real estate ch.13-18

Conforming Loan

A conventional loan that meets the requirements of Freddie Mac and Fannie Mae

Tax Shelter-

A legal method of reducing tax liabilities.

Amortized Mortgage

A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity

Adjustable Rate Mortgage (ARM)

A mortgage that can be adjusted periodically by the lender

Regression —

A principal of appraisal that states that inferior properties adversely affect the value of a better property of the same type.

Progression —

A principal of appraisal that states that superior properties of the same type enhance the value of an inferior property.

Balloon Payment

A single, large payment made to pay off the debt in full.

Partially Amortized / Balloon Mortgage

A special type of liability or obligation involving partial amortization during the loan term and a balloon payment on the loan maturity date.

Cost Depreciation Approach —

A system for estimating the market value of property based on the cost to buy the site, construct a new building on the site, but taking into account depreciation.

Automated Valuation Models —

A term for services that use mathematical modeling combined with databases of existing properties and transactions to calculate real estate values.

Sales Comparison Approach —

A valuation method which compares a subject property's characteristics with those of comparable properties which have recently sold in similar transactions.

Proration-

Adjustments of interest, taxes, and insurance, etc., on a pro rata basis as of the closing or agreed upon date.

Principle of Substitution —

Affirms that the maximum value of a property tends to be set by the cost of acquiring an equally desirable and valuable substitute property, assuming no costly delay is encountered in making the substitution.

Reverse Annuity Mortgage —

Allows borrowers to cash in some of their home's equity, without having to sell or move out and is secured against the value of their home.

Income Approach —

An appraisal method applied to income producing properties, which involves a three-step process. First, the appraiser must find the net annual income. Second, an appropriate capitalization rate or "present worth" factor must be set. Finally, the appraiser must capitalize the income by dividing the net income by the capitalization rate

Highest And Best Use —

An appraisal phrase meaning that use which at the time of an appraisal is most likely to produce the greatest net return to the land and/or buildings over a given period of time; that use which will produce the greatest amount of profit. This is the starting point for an appraisal.

Debit-

An entry on the charge side of an account; a charge or expense.

Credit-

An entry on the credit side of an account; a payment of value received.

basis

An owner's original cost of a property.

Federally Related Transaction —

Any sale transaction that involves a federal agency in either the primary or secondary mortgage market.

Capital Gain (loss)

At resale of a capital item, the amount by which the net sale proceeds exceed (or fall short) of the adjusted cost basis (book value). Used for income tax computations.

Level Payment Plan —

Calculating the total cost of a service over a period of time such as a year then averaging the payments to an amount per month that will cover the total annual bill. Most often used for utility payments.

Mortgage Fraud —

Defined by the FBI as "any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan."

Uniform Standards of Professional Appraisal Practice (USPAP) —

Establishes the requirements for professional appraisal practice,

Nonconforming Loans —

Loans that fail to meet bank criteria for funding either because the loan amount is higher than the conforming loan limit (for mortgage loans) or there is a lack of sufficient credit or the proposed use of the funds is unorthodox.

Gross Income Multiplier (GIM) —

Method of estimating the market value of commercial and industrial properties.

Gross Rent Multiplier (GRM) —

Method of estimating the market value of income producing residential property.

Appreciation —

Monetary gain resulting from the increase in the market value of an investment, excluding additions of capital.

Situs-

People's preferences for certain locations

Liquidity —

The ability to sell an asset and convert it into cash at a price close to its actual value.

MIP (Mortgage Insurance Premium) —

The amount paid by a mortgagor for mortgage insurance on an FHA-insured loan.

Preclosing Inspection —

The buyer's final walk through the empty house to check that it is in the same condition as inspection day — except that the seller has moved out.

Liquidation Analysis —

The determination of liabilities and distribution of assets in order to cover the indebtedness of a business which is to be sold.

Risk-

The difference between expectations and realizations or a measure of the uncertainty surrounding a current or future event

Principal-

The employer of an agent, such as a buyer or seller.

Reconciliation —

The final stage in the appraisal process in which the appraiser reviews the data and estimates the subject property's value.

Depreciation —

The lowering of the price or estimated value.

Buyer's Market

The number of available properties for sale exceeds the demand

Seller's Market-

The number of available properties for sale is less than the demand

Vacancy rate-

The percentage of rental units that are unoccupied.

Intermediation —

The process whereby financial intermediaries channel funds from people who have surplus capital to those who require liquid funds.

index-

The rate to which the interest rate on an adjustable rate mortgage is tied.

Equity-

The remaining interest or value after all liens and other charges on the property have been paid.

Cash Flow

The resulting amount when annual debt service, tax liability, and capital improvement costs are subtracted from net operating income.

Arrears —

The state of not being up to date in the discharge of an obligation.

Demand-

The supply of willing and able buyers in the marketplace or lack thereof

Leverage-

The use of borrowed capital (mortgage) to increase the potential return of an investment.

Going Concern Value-

The value of a business property that has been established for some time compared with the value and assets of a concern whose business is not yet established.

Negative Amortization —

This is where monthly mortgage payments are less than required to pay both interest and principal and the resulting unpaid balance is added to the loan balance.

UFMIP-

Up Front Mortgage Insurance Premium, which is required for most FHA single family mortgage insurance programs.