REAL ESTATE EXAM 2 REVIEW
What is not considered a supply-side factor that impacts a city's econ growth?
city's export activity
Six suburban office buildings have been constructed along six consecutive blocks in Roseland, New Jersey. This is an example of:
clustering
A fishing company was formed in Juneau, Alaska. Over the next decade, a canning plant, a processing plant, and a boat repair facility also opened in Juneau. This is an example of:
industry economies of scale
Most research oriented universities have many different colleges, each with separate administrations, students, curricula, and facilities. However, the university continues to exist as a total unit because of:
industry economies of scale
Assume veteran purchase $150,000 home using VA loan amounting to $44,000. If they default, max VA guarantees lender is?
$22,000
Model of urban form characterized by radial corridors or wedges representing the pattern of residential land use in relation to the location of the CBD?
sector model
Given following info, calculate net operating income assuming below-line treatment of capital expenditures: property: 4 office units, contract rents per unit: $2,500 per month; vacancy and collection losses: 15%; operating expenses: $42,000; capital expenditures: 10%.
$2,500 * 4 units * 12 months = $120,000 Vacancy (15% of $120K = $18,000) Op Exp = $42,000 ($120K-$18k-$42K)= $60,000
A new faculty member at local univ pays $1500/mo to rent apt downtown. Teaches on campus 3 days/week and works from home remaining 2 days. On commute days, takes 2 hours each way to commute (heavy traffic). According to bid-rent model, what should professor be willing to pay in rent monthly to live near campus if her hourly wage rate is $25 (In calculation, assume there are 4 weeks in a given month)
$2700 ((12 days month work * 2 hr commute to work * 2 hr commute home)= 48 * $25 hourly wage rate = $1200 + $1500 already pay in rent))
Suppose that an appraiser has just completed her analysis using the cost approach to valuation. She has determined that the reproduction cost of the subject property is $370,000. If the added value of the site is $80,000 and the accrued depreciation amounted to $50,000, what was the estimated value of the bldg. using the cost approach?
$370,000- $50,000(accrued depreciation) + $80,000 (estimated value of land) = $400,000
An individual works downtown and pays $600/mo in rent for apt located 10 mi from her office. She has calculated that she spends 30 mins/day driving each way to office and it costs her $4/day in gas and lost productivity. Using framework of bid-rent model, how much would she be willing to pay for an apt downtown, assuming a 20 workday model.
$680
GIven the following info, calculate the overall capitalization rate: sale price: $950,000; potential gross income: $250,000; vacancy and collection losses: $50,000 ; and operating expenses: $50,000.
(250,000 - 50,000 - 50,000) = $150,000/$950,000 15.78 or 15.8%
Mortgage originators often offer many types and forms of avail residential loans as part of menu. However, predominant form of prime conventional mortgage remains the
(fixed-rate) level-payment mortgage (LPM)
FHA mortgage insurance covers any lender loss after conveyance of title of property to US Dept of Housing and Urban Development (HUD). FHA mortgage insurance requires 2 premiums to be paid: the UFMIP (up-mortgage insurance premium) and MIP(monthly insurance premium). Currently the UFMIP is what % of the loan for normal loans used to purchase a personal residence?
1.0%
In addition to UFMIP, the owner-occupant borrower who decides to use an FHA mortgage loan will normally pay an additional annual MIP that depends on the LTV ratio and the term of the loan. For loan w/maturity over 15 yrs and LTV greater than 95%, the MIP will be what % of the avg. annual loan balance?
1.15%
A developer of a new townhome community estimates that there will be 1,200 home (all types) sales in UC over the next year. An analysis of demographic info has revealed core market share is 10%. Assuming a capture rate of 20%, what is the developer's 1st year projection of sales?
1200* 10% = 120 units 120 units * 20% capture rate = 24 units
Suppose developer interested in building new residential subdivision. Through market research, he determine target market segment potential in year 1 consist of 160 households. If developer projects ability to sell 24 homes in the first year, what is his assumed capture rate?
15% (24/160)
Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between
15-30 years
Using info determine location quotient for Motor City: employment motor vehicle manuf Motor City 12,643; total Motor City employment 560,379; employment motor vehicle manuf (nationally) 152,750; total employment (nationally) 106,201,232
15.7
The hybrid ARM attempts to balance the fixed payment desire of borrower with the lender's desire to increase interest rates if mkt rates rise in the future. In most commo form, known as a 2-28, the hybrid ARM will have a fixed-interest rate for
2 years
In using transaction data to determine the current vale of the subject property, it's important to recognize general mkt conditions may have changed since a particular transaction occurred. Property A sold 18 months ago for $235,000 and Property B sold 12 months ago for $215,000. If the 2 properties are priced today at $239,500 and $222,300, respectively, what is the average monthly rate of increase that can be used to adj comparable prices for changes in market conditions?
239,500-235,000= 4,500 divided by 18 months = 250 as the change per month 222,300-215,000= 7300 / 12 months = 608 as change per month 250/235,000= .106% Monthly rate of increase 608/215,000= .283% (.106 + .283) / 2 = .19% average monthly rate of increase
Added to the index of the adjustable rate is a margin, which is the lender's markup. For standard adjustable rate mortgages (ARM) loans, the average industry margin has been stable at approximately
275 basis
A comparable property sold 4 months ago for $287,000. If appr. adj for mkt conditions is -0.50% per month (w/out compounding), what would the adj price of the comparable property assuming all else is the same?
287,000 * 0.50% = $1435 * 4months = $5,740 since -0.50%, loss on price so : 287,000-5,740 = $281,260
While there is no specific number of comparables that is required for every appraisal assignment, how many comparable sales are considered adequate as long as the properties are very similar to the subject property?
3
The distinction between market rent and contract rent is important due to the diff in lease terms. Office, retail and industrial tenants most commonly occupy their spaces under leases that run
3 to 5 years
Using info, determine location quotient for this industry: % of employment in fina services industry w/in the local community: 15%; percentage of employment in fina services for entire US: 4.4%
3.4 (COME BACK)
In contrast to conventional home loans, interest-only balloon loan requires borrower to pay off loan w/balloon payment equal to original balance after
5 -7 years
Suppose that we observe 2 comparable properties that have each sold twice within the past four years. Property A sold 24 months ago $500,000 and Property B sold 48 months ago $575,000. If the 2 properties are sold today at $425,000 and $465,000, respectively, estimate the change in market conditions (% change in price) per month, assuming we equally weight the 2 properties in our analysis.
500,000-425,000= (75,000) 3125 monthly/500,000= 0.625% 575,000-465,000= (110,000) 2292 monthly/575,000= 0.399% (0.625% + 0.399%) / 2 = 0.51%
When a borrower default on a mortgage loan, his or her credit score will be affected. Credit score can recover but default will remain on report for
7 years
A conventional mortgage loan is one that is not insured or guaranteed by an agency of the US gov. Lender, can still pursue PMI policy to provide guaranteed fulfillment of borrower's obligations. Typically PMI is required for all loans that have a loan to value (LTV) ratio greater than
80%
Violations of the requirements of a note that do not disrupt the payments on the loan tend to be viewed as technical defaults. In practice, how many days must a payment be overdue in order for lenders to treat a default as serious (substantive default)?
90 days
The location of competitors w/in a particular land use area may be influenced by whether the types of services and products are convenience activities or comparison activities. Example of comparison activity is
apparel store
Since mortgages typically have multiple cost assoc. w/them, a borrower may attempt to reduce costs into single measure to compare 2 or more mortgages. Which measure is popular tool for comparing cost of several mortgages?
APR
Most appraisers adhere to an "above-line" treatment of capital expenditures. This implies which of the following?
Capital expenditures are subtracted in the calculation of net operating income
Bankruptcy type court-supervised workout for a troubled household
Chapt 13
Based on understanding of various bankruptcy and foreclosure process, which type of bankruptcy would you expect to be least harmful to a lender's mortgage interest?
Chapt 7
The risk of bankruptcy tends to travel with the risk of foreclosure since both can result from financial distress. Known popularly by it section in Federal Bankruptcy Code, which type is court-supervised workout for troubled business
Chapter 11
Bankruptcy type traditional wherein court simply liquidates assets of debtor and distributes the proceeds to creditors in proportion to their share of total claims?
Chapter 7
The FHA insures loans made by private lenders that meet their property and credit-risk standards. What is true?
Insurance is paid by borrower and protects lender against loss due to borrower default
Real estate appraisers generally distinguish among the concepts of market value, investment value, and transaction value. Which stmt best describes the concept of market value?
It is an estimate of the most probable selling price of a property in a competitive market
The going -in cap rate , or overall capitalization rate is a measure if the relationship between a property's current income stream and its price or value. Which stmt regarding cap rates is true?
It is analogous to the dividend yield on a common stock
A significant number of mortgage loans use adjustable interest rates, in which the interest rate of the loan is tied to an index rate that fluctuates overtime. For incoming-producing property, the most common index rate is
London Interbank Offered Rate (LIBOR)
Given following info, calculate EGIM (effective gross income multiplier): sale price: $950,000 PGI: $250,000; VC: 15% and miscellaneous income: $50,000
EGIM= Sale Price/EGI 15% of $250K= $37,500 $250,000- $37,500 = $212,500 + $50,000 miscl. income $950,000/$262,500 = 3.6
A city's potential for growth or its susceptibility to decline is determined by a set of economic activities that the city provides for the world beyond its boundaries.Economists refer to this set of activities as a city's?
Economic base
Which following act prohibits discrimination in lending practices on the basis of race, color, religion, national origin,, sex, marital status, age, or because all or part of an applicant's income derives from a public assistance program?
Equal Credit Opportunity Act (ECOA)
FHa loans differ from conventional loans in a number of ways. What's not true?
FHA loans require higher credit scores than are needed for prime conventional loans
Which act was passed out of concern for abusive predatory practices in subprime lending?
Home Ownership and Equity Protection (HOEPA)
GIven following info, calculate effective gross income (EGI= Potential gross income (PGI)- Vacancy & Collection loss (VC): Property: 4 office units, contract rents per unit: $2,500 per month; vacancy and collection losses : 15% ; op expenses $42,000; capital expenditures: 10%
PGI: 4 units * 12 months * $2,500= $120,000 VC: (15% of $120,000)= $18,000 $120K-$18K= EGI of $102,000
An important effect of agglomeration economies on real estate is its impact upon mkt risk. Based on your understanding of relation, what is true?
Properties located in a city w/more advanced development of agglomeration economies will carry less risk and therefore suffer a smaller price decline during an economic downturn
Congress has enacted a number of regulations that have established criteria for evaluating home loan applications and mandating disclosures in the origination of home loans. Which congressional act requires important disclosures concerning the cost of consumer credit, including the computations of the APR?
Truth-In-Lending Act (TILA)
In collecting data for nonresidential property analysis, it is helpful to understand the business community that currently exists in the specific area in question. A preliminary approach for ascertaining the number of firms by size, industry, and location is to obtain data from the
U.S. Bureau of the Census; County Business Patterns
Real estate professionals have lone supported strict standards of ethics and practice. Followed by all states and federal regulatory agencies, which imposes ethical obligations and minimum standards that must be followed by all real estate professionals providing formal estimates of market value?
Uniform Standards of Professional Appraisal Practice (USPAP)
The process of converting periodic income into a value estimate is referred to as income capitalization. Income capitalization models can generally be categorized as either direct capitalization models or discounted cash flow models. Which best describes the direct capitalization method?
Value estimates are based on a multiple of expected first -year net operating income
In constructing a market-defining story, it is helpful to answer a series of fundamental questions around which analysis can be built. Which of the following questions is designed to identify the target market?
Who are the customers?
A comparable property sold 15 months ago for $105,000. If the appropriate adj for market conditions is 0.25% per month (w/out compounding), what would be the adj price of the comparable property?
X / 105,000 = 0.25% X= 262.5 monthly change * 15 months = $3,937.50 $105,000 + $3,937.50 = $108,937.50
Mortgage insurance rates vary with the perceived riskiness of the loan. Scenario result higher premium?
a "cash out" refinancing loan
The presence of real estate cycles presents a major challenge when forecasting real estate market parameters. If the market value of a residential developer's project exceeds its construction costs, an increase in the supply of units will occur. As the market becomes oversupplied, we would expect
a decrease in real rental rates
According to the bid-rent model, which of the following changes in the model's underlying assumptions would most likely result in an increase in rents for properties closest to the central business district (CBD)?
a decrease in the average traveling time of the individual's commute
Since most data that we would like to conduct a thorough market analysis is unavailable, a researcher will find it useful to find a data series that will closely represent the variable of interest. We typically refer to this type of variable as
a proxy
Lenders generally require private mortgage insurance (PMI) for conventional loans over 80% of value of security property. It protects lenders
against losses due to default on loan
When specialized resources emerge in response to demand from multiple industries. this is referred to as?
agglomeration economies
Mortgage loans made to borrowers with normal credit quality but lacking necessary doc of financial circumstances typically need to meet conforming mortgage standard considered as
alt-A loans
According to bid-rent model, which of the following changes in the model's underlying assumptions would most likely result in a decrease in rents for properties closest to the central business district (CBD)?
an increase in the average traveling time of the individual's commute
In a mortgage loan the borrower always creates 2 documents: a note and a mortgage. Which piece of info is provided in mortgage?
an unambiguous description of the property that is being pledged as collateral for the loan
When you are evaluating the prospects for a project that is new in your setting and therefore has no actual relevant market performance data, it is most helpful to use which technique as the basis for your analysis
analogy
Gross income multiplier analysis assumes the subject and comparable properties are collecting market rents. Therefore, it is frequently argued that an income multiplier approach to valuation is most appropriate for properties with short term leases. Which property type would we find it most appealing to use a gross-income multiplier in analysis?
apartments
WHile it is often sufficient to rely on informal methods of estimating the market value of real estate assets, the complexity and large dollar value of many real estate decisions dictate that formal estimates based on methodical collection and analysis of relevant market data should be utilized. The unbiased written estimate of the market value of a property is commonly referred to as a(n)
appraisal
Real estate appraisal is often considered "more art than science," since identifying truly comparable properties is a subjective process. Therefore, it is essential that a comparable property transaction at least meets the requirement that it was fairly negotiated under typical market conditions. Which type of transaction would be most appropriate for use in sales comparison approach to valuation?
arm's-length transactions
According to the bid-rent model, which of the following individuals would be the one LEAST likely to live closest to the central business district (CBD)? (Hint: Assume that work locations are located adjacent to each other at the center of the CBD)
barista at the local coffee shop who uses a car to commute
In calculating net operating income, vacancy losses must be subtracted from the gross income collected. The normal range for vacancy and collection losses for apartment, office and retail properties is
between 5% and 15%
W/in the framework of the bid-rent model, as rent increases w/proximity to CBD, tendency is for development to?
build upward on lots w/in the CBD to allow multiple tenants
The expected costs to make replacements, alterations, or improvements to a bldg. that materially prolong its life and increase its value is referred to as
capital expenditures
A new residential development will face competition from other new developments, other builders, and sales of existing homes. To determine if demand in that market segment will be sufficient to justify proceeding with a project, a developer would be most interested in estimating a
capture rate
Providers of convenience activities find it profiting to disperse over the region of potential customers to the point where each establishment is equidistant from another and is separated by minimum distance that allows sufficient customers to support each establishment. The resulting pattern of establishment is referred to as?
central place pattern
City's econ base can be viewed in terms of a multiplier process, in which money brought in through export is respent w/in city. What is least likely to be considered a high impact or high multiplier econ base activity?
computer assembly
In contrast to conventional market analysis, the story approach to market research starts with an analysis of
conditions in the property-specific market
Fannie Mae and Freddie Mac purchase loans that meet specific underwriting standards such as loan size, documentation and payment-to-income ratio. The loans they're eligible to purchase are
conforming conventional loans
Prof James Graaskamp often asserted that when one buys real estate, what one is buying is a set of assumptions about the future. Therefore, it is not surprising that the beginning point of the market research process is to
construct a market-defining strategy
Certain mortgage loans contain a due-on-sale clause, which gives the lender the right to terminate the loan at sale of property. Which loan is most likely to contain due-on-sale clause?
conventional home loan
Considered most common type of home loan, any standard home loan not insured or guaranteed by an agency of US gov?
conventional home loan
When a borrower defaults on the payment req. of a loan, there are several options lender has at disposal. When lender allow borrower simply to convey the property to lender rather than pursue court-sup. process of terminating all borrower's claims, this is
deed in lieu of foreclosure
For most mortgage loans on commercial real estate, the right of repayment is constrained through a prepayment penalty. Which type of prepayment penalties requires a borrow to provide the lender with some combo of US Treasury securities that will serve to replace the cash flows of the loan being paid off?
defeasance prepayment penalty
Assume an indiv. has just lost his job and has been consistently late paying his bills. The bank recognizes deterioration in his credit score and has notified him that he must pay his home equity line of credit in full. The mortgage clause that makes this possible is known as the
demand clause
According to bid-rent model, which individuals would be the one most likely to live closest to the CBD? (Work locations adjacent to each other at center of CBD)
doctor at the city hospital who must walk to work
Net operating income is similar to which of the following measures of cash flow in corporate finance?
earnings before deductions for interest, depreciation, income taxes and amortization (EBIDTA)
Several techniques can be used to obtain an indication of land value. Cost approach to valuation would most likely be used for which property?
education facility
Even after property foreclose, its still possible for borrower to reclaim property long as they produce o/s mortgage bal and foreclosure costs. In states like Georgia, right only extends to the date of the foreclosure sale
equity of redemption
Because the mortgage conveys a complex claim for a long period of time, clauses are included in anticipation of possible future complications. Which clause requires a borrower to make monthly deposits into an account in order to pay obligations such as property taxes, community association fees or causality insurance premiums?
escrow clause
The sequence f adjustments to the transaction price of a comparable would make no diff if all adj were dollar adj. However, if % adj are involved then the sequence does matter. In making adj to comparable property to arrive at a final adj sales price, the proper sequence would be
financing terms, market condition, location
Diff between judicial foreclosure and power of sale in the treatment of defaulted mortgages can be significant. NOT TRUE about power of sale
foreclosed property typically sold through public auction administered by court
Accrued depreciation is the diff between the current market value of a bldg. and the total cost to reproduce it new. One reason for diff is related to changes in tastes, preferences, technical innovations, or market standards. This is referred to
functional obsolescence
Computer software systems that enable one to manipulate and "map" information with great flexibility and speed are referred to as
geographical information systems (GIS)
Institutions that have been the largest purchaser of residential mortgages?
government-sponsored enterprises
For smaller income producing properties appraisers may use the ratio of a property's selling price to its effective gross income. This is an example of
gross income multiplier
t may be appropriate for a real estate professional to use different approaches for estimating the market value of a property depending upon the particular property type and use. Which approach would be most applicable when considering the valuation of retail office space (receive most weight)?
income approach
Which of the following would be categorized as a cause of external obsolescence?
increased traffic flow due to more intensive use in the local area
At the conclusion of the traditional sales comparison approach to valuation, the appraiser evaluates and reconciles the final adj sales prices into a single value for the subject property. Single value is referred to as
indicated value
Growth of the motion picture industry in LA, petrochemical industry in Houston and the software industry in Silicon Valley are all examples of how the growth of an industry w/in a city can create a cost advantage for future growth. This phenomenon is?
industry economies of scales
The refinancing decision is sometimes oversimplified into a few rules of thumb that borrower uses to gauge potential benefits. What methodology is criticized for inability to acct for variation in refinancing benefits due to cost or holding period?
interest rate spread
Survey research has been applied to real estate markets at many levels. Despite its frequent application, analysts must be cautious with survey use because
it can be fraught with abortive errors
Based on understanding of effect of agglomeration economies in RE, you would expect institutional investors to most favor RE investments in what area?
large urban mkts
It would be hard to overstate importance of FHA in history of housing finance. What instrument by FHA is considered single most important financial instrument in modern housing finance?
level-payment, fully amortizing loans
In certain state, Florida, the transfer of title to lender doesn't occur until borrower defaults. Known as
lien theory states
Demand for access between land uses is considered gravity that holds city together. Relationships are known as?
linkages
To be considered a qualified mortgage, the loan must have specific features and meet designated underwriting req. What's not a qualified mortgage?
loan doesn't require verification of underwriting information from 3rd-party records
Common criticism of APR is that it usually understates true cost of borrowing. APR may understate cost of borrowing because it assumes
loan will always go to maturity
Operating expenses can be divided into 2 categories: variable and fixed expenses. Which of the following best exemplifies a fixed expense?
local property taxes
When employing the sales comparison approach, appraisers must consider numerous adjustments to convert each comparable sale transaction into an approximation of the subject property. Adjustments are divided into 2 groups: transactional and property. An example of what would NOT be a transactional adjustment is
location
Development of subdivisions, apartments, offices, or other commercial structures can have a lead time of two years or more. In general, the longer the construction lead time
the greater the amplitude of real estate cycles
The ability of homeowners to prepay the principal on their o/s mortgage bal. creates cash flow uncertainty for the lender. As a result, the lender may wish to prohibit prepayment on a mortgage loan for a specified period of time after its origination. This is accomplished through
lockout provision
Since conforming loans can be more readily bought and sold in secondary market, they carry a ________ interest rate than comparable nonconforming loans.
lower
NOT an example of land use for local econ activities
manufacturing center
Estimating the market value of real estate is complicated by the unique characteristics of real estate markets. In contrast to stock markets, real estate markets are characterized by all EXCEPT
market prices are revealed almost instantaneously to prospective buyers
Real estate market research is an important process used by analysts to facilitate a better understanding of a property's future profit potential. All of the following statements regarding market research are true except
market research consists of a series of facts that fails to consider the role of investor behavior in the decision-making process
Preferences of HHs can vary w/time, prosperity and context. The nuances in the preferences or needs of market subgroups are commonly referred to as
market segmentation
In real estate markets, a transaction occurs only when the investment value of the buyer exceeds the investment value of the seller. The buyers investment value is the ______________ that he or she would be willing to pay for a particular property, while the seller's investment value is the ____________ that he or she will be willing to accept.
maximum; minimum
The most common definition of a city used for government data collection and reporting, identified as a single labor market area centered around a city with a population of at least 50,000 people, is referred to as a
metropolitan statistical area
Special contract in which borrower pledges the mortgaged property as security to lender
mortgage (deed of trust)
With the arrival of subprime mortgages in recent years, a new kind of trigger event became apparent in leading HHs to default. What trigger event is primarily associated w/most defaults that may have occurred during most recent subprime mortgage crisis?
mortgage payment spikes
In a mortgage agreement, the borrower conveys to the lender a security interest in the mortgage property. The lender (receives mortgage claim) is knwn as the
mortgagee
Understanding the revenue-generating ability of core export activities of local area has important implications on mkt value of RE. When income these activities generate is respent w/in community on other local goods and services, the community is benefiting through a?
multiplier process
Some supply-side factors that impacts a city's econ growth
nature of available labor force; quality of life w/in community and cooperation of local leadership and government
Standard mortgage loans require monthly payments typically composed of 2 components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the O/S balance after each payment shortfall, the loan is said to be
negatively amortizing
Which of the following measures is considered the fundamental determinant of market value for income-producing properties?
net operating income
As part of the data analysis step in the appraisal process, it is necessary to consider the highest and best use of the property in question. In regards to determining highest and best use, all is true EXCEPT
no financial limits are considered when determining the property's best use
While predicting real estate cycles is difficult, a key indicator used to evaluate where property is within the cycle is the
number of building permits issued
Suppose homeowner reluctant to refinance until reasonably sure interest rates are not going to fall appreciably from where they are. In case, homeowner appears to be concerned about what costs associated w/refinancing?
opportunity cost
Mortgage loans that allow the borrower to switch among a variety of payment arrangements throughout the life of loan are
option ARM loans
In recent years, mortgage lenders respond to demand from home buyers who were unable to put down 20% and looking to avoid PMI requirement that would accompany loan by developing second mortgage created simultaneously w/first mortgage in amt of 10% of value of hime. This enabled borrower to obtain 90% financing while avoiding additional cost of PMI. Loans known as
piggyback mortgage loans
The starting point in calculating net operating income is the total annual income the property would produce assuming 100% occupancy and no collection losses. This is
potential gross income
Loan origination mkt in which borrowers and lenders come together to provide adequate financing for the purchase of a property
primary mortgage market
When using discounted csh flow analysis for valuation, an appraiser will prepare a cash flow forecast, often referred to as a
pro forma
In the initial round of market analysis, analysts will attempt to provide key numbers that characterize the current condition and trend in the market. For rental retail space, the key market parameters in question would most likely include all except
projected sales rates
The cap rate is an important metric that investors use to analyze the state of commercial real estate mkts. When interpreting cap rate movements, an increase in cap rates over time would indicate that
property values have decreased
A popular adage in real estate is that property value is all about "location, location, location." However, for most property types in nonresidential realms, nonlocational requirements are equally or even more important. All of the following are examples of nonlocational factors except
proximity to modes of public transportation
A tool used by real estate analysts to relate a consumer's activities, interests, opinions, and values to a consumer's demographics is referred to as
psychographics
Suppose buyer agrees to purchase tract of land for $40,000. Buyer is only able to obtain mortgage for $32,000. Rather than let deal fall through, seller agree to accept $4,000 in cash and a note from the buyer for remaining $4,000. This trans is
purchase money mortgage
When a buyer acquires a property having an existing mortgage loan, a decision must be made as to whether or not subsequent owner of property can preserve the loan. If buyer does not add his or her signature to note, buyer doesn't take on personal liability. In this case, buyer is said to
purchase property subject to the existing loan
Dodd-Frank wall street reform and consumer protection act created an important new class of home mortgages aimed at helping mortgage lenders implement an "ability to repay" standard imposed by law.
qualified mortgage loans
Which mortgage loan would be considered safest with respect to default risk?
qualified mortgage loans
With most standard home loans, the lender can hold the borrower personally liable in the event of a default. Such loans are
recourse loans
In addition to numerous congressional acts that focus more on national regulation, laws have been created that affect the practice of home mortgage lending at a community or neighborhood level. For example, laws have been enacted to prevent lenders from avoiding certain neighborhoods w/out regard to the merits of the individuals loan applications, a practice referred to as
redlining
The cost approach to valuation assumes the market value of a new bldg. is similar to the cost of constructing it today. Which terms refer to the expenditures required to construct a bldg. of equal utility modern construction techniques, materials, and design that eliminates outdated aspects of the structure?
replacement cost
Examples of land use for local econ activities
retail centers, automotive services, restaurants
Which of these is most likely to be regarded as a capital expenditure rather than an operating expense?
roof replacement
While there are several conventional approaches used to estimate the market value of real estate, the most reliable approach is
sales comparison approach
If all appraisal methods are appropriate for use in valuing a particular property, there is a clear order of preference that real estate professionals adhere to. Which depicts the preferred order (most to least)?
sales comparison, income, cost
Mortgage originators can either hold loans in their portfolios or sell them to investors. When mortgage originator decide to sell to another institution, trans. occurs in what is known as
secondary mortgage market
If homeowner in mortgage distress owes more than value of home and unable to make loan manageable by refinancing or modifying mortgage, next recourse often is a short sale of property. WHAT is NOT TRUE?
short sale relieves seller of any other o/s obligations on home, such as owner association fees or 2nd mortgage
In recent years, home equity loans have become a popular form of second mortgage. Their popularity has been a result of all BUT
shorter terms than other consumer debt
Even after property goes into foreclosure, its still possible for borrower to reclaim property long as they produce o/s mortgage bal and all foreclosure costs incurred. This right may even extend beyond date of foreclosure sale (Florida). Right is known as
statutory redemption
When borrower decide to stop making payments on existing mortgage (although able to) but home has lost value, this is known as
strategic default
Most appraisers would say that report writing is one of the most important functions that they perform. Assume that an appraiser is putting together a report for a single-family home. Which reporting options would most commonly be used in this scenario?
summary appraisal report
Within some types of land use, business location may be determined by the type of service or products that are offered to consumers. Based on understanding, which provider would operate in convenience activity space?
supermarket
Most adjustable rate mortgage (ARM) loans have been marketed with a temporarily reduced interest rate commonly referred to as a
teaser rate
When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is the property's
terminal value
Since most data for a given market study is not readily available, analysts must be creative in their use of data that they are able to obtain. The primary source for detailed household demographic information is
the U.S. Bureau of the Census
One complication that appraisers may face is the variety of lease types that may be available for a particular property type. Which best describes a graduated or step-up lease?
the lease establishes a schedule of rental rate increases over the term of the lease
The magnitude of an econ base multiplier depends upon the amt of money that "leaks" out through expenditures outside of the city limits. The econ multiplier tends to be higher except with?
the less isolated the city is from other cities
In the Elysian Forest example, the (PUD) was designed to be an unsuccessful venture from its inception because
the target market was a nontraditional segment that relied heavily on a small portion of the local University City population
Favorable mortgage financing may have a significant impact on the transaction price of the particular property. If the comparable property was known to have had a favorable financing terms negotiated into the transaction price, which adjustment should take place (Assume comparable property cannot be dropped from analysis as there are already limited comparable sales transactions)
the transaction price of the comparable property should be adjusted downward
In the Palm Grove Office Complex example, the project was destined to be an ill-fated venture from its inception for reasons except
the zoning laws of University City ultimately prevented the project's developers from starting the construction process
In certain states, Georgia, there is temp transfer of title to lender at time mortgage loan is made. Borrower then obtain rights to title once loan repaid. This is
title theory states
It is possible to have a secured real estate loan w/out mortgage through the use of a contract for deed. In contrast to the standard real estate sale, which event occurs after the closing when dealing w/a contract for deed?
title to the property passes to the buyer
Adjustments for physical characteristics are intended to capture the dimensions in which a comparable property differs physically from the subject property. If the only physical diff between the 2 is the comparable doesn't have a fireplace, which adjustment should take place?
transaction price of comparable adjusted upward
A planned unit development (PUD) is a residential development that differs from traditional residential subdivisions in all of the following ways except it
typically has larger individual lots w/extensive side-yards on the property
When calculating the net operating income of a property, it is important to identify any expenses that will be incurred in attempts to maintain the property. What's not an operating expense?
utility expenses
Foreclosure is considered the ultimate recourse of the lender because it allows them to bring about sale of the property to recover the O/S indebtedness. NOT TRUE of foreclosure is
when lender forecloses on property, it extinguishes all superior liens, bringing about a free and clear sale of the property
Earl model of land use is the concentric ring model of urban form developed by E.W. Burgess. What would be closest to the downtown area of the CBD according to Burgess model?
zone of transition that contains warehousing and other industrial land uses between the downtown area and the residential area
