly recording a title transfer?

The purpose of recording is to give the public constructive notice of a transfer of ownership. Recording doesn't transfer title; it informs the public that a transfer of title has occurred.

Private Land Use Controls

The regulations of land use by individuals or nongovernment (private) organizations in the form of deed restrictions and restrictive covenants.

Mortgage Value

The value of an asset for purposes of securing a mortgage loan.

Evaluation vs. Valuation

There is no value attached at the end of an evaluation. An evaluation is usually a marketability or land use study.

URAR (Uniform Residential Appraisal Report)

This was created to allow for standard reporting and analysis of single-family dwellings. Required for Fannie Mae

The Act that says that innocent landowners aren't responsible for clean-up of hazardous contamination.

What is the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)

Who conducts the closing?

While the person conducting a closing may change, this person is often referred to as the closing agent.

Appraiser Trainee

Works under supervision of an appraiser. - Must complete 75 hours of qualifying real estate education+ a TALCB Approved 4 hour course within a 5 year period of prior to the date of application

Certified Real Estate Appraiser

Works with all types of real property without regard to transaction value or complexity -Bachelors Degree or higher -300 total hours of appraisal education -3k hours of appraisal work over a period of 30 months with 1,500 hours in non-residential real property appraisal work

What is the Affidavit of Title?

a sworn statement by the seller that no unpaid bills remain for repairs or improvements to the property.

The Texas Property Code

contains many landlord-tenant laws affecting residential real estate. Repairs, smoke detectors, landlord's lien for rent and many other situations are covered. These laws pertain to a private owners as well as a landlord.

Appraisal Standards Board (ASB)

establishes the rules for developing an appraisal and reporting its results.

Income Approaches to Appraising Property

estimates the present value of any future benefits of owning a particular property based on the value principle of anticipation.

Assessed Value

how much the tax assessor values the property for ad valorem tax purposes

What purpose does bulk zoning serve?

restricts the density of buildings in an area through practices like setbacks and open space requirements.

Residential Zone

single-family or multi-family including a duplex or a high rise apartment

Thrifts, or savings and loan associations...

specialize in taking in savings deposits and then lending out to consumers through mortgages and other loans

Formal Appraisal/ Valuation

the opinion or estimate of value of a particular property as of a particular date using objective criteria. MUST BE CONDUCTED BY A CERTIFIED APPRAISER